Symptoms Are Expensive

Low sales. Poor staff retention. Cashflow problems. Customers leaving. These look like business problems. And they hurt. 

• They consume attention. 

• They create difficult meetings. 

• Occasionally they keep founders awake at three in the morning. 

Very often they are not the problem at all. They are symptoms. And symptoms are expensive. That’s because they invite us to treat the thing we can see rather than diagnose the thing causing it. 

If sales are falling, spend more on marketing. If staff keep leaving, recruit more people. If cash is tight, chase debtors harder. If customers aren't returning, offer them a discount. 

These all feel like perfectly sensible responses, and sometimes they even work. But if the underlying cause remains untouched, the problem has an irritating habit of returning. 

Businesses can spend years doing this. More marketing. More recruitment. Another sales director. Another agency. Another CRM. Another motivational speech. We become extremely efficient at treating the patient while never quite discovering the disease. 

Why do we chase fires? 

Actually, there is a perfectly good evolutionary explanation for this. Human beings are wired to respond to immediate threats. If something moved in the bushes, our ancestors didn’t convene a strategy meeting to investigate systemic causes. They reacted. And frankly, those who spent too long analysing the lion tended not to contribute greatly to the next generation. 

And there are times when that instinct remains enormously useful. But it is less useful when running a company.

Businesses reward a different skill: Diagnosis. 

Domino’s provides one of my favourite examples.

By the late 2000s, the company had a problem in its American business. Domestic same-store sales fell 3% in 2008. There were dozens of symptoms it could have attacked: advertising, pricing, promotions, competitors, store performance. But instead, Domino’s listened to what customers were actually saying.

Some of what the customers said was brutal. They compared the crust to cardboard and criticised the sauce and overall taste. Rather than launch a clever campaign telling people they were wrong, Domino’s concluded that the pizza itself needed fixing. 

It spent around eighteen months redesigning its core product, changing the crust, the sauce and the cheese. Then it launched the new recipe with an advertising campaign that openly acknowledged the criticism.

The result was kind of extraordinary. US same-store sales rose 9.9% in 2010. Domino’s later described the new recipe as an important contributor to increased customer reorder rates, traffic and sales.

The symptom was weak performance. The cause was that too many people simply didn't think the pizza was very good. It sounds almost comically obvious afterwards. Most good diagnoses do. But we often like to hide our heads in the sand. 

Digging Deeper

An iceberg is often a useful metaphor. 

Above the waterline sit the things we notice: 

• Sales are down.

• Absence is high.

• Margins are shrinking.

• Customers complain.

• Projects run late.

Below the waterline sit the things producing them: 

• Incentives 

• Processes 

• Leadership behaviour 

• Pricing decisions 

• Poor information 

• Inappropriate targets 

• Weak training 

• Confused responsibilities 

Sometimes, below the waterline, there lurks the assumptions on which the entire business has been built. 

Today, a new client of mine, a restaurant, is frustrated.

Sales are limited. Finding new customers is hard. Management fears hiring because additional staff will create losses, and at present they’re right on the line. The managers are all busy, while lower-level employees are comfortable doing relatively little. 

Yet they have a strong community, including the staff, who love the place. Customers are disappointed that there's often no food available, but they don't want to rock the boat by complaining. Aren't they nice?

So that's what sits above the waterline. And with limited feedback, the business doesn't even see all of that. 

If we go down to the waterline, what sits underneath? 

There is a lack of internal communication. There are no proper processes for agreed actions, so nobody is clear about what's happening, who is doing it or when. Worse still, deadlines are never set. 

Without those processes, there is no reliable way to follow up on anything that’s agreed, no way to capture customer sentiment or no way to  ensure publicity goes out early enough for the community to know an event is happening.

Is it any wonder customers don't arrive and the CEO thinks meetings lead to nothing?

All of that is happening in the dark. 

The directors can see the symptoms but they cannot yet see the system producing them. 

Wells Fargo offers an even darker example. 

For years, employees at the bank opened unauthorised accounts for customers. Looking only above the waterline, this appears to be an employee misconduct problem. And let’s be honest, individual employees were unquestionably responsible for what they did.

But investigators found something deeper. Employees were operating under aggressive sales targets and compensation incentives that encouraged them to sell additional products to existing customers. The US Consumer Financial Protection Bureau concluded that these incentives helped produce widespread unlawful behaviour, including more than two million accounts that Wells Fargo's own analysis suggested may not have been authorised. Not 2 million dollars, 2 million accounts! 

The visible problem was dishonest behaviour. But the deeper question was: what kind of system repeatedly produces dishonest behaviour? 

If one employee behaves badly, you may have an employee problem. If many behave badly in remarkably similar ways, you need to start looking at the environment in which they're operating. 

This is where founders often waste extraordinary amounts of money. We replace people when incentives are wrong. We replace software when processes are confused. We increase marketing when the proposition is weak. We blame sales when the leads are poor. Heck, we even blame the customers when the experience is disappointing! 

The symptom gets the budget because the symptom is visible. The underlying system carries on unnoticed. 

The Season

Winter matters so much in the GamePlan cycle.

Summer provided the selling period, when the business was operating hard and producing evidence in the real world. Autumn collated and sorted that evidence. Winter is where we decide what it means. 

The question founders instinctively ask is something like: 

What hurts?

But what we really should ask is:

What problem are we actually solving? 

A fall in sales might lead to a new marketing plan. But it might reveal a poor product, the wrong audience, weak positioning, bad pricing or declining customer satisfaction.

Staff turnover might require better recruitment. Or perhaps people are joining perfectly happily and discovering a management culture they don't want to remain inside.

Winter is where we have the luxury, and the responsibility, to dig below the waterline before committing another year of resources. And for the record, Spring is for testing those discoveries. 

Strategy built around symptoms merely institutionalises firefighting. Domino’s could have bought more advertising for an unloved pizza. Wells Fargo could treat misconduct as a succession of bad employees. Neither response reaches the cause. 

The expensive problems in business are rarely the ones that are easily seen. They are the ones underneath the surface.

Easter Eggs in this week’s article 

“falling” – Falling, by Julee Cruise 

“down to the waterline” – Down To THe Waterline, be Dire Straits  

“what they did” – Clean Cut Kid, by Bob Dylan 

“What hurts” – Cleanin’ Out My Closet, by Eminem