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May 31, 2018

Great Decisions: An Art of Sacrifice

Willie Pietersen

Before you can decide what you will do, you have to decide what you won’t.

Albert Camus famously said that our lives are the sum of the choices we make. The same holds true for organizations. Executives and their teams are charged with making momentous decisions that will shape the destiny of their organizations and impact, in some cases, thousands or even millions of people.

Effective decision-making is, however, fraught with difficulties. The world is constantly changing and the future is uncertain. We will never have perfect information, and we are prone to all manner of biases that can trip us up. But one crucial requirement of decisiveness is frequently overlooked: deciding what not to do.

The Latin root of the word decide is caedere, meaning to “cut down” or “kill.” Yet we tend to balk at this act of sacrifice — and this failing carries a heavy cost.

A decision is a choice between alternatives in service of a desired outcome. The reality of limited resources makes this a zero-sum game: every additional thing we do subtracts attention and energy from everything else we do. Choosing a series of actions without any subtraction is just “piling it on,” which, eventually, will stifle an organization, blurring its focus and sapping its resources.

A choice is not a choice until we decide what we will give up. We must subtract first, then multiply.

Learning from nature

Nature can be our best teacher. Successful adaptation in the natural world occurs through favorable variations that confer a survival advantage on organisms within their niches.

In this battle for survival the common red clover has devised a remarkable strategy. Its flower has a unique feature — a long, thin funnel leading to the nectar at its base. Only bees, which have very long tongues, can reach the sweet nectar. Other insects are shut out. It’s a strategy based on what this plant has “decided” not to do.

The beauty of this choice is that bees fly farther than other insects, stopping at more flowers and thus increasing the chances of successful pollination. In effect, the red clover has formed an exclusive alliance with bees that ensures that its pollen is distributed more widely than other plants, giving it a crucial competitive advantage.

This strategy is not without risk of course, no decision is. What if another plant produces a sweeter-tasting nectar and bees “switch brands”? What if the bees themselves are outmaneuvered and become extinct? Yet for the red clover this trade-off has captured a significant advantage that no other plant has been able to usurp.

Deciding what not to do

Just as in nature, human decisions are about creating favorable variations that confer competitive advantage.

Some years ago a friend of mine, Commander Noel Evans, retired from the British Royal Navy and bought a fruit farm in the Elgin Valley, a lush region known for its orchards, near Cape Town in South Africa.

It was planting time, but having spent his whole life at sea, Evans knew nothing about farming. So, he drove up and down the valley and asked his new neighbors for their advice on what he should plant: plums or peaches?  The majority agreed: “There has been a glut of peaches this year. You should plant plums.”

Evans assessed his three alternatives. He could plant plums as recommended by his neighbors; a mixture of plums and peaches to hedge his bet; or peaches only. His decided on the last.

With his neighbors all planting plums, Evans sought to corner what was sure to be an undersupplied market. Sure enough, when the trees matured, Evans was one of the few with a full crop of peaches. By deciding not to plant plums, he became one of the most successful farmers in the valley. His success was driven not by expertise in farming, but by skill in decision-making.

Deciding what not to do takes courage, particularly in business where it often means turning away from the apparent safety of the herd, and Evans had it in spades.

Steve Jobs provides another telling example. Nearly universally heralded for turning Apple around and setting it on the road to becoming the most valuable company in the world, Jobs has been hailed by commentators for his creativity, his aesthetic sensibilities, and his keen understanding of the customer. All no doubt played a role, but Walter Isaacson, in his wonderful biography of Jobs, stresses one strength above all others: Jobs’ ability to focus on very few things and exclude the rest.

Jobs would typically charge 15 teams with exploring new opportunities. Three months later each team would eagerly report its recommendations. Jobs would huddle briefly with his top team and deliver his verdict: “We will do these three things. The other twelve are off the table.” No back burners, no side shows; everyone’s energy would be devoted exclusively to those three things. Even today, Apple has a leaner portfolio than its competitors. It has steadfastly avoided the deadly trap of “all things to all people.”

The importance of priorities

An organization without clear priorities is like a ship without a rudder. But defining those priorities is not as simple as it sounds.

First we must define the outcome we seek, otherwise priorities have no meaning.

The crucial outcome in a competitive world is your winning proposition, the unique benefits you will offer your customers that give them a compelling reason to choose you. It is a statement that clarifies how your organization will capture competitive advantage in the marketplace. For Amazon, for example, the winning proposition for its online retail business is, “We make it easy for people to buy things by offering a wide range of products at great prices with fast delivery.”

Your priorities then define the crucial steps necessary to achieve that winning proposition.

Amazon has succeeded brilliantly by focusing the entire organization on its winning proposition and lining their priorities up behind it. Paramount among these priorities is an obsession with making the shopping experience easier and more enjoyable, even at the expense of short-term profits or the share price. In the words of Amazon CEO, Jeff Bezos, “Determine what your customers want and work backwards. If customers don’t want something, it’s gone, even if that means breaking down a once-powerful department.”

When it comes to setting priorities, it’s essential to remember the Pareto principle, more commonly known as the 80/20 rule. The rule tells us that there is an imbalance between inputs and outputs, that the majority of inputs have little effect while a small minority (the “vital few”) make a huge difference. Identifying and leveraging the vital few is essential for success.

That raises the question, how many priorities should there be? The common answer is between three and five. Research by psychologist Nelson Cowan suggests that the right number is four (a finding that appeals to reason given that four is the only number between three and five!), but the key is this: if you can’t remember them, you are in trouble.

The vital need for simplicity

The principle of decision-making as sacrifice serves a greater purpose — that of simplicity, for simplicity demands the ability to streamline and subtract. Albert Einstein was renowned for his ability to simplify complex ideas. He admonished, “Any intelligent fool can make things more complex. It takes a touch of genius — and a lot of courage — to move in the opposite direction.”

Complexity paralyzes organizations. Simplicity empowers them. A crucial role of leaders is to create simplicity in a world of increasing complexity. If we cannot do that we cannot succeed.

Marco Pierre White, a British chef who, at the age of 33, became the youngest person ever to receive three Michelin stars, ran a string of successful restaurants under this credo:

Complexity causes confusion. Confusion creates inconsistency. Inconsistency creates failure.

These same rules apply to all organizations, large and small.

Willie Pietersen was raised in South Africa, and received a Rhodes Scholarship to Oxford University. After practicing law, he embarked on an international business career. Over a period of twenty years he served as the CEO of multibillion-dollar businesses such as Lever Foods, Seagram USA, Tropicana and Sterling Winthrop’s Consumer Health Group. In 1998, Willie was named Professor of the Practice of Management at the Columbia University Graduate School of Business. He specializes in strategy and the leadership of change, and his methods and ideas, especially Strategic Learning, are widely applied within Columbia’s executive education programs, and also in numerous corporations. He has served as a teacher and advisor to many global companies, including Aviva, Bausch & Lomb, Boeing, Chubb Corp., Deloitte, DePuy, Electrolux, Ericsson, ExxonMobil, Henry Schein, Inc., Federal Home Loan Bank of Atlanta, Novartis, Salt River Project, SAP, UGI, United Nations Federal Credit Union and also the Girl Scouts of the USA.