Basic Business Advice from the CEO

A typical conversation with my wife—an investor—about her work generally goes like this:

Me: “Why don’t you just invest in things that will rise in value and not invest in things that will decrease? Seems pretty simple.

Erin: “It’s more complicated than that.”

Me: “Is it really?”

I’m joking when I make that comment, but many CEO stories also contain these simple-sounding recommendations.

In his autobiography Sam Walton: Made In America, Walton articulates business rules like: “Exceed your customers’ expectations. If you do, they’ll come back over and over.”

Or, on controlling your expenses, he writes, “You can make a lot of different mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient.” 

Genius stuff.

In Ursula Burns’ Where You Are Is Not Who You Are, she writes of her work to turn around a business unit:  “Our initial work was focused on reducing costs, and then we moved on to increasing revenue. And it worked.” 

Crushed it. 

I always get a chuckle when I read simple statements like that, partly because they remind me of the inane comments one often hears from sports analysts. In a great example from this year’s NFL playoffs, ex-coach Jimmy Johnson’s advice for the Philadelphia Eagles when they were down to their opponents at halftime: 

“They need to figure out a way to score some points.”

Of course, while those statements sound simple, they often reflect an important truth. Indra Nooyi shared this great story in My Life in Full:

“I knew almost nothing about restaurants the day that Roger [the head of the business unit] abruptly introduced himself. But I wanted to prove I could handle any challenge he threw at me. For the next week and a half, my seven-person restaurant strategy team worked around the clock to prepare for our meeting in Dallas. The presentation—a few dozen slides and charts presented in the big boardroom beside Roger’s office—was a detailed analysis that laid out the value drivers of the business, analyzed PepsiCo’s history in restaurants over the past five years, and considered its future prospects. We concluded with a list of questions that needed answers right away. Roger was impressed, but he didn’t say much.”

Later, Roger invited Indra to meet him in Atlanta. There, they proceeded to visit every fast food restaurant near the airport and sample everything on the menu at each place. Indra was confused about what they were doing.

She writes: “After four stops, he turned to me and asked, ‘Well, what’s the scorecard?’ I was clearly puzzled. ‘What do you think we are doing here?’ he exclaimed. ‘It’s a market tour! We need to understand the business from the ground up!’” 

I think there’s a huge lesson in that story. Namely, it’s very easy for us to stay in the office, run the numbers, and think we understand the business. Sadly, I know leaders who have never had a face-to-face conversation with a customer. 

But if one only has a view of the business from second-hand data, that’s false knowledge. Practically, that’s because the data that comes filtered into company headquarters contains lots of bias. 

For example, the data often lags behind what’s happening in the real world. Things are sometimes getting better or worse long before the research report gets delivered to the headquarters team.

And most egregiously, the data often reports the averages, when much of the important action happens in the extremes—e.g., fanatics that recommend you to others, and haters that post negative comments on social media. I’ve directly worked on products where success was entirely built on whether people simply liked the product or loved it. And the numbers could never capture the fullness of that distinction. 

It’s only by getting out there to interact with real people and actual products where one gets a nuanced understanding of the business they’re running.  

Or, as my friend Sandi, who runs a thriving customer success company, tweeted the other week: “When in doubt, talk to your customer.” She added: “It requires being vulnerable to feedback and seeking contradictory points of view. But it is only through discomfort that we grow!”