Reliable data tells us exactly how many motorcycle riders have died trying to navigate an S-curve at 100 miles per hour. The straightforward logic of traditional accounting, with its linear, no-threshold thinking, predicts one-tenth as many deaths at 10 miles per hour.
But we know this is ridiculous. The number of riders that die at 10 or 20 miles per hour is likely to be zero. There is a threshold speed at which the curve becomes dangerous. Any extrapolation that crosses that threshold is certain to be inaccurate.
If you understand the concept of “extrapolations that cross the threshold,” you have the key you need to understand why financially focused businesspeople often make breathtakingly bad decisions in business.
The rules of accounting make it counterintuitive for a financially trained person to perceive a numerical threshold at which the laws of math are suddenly altered. But keep in mind the threshold speed of the motorcycle in the S-curve: deaths at speeds above that numerical threshold will have no correlation to deaths at speeds below it. In effect, the laws of math are suddenly altered.
You and I know that an invisible force, momentum, is affecting the motorcycle and causing it to careen out of control. Although momentum can be measured, there’s no column for it on a financial spreadsheet.
Momentum in business can be positive or negative, pushing your company forward or back. Advertising, public relations, word-of-mouth and social media provide momentum to a business. But a threshold called “the experience of the customer” will dramatically alter these efforts, accelerating them forward or holding them back.
If your typical customer’s experience is delightful, your communication efforts will be highly effective. But if that experience falls short of delightful, advertising, public relations, word-of-mouth and social media will no longer have the desired effect.
Financial types like to “hold advertising accountable,” because it’s easy to blame poor advertising for every decrease in sales opportunities. But no calculation is ever made for the cumulative impact of un-wowed customers. Financial types never consider the threshold of disappointment at which once-loyal customers abandon ship.
When Michael Eisner came to Disney in 1984, he was initially perceived as a golden boy of finance, making Disney wildly profitable during a time when its rivals were faltering. He worked his miracle by putting Disney’s greatest cinematic treasures on DVD, milking every last dollar from the rich heritage that had taken the Disney brothers half a century to build. Within a few years, video sales were providing almost all the profits for Disney’s movie division and, by 2004, Disney had raked in $6 billion from video and DVD sales. But then the Disney cow was dry.
Michael Eisner looked at assets and opportunities through a financial lens. He had none of the whimsy of adventure, none of the imagination or commitment to excellence that had guided the Disney brothers. While busily milking the cow and making himself more than a billion dollars in the process, Eisner quietly abandoned the values and traditions of Disney.
“A company without values and traditions
is a train without a track, unable to gain momentum.”
– The Monday Morning Memo for July 14, 2014
“In 2003, Roy E. Disney resigned from his positions as Disney vice chairman and chairman of Walt Disney Feature Animation, accusing Eisner of turning the Walt Disney Company into a ‘rapacious, soulless’ company (against everything Walt Disney believed in and stood for.) ‘You can’t fool all of the people all the time. Nor can you succeed by getting by on the cheap,’ said Disney, referring to his accusations that Eisner slashed spending on the Disney theme parks, leading to closed rides, peeling paint and unhappy customers.”
The cow was angry at being milked dry.
Eisner was out. Bob Iger was in.
As the new CEO of Disney, Bob Iger
“put an end to the practice of making cheap direct-to-video sequels of old favourites, such as ‘Cinderella II: Dreams Come True’ — Disney’s equivalent of frozen food.”
– The Economist, Apr 17th, 2008, “Magic Restored: Under its new boss Disney has staged an impressive creative turnaround—and is making synergy work.”
Writing for Time magazine on March 21, 2014,
Kevin Kelleher maintains that whoever follows Bob Iger
“will have a tough act to follow. Under Iger, Disney’s brand and business is as strong as it’s been in four decades and there is no clear path to maintaining the double-digit profit growth Disney has been enjoying… Under Iger’s leadership, Disney has seen its stock rise 250% – five times better than the Dow Jones Industrial Average. Iger has shut down, sold off or cut back properties like Touchstone and Miramax and bought others like Pixar for $7.4 billion and Marvel for $4 billion. Iger’s Disney is closer in spirit to the one run by the Disney brothers…”
What are the values and traditions that guide your company? Are you communicating them internally (staff training) and externally (advertising and marketing) through brandable chunks?
The Next Big Thing is a pile of little things. And those little things are called brandable chunks, the most versatile, effective, “right now” thing you can do to lift your marketing into the 21st century.
Are you ready to work? Christopher J. Maddock, the inventor of brandable chunks, will join Jeff “The Professor” Sexton and me for a 2-day Brandable Chunks Workshop at Wizard Academy November 5-6. We’ll help you discover your brandable chunks so you can whisper them, sing them and shout them to the world. Rumors that this workshop might happen have already resulted in Engelbrecht House and Spence Manor both being full, which means we can accept only a dozen more people before it becomes too big and each of those dozen will have to snag a hotel room. I have no idea how long it might take to align – for a second time – the schedules of Maddock, Sexton and me, so let me just say it could be awhile before we can announce a second workshop.
Come. It’s time to do this thing.
Roy H. Williams
PS – Although the majority of financial types have tunnel-vision when it comes to business, I know a bank (Frost) and a handful of CPAs (Adrian Van Zelfden, Jean Carpenter Backus, John Groom and others) who have both eyes open and are fully perceptive. Such people make priceless advisors. My admittedly subjective observation is that competent financial counselors such as these account for roughly 1 in every 40 financial types. Take the time to seek such people out in your own town and your life will get a whole lot easier. – RHW
PPS – Nine years ago Edward Lampert, a billionaire hedge fund manager, bought enough stock to make himself CEO and Chairman of the Board of Sears. Why is it that financial types always think they understand marketing? Lampert immediately merged Sears with K-Mart, creating the third largest retailer in America. “Almost since the day he acquired control of Sears, he has been milking the company for cash as opposed to maximizing its performance as a retailer,” says Craig Johnson, president of Customer Growth Partners. “He hasn’t invested in stores, in marketing. He’s doing nothing to grow the business.” Sears Holdings, soulless under Lampert, has lost 83% of its stock value since 2007; it’s not expected to survive another year. Just as Eisner failed to recognize the genius of Walt Disney, Lampert failed to recognize the genius of Sears… a man named Julius Rosenwald. We’ll talk more about Rosenwald in the rabbit hole. Just click the cow and you’re there.
Jaymes Sorbel, founder of MeTesto Professional, says the 160 characters contained in a well-executed text-message campaign can generate a huge response because customers are so viscerally addicted to receiving and sending text messages that 80% of us text while watching TV and 44% of us take our smart phones to bed with us. Brother Sorbel details the dos and don’ts of effective text-message marketing at MondayMorningRadio.com