Many senior executives and corporate directors of B2B industrial companies have grown inured to Chicken Little prognostications.
"Trade Shows are dead!"
"3D printing is going to eliminate factories!"
"Chinese imports will blow you away!"
"The internet will eliminate sales people!"
And the nature of trends and panics is that we hear these so frequently; whether the Japanese will own all US commercial real-estate as predicted in the 80s, or coffee alternates at two week intervals between live saving and deadly.
Of course the premise of the fable "The Boy Who Cried Wolf" is that sometimes it's correct...and sadly after many claims that proved exaggerated, we sometimes miss the real one.
The biggest question facing B2B business people today is whether this time is different. If it is, strong proactive measures are indicated. If it's just another false alarm, then the incremental adaptation which is traditional, and particularly well suited to the industrial manufacturing mindset, remains a reasonable approach.
So how do we know?
We can't know for sure. If we did, then there'd be no competitive strategic edge for companies. The key is being open to seeing the change, and so the first step is to understand why that can be so hard.
The Semmelweiss Reflex
In 1847 Ignaz Semmelweiss, a Hungarian physician, suggested that the simple act of a doctor washing his (at that time they were all men) hands prior to assisting in childbirth would reduce maternal mortality rates by a factor of ten.
He didn't have "scientific" data to support his claim, and his suggestion was summarily dismissed by the elite corps of physicians at the time.
In retrospect he's known as the "Savior of Mothers", and a few years later Louis Pasteur documented precisely the mechanisms at play. But his theory was so heretical to common wisdom that he was involuntarily committed to an asylum where he was beaten and died within two weeks.
Semmelweiss reflex, therefore, is shorthand for our tendency to not just dismiss inconvenient ideas, but to reject those which challenge our competence with particular vehemence.
"The older I get, the more I realize that arguing on the basis of facts and logic only gets you labeled as someone who is out of step with the times, if not lacking in compassion." — Thomas Sowell
For such a simple, single syllable word which conveys unambiguous information, "Fact" is actually really subjective and complex.
Fake news is a perfect example. Some is certainly concocted from thin air, but much is an exaggerated interpretation which contradicts what one thinks.
And it's further complicated by the fact that there are absolute "facts" on which we all agree, but which have different half lives. So while we agree that they are indeed "facts" at one moment in time, they'll no longer be accurate later.
For example, the speed of light seems unlikely to change - that fact is dictated by immutable laws of physics.
The temperature, however, can be objectively determined at this moment but will be different this evening, tomorrow, and next month.
So facts can be static or variable. But it's more complicated!
Some facts are accepted as essentially static, even though they change - albeit slowly. The earth's population, for instance, is commonly held to be 7 billion souls. But in ten years it will be different.
This falls into a category known by many as "mesofacts" or facts that change gradually over time.
Many of the truisms on which we build our business strategies are predicated on mesofacts.
The Yellow Pages and Thomas Register were the business generation tools for local and national companies for years. TV commanded all the leisure attention of many young people. Until gradually those changed and then suddenly they no longer were accurate.
"Price, quality and lead-time...pick two" was another...until changes in manufacturing and planning obviated that simple "fact."
Some examples of current business truisms which may with a few years of hindsight be shown to be mesofacts include:
- capital equipment is sold with down and final payments in stand alone transactions (there's growing evidence that Product as a Service - PaaS - models will prevail in the medium term)
- trade shows remain lead generation tools (in parts of the world, for sure, and trade shows serve a purpose....but that purpose is changing)
- industrial buyers are slower to adopt the internet, social media and mobile (except the data shows that's rapidly changing)
- sales belongs in the field and marketing needs to create leads for them
- CRM is a burden for sales reps
(Of course there are also philosophies. Keynes vs. Hayek underlies much of our political wrangling today. These are often presented as factual...but that's a different issue.)
Kahneman, Einstein, Dunning & Chaos
“I must be willing to give up what I am in order to become what I will be.” – Albert Einstein
Kahneman's insights help us to understand why we have a hard time accepting when our market is changing around us. His extensive research on the relative cost of loss vs. gain of win explains why many managers of companies, particularly closely held, resist change. They're primary charge is not to blow what's been so successfully built. And like the engineer that can't get fired for buying IBM, they can't be responsible for failure if they don't do anything radical.
Of course that assumes that what's worked before was by design THE right solution for that time, and further that it remains so. Kahneman offers insight here too. We're programmed to build frameworks that help us to make sense of what's happening. The idea that events and our success could be random is anathema. Yet the approaches, systems, philosophies, tactics and strategies that made a company successful in the 80s could have been a randomly lucky match for the market conditions rather than some devilishly clever creation of a dynamic founder. And therefore, continuing them in an iterative form might not be conservative, it might be imprudent.
If this is unsettling, it should be. The Drunkard's Walk (which I've written about here) and Ubiquity do a great job diving into this further. I'd recommend reading both if you ever have the feeling that you've got your business or industry or buyers figured out!
And we're generally unable to recognize when we're about to outdrive our headlights as this excerpt from the recent article "The Person Who's Best at Lying to You is You" illustrates.
Dunning is an expert on the human tendency to overestimate confidence in our own knowledge and beliefs. In 1999, together with social psychologist Justin Kruger, Dunning identified the co-eponymous Dunning-Kruger effect: people who are incompetent and lack knowledge in a field tend to massively overestimate their abilities because, quite simply, they don’t know enough to recognize what they don’t know. So hugely unqualified people erroneously believe that they’re perfectly qualified. (This effect that has an unfortunate tendency to create the worst possible bosses. It’s also the opposite of imposter syndrome, which describes when qualified people worry that they aren’t qualified.)
In his latest presentation, Dunning highlights the studies that collectively show how we repeatedly and consistently fool ourselves into thinking we know more than we do, and so convince ourselves that our opinion or choice is right—even when there’s absolutely no evidence to support this. There are dozens of studies supporting this hypothesis, showing, for example, that British prisoners rate themselves as more ethical and moral than typical citizens, and that people mistakenly believe they’re better than others at reaching unbiased conclusions.
To recap - we want to avoid risk (even irrationally embracing risk in doing so) and attribute success to ourselves even when it might be quite random. Further, we're often unable to recognize how poor our analysis might be. So it's natural that dissenting voices are unwelcome.
The Enron Effect
But...it gets even more complicated.
There's some interesting analysis of the mischief at Enron which will help to understand why many decent companies stumble. In the Enron case specifically, Ken Lay had a very strong vision of himself as a moral, ethical and honest business person. He was deeply faithful and fully engaged in his church. As behavior and circumstances arose, this very strong filter limited his ability to see what Skilling was creating and what was evolving. It's possible that Lay simply couldn't believe that there was malfeasance because he believed so strongly in his own innate goodness, and therefore in the extension of that to his company. (This discussion around willful blindness provides more background.)
Now most businesses of course aren't conducting unethical business....but many owners, CEOs, founders and presidents have such strong (and often virtuous) self images (remember the Dunning-Kruger effect) that their entire view of their market is constrained by their powerful belief that they are best, right, etc.
In most cases the companies are an extension of themselves and represent years of passion and sacrifice.
But it's not their opinion or perspective that matters...
Prophet or Crackpot
As the "cost of distance" falls industrial distribution and business models will change. As marketing automation changes the information available to B2B sales people in complex sales situations, sales methodologies will change. Similarly as conversational marketing and buyer intent data introduce new sales capabilities, some organizations will adapt.
"The truth is that companies struggle to adapt because most corporate cultures and operational models were designed in an era before the internet. They’re increasingly exposed to 'out of touchness' and thus, progress closer and closer to irrelevance."
While tech companies which benefit from disruption will probably cheer, and traditional B2B industrial companies will scoff, it's not so clear cut.
And we have to ask whether Solis is actually manifesting the Dunning-Kruger effect himself (or even just been breathing too much of his own exhaust.) It's a fair question, and his widespread influence won't necessarily be dispositive to those from traditional businesses that tend to be skeptical. After all the experts are often wrong.
40% keeps you safe...in the short term
Pundits and forecasters have recently cottoned to a rhetorical device which positions them to receive credit, but offers plausible deniability when they're wrong (as they often are.) They simply predict 40% likelihood of a certain outcome.
That doesn't work for businesses which have to allocate resources in the face of uncertainty - often years ahead of time. So they often turn to "experts." The problem is that those who predict disruption are often wrong or premature - and therefore easily discounted.
On the other hand, those who project a relatively linear, incrementally evolving future state of the current conditions will be easy to agree with, and often right.
But not always. And if you agree that the saeculum theory of social change is valid, and that social change often drives business changes, then Trump's election and Brexit simultaneously illustrate the inability of most forecasts to accurately anticipate unusual change AND answer the question of whether "this time is different."
And we are in a period of unusual change. I don't encounter anyone who disputes that. Whether their focus is politics, technology, entertainment or business, all agree that the changes are profound.
But....many then argue that the change doesn't apply to their business - just as we'd anticipate based on Kahnemen's biases and willful blindness. So what's a company to do? Many will do nothing, and of course it's not the company that must "do" anything - it's the senior leadership. (One of the reasons companies lose great midlevel employees is that when they try to open the organizations eyes to opportunities and challenges, inertia and myopic sr. management grind them down.)
Some number of companies will have transcendent leadership, however, while most will have transactional management. Transcendent leaders will recognize there's an opportunity, but may be uncertain how to proceed. After all, creativity can't simply be spewed. In fact it may require a routine task to trigger it.
“Creativity always comes a surprise to us; therefore we can never count on it and we dare not believe in it until it has happened. In other words, we would not consciously engage upon tasks whose success clearly requires that creativity be forthcoming. Hence, the only way in which we can bring our creative resources fully into play is by misjudging the nature of the task, by presenting it to ourselves as more routine, simple, undemanding of genuine creativity that it will turn out to be” ― Albert O. Hirschman
What routine task might most B2B companies undertake that would trigger creative responses to help them avoid impending threats and seize opportunities created by a period of disruptive change?
It's simple - to really, really, really understand their prospects, buyers & customers.
This is the proper jumping off point because all of the changes we talk about only impact our businesses to the extent that they change buyer behavior and expectations. Technology itself, for instance, hasn't directly helped or hurt any business just as Amazon didn't kill Toys-R-Us. Rather the changes reflected in buyer behaviors and expectations are the second order effects of technology which we need to understand. B2B sales organizations need to really understand the effects on their customers' customers!
"To Understand is to Know What to Do"
"But we already understand our buyers!" That's the refrain from every B2B sales organization.
Except they don't. Without exception.
What they typically "understand" is the sum of what they project onto prospects, buyers and customers, along with the standard "insights" which the sales team feeds back to marketing and management. And by those measures this time is not different.
But we've established that in fact, in the broad social sense, it is; that this time is different. Therefore the traditional understanding of buyers will be inadequate during rapid change - the corollary to the quote above from Wittgenstein would be that not understanding means not knowing what to do....and so most companies just keep doing the same.
How would an industrial B2B company achieve the level of understanding that would empower them to instinctively know what to do? The answer will feel both comfortable and uncomfortable. When companies look at the design and manufacture of products they tend to drill down pretty deep - looking for fundamentals. Yet when they plan, whether business or product roadmap, they tend to iterate.
Reasoning by fundamental truths is closer to the former, while reasoning by analogy is far and away more prevalent, and more similar to the latter. In this "Foundation" video with Google Ventures' Kevin Rose, Elon Musk articulates the difference.
Fundamental customer and market truths
Let's really twist things up by using an anlogy to explore fundamental truths! Musk provides the example that many simply say "Battery packs are expensive and always will be", but then illustrates that based on the cost of components, they needn't be. The analogy for us is the assumption that "Customers will always have the same kind of commercial transactional relationship with companies."
That's flawed. The way they will find, evaluate, and communicate with vendors will change. What they buy, the tenor and nature of those transactions will change. Ownership and monetization of data will change.
But the fundamental truth that B2B sales teams need to understand are what, how, why, and when buyers are doing. And many companies haven't even begun to envision how deep this analysis needs to go, nor how dramatically their business may change.
From here to there
Business owners have a lot of headwinds in adapting to change.
- Claims of dramatic change are often just histrionics which should be ignored
- Our mental frameworks aren't well suited to seeing dramatic change unfolding
- Experts are often wrong
- We need to really understand buyers
- Many companies don't dive into fundamental truths to do so
Wondering if this time is different and how your business should react if it is?
You'd better get to the fundamental buyer truths ASAP. That's where you'll find the answer.
(hint - I'm convinced that this time is different!)