“Why do we do it that way?”
“Well, that’s the way we’ve always done it.”
Have you ever heard anyone ask that question and be given that answer? There is comfort in doing things the same way every year. And comfortably repeating the same established processes is good enough for many business leaders. But since you’re reading this article, chances are that comfort is not your top priority. And not surprisingly, comfort is not Priority Number One for companies that are seeking new heights.
When asked “Why do we do it that way?” breakthrough leaders encourage “first principles” thinking. They challenge their teams with the question “How can we do it better tomorrow than we do today?”
As a CPA, I was fortunate to begin my career as an auditor at Arthur Andersen. In its culture, learning was paramount. The firm needed us to grow quickly so it could charge more for our services each year we were there. It reinforced the culture of learning through a set of management behaviors that always ensured that we knew why we were doing things. “Why did you use this particular statistical sampling methodology?” “What guidance did you rely on when categorizing the balance as cash equivalents instead of investments?” The firm was driving us to truly understand what we were doing rather than going through the motions.
The methodology of first understanding the “why”, then working out the “how”, focused on the fundamentals, i.e. the “First Principles”, that allow us to truly understand our work. And it was understanding the fundamental concepts of our work that produced the environment needed to find and create breakthroughs.
Today, Elon Musk is one of the wealthiest people in the world. He built his fortune by understanding how things really work. In fact, one of his companies, SpaceX, was an initially unintended consequence of wanting to ignite public interest in space exploration. First, he needed a rocket and he tried to pick some up from various manufacturers, including old ICBM’s from the Russians. The price tag was too high. So on the flight back from a fruitless bid in Russia, he took everything he had learned about rocketry. Then he worked out how much it would cost to build one from scratch. He realized that he could actually build an entire company that could compete with national space programs because the margins were so fat. And this is where first principles came into play: Elon Musk challenged his initial assumption that he would have to buy rockets rather than build them. He gathered enough core data so that he understood the underlying process and costs, then he applied that knowledge.
How can we apply these lessons to our practices, and to our clients’ businesses as well?
A good place to start is with the vision for the business and the role we will play in it. For example, an important goal for everyone should be to create an environment that creates more for everyone than it takes. This is especially true for those of us who have made great personal sacrifices for the businesses we love.
To create an environment that gives more than it takes from each player, we need a few key ingredients:
- 1. We all need to be open to new ideas. Great ideas can come from anywhere -- our teammates, our friends and peers, even a webinar.
- 2. We all need to create a culture of learning. Just like the managers at Arthur Andersen, we are seeking learning rather than thoughtless repetitive motion.
- 3. Leaders need to edit ideas and concepts in a way that everyone understands. Many people fear taking input because it means having to reject a lot of ideas. But in fact, you need a lot of ideas in order to select the best courses of action.
Once you gather all the ideas and you have everyone’s input, there are ways to create heuristics by which you can qualify each new idea. This will help you determine which ideas are best. It will also clarify for your staff why you are ruling some things in and other things out. The goal is for the structure to be clear enough that everyone can anticipate whether the idea will fly. They should also be able to keep the good energy flowing even when an idea doesn’t make the cut.
Here’s a sample scorecard to start with. The “idea point score” is the sum of the first two minus the score for the cost. When several ideas compete for attention, the ones with highest point scores will win. Vanity projects will not score as well and will fall off.
- 1. Is the idea consistent with our vision? Scale of 1-10
- 2. How much long-term benefit will we get? Scale of 1-10
- 3. How much will it cost? Scale of 1-10
We utilize this thinking here at Liscio. Our mission is to provide firms of every size and budget with an out-of-this-world online experience that their clients deserve. At first blush, the problem is daunting because there are so many different modules to build. They range from messaging and task management to file sharing and eSignatures. And we must integrate these experiences with the variety of back-office systems our clients are using. So, we spend a lot of time working backward from the vision to thoughtfully design how each piece fits. By consistently applying first principles, we can methodically replace a patchwork of solutions with breakthrough power and convenience for both firm and client. When we get stuck, we refer to Albert Einstein’s quote about how to solve problems quickly “If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.”
We hope this helps you on your journey to build the opportunity and company of your dreams. We would love to hear from you! We get some of our best ideas from members of our Liscio family and their clients.
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