Gauging the health of your business.

How to spot the subtle signals

I had the pleasure earlier this week of hosting a development day for senior business leaders on behalf of an industry association. In advance of the session we sent out a short case study for the attendees to ruminate upon before the day.

Case studies are a great way to expose the silver-bullet bias that we all have: everyone enters the room with one answer that they believe will solve the case study problem, but almost everyone’s answer is unique to them. That’s because we all tend to lock on to the first good idea we have in any given scenario, and that becomes our silver bullet.

As the different members of the group hear and recognise the value in the ideas of their peers, it becomes a powerful lesson in remaining open minded, and seeking out alternatives before settling on a decision. But it can also help to demonstrate the difference between tactical and strategic thinking, and to emphasise the value of spotting subtle signals.

In this particular case study, a trusted distribution partner who’d always exclusively supported a manufacturer’s brand, had developed their own alternative and switched away a major customer. Most of the responses, as is invariably the case with an exercise like this, focused on addressing the immediate issue: the relationship, the contract, the incentives with that partner, looking at ways to regain the business and to either get the partnership back on track or find a replacement.

This is the business equivalent of topping up the radiator on an overheating engine. It addresses the immediate problem, but it doesn’t consider that the temperature gauge might be subtly signalling a deeper, longer-term issue within the system.

A few of the responses asked the next-level question: is this an isolated incident, or could it be the shape of things to come? And those people recommended further steps: extending the same contracts or incentives, adding resource into their account management teams and the like, to mitigate the risk that other partners might follow the same route. This is the preventative approach, of topping up all the radiators on all the engines just in case.

But it’s rare that anyone will ask the more strategic question: what’s wrong with the engine, or more specifically in this case: how is it that someone else can offer the customer a more attractive value proposition than we can? And how do we get ourselves back out in front of the pack?

These are the bigger, strategic questions that any defection, whether by a partner, a customer, or a trusted member of the team, should provoke. Defections are a pain to fix or replace, but they can also be a valuable opportunity to catch a glimpse of deeper problem while there’s still time to act. Handcuffing customers or employees with contracts creates a barrier to exit, but ultimately it only masks the problem until the heat comes back on, the pressure builds, and the cylinder block starts to crack.

With employees, the Richard Branson mantra offers one solution: “Train people well enough so they can leave, treat them well enough so they don't want to.” But it’s exactly the same with customers: continually offer them greater value than anyone else, so that they never want to leave. If they leave, it’s a subtle signal that your value is eroding, and a bigger pressure may be building.

I’ve seen businesses spend enormous sums of money on staff and shopper surveys and focus groups; on detailed competitor assessments and evaluations; when the simplest and most insightful metric is at their fingertips already. Every defection of any type, offers an important signal, It’s a twitch on the thermometer of your business’s health gauge, and each one should be a call to action, to look deeper, and to ask the question: “Is there something wrong with our engine?”