When we talk about our businesses, we use rational left-brain language, don’t we? We seldom mention messy human stuff like feelings, hopes and fears. Yet this messy stuff profoundly affects our leadership, and we need to be aware of it to maximize our business’s success.
When we overlook the messy stuff, we make poorer decisions, we leave money on the table and we don’t take advantage of powerful motivating forces. We’re left feeling that business success is hard to achieve.
But imagine if we could harness those forces to make better decisions and improve profitability, by integrating the messy human stuff with the rational business stuff.
So let’s examine the messy stuff — feelings, hopes and fears — using three topics that every business owner knows.
Who Really Makes the Decisions?
Let’s start with the decision-making process. Most of us believe that we start by looking at our data. We plug it into tools like spreadsheets, we assess the outcomes and we make our decision.
But the process often actually works quite differently because the messy stuff gets in the way. For instance, we may begin the decision-making process with a deep-seated bias, such as our love for our idea or product. We have an innate sense of the direction we should go. The problem is that we then use our tools and data to justify our decisions. This innate sense is so strong that we can ignore conflicting data.
This is the “illusion of superiority” at work. It’s a well-known cognitive bias that results in thinking our ideas, our products and our decisions are better than they really are.
In a 1991 study, one million high-school students were surveyed, and only 2 per cent of them stated that they were below average in leadership ability.
This bias is rooted in biology. It’s primitive, deep and powerful. It helps us survive by driving us forward. It gives us hope when an objective analysis might lead to despair. But it also affects rational thought and, therefore, our decision making.
Worse, most of us (85 per cent in one study) suffer from a bias blind spot. We can recognize biases in others, but we fail to recognize that we are similarly biased. This causes us to minimize the value of other perspectives without realizing it.
Think how much better our decision making would be if we could see past the messy stuff — our own feelings and biases — and properly consider all the available data. The key to improving our decision making is to become more aware of our biases and blind spots by inviting more perspectives and data into our process — especially from our customers.
Who’s in Charge of Our Conversations with customers?
Another big topic for business owners is customer relationships. Too often our customer conversations get reduced to tugs-of-war. They want to pay less, but we want them to pay more, so we find ourselves haggling over terms in a zero-sum game, like two kids squabbling over a pie. These discussions may seem rational, but once again they are rooted in the messy stuff — primal fear and protectionism.
But can we actually use the messy stuff to change our customer relationships? If emotions can so powerfully influence our thinking and behaviour, can they be harnessed to improve our business and create different kinds of conversations with our customers?
As it turns out, our customers are human too. They’re just as affected as we are by zero-sum conversations. But equally important, they too are powerfully motivated by hope.
So let’s start our conversations there. Let’s discuss their futures and aspirations. Let’s demonstrate that we understand their dreams and are committed to supporting them. Let’s build some trust and create win-win scenarios that expand both of our pies. This goes a long way toward reducing fear and protectionism and opening up conversations based on hope and trust.
Who’s Really Setting Our Prices?
Next, the messy stuff causes many of us to leave money on the table because of our pricing process. This is an awful problem because a bad price hurts revenue and gross margin every month.
Two main factors negatively affect our price setting. The first is that we’re not well schooled in how to set prices. This is totally understandable. Setting prices is complicated and boring. In a study of pricing professionals in large firms, PriceWaterhouseCoopers found a large majority of respondents had a fundamentally flawed process. So even the experts don’t do it well.
But a second factor undermines even good pricing. This factor is the business owner’s personal level of confidence — the messy stuff. When we are unsure of ourselves, we are naturally more reluctant to ask for full value for our products and services. These deep-rooted primal feelings get in the way of rational price setting.
I teach a pricing course for business owners, and I’ve watched perfectly good pricing models get completely undone by a lack of confidence. I believe that many business owners wrestle with this.
But what if we didn’t have to? Imagine what we could do with the additional revenue.
The solution is to take a renewed sense of our company’s value and feed it into our pricing model. We know we do good work. We know we have great offerings. Let’s push ourselves to reflect more of that value in our price.
Embracing the Messy Stuff in Business Ownership
When we embrace the messy stuff, we make better decisions. We price more effectively. We have richer customer conversations. We become more successful business owners. So let’s go through the steps one more time:
- Speak to your customers about their aspirations, and better understand what they truly value. Incorporate this value into your offerings.
- Use your improved understanding of customers to bolster your confidence, and then set a price that’s fair to both of you.
- Be aware of your blind spots, even though you can’t see them. Listen hard to other perspectives, and give them more weight in your decision-making process.
We all know the saying “it’s just business,” but when we understand that business comes with a lot of very human messy stuff, things begin to get a lot less messy and more clear.
This article is from the February/March 2018 issue