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The Balance Pole

Hanging on to your tools in the wrong circumstances can have tragic results.

Karl Wallenda was the patriarch of a family of the world’s greatest high-wire performers. He, along with a host of family members, invented and performed many stunning acts, such as the seven-person pyramid: four on the wire, two balanced on their shoulders, and the seventh seated in a chair above them. After premiering in Milan in 1925, the troupe was soon signed by John Ringling’s “Greatest Show On Earth,” where their first performance was met with a 15-minute standing ovation.²⁰ They never used a safety net.

“Life is being on the wire,” Karl would say. “Everything else is just waiting.” On March 22, 1978, at the age of 73, he was walking a high wire between two towers of a seaside hotel in Puerto Rico when a gust of wind threw off his balance. He crouched, then lost his balance again. He began to fall, grabbing for the wire with one hand while he held his 23-foot-long, 36-pound balance pole with the other. Unable to maintain his grip on the wire, he fell 120 feet to his death. His grandson said:

People felt he could have saved himself if he had just dropped the pole. But he would never do that. He taught us never to drop the pole.²¹

Even the most useful tools have their limits, and knowing when to let go of them can make all the difference.²²

Knockout strategies often let go of what others have considered indispensable elements. Southwest Airlines bypassed the hub-and-spoke system that its main competitors used; companies like Amazon and Netflix did away with the brick-and-mortar-based thinking that kept existing companies stuck in the past.

To choose just one example from today, the “free stuff revolution” means that large numbers of customers can pay nothing for items that include air travel, rental cars, international telephone calls, and daily newspapers—often, advertisers pick up the tab.²³ Europe’s Ryanair, for example, which flies 190 airplanes among more than 150 destinations, gave away a million and a half free seats in 2009.²⁴

Letting go of the age-old question, “How much will customers pay for this?” is the first step. Replacing it with “Who will pay for this?” comes next.

What tools are you, or your organization, hanging on to when they need to be let go? Elsewhere in this book (see “The Mile Run”) we note that Clayton Christensen has recommended that companies need to drop, or at least reconfigure, some very precious tools of financial analysis if they want to truly stimulate powerful innovation. Adrian Slywotzky demonstrated in his book The Upside that Toyota might never have developed the Prius had it clung slavishly to its risk-assessment tools that told it that there was about a one in twenty chance of success for that venture.

More hair-raising for executives might be the outcomes of a 2008 conference that gathered many of the brightest business minds, academic and applied, of our day to consider two related questions:

What is it about the way large organizations are currently managed that will most imperil their ability to thrive in the decades ahead; and given this, what fundamental changes will be needed in management principles, processes and practices?

Twenty-five “moonshots for management” emerged, each of which requires that some precious, hard-won tools be dropped by someone.²⁵

At a more operational level, consider how industry leaders have dropped old tools and developed new, more effective ones. In hiring, for example, determining skill qualifications such as education and experience has long been an essential tool for employee selection. Yet Southwest Airlines spokesman Terry Millard says the rule at Southwest is “Hire for attitude, train for skill.”²⁶ Southwest applies the rule even to pilots, according to Millard.

Regarding customer satisfaction, so much has been spent for so long on exhaustive, detailed surveys—yet Frederick Reichheld of Bain & Company argues that just one survey question—Would you recommend this company to a friend?—is all that’s required to predict top-line growth in most circumstances.²⁷ General Electric, American Express, Intuit, and Procter & Gamble are among the companies that have dropped or modified older tools and picked up this one.²⁸

What could be a more mundane, unquestioned tool than the invoice form? James Collins has hailed the California company Graniterock for adding the following words at the bottom of every invoice: “If you are not satisfied for any reason, don’t pay us for it. Simply scratch out the line item, write a brief note about the problem, and return a copy of this invoice along with your check for the balance.” In its new manifestation, the old invoice is not just a tool for collecting what’s owed; it’s a mechanism to drive customer satisfaction throughout the organization.

Graniterock refers to the policy as “short pay.” Collins writes:

To put the radical nature of short pay in perspective, imagine paying for airline tickets after the flight and having the power to short pay depending on your travel experience—not just in the air, but during ticketing and deplaning as well. . . . Or suppose your cell phone bill came with a statement that said, “If you are not satisfied with the quality of connection of any calls, simply identify and deduct those from the total and send a check for the balance.”²⁹

For individuals, there is probably no tool more deeply ingrained in us than the complex of behaviors that we call “personality.” Yes, personality is a tool: among other things, it’s the mechanism we use to try to get what we want from life. Yet behind the most popular training programs of the last half-century—situational leadership, social styles, consultative selling, learning styles, and principled negotiation, to name just five—lies the premise that true effectiveness often will require a leader to “drop” the style he or she is most comfortable with and use other ones in order to build truly effective long-term relationships.

We all create “balance poles” to stabilize us and allow us to move forward during the high-wire act of making it through our lives and careers. Sometimes, when the wind shifts, just for a moment or maybe for the longer term, we need to let go of them.

Dropping the Wrong Tools

History is filled with examples of institutions and individuals dropping the wrong tools, for many reasons, including the glitter of faddish newer tools, misperceptions of what they really need, and just plain negligence. This is an excerpt from an address in October 2008 by former Federal Reserve chair Alan Greenspan.³⁰

Another important requirement for the proper functioning of market competition is also not often, if ever, covered in lists of factors contributing to economic growth and standards of living: trust in the word of others….

Wealth creation requires people to take risks, and thus we cannot be sure our actions to enhance our material wellbeing will succeed. But the greater our ability to trust in the people with whom we trade, that is, the more enhanced their reputation, the greater the accumulation of wealth. In a market system based on trust, reputation has a significant economic value. I am therefore distressed at how far we have let concerns for reputation slip in recent years.

Reputation and the trust it fosters have always appeared to me to be the core attributes required of competitive markets. When trust is lost, a nation’s ability to transact business is palpably undermined. In the marketplace, uncertainties created by not always truthful counterparties raise credit risk and thereby increase real interest rates and weaker economies.

During the past year, lack of trust in the validity of accounting records of banks and other financial institutions in the context of inadequate capital led to a massive hesitancy in lending to them. The result has been a freezing up of credit.