Staples’ caution and optimism – The 200 words project

Here’s this week’s 200 word idea from Decisive by Chip Heath and Dan Heath..

Researchers studied companies and their moves in 3 big recessions – 1980-1982, 1990-91, 2000-02. Their moves were broadly focused either on “prevention” (e.g. job cuts) or “promotion” (e.g. investment in new products). They found that neither approach, when used too much, was successful. While prevention focused companies were pessimistic, promotion focused companies were regularly naive and steeped in denial of the gravity of the crisis.

The most successful companies were “multi-trackers” or companies that combined both approaches. For example, in 2000, Staples closed under-performing stores but hired 10% new employees to roll out a new high end service for customers. Office Depot, on the other hand, just cut 6% of workforce and made no comparable investments. 3 years later, Staples was 20% more profitable. It had cut out costs to become efficient but still invested.

AND, not OR, turned out to be good corporate strategy. When faced with cutting 5% off a budget, better to consider cutting 8% in unnecessary areas and spending 3% on future investments.

This applies just as well to our lives, of course – we make our best decisions when we combine caution with optimism.

Optimism CautionSource and thanks to:

‘A study by Kathy Eisenhardt at Stanford University found that the Silicon Valley firms that were the quickest to respond to strategic changes — and respond with a strategy that addressed the changes in their industry — were firms where top leaders considered multiple alternatives at the same time.’ | Chip Heath and Dan Heath