The difference between a profitable business and one that quickly flames out comes in how they respond to adversity, one expert argues.
In a new book, "The Soft Edge: Where Great Companies Find Lasting Success" (Jossey-Bass, 2014), author Rich Karlgaard said that "innovation response" separates thriving companies from those that struggle. Aperpetual, built-in, automatic reaction to challenges and changes, innovation response lets some companies survive the disruptive waves that knock others off their feet.
Karlgaard said the specific set of "soft" factors that make up this response — which together comprise its deepest values, its heart and soul — are now a business's only remaining competitive edge.
"Because unlike shrewd strategy and superb execution, long required for high performance, the soft edge can't be analyzed and copied," Karlgaard told Business News Daily. "Yet the soft edge is often neglected, misunderstood and underfunded."
In a recent exchange with Business News Daily, Karlgaard outlined the five key variables that make up every organization's "soft edge":
- Trust:When it comes to trust, you must ask yourself two questions: Do you have the trust of your externalmarket, customers and shareholders? And do you have the trust of your internal market, employees and suppliers? Customers must trust that your product or service is authentic and robust enough to withstand the immediacy of today's media. And when things go wrong, they must believe you'll do the right thing. Internally, trust underlies effective working relationships. It improves group effectiveness and organizational performance. Maybe most importantly, trust underpins innovation by facilitating learning and experimentation.
- Smarts: Today, "smarts" is much more than what people conventionally think of as intelligence. Unlocking knowledge and supporting learning are pivotal to success. But there's another dimension to being smart, one that relates to a few old-fashioned-sounding concepts like grit, perseverance and hard work. It also requires an ability to learn from others and from your own mistakes.
- Teamwork: Since collaboration and innovation are a must in the global economy, effective teamwork is vital. Yes, humans are imperfect. They all bring different needs, roles and perspectives to every interaction or team effort. But when people work together, they make each other better. They increase accountability, passion and effort; they facilitate learning and catalyze innovation.
- Taste: Clever product design and integration are proxies for intelligence. These features make customers feel smart. If consumers see your product or service as a badge of intelligence, you're far along the road to lasting success. But taste is much more than just good design. It's a universal sensibility, an emotional engagement, which appeals to the deepest part of people. It's wonderment and desire, power and control. And you can see it in those magical products that not only show people at their best, but also make them feel and perform even better.
- Story: In a world in which outsiders can weigh in and have a greater voice on your brand, the ability to create an effective narrative is more important than ever. Used both internally and externally, stories create purpose and build brand. Purpose may be a soft attribute, but it's what gives you steel in your spine, especially when cutting corners might temporarily boost the bottom line and delight shareholders. Externally, stories are used to launch new brands and enhance the image of existing brands. This task is made more difficult by today's many new forms of communication
Karlgaard said too many leaders today, pressured by a tough economy and badgered by shareholders, find it tempting to neglect their companies' deeper values.
"Yes, we are all operating in a turbulent, unforgiving marketplace," he said. "But to create healthy companies, we must put aside the numbers, facts, figures, statistics and analytics that keep us up at night, and instead focus on nurturing our cultures."
Originally published on Business News Daily