The business world can be a ruthless place to survive in. However, there is another forgotten side of this business world – the human side. The human side of an organization, also known as the soft-edge of the company is about attributes that are more cognizant of human relationships.
Rich Karlgaard’s The Soft-edge (2014) shows the importance the human side has in the business. Furthermore, it charts out the importance of reviving the soft-edge element of business and discusses the five supporting pillars of the soft-edge.
To understand what exactly Karlgaard means when he discusses ‘soft-edge’, it is imperative to understand the 3 key elements of a successful business. If we consider a business an equilateral triangle, then at its base is a strategy, and the two supporting sides are the ‘hard edge’ and the ‘soft-edge’.
- Strategy – The strategy of any business forms its base foundation. It includes the plan of functioning, understanding of the market, analysis of competitors, etc.
- The Hard Edge – The hard edge refers to the actual functioning of the business on a day-to-day basis. The hard edge is the execution of the strategy. The successful running of the hard edge can be measured by figures and statistics such as production speed, logistics, and efficiency of ROI.
- The Soft-edge – This refers to the deeper meanings that the business communicates to its employees and customers. The soft-edge reflects the values and principles of the organization. It is unquantifiable and is at the crux of the success of a company and clearly defining the difference between a good company and a great one. The soft-edge can, however, be measured to an extent by a companies values, creativity, innovative spirit, and culture.
Most companies begin with a great strategy and are adept at the hard edge attributes of the business. However, to understand how an organization can bridge the gap between good and great is to make sure that it cultivates and maintains its soft-edge attributes as well.
There are five important pillars of the soft-edge of a company that are discussed ahead with relevant cases that show how the pillars work.
Trust is the first and most important pillar of the soft-edge. Getting people to trust the company is a tough job and maintaining that trust is even tougher. Trust, both, internal – that is the trust of the employees within the company – and external – meaning the trust of the customers – are equally important.
According to an international study and research on organizational trust, called the Edelman Trust Barometer, trust in a company affects its reputation more than the quality of the company’s products and services.
Example 1: The ratio of insurance contracts to assets of Northwestern Mutual – one of America’s largest insurance companies – is 7:1. This proves the amount of trust the customer has in the services and values of the company, considering they are willing to trust the company with their money. This is an excellent example of external trust.
Example 2: The network storage company NetApp has been featured a number of times in the Forbes List of best working places and most innovative companies. During a rough patch when they had to cut staff, the executive management team traveled to affected offices and delivered the bad news personally. Their utmost respect for their employees in this regard made the employees work harder during that period in spite of knowing that they could be laid off too. This shows the level of trust the employees have in the company.
What makes a company smart? Is it hiring clever people? Or is it staying ahead of the competition?
At a glance, it is not possible to ascertain what makes a company smart, yet there is something definite that defines a smart company. And that is the ability of the company to seek continuous improvement in its workings. A smart company is one that isn’t afraid of change and consistently accepts and learns from mistakes. Smart companies not only learn from their own mistakes but learn from the mistakes of other companies too.
Case 1: David Chang, the chef, and owner of Momofuku (a well know restaurant group), uses the concepts of kaizen and hansei, meaning continuous improvement and acknowledgment of your own mistakes respectively. He uses these principles and gives his staff the freedom to try their own things. This practice helps them learn and come up with new and improved dishes.
Case 2: Mayo Clinic, the healthcare giant, to inculcate better hospitality skills among its staff, sends them to two of the world’s best companies in the hospitality industry for training. Using the concept of lateral thinking, they ensure that their employees imbibe skills not generally found in the healthcare industry.
A company has a better soft-edge when it applies smartness in their working processes, learning from competitors and other companies and making inculcating smartness an on-going process.
It is a proven fact that humans function better in smaller groups. That is why our social construct has the concept of family, community, and tribe. Working in smaller groups comes to us instinctively and bring efficiency in communication and processing. In the words of Jeff Bezos, the CEO of Amazon, ‘A development team should be small enough for two pizzas to feed them all.’
Case 1: Porsche, saw an increase of 19% in their profitability and a four times increase in production after they implemented the strategy of creating mini-teams to focus on improving products and development processes.
Case 2: SAP, the German software company, saw a reduction in development time from 14.8 months to 7.8 months on an average, after moving to smaller teams of 8 to 12 people after being inspired by the team size changes made by Porsche.
Apart from size, diversity in teams makes a big difference too. A culturally and ethnically diverse team gets different perspectives from its members. People from different backgrounds working together on a project bring different skills and beliefs to the mix making the team function more effectively.
Case 3: Tony Fadell, the CEO of Nest Labs, a company that produces smart thermostats, uses the concept of diversity by putting together marketers, engineers, designers, and people from other departments together to work while developing a product.
How can taste give a company or its product the soft-edge?
Taste is an innate aura of intelligence and intrigue that any company or its product and service should exude. It is a quality that cannot be seen but is surely felt by a customer. It gets them excited and makes them feel smart. Taste, though an abstract concept gives a company its soft-edge and should be on the list of must-have strategies.
Case 1: Tony Fadell of Nest Labs believes in giving his customers a tasteful product, even though it’s just a thermostat. His belief in the concept of taste led to the product not having any buttons, being remotely controlled via Wi-Fi, it comes in bamboo boxes, reinforcing their commitment to the green revolution and reduction of waste. It comes along with a special screwdriver and screws that give customers the freedom to install it wherever they prefer.
Case 2: The minimalistic design of Apple products comes from the inspiration John Ive found in designer Deiter Rams of Braun, who, in turn, found his inspiration from the Bauhaus School of Design.
Case 3: Starbucks’ Howard Schultz used the concept of taste to create a product that married the Italian coffee culture with American taste for ambiance. He reinvented the way Americans reinvented coffee.
Taste is also defined by people’s affinity towards familiar aesthetic designs and objects. Emotions and memories associated with the look and feel of a previously loved product can pave the way for people to have a liking for a new product that emulates these.
Stories about a company have the ability to shape peoples’ perceptions about it, and its products. The story gives the company’s brand a purpose. Stories tell people where the company comes from. It also helps describe what the company is aiming at, and how it intends to get there. Apple’s ‘conceptualized and built in a Palo Alto garage’ story has humble beginnings that resonate with people.
Case 1: Northwestern Mutual holds an annual two-day meeting, wherein over 10,000 financial representatives share stories and experiences. They share challenges and create learning opportunities for others via their failures and successes.
The company follows a 10:3:1 rule. The rule states that for every 10 sales calls a rep makes, he will get 3 meetings, out of which he can get one sale. They follow the same principle during recruitment, making possible hires land a sale using the principle. Yes, it is a lengthy process that ups the cost of hiring, but it is a story that the company has maintained, making it part of their identity.
For a story to add to the soft-edge of the company, it should be simple, with straightforward messages.
The Human Side Of Business
The soft-edge isn’t like other business functions and processes. It is in fact, all about the human side of the business. Whether it is taste, trust, team, smart, or story, they all involve refining the human elements that define a company.
Just like a successful formula race winner needs an excellent engine, precise data, and most importantly human acumen to win the race, an organization cannot succeed without the human side.
Companies such as Apple, NetApp, and Northwestern stand out from the crowd because they have cultivated their soft-edge. They give precedence to their relationship with employees and customers rather than simply focusing on hard-edge elements such as business processes, capital, and profit.
Activating the soft-edge for a business or a company involves building trust, being smart by being open to errors and learning from them, creating smaller effective teams, inculcating the habit of having great taste among employees and customers, and finally, crafting an engaging story for the company. Giving these soft-edge attributes more attention is the path to success!