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According to business educator and entrepreneur Keith Cunningham, the secret to financial success is to avoid making stupid mistakes. And the key to making fewer stupid mistakes is to think before you act. If that sounds easy, it’s easier said than done. However, Cunningham offers assistance by describing some of the most common stupid mistakes executives make and showing how you can avoid them.

In this guide, we’ll consider the top mistakes that Cunningham urges you to avoid and explain his methodology for thinking through business issues so you can avoid as many mistakes as possible. Along the way, we’ll cross-reference Cunningham’s ideas with complementary insights or elaborations from authors like Ryan Holiday (Ego Is the Enemy, The Obstacle Is the Way), Geoffrey Moore (Crossing the Chasm), and Edward de Bono (Six Thinking Hats).

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But even if you end up courting a different customer base, it might still behoove you to understand how your current customer base perceives you. In Positioning, Al Ries and Jack Trout elaborate on Cunningham’s assertion that you need to understand where you are now before you can make realistic plans to get to where you want to be: People outside your company often perceive your company differently than you do, and it’s possible that your desired future customer base will see your product differently than you expect them to. By understanding how current customers perceive you, you might get a firmer grasp on how your desired future customer base will perceive you and how to best appeal to them.

Trying to Be Everything to Everyone Instead of Finding Your Niche

As you tailor your product to your prospective customers’ needs and desires, Cunningham cautions you not to make stupid mistakes like ignoring competing products or trying to make your product appeal to everyone instead of to a focused target market.

He observes that even within a target market, there are three things you can focus on to differentiate your offering from the competition: low cost, high quality or performance, and customer relationships (such as providing exceptionally fast service or making every customer feel like she’s getting special treatment). In Cunningham’s experience, successful companies stand out as superior in one of these three areas, keep up with competing products in a second area, and neglect the third area almost entirely. Meanwhile, products and companies that try to focus on all three tend to die off because they’re spread too thin and not adequately differentiated.

(Shortform note: Some analysts might disagree with Cunningham’s assertion that you’ll be more successful if you limit your focus to excelling in just one of these three areas. For example, in Ten Types of Innovation, Larry Keeley and his co-authors argue that to be successful, a new product typically needs to excel in at least five out 10 standard categories. Product performance and customer service are two of Keeley’s 10 categories, while three other categories (your company’s capabilities, organizational structure or efficiency, and type of revenue stream) would dictate your product’s cost.)

The Importance of Positioning Your Product in Its Own Niche

In Crossing the Chasm, business innovation consultant Geoffrey Moore advises you to tailor your product exquisitely to the needs of a particular niche market whenever you’re introducing a new product. The reasoning behind his recommendation provides some complementary insight into Cunningham’s ideas.

As Moore explains, every product and company occupies a certain position on the market landscape in customers' minds. For example, maybe customers think of your product as the premium model, the over-priced knockoff, the best-bang-for-the-buck, or the women’s version. Your marketing can influence customers’ perceptions to some extent, but not nearly as much as word-of-mouth from other people with similar needs or tastes.

If you make your product a balanced mix of everything, as Cunningham warns you not to, it will be hard for potential customers to mentally place your product on the market landscape, because it doesn’t stand out in any particular way. This makes them less likely to remember it, let alone buy it. But if you tailor it specifically to one niche (especially a niche that doesn’t have a clear market leader yet), it’s easy for people to remember your product as the leader in that niche. And in a small, close-knit market sector (for example, the market for radiation-hardened inspection cameras, or the market for sushi in a certain city), it’s easier for word-of-mouth to get around, which will amplify the effects of your marketing. This helps to explain why companies and products that try to appeal to everyone tend to die as Cunningham observes.

Confusing Goals With Plans

According to Cunnigham, another stupid mistake that frequently tempts executives is to establish a goal or vision for improving the company but fail to establish a detailed plan for achieving it. Just thinking about a desired end state doesn’t help you get there, no matter how much you want to. To reach it, you need to identify what obstacles stand between you and your goal (you’d already be there if nothing was holding you back) and figure out exactly what you need to do to overcome those obstacles.

Cunningham further explains that, while a detailed plan enables you to progress toward your goals, letting your plans become sacred is another stupid mistake. The value of a detailed plan is that it’s actionable (unlike a goal), and it gives you a standard against which to track your progress so you’ll know when you begin to deviate from it, as you inevitably will at some point. Deviations aren’t always a bad thing—sometimes you may discover opportunities along the way that are better than your original goal. But it’s important to know when you start to deviate so you can reassess the situation and update your plans as needed.

(Shortform note: In The 33 Strategies of War, Robert Greene elaborates on the relationship between detailed, actionable plans and the ability to adapt to changing circumstances. He says successful generals would often compose detailed battle plans for a variety of possible scenarios and contingencies so that they could quickly change course if the situation warranted it. This kind of branching plan can also be useful in business, enabling you to adapt quickly to changing circumstances.)

How to Develop Your Plan

In Execution, Larry Bossidy and Ram Charan elaborate on the process of turning your strategic goals into actionable plans. While they acknowledge that every situation is different, and thus will require a unique plan, they recommend using the following standard workflow for creating your plan:

Step #1: Identify which departments or teams in your organization need to be involved in the plan. Determine what each team’s role in the plan needs to be, and ask team leaders to draft the portions of the plan that their teams will be responsible for.

Step #2: Hold a meeting with the team leaders to discuss assumptions they made in drafting their portions of the plan, and make sure everyone is on the same page.

Step #3: Assemble a complete plan from the individual portions that the team leaders submitted. Work out any differences, discrepancies, or conflicts between them.

Step #4: Identify contingency plans that can accommodate shifting circumstances.

Step #5: Wrap up discussion and secure commitments from everyone to ensure alignment with the plan.

Step #6: After the meeting, send a memo or otherwise follow up with the team leaders, summarizing each person’s commitments and short-term benchmarks.

Step #7: Assess progress toward those benchmarks at quarterly review meetings. Presumably, this is where you’ll also analyze any deviations from the plan and assess whether any parts of the plan need to be changed.

Using the Wrong Metrics

As you track your progress to plans, Cunningham stresses the importance of using the right metrics. People tend to focus more on tasks that get measured and reported because the results will reflect on them more strongly, and people want to look like they’re doing well at their jobs. Thus to set up your plan for successful execution, you need to select metrics that will focus people’s attention on the right things.

For example, suppose you’re running a telemarketing business. If you track how many calls your marketers make as a measure of how well they’re doing, that will incentivize them to make as many calls as possible—potentially forfeiting some sales if they cut their calls short to get in as many as possible instead of taking time to address customers’ questions and concerns. But if you track the number of sales instead, then they’ll focus on making sales, instead of just on making calls.

It’s also important to select metrics that enable you to make corrections to your plan early enough to avoid problems, instead of merely alerting you to problems that have already come up. Cunningham notes that standard business KPIs (key performance indicators) like monthly profit and loss usually measure results, and thus only alert you to problems after the fact. He advises you to find the causes of these results and a way to measure the causes, giving you leading indicators that you can use to steer your company toward the results that you want.

Measuring What Matters

In Measure What Matters, venture capitalist John Doerr describes a method for tracking progress on plans as Cunningham suggests. He calls it the OKR system, for “Objectives and Key Results.” This approach allows you (and everyone else) to easily see how the plan is progressing and where things may be deviating or falling behind. As its name implies, the OKR system involves tracking the objectives and key results of each team and individual worker in the company.

Doerr describes objectives as high-level goals, but he also says they must be tangible and action-oriented, so these could be milestones or other interim achievements stipulated by the plan that you’re executing. Doerr insists that each entity, whether individual worker, team, or department, should only have three to five objectives at once so that their focus doesn’t get spread too thin.

Key results are actions or sub-goals that support each goal and have specific deadlines. For example, if the objective is to increase the size of the workforce in support of a certain project, one of its key results might be to interview at least five people for a certain position and hire one of them by the end of the month. In the context of Cunningham’s discussion of tracking both cause and effect, you can view key results as causes and objectives as effects.

Again, to maintain focus, Doerr says there should be no more than three to five key results for each goal. He also recommends that each worker and team set most of their own key results, although it’s OK for their superiors to set their objectives. This gives superiors the tools they need to focus their staff on the right metrics associated with the objective, while also ensuring that employees have buy-in and understand what they’ll do to achieve their objectives.

Misunderstanding Corporate Culture

One stupid mistake that, according to Cunningham, can have a devastating effect on productivity is misunderstanding the concept of corporate culture. Specifically, thinking that you can create a culture of high performance by creating a few unique job perks is stupid.

He explains that corporate culture is the code of conduct that dictates how people in the company act by delineating the difference between acceptable and unacceptable behavior. Establishing and maintaining a positive, high-performance culture requires a constant dialogue about what’s acceptable and not. And if you fail to enforce the rules, that will undermine the culture.

Disciplinary actions can be effective for correcting unacceptable employee behavior, but they can also create a culture of fear, which produces less-than-ideal performance. Cunningham observes that every employee wants to succeed. So before you resort to firing or otherwise disciplining an employee who isn’t meeting your expectations, he recommends assessing whether she understands your expectations and whether she has the skills and resources to meet them. If not, you may be able to clarify your expectations or enable her to meet them by providing the training or support she needs.

Comparing Perspectives on Corporate Culture

Many business experts might contend that corporate culture is more than just the distinction between acceptable and unacceptable behavior, and thus it’s more difficult to change than by simply firing or disciplining an employee or by clarifying and enforcing expectations.

For example, when John Kotter discusses changing corporate culture in Leading Change, he defines culture as the set of norms, behaviors, priorities, and shared values that persist and are passed down within a group or organization. As such, Kotter asserts that training employees, having discussions with them to clarify new expectations, and enforcing behavioral expectations is only the first step toward changing culture.

Often, significant changes to corporate culture lead to significant employee turnover, and you need to be careful to hire people whose personalities will fit well with the culture you’re trying to create. The change is not complete until people’s attitudes have shifted to the point that the new culture becomes self-perpetuating.

Avoid Mistakes by Taking Time to Think

Cunningham’s solution to the problem of making stupid mistakes is to set aside blocks of time for deep thinking that force you to confront issues and answer questions you might otherwise have failed to consider. Schedule thinking sessions at least twice a week and ideally every day.

Each thinking session is one hour long: You spend the first 45 minutes pondering questions or problems and jotting down possible answers or solutions. Then you spend the final 15 minutes evaluating the ideas you came up with and documenting any that are good enough or important enough to warrant following up on—whether in a future thinking session or as actionable business directives.

(Shortform note: In Six Thinking Hats, psychologist Edward de Bono elaborates on the process of thinking, explaining that there are six fundamental types of thinking. De Bono observes that our thinking is often a jumble of all six types and argues that you can think more coherently and productively by consciously separating them. Cunningham appears to be doing just that with his thinking sessions by dedicating the first 45 minutes to generating ideas (what de Bono labels “green hat thinking”) and then 15 minutes to evaluating them (“black hat thinking”).)

Cunningham stresses the importance of minimizing distractions during your thinking sessions so you can focus deeply on questions and issues. In addition to blocking off the time in your schedule so that you won’t be interrupted, he recommends setting aside a specific place for thinking, such as a separate desk or a chair in a corner of your office where your computer screen and other reminders of pending tasks will be out of sight. He even has a separate pen and notebook that he uses only for documenting questions and ideas during thinking sessions.

(Shortform note: We’ve compiled additional methods, tips, and resources for avoiding distractions and focusing deeply in a Master Guide to Focus. For example, some authors observe that you’re naturally better able to focus deeply at a certain time of the day, which can vary depending on your chronotype (your body’s particular circadian rhythm). Others observe that consistently engaging in a rewarding activity, such as a relaxing walk outdoors, right after your sessions of intense thinking can train your brain to associate your thinking with the pleasurable break that follows, reducing stress and making it easier to maintain your focus.)

What to Think About

Cunningham advises you to start each thinking session with at least one question that you want to ponder but no more than three so you can focus deeply on them and get past the obvious, superficial answers to more original, insightful answers. He observes, though, that once you start thinking about a question, it often spawns other questions. Also, most important questions take more than one session to really think through, so don’t worry if you don’t answer all your questions in a given session.

What specific issues should you ponder in your thinking sessions? Aside from contemplating whether you’re making any of the mistakes that he calls out specifically, Cunningham discusses a number of general questions you’ll probably need to ask from time to time, so consider starting your thinking session with one or more of the following:

1) What questions or issues are most important for you to consider right now? Cunningham urges you to periodically ask yourself whether you’re asking the right questions. He notes that when you can’t seem to come up with a good answer to a question or problem, it’s often because you’re asking the wrong question.

2) What are the real problems you need to solve? Are the problems you’re currently trying to solve the actual root problems or just symptoms of an underlying problem? You might spend a thinking session listing possible causes for a given problem, or listing actions and events and asking yourself whether the problem would go away if a given event happened or stopped happening.

3) What can you do to solve a certain problem? Once you figure out what the real problem is, ask yourself what you (and your organization) can do to overcome it. We’ve discussed the difference between goals and plans. Solving the problem is your goal, now you need to plan your solution. As you make your plan, ask yourself what you need to change about your corporate focus or strategy, as well as how you’ll need to reallocate resources and rethink your metrics to support the change of focus.

4) What are your assumptions? As you consider any change or new venture, Cunningham advises you to think about the assumptions you’re making in assessing its potential. Consider whether the assumptions are reasonable and how you could validate them. Unfounded assumptions can lead to stupid mistakes, especially if you don’t realize you’re making the assumption until it proves to be false. We discussed risk analysis earlier. You’ll want to consider the risk of each assumption turning out to be wrong.

5) What are the unintended consequences? Cunningham observes that even if none of the risks that could hinder the success of your project are realized, the project itself could have unintended consequences that pose another kind of risk. For example, maybe you roll out a new product with special safety features, and people trust the new features so much that they take bigger risks when using it, such that the new safety features actually result in an increase in injuries.

Rethinking Human Errors

In The Design of Everyday Things, engineer and cognitive psychologist Don Norman explains how misconceptions about human error can prevent us from correctly identifying root causes, perpetuate poor assumptions, and precipitate unintended consequences. Thus, you may be able to make your thinking sessions more effective by rethinking how you think about human error in light of Norman’s discussion.

Norman observes that when people are looking for the root cause of a problem, especially a problem that caused an accident, they tend to conclude the search as soon as they find a person to blame. If someone did something wrong and that caused or substantially contributed to the problem, then the root cause gets labeled as “human error,” and the investigators rarely stop to ask why the person made the mistake. Often, Norman argues, human errors are actually a predictable result of poorly designed systems.

As he goes on to explain, frequently the problem is that people who design machines or other systems unconsciously assume that their users don’t make mistakes. But all humans have physical and mental limitations. For example, you can only focus deeply on a given task for a certain amount of time, and even then, interruptions can disrupt your focus. And a person may not remember to do everything she’s supposed to do if her focus lapses or is disrupted.

Norman warns that when real, fallible people operate systems that were designed for hypothetical infallible people, the unintended consequences can be severe. For example, the SL-1 nuclear reactor was designed such that the control rod (which slides in and out of the core to adjust the power output of the core) had to be lifted slightly by hand to attach it to the mechanism that would raise and lower it in normal operation. The operating procedure for the reactor specified that it should never be lifted more than four inches by hand.

One day, when workers were re-starting the reactor after it had been shut down for a while, the control rod got stuck. When a worker pulled on it hard enough to get it moving, he accidentally lifted it too far. This triggered a power surge in the core, causing the reactor to explode and killing the workers.

Thus, as you contemplate whether you’re solving the right problems, remember to look beyond human error to see if a system, device, or process needs to be redesigned. As you try to identify your assumptions, consider how you expect customers, employees, and other people to behave, and ask yourself whether your expectations are consistent with normal human limitations. And as you contemplate unintended consequences, don’t forget the possibility of people misusing your product or system.

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