Twiddling Your Levers

Make sure you know which levers you are really pulling

When building a business there are many levers you can adjust. Security. Time to Market. Customer Satisfaction. These are just some examples and it will vary per business. This is not news to you, I am sure.

Also not news is that when adjusting one lever, another lever is often moved by association. If you choose to throw an elaborate party for staff, costs go up and your profits go down. Pretty basic stuff.

What is often misunderstood or missed in the heat of the moment is that all the levers that are important to your business are completely intertwined in ways that we cannot see or predict. To be a good business leader you need to be constantly evaluating how your levers are moving without your knowledge.

Give me some examples

Ok, lets talk about that party I mentioned. If you throw a holiday party for staff, the business costs lever goes up. The staff work satisfaction lever goes up as well. But if you are doing it right, the customer satisfaction lever should go up as well. How? Because your happier, more engaged staff will be nicer to customers and be willing to go the extra mile to make things run well. This can also move the revenue lever higher.

Of course, this is all speculation and unmeasurable. That doesn’t make it any less real though.

Let’s take another example. Say you build software as a service. Say you have had a security incident, or maybe sales is telling you that you need to support an SSH encrypted tunnel using Client Certificates that runs through the TOR network or they can’t get this latest sale. Or whatever.

Figuring out what levers will move if you make the decision to add that feature is complicated and varied. The obvious one is the security lever goes up. Great! Everyone loves more secure software, right? Surely that will garner more sales. Quite possibly. At least for a certain market segment. Let’s do it!

What could go wrong?

Well, the obvious problem is the opportunity cost. If we do this we can’t do something else. There may be other things we could be doing that will get us even more sales, but let’s put that aside for the moment.

Say we choose to do this. What levers will change along with the security lever? Sales will go up, hopefully, as well as customer satisfaction. Time to market will take longer, but that is true for any work you choose to take on. Still, it should be accounted for as there are probably other things in this release that may be even more important than this that is critical for your product’s success. Maybe you and a competitor are both going to release some major feature and being first-to-market is important.

What else? Well, code complexity increases. What does this mean? It means that time to market takes longer permanently to a small degree. This is the nature of software. As you add more things, it gets more complex and harder to maintain so your velocity slows.

Risk of bugs increases. When code complexity increases, the code base is harder to understand and there is a higher chance that someone will inadvertently create a bug in a future release.

User interface complexity gets harder. If you add a new feature you most likely have to add something to the UI that allows you to adjust said thing. This can make the software harder to use.

Remember when I said that customer satisfaction got better from adding more security? That is certainly true for those customers that wanted this feature. But what about customers that don’t want or need this? Well, then customer satisfaction can have a delayed response and start to drop from the other levers that were negatively affected. This can happen right away but is just as likely to happen weeks or months later, making it hard to pinpoint the exact cause. Of course, when customer satisfaction drops, customer retention and sales follow suit. All from making the software “better”. If you are not careful, it is quite possible to “secure yourself right out of business”.

The secret of painting a Monet

The art of business is understanding your levers and making strategic decisions when moving your business forward. Just because one or more levers are negatively impacted by a decision doesn’t necessarily mean the decision is wrong. It is impossible to maximize every lever. You just can’t, so stop trying.

But you should be thinking of the indirect consequences of every decision. Don’t kid yourself that multiple things aren’t impacted by seemingly unrelated things. On the flip side, don’t fall into the trap of not moving forward with a decision until you have completely satisfied yourself that you have thought of all possible consequences. This just leads to analysis paralysis. Time to market is important. Making timely decisions is one of the key factors of success.

Since it is impossible be omniscient, you should constantly be looking at what is happening today and decide if something you did in the past moved a lever you weren’t expecting. The most effective leaders are constantly learning and reevaluating their mental model of the world and applying that to their business.

Lastly, your product or service should be opinionated. Be clear on what your product or service is and who it is made for, and then own it. By doing that you are, by definition, not making something for everyone. Companies whose target market is everyone rarely make something that anyone is really interested in.