The Competitive Advantage of Doing More With Less

The great 18th century American statesman, inventor, diplomat, and author Benjamin Franklin instinctively knew what so many of us in the modern world have for­gotten: frugality and industriousness are the ways to wealth.

I believe that frugality creates a basic competitive advantage that lasts longer than the volatility of markets. When you es­tablish principles of frugality in your life and in your business, you’ll receive abundant recompense, a better handle on inno­vation, and enjoy better staff retention, with less debt and risk. The three global principles of frugality explored in this article are those upon which I founded my firm thirty years ago, so I can claim that they are time-tested.

The first principle is based on the three basic fuels that orga­nizations run on: money, people, and rules.

Let’s not forget the people and the rules in the act of making money. The value of this “alignment” principle is clear: when you forget people and rules for long, failure is likely over time. Witness the cases of Enron and its many imi­tators, as well as all the firms that lose their core talent because they do not operate in a socially acceptable way. Why we have courts, the press, and vigilance in the investment community is so we can remain hyper-focused on good corporate gover­nance and transparency.

The second principle is a more fundamental one for 2012 to 2050. We need to return to a classic sense of “productive re­straint” – to being agents for the good in this world by doing more with less. This second humanistic principle helps explain how physical constraints on water, air, and land have sur­rounded modern man. We must become informed, persuad­ed and delighted by encountering our current limits. You see this in the great book by E. F. Schumacher, from 1973, Small is Beautiful: Economics as if People Mattered. After reading that book when it came out, I spent decades becoming the man holding the frugal enterprising balloons he spoke of, giving each its own inventive buoyancy and lift. And from this I have acquired wealth, freedom and the satisfaction of choosing projects of consequence.

Only in the last 100 to 150 years have large portions of our world forgotten the nature of fair competition and the need for frugality. Our Renaissance, then, is to return to being human in a constrained world, where water, air, and land are not taken for granted. These are as precious as breath. They involve an inward errand into the stark wilderness of restraint and teamwork.

The last principle is that only you can find your competitive advantage for creating wealth. Do not expect your current boss to give it to you, nor your parents or grandparents. You cannot get it from any further formal professional schooling. Business schools are full of cases about teams; and you do need to work with teams. But only you can position yourself and your firm for the more severe future and acquire the wisdom it takes to succeed. “Doing more with less is success”-use that as your life­long mantra. A frugal and fair approach to business prepares you for life, and family, and allows you to celebrate -rather than exploit- society. It will give your life a reason to share.

“When you establish principles of frugality in your life and in your business, you’ll receive abundant recompense, a better handle on innovation, and enjoy better staff retention, with less debt and risk.”

The Power of Loyalty in Doing More With Less

Once you realign your approach to money and people – and establish proper rules for your own and your organization’s approach to competing in this carbon-constrained, swift and severe world – you begin to feel a new power in the loyalty of your stakeholders. Your team – the employees and people around you – then help you chose the right projects to carve, and see the real options that are available to you.

I find this mysterious, curious, and at times, uplifting in that it is unexpected and seldom calculated in your original business plan. But it is worth examining. Somehow, in a sense

When you establish principles of frugal­ity in your life and in your business, you’ll receive abundant recompense, a better handle on innovation, and enjoy better staff retention, with less debt and risk. I find this mysterious, curious, and at times, uplifting in that it is unexpected and seldom calculated in your original business plan. But it is worth examining. Somehow, in a sense that’s both magical and discerning, being loyal to your money and people creates a greater good out of less.

My motto when being the captain of several competitive, contending basket­ball teams was: “Once we find loyalty, we have a team.” During my first two de­cades as a management consultant, I up-dated that mantra to: “Finding loyalty is what enables you to last.” In either case, you only begin to untangle the future of your firm with trust and loyalty in hand. These social values cannot be abstract, or something you think you have. What matters is what others think you have. All the rest is simple cash flow management and protection of your contracts.

So it pays to explore this dynamic of finding loyalty. How do sport teams earn it? And how did I find it? Perhaps the real question is: how will you untan­gle this dynamic as part of your personal and corporate plans?

We start with an empirical observa­tion: there is a relationship between staff selection, your instincts and common­sense, and the chance to frugally earn loyalty. Loyalty turns out to be more prof­itable, and more sustaining, than you ever first anticipated. It is probably more valu­able than compounded interest in most fi­nancial institutions today, so it is an item worth mining for. Keep digging until you find the gemstones in your staff.

My experience has proven my most loyal colleagues to be exceptional. That is why I select staff with extreme caution and reserve – which comes as a result of disciplined thinking. For over a decade, many of the individuals on my team have stood by me, meeting the swift, almost daily changes in assignments beautiful­ly. If you look over their career histories, you’ll find these lawyers, former CEOs and Presidents extraordinary, and ready to go after social capital.

This is an exceptional quality in today’s turbulent world. It isn’t diffi­cult to see why I failed in my selection of some veterans from J.P.Morgan, or when some of my best trained folks left for Goldman Sachs. Loyalty is as pre­cious as a Zuni stone, but more so; it is a shinning gloss on all effort. Loyalty is earned after frugal effort: it comes from others noting that you have carved social value into your effort.

At this point in life, I see the loyalty in my young staffers. Sometimes they talk about finding a pleasure in doing more with less that echoes their parent’s value; often, this notion is new to them. They conserve by taking public trans­portation instead of the limo or the hun­dred-dollar taxi. They carry out impor­tant results one quiet day after the other, efficiently moving forward, achieving social results.

Achieving results through loyalty is the flip side of squandering value by being a knucklehead. You become a magnet for efficient performers this way. I hope you discover and benefit from the impor­tance of loyalty. It takes time, and doing by example; but it does not cost much.

Losing Ground

I would be lying if I said I experienced this richness of loyalty from the start of my business. There were years of waste, stabbing competitiveness, and wrong hires. But what I have found is really quite possible for you now. You stop losing ground when you stop spending energy on wasteful gestures, arguments, competitive fights over price. Instead, you must master your craft like a Zuni stone worker; you need to outsmart the higher facts of scarcity. For example, I have found it more profitable to explain to young hires why I cannot give them something, than to just keep piling up their incentive packages. Scarcity is in­structive; excess is not.

Working smart

This is not the same as the traditional rec­ommendation to “work hard.” Working smart is about not working against your­self, or your loyal colleagues. Working smart is about doing more with less. In contrast, we mistakenly believe in modern capitalist settings that we need to be mean and fierce to get ahead. I hear many popular songs and jingles and clichés about this value in “meanness.”

You know the gruffness I refer to here: from the plane to the train, from the banks to the law offices, we see the damage inflicted by those who lack civil­ity. This hardness lurks in the shadows of most negotiations, which is why Harvard Business School Press has an entire best­selling series on how to deal with difficult people. Although I spent a great deal of time teaching classics in conflict resolu­tion, I now find it better to avoid the con­flict-to outsmart the knuckleheads-before the conflict arises. That’s smart working.

To sum up, most firms that succeed want to attract a frugal set of leaders, a small band of teammates. You can call that team the modern “governance” and “rulemaking body” in a firm. I add to this that in the end, we – like a Zuni fetish – need to withstand the test of time, across several seasons and markets, and not lose ground in hate and regret. Avoiding the wheel spinning and the knuckleheads in your firms gives you something real in return: you find a more frugal group of creativity and loyalty. This gets you much closer to the purposes of money, and the essence of smart working. It opens doors to creativity and satisfaction, making ev­erything you do in business and life feel worthwhile and enjoyable.

By Dr. Bruce Piasecki, from: http://www.europeanbusinessreview.com/?p=6357