Simon Sinek makes the strong case that the vast majority of businesses, and people for that matter get things backwards. Namely, they start with WHAT and end with WHY, assuming they ever get that far in the first place.
In his aptly named book Start with Why, he arranges how a company should operate into what he calls the “the golden circle,” which looks like this:
What, How & Why
Here’s how describes each:
“WHAT: Every single company and organization on the planet knows WHAT they do. This is true no matter how big or small, no matter what industry. Everyone is easily able to describe the products or services a company sells or the job function they have within that system. WHATs are easy to identify.
“HOW: Some companies and people know HOW they do WHAT they do. Whether you call them a ‘differentiating value proposition,’ ‘proprietary process’ or ‘unique selling proposition,’ HOWs are often given to explain how something is different or better. Not as obvious as WHATs, many think these are the differentiating or motivating factors in a decision. It would be false to assume that’s all that is required. There is one missing detail:
“WHY: Very few people or companies can clearly articulate WHY they do WHAT they do. When I say WHY, I don’t mean to make money — that’s the result. By WHY I mean what is your purpose, cause or belief? WHY does your company exist? WHY do you get out of bed every morning? And WHY should anyone care.” (Sinek 39)
This sounds in many ways like the mission statements that have become so popular of late. But while this may come off as more mindless corporate mumbo-jumbo, answering this question is critically important. And no, just writing some mission statement down and putting it away in your desk never to reference again doesn’t count.
Jim Collins echoes this same sentiment in Built to Last when he notes that:
“Profitability is a necessary condition for existence and a means to a more important ends, but it is not the end in itself for many visionary companies. Profit is like oxygen, food, water, and blood for the body; they are not the point of life, but without them, there is no life.” (55)
And it shouldn’t come as much of a surprise that Collins finds the companies that believe this and act on this belief perform the best over the long run.
With this in mind, we return to Simon Sinek’s argument to “start with why,” and he finds the best example of this mindset in the on-again, off-again biggest company in the world, Apple.
Sinek notes a normal computer company’s ad might go like this:
“We make great computers. They’re beautifully designed, simple to use and user-friendly. Wanna buy one?”
It’s a very WHAT driven message. On the other hand, Apple’s message starts with the WHY behind the company,
“Everything we do, we believe in challenging the status quo. We believe in thinking differently. The way we challenge the status quo is by making our products beautifully designed, simple to use and user-friendly. And we happen to make great computers. Wanna buy one?” (40-41)
For an example of this, just think back to their 1984 Super Bowl ad that took on Big Brother.
Apple’s WHY sets the tone that allows Apple to both design innovative products over and over again and also to demand such loyalty from their devoted followers (and also charge a premium for said loyalty). He describes this process in action regarding iTunes:
“The music industry was organized to sell albums, a model that evolved during a time when listening to music was largely an activity we did at home. Sony changed that in 1979 with the introduction of the Walkman. But even the Walkman, and later the Discman, was limited to the number of cassette tapes or CDs you could carry in addition to the device. The development of the mp3 music format changed all that. Digital compression allowed for a very high quantity of songs to be stored on relatively inexpensive and highly portable digital music devices. Our ability to walk out of the house with only one easy-to-carry device transformed music into something we largely listened to away from home. And the mp3 not only changed where we listened to music, it also transformed us from an-album-collecting culture to a song-collecting culture. While the music industry was still busy trying to sell us albums, a model that no longer suited consumer behavior, Apple introduced their iPod and iTunes, Apple did a much better job of communicating the value of both the mp3 and the mp3 player relative to how we lived our lives. Their advertising didn’t offer exhaustive descriptions of product details; it wasn’t about them, it was about us. And we understood WHY we wanted it.” (Pg. 43-44)
Basically, the recording industry was so busy doing their WHAT (making and selling albums) that they had missed the boat on how technology had changed our culture, leaving a giant void for Apple to fill by offering a better solution (buying individual songs instead of entire albums).
On the other hand, Sinek describes Wal-Mart, which he believes lost its WHY after its founder Sam Walton died:
“In the post-Sam era, Wal-Mart slowly started to confuse WHY it existed—to serve people—with HOW it did business—to offer low prices. They traded the inspiring cause of serving people for a manipulation. They forgot Walton’s WHY and their driving motivation became all about ‘cheap’… The company once renowned for how it treated employees and customers has been scandal-ridden for nearly a decade.” (177)
Wal-Mart is still a huge and profitable company, but even in that department, the company is becoming a bit sluggish.
Why Focusing on “What” Can Lead to Mediocrity
The point for everyone in business — and real estate investors in particular — is that getting caught in the WHAT of business can become a feedback loop of mediocrity. It can also tempt you to cut corners.
Our mission for our management company is to “serve people in their housing needs.” And our goal company-wide is to “build a great and enduring company.” Regarding management, it is the fundamental goal that we will provide high quality housing, maintenance and service, but in return, we also demand that our rules are followed, i.e. we don’t waive late fees.
Namely, we expect a lot from ourselves, and therefore, we expect a lot from our residents — and we won’t waiver on this.
As far as the business goes, I would be the first to admit that our WHY could use some more specificity. But I’m not simply settling for something like “I buy houses.” Yes, we do buy houses, but that’s just the WHAT. When we see an apartment or a large portfolio of houses or a commercial deal, while approaching it carefully, we are not going to exclude this opportunity because it’s outside of our WHAT (or at least, our current WHAT).
I should note this is also why we try to focus on buy and hold. While it’s a much slower process than flipping, I strongly believe this is the best path to long-term wealth and a “great, enduring company.” You can see my case for that here.
Anyway, without an overarching purpose, we can all get caught in what Stephen Covey calls Quadrant 1 activities (urgent and important), or in other words, putting out fires. And we therefore neglect the Quadrant 2 activities (not urgent but important) that can underlie the long term growth of a company. This would include things like developing strategies, networking, etc.
Focusing on the WHAT can very easily get you caught in Quadrant 1. Thus, starting with WHY as Apple does is critical for successful real estate investors.
Investors: How do you make sure you’re focusing on the “why” of your business?
Let me know your thoughts with a comment!