Book Review

Book Review

START WITH START WITH START WITH START WITH WHYWHYWHYWHY

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HOW GREAT LEADERS INSPIRE

EVERYONE TO TAKE ACTION

SIMON SINEKSIMON SINEKSIMON SINEKSIMON SINEK

PORTFOLIO

 

 

 

PORTFOLIO Published by the Penguin Group Penguin Group (USA) Inc., 375 Hudson Street, New York, New York 10014, U.S.A. Penguin Group (Canada), 90 Eglinton Avenue East, Suite 700, Toronto, Ontario, Canada M4P 2Y3 (a division of Pearson Penguin Canada Inc.) Penguin Books Ltd, 80 Strand, London WC2R ORL, England Penguin Ireland, 25 St. Stephen’s Green, Dublin 2, Ireland (a division of Penguin Books Ltd) Penguin Books Australia Ltd, 250 Camberwell Road, Camberwell, Victoria 3124, Australia (a division of Pearson Australia Group Pty Ltd) Penguin Books India Pvt Ltd, 11 Community Centre, Panchsheel Park,New Delhi- 110017, India Penguin Group (NZ), 67 Apollo Drive, Rosedale, North Shore 0632, New Zealand (a division of Pearson New Zealand Ltd) Penguin Books (South Africa) (Pty) Ltd, 24 Sturdee Avenue, Rosebank, Johannesburg 2196, South Africa

Penguin Books Ltd, Registered Offices: 80 Strand, London WC2R ORL, England

First published in 2009 by Portfolio, a member of Penguin Group (USA) Inc.

7 9 10 8 6

Copyright © Simon Sinek, 2009 All rights reserved

“The Sneetches” from The Sneetches and Other Stories by Dr. Seuss. Trademark TM and copyright © by Dr. Seuss Enterprises, L.P. 1953,1954,1961, renewed 1989. All rights reserved. Used by permission of Random House Children’s Books, a division of Random House, Inc. and International Creative Management, Inc., agents for Dr. Seuss Enterprises, L.P.

LIBRARY OF CONGRESS C ATALO GIN G -1N – P UBLI C AT IO N DATA Sinek, Simon. Start with why: how great leaders inspire everyone to take action / by Simon Sinek. p. cm. Includes bibliographical references and index. ISBN 978-1-59184-280-4 1. Leadership. I. Tide. HD57.7.S549 2009 658.4*092—dc22 2009021862

Printed in the United States of America Set in Minion Designed by Victoria Hartman

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For Victoria,

who finds good ideas

and makes them great

 

 

 

 

 

 

 

 

There are leaders and there are those who lead. Leaders

hold a position of power or influence. Those who lead

inspire us.

Whether individuals or organizations, we follow those who lead

not because we have to, but because we want to. We follow those

who lead not for them, but for ourselves.

This is a book for those who want to inspire others and for those

who want to find someone to inspire them.

 

 

CONTENTS

Introduction: Why Start with Why? 1

PART 1PART 1PART 1PART 1:::: A WORLD THAT DOESN’T START WITH WHY

1. Assume You Know 11 2. Carrots and Sticks 17

PARTPARTPARTPART 2: AN ALTERNATIVE PERSPECTIVE

3. The Golden Circle 41 4. This Is Not Opinion, This Is Biology 57 5. Clarity, Discipline and Consistency 71

PARTPARTPARTPART 3: LEADERS NEED A FOLLOWING

6. The Emergence of Trust 91 7. How a Tipping Point Tips 127

PART 4:PART 4:PART 4:PART 4: HOW TO RALLY THOSE WHO BELIEVE

8. Start with WHY, but Know HOW 147 9. Know WHY. Know HOW. Then WHAT? 171 10. Communication Is Not About Speaking,

It’s About Listening 179

 

 

 

 

PART 5:PART 5:PART 5:PART 5: THE BIGGEST CHALLENGE IS SUCCESS

11. When WHY Goes Fuzzy 195

12. Split Happens 205

PART 6:PART 6:PART 6:PART 6: DISCOVER WHY

13. The Origins of a WHY 233

14. The New Competition 247

Acknowledgments 251

Notes 257

 

 

 

 

 

 

1

INTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTION

WHY START WITH WHY?

This book is about a naturally occurring pattern, a way of thinking,

acting and communicating that gives some leaders the ability to

inspire those around them. Although these “natural-born leaders”

may have come into the world with a predisposition to inspire, the

ability is not reserved for them exclusively. We can all learn this

pattern. With a little discipline, any leader or organization can in-

spire others, both inside and outside their organization, to help

advance their ideas and their vision. We can all learn to lead.

The goal of this book is not simply to try to fix the things that

aren’t working. Rather, I wrote this book as a guide to focus on and

amplify the things that do work. I do not aim to upset the solutions

offered by others. Most of the answers we get, when based on sound

evidence, are perfectly valid. However, if we’re starting with the

wrong questions, if we don’t understand the cause, then even the

right answers will always steer us wrong … eventually. The truth,

you see, is always revealed… eventually.

The stories that follow are of those individuals and organizations

that naturally embody this pattern. They are the ones that start with

Why.

 

 

START WITH WHY

2

1.

The goal was ambitious. Public interest was high. Experts were

eager to contribute. Money was readily available.

Armed with every ingredient for success, Samuel Pierpont

Langley set out in the early 1900s to be the first man to pilot an

airplane. Highly regarded, he was a senior officer at the Smithso-

nian Institution, a mathematics professor who had also worked at

Harvard. His friends included some of the most powerful men in

government and business, including Andrew Carnegie and Alexan-

der Graham Bell. Langley was given a $50,000 grant from the War

Department to fund his project, a tremendous amount of money for

the time. He pulled together the best minds of the day, a veritable

dream team of talent and know-how. Langley and his team used the

finest materials, and the press followed him everywhere. People all

over the country were riveted to the story, waiting to read that he

had achieved his goal. With the team he had gathered and ample

resources, his success was guaranteed.

Or was it?

A few hundred miles away, Wilbur and Orville Wright were

working on their own flying machine. Their passion to fly was so

intense that it inspired the enthusiasm and commitment of a ded-

icated group in their hometown of Dayton, Ohio. There was no

funding for their venture. No government grants. No high-level

connections. Not a single person on the team had an advanced

degree or even a college education, not even Wilbur or Orville. But

the team banded together in a humble bicycle shop and made their

vision real. On December 17, 1903, a small group witnessed a man

take flight for the first time in history.

How did the Wright brothers succeed where a better-equipped,

better-funded and better-educated team could not?

 

 

WHY STAR WITH WHY

3

It wasn’t luck. Both the Wright brothers and Langley were highly

motivated. Both had a strong work ethic. Both had keen scientific

minds. They were pursuing exactly the same goal, but only the

Wright brothers were able to inspire those around them and truly

lead their team to develop a technology that would change the

world. Only the Wright brothers started with Why.

2.

In 1965, students on the campus of the University of California,

Berkeley, were the first to publicly burn their draft cards to protest

America’s involvement in the Vietnam War. Northern California

was a hotbed of antigovernment and antiestablishment sentiment;

footage of clashes and riots in Berkeley and Oakland was beamed

around the globe, fueling sympathetic movements across the United

States and Europe. But it wasn’t until 1976, nearly three years after

the end of America’s military involvement in the Vietnam conflict,

that a different revolution ignited.

They aimed to make an impact, a very big impact, even chal-

lenge the way people perceived how the world worked. But these

young revolutionaries did not throw stones or take up arms against

an authoritarian regime. Instead, they decided to beat the system at

its own game. For Steve Wozniak and Steve Jobs, the cofounders of

Apple Computer, the battlefield was business and the weapon of

choice was the personal computer.

The personal computer revolution was beginning to brew when

Wozniak built the Apple I. Just starting to gain attention, the tech-

nology was primarily seen as a tool for business. Computers were

too complicated and out of the price range of the average individ-

ual. But Wozniak, a man not motivated by money, envisioned a

nobler purpose for the technology. He saw the personal computer

as a way for the little man to take on a corporation. If he could

 

 

START WITH WHY

4

figure out a way to get it in the hands of the individual, he thought,

the computer would give nearly anyone the ability to perform many

of the same functions as a vastly better resourced company. The

personal computer could level the playing field and change the way

the world operated. Woz designed the Apple I, and improved the

technology with the Apple II, to be affordable and simple to use.

No matter how visionary or how brilliant, a great idea or a great

product isn’t worth much if no one buys it. Wozniak’s best friend at

the time, the twenty-one-year-old Steve Jobs, knew exactly what to

do. Though he had experience selling surplus electronics parts, Jobs

would prove to be much more than a good salesman. He wanted to

do something significant in the world, and building a company was

how he was going to do it. Apple was the tool he used to ignite his

revolution.

In their first year in business, with only one product, Apple

made a million dollars in revenues. By year two, they did $10 mil-

lion in sales. In their fourth year they sold $100 million worth of

computers. And in just six years, Apple Computer was a billion-

dollar company with over 3,000 employees.

Jobs and Woz were not the only people taking part in the per-

sonal computer revolution. They weren’t the only smart guys in the

business; in fact, they didn’t know much about business at all. What

made Apple special was not their ability to build such a fast-growth

company. It wasn’t their ability to think differently about personal

computers. What has made Apple special is that they’ve been able to

repeat the pattern over and over and over. Unlike any of their

competitors, Apple has successfully challenged conventional think-

ing within the computer industry, the small electronics industry, the

music industry, the mobile phone industry and the broader

entertainment industry. And the reason is simple. Apple inspires.

Apple starts with Why.

 

 

WHY STAR WITH WHY

5

3.

He was not perfect. He had his complexities. He was not the only

one who suffered in a pre-civil rights America, and there were

plenty of other charismatic speakers. But Martin Luther King Jr. had

a gift. He knew how to inspire people.

Dr. King knew that if the civil rights movement was to succeed,

if there was to be a real, lasting change, it would take more than him

and his closest allies. It would take more than rousing words and

eloquent speeches. It would take people, tens of thousands of

average citizens, united by a single vision, to change the country. At

11:00 a.m. on August 28, 1963, they would send a message to Wash-

ington that it was time for America to steer a new course.

The organizers of the civil rights movement did not send out

thousands of invitations, nor was there a Web site to check the date.

But the people came. And they kept coming and coming. All told, a

quarter of a million people descended on the nation’s capital in time

to hear the words immortalized by history, delivered by the man

who would lead a movement that would change America forever: “I

have a dream.”

The ability to attract so many people from across the country, of

all colors and races, to join together on the right day, at the right

time, took something special. Though others knew what had to

change in America to bring about civil rights for all, it was Martin

Luther King who was able to inspire a country to change not just for

the good of a minority, but for the good of everyone. Martin

Luther King started with Why.

. . .

There are leaders and there are those who lead. With only 6 percent

market share in the United States and about 3 percent worldwide,

Apple is not a leading manufacturer of home computers. Yet the

company leads the computer industry and is now a leader in other

 

 

START WITH WHY

6

industries as well. Martin Luther King’s experiences were not

unique, yet he inspired a nation to change. The Wright brothers

were not the strongest contenders in the race to take the first

manned, powered flight, but they led us into a new era of aviation

and, in doing so, completely changed the world we live in.

Their goals were not different than anyone else’s, and their sys-

tems and processes were easily replicated. Yet the Wright brothers,

Apple and Martin Luther King stand out among their peers. They

stand apart from the norm and their impact is not easily copied.

They are members of a very select group of leaders who do some-

thing very, very special. They inspire us.

Just about every person or organization needs to motivate others

to act for some reason or another. Some want to motivate a purchase

decision. Others are looking for support or a vote. Still others are

keen to motivate the people around them to work harder or smarter

or just follow the rules. The ability to motivate people is not, in

itself, difficult. It is usually tied to some external factor. Tempting

incentives or the threat of punishment will often elicit the behavior

we desire. General Motors, for example, so successfully motivated

people to buy their products that they sold more cars than any other

automaker in the world for over seventy- seven years. Though they

were leaders in their industry, they did not lead.

Great leaders, in contrast, are able to inspire people to act. Those

who are able to inspire give people a sense of purpose or belonging

that has little to do with any external incentive or benefit to be

gained. Those who truly lead are able to create a following of people

who act not because they were swayed, but because they were

inspired. For those who are inspired, the motivation to act is deeply

personal. They are less likely to be swayed by incentives. Those who

are inspired are willing to pay a premium or endure inconvenience,

even personal suffering. Those who are able to inspire will create a

following of people—supporters, voters, customers, workers—who

 

 

WHY STAR WITH WHY

7

act for the good of the whole not because they have to, but because

they want to.

Though relatively few in number, the organizations and leaders

with the natural ability to inspire us come in all shapes and sizes.

They can be found in both the public and private sectors. They are

in all sorts of industries—selling to consumers or to other busi-

nesses. Regardless of where they exist, they all have a dispropor-

tionate amount of influence in their industries. They have the most

loyal customers and the most loyal employees. They tend to be more

profitable than others in their industry. They are more innovative,

and most importantly, they are able to sustain all these things over

the long term. Many of them change industries. Some of them even

change the world.

The Wright brothers, Apple and Dr. King are just three exam-

pies. Harley-Davidson, Disney and Southwest Airlines are three

more. John F. Kennedy and Ronald Reagan were also able to inspire.

No matter from where they hail, they all have something in

common. All the inspiring leaders and companies, regardless of size

or industry, think, act and communicate exactly alike.

And it’s the complete opposite of everyone else.

What if we could all learn to think, act and communicate like

those who inspire? I imagine a world in which the ability to inspire

is practiced not just by a chosen few, but by the majority. Studies

show that over 80 percent of Americans do not have their dream job.

If more knew how to build organizations that inspire, we could live

in a world in which that statistic was the reverse—a world in which

over 80 percent of people loved their jobs. People who love going to

work are more productive and more creative. They go home

happier and have happier families. They treat their colleagues and

clients and customers better. Inspired employees make for stronger

companies and stronger economies. That is why I wrote this book. I

hope to inspire others to do the things that inspire them so that

 

 

START WITH WHY

8

together we may build the companies, the economy and a world in

which trust and loyalty are the norm and not the exception. This

book is not designed to tell you what to do or how to do it. Its goal

is not to give you a course of action. Its goal is to offer you the cause

of action.

For those who have an open mind for new ideas, who seek to

create long-lasting success and who believe that your success re-

quires the aid of others, I offer you a challenge. From now on, start

with Why.

 

 

 

ASSUME YOU KNOW

9

 

PART I

A WORLD THAT

DOESN’T START

WITH WHY

 

 

 

START WITH WHY

10

 

 

 

11

1

ASSUME YOU KNOW

On a cold January day, a forty-three-year-old man was

sworn in as the chief executive of his country. By his side

stood his predecessor, a famous general who, fifteen years

earlier, had commanded his nation’s armed forces in a war

that resulted in the defeat of Germany. The young leader

was raised in the Roman Catholic faith. He spent the next

five hours watching parades in his honor and stayed up

celebrating until three o’clock in the morning.

You know who I’m describing, right?

It’s January 30, 1933, and I’m describing Adolf Hitler and not, as

most people would assume, John F. Kennedy.

The point is, we make assumptions. We make assumptions about

the world around us based on sometimes incomplete or false

information. In this case, the information I offered was incomplete.

Many of you were convinced that I was describing John F. Kennedy

until I added one minor little detail: the date.

This is important because our behavior is affected by our as-

sumptions or our perceived truths. We make decisions based on

what we think we know. It wasn’t too long ago that the majority of

 

 

START WITH WHY

12

people believed the world was flat. This perceived truth impacted

behavior. During this period, there was very little exploration. Peo-

ple feared that if they traveled too far they might fall off the edge of

the earth. So for the most part they stayed put. It wasn’t until that

minor detail was revealed—the world is round—that behaviors

changed on a massive scale. Upon this discovery, societies began to

traverse the planet. Trade routes were established; spices were

traded. New ideas, like mathematics, were shared between societies

which unleashed all kinds of innovations and advancements. The

correction of a simple false assumption moved the human race

forward.

Now consider how organizations are formed and how decisions

are made. Do we really know why some organizations succeed and

why others don’t, or do we just assume? No matter your definition

of success—hitting a target stock price, making a certain amount of

money, meeting a revenue or profit goal, getting a big promotion,

starting your own company, feeding the poor, winning public

office—how we go about achieving our goals is very similar. Some

of us just wing it, but most of us try to at least gather some data so

we can make educated decisions. Sometimes this gathering process

is formal—like conducting polls or market research. And sometimes

it’s informal, like asking our friends and colleagues for advice or

looking back on our own personal experience to provide some

perspective. Regardless of the process or the goals, we all want to

make educated decisions. More importantly, we all want to make

the right decisions.

As we all know, however, not all decisions work out to be the

right ones, regardless of the amount of data we collect. Sometimes

the impact of those wrong decisions is minor, and sometimes it can

be catastrophic. Whatever the result, we make decisions based on a

perception of the world that may not, in fact, be completely accu-

rate. Just as so many were certain that I was describing John F.

 

 

ASSUME YOU KNOW

13

Kennedy at the beginning of this section. You were certain you were

right. You might even have bet money on it—a behavior based on

an assumption. Certain, that is, until I offered that little detail of the

date.

Not only bad decisions are made on false assumptions. Some-

times when things go right, we think we know why, but do we re-

ally? That the result went the way you wanted does not mean you

can repeat it over and over. I have a friend who invests some of his

own money. Whenever he does well, it’s because of his brains and

ability to pick the right stocks, at least according to him. But when

he loses money, he always blames the market. I have no issue with

either line of logic, but either his success and failure hinge upon his

own prescience and blindness or they hinge upon good and bad

luck. But it can’t be both.

So how can we ensure that all our decisions will yield the best

results for reasons that are fully within our control? Logic dictates

that more information and data are key. And that’s exactly what we

do. We read books, attend conferences, listen to podcasts and ask

friends and colleagues—all with the purpose of finding out more so

we can figure out what to do or how to act. The problem is, we’ve all

been in situations in which we have all the data and get lots of good

advice but things still don’t go quite right. Or maybe the impact

lasted for only a short time, or something happened that we could

not foresee. A quick note to all of you who correctly guessed Adolf

Hitler at the beginning of the section: the details I gave are the same

for both Hitler and John F. Kennedy, it could have been either. You

have to be careful what you think you know. Asumptions, you see,

even when based on sound research, can lead us astray.

Intuitively we understand this. We understand that even with

mountains of data and good advice, if things don’t go as expected,

it’s probably because we missed one, sometimes small but vital de-

tail. In these cases, we go back to all our sources, maybe seek out

 

 

START WITH WHY

14

some new ones, and try to figure out what to do, and the whole

process begins again. More data, however, doesn’t always help, es-

pecially if a flawed assumption set the whole process in motion in

the first place. There are other factors that must be considered, fac-

tors that exist outside of our rational, analytical, information-

hungry brains.

There are times in which we had no data or we chose to ignore

the advice or information at hand and just went with our gut and

things worked out just fine, sometimes even better than expected.

This dance between gut and rational decision-making pretty much

covers how we conduct business and even live our lives. We can

continue to slice and dice all the options in every direction, but at

the end of all the good advice and all the compelling evidence,

we’re left where we started: how to explain or decide a course of

action that yields a desired effect that is repeatable. How can we

have 20/20 foresight?

There is a wonderful story of a group of American car executives

who went to Japan to see a Japanese assembly line. At the end of the

line, the doors were put on the hinges, the same as in America. But

something was missing. In the United States, a line worker would

take a rubber mallet and tap the edges of the door to ensure that it

fit perfectly. In Japan, that job didn’t seem to exist. Confused, the

American auto executives asked at what point they made sure the

door fit perfectly. Their Japanese guide looked at them and smiled

sheepishly. “We make sure it fits when we design it.” In the

Japanese auto plant, they didn’t examine the problem and

accumulate data to figure out the best solution—they engineered

the outcome they wanted from the beginning. If they didn’t achieve

their desired outcome, they understood it was because of a decision

they made at the start of the process.

At the end of the day, the doors on the American-made and

Japanese-made cars appeared to fit when each rolled off the as-

 

 

ASSUME YOU KNOW

15

sembly line. Except the Japanese didn’t need to employ someone to

hammer doors, nor did they need to buy any mallets. More impor-

tantly, the Japanese doors are likely to last longer and maybe even

be more structurally sound in an accident. All this for no other

reason than they ensured the pieces fit from the start.

What the American automakers did with their rubber mallets is

a metaphor for how so many people and organizations lead. When

faced with a result that doesn’t go according to plan, a series of

perfectly effective short-term tactics are used until the desired out-

come is achieved. But how structurally sound are those solutions?

So many organizations function in a world of tangible goals and the

mallets to achieve them. The ones that achieve more, the ones that

get more out of fewer people and fewer resources, the ones with an

outsized amount of influence, however, build products and com-

panies and even recruit people that all fit based on the original

intention. Even though the outcome may look the same, great lead-

ers understand the value in the things we cannot see.

Every instruction we give, every course of action we set, every

result we desire, starts with the same thing: a decision. There are

those who decide to manipulate the door to fit to achieve the desired

result and there are those who start from somewhere very different.

Though both courses of action may yield similar short- term results,

it is what we can’t see that makes long-term success more

predictable for only one. The one that understood why the doors

need to fit by design and not by default.

 

 

 

 

16

 

 

 

17

2

CARROTS AND STICKS

Manipulation vs. Inspiration

There’s barely a product or service on the market today that cus-

tomers can’t buy from someone else for about the same price, about

the same quality, about the same level of service and about the same

features. If you truly have a first-mover’s advantage, it’s probably

lost in a matter of months. If you offer something truly novel,

someone else will soon come up with something similar and maybe

even better.

But if you ask most businesses why their customers are their

customers, most will tell you it’s because of superior quality, fea-

tures, price or service. In other words, most companies have no clue

why their customers are their customers. This is a fascinating

realization. If companies don’t know why their customers are their

customers, odds are good that they don’t know why their employees

are their employees either.

If most companies don’t really know why their customers are

their customers or why their employees are their employees, then

 

 

START WITH WHY

18

how do they know how to attract more employees and encourage

loyalty among those they already have? The reality is, most busi-

nesses today are making decisions based on a set of incomplete or,

worse, completely flawed assumptions about what’s driving their

business.

There are only two ways to influence human behavior: you can

manipulate it or you can inspire it. When I mention manipulation,

this is not necessarily pejorative; it’s a very common and fairly be-

nign tactic. In fact, many of us have been doing it since we were

young. “I’ll be your best friend” is the highly effective negotiating

tactic employed by generations of children to obtain something they

want from a peer. And as any child who has ever handed over

candy hoping for a new best friend will tell you, it works.

From business to politics, manipulations run rampant in all

forms of sales and marketing. Typical manipulations include: drop-

ping the price; running a promotion; using fear, peer pressure or

aspirational messages; and promising innovation to influence

behavior—be it a purchase, a vote or support. When companies or

organizations do not have a clear sense of why their customers are

their customers, they tend to rely on a disproportionate number of

manipulations to get what they need. And for good reason. Ma-

nipulations work.

Price

Many companies are reluctant to play the price game, but they do

so because they know it is effective. So effective, in fact, that the

temptation can sometimes be overwhelming. There are few profes-

sional services firms that, when faced with an opportunity to land a

big piece of business, haven’t just dropped their price to make the

deal happen. No matter how they rationalized it to themselves or

their clients, price is a highly effective manipulation. Drop your

prices low enough and people will buy from you. We see it at the

 

 

CARROTS AND STICKS

19

end of a retail season when products are “priced to move.” Drop the

price low enough and the shelves will very quickly clear to make

room for the next season’s products.

Playing the price game, however, can come at tremendous cost

and can create a significant dilemma for the company. For the seller,

selling based on price is like heroin. The short-term gain is fantastic,

but the more you do it, the harder it becomes to kick the habit. Once

buyers get used to paying a lower-than-average price for a product

or service, it is very hard to get them to pay more. And the sellers,

facing overwhelming pressure to push prices lower and lower in

order to compete, find their margins cut slimmer and slimmer. This

only drives a need to sell more to compensate. And the quickest

way to do that is price again. And so the downward spiral of price

addiction sets in. In the drug world, these addicts are called junkies.

In the business world, we call them commodities. Insurance. Home

computers. Mobile phone service. Any number of packaged goods.

The list of commodities created by the price game goes on and on.

In nearly every circumstance, the companies that are forced to treat

their products as commodities brought it upon themselves. I cannot

debate that dropping the price is not a perfectly legitimate way of

driving business; the challenge is staying profitable.

Wal-Mart seems to be an exception to the rule. They have built a

phenomenally successful business playing the price game. But it

also came at a high cost. Scale helped Wal-Mart avoid the inherent

weaknesses of a price strategy, but the company’s obsession with

price above all else has left it scandal-ridden and hurt its reputation.

And every one of the company’s scandals was born from its

attempts to keep costs down so it could afford to offer such low

prices.

Price always costs something. The question is, how much are

you willing to pay for the money you make?

 

 

START WITH WHY

20

Promotions

General Motors had a bold goal. To lead the American automotive

industry in market share. In the 1950s there were four choices of car

manufacturer in the United States: GM, Ford, Chrysler and AMC.

Before foreign automakers entered the field, GM dominated. New

competition, as one would expect, made that goal harder to

maintain. I don’t need to provide any data to explain how much has

changed in the auto industry in fifty years. But General Motors held

fast through most of the last century and maintained its prized

dominance.

Since 1990, however, Toyota’s share of the U.S. market has more

than doubled. By 2007, Toyota’s share had climbed to 16.3 percent,

from only 7.8 percent. During the same period, GM saw its U.S.

market share drop dramatically from 35 percent in 1990 to 23.8

percent in 2007. And in early 2008, the unthinkable happened: U.S.

consumers bought more foreign-made automobiles than ones made

in America.

Since the 1990s, faced with this onslaught of competition from

Japan, GM and the other U.S. automakers have scrambled to offer

incentives aimed at helping them hold on to their dwindling share.

Heavily promoted with advertising, GM, for one, has offered cash-

back incentives of between $500 and $7,000 to customers who

bought their cars and trucks. For a long time the promotions

worked brilliantly. GM’s sales were on the rise again.

But in the long term the incentives only helped to dramatically

erode GM’s profit margins and put them in a deep hole. In 2007,

GM lost $729 per vehicle, in large part due to incentives. Realizing

that the model was unsustainable, GM announced it would reduce

the amount of the cash-back incentives it offered, and with that

reduction, sales plummeted. No cash, no customers. The auto in-

dustry had effectively created cash-back junkies out of customers,

building an expectation that there’s no such thing as full price.

 

 

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Whether it is “two for one” or “free toy inside,” promotions are

such common manipulations that we often forget that we’re being

manipulated in the first place. Next time you’re in the market for a

digital camera, for example, pay attention to how you make your

decision. You’ll easily find two or three cameras with the spec-

ifications you need—size, number of megapixels, comparable price,

good brand name. But perhaps one has a promotion—a free

carrying case or free memory card. Given the relative parity of the

features and benefits, that little something extra is sometimes all it

takes to tip the scale. In the business-to-business world, pro-

motions are called “value added.” But the principles are the same—

give something away for free to reduce the risk so that someone will

do business with you. And like price, promotions work.

The manipulative nature of promotions is so well established in

retail that the industry even named one of the principles. They call it

breakage. Breakage measures the percentage of customers who fail

to take advantage of a promotion and end up paying full price for a

product instead. This typically happens when buyers don’t bother

performing the necessary steps to claim their rebates, a process pur-

posely kept complicated or inconvenient to increase the likelihood

of mistakes or inaction to keep that breakage number up.

Rebates typically require the customer to send in a copy of a

receipt, cut out a bar code from the packaging and painstakingly fill

out a rebate form with details about the product and how it was

purchased. Sending in the wrong part of the box or leaving out a

detail on the application can delay the rebate for weeks, months, or

void it altogether. The rebate industry also has a name for the num-

ber of customers who just don’t bother to apply for the rebate, or

who never cash the rebate check they receive. That’s called slippage.

For businesses, the short-term benefits of rebates and other ma-

nipulations are clear: a rebate lures customers to pay full price for a

product that they may have considered buying only because of the

 

 

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22

prospect of a partial refund. But nearly 40 percent of those custom-

ers never get the lower price they thought they were paying. Call it

a tax on the disorganized, but retailers rely on it.

Regulators have stepped up their scrutiny of the rebate industry,

but with only limited success. The rebate process remains cumber-

some and that means free money for the seller. Manipulation at its

best. But at what cost?

Fear

If someone were to hold up a bank with a banana in his pocket, he

would be charged with armed robbery. Clearly, no victim was in

any danger of being shot, but it is the belief that the robber has a

real gun that is considered by the law. And for good reason.

Knowing full well that fear will motivate them to comply with his

demands, the robber took steps to make his victims afraid. Fear, real

or perceived, is arguably the most powerful manipulation of the lot.

“No one ever got fired for hiring IBM,” goes the old adage, de-

scribing a behavior completely borne out of fear. An employee in a

procurement department, tasked with finding the best suppliers for

a company, turns down a better product at a better price simply

because it is from a smaller company or lesser-known brand. Fear,

real or perceived, that his job would be on the line if something

went wrong was enough to make him ignore the express purpose of

his job, even do something that was not in the company’s best

interest.

When fear is employed, facts are incidental. Deeply seated in our

biological drive to survive, that emotion cannot be quickly wiped

away with facts and figures. This is how terrorism works. It’s not

the statistical probability that one could get hurt by a terrorist, but

it’s the fear that it might happen that cripples a population.

A powerful manipulator, fear is often used with far less nefari-

ous motivations. We use fear to raise our kids. We use fear to mo-

 

 

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23

tivate people to obey a code of ethics. Fear is regularly used in

public service ads, say to promote child safety or AIDS awareness,

or the need to wear seat belts. Anyone who was watching television

in the 1980s got a heavy dose of antidrug advertising, including one

often-mimicked public service ad from a federal program to combat

drug abuse among teenagers: “This is your brain,” the man’s voice

said as he held up a pristine white egg. Then he cracked the egg into

a frying pan of spattering hot oil. “This is your brain on drug. Any

questions?”

And another ad intended to scare the hell out of any brash teen-

ager: “Cocaine doesn’t make you sexy… it makes you dead.”

Likewise, when politicians say that their opponent will raise

taxes or cut spending on law enforcement, or the evening news

alerts you that your health or security are at risk unless you tune in

at eleven, both are attempting to seed fear among voters and view-

ers, respectively. Businesses also use fear to agitate the insecurity

we all have in order to sell products. The idea is that if you don’t

buy the product or service, something bad could happen to you.

“Every thirty-six seconds, someone dies of a heart attack,” states

an ad for a local cardiac specialist. “Do you have radon? Your neigh-

bor does!” reads the ad on the side of a truck for some company

selling a home-pollution-inspection service. And, of course, the

insurance industry would like to sell you term life insurance “before

it’s too late.”

If anyone has ever sold you anything with a warning to fear the

consequences if you don’t buy it, they are using a proverbial gun to

your head to help you see the “value” of choosing them over their

competitor. Or perhaps it’s just a banana. But it works.

Aspirations

“Quitting smoking is the easiest thing I’ve ever done,” said Mark

Twain. “I’ve done it hundreds of times.”

 

 

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24

If fear motivates us to move away from something horrible,

aspirational messages tempt us toward something desirable.

Marketers often talk about the importance of being aspirational,

offering someone something they desire to achieve and the ability to

get there more easily with a particular product or service. “Six steps

to a happier life.” “Work those abs to your dream dress size!” “In six

short weeks you can be rich.” All these messages manipulate. They

tempt us with the things we want to have or to be the person we

wish we were.

Though positive in nature, aspirational messages are most ef-

fective with those who lack discipline or have a nagging fear or

insecurity that they don’t have the ability to achieve their dreams on

their own (which, at various times for various reasons, is everyone).

I always joke that you can get someone to buy a gym membership

with an aspirational message, but to get them to go three days a

week requires a bit of inspiration. Someone who lives a healthy

lifestyle and is in a habit of exercising does not respond to “six easy

steps to losing weight.” It’s those who don’t have the lifestyle that

are most susceptible. It’s not news that a lot of people try diet after

diet after diet in an attempt to get the body of their dreams. And no

matter the regime they choose, each comes with the qualification

that regular exercise and a balanced diet will help boost results. In

other words, discipline. Gym memberships tend to rise about 12

percent every January, as people try to fulfill their New Year’s

aspiration to live a healthier life. Yet only a fraction of those

aspiring fitness buffs are still attending the gym by the end of the

year. Aspirational messages can spur behavior, but for most, it

won’t last.

Aspirational messages are not only effective in the consumer

market, they also work quite well in business-to-business transac-

tions. Managers of companies, big and small, all want to do well, so

they make decisions, hire consultants and implement systems to

 

 

CARROTS AND STICKS

25

help them achieve that desired outcome. But all too often, it is not

the systems that fail but the ability to maintain them. I can speak

from personal experience here. I’ve implemented a lot of systems or

practices over the years to help me “achieve the success to which I

aspire,” only to find myself back to my old habits two weeks later. I

aspire for a system that will help me avoid implementing systems to

meet all my aspirations. But I probably wouldn’t be able to follow it

for very long.

This short-term response to long-term desires is alive and well in

the corporate world also. A management consultant friend of mine

was hired by a billion-dollar company to help it fulfill its goals and

aspirations. The problem was, she explained, no matter the issue,

the company’s managers were always drawn to the quicker, cheaper

option over the better long-term solution. Just like the habitual

dieter, “they never have the time or money to do it right the first

time,” she said of her client, “but they always have the time and

money to do it again.”

Peer Pressure

“Four out of five dentists prefer Trident,” touts the chewing gum

advertisement in an attempt to get you to try their product. “A

double-blind study conducted at a top university concluded . . .”

pushes a late-night infomercial. “If the product is good enough for

professionals, it’s good enough for you,” the advertising eggs on.

“With over a million satisfied customers and counting,” teases an-

other ad. These are all forms of peer pressure. When marketers

report that a majority of a population or a group of experts prefers

their product over another, they are attempting to sway the buyer to

believing that whatever they are selling is better. The peer pressure

works because we believe that the majority or the experts might

know more than we do. Peer pressure works not because the

majority or the experts are always right, but because we fear that we

may be wrong.

 

 

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26

Celebrity endorsements are sometimes used to add peer pressure

to the sales pitch. “If he uses it,” we’re supposed to think, “it must be

good.” This makes sense when we hear Tiger Woods endorse Nike

golf products or Titleist golf balls. (Woods’s deal with Nike is

actually credited for putting the company on the map in the golf

world.) But Tiger has also endorsed General Motors cars, man-

agement consulting services, credit cards, food and a Tag Heuer

watch designed “especially for the golfer.” The watch, incidentally,

can withstand a 5,000-g shock, a level of shock more likely experi-

enced by the golf ball than the golfer. But Tiger endorsed it, so it

must be good. Celebrity endorsements are also used to appeal to our

aspirations and our desires to be like them. The most explicit

example was Gatorade’s “I wanna be like Mike” campaign, which

tempted youngsters to grow up and be just like Michael Jordan if

they drink Gatorade. With many other examples of celebrity en-

dorsements, however, it is harder to see the connection. Sam Water-

ston of Law & Order fame, for example, sells online trading from TD

Ameritrade. But for his celebrity, it’s uncertain what an actor famed

for convicting homicidal maniacs does for the brand. I guess he’s

“trustworthy.”

Impressionable youth are not the only ones subject to peer

pressure. Most of us have probably had an experience of being

pressured by a salesman. Have you ever had a sales rep try to sell

you some “office solution” by telling you that 70 percent of your

competitors are using their service, so why aren’t you? But what if

70 percent of your competitors are idiots? Or what if that 70 percent

were given so much value added or offered such a low price that

they couldn’t resist the opportunity? The practice is designed to do

one thing and one thing only—to pressure you to buy. To make you

feel you might be missing out on something or that everyone else

knows but you. Better to go with the majority, right?

 

 

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27

To quote my mother, “If your friends put their head in the oven,

would you do that too?” Sadly, if Michael Jordan or Tiger Woods

was paid to do just that, it might actually start a trend.

Novelty (a.k.a. Innovation)

“In a major innovation in design and engineering, [Motorola] has

created a phone of firsts,” read a 2004 press release that announced

the launch of the mobile phone manufacturer’s newest entry to the

ultracompetitive mobile phone market. “The combination of metals,

such as aircraft-grade aluminum, with new advances, such as an

internal antenna and a chemically-etched keypad, led to the for-

mation of a device that measures just 13.9mm thin.”

And it worked. Millions of people rushed to get one. Celebrities

flashed their RAZRs on the red carpet. Even a prime minister or two

was seen talking on one. Having sold over 50 million units, few

could argue that the RAZR wasn’t a huge success. “By surpassing

current mobile expectations, the RAZR represents Motorola’s his-

tory of delivering revolutionary innovations,” said former Motorola

CEO Ed Zander of his new wunder-product, “while setting a new

bar for future products coming out of the wireless industry.”

This one product was a huge financial success for Motorola. This

was truly an innovation of monumental proportions.

Or was it?

Less than four years later, Zander was forced out. The stock

traded at 50 percent of its average value since the launch of the

RAZR, and Motorola’s competitors had easily surpassed the RAZR’s

features and functionalities with equally innovative new phones.

Motorola was once again rendered just another mobile phone

manufacturer fighting for its piece of the pie. Like so many before it,

the company confused innovation with novelty.

 

 

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28

Real innovation changes the course of industries or even society.

The light bulb, the microwave oven, the fax machine, iTunes. These

are true innovations that changed how we conduct business, altered

how we live our lives, and, in the case of iTunes, challenged an

industry to completely reevaluate its business model. Adding a

camera to a mobile phone, for example, is not an innovation— a

great feature, for sure, but not industry-altering. With this revised

definition in mind, even Motorola’s own description of its new

product becomes just a list of a few great features: a metal case,

hidden antenna, flat keypad and a thin phone. Hardly “revolution-

ary innovation.” Motorola had successfully designed the latest shiny

object for people to get excited about … at least until a new shiny

object came out. And that’s the reason these features are more a

novelty than an innovation. They are added in an attempt to dif-

ferentiate, but not reinvent. It’s not a bad thing, but it can’t be

counted on to add any long-term value. Novelty can drive sales—

the RAZR proved it—but the impact does not last. If a company

adds too many novel ideas too often, it can have a similar impact on

the product or category as the price game. In an attempt to dif-

ferentiate with more features, the products start to look and feel

more like commodities. And, like price, the need to add yet another

product to the line to compensate for the commoditization ends in a

downward spiral.

In the 1970s, there were only two types of Colgate toothpaste.

But as competition increased, Colgate’s sales started to slip. So the

company introduced a new product that included a new feature, the

addition of fluoride, perhaps. Then another. Then another. Whit-

ening. Tartar control. Sparkles. Stripes. Each innovation certainly

helped boost sales, for a while at least. And so the cycle continued.

Guess how many different types of toothpaste Colgate has for you

to choose from today? Thirty-two. Today there are thirty-two dif-

ferent types of Colgate toothpaste (excluding the four they make for

 

 

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29

kids). And given how each company responds to the “innovations”

of the other, that means that Colgate’s competitors also sell a similar

number of variants that offer about the same quality, about the same

benefits, at about the same price. There are literally dozens and

dozens of toothpastes to choose from, yet there is no data to show

that Americans are brushing their teeth more now than they were in

the 1970s. Thanks to all this “innovation,” it has become almost

impossible to know which toothpaste is right for you. So much so

that even Colgate offers a link on their Web site called “Need Help

Deciding?” If Colgate needs to help us pick one of their products

because there are too many variations, how are we supposed to

decide when we go to the supermarket without their Web site to

help us?

Once again, this is an example of the newest set of shiny objects

designed to encourage a trial or a purchase. What companies clev-

erly disguise as “innovation” is in fact novelty. And it’s not only

packaged goods that rely on novelty to lure customers; it’s a com-

mon practice in other industries, too. It works, but rarely if ever

does the strategy cement any loyal relationships.

Apple’s iPhone has since replaced the Motorola RAZR as the

popular must-have new mobile phone. Removing all the buttons

and putting a touch screen is not what makes the iPhone innovative,

however. Those are brilliant new features. But others can copy those

things and it wouldn’t redefine the category. There is something

else that Apple did that is vastly more significant.

Apple is not only leading how mobile phones are designed, but,

in typical Apple fashion, also how the industry functions. In the

mobile phone industry, it is the service provider, not the phone

manufacturer, that determines all the features and benefits the

phone can offer. T-Mobile, Verizon Wireless, Sprint, AT&T all dic-

tate to Motorola, Nokia, Ericsson, LG and others what the phones

will do. Then Apple showed up. They announced that they would

 

 

START WITH WHY

30

tell the service provider what the phone would do, not the other

way around. AT&T was the only one that agreed, thus earning the

company the exclusive deal to offer the new technology. That’s the

kind of shift that will impact the industry for many years and will

extend far beyond a few years of stock boost for the shiny new

product.

Novel, huh?

The Price You Pay for the Money You Make

I cannot dispute that manipulations work. Every one of them can

indeed help influence behavior and every one of them can help a

company become quite successful. But there are trade-offs. Not a

single one of them breeds loyalty. Over the course of time, they cost

more and more. The gains are only short-term. And they increase

the level of stress for both the buyer and the seller. If you have ex-

ceptionally deep pockets or are looking to achieve only a short-

term gain with no consideration for the long term, then these

strategies and tactics are perfect.

Beyond the business world, manipulations are the norm in pol-

itics today as well. Just as manipulations can drive a sale but not

create loyalty, so too can they help a candidate get elected, but they

don’t create a foundation for leadership. Leadership requires people

to stick with you through thick and thin. Leadership is the ability to

rally people not for a single event, but for years. In business,

leadership means that customers will continue to support your

company even when you slip up. If manipulation is the only strat-

egy, what happens the next time a purchase decision is required?

What happens after the election is won?

There is a big difference between repeat business and loyalty.

Repeat business is when people do business with you multiple

times. Loyalty is when people are willing to turn down a better

product or a better price to continue doing business with you. Loyal

 

 

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31

customers often don’t even bother to research the competition or

entertain other options. Loyalty is not easily won. Repeat business,

however, is. All it takes is more manipulations.

Manipulative techniques have become such a mainstay in

American business today that it has become virtually impossible for

some to kick the habit. Like any addiction, the drive is not to get

sober, but to find the next fix faster and more frequently. And as

good as the short-term highs may feel, they have a deleterious im-

pact on the long-term health of an organization. Addicted to the

short-term results, business today has largely become a series of

quick fixes added on one after another after another. The short-

term tactics have become so sophisticated that an entire economy

has developed to service the manipulations, equipped with statistics

and quasi-science. Direct marketing companies, for example, offer

calculations about which words will get the best results on each

piece of direct mail they send out.

Those that offer mail-in rebates know the incentive works and

they know that the higher the rebate, the more effective it is. They

also know the cost that goes along with those rebates. To make

them profitable, manufacturers rely on the breakage and slippage

numbers staying above a certain threshold. Just like our trusty drug

addict, whose behavior is reinforced by how good the short-term

high feels, the temptation to make the qualifications of the rebate

more obscure or cumbersome so as to reduce the number of qual-

ified applicants can be overwhelming for some.

Samsung, the electronics giant, mastered the art of the kind of

fine print that makes rebates so profitable for companies. In the

early 2000s, the company offered rebates up to $150 on a variety of

electronic products, stipulating in the fine print that the rebate was

limited to one per address—a requirement that would have

sounded reasonable enough to anyone at the time. Yet in practice, it

effectively disqualified all customers who lived in apartment

 

 

START WITH WHY

32

buildings where more than one resident had applied for the same

rebate. More than 4,000 Samsung customers lured by the cash back

received notices denying them rebates on those grounds. The prac-

tice was brought to the attention of the New York attorney general,

and in 2004 Samsung was ordered to pay $200,000 in rebate claims

to apartment dwellers. This is an extreme case of a company that

got caught. But the rebate game of cutting out UPC symbols, filling

out forms and doing it all before the deadline is alive and well. How

can a company claim to be customer-focused when they are so

comfortable measuring the number of customers who will fail to

realize any promise of savings?

Manipulations Lead to Transactions, Not Loyalty

“It’s simple,” explains the TV infomercial, “simply put your old gold

jewelry in the prepaid, insured envelope and we’ll send you a check

for the value of the gold in just two days.” Mygoldenvelope .com is

one of the leaders in this industry, serving as a broker for gold to be

sent to a refinery, melted down, and reintroduced into the

commodity market.

When Douglas Feirstein and Michael Moran started the com-

pany, they wanted to be the best in the business. They wanted to

transform an industry with the reputation of a back-alley pawn

shop and give it a bit of a Tiffany’s sheen. They invested money in

making the experience perfect. They worked to make the customer

service experience ideal. They were both successful entrepreneurs

and knew the value of building a brand and a strong customer

experience. They’d spent a lot of money trying to get the balance

right, and they made sure to explain their difference in direct re-

sponse advertising on various local and national cable stations.

“Better than the similar offers,” they’d say. And they were right. But

the investment didn’t pay off as expected.

 

 

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33

A few months later, Feirstein and Moran made a significant dis-

covery: almost all of their customers did business with them only

once. They had a transactional business yet they were trying to

make it so much more than that. So they stopped trying to make

their service “better than similar offers,” and instead settled with

good. Given that most people were not going to become repeat

customers, there weren’t going to be any head-to-head comparisons

made to the other services. All they needed to do was drive a

purchase decision and offer a pleasant enough experience that

people would recommend it to a friend. Any more was unneces-

sary. Once the owners of mygoldenvelope.com realized they didn’t

need to invest in the things that build loyalty if all they wanted to

do was drive transactions, their business became vastly more effi-

cient and more profitable.

For transactions that occur an average of once, carrots and sticks

are the best way to elicit the desired behavior. When the police offer

a reward they are not looking to nurture a relationship with the

witness or tipster; it is just a single transaction. When you lose your

kitten and offer a reward to get it back, you don’t need to have a

lasting relationship with the person returning it; you just want your

cat back.

Manipulations are a perfectly valid strategy for driving a trans-

action, or for any behavior that is only required once or on rare

occasions. The rewards the police use are designed to incentivize

witnesses to come forward to provide tips or evidence that may

lead to an arrest. And, like any promotion, the manipulation will

work if the incentive feels high enough to mitigate the risk.

In any circumstance in which a person or organization wants

more than a single transaction, however, if there is a hope for a

loyal, lasting relationship, manipulations do not help. Does a poli-

tician want your vote, for example, or does he or she want a lifetime

of support and loyalty from you? (Judging by how elections are run

 

 

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34

these days, it seems all they want is to win elections. Ads discredit-

ing opponents, a focus on single issues, and an uncomfortable reli-

ance on fear or aspirational desires are all indicators. Those tactics

win elections, but they do not seed loyalties among the voters.)

The American car industry learned the hard way the high cost of

relying on manipulations to build a business when loyalty was what

they really needed to nurture. While manipulations may be a viable

strategy when times are good and money is flush, a change in

market conditions made them too expensive. When the oil crisis of

2008 hit, the auto industry’s promotions and incentives became

untenable (the same thing happened in the 1970s). In this case, how

long the manipulations could produce short-term gains was defined

by the length of time the economy could sustain the strategy. This is

a fundamentally weak platform upon which to build a business, an

assumption of never-ending boom. Though loyal customers are less

tempted by other offers and incentives, in good times the free flow

of business makes it hard to recognize their value. It’s in the tough

times that loyal customers matter most.

Manipulations work, but they cost money. Lots of money. When

the money is not as available to fund those tactics, not having a loyal

following really hurts. After September 11, there were customers

who sent checks to Southwest Airlines to show their support. One

note that accompanied a check for $1,000 read, “You’ve been so good

to me over the years, in these hard times I wanted to say thank you

by helping you out.” The checks that Southwest Airlines received

were certainly not enough to make any significant impact on the

company’s bottom line, but they were symbolic of the feeling

customers had for the brand. They had a sense of partnership. The

loyal behavior of those who didn’t send money is almost impossible

to measure, but its impact has been invaluable over the long term,

helping Southwest to maintain its position as the most profitable

airline in history.

 

 

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35

Knowing you have a loyal customer and employee base not only

reduces costs, it provides massive peace of mind. Like loyal friends,

you know your customers and employees will be there for you

when you need them most. It is the feeling of “we’re in this

together,” shared between customer and company, voter and

candidate, boss and employee, that defines great leaders.

In contrast, relying on manipulations creates massive stress for

buyer and seller alike. For the buyer, it has become increasingly

difficult to know which product, service, brand or company is best. I

joke about the proliferation of toothpaste varieties and the difficulty

of choosing the right one. But toothpaste is just a metaphor. Nearly

every decision we’re asked to make every single day is like choosing

toothpaste. Deciding what law firm to hire, college to attend, car to

buy, company to work for, candidate to elect—there are just too

many choices. All the advertising, promotions and pressure

employed to tempt us one way or another, each attempting to push

harder than the other to court us for our money or our support,

ultimately yields one consistent result: stress.

For the companies too, whose obligation it is to help us decide,

their ability to do so has gotten more and more difficult. Every day,

the competition is doing something new, something better. To con-

stantly have to come up with a new promotion, a new guerrilla

marketing tactic, a new feature to add, is hard work. Combined

with the long-term effects of years of short-term decisions that have

eroded profit margins, this raises stress levels inside organizations

as well. When manipulations are the norm, no one wins.

It’s not an accident that doing business today, and being in the

workforce today, is more stressful than it used to be. Peter Why-

brow, in his book American Mania: When More Is Not Enough, argues

that many of the ills that we suffer from today have very little to do

with the bad food we’re eating or the partially hydrogenated oils in

our diet. Rather, Whybrow says, it’s the way that corporate America

 

 

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36

has developed that has increased our stress to levels so high we’re

literally making ourselves sick because of it. Americans are

suffering ulcers, depression, high blood pressure, anxiety, and

cancer at record levels. According to Whybrow, all those promises

of more, more, more are actually overloading the reward circuits of

our brain. The short-term gains that drive business in America

today are actually destroying our health.

Just Because It Works Doesn’t Make It Right

The danger of manipulations is that they work. And because ma-

nipulations work, they have become the norm, practiced by the vast

majority of companies and organizations, regardless of size or

industry. That fact alone creates a systemic peer pressure. With per-

fect irony, we, the manipulators, have been manipulated by our

own system. With every price drop, promotion, fear-based or aspi-

rational message, and novelty we use to achieve our goals, we find

our companies, our organizations and our systems getting weaker

and weaker.

The economic crisis that began in 2008 is just another, albeit

extreme, example of what can happen if a flawed assumption is al-

lowed to carry on for too long. The collapse of the housing market

and the subsequent collapse of the banking industry were due to

decisions made inside the banks based on a series of manipulations.

Employees were manipulated with bonuses that encouraged short-

sighted decision-making. Open shaming of anyone who spoke out

discouraged responsible dissent. A free flow of loans encouraged

aspiring homebuyers to buy more than they could afford at all price

levels. There was very little loyalty. It was all a series of

transactional decisions—effective, but at a high cost. Few were

working for the good of the whole. Why would they?—there was no

reason given to do so. There was no cause or belief beyond instant

gratification. Bankers weren’t the first to be swept up by their own

 

 

CARROTS AND STICKS

37

success. American car manufacturers have conducted themselves

the same way for decades—manipulation after manipulation, short-

term decision built upon short-term decision. Buckling or even

collapse is the only logical conclusion when manipulations are the

main course of action.

The reality is, in today’s world, manipulations are the norm.

But there is an alternative.

 

 

 

 

38

 

 

 

39

PART 2

AN ALTERNATIVE

PERSPECTIVE

 

 

 

40

 

 

 

41

3

THE GOLDEN CIRCLE

 

 

There are a few leaders who choose to inspire rather than manipu-

late in order to motivate people. Whether individuals or organiza-

tions, every single one of these inspiring leaders thinks, acts and

communicates exactly the same way. And it’s the complete opposite

of the rest of us. Consciously or not, how they do it is by following a

naturally occurring pattern that I call The Golden Circle.

The concept of The Golden Circle was inspired by the golden

ratio—a simple mathematical relationship that has fascinated

mathematicians, biologists, architects, artists, musicians and

naturists since the beginning of history. From the Egyptians to

Pythagoras to Leonardo da Vinci, many have looked to the golden

ratio to provide a mathematical formula for proportion and even

beauty. It also supports the notion that there is more order in nature

 

 

START WITH WHY

42

than we think, as in the symmetry of leaves and the geometric

perfection of snowflakes.

What I found so attractive about the golden ratio, however, was

that it had so many applications in so many fields. And even more

significantly, it offered a formula that could produce repeat- able

and predictable results in places where such results might have

been assumed to be a random occurrence or luck. Even Mother

Nature—for most people a symbol of unpredictability—exhibited

more order than we previously acknowledged. Like the golden

ratio, which offers evidence of order in the seeming disorder of

nature, The Golden Circle finds order and predictability in human

behavior. Put simply, it helps us understand why we do what we

do. The Golden Circle provides compelling evidence of how much

more we can achieve if we remind ourselves to start everything we

do by first asking why.

The Golden Circle is an alternative perspective to existing

assumptions about why some leaders and organizations have

achieved such a disproportionate degree of influence. It offers clear

insight as to how Apple is able to innovate in so many diverse

industries and never lose its ability to do so. It explains why people

tattoo Harley-Davidson logos on their bodies. It provides a clearer

understanding not just of how Southwest Airlines created the most

profitable airline in history, but why the things it did worked. It

even gives some clarity as to why people followed Dr. Martin Lu-

ther King Jr. in a movement that changed a nation and why we took

up John F. Kennedy’s challenge to put a man on the moon even after

he died. The Golden Circle shows how these leaders were able to

inspire action instead of manipulating people to act.

This alternative perspective is not just useful for changing the

world; there are practical applications for the ability to inspire, too.

It can be used as a guide to vastly improving leadership, corporate

culture, hiring, product development, sales, and marketing. It even

 

 

THE GOLDEN CIRCLE

43

explains loyalty and how to create enough momentum to turn an

idea into a social movement.

And it all starts from the inside out. It all starts with Why.

Before we can explore its applications, let me first define the

terms, starting from the outside of the circle and moving inward.

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 prod-

ucts 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 proposi-

tion,” “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 a 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?

When most organizations or people think, act or communicate

they do so from the outside in, from WHAT to WHY. And for good

reason—they go from clearest thing to the fuzziest thing. We say

WHAT we do, we sometimes say HOW we do it, but we rarely say

WHY we do WHAT we do.

But not the inspired companies. Not the inspired leaders. Every

single one of them, regardless of their size or their industry, thinks,

acts and communicates from the inside out.

I use Apple Inc. frequently as an example simply because they

have broad recognition and their products are easy to grasp and

 

 

START WITH WHY

44

compare to others. What’s more, Apple’s success over time is not

typical. Their ability to remain one of the most innovative

companies year after year, combined with their uncanny ability to

attract a cultlike following, makes them a great example to

demonstrate many of the principles of The Golden Circle.

I’ll start with a simple marketing example.

If Apple were like most other companies, a marketing message

from them would move from the outside in of The Golden Circle. It

would start with some statement of WHAT the company does or

makes, followed by HOW they think they are different or better

than the competition, followed by some call to action. With that, the

company would expect some behavior in return, in this case a pur-

chase. A marketing message from Apple, if they were like everyone

else, might sound like this:

We make great computers.

They’re beautifully designed, simple to use and user-friendly.

Wanna buy one?

It’s not a very compelling sales pitch, but that’s how most

companies sell to us. This is the norm. First they start with WHAT

they do-—”Here’s our new car.” Then they tell us how they do it or

how they are better—”It’s got leather seats, great gas mileage, and

great financing.” And then they make a call to action and expect a

behavior.

You see this pattern in business-to-consumer markets as well as

business-to-business environments: “Here’s our law firm. Our law-

yers went to the best schools and we represent the biggest clients.

Hire us.” This pattern is also alive and well in politics—”Here’s the

candidate, here are her views on taxes and immigration. See how’s

she’s different? Vote for her.” In every case, the communication is

organized in an attempt to convince someone of a difference or

superior value.

 

 

THE GOLDEN CIRCLE

45

But that is not what the inspiring leaders and organizations do.

Every one of them, regardless of size or industry, thinks, acts and

communicates from the inside out.

Let’s look at that Apple example again and rewrite the example

in the order Apple actually communicates. This time, the example

starts with WHY.

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, sim