What’s the one lever that can transform your business?


The Power Of Habit

The Power Of Habit (Photo credit: Earthworm)

I recently read (and read again) a book by Charles Duhigg that got me thinking about the power of a single idea that can transform an entire business. The book is called The Power of Habit.

Here is a summary of one story in the book that made clear to me, the opportunity to lead powerful change.

On a blustery October day in 1987, a herd of prominent Wall Street investors and stock analysts gathered in the ballroom of a posh Manhattan hotel. They were there to meet the new CEO of the Aluminum Company of America–Alcoa. It was a company that for nearly a century had made foil wraps for Hershey kisses,  the metal in Coca-Cola cans and the bolts that hold satellites together. Many in the audience had invested millions in this company. But in the past year, investors had started grumbling. Alcoa’s management had made misstep after misstep trying to expand their markets and customer while competitors stole them away.

There was relief when the board announced a new CEO, but that relief, at least today, was about to be turned on its head. Appointed to the post of CEO was a former government bureaucrat named Paul O’Neill. A few minutes before noon, O’Neill took the stage. He was 51 years old, trim, and dressed in grey pinstripes and a red power tie. His hair was white and his posture military straight. He looked dignified, solid, confident. Like a chief executive. Then he opened his mouth…

“I want to talk to you about worker safety,” he said. “Every year, numerous Alcoa workers are injured so badly that they miss a day of work. Our safety record is better than the general American workforce, especially considering that our employees work with metals that are 1500 degrees and machines that can rip a man’s arm off. But that’s not good enough. I intend to make Alcoa the safest company in America. I intend to go for zero injuries.”

The audience was confused. He didn’t talk about profits, costs, or anything that followed the usual CEO script. There were no buzzwords like “synergy, “rightsizing”, or “co-opetition”. There was no talk of “using alignment to achieve a win-win synergistic market advantage.” For all anyone in the audience knew, given his talk about worker safety, O’Neill might be pro-regulation. Or, worse, a Democrat. It was a terrifying prospect.

“Now, before I go any further,” O’Neill said, “I want to point out the safety exits in the room.” He gestured to the rear of the ballroom. “There’s a couple of doors in the back, and in the unlikely event of a fire or other emergency, you should calmly walk out, go down the stairs to the lobby, and leave the building.”

Silence. Safety? Fire exits? Was this a joke? One investor knew that O’Neill had been in Washington in the sixties… He must have done a lot of drugs, he thought.

Eventually someone raised a hand and asked about inventories in the aerospace division. Another asked about the company’s capital ratios.

“I’m not certain you heard me,” O’Neill said. “If you want to understand how Alcoa is doing, you should look at our workplace safety figures. If we bring our injury rate down, it won’t be because of cheer-leading or the nonsense you sometimes hear from other CEOs. It will be because the individuals at this company have agreed to become part of something important: They’ve devoted themselves to creating a habit of excellence. Safety will be an indicator that we’re making progress in changing our habits across the entire institution. That’s how we should be judged.”

The investors in the room almost stampeded out the doors when the presentation ended. One jogged to the lobby, found a pay phone, and called his twenty largest clients.

“I said, ‘The board put a crazy hippie in charge and he’s going to kill the company,'” that investor told the author. “I ordered them to sell their stock immediately, before everyone else in the room started calling their clients and telling them the same thing.

“It was literally the worst piece of advice I gave in my entire career.”

Within a year of O’Neill’s speech, Alcoa’s profits would hit a record high. By the time O’Neill retired in 2000, the company’s annual net income was five times larger than before he arrived, and its market capitalization had risen by $27 billion. Someone who invested a million dollars in Alcoa on the day O’Neill was hired would have earned another million dollars in dividends and the value of their stock would be five times bigger than when he arrived. All this while  the level of safety increased twenty-fold over the US average.

How did he do it?
He attacked one habit, and watched the effect of that ripple through the organization. “I knew I had to transform Alcoa, but you can’t order people to change. That’s not how the brain works. So I decided I was going to start by focusing on one thing. If I could start disrupting the habits around one thing, it would spread throughout the entire company.”

The habits that matter most are the ones that, when they start to shift, dislodge and remake other patterns. Individuals have habits. Groups have routines. Routines are the organizational analogue of habits. O’ Neill also recognized that the one change he wanted to attack had to be supported by both the unions and the executives.

What most people didn’t realize was that O’Neill’s plan for getting to zero injuries entailed the most radical realignment on Alcoa’s history. The key to protecting Alcoa’s employees, O’Neill believed, was understanding why injuries happened in the first place. And to understand why injuries happened, you had to study how the manufacturing process was going wrong. To understand how the manufacturing process was going wrong, you had to bring in people who could educate workers about quality control and the most efficient work processes, so that it would be easier to do everything right, since correct work is also safer work. In other words, to protect workers, Alcoa had to become the best, most streamlined aluminum company in the world.

The habits to attack are known as keystone habits. They are the big levers. They also have a nice side-effect of providing “small wins”. Small wins encourage and set in motion the forces to create other small wins. Small wins are not linear. They are scattered, like small experiments in pockets of the organization.

There’s a lot of detail in the book and lots of references to other great stories that illustrate the power of attacking a single keystone habit. I recommend this book.

Now I am thinking about our own organization and others. What is the one keystone habit to attack? What is the current habit loop and how can it be disrupted? What are the small wins? What is the one thing that everyone can agree is important? And how will this one thing influence everything else? Clearly not an easy problem. But if you lead change, or are an executive charged with the excellence of your organization, it’s time to start thinking about this very, very deeply, and then try an experiment, or two, or several, until you observe what works. Then build on it.

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3 thoughts on “What’s the one lever that can transform your business?

  1. Good story. This also makes me think what is keystone for us, quality? delivery lead time? This also reminds me the comments made by x-CTO for their agile transformation. He later become CTO of Huawei. He said the two practice really leverage for BT agile transformation is the two hard rulers set for their projects. 1. All projects have to be initiated or killed in 1 week. People will fly together to do that if needed. 2. All projects initiated have to be get on-line within 90 days or it will not be initiated. This is the only two practices that really matters he said.

  2. Pingback: How’s this for a change vision? | rajile

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