I’ve just come back from a short holiday in Singapore, where we spent some time eating, shopping, walking, sightseeing, and enjoying a few days of warmth after a cold winter in Perth.
One of the amazing things about Singapore is the way it has transformed itself over the last 15-20 years. I remember when most outsiders knew very little about it except as a transit spot to change planes on the way to somewhere more interesting. But now it’s become a tourist destination in its own right, with twice as many tourists now than 20 years ago.
Singapore has done this in two ways, and these apply just as much to your own business as well.
First, it has built on its traditional past, preserving and enhancing experiences such as the Lau Pa Sat hawkers market, first built 150 years ago, and protected as a National Monument of Singapore for its historical significance. By night, it’s bustling with locals and tourists, and was our favourite spot for satays and beer.
Second, it has created totally new experiences, such as Marina Bay, built on reclaimed land that didn’t even exist 30 years ago.
So Singapore has done two things:
- Evolution: Building on what they already had.
- Revolution: Creating something entirely new.
The same applies to your business.
Most leaders – especially in established organisations – think only about evolution. They look at their assets and figure out how to build on them.
Intuitively, that makes sense – but it’s dangerous. Your biggest assets are also your biggest weaknesses, because they blind you to other – possibly better – opportunities. In the past, these assets protected you from newcomers, but now they might offer only a false sense of security.
What are the biggest assets in your organisation and industry? These could include:
- Traditional accounting assets, like equipment, stock, premises, cash and other securities, and intellectual property.
- Less tangible assets, like your brand, reputation, and licence to operate in this industry.
- Intangible resources, such as your talented staff, systems and processes, and positive culture.
These are all assets, because they are positive features that have built your success … so far. But sometimes our biggest assets hold us back from something better.
- Owning premises gives you a local presence, no landlord, and more control over the building. But is it holding you back from a better location, opening other locations, or letting staff work from home?
- You might have a strong brand, but is it holding you back from doing something daring because it might damage that brand?
- The positive culture in your office is an asset. But is it holding you back from expanding your team to include remote workers?
Building these assets took effort and money, and it’s difficult to let go. But whatever you spent on them shouldn’t figure in choosing what’s best for the organisation now.
The problem is that it’s difficult to ignore the time, money, and effort you spent in building these assets. Psychologists call this the “Sunk Cost Fallacy”, where we mess up our decision-making procedure by placing too much weight on how much we have already invested in something. That makes it more difficult to abandon something, even if that’s the right thing to do.
Beware the sunk costs!
To overcome the risk of the Sunk Cost Fallacy, assess each of the assets in your business by asking this question:
“If we didn’t have this, what would we do differently?”
- If we didn’t already have a Website, what Website would we build? Would we even build a Website at all?
- If we didn’t have these systems and processes for delivering this service, what service would we really offer?
- If we didn’t have a database of loyal customers we might upset, what radical change could we make?
- If we didn’t have established agreements with our suppliers, what agreements would we create now? Would we even choose these suppliers, or would we choose different suppliers to meet our business needs now?
Sometimes the answer is, “Yes, that asset is the best option, and we wouldn’t do anything differently”. In that case, you can opt for evolution, and build on that asset.
But if the answer is, “No, if we didn’t have that, we wouldn’t choose it”, then maybe it’s time for a revolution, and abandon that asset to invest in something better.
- Which “assets” in your organisation could be liabilities because they are blinding you from other opportunities?
- If a smart start-up company without this asset wanted to get the same benefit, what would they do?
- What would you do if you didn’t care about [affecting the share price / damaging your brand / losing your best people]? How else could you achieve the same result?
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