A Habit is not a Best Practice

The following piece is inspired by the Strategy course I took part in at London Business School in 2017, taught by Professor Freek Vermeulen, and by his highly influential book, “Breaking Bad Habits”, which I sincerely recommend to anyone wishing to introduce a change-mentality to their business.

We are adept at finding and ignoring red flags. In both our personal and business lives, we tend to underplay warning signs and confidently push on based on our own judgment or biases. My most feared red flags are: “It’s always been this way” and “That’s just how it’s done”. These bring chills down my spine as they are immediate signs that you are likely dealing with a bad habit. Sure, some may consider it a “best practice”, but if it does not come with convincing arguments regarding WHY things are the way they are, it’s a habit.

Habits can indeed start off as best practices. Broadsheet newspapers became a best practice to minimize taxes levied on newspapers in 1712 on the number of pages they printed. That law no longer exists, but broadsheet newspapers do, relics still associated with past success. Fortunately, we have seen publications buck this trend: the Independent, the Metro, and the Economist have all changed their format to a “magazine-style”, previously associated with low-brow content. The result? Their readership increased significantly over their broadsheet competitors. They took the risk, they let go of a bad habit, and they embraced much-needed change.

Courtesy of WIX Media

How bad habits form and spread

Habits don’t kill you. In fact, they generally develop out of success stories (e.g., the broadsheet newspaper). A company does something once and sees that it works, so it keeps doing things that way. Competitors notice this success and copy the behavior. Very soon, this will become a best practice, a “road to success”. Over time, though, the market undoubtedly changes. Customers change. But companies, enamored with their previous success and afraid that deviating from the proven formula may lead to failure, still operate as they did generations ago. A bad habit is now clearly visible. Like a virus, it has spread without killing the hosts and has silently become what companies consider to be a “best practice” when in fact it is just an artefact of a time long past.

Eliminating bad habits

Professor Vermeulen’s methodology for eliminating bad habits is comprehensive, easily applicable, and universally valid. Here it is broken down into easy steps:

1.       Stop benchmarking: Benchmarking can be a great way for bad habits to spread across an industry. Comparing your company with peers is a dangerous path, especially if practices are mimicked blindly. Unless you are clear regarding why these practices are implemented and why they can also benefit your company, avoid them.

2.       Reverse-benchmark instead: Instead of looking at new, flashy industries, try taking a look at stable, homogeneous ones. These are where bad practices have had time to fester, where there is ripe space for innovation. You can learn from companies that bucked these trends or identify opportunities for yourself. Disruption awaits!

3.       Experiment: The secret to breaking bad habits is to maintain focus. Likely not all aspects of a complex system need to be changed, only a few specific elements of it. Pick a target customer segment. Set up a methodology to safely test new ways of working with that target segment, run your test, and monitor results. Iteration and focus are your friends here.

4.       Monitor your market’s weakest links: Companies struggling in your industry are likely places to identify bad habits. These will be identifiable practices across low performers and likely opportunities for innovation. Alternatively, if you do not want to run your own experiments, check out what new entrants are doing differently for opportunities to buck existing trends.

5.       Interview insiders: By this, I do not mean executives, but employees. They see the cracks in the operations of companies every day. They tend to have a gut feeling about where things are coming off the rails. That’s where the likely symptoms of bad habits are starting to appear.

6.       Interview outsiders: Companies not involved in your market have an objective perspective on the status quo and generally look for ways to disrupt. They have suspicions around where bad habits have formed and can guide you towards potential areas for innovation.

7.       Bundle your practices: Likely, after changing a bad practice, you will notice how you also need to change several other practices that are connected to it. Replacing bad habits leads to a bundle of “good” habits emerging. Consider how this impacts your business model as a whole and plan steps toward updating it accordingly.

8.       Focus your efforts: The idea is to focus, eliminate, and replace. Focus your efforts on a specific customer group or area of your market where it is clear a practice is seeing no success or is actively detrimental to achieving your goals. Eliminate the bad habit and provide alternatives instead. Monitor the results and expand stepwise to other areas of your market.

9.       Cut it out: Have the courage to make a tough decision. In general, companies prefer to “optimize” instead of “eliminate”. This leads to keeping bad habits alive, just under another guise. Really, you have not eliminated the cause, just made the virus more resistant. Know when to fold.

10.   Continuously watch out for the development of a new “status quo”: Remember the red flags! Whenever you hear someone in your company say, “This is how we do it” or “It’s always been this way”, take it as a sign of new bad habits arising. Act accordingly.

Becoming immune to bad habits

Once you have eliminated bad habits, consider how to empower your organization for the future so that they no longer appear in the future. There are three key elements to this, all in support of a company culture that “embraces change for change’s sake”.

The key here is to make change a proactive part of your business. Similarly to how it is easier to mold clay while it is still wet, transforming your business is much simpler before routine and rigidity set in. It may seem counterintuitive, but maintaining flexibility and agility in your company is an important factor for long-term robustness:

1.       Make life difficult for yourself: Promote behaviors that limit the formation of routines. Routines are your enemy: yes, they increase efficiency, but they also lead to a lack of presence. Your employees are less likely to catch mistakes, find ways to optimize, or in any way go beyond the call of duty if stuck in a rut. Focus on a culture of collaborative communication, where performance is based on continued improvement and learning. Focus on being less of a production line and more of a race car pit team.

2.       Balance exploration and exploitation: The key is not to forfeit efficiency, but to balance it with creativity. Exploitation is about controlling productivity, optimizing so tasks get done efficiently. Exploration, on the other hand, means promoting innovation and allowing employees the autonomy to find new ways to do things. Success lies in the balance between them. Once again, it is best to be specific and to iterate. Try out different structures and ways of working in specific teams or areas before you expand to the whole company.

3.       Be varied and selective: A change-mindset, as illustrated in the steps above, is based on balance. In this case, it is a balance between expansive thinking (variety in ideas, people, structures, technologies, etc.) and reductive thinking (selecting from experimentation what works and structuring it into efficient systems). As you experiment to drive out bad habits and introduce new ones, do not forget to select what works and ensure it becomes ingrained into your company culture. Translate experiment results into lived practices by introducing artefacts such as decision forms, diagnostic tools, and team structures that promote your company culture and avoid the formation of new bad habits.

As you may have noticed, “Breaking Bad Habits” is not about wild innovation or brutal optimization. It is about finding a balance. A change-mindset ensures your business is robust in the face of volatile markets and shifting industry trends. The future is filled with uncertainty. The best way to face it, in both our business and personal lives, is to allow change to happen while we maintain our own composure in the face of it and adapt freely to our circumstances. A company is not an island. But mit ay very well be an ocean.