Beware of "Best Practices": The Call to Innovate, Not Emulate

Leading is leading, but industries, companies, and markets create value through differentiation. J.C. Penney recently hired Ron Johnson to repeat the stellar success he'd had at Apple for them. With flagging revenues, J.C. Penney was looking for some fresh blood and new ideas.

What worked for Apple—and previously for Johnson at Target—was moving upscale. Johnson attempted to apply this same idea to J.C. Penney and was met with devastating results. In an attempt to reinvigorate the chain and brand it as a fashion-forward retailer, Johnson decided to abandon sales and coupons in favor of an "everyday low price" strategy.

This change led to sluggish holiday sales, battles with competitors, and a declining stock price that caused a stir among shareholders.

Company shares sank 44 percent in his first full year. In one quarter J.C. Penney suffered $427 million in losses, and comparable store sales in the same quarter went down 32 percent.

After only 17 months on the job, Johnson was unceremoniously fired. When the news got out, stocks quickly—albeit briefly—rose 9 percent. J.C. Penney ain't Apple, and everyday clothing ain’t Macs.

Best Practices vs. Good Strategies

Steven Shapiro, a friend and colleague of mine, has a new book called Best Practices Are Stupid. He is right. Best practices really are stupid, but I repeatedly hear managers asking for benchmarking reports.

But why are they stupid? An article in the McKinsey Quarterly on strategy puts it well: "Spurious frameworks and torrents of data often obscure the basic principles of good strategy. To beat the market, companies must exploit imperfections that stop (or at least slow) its workings."

Such competitive advantages are scarce and fleeting because markets drive a reversion to mean performance, as middling companies emulate the best, and the worst exit or undergo significant reform.

"Good strategies therefore emphasize difference—versus direct competitors, potential substitutes, and potential entrants—not industry-wide best practices," the article from McKinsey Quarterly went on to say.

Good strategies have distinctive capabilities that cannot be easily replicated. Further, what is a best practice in one organization rarely holds true at every point in time. That's why I don’t really read biographies. Take Steve Jobs, for example. The things he did to be successful were specific to him and the time and place in which he lived. Emulating his strategy won’t necessarily mean I’ll see similar results.

The answer then becomes to focus on skills and develop distinctive capabilities that you can exploit.

Any external best practices will need to be integrated and understood based on how they will extend your current capabilities.

When Best Practices Do Work

I’ve recently worked on two new client projects, one helping an international corporation transform its sales strategy, and another helping an investment bank improve productivity. In both projects, the solution is already there. Within the first client’s company, a couple of departments are already delivering the new strategy and achieving record sales, and in the second there are already a handful of teams whose productivity is dramatically higher than the norm.

For many of your most pressing issues, you do not need to look for an external best practice. Instead, you should identify where best practice is already taking place internally and engage the rest of the organization to follow suit. This is vastly simpler because the infrastructure, culture and relationships are already in place.

For one company this process took place in the model of what is known as co-creation. Becton, Dickinson and Company operates a medical surgical systems unit and endeavored to reduce the incidence of healthcare-associated infections in hospitals, which sometimes occur from unsafe injection and syringe disposal practices.

For one of the many experiments the company tested, project managers created an internal community of people who were already doing something right in their own departments – account managers, supply chain and purchasing managers, occupational health leaders, sustainability managers, financial officers, and IT professionals – and gave them space to collaborate, identify holes in the current system, and start a dialogue.

People from various areas of expertise shared their knowledge on medicine, sustainability, and product design with the end goal of reducing the incidence of infection, improving the company’s relationship with hospitals, increasing sales, and minimizing the need to compete on price. In this case, applying best practices meant looking internally and finding a way to apply the knowledge that already existed on a larger scale.

How are you uncovering, sharing and leveraging best practices inside your business?

Daniel Lock is the principal of Daniel Lock Consulting specializing in helping organizations to unlock value and productivity through project, process and change management. You can contact him on his blog or by email.