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Management in Practice

Can Low-Hanging Fruit Drive Earnings Growth?

Jeremy Eden ’86 and Terri Long, co-CEOs of consulting firm Harvest Earnings, argue that organizations ignore ways to significantly grow earnings because of “behaviors that limit what we know and how we think.” Their solution starts with asking lots of questions.

Q: In your book, you offer 77 individual ideas to improve productivity and profits. Can you describe the philosophy that lies behind your many suggestions?

Lew Platt, former CEO of Hewlett-Packard, once lamented, "If only HP knew what HP knows, we'd be three times more productive." Most CEOs agree. They are frustrated that they can't tap into their employees' deep knowledge of problems within the company because, of course, you aren't likely to solve problems about which you are not aware!

When companies "know what they know," the results are remarkable. For example, one client of ours found 2,400 smart ideas that were easy to implement, made life easier for customers and employees, and generated over $400 million annually. This company had just completed an initiative where the usual "go-to" team of key leaders did the usual budget scrubbing that yielded $95 million.

Many of the 77 ideas we describe in the book are examples of individual elements within our process. Other ideas come from working with literally thousands of managers over the years. When a company implements our process, we are up close and personal with at least the top three levels of management. We have learned an incredible amount from these experiences. We have seen wonderful examples of management, like the CEO of one client who expressed his appreciation for a team's hard work by standing up after the meeting and shaking each team member's hand. And, of course, we have seen our fair share of bad behavior. We are storytellers by nature, so the book practically wrote itself!

Q: One important aspect of your approach seems to be getting the best out of people. Why do so many organizations struggle in this area? Are there factors, such as globalization and developments in technology, that make this harder?

Organizations struggle because of issues as old as mankind, not because of new developments in globalization or technology. Those issues include the full gamut of human behavior played out daily across corner offices, cubicles, and the shop floor. Behaviors like blaming the other guy, procrastination, and believing our opinions are the same as facts are so common they become invisible. Here's a real example: An hourly factory worker sees that big chunks of tomatoes in a profitable tomato sauce are regularly clogging up the line, causing significant downtime and costing money. He wishes that the chunks would come out of the recipe but he is sure that marketing will not care about his problem. This is one of the company's top sellers. The SVP of brand management, in discussing the product, says that extensive customer testing proves that customers love the sauce and the CFO confirms that margins and volumes are high. End of story—the big chunks are worth it….or are they?

Stephen Hawking said, "The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge." You can imagine that in most companies the factory worker is never allowed, much less encouraged, to ask the SVP of brand management, "How do you know that is true?" But in this company, the CEO had instituted a process that required this question to be asked. Guess what? The customer testing had never looked just at the single attribute of smooth versus chunky and new testing showed that customers who loved the chunky sauce loved the smooth sauce…even more! Happier customers and higher savings from an idea that was easy to do.

Organizations struggle because they have not taken the time to understand the typical corporate behaviors that prevent them from getting the best out of people. Only after organizations see these behaviors clearly can they begin to eliminate them.

Q: Where do you most often find low-hanging fruit in companies? Is there a kind of company or a function within companies that more often has lots of unseen problems?

One of the most common misconceptions we face is from executives who are convinced that if only the other guy's area improved all would be well. When Jim Kilts became the CEO at Gillette, he asked his executive committee, "Who thinks the company can reduce expenses by 10%?" Every hand shot up. He then asked, "Who thinks that their own area could reduce expenses by 10%?" Not a single hand went up!

In reality, low-hanging fruit is everywhere. Every industry, every size company, those in financial trouble, those with record earnings, and every function within are able to find smarter ways to work. Ask employees, "Are you frustrated by activities that make it hard for you to serve customers?" The answer is almost always a variation of, "Absolutely—some of our processes are really dumb."

In any given company, departments will have bigger and smaller pockets of hidden problems, but it will be worth going after all of them. If there is a $10 bill next to your right foot and a $100 bill next to your left foot, you wouldn't just bend down to pick up the hundred dollar bill. While you were down there, you'd get them both. Same thing with going after low-hanging fruit.

Q: How is it possible that so many companies go on missing value in their organizations for so long? What gets in the way of seeing problems?

We like to say that "you have to believe it to see it." John Wheeler, one of the most brilliant scientists of the 20th century, and the originator of the term "black hole," said that "the likelihood of discovery is proportional to our belief that there is something to be discovered." Many executives believe that they have already done most of what is possible and the rest is too expensive or risky. Intellectually, they know there is opportunity. But it doesn't get from their brains to their guts—it doesn't drive their beliefs, because it runs up against some normal human behaviors that are hard to overcome. Here's an example: How many managers relish the chance to go to their CEO and say, "I just found out that the way I've been running my department has been wasting $1 million that we could easily save by just changing one little thing no one cares about"? We believe that we have already solved the obvious problems and that only the toughest challenges remain unsolved. This is one reason why new managers have a truly fresh perspective. They have no stake in protecting status quo as they weren't part of creating it.

Q: Many of your ideas push against conventional wisdom. How do mistakes take hold and how can one know when one is clinging to a false assumption?

Some of today's mistakes were once great ideas that have not changed as the world has changed. The chapter entitled "Chromium" in Primo Levi's extraordinary book Periodic Table illustrates this point beautifully. Levi was brought in as a consulting chemist to a paint company to solve a problem with the paint formula. He discovered that the cause of the problem was an additive the company was using. When asked why they used it, the company said they didn't know—it had been put in decades earlier.

Levi told them to take it out. A little more research and suddenly he remembered that, ironically, he had been the consulting chemist 20 years earlier who had recommended the additive to solve a problem caused by chemicals the company no longer used.

Ideas do not come with "best used by" dates. Instead, the older the idea, the more it becomes an ingrained habit carried out without the attention required to re-examine it as the world changes.

There are many other reasons mistakes take hold. For example, managers naturally rely on the valued opinions of people who have risen in the organization by proving their expertise over time. When a utility executive told his peers that he was killing an idea because he had already tried it and seen it fail, they all nodded their heads in agreement. We asked, "When did you try it?" and without any self-doubt, he gave a date 15 years in the past. As the world changes, bad ideas from the past can become good ideas as easily as good ideas can go bad.

Clinging to a false assumption feels just like clinging to a true one. The key to knowing the difference is to have institutional processes that demand intellectual curiosity. "We tried that" must be met with "When? Has anything changed since then? Is anything different about what you did and what is being proposed?" Using a five-why analysis can be very effective. Asking "why" five times will often reveal that the problem you are trying to solve is different from the one you thought you were solving.

Corporate behaviors that hammer the importance of facts are rare.

Q: One of your chapters is about the idea that "making problems harder can make finding solutions easier." Can you walk through that idea and how someone might put it to use?

Orson Welles said that "the enemy of art is the absence of limitations." Limitations give the necessary definition and clarity to problems we want to solve. Thinking outside the box actually inhibits creativity! The expression "necessity is the mother of invention" is much more appropriate. A specific need can be met much more easily than a broad request to be innovative. To make problems harder, add additional criteria the solution must meet. This means that fewer possible solutions are allowed and that helps us think deeply about a few possibilities rather than broadly about many.

Imagine you have been asked by HR to develop a solution to reduce the turnover of new hires in their first year. There are a large number of avenues to pursue and you will likely want to analyze them all.

Now imagine being given limitations that seem to make the problem harder: "Reduce turnover of new hires in their first three months while reducing recruiting expense." Now you can focus on why those employees are leaving so quickly. You discover graduates from three specific colleges are not making it out of the training program. Further analysis shows they seem to lack the communication skills necessary to be placed out of training. A well-defined problem is much easier to solve.

Q: Do leaders sometimes have to go beyond harvesting the low-hanging fruit? How can they recognize when that's the case?

Harvesting low-hanging fruit is the easiest way for companies to grow profits without risk but it does not relieve a company from climbing further up the tree. Harvesting the low-hanging fruit actually allows companies to take more risk as they have simplified their operations and improved profits. This means they are in a better position to create, to acquire companies, install that new technology, and look for new strategic opportunities. Moreover, all of those other activities depend on strong problem-solving skills and project management skills that benefit from the habits, behaviors, and process steps needed to harvest low-hanging fruit.

Q: Do you implement these ideas in your own work?

Yes, we definitely eat our own cooking. We are always looking for smarter ways to help our clients use the knowledge their employees have to find and fix problems hidden deep in their organization. We have put ourselves through the same process we use with our clients. We were as surprised as most of our clients are when we found slap-on-the-forehead improvements. That's because no matter how smart or experienced leaders of any organization are, we are all subject to the same human and corporate behaviors that limit what we know and how we think.

Perhaps we should end this question and this interview by saying that after we put ourselves through our own process we believed even more strongly than ever that because, as the saying goes, "none of us is as smart as all of us," it is imperative to use carefully designed processes to overcome many of the habits that prevent our organizations from "knowing what we know."

This interview was conducted via email.

Eden and Long are co-authors of the New York Times bestseller Low-Hanging Fruit: 77 Eye-Opening Ways to Improve Productivity and Profits.