A century before electrical contracting existed, Victor Hugo wrote, “There is nothing more powerful than an idea whose time has come.” Rapidly changing technology requires more progressive thinking today, but the powerful idea that appears as an outlier often goes unrecognized.
When you review your financial data or debrief your latest project, you consolidate the details into patterns that drive future strategy. If you realize hospital projects generate the highest profit for your company, you may pursue more of them. If you begin losing money when annual revenues reach $15 million, you may downsize. If two of your smaller customers always pay on time, you may cultivate those relationships and seek more work and referrals from them.
While focusing on these patterns, you probably will dismiss the outliers in your data or your work environment. In statistics, the term “outlier” describes data that is “markedly different” from other observations in a sample. If your typical project earns a 2 percent profit, you may dismiss the one that earns 20 as an unexpected surprise, but this outlier may have the potential to alter your entire strategy, if you understand what caused it.
Most people resist change, so we tend to fear the negative impact of unusual events and avoid them. As psychologist Carl Jung said, “New ideas are not only the enemies of old ones; they also appear often in an extremely unacceptable form.”
When Steve Jobs approached Hewlett-Packard offering an idea that would have been highly profitable, HP rejected him; after all, he hadn’t even completed college. He didn’t fit the culture or pattern that had made HP an industry leader, and by resisting his approach and his concept, HP missed the opportunity to hire one of the world’s greatest technology innovators.
Are you missing opportunities because you avoid or dismiss outliers? Consider the “black swan problem” in philosophy. Only white swans have been observed, so everyone believes that all swans are white. One day, someone observes a black swan, and it changes the underlying belief. Black swans may have existed, but until one of them was observed, the assumption persisted. No one would ever have known the difference.
The black swan problem illustrates the larger “theory of black swan events,” referring to an event that surprised the observer and has a major impact but is rationalized afterward by hindsight. The theory was developed to explain the disproportionate role of rare, hard-to-predict, high-impact events that defied expectations and assumptions in fields such as finance, technology, science and history. The tendency to use hindsight to explain a surprising event is a human reaction to the unpredictable nature of change. Again, we seek to fit the uncomfortable event into a recognizable pattern.
What if we could embrace the outlier instead of rationalizing or ignoring it? Have you shut the door on your own Steve Jobs because you were avoiding the risk of a new idea?
“Faced with changing one’s mind, or proving that there is no need to do so, most people get busy on the proof,” economist John Kenneth Galbraith said. If you have ever rebelled against “group think” and been shut down, you know the frustration of the outlier. Are you also resisting the customer, employee or adviser who offers the outlier idea that can improve your profitability? Are you drilling down into the outlier projects to see what made them unusual?
This theory of the outlier doesn’t mean you must alter your entire concept of what makes your company successful. Simply make room for consideration of unusual events or odd financial data and their potential to affect your strategy. When your intern asks why you do something in a particular way, find out what drives the question instead of defending your process. When a job goes badly, hold an open discussion to understand what really happened. Here are two examples:
• A subcontractor negotiated a project and noticed major flaws in the design. The subcontractor had always avoided becoming involved in design but was asked for ideas. Considerable time was invested, and the customer accepted the subcontractor’s solution. The project was completed, and the profit was higher than expected. The subcontractor expanded prebid design consultation, developing an unexpectedly profitable niche in negotiated work driven by design professionals’ recommendations to project owners.
• Some electrical contractors were discussing the problem of recruiting and retaining workers at a meeting and began relating experiences with female electricians. While the group consensus was that recruiting and retaining women was not advantageous, one participant noticed that productivity increased by 10–15 percent when a woman was part of the crew. He had noticed the impact that his colleagues had missed and challenged their underlying assumptions.
When you change your reaction to outliers, opportunities appear. When your black swan appears, will you notice it?
NORBERG-JOHNSON is a former subcontractor and past president of two national construction associations. She may be reached at email@example.com.