The Soft Edge: Where Great Companies Create Lasting Success

by Rich Karlgaard

It is noteworthy that a prominent business journalist from Silicon Valley—where technology and IPOs dominate headlines—wrote a book about the human factors of business success. “The yin and yang of effective management has always been about the search for the right spot between data truth and human truth.”

“Hard-edge execution is all about managing exactly to the numbers. The people who live on the hard edge of business are good at making the trains run on time. They focus on profit. Their language is time, money, and numbers. Every company in the world needs these employees.”

“Soft-edge excellence—in trust, smarts, teams, taste, and story—tends to attract loyal customers and committed employees.” Karlgaard says the soft edge is “the heart and soul” of your company.

TRUST

Trust is “the foundation of all five of the soft-edge advantages… Trust has many definitions, but I like to think of it as confidence in a person, group, or system when there’s risk and uncertainty.”

“Trust is the key to relationship building… When information can flow easily and it’s expected to flow easily—that’s what builds trust… When trust is low… this brings down the speed and increases the costs.”

“When customers trust an organization, they’re more likely to have a stronger impulse to purchase products, as well as have a higher level of customer satisfaction… Simply put, trust sells.”

SMARTS

“In the real world, smarts isn’t about looking for the next star student with a 4.0… Instead, it’s about the importance of hard work, of perseverance and resilience. Call it grit. Call it courage. Call it tenacity. Call it a can-do attitude… Grit leads directly to faster learning.” Smarts comes from taking risks and learning from your mistakes.

“No matter what field you’re in, there are always new and innovative ideas you can borrow from art, from sports, from other businesses and industries.” This is known as lateral thinking.

Karlgaard notes that exercise also improves cognition, especially outdoors and with a social aspect. “You see, those lunchtime walks or bike rides with coworkers may be doing a lot more than just burning a few calories; they may actually be making you smarter.”

TEAMS

“Diversity will fail if it’s shallow and legalistic… From my exploration of teams and team dynamics, I’ve found the broader and more inclusive designation of cognitive diversity—which includes age and experience alongside race and gender—to be a more powerful concept, yet underreported in existing literature.”

“Team members worth a fig, by definition, will want some control over their own environment… According to a 2008 study by Harvard University, there’s a direct correlation between employees who have the ability to call their own shots and the value of their creative output. So take notice: a team member who has to run every detail by you will quickly lose initiative.”

The ideal team size is eight to twelve people. This is also known as the two-pizza rule.

TASTE

Taste goes beyond aesthetic. “It’s delight and wonderment… Often the emotional connection to a product is what engages us in the first place. Time and again, we see successful products that were not necessarily the first to market but were the first to appeal to us emotionally—a Coca-Cola bottle, Star Wars, the Sony Walkman.”

New products and services must be intuitive, uncluttered, and purposeful. Karlgaard points out the Nest thermostat comes with “custom screws designed to let anyone put them into any surface. You don’t have to be a carpenter. You feel competent. You feel in control. You feel smart… This notion of creating and selling the entire experience flies in the face of classic business ideas like economy of scale.”

“Even when a product is new or novel to the point of being revolutionary, people still need to associate with it… Research on aesthetic preferences shows that familiar objects—ones we’ve been exposed to, heard about, or seen—are preferred over objects that we’ve never come across before… In other words, patterns, relations, and designs that we’ve encountered in the past play a huge role in forming our preferences.”

STORY

“The most powerful way to persuade others, to overcome resistance, is by linking an idea with an emotion. And the best way to do that is with a good story. If you can stimulate imagination through a good story, it causes people to suspend analytic thought… Storytelling doesn’t replace analytical thinking. It supplements it by enabling us to imagine new perspectives and new worlds.”

“Stories are how we remember… Stories have an impact not so much through transferring large amounts of information as through synthesizing understanding.”

“Two areas where I believe storytelling is particularly important are in creating purpose and in building brand.”

“Right here and now, let me just say purpose is a hugely important soft-edge factor. It is the thing that leads you to create authentic products and heroic customer experiences, even if that isn’t the right ROI thing to do in the short term… As soon as you lose that real belief in your greater purpose and fail to sell it, you begin compromising whatever it was that made your brand great… In the end, a leader’s job is to articulate and help people cohere around a shared purpose that embraces the company’s past and outlines its future.”

“Brands represent the emotional relationship, the touch point, between a consumer and a product… Therefore, at its very core, marketing is storytelling… Storytelling de-commoditizes… and wraps meaning around your products.”

In conclusion, “companies strong in the soft edge can often survive a big strategic mistake or cataclysmic disruption that would sink companies without a sturdy soft edge. Loyalty, passion, and commitment are the dividends of a strong soft edge. Hard-edge strength provides a fleeting advantage. The hard edge is easier to clone than the soft edge, especially as technology and software become cheaper and more widely accessible.”

Hewlett-Packard offers and case in point about the value of the soft edge. For decades, “the so-called HP Way was universally understood by HP employees as a set of inspirational and ethical standards… But successive CEOs, straining too hard for top-line growth, chipped away at HP’s core values. Eventually the HP Way was lost—and with it, creativity, talent retention, brand value.”

Tom Peters called The Soft Edge the “top business book of the decade to date.”

Karlgaard, Richard. The Soft Edge: Where Great Companies Find Lasting Success. San Francisco: Jossey-Bass, 2014. Buy from Amazon.com

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