Build The Five Pillars Of “The Soft Edge” For A Powerful Competitive Advantage

by Forbes magazine publisher Rich Karlgaard and author of “The Soft Edge: Where Great Companies Find Lasting Success“

Success in business has traditionally meant having a strategy and excelling at the hard skills. Controlling costs. Boosting speed. Effectively managing the supply chain. Superior number-crunching and analytics. Most of today’s CEOs, CFOs, chief operating officers, boards of directors, and shareholders speak the language of this hard edge. It’s their comfort zone: numbers, metrics, analytics, logistics, strategies, and a well-defined and easy-to-see ROI.

But today’s turbulent marketplace has taken much of the bite out of the hard edge. Its very appeal, the fact that it can be measured and quantified, also means it can be analyzed and copied by the competition.

To really get ahead, and stay there, a company must also master its “soft edge” — a powerful competitive advantage that is made up of five pillars:

PILLAR 1: Trust.

When it comes to trust, you must ask yourself two questions: 1) Does your external market, your customers and shareholders, trust you? And 2) Does your internal market, your employees and suppliers, trust you?

Customers must trust that your product or service is authentic and robust enough to withstand the immediacy of today’s media. And when things go wrong, they must believe you’ll do the right thing. Internally, trust underlies effective working relationships. It improves group effectiveness and organizational performance. Maybe most importantly, trust underpins innovation by facilitating learning and experimentation.

Trust may seem like a blurry concept in terms of ROI. But research and market results have proven that deep trust creates measurable real-world returns.

PILLAR 2: Smarts.

Today, “smarts” is much more than what we conventionally think of as “intelligence.” In the age of Google, true smartness means the ability to see and recognize patterns—and constitutes the difference between forecasting a likely future and simply following the conventional wisdom.

Of course, we know that unlocking knowledge and supporting learning are pivotal to success. But there’s another dimension to being smart: one that relates to a few old-fashioned sounding concepts like grit, perseverance, and hard work. It also requires an ability to learn from others and from our own mistakes.

PILLAR 3: Teamwork.

How does FedEx’s Fred Smith manage 290,000 worldwide employees, who move more than 3 trillion packages in a year? What balance of central authority and peripheral autonomy works in such a logistically complex organization? Or why, in an entirely different industry, did German software giant SAP blow up the management framework for its 20,000-person development department and replace it with small teams?

Since collaboration and innovation are a must in the global economy, effective teamwork is vital. Yes, we humans are imperfect. We have different needs, roles, and perspectives that we bring to every interaction or team effort. But when we work together, we make each other better. We increase accountability, passion, and effort. We facilitate learning and catalyze innovation.

For example, just consider that team-oriented selling and sales commissions outperform individually focused sales teams by 30 percent.

PILLAR 4: Taste.

This is the word Steve Jobs used when he described Apple’s unique but universal aesthetic appeal. Jobs felt taste came from his own understanding of the yin-yang of science and humanity. The chief designer of Specialized Bicycles, Robert Egger, calls it “the elusive sweet spot between data truth and human truth.” Nest Labs founder Tony Fadell said, “If you don’t have an emotionally engaging design, no one will care.”

Clever product design and integration are proxies for intelligence — they make customers feel smart. If your product or service is seen as a badge of intelligence, you’re far along the road to lasting success. But taste is much more than just good design. It’s a universal sensibility, an emotional engagement, that appeals to the deepest part of ourselves. It’s wonderment and desire, power and control. And we see it in those magical products that not only show us at our best, but also make us feel and perform even better.

PILLAR 5: Story.

In a world where outsiders can weigh in and have a greater voice on your brand, the ability to create an effective narrative is more important than ever. Used both internally and externally, stories create purpose and build brand. Purpose may be a soft attribute, but it’s what gives you steel in your spine, especially when cutting corners might temporarily boost the bottom line and delight shareholders.

Externally, stories are used to launch new brands and enhance the image of existing brands — a task made more difficult by today’s many new forms of communication.

Make no mistake, the hard edge does matter. Mastering it is “table stakes” — necessary to compete but not sufficient to win. Still, companies that can’t find the right balance between their hard and soft edges — those that neglect and underestimate the five pillars — will ultimately fall to those that can.

What many left-brained business titans have viewed as the realm of artists, idealists, hippies, poets, shrinks, and do-gooders, the soft edge is where innovation happens. It’s where brands are built. It’s how companies become agile. It’s where loyalty, passion, and commitment are born. It’s how today’s companies can differentiate themselves from the competition.

Rich Karlgaard is author of ”The Soft Edge: Where Great Companies Find Lasting Success“. He is also the publisher of Forbes magazine, where he writes a column, Innovation Rules, known for its witty assessment of business and leadership issues. He has been a regular panelist on television’s Forbes on FOX since the show’s inception in 2001. Karlgaard is also a serial entrepreneur, having co-founded Upside magazine, Garage Technology Partners, and Silicon Valley’s premier public business forum, the 7,500-member Churchill Club.