Standard Practices versus Standout Practices

About twenty years ago, a client of mine hired one of the Big Consulting Firms to analyze their IT. The resulting report said my client had ten times as much world class IT expertise in-house as their nearest competitor, and that was bad.

The recommendation was to retire the proprietary software those IT people had created, standardize on commercial off-the-shelf software instead, shed nearly all their IT expertise, and outsource as much of their needed IT services as possible.

My client’s IT chief announced acceptance of these recommendations with glowing predictions about how much more profitable they would be when they used the same software as everyone else.

I have simplified the story a lot, skipping some pieces that would raise your eyebrows even more. But they were very much in step with the times. Outsourcing and standardization were becoming major fads in IT.

Even when you only consider the highlights, it never made any sense to me. My client’s software was the ancestor of an entire category of highly reliable production software. Two commercial software firms grew out of it directly, and most of the others owe their existence to that beginning (whether or not they realize it). How can you possibly gain competitive advantage by doing things the same way as everyone else if you could be doing things better than everyone else instead?

Sure enough, my client went through a seriously unpleasant period for several years before starting to find their way again. Treating world class IT expertise as undesirable was not the main decision that damaged them, but it did contribute to a slide from the enviable position their business used to enjoy. (Perhaps it is not coincidence that the Big Consulting Firm no longer exists. A good consultant’s advice is supposed to help clients, not hurt them.)

The Problem with Adhering to Standards

Standards generally define what is acceptable as either the average or median. If that’s all you want to be or all you want your business to be, stick to the standards.

But if you want to excel, you can’t get there by following standards. So-called standards of best practice are not what their label says. They are really definitions of minimum acceptable practice for their field.

It’s easy to understand why. No shareholder or business owner wants to hear the executives say, “We adhere to our industry’s standard for minimum acceptable quality.” The executive officers will quickly be looking for new jobs if they say that. Far better if they can get together with others in the industry, publish a manual of basic rules for how to run their business that any reasonably competent company in their field should meet, and call that Standards of Best Practices. Then the executives can announce that’s what they meet and it sounds like they excel.

The businesses that truly excel don’t stick to industry standards. They use those as no more than a starting point (and sometimes not even that much) and climb ever-higher from there.

For a sterling example, try Warren Buffett’s business empire. If you have read any of his essays or annual reports to shareholders, you know he feels many standard practices in both business and accounting don’t actually make good business sense. He has developed his own guidelines for how to run a business, and he reveals a lot about them in his writings. In some regards, his practices are directly contrary to what most of the business world considers standard.

His track record serves as evidence that his methods work better than the standard methods.

What are Standards Really Good For?

I’m not saying standards are bad. Far from it—we can use them as a basis for training and certification programs, and as a way to measure whether a business is performing at least adequately.

But if you want to be a standout, using “satisfying standards” as your goal would be like using “get a university degree” as your goal. Graduating from university is not an end in itself, it’s a beginning. It means you have the foundation to build a productive professional life. There are other ways to acquire an equally good foundation, but those other ways don’t give you a degree as a shorthand way of proving it to someone else.

Standards, and certifications based on them, fill a similar role for businesses. Satisfying a set of standards or earning a certification means you have a particular type of foundation. As with a university education, there are other ways to develop an equally good foundation, but the evidence is in the record of performance and not so easily recognized by someone else.

No matter how you get the foundation, its worth on its own is limited. To unleash its full worth, you’ve got to build on it.

If you want your business to be average, meet the standards in your field. If you want a standout business, top of the heap, the standards are no more than your starting point. Improve from there.

Like me, you’ll know you’re on the right track when your clients look at you, pleasantly surprised by something you’ve done, and say, “You’re not like the others!”