Summary and My Thoughts

Like many of the other books that I’ve created book notes for; I had to revisit and attempt to refreshen my familiarity with the content of this book and this was incredibly difficult given the amount of content in each chapter. Each chapter also draws up an ongoing collection of case studies to provide examples of his theory in reality.

In short, Simon has created this concept of the Golden Circle that describes the relationship between the “Why”, “How”, and “What” with the “Why” being the starting point from which the others flow. The “Why” of a business is incredibly important because not only does it steer the actions of the business but it also inspires loyalty from the customer base. Loyalty through inspiration is much more dependable for success than other sales strategies such as manipulation which may fail in the long term. Your “Why” is your purpose and vision, your “How” is the actions disciplined around your “Why”, and your “What” is the result of your actions and purpose; your contact point with your loyal customers. Your “Why” helps establish your brand with the early adopters, those responsible for tipping the early majority or the largest reachable base into believing in your product. The most important determinant of business success and success in other causes is the ability to clear present a “Why” that others can believe in and belong to.

Part 1 - A World That Doesn’t Start With Why

Chapter 1 - Assume Your Know

We make decisions on what we think we know which typically involves either false or incomplete information. When making decisions, to achieve some target of success, we attempt to gather as much information as possible to inform our right decision; but sometimes regardless of the amount of information collected we still make the wrong decision. Likewise, sometimes when things actually go right we attribute the success to the wrong reasons, in actuality our incomplete information means that we don’t truly know why it was a success. Even if after making an incorrect assumption, we gather even more information, we can still set about on making an incorrect judgement; life is a dance between gut and well informed decisions. How do you develop 20/20 foresight when even with near-exhaustive information, you still can not fully comprehend why something was a success. Every result, every course of action is determined by a decision and the best way to make the long-term success of the decision more successful is to completely understand the WHY behind the decision.

Chapter 2 - Carrots and Sticks

In today’s business environment, the first mover’s advantage is short lasting; therefore you must understand how a business captivates and keeps its customer base. There are two strategies of achieving this: manipulation and inspiration. Manipulation is a benign tactic in most cases and generally used by companies that are as attuned to their customer base, An example of manipulation includes dropping the price (which requires the need to sell more to compensate), this is difficult to carry out long term while maintaining profitability. Another example of manipulation is offering promotions such as cash back incentives, two for one, or free toy inside. The success of promotions are dependent on breakage or the percentage of customers to advantage of the promotion (such as failing to send in mail-in rebates). Other forms of manipulations include fear, aspirations, peer pressure (4 out of 5 dentists, celebrity endorsements), novelty (perceived innovations, real innovations change industry). Manipulations work in the short term but often cost more in the long term or simply don’t last in the long term, they simply drive the sale but they don’t instill brand loyalty in the customer. Loyalty involves a customer who would turn down a better product or a better price in favor of you versus repeat business which is simply when a customer does business with you multiple times. Unfortunately because manipulations do work, businesses, products, and organizations have become weaker overall.

Part 2 - An Alternative Perspective

Chapter 3 - The Golden Circle

Business leaders that seek to inspire rather than manipulate express their vision and purpose through a naturally occurring pattern labeled The Golden Circle, three concentric circles with the WHY being the inner-most circle, then the HOW, then the WHAT. Just like how the golden ratio is a naturally occurring phenomena that describes nature, the Golden Circle describes human behavior by reminding us to always start everything we do by asking WHY. WHAT, every organization knows what they do. HOW, some companies and people know HOW they do WHAT they do. WHY, very few people or companies can clearly articulate WHY they do WHAT they do. WHY asks what your purpose is, your cause, your belief, why does your company exist? Most companies go from WHAT to WHY since it is easier and clearer to articulate WHAT first. Inspired companies work from the WHY to the WHAT. If Apple marketed by WHAT they would simply explain what they do, rather they market by WHY (e.g., ‘think different’) to inspire their customers to follow along before detailing their WHAT. People don’t buy WHAT you do, they buy WHY you do it.

Chapter 4 - This is not opinion, this is biology.

People have an innate sense of belonging, a desire to belong to something. When a company communicates their purpose, their WHY and the customer also believes in that same WHY, the customer will go to extraordinary lengths to incorporate that brand in their lives, to obtain a sense of belonging. Our sense of belonging also helps us distinguish things that don’t appear to belong together (DELL selling MP3 players, IPod and Celine Dion, etc), we are drawn to companies and people who are good at communicating their WHY. Like the Golden Circle, the human brain can be viewed as a three concentric circles where the limbic brain (“Why”) is the middle two sections and the neocortex (“What”) is the outer section. When we communicate from the outside-in, we communicate our WHAT, the facts and reasons. Communicating from the inside out is much fuzzier and heatfelt, “it just feels right”, this is where “gut decisions” come from. Decisions made from the rational neocortex can take longer since they involve more rationality, they can also be of less quality. Decisions from the limbic brain tend to be faster and of better quality. Companies that fail to present a WHY force their customers to make rational decisions using only empirical data to support those decisions which leaves their customers prey to manipulative tactics. Great leaders are able to act on gut decisions and communicate their WHY thus having the ability to win hearts over minds. Products with a clear sense of WHY allow their customers to communicate their own WHY to the rest of the world.

Chapter 5 - Clarity, Discipline, and Consistency

To inspire, you must be able to provide clarity to your WHY otherwise your WHY is a vague and ineffective. HOW is your principles and values and determines the disciplined approach to WHAT you do. Your HOW is guided by your WHY. Instead of clarifying your values and principles as adjectives (integrity, innovation, communication), you should clarify them as actionable verbs (integrity = always do the right thing, innovation = look at the problem from a different angle). Discipline in your HOW allows you to stay focused on your WHY. WHAT is the result of the HOW or actions that are based on the beliefs WHY. Your WHAT should always be consistent with your beliefs. Authenticity means that your WHAT adheres and stays consistently aligned with your beliefs or your WHY. Always start with the clarity of the WHY to inform your HOW and dictate your WHAT, you should always keep this order. When you approach a decision from a rational perspective, the best we can provide is an “I think this decision is right.”, when we make a decision from the gut, “We feel this decision is right.”, this gut decision is based on your WHY. A business should not simply do business with someone who wants what you have, rather it should focus on people who believe what it believes, those who share the same WHY”.

Part 3 - Leaders Need A Following

Chapter 6 - The Emergence of Trust

Happy employees ensure happy customers ensure happy shareholders. Trust is a feeling, not simply the result of a rational case on why a customer should purchase a product. Trust begins to emerge when we have a sense that another person or organization is driven by things other than their own self-gain. Trust is the result of the balance of your WHY, HOW, and WHAT. The chapter describes the story of how Bethune redirected the WHY in continental airlines to create a more transparent company that embraced its employees to promote a message of togetherness which helped elevate the struggling airlines; these changes fostered trust between Bethune and his employees. Trust is fostered by a community or culture that similar beliefs and customs, similarly this is how trust is fostered between customers and companies that share the same WHY. Great companies attract and hire motivated people and inspire them rather than hire skilled people and motivate them. When you are motivated by WHY, success follows.

Chapter 7 - How a Tipping Point Tips

TiVo failed because they presented their WHAT instead of their WHY and they also ignored The Law of Diffusion of Innovations. The Law of Diffusion Innovations breaks the population down into categories: innovators (2.5%), early adopters (13.5%), early majority (34%), late majority (34%), and laggards (16%). Innovators pursue new ideas and technology aggressively and challenge the way we view the world around us. Early adopters are quick to recognize the value and potential of new technology and are willing to take the risk, however they are not idea generators. Both innovators and early adopters rely on their “gut” or intuition to drive their decision and they are willing to pay a premium or suffer some inconvenience to own a product or espouse an idea that feels right. Next comes the early majority then the late majority followed by the laggards. It doesn’t matter when the population on the right side of the graph if you have something they need, they simply aren’t responsive so you shouldn’t waste your time and money trying to market to them. Many people call fall into different categories based on certain products or brands. To capture the early majority, you must be able to capture the early adopters since the early majority will only gravitate toward products that been tried and tested prior. You must have the discipline to focus on the early adopter and the early majority will eventually follow; but to capture the early adopters you must be able to clearly communicate your WHY. You need to give them something to believe in.

Part 4 - How to Rally Those Who Believe

Chapter 8 - Start With Why, But Know How

Energy motivates but charisma inspires. To have charisma, you must have a clarity of WHY, an undying belief in a purpose bigger than yourself. Your WHAT is simply the tangible way to breath life into your WHY, the unchanging purpose, cause, or belief. A clear WHY draws in people who share the same cause or belief. The HOW is the action that bridges the WHAT and the WHY, it doesn’t matter what the WHY is, if the actions of the HOW are not present then the results are never manifested, the vision is never brought to reality, failure results. The HOW is crucial for making the WHY tangible, it is the plan of action responsible for this. Those who know WHY need and are dependent on those who know HOW, whereas WHY types have the power to develop a clear vision, they still need the presence of the HOW to direct the vision in an actionable direction. Successful organizations and partnerships can be viewed in terms of the WHY visionary and the HOW types working in tandem to create the success.

Chapter 9 - Know Why, Know How, Then What?

View the Golden Circle as a three-dimensional cone with a fourth level known as the chaotic marketplace that contains the customers, potential customers, press, shareholders, etc. The WHAT layer of the golden circle is the contact point between this organized golden circle structure and the chaotic marketplace. The WHAT layer is responsible for communicating the WHY to this chaotic marketplace and captivating potential customers from the chaotic marketplace; because of this your WHAT should always be consistent with your WHY. As companies become larger, they fall into the trap of forming a disconnect between their leader, the WHY and their products, the WHAT. Your WHAT should clearly communicate your WHY, your products and services should illustrate your vision and purpose.

Chapter 10 - Communication is not about speaking, it’s about listening.

Symbols are extremely important for presenting their WHY. Best practices are not always best and emulating the HOW and WHAT of other successful companies does not guarantee similar success for you, not unless the WHAT and HOW are consistent with your WHY. You can use the celery test to determine the WHAT and HOW that works for you. Imagine that you’re at a gathering and different people are offering advice on how to improve your business by purchasing different items such as M&M’s, Oreos, rice milk, and celery so you go to the store and expend time and resources purchasing a little bit of everything. The products are the HOW and WHAT. You may not get any value from any of these items. Instead, you should filter your choices of the HOW and WHAT based on your WHY. If your WHY is health, then you would simply purchase the rice milk and celery. Filtering your decisions based on your WHY also shows to others your WHY based on your choices. By implementing the celery test, you build trust with your customer base. If you violate the celery test, if your decisions do not match you WHY, you destroy trust.

Part 5 - The Biggest Challenge Is Success

Chapter 11 - When Why Goes Fuzzy

Wal-Mart is the example of business whose WHY became fuzzy after the death of its owner. Wal-Mart began to confuse its WHY with its HOW and started using manipulative tactics and focus strictly on being cheap. Oftentimes companies begin to lose clarity of their WHY when they strictly pursue profits in violation of their purpose and principles. Achievement comes from the pursuit and attainment of WHAT, but success comes when you are clear in pursuit of WHY you want to achieve what you achieved. The former is motivated by tangible factors whereas the latter is motivated by something deeper. When along the path of achievement, the WHAT, companies and organizations often split from their WHY. The separation of the tangible and intangible marks this split between the WHAT and the WHY.

Chapter 12 - Split Happens

A WHY without a HOW, a passion without structure has a high probability of failure. This is why many small businesses fail. In other cases, the structure and systems or the HOW is present but the passion, the WHY has been lost, typically this is the case of businesses that fail in the long run. The single greatest challenge to a business is success, as a company becomes successful by any metric, the owners become fixated on the WHAT and HOW and lose concentration on the WHY. The chapter introduces the School Bus Test which asks, “If the founder or visionary of the company is hit by a bus, would the company still exhibit the ‘Why’ exemplified by the founder.” In the case of Wal-Mart, they lost their WHY with the loss of their founder. You seek a perfect parallel between your WHAT and your WHY throughout the duration and journey toward success in your business. Good successions keep the WHY consistent and alive no matter the presence of the leader, the WHY should embody everything within the company. When you lose your WHY, all that you have left is your WHAT.

Part 6 - Discover Why

Chapter 13 - The Origins Of A Why

Learning the WHY or a company or an organization and understanding the WHY of any social movement always starts with you. This chapter is autobiographical and details how the author lost his WHY when pursuing his own business. After realizing that his failure was the result of losing focus on his WHY, he became obsessed with discovering the importance of WHY behind every success story. Now he knows that to guarantee the success of his business he must always start with a clear WHY.

Chapter 14 - The New Competition

If you follow your WHY then others will follow you. When you compete with everyone else, no one wants to help you, when you compete with yourself, everyone wants to help you. Your sense of WHY keeps you pushing, getting up, and going. In business, we’re often competing with others and comparing ourselves with others. Instead, the new competition is to compete with ourselves, to focus on being better than the week or month before. To forget your WHY is to show up and simply attempt to outdo someone else other than yourself. You should always have a clear sense of WHY and your competition should be against yourself as you attempt to better align yourself with your WHY, this in turn will inspire others. If every organization started with WHY then decisions would be simpler, loyalties will be greater, and trust would be a common currency.