Understanding Local Max

My guess is that you’ve been wrestling with your Local Max.

If your organization or even your career is stuck, it may just be because of this chart.

LocalmaxwEveryone starts at that dot at the bottom left corner. You’re not succeeding because you haven’t started yet.

Then you try something. If it works, you end up at point A.

A is where you see results as the direct output of a strategy and hard work. A is the job you got after investing in an MBA. A is the sales you got after running an ad.

Of course, being a success-oriented capitalist, that’s not enough. So you do more. You push and hone and optimize until you end up at the Local Max. The Local Max is where your efforts really pay off.

So you try harder. And you end up at point B. Point B is a bummer. Point B is backwards. Point B is where the outcome of more effort against your strategy doesn’t return better results. So you retreat. You go back to your Local Max.

And that is where most people stay. Most people get stuck at the Local Max because changing strategy in any direction (this is really a 3D chart, but I’ve smushed it to make it easier) leads to poorer results.

You’ve got a very good job as an art director. To do better, you’d either have to move to another firm, move to another town, switch careers or go back to school. And all of them have costs and very uncertain returns, so you stay.

You have 100 competitors in an industry that is self-described as a commodity. You use the same tactics your competition does, because if you change your pricing or fundamentally alter your marketing outreach, you get punished in terms of sales or profits.

You’ve got summer camp with 80 kids in it. If you want to grow, you’ve learned the hard way that hiring one or two more senior staff people won’t work, because you can’t afford them. So you stick with what you’ve got.

The lie of Local Max is this: the chart is incomplete. It really looks like this:

Localmax2_3

Local Max isn’t actually that great when you realize that Big Max is not particularly far away.

The problem is that to get to Big Max, you need to go through step C, which is a horrible and scary place to be.

There were 10,000 single-location hamburger restaurants in the world when Ray Kroc decided to build a giant chain of franchised McDonald’s. Anyone could have done it. No one did. Because everyone who tried had to go through point C to get there. It took Colonel Sanders more than a decade of pain to get through point C.

Of course, it’s not just about growing sales or revenues. The Big Max/Local Max paradox affects everything from education to non-profits to politicians. If you have a "Max", whatever you’re measuring, the odds are you’re actually dealing with a Local Max, not the Big one.

If your market is changing, this idea is even more important to understand. That’s because changing markets are always surfacing new Big Max points, and the only way to get to them is to go through the pain (yes, it’s painful) of point C.

You can’t reinvent yourself and your organization until you deal with the fear of point C, and that’s hard to do without talking about it. I think the benefit of the Local Max curve is that it makes it easy for you and your team to have the conversation.

Seth Godin

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