Back to First Principles

Every organisation has invisible rules that shape its destiny, for better or for the worse.

A set of assumptions on which they are built, which provide coherence, and mark the edges.

First Principles.

An organisation’s First Principles are a set of beliefs about the world that have deep resonance in their actions. Whether they are newly developed, or historically derived from stories of success or hardship, they hardened over time into visceral decision-making instincts about how best to focus and organise.

They are often informed by and connected to a company’s purpose – but because they direct choice in a more tangible way, they often have a more direct impact on the actions of the organisation.

They often connect into stated and shared values – but because they have much greater capacity to motivate, frustrate or exclude people, they potentially have a more direct effect on individual behaviour and collective culture.

Unlike purpose or values, they are often uncaptured and unstated – but have huge impact by seeping into day-to-day behaviour, from acronyms, to cultural norms, to rules of thumb.

We’re talking about Principles as fundamental as what the organisation believes makes customers happy; how it thinks they world is going to change, and how fast; how it believes complex tasks are best achieved; what it thinks of as being efficient, or effective.

They tend to have a colossal effect on all of the most tangible decisions businesses make – from growth strategy, to structure, to product development.

Crucially, they also directly relate to the personal inter-relationships between the most influential people in those organisations, and in some cases are erected around those power structures, which can create a huge and often irrational impact.

As such, they have huge capacity to be the fundamental divers of success, or to limit growth to the point of obsolescence.

First Principles are probably most visible right now in the bare bones of the founding stories of start-ups, particularly the tech disruptors that have ended up consolidating vast proportions of the world’s wealth, attention and influence.

The most celebrated go beyond the level of vision, mission and values, but go much deeper into the ‘middle bit’ – ie the organisational principles that connect the vision to day-to-day decision making.

A classic of the genre is Netflix’s much-lauded talent management document from 2014, which includes aphorisms as pointed as this:

‘As we grow, minimize rules. Inhibit chaos with every more high-performance people. Flexibility is more important than efficiency in the long term.’

People I know who have worked at and with Netflix assure me that this, and most of the other granular aphorisms in the document, are real, visceral in the organisation and take primacy over apparently logic-based decision making in many situations.

This means that on any given day these principles can lead to inspiration, or to lunacy – but on a fundamental level for the moment they are empowering an outrageously ambitious organisation to continue to create and build artistic and financial value.

How Netflix Reinvented HR

But if at this point you’re thinking that creating a set of clearly articulated First Principles is an automatic ticket to the Netflix class, then take a look at Kodak. One of the absolute icons of digital failure – a business that once bestrode the imaging world like a colossus, but went from 90% share of some key markets to abject failure within little more than a decade.

It’s often described as a business that was too slow, too set in its ways, too invested in legacy to adapt to the world of digital imaging, but it is important of course to remember that it was Steve Sasson, a 24-year-old engineer at Eastman Kodak, that created the world’s first viable digital camera.

And Kodak was hardly a business that dealt in complacency. Its founding father, George Eastman, had successfully navigated at least two seismic shifts in imaging quality, and was known for this quote, well known by all the leaders of the business subsequently:

“The world is moving, and a company that contents itself with present accomplishments soon falls behind.”

And from that day until the day of its demise, it fought tooth and nail to out-innovate and outfight its competitors – Fuji in particular.

When you study the story of Kodak with the benefit of hindsight it seems incomprehensible that such a smart, well-equipped, dynamic business would miss the only boat that mattered.

But this is a business that had a deep-seated (and economically convenient) belief in tangibility – that continued to believe, perhaps rightly, in the emotional primacy of the printed photo; that in the 1980s put much more serious immediate thought into a serious pivot towards becoming a chemical business than into becoming a digital business.

It allowed an underlying First Principle to ride through the organisation that the future of the organisation was intrinsically bound to the power of chemical engineering. It shaped their structure, their culture, the financial models that chose, and the people they promoted.

And that Principle was too deep-rooted to shift with incipient changes in consumer behaviour, or even, ultimately, with leadership attempts to pivot.

First Principles are a crucial underpinning of coherence, something that pulls you out from the dreck of a thousand abandoned ideas and brands, and transcends a moment.

First Principles can be a key driver of sustainable success, giving you the resilience to ride the pressures of growth, societal change, and crisis.

If you are starting a new journey, or a new business, setting out your First Principles early on is likely to be essential to keep you on track, and growing in a meaningful way.

But First Principles need to be revisited constantly. If they are locked into a medium or a context that is transitory, they can’t be allowed to ride – they need to be challenged, and adapted.

If you want your First Principles to take you forward, you need to be equally ready to challenge or defend them, based on evidence and an open mind.

But the first step is to be truly aware of them.

To state your shared assumptions, and to question either whether they are right ones, or whether they are merely what brought you here, or what you would like to be true.

Things like:

– Regardless of the importance of a particular service to our bottom line, is that service fundamentally as valuable in the future as it is now? If not, what is our plan?

– Do our customers really have appetite for ever-more integrated sets of our brands, products and experiences, or is that partly wishful thinking?

– Is our physical channel really the cornerstone of the business experience, or is it at least partially an anchor slowing progress?

– Does our business really need to shape itself around a fully fixed workforce?

If these questions are nagging you, it might be time to go back to your First Principles.

Which is, after all, what they are there for.