The Soft Edge

Great companies don’t just execute strategies; they create meaningful connections that resonate with people – their employees and customers alike.

1. Three Core Components of Successful Businesses

A thriving business operates on three fundamental components: a strategy, a hard edge, and a soft edge. Think of this as the three sides of a triangle. The strategy forms the base, providing clarity about the market, competition, and target customers. Meanwhile, the hard edge is about execution – ensuring logistics, capital efficiency, and seamless operations.

Businesses often prioritize strategy and hard edge because they are quantifiable, but the soft edge is what sets outstanding companies apart. Soft edge is about the human connection, encompassing values like creativity, trust, innovation, and culture that can’t be measured on a spreadsheet.

Imagine a platform supported by five pillars within the soft edge: trust, smarts, teams, taste, and story. Together, they give companies unique strength and identity, fostering deeper engagement with people and transforming a company from being good to being great.

Examples

• Amazon’s strategy dominates logistics, but it’s their focus on soft aspects like storytelling that bonds customers with the brand.
• Porsche succeeds with well-executed engineering on its hard edge but stands out because its teams display creativity and collaboration.
• Northwestern Insurance built its brand on trust, leveraging both its hard and soft edges for long-term customer relationships.

2. Trust as the Backbone of Relationships

Trust forms the bedrock of successful interactions, whether external (customers) or internal (employees). The Edelman Trust Barometer confirms that customer trust directly impacts corporate reputation more than the quality of products or services.

Northwestern Mutual, America’s largest insurance provider, exemplifies trustworthiness by maintaining financial predictability. Its high asset-to-contract ratio reassures customers, fostering security and loyalty. On the other hand, trust within the organization is critical for employee dedication and performance.

NetApp, for instance, earned a stellar reputation by staying transparent even during challenging times like layoffs. Their executive team personally delivered tough news, respecting employees’ positions, which helped retain morale among remaining staff and maintained operational momentum.

Examples

• Northwestern Mutual’s prudent asset management secures consumer trust consistently over its 157-year history.
• NetApp values transparency with employees, which is why they’ve repeatedly been named one of the best workplaces.
• Edelman reports that companies emphasizing trust see higher customer loyalty.

3. Learning From Mistakes Defines Smarts

"Smart" companies stay ahead by embracing continuous improvement and recognizing that mistakes are an opportunity to grow. These companies encourage curiosity, resiliency, and a commitment to smart processes.

Chef David Chang of Momofuku embodies this mindset by promoting kaizen (continuous improvement) and hansei (acknowledgment of mistakes) in his kitchens. Employees are encouraged to experiment with dishes, knowing that learning from errors leads to better outcomes.

The Mayo Clinic also reflects this philosophy. By borrowing insights from hospitality giants, they train staff to prioritize customer (patient) care with warmth and professionalism, blending healthcare efficiency with emotional intelligence.

Examples

• Momofuku chefs perfect recipes by testing new ideas and learning from mishaps.
• Mayo Clinic employees improve patient satisfaction by incorporating hospitality best practices.
• Businesses engaging in lateral thinking often outshine competitors stuck in rigid methods.

4. Small and Diverse Teams Drive Innovation

Humans thrive in small, cohesive groups, and businesses mimic this natural structure. By keeping teams small, communication improves, and efficiency increases. Amazon founder Jeff Bezos famously stated, “A team should be small enough to be fed with two pizzas.”

Small, diverse teams drive innovation by integrating a variety of perspectives. Porsche introduced mini-teams that transformed its production, quadrupling output and sharply increasing profitability. Similarly, SAP halved its software development timeline by adopting a comparable team structure.

Nest Labs, another example, ensures its teams bring engineers, designers, and marketers together, reflecting the diversity of their customer base and producing nuanced, customer-centric products.

Examples

• Amazon applies the “two-pizza rule” across development teams to encourage innovation and agility.
• Porsche’s mini-teams helped revitalize production efficiency and profitability.
• SAP’s smaller groups expedited software development from 14.8 to 7.8 months.

5. Taste Connects Customers Emotionally

Taste is the art of balancing form, function, and meaning in products. Products with taste invoke an emotional connection – they feel familiar yet exciting, intelligent, and thoughtful. At its core, taste stems from a deep understanding of customer needs and aesthetics.

For example, Tony Fadell instills taste into Nest Lab’s smart thermostat design. From bamboo packaging highlighting sustainability to user-friendly installation tools, every touchpoint reflects thoughtfulness. Similarly, Apple’s sleek devices draw inspiration from minimalist traditions like Bauhaus, making their design universal.

Starbucks founder Howard Schultz tapped into taste by bringing Italy’s coffee culture to the US. The leisure-filled ambiance of cafés, combined with thoughtfully prepared coffee beverages, became more than transactions – they transformed coffee breaks into meaningful experiences.

Examples

• Nest Labs’ thermostats feature ergonomic designs and eco-friendly materials.
• Apple products channel minimalism inspired by Bauhaus to evoke global appeal.
• Starbucks redefined “coffee culture” by merging taste with storytelling.

6. Stories Give a Brand a Purpose

A company’s story is its narrative, revealing who they are and why they exist. Stories humanize companies, making them relatable. Customers identify with the vision and feel part of its journey.

Northwestern Mutual celebrates its enduring story through rituals like their annual gatherings where representatives share professional growth and personal triumphs. This reinforces brand identity and motivates employees to engage profoundly with their work.

Brands like Apple and Starbucks also create powerful narratives. Apple’s “garage startup” story showcases innovation birthed from humble beginnings, transforming how we perceive technology brands as imaginative visionaries.

Examples

• Apple’s origin story in a Palo Alto garage is still referenced as part of its ethos.
• Starbucks’ journey links its evolution directly with its Italian coffee inspirations.
• Northwestern Mutual reinforces its message by narrating its transformative sales formula every year.

7. Soft Edge as the Human Factor in Business

While data helps shape business metrics, people drive innovation. Companies that lean exclusively on the hard edge risk losing their soul – it’s the soft edge that balances this equation. People ultimately decide a company’s direction, even in data-rich industries.

Sauber’s Formula One team exemplifies this blend. Despite sophisticated technology tracking every parameter, a driver’s intuition at 200 MPH decides the result. This combination of human ingenuity and machine assistance mirrors how businesses should approach growth.

Wall Street’s hard-edge obsession often overlooks emotional investment in employees or customers, making companies interchangeable. In contrast, businesses like Apple and Northwestern thrive because they amplify the human aspect.

Examples

• Sauber embraces human performance despite its high reliance on technical data.
• Apple prioritizes user experiences to differentiate itself in the saturated tech market.
• Northwestern Mutual intertwines trust with financial wisdom to secure decades of customer loyalty.

8. Ignoring the Soft Edge Hurts Profitability

Companies that neglect the soft edge often struggle with long-term customer loyalty and employee retention. Wall Street’s short-term focus on measurable gains often neglects the emotional story the brand could tell or its value-driven purpose.

Nordic airlines SAS once revamped to focus on customer experience (a soft edge factor), which drove profitability following years of losses. Similarly, Southwest Airlines maintains a people-first philosophy, cultivating loyal fans and keeping costs low by emphasizing relationships.

Without attention to these human aspects, companies miss the chance to build lasting customer sentiment or stand apart from competitors chasing similar goals.

Examples

• SAS reclaimed profitability by emphasizing soft skills like better customer experience.
• Southwest Airlines revolutionized low-cost airlines by putting relationships first.
• Too much focus on stock prices derails companies from creating emotional connections.

9. Soft Edge Fuels Long-Term Success

Businesses that harmonize the soft edge with strategy and hard edge enjoy sustained success through challenges. While the soft edge might not show immediate returns, it often delivers unmatched long-term loyalty and innovation.

Northwestern Mutual exemplifies this balance. Their long-standing reputation for financial prudence aligns with their dedication to storytelling and trust. Likewise, tech giants like Apple stay profitable by cultivating taste, smart practices, and human connections alongside groundbreaking tech.

Businesses that integrate all three edges create not only functional operations but emotional resonance.

Examples

• Northwestern Mutual’s growth stems from balancing financial discipline with trust-building.
• Apple combines user-based creativity with sharp design to remain distinctive.
• Amazon links efficient logistics with stories of customer commitment, improving its brand.

Takeaways

1. Build trust through transparency and reliability in both external customer interactions and internal employee relations.
2. Keep teams small (eight to twelve people) to encourage creativity, effective communication, and collaboration.
3. Dedicate time to crafting your company’s story – one that captures your purpose and resonates with customers and employees alike.