In October 1987, Paul O’Neill stepped on the stage in the ballroom of a posh Manhattan hotel. This was the first time Wall Street investors and stock analysts would interact with him since he became the CEO of Aluminum Corporation of America (Alcoa).
In the meeting, O’Neill announced his area of focus: worker safety. Each year, O’Neill explained, numerous Alcoa workers would get injured so badly that they had to miss a day of work. He wanted to make Alcoa one of the world’s safest companies by going for zero injuries.
This shocked the investors. They expected a blizzard of buzzwords and phrases like “synergy,” “right-sizing,” “co-opetition,” and “using alignment to achieve win-win synergistic market advantage.” O’Neill used none. In fact, he even refused to field questions about inventories in the aerospace division or the company’s capital ratios.
As soon as the presentation ended, stock-brokers jogged to payphones to call their largest clients and order them to sell all of Alcoa’s stock, because the “board had put a crazy hippie in charge.” It turned out to be a terrible — possible the worst — piece of advice they gave.
Within a year, Alcoa’s profits hit a record high. By the time O’Neill retired in 2000, the company’s valuation had risen by $27 billion and its net income was five times larger than before he arrived.
O’Neill’s unconventional approach to focus on safety is a brilliant example of upstream thinking. It turned one of the largest, most rigid, and potentially dangerous companies, into a profit machine.
What is Upstream Thinking?
Such a mindset focuses on preventing problems before they occur. It’s about proactively getting to the root cause rather than reactively dealing with visible symptoms.
In the medical world, we value upstream thinking. We expect doctors and nurses to eliminate ailments, not suppress them. Then why do we shy away from such a mindset in the corporate world?
Some problems should be solved, others should be left alone. But some should not exist at all. The trouble is, we spend most of our time creating and solving problems of the third type in the quest to stay busy.
In Upstream, authors Chip and Dan Heath laid out some reasons for the rampant reactive mindset at the workplace.
The foremost reason is that workplaces still equate visible actions with productivity.
Consider two police officers. The first one stands at a corner where many accidents happen. Her presence makes drivers careful and reduces collisions. The other hides around the corner, nabbing cars for prohibited turn-violations.
The first officer does more for public safety, but the second officer gets rewarded for the stack of tickets she can show for her effort.
This obsession with doing more visible work eventually leads to “tunneling,” where we get so overwhelmed that we cannot deal with problems until they spiral out of control. Plus, we cannot deny the emotional high we secretly enjoy by stopping a huge screw-up at the last minute.
Finally, trying to prevent problems slows us down, something the unending stream of urgent tasks doesn’t permit. We also get pushed us outside our comfort zone and encounter problems we don’t have answers to. And leaders cannot afford to not have answers, especially when everyone is looking up to them.
So leaders resign to solving the same problems over and over again. (Secretly, they also feel this justifies their worth.)
But this archaic “solve-don’t-prevent” way of working takes a huge toll on companies.
For one, it causes rework that impacts productivity and revenue. In 2010, the Juran Institute estimated that 15-20 percent of revenues for manufacturing companies and 30-35 percent for service companies, were lost to rework.
Consider the worker compensation firm that discovered it could slash costly disputes and attorney involvement simply by contacting injured workers within 24 hours. Yet, new claims languished for almost a week because employees were dealing with all the prior claims that landed in court. This meant 80 percent of the new claims would also involve attorneys and disputes.
Downstream, reactive thinking also makes businesses sweep important decisions about new strategies and technology under the carpet. When they finally take action, they discover that the market has moved on to the next thing.
Such companies are either always busy playing catchup or become sitting ducks for the competition.
On the other hand, upstream thinking helps leaders identify the Archimedes lever that brings Pareto’s Law into play.
When leaders align the organization on the 20 percent of actions that yield 80 percent of results, witchcraft happens. Companies don’t just solve problems, they also carve out a profitable niche for themselves.
The Benefits of Upstream Thinking
Upstream, proactive thinking helped Paul O’Neill build the right organizational habits that catapulted Alcoa to new heights.
1. Efficient Processes
The aim of zero injuries meant Alcoa had to first identify why workers got injured.
This led them to study how the manufacturing processes were going wrong. They brought experts to educate workers about quality control and more efficient processes since correct work improved safety.
2. Swifter Communication
O’Neill also mandated an automatic routine where the unit president of any plant had to submit a report to him within twenty-four hours of an injury with a plan to ensure the injury never reoccurred.
This meant presidents needed ideas to prevent injuries, and most of the good ideas came from workers at a plant. So plants revised the communication system to make it easy for the lowest workers to get an idea across to the highest authorities as quickly as possible.
To focus on safety-related information in real-time, O’Neill also ordered Alcoa’s offices around the world to link up in an electronic network, which acted as a data system that managers could use. These were the 1980s when the worldwide web still hadn’t reached personal computers.
At first, people shared safety-related information. Slowly, they also started sharing pricing information, intelligence on other companies, and more. This tool speeded up their communication, which in turn, helped them stay ahead of the competition.
When the Web blossomed, Alcoa was perfectly positioned to take advantage of email years before the competition caught up.
3. Impact on Profits
The focus on safety also indirectly brought down costs, improved quality, and enhanced productivity.
Pouring systems of molten metal got redesigned if their splashes injured workers. This didn’t just save workers, it also saved money lost in raw material spills. If a machine kept breaking down, it got replaced. As a result, the quality of products improved because malfunctioning equipment was a chief cause of subpar aluminum.
One worker suggested a solution to his general manager for a problem which the division had been paying consultants millions of dollars to solve (but to no effect). His solution made the division nimble in responding to customer demands, and profits doubled.
The worker apparently had been suggesting the idea for a decade but hadn’t been able to tell management. When communication improved, things changed.
Time and again, leaders have used the “solve-and-prevent” mindset to build keystone habits in their organizations. Apple focuses on design. Amazon obsesses over customer experience. Tesla wants to make renewable energy affordable.
The results show up in the company’s culture, the balance sheets, and eventually across the world.
“…Because the people who are crazy enough to think they can change the world are the ones who do.” — Apple’s Think Different Campaign
You don’t have to change the world. You just have to shift your lens from problem-solving to problem-preventing.
The upstream mindset will help you douse repeated fires, build a workplace where people want to give their best every day, and put your company in the enviable position to make a change.
You won’t just thrive as a leader. You’ll also change the world.
Because the people who are crazy enough to think they can change the world are the ones who do.