1: To answer this question, we must step back in time.
“Imagine a world in which our only reliable options for a quick lunch across much of the country were fast-food joints like McDonald’s and Burger King,” Panera Bread Company founder Ron Shaich writes in his powerful book Know What Matters.
If we were born after the year 1990, this reality is likely hard to comprehend.
Because now there’s “a Starbucks on every block, a Whole Foods Market down the street, and Panera and Chipotle around the corner,” Ron observes.
But none of that existed thirty years ago. This was a time when fast food was considered “special.”
Ron writes: “I remember attending the grand opening of a Burger King with my dad. Could you imagine that today?”
2: The year was 1994, and Ron was sitting on a barstool, somewhere outside of Chicago.
The winds of change were blowing.
“You want to understand today’s consumer? Look at the label on their beer bottle,” said Dwight Jewson.
Dwight is “a psychologist turned researcher and strategic consultant, with a knack for decoding consumer behavior,” Ron writes. “In the mid-nineties, he’d become my most valued thinking partner in the quest to discover new opportunities for competitive advantage.”
At the time, Ron was CEO of Au Bon Pain, a chain of French cafes that were beginning to struggle, along with a recent acquisition, the St. Louis Bread Company, with 20 locations (that would one day become Panera Bread Company with more than 2,000 stores).
“The label on that bottle is a mirror for who people perceive themselves to be,” Dwight continued. “When you have people over and you want to make a good impression, you don’t serve them Bud. You serve them Corona or Sam Adams.”
[“Remember, this was 1994,” Ron interjects, “and the ‘craft’ revolution was just beginning. Today, the same point might be made with a triple-hopped IPA from the local microbrewery.]
“And when you do so,” Dwight said, “you’re making a statement about who you are.”
Ron nodded his head. The two men had spent months traveling across the country, attempting to figure out what would matter to tomorrow’s consumers.
“How would the restaurant industry evolve in reaction to new consumer trends?” they asked.
And: “How did we want to position our business so that those trends were a tailwind for us?”
Dwight’s insight “meshed with what we’d observed over the past weeks and months,” Ron recalls. “I could feel we were onto something significant.”
They’d visited countless cafes that were “pushing the extremes, pleasing the most discerning customers,” he writes. “We bet that we would learn the most from those businesses that were the least like our industry’s incumbents. We can’t glean insight into the future from studying the status quo.”
Underlying Dwight’s barstool comment was a sense of empathy: “He saw into what their target consumer really wanted,” he observes. “People don’t just want a special product. They want to feel special in a world in which they no longer are.”
Ron writes: “We called this phenomenon ‘a drive for specialness.’ Ultimately, it became one of the most powerful trends that defined the consumer marketplace in the late nineties and into the new millennium. . .
“Just as the drive for specialness was happening in beer, coffee, and beverages, we realized, so it was about to happen in food.
“We recognized that a growing number of consumers wanted that feeling of specialness,” he explains. “And fast food made them feel anything but special. They didn’t want to look too closely at the Formica tables, plastic seats, or paper hats on employees.”
What was the “job” these target customers wanted done?
It “wasn’t simply to deliver a great-tasting quick breakfast or lunch for not much money,” Ron writes. “It was to serve them great food and beverages while giving them back a bit of their dignity. To make them feel special again.
“Everything we discovered during this formative period resulted from answering the most important question: What matters? Unless we take the time to learn what matters, we’ll miss the opportunity to discover truly significant trends, address the deepest human needs, and build something that will have real impact.
“It was so clear to us that specialty food was a revolution reaching its time,” he recalls, “and so far, no one had done it at scale. We were determined to be first. We felt that we had seen the future. . .
“We began to sketch out a vision of a cafe that would be built on relationships instead of transactions; a cafe that filled a bit of our soul as well as our stomach; a cafe that was an oasis from the rush of everyday life rather than an amplifier of it. We could imagine a ‘specialty food’ cafe, built on the authority of artisan bread. We could see it, feel it, taste it. Now we just had to get the job done and bring it to life.”
3: Insights like these are hard-earned.
“Most leaders don’t take enough time to do this learning,” Ron writes. “Learning mode is not a comfortable place to be because it means first admitting that we don’t have all the answers and then gathering the patience and humility to explore many possible options. . .
“Most of our learning on those trips was built on developing deep empathy with customers,” Ron notes. “Empathy requires that we pull away from our own concerns and obsessions and extend ourselves—emotionally and mentally—into another person’s mind and experiences.
“This is not surface-level. We need to get in customers’ heads and feel the world as they feel it,” he suggests. “It won’t always make sense to us, as we tend to be stuck in our own mental models, assuming that the rest of the world thinks the same way. We are so often unwitting prisoners of our own paradigms and quick to assume we understand before we’ve taken the time to do so.
“It’s little wonder so many businesspeople come up with innovations that look good on paper but fail in practice. It’s because they aren’t rooted in empathy.
“People don’t always know what they really want or need, which is why focus groups often fail to provide useful insights.
“A well-developed sense of empathy gets to the roots of the customer’s problems,” Ron reflects. “Taking note of physical details, reading body language, asking questions, listening, and most importantly, watching what people do.
“Then, once we start to connect to something that matters, we need to be patient, step back, and look to extract the generalization–the broader patterns that might confirm the relevance of the need we’ve uncovered. This is the work of the innovator.
So what is a CEO’s most important job?
Discovery.
As our companies grow, there is a temptation to outsource our R&D efforts to an internal department or an external consulting firm.
Bad idea, Ron believes.
“Don’t. Stay directly involved,” he advises. “To me, getting out of the office to connect with customers is the most important thing a leader can do, which was why I made those trips with Dwight. . .
Discovery is something that “should never be delegated,” he writes. As CEO’s, “our job is not to accept what is. Our job is to change the trajectory of the business. The minute we think we truly understand the customer and can take our attention off discovering what matters, we’re dead.”
Which is why the CEO must embrace this critical responsibility.
“As a leader, I also know that there are times when I’m the only one who has the power—and the accountability to the enterprise as a whole—to overcome the internal skeptics (often a company’s functional leaders) and summon the resources needed to innovate,” Ron writes.
“Of course, it takes many heads, hands, and hearts to bring a new business idea to life.
“But when it comes to betting and executing on a game-changing, disruptive strategy,” he suggests, “we need ownership from the top. The CEO, as innovator-in-chief, must take the lead in making it happen. And it’s the CEO who must be held accountable for the results.
“Einstein once said, ‘If at first the idea is not absurd, then there is no hope for it.’ Who but the CEO has the influence to convene and marshal the company’s resources behind an ‘absurd’ idea and drive it through the organization?
“And what’s the point of a CEO title,” he asks, “if it’s not used to ensure the company’s ability to innovate?”
More tomorrow!
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Reflection: Am I consistently stepping out of my comfort zone to observe, learn, and empathize with customers—ensuring our organization keeps discovering what matters next?
Action: Set aside intentional time this week to directly engage with customers and team members—observe, listen, and ask “What matters most to you right now?” to spark new ideas.
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