One stage left

The most consistent finding across nearly three decades of pricing and strategy reviews is not a number. It is a direction. Ask a leadership team where the business stands and they will place it, honestly and in good faith, one stage to the right of where the evidence puts it.

The gap is almost always exactly one stage. Not two, and rarely none. It shows up so consistently that we assume it before any review begins. And anything that consistent has a cause worth understanding.

The policy and the practice are different things

Leaders see the policy. There is a discount authority ladder; it is in the sales handbook; they approved it. The salesperson sees the practice: the ladder is bypassed for anything urgent, and everything is urgent by Thursday. Both are telling the truth. The leader's version is one stage to the right of the salesperson's, every time, because the leader is describing the system as designed and the salesperson is describing it as used.

The same thing happens with strategy. The chief executive knows the strategy has three themes, because they wrote them. Two levels down, the strategy is a rumour and the themes are whatever last month's town hall emphasised. Ask the top team whether the strategy has been communicated and they will say yes, with a straight face and a slide to prove it.

Three people, one grid

The cleanest demonstration we have seen came from letting three people in the same business answer the same grid separately. Most of their answers landed within a stage of each other. Where they disagreed, the disagreement followed their role: the person who owned the systems saw a capability, the people who lived with the output saw a practice. Neither was wrong. The business's real stage was where the practice sat, and the honest reading was lower than any one of them would have offered in a meeting.

Client testing since has shown the same pattern more widely. Businesses that run the check across the organisation are less interested in the average than in the spread, and the spread has a shape: the closer a respondent sits to the front line, the lower the scores. Policy lives at the top of the building. Practice lives at the bottom.

That is the general case. A self-assessment answered by one senior person is a self-portrait. Answered by three people who see different parts of the machine, it starts to become a photograph.

Why it matters

The gap costs money in three predictable ways.

Budgets are set for the stage a business imagines it is at. A leadership team that believes its pricing data is in good order buys optimisation software. If the data is actually patchy and untrusted, the software has nothing sound to work with. It will still produce confident recommendations, and they will be wrong. The business has paid a great deal to automate a guess.

Fixes are aimed at the wrong problem. If the leadership team believes discounts are under control, the plan to lift margin will be a strategy exercise: segmentation, value research, a new price architecture. If discounts are in fact approved by whoever the salesperson asks, the money is in the approval ladder and the exception log. The strategy exercise will produce a beautiful structure that leaks exactly as fast as the old one.

Progress is measured from the wrong starting line. Getting from rules that exist on paper to rules that are actually followed is real progress, and worth points of margin. A team that thought it was already there will experience that same move as standing still, and lose patience with it.

The three-minute test

You do not need a diagnostic to find your own gap, though it helps. Try this.

Pick one practice you are confident about. Write down, in one sentence, what actually happened the last three times it was exercised. Not the policy, the three instances. Who approved the last three discounts above the threshold? What did the last three strategic initiatives get, in dollars, that business as usual did not? How much of the last price increase did the ten largest accounts actually pay?

If the three instances match the sentence you would have used in a board paper, you are at the stage you thought. If they do not, you are one stage left, and you have just found out for free.

The sentence you would be embarrassed to confirm

A stages-of-excellence grid is built so that the honest answer is the easy one. Every cell is a plain, checkable sentence, and the ones at the low end are deliberately unflattering: "Discounts are approved by whoever the salesperson asks." "The goals are the strategy." "Nothing is ever exited."

The useful exercise is to read the low cells looking for the one you would be embarrassed to confirm in front of your own team. That embarrassment is information. It usually marks the row where the business is one stage left, and the row where the next step right is worth the most.

Where does your pricing honestly stand? · And your strategy?