The Wisdom Pyramid

The 9 Principles provide a framework for fulfilling any business goal and working through any business problem. Once again, however, there are no pat solutions, which is why we must use a principled approach.

As the book says, “we don’t become experts overnight.” In lieu of snapping our fingers to resolve our issues, we develop a model for assessing where we are and how to think our way to the next level. The diagram below illustrates this framework.

This model suggests that what we’re ultimately after is Wisdom—not in the generic sense, but rather Business Wisdom. We also suggest that Wisdom is not a random occurrence in the realm of talent or luck. Wisdom is something that can be developed and honed.

The beginning of wisdom in business is data. Data is simply the numerical explanations of activities. Data is input into the accounting system. This data is accumulated and compiled within the system and subsequently becomes information.

From that information, decisions are made, and knowledge and experience are gained. Over time and with practice, wisdom is developed. At this point, you can make decisions based on wisdom—not just on the data and information that are available. You become the expert!

Data and the information in the Wisdom Pyramid usually come directly from the accounting system. The critical factor is that the accounting system of the business provides appropriate and accurate information needed to eventually develop knowledge and wisdom.

Here is an example of how I have gained wisdom about what causes business failures. For years, I have worked with businesses of all sizes. Many were failing; some didn’t make it. I was able to observe various reasons for these failures. First, those observations were just data points. Then they became information, then knowledge, and then wisdom. The list below outlines the major reasons for business failures. As you can see, not all of these reasons can be learned from data and information. Rather, most of the reasons can be learned from the knowledge and wisdom developed through the years. In most cases, it started with accurate information gathered from the accounting system.

The Biggest Reasons for Business Failures:

• Insufficient working capital (current assets less current liabilities)
• Inexperience
• Extravagance (spending money on unnecessary purchases)
• Dishonesty
• Overly optimistic or unrealistic outlook
• Personality issues
• Credit policies
• Incomplete accounting system
• Misunderstood accounting information

This list represents wisdom accumulated over the years, which is critical in creating profitability. The Wisdom Pyramid provides a process for learning that is valuable in making better decisions which, in turn, will make your business more successful.

Integrating the Wisdom Pyramid into Business Strategy

Understanding and implementing the Wisdom Pyramid can significantly influence your business strategy. Start by ensuring that your accounting system is robust and accurate. This foundation will allow you to collect reliable data, which is the bedrock of all subsequent steps.

Once you have reliable data, transform it into actionable information. For instance, analyze your sales data to identify trends and patterns. This information can guide your marketing strategies, inventory management, and customer service improvements.

As you continuously analyze and apply this information, you’ll gain knowledge about your business environment. Knowledge encompasses understanding why certain strategies work and others don’t. For example, you might learn that certain marketing campaigns yield higher returns during specific seasons.

Over time, with consistent application and reflection, this knowledge evolves into wisdom. Business wisdom will help in predicting the challenges, making informed decisions, and going ahead with strategies that are not reactive but proactive. You'll start recognizing subtle signs that tell you of a possible issue and thus act upon them before escalation.

Practical Application of Business Wisdom

Let's delve into a practical scenario. For instance, if customer satisfaction has taken a decline in your business, you can get data on customer feedback, returns, and complaints. This raw data alone won’t provide solutions, but it’s a start.

Next, convert this data into information. Categorize the complaints—are they mostly about product quality, delivery times, or customer service? This categorization transforms data into actionable information.

With this information, you gain knowledge about the root causes of dissatisfaction. You might have discovered that most complaints are about delayed deliveries. Now, use this knowledge to implement changes—perhaps by optimizing your logistics or partnering with more reliable carriers.

You not only learn how to solve problems, but also how to look ahead and see where your plan may be disrupted and fix it before it does. That experience, refined over the years, is one of the most important tools that will lead your business toward enduring success.

Conclusion

The journey from data to wisdom is inseparable and is a continuum in the quest for the attainment of sustainable business success. By embracing the 9 Principles and diligently applying the Wisdom Pyramid, you will be better placed to navigate complexities, make informed decisions, and steer your business toward growth and profitability.

My invitation to you is to ask yourself, “Where are you in the Wisdom Pyramid in each of these three functions in the Universal Business Model?” Reflecting on this question will help you identify areas for improvement and ensure you’re on the path to developing true business wisdom.

Take the Next Step Towards Business Wisdom

At P&G Advisors, we specialize in helping businesses transform data into wisdom. Our team of experienced advisors can assist you in optimising your accounting systems, interpreting your data, and developing strategic insights that drive success.

Ready to elevate your business? Book a call with one of our advisors today and let us help you achieve sustainable success.