For the ultra-rich, there’s the luxury of tailor-made insurance plans
By LORNA TAN
SINGAPORE: Very wealthy people, not surprisingly perhaps, are in the market for insurance policies that pay out mega sums.
But until fairly recently, the market in Singapore was so limited that these people often had to go abroad to arrange such policies.
Times are changing as this high-end market grows larger. Insurers here, eager to tap into the burgeoning very wealthy population, have launched ‘jumbo’ or ‘universal’ policies to cater to their needs. These plans provide very large death benefits, above S$653,000 (RM1.5mil) and as much as S$25mil (RM60mil) or even more per policy.
Some plans, such as the AIA Platinum Legacy policies, actually have no upper limit on the sum assured and these jumbo cases will be assessed on a case-by-case basis.
Needless to say, you need to have deep pockets to buy a universal plan. But high net worth individuals (HNWIs), to use the industry jargon for these very well-heeled types, also enjoy the flexibility of deciding the amount and frequency of additional premiums after paying the minimum initial premium, subject to certain conditions.
For example, Prudential’s PruUniversal Vantage’s premium is paid on a lump sum basis.
Prior to 2005, such high-end products were available only through offshore providers, and clients were flown to Hong Kong for underwriting. In 2005, United States insurer Transamerica Occidental Life Insurance Company set up an office here.
As the market for such plans took shape, more insurers have jumped on the bandwagon. Said Walter De Oude, chief executive of HSBC Insurance (Singapore): “Given the rising affluence in Asia, there is certainly a demand for solutions to help HNWIs protect and distribute their wealth.
“Our high net worth business for HSBC Jade Select Universal has more than doubled in the past year,” he said.
HSBC Jade Select Universal was launched early last year and is the only one in the region that has a multi-currency option and multiple tenures for interest rate guarantees, he added.
Currently, there are seven insurers offering universal life products. Of the seven, three –Canadian insurer Manulife, local insurer Great Eastern and British insurer Prudential Assurance – launched their universal plans this year.
Universal life plans are a variant of traditional whole life and endowment plans, where policies accumulate a cash value. But there are several factors that distinguish them from plain vanilla policies.
For instance, the premiums and death benefits of universal plans are flexible. The period of coverage can also be altered to meet desired financial goals from the policy’s cash value accumulation.
This differs from a traditional life plan that serves to provide specifically a death benefit (whole life plan) or a maturity benefit (endowment plan) and does not offer such flexibility, said Tang Yin Fong, wealth management firm Providend’s risk management senior specialist.
Universal life plans also differ from traditional products, whose cash value is dependent on the investment performance of the insurer’s life fund. Instead, the cash values of universal life products are dependent on so-called ‘interest-crediting rates’ declared by the firm. Most of these plans come with a minimum guaranteed interest rate.
For instance, for AIA Platinum Legacy plans, the crediting rates for the plans vary but there is a minimum guaranteed rate of three per cent, said Paul Hughes, chief marketing officer at AIA Singapore.
The downside to such policies is that the death benefit or sum assured may not be guaranteed. This means that the policy could lapse if the crediting interest rate falls to its bare minimum. The premium may be insufficient to cover the monthly deduction for charges, such as mortality costs, if the policyholder fails to top it up.
To prevent this from happening, some insurers offer a no-lapse guarantee benefit, which guarantees cover even if the cash value of the universal life plan drops to zero, subject to certain conditions.
Patrick Lim, associate director at financial advice firm PromiseLand Independent, also cautioned policyholders to note that the policy may lapse if the minimum premium requirement is not met, subject to certain conditions.
The commissions for such policies are quite substantial, usually 10% of the single premium.
Plans for estate planning
Financial experts say that universal life plans are most appropriate for estate planning. This includes accommodating the wishes of the well-heeled to preserve their wealth so as to leave behind a meaningful legacy for future generations or charities.
Said Albert Lam, investment director at IPP Financial Advisers: “One key advantage is that a universal life policy is not an off-the-shelf product. It can be tailor-made to suit the needs of customers.”
He gave the example of a grandparent, aged 60, who purchased a universal life policy for S$400,000 (RM900,000) on the life of his son, aged 30. The sum assured was S$2mil (RM4.7mil) and it was meant to provide protection to his grandchild upon the death of his parent.
If the parent did not pass away, the policy provides the flexibility of paying out a pre-agreed percentage of the premium on an annual basis when the grandchild reaches 18 or 21 years of age for the next decade or so. This can be used to fund the grandchild’s university education or supplement his salary in the initial years of employment.
Other uses of universal life plans include retirement planning, where one’s wealth may be enhanced through the plan’s benefits. Such plans are also used as collateral for banking facilities, and to fund business succession planning where key personnel are insured.
Given the huge premiums required to kick-start a universal life plan and to keep it in force, the target market for such products is primarily the mass affluent and HNWIs.
“These people would be looking for a life policy that is more flexible and has the potential to accumulate larger cash benefits,” said Lim. It appears that such products are more suitable for older investors, who are around 50 or older.
Sunday, October 17, 2010
Super-rich come to S'pore
Insight Down South
By Seah Chiang Nee
Many of working class living in the heartland do not see much benefit from having so many rich people around – but they feel the pain of rising costs.
"Asia's growing wealth is slowly making its way into Singapore. Most Europeans, too, are parking their money here"
A LUXURIOUS 7,072 sq ft penthouse at a prime district has just changed hands for S$30mil (RM71.46mil) in one of the most expensive deals on a per square foot basis. The buyer was a permanent resident from Hong Kong and the seller an Indian tycoon who had bought it in 2006 for S$17.3mil (RM41.21mil).
The cost of the triplex with five bedrooms and an 11m swimming pool worked out to S$4,242 per sq ft, a record in land-scarce Singapore.
Last June, an unknown Chinese national snapped up a bungalow on Sentosa Island for S$36mil (RM85.77mil), the highest paid for a residence here. The PR holder from China had considered the price a bargain, according to the agent who handled the sale.
These are among a rising number of wealthy foreigners – especially Chinese, Indians and Indonesians – who have made this city their family residence while doing business outside.
Asia’s growing wealth, particularly from China and India, is slowly making its way into Singapore. More Europeans, too, are parking their money here.
For a glimpse of a Singapore in, say, another 10 or 15 years, just take a picture of Monaca or Zurich and superimpose it on this island. What will emerge is a city of wealth – transient and abiding, a land of personal banking, celebrity-chef dinners, where Bentleys, Lamborghinis and Ferraris ply the street and branded goods will become daily items.
An example of the foreign presence can be gauged at Sentosa Cove, one of Singapore’s most posh and expensive waterfront projects.
More than 3,000 people now live there. They have come from 22 countries, the top five nationalities being Singaporeans (who make up 40%), Australians, Britons, Germans and Chinese.
“Singapore has opened up a lot in recent years and we’re drawing foreigners keen to park their money as well as live here,” a developer said.
The arrival of the nouveau riche has created new fortunes for Singapore’s upper middle class, but it has also widened the economic gap between the rich and the poor as few of the lower class derives much benefit from the phenomenon.
For the upper class, the story is clear. Last year the number of millionaires jumped by 26%. Currently, 11.8% of Singaporean households have at least US$1mil (RM3.09mil) in investible assets (excluding property) each.
Some recent headlines gave an indication of the change, good and bad.
A Singaporean billionaire, Peter Lim, has just made a US$507mil (RM1.56bil) bid to buy England’s Liverpool football team. And two Singaporeans displayed their wealth less gloriously at the casino tables. One, a company managing director of a seafood business, lost S$26mil (RM61.95mil) in just three days, while the second, who was in the latest Forbes list of Singapore’s 40 richest people, dropped S$100mil (RM238.27mil). Easy come, easy go!
Cashing in on it, Citibank last week launched an exclusive Ultima credit card for the super rich in Singapore where members must have S$5mil (RM11.9mil) and admitted only by invitation.
Some of the nouveau riche came because of their children’s education. Among them is action star Jet Li, who bought a bungalow for S$19.8mil (RM47.15mil) last year. He took up citizenship and sent daughter, Jane to study here.
Another new settler, US investment guru Jim Rogers, with a net worth of US$1.8bil (RM5.55bil), also came to send his daughter to the reputable Nanyang Primary School two years ago.
To ensure she got a better chance, Rogers and his wife had performed 40 hours of volunteer work, something the locals do.
Who are the richest foreigners living here?
The Forbes’ list of top 40 ranks China-born Zhong Sheng Jian, 48, as the fourth richest man in Singapore with a net worth of US$2.5bil (RM7.71bil). And 47 year-old Indian-born Sudhir Gupta, now a naturalised citizen is ranked 13th richest. He has a personal fortune estimated at US$320mil (RM987.3mil).
Seventeen percent of foreign buyers of high-end property in the first quarter are Chinese, and the number is rising. One out of five bought houses in prestigious multi-million dollar districts of 9 to 11, the Central Business District (CBD) and Sentosa.
Some salesmen have reported cases of Chinese buyers paying the down payment with a bag of cash, leading to suspicion they may be keen to cover the money trail.
Recently a growing number of foreigners have turned to buying landed properties.
Under the law foreigners, including PRs, cannot buy any property on land or any apartment with fewer than five storeys – except with special approval. Under its strategy of attracting the wealthy and talented to settle here, the government appears to be loosening the screw.
In the first half of this year, 150 such sales were allowed, most in the prime, rich areas.
Local critics are protesting against such sale of precious landed properties. “It is like selling the country’s Crown Jewels to outsiders,” one blogger wrote.
The influx of foreign wealth is not welcomed by all Singaporeans. Some see their cake becoming smaller and more expensive.
Many of working class citizens living in the heartland do not see much benefit from having so many rich people around – but they feel the pain of rising costs.
A polytechnic student asked: “And what happens to us when they suddenly take their money and go home?”
"Asia's growing wealth is slowly making its way into Singapore. Most Europeans, too, are parking their money here"
A LUXURIOUS 7,072 sq ft penthouse at a prime district has just changed hands for S$30mil (RM71.46mil) in one of the most expensive deals on a per square foot basis. The buyer was a permanent resident from Hong Kong and the seller an Indian tycoon who had bought it in 2006 for S$17.3mil (RM41.21mil).
The cost of the triplex with five bedrooms and an 11m swimming pool worked out to S$4,242 per sq ft, a record in land-scarce Singapore.
Last June, an unknown Chinese national snapped up a bungalow on Sentosa Island for S$36mil (RM85.77mil), the highest paid for a residence here. The PR holder from China had considered the price a bargain, according to the agent who handled the sale.
These are among a rising number of wealthy foreigners – especially Chinese, Indians and Indonesians – who have made this city their family residence while doing business outside.
Asia’s growing wealth, particularly from China and India, is slowly making its way into Singapore. More Europeans, too, are parking their money here.
For a glimpse of a Singapore in, say, another 10 or 15 years, just take a picture of Monaca or Zurich and superimpose it on this island. What will emerge is a city of wealth – transient and abiding, a land of personal banking, celebrity-chef dinners, where Bentleys, Lamborghinis and Ferraris ply the street and branded goods will become daily items.
An example of the foreign presence can be gauged at Sentosa Cove, one of Singapore’s most posh and expensive waterfront projects.
More than 3,000 people now live there. They have come from 22 countries, the top five nationalities being Singaporeans (who make up 40%), Australians, Britons, Germans and Chinese.
“Singapore has opened up a lot in recent years and we’re drawing foreigners keen to park their money as well as live here,” a developer said.
The arrival of the nouveau riche has created new fortunes for Singapore’s upper middle class, but it has also widened the economic gap between the rich and the poor as few of the lower class derives much benefit from the phenomenon.
For the upper class, the story is clear. Last year the number of millionaires jumped by 26%. Currently, 11.8% of Singaporean households have at least US$1mil (RM3.09mil) in investible assets (excluding property) each.
Some recent headlines gave an indication of the change, good and bad.
A Singaporean billionaire, Peter Lim, has just made a US$507mil (RM1.56bil) bid to buy England’s Liverpool football team. And two Singaporeans displayed their wealth less gloriously at the casino tables. One, a company managing director of a seafood business, lost S$26mil (RM61.95mil) in just three days, while the second, who was in the latest Forbes list of Singapore’s 40 richest people, dropped S$100mil (RM238.27mil). Easy come, easy go!
Cashing in on it, Citibank last week launched an exclusive Ultima credit card for the super rich in Singapore where members must have S$5mil (RM11.9mil) and admitted only by invitation.
Some of the nouveau riche came because of their children’s education. Among them is action star Jet Li, who bought a bungalow for S$19.8mil (RM47.15mil) last year. He took up citizenship and sent daughter, Jane to study here.
Another new settler, US investment guru Jim Rogers, with a net worth of US$1.8bil (RM5.55bil), also came to send his daughter to the reputable Nanyang Primary School two years ago.
To ensure she got a better chance, Rogers and his wife had performed 40 hours of volunteer work, something the locals do.
Who are the richest foreigners living here?
The Forbes’ list of top 40 ranks China-born Zhong Sheng Jian, 48, as the fourth richest man in Singapore with a net worth of US$2.5bil (RM7.71bil). And 47 year-old Indian-born Sudhir Gupta, now a naturalised citizen is ranked 13th richest. He has a personal fortune estimated at US$320mil (RM987.3mil).
Seventeen percent of foreign buyers of high-end property in the first quarter are Chinese, and the number is rising. One out of five bought houses in prestigious multi-million dollar districts of 9 to 11, the Central Business District (CBD) and Sentosa.
Some salesmen have reported cases of Chinese buyers paying the down payment with a bag of cash, leading to suspicion they may be keen to cover the money trail.
Recently a growing number of foreigners have turned to buying landed properties.
Under the law foreigners, including PRs, cannot buy any property on land or any apartment with fewer than five storeys – except with special approval. Under its strategy of attracting the wealthy and talented to settle here, the government appears to be loosening the screw.
In the first half of this year, 150 such sales were allowed, most in the prime, rich areas.
Local critics are protesting against such sale of precious landed properties. “It is like selling the country’s Crown Jewels to outsiders,” one blogger wrote.
The influx of foreign wealth is not welcomed by all Singaporeans. Some see their cake becoming smaller and more expensive.
Many of working class citizens living in the heartland do not see much benefit from having so many rich people around – but they feel the pain of rising costs.
A polytechnic student asked: “And what happens to us when they suddenly take their money and go home?”
Saturday, October 16, 2010
Leadership, Why, how, what? How To Innovate Like Steve Jobs?
Why, how, what?
Inside-out leadership the difference between winners and losers
SCIENCE OF BUILDING LEADERS BY ROSHAN THIRAN
“People don’t buy what you do, they buy why you do it. And what you do serves as the proof of what you believe.” – Simon Sinek
A COUPLE of years ago, I was perplexed by an issue: Why are some people and organisations more innovative, more influential, and more profitable than others, even though they may be less funded, less equipped, and possibly far inferior? Why do some command greater loyalty from customers and employees alike?
Everywhere, small start-ups’ were outwitting big giants, and little “people” like Nelson Mandela, Mahatma Gandhi and Sam Walton were out-muscling far more advanced and illustrious opponents.
Why is Apple considered more innovative than Samsung, even though Samsung wins more innovation awards?
Mozilla is a small foundation with less than 60 employees but their Firefox products is far superior to mighty Microsoft’s Internet Explorer; Microsoft has more resources, talent and funding.
Last week, I interviewed Wikipedia founder Jimmy Wales on the Leaderonomics Show. Wikipedia has one employee yet eliminated heavy-weights Encyclopaedia Britannia and Microsoft’s Encarta to become the world’s largest encyclopaedia.
This question kept bugging me until I met Simon Sinek via a TED Talk, who similarly grappled with this issue.
He studied the lives of Martin Luther King, and the Wright brothers, who did not have as much funding or expertise as Samuel Langley in the aviation wars, yet won against the odds.
Sinek found that successful people think and act completely opposite from the others who ended up “losing”. He used three words – why, how and what – in a concept he named “the golden circle”.
The outermost circle, labelled “what” represents, for example, a company’s product. The next circle, “how”, would be the technology behind this product, and the innermost circle represents “why” the company makes the product.
With successful individuals, everything started with “why” followed by “how” and finally “what”. Sinek discovered that the “losers” communicate in the exact opposite manner.
He adds: “Any organisation can explain what it does; some can explain how they do it; but very few can clearly articulate why.”
Success can easily be replicated if we all start practicing “inside-out” instead of “outside-in” leadership.
The why-how-what model is actually grounded in biology. Our brain is split into the neo-cortex and the limbic brain. The neo-cortex (how and what) is responsible for all our rational, analytical thought and language.
Our limbic brain (why) is responsible for feelings, trust and all human behaviour and decision making with no capacity for language.
When we communicate from the inside-out, we are speaking directly to the parts of the human brain that control behaviour.
The neo-cortex will then follow, rationalising that behaviour. When we communicate from the outside-in, people may understand vast amounts of complicated information, but may not trigger behaviour.
This is why you can give someone all the benefits of your product but they still don’t buy your products, while in some cases (as with Apple’siPhone 4 with receptor problems), people would still flock to the product.
Why
Steve Jobs once said: “Innovation has nothing to do with how many research and development (R&D) dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about how you’re led.” Jobs understood clearly how to lead and it meant starting with the “why”.
The crux of Sinek’s idea lies within this centre “why” circle. The “why” represents an entrepreneur’s beliefs and passion. Why does your organisation exist? This is probably the most important strategic question your business needs to answer yet most people answer this question with “making money”.
Making money is necessary for survival but cannot be your sole purpose; we all need good health to live but that doesn’t make good health the purpose of living.
Your “why” should be enduring, and involve a social contribution and be worthy – bringing a sense of purpose.
Here are some examples – Google (let’s organise the world’s information), Mozilla (let’s kill Microsoft), Apple (let’s reinvent the status quo), Wikipedia (let’s all contribute knowledge and create a true depository of global information), AirAsia (enabling everyone to fly) and Leaderonomics (let’s transform the nation).
Neurologist Aron Buchman claims people who understand their “why” in life, actually live longer and have lower risk of Alzheimer’s. He adds: “People with high purpose in life have a lower risk of dying and developing disability. We found that people with high purpose in life at the beginning of the study had a two-and-half times lower risk of developing dementia.”
Knowing your “why” gives you direction. You tend to have more opportunities than you could possibly pursue. Knowing why you exist helps you decide what you will do and what you will intentionally choose not to do.
How
After your “why” is formulated, you can then figure out “how” it is going to accomplish the “why”. Take Walmart, the world’s largest retailer.
It started with a simple “why” – everyday low prices. Sam Walton wanted to create a store where customers didn’t need to cut coupons, compare prices or engage in non-value added activities to obtain the lowest price.
Then, he went about the “how”. Walton built an entire infrastructure to support his “why”, including the world’s best supply chain, an EDI system that ensured cost efficiency, hiring of “lower cost” retired folks, establishing stores in remote locations where rental was lower, completely cutting out advertising and keeping his corporate team as lean as possible.
Most organisations benchmark Walmart and try to “copy” their “how”. However, the “how” at Walmart has its foundation on its “why”, thus making copying immaterial.
AirAsia’s “why” was to ensure “everybody can fly”. Their “how” was to build an entire infrastructure to support this “why”.
To enable everyone to fly, they needed to manage costs and price tickets from zero (for those with no money) to full price (for those who can afford to pay). If their “why” was to be the “best low-cost airline”, all their tickets would be priced low.
Essentially, the “how” are ways the “why” gets accomplished – your value system, processes and structures, infrastructure, the talent in your organisation and the eco-system you create to support your “why”.
Wikipedia’s “why” enabled them to build an entire web eco-system (how) with a global volunteer and policing organisation.
What
Amazon.com is a business that defies logic – an online retailer that has become the biggest bookstore in the world. Jeff Bezos, its CEO and founder, knew his “what” – to open an online book store. But unlike others, he didn’t start with “what”.
He spent countless hours in traditional brick-and-mortar bookstores trying to figure out “why”. As Bezos visited bookstores, he realised there was an “experience” people went through buying books. People read parts of the books, compared books, browsed the best-seller lists and got frustrated when a book they wanted was out of stock.
Bezos quickly understood his “why” – to become “earth’s biggest bookstore.” He later refined his “why” to “We seek to offer earth’s biggest selection and to be earth’s most customer centric company.”
His “how” was to ensure the “experience” in a traditional bookstore was replicated while the frustrations (ie. lack of book titles) was addressed.
This infrastructure that he built costs millions but guaranteed Amazon provided a truly unique customer experience (his “why”).
Finally, after this entire infrastructure was built, he focused on the “what” – the actual products and services that Amazon offered – books, music and videos. The “what” may have started out as a bookstore, but once he understood his “why”, it progressed into much more.
Likewise, Apple started out as a computer company, but their “why” was to make a dent in the universe. Apple believed that “everything we do, we do differently”.
They believed in challenging the status quo. That was their “why”. And “how” they challenged the status quo was by hiring talented people and making beautiful products with great designs.
And finally, “what” Apple does is make computers, MP3 players, phones or anything that supports their “why”. We often communicate starting from the “what”. Companies communicate “what” they’re selling. But the truth is, people don’t buy what you do. They buy why you do it.
Final thoughts
There is a difference between giving direction and giving directions. Direction is the end destination (your “why”) to which you are headed, while directions (your “how” and “what”) is the plan to get you there. Leaders often give directions when they should be setting direction.
Martin Luther King inspired many to make a difference on racism. Interestingly, his speech began with “I have a dream” and not “I have a plan”.
We think a great business begins with a solid business plan. But numerous businesses built on solid business plans don’t last either. Instead, start with “why” and you may just end up inspiring millions.
>Roshan Thiran is CEO of Leaderonomics, a social enterprise passionate about transforming the nation through leadership development. To sign up your kids for leadership camps this school holidays, email
yasir.osman@leaderonomics.com, or login to
www.leaderonomics.com.
What does Steve Jobs do, that none of us seem to be able to emulate?
Carmine Gallo has been following Steve Jobs for more than a decade.
He watches all of Steve Jobs’ presentations. He’s talked to analysts, former employees and other experts to find out what makes Jobs not only the best communicator in the world, but also the best innovator.
He has a new book on the market called, “The Innovation Secrets of Steve Jobs.”
The book is #1 on Amazon’s Kindle in three categories: creativity; leadership; and office skills.
There’s a chapter in the book called, “Kick-Start Your Brain.” In it, Gallo explains that what scientists have found is that great innovators practice what’s called “association”. They look outside their industry for ideas they can apply within their organization. Steve Jobs has been doing that his whole life.
Here are two examples:
1) Gallo says Jobs’ inspiration for not having a designated cashier in the Apple Store, came from the Four Seasons hotel chain, which has a concierge;
2) When Jobs and Steve Wozniak were creating the Apple 2 computer, which became one of best selling personal computers of its time, Jobs wanted a computer people would have in their homes. But instead of looking at his competitors, he walked through the kitchen appliance isle at Macy’s for inspiration.
In that same chapter, scientists explain to Gallo that another key to kick-starting your brain and get those creative juices flowing is to try new and novel experiences that push you outside your comfort zone and push your interests.
Take a look at the video below. In it, Gallo shares one BIG key to Jobs’ success: “Sell Dreams, Not Products.”
Newscribe : get free news in real time
 | Simon Sinek: How great leaders inspire action 19 min ted.com |
A COUPLE of years ago, I was perplexed by an issue: Why are some people and organisations more innovative, more influential, and more profitable than others, even though they may be less funded, less equipped, and possibly far inferior? Why do some command greater loyalty from customers and employees alike?
Everywhere, small start-ups’ were outwitting big giants, and little “people” like Nelson Mandela, Mahatma Gandhi and Sam Walton were out-muscling far more advanced and illustrious opponents.
Why is Apple considered more innovative than Samsung, even though Samsung wins more innovation awards?
Mozilla is a small foundation with less than 60 employees but their Firefox products is far superior to mighty Microsoft’s Internet Explorer; Microsoft has more resources, talent and funding.
Last week, I interviewed Wikipedia founder Jimmy Wales on the Leaderonomics Show. Wikipedia has one employee yet eliminated heavy-weights Encyclopaedia Britannia and Microsoft’s Encarta to become the world’s largest encyclopaedia.
This question kept bugging me until I met Simon Sinek via a TED Talk, who similarly grappled with this issue.
He studied the lives of Martin Luther King, and the Wright brothers, who did not have as much funding or expertise as Samuel Langley in the aviation wars, yet won against the odds.
Sinek found that successful people think and act completely opposite from the others who ended up “losing”. He used three words – why, how and what – in a concept he named “the golden circle”.
The outermost circle, labelled “what” represents, for example, a company’s product. The next circle, “how”, would be the technology behind this product, and the innermost circle represents “why” the company makes the product.
With successful individuals, everything started with “why” followed by “how” and finally “what”. Sinek discovered that the “losers” communicate in the exact opposite manner.
He adds: “Any organisation can explain what it does; some can explain how they do it; but very few can clearly articulate why.”
Success can easily be replicated if we all start practicing “inside-out” instead of “outside-in” leadership.
The why-how-what model is actually grounded in biology. Our brain is split into the neo-cortex and the limbic brain. The neo-cortex (how and what) is responsible for all our rational, analytical thought and language.
Our limbic brain (why) is responsible for feelings, trust and all human behaviour and decision making with no capacity for language.
When we communicate from the inside-out, we are speaking directly to the parts of the human brain that control behaviour.
The neo-cortex will then follow, rationalising that behaviour. When we communicate from the outside-in, people may understand vast amounts of complicated information, but may not trigger behaviour.
This is why you can give someone all the benefits of your product but they still don’t buy your products, while in some cases (as with Apple’s
Why
Steve Jobs once said: “Innovation has nothing to do with how many research and development (R&D) dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about how you’re led.” Jobs understood clearly how to lead and it meant starting with the “why”.
The crux of Sinek’s idea lies within this centre “why” circle. The “why” represents an entrepreneur’s beliefs and passion. Why does your organisation exist? This is probably the most important strategic question your business needs to answer yet most people answer this question with “making money”.
Making money is necessary for survival but cannot be your sole purpose; we all need good health to live but that doesn’t make good health the purpose of living.
Your “why” should be enduring, and involve a social contribution and be worthy – bringing a sense of purpose.
Here are some examples – Google (let’s organise the world’s information), Mozilla (let’s kill Microsoft), Apple (let’s reinvent the status quo), Wikipedia (let’s all contribute knowledge and create a true depository of global information), AirAsia (enabling everyone to fly) and Leaderonomics (let’s transform the nation).
Neurologist Aron Buchman claims people who understand their “why” in life, actually live longer and have lower risk of Alzheimer’s. He adds: “People with high purpose in life have a lower risk of dying and developing disability. We found that people with high purpose in life at the beginning of the study had a two-and-half times lower risk of developing dementia.”
Knowing your “why” gives you direction. You tend to have more opportunities than you could possibly pursue. Knowing why you exist helps you decide what you will do and what you will intentionally choose not to do.
How
After your “why” is formulated, you can then figure out “how” it is going to accomplish the “why”. Take Walmart, the world’s largest retailer.
It started with a simple “why” – everyday low prices. Sam Walton wanted to create a store where customers didn’t need to cut coupons, compare prices or engage in non-value added activities to obtain the lowest price.
Then, he went about the “how”. Walton built an entire infrastructure to support his “why”, including the world’s best supply chain, an EDI system that ensured cost efficiency, hiring of “lower cost” retired folks, establishing stores in remote locations where rental was lower, completely cutting out advertising and keeping his corporate team as lean as possible.
Most organisations benchmark Walmart and try to “copy” their “how”. However, the “how” at Walmart has its foundation on its “why”, thus making copying immaterial.
AirAsia’s “why” was to ensure “everybody can fly”. Their “how” was to build an entire infrastructure to support this “why”.
To enable everyone to fly, they needed to manage costs and price tickets from zero (for those with no money) to full price (for those who can afford to pay). If their “why” was to be the “best low-cost airline”, all their tickets would be priced low.
Essentially, the “how” are ways the “why” gets accomplished – your value system, processes and structures, infrastructure, the talent in your organisation and the eco-system you create to support your “why”.
Wikipedia’s “why” enabled them to build an entire web eco-system (how) with a global volunteer and policing organisation.
What
Amazon.com is a business that defies logic – an online retailer that has become the biggest bookstore in the world. Jeff Bezos, its CEO and founder, knew his “what” – to open an online book store. But unlike others, he didn’t start with “what”.
He spent countless hours in traditional brick-and-mortar bookstores trying to figure out “why”. As Bezos visited bookstores, he realised there was an “experience” people went through buying books. People read parts of the books, compared books, browsed the best-seller lists and got frustrated when a book they wanted was out of stock.
Bezos quickly understood his “why” – to become “earth’s biggest bookstore.” He later refined his “why” to “We seek to offer earth’s biggest selection and to be earth’s most customer centric company.”
His “how” was to ensure the “experience” in a traditional bookstore was replicated while the frustrations (ie. lack of book titles) was addressed.
This infrastructure that he built costs millions but guaranteed Amazon provided a truly unique customer experience (his “why”).
Finally, after this entire infrastructure was built, he focused on the “what” – the actual products and services that Amazon offered – books, music and videos. The “what” may have started out as a bookstore, but once he understood his “why”, it progressed into much more.
Likewise, Apple started out as a computer company, but their “why” was to make a dent in the universe. Apple believed that “everything we do, we do differently”.
They believed in challenging the status quo. That was their “why”. And “how” they challenged the status quo was by hiring talented people and making beautiful products with great designs.
And finally, “what” Apple does is make computers, MP3 players, phones or anything that supports their “why”. We often communicate starting from the “what”. Companies communicate “what” they’re selling. But the truth is, people don’t buy what you do. They buy why you do it.
Final thoughts
There is a difference between giving direction and giving directions. Direction is the end destination (your “why”) to which you are headed, while directions (your “how” and “what”) is the plan to get you there. Leaders often give directions when they should be setting direction.
Martin Luther King inspired many to make a difference on racism. Interestingly, his speech began with “I have a dream” and not “I have a plan”.
We think a great business begins with a solid business plan. But numerous businesses built on solid business plans don’t last either. Instead, start with “why” and you may just end up inspiring millions.
>Roshan Thiran is CEO of Leaderonomics, a social enterprise passionate about transforming the nation through leadership development. To sign up your kids for leadership camps this school holidays, email
yasir.osman@leaderonomics.com, or login to
www.leaderonomics.com.
How To Innovate Like Steve Jobs ?
Image via CrunchBase
Carmine Gallo has been following Steve Jobs for more than a decade.
He watches all of Steve Jobs’ presentations. He’s talked to analysts, former employees and other experts to find out what makes Jobs not only the best communicator in the world, but also the best innovator.
He has a new book on the market called, “The Innovation Secrets of Steve Jobs.”
The book is #1 on Amazon’s Kindle in three categories: creativity; leadership; and office skills.
There’s a chapter in the book called, “Kick-Start Your Brain.” In it, Gallo explains that what scientists have found is that great innovators practice what’s called “association”. They look outside their industry for ideas they can apply within their organization. Steve Jobs has been doing that his whole life.
Here are two examples:
1) Gallo says Jobs’ inspiration for not having a designated cashier in the Apple Store, came from the Four Seasons hotel chain, which has a concierge;
2) When Jobs and Steve Wozniak were creating the Apple 2 computer, which became one of best selling personal computers of its time, Jobs wanted a computer people would have in their homes. But instead of looking at his competitors, he walked through the kitchen appliance isle at Macy’s for inspiration.
In that same chapter, scientists explain to Gallo that another key to kick-starting your brain and get those creative juices flowing is to try new and novel experiences that push you outside your comfort zone and push your interests.
Take a look at the video below. In it, Gallo shares one BIG key to Jobs’ success: “Sell Dreams, Not Products.”
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