Take Olam International, the commodities trading company. One of Olam's key strategic pillars is that its supply chains extend directly to the farmer in the producing countries' fields. Though it deals with more than 200,000 separate suppliers, Olam uses the power of nonnegotiables to maintain consistency throughout its operations. For instance, managers must live in a rural area in a developing country to learn about what really goes on at the front line. Each local manager must consider relationships with the local farmers as the highest priority. Olam even has created models of efficient farms through its farmer field schools, which demonstrate practices that can improve farmers' operations.
Good nonnegotiables are hard and serious, not soft and fuzzy. They affect decisions about tradeoffs, reinforce a company's strongest advantage and link to rewards and other sources of motivation. Most of all, they connect directly to the daily routines of frontline employees (see figure).
IKEA is an illustration of how this works. Founder Ingvar Kamprad established the principle early on that the company should "reach good results with small means. Expensive solutions are often a sign of mediocrity." This fundamental strategic tenet underlies the organization's nonnegotiables, such as its relentless cost focus in every detail of design. In 1996, for example, IKEA decided to create a mug that could be sold for only five Swedish kronor (about fifty cents at the time). The company avoided red pigments because they were more costly than others. It increased the number of mugs that could be stored on a pallet, eventually reducing shipping costs by 60 percent. The next-generation version of the mug was further redesigned so that more could fit into the kiln in manufacturing, further shaving cost. This level of commitment is why rivals have found IKEA so difficult to emulate.
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