Knowledge | Sense cannot function on what you do not know

Knowledge

Last time, I wrote about business sense as the "ability to pick up on discrepancies."

Sales, meetings, customers, numbers, organizations.

Whether or not you can pick up on the small deviations appearing there before it is too late—that difference is what looks like business sense.

Click here for the previous article

However, there is one problem here.

You cannot feel a sense of discrepancy about things you do not know.

If you do not know how a market collapses, you cannot notice dangerous growth.
If you do not know the signs of an organization breaking down, you will overlook the silence in the workplace.
If you do not know how numbers can be distorted, you will feel at ease just because sales are growing.
If you do not know the atmosphere before customers leave, you will not notice the problem until cancellations occur.

Sense does not spring up from nothing.

You notice because you know.
You can doubt because you have seen it before.
You can see the deviation because you have something to compare it to.

Sense cannot function on what you do not know.

Sense is determined not by the amount of knowledge, but by the amount of comparison material

The term "business sense" sounds somewhat intuitive.

Good intuition.
Sharp ideas.
Quick judgment.
Good at reading the room.

People who appear that way seem to have a special intuition.
But in reality, they have many points of comparison in their heads.

They have seen similar companies.
They have seen similar markets.
They have seen similar failures.
They have seen similar ways organizations collapse.
They have seen similar distortions in numbers.
They have seen similar customer churn.

That is why, when they see the events in front of them, they can cross-reference them with past patterns.

"This way of growing is dangerous."
"This increase in meetings is a symptom of a company that cannot make decisions."
"This way of hiring will lead to collapse after they join."
"The more sales you get from this, the more the workplace will break down."
"This way of looking at the market is based on the wrong premise."

Such judgments do not come from nothing.

Knowledge and experience serve as points of comparison in your mind.
Because those points of comparison exist, you can pick up on things that feel off.

The true nature of sense is not knowledge itself.

It is the sense of discomfort that arises when accumulated knowledge clashes with the reality in front of you.

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Without knowledge, you mistake the abnormal for the normal.

What is scary is not what you don't know.
It is thinking that something is normal while remaining ignorant.

For example, consider a company whose sales are growing.

Monthly sales are up.
New customers are increasing.
Sales materials have been polished.
Hiring is progressing.

Looking only at the surface, it appears to be going well.
But those who know look elsewhere.

Is the gross profit remaining?
Has the unit price per order dropped?
Has the churn rate increased?
Has the customer acquisition cost become too heavy?
Have sales labor hours increased too much?
Is the operational burden on the front lines visible?
Is cash actually remaining?

If you do not know how to look at things this way, you will feel at ease just by seeing sales growth.

The more a company appears to be growing, the more it may be overextending itself on the inside.

The more you chase sales, the less profit remains.
The more you increase customers, the more the front lines become exhausted.
The more you increase hiring, the more ambiguous responsibilities become.
The more you increase meetings, the slower decision-making becomes.

Without knowledge, you cannot perceive this state as abnormal.

Rather,
it looks like a company working hard.
It looks like a company moving forward.
It looks like a company that is growing.

But to someone who understands the structure, something else is visible.

It is not growing; it is overextending.
It is not managing; it is just increasing paperwork.
It is not delegating; it is just blurring responsibilities.
It is not looking at the market; it is just looking at convenient numbers.

This difference is not about talent.
It is determined by whether or not you know.

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The "lack of knowledge" that occurs in the field is quite difficult to see.

A lack of knowledge is hard for the person themselves to realize.
This is because you cannot doubt what you do not know.

For example, look at the TAM.
The market size is large.
The growth rate is also high.
There are competitors.
It is easy to explain to investors.

Therefore, I think this market is attractive.

However,
A large market is different from our company being able to win.
A growing market is different from being able to retain profit.
Having customers is different from what our company can currently deliver.

If you do not know this difference, you will feel like you have seen the market just by looking at the TAM.

In an organization,

We hired excellent people.
We gave them titles.
We have them attend meetings.
We have given them numbers to manage.

Therefore, I think leaders are being developed.

However,
Giving a title is different from giving responsibility.
Giving them numbers is different from giving them decision-making criteria.
Having them attend meetings is different from having them participate in decision-making.

If you do not know this difference, you will increase dependency while thinking you are developing them.

In management control,

We set KPIs.
We are doing budget-actual management.
We are checking numbers in meetings.
We are also creating documents every month.

Therefore, I think we are managing it.

However,
Lining up numbers is different from using them for decision-making.
Looking at variances is different from changing your tactics.
Reporting is different from moving the company forward.

If you do not know this difference, the company will stall while you think you are managing it.

A lack of knowledge does not end with simply not knowing something.
You misinterpret the meaning of what you see.

That is what is frightening.

Knowledge exists not to provide answers, but to formulate questions.

When people hear the word 'knowledge,' they tend to think it means knowing the answers.

However, knowledge in business does not exist solely to provide answers.
Rather, it exists to formulate questions.

Sales are growing.

Without stopping there, can you ask, 'Is this revenue leaving a profit?'

The market is large.

Without stopping there, can you ask, 'Where can our company capture share in this market?'

Hiring is progressing.

Without stopping there, can you ask, 'As the headcount increases, are responsibilities becoming clear?'

Meetings are increasing.

Without stopping there, can you ask, 'What is this meeting supposed to decide?'

We are looking at KPIs.

Without stopping there, can you ask, 'Do these numbers connect to the next course of action?'

A knowledgeable person is not someone who provides answers immediately.
They are someone who can increase the number of points that need to be examined.

When you are in a position to oversee a business, you must not be lulled into a false sense of security by superficial success.

When you look at the numbers, customers, organization, meetings, and the atmosphere on the ground all together, you need to ask whether something is out of alignment.

Whether or not you can ask a question depends on the amount of knowledge you have.

If you do not know, a question will not arise.
If there is no question, you cannot pick up on anything that feels off.

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Knowledge only becomes sense when it is connected to the field

However, just collecting knowledge is not enough.

You read books.
You memorized frameworks.
You learned market analysis.
You studied accounting.
You learned organizational theory.

That alone does not become sense.
Knowledge can only be used once it is connected to the field.

For example,

Just knowing 3C is meaningless.

You must line up the customer, competitor, and company, and look at where the discrepancy lies right now.

Just knowing SWOT is meaningless.

You must organize strengths, weaknesses, opportunities, and threats, and decide what to choose and what to discard.

Just knowing TAM is meaningless.

Instead of being satisfied with looking at a large market, you must think about the customers your company can actually reach, the angles where you can win, and the order in which you can capture them.

Just knowing KPI is meaningless.

Instead of just lining up numbers, you must decide which measures to change if a certain number deviates.

Having knowledge and being able to use it are two different things.

People with sense apply their knowledge to the situation at hand.

What is off-base in this company?
What is being overlooked in this market?
What are these customers paying for?
What are these numbers hiding?
What is this meeting failing to decide?
Where does responsibility stall in this organization?

Apply knowledge to the discrepancies you sense in the field.
Only then does knowledge transform into sense.

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When you have few points of comparison, judgment becomes a matter of preference.

People with few points of comparison tend to rely on personal preference for their judgments.

This initiative seems good.
This market seems like it will grow.
This person seems talented.
This document is clean.
This meeting was productive.
These numbers are not bad.

Of course, intuition is important.
But intuition without points of comparison is dangerous.

If you have not seen similar failures in the past,
you will overlook dangerous signs.
If you have not seen similar markets,
you will judge based solely on size.
If you have not seen similar organizational collapses,you will mistake silence for stability.If you have not seen similar distortions in numbers,you will mistake a rise in sales for growth.

Because you have points of comparison, you can sense when something is wrong.

"That company also saw sales grow in the same way at first."
"That organization also saw honest opinions disappear from meetings before people started quitting."
"That business also had a large market size, but got stuck on customer acquisition."
"That hiring also brought in talented people, but collapsed due to poor responsibility design."

People who have these references do not look at the phenomenon in front of them in isolation.
That is precisely why their judgment is refined little by little.

Sense does not become sharp overnight.

You become able to notice discrepancies little by little, in proportion to the increase in your points of comparison.

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Standards you can use tomorrow

When increasing your knowledge, it is better not to just collect information.

What is important is to retain it in a form that can be used for decision-making.

There are five things you should look at.

First

What were the premises it was based on?

Did that success or failure occur due to market, customer, timing, organizational, or financial conditions?

Second

Where did the discrepancy arise?

Was it in the numbers, the customers, the organization, the meetings, or the accountability?

Third

What were the initial signs?

Did they appear in sales, cancellations, the atmosphere on the ground, meetings, chats, or customer reactions?

Fourth

Why was it overlooked?

Were you looking at convenient numbers? Were you failing to pick up on feedback from the field? Was there no basis for comparison? Was there no one taking responsibility for monitoring it?

Fifth point

Where would it appear if it were your own company?

If this case were to happen at your company, which numbers, which meetings, which customers, or which organizational atmosphere would it show up in?

Knowledge is not gathered just to be memorized.
Therefore, if you want to polish your sense, you have no choice but to start by knowing.

However, simply increasing your knowledge is not enough.

You must apply that knowledge to the company you are in, the market you are watching, the customers you are facing, and the organization you are driving.

Only when you do that does knowledge become business sense.

When looking at a market, if you only look at the TAM, you will make the wrong judgment.

You may think you are looking at the market size, but in reality, you might not be looking at the conditions under which your company can win.

I wrote about that in a previous article here.
“Market (1): Why companies that only look at TAM lose”

Business sense cannot be polished without knowledge.
However, it also cannot be polished just by gathering knowledge.

Apply your knowledge to the sense of discomfort you feel in the field.
From there, the sense you can use for judgment will gradually grow.

Next time, I will write about “context.”

Even with the same move, the correct answer changes depending on the company.

If this topic resonated with you even a little, I would be happy if you could give it a like or follow me.

In future installments, I will continue to break down business sense not as a talent, but as a set of judgment criteria that can be polished through practical work.