“Exceeds expectations” sounds pretty positive (and it’s certainly better than getting a “Not your best”). After all, we’ve been conditioned, through years of school and performance reviews, to think of exceeding expectations as a marker of success, something to be celebrated. And many of us have transferred that view over to the companies we run and the business we do. The public company that beats its earnings guidance, for example. Or the project that comes in early and under budget. While these seem like successes on their face, the fact of the matter is that errors are errors, even if they result in upside rather than downside.

While it’s fine (fun?) to exceed expectations every once in a while, if you’re doing it consistently, it means you have a problem. Because if you’re repeatedly exceeding expectations, you need to raise them.

Back before we were Permanent Equity, we ran several marketing agencies, one of which was an early adopter of a breakthrough digital film technology called Red One. This technology allowed us to shoot high quality, high resolution video at a fraction of the cost of competing technologies. Buoyed by our confidence in what this technology would allow us to do, we bid on a big contract with the city of Chicago to do tourism advertising. We were extremely confident in our bid. We thought it was a compelling treatment at a great price.

But when we heard back from Chicago, we were told we were out. The reason? Our bid (~$300k) was orders of magnitude lower than any of the other bids. What we thought was a feature and strength was, in the eyes of the customer, a bug and a weakness. We had so far exceeded their expectations of what was possible that they didn’t believe it was possible to produce a high-quality product at the price we were proposing. And while we offered to raise our price, it was too late. We had lost credibility in the eyes of the customer and were booted from the process. We should have been confident in our value proposition and priced our product in line with that.

In other words, if you’re a business that’s consistently exceeding expectations, it may be the case that:

1. You’re not setting its prices high enough; or

2. You’re not articulating your value proposition to customers on the front end; or

3. You’re sandbagging on goals; or

4. You haven’t yet appropriately defined “success.”

Whichever it is, stop doing that…

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