Decision-making criteria should transcend common sense
I can cite many examples that show the extent to which a person's mind can be ruled by common sense or general convention.
The concept of sales and general administrative (SG&A) expenses as a ratio of revenue is shrouded in superstition otherwise known as common sense. In a normal world, sales and general administrative expenses should vary, depending on the sales organization and sales methods. And yet, a company sets the expense ratio at 15%, simply because competitors are using 15%. Why does it not occur to that company to sell with a lower expense ratio, if another company is using 15%? This is where you need to have a Why? way of thinking.
Profit ratio, too, is set by so-called common sense at a particular percentage after tax, for a business of a particular kind and scale. If you fall into this kind of common practice, then your profit ratio will stay at that level. When wages rise, for instance, you will apply severe rationalization to your operations and thus maintain that profit level. However, you will still be unable to rise above that rate. Although you could apply the same effort continually to become a company with even higher profit, you have acquired the belief that this industry can do no better than the commonly accepted profit ratio. It is almost as though some mysterious force is preventing the profit ratio from moving. These examples illustrate the extent to which common practice restrains human mentality and creativity.
This mentality must be applied to a tremendous degree not only in business management, but also in research and development. I urge you to retain this notion clearly in your minds. People who are steadily successful in research and development have a mentality that is not tied down by common sense.
Kyocera Management Studies Course at Kagoshima University, Faculty of Engineering (December 11, 2002 & July 7, 2003) Summary