It's time for the "Numerati" to step back

I've been reading the book "Einstein's Mistakes" by Hans Ohanian and though it's been a lot different from my expectations (I was looking for mistake stories and through 150 pages haven't found many) it has proved useful in spurring some thoughts.

One such thought has been the consequences of the growth of science and logical thinking. The first part of "Einstein's Mistakes" describes the roles of Galileo, Newton, Maxwell and others in setting the stage for Einstein's relativity theories. What this brief physics history reinforced to me was the gradual rise to preeminence of logic and mathematics in the processes of human thought--at the expense of philosophy, sociology, anthropology.

Interestingly, even in these legendary clear thinkers there was the all-too-human urge to self-protect and rationalize. Notable was Galileo's effort, according to Ohanian, to fudge the numbers so that his calculations would match what he knew to be correct about the heavens.

Next on my list to read (around "War and Peace") is Stephen Baker's "The Numerati." I find I come to this book with loads of prejudgments. From the press and the jacket copy, the book celebrates the numerization of our thinking. Which I believe is mostly bad news.

This kind of number-worship has brought us financial risk mitigation that paradoxically increased risk, created AAA-rated bonds which were actually of junk status, and any number of other examples of solid financial and numerical logic that under examination simply failed the common-sense test. In other words, a hedge fund that studied human nature might have made a lot of money these last few years.

To me, "The Numerati" is behind the times. We've seen the apotheosis of the logical/mathematical revolution, and it ain't pretty.

It's time to put numbers into their context, and begin to shift more investment to understanding people, how they think, feel and relate to one another. This is where the money will be in the future, and this is what society needs now.

As Dave Snowden writes, "It's not that social computing has created some completely new form of human interaction, what it has done is to enable conversations across barriers and boundaries. We can now be a global tribe (or rather tribes), if we can make the changes that the technology permits."

Tags:
reading list, logic, thinking, social media

A Mistake-Bank-perfect epigraph

I just unwrapped "Einstein's Mistakes" and this appears before the Preface:

Errors are the portals of discovery.
James Joyce, Ulysses

Why don't businesses change and adapt? No "Sense of Urgency"

John Kotter is the change guru. His article "Leading Change" from Harvard Business Review is a classic I've recommended to a number of people. His newest book, "A Sense of Urgency," focuses on the one area where companies most often fail the change test--establishing an organization-wide priority to, using Kotter's words, "move, and win, now."

It's a terrifically-written book, with lots of stories of organizations succeeding at or failing the urgency test. Kotter points out (as I've experienced) that many organizations in trouble foster a sense of "false urgency"--an inwardly-focused, fearful level of intense activity (wall-to-wall meetings; sound familiar?) that harms the organization, perhaps as much, or more than, old-fashioned complacency.

By contrast, "true urgency" engages employees' hearts; focuses outwardly on customers, competitors and the industry environment; and is practiced by everyone in the organization, most especially the leaders. It also requires understanding the true priorities of the company and purging activities that are not connected with those priorities, thereby opening up time for reflection, experimentation, and immersion in the world outside the company walls.

Here's my favorite snippet from "A Sense of Urgency":

imagine

We call this a thought experiment. Imagine, if you will, an organization where people up and down the hierarchy, and systems throughout the organization, help pull the outside in through

• Sending out people
• Bringing in people
• Bringing in relevant data in an eye-catching manner
• Listening to customer-interface employees
• Creating video about the outside
• Widely sharing what is learned instead of shielding others from possibly troubling news
• Changing the visuals

Nearly everyone in an organization can use these tactics to create more urgency among peers or their bosses. Imagine what would happen to complacency if many people at many levels did so. (p.100)

I can't think of a better book for today's business environment, when so many companies are struggling to reinvent themselves, while companies clearly in deep trouble continue to be surprised by the outside reality (example). " A Sense of Urgency" is a must-read.

Related post:
Time to start listening to front-line employees

Best business books of 2008 (so far)

Click here for my end of year 2008 list. Continue reading for the half-year list.

It's been a great year for business books, in my estimation, so rather than hold off till the end of the year, here's a first-half "best of" list for your perusal:




"The Opposable Mind" - Roger Martin. How the greatest business innovators can resolve paradoxes and therefore create new markets.

"Presentation Zen" - Garr Reynolds. Radical rules for creating and delivering powerful business presentations.

"Rain Making" (2nd edition) - Ford Harding. Finally, a book about selling that doesn't shout, but quietly gives commonsense, useful advice on every page.









"Groundswell" - Charlene Li and Josh Bernoff. Describes the business impact of social media technologies like blogs, social networks, forums, etc. It would be important just for the subject matter. Delightfully, it's also very well researched, documented, and written.






"Senior Leadership Teams" - Ruth Wageman, Debra Nunes, James Burruss, Richard Hackman. Illuminating a hidden corner of company dysfunction--the leadership team that can't work together--and demonstrating the practices that can overcome it.






"Brain Rules" - John Medina. A delightful, story-filled book that illuminates how the brain works, and how we can change our behaviors to be nicer to our brain and to others'.

Tags:
reading list, best of, business, 2008

"Innovator's Guide to Growth": readable, productive prescriptions for disruptive innovation

I didn't really understand Clayton Christensen's "The Innovator's Dilemma" when I read it many years ago. Perhaps like a lot of people employed by large companies, I suffered "innovator's myopia." But after experiencing disruptive products like Skype, Linux and salesforce.com it started to make more sense to me.

Christensen and his followers are still preaching the disruptive innovation gospel, and now, with "The Innovator's Guide to Growth" I am finally getting the picture.

It's the size and shape of a textbook, and works as one. Written by Mark Johnson, Scott Anthony and Joseph Sinfield, along with Motorola's Elizabeth Altman, "The Innovator's Guide" provides a rigorous introduction and a process for nurturing disruptive innovation. It guides a company through identifying opportunities, developing ideas, devising strategies, and deploying them.

There are no magic bullets presented--the core strategy, to find innovations that fundamentally reshape markets, is still difficult for market leaders to follow. Leaders' instincts are to protect market share and "feature up" their products, precisely the wrong approaches to disrupt a market.

One tenet of disruptive innovation is to target "overshot" customers. These customers have grown disenchanted with the continual upgrades of a product and won't pay more for new features. It occured to me that users of Microsoft Windows Vista--a huge product that just isn't exciting anyone (and annoying many)--are just such overshot customers.

The chapter entitled "Mastering Emergent Strategies" was worth the price of the book alone. Referencing the work of Rita Gunther McGrath and alluding to managerial complexity as elaborated by Boone and Snowden in a recent HBR article, it lays out the case for an iterative approach to planning as opposed to an all-out march to a clearly-defined objective.

The authors define three critical steps for iterative planning: (1) identifying areas of uncertainty, (2) performing "smart experiments" and (3) adjusting and reflecting.

The rest of the book is similarly insightful. If you're an innovator, or need to be one, this book should stay on your bookshelf as a valuable reference for many years.

Related posts:
Use your strategy to drive your acquisitions and vice versa
Rita Gunther McGrath

Tags:
innovation, strategy, complexity, reading list

The deep attraction of the locally-produced

While reading a review of Rob Walker's "Buying In," in today's New York Times Book Review, I got to thinking about why I buy a certain type of beer.

The review points out Walker's description of the rebirth of Pabst, which after decades of decline began to grow again, led by young people seeking an unpretentious and less heavily-advertised beer to drink. Picking up on the weak signals, Pabst marketing shrewdly capitalized on the image by embarking on a low-profile campaign focusing on small-scale sponsorships of happenings favored by their market segment.

Yesterday, I took the kids and some friends and went on a tour of the Troegs Brewery across the river in Harrisburg.

I only drink local beers--Troegs, Stoudt's, Lancaster Brewing. And reading the book review made me ponder why this was so. Local beer is fresh, sure. Brewed in small batches. It has more taste than the mass-produced beers. But this didn't explain it all to me. To me, the local aspect is predominant.

Was there a "deep metaphor" at work here? With apologies to the Zaltmans, authors of "Marketing Metaphoria" and coiners of the phrase "deep metaphor," I think so. Something deep in my psyche makes me yearn for Troegs Sunshine Pils and revolt at the thought of Miller Genuine Draft.

Similarly, we get our vegetables much of the year from Spiral Path Farm, a CSA farm located about an hour from here, which we've visited.

At any rate, if this is so, it perhaps explains another phenomenon--when a big national bank buys a local bank, within two years a new local one springs up to take its place. Or does that only happen in my town?

Related Post:
"Marketing Metaphoria": Deep yearnings about the products we buy

Tags:

metaphor, marketing, viral marketing, psychology, reading list

"Marketing Metaphoria"--the deep yearnings behind the products we buy

Father-and-son team Gerald and Lindsay Zaltman, authors of "Marketing Metaphoria: What Deep Metaphors Reveal About the Minds of Consumers," assert that beneath our purchasing decisions lie deep, unconscious frames of how the world works. Companies who can understand these frames and connect their products with them can own key positions in their marketplace and build tremendous brand power.

Did you ever wonder why nearly every Budweiser campaign centers around guys drinking together? According to the Zaltmans, it is because they are reinforcing the brand's association to connection, one of the seven heavyweight "deep metaphors" that account for more than 70% of the metaphor usage found in their research. The other "giants" are:

• Balance
• Transformation
• Journey
• Container (keeping things in or out)
  
• Connection
• Resource
• Control
  

An example of deep metaphor usage is the Michelin advertising image of a baby sitting in the tire. The deep metaphor of container is at work here--high-quality, well-designed tires provide a safe cocoon for the occupants of the car. And by extension Michelin owns the safety position with tires. Other brands must find other metaphors to occupy within our brains (say, journey or control).

As a way of showing how understanding deep metaphors can help companies create innovative products, the authors describe how the hearing-aid company Oticon redefined its product category. Oticon interviewed hearing-aid wearers about why they frequently didn't wear their devices. They learned that typical hearing aids were gawky-looking and prominent, thereby stoking users' deep fears of being broken, ugly containers. The company then created a new product that was smaller and sleeker, resembling a high-tech cellphone device more than an old-fashioned hearing aid, and combined it with an advertising campaign reinforcing the "escape" metaphor.

The authors urge readers to use this type of "workable wondering" to reimagine their innovation approaches, not just to find new ways to package or promote the same old products. I agree. When marketers use psychology to understand customers deeply, and respond to those unspoken needs, they're doing a service. (If they're just trying to get into my brain to sell me more peanut butter, well, that's just creepy.)

"Marketing Metaphoria" is a fascinating, fresh look at understanding how humans react to products beyond their functional attributes--a topic as old as advertising itself. But in connecting itself with the entire innovation process, it's more than just a book about communication.

A video interview with co-author Gerald Zaltman, where he elaborates on deep metaphors and how they can be discovered, can be found here.

Tags:
metaphor, marketing, market research, psychology, reading list

"Brain Rules" rules

I'm happy to use my sons' favorite expression to headline today's post. If something is really, really good, it "rules." I guess kids wish for monarchy (or feel as if they live under one). For example:

"Spongebob rules."
"Indiana Jones rules."
"Swim team rules."

And, similarly, John Medina's "Brain Rules" rules. (And I'm not the first to say so.) It performs an amazing trick--besides being informative and insightful...it's also a delight to read.

The book sets out twelve rules about how our brains work (#1: Exercise boosts brain power; #8: Stressed brains don't learn the same way), cites study after study to back up the rules, and demonstrates how our current lifestyles often aren't particularly good for our brains. Mixed in is advice for students, parents, presenters, executives, drivers--everybody--about how to act more in support of your brain rather than in opposition to its needs.

I gravitated to the section about attention (#4: We don't pay attention to boring things), especially his description of the 10-minute rule for his university lectures:

I decided that every lecture I'd ever give would come in discrete modules. Since the 10-minute rule had been known for many years, I decided the modules would last only 10 minutes. Each segment would cover a single core concept--always large, always general, always filled with "gist," and always explainable in one minute. Each class was 50 minutes, so I could easily burn through five large concepts in a single period. I would use the other 9 minutes in the segment to provide a detailed descrtiption of that single general concept. The trick was to ensure that each detail could be easily traced back to the general concept with minimum intellectual effort. I regularly took time out from content to explain the relationship betwen the detail and the core concept in clear and explicit terms. (p.89)

The book is full of stories, blessedly, and also demonstrates Medina's innate grasp of rule #4 by creating suspense in passage after passage, for example:

To explain how timing issues figure into memory formation, I want to stop for a moment and tell you about how I met my wife. (p.133)

How could anyone close the book there? Devices like these (used seamlessly and delivered in a deadpan voice) propel you through the book, so that at times it feels like you're reading a thriller, not a book about neurology.

Enough said. Great book. Read it. Do something nice for your brain.

Related posts:
The first great business book of 2008
A must-read for people who present

Tags:
storytelling, learning, neurology, presentation, reading list

Michael Dell on generating sales leads

I found this great Michael Dell story in "Lessons Learned: Starting a Business." In case you thought his success with Dell Computers was a complete accident, read this:

The first job I got when I could actually drive...was with the Houston Post newspaper. My job was to call people on the telephone and convince them to buy the newspaper. The first partial month I worked there, I figured out that when people wanted to buy the newspaper, either they were moving into a new house or an apartment, or they had just gotten married.

The way to find people who'd just gotten married was to go to the county courthouse. They have the applications for marriage licenses, which are a matter of public record in the state of Texas. And there is a place on the application form where you could request the license be sent. So that turned out to be a really good place to find people to whom I could send an offer to get the newspaper.

The other thing I found was that you could actually get lists of people who had applied for and received mortgages. And that was another great list of people. My first full month at the paper, I was the top salesperson of newspapers, and I had a great time. This was a summer job. I started hiring my friends and sending them out to all the surrounding counties to collect all these lists of people who had applied for marriage licenses and just had a blast. I was sixteen years old. I saved my money and bought a BMW.

Reprinted by permission of Harvard Business Press. Excerpted from Lessons Learned: Straight Talk from the World’s Top Business Leaders--Starting a Business. Copyright (c) 2008 Fifty Lessons Limited; All Rights Reserved.

For more information about the "Lessons Learned" series, including a showcase of 50 Lessons video stories, please follow this link.

Related Posts:
The value of not caring in the workplace
A new midlife crisis story from Williams-Sonoma
Be careful using other people's money to make acquisitions
Bosses, choose your words carefully

Tags:
narrative, career, sales, resourcefulness, lead generation, reading list

"Three-Story Laurie" and remembering to repeat

I'm having fun reading "Brain Rules" by John Medina. It's interesting, funny and--unexpectedly--not the least bit dry. I'll write more about it in the next few days. But for now, one of the rules, #6 (Long-Term Memory: Remember to Repeat) made me recall someone named Three-Story Laurie.

It was one of my favorite nicknames ever, because while it sounded like it might have referred to an apartment building, Three-Story Laurie referred to her tendency to repeat the same few stories again and again. She showed up at various gatherings of my college friends over the years, and always had a collection of three new stories that she'd tell and retell over the course of the weekend. By repeating the stories, she made sure she remembered them. In doing so, Laurie was employing this advice from "Brain Rules":

...The relationship between repetition and memory is clear. Deliberately re-expose yourself to the information if you want to retrieve it later. Deliberately re-expose yourself to the information more elaborately if you want the retrieval to be of higher quality. Deliberately re-expose yourself to the information more elaborately, and in fixed, spaced intervals, if you want the retrieval to be the most vivid it can be. (p. 133)

This idea of remembering via repetition has a lot of uses. I've found, when recording stories for the Mistake Bank, that a second or third retelling is better, tighter and richer than the first.

And, oftentimes, I write in this space about something I've read, in order to understand it and remember it better.

Sort of like now.

memory, narrative, learning, reading list

"Senior Leadership Teams" is essential reading for executives

I recently related a story for the Mistake Bank about my experience as a senior leader with a medium-sized IT company. It involved a particularly difficult senior team meeting and my nasty reaction to a colleague's questioning a decision I'd made regarding a member of my team.

I recalled the story because I was reading "Senior Leadership Teams" by Ruth Wageman, Debra Nunes, James Burruss and Richard Hackman, which discusses that peculiar species--the team of leaders. One of the themes of the book is that senior leaders, left to their own devices, will prioritize their individual work and give little to the team. Another is that senior leaders rise to prominence based on their talents to achieve results with teams that work at their direction, meaning their teamwork skills are rusty at best. A third is that CEOs don't take many of the basic actions required to form a cohesive and productive team--things like explicitly choosing team members, setting explicit standards and norms for behavior, or providing adequate information for teams to act effectively.

My senior team experience bears this out. I focused on my team and my results, and preferred to leave my colleagues to clean up their own sandboxes. And when a colleague got too involved in "my" area, I didn't take kindly to it. I didn't know what the senior team was for, nor what was expected of me and how I should behave. In retrospect, I didn't behave well some of the time--even if I felt I was doing what was best for the company.

Perhaps you see why a book is needed to instruct people in this area. And, thankfully, "Senior Leadership Teams" is an excellent effort. The authors, affiliated with the Hay Group and with Harvard University, studied more than 100 senior teams and tried to understand why many performed poorly, while others--a smaller number--worked well. They found six conditions--three "essentials" and three "enablers"--that excellent teams had in common:

The essentials:

1. A real team
2. The right people
3. A compelling direction

The enablers:

1. A solid structure
2. A supportive context
3. Team coaching
   

The six conditions might sound simple, but the book is filled with insight as to why these simple things are hard to do, and what's necessary to make them real. As an example of the commonsense yet counterintuitive advice throughout "Senior Leadership Teams," read this section regarding selecting the right people to be on the team:

An executive suite is not a schoolyard. Just because someone wants to play on your team, has always been on the team, or was considered the heavy hitter of a past team does not mean that you are obligated to have him on your team. What's more, just because you have been chosen to lead an established team does not mean you must keep all the players when you take it over. (p.79)

There is wisdom like the above all over the book--on reward systems, team purpose & objectives, and prioritization. And interesting stories of real CEOs and how they made their teams effective.

One minor complaint--the book is addressed to a CEO, and as such gives lots of advice about selecting, coaching and enabling the team, and less advice about being an effective member of the team. Perhaps this is a topic the authors can explore in a future book.

But this is no reason to avoid "Senior Leadership Teams," no matter what your role. If you are an executive, or want to be an executive, read this book--before your next senior team meeting.

Related posts:
The Mistake Bank Manifesto
"Stay the f--- out of my department":

Find more videos like this on The Mistake Bank


Tags:
management, leadership, teamwork, reading list

Champy's "Outsmart"--less than meets the eye

We talked some about business gurus last week, and while the name Jim Champy wasn't on the WSJ list, he would have been in the past. So when I was sent his new book, "Outsmart," I put down the other books I was reading to take this one up.

The good news was, at 165 pages with ample white space, it didn't take long to read. The bad news was that it fell far below my expectations. "Outsmart" is the business-literature equivalent of those new paper-like mint strips you lay on your tongue. The ideas dissolve in an instant.

Why? The book lacks the rigor of other recent books in the strategy literature, "The Opposable Mind" and "Big Think Strategy." It fails to paint the far-reaching vision of "The Future of Management." It is a collection of inspiring stories, and that has value. After reading it, however, I had difficulty taking away any lesson other than to be an extraordinary success, you had to be an extraordinary person with a strong vision and have excellent timing--not a very useful blueprint for most leaders.

At the end of each chapter is a summary of learnings. In "Compete By Doing Everything Yourself," Champy offers this lesson:

Control what matters. Doing everything yourself speaks to a very human impulse. When Cappello [the CEO of S.A. Robotics, the company that competed by doing everything itself] talked to me about his need to control his company's processes, I immediately understood that he was really talking about his distaste for losing control, especially for the kind of product he makes.

If you manufacture a complex, customized product, the need for control is clear. If you are providing a more commoditized product or service, however, outsourcing part of your work might be a legitimate option or, in some cases, a competitive necessity.

In other words, you can succeed by doing everything yourself, or by having others do work for you. It depends.

And in another chapter he writes, "I'm a strong believer that a company must be a low-cost producer to compete." Really? Is S.A. Robotics, which builds everything internally, a low-cost provider?

To me, these are indications of a book without a center. Compared to "The Opposable Mind" or "Big Think Strategy," "Outsmart" is lightweight. There's no science behind the theories other than a Darwinian metaphor in Chapter 1. The explanations are anecdotal (most times, a single anecdote). And no unifying theme.

"The Opposable Mind" described founders or CEOs who could reconcile contradictory ideas and thereby create new markets. Each example (and there were many) reinforced that idea. So did the cognitive research cited. "Big Think Strategy" supplemented its case studies with a strategic method.

By contrast, "Outsmart" is a brief, easy to read, set of success stories, that together don't add up to an important book, sad to say.

Related Posts:
"Big Think Strategy" is a fun, inspiring read
The first great business book of 2008 ("The Opposable Mind")
On Gary Hamel's "The Future of Management"

Tags:
innovation, strategy, reading list

A "new midlife crisis" story from the Williams-Sonoma Chairman

[This story is from Howard Lester, Chairman of Williams-Sonoma, the large home-goods retailer.]

...I realized that to that point in my working career, I had kind of done the things that were necessary. I was trying to make a living and just do the best I could and make money, but I was never really happy. I wasn't excited about getting out of bed in the morning and going to work, so I gave a lot of thought to what it was that I wanted to do, and I knew it was something different.

One of the main conclusions that I reached was that it was important for me at that point in my life--as I mentioned, I was in my early forties--to do something; you know, this is not a dress rehearsal. And I wanted to do things that I loved doing. Why go through life doing things that you don't love doing? And I felt that if I was doing something I loved, I'd have a better chance at being good at it than doing something I didn't love, because it wouldn't be work, it would be a joy.

So I went on a little journey of looking at a lot of businesses, some of them pretty weird. And one day I came across this little company called Williams-Sonoma, which was struggling. It was a little $4 million company with four stores and a small catalog, located in San Francisco. One thing led to another, and I was able to purchase the business in the summer of 1978.

We've been very fortunate. We've grown a business that we're quite proud of, and I can tell you that since acquiring Williams-Sonoma, I don't think there has been a day or a morning when I wasn't excited about getting up and going to work.

Reprinted by permission of Harvard Business Press. Excerpted from Lessons Learned: Straight Talk from the World’s Top Business Leaders--Starting a Business. Copyright (c) 2008 Fifty Lessons Limited; All Rights Reserved.

For more information about the "Lessons Learned" series, including a showcase of 50 Lessons video stories, please follow this link.

Related posts:
"The New Midlife Crisis: It's an existential necessity"
"Midlife Crisis--21st century style"

Tags:
narrative, career, midlife crisis, reading list

"Greater Good": a good, but not great, book on marketing and democracy

"Greater Good: How Good Marketing Makes For Better Democracy" is a book that promises a lot. Inside the front flap it charges that "marketing is more democratic than politics." Its co-author John Quelch is a renowned expert on consumer marketing and professor at Harvard Business School, the author of a thoughtful and incisive blog on marketing. By aiming at dissecting and improving democracy, Quelch and co-author Katherine Jocz seek to elevate marketing to a level currently held by economics--i.e, a discipline that can drive progress of entire nations.

And, while it has many virtues, the book doesn't deliver on that promise. Partially this is because of the very broad topic it takes on. Its scope is the strength and weakness of the book. The book's first part, "Marketing as Democracy" is as good a survey of consumer marketing--its aims, faults and practice--as you could fit into 150 pages. But this means that there's four pages on fairness, six on advertising. As a result, it's a great book if you want to teach people all about marketing at a high level, but not so great if you want to galvanize readers to make their democracies more effective and citizen-focused.

There are sections of the book (for example, the chapter on consumer engagement or the one on marketing government and NGO programs) that could become strong books themselves if they dove more deeply. There are also some important insights, such as this:

...Coke and Pepsi don't sling mud at each other, because if they did, consumer purchases would eventually shift away from both of them to alternative colas and beverages. Both brands want to enlarge the market, not reduce it. However, in politics, market share, and not market size, matters. Negative campaigning may turn off a sizable number of the electorate, but if George Bush sicceeds in making John Kerry marginally less acceptable to the voters who show up on Election Day, Bush comes out ahead. (p.171)

Quelch and Jocz are onto something in terms of using what marketing's good at to improve democracy. While "Greater Good" isn't a home run, I hope they don't give up on the topic. There's more there to study, and, even more interesting, to try out.

If you want a comprehensive introduction to consumer marketing, buy "Greater Good" and read the first 150 pages. If you want to fix what's wrong with democracy, you'll have to wait for another book.

marketing, democracy, reading list

Be careful using "other people's money" to make acquisitions

From The Mistake Bank.

[This story is from Ray Anderson, Founder and Chairman of Interface, Inc., a manufacturer of carpeting and fabrics.]

When we began [Interface], I made the initial investment personally. And then friends came in, then a much larger partner joined in, and we eventually financed the company. And, by the way, the day we had our finance all in hand is the day we count as the birthday of Interface. Up to then, everything is conception and gestation, beginning with the gleam in my eye, perhaps the idea; but it’s only when you have your money in hand that you can truly call yourself a company. And that’s the birthday.

Interface, after getting through that treacherous startup, in the teeth of the worst recession since 1929, really hit a home run year after year, 70 percent compound growth. And then ten years later we went public, and for the first time had access to other people’s money. Investors who bought shares in the stock, our expanded capital base of Interface, enabled us to begin to make acquisitions, and we made acquisitions in Canada, in Northern Ireland, and eventually in the United Kingdom and in Holland. And then in 1998, when the company was fifteen years old, we were a global company. Then we made other acquisitions, made subsequent stock offerings to the public, and had people subscribe to the stock and further expand the capital base, which enabled us to do more. We leveraged other people’s money time and again over the years, so much so that it got to be a little too easy to access it.

And then we made a concentrated series of acquisitions to create a downstream distribution system. We made twenty-nine acquisitions, over a very short period of time, of contract dealers, the people who install and maintain their products. We wanted a captive, owned distribution system, and we invested $150 million of other people’s money, basically by selling stock and doing bond offerings. And it was too easy.

If we’d been spending our own money, we would have thought very hard about those acquisitions. In the long run, they turned out to be a mistake, and six, seven years later we began to dismantle this distribution system and liquidate it, selling the businesses back to the owners or back to the employees. And we might not ever have undertaken that unfortunate series of investments if we’d been investing our own money. We would have questioned it.

Reprinted by permission of Harvard Business Press. Excerpted from Lessons Learned: Straight Talk from the World’s Top Business Leaders--Starting a Business. Copyright (c) 2008 Fifty Lessons Limited; All Rights Reserved.

For more information about the "Lessons Learned" series, including a showcase of 50 Lessons video stories, please follow this link.

acquisitions, narrative, capital, financing, startup, entrepreneurism, reading list, Mistake Bank

"The Breakthrough Company"--wise advice for the emerging entity

I was prepared to dislike "The Breakthrough Company." The dust jacket is a garish silver. The author photograph reminded me of Svengali, and the first line of his bio read, "At the age of twenty-six, Keith R. McFarland was named associate dean of one of the nation's leading business schools." And continued, "He and his family live just downhill from the ski lifts at Snowbird, Utah."

This was a cover that screamed at you: THIS IS IMPORTANT, VITAL, DON'T MISS IT. (I mean, how could you not listen to someone who lives just downhill from the ski lifts at Snowbird?)

But you can't judge a book by its cover, nor its author bio, and "The Breakthrough Company" is a serious, substantial and useful effort. McFarland and his colleagues at McFarland Strategy Partners set out to give the "Good to Great" treatment to a different segment of companies--those that graduated from entrepreneurial status (around $10 million in revenue) to substantial size ($250 million to upwards of $1 billion).

They surveyed 1500 companies and from those picked the nine best performers, then reverse-engineered these companies to settle on six characteristics that stood out. And while I've posted before on the limitations of this type of "best practice" approach, it's to McFarland's credit that he also plays down the value of copying the template: "This is not intended to be a recipe book."

Also, the companies he is aiming at helping are still in their formative stages. A company with 250 people can still be shaped. One with 5,000 is much harder to reorient.

And with that, the characteristics McFarland highlights--e.g., "crowning the company," or putting the company's needs and priorities above the founder's--are important, and rare in companies big and small.

My favorite chapter is titled, "Enlisting Insultants," in which McFarland discusses how vital it is for growing companies to have people who can give voice to the minority opinion--either critiquing the conventional wisdom or championing an unpopular initiative. This view echoes those of Gary Hamel in "The Future of Management" as well as Traci Fenton's efforts to promote organizational democracy.

As might be apparent, McFarland can also turn a phrase. The book is well-written, with lots of great stories from the companies' leaders. And from its prominent position in my local Barnes & Noble's business section, it's probably selling a few copies.

In sum, there's a lot to learn from on an important subject. And don't let the cover bug you--the dust jacket is easily removed.

Related:
On Gary Hamel's "The Future of Management"
Shop Talk Podcast #3 - Traci Fenton on democratic workplaces

democracy, leadership, management, entrepreneurism, growth, reading list

Is your marketing department confused about web2.0? Read this

The one nearly universal feeling of companies dealing with the changes that web2.0 has made to marketing is utter bewilderment. I participated in a project to assess corporate blogs last year and I wouldn’t give any company I looked at better than a “C.” In fact, most of them would get incompletes: they had no blogs at all.

Never mind wikis, Facebook, Second Life, YouTube, Twitter, Digg, etc., etc.

So it’s very timely that Charlene Li and Josh Bernoff of Forrester Research have written “Groundswell,” a book that illuminates what web2.0 means to everyday businesses. In straightforward language, and buttressed by primary research into how various groups participate in web2.0, Li and Bernoff define the most important web2.0 technologies, show how consumers use them, and lay out how companies can encourage and participate in the conversations about themselves and their products.

At the outset, Li and Bernoff define six overlapping types of web2.0 users & nonusers (creators, critics, collectors, joiners, spectators, inactives) and show their representation in various segments. For example, Democrats have more web2.0 users across the board than Republicans. Japanese Fujitsu PC owners are far more likely to be collectors (e.g., content taggers or subscribers to RSS feeds) than NEC’s PC customers.

Through these examples, the authors crisply demonstrate that companies need to understand the web2.0 profiles of their customers, so as to understand, ultimately, how to engage them in productive conversation.

Case studies appear throughout the book, both success stories (Blendtec’s “Will It Blend” videos) and failures (the short-lived blog of Unica’s Chief Marketing Officer). To satisfy old-line executives (especially CFOs), they include pro forma business cases for several web2.0 projects—including laying out the upfront and ongoing costs of these initiatives.

Over and over, Li and Bernoff emphasize the need, when using these technologies, to listen, and not to shout. To be transparent, and to be authentic. Whether this is possible with traditional companies, in which desiring to control the message is deeply ingrained, remains to be seen.

---------------------------------

Examples of web2.0 user types defined in “Groundswell”:
Creators – blog writers, amateur YouTube videographers
Critics – blog commenters, Amazon product reviewers
Collectors – del.icio.us taggers
Joiners – myspace and Facebook users
Spectators – blog readers, forum readers

Related:
Groundswell blog
Corporate IT maximum-security is damaging innovation
How enterprise 2.0 adds value to the connections between workers

social networking, information technology, web2.0, marketing, blogging, virtual communities, reading list

A must-read for people who present

I have sat through, by my estimate, more than a thousand lousy presentations. You know the ones: someone in a suit stands at a lectern and dryly reads PowerPoint bullets for a half-hour, or an hour, or sometimes even longer. The slides use a garish corporate template and contain unreadably-small text, save for a few lame clip-art images. Ugh.

Even worse, I've given hundreds of similar presentations.

Luckily for me and other poor presenters, Garr Reynolds has been providing expert critique, tips and examples to help people present better on his Presentation Zen website. (I've written about Garr's work a number of times: 1, 2, 3, 4.)

Now, he's assembled his ideas into a book.

As you might expect, Presentation Zen: Simple Ideas on Presentation Design and Delivery is beautifully designed and laid out. With lots of white space, beautiful pictures, and a nice variety of page layouts, it reinforces its theme by its very look. [Similar to Edward Tufte's books, Presentation Zen is fun to flip through just to look at the pictures.]

If you didn't think you could say more with less text, or didn't know how to find cool photographs that would actually enhance your message, or didn't know how to make your subject as compelling to the audience as it is to you, Presentation Zen has insight you need.

While Reynolds echoes themes and specific advice he's presented in his blog, the accrual of the information between the book's covers has a more powerful effect than reading the same material over a long period of time in several blog posts. For example, throughout the book he shows side-by-side comparisons of poor slides and improved ones, or shows a number of different ways of conveying the same information with different slide designs. By the time you get to the end, the message is clear.

In other words, if you read Reynolds' blog regularly, you should still invest in the book. And if you don't read the blog, you should buy the book right away. And start applying the lessons today. [Please! I'm going to another seminar at the beginning of April.]

storytelling, design, presentation, PowerPoint, reading list

"Big Think Strategy" is a fun, inspiring read on reinventing business

Every CEO these days wants to reinvent her business. One problem is thinking big enough. Being part of an industry, a market, a sector tends to limit a company's peripheral vision. How do companies break out of their comfort zone and find strategies that take advantage of their unique strengths while opening up new markets?

That is the question "Big Think Strategy" by Bernd Schmitt, professor at Columbia Business School, tries to answer. And the book does a good job of showing what is needed to "kill the sacred cows" of a business and imagine and invent a prosperous, growing future. Schmitt's focus is on nurturing creativity in the executive suite and in among the rank and file. And it's written in a fun style that complements the subject matter and inspires the readership to give the ideas a try.

The best parts of the book are around generating new ideas--from staff, customers or seemingly unrelated industries--creating a strategy from those ideas. In Chapter Four, Schmitt describes four "big think strategy" types--opposition, integration, essence and transcendence--and what competitive reaction each type is likely to spur.

Like more and more business books these days, Schmitt lets his personal story seep into the pages, whether it's his love of steak or a nice suit, or the opera. (I have to say my enjoyment of these anecdotes was offset somewhat by twinges of envy--Schmitt's life seems pretty posh for a consultant... perhaps he is hiring?)

"Big Think Strategy" is a companion piece to a couple of other recent books of importance: "The Opposable Mind" and "The Future of Management" (see posts on these books here and here). And it suffers a bit by comparison to each. Due to its brevity and fewer examples, and to some extent its breezy writing style, it feels less substantial than either book. Nonetheless, it's a good book on a crucial subject for today's leaders.

If you can only buy two books on reinventing your business this year, I'm afraid you'll have to skip "Big Think Strategy." Otherwise, it's a worthy addition to your bookshelf.

creativity, strategy, business development, reading list

Executing your strategy is a good idea

The new book “Executing Your Strategy: How To Break It Down And Get It Done,” by Mark Morgan, William Malek and Raymond Levitt, is an invaluable resource for leaders seeking to plot a course for the future.

The authors accurately accuse most leaders of vision by default—setting management priorities based solely on the issues confronting them rather than looking ahead, and deciding what to do next. At the same time, Morgan, Malek and Levitt put forth a systematic approach for companies to decide “who they are, where they want to go and how to get there” and illustrate the means to implement those ideas. They also cover the key elements linking vision, strategy and operations--and how to connect them together into a coherent operating model for a company.

“Executing Your Strategy” is not a breezy read, and probably works best digested a bit at a time, and thereafter as a reference. Yet its density is welcome when the issue at hand—as the authors state, “The global business landscape is littered with expensive, well-intentioned strategies that failed in the execution phase”—is so important.

By contrast, “The New Leader’s Guide to Diagnosing the Business” (link - $$) in the February Harvard Business Review sets out a complete menu of activities for the new CEO in ten pages. While the tools to diagnose the current state of the business are fine and useful, “The New Leader’s Guide” goes awry when it tries to convert those findings to a working strategy (perhaps suffering from the consultant’s detachment from the complexities of actual business management). Here is a sample strategy they propose for a new CEO:

• Reduce costs by $200 million to move relative cost position from 110% of best competitor to 90%.
• Increase relative market share from 0.9 to 1.2 [i.e., from second in market share to first]….
• Increase share of profit pool from 40% of $2 billion to 70% of $2.8 billion
• Cut SKUs from 100,000 to 2,000; reduce organizational layers in SG&A from five to three; outsource 20% of all SG&A costs.

These consultants will remain nameless (their firm’s name rhymes with main), but they are in effect proposing a strategy to become a cost leader, a market share leader, and a profitability leader--all at the same time.

The authors of “Executing Your Strategy” say this:

We have worked with many companies whose strategies seem to ask them to do it all…. This type of multifront strategy is almost always a nonstarter…. What differentiates one organization from another in terms of strategic execution is the discipline of engaging the strategy with the tailored portfolio of projects and programs that will bring it to life. In a world of limited resources, it is as much about choosing what not to do as about deciding which strategic projects and programs to invest in. (p. 141)

Makes sense to me. If I needed strategy consulting help, I think I’d bypass the …ain guys and talk to Morgan, Levitt and Malek.

strategy, execution, reading list, Harvard Business Review