A quick skim covering innovation, marketing, and complexity

A quick skim through several important blog posts you should read right now.

John Quelch of Harvard Business School covers eight principles for marketing during a recession.

Glenn Gow of Crimson Consulting Group explains clearly that while great companies should perhaps "eat their own dog food," they should certainly become expert consumers and users of their competitors' products.

Roberto Verganti, visiting professor at Harvard, has a paper covering, among other topics, why cutting-edge design companies don't use focus groups and why innovation followers have more product variety than leaders. (See here and here for earlier posts for discussion of earlier Verganti work.)

In the Cognitive Edge guest blog, Boudewijn Bertsch relates a powerful story of how a company--which had tried and failed to improve workplace safety using directives and processes--finally made progress by using stories to give it "a human face." (Boudewijn's other superb posts are also required reading: "The forgtten whole and the flawed focus on the 'lonely' parts of the organization" and "'Improvement must be focused on what you want, not on what you don’t want.' Russell Ackoff.")

(Photo by zela via stock.xchng)

innovation, marketing, complexity, learning, narrative

The Forgetting Organization

Many years ago, I took a series of courses adapted from Peter Senge's book "The Fifth Discipline." The hallmark of that book was a concept called "the learning organization," which posited that to be adaptable in an environment of constant change, companies had to nurture and support the learning impulses in all their employees.

While I really enjoyed the courses (and over the past decade have grown to appreciate them more), I grew frustrated by our company's inability to learn from our experiences. We made the same mistakes again and again.

With the gallows humor familiar to anyone who works for a very large, slowly-changing company, I started calling us "The Forgetting Organization."

Twelve years on, not much has changed. January's Harvard Business Review features "The Experience Trap" (link - $$) by Kishore Sengupta, Tarek K. Abdel-Hamid, and Luk N. Van Wassenhove. In simulations performed with software project managers, the authors discovered that even experienced project managers made similar mistakes--for example, bringing on staff too late in the project--again and again, in different projects. Rather than learning from what had gone wrong in Project 1, the PMs did much the same in Project 2, and 3, and so on.

Sengupta et. al. attribute this forgetting to several factors: (1) the disjoint and time-lagged relationship between cause and effect, (2) conflict between initial plan and long-term goal when conditions change and (3) the fallibility of initial estimates (and people's tendency to hang onto those far past their useful lives).

In other words, software projects, like so much of the high-value work in business today, operates in the complex domain. The authors prescribe a set of practices to help companies suffering from "the experience trap," but a simple recognition of the environment that people are working in, and training and reinforcing awareness of that fact, could help workers learn more.

Or, in other words, to forget less.

(Note: I also mentioned the above story in a previous post.)


complexity, learning, organizational behavior, project management, Harvard Business Review

Celebrating 500 posts

According to Blogger, this is the 500th post for Shop Talk. Just about 600 calendar days have passed since June 13, 2006, when we first published on the net.

Among these posts have been:

• 18 book reviews
• 17 spoken posts
  
• 10 cartoons
• 5 podcasts
• 2 rants
  

As to readership, there have been over 20,000 readers and 30,000 pages viewed since inception. I thank them all.

And you, too.

Garr Reynolds celebrates learning via narrative

You don't have to read this blog very often to learn that I love the work of Garr Reynolds on developing and delivering excellent presentations. I've bought his book and plan to read and review it in the next few weeks. In the meantime, however, Garr continues to give away his knowledge and learning via the Presentation Zen blog and today he touches on (among several other items) one of my favorite topics: learning via narrative.

In reviewing a Google Talk of Cornell economist Robert Frank, he highlighted some of Frank's thinking about learning, and in particular two remarkable quotes:

At its core, the narrative perspective holds that human beings have a universal predisposition to "story" their experience; that is, to impose a narrative interpretation on information and experience.

Walter Doyle and Kathy Carter, University of Arizona

and

[children] turn things into stories, and when they try to make sense of their life they use the storied version of their experience as the basis for further reflection.... If they don't catch something in a narrative structure, it doesn't get remembered very well, and it's not very accessible for further kinds of mulling over.

Jerome Bruner, "Narrative and Paradigmatic Modes of Thought"

Exactly right. This is about the most straightforward and commonsense explanation for the value of narrative in the businessplace that I can imagine. Given that, everyone involved in business leadership should work on understanding and using these concepts to teach their staff--and to learn from them.

It starts now.

narrative, learning, organizational development,

The full Robert Frank speech is below:

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

Influentials--or lots of bloggers--affect music sales

This week's release of a study concluding that more blog mentions increase music sales has caused me to think about the work of Duncan Watts, which has garnered a lot of notice based on this Fast Company article. (Shop Talk readers were alerted to Watts' work in February and May of 2007.)

The study mentioned above, by Vasant Dhar and Elaine Chang of NYU's Stern School of Business, found that the volume of blog posts was correlated with increased sales. In other words, controlling for other factors, a record mentioned in 250 blog posts would sell more than one mentioned in 25.

Which brings me back to Watts' thinking. He taunts Gladwell about the assertion that a small number of influentials can drive product adoption. From the "Fast Company" article:

He has analyzed email patterns and found that highly connected people are not, in fact, crucial social hubs. He has written computer models of rumor spreading and found that your average slob is just as likely as a well-connected person to start a huge new trend. And last year, Watts demonstrated that even the breakout success of a hot new pop band might be nearly random. Any attempt to engineer success through Influentials, he argues, is almost certainly doomed to failure.

Yet as I look at the NYU data, I can interpret it Watts' way or Gladwell's.

Either lots of people found the music and talked about it separately, and through lots of small interactions (what Watts would attribute to marketers' "big-seeding"), people discovered and bought the music.

Or a few Gladwellian "influencers" touted the music, causing other bloggers to discover the music and tout it as well, adding up to a large volume of blog posts, and thus sales.

Who's right?

blogging, marketing, music

LEGO knows partnering

My two sons, ages 7 and 5, are all about Star Wars. They know every episode, every character, every spaceship. It amazes me that a 30-year-old film (and its successors) could have a hold on little imaginations as strong as if it were released last year.

They also love Legos. And what could be better than combining these two obsessions?

(Well, nothing actually.)

Legos have come a long way since I was a kid. Then they were basic building blocks--eights, sixes, fours, twos, a few windows and wheels. That was it. Now Lego has morphed into a modeling architecture--like the plastic models of my youth, without the nasty glue and paint. It's a nightmare if you want to sort parts, but for a kid, being able to build an exact replica of an AT-AP is priceless.

Going even further, there's a Lego Star Wars web site, as well as a video game, which is permanently installed in our Wii.

In order for Lego to enter this new phase, they had to get comfortable with partnering up. They worked with Lucasfilm Ltd. to license the Star Wars characters, scenarios, etc. (This is one of several licensing projects that Lego is involved in: have you seen the Lego Hogwarts Castle?) In so doing, they extended their brand and made it relevant to an entire new generation of customers--without losing what was distinctive and different about Legos.

(And if you're not a kid anymore, like I am, you can still construct a house with eights, sixes, fours and a few windows.)

(Photo: LEGO Star Wars Yoda, from the web site)

partnerships, alliances, movies, toys

The new midlife crisis--it's an "existential necessity"

I've been working through my midlife crisis (profiled in this earlier post)--not buying a sports car or seeking a trophy wife (I have one of those already), but confronting this: since retiring at fifty is neither practical nor desirable, working 2000 hours or so per year better be fun and have some meaning in it.

For me, that means working for myself, engaging in lots of different projects with different clients, working with folks from different countries (UK, Brazil, Japan, Northern Ireland in the past year), reading and researching, and playing with some new product ideas that may never earn a dime. (And being able to spend time with the family guilt-free.)

It may not be a house on the Maui beachfront, but it's a bit of paradise to me.

I have found that I have company in this new midlife crisis. I just caught up with a colleague from the '80s who left the rat race to develop a business combining his passions of marketing and auto racing. Very cool.

And now I learn that it is not only desirable, but necessary, to go through this change. Carlo Strenger and Arie Ruttenberg write in the February Harvard Business Review about "The Existential Necessity of Midlife Change" (link - $$). Strenger and Ruttenberg recognize that the midlife years often bring a need for career transition--boredom with the "same old job," lack of promotion opportunities, corporate restructuring or even being fired during our forties and fifties. Yet our assumptions of what we have left to offer are hopelessly out of date:

The myth of midlife as the onset of decline is rooted in historically outdated conceptions. According to this myth, people end their productive lives and retire at age 65. Sixty-five is not a magical number, however. It was introduced as the retirement age in Germany in 1916. Twenty-seven years earlier, Chancellor Otto von Bismarck had established 70 as the age to begin receiving a pension. When asked how the state could afford such largesse, Bismarck replied that almost nobody would reach this age anyway. He was right. According to one source, life expectancy in Germany at the time was 49.

Since life expectancy in much of the developed world exceeds 80 years, retiring at 65 is a decade or more too early (ask my 83-year-old dad, who is completing his seventeenth year of work at the local elementary school, a job he took after retirement).

But for those forty-somethings who are looking at how to spend their next thirty years' productivity, there's another trap, write the authors: the myth of magical transformations:

This myth, the fruit of the past few decades, has been fed by countless self-help books and magazine articles, and by a general cultural atmosphere. The myth tries to sell the illusion that if people have enough vision and willpower, they can be anything or anybody they want to be. Paradoxically, this doesn’t make midlife career changes easier—it makes them more frightening. Faced with stories of doctors who get up one morning knowing that they want to become chefs, housewives who have a sudden vision of the business empires they are about to build, and lawyers who one day have crystal clear plans for high-tech businesses, real-life human beings are bound to feel inadequate. They have fears, doubts, and vague ideas at best, so they’d better stick to their knitting.

To sidestep this trap, the article gives us some commonsense advice: "To be productive, dreams must be connected to our potential. Otherwise, they are idle fantasies."

So, there's a prescription. Dream your future--as connected to your capabilities and strengths. Then go do it.

Anyone else out there giving it a go? Let me know.

(Photo by outrequin)

career, midlife crisis, Harvard Business Review

Shop Talk Podcast #5 - Todd Mittleman of Honda on Green Automobiles

On this edition of the Shop Talk Podcast, I talk to Todd Mittleman, Director of Environmental & Safety Public Relations for Honda, about environmentally-friendly vehicles.

I confess that all the "green" options make me a bit dizzy--hybrid, E85, fuel cell, all-electric, clean diesel. Todd helps put the various environmental considerations--fuel efficiency, emissions, carbon footprint--into context for us. And, of course, he talks about the cars Honda has now and in the future for the environmentally-conscious driver. It's a very interesting conversation.

Please right-click and save here to download the podcast.

automobiles, environment, technology, green technology, podcast, corporate social responsibility

Taste trumps distribution (finally) in the beer market

Distribution prowess has ruled the US beer market at least since the '70's. (I recall a Harvard case talking about the downfall of Schlitz, focusing on Anheuser-Busch's building a nationwide distribution network.) As a result, most consumers have had to scan shelf after shelf of Bud Light and Michelob Ultra to find a good-tasting, fuller beer.

How things have changed. The craft beer movement, starting with Sierra Nevada in the '70s and blossoming with Samuel Adams in the '80s, is now a full-fledged market trend. People are buying Sea Dog, Cape Cod Beer, Yuengling, Brooklyn Lager, and hundreds of other small brands. Anheuser's market share is down, despite deals to distribute Stella Artois and Beck's.

And now, finally, the distribution monopoly that helped Anheuser crowd out rivals in the past is crumbling. In today's Wall Street Journal, David Kesmodel reports that distributors who had signed exclusivity agreements with A-B in exchange for promotional and cash incentives are beginning to turn away from those agreements ("Beer Distributors Want More Than One Best Bud" link - $$). Writes Kesmodel:

In recent years, some of Anheuser's 560 independent distributors became frustrated as craft brands such as New Belgium Brewing Co.'s Fat Tire Amber Ale surged in popularity and competing distributors snatched them up. Often, the distributors adding such high-margin brews were the same ones that peddled the beers of Anheuser's top rivals, SABMiller PLC's Miller Brewing and Molson Coors Brewing Co.

Anheuser wholesalers "are realizing that we have made the competition stronger by basically forfeiting these brands to them," says Chris Monroe, vice president of D. Canale Beverages Inc., a Memphis, Tenn., distributor that carried only Anheuser products until last fall.

It's a total reversal of where we've been. For years, large beer companies have relied on investment in non-product-related marketing, such as advertising and distribution, for sales growth--traditional "push" marketing techniques. Now, customer demands for better tasting, more-distinctive product are forcing distributors to carry what customers want.

Sounds like progress to me.

(Photo courtesy of Cape Cod Beer)

beer, distribution, marketing, advertising, Wall Street Journal

Super Bowl Stories

People who aren't football fans tune into the Super Bowl to watch the advertisements. You've probably seen them, and read about them, already. The talking stain, Shaquille O'Neal as a race jockey, and so forth.

I was fascinated by another ad, part of a fascinating project by the National Football League which gathered stories from over 200 NFL players, and had fans vote on their favorites. The winner was made into a 60-second film, broadcast during the Super Bowl. It's a narrated story, partially dramatized, about an NFL player who meets a large man working at the grocery store. He convinces the man to try out for the college football team. You'll have to watch the video for the rest of the story.



The final product is excellent. But it's also interesting to view the original story, told one-on-one by the Houston Texans' Ephraim Salaam, and see how it changed in the more polished retelling. I love the final ad, but I think I like the original story even better.

storytelling, narrative, marketing, advertising, football, Super Bowl, sports

Extracting value from a failed cold call

A few days ago l got a cold call from Pitney Bowes, the postage meter company. And they wanted to sell me a new postage meter that they had scaled down for small & medium size businesses. It was an interesting machine but looking at the price of it and the value it had to me I wasn't really interested.

In the course of the conversation, though, I gave them quite a bit of information about what I really wanted. Here's the price point I could accept, here was the no. of letters that I mail per month and packages and so forth.

Eventually the conversation ended but it occurred to me that there would be a lot of information in those types of calls that could be used for marketing research. The feedback from various prospects could be assembled and made sense of, narrative-wise, and convey a lot of information to the marketing group. (This is in the spirit of getting value out of, for example, "unsuccessful" product development efforts and "failed" scientific experiments.)

All marketing calls are recorded of course, but my sense is that sales call recordings go into the archives, especially failures, and are not dealt with again.

Which seems like a lost opportunity for the product manager to learn more about an untapped customer segment.

spoken through SpinVox

customer service, product management, market research, sales, narrative, spoken post

Yahoo having trouble with the vision thing

Something in this NY Times Bits post about Yahoo's downbeat earnings call and resulting stock swoon reminded me of a book I'm reading now. Here's the bit that triggered the connection:

...Mr. Yang and Ms. Decker’s strategy is essentially “vision goes here.” They want to be the “starting point” for users on the Web. They want to be the “must buy” for advertisers. And Mr. Yang said he would assume an “aggressive investment posture.”

The only thing missing from that is the substance. Why would users start at Yahoo? How are advertisers going to find Yahoo superior? And what will the company invest in?

...Maybe Yahoo simply has a communication problem. Perhaps it will emerge with great products for users and advertisers. But my take is that it will be much harder if its customers, employees and stockholders don’t understand what it is doing and why they should care.

The book is "Executing Your Strategy" (I'm going to have to post on clunky titles affixed to good business books) by Mark Morgan, Raymond Levitt and William Malek. The book says that to create a vision, a company must answer three critical questions. These questions drive and prioritize the handful/dozens/hundreds of projects that will help the company achieve its strategies. They are:

1. Who are you?
2. Why are you here?
3. Where are you going?

From the earnings announcement and conference call, if Yahoo has deeply considered and answered these questions, they're not saying.

strategy, reading list

700Mhz auction: who will be coming to Harrisburg, PA?

Depending on whom you read, the auction is making good, predictable progress or barely inching forward. I agree with the former. The nationwide C-block package, the one with open-access requirements, is approaching its reserve amount. The total bid is closing in on the pre-auction estimates of "over $10 billion." All this with less than a week gone. So I think we'll be fine, in spite of the slow bidding thus far for the D-block, public safety band.
So the real question is:

If the 700mhz band is wireless "beachfront property," then who wants to build a trashy wireless boardwalk in my town, Harrisburg, PA?

For answers, I turn to Greg Rose's Econoklastic blog, which has been the most insightful resource I've found about the auction, and the stories behind it. Greg has done a sprawling, six-part post (1, 2, 3, 4, 5, 6) on who might be bidding for which slices of spectrum. What does Greg think about Harrisburg, or, more specifically, the Harrisburg-Lebanon-Carlisle A- and E-block components?

Verizon will be aiming at the nationwide license bundle. But others, such as MetroPCS, Cricket, and Alltel, who need to fill in coverage gaps might be interested. While most of these folks would prefer the larger B-block licenses, they will use the A's and E's as fallbacks.

How about cable companies? Sorry, no. The qualified bidders (Cablevision, Cox, Advance/Newhouse) are expected to stay in their regions. Our dominant cable provider, Comcast, is sitting the auction out.

Chevron, a wild card? Greg expects them to target offshore regions where their oil platforms reside.

And, of course, Google. They are aiming at the nationwide C-block package. I for one really want the opportunity to buy a Google phone and subscribe to Google service. I can't imagine what that would be like, except I'm pretty sure it wouldn't resemble the wireless experience as we know it today.

We can only hope they're successful...

(Photo by weirdvis)

broadband, technology, wireless, Google, 700MHz auction

Top 5 Harvard Business Review breakthrough ideas

In which we select the best of the annual Harvard Business Review list of twenty breakthrough ideas (free link) for the benefit of time-constrained executives everywhere. This service is provided at no extra charge.

1. "Here Comes the P2P Economy," by Stan Stalnaker. Web 2.0 is accelerating a shift to an economy with many, many small sellers.

2. "Task, not time: Profile of a Gen Y Job," by Tamara Erickson. Young workers are not tied to the clock, or the office. Give them specific tasks and let them do them when, and where, they see fit.

3. "A Doctor's Rx for CEO Decision Makers," by Jerome Groopman. A relatively new technique--intensive peer review of failures--allows physicians to detect and understand decision biases that contribute to misdiagnoses. Such a process can help business decisionmakers as well.

4. "The Gamer Disposition," by John Seely Brown and Douglas Thomas. People adept at multiplayer computer games have qualities (such as desire to improve, appreciation of diversity, and results-orientation) that businesses should be seeking in their employees.

5. "What Good Are Experts?" by Michael Mauboussin. Research and experience with decisionmaking tools such as prediction markets is showing that expertise has a more narrow application than previously thought. Good businesses will assess which tool works better for the problem at hand--prediction markets for probabilistic problems, computers for rules-based problems, and experts for the remainder--and act accordingly.

Bonus "I really didn't know that" item: "Islamic Finance: the New Global Player," by Aamir Rehman and Nazim Ali. Despite the seemingly-restrictive rules of Sharia, Muslim law, on investing and charging interest, a vibrant and growing Sharia-compliant financial marketplace has emerged in the Islamic world.

strategy, decisionmaking, finance, learning, mistakes, organizational behavior, Harvard Business Review

How to fix your selling process in 192 pages (not)

A column in today's Wall Street Journal boils it down for us: "...[C]ompanies need to 'reinvent' the way they sell, to focus on their customers rather than product features."

Stop me if you think you've heard this one before.

It turns out that consultant Ram Charan (best known as the co-writer of "Execution" with Larry Bossidy) has sales in his sights. He has a new book, of course, entitled "What the Customer Wants You to Know," and is interviewed in today's "Theory and Practice" column. Here's a taste of Charan's wisdom:

The sales function has traditionally been about execution. Most sales people are very good at connecting with the purchasing customer. They get training to know the product. And they beat the competition on price.

Now the world has changed. Copying a product became very quick. You now have competition on the Internet to beat down prices.

It has become very hard to differentiate yourself in the eyes of the customer, for business-to-business sales. So salespeople should not sell the product any more. They should find out what the customer needs, which will be a combination of products and services and thought leadership.

Nothing in the above excerpt is incorrect. So why am I so annoyed?

Because these concepts are more than a decade old. There's not a single statement in the interview that wasn't well expressed in the '90's by people like Michael Bosworth, and Jim Holden, and Jeff Thull, and others. Hundreds of companies have implemented programs to instill these lessons into their organizations. But apparently we needed Charan to compile these ideas into a new book, and assert they are "reinventions," before businesses would take them seriously.

Hopefully the book is well-sourced, and credit given to the folks who first developed these ideas. But Charan's salesmanship gives reason for concern: the book's website states, "This book defines a new approach to selling—which Charan calls value creation selling—that while radical is nonetheless practical."

Funny, I first learned that new approach to selling in 1995.

All the above obscures one undeniable fact: despite these methods being well-understood and well-taught, most business selling hasn't improved significantly. So there's something much, much deeper impeding improvement in sales.

I just don't think we'll find it in "What the Customer Wants You to Know."

* * *

(If you're interested in sales improvement, I'd recommend connecting with ES Research, a company with a much richer heritage in sales and sales leadership. ESR assesses many different sales improvement programs and provides information to companies looking to adopt new methods.)

sales, sales process, sales improvement, Wall Street Journal

How is the Getty Museum different from Enron?

It's not a trick question. There may be little difference at all. The Getty is one of several museums that have been accused of systematically acquiring stolen antiquities. (The Getty last year agreed to return forty disputed works to the Italian government.) In today's New York Times, an article states that staffers at two other LA-area museums knowingly engaged with smugglers wishing to sell antiquities to the museums.

But there's one difference I see. The Enron spectacle played out on the front pages of the nation's newspapers. Today's Times article led off the Arts section. The Enron conspirators received sentences of twenty years or more in prison. By contrast, there seems to be little appetite to "make an example" of those associated with trafficking in smuggled artworks (charges were dismissed against the main figure in the Getty case, though other charged remain open).

Why the double standard? Why is buying smuggled artwork less odious than defrauding shareholders? Are curators somehow too classy to engage in criminal behavior?

Or is that no one cares about fraud in the narrow niche called the art world?

(Photo: a disputed funerary wreath returned to Greece by the Getty Museum in 2006, from Agence France Presse via the Guardian)

art, fine art, crime, New York Times

700 MHz auction - away we go

The long-awaited (and I mean long-awaited) 700MHz spectrum auction kicked off yesterday with the first two rounds of bidding. To maintain bidder confidentiality and try to prevent gaming the system, individual bidder names are not released--results only reflect the total amount bid in each individual auction.

The bottom line: a lot was bid yesterday, but nowhere near the FCC's "reserve" amount. This is especially important for the C-block spectrum, which will have open access requirements should the amount bid exceed the government's target of $4.65 billion (which Google, the most prominent name in the auction, could fund out of petty cash).

The C-block nationwide bid was for $1.2 billion, a tidy sum, but a long way from $4.65 billion.

Some quick facts on the auction method being used:

• C-block spectrum is segmented into three packages: a "nationwide" license, one covering the Virgin Islands and Puerto Rico, and one covering US Territories in the Pacific.
  
  
• D-block spectrum is in twelve regional segments.
  
  
• Bidders submit sealed bids each round.
  
  
• Software calculates minimum bids required to continue participating in the auction and publishes them. Bidders can choose to place the next bid at the minimum amount or drop out.

And so it goes, until there are no more higher bids. As long as the FCC's reserve amount is met, the auction is done and the winners pay for their licenses. If it's not, the licenses are not distributed and we do it all again.


broadband, technology, wireless, Google, 700MHz auction

Don't let negotiating counterparts overcommit

The most useful part of Danny Ertel and Mark Gordon's recent book "The Point of the Deal," to me, is this lesson: in a negotiation, if you convince the other side to do more than it can reasonably deliver, you have not won anything. More likely, you have set up the project for failure.

It's easy to say "it's their problem" when the counterpart agrees to a concession that you demand. But if the concession causes long-term issues for the counterpart, eventually your company will suffer.

Here's an example: when I was a product manager, we sold a usage-data collection product to a large wireless telecom carrier. It turned out that the service level that the customer insisted on added costs that made the deal unprofitable for us.

We agreed to the service level, and certainly made serious errors. I made some optimistic assumptions about future customers we could sign on, cost efficiencies we would gain with experience, etc., that didn't occur. We really needed that anchor customer, and stretched too far to get it.

But the point is that, while the customer had a couple of years of getting more service than they were paying for, our problem eventually became their problem. Our company looked at this money-losing account and said, "Something's got to change," and they insisted on a price increase. The customer refused--they had not been previously aware of the cost issue. The contract was not renewed, the product was pulled out--even though it was adding value. Goodwill evaporated.

Ertel and Gordon recommend the following steps to ensure that the other side doesn't overcommit:

• Avoid extracting pointless overcommitments
• Adopt an implementation mindset
• Take the "80/20" hindsight challenge (identify with your counterpart, while negotiating, the 20% of decisions and commitments which in the future you will wish you had clarified further)
• Engage with all the key implementation stakeholders
  

(Photo: "Overload" by brage)

negotiation, dealmaking, reading list

Collaboration or individual leadership? Which is it?

Collaboration is in. The WSJ Business Insight article "Leading From Below" states, "at most companies, senior managers are increasingly hamstrung by the demand from investors and analysts for immediate results"--requiring middle managers to provide leadership at the company level. Other scholars say dissent in the workplace is to be encouraged. The democratic organization is gaining traction.

You would think that we've passed into a new phase of corporate management--leadership by collective. Yet a couple of authors have recently reasserted the importance of individual vision and leadership in business.
In "The Opposable Mind," Roger Martin celebrates the unique capability of individual innovators. Martin writes, "the most common failing of conventional thinking is the tendency to lose sight of the whole decision. It may be easier to dole out pieces of a decision to various corporate functions, but that ensures that no one will take a holistic view of a particular problem." (p.46)

And, in the January Harvard Business Review, Cynthia Montgomery of Harvard Business School states that we should be "Putting Leadership Back Into Strategy" (link - $$). Writes Montgomery:

The need to create and recreate reasons for a company's continued existence sets the strategist apart from every other individual in the company.

Throughout her paper, Montgomery underlines the need not to delegate strategy, but to make it the most important task of the CEO. Strategy-making by committee? Not in Montgomery's view.

So which approach is correct? I'm stumped. Perhaps the artful company balances a strong, visionary leader with the tools and techniques of collaboration, somehow combining the coherence of a single vision and the power of the masses and the "wisdom of crowds."

No wonder there are so few brilliant companies out there.

organizational behavior, strategy, leadership, Harvard Business Review

The world's worst professional services invoice

In today's New York Times, a front-page article in the Business section concerns the legal difficulties of famed plaintiff's lawyer Richard Scruggs, one of the authors of the multi-billion dollar settlement with the tobacco companies. What caught my eye was the above invoice, sent to Scruggs (or "Dickie") by PL Blake, a figure in the case.

There is little or nothing tangible exchanged in a professional services transaction. Therefore, the invoice is normally constructed to give comfort to the payer (and its auditor) that the vendor delivered appropriate and valuable services in exchange for the payment.

Given the large amount due and the, say, haphazard way it was put together, invoice #856 sets a new low in the practice.

I wonder what his tax return looked like?

professional services, invoicing, law, New York Times

Hats off to those who made free software into a successful business

I have been stuck in Chicago for three hours--snow in Chicago, snow in Harrisburg--and it looks to be at least another two hours before I get out. So, I've gotten a glass of wine here in the United Red Carpet Room and am prepared to stay here a while longer.

This is a roundabout way of saying that what I planned to write about, how CEOs cannot delegate strategy, will have to wait for another day.

Instead, let's talk about open-source software. ("What?" say the readers. "We were expecting something interesting!") For the uninitiated, open-source software's programming instructions (source code) are freely available and modifiable.

It sounds like a joke. Imagine coming into a venture capitalist's conference room, firing up the laptop, and announcing, "Our business sells free software...we're looking for a first round of $5 million."

"Get out of my office!" says the venture capitalist.

But today comes news that Sun Microsystems will pay $1B for MySQL, distributor of the free relational database software of the same name. And Bob Young, the founder of another open source company, Red Hat Software (most recent quarterly net income: $20 million) was profiled in "The Opposable Mind" (reviewed earlier this week).

Call it Open Source Week.

So how do open-source companies make money? By packaging that free software into standard releases, providing maintenance and help-desk services, to businesses that want to use open-source products.

The businesses' IT staffs could download the source code over the internet, compile it themselves, then distribute it to their own servers for installation--all free. But the volume of open source modules and the frequency with which the modules change add up to a major headache to companies who want a stable, predictable environment for their web sites or other applications.

The genius of the successful open-source companies, therefore, was to recognize a value niche between the chaos of truly free software and the large license fees of proprietary software like Windows. They sell open-source subscriptions at a fraction of proprietary license fees--that offer a stable, supported product to risk-averse corporate customers.

Add it up, and it's worth a pretty penny--or a billion dollars to Sun.

technology, software, open source

The first great business book of 2008

When I was growing up in the northeast US, it became fashionable for weather forecasters to declare, "This is one of the ten best days of the year!" And I always wondered what happened if they used up their ten-best days too early--for example, not being able to duly recognize a spectacular October 17th.

Such is the risk in proclaiming a book on January 14 to be one of the best books of the upcoming year. But if I read five better books than "The Opposable Mind" this year, it will have been a good year indeed.

The book, by Rotman School of Management dean Roger Martin, seeks to demonstrate that great business innovators use a different mode of thinking from that of the run-of-the-mill manager. Such thinking (using the "opposable mind," in the book's parlance) allows them to hold several conflicting ideas in their heads and craft breakthrough solutions that resolve the conflicts. While relying on vivid anecdotes and case studies, the book also has a strong academic underpinning, referencing the work of, among others, Stanford's James March.

Martin introduces us to a new cast of great thinkers. Likely because the author's home base lies in an important metropolis outside the US--Toronto--he has discovered innovators rarely profiled in business books. While trotting out a few of the usual suspects (Welch, Lafley), Martin also reviews the decisionmaking of Four Seasons Hotels' Isadore Sharp; citytv's Moses Znaimer; and Piers Handling of the Toronto Film Festival.

In many ways, the book is a celebration of the entrepreneur. Collaborative decisionmaking is nonexistent in the book. One of Martin's theses is that only an individual seeing the entire picture can create the creative leap to the new. Even in large corporate settings, like P&G, the hero is the individual who can resolve the paradoxes and see the breakthrough solution that his/her thousands of colleagues have missed.

For Sharp, it was uniting the best of small, high-service hotels and large, impersonal hotels with vast amenities. For Znaimer, it was creating a brand for a television station apart from simply a compendium of others' programming. And for Lafley, it was seeing that the requirements for low-cost products and increased innovation did not have to be mere tradeoffs, but could point the way to a new way of creating products--Connect & Develop.

"The Opposable Mind" is an utterly optimistic book. Martin believes strongly that anyone can learn these thinking skills. He teaches them to Rotman students and describes their struggles and forward steps in mastering what to folks like Moses Znaimer is natural, but to the rest of us is brand-new thinking indeed.

Posts that discuss related subjects:

• James March and "Foolishness"
• Gap International's Breakthrough Intensive
• The Cynefin framework and decisionmaking in complex environments

creativity, complexity, entrepreneurism, reading list

Reviewing the recent 700MHz auction chatter

Awaiting the 700MHz wireless spectrum auction, which begins on 24 January, is a bit like waiting for the Super Bowl. There's endless speculation, story-making, background, and then it's finally game time.

On second thought, it's like waiting for the Super Bowl if you are one of the probably 10,000 or fewer wireless fanatics out there. For everyone else, it's more like waiting for nothing at all.

At any rate, apologies to the millions who don't care about the spectrum auctions, and on to the recent chatter:

Harold Feld on Wetmachine discusses Google's motivations for bidding in the auction. While there has been some speculation that Google is simply bluffing, Harold is certain Google will participate and win. I agree with him.

Some of this speculation results from analysts' puzzlement over what Google will do with the spectrum, given that their business is as far from a network operator as you can get. To me, Google's strategy is very simple: win the auction, then lease the spectrum to people who will adopt Google-friendly (euphemism: "open") access rules for content providers.

Ike Elliott, on Telecosm, forecasts that Google winning spectrum will accelerate the development of the mobile VoIP market. As a hard-core Skyper, I'm rooting for that outcome.

Chetan Sharma in GigaOM describes the uneasy alliance/battle between network operators and media companies, which the auction results will affect.

For those interested in arcane mathematical models, Caltech rode on the coattails of the 700MHz auction hype to issue a press release describing how one of its professors created the bidding approach that the auction will use.

Finally, Rhonda Wickham, in Wireless Week, talks about the possibility that the auction may turn out to be a lot less spectacular than the anticipation would warrant.

On reflection, maybe it's not so different from the Super Bowl after all.

(Photo: "Countryside Auction" from jansun via stock.xchng)

broadband, technology, wireless, Google, 700MHz auction

Complex business problems need diagnosis, not packaged solutions

Dave Snowden, whose posts are always interesting and instructive, says this in a post today:

What I am finding is that the more accurately you can describe the situation, the less you need formal intervention methods. For example if I can show a statistically valid trend, supported by narrative then most people in leadership or management positions can work out what they need to do.

In other words: if you fully understand the problem, you don't need complex managerial methodologies to solve it. Over-relying on "five practices" or "seven habits" or "four steps" amounts to short-cutting the real difficulty of understanding complex situations. There are lots of reasons, which Dave describes well in his post, why best practices and case studies are not good guidance for action in most circumstances.

And it is difficult to know what the problem is in a complex environment. Standard assessments & surveys demonstrate this. Asking a thousand employees, "How innovative are we on a scale of one to five?" produces, at best, a pretty-looking chart that signifies nothing. At worst, it can point you in a completely-wrong direction. But everyone wants a short cut.

Exhibit A: the current romance with performance dashboards. In my experience, at best dashboards point you to a situation that you need to understand more deeply ("Is this drop in region 5 sales an anomaly, or is there something substantial behind it?"). In no circumstances is dashboard information enough to act on.

So the need is more for problem-understanding skills, and less for problem-solving skills--meaning managers will need to get more in tune with narrative sense-making. Here are two examples where intelligent executives looked beyond the data, into the narrative mess behind a problem or dilemma, and used the story that emerged to guide their actions:

1) A.G. Lafley of Procter and Gamble, as described in the book "The Opposable Mind":

While trying to decide to whether to roll out highly-concentrated laundry soap, Lafley faced a dilemma. Merchants loved the idea, but consumers, as measured by P&G's quantitative research, were neutral to negative. In most cases, this would answer the question: don't roll out a product that consumers didn't love. But Lafley didn't accept the data at face value:

...[He] decided to dive into the voluntary comments that some of the consumers added to their quantitative research forms.... Lafley took many evening and weekend hours to pore over more than four hundred handwritten voluntaries. He came to the conclusion that while consumers weren't wildly enthusiastic about compact detergents, few were actively hostile....

And, as a result, Lafley decided that the product could be a success. And, of course, it was. (Stay tuned for a review of "The Opposable Mind" later this week.)

2) A Fortune 500 VP of Human Resources, evaluating a new performance appraisal system, as described in this blog:

Last year we had a pilot of a new performance management system for our employees. The trial group was 4000 people. We had spent a lot of time on the pilot and gathered a lot of data. At the end of the trial, the VP of Human Resources printed out all the comments that had been received on the survey forms. He took them home one night and read every single one. Then he came in the next day and said, "We can't roll this system out." And that was it. The trial was very expensive. We'd gathered lots of data, lots of numbers, but the final determinant was what he read in those comments.

One observation about the above two incidents is that reading narratives and evaluating qualitative data, if done at all, are relegated to nights and weekends.

This is perhaps a sign of some of the difficulties we face in the corporate world--you can spend all day looking at charts and spreadsheets, but read stories on your own time!

assessment, measurement , management, narrative, complexity

I'm on my fourth career - how about you?

Time was, you went to work for a company and stayed there your entire career. You retired in, say, your fifties, then bought the condo in Boca Raton or Hilton Head and lived off your company-provided pension.

Boy, does that seem a long time ago. Almost nobody spends a career at one place. And fewer and fewer of us are limiting ourselves to one career either (part of the reason being that retiring in one's fifties isn't financially viable, nor really appealing, to most people).

I'm on my fourth distinct career, by my reckoning. Here's the breakdown:

1984-1992 - software developer
1992-2000 - product manager, marketer, channel salesperson
2000-2006 - senior manager (getting involved with all the above areas)
2006-? - consultant/entrepreneur/writer/???

And the priorities have changed along the way. I'm a lot more concerned about day-to-day work being enjoyable & intrinsically rewarding than I used to be. Keeping control of my time and being able to devote enough to family time is also important.

Knowing that I'll be working for twenty more years, at least, is making me much more conscious of working "in the moment," with less concern for what happens a year, or five years, hence.

How about you?

(Photo: career men & women from another time. "Mad Men," courtesy of AMC television.)

career

Sales has its own culture--is this a bad thing?

I was recently part of a sales meeting where the salespeople from each region of the company descended onto headquarters, gave presentations to the senior management team, got direction, feedback, etc., then went back home to continue selling.

It struck me while I was there that I have seen this very same meeting in each company where I've had close contact, or been part of, the sales team.

And one observation I'd make is that quarterly sales meetings show how the culture of the sales team significantly differs from that of the company at large. Another way of saying this is that the sales team is not very well integrated with the company as a whole.

For example, when the salespeople emerged from the meeting and went onto the floor where everyone else works, they were clearly visitors. There was loud talking, laughter, as people came up and greeted them. Small meetings broke out, at which they discussed proposals, customer meetings, the state of the product collateral.

And then they were gone, and the office returned to its quiet buzz of activity.

That evening, the sales team went out to dinner. Just them, without other team members. And they talked about their concerns about the product, the level of support they got from marketing, operations, etc. Their feeling of being separate, on the margins.

The scene was eerily consistent with what I'd seen at several other companies, which makes me wonder if it's something that could be changed if a company wanted to.

But to me it meant that the sales team wasn't part of the overall team. And that has all sorts of negative ramifications. Thinking of it from a social networking perspective, these salespeople have strong external networks and weak internal networks--which reduces their ability to get things done in the company and therefore makes it more difficult to create strong solutions for customers. Which reduces sales. And contributes to sales turnover.

Or perhaps it would be just as bad if they had strong internal networks. Their external networks would suffer, they would have less distance from their colleagues, which would reduce their ability to lobby on the customer's behalf and demand more from their company.

What do you think?

culture, organizational behavior, social networking, sales

News flash: companies can't succeed in the technology business all by themselves

From CES, the New York Times Bits blog reports that "the monolithic corporation" is in decline, replaced by networks of alliances, creating "a chaotic alchemy that is making business noisier and strategy even less pointed than in years past here."

While the acknowledgement of the importance of alliances is welcome, from my perspective, the only news about this is that it is news. Doesn't everybody know that companies can't do it all themselves anymore?

innovation technology alliances

Are judgment and experience irreconcilable?

I've just got around to reading "Judgment Trumps Experience," the Wall Street Journal article serving as a teaser for the forthcoming book "Judgment: How Winning Leaders Make Great Calls" by Warren Bennis and Noel Tichy. (Thanks to HBS Working Knowledge for the pointer.) In the article, Bennis and Tichy write,

After a five-year study of leadership covering virtually all sectors of American life, we came to the inescapable conclusion that judgment regularly trumps experience. Our central finding is that judgment is the core, the nucleus of exemplary leadership.

At the same time, I read this article in our local business newspaper about the longtime Harrisburg electronics entrepreneur Izzy Schwab.

Bear with me; these fit together.

Here is one quote from each piece:

Bennis/Tichy: "Our central finding is that judgment is the core, the nucleus of exemplary leadership. With good judgment, little else matters. Without it, nothing else matters."

Schwab: “What I bring to the party today is all the experience of 50 years of mistakes. If it didn’t work five times in the past, it won’t work today. Keep it simple.”

Of course, both judgment and experience are needed for the best decisionmaking. Bennis and Tichy say as much: "We are not discounting the importance of experience. Seminal and appropriate experiences must be drawn on and understood before judgments can be informed."

Yet, how do we reconcile these viewpoints? Are Bennis and Tichy right, or Izzy Schwab? Thinking about learning from mistakes can help. We can't learn much from things that go well. We can learn a lot from failures. Note that Schwab focuses on the things he has done wrong when he talks about his experiences--not his many accomplishments (here's an overview of his company, D&H Distributing).

Bennis and Tichy bring up the Cuban Missile Crisis as an example of Kennedy's brilliant judgment. Yet it was only eigtheen months before that another Kennedy decision, the authorization of the Bay of Pigs invasion, ended in utter failure.

The same person made both decisions. So thinking of "judgment" as distinct from experience rings false to me. Without being able to reflect on the Bay of Pigs tragedy, it's entirely likely Kennedy would have handled the missile crisis with far less restraint.

Judgment may trump experience, but to me one type of judgment may be best of all: the judgment to know when your experience can help you, and when it cannot.

(Photo by vivre via stock.xchng)

learning, experience, judgment, mistakes

Here comes the US 700MHz wireless auction

On January 24, the US Federal Communications Commission will auction off 62MHz of spectrum in the 700MHz band, where ultra-high frequency broadcast television channels operate today. This frequency range is perfect for high-bandwidth, long-distance propagation--i.e., wireless broadband.

We've written in this space that the US desperately needs more broadband options (see here and here). So this auction could (hopefully will) help reshape the broadband competitive landscape. Over the course of the auction, Shop Talk will post on its progress, the main players, and what it could mean for the US wireless and broadband industry.

Stay tuned.

To whet your appetite, read these excellent posts from Gregory Rose's Econoklastic blog covering all the companies that have registered to participate in the auction (1, 2, 3).

broadband, technology, wireless, 700MHz auction

Listening to dissent stops automatic thinking

Recently, I was working with a colleague on an order we were about to place with a supplier. We had had some issues with this supplier's performance, but they had been resolved. Anyway, that had been weeks earlier and I was looking ahead to what we needed next. One morning I got an email from my colleague answering some questions I had about the order.

But at the end of this email, he wrote something that really stopped me in my tracks. He wrote: should we continue using this supplier?

Despite the troubles, I hadn't even considered replacing them. As I spent the next few hours thinking about my colleague's question, it occurred to me that this is one of the values of dissent: it helps stop automatic thinking.

I was ready to go ahead and place the order and the response from my colleague made me stop and think. We talked, my colleague and I, and decided the order should go ahead, but in addition, we put together a list of the concerns we had, and asked the supplier to respond to them before the next order shipped. Looking back, I was glad my colleague raised his voice. And I was glad I listened.

spoken through SpinVox

spoken post candor organizational behavior disagreement leadership

Negotiating a joint venture isn't like buying a used car

For most people, the prototypical negotiation is buying a used car from an untrustworthy dealer. And the negotiating strategy for this situation can be summed up in two words: Caveat emptor.

But as more and more business becomes collaborative and partner-driven, a new kind of negotiation is becoming common. Sometimes it is called "win-win," or "implementation-oriented." At any rate, it is not a transaction that ends with signing papers and handing over money. It is one that begins that way.

Examples include joint ventures, channel agreements, long-term outsourcing contracts, and long-term purchasing commitments.

An important feature of these types of arrangements is that the contract cannot include everything needed to make the deal successful. The parties must also work in good faith after the contract is signed to create the value anticipated by the agreement. And given that the arrangements last years or decades, the parties must also build in flexibility to adapt to market, regulatory or other changes. Such thinking is the polar opposite of the used-car negotiation.

Such types of agreements are the subject of the new book "The Point of the Deal," by Danny Ertel and Mark Gordon, an expansion of their 2004 Harvard Business Review article called "Getting Past Yes: Negotiating As If Implementation Mattered" (link - $$).

Ertel and Gordon, from the consulting firm Vantage Partners, discuss at length how traditional negotiation approaches--such as using surprise, withholding information, entrusting negotiations to specialists, and pressing for quick closure--frequently undermine long-term arrangements.

For example, the authors say this about limiting the information disclosed to the other side in a negotiation:

Traditionally, negotiators have treated information as a precious commodity, to be preserved and protected and not given away freely.... Many negotiators assume that the more information they disclose, the weaker they become; that it is up to the other side to do their due diligence and discover whatever information they need.... Such behavior[, however,]...tends to lead to lots of surprises when the parties turn to implementation.

If you're encountering more negotiations of this type, where the old rules don't work well any more, you'd be well advised to read "The Point of the Deal."

Some other negotiation resources:
Barbara McFadden podcast
Negotiation Genius review
HBR podcast with Danny Ertel

negotiation, dealmaking, reading list