For example, a business owner complained to me about one of his associates.  His gripes were personal preferences.  He didn’t like the way his associate did this or that.  He asked my opinion.  Rather than giving it based on my five minutes with the guy (which I didn’t think would be fair to anyone), I simply asked how are his numbers?  I thought it would be good to re-focus the owner on the results.  I could read it in the owner’s eyes, good question, I hadn’t thought of that.

My advice to folks who desire to be a successful leader is to grow accustomed and adept at asking and answering …and that resulted in what?

The next step is making sure you hold folks accountable to the right results.

A business professor of mine once told the class his story about bonus structures he experimented with when he owned and operated sandwich shops.

First, he wanted to grow revenue so he tied managers’ bonus to revenue growth.  That resulted in high food and staff costs as managers tried to attract business with over portioned sandwiches and always had more than enough staff on hand to handle unexpected rushes.  While customer traffic was good, profits suffered because of high costs.

Next, he tied rewards to costs to gets costs under control.  That resulted in long lines, under portioned sandwiches and customer complaints as managers tightly controlled staffing and portions to meet the cost targets.  Customer traffic slipped with service and product quality and profits suffered.

In both cases, he felt the store managers didn’t pay enough attention to the cleanliness of the store.  The owner was spent late hours scrubbing trash can lids and cleaning windows to meet his standards.

Finally, he tried a combination plan.  First, he came up with a 70 point inspection checklist that he would use to rate the cleanliness of things like the trash can lids, bathrooms, tables, floors, counters and doors.  He told his managers that he would inspect the stores any time, day or night, and to be eligible for a bonus store the store had to score 69 out of 70.

If the manager passed the inspections, then he or she would be eligible for a bonus that was based on year-over-year revenue and profit growth for the month.  Further, for each month that staff costs were less than a certain percent of sales, staff would receive a bonus making up the difference.

He was pleased with the results.  He said managing the operation became as simple as conducting the inspections.

He no longer spent late nights scrubbing trash can lids.  Managers and staff found ways to increase sales and control costs, rather than focusing on one at the expense of the other.

It took some experimentation, but he seemed to have have found the right outputs to reward.

The “not invented here” syndrome is an example of a bad mental model in business.  This syndrome  prevents management from adopting the practices of outside competitors because they don’t want to copy success, they want to create their own.  The fallacy here is that competitors can have good ideas.

Not my idea syndrome is a sub-variant of the “not invented here” syndrome. This is when managers will only support their own pet projects and give no credence to ideas that come from others in their organization.  The flaw here is that others can have good ideas.

The manager’s job is to try the best ideas, not just his or her ideas.

Credentialing syndrome is when managers hire, promote and reward folks based on  college degrees from certain institutions, or have specific degrees, certifications or licenses.  A great example of this is K-12 teachers.  School districts often pay their teachers based on the certifications they receive.  The fundamental flaw here is that there’s usually not a great deal of relation between effectiveness and certification level.  Not as much as there is between prior results and effectiveness.

Input management syndrome occurs when managers hire, promote and reward based on how people carry out their work, rather than the results they produce.  The fundamental flaw here is in managing the inputs rather than outputs.  This is also called micromanaging.  My father-in-law was a capable foreman for his crew and produced good results.  But, he said one of his bosses would always tell him that he was too easy on his men.  That boss didn’t look at the results.

The manager’s job is to hire and reward the people who produce the best results.  It’s not to get the people who have best credentials or do things a specific way.

The fatal conceit syndrome, inspired by F.A. Hayek, is when managers believe their job is to control how things are done in far flung organizations.   Rather than hiring people who can produce good results, they hire people who do what they are told to do.  Two fundamental flaws exist in this bad mental model.  First, managers rarely have the information they need to control things effectively in far flung organizations, aka the knowledge problem.  Second, innovation is suppressed and limited to few ideas of the managers and they are soon overrun by the many ideas of their competitors.

The manager’s job is to develop an organization that can function.

I’ll explore more bad mental models in the future.

Unfortunately, bad mental models are tough to change.  I’ve seen many leaders go down with the ship and get fired for producing bad results without giving consideration that they may be wrong. I’ve seen them take their bad mental models to other organizations and eventually get fired from them as well.

But, one way I like to plant the seed of doubt is to simply ask what evidence folks have that their way of doing things is right.  They usually haven’t tested that evidence as well as they think they have.

Related Articles

• Some thoughts on “Mental model risk” (nicholasjdavis.wordpress.com)
• We are all mental (digitaria.com)
• mental models (jl10ll.wordpress.com)

Name a Silicon Valley giant that has managed CEO succession well. HP hasn’t. Sun blew it. Advanced Micro Devices never adequately replaced Jerry Sanders. Apple dropped the baton repeatedly its first incarnation – Steve Jobs to John Sculley, Michael Spindler and Gil Amelio — and it’s too early to tell if Tim Cook can replace Jobs this time around.

Among large companies, only Intel has mastered CEO succession multiple times. Founded in 1968, Intel has gone from founders Bob Noyce and Gordon Moore, who both served as CEOs, to Andy Grove, Craig Barrett and now Paul Otellini without losing its status as the world’s preeminent chip manufacturer.

I also like how Otellini attributed different aspects of Intel’s culture to each CEO:

Egalitarian. Merit based. That came from Noyce. Anyone can speak in a meeting, but you must speak with data. That came from Moore. Take risks. Embrace innovation, but do it with discipline. That’s Grove. World-class manufacturing came from Barrett. I’ve added a marketing component.

I enjoyed this last piece because I see these as key attributes missing from dysfunctional and bureaucratic organizations.

In dysfunctional organizations, politics override merit.  Rhetoric gets you further than data and experience.  Innovation is not embraced, rather its usually the pet ideas of the political masters that get the attention.

1) You may have the fatal conceit.

2) You have hired the wrong people.

3) It is not likely to end well for you.

I know I lifted this from an economist, but I’m not sure which one.  Perhaps it was many.  I think it was Thomas Sowell, maybe Hayek, Friedman, Roberts or Landsburg.  If I figure it out, I’ll properly credit it.

Credit they deserve.  It comes to mind often.

This mistake is made often for economies, governments and companies.

I’ve witnessed and abetted numerous management teams go through top-down centralized planning where the output of the hard labor of many individuals was primarily a prop to create the illusion to Boards of Directors that productive work had been accomplished.

Sometimes, and unfortunately for the owners of those firms, management attempted to execute against those centralized plans.  They mistook that as their job. They didn’t keep their job much longer.  But, they get other jobs and they do the same thing over again with the same results.

Their job is not to execute a centralized plan.

What is their job?

Their job is to encourage the individuals in the firm to align their individual plans in ways that results in the success of the firm and the successes of individuals.  (They’re also charged with finding those individuals).

Update: Aaron McKenzie commented to inform me that Hayek deserves the credit based on a quote from his book The Use of Knowledge in Society.  Thanks Aaron.

First, recipes for delicious chocolate chip cookies are maybe as numerous as recipes for successful businesses.

Second, I agree with the strand of DNA analogy.  But, I like to think of it as a trial-and-error experiment.  That’s what different configurations of DNA are as well – trial and error experiments.

Every new product, every new business, nearly every decision made in the running of the business is a trial-and-error experiment with an uncertain outcome.

The business experiment tests whether customers find enough value in whatever is being sold to trade what’s needed to encourage the producers to make more.  Some experiments work out and many others don’t.  There’s no sure fire way to tell if you’re on to something without trying it.

While I agree with Godin that  there is no sure-fire recipe business success, I do believe there’s a way to improve chances of finding successful businesses with good experimentation.

For existing businesses the lesson is to try many new things on small and inexpensive scales.  Many businesses flip-flop this.  They try a limited number of expensive experiments.

Mature companies forget they were founded as a result of a trial-and-error experiment.  Some never even realize it.

Managers appoint themselves as the judge of what will work and what won’t and they filter out many ideas based on their own preferences, never realizing that their preferences aren’t worth a heck of a lot.

Mature companies become old and clunky because they reduce experimentation, sometimes without realizing it.  Even after choking off conscious experimentation, most companies have natural experimentation happening within their business and they tend to ignore the results or kill them if the new process or product deviates too far from their comfort zone.

I remember sitting in a meeting discussing a new experiment at one company.  The 20 people in the room from different parts of the business were each interested in getting their stamp on the experiment so they could appear to be adding value and have something to plug in their next performance appraisal.  None of them had been a part of any previous successful experiment.  The experiment was a Homer (as in the car designed by Homer Simpson).  It had a little something for everyone and worked for no one.

Folks from this company will tell you that they experiment.  They just don’t realize that they experiment poorly.  They don’t conduct enough experiments, don’t have the right people working on them and the experiments they do conduct are subject to too many political stakes.

Here are my suggestions for companies who are interested in tapping into the power of experimentation:

• Increase the number of experiments.
• Make the experiments as cheap as possible.
• Measure success on actual customer response and feedback.
• If you need a statistician to tell you if the experiment worked, it didn’t work or it didn’t work well enough.  You want experiments that work really well.
• Keep an eye out for natural experiments.   These may take the shape of an accident that has a good result or someone in a remote location doing something a little different that’s generating good results.
• Associate successful experiments with people.  Don’t expect anyone to bat a 1,000, but notice and reward that some people have a talent for hitting on successful experiments.  You want to keep these people around and let them have some runway and reward them when they do hit on something.
• Resist temptation to impose arbitrary preferences on experiments.  I’ve seen leaders kill any hopes of a successful experiment by imposing their own preferences into it (e.g. “it must use our brand name” or “it can’t cannibalize our existing business”).
• Kill failed experiments.  I’ve seen failed experiments carry on far too long because the experiment happened to be the pet project of someone with political power in the organization…
• …but don’t be afraid to evolve experiments.  Sometimes an experiment needs to evolve a little before it hits.
• Start small and expand slowly.  Another crazy thing big companies do is roll something out big that has little or no experience, battle testing and evolution.  These are either ego-driven projects, hail mary acts of desperation or just bad business management.   These types of projects may have been the origin of the phrase epic fail.  Management tends to over react to gain a first-mover advantage, but that’s a myth.  The eventual winner tends to be the product that is most battle tested and evolved to best suit the needs and preferences of the customers (e.g. Google vs. Yahoo!, MySpace vs. Facebook, Lotus 1-2-3 vs. Excel).
• Use an entrepreneurial model with small project teams and get those teams away from HQ so they won’t be influenced by office politics.

Show me a company that is lagging, let me speak to a few people there and I can likely tell you how they are snuffing out the power of experiments.  Show me a successful company and I can find out how they came upon the successful experiments and see if there’s trouble in the future due to a bad experimentation model.

To use a band analogy, some companies end up being one-hit wonders while others endure.  And for the very same reasons.  One hit wonders may make enough money and decide they no longer need to experiment with new music. Enduring bands never seem to lose that experimental motivation.  They continue to experiment with music and continue to hit upon new hit songs.

To sum up, the secret to good business is good experimentation.

I was lucky a few nights ago to get to listen to an interview with Keyshawn Johnson, former NFL wide receiver and current ESPN sports caster.  I was lucky because Mr. Johnson provided a great example of how to carry on a productive conversation and he demonstrated well that he isn’t a sound bite thinker.

Mr. Johnson keeps himself busy.  In addition to his ESPN duties, he owns and operates Panera Bread franchises and has a production company to produce shows for television networks. It sounds like he’s taken the leadership lessons from his coaches and applies them to way he runs his businesses.

But the good part was how he conducted the conversation.

The talk show host had a pet theory he wanted Keyshawn to validate.  The talk show host believed the coach of the KC Chiefs, Todd Haley, must be tough to work for and he thought this was the real story behind the Chiefs offensive coordinator deciding to leave for Florida after one season.

Keyshawn has worked with both individuals and didn’t take the bait.  He said there could be a number of factors contributing to Weis’s decision and Todd Haley may or may not be one of them.  Here’s their paraphrased conversation:

KJ: “Maybe he got a taste of the college game at Notre Dame and prefers that to the NFL, have you considered that?”

Local talk guy: “But, it seems Haley would be tough to work for.  Perhaps they didn’t agree on some things.”

KJ: “Anytime you get two coaches together, you’re going to find things they disagree on, but the good ones respect their positions and do their jobs and these guys are good.”

Then the local sports guy tried a different angle to disparage Haley — a Jason Whitlock (sports writer) column that claimed Haley wasn’t head coach material.

KJ: “Really?  I’ll have to go online and read that column and see what he has to say.”

Again KJ doesn’t take the bait.  He said, let me do my homework before getting too crazy and then asks a clarifying question, “I would just ask why isn’t he head coach material?  The guy took a 4 win team to the playoffs in two seasons, it’d be tough to argue with those results.”

Local sports guy tries one more time:  “You have worked for Haley.  He was your position coach at one point.  Was he tough to work with?”

KJ, again not taking the bait: “If you want to be babied, sure.  All the good coaches are tough to work with.  They expect you to do your job and will hold you accountable, but they’ll make you a better player.  Haley made me a pro bowler.  He went on and turned other people into pro bowlers.  Are you going to rub some people the wrong way when you do that?  Sure, but it’s hard to argue with the results.”

I believe KJ went on to say that he learned a lot from the Haleys, Weis’s and Parcells and applies those leadership lessons to the running of his businesses.

The sports show host finally conceded.  “Well, it sounds like you were able to take some good lessons from these guys and you really have some good thoughts about it.”

Subway kicked it off a price promotion with their $5 foot long promotion, which seemed to work for awhile.  It was a black swan that was happened upon by a Subway franchisee in Miami.  He put out a sign for $5 foot long sandwiches and earned more money.  Others followed suit and eventually the corporate headquarters picked it up.

But, price is rarely a source of a sustainable advantage.  It may work for awhile, but price promotions is something that is easily copied by competitors and eventually they too will find compelling offers.

The most important thing is the value proposition.

Early KFC began offering $5 meals.  Pizza Hut went to $10 for Any Pizza.  Both seemed to work for awhile.  The $10 Pizza got the mother of my Papa John’s-loyal nephew to try Pizza Hut and he liked it.

Then he came to our house and wanted pizza.  I started to call Papa John’s, but he said he’d rather have Pizza Hut.  It had been 10 years since I tried Pizza Hut because the last pizza I got from there was a grease ball.  I tried some of his Pizza and I liked it. It tasted good.

That’s value proposition.  In the beginning the $10 pizza got my nephew to come in, but it was the good quality pizza that kept him coming back.  Since then, I’ve ordered Pizza Hut several more times, likewise because of the quality of the pizza, not the price.

Pizza Hut advertising seems to reflect this.  Several months ago the advertising focused on the $10 Any pizza message.  A few weeks ago they changed their pricing to $8, $10 and $12.  Still simpler than before, but a little more variation to better align the price and the value.

This past Sunday I saw it come full circle.  Pizza Hut’s ad didn’t mention price.  It explained the value prop:  Good pizza and convenience, in ways people can understand like “this means I can spend more time with my daughter.”

As Bill Cosby said in his commencement address to Cheyney University’s Class of 2007, workers at McDonald’s pick up many skills.  “If I’m flipping burgers,” Cosby noted, “I’m not flipping burger for the rest of my life.  I’m learning to become a manager.  And I’m not the manager forever because I’m learning to become the regional manager.”  Cosby accurately depicted opportunities at McDonald’s–for those, it should be stressed, who adhere to McDonald’s rigorous standards.

That passage brought back more than a few discussions I’ve had over the years about “burger flipping jobs.”  Usually, the reference was made by discussion partners as if they were dead-end, low pay hopeless jobs.

One of the best managers I’ve had the opportunity to work for is a former McDonald’s burger flipper.

The author, Paul Facella, started working with McDonald’s at 16 and rose to become a regional vice-president for the company and judging from his writings, he enjoyed it and found it greatly fulfilling.

Just a few pages earlier (p. 77), Facella wrote about the pride of burger flipping:

I worked my way to grill person, the key position, after many months and had a pretty good knack for speed and dexterity, always striving to perform up to the standards expected of me.  Coworkers and I raced to see who was the fastest at flipping burgers and putting patties on the grill.  I could usually hold my own.  But the more important contests were sales.  We strove to break any record…hourly, daily, or weekly.  There was a bonus if you worked during that time period.  And we broke records. Our store became one of the top sales restaurants in the area, and we got quite good at keeping the lines down and increasing sales.   It was also important in the status of your crew if you worked the record hour on your station. We fought to be there when the big crowds gathered for a chance to break the record on our shift.

Interesting.

It sounds like a burger flippers learned to see the big picture.  They knew their efforts contributed to keeping lines moving quickly, which helped keep customers satisfied and their store break sales records.   As Cosby said, they’re learning to be the manager.  And they took pride in their work.  Imagine that.

Megan’s post explores why Netflix may have achieved such an advantage over a company like Blockbuster, when other innovators have failed.  She offers Netscape, TiVo and cat scans as big innovations that changed the market, but were ultimately copied and outdone by established players.

I think it’s a great question.

A fellow I met through work earlier this year had previously managed some Blockbuster locations.  He shared with me his view.  He said that Blockbuster execs couldn’t understand the Netflix value proposition.  They thought of movie or game rentals as impulse purchases and that the bricks and mortar model was better than having to sign up and wait to get something through the mail.  I thought that myself until earlier this summer.  I couldn’t imagine why I would want to do that. I moved late.  I could afford to. Blockbuster execs moved much too late.  They couldn’t afford it.

Repeated conversations with a co-worker and facing a summer of bad television got me to pull the trigger.  I chose Blockbuster Online.  I hope they don’t go out-of-business because I’m very pleased with the service.  After about three months with the Blockbuster Online, here’s what I think:

1.  The online queue is an excellent innovation. This reminds me of my online access to my library account where I’m able to load books into my queue when I hear about them and then the library sends me a nice e-mail to let me know the books are ready to pick up.

Now I can do the same thing with movies and TV shows.  When I hear or read about one that sounds interesting, I can log into my Blockbuster Online account and add it to my queue and know at some point in the future I’ll get it in the mail.

I have found this to be superior than store rentals in two ways.  First, I don’t have to remember anything.  Inevitably when I went to the store to pick up something, I forgot all the things I wanted to see and ended up picking a movie off the rack.

Second, I’m not faced with comparing my desire to watch something with the price.  Often I’d find DVDs that I might want to see, but I wasn’t willing to fork out $4 for it.  Now, with the online queue, I find myself more amenable to those marginal choices.

2.  The online rental service is a great way to catch up on tv shows. There’s a lot of good television that I’ve missed over the last decade or more.  This summer I caught up on a few shows.  Online rental is a good way to watch TV shows because you get one or two DVDs to watch at a time, there’s no late fees, you have the DVD lying around for backup.

In fact, I’ve only watched three movies through the service.  Most of what I’ve rented has been tv shows.

3.  DVDs are excellent to have handy. I can watch them on a plane with my laptop, I can watch an episode or two of a tv show after the kid goes to sleep or while I’m working out on a stationary.

Overall, I’m pleased with the service.  As the new season of TV kicks off, I may watch more DVDs and less new shows and just catch up with them later.

I chose Blockbuster Total Access because of the value add of being able to combine the mail service with the store service.  I can go in 5 times a month and trade a DVD from the mail service for an in-store DVD to satisfy my impulse movie rentals.  I find that almost pays for the service itself.

I have found value prop in this “new” model as have many others.  Time will tell if Blockbuster will be able to hold on.  The bricks-and-mortar is under attack not only from online but from the DVD kiosks as well. It’s tough to predict exactly how it’ll pan out.

This is a great of example of Joseph Schumpeter’s idea of creative destruction and the idea that in capitalism, markets respond to consumer preferences.  Ultimately, Blockbuster simply didn’t give customers what they wanted for long enough for a new competitor to get a strong foothold in the market.

Interestingly enough, Netflix is innovating to bring the impulse purchase back with instant streaming to digital devices.

If you were to venture a guess, I’d say network and cable channels should watch out.  I can see a day coming where TV programming is set much like podcasting – folks do it themselves on their computer and have the shows they want to watch downloaded.

That reminded me of some wise advice I read about long ago from successful growth investor Philip Fisher.  It took me awhile to find it, but I had posted on the subject a couple years ago.  In this post, How to Run a Business, I quote from Philip Fisher’s book, Common Stocks and Uncommon Profits.

This passage came from a section of the book called Conservatives Investors Sleep Well (p. 188):

Here is an indication of the heart of the second dimension of a truly conservative investment: a corporate chief executive dedicated to long-range growth who has surrounded himself with and delegated considerable authority to an extremely competent team in charge of the various divisions and functions of the company.  These people must be engaged not in an endless internal struggle for power but instead should be working together toward clearly outlined corporate goals.  One of these goals, which is absolutely essential if an investment is to be a truly successful one, is that top management take the time to identify and train qualified and motivated juniors to succeed senior management whenever a replacement is necessary.  In turn, at each level down through the chain of command, detailed attention should be paid to whether those at this level are doing the same thing for those one level below them.

Businesses I’ve been involved with tend to take a program or project approach to running the business.   Whether it’s in their core value proposition (the business line putting most of the profit on the bottom line) or in developing or finding new value propositions, the exercise generally seems to be around what programs will best take advantage of some perceived trends.

For example, someone identifies a trend like the population is aging, then asks the question what products or services can our company offer that will be relevant to that trend?

From experience, I have not seen a great deal of value created from this approach.  I think it misses a key ingredient.

People.

Perhaps the person who spotted the trend is wrong.  Perhaps the people who identified programs to leverage the trend are wrong.  Maybe the people who are running the programs aren’t that good.

I think we can learn something from the wisdom of Philip Fisher.  Maybe, long-range planning at a company should look a lot more like an organization chart and it should be answering questions like:

1. Who do we have running our core value proposition (the business experiments that took off years ago)?  Who’s ready to take over?  What are we doing to get them ready?
2. Who is developing our latest experiments that seem to have legs?
3. Who do we have doing more experiments to find tomorrow’s value propositions?

It seems with each group of questions, you may want people with different sets of capabilities, talents, skill sets, past experiences, successes and temperaments.

Once these questions have been answered, the next logical questions would seem to be how much money do they need?

I posted my theory in the comments section of Landsburg’s blog.  I suggested that perhaps investors were shocked that the Board of Directors of HP doesn’t seem to have a succession plan and this may be an indication that it simply isn’t running the business well.  Maybe a CEO isn’t worth 10% of the market cap, but the decisions a Board makes can be. 

Though, in this case I found the title misleading.  I think the two had good things to write about markets, but I’m not sure it deserves the title.  Both authors admitted in the comments that their points were complementary, rather than counter.

Regardless, I found one nugget that struck a chord from Chidem’s part of the post:

Political powers-that-be controlled economic activity and did not leave scope for much innovation—indeed often punished innovators.

This struck a chord with me because I’ve seen this first hand in business.  I’ve watched good businesses lose ground because they came under the control of people who desired political power and suffered from the fatal conceit in believing they can take the business to the “next” level with their great ideas and careful guidance.

What they actually do is run the business for their own benefit and try out a narrow range of ideas — most of which are their own.  They ignore the true engine of innovation that could take the business to the next level — trial and error experimentation, lots of it.  Several years down the road, competition, where the true trial-and-error is takes place begins to take its toll.

I imagine this can be true for many other organizations.  Education seems to struggle with this.  Charities seem to struggle with this.  Government entities definitely struggle with it. Churches struggle with it.  Homeowners associations struggle with it.

This isn’t be surprising, since all organizations are manned by people.

Good talent is usually easy to spot.  They’re the one’s that make your life easier.  Be it a painter that you can rely on to get the job done right, on time and you can trust to have in your home, or an associate that you would like to have on your team now or someday, you’ll be better off if you know who these people are as you find them.

Next topic, promotion.

Once you find these people, your next job is to promote them and try to open doors for them.  Again, be it the good painter or your associate, part of your job other than paying these people for their services is to let others know about them and try to open doors.

Actively recruiting and promoting will make your life easier and will result in great success.

I suggest that Diane take an honest look at the accountability model she supported.

She supported government-enforced accountability where students were tested for proficiency each year and the scores reported up through the state government to the Federal government and government would decide if the school is performing or not.

This accountability model doesn’t work because those in government do not know how to get a true read on success or failure.  True success can’t be measured and aggregated and rolled-up to a national level.  In her model, the wrong people were responsible for holding the schools accountable.

Schools should be held accountable by parents.

When I was in second grade, my Mom and Dad held the school district I was in accountable for its poor performance by moving our family to a better school district.  So did many others.

The problem is my old school district didn’t receive the message.  It continues performing poorly decades later because it has not been allowed fail, though the suburbs and limited numbers of charter schools have made dents in its enrollment. 

That school district keeps receiving funding to operate and more funds to fix its problems. This funding model is a negative reinforcing loop.  It rewards failure.

If the funding choice for that school district lied with the parents, not some government funding formula, it would have failed long ago to be replaced by better performing schools.

The narrator in the ad says:

We realized a long time ago that what you make people feel is just as important as what you make…

Yes.

That is value proposition. Many businesses and products that had what seemed like good products failed because they didn’t realize this.

I remember once, a long time ago as a young engineer in my first job working with an older engineer that was hooked on Corvettes.  He had bought many over the years.  He was trying to call GM to get some spare parts and was having a terrible time with the customer service department in getting anyone who not only knew something, but would actually treat him with respect.  Here’s a loyal customer for goodness sake.  This gentlemen was nearly in tears as he described to me the experience and explained that had ended his love affair with the Corvette.

Here Chevy had a hit product and loyal customer.  Yet, they still managed to make him feel bad enough to cause him to reconsider being a customer.

That’s not how you want to make your customers feel.

BMW’s commercial ends with:

…and at BMW, we make joy.

Listen up CEOs.  How do you make your customers feel?   With a good many companies they make me feel just slightly enough better than the competition to keep me coming back which leaves the door wide open for competitors.

How you make your customers feel can be an intangible, and high value, competitive advantage.

The narrator in the ad says:

We realized a long time ago that what you make people feel is just as important as what you make…

Yes.

That is value proposition. Many businesses and products that had what seemed like good products failed because they didn’t realize this.

I remember once, a long time ago as a young engineer in my first job working with an older engineer that was hooked on Corvettes.  He had bought many over the years.  He was trying to call GM to get some spare parts and was having a terrible time with the customer service department in getting anyone who not only knew something, but would actually treat him with respect.  Here’s a loyal customer for goodness sake.  This gentlemen was nearly in tears as he described to me the experience and explained that had ended his love affair with the Corvette.

Here Chevy had a hit product and loyal customer.  Yet, they still managed to make him feel bad enough to cause him to reconsider being a customer.

That’s not how you want to make your customers feel.

BMW’s commercial ends with:

…and at BMW, we make joy.

Listen up CEOs.  How do you make your customers feel?   With a good many companies they make me feel just slightly enough better than the competition to keep me coming back which leaves the door wide open for competitors.

How you make your customers feel can be an intangible, and high value, competitive advantage.

Tests and other criteria which convey the realities of their existing capabilities, compared to that of others, can have what is called a “disparate impact,” and are condemned not only in editorial offices but also in courts of law.

But criteria exist precisely to have a disparate impact on those who do not have what these criteria exist to measure. Track meets discriminate against those who are slow afoot. Tests in school discriminate against students who did not study.

Disregarding criteria in the interest of “fairness”– in the sense of outcomes independent of inputs– adds to the handicaps of those who already have other handicaps, by lying to them about the reasons for their situation and the things they need to do to make their situation better.

I’ll repeat that last part, ” adds to the handicaps of those who already have other handicaps, by lying to them about the reasons for their situation and the things they need to do to make their situation better.”

That reminds me of something written by two well respected business leaders – Jack Welch formerly of GE and Howard Schulz, founder of Starbucks.  Both wrote about their thoughts on removing people from jobs that they weren’t very good at it.  Of course, they did this for business reasons, to improve the business.

But, both made an excellent point.  They felt keeping and under performer in a position was more disrespectful to the person than trying to shield them from the truth and may eventually lead to a much colder, harder lesson for those people.

A great example of this are the awful singers who audition for American Idol and are devastated when they hear the judges  tell them the truth.  It should not get to the point where someone who doesn’t remotely have singing talent make it in front of the American Idol judges.

Honest and accurate feedback was either never given to these people or never received.

I’m continuously amazed by business managers that try to shoot astronauts to the Moon with a slingshot.  When it doesn’t work, they build a bigger and better slingshot and convince everyone that this one will work, it has to (their contract is running out and they want to stay).  Alas, this slingshot doesn’t do the job.

For many business managers, it never occurs to them that they may need to bring in a few rocket scientists to achieve their goal.  They keep building slingshots until the owners wise up.  Unfortunately, the owners so very often hire a cannon builders to replace the slingshot guy.

I’m continuously amazed by business managers that try to shoot astronauts to the Moon with a slingshot.  When it doesn’t work, they build a bigger and better slingshot and convince everyone that this one will work, it has to (their contract is running out and they want to stay).  Alas, this slingshot doesn’t do the job.

For many business managers, it never occurs to them that they may need to bring in a few rocket scientists to achieve their goal.  They keep building slingshots until the owners wise up.  Unfortunately, the owners so very often hire a cannon builders to replace the slingshot guy.

Take a look at this piece of art. I love it.

Sinister Rainbow, Emma d'Souza (medium- acrylic, silk thread & felt)

Is it just paint splashed around? Is the artist authentic ? Does it encourage other people to come and look at other pieces of work? Will it influence others? Will you look at your own work and want to do better or differently next time? Could the artist explain why? Would you be proud to display or own this piece of art? Is it art?

I believe the same questions can be raised of management style.

I’m sure, with the right materials and time I could attempt to produce something like that. But is that art? Is it just the finished article we are looking for? Is a poor copy worth the same? Surely what is more important is the journey to that end point.

We all have to accept that targets are met, roles fulfilled, projects planned and appraisals achieved but surely (please?) what is actually more important is not the end point but the nature of the  journey in getting there. There has to be more art to management than simply administration.

Clever people think of complexity as a virtue.  They’ve differentiated themselves from others their whole lives by figuring out complex things.  They probably got attendtion from their parents at a young age by solving puzzles.  They achieved academic success by studying hard.  Their early career success came from doing the stuff others couldn’t figure out.   

Watch out when one of these people become a manager.  They continue to think their job is to figure out complex things.  And, if they find something isn’t all that complex, they think it’s their job to make it so. 

This happens at successful firms.  The managers who made the firm successful bring in clever people to take the company to the next level.  Not looking to disappoint, the new managers – often with presitigious degrees and experience of a more academic nature – try to work their magic. 

To be sure, these people don’t know what they’re doing, but they’ve never admitted that to themselves let alone anyone else.  Thinking their intelligence will carry them, they try things.  After all, their job is to take the organization to the next level.  

These clever people learn to sell these things by making them sound clever.  Others buy into the cleverness.  The cleverness of the ideas keeps them going for awhile, even in the absence of true results.   The clever people will find ways to spin the lackluster results with a hint of silver lining and clever analysis and clever reasons why we need to wait and see. 

Eventually, in capitalism, true results trump cleverness.  It may take some time, especially if the organization had a lot of momentum before the clever arrived.  Shareholders with a direct financial stake in the company tend to eventually hold their managers accountable to producing value, even though they may have been sidetracked by the cleverness for awhile.

Such cleverness, however, often finds a self-reinforcing home in politics.  Voters, with less direct interest in particular political outcomes, can be taken by cleverness for quite some time.

Clever people think of complexity as a virtue.  They’ve differentiated themselves from others their whole lives by figuring out complex things.  They probably got attendtion from their parents at a young age by solving puzzles.  They achieved academic success by studying hard.  Their early career success came from doing the stuff others couldn’t figure out.   

Watch out when one of these people become a manager.  They continue to think their job is to figure out complex things.  And, if they find something isn’t all that complex, they think it’s their job to make it so. 

This happens at successful firms.  The managers who made the firm successful bring in clever people to take the company to the next level.  Not looking to disappoint, the new managers – often with presitigious degrees and experience of a more academic nature – try to work their magic. 

To be sure, these people don’t know what they’re doing, but they’ve never admitted that to themselves let alone anyone else.  Thinking their intelligence will carry them, they try things.  After all, their job is to take the organization to the next level.  

These clever people learn to sell these things by making them sound clever.  Others buy into the cleverness.  The cleverness of the ideas keeps them going for awhile, even in the absence of true results.   The clever people will find ways to spin the lackluster results with a hint of silver lining and clever analysis and clever reasons why we need to wait and see. 

Eventually, in capitalism, true results trump cleverness.  It may take some time, especially if the organization had a lot of momentum before the clever arrived.  Shareholders with a direct financial stake in the company tend to eventually hold their managers accountable to producing value, even though they may have been sidetracked by the cleverness for awhile.

Such cleverness, however, often finds a self-reinforcing home in politics.  Voters, with less direct interest in particular political outcomes, can be taken by cleverness for quite some time.

“Everything should be made as simple as possible, but not one bit simpler.” -Albert Einstein

Oliver Wendall Holmes’s quote brings to mind a curve on a graph in the shape of a single hump, commonly referred to as the normal distribution.  To the left of the hump is the simplicity he wouldn’t trade for a fig.  The hump is complexity.  To the right of the hump is the simplicity he values.

Getting to the right side of the hump is a fine art few recognize, let alone achieve.  Holmes, Ben Franklin and Einstein were masters. Warren Buffett and Jack Welch are modern day masters. 

Getting to the right side requires thorough understanding of a subject and deep reflection.  Like sculpting a human form out of a lump of rock, it takes practice, determination, refined technique, mastered use of the right tools, a feel for the material and a keen eye for achieving the desired shape.

The complexity curve explains why NFL management talent is not deep.  Over 95% of the managers operate to the left or inside the complexity hump.  Less than five percent are to the right.

The effectiveness of leadership and management strategies from the 95% of managers is random.   Some work, some don’t.  Successes aren’t consistently repeatable by this crowd.  They’re often like the one-hit wonders of the music world.

The success rate from the 5% is not perfect, but it is high and more consistent.  They’re much more like the bands that endure. 

The five percenters started off as 95 percenters and moved to the right with experience and reflection. 

A few things set these people apart.  They’re open to feedback.  They don’t let their egos get in the way of learning.  The distinguish root causes from symptoms.  They have a healthy skepticism of conventional wisdom.  They have a good handle on their biases.  They can see things from other points-of-view.

“Everything should be made as simple as possible, but not one bit simpler.” -Albert Einstein

Oliver Wendell Holmes’s quote brings to mind a curve on a graph in the shape of a single hump, commonly referred to as the normal distribution.  To the left of the hump is the simplicity he wouldn’t trade for a fig.  The hump is complexity.  To the right of the hump is the simplicity he values.

Getting to the right side of the hump is a fine art few recognize, let alone achieve.  Holmes, Ben Franklin and Einstein were masters. Warren Buffett and Jack Welch are modern day masters.

Getting to the right side requires thorough understanding of a subject and deep reflection.  Like sculpting a human form out of a lump of rock, it takes practice, determination, refined technique, mastered use of the right tools, a feel for the material and a keen eye for achieving the desired shape.

The complexity curve explains why NFL management talent is not deep.  Over 95% of the managers operate to the left or inside the complexity hump.  Less than five percent are to the right.

The effectiveness of leadership and management strategies from the 95% of managers is random.   Some work, some don’t.  Successes aren’t consistently repeatable by this crowd.  They’re often like the one-hit wonders of the music world.

The success rate from the 5% is not perfect, but it is high and more consistent.  They’re much more like the bands that endure.

The five percenters started off as 95 percenters and moved to the right with experience and reflection.

A few things set these people apart.  They’re open to feedback.  They don’t let their egos get in the way of learning.  They distinguish root causes from symptoms.  They have a healthy skepticism of conventional wisdom.  They have a good handle on their biases.  They can see things from other points-of-view.