An Advisor's Notebook

Deep click

2011-05-05T11:37:00.000-04:00

Waiting for "Deep Throat"

Taking a cue from the spy trade, The Wall Street Journal has just launched its new website for tipsters and whistle-blowers naming it the WSJ SafeHouse. It comes with instructions and a set of legal disclaimers or Terms of Use.

This digitized approach to gathering news certainly lacks the drama of some of the more established methods known to reporters -- the strange package, the halting voice on the telephone, the ranting letter or the stranger in the lobby.

Alas, the news business has joined the ranks of e-commerce and created a user interface that's easy to use, which is particularly critical to the first-time user.

One can only imagine the kind of material that will come in over this digital transom. Our money is on photos -- real or fake -- of a certain late terrorist.

Opportunity cost

2011-05-04T12:10:00.000-04:00

With the death of Osama bin Laden, we now begin the great opportunity cost debate. At the center of the discussion is the question: what has the war on terror cost us in terms of resources -- human and financial -- shifted from basics needs such as education and health care, to security and military expenditures over the past ten years.

Opportunity cost is an economics concept intended to give proper recognition to largely incalculable and intangible costs of a "road not taken", in the words of poet Robert Frost. It is a useful tool in all those circumstances where we have to make choices, usually big choices -- an acquisition or divestiture; targeting a market; making or buying a product or service; or expansion into less familiar territory. The common element in all of these situations is constraint; we don't have the people, time or resources to exploit every opportunity that comes along. We have to make choices.

While estimating opportunity costs has considerable value at the time a choice is made, it has zero value ten years later. And who's to say that our education and medical care systems would be better today if we had invested more heavily in them for the past decade. In the case of medical care, for instance, the problem seems to be that we spend quite a lot -- more than any nation on earth -- but don't get full value for the investment.

Over the course of ten years, the choices change, whether it's in business or politics. Likewise, the opportunity costs have to be recalculated.

Philosopher John Stuart Mill, who first developed the concept of opportunity cost in the 19th Century, said this: "War is an ugly thing, but not the ugliest of things. The decayed and degraded state of moral and patriotic feeling which thinks that nothing is worth war is much worse."

Out of the ashes

2011-05-02T10:04:00.001-04:00

Wreckage of Operation Eagle Claw

There is a saying among experts in dealing with setbacks of all kinds, that a crisis is a terrible thing to waste. It should be a learning opportunity.

If the resounding success of today's news regarding the mission to take out Osama Bin Laden isn't an indication of the validity of this notion, then nothing could be.

The simple truth is that the three crucial elements of the mission -- special forces, organizational capability and intelligence gathering -- were born of total disaster.

They were:

The Bay of Pigs invasion. Little more than a month after this flawed attempt to overthrow Fidel Castro, President Kennedy asked Congress to significantly increase funding for special forces, saying: "In addition our special forces and unconventional warfare units will be increased and reoriented. Throughout the services new emphasis must be placed on the special skills and languages which are required to work with local populations." In the very same speech, The President famously launched the mission to the moon by the end of that decade.

Operation Eagle Claw. This mission to rescue the Iran hostages in 1980 ended in a debacle in the desert with eight servicemen losing their lives. The ensuing investigation, however, pointed to a lack of inter-service coordination in the planning of the mission and led to the creation of the Special Operations Command. That entity now oversees all special operations, service wide, and was instrumental in the successful mission in Pakistan yesterday.

The 9/11 Attacks. The widely-praised investigation into the root causes of the terrorist attacks on the U.S. mainland revealed numerous holes in our ability to collect and act upon good intelligence in a part of the world where we had few assets on the ground. It appears that at least some of those holes have been plugged, to say the least.

There is little glamor in leading the post-mortem of a crisis. Critics say that they can lead to useless finger-pointing and degenerate into witch hunts. Nevertheless, some of the best, game-changing, ideas come from just such exercises.

One of us

2011-04-28T13:03:00.001-04:00

Our President has had to go to some extraordinary lengths recently to convince at least a portion of the electorate that he is indeed "One of Us";in other words, he is a native-born an American.

The need to fit in is an urge that drives a lot of human activity and inspires much of our great literature.

In business life, finding the right fit can be a difficult quest, whether it's for our own career or for an open position we're trying to fill.

Looking in on this evergreen topic, FORTUNE Magazine today posted a story entitled, "Is it better to hire for cultural fit over experience?" The story points out the shortcomings of interviews, psychological tests and detailed job descriptions as effective tools in predicting a candidate's likely success in the particular job.

One technique that seems to get an endorsement from the FORTUNE article, however, may be the oldest one of all -- the network referral. Relying on current employees to bring in people they think will feel comfortable in the organization has proven to be an effective recruiting tool in all kinds of organizations.

No single approach is sufficient, of course. There are drawbacks to networking. One is that the network may be too small or too narrow relative to the company's expanding opportunities and customer base. Another is that a large number of recruits who share a common background -- IBM, General Electric, the Navy Seals, Wal-Mart ...whatever -- will hijack the existing culture in a given company.

Like our country which has historically expanded the pool of presidential candidates to match its changing demographics, the biggest challenge for corporate leaders may not be finding people who are "One of Us." It will be defining what "Us" means.

Another way of looking at this is to recognize the dynamic nature of teamwork. As William James wrote:"The community stagnates without the impulse of the individual. The impulse dies away without the sympathy of the community."

And then there were six

2011-04-22T11:31:00.000-04:00

In its All Things Digital blog this morning, The Wall Street Journal reports that Google has updated its management page to reflect the numerous recent changes, including Larry Page taking back the title of CEO. In the process of doing so, Google has cut a list that once contained 70 members to just six.

The Journal's take on the situation focuses on the lack of transparency being provided by Google owing to its slow pace in announcing the numerous changes. In another recent Journal piece, the search company also came in for some criticism for the manner in which it handles its quarterly investor conference calls. Fair enough.

There is, however, another aspect to this news that has little to do with transparency and a lot to do with leadership and decision making. One could draw from it that Google is telling the world that there are six people in the company whose perspective is taken into account when policy decisions are being made. If that's the case, it should be taken as good news by all Google stakeholders.

We have found that leadership teams generally work best with five to seven members. In larger organizations, that of course means that some areas of expertise may not be directly involved regularly in making significant policy decisions. CEOs , though, need to have a clear notion of who it is they want in the room as they wrestle with major issues.

Some things for leaders to consider are:

Making sure they avoid an even number to eliminate the possibility of tie votes;
A team smaller than five tends to diminish creativity and provide fewer perspectives;
As a team expands beyond seven, so does the possibility for conflict and the emergence of sub-groups;
Membership demands a very high level of trust.

It should be pointed out that there is plenty of room in this framework to expand the group at any time to provide perspectives needed for a given topic. Many also believe that communication technology has made it easier for a CEO to stay in closer touch with a larger team than in the past. Nevertheless, when it comes time to bring the matter to closure -- preferably face to face -- it's best done, and done in a more timely fashion, by the smaller, core team.

C-Level change

2011-04-15T14:10:00.000-04:00

The concept of hiring temporary executives who parachute in to fill a hole in a company's management structure is not new. In the current environment, however, it is seemingly getting some new traction, as evidenced in an article entitled, "The rise of the hired gun C-suite", posted on FORTUNE's web site.

The FORTUNE article highlights several case examples involving companies who had a sudden and immediate need for an executive, sometimes in the middle of a challenging transition such as a merger or a turnaround.

One of those quoted in the article is Charles Dunlap who is on his fifth CFO assignment. According to FORTUNE "Having interim executives can be especially helpful during tense situations such as restructurings, Dunlap adds.'We can be brought in as an intermediary who allows the financing structure to remain. We handle the tough negotiations. We engineer [the restructuring], so when we go away, some of that negative feeling goes away.' "

Whether the transitional role Dunlap describes is done by an insider or an outside advisor, the dynamics are the same. Leading during a major transition calls for insights and experience that do not spring from day-to-day management. Some of the risks and opportunities of such a period include:

•Many decisions, with long-term impact, are made in a relatively short time•
•The organization must develop new attitudes and work habits
•The leadership team may not on the same page
•The • right people are not consulted or listened to
•A proper frame of reference is not set
•There is a drift from roots and values

Perhaps the biggest challenge is for a leader to channel the energy -- the corporate adrenaline, if you will -- that's generated by transitions such as mergers, turnaround, or accelerating growth.Making the most of a transition depends on how leaders approach change as much as what they do. This starts by standing back and giving some thought to the environment in which a major change is taking place The analysis supporting any given transition looks very similar from one company to the next. But the context – culture, history, relationships, identity – is unique to each one. How leaders bring these elements together day to day has a big impact on implementation.

Another way of looking at this is to recognize the power of transitions, as Machiavelli did when he wrote: "One change always leaves the way open for the establishment of others."

•

As the world tweets

2011-04-14T10:13:00.001-04:00

It is a quote that you would expect to hear on Dr. Phil.

Near the end of a lengthy FORTUNE Magazine cover story under the ominous headline, "Trouble@Twitter", one of the company's directors, Peter Fenton of Benchmark Capital, sums up the current environment in the management ranks thusly:

"The act of getting from there to here was violent," he says. "We've had a revolving door of senior leaders who leave." But he says he's pleased with the current crew. "The attribute I've now been able to see is that the team is building the respect and affection that is required to get to the next level."

Respect and affection? These were indeed the missing ingredients in a company that had money, millions of loyal users, and squadrons of engineers. Writer Jessi Hempel observers:

"The problem is a board and top executive team that don't always appear to have control of its wide-ranging cast of characters, including founders who have attained near-celebrity status (another co-founder, Biz Stone, is a regular on NPR, and earlier this year Dorsey was profiled in Vanity Fair), headstrong and divisive managers, and investors used to getting their way. For some time Twitter's runaway growth -- in the first half of 2009, Twitter added more users more quickly than almost any web service in history -- masked its execution problems."

For a team to come together to develop an idea into a commercial product it takes some continuity, focus and time. Think of how the long hours they played clubs in Germany -- and spending lots of time together -- gave the Beatles a chance to jell as a group and provided the foundation for their ultimate success.

Unfortunately, Twitter apparently grew up in a world that was more Jerry Springer than Dr. Phil.

Starbursts

2011-03-30T12:44:00.001-04:00

On December 1, 1964, Hilton Hotels Corporation spun off its International division to shareholders. It was the first such transaction and marked the emergence of a new tool for corporate leaders, and their investment banker advisors, to shift the strategy and structure of their companies.

Over the years, spin-offs have been at the center of discussions of corporate strategy. They have figured in the decades long debate over the proper valuation of conglomerates; the ability of one management team to manage diverse enterprises; and and the urge among CEOs to re-define and re-position their businesses in response to shifting stock market tastes and trends.

In the wake of the financial crisis, spin-offs once again are back in the news. For example, a recent story in The Economist even introduces us to a new word to describe companies who are in a spin-off sate of mind: "starbursts." Like other celestial events, such as Halley's Comet, they do occur in cycles.

The writer ascribes the current surge in activity to the lack of private-market and private equity appetite for acquisitions:

"One of the main reasons for the starburst revival is that companies seeking buyers for parts of their business are not getting good offers from other firms, or from private equity. Foster’s, an Australian drinks group, is prepared to sell its wine business but, if no decent offer is forthcoming by May, will spin it off."

In the years since the Hilton International spin-off, these deals have created numerous opportunities for new owners to create considerable value, acquiring out-of-favor businesses and holding them long enough for the tide to turn in their direction.

To this point, On December 29,2005, Hilton Hotels re-acquired Hilton International for $5.71billion, 41 years after the initial spin-off.

Defining moments

2011-03-25T12:03:00.000-04:00

Many, if not most, communication breakdowns can be traced to a failure to agree on basic terms of discourse, otherwise known as definitions. When such failures occur in large, complex business transactions, the economic cost can be substantial in subsequent litigation.

Touching on this topic in today's NY Times DealBook, Steven M. Davidoff writes about the considerable lawyering that went into constructing the agreement which made this $39 billion AT&T Deutsche Telekom deal possible. As the writer points out, the document is dense with detail. " One of the reasons is because they use a common trick that lawyers do in drafting agreements: they make the definitions do the work." In the document, he notes, there are 15 pages of definitions alone.

Making the definitions do the work is a concept that applies to many day to day situations in business. For example, when a team comes together to lead a company or complete a project, it's essential to define at least two things clearly and succinctly -- the mission and what constitutes success. Another instance is defining strategic boundaries within which the company chooses to compete. An operating budget is, in essence, a definition of the company's resources and how they will be allocated.

The cumulative effect of these definitions is to literally define the nature and character of an organization. Similar to the AT&T Deutsche Telekom document, it is in effect a "contract" that binds the members together in a common effort.

In the end, it pays to start with agreeing on the meaning of key words. As Socrates put it, "The beginning of wisdom is the definition of terms."

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The color of money

2011-03-24T12:39:00.000-04:00

The launch yesterday of a new photo sharing app yesterday called Color has garnered quite a bit of attention, not so much for the app itself but for the staggering sum of $41 million invested by venture capital firms prior to the product's launch.

The most intriguing part of the story thus far, we believe, was contributed by Matthew Ingram's blog entry on GigaOm this morning in which he posited the following radical explanation for the out sized investment:

"Is this new app really as revolutionary as that implies? Maybe. But what’s more likely is that the VCs involved are betting the team behind Color will come up with something worthwhile for that $41 million, and they don’t particularly care what it is."

Think about that: the team is more important than the product idea.

We couldn't agree more.

To get a group of people with complementary talents together, with a lot of drive and self confidence. and persuade them to leave their personal egos at the door -- that's a challenge. If you succeed in doing that, there is a high probability that the team will do something great, even if it takes a lot of failure to get there.

Having said that, $41 million can fund a lot of failure. A hungry team, on the other hand, operating with limited resources, tends to be more focused in its thinking.

Let your fingers do the talking

2011-03-22T15:11:00.000-04:00

"He's an honest man - you could shoot craps with him over the telephone."

--Earl Wilson

Just as there aren't many crap games being played over the phone, there apparently isn't much talking, either.

So says Pamela Paul in last Saturday's New York Times, pointing out: "In the last five years, full-fledged adults have seemingly given up the telephone — land line, mobile, voice mail and all. According to Nielsen Media, even on cellphones, voice spending has been trending downward, with text spending expected to surpass it within three years."

She goes on to present some anecdotal evidence of the trend including one publicist -- traditionally a phone-addicted occupation -- whom she quoted as saying, “You pretty much call people on the phone when you don’t understand their e-mail.”

For efficiency's sake, this is all well and good. Concise language and a well-turned phrase can get the job done quickly and effectively. A text message demands even greater brevity and a working knowledge of shorthand and code words that cram a great deal of information into 140 characters or fewer.

Still, there are times when there is no match for the inflection and sound of the human voice. As Benjamin Disraeli declared, "There is no index of character so sure as the voice."

Where everybody knows your name

2011-03-21T13:17:00.001-04:00

Making your way in the world today takes everything you've got

Taking a break from all your worries sure would help a lot

Wouldn't you like to get away?

Sometimes you want to go - where everybody knows your name

and they're always glad you came

You wanna be where you can see - our troubles are all the same

You wanna be where everybody knows your name

You wanna go where people know people are all the same

You wanna go where everybody knows your name

Cheers theme song

The service at Sam's bar on Cheers was about as personal as it gets, a metaphor for the kind of recognition and comfort we all crave in the services we use.

Now it appears, it is a reachable standard for virtually any kind of service organization with multiple "touchpoints" such as stores, telephones, smartphones, tablets, desktop, etc.

And it has a name: "Agile Commerce."

According to Forrester Research, who has just published a new report on the subject, the proliferation of devices has raised the urgency of developing the technology, and the organization structure, that will allow employees manning the touchpoints to not only know the customer's name, but their buying habits, preferences, experiences and anything else related to their contacts with the company.

The author of the report, Brian Walker, writes: “Today's multichannel organizational approaches do not reflect the new reality of engaging and serving the customer across touchpoints — from online search to affiliates to marketplaces to branches and stores to websites to mobile sites to call centers to Facebook.”

In its blog, Forrester says of the report's findings:

"Agile customer service requires fundamentally re-evaluating how customers are engaged and assisted across a growing number of touchpoints. Customers don’t consider the technical or operational complexity behind resolving their issues. They simply want to contact you on the device of their choice and get what they want when they want it. And they expect you to know who they are at every point along the way."

This trend is not limited to the retail world. Virtually any kind of service -- consulting, medicine, government, finance, et al -- has access to technology that can enable its people to know every customer's name.

Is good advice scalable?

2011-03-16T11:57:00.001-04:00

As participants in the advice-giving business, we pay attention when various experts expound on significant trends affecting firms such as ours. This morning, Venture Beat carries a piece by "Minitrends" author John Vanston entitled, "9 emerging minitrends to watch."

In the article, one of Mr. Vanston's minitrends is "New approaches to giving and receiving advice.", about which he writes:

"Individuals and organizations commonly seek expert advice when making important decisions. In providing such advice, large consulting firms with large, multidisciplinary staffs, well-structured processes and procedures, huge computer capabilities, and long-standing reputations have traditionally had a major advantage. However, the ever-increasing power and ubiquity of information gathering, processing, and communicating technologies, small and medium-size consulting groups are often able to give more focused, timely, and user-friendly advice than the larger firms."

We are indeed flattered that smaller firms such as ours are apparently the beneficiaries of this trend, simply by virtue of our size. Over the years, though, we have often observed that the size of one's firm and the quality of his advice have very little in common. On any given issue or problem, the insights and other personal qualities of the advice giver sitting with the client that makes the difference.

It makes sense, then, to recognize that advice and implementation are two different things. Picking the right design for a building and actually getting it built don't require the same experience or skills. Likewise, making difficult choices at the top and bringing them to life throughout an organization call for different kinds of "consultants", if you will. It is a distinction made by David Maister, our favorite observer of the professional services and consulting businesses, between projects requiring "brains" versus "arms and legs".

Unlike many other things in business, good advice isn't scalable.

Exchanging names

2011-03-13T11:13:00.000-04:00

Some years ago, a friend of ours in the news business pointed out that there were only two places in the U.S. where the television networks kept "hot" cameras ready to go on the air at a moment's notice: The White House and The New York Stock Exchange.

Today, things are different in that broadcasting is now feasible even through a cellphone camera. But the NYSE's place in the hierarchy of news makers hasn't moved an inch.

Now the NYSE's parent company -- NYSE Euronext -- is in the process of merging with Deutsche Borse as the minority partner in a new company, yet to be named. And that's where, yet again, the cameras will get hot.

A Reuters report today quotes the head of Deutsche Borse telling a German financial newspaper that the name of the newly-formed venture would be selected by its employees. Politicians and labor unions on both sides of the Atlantic have already made everything associated with this transaction a sensitive matter.

Naming something -- a new star, a child, a product, a country or a company -- pulls the namer in many directions. History, symbolism, personality, character, function or a founder's name all enter into the discussion. As our world gets smaller, so does the pool of available names to choose from. Thus we have the proliferation of names that begin with x and z and are designed to meaningless in any language.

As it is with any name, it will acquire its ultimate significance and meaning based on its performance as time goes by.

The most important thing is to make a decision and move on, and not get bogged down trying not to offend anyone. In many ways, the process for selecting the name will tell us a lot about the future direction of this new global exchange.

A big name, of course, can get in the way of progress, as Voltaire pointed out: "What a heavy burden is a name that has become too famous."

Read more: http://www.brainyquote.com/quotes/keywords/name_2.html#ixzz1GUYtA3SA

Terminal velocity

2011-03-12T10:47:00.001-05:00

Bloomberg Building NYC

There are few, if any, industries that have received more negative coverage in recent years than the news business. In particular, the decline of daily newspapers, magazines and broadcast networks is evidence of a profound shift in the media habits of readers as well as the mans of distributing news content to them.

It is interesting, therefore, to see how one news organization seems to be dramatically bucking the trend, and perhaps offering lessons to others, inside and outside the news business, trying to adjust to the cultural and technological changes all around us.

That company -- Bloomberg News -- is the subject of a revealing article in the current American Journalism Review. The piece profiles Bloomberg at length and along the way touches on some of the sources of the media company's unquestioned success, including the following:

It doesn't rely on advertising. About 85 percent of the company's revenues come from subscriptions covering its 300,000 terminals.

It's tight focus on the economic and business impact of news begins what its president, Daniel L. Doctoroff, calls a virtuous circle: "The more readers and viewers of Bloomberg News we have, particularly among corporate executives and government officials who make business news, the more influence we have. The more influence we have, the more access we have to them. The more access we have, the more market-moving information we have. That helps us sell more Bloomberg terminals. The more we sell, the more we invest back into our news organization, creating this wonderful virtuous cycle that is unlike anyone else in any other news organization."

Strict adherence to a 361-page document called "The Bloomberg Way" that lays out basic principles for editors and reporters, including a dim view of the use of adjectives and opinion by staff and a strong emphasis on inclusion of opposing points of view.

And, perhaps most important of all, the organization pulls together under one overriding goal: to be the most influential new organization in the world.

The social side of discovery

2011-03-05T11:12:00.001-05:00

Research, and its cyber tool "online search", is on a roll. From the analytics developed for digital consumer media, to the myriad applications of GPS technology, to the sober business of data mining used by large enterprises, we can do so much more -- cheaper, better and faster -- than ever before.

One example at hand is a story in The New York Times about the emergence of "e-discovery" software now coming into use that is dramatically improving the productivity of one of the most time intensive, aggravating and costly activities in the legal trade. In a nutshell, one of these algorithms can do the work of hundreds of lawyers in large-dollar litigation.

Without getting into the potential impacts of such software on the legal profession itself, it is interesting to note some the things it can do.

For starters, there is what is called the "sociological" branch of e-discovery that is discussed in the Times article:

"Engineers and linguists at Cataphora, an information-sifting company based in Silicon Valley, have their software mine documents for the activities and interactions of people — who did what when, and who talks to whom. The software seeks to visualize chains of events. It identifies discussions that might have taken place across e-mail, instant messages and telephone calls. "

While sifting through available data, the software can look for "call me" moments in e-mail, when an individual is shifting media, possibly to cover up some sensitive information. It can also detect shifts in tone in someone's communications that may raise a red flag. New tools are being developed that help researchers understand how language is used and how social networks operate.

However advanced its methodology, though, research does have its limitations, as the advertising legend William Bernbach pointed out: "There is no such thing as a good or bad ad in isolation. What is good at one moment is bad at another. Research can trap you into the past."

And that's the catch. The data gathered by all this research is history. For leaders making bets for the future, algorithms are not likely to replace judgement any time soon. Once again, Mr. Bernbach put it simply:

"We don't ask research to do what it was never meant to do, and that is to get an idea."

To the shores of Tripoli

2011-03-04T10:49:00.002-05:00

In 1804, it was the Marines that got sent in. Two hundred years later, it was the consultants.

There is a fascinating story in The Boston Globe today about Moammar Khadafy's engagement of The Monitor Group a few years back "to enhance international appreciation of Libya."

The highly-respected Cambridge firm, founded by Harvard Business School professors including strategy guru Michael Porter, took on a number assignments culminating in a 22-page proposal for a book to be published. The proposal stated: “The book will allow the reader to hear Khadafy elaborate in his own words, and in conversation with renowned international experts.’’

As they did their work, the Monitor consultants had reason to doubt the Libyan leader's commitment to the spirit of the whole thing, as the Globe story points out:

"Monitor sent about a dozen consultants to Tripoli to produce the strategy for economic reforms, which Porter unveiled in a speech in Tripoli in front of Libyan officials in 2007. He realized, however, that the reforms were going nowhere when a person who opposed them was appointed head of the group charged with implementing them. Porter quit a few months later."

In fairness to Monitor, the firm did demand that Libya begin to settle its differences with the rest of the world -- including its role in the bombing of Pan Am Flight 103 -- before taking on the assignment. Libya experts quoted in the story, however, fault Monitor for allowing Khadafy to believe that he and his country could become a major player on the world stage. Furthermore, they said that the Monitor work enabled the embattled leader to avoid coming to terms with the limitations of his ideas and his significance in the global affairs, setting the stage for the violent revolution now underway.

Advising leaders throughout history has always been a tricky, and sometimes dangerous, business. Just consider Thomas More's relationship with Henry VIII. As we noted in an earlier item, change begins with the leader becoming the first to look in the mirror and seeing what he needs to do differently.

Given their client's temperament and history, we are impressed that the Monitor people even tried.

Systemically important

2011-03-02T10:47:00.001-05:00

Ever since the waning of the Industrial Era, the world economy has been making the transition to an era in which knowledge has become an asset akin to plant, equipment and resources. Not only that, but the movement and storage of that knowledge has drawn virtually all aspects of economic life into an interdependent, and interactive, system of actors.

Because of this interdependence, we are faced with the ever-present risk that any one part of the system -- whether it be a company or an industry -- can have an adverse, or even catastrophic, effect on the whole. We need only look to the financial shenanigans at Enron, the safety short-cuts in BP's offshore drilling operation, or Union Carbide's disaster in Bhopal, India.

For any CEO, the ongoing effort to balance the drive of the various divisions and departments within his company with the priorities and objectives of the company as a whole is a central problem in leadership.

Now we have the Fed Chairman -- in effect, the CEO of our financial system -- wrestling with the aftermath of the financial crisis, and trying to identify potential threats to the system. Obviously, he doesn't have many of the usual levers available to the typical CEO -- the power to hire and fire the heads of independent financial companies, for example -- but he can command the disclosure of critical data, including such touchy matters as risk exposure and key business relationships.

A Bloomberg story this morning, based on a leaked report from the Fed's Financial Stability Oversight Council, reports that the group has, "identified dozens of 'potential metrics' to decide which non- bank financial firms should be designated 'systemically important' and subject to Federal Reserve supervision..."

The story goes on to say:

"The council, charged with averting another financial crisis, will collect data that can be used to force firms to raise capital, increase liquidity and sell assets deemed too concentrated in any segment of the economy. Industry groups for hedge funds, mutual funds and insurance companies are lobbying to avoid being designated systemically important."

Let the games begin.

Squeezing the Big Apple's assets

2011-02-25T12:06:00.000-05:00

The City of New York is working to improve its ROA, according to a Bloomberg story today and an RFP posted on the City's website. And it needs help. So it's calling for proposals from investment banking firms to develop creative approaches to better managing the City's assets, starting with parking meters and garages.

The Bloomberg story points out:

"In a request for expressions of interest on its website, the city Economic Development Corp. seeks ideas on how 'to develop new sources of revenue' and restrain costs, as officials confront a projected deficit of almost $5 billion, or 6.8 percent, of an estimated $71.6 billion fiscal 2013 budget."

The sudden inability to raise prices -- in the City's case, taxes and fees -- has forced some creativity in the past. Back in the 1980s, the reversal of the inflation spiral of the 1970s, forced American manufacturers into a massive wave of "asset redeployment" in which businesses and plants were sold, shut down or written off. There are scores of businesses today sold by conglomerates to entrepreneurs that are thriving under new missions and ways of doing business.

It's at least slightly ironic that the movie "Cool Hand Luke" -- the ultimate anti-system tale -- opens with the title character, played by Paul Newman, robbing parking meters. It will be interesting to see how "the system" in New York is changed for the better by some creative thinking

Thinking socially

2011-02-23T16:55:00.000-05:00

For any company undergoing a major transition -- from a start up to a merger to a significant change in the marketplace, and so on -- new thinking and new perspectives are more valuable than ever.

One company that thrives on the constant influx of new ideas is Medtronic, the world's largest maker of medical devices. In an article in MIT's Technology Review, the company describes its approach to managing the process. In some ways, managing may be too strong a word. What the company is doing is simply making it possible for its 5,000 scientists and engineers to bring new thinking to bear on their product development work.

The Medronic approach includes:

-- A heavy emphasis on social networking technology built on top of a Microsoft SharePoint software;

-- Wiki-like social networking tools that help to break down knowledge silos;

-- Seeking outside expertise through Innocentive, an open innovation network that allows participants to post challenges or technical problems anonymously worldwide.

According to Mike Hess, Medtronic's vice president of innovative excellence:

"The company has developed community pages centered on specific topics, similar to fan pages on Facebook. 'When new people come into the organization or a project area, they have some knowledge to tap into,' he says. 'For example, we use lots of materials in different medical products that have different characteristics. We are using social networking to make information about those materials more systematic.'

Of course any such system can not be implemented in isolation from the working environment or indeed the culture of a given company. These are tools, after all. People have to be motivated, and skilled enough, to use them in the right way. Imagine an improvisational team such as a jazz ensemble that's suddenly joined by a classically-trained pianist. Needless to say, a few things have to happen before the true collaboration begins.

Terminal value

2011-02-19T15:49:00.001-05:00

There are reports, including this one in The New York Observer, that Apple Computer is planning to open its largest retail store yet in New York's Grand Central Terminal. Pointing out that no one has confirmed the report, the Observer says of the potential project:

"Apple is most famous for its glass cube on Fifth Avenue (the fifth most-photographed site in New York City) and a similar store on the Upper West Side. But the company also has a track record of historically sensitive design: namely, its first New York store, inside a Soho post office, its warehouse store in the Meatpacking District, and one in historic Georgetown, in Washington, D.C. "

If things work out, Apple would join a list of merchants from "The Art of Shaving" to "Zocalo Bar and Restaurant" , with a "Eddie's Shoe Repair" thrown in somewhere in the middle to keep it real.

The company is rumored to be interested in locating inside the terminal itself which over the nealy 100 years of its existence has been home to everything from Redstone missiles to Alfred Hitchcock's "North by Northwest."

In the vernacular of Apple's industry, the venerable Terminal is a perfect "platform" for the company's showcase of digital media. It is also yet another example of how the company has brought its vision to life time and again, and become the most second most valuable public company on earth, behind Exxon Mobil. Some analysts predict they will be number one before too long.

Pricing leadership

2011-02-18T10:23:00.002-05:00

There's a Bloomberg story this morning quoting from Warren Buffett's interview with the Financial Crisis Inquiry Commission in which the legendary investor declared that, “The single most important decision in evaluating a business is pricing power.” He went on to state, “The extraordinary business does not require good management.”

Buffett, of course, is speaking from the vantage point of an investor who is looking at a set of circumstances and fundamentals at a particular point in time. As such, he doesn't have to give any weight to how the business became extraordinary in the first place. Nor does he have to worry -- yet-- about it losing its pricing power in the marketplace.

He is also, no doubt, speaking of companies that are relatively mature, or well beyond the life-and-death early stages of growth and development.

The one thing we would point out is that we are hard pressed to think of a successful company that is not associated with an individual leader -- or series of leaders for the very fortunate ones. And one of the hallmarks of such leaders is what they leave behind and how long the company is able to thrive once they are gone. Sometimes, that means a "no-name" leadership team that just gets it done without a lot of headlines or buzz.

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The greatest deception

2011-02-17T10:41:00.000-05:00

The most significant news emerging from Bernie Madoff's interview with Diana Henriques published in The New York Times yesterday is that some people with fiduciary responsibilities -- namely banks and investment firms -- suspected that Madoff was a Ponzi artist and chose to ignore their doubts. If true, this is just one more high-profile case of someone in authority saying something like, "As long as you produce, I don't want to know how you are doing it."

In many ways the Madoff story has played out with more than a slight similarity to the collapse of Enron Corporation ten years ago. The two plot lines start with different premises -- one a deliberate, and apparently cynical, effort to deceive others and the other a spectacular failure of corporate leaders who deceived themselves. Both, however, wound up in the same place: a personal, and financial disaster for thousands of employees and investors.

Another New York Times reporter, Kurt Eichenwald, wrote a gripping account of the demise of Enron which left us with the impression that there was never an organized conspiracy. It was, rather, a deadly brew of people, motivations and institutions that was swallowed by the media, investors, employees and others in a sort of corporate Jonestown.

All of which is not to say that there aren't lessons for anyone in a leadership position. Some that come to mind are:

Don't hire people on one dimension alone. Top positions at Enron went to "smart" people. Other factors were not considered important.

Always have a broad perspective on your company. Thinking about the company as a whole -- its risks or even its cash position -- was nobody's job at Enron. Take time to stand back and think about risks and opportunities.

Ask the obvious questions. At a critical juncture late in the story, CEO Ken Lay never asked whether Enron's new merger partner, Dynegy, had received updated documents showing massive, and unanticipated, financial exposures. As with many incidents in the past, he probably didn't want to know the answer.

Blaming the media or analysts is a sure sign that you are out of touch. To the very end, Mr. Lay believed Enron was a victim of rumors and negative stories. The only way to fight back is with facts and actions that address the core problem.

Ultimately, leaders sink or swim because of the environment they create. Enron's supposedly brilliant strategic thinking was never supported by a realistic business model, a cohesive set of priorities, and the discipline of a control system to keep its thousands of motivated employees on the right path.

Don't get cocky. One of the book's minor, but telling, anecdotes concerns the first piece of due diligence documentation that Dynegy -- in its attempt to acquire the struggling Enron in 2001 --sought from Enron: the naming rights contract for Enron Field in Houston. Anytime you begin to think you're wonderful, someone, or some incident, comes along to set you straight. In Dynegy's case, it was the billions in their cash that evaporated before the deal was ever completed. Indeed, it never was.

Perhaps Leonardo da Vinci had it right when he said: "The greatest deception men suffer is from their own opinions."

Trash the plans?

2011-02-16T10:51:00.000-05:00

Planning is one of those words in the English language that has a variety of meanings and applications. Think of the word painting, for instance, and what comes to mind?

We just read a blog post in the Christian Science Monitor by Brink Lindsey headlined "An entrepreneur's plan: Trash the plans and dive right in." Mr. Lindsey rightly points out the potentuially stifling aspects of planning on an early-stage business with a new idea. He writes:

"...entrepreneurs grasp intuitively the central insight of the great economist F. A. Hayek: that capitalism is a process of discovery. Hayek saw that socialist central planning, then at the height of intellectual fashion, was doomed to founder on the unpredictability of the future ... Entrepreneurs are Hayekians at the micro level. They don't want to sit back and plan, they want to dive in and discover and learn. They want to experiment: to see what works and what doesn't, to build on the successes and leave the failures behind."

No argument there, as long as the particular notion of planning is what we would call a formal process resulting in a book full of analyses, charts, graphs and to-do lists. It is not unusual for entrepreneurs in the current environment, expecially those seeking capital, to have a polished plan on the shelf before they have a viable product to sell.

Addressing the subject of what planning is all about, General Dwight Eisenhower pointed out, "In preparing for battle I have always found that plans are useless, but planning is indispensable." In his sense, planning is a discipline, a framework, a thought process. In the real world, its hard to do anything without it.

We like to think of a plan as a process that begins with a theory. a framework of ideas that help us understand a technology, a marketplace, a financial market, or the like. Like its original Greek root, the word theory literally means "contemplation." As it is with any good theory, a plan should provide great flexibility as new data and insights change one's view of the theory -- or the assumptions supporting it.

In the end, planning helps reduce the risk and increases the odds of success of any undertaking, entrepreneurial or otherewise. As Winston Churchill told the hand-wringers on the eve of war: "Let our advance worrying become advance thinking and planning."

Machine dreams

2011-02-14T12:04:00.000-05:00

Since the Industrial revolution began more than 200 years ago -- and the forms of organization it spawned -- society has been wary of turning men into machines. In our own age, the concern now has to be turning machines into men, as evidenced in an article in the new Atlantic by Brian Christian entitled "Mind vs. Machine".

In his article, Mr. Christian talks about the annual Turing Test, named for Alan Turing, one of the founders of computer science who, in 1950, devised a test to determine whether machines can think. Christian explains:

"Instead of debating this question on purely theoretical grounds, Turing proposed an experiment. Several judges each pose questions, via computer terminal, to several pairs of unseen correspondents, one a human 'confederate,' the other a computer program, and attempt to discern which is which. The dialogue can range from small talk to trivia questions, from celebrity gossip to heavy-duty philosophy—the whole gamut of human conversation. Turing predicted that by the year 2000, computers would be able to fool 30 percent of human judges after five minutes of conversation, and that as a result, one would 'be able to speak of machines thinking without expecting to be contradicted.' "

While Mr. Turing's prediction has not yet come to pass, it's getting closer to reality, as the story explains in very amusing detail.

What's interesting to us is the technologists' view that a machine's highest achievement would be to match human intelligence. Meanwhile, many of us in the world of companies and institutions still think of machines as the ultimate template for human performance. We think in "models" and reduce the living organisms that are organizations to flow charts and data drill-down. We merge, and re-engineer, and re-brand with abandon.

Fortunately, despite this dark scenario, there are leaders who are able to imagine and relate to the real people who make and consume their products. Ken Olsen, for example, whose recent passing we noted the other day, once hauled his entire management team into a warehouse for a day of uncrating, assembling and starting up the company's computers, just to put themselves in the shoes of their customers. Legendary figures such as Sam Walton, Walt Disney or Robert Woodruff never confused humans with machines.

No shortcuts

2011-02-13T10:42:00.000-05:00

Good post by Om Malik this week about the difficulty of change, particularly that of corporate DNA.

His main point:

"Large companies are somewhat like me — once they get used to a certain behavior, they develop a certain culture and a set of procedures, processes and a work environment that defines them and their future. These define their corporate DNA. It is hard to change. You can’t buy new DNA, and companies can’t acquire their way into new corporate cultures. Furthermore, companies that lack that self-awareness of their DNA and behaviors, in the end, find themselves extinct."

We wrote about corporate DNA last year in a piece entitled, "The System is the message", and talked about creating the right environment to implement new ideas in an existing organization.

As a general rule, we have found that acquisitions of smaller companies by larger ones with lots of value added capabilities -- General Electric and Johnson&Johnson, for instance -- can produce happy and prosperous marriages. Mergers of "equals" -- Daimler-Chrysler, AOL Time Warner, and such -- have to spend so much time figuring out where their center of gravity is that they never get deep-down organizational improvements, and, even worse, they fall behind in the marketplace. These mergers are, sad to say, genetic disasters.

Handling the truth

2011-02-10T10:01:00.003-05:00

There's a report in AdAge today about the storied New York Nets NBA franchise's decision to hire a branding firm to position with various publics the team's impending move to the new Barclays Center now under construction in Brooklyn.

On the surface, this sounds like a sensible business decision, because in the realm of public opinion, the Nets are playing from behind. Their record on the court is abysmal, and that court has now been in five different locations -- The Armory in Teaneck, Long Island Arena, The Rutgers Athletic center, The Meadowlands Sports Complex, and the Prudential Center in Newark.

Also, planting a new sports franchise in the hearts and minds of a community is a complex, long-term undertaking. That's with a clean slate. The Nets greatest challenge is their own troubled history, all of which was witnessed, step by step, by the same people, in the same media market, they are now seeking to win over.

It's a big job, and one that is vital to the long-term success of the franchise.

In a moment such as this, few commodities are more valuable -- and usually more scarce -- that an advisor who is willing to throw some cold water in the faces of the principal actors by telling the the truth. Such an independent point of view is vital to managing expectations, clarifying the real challenges and setting realistic goals. Whatever the adversity the company, or the sports franchise, is facing, it will surely take more time and more money to get things on a positive course than anyone expects at the outset.

Where have the Nets turned for this advice? To a multi-cultural advertising firm in New York. So far, so good. That firm, however, is owned by Jay-Z, one of the co-owners of the Nets. So much for an independent point of view.

However it turns out, this will be textbook case for communication and branding studies for a long time to come.

Cognitive biases

2011-02-09T12:42:00.002-05:00

In our work with clients we focus a great deal on the perspective -- or point of view -- a leadership team has on the world in which they compete. The reason is that a faulty or outdated perspective can be troublesome if not deadly.

Now comes an independent report to the International Monetary Fund on why the organization failed to see the current world financial crisis approaching. It turns out that core findings blame a variety of analytical weaknesses, as you would expect. But among those analytical weaknesses was a cognitive bias -- groupthink, in other words -- which was founded on some mistaken assumptions. The report states:

"Several cognitive biases seem to have played an important role. Groupthink refers to the tendency among homogeneous, cohesive groups to consider issues only within a certain paradigm and not challenge its basic premises (Janis, 1982). The prevailing view among IMF staff—a cohesive group of macroeconomists—was that market discipline and self-regulation would be sufficient to stave off serious problems in financial institutions. They also believed that crises were unlikely to happen in advanced economies, where “sophisticated” financial markets could thrive safely with minimal regulation of a large and growing portion of the financial system."

Perspectives are based on assumptions and say more about an organization, a company or a brand than virtually anything else. As George Bernard Shaw pointed out: "What a man believes may be ascertained, not from his creed, but from the assumptions on which he habitually acts."

Technobumpkin

2011-02-09T10:13:00.000-05:00

Technobumpkin.

That was the term people at Digital Equipment Corporation applied to the personal style of founder Ken Olsen, who died this past Sunday at the age of 84.

Becoming one of the very first venture-backed enterprises, he and two partners started the company is 1957, dropping the word "computer" from its name at the request of their conservative financial backers.

Almost everything they did became a template for others to follow. To wit:

-- Building smaller, more distributed, computers, in recognition of the simple fact that smaller machines were all that most customers needed to manage the routine tasks of their businesses;

-- Building a culture that was informal, centered on engineering, and without walls of any kind; a kind of "anti-IBM" of its day, which was Olsen's intention;

-- Locating in a recycled woolen mill in industrial Lowell Massachusetts, one of the earliest attempts to preserve historic structures for modern purposes (their biggest problem at the facility was keeping the pigeons out);

-- Adopting a relaxed dress code that featured rubber-soled shoes, unheard of in the executive suite at the time.

While embracing such modern, and ground-breaking, concepts, Olsen had much in common with an earlier generation of "Titans" who created new kinds of organizations to exploit the rapid-fire development of technology in their respective eras. The similarities, to be sure, extend to his religious and philosophical roots in a Puritan view of the world. A FORTUNE Magazine story recounts a typical Olsen talk to a group of visitors to the company:

"Olsen starts by speaking of science as a search for truth, and life as a pilgrimage, and humility as the key to business success. 'It's easy to compete with people who think they know it all,' he says. Pretty soon the discussion shifts to the Puritans. He calls them the 'toughest men this world has ever seen,' better equipped to cope with failure than people today. Their secret? Never expecting much of their fallen fellow man, and never blaming others for their mistakes."

Like the rest of us, Olsen didn't get everything right. He had a dim view of the concept of personal computers for the home, for example.

But he did leave us with a clear notion of what a "shared vision" means.

Patience or Procrastination?

2011-02-08T17:37:00.000-05:00

When does patience-- with people projects or investments -- devolve into procrastination?

The answer is certainly more art than science. While there may be a tipping point that can be measured, waiting until it can may be a losing proposition. Once the issues are obvious to everyone, the decision maker has much less flexibility and fewer options than before. Worse yet, ego and a damn-the-torpedoes attitude may trump good judgement. The current, and very public, adventure-comic journey of Broadway's "Spider Man:Turn Off the Dark" is a vivid case history of just such a development.

There are, however, some road marks that indicate the end of patience should lie just over the next rise:

-- Communication begins to deteriorate, and adverse developments are either reported slowly or not at all, falling into the surprise category.

-- Unrelated activities begin to go awry as the project in question sucks in more time and resources.

-- Risks being taken are not justified by the project's ultimate payoff.

-- Intelligence gathered in the early stages indicates that the likelihood of success was overestimated or the obstacles were underestimated. Or both.

-- There is a risk that the product or service will miss the market unless the project is greatly accelerated.

-- Major issues with the project continue to be unresolved, long after they were identified and put at the top of the priority list.

The poet Robert Frost got it about right: "Take care to sell your horse before he dies. The art of life is passing losses on."

"We're not interested in style points"

2011-02-06T11:45:00.002-05:00

In a NewYork Times profile today, Pittsburgh Steelers head coach Mike Tomlin talks about his belief in the concept of "servant-leadership", saying, "Every day when I go to work, I don’t think about things I have to do, I think about the things I can do to make my men successful."

In the spirit of his philosophy, he gives full credit to his former boss at Indianapolis, Tony Dungy, as the inspiration for his approach to being a head coach.

The flip side of Tomlin's approach is to have high expectations for each player on the 45-man roster: "We don’t grade on a curve. If I give any of these guys a helmet on Sunday, I expect them to potentially put themselves in position to be the reason why they win. I think there is not a man in our locker room who doesn’t embrace that. We’re not interested in style points.”

The man who coined the phrase "servant-leadership" was Professor Robert K. Greenleaf of Indiana State University back in 1970, a year in which Americans had serious questions about the character of their leaders in politics, education and industry. He wrote that the true servant-leader's attitude:

"... manifests itself in the care taken by the servant-first to make sure that other people’s highest priority needs are being served. The best test, and difficult to administer, is: Do those served grow as persons? Do they, while being served, become healthier, wiser, freer, more autonomous, more likely themselves to become servants? And, what is the effect on the least privileged in society? Will they benefit or at least not be further deprived?"

By the way, there is a Greenleaf Center for Servant Leadership today at Indiana State. The CEO of the Center, Dr. Kent M. Keith has written a number of articles on the subject, including this one on "The Key Practices of Servant-Leaders."

A few good reads

2011-02-05T12:18:00.000-05:00

Henry Blodget's call yesterday on Business Insider for readers to nominate their favorite titles for a list of the top ten business books of all time started us thinking about how we might compose such a list.

Some criteria that came to mind were books that:

Give vivid first-hand accounts of how the author made choices;
Provide timeless models of analysis and insight;
Tell engaging stories that help the reader imagine situations and challenges they may someday encounter.

None of them prescribe solutions -- "Ten Surefire Ways to...." , etc. That's left to the reader's own imagination and intelligence.

Here's our list of nominations, in no particular order:

The Embezzler, Louis Auchincloss. A novel of high finance and the importance of choosing the people in whom we place our trust.
My Years with General Motors, Alfred Sloan. Clearly articulated narration of the situations, choices and results of the building of a new type of organization.
The Way We Live Now, Anthony Trollope. Published in 1875, this novel about money manias and the society that created them is just as fresh today.
History of the Second World War (Six Volumes), Winston S. Churchill. Memorable first hand history, but its the memos and minutes in the back that provide the inspiration for anyone who has to explain themselves in writing.
Securities Analysis, Benjamin Graham and David Dodd. Some say this crystal clear volume on fundamental analysis is showing its age. Anyone who believes that does so at their own peril.
Confessions of an Advertising Man, David Ogilvy. The author was a businessman first, and an ad man second. No one, before or since, has written as well about the intimate connection between selling an idea and then building something worthwhile.
Indecent Exposure: a True Story of Hollywood, David McLintick. True story of a CEO struggling to understand and work with his Board. Moreover, it's a genuine page-turner.
The Essence of Decision, Graham Allison. Penetrating analysis of the Cuban Missile Crisis from three different perspectives -- the rational actor, the organizational process, and government politics. A classic work on how people's behaviour is shaped by the environment they work in.
Generations: The History of America's Future, 1584 to 2069, Neil Howe and William Strauss. Nothing we deal with is more certain, or illuminating, as the study of demographics. This book, more than any other we've encountered, helps explain why people are the way they are based on when they were born.
Competitive Strategy, Michael Porter. We all need frameworks to understand the world of competition and how the pieces fit together. Professor Porter's book is as intelligent a guide as you will find.

The Revolution Will Not Be Televised

2011-02-04T12:14:00.000-05:00

Gil Scott-Herron's "The Revolution Will Not Be Televised", wrtitten in 1970, is often referred to as the first rap song, and has since become an anthem for movements around the world. The artist's original intent was, of course, to reject mass media's portrayal -- or lack thereof -- of black America.

In one sense, the key word in the song's title is "Not". Revolutions are usually brought about by coalitions of groups that agree on what they don't want. Deciding what they do want is another matter entirely, and usually takes decades to settle. A new article by David Mack in Foreign Policy makes the point as it relates to the current turmoil in the Middle East.

The usual measured tones on boardroom discourse sometimes give way to more heated debate and even the occasional coup. The Apple board's rejection of Steve Jobs in the mid 80s is one example.

In the end, revolutions are a precarious exercise and can degenerate into a civil war to decide issues that have been simmering for a long time.

In the wake of the "revolution" in physics touched off by Albert Einstein's work, mathematician and philospher Alfred North Whitehead wrote: "The art of progress is to preserve order amid change and to preserve change amid order."

Amen to that.

Geeks at the gate

2011-02-03T10:47:00.003-05:00

Rupert Murdoch launched his company's long-awaited tablet based news app, called The Daily, yesterday at the Guggenheim Museum in New York. The setting was indeed appropriate in that the Museum's mission is to build a collection of art with entirely new ways of looking at the world.

Mr. Murdoch's undertaking is the latest step by a media company to adapt to a radical development that could be traced back to September 26, 1960, the date of the first televised Presidential debate between John Kennedy and Richard Nixon. It was likely the first time that an electorate could see for themselves what the two candidates were like; in other words they could go right to the source, unfiltered by writers and editors, and draw their own conclusions.

Ever since then, news organizations in particular have been scrambling to react to this development; two in particular stand out. In 1980, ted Turner launched CNN, filling the cables with video -- much of it live -- 24 hours a day. Two years later, The Gannett Company created USA Today, a national newspaper designed to appeal to the shorter attention spans and video appetite of the so-called "TV generation."

In the meantime, information technology and the more recent emergence of digital media have turned things upside down. Once the gatekeepers of news and information, news organizations and advertising agencies alike have had to make room for software engineers at the conference table. It turns out that the geeks are, in many ways, in a better position to understand how end-users (you and me) seek out and process news and information. In other words, the power of the traditional "gatekeepers" and "agenda setters" such as The New York Times or the network news programs is greatly diminishing.

Whether Mr. Murdoch is successful in playing such a role in cyberspace, one that will be rewarded with advertising dollars, is still very much in question. The Daily certainly has all the bells and whistles of digital media, as the video above demonstrates.

Nevertheless, in an age in which a computer algorithm could theoretically help each of us create our own up-to-the-minute"newspaper", the name itself -- The Daily -- and the concept of "issue" may already be passe. We will see.

Those of us who have businesses to run are no less affected than Mr. Murdoch by these trends. People in leadership positions are no longer gatekeepers or agenda-setters in the traditional sense. Just ask the Tunisians or the Egyptians, or anyone else in public life. In many ways, leaders need to adopt some geek-like thinking and become facilitators, providing the tools and the right environment for their people to see and learn for themselves.

Where no man has gone...

2011-02-02T11:30:00.000-05:00

As we sit down to draft a pitch for a new idea, be it a product, a deal a new company or the like, it is helpful to find inspiration in write-ups that have been successful in the past. The particulars -- the industry, the technology, the circumstances -- don't really matter. It's the thought process behind the pitch that we are looking for.

Thanks to Jason Kottke's blog, we just came across Gene Roddenberry's original draft of a concept for a new TV show called "Star Trek." As an example of a successful pitch, one would be hard pressed to beat this one. Nearly 50 years later, the multi-billion-dollar franchise created by this document continues to draw new generations of viewers into its web of fantasy.

What is it about this document that helped bring an idea to such a long and prosperous life?

-- It starts in a familiar place -- the "Wagon Train" TV series -- and takes it to a new world.

-- It has integrity in that the combination of characters, plots and settings make sense,once you accept the basic premise. And the premise itself is justified by the mathematical probability of intelligent life elsewhere in the universe.

-- It doesn't stop with a pilot concept but offers a number of places to go with the idea, a series of episodes and plots for the future.

-- It anticipates studio executive concerns, in this case potential budget-busting scenery or special effects required by a space drama. Get this: "For example, interiors and exteriors temporarily available after an 'Egyptian' motion picture, a 'horror' epic, or even an unusual telefilm, could be used to meet the needs of a number of story premises listed here."

-- It conveys that it was put together by someone with not only the passion but the wherewithal to carry it out successfully in the real world of Hollywood production.

Remember, the objective of preparing this kind of document is to get someone to believe in the possibility of bringing an idea to life. The movie sequels, comics, video games, conventions and all the rest may come, but they have no place in the first pitch.

Looking in the Mirror

2011-02-01T18:11:00.002-05:00

Mr. Mubarak's current travails are just the latest, and most spectacularly visible, manifestations of the first principle of managing change -- it starts at the top. And it starts with a long hard look in the mirror.

Any leader facing a setback or a crisis cannot demand much of anything from subordinates until he understands how he contributed to creating the current situation. The big question is often: how could I have missed the signals that we were headed in the wrong direction?

The answer to that question could be any of the following:

Low tolerance of the delivery of bad news;
Key skills and perspectives missing from the leadership team;
Inability to see himself as others in the organization do, or to see the unintended impact of his actions;
Belief that he can walk on water and can thus see farther and more clearly than anyone else;
Emotional or even irrational investment in a strategy that's more wishful thinking than hard analysis.

We could go on....

Getting back to the Egyptian president, the people he leads surely dropped a few hints of their dissatisfaction over the past 30 years before taking to the streets and facing tear gas and bullets, rubber or otherwise. As one of those wounded in the AK-47 attack that killed his predecessor, Anwar El Sadat, Mr. Mubarak could hardly be unaware of the ultimate price to be paid for voter unrest.

Former GE CEO Jack Welch said it best: "Willingness to change is a strength, even if it means plunging part of the company into total confusion for a while."

Simple rules

2011-01-12T11:26:00.000-05:00

Before the sudden death of its star, John Ritter, "Eight Simple Rules for Dating My Teenage Daughter" was one of the highest rated shows on network television. The rules referred to in the name of the show -- based on W. Bruce Cameron's best selling book -- are as follows:

1.Use your hands on my daughter and you'll lose them after.

2.You make her cry, I make you cry.

3.Safe sex is a myth. Anything you try will be hazardous to your health.

4.Bring her home late, there's no next date.

5.If you pull into my driveway and honk, you better be dropping off a package because you're sure not picking anything up.

6.No complaining while you're waiting for her. If you're bored, change my oil.

7.If your pants hang off your hips, I'll gladly secure them with my staple gun.

8.Dates must be in crowded public places. You want romance? Read a book.

Likewise, working relationships -- in a global company or a small office sharing one refrigerator -- are built on rules, and the simpler the better.

In a column written, tongue in cheek, 15 years ago, and reprinted in the Financial Times yesterday, Scottish economist John Kay tells a cautionary tale of heavy-handed promulgation of rules. It involves an imaginary, recently-privatized company desiring to adapt to private-sector employee dress standards.The new code called for male employees to wear " smart suits, shirts with collars, and ties", Kay writes:

But soon someone came to the office in a red suit. When criticised, he pointed to the terms of the dress code. The suit was undeniably smart: but it was the smartness of the nightclub rather than the boardroom. So the dress code had to specify colour. Red was out, grey was in. But what of blue? Some blues were clearly acceptable. The chairman’s favourite suit, in fact, was a fetching shade of navy. But bright blues could not be admitted. So how bright was bright?

An so on...

The bottom line is that it makes sense to invest more in selecting the right people and less in writing rule books.

Big ideas and small steps

2011-01-08T11:03:00.001-05:00

The general take on this year's Consumer Electronics Show is that there was a lot to see but not much in the way of breakthrough ideas. This L.A. Times story is fairly typical of reactions among attendees.

Once again, we are reminded that big ideas don't come along on schedule. But that's okay. Refinements of existing products and finding new applications for technology are good enough to make our lives -- and our economy -- better.

If you follow the technology media day to day, you'd think the iPad -- last year's big idea -- had saturated the market. At the moment, it has achieved less than one percent share of the global PC market. It simply takes time for users and developers to find practical applications for new platforms and technologies. For heaven's sake, we're still finding new applications for baking soda, something that the Egyptians were using thousands of years ago.

Slideshare's top presentations of 2010

2010-12-30T12:13:00.000-05:00

The presentation sharing site SlideShare today posted its review of the most popular downloads of 2010.

Among the attributes of the most poplar presentations:

Short and sweet, with average of 19 slides per presentation (the longest had 1937!);
Women use fewer slides, on average, than men;
PowerPoint still dominates slide production
While only 2 percent of presentations are produced with Apple Keynote, they account for 16 percent of the top presentations;
Japanese presenters use the most slides while English-speaking presenters use the fewest;
Top presentations average only 24 words per slide.

Here are the top five business presentations, according to SlideShare's survey:

Social Media for Business
Steal This Presentation
What the f**k is social media now?
Rethinking the Mobile Web
Future of Retail

SlideShare Zeitgeist 2010

View more presentations from Rashmi Sinha.

Day of info

2010-12-07T10:54:00.003-05:00

The juxtaposition of headlines today remembering Pearl Harbor with the London arrest of WikiLeaks founder Julian Paul Assange sparked a thought: what if there were such a thing as WikiLeaks back in 1941?

Or Sarajevo in 1914?

Or New York in 2001?

Or the sub prime crisis in 2007?

Or the Madoff scheme in 2008?

Events that seem to come out of the blue, and change history, seldom do. Hindsight and history prove otherwise. There's usually a long paper trail of warnings and analysis that would have positioned such events as inevitable. At the same time, broader knowledge of the inner workings of international relations may have helped our race smooth out some of the bumps of the 20th Century, such as the estimated 60 million casualties suffered in World War II.

Considering such a possibility at the very least reminds us of the power of information -- whether it be gleanings from data bases or the informal banter of social media -- to fuel our own imagination. Business leaders and world leaders can look deeper into the thoughts and actions of their respective marketplaces than ever before.

It may be useful to recognize the WikiLeaks phenomenon as neither a good thing or a bad thing. It is a fact.

Catching the wave

2010-12-04T10:13:00.001-05:00

A story in this morning's Deal Book in the NY Times under the headline, "A Silicon Bubble Shows Signs of Reinflating" reports on some growing sentiment that the tech world may be headed for another bust.

Whether or not this happens, time, of course, will tell. One thing we do know from experience, however, is that few people see these of surges coming or going. They start and end without much warning. For the lucky few standing around at the outset, fame and fortune seem to come easy.

Two books published this year tell us about about a few young guys, about the same age as today's tech entrepreneurs, who just happened to be in the right place at the right time. They are: Frank:The Voice, James Kaplan's biography covering Frank Sinatra's early years, and "Life", the extraordinary autobiography of Keith Richards, lead guitarist of The Rolling Stones.

Frank Sinatra had the talent and the drive for a successful singing career at the height of the big band era. It was the development of high-quality microphones, night club connections through phone lines to new radio networks, and hordes of teen aged girls with radios in their bedrooms ( and boyfriends fighting the war) that turbo-charged the young crooner's career.

Moving forward into the U.K. in the early 60s, Richards and his band mates were on a mission to become the best rhythm and blues band in London. It just so happened that a whole generation of young music fans -- many of them delirious young women -- were coming of age with a taste for American rock and roll and desperately seeking some color in their drab post-war lives. Without any idea of what they were getting into, the Stones set off on a journey that, remarkably, has yet to end.

These two books, it appears to us, tell us more about the dynamics of bubbles or waves or manias -- whatever you want to call them -- than than all the models and business plans you can digest.

A Faustian Bargain

2010-11-19T14:27:00.001-05:00

For the last century, business communication has taken its cue -- and most of its practitioners -- from the world of journalism.

We mention this because there's a relatively new trend in journalism's latest manifestation -- online media -- known as The Slideshow. Any of us who read newspapers or blogs online have spent a few minutes clicking through something headlined: "15 reasons to worry about..." , " The 10 sexiest...", "25 things you need to know about...", or "The 10 best places to..."

All of this time wasted/invested has attracted the ultimate compliment in the media world -- advertiser support -- for a simple reason: users like doing it. Indeed, the Slideshow has emerged as a communications tool uniquely suited to online media consumption. The august Columbia Journalism Review has put its stamp on the Slideshow in an article entitled "A Faustian Bargain" posted this morning on its website.

Quoting Henry Blodget, founder of the prominent blog The Business Insider the article reads:

His sites are havens for slideshows because, according to Blodget, they consider them a story-telling mechanism native to web journalism. “Every new medium develops certain forms of storytelling…ways of conveying information that take advantage of what the medium does well…relative to other media,” Blodget wrote over e-mail. “Good slide shows help increase engagement (time on site, page views), the same way an excellent article helps increase the amount of time a reader spends with a newspaper or magazine. Bad ones don’t help with anything.”

Those of us who are trying to get something across to our teammates or customers have a new tool to work with.

Boundarylessness

2010-11-17T13:36:00.001-05:00

How's that for a word. If it is a word. But the concept behind it appears that it will be a big part of business life for some time to come.

It first came to our attention when Jack Welch announced back in the 1980s his goal to make General Electric a boundaryless company. With a greater emphasis on moving competitive boundaries, the term applies to many, if not most, companies today. In a slower-growth environment, scale is achieved by redefining the boundaries and entering new markets.
Just consider some of the higher profile examples:

McDonalds' heavy commitment to its McCafe concept in Starbucks' market;
Apple Computers foray into recorded music;
International expansion of the major professional sports leagues;
Google's entry into everything from cloud computing to television;
Wal-Mart's entry into urban markets;
M&Ms getting into the pretzel business

You have to stay alert. You don't want to be surprised by an unexpected competitor.

Informed Bewilderment

2010-11-17T13:01:00.001-05:00

It is easy to find yourself in a sandstorm of ideas and data when thinking about the Internet. So when you see something that puts the whole thing in some kind of reasonable perspective, you want to share it. After all, sharing is what the Internet is all about these days.

John Naughton , a professor at the Open University in the U.K., wrote a few months ago "The Internet:Everything You ever need to know" in of The Guardian, a print publication no less. He describes nine steps to understanding what it all means. It is meant to help the reader overcome what he calls "informed bewilderment", or information overload on all things cyber.

In the piece, Naughton writes:

"Many years ago, the cultural critic Neil Postman, one of the 20th century's most perceptive critics of technology, predicted that the insights of two writers would, like a pair of bookends, bracket our future. Aldous Huxley believed that we would be destroyed by the things we love, while George Orwell thought we would be destroyed by the things we fear."

As most things in life tend toward a middle course, hopefully neither author will be proven right.

Down the chute

2010-08-11T12:01:00.002-04:00

Life's complicated, in case you haven't noticed.

Even for a company that has done everything right building a user- friendly reputation for its brand. Doing the right thing day after day, in the eyes of customers, is the best way to create a reservoir of goodwill that is so valuable when a crisis hits.

Today Jet Blue is all over the news because one of its flight attendants, fed up with rude passengers, left his post in dramatic fashion Monday, escaping down the evacuation slide at New York's JFK Airport. Not since D.B. Cooper, and $200,000 in ransom money, went out the hatch of a 727 over southwestern Washington in 1971 has the exit from a plane been such news.

While the airline is being cut considerable slack in the media and on the Internet, it has come in for some criticism for its silence on the social media circuit. After earning a reputation as a thought leader in the development of its social media presence, the company has apparently failed in its response to the incident to live up to the standards expected of it. In other words, to this point, the company has said nothing on Facebook, Twitter or elsewhere. The general take seems to be that the Jet Blue legal department has pulled the plug on the social media department, at least for now.

The whole episode just goes to show how new all of this form of communications is, and how difficult it is, in the short run, to mitigate the risks involved in opening up to the cyber world.

Our guess is that Jet Blue will be just fine, drawing on that reservoir of goodwill and continuing to have online conversations with its customers.

Unfiltered data

2010-08-06T11:55:00.001-04:00

On Sunday, June 18, 1815 Wellington's army defeated Napoleon at the Battle of Waterloo. The momentous news was brought to financier Nathan Rothschild in London by an agent who took a boat from Ostend, giving the banking house a timely edge that translated into vast trading profits. Indeed, Rothschild received the news before the government or the press.

Information unfiltered by the usual channels can be extremely valuable, as Mr. Rothschild proved. This, of course, depends almost entirely on the reliability of the source.

Internet tools, social media in particular, offer boundless sources of good information (mixed in with even more misleading data) for anyone creative enough to look for it.

This Forbes article focuses on the use of Twitter messages by farmers and commodity traders to improve their buying and selling strategies. Here's one example from the story:

"Ryan Weeks, another fifth-generation farmer, lives in Juniata, Neb., which is little more than a few streets and a cemetery. He has 832 followers, which is more than Juniata's entire population. Weeks recently used Twitter to broadcast that there were 'a few pollination issues on bottom of ears. Not field, hybrid, or company specific.' "

Once in possession of inside info on "pollination issues" or any other such tidbit, one obviously needs to know what to do with it.

The new perils of publishing

2010-08-02T16:24:00.001-04:00

It is no secret that online digital media is offering consumers unprecedented access to "content" -- formerly known as programs, newspapers, CDs, movies and books -- and a variety of ways to receive it.

A Reuters report yesterday indicated that e-books are now providing a healthy share of book publishers' revenues. The story quoted the chairman of Random House, Markus Dohle, as stating that his company's e-book sales in the U.S. are already at eight percent of total revenues.

Asked whether his firm's books would be available on the iPad any time soon, he said "No" for an interesting reason: Apple forces publishers to set consumer prices, something he and his industry have never done.

"We've got to think very hard about whether we want this drastic change in our business model," he said. "The question is if publishers know how to find the right retail price... This hasn't been our job in the past."

"One hundred days in the iBook store won't decide about success or failure," he said. "We think we have to tread carefully to find a business model that is sustainable for the years to come."

In effect, the opening of a direct channel to the consumer has given new power to, along with new responsibilities, to creators and publishers of virtually every kind of content.

Indeed, Mr. Dohle may want to read this Newsweek piece entitled "Who Needs a Publisher?" It points out that thriller author, and self-publisher, A.J. Konrath "... quickly realized that by cutting out the middleman, he was making as much money on a single $2.99 e-book as he would on a $25 hardcover. 'I started to be able to pay my mortgage on e-book money, then pay my bills on e-book money,' Konrath says. 'I’m going to make over $100,000 this year, and a lot of the money is from the books that New York publishers rejected.' Konrath attributes his strong sales on Amazon to user-generated ratings and reviews on message boards, as well as to the low price of his e-books."

CEOs and startups

2010-07-21T10:58:00.001-04:00

Yesterday we wrote that leadership in many ways is situational -- the time, place and environment dictate who gets to lead. In that piece we were talking about Winston Churchill's becoming prime minister and head of the war effort in 1940.

Becoming CEO of a startup company is another good illustration. As many have learned, the growth and development of a company from concept to full-scale operation is not a continuum, but a series of milestones. A common mistake for chief executives is to look too far beyond the next milestone, thinking, for example, about issues related to scale-up when they are still proving their concept.

The greatest challenge of all, of course, is when the situation changes, or advances, to the next stage and investors push for new leadership, experienced running a larger organization, to take the company forward. A complicating factor is the CEOs ownership position and what to do about it. This post by Steve Blank in his informative blog on life in early stage companies provides some good insights for CEOs.

His take: the job of a founding CEO is "to find a repeatable and scalable business model. The goal of your business model can be revenues, or profits, or users, or click-throughs ( or even just to get the technology into production) whatever the founders and their investors have agreed upon." Steve had defined this in more detail in an earlier posting.

The gritty truth about leadership

2010-07-20T12:30:00.001-04:00

Despite the promises of myriad expert guides on the subject, leadership is, in the end, learned on the job. How one gets into such a position is usually a product of circumstances, constraints and compromise on the part of those who decide who the leader will be. Once there, the new leader discovers the real limits to his or her power and influence, and begins the up and down process of figuring out what will work.

This message came through in vivid detail reading Max Hastings' new book about Sir Winston Churchill's leadership during World War II, Winston's War: Churchill 1940-1945. At the age of 66, after lifetime in public service, incuding facing live fire in the Boer War, Churchill became prime minister -- a lifelong dream -- at his nation's darkest hour.

Seventy years later, it's easy to look at a Churchill as an almost mythical leader who directed an ultimately successful war effort, enjoying the love and repsect of all concerned. That's one version of the story.

The other one Hastings tells in colorful and often painful detail, based on the letters and diaries of the great man's contemporaries. The basic plot, of course, is familiar to anyone acquainted with the history of the war. In between the big milestones -- Dunkirk, the Blitz, North Africa, Italy, D-Day, etc. -- the reality of Churchill's living experience emerges. And, with it, a many thoughts about what it means to lead, especially in a time of crisis.

Here are three:

He learned to be humble. He had to submerge his aristocratic ubringing, enormous intelligence and years of experience in world affairs, to the reality of Britain's weak economic and military position in dealing with the other Allies. He had to persuade much more often than he was able to command. Meanwhile, he had to live with the sniping of countrymen who, for the most part, were not facing reality.

He quickly put setbacks behind him. Churchill was a man of constant ideas and schemes, many of them ill-advised, and some of them disastrous. Many of them were effective. But he never stopped trying.

He embodied confidence. His bulldog determination and ancient family lineage in Britain gave his people a living symbol of defiance -- something to believe in -- in the face of terrible odds. When seeking peace terms with Germany was seen by many as the most practical thing, Churchill's soaring oratory put an end to such talk. The power of Churchill's words is underscored when Hastings points out how surprising it is that the Germans never made a serious attempt to assasinate him and thereby shorten the war. In many ways, one man made all the difference.

Protectable Advantage?

2010-07-15T11:32:00.002-04:00

In a post today on VentureBeat, David Goldenberg addresses one of our favorite topics, what he calls "Protectable Advantage."

The term is often used by investors when asking technology start-ups whether they have some intellectual property protection on their ideas or a secret process unavailable to competitors.

Goldenberg's advice?

"So what should you tell potential investors who want to know what your company’s protectable edge is? Ask them what Facebook’s protectable edge is. Or Twitter’s. Or any of the myriad other startups that are successful not because they’re the only ones doing something but because they do it better than everyone else does."

This kind of thinking applies not only to early-stage companies but to all, in our opinion. The hardest thing for competitors to copy should not be your technology but your organization. The right talents, working together effectively, focused on the right mission is very difficult to match quickly or easily.

Not your father's commercial

2010-07-14T10:27:00.001-04:00

With the advent of social media, high-quality online video, and users permanently connected to the Web, it is now possible for marketers to have virtual conversations with their fans and customers. To find an example that puts it all together, take a look at this creative work featuring the Old Spice Man. It features The Man answering Tweeters' questions on the brand's YouTube Channel.

Making a seventy-year-old brand cool again is no mean feat.

Execution Excellence

2010-06-29T10:13:00.002-04:00

We just came across a post by Rob Adams on the Inc.website under the headline "Ideas Are a Commodity, It's Execution Excellence That Matters."

Amen to that.

Adams warns:

"Are you worried about someone stealing your idea? Don’t worry, not one wants to take something that isn’t proven. Get successful and you’ll find them very interested in what you’re doing. So don’t waste time worrying about your idea getting stolen, spend time making your idea successful."

Another way of looking at this is that it is far easier for others to copy your idea than it is for them to replicate the focused, disciplined, and successful organization behind it.

When all else fails, innovate

2010-06-24T12:07:00.001-04:00

Reuters moved a story this morning on retailers' growing emphasis on new products as a means of dealing with slack overall demand.

Here's the gist:

"What is quite clear is there is consumer spending available for things that are different. The iPad is the super extreme example of that, but I think that's playing into a broader theme," said Ian Cheshire, chief executive of Kingfisher (KGF.L), Europe's biggest home improvements retailer. "You will see switching of spend in markets toward new and interesting."

The mood out there seems to be: "There's got to be a better way."

No one is safe. Incumbency is a liability. From politicians, to generals, to everyday products, people in all walks of life are open to suggestions.

The power of innovation is nowhere more evident than Apple, Inc.'s market cap, which is now second only to Exxon Mobil. It's founder Steve Jobs was quoted in Fortune magazine some years ago, stating:

"Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It's not about money. It's about the people you have, how you're led, and how much you get it."

Vuvuzela concerto anyone?

2010-06-24T09:06:00.001-04:00

The human race has advanced itself over the eons because there was always someone who could take a humble idea and run with it.

With the World Cup in full swing, and the vuvuzela with it, we now have the brass section of the Berlin Philharmonic welcoming a new instrument into serious music.

This could be big.

(With thanks to Minnesota Public Radio)

Suck it up

2010-06-22T11:01:00.001-04:00

In the midst of lengthy, and brutal wars against Germanic barbarian tribes invading the Roman Empire from the north, Emperor Marcus Arurelius reflected often on what it meant to lead a good life. The result of his self-examination is his classic work of Stoic philosophy, The Meditations.

The blog In Character recently carried a review by Emily Colette Wilkinson of a new book on Aurelius, in which she writes:

"...our modern conception of Stoicism consists mainly in colloquial expressions such as "be a man," "take what's coming to you," "roll with the punches," and "make the best of it." Such expressions communicate the Stoic insistence on acceptance and steadfastness in the face of whatever life presents, no matter how calamitous. One of the most famous lines from the Meditations is, "Remain ever the same, in the throes of pain, on the loss of a child, during a lingering illness" and many modern readers, including McLynn, find the Stoic creed-that virtue is the only good and the source of happiness and that we should train ourselves to rise above emotional, physical, and material concerns-inhuman, even monstrous. "

There are many observations in The Meditations to help leaders think about their own lives, work and otherwise. Here's one:

"How ridiculous and unrealistic is the man who is astonished at anything that happens in life."

Who's to say...

2010-06-20T09:45:00.001-04:00

Watching this guy pursue his dream is truly inspiring.

And who's to say what may come of his -- some would call it -- mad passion. Lots of people who were considered lunatics in their time are icons of human progress today.

That's the way it is with invention. The discovery comes first and the practical application later, sometimes a long time later. The good news is that there are people out there doing this stuff.

Extrapolationism

2010-06-18T16:51:00.001-04:00

I've got to admit it's getting better (Better)

I have to admit it's getting better (Better)

It's getting better since you've been mine

"Getting Better" by The Beatles

With all the reasons we have to be pessimistic these days, along comes a book that puts things in a more reasonable -- indeed reasoned -- perspective. It's "The Rational Optimist" by British author Matt Ridley.

In a series of essays, all having to do man's overcoming one challenge after another -- food, transportation, health -- he addresses the question: why is man the only creature on Earth capable of changing his behavior to solve problems, survive and prosper?

He not only answers this one -- it has to do with our collective brain -- but he deals with a follow-up question: why is pessimism so much in vogue?

He writes:

"It is my proposition that the human race has become has become a collective problem-solving machine and it solves problems by changing its ways...The pessimists' mistake is extrapolationism: assuming that the future is just a bigger version of the past."

We have certainly seen enough corporate planning that suffers from extrapolationism, assuming that the rest of the world will not adjust to one's own great success.

A little better all the time (It can't get more worse)

The Tangible Reality People

2010-06-16T10:57:00.001-04:00

We hate to keep harping on the Gulf oil disaster, but it continues to open so many windows on the challenges of leadership that it's hard to resist.

Here's another one.

Leadership over the centuries has be come such an abstraction -- a white-board exercise even -- that it's easy to forget that some things require the sheer physical energy, determination, humility and practical sense of things of a special group of people.

They are the Tangible Reality People.

You know them. They are the ones who organize the church outings; the office holiday party; the rock band's road tour; the sand-bagging effort when the river rises.

Being a member of this elite team is seldom a full time job. After all, 73 percent of all firefighters in the U.S. are volunteers. Everyday titles, ranks and social status go out the window. Anyone attempting to lead them better have the same practical, common sense approach that they have.

They also need to have a defined task and an objective. Things just don't fall into place without that.

Finally, they must:

Pay close attention to the number of hours in a day
Know how long it takes to get from here to there.
Anticipate what volunteers will need for food, drink and shelter.
Think in steps, and keep instructions simple
Possess a sixth sense for the right lines of communication
Be totally selfless

So whether it's a special project in your company, or containing the disaster in the Gulf, it pays to recognize the special contribution the Tangible Reality People can make, and what kind of leadership they deserve.

\

Great Expectations

2010-06-15T10:14:00.002-04:00

Three of the most visible and successful people in the industry join forces to form a new company.

Their skills, temperaments and executive experience are complementary. They have access to boatloads of capital. One of them is highly respected, if not revered, by the consumers of the new company's products as well as people working in the industry.

Expectations in and around the industry are sky high.

Yet five years into the venture, few of the company's products were hits. Indeed, production levels were not high enough to support its heavy investment in overhead. The company was losing money.

Writing the history of this enterprise more than a decade later, an industry reporter pointed to several factors that led to this unexpected outcome:

Hubris -- the idea that the company didn't need to heed any of the industry's rules;
The original partners had no one to hold them accountable, or to temper their spending habits;
Critical leadership roles were handed off to inexperienced people;
Expectations -- promoted by the company itself -- were impossibly high.

The company, of course, is Dreamworks SKG, the entertainment joint venture of Steven Spielberg, David Geffen and Jeffrey Katzenberg, founded in 1994. The book is "The Men Who Would Be King" by Nicole Laporte.

Much more than a feast for movie fans, the book is a cautionary tale for anyone involved in starting a company, demonstrating in great detail why ideas and capital without the discipline of an organization make for a troubled story line.

Thinking inside the box

2010-06-11T11:13:00.002-04:00

Over the past week, the New York Times small-business blog has carried two entries (here and here) by guest writer Paul Downs, owner of a cabinet-making business near Philadelphia. He writes asking for ideas on how to solicit suggestions from employees. He received a healthy response from readers and their comments contain many good ideas.

At the end of the piece, Downs says of the readers' suggestions he received: "I was struck by how many of the ideas presumed that there was excess management capacity or worker time available. There isn’t....I’m trying to put some of your good ideas to use but having some difficulties because of a lack of resources. Story of my life."

One of the challenges with asking for suggestions is that it raises expectations, and the responses usually take little account of time and money constraints. They also tend to involve adding work without eliminating inefficient or out-dated activities.

It may be best to keep the request for workplace ideas very narrowly focused, with full disclosure of the constraints.

At the same time, it certainly pays to listen to suggestions, whatever the source, without fanfare or formal programs. As the Nobel laureate Linus Pauling said, "The best way to have a good idea is to have lots of ideas."

Aquaphobia

2010-06-10T13:58:00.002-04:00

Summer season getting underway.
An unseen underwater threat.
Period of inaction or outright denial.
Beaches closed.
Business and tourism threatened.
A leader out of his element.
Lots of screaming and yelling.
An odd assortment of personalities and skills assembled.
Regular tools don't seem to be up to the task.
When all else fails, innovative solution found.
Life goes on.

Sound familiar? It should. It's the plot for the movie Jaws, one of the biggest summer blockbusters ever.

And it's not just a Hollywood fantasy. This is the way it is with crises. They defy standard operating procedure. Responding to them puts everybody out of their comfort zone. Someone has to step forward and create an environment in which decisions can be made and implemented. New points of view and expertise are required. The leader has to get people who don't know --or even like -- each other to work together. All the while he or she has to reassure all concerned that the problem will be solved.

Dealing with a crisis almost always takes leaders into very unfamiliar, and often scary territory. Case in point: the police Chief Martin Brody in Jaws was afraid of the water.

Social Security

2010-06-08T12:07:00.002-04:00

With every advance in technology, there is a new wave of policies and procedures to govern their use. From copier machine keys to Internet filters, companies of all sizes have had to protect their legal, financial and reputational flanks.

The explosion in social media in corporate marketing as well as in the personal lives of employees poses some special problems for decision-makers.

ISACA, an association sharing knowledge and practices with information systems users around the world, has published a White Paper on social media, addressing the critical security and governance issues related to social media. The Paper will provide most users with a useful framework to identify the risks, find gaps in policies or security practices, and establish training priorities.

Style and substance, oil and water

2010-05-30T11:21:00.003-04:00

We are not here to throw stones at anybody, including the goat of the moment -- BP.

Yet the company's history, strategy and operational capabilities have now combined to provide one of the most vivid case studies of style and substance in business life.

After its privatization by the British government in the 1980s, BP grew dramatically through numerous acquisitions in the 1990s, including Amoco in 1998.

Getting all of these merged organizations to work effectively as one company posed all of the usual challenges. Like a new nation comprising multiple nationalities, one of BP's first tasks was to design a flag that all of its constituents could salute. In BP's case, the flag they chose was Green -- as in friendly to the environment. They went on to support this re-branding initiative with a $200 million campaign featuring its friendly, new sunburst logo replacing the old BP shield.

In an industry that had taken its lumps for nearly 30 years, operated in many high risk and politically sensitive environments, and, worse yet, had been highly profitable, BP's new face was unsettling, to say the least. Nevertheless, they have stayed the course for the past decade and become a familiar landmark along the highways.

But grand proclamations such as BP's will sooner or later be tested.Big ideas are a target. This country fought its bloodiest war with itself, testing its commitment to freedom for all citizens.

Style is often dismissed as a mere surface quality, a coat of paint on a deteriorating structure. Whether this is true in BP's case is yet to be seen.

Teddy Roosevelt’s advice to “speak softly and carry a big stick” may be the most succinct definition of a leadership style ever.

Style does not exist for its own sake, certainly not in business. It exists only to be coupled with consequences, good or bad. It is full of promises of rewards for those who follow it carefully, and penalties for those who do not. If there are no consequences, there is no style or substance. Niccolo Machiavelli, stranger among the recesses of human nature, wrote: “Where the willingness is great, the difficulties cannot be great.”

If there is no price to be paid to be part of something, it’s probably not worth joining. The rite of passage to becoming a “member” is an organization’s first opportunity to instill values, habits and instincts for making big decisions later on when the stakes are much higher.

An effective planning process, involving the entire organization, should do the same, year after year. A style is a voice, a manner of speaking, applied to an inanimate, legal entity, a corporation. It is a vocabulary, with elements unique to the particular organization. In many instances, it has folklore, a mythology and an oral history with heroes and villains. It can be colorful and very distinctive. It can’t be forced.

What style most certainly is not is sparkling prose and catchy slogans invented by advertising and public relations consultants. Style, like an organization’s soul and identity, emerges from within. It must be discovered by listening carefully to how people talk about their company. When it comes to advertising and other media, the tone should be driven by the character of the company, never the other way around. It must appear genuine and ring true to anyone associated with the organization.

Finally, everyone should believe that your organization means what it says.

For the people of BP, and any other company that adopts a strong style statement (Google's "Don't be evil" comes to mind), the question is how much attention is paid -- starting with its planning process -- to making tough choices in support of its chosen mission.

After a decade of preaching from the pulpit, BP is now forced to bare its soul.

Getting beyond carrots and sticks

2010-05-30T08:54:00.001-04:00

This an interesting presentation by writer Dan Pink on motivation and reward. At the very least, it will get you to re-examine your assumptions regarding pay, performance and work environment.

Sticky technology

2010-05-27T17:19:00.002-04:00

iPad + Velcro from Jesse Rosten on Vimeo.

It's pure nirvana when your customers do your product development work for you.

Take Apple enthusiast and California film maker Jesse Rosten. He isn't waiting for the company's R&D people to figure out how to make the iPad more useful.

It's not clear to us, however, whether he's come up with new applications for the iPad, or new applications for Velcro. We could go either way.

A Bridge Too Far

2010-05-27T13:18:00.002-04:00

If Memorial Day inspires you to pick up a book about the experiences of those who served in wartime, one of the best choices would be Cornelius Ryan's "A Bridge Too Far".

Ryan, who built his war narratives around eyewitness accounts, tells his stories with a novelist's sensibility to character and plot. While the title of this work is a phrase that has become a familiar refrain in all kinds of situations, the story behind it it may not be as well-known.

It is the story of Operation Market Garden, the Allies biggest failure in the European campaign in World War II, an ambitious attempt to outflank the Germans and hasten the end of the war by seizing a series of critical bridges in the Netherlands and Germany.

In the end, the Operation failed because its success depended on all elements of the plan -- including the biggest airborne assault ever attempted -- working. Failure to take one or more of the bridges could bring down the whole undertaking, which, of course it did.

Despite the outcome, the stories of the officers and men participating in Operation Market Garden, are some of the most heroic of the entire war, and Ryan's prose brings their experiences to life.

Ryan's account of the planning aspects of the Operation are also vivid, and yield a case study in how an undertaking can get ratcheted up and stretched too tight to bend without breaking. It's a lesson for all of us.

Present Shock

2010-05-27T09:40:00.002-04:00

If something is said loud enough, often enough, it can be accepted as The Truth.

Case in point: the current escalation in government debt will be an obligation borne by future generations.

But wait. We have Hedge Fund manager David Einhorn on the editorial page of this morning's New York Times positing that we needn't worry about that eventuality. The reason, he argues, is that we are going to have to deal with the problem. And he backs up that statement with some startling data as well as insights on rating agency debt ratings vs. private investor valuations.

A sobering read, to say the least.

The Social Life of Information

2010-05-26T12:13:00.001-04:00

It has been ten years since Since John Seely Brown and Paul Duguid published their "Social Life of Information."

For a book written by two scientists, it is remarkably free of jargon, and it avoids giving pat solutions or the "ten helpful hints" kind of advice. They simply observe human behaviour in organizations, and draw some conclusions, with a tight focus on technology and communication. They leave it to the reader to insert his own examples.

It should be required reading for any manager contemplating a re-organization or the integration of a newly-acquired company. The authors make a compelling case that trying to understand how a company functions by reading organization charts and procedure manuals, or by concentrating on systems software can be misleading if not destructive.

Don't miss the example of of the Xerox repair men.

Cyber Fame

2010-05-26T10:55:00.001-04:00

There was a time when influence was measured by such things as having the right table at "21", occupying the office closest to the boss, cutting lines at a night club, or getting on the more exclusive Christmas card lists.

Now in the age of social media, there are new ways to tell how influential you are.

One of them was released over the weekend by Web Trends. It's a map of the 140 most influential people on Twitter. With this document in hand, influentials will now be able size up their relative importance by (a) their presence on the map (b) the size of their dot and (c) their position on the map.

What's this kind of fame worth? It's hard to tell, but Truman Capote once said, "Fame is only good for one thing -- they will cash you check in a small town."

Keeping it normal

2010-05-24T12:01:00.001-04:00

Case Stengel once said of manging in the Big Leagues, "The key to being a good manager is keeping the people who hate me away from those who are still undecided."

Managing in the major leagues through a seven-month, 162-game schedule may be the best paradigm in sports for leading teams in all walks of life. Thus, when one of them talks about his approach to his job, it's usually good food for thought.

In yesterday's Boston Globe Magazine there was a profile of Red Sox Manager Tito Francona. With a tenure of six seasons, he has been on the job longer than all but one of the team's managers over the past Century. He has guided them to two World Series Championships, as well.

The writer, Charles Pierce, quotes Francona on the challenge of maintaining "a sense of being normal" during the long grind of the playing season:

“I want there to be an atmosphere where they want to show up every day and do the right thing. We can have rules out the [expletive], but if they want to do the right thing, we’ll be a better team. It’s about consistency. If they win the other night or if they don’t, they don’t need to come in here and see me either bouncing off the walls or dragging my tail. It doesn’t work. It’s got to be the same every day."

"Normal", of course is a relative and highly subjective term. A consistent style -- whether it's high-strung or ice cool -- seems to be the key.

Finding a better way

2010-05-23T11:48:00.001-04:00

Meanwhile, the innovators aren't waiting to read the debate transcripts. They are hard at work. In one small example, The New York Times reports today on a medical technology start up, Watermark Medical, which has developed a device for diagnosing sleep apnea. The story is told in the context of how advances in web technology, digital sensing devices and computer software are fueling decentralized innovation in the medical world. The Times report points out:

Making processes work better is more convenient than changing or eliminating the processes themselves. We can spend a lot of time and energy making outdated practices work better.

The current national debate over health care is a case in point. We have given a lot of attention to the question of who will pay for these vital services, and not enough to finding a better way.

"The trend promises to shift a lot of the diagnosis, monitoring and treatment of disease from hospitals and specialized clinics, where treatment is expensive, to primary care physicians and patients themselves — at far less cost."

The key to this kind of change, we have found, is to allow those closest to the actual work to play a significant role. A lot of companies learned the hard way during the "re-engineering" era that wholesale, top-down, consultant-driven change can be a disaster.

Small steps that don't rip the unseen fabric of an organization seem to work the best. In addition, they generally allow managers to learn something about their company that may be applied in other areas.

History has adequately demonstrated that it has been small innovations -- born during turbulent times -- that have pulled us through. Just think of the geeks in garages soldering their own circuit boards while the world seemed to spin out of control in the 1970s.

Eat dots. Avoid ghosts.

2010-05-22T11:13:00.001-04:00

Video game Pac-Man is celebrating its 30th anniversary today, as noted in Harold Goldberg's article in The Washington Post.

In an industry where gaming has become such a complex undertaking, and requires the computer capacity of a moon launch, Goldberg says the key to Pac-Man's success and longevity is simplicity. He writes:

"You were required to follow three simple rules: Navigate the maze. Eat dots. Avoid ghosts. You needed quick reflexes and a fear/hatred of those ghosts to succeed."

Pac-Man proved that something can be very simple to understand and difficult to play at the same time.

Whatever game we're in, a few simple priorities and rules can , indeed, focus the mind, including the collective mind, of a team or organization. Even the conscious decision to have no rules does the trick, as Thomas Edison said of his legendary laboratory:

"Hell, there are no rules here -- we're trying to accomplish something."

Write the Future

2010-05-21T09:20:00.006-04:00

There is some new Nike World Cup creative work now circulating on the Internet. The centerpiece is a three-minute video that features fan reactions in all corners of the planet to events on the field.

On one level, it's a dramatic snapshot of our time -- it's art, culture and sport. On another, it's a showcase of one company's unrelenting focus on the spirit and the fervor of athletic competition around the world.

Enjoy.

Making Choices

2010-05-20T11:11:00.002-04:00

We noticed two stories, in two different publications, a couple of days ago that had to do with consumer choice. Specifically, the stories involved luxury as well as mass market merchandisers and how successful they have been narrowing choices for their customers. Though there were certainly exceptions, they found that cutting the number of items or brands in given categories actually increased sales.

The examples cited in these articles showed how the merchant's success with this approach varied by product. In the dairy aisle, for example, they found, it was easier to reduce variety in margarine, while added variety increased yogurt sales.

It is possible, though, the whole subject has more to do with the customer and not the product.Over the years, it we have learned that different people make choices in very different ways. Personality tests have shown that there is a range of approaches to making choices. At one end there are "maximizers" who always seek the very best option from a choice set, and may anguish after the choice is made as to whether it was indeed the best. At the other end are "satisficers" who set high standards but are content with a good choice, and place less priority on making the best choice. Maximizers are more likely to avoid making a choice when the choices are numerous, probably to avoid the angst associated with not knowing whether their choice was optimal.

In business, obviously, the choices are more complex than they are in grocery shopping, and carry far greater consequences. Yet the psychology is the same. In making a decision, how do we feel we have enough data? That we have identified all the alternatives? That we believe in the proposal? That we trust in our ability to execute once the decision is made?

In between personality and choice is a third factor -- time. As the writer Voltaire declared, "the better is the enemy of the good."

Mental maps

2010-05-19T11:20:00.002-04:00

In our client work we often talk about the concept of framework -- a way for a CEO and a leadership team to look at their company and the world it lives in. It's a mental map of the contact points a business has with a host of people and entities that influence, or are influenced by, the decisions it makes. One of the best examples we have seen lately is this view of the iPhone put together by Ben Millen a Canadian industrial designer and engineer.

To us, the most important thing about frameworks is that they can be shared. A team of people can look at the same arrangement of data and come to some common understanding of their world. Getting on the same page, so to speak.

In the field of psychology, this process is known as cognitive mapping. Lately, it came to light that the Pentagon is now focusing on things cognitive in its training and development of soldiers. Last month it asked for proposals for help with what it is calling "Cognitive Readiness Technology", and defined the area as follows:

Cognitive readiness may be understood as a combination of three basic abilities: 1) Recognize new situational patterns in the battle space (requiring adjustments in situation awareness, new knowledge, and transfer of training); 2) modify problem solutions associated with these patterns as required by the current situation (requiring adjustments in meta-cognition, socio-cultural agility, and creativity); and, 3) design and implementation of plans of action based on these solutions (requiring adjustments to decision-making, leadership, and controlling emotions in new social environments).

In a world of asymetric threats, suicide attacks, cultural and religious pressures, unlimited data and instant communication, it is no surprise that the military is trying to change the way it trains personnel to process all of these factors and then react, quickly. And a big part of this will be the discipline of drawing mental maps -- and redrawing them -- as a foundation for future action.

The industrial age rode on a wave of division of labor, breaking processes down to the simplest, repeatable tasks. The cyber age has completely reversed all of this by tying all of our worlds -- nation, company, institution -- together in a high strung web of relationships. Just ask any foot soldier in Iraq or Afghanistan what goes through his or her head before they step outside their secure perimeter.

Ron Shaich's non-profit venture

2010-05-18T15:49:00.001-04:00

"Free food" is not a pleasant phrase in the restaurant business. It's right up there with "slip and fall."

Nevertheless, that's what Panera Bread Co. is doing, with the launch this week of its first non-profit store in a St. Louis suburb. At this location, customers are invited to pay what they can. Proceeds help support the hungry and troubled youth.

The company's founder and chairman, Ron Shaich, who led in the development of the nonprofit concept, has been a long-time innovator in the restaurant industry. Before starting Panera, he founded Au Bon Pain, one of the hottest chains in the 80s and 90s. Before that he was involved in the development of Store 24 in the Boston area, one of the first merchants to operate around the clock.

In an interview with Nation's Restaurant News last November, he talked about his intention to "contribute to the broader world beyond Panera" when he stepped down as CEO last week:

"What I enjoy doing and what I love is solving problems. In many ways, Panera, for 28 years, has been a laboratory and a place to do just that — To solve a whole range of problems and figure out, ‘How do you make an organization work?’

"Having said that, for a very long time I have felt this capacity to actually solve problems and to make a difference [and] I’d love to contribute to the broader society in a public policy role, potentially in a non-profit, and maybe politically, thought I’m not so sure that would be [through] elective office. So many of the ways that we as a community or society approach problems are very short term, and what it takes to run a business like Panera is a focus on the medium term and the long term. I would really like to use some of what I know in the broader society."

Of the new non-profit venture, he said, "I'm trying to find out what human nature is all about."

Looking through different lenses

2010-05-17T12:54:00.002-04:00

Enron, the play, ended its doomed Broadway run last week, nearly a decade after Enron, the company, closed its doors for good in Houston. This came as a surprise to many after the play's considerable success in London, where it is still running at the Noel Coward Theatre.

The reasons cited for its New York demise include: perceived anti-American sentiments; the insertion of a new scene featuring video of planes flying into the World Trade Center on 9/11, which played poorly to Manhattan audiences; and the simple fact that Enron's collapse, and the executive machinations behind it, seem rather tame compared with events in the financial world in recent years.

We would vote for the third one.

Any good novelist will readily admit that their own imagination is no match for real life-- how real people, driven by the pressures of day to day living, resolve their dilemmas. This is another way of saying, "You can't make this stuff up."

Enron's demise on the stage is a living testament to the speed of applied imagination -- otherwise known as innovation -- in so many walks of life, including fraud. Thus the shock is that the Enron story just isn't that shocking anymore, at least not enough to sell $200 tickets to a play.

Maybe it's better to think about our susceptibility to manias, frauds and schemes in an entirely different context. For example, one of the London critics compared Enron with Shakespeare's King Lear. A more modern reference point would be Anthony Trollope's The Way We Live Now, written after the financial scandals in London in the early 1870s.

One other thing. The different reception given Enron in New York and London is a helpful reminder that we may operate in a global marketplace, but we still look at the world through different lenses.

Back from the desert

2010-05-14T12:59:00.003-04:00

Forbes.com published a story this morning on Comeback Companies, a look at ten organizations that came charging back from the wilderness of market adversity and self doubt.

Among the companies -- Apple, IBM, Ford, Hewlett-Packard, to name a few -- most are still being led by the people who brought them back from the brink. Ergo, we don't yet have any good personal, first-hand accounts of their respective journeys.

One exception, though, is IBM. The man who led its renaissance -- indeed, its transformation as a services company -- Lou Gerstner, wrote his personal account in "Who Says Elephants Can't Dance?"

Going beyond the usual platitudes associated with turnarounds -- truth-telling, hard decisions, the importance of communication -- Gerstner gives one of the best first-person accounts of the rational and the emotional sides of taking on such a task. Here he is writing about the key elements of a transition:

“You can’t lead the revolution from the splendid isolation of corporate headquarters. You can’t simply give a couple of speeches or write a new credo for the company and declare the new culture has taken hold…What you can do is create the conditions for transformation. You can provide the incentives. You can define the marketplace realities and goals. But then you have to trust. In fact, in the end, management doesn’t change culture. Management invites the workforce itself to change the culture.”

Gerstner's ideas are valid in many situations other than recovering from adversity. They really have to do with a change in circumstances. As such, they are applicable in managing success as well as failure. To be sure, managing success can be an even bigger challenge, because it is hard to get people to focus on changing a proven formula. Think of all the companies that have rocketed to success and then fallen into oblivion.

As Lee Iacocca, a comeback CEO from an earlier era, observed: "The most successful businessman is the man who holds onto the old just as long as it is good, and grabs the new just as soon as it is better."

O Fortuna

2010-05-13T11:33:00.007-04:00

The concept of "risk" first appeared in the English language in the 17th century, replacing the ancient notion of "fortune", good or bad.

Over a long period of time, the concept moved from one commercial activity to the next, from shipping to all forms of insurance, and in the 1980s the creation of new financial instruments. Since the 1990s, widespread data collection has been used to reduce the risk of almost any investment. User data from social media, for example, is now being used to make advertising and promotion more targeted and thus less risky.

Disciplines such as scenario planning and game theory emerged to help identify threats, vulnerabilities and potential cost of certain negative events. In hindsight, though, it is somewhat jarring to see how wrong the data analysis was in circumstances ranging from the assessment of Soviet strength during the Cold War or the presence of WMD in Iraq nearly a decade ago.

As we watch the seemingly unlimited risk faced by BP in the Gulf of Mexico, the recent failure of government regulators to identify unacceptable financial risks or even out and out Ponzi schemes (Madoff turned himself in) our modern concept of risk can only take us so far, before we are thrown backward by some unforeseen event.

So...maybe "fortune" is a concept we shouldn't abandon entirely. It is no accident that of the 24 medieval poems set to music in Carl Orff's cantata, Carmina Burana, the most familiar one to modern audiences is "O Fortuna".

Convergence

2010-05-12T11:05:00.002-04:00

In "The First Tycoon",T.J. Stiles' absorbing new biography of Cornelius Vanderbilt and his times, we learn how the railroad industry developed in 19th Century America into the most significant factor in the explosive growth of the nation's economic life.

In 1860, Stiles writes, there was a total of 30,626 miles of track laid in the U.S. One problem, among many, was that there were as many as seven different gauges, or widths, between rails. The reason for this was that most railroads started at regional enterprises designed to serve local development.

Along comes Vanderbilt, who had made his fortune in steamboats, who not only created the means of raising the capital to consolidate a fragmented industry, but a corporate organization, as well, capable of running such large and complex system. To learn how this plays out, it would be well worth your time to read Mr. Stiles' book.

Coming now to our own Century, it appears that information technology will be the driver of most of our economic growth for decades to come. But its development has faced some of the same parochial concerns that would have kept the railroads from contributing so much to economic advancement.

Nowhere is this more evident than in the media business where myriad technologies have been developed to deliver "content" to end-users. Now, according to an item today in VentureBeat, television sets are becoming -- in many ways have already become -- computers. As this trend plays out, a new platform is emerging for untold services and applications. When it does, the gauges of the tracks will truly have become standardized.

How about some 3-D...Chess, that is

2010-05-11T17:42:00.002-04:00

Hats off to Viswanathan Anand who won the world chess title today in Sofia Bulgaria defeating Vaselin Topalov in their 12th and decisive game. The experts are saying he should probably enjoy the moment because, at age 40, he is vulnerable to attack from some talented young players, including one Magnus Carlsen of Norway who is only 19.

It is easy to forget just how much influence the game has on our culture, and on the business world, in particular. It ranges from first-mover advantage to imagery and terminology describing competitive strategy. Indeed, chess captured the imagination of computer programmers long before video gaming. Spock's taste for the three-dimensional variety spoke volumes about his character in Star Trek.

In his 1750 article "The Morals of Chess", Benjamin Franklin wrote: "By playing at Chess then, we may learn: I. Foresight, which looks a little into futurity, and considers the consequences that may attend an action II. Circumspection, which surveys the whole Chess-board, or scene of action: - the relation of the several Pieces, and their situations III. Caution, not to make our moves too hastily."

Useful leadership traits, all.

Looking between the data points

2010-05-10T10:50:00.002-04:00

Among the important questions of 2010 -- economic policy, Iran, Iraq, immigration, the future of the space program --you'll find, "Why does it take the Boston Red Sox and the New York Yankees so long to play a baseball game?"

In an earlier era, games played in little more than two hours, now take four or even five hours.

The theoretical answer to the Boston New York question has, to this point, centered on so-called conventional wisdom: two veteran teams with experienced hitters "work the pitch count", patiently taking or fouling off pitches until they see one they like or they walk. It is a theory that is supported by reams of data. Not only that, but it fits neatly with they way we remember any particular game -- play by play.

Unfortunately, the game is played in real time, not abstract historical time. It took a New York Times reporter, Richard Sandomir, to study a game between the two teams in real time, with a DVD Player and a stop watch, to get to the bottom of things.

The real reason for such long games, Sandomir found, was what happened between data points -- balls, strikes, hits, etc. In between pitches, it turns out, pitchers and batters spend an enormous amount of time standing, swinging, spitting, staring, thinking, and kicking dirt around. For example, Derek Jeter, the Yankees star second baseman, takes, on average, a break of 13.6 seconds between every pitch, Sandomir found, writing "He blew on his hands, tucked his bat under his left arm and tapped his spikes.” And it goes on from there.

While Sandomir's specific findings caught the attention of dedicated baseball fans, we found his methodology even more interesting. That's because it underscores the value of one of the least glamorous research methods -- simple observation, otherwise known as looking.

Among the myriad tools available -- operating reports, financial analyses, operations research, consultant reports, focus groups, surveys and such -- simply watching may be the most powerful tool of all.

Whether it's watching how a leadership team actually works together, gauging the atmosphere on a factory floor or timing the service in a restaurant drive-through window, we get a clear picture of what happens between the data points. And that may be the most important, and actionable, information of all.

Over hill, over dale we have hit the...Overhead?

2010-05-09T14:20:00.003-04:00

Defense Secretary Robert Gates gave a speech yesterday at The Eisenhower Library in Abilene Kansas calling for significant belt-tightening measures in his Department.

The most startling part of his talk, in our view, was an estimate that 40 percent of the Deparment's budget is overhead. What's more, the number of layers between him and a field officer has increased from 17 to as much as 30 since Donald Rumsfeld was in charge.

Nowhere is the art of leadership more in demand than deciding the right balance between revenue or results producing activities and the system of people, processes and capital equipment that support them.
Where do you draw the line? Industry standards can serve as a guideline but, even there, individual companies may vary in what they consider -- and account for as -- overehead. Another approach is to keep cutting until something bad happens. Others try to constrain growth in overhead expenditures to some target number, usually an inflation-based target.

Information technology promised to give much greater power to line managers and employees by providing useful data in real time and in an easily searchable format. Just when this layer-reducing, speed-enhancing trend was taking hold, along come a host of new activities to offset some, if not much, of the benefit.
Here are a few areas where costs have risen considerably: Sarbanes Oxley compliance expenses, health care coverage costs, security for people and data, salaries (particularly in the executive suite), legal expenses and liability coverage.

Anyone who has ever presided over an overhead budget meeting knows that the opportunities to spend time and money on value-added activities and projects are in good supply. Rational arguments can be made in their defense. One can look at them as "investments", not ugly little expenses. The frustrating thing to leaders is how difficult it is to determine which half of their budget they are wasting, as the movie mogul Louis B. Mayer bemoaned years ago.

One of the best approaches we have seen to this dilemma is to force department heads to take a more rigorous look at expenditures by raising their personal stake in the outcome. This is accomplished by asking managers to stake part of their salary or bonus to the success of their recommended additions to overhead expense. While it is always difficult to appraise the value of a particular budget request, it is possible to find out whether the department head really believes in it. And that's good information.

Secretary Gates,it seems, is willing to invest his own political capital in a very public way.

Miscalculated risk

2010-05-05T13:05:00.002-04:00

High-profile business and professional crises are the practical equivalent of forest fires in nature -- they reign in development that has gotten ahead of the system that supports it.

You can study virtually any of these events -- there is a good supply at the moment to choose from -- and find cautionary tales for decision-makers in all walks of life. The key lesson is that moving in new directions always brings new kinds of risk. Once you decide to open the second restaurant, for example, you are in a new business. You can't be in two places at once.

Without exception, the people and organizations under siege at the moment can trace their current troubles to conscious decisions they made in the past.

British Petroleum. Now positioned in its 2009 Annual Report as "Operating at the energy frontiers", the company as taken on risks drilling in deep water that it obviously wasn't prepared for.

Tiger Woods. His decision years ago to jump from celebrity athlete to Global Brand carried risks that the man himself clearly underestimated. How else can you explain the text messages and voice mails?

Goldman Sachs. The firm's decision to change from a private partnership to a public company put its leaders on a new stage where they were subject to far greater levels of scrutiny. When their crisis hit, the highly-respected firm turned out to be tone deaf in its response.

Toyota. It turns out that the company's march to the top of the U.S marketplace was supported by a management structure and communications practices put in place 50 years ago. At the first bump in the road, the leadership system failed and rolled a great brand right into the ditch.

Government. In their zeal for real estate bubble and record breaking capital markets, people who held a public trust failed to detect the foolish risks being taken as well as the outright fraud of financial hucksters. As a result, Incumbency is a liability going into the Fall elections.

Facebook. It may be in its early stages, but one of the hottest companies on the planet appears to have never seriously considered the risk of doing business in a world of privacy concerns and identity theft.

Newspapers. In this instance, the present crisis began with a decision that wasn't made years ago. Big dailies never made a commitment to online classified advertising, thus opening the door to Craig's List and others to take one of the most profitable parts of their business away.

John Edwards. At the age of 45, the highly-successful North Carolina trial lawyer made a decision to enter public life and won election to the U.S. Senate. His subsequent fall from power begs the question: did he ever listen to good advice?

None of this is an argument against risk-taking. It simply means, in our view, that moving in a new direction will change things. Therefore, it pays to bring new perspectives, skills, styles, and methodologies into an organization early in the process. Accidents will happen, of course, but none of the above examples fall into that category. In all cases, things could have been different if responsible individuals had properly assessed the risks they were taking.

None of us wants to join the Knight in The Seventh Seal playing chess with Death, a game he couldn't win.

Getting to the point

2010-04-30T10:22:00.008-04:00

A report in The New York Times earlier this week focused on the U.S. Military's dependence on PowerPoint presentations as a primary means of communication of often complex ideas and situations. The net result, the article points out, is that:

"Commanders say that behind all the PowerPoint jokes are serious concerns that the program stifles discussion, critical thinking and thoughtful decision-making. Not least, it ties up junior officers — referred to as PowerPoint Rangers — in the daily preparation of slides, be it for a Joint Staff meeting in Washington or for a platoon leader’s pre-mission combat briefing in a remote pocket of Afghanistan."

Sound familiar?

There are many tools available today to help us communicate better. They can all be abused. Sometimes they can be used very effectively. Just look at some of the examples on this site.

We usually recommend two things to presenters. First, think about what they want their audience to understand and distill it down to one sentence for the total presentation and for each slide. Second, select the data and the images that support that thematic sentence. And, third, put all other data, particularly complex data, in a handout (in advance, if it's feasible). The first step is usually the biggest challenge.

The comedian Don McMillan has built a stand-up career around poking fun at technology (he has a Master's Degree from Stanford in electrical engineering), including PowerPoint. This video of his act should hit home for any of us who has had to give, or listen to, a presentation.

The BS Meter

2010-04-29T11:50:00.003-04:00

In a world of sound bites and 140-character messages, the pressure is on to get to the point quickly. And that's fine, as far as it goes.

For any of us who have some form of leadership responsibility, the days are often filled with myriad and fast-paced communications -- with co-workers, suppliers, customers, bankers and so on. The things we do everyday should form a kind of mosaic that aggregates into a clear picture of whatever it is that we are working on or creating. But much of the time they don't.

Leaders of public companies must try to paint such a picture at a minimum once a year in their letter to shareholders, and then take questions at their annual meetings. The most prominent example is Warren Buffet's annual shareholder letter which focuses not only on his own company, Berkshire Hathaway, but on the economy, government policy, and the business climate in general. What he has to say always makes news, and often moves markets.

Looking for other good examples, we turned to J.P. Morgan Chase & Company which was recently chosen as the company with the best investor relations program by the National Investor relations Institute. This year's letter from CEO Jamie Dimon addresses a company and an industry emerging from a year of crisis and recovery. It pulls no punches and makes no excuses. In clear straightforward prose, surprisingly free of jargon and complexity, it is a snapshot of a company that has taken the blows and survived by a belief in its long-term strategy. Here is one of the key passages:

"During this difficult year, the strategic imperatives that have defined and distinguished our company continued to serve us well. We maintained our focus on risk management; high-quality capital; strong loan loss reserves; honest, transparent reporting; and appropriately conservative accounting. We maintained an extremely strong Tier 1 Common ratio, which stood at 8.8% at year-end. We also increased our loan loss reserves over the course of the year from $23.2 billion to $31.6 billion, an extremely strong 5.5% of total loans outstanding. Our relentless focus on our balance sheet has always enabled us to prevail through tough times and seize opportunities while continuing to invest in our businesses."

As for leaders who don't face this built-in discipline of having to write about the state of his or her company once a year, we often suggest that they instead write one to themselves. It could state what they are trying to achieve, the issues to be addressed, who is taking the lead on each and how. It's that simple.

The value of doing this is usually apparent before writer gets to the end of the first line. Writing ideas down shines a bright light on the logic, consistency, thoroughness, and, above all, clarity of your thinking. It also serves as a pretty good BS meter. Ernest Hemingway put it best, "The most essential gift for a good writer is a built-in, shockproof shit detector. This is the writer's radar and all great writers have had it."

You got a plan for that?

2010-04-28T12:37:00.001-04:00

"Adventure is just bad planning," said the arctic explorer Roald Amundsen.

Now there's nothing wrong with the occasional adventure. Some of us like living on the edge. For example, the world is divided into people who read directions carefully in assembling furniture, swing sets, etc. And then there are those who don't. No problem. You know who you are.

The problem comes in getting an organization to execute, day in and day out. Any business has over time developed a personality and a way of doing things. It has an attitude toward risk; it has a framework it uses to understand its world; and it has a set of controls and guidelines that hopefully keep it out of the ditch. Every organization has these things whether or not it had used a formal planning process to put them in place.

Many companies engage in what we call planning by default, which works fine for a while, maybe even a long while. But its weaknesses as a leadership philosophy come into sharp, and often painful, focus when there is a turn in the road -- a severe economic downturn, a period of rapid expansion, an unexpected move by a competitor, or a sudden need to change leadership or sell the business. In the latter instance, a prospective buyer coming in with an extensive due diligence check list can be a sobering experience. "We didn't think of that" is not something you want to hear yourself saying in response to a buyer's or an investor's question.

One more thing. Planning is a discipline, not a binder full of PowerPoint presentations and charts. It is not list making. It is not a story.

What planning is is taking the time -- at least once a year -- to:

Clarify what the company is trying to accomplish;
Identify what issues or concerns will affect the company's ability to reach its objectives;
Determine how best to address those issues and concerns;
Decide who will take the lead on these items and when;
Agree on how best to engage the organization in the process.

These activities are far from comprehensive, but you get the idea.

Maybe the problem is that the word planning itself is dry as dust. Or that it can bring to mind documents that are in fact collecting dust. It can sound bureaucratic. Using words such as "scenario", "agenda" or "program" could help.

Whatever you call it, though, getting better at it as a team will allow you to spend much more time playing offense than defense.

Trust in short supply?

2010-04-27T11:49:00.005-04:00

We have often talked with clients about trust within an organization as the greatest efficiency program there is. With a high level of trust, there is less time, and fewer resources, devoted to checking up on people.
The absence of trust, say in a totalitarian regime, costs a a society dearly and ultimately leads to collapse under the economic cost of bureaucracy.

Trust also builds great companies. The annual FORTUNE Magazine list of most admired companies -- based heavily on their trustworthiness -- is populated by financially-successful organizations.

In addition to such opinion surveys, economic analyses have also proven the point. In a 1998 study published by the University of Maryland, "Trust and Growth", the authors stated:

"Trust is found to be positively associated with investment rates and growth in per capita income, controlling for other standard determinants of economic performance. Investment as a share of GDP rises by about one percentage point for every 7percentage-point rise in trust. Average income growth rises by about 1 percentage point for each 15-point increment in trust."

The same metrics we believe apply to companies of all sizes, with one caveat. Trust building doesn't start with exercises in off-site meetings. It starts with leaders -- at all levels -- taking the first step, placing trust in others.
Peter Drucker said it well:

"The leaders who work most effectively, it seems to me, never say 'I'. And that's not because they have trained themselves not to say 'I'. They don't think 'I'. They think 'we'; they think 'team'. They understand their job to be to make the team function. They accept responsibility and don't sidestep it, but 'we' gets the credit. This is what creates trust, what enables you to get the task done."

Given the apparent low level of trust in many of our institutions at the moment, it's a subject that's worth thinking about.

Better start paddling

2010-04-22T12:05:00.001-04:00

Going from a big company to a start-up is like crossing the ocean on a rowboat instead of a yacht. Only there is one further consideration. There is no rowboat to begin with. You have to build it.

This came to mind as we read Ben Horowitz's blog entry yesterday, "Why is it Hard to Bring Big Company Execs into Little Companies?" The case he makes is a strong one -- big company experience can be a liability in early stage companies.

During the dotcom boom a decade ago, we saw many examples of prominent executives who failed in the development of cyberspace businesses.

Based on our own experience, it is unfair to say that people who have managed on the big stage can't make this transition. We know that there are many executives who make their own coffee, so to speak, and get their fingernails dirty. They are often frustrated by the constraints -- and the inefficiencies -- of large organizations. They are also blessed with the humility and native curiosity it takes to build anything from scratch. You could say that inside many corporate people is a true entrepreneur crying to get out.

The key, it seems, for any startup is finding people who have what it takes to build the rowboat, and the energy to keep making headway.

Come Skype with me

2010-04-20T10:41:00.001-04:00

FM radio didn't catch on until millions of baby-boomer music lovers came of age. Television network news became far more influential after JFK was assassinated. Small Japanese cars became popular after the 1973 Oil Crisis.

And now, in the age of Icelandic volcanoes, video conferencing seems to be coming into its own. A Reuters report and many others indicate that the current emergency will permanently establish video conferencing in the minds of business leaders around the world.

It's safe to say that communicating by video is moving rapidly from the wonder of the AT&T phone call from space in 2001:A Space Odyssey to a familiar staple of our working lives.

Joyce, Proust and the elevator pitch

2010-04-19T15:07:00.001-04:00

When James Joyce and Marcel Proust, the two most influential writers of the 20th Century, met in Paris in 1922 for the first, and only, time, the results were very disappointing to those who had arranged the get-together at a dinner party. It seems the two men could find nothing in common to get a conversation started, and, to make matters worse, neither would own up to reading the other's work. Proust was dead six months later, to the day.

This non-event, in today's vernacular, comes to mind when we think about something that is getting a lot of attention, particularly among entrepreneurs -- The Elevator Pitch. If nothing else, the Proust /Joyce encounter demonstrates that ideas, no matter how substantive, do not flow seamlessly from one human being to another. The stage has to be set.

Most of what we read on the the subject of elevator pitches deals with the substance of the conversation, including this item on Read Write Web last week, The Art of the Elevator Pitch: 10 Great Tips . The trouble is that, no matter how well prepared and rehearsed one is for such an opportunity, it can be wasted if no personal connection is made.

At the same time, it is clearly up to the person doing the pitch to seize the initiative. Taking the time to understand some aspect of the intended audience can establish a connection that will open up more substantive conversation. This can come from research on a venture capitalist's investing style and portfolio; personal observations on the spot about the person, his demeanor and surroundings; or listening carefully and playing back his or her own words and ideas.

However one approaches the task, it pays to heed the advice of an author who virtually invented the advice business nearly a century ago -- Dale Carnegie -- who said, "You can make more friends in two months by becoming interested in other people than you can in two years by trying to get other people interested in you."

Learning how to manage in 2010

2010-04-17T09:44:00.002-04:00

We are always wary of the notion that the world has changed seemingly overnight. History has proven time and again that fundamental change comes about over long stretches of time. In our current economic slump, though, people in leadership positions are, once again, wondering whether the future will be radically different.

The cover story in this week's Business Week -- "Can GE Still Manage?" -- tells of CEO Jeff Immelt's review of his company's approach to developing management talent. Indeed, in light of the company's sub-par peformance, there are questions inside and outside GE about its highly regarded approach to identifying and educating business leaders.

To be honest, most of us will never have Jeff Immelt's problem -- wondering whether sending mangers to the company's internal university is a good idea, and what to do with them once they are there.

Nonetheless, there is one aspect of his reflections on the art and science of management that applies to all of us. People, especially younger managers, listen, learn and relate to one another in ways that are very different from the accepted models of the past. Even the recent past.

We need look no further than the rapid adoption of new media and technologies around the world. It's as though generations raised in a wired -- and now wireless -- culture, going back to the advent of cable TV in the 1980s, were waiting for all of this. Once interactive social media became available, they pounced on it.

The change that Jeff Immelt, and the rest of us, are grappling with has been underway for a long time. There is nothing radical or sudden about it. We are simply waking up to it.

Proud to pay

2010-04-15T12:03:00.001-04:00

The entertainer Arthur Godfrey said, "I'm proud to be paying taxes in the United States. The only thing is I could be just as proud for half the money."

On Tax Day 2010, one IRS document other than a 1040 is making the rounds on the Internet. It's the Service's annual publication of data from the top 400 income tax returns from 1992 to 2007 (the most recent year available).

Depending on your political point of view, the numbers tell many different stories about economic life in the United States. We were struck by the decline of wages as a percent of total income among the Top 400. Between 1992 and 2007, salaries and wages as a percent of Adjusted Gross Income declined from 26.22 percent to 6.53 percent.

One possible factor to consider for this trend was the push that began back in the 1980s for business leaders to put more of their income "at risk" through options and incentives plans that aligned executives pay with shareholder interests. Tax policy itself, of course, has supercharged the effect of this long-term trend in compensation by favorable treatment of various incentives. At the same time, the Dow Jones Average has risen from 1738.74 at the close on Black Monday, October 19, 1987 to 11,123.11 yesterday. Draw your own conclusions.

We don't eat scones

2010-04-15T09:57:00.002-04:00

The term entrepreneur is attached far too frequently to individuals who don't fit the true definition of the word.

In the case of retired NBA-great Magic Johnson, however, it fits perfectly.

In 'We Don't Eat Scones': Magic Johnson Proves He Has the Acumen for More than Hoops", an article in the current Wharton newsletter, we hear about Magic's insights about adapting mainstream concepts -- Starbucks, T.G.I. Friday's and 24 Hour Fitness, to name a few -- to the urban marketplace. Through numerous, often subtle modifications, mainstream, standardized businesses have been able to successfully penetrate markets usually by-passed by chain operators.

In a talk he gave to Google employees last year, he lays out his business philosophy clearly and passionately.

Promoting discussion

2010-04-08T11:22:00.005-04:00

Anyone -- or any company -- that has found themselves in a difficult situation knows the value of going direct to their closest friends to give them a heads-up. It is often the one opportunity they have to put things in perspective or set the tone before their valued associates have had an opportunity to form an opinion on the matter.

With the global penetration of online video we have a powerful new tool to go direct to those who matter to us, in good times or bad.

For example, we have the release yesterday of Tiger Woods' 30-second Nike ad on YouTube, featuring the voice of the golfer's late father. By distributing the ad on YouTube, Nike was able to go direct to Tiger's fans, and get out ahead of the media commentary that was sure to follow. They were able to set a tone and give a perspective before their audience -- or at least a large segment of it -- had been influenced by talking heads and bloggers.

How successful this particular tactic was, remains to be seen. But it is a new path to redemption that others are sure to follow.

The CNN effect

2010-04-07T17:03:00.006-04:00

During the Gulf War in the early 1990s, people at the Pentagon coined the phrase "The CNN Effect" to describe the impact of live, 24-hour news on government decision-making.

Now comes news that the 30-year old network is on the ropes, ratings wise. Some are even questioning its long-term viability. What's behind this slide from the avant-garde to the rear guard of the news business?

The irony is that the same phenomenon that gave the network its start -- the advent of a new distribution system (cable TV, in 1980) -- is now taking it's audience elsewhere. Broadband communications offers users numerous alternatives to the traditional networks, including CNN. Cell phone video from Tehran can now be transmitted directly to computers and wireless devices anywhere, anytime. CNN -- and other TV news organizations -- are like the restaurants on the two-lane byway losing business to the new interstate highway.

In their very insightful 2001 book "Creative Destruction: Why Companies That Are Built to Last Under perform the Market--And How to Successfully Transform Them" McKinsey executives Richard Foster and Sarah Kaplan write:

"Outstanding corporations do earn the right to survive, but not the ability to earn above-average or even average shareholder returns over the long term. Why? Because their control processes -- the very processes that help them to survive over the long haul --deaden them to the need for change."

Put another way, many of us spend a lot of time and energy perfecting the processes that drive our businesses, and not enough on questioning whether they are the right processes to begin with.

Ford's Focus

2010-04-06T12:13:00.014-04:00

Henry Ford once said,"You can't build a reputation on what you are going to do."

It's a message no doubt taken to heart by his successors at Ford Motor Company, which is enjoying a rather startling boost in its reputation in the U.S. According to the 1 1th Annual Harris Interactive U.S. Reputation Quotient® (RQ®) Survey released yesterday, Ford has achieved the largest one-year improvement of any company in the survey over the past nine years. Commenting on the results, Robert Frank of Harris stated:

"Ford's almost record-breaking leap in reputation, the second-largest in our study's 11-year history, was enabled by perceptions of their products and services finally catching up with the other positive indicators we have seen in the market over the past few years. This, combined with perceptions of a clear vision and strong leadership, really distinguishes Ford from one of the lowest-ranking industries and provides them with a competitive business advantage."

In the spirit of its founder, the company has reached this milestone on the basis of what it has done.

How did they do it? A recent entry by Tony Schwartz on the Harvard Business Review blog site boils it down to four factors:

A simple mission;
A refusal to make quarterly earnings paramount;
Energetic and optimistic leadership;
Creating a culture of telling the truth.

Not a bad formula for an organization in transition -- or , indeed, survival -- mode.

Think different

2010-04-02T07:57:00.005-04:00

How many companies can claim to be distinctive nowadays? To earn such a status, a company would have to maintain a strong internal consistency in everything it does; a disciplined adherence to an idea that drives its business, and an ability to say no to ideas and opportunities that do not fit its identity.

In view of its launch this week of its new iPod, Apple comes to mind, not so much for what the product is, but how it is being marketed. A CrunchGear post yesterday tells the story.

While the best remembered of Apple's marketing efforts may be the 1984 commercial introducing the Macintosh computer and shown only once on the Super Bowl telecast, we continue to enjoy this 1997 piece narrated by Richard Dreyfuss and used to kick off the Think Different campaign.