Eric Nehrlich, Unrepentant Generalist

One particular issue I’ve been thinking about with startup vs. big company culture (and that is referred to in a comment on my last post as well as comments over on Facebook) is how to encourage useful failure – failure where you learn something and then apply what you learned to improve next time.

This sort of grit to struggle through failure (what Seth Godin calls “The Dip”) to find the next level of success is rare in a big company. As is typical for me these days, I would argue this is an issue of incentive alignment.

At a startup, walking away from a failure means quitting and finding a new job, whereas pushing through to find the bigger success (what Marc Andreesen has called product-market fit) has the potential for tremendous upside in the form of stock options. The risks are higher, but it’s worth it.

Big companies and their annual performance reviews tend to reward piling up little successes rather than long struggles with a big success at the end. Sticking with a project that isn’t working can lead to a bad performance rating, so people look for a quick transfer to a different project where they can ride on somebody else’s coattails to success and keep their ratings up. Those that do stick around and try to turn a failing project around rarely benefit from the upside if they succeed – maybe they get one good rating that doesn’t make up for the previous poor ones.

At an organizational level, it’s also easier for the big company to walk away from a “failure” because the company has other projects and revenue streams. As The Only Sustainable Edge points out, companies that only do one thing (e.g. startups) are driven to be the best in the world at it because they have nothing else to fall back on. That lack of a safety net drives further achievement than they would achieve if they could give up more easily.

Another perspective comes from this description of successful startups from Glenn Kelman (CEO of Redfin): “They weren’t afraid of failure, and they didn’t “pivot” when faced with their first setback”. And sometimes by having the grit to stick with a project that they were initially doing for their own passion without regard for commercial potential, they found a way to inordinate success.

How can we instill that kind of grit and passion into a big company? I can think of a few cases where a strong leader has bet the company on a change of direction (e.g. Bill Gates’s Internet memo, Steve Jobs turning Apple into a consumer electronics company, Jeff Bezos mandating that Amazon transform its infrastructure into a service-oriented architecture, Larry Page trying to focus Google on social), but this can also backfire (e.g. Elop’s “oil platform” memo). And these cases are more about a top-down change in direction rather than creating a new culture.

On the topic of encouraging useful failure, I could see some ways of trying to design an incentive system that would encourage people in that direction. Unfortunately, I think the people who work at a big company would rarely agree to such an incentive system. And in my experience, the people who would like such a system will try to do the right thing regardless of the incentive system.

So to re-state the question in a different way – is it possible to create more “startup” people who are willing to take chances and struggle through failure? I wonder if it would involve a re-design of our education system – the US education system is designed to reward people who follow directions and respond to incremental incentives (aka grades), and punishes those who fail even intermittently. Could any incentive system be powerful enough to overcome a lifetime of cultural conditioning?

Hard questions. I don’t have any answers. And, obviously, a lot of digressions. But I’ll keep exploring these sorts of topics over the upcoming weeks. Let me know if you have any thoughts.

Since Larry Page became Google’s CEO again in April, his focus has been on “making a company of more than 24,000 employees act like a startup“. And because of my interest in mapping out organizational space and understanding the different ways in which people can organize themselves, I’ve been trying to figure out what, exactly, differentiates a startup culture from a big company culture.

My current theory is that the difference is in incentive alignment. At a startup, it is difficult to be individually successful while doing the wrong thing for the company, because if the company fails, everybody is out of a job. At a big company, though, fiefdoms can develop, where within a fief, people can get promoted for improving the position of that group despite being obstructionist to the rest of the company. This is often what people disdainfully refer to as corporate politics.

This reminds me of Mancur Olson’s book Power and Prosperity, where he describes how it makes economic sense for special interest groups to subvert democracy in harmful ways – if they represent 1% of the population and push for an action that will benefit them while hurting the overall democracy, they reap 100% of the benefit but only feel 1% of the pain. A similar dynamic is at work for groups within big companies, where they push for their own agenda even when it might hurt the overall company’s position.

This difference in incentives drives many of the differences in behaviors between startups and big companies. At a startup, nobody says “That’s not my job” when asked to do something that’s critical to the company’s success, because they won’t have a job if the company isn’t successful. At a startup, people have an understanding of what drives the company’s success and re-prioritize on the fly if necessary if market conditions are changing. Everybody is invested both economically and personally in the startup’s success, and that drives a unity of purpose that overrides individual agendas.

At a big company, people want to avoid risks and perpetuate the status quo, because creeping up the corporate ladder is the safer path. It’s easier to say no than yes, leading to the big-company phenomenon where every new project has to be signed off on by 10 different departments (legal, finance, security, PR, marketing, sales, engineering, etc), creating 10 opportunities for “No” without having a single person that can say “Yes” and have it stick. It’s possible to get promoted and get paid more without doing anything to benefit the company, if you are advancing your group’s agenda and hitting your individual targets even if the targets are no longer meaningful.

So what does it mean to have a big company with a startup culture? Part of it is figuring out how to get everybody at the company aligned on what the priorities of the company are (this is incredibly difficult at a sprawling company like Google), and rewarding them appropriately. Part of it is to encourage appropriate risk-taking – rewarding those who said “Yes” when it was the right thing to do even if the project failed. Part of it is creating a more risky environment in general – the people who are attracted to safe big companies with a well-defined ladder are not the people that will function well in a startup culture where things are changing fast. And I’m sure there is lots more that I haven’t figured out yet.

I’m fascinated to be part of Larry Page’s Google experiment on creating a big company with a startup culture. I’m not sure it’s possible without addressing the questions of incentive alignment and risk I raise here, but I want for it to be possible. The scale of projects that can be done at a big company are mind-boggling, but I also miss the free-wheeling all-for-one-and-one-for-all culture at the startups I’ve been at in the past. I will be watching closely and looking for opportunities to help with this culture shift as somebody who has startup experience and is interested in these sorts of culture questions.

I was having a conversation with a friend the other day about what we thrived on in a job, and it was interesting to see how our perspectives differed. She talked about the thrill of fixing a problem, of figuring out what was happening, and designing a process or system to solve the problem forever. I talked about how I love the challenge of understanding how all the different parts of a system fit together and figuring out what actually matters. The conversation was a good reminder for me of how important it is to have the right mix of people to get things done in an organization.

I’ve been thinking about this recently as I start a new role at Google where I am trying to articulate to my new team the value that I bring. My strength is as a systems analyst – understanding all of the different parts of a complex system, seeing how they inter-relate, and being able to describe the levers that drive the whole system. This applies whether the system is conversation, corporate culture, or the intricacies of Google’s revenue. I believe that my ability to both understand the big picture as well as the details allows me to extract insights that other people could not from just one level. And I am driven to keep on poking at the system until I feel I understand which stimuli will provoke which responses. The collection of observations on this blog over the years is a reflection of my drive to understand.

However, I struggle in taking the understanding I develop and doing something about it. I can understand how the system is put together and where the friction in the system is, but not how to fix those things. Part of understanding the whole system is understanding why different design decisions were made in the construction of that system, and that understanding sometimes makes it difficult for me to envision a different way of doing things that would solve the issues I identify.

My friend is more pragmatic as she is more interested in fixing important things that are broken. She has worked in a couple different industries, and in each case, it was more about identifying the systemic things wrong with her company, and figuring out how to make them work better by instituting a new process or a new system element. She also has a good understanding of systems, as she wouldn’t be able to fix things effectively if she didn’t. But for her, it’s the fixing that matters, not the understanding.

I think both roles have value to an organization. And a particularly good combination is to pair an understander with a fixer so that the system insights that the understander develops can be fed to the fixer. An understander without a fixer identifies problems but those problems linger since nothing is being put in place to counter them. A fixer without an understander is sometimes fixing symptoms rather than the underlying problems that are driving problems in the system. Together, though, they can be a truly powerful force.

P.S. There are a few other themes inspired here that I’m going to set aside for a future post:

• Good managers understand the strengths and motivations of their people such that they can (a) keep their people happy by giving them the types of problems that interest them and (b) combine their people in ways that complement each other.
• The “fixer” trait fascinates me because I don’t have it. I know many people who see something wrong in the world and are not satisfied until it is corrected (most hackers are like this). I figure out what’s wrong and then work around it, because changing myself is easier than changing the world. But I’m working to develop this trait.
• There is probably a Myers-Briggs or other personality trait that I am describing here – if you happen to know what archetypes I’m describing, please share in the comments.

When I was considering whether to take a job in Google’s finance department, a successful entrepreneur friend of mine told me I was making a mistake. He felt that designers and engineers added value to the world by creating new products, but the only thing finance people did was to say no. Given the pride I had taken over the years in creating valuable products like the CellKey system, I wondered whether I was making the right choice.

After a couple years here at Google, I agree with my friend that there are far too many people within corporate finance departments that are beancounters. Their only goal is to make sure the sums add up and that the processes are being painstakingly followed. Anything that disrupts their routine is fought with every fiber of their being. I made a mistake last fall that meant that Google had to pay out invoices faster than net 30 terms, and I spent weeks begging the team in accounts payable to vary their process this one time. Other finance teams have frustrated me by sticking resolutely to their quarterly plans even when the environment had shifted since those plans were made.

That being said, good finance people provide a level of clarity and objective vision to the executives. Finance takes a separate look from outside the product domain to review revenue and cost trajectories, as my team at Google does for the Revenue Force team. Our CFO, Patrick Pichette, asks every product leader what they’re going to get done next quarter and what resources they’ll need to get there, and then he follows up the following quarter by evaluating their success on achieving those goals with those resources. By having that outside check, it forces product teams to re-evaluate their own success every quarter rather than trying to launch at all costs.

Finance can also help the executives make decisions across product lines. Product people often want to invest in all the cool ideas they have and won’t prioritize to make the hard tradeoffs, because it’s like choosing one’s favorite child. The finance team can provide a framework to the execs for valuing the different product initiatives for the company to help the execs make those tradeoffs at the corporate level. This doesn’t necessarily mean making decisions purely based on profits – corporate objectives might include other metrics like user adoption, as is the case for Google products like Chrome and Android. But having a consistent framework makes it easier to compare products across the company.

Evaluating the business model for a product is also part of finance’s responsibility. Even if a product is technically excellent, the business model surrounding it may not be successful (e.g. Signature going bankrupt despite the CellKey instrument being on the path towards success, or Google Wave). Good finance people understand the product vision and the potential market, but can tie those lofty goals back to the prosaic P&L statement, and provide a viewpoint on whether the assumptions embedded in that model make sense and are achieving corporate objectives.

Lastly, great finance people can change the way executives think by giving them a new way to frame their businesses. Because the finance team is looking at things from a different perspective, they can provide insights that the executive team might be missing. It means going beyond the numbers to provide strategic insight that changes the priorities of the executives. I’ve been fortunate enough to see my manager do this a few times with the Google execs, and the value of providing that new perspective is huge.

This vision of a good finance person is actually well aligned with the value I provide as a generalist, connecting different perspectives and providing new viewpoints based on integrating those perspectives together. So while I agree with my friend that product people are creating value in a more concrete way, I believe that finance people can create value through changing the way the rest of the company thinks about the business. We’ll see if I can start changing the way product people think about their counterparts in finance.

Scott Berkun just posted about situations in life where good data is impossible, which reminded me of a quote I’ve been meaning to share.

I once went to a talk by Bob Sutton where he cited a quote by Andy Grove, CEO of Intel:

“I think it is very important for you to do two things: act on your temporary conviction as if it was a real conviction; and when you realize that you are wrong, correct course very quickly.

Investment decisions or personnel decisions and prioritization don’t wait for the picture to be clarified. You have to make them when you have to make them. You take your shots and clean up the bad ones later.

(So you have to keep your own spirits up even though you well understand that you don’t know what you’re doing)”

I think this is one of the hardest things to learn as I progress in the business world – many situations I’m asked to handle are novel, because routine decisions are handled by bureaucracy in the form of established processes or at a more junior level. Taking action when I know I don’t have enough data requires a leap of faith that I’m best positioned to make a decision anyway.

Babe Ruth pointing to the stands, and then hitting a home run.

Joe Namath guaranteeing a Super Bowl victory despite being an 18-point underdog, and then going out and winning it.

There’s something magical about calling your shot – telling people you’re going to do something impressive and then doing it.

Even in the workplace, the way to earn more credibility, more trust, and more freedom to do what you want without interference, is to call your shot. Tell your audience, whether it’s your managers, your team, or your investors, that you’re going to do something ambitious and then execute. Every time you call your shot and make it, you earn yourself a longer rope. If you watch the dynamics at your workplace, you’ll see this play out repeatedly.

Of course, the downside is that if you call your shot and fail, then you may lose credibility. It’s a risky ploy in that way.

But the bigger risk may be not committing to any goals at all for fear of failure. Not calling a shot means that you are subject to those around you – the freedom and credibility will go to those who take risks, while you are left behind.

Which risk do you prefer? The risk of inaction or the risk of trying something ambitious and failing? And does it change the decision to realize that trying and failing is more respected and more satisfying by far?

One of the broader points that I don’t know if I made clearly in my last post is that effective communication depends not only on the message you are delivering, but also on the audience which the message is targeting. In the case of writing a resume, you have to remember that you are targeting a busy hiring manager who will spend less than ten seconds in glancing at your resume before making a decision. To get the phone screen, you need to tailor your resume for that audience, rather than doing what is most convenient for you.

This idea of knowing your audience resonates in all aspects of business life. It’s difficult to design an effective communication without knowing who the recipient is. But if you know who are you speaking to and the message you want to deliver to that person, it makes it much clearer how to design that message to reach your target. For instance, when a presentation is not coming together, I am often able to help coworkers by asking who the target audience of the presentation is, and what message they want to deliver to that audience. I’ve learned from my manager to ask of each element of the presentation “So what?” – why should the audience care about what I’m presenting?

As an aside, another aspect of designing effective presentations is realizing that you need to get the audience’s attention in the first 30-60 seconds, just like with a resume. These days, every audience has their smartphones or their laptops in easy reach with lots of distracting possibilities. So your presentation has to grab their attention in the first minute, or they’ll tune you out and go catch up on email or Twitter or Facebook. Any presentation that depends on the audience paying attention for ten minutes before delivering any sort of pay-off is going to fail because the audience will have been lost. As with the resume, what you are really trying to do with a presentation is earn the right to the audience’s attention for a little while longer. Structure the presentation in such a way to deliver value to the audience throughout, or you will lose them.

Being able to understand your audience well either involves empathy or experience. Empathy in the sense that it depends on being able to put yourself in the position of your audience to understand what they care about. Experience can sometimes substitute for empathy as you may have been in the position of your audience yourself (e.g. my experience as a hiring manager has made it clearer to me what other hiring managers might be looking for on a resume). Either way, though, the first step is to step away from your own knowledge and needs to think about what your audience needs to get from your communication.

This is also a key skill as a product manager – understand the target user, figure out what problems they are having and design a new product or feature to solve their problem. All too often, product managers start from a self-centered point of view and create a new product/feature based on what they can offer without thinking through what their user wants. This is particularly common in larger corporations where the product managers are often separated by many layers from dealing with actual customers or users. Meanwhile, in my time at Fog Creek, I spent enough time on the phone doing tech support and sales that the perspective of our customers was never far from my consciousness. Again, either empathy for or experience as the potential user is crucial to making the right decisions.

Developing the ability to effectively construct communications for a variety of audiences, whether the communication is in the form of a presentation, a white paper, an email, or a product requirements document, is a skill that is essential to corporate life (and, really, all of life). So before your next important communication, think about who your audience is, what they want, and how you can construct your communication in such a way as to get your message across more effectively.

P.S. It’s interesting to note how my thinking on this has evolved slightly from my post in 2009 asking what is the story, as I now realize that getting the story right involves understanding the audience. Stories are not universal – they are just one way to convey a message from me to you.

I’ve written the same email five times in the last several months giving friends advice on how to write their resume, so I figured it was time for me to package it into a blog post that I could then just link to when needed. Assume this is my response to somebody with a few years of experience who is starting to look for a new job and looking for feedback on their resume.

The first thing to remember is that a resume is a sales brochure – the goal of a resume is to convince the HR person and hiring manager to give you a phone screen. That’s it. Your resume is not your career history or academic C.V. where you list everything you’ve ever done – its only purpose is to convince somebody to give you more time to sell them on the fact that you are the right person for the job.

Even scarier, your resume has only ten seconds to make that initial sale and convince the company person that you are a good enough fit for the position to be worth spending more time on. It may seem unfair for your career to be evaluated in ten seconds, but I’m often reviewing resumes at the end of the day, flipping through a stack and seeing if any catch my eye. I’ll review the ones that catch my eye more closely and spend as much as 30-60 seconds looking at the resume before making a decision on the phone screen. But the resume has to grab my attention in the first ten seconds, or it’s gone. I like Rands’s take on how a hiring manager scans resumes to explain the thought process.

If you only had ten seconds to sell yourself to somebody, would you try to tell them your entire life story? Of course not – you would tell them only a few key points that make you stand out and show that you’d be a great fit for the position. You should take that attitude with your resume – anything in your resume that does not contribute to the immediate goal of selling yourself to the company should be removed.

So what does that mean in practical terms? You need to make it really easy for the resume reviewer to learn what you want them to know about you in that initial ten seconds. You can help with that by only including what you want them to know and using formatting to make particular bits stand out. For instance, on my resume, I put my academic degrees at the top because seeing MIT, Stanford and Columbia generally gets people’s attention. I’ve also gotten to the point in my career where I’ve started dropping jobs that aren’t relevant to my current career track (e.g. my physics internship between undergrad and grad school).

You also need to sell yourself on the resume. This is difficult for many engineers and introverts, as bragging is not something that comes naturally to us. But this is the place to do it. Talk about how great you are, and the amazing things you’ve done. You can not expect the reviewer to spend time reading between the lines to understand your awesomeness – you have to spell it out in neon so they can get it on a quick glance.

Along those lines, list key accomplishments, not responsibilities. Don’t tell me that you were doing X, Y and Z – that doesn’t tell me whether you did X, Y and Z well, even if you say you “successfully” did X. Tell me how you changed things for the better. How was the company different because you were there rather than some other person? If you can quantify your accomplishments, even better – increased sales 20%, reduced downtime by 50%, whatever you can measure. As an aside, this is also useful to consider how you are approaching your current job – what are you accomplishing and can you measure it?

Make the resume specific to the job that you are applying for. Remember, the resume is a sales brochure – you want to target your sales job at your customer, the resume reviewer in this case. That may change which of your accomplishments you want to highlight in a given job, or may change what you want to emphasize with formatting on the resume. You can have a “raw materials” career history with all of your career accomplishments from which to draw, but then edit it down for this specific audience.

Include interesting extracurriculars, especially ones that show achievement. Again, the goal of a resume is to stand out from all the others ones in the stack being reviewed – extracurriculars are one way to do that. We had one candidate last year that included the fact that she had won beauty contests as a teenager – totally irrelevant for a financial analyst position, but it made her resume stand out, and we took a closer look at her actual credentials and brought her in for an interview. In my case, my San Francisco Symphony Chorus experience, which included singing at Carnegie Hall and winning a Grammy, is a nice tidbit to mention.

Keep the resume to one page – this may seem impossible once you have more than a couple jobs, but if you only list one or two key accomplishments from each job, you can do it. Remember, anything that isn’t relevant to making the sale shouldn’t be on the resume anyway. Plus I rarely read beyond the first page of a resume, so if there’s anything on the second page that you wanted me to see, you lost your chance.

I highly recommend converting your resume to a PDF before submitting (I print to a PDF file using CutePDF), just to make sure that formatting is preserved and nobody can edit your resume as it wends its way through the system.

That’s about it. Remember the key points – your resume is a sales document designed to earn you more time to sell yourself on why you’re the right fit for the job. It initially has ten seconds to stand out, and then another 30-60 seconds to convince the resume reviewer to give you a phone screen. Everything on the resume should contribute to closing that sale. If you do that, your chances of getting phone screens will go up.

P.S. I’ve uploaded the resume that got me the interview at Google if you’re interested in what I did last time I was looking for a job. I’d do things differently now, but hopefully it gives some ideas.

The Management Innovation Exchange (aka MIX) looks like an interesting project. It’s a collaboration between McKinsey, London Business School and a couple companies like Dell, with the idea being to open source ideas about management. It’s unclear yet whether it will attract a critical mass of community to discuss ideas (so far, the curation looks weak), but given my long-standing interest in different management structures, I plan to stick around for a while offering up ideas. I’ve already written one post there about the challenges of communication within an organization, and plan to do a couple more this week. Check it out!

Amazon link

Trade-Off is a book which explores a simple, but useful, way to frame the world. Kevin Maney plots products along two dimensions, fidelity and convenience, and then spends the rest of the book discussing how products end up in different places on that graph, from the “fidelity belly” to the “fidelity mirage”

Fidelity is essentially quality – what makes a product unique or an experience. Examples include luxury goods that identify the owner as a person of taste, or live rock concerts where the sheer sensory overload is unmatchable by one’s stereo.

Convenience is, well, convenience – how easy it is to get the product. This includes both physical convenience as well as cost – places like Wal-Mart aim to maximize convenience by being a one-stop shop with the lowest prices.

Maney makes a few key points:

• There is always a trade-off between fidelity and convenience. Trying to position the same product as being the highest quality as well as the most convenient is oxymoronic (one of his interviewees quips that “A successful business is either loved or needed.”). He calls this the “fidelity mirage” where a company attempts to maximize both dimensions at the same time, which generally leads to failure in the marketplace.
• The products that win pick a dimension to maximize and stick to it. Either they aim to be the high-end of the market, like Apple has with the iPhone, or they aim to be the commodity provider, like Wal-Mart. Being clear about where a product is positioned is essential to success.
• Products that fail to distinguish themselves along either dimension end up in the “fidelity belly”, neither high enough quality to distinguish themselves, nor convenient enough to compensate for the perceived lack of quality.
• One useful observation was that technology continually expands the boundaries of the “fidelity belly”. The feature that made your product unique and special a year ago will get copied by your competitors and is no longer a distinguishing characteristic – the fidelity advantage has been lost. Similarly, a supply chain innovation that enabled lower prices can also be copied, losing the convenience advantage. Companies must keep innovating to stay ahead of their competitors, and only by staying focused on one dimension can they outrace the “fidelity belly”.

That’s basically the whole book right there. He tells a bunch of stories about how companies succeed or fail framed with this viewpoint, but you get the idea.

The book was a good reminder about the importance of focus and positioning; understand where you can get a step on your competition, and then find ways to maintain or extend that lead. The same applies to personal positioning, as Maney mentions in an epilogue. All in all, it was a quick read from the library, but I can’t particularly recommend it.

P.S. Jim Collins, the Good to Great author, wrote the introduction, and had a nice paragraph explaining the value of finding new mental models as tools:

A strategic lens … does not in itself give an answer about what you should do, and not do. Rather, and much better, it forces you to engage in a powerful question, from which you derive your own insight and make your own decisions. If you engage your team in a vigorous debate stimulated by the questions that naturally arise from the ideas in these pages, you will gain deeper understanding not just of what you should be doing (or not) but, even more important, why. The power of a strategic concept lies first and foremost in giving us a lens and a stimulus for hard thinking and hard choices. The critical question is not its universal truth, but its usefulness.