The Wisdom of Teams, by Jon Katzenbach and Douglas Smith
Posted: March 19, 2008 at 8:59 pm in management, nonfiction ~ Permalink

Amazon link

I love being part of teams. When I’m on a good team, I work harder, I get more done, and I enjoy the activity more. My biggest career achievement thus far was achieved as part of a tight interdisciplinary team. And yet I’ve often been part of teams that never jell, and are ultimately more frustrating than inspiring. What are the qualities that make a team work, and what can prevent good teams from forming? That’s what Katzenbach (whose work I previously enjoyed in Real Change Leaders) and Smith investigate in The Wisdom of Teams.

The book is filled with inspiring stories of teams that came together under dire circumstances and achieved amazing things. Katzenbach and Smith use these stories as a way of organizing their observations about how to create high-performance teams, from details of how to get people to exchange an individual focus for a team focus, to the characteristics of good team leaders, to how to get a team unstuck from obstacles. But let’s start with determining what a team is.

The authors define a team as “a small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable.” These are the key components to creating what they call a “real” team, as opposed to a group of individuals who are working together. They studied teams in dozens of organizations and determined these were the common elements among the teams that were highly successful. So let’s take a closer look at these characteristics.

  • Small number - Smaller groups have fewer logistical issues with meeting often enough for them to form a real team. In a small group, each person’s contributions and responsibilities are clear, whereas larger groups have a more difficult time organically determining those responsibilities.
  • Complementary skills - The members of the team have to have all of the necessary skills for them to achieve their goal. This requirement is somewhat less important than the others, as the authors observe that real teams give their members the incentive to go learn the skills they need for the team to be successful.
  • Common purpose - Everybody on the team has to believe in a common goal. Teams in the process formation often require a great deal of communication and negotiation to agree on their common goal, but until the overall purpose is clear, the team can not move forward.
  • Performance goals - The team must translate the common purpose into specific and measurable short-term goals. These goals give the team a chance to bind together in the pursuit of the goals, and create situations where all team members must contribute in order to achieve the goals. The goals also provide chances to celebrate small wins along the way towards the larger purpose.
  • Common approach - How does the team accomplish its goals? Who takes care of necessary logistics? The answers to these questions must be articulated for the team to continue moving towards its larger purpose, and not get mired in process and procedure.
  • Mutual accountability - This is the big one in my opinion. Teams have to feel accountable for their results as a team, not as a group of individuals. The idea that the team can fail but that an individual team member has succeeded is incompatible with a real team. But when a team really believes in its purpose and performance goals, it will often hold itself to standards far beyond what the organization is expecting of it.

The CellKey team which I enjoyed so much had all of the characteristics of a “real team”. We were 12 people, each with different skills, who were trying to build this completely new instrument. MDS Sciex gave us short-term performance goals in the form of “phase-gates” where we had to prove the viability of our research in order to continue moving forward with product development, but we held ourselves mutually accountable to a higher standard than Sciex did. And we achieved more than I would ever have thought possible when we originally started experimenting with cells in a back room at Signature.

One surprising lesson from this book is that an emphasis on teams does not create teams. No amount of team-building exercises or team initiatives will create teams… unless there is a focus on strong performance. The first “uncommonsense finding” in the prologue states that “Companies with strong performance standards seem to spawn more “real teams” than companies that promote teams per se”. When the stakes are high and things absolutely have to get done, the normal way of doing things breaks down as being too slow to change and react, so teams emerge as the method to reach those performance goals.

This observation reminds me of a paper on innovation that Scott Berkun recommended, which said that the way to spur innovation was to set a goal that was impossible to achieve by normal methods. People don’t think of new ways of doing things unless they are forced to by circumstance - why take the risk of trying something new when the old way will work? Similarly, organizations will cling to hierarchy and bureaucracy unless they absolutely have to achieve more than they have been; teams emerge to save the day.

I have to admit that I’m not entirely convinced that teams can be manufactured by applying the principles described in this book. As the Peopleware authors observe, team building is more about removing the obstacles to the team forming. I think that the observations of Katzenbach and Smith fall into a similar category - these are necessary but not sufficient conditions for a team to emerge. I suspect that you could do everything mentioned in this book and still not have a team form because of a personality conflict or some other detail.

I recommend the book as a good way to reflect on how high-performance teams can be cultivated within an organization. It’s also fun to read about teams that conquer all the obstacles before them - the epilogue tells the story of the “Killer Bees”, a basketball team in Bridgehampton that competes for the state championship every year despite a male student body of less than 20. But they work hard, they play as a team, and with an entire town rooting for them, they somehow overcome the odds to succeed. Stories like that continue to inspire long after the book is done (which isn’t surprising, since it fits all of the Made to Stick rules of being simple, unexpected, concrete, credible, emotional and in the form of a story) and only add to the enjoyment of the book. Thumbs up.


higher standard than Sciex: At the end of one phase-gate, we were asked to rate ourselves on how we were doing, and we all rated ourselves poorly. Our project manager was surprised by this as we had achieved all the goals for that particular phase-gate, but we were comparing ourselves to where we needed to be to launch the product. I discussed this before as a symptom of big vs. small companies, but it’s not surprising that it’s relevant to team building as teams are essential to small company performance.

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The 4-Hour Work Week, by Timothy Ferriss
Posted: February 12, 2008 at 10:24 pm in management, nonfiction ~ Permalink

Amazon link

The idea that we can work less and free up time to pursue our own dreams is highly attractive for most people and this book is a guidebook on how to do it. The methods that Ferriss recommends to achieve that lifestyle provoked both admiration and disgust from people I know who read it, and I’ll get more into that below. Let’s start with what Ferriss says before getting into reactions.

Ferriss recommends a four step process to changing your life, which he abbreviates DEAL:

  • Define - Figure out what you want to do. Honestly answer the question of what you would do if you had unlimited money and time. Travel the world? Learn a new language? Become a world-class expert in tango? Then sit down and figure out what it would take to actually do those dreams - Ferriss points out that it’s not as much as you think. For instance, he spent approximately $1500 a month to stay in Argentina and take private Spanish lessons and private tango lessons for several months before entering a tango competition - most of us spend more than that on our mortgages and/or rent. Don’t delay your dreams for a long-off retirement - start doing them today.
  • Eliminate - Eliminate anything from your life that doesn’t contribute to you achieving your dreams. Ruthlessly apply the Pareto Principle that 80% of the benefits come from 20% of the work. If you’re an entrepreneur, concentrate on your cash cow clients, and get rid of the small clients and the complainers. Deal with all the important things that you are avoiding doing by engaging in time-wasting activities like meetings and email and surfing the web. Get rid of stuff that you own that ties you down and keeps you from being mobile.
  • Automate - Start a business that you can reap the benefits of without being in the critical path (he calls these muses). He recommends selling things like training CDs or DVDs in an area where you are perceived as an expert (see below for how to achieve that). Hire a virtual assistant from India at $10/hour to do paperwork and answer email. Set up the purchasing system on the web so it automatically forwards orders to the warehouse which ships the materials. Take yourself out of the equation completely.
  • Liberate - Adopt a completely mobile lifestyle. Once the business has been automated, you should only need to check in once a week via email to make a few decisions. Only pick up the phone for a few hours each week, and train all your people that you are only reachable during that time - they’ll start to take initiative and solve problems themselves. At that point, you’re ready to embrace the lifestyle defined in step 1 and pursue your dreams.

The process makes sense. And I think it would work if followed. So why not follow it?

Ferriss is exploiting the existing system, something he takes great glee in doing. He brags about winning a world championship in a martial art by figuring out that weigh-ins were the day before, so he dropped 20 pounds of water weight for the weigh-in, rehydrated before the match, and took advantage of a loophole in the rules that awarded a TKO for pushing his opponents out of the ring by using his longer reach. For selling a training CD, he describes the process of becoming perceived as an expert:

  • Join the industry association of the field
  • Read the top three books in the field, as recommended by that association
  • Summarize the books into one page of talking points each
  • Contact a local university, and offer to give a talk, leveraging your association membership.
  • Contact two local companies, and offer to give a talk, leveraging your association membership and the fact that you’ve spoken at “University X”.
  • Put yourself on a media expert website and cite your association, the talk at “University X”, and talks at “Company X” and “Company Y”.
  • Total time to achieve media experthood in your chosen field: Four weeks

I admire his chutzpah and his ingenuity in figuring out how to live life on his terms, but I still don’t completely subscribe to his ideas.

Everything he’s doing is within the rules as they currently exist, but that just perpetuates the system. He’s playing the game as it’s given, rather than trying to improve the game (it reminds me of the difference between finite and infinite games). Maybe changing the system isn’t possible and the best we can do is to exploit it to our advantage. I’m not ready to do that yet, and I will continue trying to live my life “as if” things could be different. Maybe in a couple more years I’ll be ready to concede and I’ll just want to cash out as he did.

I still recommend reading the book, although I’d borrow it from a friend or the library. It’s a quick read, and it’s definitely a strong meme going around my generation, so it’s good to be able to participate in the conversation. There are several good lifestyle suggestions in the book, especially in clearly defining one’s own goals, and eliminating behaviors that are not contributing to achieving those goals (tasks that would be valuable in one’s professional life as well as one’s personal life). I need to commit to some more specific goals, and start hacking my way towards them, and we’ll see if the ideas from the book can help me with that.

~ 7 Comments ~

Learning from Rock Band
Posted: February 9, 2008 at 7:52 pm in socialsoftware, management, people ~ Permalink

Rock Band is a video game phenomenon. One enthusiast I know calls it the greatest in-person multiplayer game ever. Over the holidays, I played it three times in a week at three different apartments, and played it some more at our company retreat last month. So what makes Rock Band a great game?

First of all, it’s just fun. Almost everybody wants to pretend they’re a rock star, so being able to rock out with friends is a great experience. Everybody gets a prop (guitar, bass, drum set or microphone for vocals) and if you play the game on a big screen and hooked up to a stereo, it’s like starring in your own rock concert. They’ve done a good job of selecting songs with catchy tunes that most people know (who of my generation doesn’t enjoy rocking out to Bon Jovi?). But I think the design of the game is exemplary in other ways.

Rock Band enables people of different skill levels to enjoy playing with each other. This sounds minor, but imagine the experience of a novice playing a first-person shooter game such as Quake 3 with somebody that’s an expert. The expert kills the novice repeatedly, and it’s not fun for either player as the expert is bored and the novice gets no chance to improve. Compare that to Rock Band, where one player can select Easy and the other Expert, and both will be presented with game material challenging for their skill level. Everybody has fun, and when they make it through a song, they can celebrate together.

Rock Band also does a great job of continually challenging players. When playing Rock Band for the first time, you choose the Easy skill level of an easy song. As you get more comfortable, you can try harder songs at the Easy level. Once you can master the hardest songs on Easy, you realize that you can handle the easier songs at the Medium level, and start working your way through the songs at that skill level. The game offers a well-designed continuum of challenges so that there is always a next step just out of reach, so that if you try that song one more time, you might get through it. This continuous incremental achievement is gratifying and I think it is why many of my friends are so addicted to the game.

The game keeps players working towards improvement by offering excellent feedback. At the end of each song, each player is given a percentage grade showing how well they did at matching the patterns given to them. The grading is dependent on the skill level; the game is much more forgiving of being a split second off (or of being out of tune when singing) at the Easy level than at the Expert level. With the numerical grade, one can chart one’s improvement even when playing the same song repeatedly, and when combined with the range of game material discussed in the last paragraph, that offers players the challenge of always improving themselves.

The one area in which Rock Band could improve is in offering direct competition with others. While we were on the company retreat, we split up into two teams of four with roughly comparable skill levels, and took turns playing the same song to compare our scores (although we spent all of dinner arguing over what the proper way to compare scores would be). This turned out to be remarkably fun and each of us probably played our best when we were doing our battle of the bands because we were so focused. I imagine something like this is possible with XBox Live, but I’ll defer to others who would know better.

The interesting thing to me is that all of the design choices that make Rock Band excellent can be applied to management.

  • Having fun is important. It may be difficult to quantify, but I believe that employees that are happy at work are more productive.
  • People want to feel like they’re contributing regardless of their skill level - they don’t want to be on a team where the expert does everything and everybody else watches.
  • Jobs should be designed so that they are always stretching employees’ capabilities. When they master one set of skills, introduce some new element that challenges them to continue learning.
  • Consistent feedback is vital to employee satisfaction and improvement. When they know how they are doing, they have a target which they can aim to exceed moving forward.
  • Competition is good. It gets people to push themselves harder than they would otherwise, and achieve results they would not achieve by themselves.

P.S. I’ve been meaning to write this post for a month, but life has been crazy. This is only the second weekend I’ve spent in New York since mid-December, and the other one was when I had class from 9 to 5 on Saturday and six hours of reading to do on Sunday. I have several posts I want to write, including catching up on my backlog of book reviews, so please nudge me if I don’t start writing more often.

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Randy Pausch lecture and feedback
Posted: January 23, 2008 at 7:30 am in management, links ~ Permalink

Wax Banks pointed me at this lecture which you can see on Google Video by a CMU professor named Randy Pausch.

Dr. Pausch has lived an incredible life, and this lecture is about achieving your childhood dreams - he talks about his dreams, from being in zero gravity to being an Imagineer for Disney to being Captain Kirk, and how he achieved them (he didn’t get to be Captain Kirk, but he did land a walk-on role in the new Star Trek movie). He goes on to talk about helping other people achieve their dreams, and the satisfaction that comes from that. It’s a great lecture - I meant to only watch the beginning, but I ended up staying up late and watching the entire hour and a half.

One thought-provoking moment from early in the lecture is his experience as a high school football player. He had a bad day, and the coach was yelling at him throughout the practice. At the end of practice, an assistant coach sidled up to him and said “Coach was riding you pretty hard today”, and he glumly said “Yeah.” The assistant coach said, “That’s a good thing. When you’re screwing up and nobody’s saying anything to you any more, that means they gave up.”

I love that one line summary of the importance of criticism and feedback. I’ve written about the importance of feedback and the feedback sessions. I’ve also written about the value of harshness where I say “I want to be criticized. I want to find out what I’m doing wrong. How am I going to get better otherwise?” And I agree with that unnamed assistant coach - if you’re not getting feedback, that means that people have given up on you.

That sentiment also reminds me of my time at Signature. Signature BioScience had many young folks in their first or second jobs, and we were complaining about everything, sometimes legitimately and sometimes not. One of the older and wiser engineers told me at one point “You don’t understand this now, but it’s a good thing when people are complaining. When they stop complaining, that means they no longer care.” Same sentiment from the opposite direction - if I’m a manager and I’m not hearing anything from my employees, they are either still complaining and I don’t know about it (bad) or they have mentally checked out of the company and are looking for other jobs (worse). Complaining can be a sign of a healthy company where debates are happening between people passionate about trying to make the company successful.

There were lots of other great moments in the lecture, like when he described brick walls as an obstacle to help one figure out how to get past them. It was inspiring to hear about all of his accomplishments and I’ll have to see if I can figure out what my dreams are and how to move forward on achieving those dreams.

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Finishing a product
Posted: January 19, 2008 at 10:32 am in tech, management ~ Permalink

I used to think that the hard part of creating a product was developing the technology. That’s not a surprising attitude for an MIT graduate, steeped in the lore of plucky inventor heroes who toil in their labs for years before making scientific breakthroughs that bestow great benefits on mankind. I scorned all that “MBA crap” of marketing and sales and believed that the best technical solution was the one that would win (”If you build it, they will come”). I worked as a consultant and as a research prototype developer, and in both cases, once I delivered software that worked for that one person in that one situation, I was done. Getting the technology right was my only task so I thought it was the only thing that mattered.

I have since been involved in launching a couple products into the world (CellKey and the latest version of FogBugz) and have realized that getting the technology right is only a small part of releasing a product. Once the technology is “done”, finishing the product involves:

  • Making sure that customers want to buy the product (”Did we build the right thing?”)
  • Testing it in all possible situations that might be encountered in the world (”Wait, somebody’s trying to run FogBugz on a linux distro and MySql version that are both four years out of date?”)
  • Fixing all the bugs that arise in such unanticipated field environments.
  • Making sure that customers can actually buy the product (”Oops, we need to re-design the website“).
  • Publicizing the product so that potential customers who might benefit from the product know about it and proving to those potential customers that your solution solves their problem. This was a particular issue with CellKey since it was a new technology so nobody had any idea how to incorporate it into their process. It comes up with FogBugz as well; despite the name, it’s a full-featured project management system, but doesn’t work like Microsoft Project, so customers aren’t quite sure what to make of it.

To do all of these other tasks, companies have to create what Joel Spolsky calls the development abstraction layer. As a technologist at small companies doing mostly consulting-type work, I didn’t really understand what most people did at larger companies. But those people are doing all of the support work necessary for the development abstraction layer, from QA to support to sales and marketing.

The first priority is making sure that the technologists build something of value to the customer. Technologists have an unfortunate tendency to believe that everybody else values the same things that they do. Back in 1996, I couldn’t understand why anybody wouldn’t run Linux on their home computer as I did, because it was clearly more stable than Windows, and had far more power via the command line than the Macintosh froofy graphical interface. It took me years of working directly with end-users to learn that powerful software was not defined by technology metrics, but by whether the software enabled the end-user to do what they want. Delivering a product means understanding the customer well enough to anticipate their needs and designing a solution to meet or exceed those needs.

Once a potential product is developed, it needs to be released. Big successful companies are built around having the infrastructure and machinery necessary to consistently release products. MDS Sciex had “phase gates” for the CellKey project every few months, and I didn’t understand the point of the gates until a more experienced colleague explained to me that each gate answered one of the questions from the development abstraction layer above. Early gates were about confirming the market need and that we were building something that customers would want, while later gates confirmed that we had built something that would work consistently in the field. A good company works to answer those questions about a potential product, so that once a new technology is developed, the company has the resources in place to successfully bring it to market.

Getting this infrastructure right is easier said than done. Sciex had a process in place, but it was too rigid, so we had culture clashes trying to adapt their process to the completely new product that CellKey was for them. Startups have not had the time to develop a process, so everything is done haphazardly and releases can drag on for months as people say “Oops, we forgot to do the documentation” and “Oops, we need to fix the product in this environment”. Unfortunately, customers don’t really want to wait while a company gets all these details right, so they get frustrated watching the company screw up. I’m not sure there’s a real model for getting all aspects of this infrastructure right, although a company like GE might be a candidate.

The world was a much simpler black-and-white place when I first entered industry as a software developer. New products developed by forward-thinking technologists were released into the world where customers made buying decisions based on technical brilliance. Alas, the world is more complicated than my naive perspective, and technology is not the only metric used to make decisions. There is an enormous amount of work necessary to take a promising technology and turn it into a product, work that is outside the scope of the technologist. Understanding that puts me in a powerful position where I can connect the technologist’s perspective to the larger context necessary for companies to consistently release successful products.

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Becoming a CIO
Posted: January 2, 2008 at 1:40 pm in management, journal ~ Permalink

I took a great class this fall in the Technology Management program at Columbia. The official title of the class is “Behavioral Challenges in Technology Management”, but it should really be called “How to become a Chief Information Officer (CIO)”. The class is taught by Alan Morley, and is a class he designed to take technologists and get them thinking like the executives we aspire to be.

On the first night of class, he pointed at one of my classmates, and said “Come up to the board and explain to the class how a company’s balance sheet works”. My classmate, like myself, had taken the Corporate Finance class a year ago, but, also like myself, had forgotten most of the information from that class. He struggled, and got excoriated by Morley. What was Morley’s point in doing so? Well, we each showed up to every class well prepared the rest of the semester - we knew that we could be publicly humiliated if we didn’t know our stuff.

But more importantly, his point was that an executive has to understand the financials of the company. If you’re not involved with increasing shareholder value as represented by the financial statements, you’re a flunky, not an executive. So one of the things we did was read How to Read a Financial Report, by John Tracy, to make sure we understood every nuance of the balance sheet and income statement, so that we could trace the cash moving around the company that way.

Another key skill that an executive must have is understanding the strategic position of a company. Technologists often believe that technology has inherent value, but it doesn’t - it only has value insofar as it contributes to the strategic goals of the company. The technologist is happy to have somebody else figure out the strategy and tell him what projects to work on - the executive must be involved in the formulation of the strategy. So we spent a few weeks going through different strategic frameworks like the SWOT analysis, Michael Porter’s Five Forces analysis, PEST analysis, and the value chain analysis. And we applied these frameworks - one week, he split the class up into groups and each group had to do a different analysis on Pfizer. The next week, we were split up into different groups and had to prepare a presentation on a company involving these analyses (my group was given ABB and covered the threats and opportunities of building generators for developing countries like India and China).

Being an executive also involves being effective at communication, so every class incorporated presentations. We had to present in group exercises as described in the previous paragraph, we had “volunteers” summarize and annotate the reading each week, and a couple people were selected each week to present an article to the class that was relevant to the week’s reading. The class was designed to get us more comfortable on our feet explaining strategic concepts in front of a room of people, as well as to function more effectively in groups. Morley also found ways to make us more succinct in our communication - we often had a time limit on our presentations so we had to figure out what the highest value information was and present that first.

The final exam tied all of the class goals together. Two nights before the final, he sent us a case study describing an agricultural chemical company. On the night of the exam, he split us into arbitrary groups and gave us the question: “You are an advisory group to the CIO - identify the strategic, technology and personnel issues facing this company, and a way to address those issues with technology.” We had two hours to prepare a ten minute presentation, using the strategic analyses to help frame the issues facing the company, and then presenting an appropriate response. Our group came up with a plan to use the web to eliminate the middleman distributors so as to increase the margin on each sale (we described it as the “Dell of Agribusiness” plan), and our ten minute presentation covered a dizzying array of topics, including a value chain analysis, an overview of the technology solution, a new plan for marketing, and the financials of how our plan would benefit the bottom line and could be funded.

The class changed how I view the world. I’m thinking more strategically, I’m poking at the numbers more, I’m looking for ways to make an impression on others both inside and outside my company. As Morley emphasized throughout the class, he’s giving us the tools necessary to be an effective executive, but it’s up to us to seize the opportunity. I may not ever be a CIO, but after this class, it will be because I did not have the will, not because I didn’t have the tools.

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Peak, by Chip Conley
Posted: December 15, 2007 at 9:35 pm in management, people, nonfiction ~ Permalink

Amazon link

Subtitled “How Great Companies Get Their Mojo from Maslow”, this is a book applying the ideas of Maslow’s hierarchy of needs to running a business. Maslow’s hierarchy states that people have different needs, but they can’t even think about certain needs until more basic ones are considered. We have to have food and shelter and safety before we ever start thinking about friends and family. We have to have friends and family before we worry about fulfillment, etc.

Conley applied these ideas in running his hotel management company, Joie de Vivre. He says that everybody involved in a business, from employees and customers to investors, have a hierarchical set of needs. For employees, the baseline need is for good benefits, a fair salary and to be treated well. But that’s not enough to get employees to be loyal participants in the business. Once those basic needs are satisfied, they have social needs - they need recognition from their peers and from their management. If all of their basic and social needs are met, then they look for meaning in their job, where it’s not just a job, but a calling, sharing the company’s mission.

He goes through similar pyramids for customers and investors, and observes that only by reaching the top levels of each pyramid do you get fanatic employees, fanatically loyal customers (Apple), and fanatically loyal investors. And getting those fanatics is a great place for a business to be.

These ideas make a lot of sense to me. As I mentioned at Thanksgiving, I’m fortunate that I’m in a position where I can worry about that top level of the employee pyramid, where I’m looking for meaning in my work. It also helps explain why I’ve been dissatisfied at other jobs in the past, despite getting paid well and having autonomy - I either didn’t feel I was getting the recognition I deserved within the company, or I didn’t share in the company’s mission.

While there aren’t any radically new ideas here, this book presents a good framework to think about the issues associated with running a company. It’s not the answer, but I like the viewpoint it presents, and it’s one I’ve referred to several times since I started reading this book.

~ 2 Comments ~

Being anti-stealth
Posted: October 30, 2007 at 8:53 pm in nextny, management ~ Permalink

Charlie O’Donnell has been taking an anti-stealth approach to his new startup Path101, where he’s blogging everything that’s going on with the company, from meeting agendas to funding strategies. His strategy sparked a great thread on the nextNY mailing list about the advantages of being anti-stealth versus being secret. I contributed to the thread, and I’m going to steal my email to be the bulk of this blog post, because I think it’s a great topic.

I’m going to start with Marc Andreesen’s premise that “The only thing that matters is getting to product/market fit” where he defines product/market fit as “being in a good market with a product that can satisfy that market.” Marc points out that it doesn’t matter how great your operations are or how good your people are if there’s not a market. And if you tap into a previously unexploited market, you can have terrible operations and mediocre people, but if your product basically works, “customers are knocking down your door to get the product”. So how do you find that fit between your company’s capabilities and a good market?

One possibility is planning. This is the myth of the MBA, where the MBA analyzes the market, plans out the strategy with fancy frameworks like the 4 Cs or the 4 Ps, does revenue projections, and the plan is executed perfectly, leading to market success. Yeah, right. As military leaders have known for centuries, no plan survives first contact with the enemy (or the market in this case). But this myth of planning leads to the emphasis on secrecy - keeping your plans secret makes sense if you are sure that you know everything about what you’re doing, who your audience is, and what the market is.

But in the real world, you know none of those things with certainty, so it makes more sense to be anti-stealth. You need to test your ideas in real markets as soon as possible. That will tell you if there’s a demand for the product, and if your potential customers believe that you can deliver a product that meets their demand. Being anti-stealth will get more people giving you feedback on your product, and the changes necessary to meet market demand.

If the most important thing is to find a product/market fit, then companies have to quickly find that fit. Taking a cue from Beinhocker’s Origin of Wealth, evolution is a good model for finding a niche in the battleground of competing business models. Going into stealth mode with your business idea is like hiding in an area with no predators - like large mammals in prehistoric North America, you can be very successful in such an area until a real predator finds you and destroys you (as humans did to those mammals). Being anti-stealth means getting out there and taking on all competitors; if you survive, your company will be the stronger for it. You have to change and change and change again to adjust to the environment, and if you don’t do that, you’ll fail.

There’s also an element of rapid prototyping and experimentation here. Test early, test often. If you’re going to fail, it’s better to fail earlier when you haven’t spent as much money. This is certainly true in engineering and development, and I think it applies in this arena as well - you have to identify the assumptions that are critical to your company’s success and test whether they hold true. You can’t fail if you are keeping everything secret. That may be why some companies stay in stealth mode so long, but it’s pointless because the company would save time and money by failing sooner.

I think an anti-stealth strategy also has real benefits from a publicity standpoint. Unless your network is phenomenal to begin with, you’re not going to know everybody who might have something to contribute to your project. Being anti-stealth gets your name out there, and gives you the opportunity for people you don’t know to contact you and give you help you didn’t even know you needed.

If a company is going to be successful in the market, it will have to have capabilities that nobody else has. There has to be a fit between what its employees can deliver and what its customers want; otherwise, any other company in the space could swoop in and take those customers away. Keeping the company’s strategy under wraps only delays the inevitable if the company has no differentiation from its competitors. Like security through obscurity, you are probably doomed if you are depending on keeping something secret. In other words, secrecy is not a competitive advantage.

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Common Sense
Posted: October 14, 2007 at 1:01 pm in management ~ Permalink

Bill Simmons, the Sports Guy columnist at ESPN.com, has used the recurring trope of the Vice President of Common Sense which he describes in this column where he derides the choice of Mario Williams over Reggie Bush in the NFL draft:

I’m becoming more and more convinced that every professional sports team needs to hire a Vice President of Common Sense, someone who cracks the inner circle of the decision-making process along with the GM, assistant GM, head scout, head coach, owner and whomever else. One catch: the VP of CS doesn’t attend meetings, scout prospects, watch any film or listen to any inside information or opinions; he lives the life of a common fan. They just bring him in when they’re ready to make a big decision, lay everything out and wait for his unbiased reaction.

I’m beginning to think that all corporations need a VP of Common Sense. Another recent example from the world of sports was the New York Knicks and Isiah Thomas inexplicably not settling with Anucha Browne Sanders in a sexual harassment case. The case went to trial, which Simmons describes with glee. No matter how much the settlement would have cost, I think it would have cost less than having the organization’s reputation severely tarnished by the antics described in the trial.

We discussed the Andersen/Enron case in class last week, which had a similar feeling. As an audit firm, Andersen was completely dependent on the goodwill and trust of its clients. When faced with the Enron situation, the partners of Andersen refused to admit guilt in a settlement, instead choosing to fight the case in court. As we know now, Andersen went out of business within months of that decision. A VP of Common Sense might have told them “Those Enron partners are going down, no matter what. The only thing you can do is admit guilt to the public, say you screwed up, and do everything possible to assist the investigation and improve yourselves in the process.”

These examples illustrate the perils of groupthink, where one becomes so indoctrinated into the culture and perspective of an organization that one loses the ability to see how actions will be perceived by others. Microsoft is another example of an organization that has shown a stunning lack of sensitivity to what its customers or competitors or regulators might think of it. Microsoft is well known for having a “Microserfs” culture that encourages its employees to spend all of their time at Microsoft with their coworkers, so there are no opportunities for outside perspectives to be introduced. Ironically, Netscape had a similar problem, where they proclaimed their own superiority without realizing that they could quickly be overtaken by Microsoft.

Smaller organizations are less prone to this issue, as they have too many interactions with the outside world, from dealing with customers and consultants to talking to friends and family, to be able to make decisions without some sense of how they will be perceived. But startups can wrap themselves up in their work so enthusiastically that they lose track of reality too, as the dot-com boom and bust illustrated. One lesson from the dot-com era is that if you can’t explain your business model to your mom, it’s probably because you don’t have a business model, not that your mom doesn’t “get it”.

The need for a VP of Common Sense is present in all aspects of business. The elevator pitch is a fine example - if you can’t boil your business idea into something that can be explained in two minutes without jargon to an outsider (aka a VP of Common Sense), your idea needs work.

The Common Sense role is meant to be filled by the board of directors, which assembles a few times a year to review the key decisions being made by the company. They are not part of the everyday culture, so they bring an outsider’s perspective and can ask the questions that are not being asked internally. Unfortunately, the board is often dominated by the CEO who is part of the groupthink, which perpetuates the problem. This lack of board independence is starting to change after corporate scandals such as Enron, but it’s still an issue.

Groupthink is a threat for any organization, especially ones that have a strong culture and barriers to entry. Once you have spent the time to assimilate the culture, learn the jargon and survive the initiation rites, you are invested in the organization and will think like your organization in the future. You will be likely to deride outsiders as not getting it, as they have not been chosen as you have. You can discount their objections as being sour grapes, as them not being as brilliant or well-informed as you are. Observe the behavior of academics in a specialized field or tenured professors mocking new theories, and it’s clear that groupthink can happen in all organizations, not just companies.

If you are in an organization, consider consulting people outside the organization when making major decisions. Explain the basic idea to a friend or a relative and treat them as your VP of Common Sense - if they say “Um, wait, that doesn’t make any sense”, you probably have a problem.

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Six Sigma and the Perils of Process
Posted: October 7, 2007 at 10:36 am in management ~ Permalink

We had to read about Six Sigma process management last week for class. Six Sigma is a set of practices that allow companies to improve their processes towards satisfying customer needs, which is a laudable goal. The basic idea is that you have to first Define your goals, find ways to Measure your performance relative to those goals (which has its own problems), Analyze your measurement results, and then Improve and Control your process to narrow the gap between goals and results. Six Sigma calls this the DMAIC model. And that’s where I start having issues (note: this is based on reading 70 pages of a single Six Sigma book so I am extrapolating wildly).

As far as I can tell, Six Sigma is designed to make mid-level project managers feel more important and knowledgeable than they are. Rather than say “First you have to figure out what needs to get done, and then make sure that you are doing what you said you would”, Six Sigma introduces a massive infrastructure with indecipherable jargon like DMAIC and Process POA and SIPOC diagrams and QFD Matrices, terms which have precise definitions to make those who have not studied Six Sigma look ignorant.

People who sign up for the Six Sigma cult are rewarded for their increased study with status symbols leading up to the “black belt”, giving them the title of a martial arts sensei for their command of the minutiae of management jargon. By using this jargon to separate their discussions from the rest of the organization, project managers can feel that they have mastered a discipline, putting them at the same level of achievement as trained software engineers or quantitative analysts. Since this jargon is used to refer to what should be common sense (identifying goals and ensuring movement towards those goals), Six Sigma has the feel of the more bogus aspects of critical theory, where jargon can be used to dress up basic concepts to the point where nobody can determine whether a paper is legitimate.

Our lecturer made the good point in class that the prevalence of Six Sigma does mean that it provides a common framework that one can use to communicate between organizations. Aligning language is difficult, and perhaps Six Sigma has to use artificial jargon to ensure that none of its terms could be confused with terms we might think we know. This would serve a valuable purpose, but the sense I get from Six Sigma is that it’s considered to be an end in itself, rather than a means to more effective communication.

One of the perils of introducing process is that it overrides the initiative and decision making capacity of the people who have the most relevant information. I have been suspicious of process ever since an experience where an organization applied its process so restrictively that we never answered the questions that the process was originally designed to ask. We followed every single detailed step of the process, but we didn’t get any of the benefits that the process was supposed to deliver because we couldn’t adapt it to our particular situation. Six Sigma has the feel of a methodology where that could easily happen. By letting people displace responsibility onto the process (”I did what Six Sigma said I should do”), it distracts organizations from focusing on the core function of delivering value to customers.

This distrust of process may be a result of my never having worked at a large organization. Larger organizations require a certain level of process and infrastructure to function, much like animals need a skeleton to grow past a certain size. And I have seen the disadvantages of not having any process in place at some of the smaller organizations I have experienced. Perhaps if I had worked at an organization where process enhanced productivity and initiative, I might be more amenable to believing in its usefulness.

Process is a powerful, but dangerous, weapon. When used skillfully and appropriately, processes can enable organizations to be more productive and react more intelligently by ensuring that knowledge is distributed to where it is needed. But when process is an end in itself, or is misused in a task for which it is not designed, it can choke an organization and prevent people from achieving what needs to get done. Six Sigma might be great if an organization could use the parts that it found useful to help align language and objectives. However, Six Sigma could be a disaster if if is imposed in a top-down fashion where the whole infrastructure is implemented regardless of whether it is appropriate or not.

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