Traits of a Truly Entrepreneurial Mindset: Michael Gerber

I've spent most of my life working with small-business owners. And what I've learned is that most small-business owners don't truly understand how to think like an entrepreneur. And, because of that, the vast majority of small businesses--and the people who create them--remain today what they were when they were started: jobs for the people who created them. They aren't entrepreneurs at all, but are instead what I call "technicians suffering from an entrepreneurial seizure."

Seventy percent of all small businesses are sole proprietorships, meaning that their owners are self-employed. They have created a job for themselves, but have not learned how to create a business, meaning they could step away and still have the thing run.

Please don't misunderstand me; I am not negative about small business. To the contrary, I have worked with more small businesses over the past 50 years of my life than anyone I know. Tens of thousands of them. My problem is that I am simply shocked again and again at how little most small-business owners seem to understand about what it truly takes to invent, design, build, grow, and maintain a thriving company. Even those who consider themselves to be information junkies seem to miss the point by a wide margin.

In short, entrepreneurship is not about information; it's about perspective.

Some call it "mindset."

What is a truly entrepreneurial mindset?

In order to develop a truly entrepreneurial perspective, you must begin again. No matter how long you've been in business, it's important that you take on the perspective that you're starting it anew today.

So, when you start your company, you must think of it as though you were about to write a book. What would that book of yours say? What would you, as the author of your book, wish to impart to your reader that would hopefully transform the way they think about their life, about their success, about their future?

That's the point of your business, isn't it?

Your business is a product of how you, its creator, think about it: what it sells, what it does, how it does it, who your people are, and how you help them grow.

It's why Starbucks is such a wonderful example of an entrepreneurially designed company. Look at how the founder of Starbucks has made its mission, to expand the economic viability of small family growers throughout the world, a part of everything Starbucks does.

It's why causes are important to entrepreneurs in this Age of the New Entrepreneur. Causes add dimensionality to your business. Causes add meaning to your business, beyond simply making money. Which is not a cause in itself but a necessity. A necessity doesn't need to be stressed every day. But a cause must be.

As you go to work on your business, you must think beyond what the day-to-day reality of your business calls you to do. As an entrepreneur, you must rise above the stuff of doing it, doing it, doing it. It means you must ask meaningful questions about your role in the world, your community, and how you can institutionalize your new-found perspective into the genes of your company, so that it lives, speaks, and demonstrates it in every action your company takes.

Which means that every single entrepreneur on the face of this earth, in this Age of the New Entrepreneur, is actually writing a book. If he or she is truly determined to create a great company, that is.

And the nature of that book must begin right now. Where you are. With the question: What do I wish to say?

 

Michael E. Gerber is a true legend in entrepreneurship, helping transform 70,000+ businesses in 145 countries over the past 25 years. Michael’s New York Times best-selling book, The E-Myth Revisited, has sold over 5,000,000 copies. @MichaelEGerber

via inc.com

 

Advice for All The Innovation Buzzword Boys and Girls: Hugh MacLeod

“Crea­tive”, howe­ver, is more of an “inter­nal” word. It’s sub­jec­tive, it’s mur­kier. It’s far har­der to mea­sure, it’s far har­der to define. It’s an inward jour­ney, not out­ward. Which is why a lot of peo­ple in busi­ness try to keep the word out of their offi­cial lexi­con, pre­fe­rring ins­tead more neu­tral, more externally-focused lan­guage like “Value”, “Exce­llence”, “Qua­lity” and yes, “Inno­va­tion”. 
The trou­ble is, of course, that approach doesn’t work as well any more. In this glo­ba­li­zed, hyper-linked, internet-enabled world, “Boring” has sud­denly become a very expen­sive luxury. 
Do you REALLY think Apple is afraid to use the word, “Crea­tive”? Do you REALLY think Steve Jobs goes around his office yak­king on end­lessly about “Value, Exce­llence, Qua­lity and Inno­va­tion”? No, of course he doesn’t. Apple’s UTTERLY AMAZING design, busi­ness and mar­ke­ting pro­wess comes from the UTTERLY AMAZING crea­tive fire in their collec­tive belly, not the other way around. 
I want to make limited-edition prints that somehow, even in a small, indi­rect way, helps make com­pa­nies and indi­vi­duals less afraid, and more willing to be CREATIVE, more willing to embrace the CREATIVITY that they already have. Because eco­no­mi­cally and spi­ri­tually, that is ulti­ma­tely where our future lies, even if that idea some­ti­mes terri­fies us. 

There. So now you know my sec­ret, evil plan. You have been warned. 

Jim Woods : How Innovation is a Tactical Decision

In 1862 Europe poised to recognize the confederacy, the unthinkable seemed unlikely. The Union was going to lose the war. Wrote Lincoln, "We must change our tactics or lose the game."  To Lincoln it was clear the old ways would no longer resolve new challenges. 

Layered beneath today’s strategic plans organized to ad nauseum and mission statements with all the fervor of stale bread are carry over premises formed years ago during the Industrial Revolution. Day after day leaders and staffs are reminded that these antiquated premises held to by the fearful or unimaginative, no longer address change in the new age of speed. Yet, they do nothing. 

 After months of one ineffective leader after another, the Union anxious for a victory, found one during a minor skirmish under McClellan. Eventually appointed to head the Army of The Potomac, McClelland hampered his ability to challenge aggressive opponents in a fast-moving battlefield environment. He chronically overestimated the strength of enemy units and was reluctant to apply principles of mass, frequently leaving large portions of his army unengaged at decisive points. Sound familiar?

 There is an important parallel to draw with current day leaders and managers. He, McClelland was phenomenal in perpetually assessing the enemy. He created one strategic plan after another. Stock piling ammunitions and supplies for a war that was already upon him.

 Today businesses are in no less of a war with McClellanesque leaders at the helm waiting for more favorable conditions before acting.

 I continue to admonish "leaders" to heed 5 constants: commoditization, shifts in consumer tastes, and hordes of nontraditional competitors, regulatory upheavals, and geopolitical shocks. While they attempt to remind me of conditions and circumstances at play restricting their abilities to compete. I reply, “Grow up. Perpetual victimization is your ever present melody.There are limits to the blame shareholdres will permit "leaders" to place at the feet of the economy." Knowing in advance of the 5 conditions of business should be enough for leadership to step out of mediocority.In this post many will exclaim my insensitivity to the complexities of business. And they are correct. I expect organizations to measure up. So do shareholders. Mediocrity in whoever wears its hat has no comfort with the market.

Hire Jim Woods to speak to your organization. Jim Woods is President and founder of InnoThink Group. A leading innovation and comnpetitive stratefy consultancy. We invite you to request more information on our consulting and speaking engagements. You may reach Jim at 719-266-6703 or  info@innothinkgroup.com

 

Marissa Mayer's 9 Principles of Innovation: Chuck Salter

Google's VP of search products and user experience shares the rules that gives the search company its innovative edge.

• 1. INNOVATION, NOT INSTANT PERFECTION.

"There are two different types of programmers. Some like to code for months or even years, and hope they will have built the perfect product. That's castle building. Companies work this way, too. Apple is great at it. If you get it right and you've built just the perfect thing, you get this worldwide 'Wow!' The problem is, if you get it wrong, you get a thud, a thud in which you've spent, like, five years and 100 people on something the market doesn't want. Others prefer to have something working at the end of the day, something to refine and improve the next day. That's what we do: our 'launch early and often' strategy. The hardest part about indoctrinating people into our culture is when engineers show me a prototype and I'm like, 'Great, let's go!' They'll say, 'Oh, no, it's not ready. It's not up to Google standards. This doesn't look like a Google product yet.' They want to castle-build and do all these other features and make it all perfect.

I tell them, 'The Googly thing is to launch it early on Google Labs and then iterate, learning what the market wants--and making it great.' The beauty of experimenting in this way is that you never get too far from what the market wants. The market pulls you back."

• 2. IDEAS COME FROM EVERYWHERE

"We have this great internal list where people post new ideas and everyone can go on and see them. It's like a voting pool where you can say how good or bad you think an idea is. Those comments lead to new ideas."

• 3. A LICENSE TO PURSUE YOUR DREAMS

"Since around 2000, we let engineers spend 20% of their time working on whatever they want, and we trust that they'll build interesting things. After September 11, one of our researchers, Krishna Bharat, would go to 10 or 15 news sites each day looking for information about the case. And he thought, Why don't I write a program to do this? So Krishna, who's an expert in artificial intelligence, used a Web crawler to cluster articles. He later emailed it around the company. My office mate and I got it, and we were like, 'This isn't just a cool little tool for Krishna. We could add more sources and build this into a great product.' That's how Google News came about. Krishna did not intend to build a product, but he accidentally gave us the idea for one. We let engineers spend 20% of their time working on whatever they want, and we trust that they'll build interesting things."

• 4. MORPH PROJECTS DON'T KILL THEM

"Eric [Schmidt, CEO] made this observation to me once, which I think is accurate: Any project that is good enough to make it to Labs probably has a kernel of something interesting in there somewhere, even if the market doesn't respond to it. It's our job to take the product and morph it into something that the market needs."

• 5. SHARE AS MUCH INFORMATION AS YOU CAN

"People are blown away by the information you can get on MOMA, our intranet. Because there is so much information shared across the company, employees have insight into what's happening with the business and what's important. We also have people do things like Snippets. Every Monday, all the employees write an email that has five to seven bullet points on what you did the previous week. Being a search company, we take all the emails and make a giant Web page and index them. If you're wondering, 'Who's working on maps?' you can find out. It allows us to share what we know across the whole company, and it reduces duplication."

• 6. USERS, USERS, USERS

"I used to call this 'Users, Not Money.' We believe that if we focus on the users, the money will come. In a truly virtual business, if you're successful, you'll be working at something that's so necessary people will pay for it in subscription form. Or you'll have so many users that advertisers will pay to sponsor the site."

• 7. DATA IS APOLITICAL.

"When I meet people who run design at other organizations, they're always like, 'Design is one of the most political areas of the company. This designer likes green and that one likes purple, and whose design gets picked? The one who buddies up to the boss.'

Some companies think of design as an art. We think of design as a science. It doesn't matter who is the favorite or how much you like this aesthetic versus that aesthetic. It all comes down to data. Run a 1% test [on 1% of the audience] and whichever design does best against the user-happiness metrics over a two-week period is the one we launch. We have a very academic environment where we're looking at data all the time.

We probably have somewhere between 50 and 100 experiments running on live traffic, everything from the default number of results to underlined links to how big an arrow should be. We're trying all those different things."

• 8. CREATIVITY LOVES CONSTRAINTS

"This is one of my favorites. People think of creativity as this sort of unbridled thing, but engineers thrive on constraints. They love to think their way out of that little box: 'We know you said it was impossible, but we're going to do this, this, and that to get us there.'"

• 9. YOU'RE BRILLIANT? WE'RE HIRING

"When I was a grad student at Stanford, I saw that phrase on a flyer for another company in the basement of the computer-science building. It made me stop dead in my tracks and laugh out loud. A couple of months later, I'm working at Google, and the engineers were asked to write job ads for engineers. We had a contest. I put, 'You're brilliant? We're hiring. Come work at Google,' and got eight times the click rate that anyone else got.

Google now has a thousand times as many people as when I started, which is just staggering to me. What's remarkable, though, is what hasn't changed--the types of people who work here and the types of things that they like to work on. It's almost identical to the first 20 or so of us at Google. There is this amazing element to the culture of wanting to work on big problems that matter, wanting to do great things for the world, believing that we can build a successful business without compromising our standards and values.

If I'm an entrepreneur and I want to start a Web site, I need a billing system. Oh, there's Google Checkout. I need a mapping function. Oh, there's Google Maps. Okay, I need to monetize. There's Google AdSense, right? I need a user name and password-authentication system. There's Google Accounts. This is just way easier than going out and trying to create all of that from scratch. That's how we're going to stay innovative. We're going to continue to attract entrepreneurs who say, 'I found an idea, and I can go to Google and have a demo in a month and be launched in six.'"

via fastcompany.com

 

4 Lessons In Creativity From John Cleese

 

There’s a certain generation (or two) that owes its twisted, awkward, scorchingly black sense humor to John Cleese. Famous for his work with the Monty Python films and television series, the BBC comedy Fawlty Towers, as well as feature films like A Fish Called Wanda, the writer, actor, comedian and film producer knows from funny.

Live at Cannes 2012

But he also knows a thing or two about wrestling the creative beast, which is the topic Cleese was invited to speak about at last week’s Cannes International Festival of Creativity. Addressing a group of attendees from the Havas Media group, Cleese brought a storytelling flair to the topic of the creative process, something he’s been discussing for decades through his educational video company Video Arts, sharing tales of writing mishaps and lessons learned from leading creative and scientific minds.

Through a series of stories, Cleese spoke of the importance of succumbing to the unconscious mind, two key traits possessed by highly successful creative people, the necessity of allowing for contemplative thinking, and why all of these together result in creative breakthroughs. He touched on the points raised in his much-discussed 1991 lecture, but rounded them out and introduced new ones (plus, this piece won’t take you 36 minutes to read). Here are those stories.

A story about your unconscious saving your ass; or letting your ideas bake

Image: Flickr user Liliana Fuchs

Cleese began his talk recounting one of his epic writing sessions with longtime writing partner Graham Chapman. While the two wrote arguably some of the most seminal comedic sketches of their generation, the partnership was not without its glitches. Like the time Cleese wrote and then lost a piece of work--and how that turned out to be the best thing that could have happened.

“I was embarrassed that I lost our work, so I rewrote it from memory, straight off in a hurry. Then I discovered the original and the one I’d done very quickly was better than the original. I didn’t spend any time thinking about it, so how could it be better than the original?"

“The only thing I could think was that my unconscious had been working on the sketch and improving it ever since I wrote it. I began to see a lot of my best work seemed to come as a result of my unconscious working on things when I wasn’t really attending to them."

“I’m not talking about the Freudian unconscious but the intelligent unconscious. We can’t control our unconscious but we can look to how we can create the circumstance in which it becomes easier for us to work with our unconscious.”

A story about the habits of highly creative people; or how to play and defer

Image: Flickr user Ben Bunch

As well as identifying that ideas and breakthroughs percolate in the deep recesses of our brain, Cleese talked about some of the key, practical traits of truly creative people. In doing so he told a story of Brian Bates, a psychology professor at Sussex University. Intrigued by how the creative mind works, Bates chose to study the work practices of architects, because the profession required the combination of two brains in the creation of beautifully groundbreaking yet structurally sound buildings.

“He did a very simple test. He asked various architects to name who, in their opinion, were the most creative architects in the field. He then asked those creative architects to tell him what they do from the moment they wake up to the moment they go to bed. He then went to the uncreative architects--without perhaps explaining that’s why he was talking to them--and asked them the same thing. Then he compared the two. He discovered two differences, and neither was to do with intelligence."

“The first thing he discovered is that the creative architects knew how to play. They could get immersed in a problem. It was almost childlike, like when a child gets utterly absorbed in a problem. The second thing was that they deferred making decisions as long as they could. This is surprising."

“If you have a decision to make, what is the single most important question to ask yourself? I believe it’s ‘when does this decision have to be made’? When most of us have a problem that’s a little bit unresolved, we’re a little bit uncomfortable. We want to resolve it. The creative architects had this tolerance for this discomfort we all feel when we leave things unresolved."

“Why would those two things be importance? The playfulness is because in that moment of childlike play, you’re much more in touch with your unconscious. The second is that when you defer decisions as long as possible, it’s giving your unconscious the maximum amount of time to come up with something.”

A story about how to achieve productive thought; or how to think like Einstein

As is the trend with talks about creative thinking, Cleese made a point of illustrating that creativity is not the domain of the “creative class." He told the story of how Einstein and other lauded scientists and Nobel laureates describe their breakthroughs as visions.

“Now I want to read you two things. We tend to think of physics as being the hardest of sciences, and I want to read what one or two people say about their creative process. Consider this passage from Einstein: ‘The words of the language as they are originally spoken don’t seem to play any role at all in my mechanism of thought. The elements of my thought are certain signs, or more or less clear images, which in my case are of a visual and sometimes of a muscular type. The combination of these different images in productive thought is what enables me to make progress before there is any connection with logical construction in words or any other sign that could be communicated to others.'"

“When Einstein is thinking he could not describe to anyone in words what’s going on in his mind. And if you press too hard, nothing comes of it."

“Guy Claxton, the author of Hare Brain, Tortoise Mind, says there are two kinds of thinking: one dependent on reason and logic, and one that’s less purposeful, it’s more playful, leisurely, and dreamy. In this mode, we are mulling things over, almost meditative, pondering a problem versus earnestly trying to solve it. He says allowing the mind time to meander is not a luxury. You need the tortoise mind, such as Einstein described, as much as you need the hare brain."

“The hare brain loves clarity; it wants everything to be expressed in a very simple, straightforward clear way. Tortoise mind doesn’t expect clarity; it doesn’t know where the illumination is going to come from. The language of the unconscious is images. That also means a lot of times when you’re being very creative you can feel very confused. You don’t know where you are or where you’re going. And you can tolerate that and continue to defer the decision. Because you’re taking your time in tortoise mind, if you have a question, you’re much more likely to get interested in the question."

“One other important distinction between the two is that hare brain always treats perception as not being important, when in fact how you perceive things is enormously dependent on your emotional state. And when you’re more relaxed and focused, you’re much more likely to be more aware.”

A story about anxieties and interruptions; or how to remember Chinese ideograms

Means "Sincerity"

The tension between impulsive action and contemplative thinking is a very real one, particularly in this real time, over connected world. But, says Cleese, don’t let that get in the way of giving yourself time for deeper, unconscious thought.

“Now I want to explain about getting into tortoise mind. The enemies of tortoise mind are anxiety and interruptions. The moment you get anxious or interrupted you go back into hare brain. What you have to do is give yourself a place where you’re not going to be interrupted for about an hour, because it takes time for your thoughts to settle. You have to create boundaries of space and then you have to create boundaries of time. You need to give yourself the time to let these ideas come up because it deals in the confusion and images and very subtle things."

“This is how extraordinary the unconscious is. A researcher once got a bunch of people and showed them a bunch of Chinese ideograms. He asked them back a week later and said he was going to show them some they saw the week before and some they didn’t see. They were hopeless at identifying the ones from the week before. He tried it again but this time asked them to tell him the ones they liked best. When they picked the ones they liked, they were the ones they’d seen the week before. So the unconscious has this extraordinary knowledge; the trouble is it doesn’t come up very clearly. That’s why you have to give it time. That’s why when you start on something that’s fundamentally creative, don’t bring the old critical mind in too quickly. Let the thing fall, find out when it is. And then, by all means, bring hare brain in to evaluate them, because you’ll get ideas, but not all of them will be good.”

via fastcocreate.com

 

Innovation Almost Bankrupted LEGO -- Until It Rebuilt with a Better Blueprint

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It was 2003, exactly 56 years after Ole Kirk Christiansen bought the first plastic injection molding machine in Denmark to start manufacturing plastic bricks for building-block toys. On the surface, or so it seemed, the LEGO Group had done everything right over that time period.

The company was an iconic name in the toy business -- plastic building block toys were "LEGOs" in customers' minds, just like all tissues were Kleenex and all flavored ice pops were Popsicles. LEGO was also rare among big companies in that the firm was still run by the founding family, with Christiansen's grandson, Kirk, serving as CEO. While LEGO had always looked for new products, after a sales slump in 1993, the firm tripled its offerings, and in 2000 went on a binge of innovation, adding on LEGO-branded electronics, amusement parks, interactive video games, jewelry, education centers, and alliances with the Harry Potter franchise and the Star Wars movies.

Speaking at a recent conference on innovation at Wharton's William and Phyllis Mack Center, Wharton practice professor of operations and information management David Robertson said Kirk Christiansen and his leadership team adhered to nearly every one of the major principles that are widely prescribed by experts in launching its spate of innovation in 2000: The firm found relatively competition-free markets where LEGO could dominate. Management sought the participation of a number of different constituencies from both inside and outside the firm and hired a diverse and creative staff. It tried to create new products that disrupted existing markets, and it listened to customer feedback. Innovation became a focus of every aspect of the company, with the goal of turning it into the world's strongest brand among families by 2005.

In short, LEGO had created an innovative culture that seemingly would have been the envy of any firm. "LEGO followed all the advice of the experts," said Robertson. "And yet it almost went bankrupt." Robertson's forthcoming book, Brick by Brick: How LEGO Reinvented Its Innovation System and Conquered the Toy Industry, was the basis for the seminar titled, "Learning From Failure in Innovation." The LEGO story, according to Robertson, lies at the heart of why companies should not blindly follow the typical mantras of innovation. Management and evaluation must be at the heart of any innovation strategy, he noted, and although it is generally not good for a firm to remain stagnant, the reality is that unbridled innovation in the vein of LEGO may not be the answer, either.

Playing Well

The first half-century of LEGO's history, however, is the tale of a successful post-World War II Scandinavian company. Ole Kirk Christiansen started making wooden toys in his town of Billund, Denmark, during the Depression of the 1930s, eventually naming his company LEGO, which loosely translated from Danish means "play well."

When the war was over, Christiansen bought a plastic injection molding machine and experimented with it to see what kinds of toys he could make. By 1949, he had developed the now-familiar building blocks with circular studs on the top, an advancement that allowed children to lock connecting blocks into different shapes rather than just stacking wooden blocks on top of each other. Half of LEGO's output was plastic by 1951. Later that decade, the company developed a more durable plastic polymer for manufacturing the toys and also trademarked the building-block style for which LEGO is still famous.

Over the next two decades, LEGO's sales and profits grew steadily but modestly as the firm focused primarily on its trademark building sets with just a few variations, including castle and space themed toys. Beginning in 1978, however, the popularity of LEGOs surged, and profits doubled every five years during the 1980s. LEGO's rise came during the peak years of the baby boom and that generation's children. The firm's building-block materials continued to appeal to those groups for years, as the company turned out more and more themed building sets and expanded its markets.

In 1993, however, sales slowed to a crawl. The Chinese had started manufacturing similar items at a fraction of the cost. LEGO added more toys to its product line, but did not sell more items overall, thus inflating manufacturing and delivery costs while not increasing revenues. At the same time, consolidation among some retailers and the phenomenon of big-box stores made it tougher for company leadership to negotiate prime shelf space for LEGOs. Further, with the advent of video and computer games, boys -- and it was primarily a "boy toy" company -- began giving up LEGOs in favor of more sophisticated toys at an earlier age, reducing the company's potential market. "Kids were getting older younger," Robertson noted.

These challenges precipitated the firm's 2000 innovation binge. Many of the new items received positive reviews within the industry and from customers, particularly the Star Wars and Harry Potter-themed products. "They were successful -- until they weren't," Robertson stated, noting that the Star Wars and Harry Potter-centric toys, for instance, were blockbusters -- but only in the years when new movies or books in those series were released. Other toys either failed to gain traction or were only popular within small niche markets.

By 2003, the company was virtually out of cash. It lost $300 million that year, and the projected loss for the next year was up to $400 million. "Basically, LEGO had strapped on wings and was flying at 30,000 feet," Robertson noted. But the company had not asked or answered the questions needed to financially sustain such growth -- questions such as, "Where do you want to go?", "Where are you now?" and "How will you get there?" "If you are going to accelerate innovation, you need to know which way you are going," Robertson said.

Playing Smart

To get the firm back on track, Kirk Christiansen turned to a report from management consultant Jorgen Vig Knudstorp, which showed that LEGO needed to better organize and control its cutting-edge ambitions. Christiansen ultimately stepped aside, becoming chairman and letting Knudstorp take the role of CEO. To generate cash for its next phase, the company sold a 70% stake in its successful Legoland theme parks for $460 million to the Blackstone Group and closed the firm's Danish headquarters building, moving management into a nearby factory. It then outsourced the overwhelming majority of its plastic brick production to cheaper facilities in Mexico and the Czech Republic.

The new regime at LEGO, however, did not just throw over innovation, said Robertson. Instead, it created a more organized structure for those efforts. Management gave everyone from the sales force to the headquarters staff the capability to create and suggest new avenues for growth. But their ideas were put to the test: Any innovation had to prove to be consistent with the company goal of LEGO being recognized as the best company for family products.

For instance, experts generally suggest that innovation should move toward "blue oceans," that is, markets where the product will be unique. But as Robertson noted, "red oceans" -- meaning that blood could be in the waters from competitive sharks -- exist for a reason. "People are competing in red oceans because there is something there [worth going] after." The company sought to compete with LEGO-like toys in three dimensions and on video. It opened retail stores and created LEGO-themed board games and straight-to-DVD films.

While the company may no longer be flying loop-the-loops at 30,000 feet, it is no longer susceptible of crashing and is cruising along again as one of the more successful toy companies, according to Robertson. By managing its innovative tendencies, over the last three years, LEGO's sales have gone up an average of 24% annually and profits have grown 41%, he added. The company now has about 10,000 employees, and is the world's third largest manufacturer of play materials. LEGO products can be found in more than 130 countries.

LEGO may not regularly make lists of the most innovative companies, but it is moving forward at a time when competitors such as Hasbro and Mattel are stagnating, Robertson noted. "Controlled innovation has clearly worked. That is the lesson learned at LEGO -- just in time." via knowledge.wharton.upenn.edu

MARSHALL GOLDSMITH ON LEADERSHIP EFFECTIVENESS: FEEDFORWARD INSTEAD OF FEEDBACK

Providing feedback has long been considered to be an essential skill for leaders. As they strive to achieve the goals of the organization, employees need to know how they are doing. They need to know if their performance is in line with what their leaders expect. They need to learn what they have done well and what they need to change. Traditionally, this information has been communicated in the form of “downward feedback” from leaders to their employees. Just as employees need feedback from leaders, leaders can benefit from feedback from their employees. Employees can provide useful input on the effectiveness of procedures and processes and as well as input to managers on their leadership effectiveness. This “upward feedback” has become increasingly common with the advent of 360 degree multi-rater assessments.

But there is a fundamental problem with all types of feedback: it focuses on the past, on what has already occurred—not on the infinite variety of opportunities that can happen in the future. As such, feedback can be limited and static, as opposed to expansive and dynamic.

Over the past several years, I have observed more than thirty thousand leaders as they participated in a fascinating experiential exercise. In the exercise, participants are each asked to play two roles. In one role, they are asked provide feedforward —that is, to give someone else suggestions for the future and help as much as they can. In the second role, they are asked to accept feedforward—that is, to listen to the suggestions for the future and learn as much as they can. The exercise typically lasts for 10-15 minutes, and the average participant has 6-7 dialogue sessions. In the exercise participants are asked to:

• Pick one behavior that they would like to change. Change in this behavior should make a significant, positive difference in their lives.

• Describe this behavior to randomly selected fellow participants. This is done in one-on-one dialogues. It can be done quite simply, such as, “I want to be a better listener.”

• Ask for feedforward—for two suggestions for the future that might help them achieve a positive change in their selected behavior. If participants have worked together in the past, they are not allowed to give ANY feedback about the past. They are only allowed to give ideas for the future.

• Listen attentively to the suggestions and take notes. Participants are not allowed to comment on the suggestions in any way. They are not allowed to critique the suggestions or even to make positive judgmental statements, such as, “That’s a good idea.”

• Thank the other participants for their suggestions.

• Ask the other persons what they would like to change.

• Provide feedforward - two suggestions aimed at helping the other person change.

• Say, “You are welcome.” when thanked for the suggestions. The entire process of both giving and receiving feedforward usually takes about two minutes.

• Find another participant and keep repeating the process until the exercise is stopped.

When the exercise is finished, I ask participants to provide one word that best describes their reaction to this experience. I ask them to complete the sentence, “This exercise was …”. The words provided are almost always extremely positive, such as “great”, “energizing”, “useful”, or “helpful.” One of the most commonly-mentioned words is “fun!”

What is the last word that comes to mind when we consider any feedback activity? Fun!

Eleven Reasons to Try FeedForward

Participants are then asked why this exercise is seen as fun and helpful as opposed to painful, embarrassing, or uncomfortable. Their answers provide a great explanation of why feedforward can often be more useful than feedback as a developmental tool.

1. We can change the future. We can’t change the past. Feedforward helps people envision and focus on a positive future, not a failed past. Athletes are often trained using feedforward. Racecar drivers are taught to, “Look at the road ahead, not at the wall.” Basketball players are taught to envision the ball going in the hoop and to imagine the perfect shot. By giving people ideas on how they can be even more successful (as opposed to visualizing a failed past), we can increase their chances of achieving this success in the future.

2. It can be more productive to help people learn to be “right,” than prove they were “wrong.” Negative feedback often becomes an exercise in “let me prove you were wrong.” This tends to produce defensiveness on the part of the receiver and discomfort on the part of the sender. Even constructively delivered feedback is often seen as negative as it necessarily involves a discussion of mistakes, shortfalls, and problems. Feedforward, on the other hand, is almost always seen as positive because it focuses on solutions – not problems.

3. Feedforward is especially suited to successful people. Successful people like getting ideas that are aimed at helping them achieve their goals. They tend to resist negative judgment. We all tend to accept feedback that is consistent with the way we see ourselves. We also tend to reject or deny feedback that is inconsistent with the way we see ourselves. Successful people tend to have a very positive self-image. I have observed many successful executives respond to (and even enjoy) feedforward. I am not sure that these same people would have had such a positive reaction to feedback.

4. Feedforward can come from anyone who knows about the task. It does not require personal experience with the individual. One very common positive reaction to the previously described exercise is that participants are amazed by how much they can learn from people that they don’t know! For example, if you want to be a better listener, almost any fellow leader can give you ideas on how you can improve. They don’t have to know you. Feedback requires knowing about the person. Feedforward just requires having good ideas for achieving the task.

5. People do not take feedforward as personally as feedback. In theory, constructive feedback is supposed to “focus on the performance, not the person”. In practice, almost all feedback is taken personally (no matter how it is delivered). Successful people’s sense of identity is highly connected with their work. The more successful people are, the more this tends to be true. It is hard to give a dedicated professional feedback that is not taken personally. Feedforward cannot involve a personal critique, since it is discussing something that has not yet happened! Positive suggestions tend to be seen as objective advice – personal critiques are often viewed as personal attacks.

6. Feedback can reinforce personal stereotyping and negative self-fulfilling prophecies. Feedforward can reinforce the possibility of change. Feedback can reinforce the feeling of failure. How many of us have been “helped” by a spouse, significant other, or friend, who seems to have a near-photographic memory of our previous “sins” that they share with us in order to point out the history of our shortcomings. Negative feedback can be used to reinforce the message, “this is just the way you are”. Feedforward is based on the assumption that the receiver of suggestions can make positive changes in the future.

7. Face it! Most of us hate getting negative feedback, and we don’t like to give it. I have reviewed summary 360 degree feedback reports for over 50 companies. The items, “provides developmental feedback in a timely manner” and “encourages and accepts constructive criticism” both always score near the bottom on co-worker satisfaction with leaders. Traditional training does not seem to make a great deal of difference. If leaders got better at providing feedback every time the performance appraisal forms were “improved”, most should be perfect by now! Leaders are not very good at giving or receiving negative feedback. It is unlikely that this will change in the near future.

8. Feedforward can cover almost all of the same “material” as feedback. Imagine that you have just made a terrible presentation in front of the executive committee. Your manager is in the room. Rather than make you “relive” this humiliating experience, your manager might help you prepare for future presentations by giving you suggestions for the future. These suggestions can be very specific and still delivered in a positive way. In this way your manager can “cover the same points” without feeling embarrassed and without making you feel even more humiliated.

9. Feedforward tends to be much faster and more efficient than feedback. An excellent technique for giving ideas to successful people is to say, “Here are four ideas for the future. Please accept these in the positive spirit that they are given. If you can only use two of the ideas, you are still two ahead. Just ignore what doesn’t make sense for you.” With this approach almost no time gets wasted on judging the quality of the ideas or “proving that the ideas are wrong”. This “debate” time is usually negative; it can take up a lot of time, and it is often not very productive. By eliminating judgment of the ideas, the process becomes much more positive for the sender, as well as the receiver. Successful people tend to have a high need for self-determination and will tend to accept ideas that they “buy” while rejecting ideas that feel “forced” upon them.

10. Feedforward can be a useful tool to apply with managers, peers, and team members. Rightly or wrongly, feedback is associated with judgment. This can lead to very negative – or even career-limiting – unintended consequences when applied to managers or peers. Feedforward does not imply superiority of judgment. It is more focused on being a helpful “fellow traveler” than an “expert”. As such it can be easier to hear from a person who is not in a position of power or authority. An excellent team building exercise is to have each team member ask, “How can I better help our team in the future?” and listen to feedforward from fellow team members (in one-on-one dialogues.)

11. People tend to listen more attentively to feedforward than feedback. One participant is the feedforward exercise noted, “I think that I listened more effectively in this exercise than I ever do at work!” When asked why, he responded, “Normally, when others are speaking, I am so busy composing a reply that will make sure that I sound smart – that I am not fully listening to what the other person is saying I am just composing my response. In feedforward the only reply that I am allowed to make is ‘thank you’. Since I don’t have to worry about composing a clever reply – I can focus all of my energy on listening to the other person!”

In summary, the intent of this article is not to imply that leaders should never give feedback or that performance appraisals should be abandoned. The intent is to show how feedforward can often be preferable to feedback in day-to-day interactions. Aside from its effectiveness and efficiency, feedforward can make life a lot more enjoyable. When managers are asked, “How did you feel the last time you received feedback?” their most common responses are very negative. When managers are asked how they felt after receiving feedforward, they reply that feedforward was not only useful, it was also fun!

Quality communication—between and among people at all levels and every department and division—is the glue that holds organizations together. By using feedforward—and by encouraging others to use it—leaders can dramatically improve the quality of communication in their organizations, ensuring that the right message is conveyed, and that those who receive it are receptive to its content. The result is a much more dynamic, much more open organization—one whose employees focus on the promise of the future rather than dwelling on the mistakes of the past.

 

Dr. Marshall Goldsmith was recently named winner of the Thinkers50 Leadership Award (sponsored by Harvard Business Review) as the world's most influential leadership thinker. Along with being recognized as the #1 leadership thinker, Marshall was listed as the #7 greatest business thinker in the world. What Got You Here Won’t Get You There was the #2 bestseller on the INC Magazine / CEO Read list of business bestsellers for 2011. This is the fifth year in a row that What Got You Here Won’t Get You There was in the top ten. MOJO was listed at #19. This is the second year in a row that it has been in the top twenty. via marshallgoldsmithlibrary.com

 

via excellenceininnovationblog.posterous.com

 

Marshall Goldsmith on Leadership Effectiveness: Feedforward Instead of Feedback

Providing feedback has long been considered to be an essential skill for leaders. As they strive to achieve the goals of the organization, employees need to know how they are doing. They need to know if their performance is in line with what their leaders expect. They need to learn what they have done well and what they need to change. Traditionally, this information has been communicated in the form of “downward feedback” from leaders to their employees. Just as employees need feedback from leaders, leaders can benefit from feedback from their employees. Employees can provide useful input on the effectiveness of procedures and processes and as well as input to managers on their leadership effectiveness. This “upward feedback” has become increasingly common with the advent of 360 degree multi-rater assessments.

But there is a fundamental problem with all types of feedback: it focuses on the past, on what has already occurred—not on the infinite variety of opportunities that can happen in the future. As such, feedback can be limited and static, as opposed to expansive and dynamic.

Over the past several years, I have observed more than thirty thousand leaders as they participated in a fascinating experiential exercise. In the exercise, participants are each asked to play two roles. In one role, they are asked provide feedforward —that is, to give someone else suggestions for the future and help as much as they can. In the second role, they are asked to accept feedforward—that is, to listen to the suggestions for the future and learn as much as they can. The exercise typically lasts for 10-15 minutes, and the average participant has 6-7 dialogue sessions. In the exercise participants are asked to:

• Pick one behavior that they would like to change. Change in this behavior should make a significant, positive difference in their lives.

• Describe this behavior to randomly selected fellow participants. This is done in one-on-one dialogues. It can be done quite simply, such as, “I want to be a better listener.”

• Ask for feedforward—for two suggestions for the future that might help them achieve a positive change in their selected behavior. If participants have worked together in the past, they are not allowed to give ANY feedback about the past. They are only allowed to give ideas for the future.

• Listen attentively to the suggestions and take notes. Participants are not allowed to comment on the suggestions in any way. They are not allowed to critique the suggestions or even to make positive judgmental statements, such as, “That’s a good idea.”

• Thank the other participants for their suggestions.

• Ask the other persons what they would like to change.

• Provide feedforward - two suggestions aimed at helping the other person change.

• Say, “You are welcome.” when thanked for the suggestions. The entire process of both giving and receiving feedforward usually takes about two minutes.

• Find another participant and keep repeating the process until the exercise is stopped.

When the exercise is finished, I ask participants to provide one word that best describes their reaction to this experience. I ask them to complete the sentence, “This exercise was …”. The words provided are almost always extremely positive, such as “great”, “energizing”, “useful”, or “helpful.” One of the most commonly-mentioned words is “fun!”

What is the last word that comes to mind when we consider any feedback activity? Fun!

Eleven Reasons to Try FeedForward

Participants are then asked why this exercise is seen as fun and helpful as opposed to painful, embarrassing, or uncomfortable. Their answers provide a great explanation of why feedforward can often be more useful than feedback as a developmental tool.

1. We can change the future. We can’t change the past. Feedforward helps people envision and focus on a positive future, not a failed past. Athletes are often trained using feedforward. Racecar drivers are taught to, “Look at the road ahead, not at the wall.” Basketball players are taught to envision the ball going in the hoop and to imagine the perfect shot. By giving people ideas on how they can be even more successful (as opposed to visualizing a failed past), we can increase their chances of achieving this success in the future.

2. It can be more productive to help people learn to be “right,” than prove they were “wrong.” Negative feedback often becomes an exercise in “let me prove you were wrong.” This tends to produce defensiveness on the part of the receiver and discomfort on the part of the sender. Even constructively delivered feedback is often seen as negative as it necessarily involves a discussion of mistakes, shortfalls, and problems. Feedforward, on the other hand, is almost always seen as positive because it focuses on solutions – not problems.

3. Feedforward is especially suited to successful people. Successful people like getting ideas that are aimed at helping them achieve their goals. They tend to resist negative judgment. We all tend to accept feedback that is consistent with the way we see ourselves. We also tend to reject or deny feedback that is inconsistent with the way we see ourselves. Successful people tend to have a very positive self-image. I have observed many successful executives respond to (and even enjoy) feedforward. I am not sure that these same people would have had such a positive reaction to feedback.

4. Feedforward can come from anyone who knows about the task. It does not require personal experience with the individual. One very common positive reaction to the previously described exercise is that participants are amazed by how much they can learn from people that they don’t know! For example, if you want to be a better listener, almost any fellow leader can give you ideas on how you can improve. They don’t have to know you. Feedback requires knowing about the person. Feedforward just requires having good ideas for achieving the task.

5. People do not take feedforward as personally as feedback. In theory, constructive feedback is supposed to “focus on the performance, not the person”. In practice, almost all feedback is taken personally (no matter how it is delivered). Successful people’s sense of identity is highly connected with their work. The more successful people are, the more this tends to be true. It is hard to give a dedicated professional feedback that is not taken personally. Feedforward cannot involve a personal critique, since it is discussing something that has not yet happened! Positive suggestions tend to be seen as objective advice – personal critiques are often viewed as personal attacks.

6. Feedback can reinforce personal stereotyping and negative self-fulfilling prophecies. Feedforward can reinforce the possibility of change. Feedback can reinforce the feeling of failure. How many of us have been “helped” by a spouse, significant other, or friend, who seems to have a near-photographic memory of our previous “sins” that they share with us in order to point out the history of our shortcomings. Negative feedback can be used to reinforce the message, “this is just the way you are”. Feedforward is based on the assumption that the receiver of suggestions can make positive changes in the future.

7. Face it! Most of us hate getting negative feedback, and we don’t like to give it. I have reviewed summary 360 degree feedback reports for over 50 companies. The items, “provides developmental feedback in a timely manner” and “encourages and accepts constructive criticism” both always score near the bottom on co-worker satisfaction with leaders. Traditional training does not seem to make a great deal of difference. If leaders got better at providing feedback every time the performance appraisal forms were “improved”, most should be perfect by now! Leaders are not very good at giving or receiving negative feedback. It is unlikely that this will change in the near future.

8. Feedforward can cover almost all of the same “material” as feedback. Imagine that you have just made a terrible presentation in front of the executive committee. Your manager is in the room. Rather than make you “relive” this humiliating experience, your manager might help you prepare for future presentations by giving you suggestions for the future. These suggestions can be very specific and still delivered in a positive way. In this way your manager can “cover the same points” without feeling embarrassed and without making you feel even more humiliated.

9. Feedforward tends to be much faster and more efficient than feedback. An excellent technique for giving ideas to successful people is to say, “Here are four ideas for the future. Please accept these in the positive spirit that they are given. If you can only use two of the ideas, you are still two ahead. Just ignore what doesn’t make sense for you.” With this approach almost no time gets wasted on judging the quality of the ideas or “proving that the ideas are wrong”. This “debate” time is usually negative; it can take up a lot of time, and it is often not very productive. By eliminating judgment of the ideas, the process becomes much more positive for the sender, as well as the receiver. Successful people tend to have a high need for self-determination and will tend to accept ideas that they “buy” while rejecting ideas that feel “forced” upon them.

10. Feedforward can be a useful tool to apply with managers, peers, and team members. Rightly or wrongly, feedback is associated with judgment. This can lead to very negative – or even career-limiting – unintended consequences when applied to managers or peers. Feedforward does not imply superiority of judgment. It is more focused on being a helpful “fellow traveler” than an “expert”. As such it can be easier to hear from a person who is not in a position of power or authority. An excellent team building exercise is to have each team member ask, “How can I better help our team in the future?” and listen to feedforward from fellow team members (in one-on-one dialogues.)

11. People tend to listen more attentively to feedforward than feedback. One participant is the feedforward exercise noted, “I think that I listened more effectively in this exercise than I ever do at work!” When asked why, he responded, “Normally, when others are speaking, I am so busy composing a reply that will make sure that I sound smart – that I am not fully listening to what the other person is saying I am just composing my response. In feedforward the only reply that I am allowed to make is ‘thank you’. Since I don’t have to worry about composing a clever reply – I can focus all of my energy on listening to the other person!”

In summary, the intent of this article is not to imply that leaders should never give feedback or that performance appraisals should be abandoned. The intent is to show how feedforward can often be preferable to feedback in day-to-day interactions. Aside from its effectiveness and efficiency, feedforward can make life a lot more enjoyable. When managers are asked, “How did you feel the last time you received feedback?” their most common responses are very negative. When managers are asked how they felt after receiving feedforward, they reply that feedforward was not only useful, it was also fun!

Quality communication—between and among people at all levels and every department and division—is the glue that holds organizations together. By using feedforward—and by encouraging others to use it—leaders can dramatically improve the quality of communication in their organizations, ensuring that the right message is conveyed, and that those who receive it are receptive to its content. The result is a much more dynamic, much more open organization—one whose employees focus on the promise of the future rather than dwelling on the mistakes of the past.

 

Dr. Marshall Goldsmith was recently named winner of the Thinkers50 Leadership Award (sponsored by Harvard Business Review) as the world's most influential leadership thinker. Along with being recognized as the #1 leadership thinker, Marshall was listed as the #7 greatest business thinker in the world. What Got You Here Won’t Get You There was the #2 bestseller on the INC Magazine / CEO Read list of business bestsellers for 2011. This is the fifth year in a row that What Got You Here Won’t Get You There was in the top ten. MOJO was listed at #19. This is the second year in a row that it has been in the top twenty. via marshallgoldsmithlibrary.com

 

Lessons on Leadership - Organizational Culture, Penn State, and Avoidance

It will be many years before the implications of the child sexual abuse perpetrated by Jerry Sandusky will be fully understood. As details continue to emerge in the present we find a horrifying pattern of abuse over many years and an organizational culture that enabled individuals at multiple levels of leadership to look the other way. The echoes of disbelief from similar scandals in the church ring in our ears. We have learned how deluded and deceptive pedophiles can be in securing relationships of trust to exploit children, rationalizing abhorrent behavior as something other than what it is – criminal assault.

Added to our immense grief for the physical and psychological harm done to innocent lives, is the realization that when leaders are made aware of a possible act of abuse, the instinct is to duck and cover. Is this the result of an individual character flaw? Is there some lack of professional training or development? Did they not understand the expectations and responsibilities they carry in positions of authority?

The report released Thursday from the Special Investigative Counsel, Louis J. Freeh, former director of the FBI, details the many failures of leadership involved at Penn State. One reference in the executive summary, however, makes a much broader sweeping statement about the cultural context of the university and the community:

“A culture of reverence for the football program that is ingrained at all levels of the campus community.”

It seems this statement could be adapted to many settings in which the decision to act is mitigated by a fear of bad publicity. The generic version would read, “A culture of reverence for the [fill in the blank] that is ingrained at all levels of the [organization].” Suddenly the pain of the Penn State community feels closer as we all know circumstances in which our regard for individuals or institutions can cause us to compromise on standards that cross moral, legal or ethical boundaries.

As I followed the news coverage of the events surrounding the emergence of the scandal through the Sandusky trial, I was struck by two events that appeared out-of-place. First, when the Penn State board of trustees made the decision to terminate Coach Joe Paterno (along with President Graham Spanier), the crowds protesting the end of Paterno’s career at Penn State seemed odd. The investigation was ongoing. The facts had not surfaced publicly. Yet the exuberant devotion to a sports idol and elevation of the football program to cult status revealed a distorted culture. Children had been sexually abused. We had many more questions than answers. Yet the crowds celebrated the hero-status of someone who knew about it and didn’t stop it. The situation did not call for a celebration; it called for reflection.

Second, the conclusion of the trial delivered a stack of guilty verdicts for Jerry Sandusky. Here again, crowds gathered as if it was a pep rally following the game. The fans cheered as the lawyers emerged from the courthouse to offer “post-game” remarks much like the coach and the MVP of the championship team. Media interviews followed on strategy and tactics. The coach for the losing team signaled he would be back with an appeal. One of the commentators on the news broadcast I was watching was stunned by what he saw. As a trial lawyer himself, he had seen many post trial settings, but nothing like this. The situation did not call for celebration; it called for reflection.

It’s inexcusable, but understandable that a distorted cultural context can give pause to leaders charged to act in ways that may be misunderstood or unpopular. We have much to learn from this tragedy. We have to find ways of developing healthy organizational cultures that will not bend to fears of bad publicity, but remain steadfast in ensuring well-being, providing justice and acting with integrity.

Mark Putnam is president of Central College in Pella, Iowa. He authors a blog, Mark: my words, at http://blogs.central.edu/president/ and can be reached at president@central.edu.

 

via hard-ball-innovation.posterous.com

Tom Peters: Ten Questions on Excellence

In the 20-odd months since In Search of Excellence was published, I have spoken to some 400 audiences. They were in Maui, Hawaii; and Geneva, Switzerland. They were representatives of old industries like steel and forest products, and of new industries like software and gourmet chocolate-chip cookies. They included everyone from a top wholesaler of plumbing and electrical fixtures in Sweden to the owner of the world's largest dairy store, in Norwalk, Conn. Among them were 5,000 city managers, 1,000 bakers, and the senior management of Bell Telephone Laboratories Inc.

Surprisingly, despite the diversity of the audiences, they all asked similar questions. What follows is a distillation of those questions -- and of how I try to respond.

1. Excellence focused on large companies. But is there anything you learned that relates to the particular problems and opportunities of smaller companies?

There is a lot of advice and writing on the transition a small company must go through as it grows. It suggests an inevitable cycle of deterioration, an evolution from a highly charged, entrepreneurial, customer-intensive enterprise to a bureaucracy. The implied message is: "You're going to become calcified; it's just a matter of how soon."

There is a germ of truth in this. There is no doubt that the $15-million company, no matter what the business, needs a more highly articulated set of procedures for controlling things than the $100,000 company does.But most of the scenario is hogwash. The magic of W. L. Gore, Dana, Emerson Electric, 3M, Hewlett-Packard, Procter & Gamble, PepsiCo, Milliken, and Johnson & Johnson -- in other words, the companies we hold up as excellent -- is that they have all retained a much higher share of their "small company" simplicity and vitality than their less effective competitors have.

The message of Excellence is that the key to corporate success lies in superior customer service, continuing internal entrepreneurship, and a deep belief in the dignity, worth, and potential of every person in the organization. There is no iron law that says you must lose those virtues as you grow; in fact, the principal job of senior officers of a small corporation is to maintain them. The tools may be different for a Disneyland than for a one-park, 20-acre establishment. But the intensity of customer focus can and must be maintained. The personal touch -- we call it Management By Wandering Around, courtesy of Hewlett-Packard -- can also be maintained. Giving up MBWA is not an imperative of size. But the sad news is that small companies can lose touch very easily and that the basics of Excellence are at issue from the start.

2. Excellence also focused on the concerns of people who are building companies, using models of enterprises that have been people-oriented and innovative since inception. But what can you do if you inherit a company that has been bureaucratic or lackluster for decades?

Successful turnarounds are a tough act, but what is perhaps most interesting about them is that they follow exactly the same form as the new-company building efforts. The greatest turnaround artists work repetitiously on creating distinctive strategic skills. They are tireless.Each, above all, believes in the power of a thousand little things done just a bit better.

A handful of stories come to mind. Rene McPherson inherited, as chairman, a then-$1-billion (now more than $3-billion) business in Toledo -- Dana Corp., a manufacturer of such products as brass propeller blades and axles, a company he described as "having the rottenest product line ever granted by God to a Fortune 500 company." In the 1970s he turned it around to the point at which it became the number 2 company among the 500 in return to investors. McPherson radically decentralized. He gave the factory managers autonomy and the tools to do the job: finance, personnel, purchasing, computers, etc. He created an exciting, no-nonsense, competitive environment with a ceaseless focus on practical productivity improvements. His focus was the people on the line -- "the boss of their 25 square feet," in McPherson's terms.

More important was McPherson's approach to change. When he is asked to comment on the importance of any particular program in his productivity-improvement process, he shoots back with: "It is damned important. Another feather on the scale."

A different sort of turnaround is PepsiCo Inc. Fifteen years ago it was a sleepy, second-rate competitor to The Coca-Cola Co. Today it is a vital, entrepreneurial, $7.5-billion company. The magic has been brute persistence, never assuming that the job is complete.President Andy Pearson's strategy, while in the field with a division, is to avoid the executive suite like the plague. He first zeros in on the young assistant brand manager, and he always asks the same damned questions. "What have you learned in the last 96 hours? What's going on in the test market? What are you up to?" That's the PepsiCo magic. Every one of Pearson's talks is, at best, another feather on the scale.

The theme is incredibly consistent, regardless of the company, yet each variation of the theme is unique.Successful turnabout artists are, pure and simple, no more and no less, broken records. No stone is left unturned. No stone is especially important. Yet no stone is unimportant.

3. One of Excellence's premises is that a company's attitudes about people, products, and its way of doing business are defined by its founder. The book holds up Tom Watson, the founder of IBM Corp. and the inspiration for many of IBM's characteristic values and practices, as a model. But what if the founder of your company lacks Watson's stature?

There are several ways to answer this question. Most important is to challenge the notion that the people who run the socalled excellent companies are 17 feet tall with well-honed tap-dancing skills. It's not so. Some are extroverts. Many are introverts. Tom Watson Sr. was, in his own words, an "avowed showman." On the other hand, if you're more than seven inches away from Bill Hewlett, you have a tought time hearing him. But they all have one thing in common.Almost all are obsessives.

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Jim Woods is principal and founder of InnoThink Group. A strategic innovation consulting firm engaged to catalyze bottom-line growth. He has worked with government, U.S. Army, MITRE Corporation, Pitney Bowes, Whirlpool, and 3M. Jim’s business experiences, extensive research on competitive strategy and innovation have given him a fresh perspective on improving individual and organizational performance. Jim is a prolific speaker on strategic innovation, creative leadership, uncertainty and competitive strategy. Speak with us for consulting or speaking engagements call 719-266-6703 or click here for more information.  Follow us @innothinkgroup LinkedIn Facebook

 

Innovation and Growth : Tom Peters Takes On Harvard Business Review

Thanks, Ted. It's about time the Harvard Business Review recognized the important issues raised by the entrepreneurial renaissance of the past 10 years. Since you're the Review's editor, I guess you deserve the credit for opening up the magazine to a debate on the subject, and for letting George Gilder lead it off with his article in your March-April issue. He was most eloquent in showing how, and why, entrepreneurship has made the United States more competitive in the international semiconductor market. But as for your own column in that same issue, well that's another matter. . . .

1 OK, I suppose there is a thriving industry built around the entrepreneurial phenomenon. You may also have noticed that there's a much, much bigger industry that thrives on advising and chronicling the sparkling personalities who run our largest companies. The Harvard Business School practically invented it. You and your colleagues sit on big-company for the giants. Are we to conclude that your views on the role of large companies are, ipso facto, suspect?

2 Yes, Ted, some guides to small business are that trite, but no serious student of entrepreneurship suggests that success is either easy or certain. To paint all of them as simple-minded cheerleaders is like writing off Forbes, The Wall Street Journal, and the Harvard Business Review just because The One-Minute Manager and a host of kindred publications make fixing General Motors seem as easy as one, two, three.

3 Come on, Ted. To begin with, what economic proposition offers anything but "modest plausibility," from the forecasts of Chase Econometrics to the pronouncements of Federal Reserve chairman Alan Greenspan? And surely there is at least as much truth and plausibility in the work of David L. Birch and George Gilder as in the formerly fashionable hype of, say, John Kenneth Galbraith. You remember him. He's the sage who once wrote: "There is no more pleasant fiction than that technical change is the product of the matchless ingenuity of the small man forced to employ his wits to better his neighbor. Unhappily, it is a fiction. . . . A benign providence . . . has made the industry of a few large firms an almost perfect instrument for inducing technical change."

4 Ted, Ted, Ted. "Privileged few"? "Undistinguished many"? Even at Stanford, they wouldn't go quite this far. By "privileged few," you mean, I suppose, those who've been privileged to attend Harvard Business School, and other assorted denizens of the Fortune 500 boardrooms. But who do you include among the unwashed masses -- excuse me, the "undistinguished many"? Bill Gates? Steve Jobs? Don Burr? Tom Monaghan? Seymour Cray? Fred Smith? This is really too much, dear professor. It's no wonder that guys like poor Dick Nixon, the Whittier bench warmer, came to loathe the Harvard establishment.

5 Yes, it is. But it is easier, and more conventional, to exaggerate what big companies do, and what they've done in the face of new competition and a technological revolution. And what have big companies done lately? Lost jobs. Innovated less. Moved operations mindlessly, and prematurely, offshore. Failed to protect their markets. Kept their leaders insulated from reality (although that may be changing, thanks largely to the efforts of such financial entrepreneurs -- pardon the expression -- as T. Boone Pickens and the Hafts).

6 Now hold on, Ted. When it comes to imitativeness, lack of creativity, and aversion to risk, nobody can top your longtime friends at companies such as Procter & Gamble and NBC. I refer to you to The Bigness Complex, by economists Walter Adams (former Michigan State University president) and James W. Brock, who review numerous studies on the innovativeness of big companies: "Nor do giant firms display any appetite for undertaking more fundamental and risky research projects. That is, contrary to the image that bigness is conducive to risk-taking, there is no statistically significant tendency for corporate behemoths to conduct a 'disproportionately large share of the relatively risky R&D or of the R&D aimed at entirely new products and processes. On the contrary, they generally seem to carry out a disproportionately small share of [that] R&D. . . ."

7 Come, come. Condescension is one thing, but this is perverse. Of course, many start-ups fail. So do most new products from large companies. And, yes, companies -- as well as products -- often start out as "illusionary creations." A dream is illusionary by definition. To become reality, it must be modified again and again. Even then, it may come to naught. But without such dreams, there is no progress -- at IBM, at GE, or at Microsoft.

8 Watch it, Ted, you've just tripped. A couple paragraphs back, you were dismissing most start-ups for their lack of "exceptional enterprise or new ideas." Now, you're praising big companies precisely because they avoid exceptional enterprise and new ideas. So which is it -- bold is good, or bold is bad?

9 We all like to play the Big Numbers game, Ted, but these numbers are utterly meaningless. Nobody doubts that large companies spend a lot of money on R&D. The question is: what do they get, and produce, in return? All that spending hasn't kept the Fortune 500 from losing 2.8 million jobs since 1980. Meanwhile, the United States has gained nearly 10 million jobs over the same period, the vast majority created by small, growing companies. As a nation, we're getting a far better return on investments in entrepreneurship than on big-company R&D.

But we all know you can't win the Big Numbers game without producing a figure four times larger than the other guy's biggest number. So let me just add that, as impressive as IBM's $5.5 billion may seem, it is barely a quarter of the investment that new and ongoing businesses obtained last year from the "informal" capital network of aunts, cousins, dentists, and so on.

10 Finally, a simple statement of fact. Thanks, Ted.

11 On the contrary, there is precisely such a presumption. That's the whole point, Ted. We are in an era when the gazelles seem to have a clear advantage over the elephants. Markets are fragmenting. (Yes, I know, you are the grand doyen of "global branding," but hey, I won't rub it in.) Product cycles are shrinking. Competition is intensifying. And the technology of miniaturization is upon us. The elephants know what all this means, even if you don't. Why else would they be trying so hard to imitate gazelles -- downsizing, decentralizing, working overtime to make themselves look like collections of smaller companies? If you don't believe me, talk to your friends at P&G, Du Pont, Campbell Soup, and IBM, to name but a few.

12 Sure, Genentech grew fast, but it's still less than a tenth the size of Merck or American Home Products -- and doing just fine in the pharmaceutical big leagues, thank you. Anyway, I'm not saying there are no advantages to size. But there are also any number of inherent disadvantages, which we are just beginning to understand. These days, moreover, a midsize company can often achieve many of the advantages without the disadvantages -- by subcontracting, creative use of databases, strategic alliances, and so on.

13 Look, it's no big thing, but what you're saying here is: we bigger, Harvard-bred folk should really look out for the little folk -- give them a hand, or a ladder (to use your metaphor). It's all so nauseatingly condescending. Stop. Desist. We've had enough.

14 So you want us to shut up. Ted. You want us to stop "[discrediting] the large entities" that just happen to be so generous in their support of Harvard Business School, from which so many of their leaders graduated. And we're supposed to be grateful to these larger enterprises for "[producing] the capital and the markets that encourage and sustain new companies." You're saying the little guys, who create most of the jobs and do most of the innovating, are here courtesy of the big guys. Sure, Ted, right. Now tell us about the helping hand IBM gave to Control Data, Cray, Amdahl, Apple, Digital Equipment, Hewlett-Packard, Compaq, Sun Microsystems. . . . Isn't there some new best-seller about swimming with the sharks?

15 I suppose this is true, as far as it goes. But tell me, Ted: if company size is no big deal after all, why is HBR devoting its pages to a major debate on the subject? Of course, the "world's work gets done by all sizes of enterprise." What that statement overlooks are the real problems large companies are having because they are large, and the challenges they are facing from smaller companies -- which are producing better results with fewer resources.

Economies change, Ted. There have been long periods when predictability reigned, and large, stable enterprises thrived. But isn't it possible that we've entered a new era -- call it the Age of the Gazelle -- in which excessive bigness has become a handicap, while leanness and flexibility have emerged as advantages? There is much evidence to support such a view, not just in the United States, but in China, Belgium, Italy, Great Britain, and Spain, to name but a few of the countries where aggressive new companies are on the cutting edge of economic change. These days, even executives of large companies are questioning the advantages of size. Consider Don Povejsil, retired vice-president for corporate planning at Westinghouse, who recently stated that "most of the classical justifications of large size have proved to be of minimal value, or counter-productive, or fallacious."

That's why the Gilder article is so timely. Maybe you should go back and reread it. He makes a very convincing case that size is a profoundly important issue in today's economy -- an issue that can't be dismissed with platitudes about the need for companies big and small. via inc.com 

Jim Woods is principal and founder of InnoThink Group. A strategic innovation consulting firm engaged to catalyze bottom-line growth. He has worked with government, U.S. Army, MITRE Corporation, Pitney Bowes, Whirlpool, and 3M. Jim’s business experiences, extensive research on competitive strategy and innovation have given him a fresh perspective on improving individual and organizational performance. Jim is a prolific speaker on strategic innovation, creative leadership, uncertainty and competitive strategy. Speak with us for consulting or speaking engagements call 719-266-6703 or click here for more information.  Follow us @innothinkgroup LinkedIn

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Why Best Practices Get You Only So Far - C.K. Prahalad

Companies identify best practices, particularly those of market leaders, and try to implement them. Such benchmarking has a role to play in business, but I’m not exactly a fan of the process. It may allow enterprises to catch up with competitors, but it won’t turn them into market leaders. Organizations become winners by spotting big opportunities and inventing next practices—as I’ve pointed out to CEOs for over two decades now.

Companies become winners by spotting big opportunities and inventing next practices.

Next practices are all about innovation: imagining what the future will look like; identifying the mega-opportunities that will arise; and building capabilities to capitalize on them. Apple’s Steve Jobs and Tata Motors’ Ratan Tata do just that.

Most executives believe it’s tough to identify breakthrough opportunities. However, several are pretty obvious; Peter Drucker once said that the best opportunities are “visible, but not seen.” I help executives unearth opportunities by focusing them on big problems that their companies will benefit from by tackling. They must ask six questions:

• Is the problem widely recognized?

• Does it affect other industries?

• Are radical innovations needed to tackle the problem?

• Can tackling it change the industry’s economics?

• Will addressing this issue give us a fresh source of competitive advantage?

via excellenceininnovationblog.posterous.com

Why Best Practices Get You Only So Far - C.K. Prahalad

Hire Jim Woods for your event. Jim speaks and consults on innovation, strategy, competition, leadership, and creativity.

Call: +1 719-266-6703 begin_of_the_skype_highlighting FREE +1 719-266-6703end_of_the_skype_highlighting Email: consulting@innothinkgroup.com

As president and CEO of InnoThink Group Jim works confidentially with economic development agencies, start ups, governments non profits and business enterprises. Visit our website: www.innothinkgroup.com

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Jim Woods is president and founder of InnoThink Group. A global management consulting firms specialized solely in helping organizations of all sizes in all industries catalyzing top line growth through strategic innovation and hypercompetition. Jim has over 25 years consulting experience in working with small, mid size and Fortune 1000 companies. He is a former U.S. Navy Seabee and grandfather of five. To arrange for Jim to speak at your next event or devise an effective growth strategy email or call us at 719-266-6703 begin_of_the_skype_highlighting FREE 719-266-6703end_of_the_skype_highlighting for availability. consulting@innothinkgroup.com

via excellenceininnovationblog.posterous.com

An Innovative and Creative Class of Graduates Assimilating to The Metro

"So if you haven't found a job yet: You're better off coming to the city than sitting on your parents' couch."
Mayor Michael Bloomberg, Remarks at the Cornell University 2012 Convocation, May 27, 2012

 

As another college graduation season draws to a close, today’s New York Times reports the results of a small analysis we conducted on college degree attainment rates in metropolitan areas. We examined the share of adults age 25 and over in the 100 largest U.S. metro areas who held at least a bachelor’s degree in 2010, versus in 1970. (The Times’ website provides a table with the key data.)

It suggests a centrifugal force that is concentrating the nation’s college graduates into a set of metro areas that, like Bloomberg’s New York, are pulling farther away from the pack.

But first: Why is high college degree attainment important for a metropolitan area? The article notes that places in which lots of college graduates cluster exhibit patterns that, not surprisingly, are common to college graduates themselves: longer life expectancies, higher incomes, fewer single-parent families. Indeed, differences in adults’ rate of bachelor’s degree attainment explain nearly three-quarters of the variation in per capita income among metro areas in 2010. And higher regional income can translate into a higher tax base, better public services, and more private amenities.

The Times story emphasized one of the key findings of the analysis: as the overall American population grew more educated over that 40-year period, metro areas became less alike in their rates of college degree attainment. It reports the story from Dayton, OH, a metro area that ranked in the middle of the pack in 1970 (49^th out of 100), when it had a large supply of good jobs, at firms like NCR and GM, that didn’t require a college degree. Today, however, in the wake of significant manufacturing job losses, it ranks 85^th among the 100 largest metro areas, with just 24 percent of its adults holding a college degree, well below the metro average of 32 percent.

By contrast, the Chicago metro area—also a significant manufacturing center in 1970—had a very similar share of college graduates to Dayton that year. Yet it managed a large jump in educational attainment over the succeeding four decades, as its economy diversified and moved into high-value services, ranking the region 18^th overall by 2010 (34 percent of its adults hold a four-year degree).

These two places exemplified the broader divergence that occurred over time among metro areas in their college degree attainment rates. Some trends worth noting:

• In the 20 most highly educated metro areas in 1970, 16 percent of adults held a college degree. In those same metro areas in 2010, 38 percent of adults held a college degree, a 22 percentage-point increase. The 20 least educated metro areas in 1970 made substantial progress too—growing their college degree share from 9 percent to 25 percent—but that 16 percentage-point increase still left them farther behind the “smartest” metro areas by 2010.
• Seven of the ten most educated metro areas in 1970 remained among the ten most educated in 2010. Washington, D.C. held the number one spot in both years. Only four of the ten least educated metro areas in 1970 remained in that group in 2010, with Central Valley immigrant magnets such as Stockton, Modesto, and Bakersfield moving down the list during that time.
• Metro areas that enjoyed the most substantial jumps in their college degree attainment ranks included many, like Dayton, that lost a tremendous share of their manufacturing between 1970 and 2010. But because regions like Worcester, Baltimore, Charlotte, and Pittsburgh shed much of that base earlier than other manufacturing centers, they have had more time to build services-oriented economies in sectors like health, professional services, higher education, and finance, and to grow, attract, and retain highly educated populations to fill those jobs.
• When it comes to absolute increases in the share of adults with college degrees, size clearly matters. Among the 20 metro areas with the largest such increases from 1970 to 2010 were Boston, San Francisco, Washington, New York, Chicago, Seattle, Atlanta, and Denver. Indeed, the metro areas posting the largest gains are, on average, more than three times as large as the metro areas experiencing the smallest gains over that period.

So what’s going on? A mixture of powerful economic phenomena are boosting the value of living around other college graduates. Young educated workers will change jobs numerous times over their careers, which makes living in a large, “thick” labor market with diverse opportunities more appealing. The same force leads an increasing number of educated two-earner couples to these same sorts of large metro areas. Living in a highly educated metro area boosts one’s own acquisition of human capital and earning power, and leads to better employment outcomes for workers across the education spectrum.

This doesn’t mean, however, that it’s the end of the line for Dayton and other metro areas that are lagging in the race for highly educated workers. If nothing else, the experience of places like Pittsburgh indicates that progress is possible, even for metro areas that are not exactly migration magnets for young adults. But those places also provide a reminder that an upgrade in educational attainment doesn’t occur spontaneously, and often accompanies broader economic transition in the region.

Young people will still leave Dayton, as they do every major U.S. metro area, for opportunities in places like Charlotte and New York. Yet with respected higher educational institutions, a still-significant advanced manufacturing base, innovation hubs like Wright-Patterson Air Force Base, and a new sense of urgency, Dayton may have the fundamentals to compete more vigorously for a highly educated workforce in the coming decades, and the prosperity that it can bring.

• 

  Alan Berube

  Senior Fellow and Research Director

  Metropolitan Policy Program

   

  Alan Berube is senior fellow and research director at the Brookings Institution Metropolitan Policy Program. His areas of expertise include metropolitan demographic and economic trends, and social policies affecting low-income families and communities.

via brookings.edu

 

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