Thanks to Verne Harnish for Leading the Fortune Growth Summit. It was fun to participate as a speaker, get a chance to connect with some amazing companies and listen to a group of very talented business thinkers The link to the Gazelles TV channel on Youtube is here. My after-interview is here:
(embed is sketchy, here's the link if it doesn't work: http://www.youtube.com/user/gazellestv#p/u/2/JEunw6mE9dA)
It's hard not to be impressed by David Brooks, particularly when he agrees with you. The New York Times columnist wrote a piece today called The Talent Magnet in which he discusses the type of open, dynamic environment that attracts the best and brightest from around the world:
In this century, economic competition between countries is less like the competition between armies or sports teams (with hermetically sealed units bashing or racing against each other). It’s more like the competition between elite universities, who vie for prestige in a networked search for knowledge. It’s less: “We will crush you with our efficiency and might.” It’s more: “We have the best talent and the best values, so if you want to make the most of your own capacities, you’ll come join us.” [Emphasis Added]
The new sort of competition is all about charisma. It’s about gathering talent in one spot (in the information economy, geography matters more than ever because people are most creative when they collaborate face to face). This concentration of talent then attracts more talent, which creates more collaboration, which multiplies everybody’s skills, which attracts more talent and so on.
In one sense, I think Mr. Brooks is right. Talented people are inexorably drawn to other talented people. But, his comparison to universities hits the second ring of the bull's eye. The center target is the competition for resources that companies in the entrepreneurial space face every day: to amass the most dense collection of human talent and maximize their creative output. If he wants a model for the US government to emulate, he need drive no further than the 25 square miles around Mountain View, California or similar US venture center.
In Built for Change, we studied several companies--ones I call Transformative--who have competed for these extraordinary individuals with aplomb. For the most part, they did it in two ways. First, companies like Southwest and Zappo's fostered an irreverent corporate culture that paid no obeisance to industry conventions. Indeed, in language pre-echoing Mr. Brooks, the book notes that:
"An irreverent work environment "creates a self-reinforcing magnetic effect that attracts and retains talented people"
The second way Transformative Companies became talent magnets was with something I called non-process processes. Companies like Netflix eschewed rigid corporate rules around vacation days, face time, and policy manuals. Reviews are very simple: does the person pass the keeper test? Specifically, if they told their boss they were leaving, how hard would their boss fight to keep them? Deadlines and responsibilities are clear, how someone gets their work done is up to them.
That kind of latitude breeds a fierce loyalty, because most people realize that they won't be given such freedom elsewhere. Again, from the book:
"...Netflix now finds itself a talent magnet. Recruiting has become almost effortless...Netflix's potential employees know that this is a place that provides maximal leeway to those who are guaranteed producers."
I hope David Brooks is right and President Obama takes the steps for the US to remain a talent magnet. All our futures are riding on it.
In the aftermath of Built for Change, I've picked up a new writing gig as a Contributing Editor at Digital Media Thoughts, with a focus on the Digital Home. I'll be working with Jason Dunn and several other super smart writers and technologists thinking about the next wave of our increasingly digital lives. Check out a quick post here.
In today's Wall Street Journal, Christine Rosen has a great review of Is the Internet Changing the Way You Think?, edited by John Brockman. Article link here. She cleverly titled the article Pay Attention, Please with the equally provocative subtitle: The New Darwinian imperative may be 'survival of the focused.'
Thomas Metzinger, a philosopher, argues that the Internet isn't changing the way we think; it is exacerbating the deceptively simple challenge of "attention management." "Attention is a finite commodity, and it is absolutely essential to living a good life," he argues. The way we use the Internet today represents "not only an organized attack on the space of consciousness per se but also a mild form of depersonalization. . . . I call it public dreaming."
These are not the laments of technophobes. MIT professor Rodney Brooks, an expert on robotics, worries that the Internet "is stealing our attention. It competes for it with everything else we do." Neuroscientist Brian Knutson imagines a near future in which "the Internet may impose a 'survival of the focused,' in which individuals gifted with some natural ability to stay on target, or who are hopped up enough stimulants, forge ahead while the rest of us flail helpless in a Web-based attentional vortex."
As the parent of 4 young kids, this is something I worry about a lot. My children have already developed a concerning attachment to all the electronic devices (imitating their parents unfortunately) that bring staccato bursts of entertainment, news and connection with friends. I worry they won't be able to function without constant stimulation, including not being able to finish homework and tests in school. The irony is that they're getting very bad at something I hoped they would never excel at: Do absolutely nothing. But now I'm not so sure it isn't a good idea. These themes were explored in a New York Times article from June called Attached to Computers and Paying a Price (link here: http://www.nytimes.com/2010/06/07/technology/07brain.html).
The key takeaway:
Scientists say juggling e-mail, phone calls and other incoming information can change how people think and behave. They say our ability to focus is being undermined by bursts of information.
These play to a primitive impulse to respond to immediate opportunities and threats. The stimulation provokes excitement — a dopamine squirt — that researchers say can be addictive. In its absence, people feel bored.
Unfortunately, thinking about my own behavior in the middle of a boring meeting, I will often reach for a dopamine squirt via my T-Mobile Slide. Once it starts it's hard to stop. Same thing during dinner, while on a conference call, pretty much any time. You can always tell when someone you're talking with on the phone is doing it too. There are the long pauses and generic answers to questions. The scientists sited in these articles seem to suggest that previously we weren't tuning out as much, but is that really so? I can only assume that before we all had these devices we were either better listeners or more accomplished stealth daydreamers, because there's no way everyone was staying focused the whole time or regularly checking out without anyone noticing.
I argued in Built for Change that the best companies are very good at what I call being Proactively Inactive. In other words: intentionally shutting off in order to plan, assimilate information and clear the mental clutter. They do this on an organizational level; it's structured, scheduled and enforced by the group with social pressure ("If I'm shutting off my Blackberry, you should too."). But if the scientists are to be believed, those who never forget or who are able to (re)learn how to disconnect as individuals will have the greatest success.
Hat tip to Scott Little of Legend portfolio company Invoice Insight on his response to my shameless promotion of Built for Change:
Today's Capital Business from the Washington Post has a great interview with Chipotle (NYSE: CMG) CEO Monty Moran. (Link to the original Motley Fool Live Chat interview here.) Chipotle's had a great run of late, with the stock rising nearly 3X in less than 12 months, the pending introduction of an Asian concept and a deeper focus on using locally grown ingredients. In the brief interview, the Motley Fool staff provides a concise window into what differentiates the company and undergirds its success.
The article piqued my interest because Chipotle is one of the Transformative Companies from Built for Change (Amazon link here: http://www.amazon.com/Built-Change-Essential-Transformative-Companies/dp/0313381429/ref=sr_1_2?ie=UTF8&qid=1291391866&sr=8-2) that my publisher pushed back on. Essentially, they were flummoxed how a burrito shop could be anything but a dull throwback to the tired food retailing space. More Google and Apple, less fast food was their message. They're trying to move unit sales, after all, and tech is hot.
But as the interview points out, you don't have to be a tech company to transform your market. You just have to know what you do well. For example, when forced to offer a breakfast menu in order to secure a valuable spot at Dulles Airport, they kept to their already successful model. The money-quote from Moran:
"What we're most pleased with is that we've been able to keep the breakfast offering so simple that it didn't require significant changes to labor or operations, and didn't complicate things for customers."
The Chapter on Process emphasizes this same point and other food retailers are catching on. The latest is Vapiano, an import from Europe in the Italian Fast Casual space. The ingredients are great, but the offerings are relatively narrow. Like Chipotle, they place limits on their menu so the choices for employees and customers are straightforward. For these types of businesses, success comes from both executing well and knowing what not to do.
Around this time every year, Google delivers a digital bon bon to anyone with a wisp of curiosity and a moment of spare time. Chalked full of current data on what's trending up and down in Internet searches, the Google Zeitgeist resembles a stock market of hotness, momentum, waxing or waning influence and interest. If you're dying to know whether Justin Bieber is still the hottest thing, this is the place to find out.
But I quickly click past the contemporary cultural searches to an area Google politely if somewhat condescendingly labels "Quirky." Here resides my favorite section: the "How To" searches. These are the private spaces where people furtively express their personal aspirations, their desires to improve themselves and the things they wished they'd once taken the time to learn, and may yet make the effort.
The following are the top ten How To searches by year going back to 2006 (sorry about the formatting).
| 2010 | 2009 | 2008 | 2007 | 2006 | |
| 1 | Draw | Kiss | Draw | Kiss | Refinance |
| 2 | Kiss | Draw | Kiss | Draw | Wiki |
| 3 | Knit | Knit | Write | Knit | Drift |
| 4 | Meditate | Crochet | Cook | Hack | Podcast |
| 5 | Dougie | Flirt | Tie | Dance | Scream |
| 6 | Flirt | Meditate | Hack | Crochet | Levitate |
| 7 | Hack | Hack | Run | Meditate | Tattoo |
| 8 | Fight | Sing | Cite | Flirt | Blog |
| 9 | Sing | Dance | Paint | Levitate | Kickflip |
| 10 | Dance | Fight | Spell | Skateboard | Draw |
A few observations. First, in good times and bad people are consistently interested in being better kissers, flirters, hackers and drawers. I suspect some enterprising sociology grad student could earn her PhD if she could draw a connection between those activities. Also, what's the deal with crafts? Whether it's knitting, crotchet, or similar hand craft, at least one of them makes the top ten every year. Although, interestingly it's not always the same one. It's a curiosity what makes macrame this year's Justin Bieber of crafts. Perhaps there's a different PhD in the making for that one. Finally, somewhere between 2006 and 2007 people shifted from levitating to meditating, which seems infinitely more achievable, if less aspirational.
Then, there's the great outlier. In all of the years I've been amusing myself with this little skylark, there's been only one in which a How To search on the topic of personal finance even made the list. That was How To Refinance, which was the #1 How To search in 2006. Of course, by 2008 the mortgage market had completely melted down; no PhD thesis required to draw the connection.
When the absolute number one thing on our collective minds is how to wring a few percentage points out of our mortgages, or get a loan without a job or collateral, bad news is on the way. I can't help shaking my head a bit that this most unusual top ten list was published in December of 2006, a full 15 months ahead of Bear Stearns and nearly 20 months before Lehman Brothers. Someone was whispering breathlessly in our ears, but we weren't listening. The evidence is pretty convincing that we are all better off when we stick with kissing and drawing.
The New York Times has a great article today on how David Bradley turned around the venerable but chronically unprofitable Atlantic Media. It's a story of vigorous entrepreneurial energy, perseverance and creativity. But, how did it happen and can other companies do the same?
Bradley and Co did it first by defying conventional wisdom (what I call Banishing Small Thinking here) and by being willing to reinvent themselves with an unrelenting attack on their own business model (something I call an Appetite for Destruction also here). Now, Atlantic media is a growing and profitable enterprise in a segment characterized by contraction, frustration and red ink.
A terrific example the article sites is the merging of the digital and print sales forces. While many other publishers have since followed suit, this was complete heterodoxy at the time. In most cases, the digital and print sides of the house didn't even believe they were in the same business. Nonsense, said the Atlantic. There's no New Media and Old Media, there's no Digital Media and Analog media, there's only media: one strategy, one company, one experience. Banishing Small Thinking indeed.
My favorite quote from the article, however, comes from Justin Smith, President of Atlantic Media, and circumscribes the Appetite for Destruction attitude. In discussing the mindset required to endure such wrenching change, he states:
“We imagined ourselves as a venture-capital-backed start-up in Silicon Valley whose mission was to attack and disrupt The Atlantic...In essence, we brainstormed the question, ‘What would we do if the goal was to aggressively cannibalize ourselves?’ ”
When working with our portfolio companies, I try to push management to ask themselves the same question, although phrased a little differently. Specifically, I ask them:
"If the board fired you tomorrow and you started a new enterprise but could only hire one person from the company, who would it be? Now, with that one other person, how would you eviscerate our business model?"
This question inevitably initiates a fascinating conversation about first priorities:
and then more broadly, our economic exposure:
And finally, what do we do about it? Could we restart our business with 75% less in operating costs? How? Who would lead it? What should we start doing today to hasten the business model change we believe is inevitable?
Answering these questions leads to a generative discussion about what we should be doing to transform ourselves first, before someone else does it for us.
In this post on Thursday, I argued that Groupon should say no to Google's $6 billion offer. Now Chicago's Breaking Business is reporting Groupon rejects Google's offer, will stay independent. I'm sure some will say "bird on the hand..." etc. but the management and shareholders have a chance to build something extraordinary, dare I say transformative, in the local retailing space. If you're lucky, chances like that come along once a career in most cases. If the reports are accurate, I say kudos to all for having the courage to keep going.
There's been a 1985 Playboy Magazine interview with Steve Jobs making the Internet rounds lately. Jobs is 29 at the time, and even at that relatively young age he delivers a tour-de-force of entrepreneurial insight and wisdom.
He mentions all 8 of the traits of transformative companies that I write about in Built for Change, and it's remarkable how much they synchronize throughout the interview. Below are the themes from the book and Jobs' specific quotes that relate to them:
- Universality--an elemental goal in all of us: "...right now is one of those moments when we are influencing the future. Most of the time, we're taking things. Neither you nor I made the clothes we wear; we don't make the food or grow the foods we eat; we use a language that was developed by other people; we use another society's mathematics. Very rarely do we get a chance to put something back into that pool. I think we have that opportunity now. And no, we don't know where it will lead. We just know there's something much bigger than any of us here." [emphasis added]
- Fearlessness--entrepreneurial self-confidence born of deep customer knowledge: In competition with IBM and the other dominant computer companies, "...if there's going to be innovation in this industry, it'll come from us. It's the only way we can compete with them. If we go fast enough, they can't keep up."
- Process--thinking differently not just about product, but how it's made: "At the time we designed Macintosh, we also designed a machine to build the machine. We spent $20,000,000 building the computer industry's most automated factory. But that's not enough. Rather than take seven years to write off our factory, as most companies would do, we're writing it off in two. We will throw it away at the end of 1985 and build our second one, and we will write that off in two years and throw that away, so that three years from now, we'll be on to our third automated factory. That's the only way we can be fast enough."
- Irreverence--we're aware of our competition, but we don't follow them: On competing not just in the Fortune 500, but more broadly, "Our approach is to think of them not as businesses but as collections of people. We want to qualitatively change the way people work...we've got to approach this from a grass-roots point of view. To use a networking as an example, rather than focusing on wiring up whole companies, as IBM is doing, we're going to focus on the phenomenon of the small work group.
- Banishing Small Thinking--no Devil's Advocates allowed: On the need to keep Apple's culture innovative, "When two young people walk in with the next thing, are we going to embrace it and say this is fantastic? Are we going to be willing to drop our models, or are we going to explain it away? I think we'll do better, because we're completely aware of it and we make it a priority."
- Appetite for Destruction--we don't just rock the boat, we sink it: On attacking competitors' business models and keeping ahead, "As soon as we can lower prices, we do."
- Detachment--stepping away, becoming proactively inactive: On separating from the day-to-day in order to gain fresh perspectives, "...a lot of times, artists have to go "Bye. I have to go. I'm going crazy and I'm getting out of here." And they go and hibernate somewhere. Maybe they re-emerge a little differently."
- Reinvention--keeping what's core while crafting a new future: On how the Macintosh was different from two recent failed product introductions, the Lisa and the Apple III, "...so we had to make a break. We just had to do it. We wanted to make sure it was great, because it may be the last chance that any of us get to make a clean break."
If you had invested in Apple stock at the time of this interview and held it, you would have made 185 X your money. In contrast, if you had owned the NASDAQ composite, your return would have been 8.7 X. The signs of success were all there for those who were looking for them.