“Business has only two functions—marketing and innovation.” I have heard this quotation attributed to Peter Drucker, a.k.a. “the father of business consulting” (talk about a guy with some dubious children), as well as Czech novelist Milan Kundera. Citations for Drucker usually extend…
I was thinking about a class that my daughter Simone and wife Rebecca went to a couple of months ago. It was a girls leadership course for moms and daughters; my daughter is 10 years old.
In one of the three workshops that they went to they came home with a tool that I found pretty interesting. It’s called the “But bomb.”
The general idea is that when my daughter, and to be clear … anyone, is presented with a situation where they need to describe what it is that they need, give a compliment or deal with conflict they shouldn’t add anything to what they intend to say.
“I appreciate your position on that Parker … BUT, let me tell you why it’s wrong.”
“You look wonderful today Rebecca … BUT, your shirt is wrinkled.”
“I didn’t get to my homework … BUT/BECAUSE, i had a basketball game.”
You get the point. The initial statement is what is important. The second is another thought. They shouldn’t be packed together.
I find myself with this bad habit often and I’m sure many of you see or commit this yourself. Remember being at that meeting when you said that’s a really great idea but…. You are invalidating everything that you’re saying to the person that was a compliment and packing everything into the problem. And it’s passive agressive.
Imagine how much more powerful and direct these statements can become:
“I appreciate your position on that Parker. I disagree with the following assumption.”
“You look wonderful today Rebecca.”
“I didn’t get to my homework. I’m sorry.”
The effect of the but bomb in the office is substantial and expensive. It’s devalues the contributions of your team. It reinforces distrust amongst peers and it plain-old makes people upset and that contributes to a decline in productivity.
If you find yourself complementing or giving direct feedback followed by a but … stop. Reassess what you’re going to say and why it’s important. We have a little bit of fun with this at home calling out each other’s but bombs; “That was a but bomb dad!” And i’ve started to use it in the office as well.
The ultimate lesson of the but bomb? Be clear with what you say.
Being direct in describing what you mean will benefit you and the person you’re talking to.
When 90 per cent of executives say they would use social media more “if it were helpful to their business,” the C-Suite is clearly not seeing the ROI of personal engagement. Thankfully, there are a few notable exceptions. It is to these CEOs that executives should look for proof as to why the C…
Most fascinating about the results is not the raw volume and gradual increase but the timing. I believe there is a correlation between the popularization of Social Networks (specifically Facebook) and the need to use different processes in Marketing. The beginning of the recorded search volume coincides with just that…the popular rising of Facebook.
A guide to getting starting with Agile Marketing where I discuss the patterns that have occurred in Agile development and now marketing.
Businesses tend to think their major constraint is resources, when in reality it’s process. And the process constraint modern businesses need to over come hierarchy is agile.
Agile is a process designed to achieve difficult and rewarding innovations by priority, not by stockpiling resources. Agile is the process of full value thinking, not marginal thinking.
Besides, abundant resources tend to stymie innovation. If you don’t believe me, go work at a company that has piles of cash. There’s often no way to innovate while still conforming to their rule of marginal costs, a way of thinking widely taught in business schools and conventional economics classes.
Case Study: Blockbuster Video vs. Netflix
Back in the day, Blockbuster Video made 70% of its profits from late fees. Blockbuster made money the more its customers watched DVDs and returned them late. Netflix, a company that had no late fees, made more money the less its customers watched DVDs. The less they had to mail discs, the more their inventory could serve.
So both companies had different strategies, but why did Blockbuster fail and Netflix succeed?
When evaluating the opportunity costs, conventional economics says ignore the sunk and fixed costs, which have already been incurred, and base decisions on the marginal costs and marginal revenues of those alternatives. But that’s what Blockbuster did, and they lost big!
Blockbuster looked at the margins of DVD mailing (and, later, online streaming) and decided the marginal revenue was too small to worry about compared to the massive amounts of money being made on in-store rentals and late fees.
Netflix looked at the full potential of DVD mailing and online streaming, decided that was where the world was headed and was unencumbered by marginal concerns or the maintenance of existing margins.
Blockbuster also feared cannibalizing its own brick-and-mortar business. They thought the business alternative to not pursuing Netflix was to continue making huge 66% margins on billions of dollars in revenue.
In reality, Blockbuster’s business alternative was bankruptcy.
The Conventional Ideas of “The Right Stuff” for Business Success:
The New Idea of High-Flyers for Agile Business Success:
Marginal Thinking Is Fear and Conservatism
Marginal strategy aims to protect business. The problem is the business you protect will probably become useless or disappear, especially in competitive, quick-changing markets and technology. As soon as technological innovation got involved with movie rental, the world changed and the big companies like Blockbuster disappeared with terrible speed.
The way an agile business thinks is not marginal. Agile asks, “If we had no existing business, how could we best build a new one?”
Many start-ups have no existing business, which is a problem.
But it’s also the biggest opportunity they have, because producing on the margin may be cheaper and profitable in the short-term, but it doesn’t help develop new capabilities, which is what start-ups offer.
“Leveraging” what you have already put in place to try and retrofit it to a new opportunity is usually a sure way failure. It’s how disruptive forces overtake you in the market, because the full cost of doing business to a new market entrant is an established company’s marginal cost.
That’s how the small and agile do more with less.
Just This One Time Can’t Hurt
In his book How Will You Measure Your Life? Clayton Christensen says there’s a personal equivalent to marginal thinking, and it sounds like this: “I know this is wrong, but just this once I need to do it. One time won’t hurt.”
The marginal cost of doing something always seems lower than doing the full, hard way. But life—and business—is a series of “just this once” contingencies. Going 100% is easier than 98% of the time, Christensen says, because of all the time and effort wasted determining whether an situation falls into the 2%, “just-this-once” category or not.
Agile always pursues new opportunities 100%, but it makes small steps to test the situation along the way. If Blockbuster had not considered DVD mailing as too small and marginal to worry about—had they gone 100% in on testing the waters of mailing and streaming—they probably would have taken much of Netflix’s business before Netflix ever got off the ground.
Instead, they went extinct—not an agile move, at all.
Agile process allows innovators the space they need to explore while making the minimum number of concessions to the existing business hierarchy. It ensures day-to-day operations continue long enough for a working, evolving strategy to emerge.
Exploration. Testing. Re-evaluation. These are the gradual repetitions of a solid agile process:
Dual operating systems
These repetitions in time produce a lasting company culture, because culture isn’t something you collaboratively write and agree upon in a meeting. Culture is something that emerges through the repeated process. It supports—or spites—what you say you are doing.
Case Study: Enron
We all know people and companies that say one thing and do the other. In fact, a copywriter I know insists that the business taglines clients like the best do either one of two things:
The tagline states the exact truth.
The tagline states the exact opposite of the truth.
And companies have a hard time telling one from the other. They know what they like when they hear it, and often what they hear is a mirror image of the truth.
For an example, sadly, one need not look too far into the recent past. In his book “How Will You Measure Your Life”, Clayton Christensen recalls Enron, an energy company whose explicitly enumerated points of culture included:
Blah, blah, blah. All of that proved in time to be total hogwash when compared to the actions that were common in the real culture of the company. And when it all surfaced, the company was done for, and people went to prison.
Culture doesn’t come from a list of highfalutin words like “integrity.” It comes from a backlog of work priorities and the repetition of a process for how to use resources to achieve them.
Actions speak louder than words.
Let’s Do Have a Purpose, However
Rather than making a statement about company culture, agile managers make statements about purpose. These are not the same things. Capabilities create culture, and culture tries to live up to a purpose.
“Whether they want one or not, every company has a purpose—it rests in the priorities of the company and effectively shapes the rules by which managers and employees decide what is most important in each unique situation,” writes Christensen.
A statement of purpose has three main things:
a likeness the company is trying to embody
a commitment to that likeness, and
metrics to measure the progress of fulfilling that likeness
Christensen continues: “Companies that aspire to positive impact must never leave their purpose to chance. Worthy purposes rarely emerge inadvertently; the world is too full of mirage, paradox, and uncertainty to leave this to fate. Purpose must be deliberately conceived and chosen, and then pursued. When that is in place, however, then how the company gets there is typically emergent—as opportunities and challenges emerge and are pursued.”
Do your company’s capabilities—resources, processes, priorities—create a culture you would say has a purpose worth writing down?
Having been a Yahoo! In the early days it’s sad to see the discourse swirling around the work-from-home policy in the public eye right now. I can’t say it’s the worst policy for Yahoo! at this point in time but the message that ‘should’ be reinforced is that accountability and autonomy will fuel happiness and ultimately better product. Everyone works differently and if you want/need/should be at home, or in a conference room locked away from the noise of the cubes, or somewhere else we (the royal we) clearly have the technology to make that happen. The message should never be about butts-in-seats rather accountability for bringing the best ideas to market.
If you’ve spent any time around engineers and software developers, you will hear a question, the same question in one form or another that you will hear at hierarchy-dominated companies that don’t practice agile techniques, where the transparency, communication and accountability are lacking:
Does management ever do anything?
Does it seem like there are more managers than employees?
Why do we need managers at all?
On the other hand, if you work at an agile business now, you probably have grown accustomed to working in networks with self-employed, self-motivated contractors. You’re probably comfortable following leads, directing projects, and dealing with people who use their own resources to handle things.
Agile workplaces are definitely different from the old-school hierarchy, but the same kind of question still pops up:
Do we even need a manager?
Is there a skill managers have that justifies authority?
Who died and made that guy boss?
But what are the best practices today, especially now that modern business is more about innovation than assembly lines?
A recent study by Nicholas Bloom of Stanford University proves that, if you’ve ever asked what management does, you may have good reason to wonder.
Bloom’s research group, including Raffaella Sadun of Harvard Business School and John Van Reenen at the London School of Economics, tested whether thousands of businesses followed practices considered to be essential to good management.
After compiling 10 years worth of studies from 100 researchers in 20 different countries covering 8000 medium-sized manufacturing firms with between 50 and 5000 employees, the results were unequivocal:
In Bloom’s own words: “Poor management is rampant.”
That’s probably not a surprise to anyone, except the managers themselves.
The 3 Essential Elements of Good Management
Bloom found these three best practices were essential to good management:
Does the organization in question support long-term goals with tough—but achievable—short-term benchmarks?
Does the organization reward high performers?
Do they retrain or move under-performers?
Does the organization collect and identify performance data to identify opportunities for improvement?
(Bloom used those three elements and ranked the 8000 companies in the study on a scale from 1 to 5—5 being the best—where each point represented a 23% rise in productivity, 14% increase in market capitalization, and 1.4% annual sales growth. Scores of 5 were rare; 1’s were plentiful.)
The Prognosis Is Not Complicated
Nor does it need to be.
A staggering majority of businesses don’t know how to develop targets, create incentives to reach those targets, and monitor and measure progress.
As Bloom states, “A call for ‘better management’ may not seem like a cutting-edge idea, but given the potentially large effects on incomes, productivity and delivery of critically needed services worldwide, it may actually be a radical one.”
I think agile practices—with open communication; a combination of scrums, sprints and data visualization; and emphasis on emergent strategies and a “try anything once” mentality—are the answer.
Awareness Is The First Step
In the same way that awareness is the first step in customer purchase, awareness is also the first step in improving bad business management.
Business managers either don’t know they have a problem, or they can’t be objective in evaluating their own skill level. It seems bad managers spend too much time lobbying for how good a manager they think they are.
For example, 79% of the 8000 organizations in the study claimed to have “above average” management practices. That’s 79% of cross-section of overwhelmingly poor business managers, whose self-assessment of management ability had no correlation to their measured score in Bloom’s study. No correlation!
Not only does this expose management’s typically rosy opinion of itself, it also suggests the human tendency—like the children of Lake Woebegone—to believe, “We’re all above average.”
“Above average.” It’s not the best tagline, considering how low the bar sits to begin with.
Criticisms of Bloom’s Study
Bloom’s research, which he also discussed on Freakonomics Radio episode “I Consult, Therefore I Am” (11/26/2012), showed management can improve. In fact, improvements come fairly easy.
When companies in the study received five months of heavy business consulting versus only one month of light consulting, the heavy consulting produced dramatically better business results.
But many of the companies Bloom studied worked in textile and steel mill environments in places like India, where simple improvements like “inventory control”—having some, rather than none—and “equipment maintenance” produced vast improvements over the control group. Presumably, some of these companies had rusty nails around the warehouse and pools of engine oil under every forklift.
Agile marketers more likely work in technology environments building SaaS software. What good could specific management initiatives like those do for us?
Not much, on the surface.
And what about business consultants?
If you don’t have a high opinion of business management, you probably don’t have a high opinion of business management consultants. Freakonomics host Steven J. Dubner lists the objections to consultants:
Many consultants tell clients what they want to hear.
Clients hire consultants to justify decisions they already want to make.
Clients hire consultants to have a scapegoat in case those decisions don’t work.
Business consultants have no qualifications or certifications.
Business consultants have little actual experience in business strategy.
By one funny (if sexist) summary, a management consultant is “a guy that can tell you 50 ways to make love but doesn’t know any women.”
Spare Us The Celebrity Figurehead
In a second Freakonomics podcast, “How Much Does A good Boss Really Matter?” (12/26/2012), Dubner references studies that show a good boss can produce upwards of 10% gains in worker productivity.
That’s the boss’s contribution alone, and 10% is substantial. But these are direct bosses. Hands on. A coach who played the game.
On the other hand, figurehead leaders—like celebrity CEOs, presidents, and other big wigs—don’t matter as much. Their contributions to worker productivity according to the study measured much lower.
Good Bosses Matter Most in Agile.
And whether agile or not, good management works. Good management is rare, but the way to be good is rather simple:
create incentives, and
And if you accept the history that shows lean manufacturing, cost cutting measures, efficiency, and widespread deregulation have all reached a point of diminishing return, then agile appears to be the only way forward.
And it’s up to technology industries, and specifically SaaS—arguably the most competitive industry on the planet—to lead the way.
Our process is the leanest.
Projects come and go faster.
Markets change faster.
Fortunes are made and lost faster.
People jump on and off bandwagons with more regularity.
Agile software development is where agile management ideas came from in the first place.
But how can we create the networks required to be agile, especially when many of us face entrenched (and measurably poor) management hierarchies?
The answer: A dual-operating system, where agile networks establish themselves over time alongside the hierarchy.
How do we do that? Look for that in a future post in this series.
Checklist: Do You Follow The Three Essential Elements of Good Management?
These questions were adapted from interviews in the study of over 8000 manufacturers in 20 countries. For more questions from the study, see www.worldmanagementsurvey.org
How do you communicate organizational goals to individual workers?
Does anyone complain that the target definitions are too complex?
How do you deal with repeated failures in a specific business segment?
How do senior managers show that attracting, developing, and retaining talent is a top priority?
How long is underperformance tolerated?
What makes it distinctive or special to work at your company?
What does your company do about star performers who want to leave?
How do problems get exposed and fixed?
What key indicators do you use for performance tracking?
For a given problem, how do you identify the root cause?
Source: “Does Management Really Work?” Nicholas Bloom, Harvard Business Review, Nov 2012; Freakonomics Radio