Book – The Startup Way

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I enjoyed the previous Eric Ries book, Lean Startup (listened to it at least twice), though I waited a couple of years to start.  The book was recommended a few times based on my reading interests, but I did not think it was relevant to me.  At that time I typically worked for large sleepy companies.  I thought my “skunk works” navigation of political and operational networks within a large organization was dramatically different from a startup approach.  “Startup” concept felt frightening.  When I finally picked up the book, it felt very relevant and had a following within slowly moving enterprises on high levels.  Though…  nothing seemed to happen.

The Startup Way is the inspiration (and an instruction) to everybody on the inside of an average enterprise.  This volume explains how to take the ideas of Lean Startup and make them work within a large company.   The approach makes sense even it the company has been organized in the most inhospitable way for anybody with a slightest entrepreneurial thought.

But – times are changing, and changing fast.  Companies need to innovate their way to a continuous existence and find a reliable methodology to do it consistently.

I guess the most challenging task in a multi-billion established business, sometimes, is to actually articulate (or understand?) basic concepts from these books.  You might hear an MVP term, while people who discuss their “MVP” might have an idea of what it means (though rarely read the book), and an entire project team happily describes a “Phase 1” of a defined and impossible to change multi-million project as an “MVP.”

The Startup Way has many interesting examples showing how internal teams avoided similar misunderstanding.

Visualization

One of the critical approaches is metered funding.  The idea should not receive an additional funding unless it has not proven itself in customer tests.

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A concise summary of the book is available at Your Exec.  This resource also has interesting examples of PPT templates.

Interesting book!

Book – Matchmakers: The New Economics of Multisided Platforms

matchmakers.pngYes, it is completely correct, I do not remember anything related to multi-sided platforms in business school curriculum several years ago. The book gives an excellent explanation of business principles behind the phenomenon.

Though the discussion of platform externalities and negative network effects are common, and the Book – Platform Revolution has an Glossary.pngexcellent description, Matchmakers emphasizes the economic reality of the multi-sided platforms.  Book site includes a convenient glossary of industry terms.

Interesting: a platform relaying on advertisement has three sides (producers, consumers, and advertisers).  Microsoft Windows is a platform that connects computer manufacturers, app creators, and app users, where Microsoft Office is the most popular apps.  However, when Microsoft tried to find producers for X-box console, the search was unsuccessful as game console is the subsidy side of the platform.

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opentable.PNGOpen Table initially tried to attract “eye balls” in general, and the strategy was unsuccessful.  The company signed up many restaurants, but not enough in one market to become attractive for the consumer.  The company changed its approach, and concentrated on specific markets to generate enough restaurants to be attractive for the potential diners.

BrightCove was conceived as a platform, but the approach was unsuccessful, and company changed its strategy.

Multi-sided platforms need to be designed to encourage participation from different sides.  For example, money-sending platform would charge more for sending money to a person who was not signed up than to a person who was signed up.

HBR’s 10 Must Reads 2017

hbr.pngThe excellent collection overall has two interesting articles related to automation of knowledge work.  One of the articles emphasizes imperfections of algorithms and another one suggests strategies for humans when AI is able to perform some of their tasks.

(Based on my experience in marketing, marketing automation did not reduce the demand for knowledge workers, but rather expanded the “knowledge” required to be a marketer.  Though companies thought initially that they will need less marketers with the advent of automation, this assumption was incorrect.  The automation allowed more knowledgeable people to achieve better results, but the minimum number of people  and minimum amount of knowledge to realize any ROI on automation actually increased.)

Algorithms Need Managers, Too

The article suggests that however sophisticated, algorithms are literal, require very precise instruction and understanding of their limitations.  The typical example is giving the instruction to an AI to “save the Earth,” which will proceed with an attempt on elimination of humans as the most reasonable method of achieving the objective.

Example: a predictive algorithm was selecting products that can be purchased in China and re-sold in US.  The program worked well until customers started to return the products.  Long-term product satisfaction was not built into the process.

Example: algorithm can predict clicking on an add, but the required result is a sale; optimization on the click will generate more activity, but may not generate revenue.

Example: Netflix predictive algorithm for DVD rentals did not apply to video streaming.

Also remember that correlation still doesn’t mean causation. Suppose that an algorithm predicts that short tweets will get re-tweeted more often than longer ones.  This does not in any way suggests that you should shorten your tweets.  This is a prediction, not advice.  It works as a prediction because there are many other factors that correlate with sort tweets that make them effective.  This is also why it fails as advice: shortening your tweets will not necessarily change those other factors.

Beyond Automation

The article ponders the future of AI replacing some of the knowledge worker’s tasks, and what knowledge workers could do:

  • Step up (strategy)
  • Step aside (area that requires human interaction)
  • Step in (work with algorithms – what might be a default “augmentation” approach)
  • Step narrowly (area within profession that is unlikely to be automated)
  • Step forward (create next generation of AI)

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How Indra Nooyi Turned Design Thinking into Strategy (Pepsi)

The article explains very well “design thinking” on easily understandable examples of Pepsi.

Interesting: Pepsi also uses a variation of “reverse innovation” – launching a product in smaller market (outside of its home US market), where cost of failure is acceptable.

Interesting: Pepsi calls healthy products “good for you,” and products that do not fall into this category “fun for you.”

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Every morning you’ve got to wake up with a healthy fear that the wold is changing, and a convection that, to win, you have to change faster and be more agile than anyone else.

People Before Strategy

Discussion of people should come before discussion of strategy.  What are employees’ capabilities, what help might they need, and are they the very best?

Interesting… 🙂

Book – Thriving on Chaos

thriving.pngFantastic book!  The most remarkable is the applicability of many suggestions now, a couple of decades later.

The book starts with an idea that was demonstrated so true in recent times:

There are no excellent companies.  The old saw “If it ain’t broke, don’t fix it” needs revision.  I propose: “If it ain’t broke, you just haven’t looked hard enough.” Fix it anyway.

The book also has many “analog” examples of very modern concepts, examples that give a more complete view of the concept.  As now listening associated with social media, the most effective approaches to listening may not need to be online at all.

One of the most interesting points is the perception of effectiveness of automation (in manufacturing context), which is very similar to implementation of marketing technologies now.  As our industry realized that the biggest challenge of marketing technologies is the “people and the process” rather than “data and technology” itself, similar perception has been observed decades ago:

“Spending big money quickly on automation is not wise.  In the end, its effectiveness depends as much on organizational preparation as on money and technical prowess.  Major automation cannot be effectively “installed;” it must be accompanied by a way of organizational life.”

“…It turns out that the installation of integrated information technology-based systems is not primarily a matter of technology.  It is a matter of organization.  Every power relationship, inside and outside the firm, is affected by the installation of the new information technology systems…  The failure of so many elaborate new systems results from a failure to think through the bare-knuckle issues of power redistribution.”

Creating Total Customer Responsiveness 

C-1 Specialize/Create Niches/Differentiate

Interesting, the author believes that “the more the world perceives the product to be a commodity, the greater the opportunity to differentiate and create new and unexpected niches…”  The example is “shop towel” producer (rug business), which helps industrial launderers to run their business and “rent” the rugs to the end users.

C-2 Provide Top Quality, as Perceived by the Customer
C-3 Provide Superior Service/Emphasize the Intangibles
C-4 Achieve Extraordinary Responsiveness
C-5 Be an Internationalist
C-6 Create Uniqueness
C-7 Become Obsessed with Listening

One organization asked its customers to share their perspective on the industry and what they actually needed.  “Interesting that they wouldn’t give me 15 minutes to listen to me in their offices, but would allow me two hours in my hotel if I would listen to them.”

Calls coming to the service center: asking customers for their ideas during the calls and report what they heard to top management directly. 

“In fact, we’d be much better off if we could pretend that our customers are foreigners who do not speak our language.”

Walmart:  “…each of top executives picks out an item of store merchandise that he or she will directly sponsor throughout the year.  The most beneficial aspect of the program is simply that it keeps senior management’s hand in the business in a very direct way.” 

C-8 Turn Manufacturing into a Marketing Weapon
C-9 Make Sales and Service Forces into Heroes

Innovative approach of a government agency to recognition: “Baltimore’s transit boss… wanted to reward good performance from bus drivers.  Not fazed by the public sector’s inability to give tangible rewards, he figured that downtown merchants benefited from good transit service.  So he solicited gifts from them to give to top drivers (such as free meals and movie tickets) in return for free advertising space on the buses.”

C-10 Launch a Customer Revolution

Pursuing Fast-Paced Innovation 

I-1 Invest in Applications-Oriented Small Starts
I-2 Pursue Team Product/Service Development
I-3 Encourage Pilots of Everything

“We don’t need proposals. Or, rather, we need a new form of proposal.  The most useful proposal aimed at an executive committee is one that has been thoroughly presold to everyone on the basis of hard evidence signed by and contributed to by each key executive’s own field people.” 

I-4 Practice “Creative Swiping”
I-5 Make Word-of-Mouth Marketing Systematic
I-6 Support Committed Champions
I-7 “Model” Innovation/Practice Purposeful Impatience
I-8 Support Fast Failures
I-9 Set Quantitative Innovation Goals
I-10 Create a Corporate Capacity for Innovation

Achieving Flexibility by Empowering People

P-1 Involve Everyone in Everything
P-2 Use Self-Managing Teams
P-3 Listen/Celebrate/Recognize
P-4 Spend Time Lavishly on Recruiting
P-5 Train and Retraincomplexity.png
P-6 Provide Incentive Pay for Everyone
P-7 Provide an Employment Guarantee
P-8
Simplify/Reduce Structure
P-9 Reconceive the Middle Manager’s Role
P-10 Eliminate Bureaucratic Rules and Humiliating Conditions

Learning to Love Change: A New View of Leadership at All Levels

L-1 Master Paradox

“Success will steam from more love of the product – and less attachment to it.”  

“The core paradox, then, that all leaders at all levels must contend with is fostering (creating) internal stability in order to encourage the pursuit of constant change.” 

L-2 Develop an Inspiring Vision

“Effective visions are aimed at empowering our own people first, customers second.”  Very interesting – and decades before Employees First – Customers Second movement. 

L-3 Manage by Example

“Lead, as never before, by personal example – in particular, calling attention to the new by means of our primary leadership tool: our calendars; that is, the way we spend our time.”

“Modify your calendar by 15% in the next six weeks to call attention quantitatively to your top priority.”

L-4 Practice Visible Management
L-5 Pay Attention! (More Listening)

“You must have the guts to ask dumb questions.”  (Illustration is a senior consultant unfamiliar to the specific industry unafraid to ask the business to explain industry terms, while junior consultants were afraid that they were expected to know the terms and did not dare to ask questions.

“Eat your way through the medical staff.”  A brilliant approach used by a hospital administrator to connect with medical staff, who was considered as “don’t want to cooperate.”  “I simply declared that I was going to be in my office on the same morning each week, with coffee and Danish, and I’d be pleased if any of the medical staff would drop by and join me toward no particular end.  It was slow to catch on, I’s be the first to admit it.  There were a lot of lonely breakfasts, but now it’s the most important and real “Staff meeting” of the week.” 

L-6 Defer to the Front Line
L-7 Delegate
L-8 Pursue “Horizontal” Management by Bashing Bureaucracy
L-9 Evaluate Everyone on His or Her Love of Change
L-10 Create a Sense of Urgency

Building Systems for a World Turned Upside Down

S-1 Measure What’s Importanttraining
S-2 Revamp the Chief Control Tools

“… Numbers too often focus on highly abstract outcomes.  We need, instead, to emphasize capability building – developing the skills that will give us strategic advantage over the long haul.  We need to talk about “building sales-force capability and support systems,” “achieving flexibility,” and “cutting product development time” more than about achieving “15% earnings-per-share growth.”  The later target may be admirable, but is not much related to the skill enhancement necessary for adjusting to the changing world.”

S-3 Decentralize Information, Authority, and Strategic Planning
S-4 Set Conservative Goals
S-5 Demand Total Integrity

Book – The Content Trap

content.pngVery thought-provoking book that asks the reader to questions some of common industry assumptions.

The author suggests that we overestimate the value of content; successful companies excel not because of the quality and uniqueness of the content they produce, but because the content facilitates connections between customers.  However, companies should not rely on best practices that might be beneficial for other organizations, but need to find their own approach and use content to help their customers connect in a way the most beneficial for the company’s objectives.

Interesting: the decline of newspapers may not have been created by the decline in the readership of the content (the circulation revenue did not decline so sharply), but the decline in advertising – which has primarily “connecting” function.  As buyers and sellers were better served by online resource, newspapers lost advertisement that always supported the content itself.  news.png

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Another interesting example: comparison of Tencent and Facebook.  Though Tencent has a very effective digital currency, Facebook’s attempt to create a digital currently were unsuccessful.  Tencent might have accidentally found an application of digital currency when popular handles started to generate value in real currency.  The company makes avatars and other electronic enhancements available in exchange for its digital currency, what keeps generating interest.  Facebook’s attempt to create digital currency did not have sufficient context for the product to become popular.  As a result, these companies have very different revenue profile.

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The book explores music industry from the content perspective in useful and also entertaining form.  The change of the musical recording format chart is particularly insightful.

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Value of format is also specific for an industry, or, maybe, even a unique product.  The popular book 50 Shades of Grey was initially published electronically, and did not reach wide audience in this format.  The book’s popularity came after the debut of its print edition.

Economist.PNGQuite interesting – and very successful – approach of The Economist: as the company’s brand have been well-known and functioned as a status brand, the company did not have to hurry to provide any unique content online, and did not need to create any additional free content.  The Economist does not credit its success to exceptional quality of content, though it promotes consistency of style.  As sufficient number of people would be happy to be seen with The Economist and not actually read it, the promotional efforts of the magazine in US were based on this nuance.  Marketing efforts were not concentrated in San Francisco or New York, but in many other less expensive markets where The Economist might have “many potential readers, but not actual ones.”  This approach saved marketing dollars and achieved desirable results.

Editorial quality experiment: readers were asked about the editorial quality of the article branded as The Economist, The Huffington Post, or unbranded.  The article was accompanied by high quality ads (Jaguar, AMEX), or simple popup ads, or had no ads at all.

  • The Economist: editorial quality of the article without ads or with high quality ads was perceived the same; simple popup ads decreased perceived quality of the article
  • Huffington Post – no difference in perception of the editorial quality of the article disregarding the presence of the ads or their quality
  • Unbranded article – any ads increased perception of the editorial quality (if anybody is advertising… the content must be worth it…)

ebay.pngAn example of an advertising approach that must also be considered by companies based on their unique business rather than a general industry “best practice.”  Ebay discovered that brand paid search advertisement brought new visitors to their site, who did not quite buy the products.  However, the ads were clicked by returning visitors, who would not need an ad, and would click on organic listing anyway.  In short term, the paid brand search advertisement’s return was negative for Ebay.  Ebay suggested that other brands might have similar results. Google disagreed based on its own research, and recommended each brand to evaluate the benefit of search advertisement for its unique business 🙂

Business strategy itself requires consideration of company’s unique position in the market and “connection” of all strategic elements.  If the company is thinking about “Content,” it needs to focus on how the content will help to connect its customers or leverage existing customer connections.

Book – Thinking, Fast and Slow

Fascinating and thought provoking book.  And also the book that explains limitation of human thinking.  From another side, the author states that human being are not irrational, but rather have some biological limitations that can be compensated with a nudge carefully organized into our lives.  If we, as a society, would like to see more organ donations, the form should require a check box to opt out rather than a check box to opt in…

Humans are driven by heuristics, are subject to biases, and have a very strange manner of thinking about happiness.  This is who we are, even if opinions on what we should be may differ 😉

A few interesting tidbits:

CEO effort is contributing only about 30% to the company’s success – defining and applying “winning management techniques” may not be possible/practical

Regression to a mean: good performance as well as bad performance is typically regressing to the mean (pilots praised for exceptional airplane handling in training don’t do as well next time, pilots who performed badly improve).

Optimistic bias – people are generally over-optimistic about life’s possibilities.  Optimism makes people happier and healthier; however, it encourages them to act irrationally and take more risks and needed.

Over-confidence in personal abilities: entrepreneurs overestimate success rate of the businesses in their field about twice and overestimate their own success even more.  Statistically, selling expertise to others is more profitable and less risky than starting a new business.

Competition neglect: businesses often function in a vacuum making decision without taking into consideration competitive moves.

Interesting: failed businesses that open new markets and highlight them for more capable businesses are considered economic “martyrs.”  They loose, but they serve a positive role for the economy as a whole.

Neglect to check success rate of the reference group when planning for the project success. Even the success rate of the projects of that type is known, people usually neglect to apply it to project they pursue and give over-optimistic projection.  Author and a team estimated a curriculum-writing project in 2 years, while the base-rate for these type of projects was 7-10 years.  Author’s project took about 8 years.

Pre-mortum project evaluation.  When the project was approved with a possibly optimistic plan, every team member is required to do an independent written exercise: Today is a year  [or how much is required to complete the project] later. Project failed. Describe the reasons why it happened.

Interesting: denominator blindness…  Our ability to evaluate denominators (and desire to calculate) are minimal…  A statement “one out of 1000….” could be more impressive than “10%.  Miles per gallon is not as easy to grasp as “gallons per 100 miles,”  maybe this is why it is used 🙂

Considering that our thinking ability is flawed…  Could/should human society to “evolve”?  Video below (produced over a decade ago) has an interesting point…

Think Again – why good Leaders Make Bad Decisions and How to Keep It From Happening to You

Think-Again-bookThis book fundamentally changed my understanding of the decision making. The authors explained that even highly knowledgeable and very experienced decision makers can make obviously bad decisions. Though in some cases the decisions may not look ethical, there is a possibility that the decision maker could be unaware that he or she is not objective.

Based on the research described in the book, human evolution assured that we are equipped with the decision-making system that works well – most of the time. However, there are times, when our nature is working against our own interests. We can learn to identify these “red flag” situations and use “safeguards” to minimize “red flags” influence.

Red Flags

Misleading experiences (our subconscious search for pattern in the past – pattern could be found incorrectly, but the mistake won’t be clear to the conscious mind).
Example: a proposed acquisition looks similar to several successful acquisitions made in the past; however the situation is different, what is not recognized.

Misleading pre-judgments (previous decisions that mislead current decisions).
Example: a decision made several years earlier leads the decision maker to execute the long-planned strategy when he acquires needed power; the situation has changed and the strategy is no longer reasonable.

Inappropriate self-interest (self-interest that may not be recognized consciously by the designs maker as affecting his or her judgment).
Example: an incompetent employee remains in the organization because firing the employee could create short-term difficulties for the manager

Inappropriate attachments (decision makers can be attached to people, places, or things without realizing that this attachment can cloud their judgment).
Example: a business unit leader resists a new logo consistent with the corporate image because he was personally involved into creating the previous logo

SafeguardsThink-Again-book-safeguards

Experience, data, analysis
Example:
encourage the decision maker to do additional research on the area involved into the decision

Debate and challenge
Example:
introduce a person with necessary experience to the decision team who can challenge the decision maker (if the decision maker can be challenged)

Governance
Example: create a process of decision making that would involve other people without a particular bias (however, too much process can stall any decisions – the process needs to be appropriate)

Monitoring
Example: if the wrong decision is made the error should be identified quickly; in some cases people tend not to communicate “bad news” if they know that the leader is partial to the decision – this should be avoided.

Wonderful example of applying a safeguard to counterbalance possible pre-judgments:

In one company, the CEO was concerned that his managers appeared to be anchored to the status quo. So he started the planning process by asking each manager to compose an imaginary article to appear in the Financial Times in ten years’ time describing the adherents of the current management team over the “past” ten years. The goal was to get each individual to generate creative ideas of how the business might be developed, and so provide a good platform for a debate over a wide range of options. After the exercise, one member of the management team commented that the new plan was “the first time we have had a real strategy.”

More resources are available on the book’s web site.

Wonderful book – highly recommend.