Entrepreneurial Mettle

Great anecdote on business focus

The following quote/ anecdote was featured on Seth Godin's blog yesterday:

Tim Cook at Apple:

“This is the most focused company I know of, am aware of, or have any knowledge of... We say no to good ideas every day.” Cook then pointed out to analysts that every single product the company makes would fit on the single conference table in front of him. “And we had revenue last year of $40 billion."

What the hell is an OKR?

Don Dodge is an evangelist at Google (his official title is Developer Advocate) and he writes a blog called Don Dodge on The Next Big Thing.  In his January 28 post "How Google sets goals and measures success" he outlines a nifty approach called setting OKRs.  Interestingly, Mark Pincus, the founder and CEO of Zynga, commented in a profile of him in the New York Times on January 30, 2010 (see Corner Office) that he uses the OKR process, something he learned from John Doerr (Kleiner Perkins fame), who, in turn, learned it from Intel.  My "pay attention" alert is deafening given these smart people taking about OKRs.  

What is an OKR?  It is an acronym for Objective - Key Result.  According to Pincus:

 "...the idea is that the whole company and every group has one objective and three measurable key results, and if you achieve two of the three, you achieve your overall objective, and if you achieve all three, you've really killed it...we put the whole company on that, so everyone knows their OKR's.  And that is a good, simple organizing principle that keeps people focused on the three things that matter -- not the 10."

Dodge writes:

"Every quarter every group at Google sets goals, called OKRs, for the next 90 days. Most big companies set annual goals like improving or growing something by x%, and then measure performance once a year. At Google a year is like a decade. Annual goals aren’t good enough. Set quarterly goals, set them at impossible levels, and then figure out how to achieve them. Measure progress every quarter and reward outstanding achievement."

Sounds pretty simple and powerful.  One can always learn something new from smart people.  

Strategic Plans Lose Favor

Huh?  Such was the title of a Wall Street Journal "Theory & Practice" article that ran on January 25, 2010.  I was immediately intrigued as I am a big believer that strategic drift and failures to plan are business killers.  Just yesterday I wrote about how Toyota got slammed because it pursued aggressive growth without thinking through how best to prepare its organization to support such growth.  What was up with this article?  Was the WSJ handing ammunition to iintellectually lazy executives to use as an excuse for their failure to plan?

A close reading of the article settled my fears.  In fact it gave me hope and buttressed my beliefs.  The companies it highlighted had not abandoned strategic planning; rather, they were doing it with more frequency and intensity than ever before in order to stay nimble in a tough, ever changing economy.  What are dead, according to the article, are the static, long-term plans that some companies slog through once a year to then collect dust until it is time to slog through them again.  No surprise there.

The article featured Office Depot which moved to monthly rather than quarterly planning reviews so that the office supply store could react faster to changes in customer needs.  Also highlighted was a company called Spartan Motors that updates its three-year plan every month, a process that has allowed it to capture opportunities it otherwise might have missed.  There are the requisite quotes from Boston Consulting Group and McKinsey consultants who have, respectively,  coined the terms "adaptive strategies" and "just-in-time" decision making.

Unless I am missing something, strategy and planning is becoming ever more important in a dynamic competitive environment.  If top companies are applying intellectual horsepower to strategic issues on a monthly basis, what happens to those companies that don't even think strategically and plan?  Nothing great.  

Be Careful What You Wish For

Yesterday witnessed Akio Toyoda, Toyota's president and chief executive, doing the perp walk in front of the US House Oversight and Government Reform committee in Washington.  Subjecting the leader of the world's largest automobile maker to the political theater that is known as a congressional hearing is ripe for opining upon.  What interests me more, however, are the comments Akio Toyoda made about why these problems may have occurred.  The February 24th edition of the Financial Times carried excerpts from his written testimony.  Here are a few that caught my attention:

"I fear the pace at which we have grown may have been too quick..."

"We pursued growth over the speed at which we were able to develop our people and our organization, and we should sincerely be mindful of that..."

He also commented that the company's priorities became "confused" and that the company "lost way" in its rapid rise.

What an interesting parable!  Although Toyota is one of the world's largest companies, the events leading up to its current predicament could take place in any size organization.  How many of us aren't under constant pressue to grow and expand market share?  Who would feel comfortable raising one's hand and saying "hey guys, I think we should slow down and get things right." That can be a career killing argument!  There are undoubtedly more than enough gung ho, aggressive, hubristic folks that would take that opening and run with it to your detriment.  I can't tell you how many times I have heard statements like "it's a nice problem to have" or "we'll figure it out later - just go get it done."  I can also say with confidence that most of those situations didn't end well.

So, what's the solution to prevent the wheels from falling off as growth accelerates?  Certainly we want options other than growing less.  

The companies I have observed who have handle growth well embrace planning and preparation.  They plan early and often -- they prepare early and often.  Equally important, they have a holistic view of the organization and the individual functional parts participate, communicate and coordinate with discipline.  The smart companies realize that growth is not just the domain of sales and marketing. 

Conversely, the companies that get into trouble have disjointed planning and communications processes, with the sales and marketing functions typically operating in a vacuum.  As one can imagine, as growth kicks in the other areas of the company are unprepared as they had no visibility on what to expect.  Manufacturing is caught flat footed, customer service is overwhelmed, HR is scrambling and accounting can't bill and invoice fast enough.  Delays and mistakes begin to take place, customers get angry, the wheels begin to wobble.  If the company is lucky, it can throw a ton of resources at the problem (sound efficient?) to keep the wheels from falling off.  If the company was smart to begin with it is comfortably enjoying it growth and already planning and preparing on how to take it to the next level.  Success in preparation begets succes in growth and expansion.    

The Simple Elegance of Good Leadership

There are more than enough articles, books, seminars and experts examining the topic of effective leadership.  Nevertheless, I enjoy studying and talking about the topic and, in particular, I enjoy reading articles featuring people in leadership positions sharing leadership philosophies.  The Sunday Business section of The New York Times runs a feature titled "Corner Office" that I find particularly well done.  As I always seek to distill issues and topics to their bare essences, I have come to realize that most of what is said and written about leadership share the same themes. In other words, most people are saying the same things albeit in different ways.  This has lead me to conclude that good leadership has a simple elegance that can be distilled down to three foundational elements:

(1)  Good leadership instills confidence that the future will be positive and good. 

People need to believe that tomorrow will be as good if not better than today.  They can accept some bruises and bumps along the way but they need to be confident that such bruises and bumps are investments towards a brighter future.  If a leader cannot effectively and credibly communicate a vision for a positive and good future then the organization will founder.  If a leader fails in his/her actions, behaviors and comportment to embody such confidence then his/her efforts will be weakened.   

(2)  Good leadership communicates sense of purpose.  

People need to understand their roles and responsibilities.  More importantly, they need to understand why their efforts matter to the broader vision, purpose and creation of a positive future.  I once heard a story that probably isn't completely true but nevertheless highlights this point.  Apparently during the Apollo program a janitor was asked about his job and his proud reply was that he was helping to put a man on the moon.  Assuming this actually took place, it exemplifies how leadership was able to galvanize an entire organization to work towards a common goal with each and every participant, no matter how menial their task, feeling part of the broader mission.   

(3)  Good leadership enables people to fulfill their purpose.

People need to have the support necessary for them to execute upon their roles and responsibilities.  This doesn't mean that they won't need to bootstrap, be resourceful or innovate in order to get the job done.  It doesn't mean that they will be coddled or not pushed to reach beyond what they think their limitations are. It does mean, however, that they are placed in a position to succeed and not fail.  Good leaders take care of their people.  In return, people take care of their good leaders and great things happen.

Demonstrating Mettle: A Leading Indicator of Success

I know I am onto a good thing when I can apply the word mettle when talking about an individual or organization.  Mettle - synonymous with courage; strength of character; strength of spirit; fortitude; nerve; spunk; stamina; and heart. Clearly a quality that is a leading indicator of success in life and business.  In the world of start-ups, mettle may very well be the determinant between life and death.  Unless one is exceedingly lucky, success in business will require overcoming obstacles, challenges and set-backs.  Not everyone has the courage and character -- the mettle -- to do so. 

There's a saying in venture capital circles to "bet the jockey and not the horse."  Veteran venture capitalists know that the entrepreneur's leadership qualities and character are as important, if not more so, as the business idea itself in determining the ultimate success of a venture.  Given this, the savvy venture capitalist focuses on an entrepreneur's past ventures to gauge character.  Surprisingly, failures are not necessarily a bad thing.  Failures are an inherent part of innovation.  The true litmus test is how failures are handled.  Did the entrepreneur dust himself off and get back into the game undaunted?  Did the individual learn from his/her mistakes and seek to improve upon them?  Or, did the entrepreneur retreat as a defeated , rattled and emotionally damaged individual?  In other words, did they or did they not demonstrate mettle?