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Wednesday, August 26, 2009

Clayton Christensen Explains Disruptive Innovation at the American Enterprise Institute

Clayton Christensen, who has observed and written about how disruptive innovation changes markets and industries made three presentations at the American Enterprise Institute explaining disruptive innovation and then showing how it applied to healthcare and education. His talks give an extraordinary advantage defining what to look for when analyzing a situation for innovative opportunities. (Long post)

Before attending Clayton Christensen’s multiple presentations at the American Enterprise Institute, I watched some You Tube videos to get his context. From the videos:

Disruptive Change – If you try to innovate inside an existing system, the innovation will be co-opted by the existing system. It must compete and win from the outside to be accepted. (Chrome!)

Innovator’s Dilemma – Microsoft has overshot what its customers need. (feature creep) Scott McNealy says early technological leaders were hairballs, non-standard, heavily tweaked builds to provide or improve performance.

“I learn better by analogy than by having a mirror shoved in my face”

Clay Christensen at AEI. (6’8”, Reagan Administration alumni, genuinely pleased to be with the group). Frederick (Rick) Hess, Director of AEI Policy Studies introduces.
In industry after industry, new technology starts expensive and complicated. Then along the way there is a breakdown between value and cost. Someone can provide better quality at less cost. That is the disruption.

There are two lines of progress. Performance improvement that customers can use is usually less than the pace of technological progress. Markets open in underserving customers.

Progress can be incremental or breakthrough. Analog to digital phones was a breakthrough. On incremental change, incumbents nearly always win. The rich get richer.

A disruptive breakthrough starts as not nearly as good, but more affordable. Then the entrant becomes the new leader.

In case studies, they find the upmarket leader successively gives up the low profit, more competitive market to the new technology and the new technology improves to move steadily upmarket over time. There is no stupidity and no villains. Each group is doing what makes sense for them.

If the upmarket leader tries to introduce an offering down market, it seldom works. Each management function wants to impose their current best model of how to solve their problem. Sales will recommend its current model, design will share its current model, engineering will share its current model, distribution will want to use its current model.

To go down market, you have to allow that the product will not be solving the same problems as the market leader. It will have a different user base, (less experienced, lower expectations) a different business model (faster and cheaper to market), a different distribution system (less convoluted and expensive) than the originator. They are solving different problems, so the experience of the industry leader is of limited value to the down-market challenger.

Case studies – Steel (Bethlehem and Nucor), Airplanes (Boeing and Embraer), Airlines, Automakers, Computing Models (IBM, Microsoft, and Linux}

Similar slide presentation: Disruptive Innovation in Education & Health Care found at

Steel Industry Case Study – Electric furnace enables the mini-mill (Nucor) to make steel 20% cheaper than the integrated mill (Bethlehem).

Mini-mill starts making rebar, lowest quality steel (it is buried in concrete) 7% margin, 4% of market. They have a price advantage, eventually Bethlehem leaves the market. Prices drop 20%. Note – You can only win with a low price strategy when you have a high price competitor.

Nucor improves technology, moves up to angle iron, 12% margin, 8% of market. Integrated mills pull out, 20% drop in commodity price.

Nucor improves technology, starts making structural beams. 18% margin, 22% of market. Integrated mills pull out, price drops 20%.

Nucor improves technology, starts making sheet steel, 25 – 30% margin, 55% of the market, Bethlehem goes out of business.

Guy sitting next to me leans over and relates he was selling health benefit packages to the steel industry during that period. Many meetings with Bethlehem executives, committees, unions, couldn’t get a decision. Nucor bought quickly.

Clay’s maiden analysis was the disk drive industry. He has old disk drives as trophies all over his office, like an anthropologist has statues and totems.

He wrote a book about disruption in disk drives and got a call from Andy Grove’s office. Would he come out and brief the Chairman on innovation and disruption?

Flies across country for a half hour meeting. Gets there, Intel’s hair is on fire. New offer, ten minute meeting. Clay does ten minutes on the concept. Grove says, “I get it, so how does this affect Intel?”

Clay tells the steel story for ten minutes. Grove says, “I get it, so we have to cannibalize our existing products so we stay in business.”

Clay tells us, “How lucky I was telling the steel story. If I had told him how to fix his business, he would have never believed me. I don’t tell them what to do, I give them the tools and templates to think about what they have to do.”

Clay and Grove went on to present 18 retreats to discuss this with 2,000 Intel execs. They had breakout sessions and planning sessions, etc. Clay says the ideas generated in those shows have been responsible for $16B in new sales.

How transistors replaced the vacuum tube. Early transistors could not handle enough power to work in vacuum tube radio and television chassis. Existing radio and television manufacturers were working to develop higher voltage transistors, going nowhere. Transistors were first proven on hearing aids, where vacuum tubes were too big to use.

Boeing vs. Embraer – Embraer started out building 12 passenger aircraft. Boeing couldn’t make one at market price, that was not their market. Embraer is now selling aircraft that carry over 100 passengers, Boeing keeps innovating in both size and is now pioneering fiber material airplanes.

Airlines – Short haul routes have highest turnaround expense. Southwest dodged federal CAB jurisdiction by flying short routes inside Texas until they were ready to compete.

Retail – Hard goods like paint are less profitable, more commodities, people come into the store wanting to buy paint. Clothing and cosmetics increase margins when merchandised. Target, a disruptive spin-off of Dayton Hudson, took over hard goods and department stores got out of the market. As Target added upmarket inventory, chased the regional department stores out of business. Now Target is being chased by Wal-Mart.

Television supply chain – When Sony introduced the transistor TV, appliance stores, which sold vacuum tube TVs, would not sell transistor models, since they made substantial money replacing tubes in televisions. Kmart was just coming up and was glad to distribute Sony TVs. How fortunate that the television that needed no service was being sold by the stores that could provide no service.

In every case, there was no stupidity or villainy on either side. The existing paradigm paralyzed best practices for meeting the down-market challenge. The industry leaders were beaten by an asymmetry of motivation.

As the new, cheaper, disrupter gains market, their customers are not previous users, but new users who have access to the product benefit for the first time. Mainframes were operated by dedicated teams of professionals. PC’s were for people who would take them home and learn how to complete work on them. Linux allows the hobbyist to write their own software, create the functionality of the system.

You need a new business model to take on an entrenched competitor. Transistors couldn’t replace vacuum tubes. Although everyone knew it would happen, they couldn’t make transistors work in a 50,000 volt chassis. Transistors had to establish a beachhead in hearing aids.

When Clay and his brother pooled their funds to buy a $2.00 Sony transistor radio, it was staticky and they had to face the Great Salt Lake to hear anything. You couldn’t sell that radio to someone who owned a vacuum tube radio. You had to sell it to someone who had nothing, to teenagers, the “rebar” of the social order.

A disruptor just has to be better than nothing when the group to be served has nothing. When you compete against non-consumption, all you have to do is make it better than nothing and consumption soars.

Solar only works where you don’t have a ubiquitous, dependable, inexpensive power grid. Solar power is being adopted in the third world, but it hasn’t succeeded competing against the grid.

Slide design note – Clay’s slides started with a “high and to the right over time” graph to show each established industry’s market segments. He would then show a similar graph for the disruptor in the foreground of the first chart to show there is no interaction.

As the disrupter grew and absorbed the predecessor industry, he would refer to the previous industry as the “backplane,” showing his experience in disk drives and circuit board design.

One of Clay’s students returned to Japan and spent 2 years building the plan for the future of Japan’s economy. Called Clay in despair, said he didn’t see any hope. Clay said, “Well, come on back to Harvard. We can usually figure something like that out in a couple of days.”

After a half hour, the former student had outlined that Japan’s incredible growth in industry after industry had come from disrupting the established order…and now they were getting disrupted by the third and fourth world. Toyota loves competing with Mercedes with the Lexus. There is plenty of margin in that space…but not growth. Clay is still thinking about that.

From the audience, “What about the US, then?” Clay says we have a fluid job market, financing for new companies in place, a tradition of startups. (The previous day I saw Clay on a video saying an innovator was someone who had parents who took stuff apart and fixed things, giving the innovator permission to do the same.) Japan doesn’t have these things. There are microeconomic factors for a country’s macroeconomic optimism or malaise.

The right product architecture depends on the basis for competition. (I think that gets back to not overbuilding when you just have to be better than nothing. Establish how good you have to be and manage feature creep to your strategic advantage. D2)

Mainframes were individually wired at the start, went through “all Blue” then “plug compatible” phases. PC’s were even looser (It was a PC if it could run MS Flight Simulator). Now Linux systems take different modules from multiple distros and with some fitting they all work.

Linux is more open source than the PC which was more open source than the Mini, which was more open source than the IBM mainframe, which was more open source than the original sitewired, hairball mainframe computers. D2

Clay (and others) compute the investment to create the Windows environment is over $1B. That is possible because so many companies invested and got a return from the Windows environment. This openness means there was a lot of freedom for subsequent engineering, as they provided a basic set of standards. These standards also made them back off the frontier edge of what’s possible from their successors.

In contrast, the early MP3 was an open system which didn’t work due to different components, both in the player, in the downloading systems, and in the content. Ipod/Itunes came in and provided a complete solution which performed well and took over the market.

When something gets to be “good enough” it goes to an open architecture giving speed, responsiveness and customization. However, if the system doesn’t work, centrally controlling the user experience to make sure it works can create a market boost.

Three Enablers of Disruption
1. Simplify Technology – Foolproof and idiot simple.
2. Business model innovation
3. Value Network – Different model for retailers and suppliers

Disruption is facilitated when historically valuable and expensive expertise becomes commoditized. Three stages of this process are:
1. Experimentation and problem solving (Art)
2. Probabilistic pattern recognition solutions
3. Rule based solutions

DuPont had four molecules to build an empire, acetate, nylon, Kevlar and Teflon. They were created by experimentation and problem solving. After those molecules were created, there was a good deal of puttering and pothering to figure how to best use them. Today, there is software to predict the behavior of new molecules and also software where you can specify behavioral properties and the software will recommend a molecule, whether it already exists or not. When I wwas a Master Carpenter at DuPont in the 70’s, the Chairman, Mr. Shapiro, said DuPont could no longer afford basic research, and had moved to applied research. D2

There is a problem in medicine of diagnosing by symptom. We only have so many symptoms to present, so multiple diseases express with the same symptoms. There are currently 21 diseases that have the symptom of elevated glucose, all lumped under “diabetes.” One is fat in the liver which causes inflammation of the liver. This is cured with ibuprofen, an anti-inflammatory. Diabetes Type 1 is easy to solve with insulin.

The current state of medicine is intuitive medicine. The next step is “empirical medicine,” or pattern diagnosis, which will be replaced by “precision medicine” which is rules based.

Current diagnosis is largely by physician intuition of expressed symptoms. The next step will be understanding molecular diagnostics, and then using imagery technology.
The traditional general hospital is not a viable business model. They can’t survive as currently set up, and are surviving on philanthropy and financial rescues. Their current value proposition is “We don’t know what is wrong. We can address any problem you bring.”

There are three underlying business models that apply to hospitals and if we are going to get health costs under control, we need to understand and correctly use them.

Business Models
1. Solution shop – Fee for service. Diagnosis and experimentation to define the problem
2. Value Added Process Business – Fee for outcome. Medical procedures after a definitive diagnosis
3. Facilitated Network – Fee for membership. Caring for chronic disease.

Four Elements of a Business Model – Value Proposition, Resources, Processes, Profit Formula. These are not only a cycle, but each part becomes interlocked and interdependent with each other.

Improvement in medicine happens disease by disease, and as a case is diagnosed, it can go to treatment, then go to chronic care/ongoing therapy. (Note – If initial diagnosis is incorrect and you are passed off to a procedure, you are hosed with this model, but understanding when you are trying to form the diagnosis would help everyone on the case behave better. D2)

Clay has also observed this process in other industries. The University of Michigan now gets the majority of its students from feeder state schools, where the cost of credits are lower, since the state schools are not paying for faculty research. As this path has become better defined, the state schools are moving up and providing four year and graduate curricula, disrupting the traditional university market. However, the universities are increasing their graduate education and other services. Everyone is moving upmarket.

New disruptive solutions are usually aimed at the toughest problems, but they should be started on the simplest problems.

You can’t redo a whole system when you are making a profit from it. You should apply the disruptive solution to the simpler, unprofitable, low margin, and commodity services.

There are no villains and no stupidity. People are doing what it makes sense for them to do.

Powerful monopolies, network effects (like appliance shops selling tube televisions) and stifling regulation are most easily broken through disruption than through head-to head competition. (I see Google with Chrome, GPhone, and FCC bandwidth auctions using this. D2).

Changing Class – How Disruptive Innovation Will Change The Way The World Learns
Michael Horn

The biggest problem are conflicting mandates vs. the way we teach and learn. Computers have failed because we put them in conventional classrooms.

Howard Gardner says there are multiple intelligences, linguistic, logical/mathematical, spatial, bodily kinesthetic, musical, interpersonal, intrapersonal, naturalist.

A second filter would be learning styles, visual, written aural, playful, or deliberate.

A third filter would be pace of learning, fast, slow, or medium.

People don’t learn all things the same way.

Chester Finn, an education manager and bureaucrat did not support Gardner’s ideas, but in the end agreed education was paralyzed by existing regulation and mandates. Said this was a special situation where disruption wouldn’t work because of the social and regulatory power of the unions. He kept talking and realized that disruptive education would flourish outside of the education industry, which would just siphon off the funding.

Parents and the low cost of the disruptive technologies would be pitted against new laws limiting the amount of disruptive education, for instance the number of students allowed to enroll in alternative, disruptive education, or the certification of disruptive education. Finn was accurate and it was sad. In the end they all agreed that the education unions formed a tougher problem than Finn had been able to fix, and Clay and Michael Horn didn’t press.What will happen is clear in spite of regulation and educational industry muscle.

There are other problems attempting to block disruption in education. Temporal (educators say you have to finish the seventh grade before learning the eighth grade material), lateral (if you have a breakthrough in teaching French, you may have to go apply it to English and History) Physical (educators agree that project based learning is superior, but classrooms are not set up for it), and hierarchical (current education is the established monopoly and has the headcount to prove it.).

Audience Observation – Finn was passionate that disruption wouldn’t happen to his education industry.

Christensen and Horn didn’t argue. They had made their point previous that education was a poster child for disruption and soon. They didn’t have to respond. They had been making their case all day.

After the dustup, they got back to “wouldn’t it be nice” if there was customization instead of standardization for the good of the students.

If you are going to start the disruption, what are the lower value parts of US education? It turns out the higher values have nothing to do with education, but with maximizing political and financial leverage. Standardized testing is the current value leader and will be the last to be disrupted. The unimportant areas that are open to disruption are credit recovery (remedial education), dropouts, AP Courses, Home school and home study, small rural and urban schools, tutoring, pre-K. (and electives like “German” the rebar of the education industry.) Lack of money for educational areas the buyers think is important or that the students want to learn will propel the disruption.
Chester coins “Private Pay Parent Purchase.” (However the cost of internet distribution will approach zero. D2)

Clay explains that progress of a disruptor replacing an incumbent in a market follows an “S” curve, which comes out to a straight 45 degree line if your vertical scale is increasing log values. Clay says they can look at the very early stages of a disruption and precisely plot market gain over time.

The established giant flees to greener pastures of what is politically most important, so it is important for the disruptor to compete against non-consumption. Private Pay Parent Purchase is looking for a simpler model with better results. Start in the easiest, most underserved part of the market.

A district can evolve, a school cannot is like an culture can evolve, an organism cannot. (This reminds me of “To make a better decision, first stop implementing your worse decisions.” D2)

Clay’s models aren’t to give a solution. They give us a common language and a common way to frame our reality so we can come up with the solutions.

Tuesday, August 25, 2009

Introduction To Strategic Planning

Why bother to plan?

  1. Define a group of potential strategies

  2. Educate the group to potential actions

  3. Identify and support existing capabilities for each potential project

  4. Create a group of acceptable results

  5. Select projects which become the strategic plan

Completing a planning exercise is the beginning of the planning/execution process. A good plan creates a system for effective communication to monitor progress against planned milestones while seizing opportunities as they are defined.

Finally, defining any goal greatly increases the probability of achieving that goal. In our experience, accomplishing an ambitious 5 year goal in 18 months due to common focus on the goal has occurred enough times.

Who initiates planning?

The planning process requires a top down approach to define which goals are most valuable for the organization. While feedback from the organization may generate some good ideas, defining "conditions for satisfaction" for the planning process must come from management.

Who manages planning?

In our organizational transformation model, acceptable results are defined by the manager. Tactical procedures and reporting milestones are designed by the person doing the work, and "sold" to the manager. After the project has been negotiated, fulfilling project obligations (or managing) is the responsibility of the person doing the work.

How sophisticated should planning get?

Development and execution of the planning process for project management should be taught to every person who will be responsible for achieving a result. At each level, the planning process should be sophisticated enough to convince management that the desired result will be achieved on time, following the plan. The alternative is that if the goal will not be reached, management will be notified in time to reformulate how the goal will be reached.

At a minimum, there are three good elements to a strategic plan.

  • First Strategic Element- What is the mission of the organization?

  • Second Strategic Element- What is our history?

  • Third Strategic Element- What will our future be?

First Strategic Element - What is the Mission of the Organization?

A positioning statement is a declaration of purpose for your organization. The positioning statement should define your industry, why you exist, and identify your emotional and qualitative goals.

If you are developing a positioning statement, think about what your organization will be in 6 months. Describe it in 2 or 3 one clause declarative statements.

The only way to refine a declaration is to say it, out loud, until you are comfortable with it and you believe it.When you finish a positioning statement it will become a simple declarative statement.

"What do you do?" is the question best answered by a positioning statement. Here is a method for developing your positioning statement.

  • Why are you excellent?

  • Why is your organization excellent?

  • Why do your customers think your organization excellent?

  • After six months of improvement, what would your customers think is the best service you offer?

Second Strategic Element- What is our history?

  • Years in business

  • Key events

  • Historical performance.

  • How has the corporate mission changed?

  • Initial

  • Mid

  • Current

Initial facts

  • Year

  • Performance

  • People

  • Contracts

  • Business Units

  • Profits, etc.

Compound Ratios (based on combining 2 or more initial facts)

  • Performance per capita

  • Performance per contract (more than average or median, set up multiple bar graphs for each of the past four years) This generates contract "families".

  • Definition of existing business areas. ("Strategic business units" means we are trying to think "strategically").

Other data manipulation to develop compound ratios is best done on a spreadsheet. The purpose of the data manipulation is to discover and agree on ratios for evaluating performance.

Third Strategic Element- What will our future be?

Defining and attempting to achieve extraordinary results, builds loyalty, and actual results, whether the goal is achieved or not, exceeds the results of competing organizations that do not set, communicate and manage by their goals. By attempting to achieve a goal, problems are more easily defined, which is the first step in solving a problem.

Corporate goals come from personal needs. Risks and rewards for achieving goals should be clearly stated before the project is attempted.

Our experience is that a superior who communicates his or her goal (technically called vision) and describes their personal tactical plan, can then invite their subordinate to create a personal vision that supports the larger vision. When the superior allows the subordinate to create the tactical plan that will produce the specified results within a specified time frame, we have just created a pocket of organizational transformation.

Transformational management styles often outperform Taylor model (organizational pyramid) management styles by a compound rate over time.


  • What should our mission be this year?

  • For the next 5 years?

  • What should our quantitative goals be?

  • What are our managerial, cultural, qualitative,innovative and organizational bonding goals?

Managerial style

  • Management organization structure

  • Cultural

  • Qualitative

  • Innovative

  • Organizational Bonding


  • What resources already exist within the organization?

  • What resources can be created from within the organization?

  • What external resources will we have to define and procure?

Completing The Plan

Which ratios will we use to chart our progress? What are good milestones?

How should this be communicated to our stakeholders?

What other information is required to complete a great strategic plan?

What is our formal, one year plan for holding further strategic planning meetings?

When will the next draft of the plan be completed?

Who is going to type this beast?

Thank you.


Friday, August 21, 2009

Sales Lab's Planned Work Cycle

I have found this four-part planning process to be a real time saver, increasing my percentage of successful projects and allowing me to tackle significantly bigger tasks.

The first step is defining what is to be done. Any number can play, especially the people who will be building or using the project. I go through several written drafts, starting from handwritten lists, and then depending on the size and value of the process, using an appropriate organizing tool that will make the details available in a usable fashion.

How much architecture?
Not a minute more than you need to understand what the project will do. The more I use this model, the more I realize that extra time spent at the beginning has a multiplier effect reducing the amount of time required for successful completion.
I also understand that some people will suffer "paralysis by analysis" and have a difficult time moving past the "What are we doing?" phase. When you are doing the architecture, the amount of time you spend is a judgment call. A reliable indicator is whether you think you spent too much or too little time defining the architecture of previous projects.
Someone else may have a different opinion, but that's all it is ... an opinion. That doesn't mean it would be any more accurate. However, if they are paying, then they get to have the opinion! That's the golden rule ... the guy with gold makes the rules.

Design is figuring out "How" to do something. The process I follow is fairly simple.
First question - What is the best way I can do the job with tools and knowledge I have already mastered? That usually gives me most of the assembly plan.
The next question - Who do I know who has already successfully done the parts I don't know how to do? This lets me know where I will need outside effort and diplomacy.
Many of the projects that founder have a part of the Architecture that isn't included in the Design, because it was too hard to figure out in the Design stage. It gets even harder to figure out in the Execution stage.

Most people are happiest and most fulfilled in the Execution stage. Tangible things get done. At the end of the day you can see what was accomplished. As a result, we sometimes spend more time than necessary in the Execution stage.
The Execution stage is the expensive part of the project. It's fun to have a crane on a construction project ... but a crane costs so much, you better have that crane working all the time it is on the job. And when the crane's work is done, the crane better be gone and you better not need it again. That's the way to think in Execution. Get in, get out, get done.
The specifics of Execution are different for every project. Finding better ways to work shows professional competence. Quality of Execution is heavily dependent on the quality of Architecture and Design.

Evaluation is the part of the work cycle most often neglected. That is because people don't understand how to do it in a way that gets results worth the effort.

Want to do a useful Evaluation? Ask these two questions:
  • What did we do right?
  • What do we do next?
Evaluation is not about finding fault or having opinions or expressing disappointment. Opinions and disappointment show grief, caused by excess adrenaline left over after finishing the Execution part of the job. We grieve when we lose, we grieve when we win. Grief means something is over, not that something was bad.
These two questions generate the useful information needed to continue. They bind the team together, and often generate valuable answers that are impossible to get when fingers are pointing and hot words prevail.
Evaluation cycles back to Architecture. Few successful projects just stop. People working together create efficiencies and knowledge that have continuing market value.

Tools for Knowledge Workers - Your Journal

As our economy becomes a increasingly knowledge-based, jobs have a growing emphasis on acquiring, storing, and using knowledge. Computer hardware and software advertisers take the position that they provide the new information management tools, but for many people mastering the use of a journal is a basic and often more useful skill.

A journal, or notebook, is a powerful tool for managing information. A journal is unobtrusive, easily transportable, and works almost anywhere.

A journal is a tool for thinking. It provides a place to put new facts and ideas, a place to improve those facts and ideas, and a place to store them until they can be used.

A journal confers status. Someone taking notes is thought to be organized and competent until proven otherwise. Keeping a journal over several meetings establishes mastery without deliverables.

Selecting Your Journal
I choose a journal over a pad of paper because it holds the pages together. My journal allows me to easily keep several months of old telephone numbers and addresses with me when I am out of the office. I prefer a sewn binding (like a composition book) because I can put loose papers and handouts in the notebook without breaking the binding. I currently use a Levenger Notabilia lab notebook with a leather cover, which lets me stash handouts, a presentation folder, some Post Its, a name tag, 3 by 5 cards, and business cards.

I have been writing on quadrille (graph) paper for years, ever since a buyer said, “Graph paper. I like that. Shows you are organized.”

When I am alone with access to a computer, I usually make a quick outline of what I want to write in my notebook, with a list of details I want to make sure are included. Then I compose directly on the computer. When I am alone without access to a computer, I write the initial draft in my journal. Writing a first draft shows whether to build a document in an email, word processor, spreadsheet, publication software, diagramming software or online template.

In a meeting, whether I have access to a computer or not, I use the journal. It is faster, less intrusive, and allows me to pay closer attention to the meeting.

Using Your Journal
Put your name and phone number inside the front cover. I left my journal in a coffee shop and got it back because I had my name and number in it.

My master log of meetings and activities is my Google calendar, so I date every new entry in the journal. Next, I write the names of everyone attending the meeting. If it is a new group or a large group I make a seating chart so I can address people by name and understand their concerns in the meeting. This is a good reason to start meetings with introductions. If not, I put in names and concerns as I learn them.

My goal in taking notes is to capture ideas that are useful to me. Sometimes that means furiously taking notes and sometimes that means working on another project while the meeting drones on.

If someone repeats a quote or information I think has value, I write it again...and again...and every time I hear it. I am reinforcing by repeating.

I use a four colors of ink to make the notes easier to read, and to amuse myself.

I include graphics from the presentation or draw new ones to improve the presentation.

My notes reveal the structural outline of the talk, when there is one. My notes allow me to write a question and go back to it if subsequent discussion does not address it. Often a presenter will inadvertently leave out a crucial detail, which shows in the notes. I can ask about the subject and remind the presenter.

People are more specific and get to the point more quickly when others take notes.

Sharing Your Notes
When notes are worth sharing, I transfer them to a computer. Not all my notes, just the information I want to share. From the computer they can be distributed by print, fax, email, and website as many times as necessary. Some notes have frequent distribution for years, however, I have no idea which ones are “the good ones” when I am initially capturing them.

Thursday, August 20, 2009

Status Meetings - The Best Hour You Can Spend Building Your Company

Steve Jobs, founder of Apple Computer, was asked if the high tech-revolution he was predicting would diminish human contact. He said that as "high-tech" increases, so does "high-touch."

Alvin Toffler predicted that the amount of information reaching people and the number of decisions they would have to make is increasing. We need to learn more to keep up with relevant information so we can make better decisions.

I can think of three ways I learn.

The least effective is figuring things out on my own. It is exhausting, slow, and the results seldom survive "real world" analysis.

Better is learning from seeing words or pictures.

For me the best way to learn is by listening to people who have been successful doing something.

Sales Lab Status Meetings are designed to give participants an opportunity to learn quickly and easily. While the meetings create extraordinary insights into selling more effectively, they also provide practical experience for improving work skills, management skills, relationship skills, communication skills, and team building skills.
These meetings also give management a much better understanding of what is going on inside the organization.

What happens in a weekly Sales Lab Status Meeting?

Sales Tools
At my first public meeting with the management team and sales team at the original Cellular One, my customer told me the previous sales leader had had a rather public humiliation from the group, and had resigned. 
Why didn't you tell me this before?” I asked. 

I was afraid you wouldn't show up.” 

So I walked in front of a watching, but not hostile (yet) group, and said, “I have a simple test that shows who in this room should be in sales and who should merely be in management. Would you care to take the test?” 
They started looking at each other and then their ringleader said, “We'll do it.” 

I reached in my pocket, pulled out my business card and said, “I'm qualified to be in sales. Anyone else?” 

There was a lot of triumph and sheepishness as cards were shown and excuses made. That was the last meeting where any veterans were caught short, and carrying business cards became an internal badge of professionalism. 

We show sales tools at the start of every status meeting to get everyone in the habit of carrying business cards (or better) and finding better ways to communicate. We ask for a story about using sales tools. Few organizations have developed a practice of systematically defining and using better ways to explain their business. This is where that happens.

At the meeting, we are not looking for something theoretical. We are looking for a story about of something that has worked since the last meeting.

When you execute well in the field, whether discovering something new or executing something previously learned, come to the meeting prepared to demonstrate.

We have a defined introduction that provides value in two stages. First is making sure that everyone has something to say when their wits desert them when they have to speak in public.

Second is finding increasingly effective ways to describe what you do. In the meeting, use something that worked in an actual situation. If you can't think of an actual situation, what does that say about the way you did your job?

Promised and Produced
Years ago I noticed that the owners of companies could anticipate and predict what they would accomplish, and that the people working for them could not. Later I learned that it takes about six attempts over six weeks for most people to become deadly accurate at predicting their work. We practice every week so participants can create accurate management information and figure out what is important in their work.

Story about your work
We are looking for your breakthrough since the last meeting. Noticing the breakthrough is a learned skill, and anticipating the breakthrough improves preparation. Sharing the breakthrough defines it to the storyteller, and there is always the possibility that the story may help someone else recognize the opportunity for a similar breakthrough.

I have found that when the story is important to the teller, that is the value, and that the listener may recognize the value immediately, later, or not at all.

Best Thing You Learned
One of the hallmarks of a successful operation is the ability for enough people to learn what they have to know quickly and easily. Everyone needs to be gathering information. When you find good information, share it. The best way to share information is bring samples or handouts and explain how it has already helped you.

What will You Produce By The Next Meeting?
Identifying key deliverables lets you know what you are doing (and how you are doing). It also lets everyone else know what is coming, and who is making progress. 

I have found that when the format of the meeting is understood and anticipated, participants do prior preparation and get better results. Meeting format should not be a barrier to better results.

Moments of Truth - New Strategies for Today's Customer-Driven Economy

by Jan Carlzon, ©1987 Ballinger Publishing Company

Jan Carlzon became President of Scandinavian Airlines after successfully running a travel services company and a smaller airline. His book shows how getting people involved in continually upgrading performance requires unusual actions and often gets unplannned, but extraordinary results. This page is my “best of” compilation from the book. As I read it, I realize these are things most Sales Lab customers do. The whole book is a gem, very good and mercifully short.

Mistakes can usually be corrected later; the time lost in not making a decision can never be retrieved. p26

Anyone who is not given information cannot assume responsibility. But anyone who is given information cannot avoid assuming it. p27

The ability to understand and direct change is crucial for leadership...By defining clear goals and strategies and then communicating to his employees and training them to take responsibility for reaching those goals, the leader can create a secure working environment that fosters flexibility and innovation. Thus a new leader is a listener, communicator, and educator-an emotionally expressive and inspiring person who can create the right atmosphere rather than make all the decisions himself.

These skills were once regarded as feminine, an association that goes back to women's roles in the old agricultural society when they took care of family and social relationships in the village. Their intuition and sensitivity are traits that are essential for any manager, but cannot, unfortunately, be picked up overnight. p35-6

In many respects, though, the leader has to be an enlightened dictator-one who is willing to disseminate the vision and goals throughout a large, decentralized organization but who will not brook active dissent to the underlying ideas. p36

Some employees may not see or fully understand the vision and goals at the beginning. The leader must resist the urge to dismiss those people and instead work with them, give them additional information, and attempt again to make them understand.

Of course there will always be those who refuse to be persuaded. From them he must demand loyalty, if not emotional commitment to the goals. Otherwise they should be asked to leave. p36-7

A leader is one who creates the right environment for business to be done. p37

At times the press in Scandinavia has "divulged" that I personally have not originated all the ideas that have led to SAS's success ... The great triumph at SAS is that we have unleashed our employee's creativity through decentralization ... This same applies to my approach to outside consultants ... To me it cannot be anything other than sensible and responsible to bring a ship's pilot on board when you are steering your vessel into new and dangerous waters! p38-9

Unfortunately, many corporate executives are noticeably lacking in intuition, courage and conviction. The hierarchical company is traditionally headed by people skilled in economics, finance, or other technical expertise ... may be extremely bright, but they are often disastrous decision-makers and implementers. They find 10 solutions to every problem and just as they are about to decide which one to try, they discover five more. In the meantime, opportunities have passed them by. Sometimes I think they think up new alternatives in order to avoid taking the critical leap. p77

A manager cannot be allowed to keep his position if he does not accept his company's overall strategy or if he is incapable of meeting his objectives. p84

We had caught ourselves in one of the most basic mistakes a service-oriented business can make: promising one thing and measuring another. p108

Setting a good example is truly the most effective means of communications-and setting a poor one is disastrous! Most traditional managers drape themselves in imperial trappings. But when the customer comes first, you simply can't afford to do that. p95

When you reach your goal, you may become a prisoner of success ... it's tougher to win peace than to win war.

... this can't go on any longer. We have to begin making demands again ... By establishing our original goal, we had placed a demand on our employees. But now that there was no goal, a kind of reversal had set in ... people began setting their own individual goals, scattering in all directions and making different demands on the company. It was a graphic illustration of the need for top management to direct all forces toward a common goal. p121

First step - make a list. p125-6

We hadn't invented a goal. Rather we developed one out of a concern that had been there all along. p128

Although some people have criticized our passion for goal-setting as bordering on the hysterical, I disagree. Larger goals help us see beyond our daily tasks. People want challenges in their jobs and lives. By setting goals ... we can contribute to our employees' well-being and, together, we can strive to serve our customers better and better. p133

Empowering employees with real responsibility and authority requires a radically different organizational structure. The model is horizontal, and the work roles are redefined.
The first level is responsible for guiding the company into the future, anticipating threats to current business, and scanning for new opportunities. People at this level establish goals and develop strategies for reaching them. Of course, this entails making decisions, but not regarding specific actions.

The next level is responsible for planning and allocating the available resources by investing money or recruiting people-in other words, doing everything necessary to enable the people at the operative level to carry out the strategies that top management has established. Again, these are not decisions on specific actions. Rather, they are a means of creating the prerequisites for others to make those decisions. The third level is what I call the front line, or operations. This is where all the specific decisions should be made-all decisions necessary to run the company in accordance with top management's goals and strategies. p133-4

Fortunately, the front line and the market itself are reliable guides for remaining on track. p134

Wednesday, August 19, 2009

Quotes from Dune - Frank Herbert on Leadership

Dune is a science fiction/ecology saga (more than 6 books) written in the ’60’s and ’70’s by Frank Herbert. Dune is also a written simulation about governing (leading) an empire (organization). Like SimCity shows urban development over time and SimAnt models an ant colony, Dune explores cause and effect in the practice of management, leadership, environment, security, loyalty and economics over thousands of years. Frank Herbert’s observations on leadership are original, thought-provoking, and useful. Dick Davies

From Dune, 40th Anniversary edition:
“The Guild Navigators, gifted with limited prescience, had made the fatal decision: they'd chosen always the clear, safe course that leads ever downward to stagnation.” (p458, Dune)

From the third book of Dune:
“Perhaps your deficiency rests in the false assumption that you can order men to think and cooperate. This has been a failure of everything from religions to general staffs throughout history ... Men must want to do things out of their own innermost drives ... Every civilization depends on the quality of the individuals it produces.” (p335, Children of Dune)

From the fourth book of Dune:
“The difference between a good administrator and a bad one is about five heartbeats. Good administrators make immediate choices.”
“Acceptable choices?”
“They can usually be made to work. A bad administrator, on the other hand, hesitates, diddles around, asks for committees, for research and reports. Eventually he acts in ways which create serious problems.”
... A bad administrator is more concerned with reports than decisions. He wants the hard record he can display as an excuse for his errors.”
“And good administrators?”
“Oh, they depend on verbal orders. They never lie about what they've done if their verbal orders cause problems, and they surround themselves with people able to act wisely on verbal orders. Often the most important piece of information is that something has gone wrong. Bad administrators hide their mistakes until it's too late to make corrections.”
“Men of decision.”
One of the hardest things for a tyrant to find is people who actually make decisions ... Most bureaucracies before mine sought out and promoted people who avoided decisions.” (p240-1, God Emperor of Dune)

“Even a society such as the one he had created ... had no real hope of totally eliminating dangerously violent small weapons. The whole idea of controlling such things was a chimera, a dangerous and distracting myth. The key was to limit the desire for violence.” (p252)

“Not addressing immediate needs is an offense to the young.” (p257)

... there is knowledge you can only gain by participating in it. There's no way to learn it by standing off and looking and talking.” (p291)

From the fifth book of Dune:
“For the in-between universe where we find our daily lives, that which you believe is a dominant force. Your beliefs order the unfolding of daily events. If enough of us believe, a new thing can be made to exist. Belief structure creates a filter through which chaos is shifted into order. (p131, Heretics of Dune)

“Law always chooses sides on the basis of enforcement power. Morality and legal niceties have little to do with it when the real question is: Who has the clout?” (p151)

Bureaucracy destroys initiative. There is little that bureaucrats hate more than innovation, especially innovation that produces better results than the old routines. Improvements always make those at the top of the heap look inept. Who enjoys appearing inept?” (p222)

Philosophy is always dangerous because it promotes the creation of new ideas. (p449)

From the sixth book of Dune:
“Confine yourself to observing and you always miss the point of your own life. The object can be stated this way: Live the best life you can. Life is a game whose rules you learn if you leap into it and play it to the hilt. Otherwise, you are caught off balance, continually surprised by the shifting play. Non-players often whine and complain that luck always passes them by. They refuse to see that they can create some of their own luck.” (p56, Chapterhouse Dune)

“Remember: Bureaucracy elevates conformity ... Make that elevates ‘fatal stupidity’ to the status of religion.” (p111)

“Many things we do naturally become difficult only when we make them intellectual subjects. It is possible to know so much about a subject that you become totally ignorant.” (p114)

“Do actions agree with words? There's your measure of reliability. Never confine yourself to the words. Look for the consequences. That's how you ferret out things that work. That's what our much-vaunted truths are all about.” (p 128)

“Laws to suppress tend to strengthen what they would prohibit. This is the fine point on which all the legal professions of history have based their job security.” (p131)

“Delegate heavily to only the same people and you fell into bureaucracy.” (p133)

“Instincts and memories of all types ... even Archives-none of these things spoke for themselves except by compelling intrusions. None carried weight until formulated into a living consciousness. But whoever produced the formulation tipped the scales. All order is arbitrary. ...There is no reality. Only our own order imposed on everything.” (p137)

“Power attracts the corruptible. Suspect all who seek it ... We should grant power over our affairs only to those who are reluctant to hold it and then only under conditions that increase that reluctance.” (p151)

“If you don't see the difference between regulation and law, both have the force of law.”
“I see no difference.”
“Laws convey the myth of enforced change. A bright new future will come because of this law or that one. Laws enforce the future. Regulations are believed to enforce the past.”
In each instance, action is illusory. Like appointing a committee to study a problem. The more people on the committee, the more preconceptions applied to the problem.” (p166)

“Some never participate. Life happens to them. They get by on little more than dumb persistence and resist with anger or violence all things that might lift them out of resentment-filled illusions of security.” (p173)

From Sandworms of Dune
“Some problems are best solved with an optimistic approach. Optimism shines a light on alternatives that are otherwise not visible.” (p468)
Sheanna, Reflections on the New Order

WordPictures - Phrases That Lit The Bulb!

WordPictures is a continuing list, started before the Internet, of the best things I’ve heard, read, or said.

Good things happen when I keep my commitments

I’m not cheap...I’m frugal

I’d rather be workable than right

Life is what happens when you are planning something else

The *New* Bauhaus Philosophy for Internet Design - Form *Still* Follows Function

Websites (and other things) get “better,” not “finished.”

Learning from customers is a practice. We get better the more we do it.

Startups are for young guys. Finishups are for rich guys.

A model is a simplified version of reality. When your model no longer returns accurate results, improve your model.

The RIGHT picture is worth a thousand words.

Blessed are the early, for they shall find a seat.

One Man’s Wingnut is Another Man’s Guru.

The Internet is a network of computers. The World Wide Web is a collection of links.

Five stories is a culture.
Dick Davies

Sales is just a conversation with a yes at the end.
Jack Gates

If we can’t beat a copycat at our own game, we suck.
Ben Huh, CEO, Cheezburger Network

Rework is evil.
Bob Patterson, Boeing Corporation

Did you ever notice, no matter how hard you do the wrong thing, it never quite works?
Ted Long
If you think it's expensive to hire a professional to do the job, wait until you hire an amateur.
Red Adair

I began my cure of anger by noticing its effects in others.

The customer is in charge of the new world disorder.
Dieter Huckestein, Wired

It’s easier to give birth than to raise the dead.
Theo Androus

Not everything that counts can be counted, and not everything that can be counted counts.
Albert Einstein

Experimental confirmation of a prediction is merely a measurement.
An experiment disproving a prediction is a discovery.
Enrico Fermi

Sturgeon’s Law - 90% of everything is crud
Theodore Sturgeon

The future is already here. It’s just not evenly distributed.
William Gibson

You manage things. You lead people.
Peter Drucker, The Effective Executive

If you’re not competitive, don’t compete.
Jack Welch, General Electric

Let’s not confuse activity with progress.
Paul Bortree

The Rule of Holes - If you find yourself in a hole, stop digging.
Outside Wall, Barnes and Noble, Bethesda

Win some, lose some, wreck some.
Dale Earnhardt

It's a fallacy of academic market theory that information is available equally.

Bill Van Dyke

Being a sales manager is life in (Covey’s) Quadrant 3 (Urgent/Not Important).
Bill Van Dyke

If it’s not written down, it doesn’t exist.
Doc Fails, Fails Management Institute

Writing is evidence of thinking.
Werner Erhard

The first purpose of a brochure is to tell our side what we are doing.
David Kritzer

We have to stop paying people for duration and start paying them for innovation.
Paul Zane Pilzer

Work as if you live in the early days of a better nation. 
Carved in stone on the wall of the Scottish Parliament

Marketplace companies sell to consumers; enterprise companies sell to other businesses.
Marc Andreessen in The New Yorker

The first requirement for growth is a relentless commitment to tell the truth about reality.
The second requirement is surrounding yourself with people who are committed to growth.
Stewart Emery

There is no solution in the negative.
Dick Davies

Managers who focus on failure become experts on failure.
Dr. W. Edwards Deming

There is something that is much more scarce, something rarer than ability. It is the ability to recognize ability.
Robert Half

When I am teaching, I never say never and I don’t say don’t, if I can help it. I try to put everything in positive, constructive terms. ...when you are hitting a golf shot, a negative thought is pure poison.
Harvey Penick's Little Red Book

No matter what your interest or profession, the internet should now be your primary research tool.
Mario Morino

Some problems are best solved with an optimistic approach. Optimism shines a light on alternatives that are otherwise not visible. (p468)
Sheanna, Reflections on the New Order, Sandworms of Dune

There is a great paradox. We must use technology to the fullest extent possible to increase distribution. At the same time, there is no substitute for a face-to-face meeting...

Don’t focus on hierarchy. Hierarchy will change. Focus on solutions to problems...
Most consultants are very, very deep experts in one or two areas, but they don't really see where these areas fit in the context of their client’s business...
As a professional, I provide services to my clients and to my company. I am a vendor to each.

Ben Gorton

Networking is helping someone achieve their goals
Tom Peters

Any technology, sufficiently advanced, is indistinguishable from magic.
Arthur C. Clarke

Philosophy drives attitude, which drives action, which drives results, which drives lifestyle.
If you have a problem with your lifestyle, check your philosophy.
Jim Rohn

If you can’t fix it with a hammer, it’s an electrical problem.
David Richardson, Construction Management Group

Remember Dick, there's no such thing as free money.
Harry Mulkey

Participation for sure, consensus where possible.
Scott McNeely
Stanford University Network Computers

Standards should be discovered, not decreed.
Computer scientist explaining why TCP/IP crushed OIS in
Where Wizards Stay Up Late - Origins of the Internet

We live in an age of oversupply. Customers have more choices than ever. If you tell people, “We offer high quality, low prices, good features,” what you’re really saying is, “We’re just the same as everybody else.”
Gunter Pauli, Fast Company

For every complex question there is a simple answer, and it is wrong.
 H. L. Mencken
It's okay to talk to yourself. Just don’t tell yourself any lies.
Danny Evans, Carpenter

The individual must shoulder the burden of defining what his or her own contribution will be. We have to demand...and demand is the word, nothing permissive...that people think through what constitutes the greatest contribution they can make in the next eighteen months or two years. Then they have to make sure that contribution is accepted and understood by the people they work with and for...

When you don't communicate, you don't get to do the things you are good at.
Peter Drucker, Managing Great Change

Profound knowledge is knowledge you understand and use immediately.
Tony Robbins
(Which means the value is created by the listener. - Dick)

Our organizational world is no longer a pattern of jobs, the way that a honeycomb is a pattern of those little hexagonal pockets of honey. Today's organization is rapidly being transformed from a structure built of “jobs,” to a field of “work needing to be done.”
William Bridges, JobShift

It’s not hard to be grateful. Just say Thank you when you wake up every morning.
A Calendar For Women Who Do Too Much

I don’t read five page résumés.
Deborah Pinckney, Lucent Technologies Employment Consultant

Two things force decisions...lack of time and lack of money.
John Sanders, Parables For Entrepreneurs at

There are two ways to sell. Either be the horse your customer can ride up the organization or play to FUD (Fear, Uncertainty and Doubt).
Gene Riechers - Friedman, Billings, Ramsey & Co.

Journalism is about facts. Fiction is about truth.
Bruce Goldstein

The Three T’s
A “Grook” (small poem) by Piet Hein

Change is inevitable.
The speed of change appears to be increasing.
Being hammered by change is exhausting, confusing and frightening.
Taking control of change is exhilarating, liberating and affirming.
Taking control of change greatly increases your probability of success.
Dick Davies
To Learn More About:
Harnessing Your Corporate Culture
You’re Paying For it,
You Might As Well Use It!
Contact Dick Davies at Sales Lab.