“Look, kiddie. I built this business by being a bastard. I run it by being a bastard. I’ll always be a bastard, and don’t you ever try to change me.”

— Charles Revson to a senior executive in the company

The main essence to The Innovators Dilemma

The Innovators Dilemma is arguably one of – if not the - most important book in describing how technological innovation works and why almost always the incumbents and leading players in markets fail to capture the next wave of innovation in their market   and have their lunch eaten by a newcomer. This book is so good I read it multiple times and every time I learn more.  Below I share what I think is the most important excerpt from this book which captures its key essence (although I highly suggest anyone operating in the technology business to read the entire book)

“The reason [for why great companies failed] is that good management itself was the root cause. Managers played the game the way it’s supposed to be played. The very decision-making and resource allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies: listening to customers; tracking competitors actions carefully; and investing resources to  design and build higher-performance, higher-quality products that will yield greater profit. These are the reasons why great firms stumbled or failed when confronted with disruptive technology change.

            Successful companies want their resources to be focused on activities that address customers’ needs, that promise higher profits, that are technologically feasible, and that help them play in substantial markets. Yet, to expect the processes that accomplish those things also to do something like nurturing disruptive technologies -  to focus resources on proposals that customers reject, that offer lower profit, that underperform existing technologies and can only be sold in insignificant markets– is akin to flapping one’s arms with wings strapped to them in an attempt to fly. Such expectations involve fighting some fundamental tendencies about the way successful organizations work and about how their performance is evaluated.”

A frequent misinterpretation of the innovators dilemma is that incumbents (described above as great companies which in many cases they were) fail to develop these disruptive technologies or to embrace them due to the inability of the organization to adapt operationally or technologically to these new innovations.  In other words conventional theory zeros in on the inability of management to spot, develop or reorganize to bring these new technologies to market. That is plain wrong and the opposite is in fact shown to be true.

What the theory (and the extensive supportive evidence) in fact supports is that in the incumbents are most often the ones to spot and develop these technologies  and reorganize themselves just fine to do so. The problem is t in fact they fail to value them properly because they  apply them to their existing  customers and product architectures (what the author calls ‘value networks’).  Often these new technologies are still (at their early stages) weak  for the more advanced and mature value networks that these incumbents operate in,  so the ROI on the effort needed to advance them is seen as low. In other words, management acts sensibly in rejecting the continued investment in these new technologies acting in the company’s best interest to protect profits and avoiding cannibalization. Moving into new markets is rejected as they are seen as too small to make a dent for them and their cost structure prohibitive to enter at sensible margins.  

Therefore what ends up happening is that new entrants (often founded by frustrated departing ex-employees of the incumbents) with little or nothing to lose do gown down-market (or upmarket for them from their ground zero starting point). Initially that doesn’t pose a threat – the new entrants just find new markets for these technologies largely by trial and error, at low margins but their nimble and low cost structure allows them to operate sustainably where the incumbents could not. However, the error in valuing these technologies comes from what happens next. By being intrinsically superior technologies that find new niche markets, they advance very rapidly and hit that steep part of the classic ‘S’ curve, eventually entering the more mature markets of the incumbents and disrupting them. In other words, the smaller markets (the classic Trojan horses) are the guinea-pigs that help the technologies advance enough to play in the big boys league. In many cases the entry-point markets become an insignificant share of the eventual total as the new technologies move into higher margin upmarket territory disrupting them due to their superior performance.

So technology leaders evaluating whether to invest in new and immature technologies must do so with a futuristic frame of reference. The key question being: if these technologies  found new customers, new markets which may in themselves be small and insignificant (now and in the future), could they mature enough to make inroads into the big boys league and have our lunch? And if so, does investing in them today at the risk of cannibalizing ourselves make sense in the longer term? Hence, the innovators dilemma.

The 3 attributes of true leadership

“The ability to charm dogs off a meat truck”…   “When people want to follow you even if just out of curiosity” …  “The ability to make the other guys feel in charge”.  To “empower”, to “motivate”, to “inspire”…  The list of attributes to what makes a great leader is countless.  They all make a good read, but none of them fully capture the true essence of what makes a great Leader in a complete way, I believe

Great leaders may posses a myriad of attributes, no least of which are smarts, intelligence, charisma and natural charm. All of these things matter. However you can be a great leader and not be naturally charming or very intelligent, or many of the other attributes named. 

The below are in my view the three must-have attributes to be a great leader,  and in this priority,  (although reverse order of difficulty).

1. VISION 

The ability to amass a great team, motivate and inspire them is plain useless if you don’t have a clear vision of where you need to get to.  Leadership is first about seeing the future and being able to figure out a feasible path to getting there. It’s seeing the iceberg before the Titanic hits it and taking fast and decisive action. It’s seeing beyond the forest when all everyone around sees, is the forest.  Its doing the one right thing versus doing many things right. It’s being different, not following the herd, being controversial, seeing what others don’t see. It’s having a nose for what’s coming, and the eyes and ears to react at the right time, before others do. Without vision, you can empower people all you like but you won’t get anywhere. You may have people drooling at your feet for attention - you are still not a leader.  You have a following but no direction. You may make a great motivational coach bit not a leader. The thesis that you can collectively find the direction is nonsense.  That may work in maintaining the status quo when things are going well. But every really hard situation (and no leadership of any kind is ever devoid of them) needs a visionary leader to point the way and take a tough decision.  

2. INFLUENCE  

Once you have a clear vision (but only then), next you need a sting followership because you are unlikely to fulfill it alone.  That requires the power of influence.  Whether you are a hired gun put in an existing situation to lead it, or the creator of one, this is very hard thing to do. Exceedingly hard.  First because you are a newbie in either scenario. People are used to measuring  the odds, that’s how they size things up, and the odds are against you. Why should people trust a newbie? Secondly, the vast majority of people are resistant to change, no matter the odds.  Doing what you are used to is far easier, always. Yet to fulfill any grand vision you need to drive change, by definition, otherwise you are just a puppet master holding the strings waiting for the show to end. In that process you need to influence people across the board:  employees leave secure jobs and come join you; investors to give you money when you haven’t proven anything, customers and fans to support you, your bank manager to give you an overdraft, your landlord to give you a lease and rent-free period; your wife to put up with sleepless nights, cold sweats and no pay; your mum to let you camp in the basement when your wife finally kicks you out.  What makes this even worse is you carry that burden of influence with you.  Every day that passes you get a little heavier knowing that if you go down you take more people with you than yesterday.

3. COURAGE 

Hence the third element and the hardest. You’ve clarified a vision and built a followership by begging, charming, coercing, schmoozing….ultimately influencing enough people.  After all this work you realize its just day1. Because all of these are like the boat (more like a raft) and the compass. You now need to cross the ocean. This is the final and true test of great leadership. And it ultimately comes down to courage. Intelligence and knowledge are advantages of course, but without courage they are wasted. Whilst courage without them will get you there, albeit slower and with more pain. So the key question is: do you have the courage to keep going when everyone tells you to turn back; to know you’re right when everyone says you’re wrong; to stick to your instincts when people call you crazy knowing that if you fail you will be called a stubborn loser (and if you succeed a genius); to carry other people’s weight when they fall, to set the tempo and beat the drum however tired  you may be, to keep people together when they are drifting apart and losing faith; to give them courage but not fake hope; to tell it how it is even if they don’t want to hear it; to say NO when they are desperate for a YES; to cut the rope when the load gets too heavy and may sink the boat; to let go of some to save the  many;  to weather the storm but not bask in the sunlight when it ends, because by now you should know: it never ends.

—-

Vision and Influence make you a well equipped Captain. But courage gets you there. On the other hand courage alone is being a fighter without a cause.  A hero  but not a leader. You may be good at creating lots of noise, but, to paraphrase Sun Tzu’s Art of War: it’s just “the noise before defeat” 

“Empowerment is what you are given. Self-leadership is what you do with it”

— The one minute manager

“I don’t believe in statistics. I believe in calculus”

— Ben Horowitz

“We shall not cease from exploration, and the end of all our exploring will be to arrive where we started and know the place for the first time.”

— T.S.Eliot

10 reasons to carry on doing what you’re doing

I was recently asked by someone why I do (or carry on doing) what I do. It’s such a simple question yet it startled me. It’s easy enough to jump in to a knee-jerk textbook answer. But its really hard to articulate why it really is that you do what you do (short of things like necessity, habit, or lack of choice. The ‘why not’ is not a valid answer.

So I applied the ‘amnesia test’. If I woke up tomorrow and had no recollection of what it is that I do, devoid of any emotional attachment to it, or habit, what would be the ten criteria I would write down in evaluating whether ‘it’ is what I really want to do? Here’s what I came up with:

1. Do I really enjoy it? Plain and simple. Do I feel eager every day to get out of bed and crack on doing it?  Or do I snooze the alarm clock? Somehow my body clock precedes my alarm every single day, no matter what time zone im in or what time I set it to.  Not the be all end all but certainly a good start.

2. Can I do it better than others? Or stand a good chance to be amongst the top handful of people in the world in what I do? If I push myself can I compete with them ferociously even if today I’m still the underdog? This can’t be for high level things like ‘being a CEO’, or an investor . It has to be specifically for the field you specialize in. Be brutally honest in drawing that boundary but equally honest in the answer. Life is too short to waste it in second place.

3. Can I make a difference in the world doings what I do?  Is what I do important, in a meaningful way, beyond just making money. Happiness is amplified multifold (in most people and certainly in my case) when there is a purpose to what ‘it’ is other than short term gain. It has to outlive you.

4. Does it keep me challenged? Do I work on hard enough problems that rack my brain every day and push my limits? The only thing worse than not being good at what you do is – paradoxically – being too good at it. Boredom is far worse than the agonizing feeling of trying to crack really hard problems, sometimes out of your depth. That’s how I feel every day.

5. Do I learn every day doing it?  This goes hand in hand with 4) but its not exactly the same. You can be challenged without necessarily developing yourself. There are different forms of challenges, those that test your endurance, those that test your interpersonal skills, your ability to adapt or your ability to stretch and venture into new grounds. 

 

6. Do I get to work with people I enjoy? One of the worst moments in my memory as an entrepreneur is walking into the company I founded and feeling alien. Feeling that this is not what I had in mind. It’s a painful feeling, that thankfully I no longer have and one I will never forget. It’s like watching your kid grow and one day you take a look at him and think: how on earth did you turn out this way? This experience thankfully became a catalyst of change for me. I implemented ruthless cut-throat cuts getting rid of all those misfits. The people left behind now at PeoplePerHour are like family. Bonded by something beyond a contract of employment. We are on the same page. Before we weren’t even in the same book! 

7. Equally, do I get to NOT work with people I don’t enjoy?  Choosing who to work with is as important as being able to say NO to those you don’t like. Which is not obvious. In most jobs you will have some asshole you cant get rid of – even as a Founder. Maybe its an investor, a member of management planted by them, Clients you depend on etc.  At PeoplePerHour we are lucky enough to be at the top of the food chain and choose who to work with. As I often like to joke: there’s only space for one asshole in the room. And that’s me!

8. Do I get to NOT have to do the things I don’t enjoy. Jeff Bezos was asked once whether he would do another Startup if he sold Amazon. To which he chuckles: “that’s; like going back to kindergarten”. There is an awful lot of things a founder needs to do in the beginning that they don’t enjoy and are not good at. Reaching a point where you no longer need to do this is an important soft milestone that - in my experience - paved the way for accelerated success. It means you can focus on the things you enjoy and are good at. 

9. If I stopped doing it would it matter to anyone? A measure of how much you matter in the world is to imagine what would happen if you just didn’t. Would anyone care? And by that I don’t mean how many people. You can have more impact in this world if 1000 people really REALLY care versus 10 million who sort of do. 

10. Does it allow me to develop myself in other ways, other than just doing it? Does it give me the time and energy to be a more complete person? If what you do is completely dominating your life firstly you will not be as productive in it. You will develop tunnel vision and lose your creativity. I find that my best ideas hit me when I’m doing other things, like a sport or painting or reading, visiting a museum or writing a post like this, or just lying on the beach. Over the past 12 months I’ve made a concerted effort to do more of those things and as a result I’ve become a lot more productive at my work. And happier!  

So there it is. That’s my 10 point checklist. What’s yours?

My latest painting, inspired by watching Luis Banuelos play the guitar at SXSW in Austin. 

My latest painting, inspired by watching Luis Banuelos play the guitar at SXSW in Austin. 

Disaggregation of a Bank

fermivc:

There are lots of cool charts thrown around the startup/VC world. One of the best is the “Disaggregation of Craiglist,” originally created by Andrew Parker in 2010 and updated by David Haber in 2012 (shown below):

USV has recently invested in a host of internet-enabled financial services,…

My only allergy - NEGATIVE PEOPLE!

I’m lucky enough not to have any allergies. But recently I developed one very strongly -  NEGATIVE PEOPLE! 

I cannot deal with negativity any more. It’s what’s killing the world. The winging, constant “I can’t” attitude instead of “can do”… seeing all the things that can go wrong first instead of what can go right.  For the love of God , if you want nothing to go wrong then stay in bed and spare the rest of us the itch. Nothing can go wrong if you stay in bed can it ?! STAY ! 

Unfortunately as the diagram below depicts very neatly this describes 90% of the population.  And in Europe probably 99%! That’s the main reason I left Europe even though there are so many things I love about it. The constant, ubiquitous negativity,  the winging, complaining.  The small-mindedness and thinking inside a tiny box, not questioning what may be beyond the forest.  No wonder Europe is screwed. 

 image

We have so little to lose in life, and so much to gain by just being fearless, trying out whatever it is we aspire to, even if that means you fail, ridicule yourself or look like an idiot. So what?  You’ve done more than most people by just trying. And if you don’t, aren’t you a bigger idiot?  

So if you know me and see me itching, scratching, sneezing, shaking or any other allergy symptoms   - just jump out of your comfort zone, or go back to bed. And stay there.   Because if you don’t aim to raise the bar in life, and you don’t have the courage to try, then you may as well be dead. Period. 

ACHOO !

Good Product Managers, Bad Product Managers

Finding great product managers is one of the hardest roles to hire for in any company I find. Great product managers are often unemployable and become the entrepreneurs themselves. But not impossible. The below paper written by  the acclaimed entrepreneur-turned-VC Ben Horowitz which is taught at Stanford is the best i’ve read so far that articulates the distinction between a good and a bad Product Manager. It’s a must read  for any entrepreneur, CEO, recruitment professional or product manager

It can also be found on Stanford’s website here

Courtesy of Ben Horowitz

Good product managers know the market, the product, the product line and
the competition extremely well and operate from a strong basis of
knowledge and confidence. A good product manager is the CEO of the
product.  A good product manager takes full responsibility and measures
themselves in terms of the success of the product. The are responsible
for right product/right time and all that entails. A good product
manager  knows the context going in (the company, our revenue funding,
competition, etc.), and they take responsibility for devising and
executing a winning plan (no excuses).

Bad product managers have lots of excuses. Not enough funding, the
engineering manager is an idiot, Microsoft has 10 times as many engineers
working on it, I'm overworked, I don't get enough direction. Barksdale
doesn't make these kinds of excuses and neither should the CEO of a
product.

Good product managers don't get all of their time sucked up by the
various organizations that must work together to deliver right product
right time. They don't take all the product team minutes, they don't
project manage the various functions, they are not gophers for
engineering. They are not part of the product team; they manage the
product team. Engineering teams don't consider Good Product Managers a
"marketing resource." Good product managers are the marketing counterpart
of the engineering manager. Good product managers crisply define the
target, the "what" (as opposed to the how) and manage the delivery of the
"what." Bad product managers feel best about themselves when they figure
out "how". Good product managers communicate crisply to engineering in
writing as well as verbally. Good product managers don't give direction
informally. Good product managers gather information informally.

Good product managers create leveragable collateral, FAQs, presentations,
white papers. Bad product managers complain that they spend all day
answering questions for the sales force and are swamped. Good product
managers anticipate the serious product flaws and build real solutions.
Bad product managers put out fires all day. Good product managers take
written positions on important issues (competitive silver bullets, tough
architectural choices, tough product decisions, markets to attack or
yield). Bad product managers voice their opinion verbally and lament that
the "powers that be" won't let it happen. Once bad product managers fail,
they point out that they predicted they would fail.

Good product managers focus the team on revenue and customers. Bad
product managers focus team on how many features Microsoft is building.
Good product managers define good products that can be executed with a
strong effort. Bad product managers define good products that can't be
executed or let engineering build whatever they want (i.e. solve the
hardest problem).

Good product managers think in terms of delivering superior value to the
market place during inbound planning and achieving market share and
revenue goals during outbound. Bad product managers get very confused
about the differences amongst delivering value, matching competitive
features, pricing, and ubiquity. Good product managers decompose
problems. Bad product managers combine all problems into one.

Good product managers think about the story they want written by the
press. Bad product managers think about covering every feature and being
really technically accurate with the press. Good product managers ask the
press questions. Bad product managers answer any press question. Good
product managers assume press and analyst people are really smart. Bad
product managers assume that press and analysts are dumb because they
don't understand the difference between "push" and "simulated push."

Good product managers err on the side of clarity vs. explaining the
obvious. Bad product managers never explain the obvious. Good product
managers define their job and their success. Bad product managers
constantly want to be told what to do.

Good product managers send their status reports in on time every week,
because they are disciplined. Bad product managers forget to send in
their status reports on time, because they don't value discipline.
 

Watch my official (and verbose) speech at the launch of DeskDonkie in SXSW ;) 

Passionate entrepreneur and artist at heart, lover of life with an overly curious mind. Advocate of the different, creative and unconventional; follower of art, design, anything creative, pretty and cool. Fan of elegance found in simplicity and minimalism; allergic to the verbose, the superfluous, the non-colorful and the dull. Life long enemy of conformity; specializes in poking the fire and stirring things up, accidental Founder of and now fully and truly wed to PeoplePerHour.com