The Business Sensei

Death of Thousand Knives

Very few companies are ever driven out of business by their competitors.

I’ve found that this statement upsets a great many people, all of whom are quick to jump up and start providing examples of companies that were, in fact, driven out of business by their competitors. This is missing the point. Indeed, it’s rather like a detective in a murder mystery concluding that the cause of death was that the victim’s heart stopped. It matters whether the heart stopped due to lead poisoning, for example in the form of a bullet, or due to some other cause. Indeed, understanding exactly what led to that heart stopping moment is a key part of solving the mystery.

Similarly, while it’s not so unusual for a failing company to have the coup de grace administered by a competitor, how they got to that point makes all the difference. Focusing only on the end point provides a very simple, comfortable solution, but not necessarily a particularly useful one.

Robotic Chromosomes, for example, was a company that dominated a particular niche in the bioinformatics market. They were an early entrant into the field and their products were initially the best on the market.

Over the course of several years, though, they developed a view of their clients as idiots. The fact that their clients were all highly educated research scientists did not enter into the equation. If they had trouble using the software, they were idiots. As a result, the company became increasingly less open to feedback from either their clients or from the market. While their market share was increasing faster than the market itself, they could get away with that attitude. Eventually, though, their growth started lagging the growth in the market. Phrases like “law of large numbers” and “temporary aberration” were batted about. When their market share started shrinking, phrases like, “temporary aberration” became even more popular. The view of the clients as insanely stupid for buying competing products also became more common.

Today, they no longer exist. Were they driven out of business by their competitors? Only in the sense that they put themselves in a position to allow their competitors to drive them out of their dominant position in the market. Sure, their competitors may have pushed them over the cliff, but they were the ones who chose to walk to the edge and lean over.

Now, it may reasonably appear from the preceding description that Robotic Chromosomes was taken down by a clearly defined event, that is, viewing clients as idiots. That is not, however, quite correct. While it may appear that way in retrospect, the reality is that Robotic Chromosomes suffered from a series of cascading errors. Each mistake was small, easily overlooked or ignored. Each mistake led to more mistakes until eventually the company was suffering from so many small cuts that it eventually had no strength left to resist when its competitors moved in. So how does a company avoid this death of a thousand knives?

The obvious answer is that they needed better communications. While true, it again misses the point. Communications is where problems show up, but the communications are rarely the problem. Rather, the dysfunctional communications are the symptom of the problem. It’s critical to look beyond the symptoms to identify the real problem. Otherwise, you spend all your time looking at the wrong things, as Robotic Chromosomes so eloquently demonstrated.

Avoiding that fate requires a willingness to accept negative feedback; it means being willing to hear what people are saying about your product, your service, or your management style. If you aren’t willing to listen, or if you structure the way in which you listen to negate the feedback, you’re setting yourself up for failure, one step at a time. For example, creating a culture that mocks and demeans your clients is not a recipe for success, and closes you off from valuable feedback from those clients.

Being willing to accept feedback is only a first step though. You have to create a context in which employees are not afraid to give you that feedback, and in which they believe that providing feedback is worthwhile. If people that they’ll be punished for being critical or regarded as “not a team player,” it’ll be hard to get them to provide feedback.

Next, you need to clearly define your goals and also define how you’ll know whether you’re succeeding or failing. Robotic Chromosomes had very fluid definitions of success, definitions that shifted regularly to avoid facing unpleasant results. It’s important to separate the evaluation of the feedback you’re getting from the testing to see if the criteria for that evaluation are valid. In fact, verifying the validity of your criteria should be done before you then evaluate your feedback: otherwise, it’s too easy to redefine success and give yourself a few more cuts. None of them seem all that bad at the time.

Step by step, over the course of several years, Robotic Chromosomes successfully created an environment where any negative feedback could be ignored because that feedback was always coming from idiots.  Their competitors didn’t drive them out of business. They drove themselves out of business; their competitors simply put them out of their misery. How will you avoid the death of a thousand knives?

Communications: The Proximity Paradox

This is an excerpt from my new book, Organizational Psychology for Managers.

Communications technology is truly amazing. We can carry in our pockets a device that has more computing power than you could pack into a house a few decades ago and that device can even make phone calls. We may not even have to dial the number: if you happen to own an iPhone, you need do nothing more than tell Siri whom to call and Siri places the call for you. What Siri, and its equivalents, cannot do is figure out who you need to call and when you need to call them. This is no doubt an interesting technical problem, made even more complex in the cases where the person you need to talk with isn’t someone you even know.

An article in the NY Times in Dec 2012 made the observation that when you put R&D and Manufacturing near one another, you get unexpected connections. Manufacturing can give feedback to research and vice-versa, and this feedback happens rapidly. MIT researchers are now studying the shocking revelation that people who are physically near one another will often talk to each other.

Okay, I’m being a little bit sarcastic here (but it is true that MIT researchers are studying this). The trap that we often fall into is forgetting that “Manufacturing” or “Research and Development” are not entities. They are merely convenient labels we use to identify different organizational functions. Manufacturing does not talk to Research and Development; the people in the manufacturing division talk to people in R&D. Despite all our technology, we tend to think about and connect most easily with the people around us. If manufacturing and R&D are located near one another, casual conversation and connection is easy, to say nothing of more formal communications. We don’t want them intermingled, for reasons that we’ve already discussed: they are different functions and need to have the space to forge a sense of identity. Neither do we want them so separated that they cannot easily communicate: that creates silos. It doesn’t matter if the silo is across town or in another country, it is still a silo!

Now, you might be thinking, how hard can it be to communicate? After all, those folks in R&D just have to call those folks in manufacturing! What’s wrong with them? The problem is that when we’re separated into silos, we don’t know whom to talk to! Even if we have a name, without a connection to that person, it’s hard to make that call and get them to listen: they are busy, we are busy, and exploratory conversations get swept aside in the rush to meet deadlines or deal with day-to-day business. Pretty soon, both parties forget. There is a real truth to the old saying, “Out of sight, out of mind!”

Building relationships with other people is a human activity. We can maintain relationships over a long distance and many years with our technology far more easily than ever before. What technology cannot do, however, is create relationships out of nothing. For that, we need human contact. We can initiate and reinforce those contacts through orientation and learning tools such as serious games, we can increase the probability of contact through the physical layout of our offices and plants, we can bring people from different parts of the organization together in various offsite locations, but no matter what we choose, we must create the opportunities for those contacts to occur. Once they do occur, we need to periodically refresh and reinvigorate them. Even professional relationships need reinforcement!

I was recently asked how to determine the ROI of holding a meeting to bring people together from different parts of the organization. This is the wrong question to ask. It is the equivalent of asking an athlete to determine the ROI of any individual workout. One workout is pretty much meaningless. If you happen to miss a trip to the gym or a run around the track, nothing much will happen. But if you stop going to the gym or stop running, after a few weeks or months, you’ll notice a difference! It’s the habit of exercise that matters, not any specific workout. Similarly, it’s the habit and ease of making connections throughout the organization that matters. It’s the flow of information that leads to problems being solved and innovation taking place. You can decide how much that is worth to your organization!

“Balzac combines stories of jujitsu, wheat, gorillas, and the Lord of the Rings with very practical advice and hands-on exercises aimed at anyone who cares about management, leadership, and culture.”

– Todd Raphael, Editor-in-Chief, ERE Media

Teams in Space

This is an excerpt from my new book, Organizational Psychology for Managers.

Go back to our discussion of silos and spaghetti in Chapter 1. When the borders between groups are vague and intermingled, you start to get spaghetti organizations. It’s easier to take information out of context: people chat with those around them, without really thinking about the context of the information they are discussing. A message meant for marketing might well be misinterpreted in engineering and vice-versa. In each case, the message might well have been delivered in the context of the team’s primary responsibilities; stripped of that context, the meaning changes.

On the flip side, when the interfaces between groups are difficult or hard to cross, you get silos. Locked doors or separate buildings are two obvious examples, but sometimes it’s just the attitude expressed toward those who “don’t belong here.” In New England, it’s customary to give directions in terms of the landmarks that used to exist: “Go straight down the road and turn right where Jack’s barn used to be before it burned down in ’92. Then continue to the…” and so on. This form of direction giving is something of a code to see who belongs and who doesn’t. When groups become too insular in their space, they stop communicating effectively. Mingling is good; you just don’t want the space intermingled.

“…Balzac preaches real engagement with one’s own company and a mindful state of operation, especially by executives…”

– Sid Probstein, Chief Technology Officer, Attivio – Active Intelligence

The Speed of Mistrust

Remember the scene in the original Star Wars where Luke, Hans, Chewbacca, and Leia are trapped in the garbage disposal with the walls closing in on them? As the walls inexorably press closer and closer, they engage in increasingly desperate attempts to stop them, a ritual made famous in dozens of adventure movies. No matter how hard they push back against the walls, their efforts are futile. Of course, they are the heroes of the movie, so they do find another way out; after all, if they had not, the movie would have come to an abrupt ending and the fans would have been crushed.

Of course, rather than counting on finding a miraculous escape, it would have been better to have not been in that tight a predicament in the first place.

At Soak Systems, the CEO, whom we’ll refer to as Luke, recently made the comment that, “I guess I should have pushed back harder.”

He was referring to a disastrous product release, one whose eager anticipation by their largest customer was exceeded only by that same customer’s anger and disgust when they finally received it. Their subsequent email was, to say the least, crushing.

In the inevitable post-mortem, it quickly came up that Luke had made at least a couple of attempts to play with the product before it was shipped, but that engineering had “refused to let me see it.”

In retrospect, Luke felt that if he had only insisted more strongly, then clearly engineering would have complied and he would have been able to identify the problems and save the release. Luke is also capable of holding back those moving walls with just the little finger of his left hand. Okay, well maybe not.

While it was gallant of Luke to accept some of the blame for the disaster, he was actually missing the point. In fact, the question is not whether Luke could push back hard enough to convince engineering to cooperate. The question is why he was in that position in the first place. Why, as CEO, does he need to push back that hard just to get basic cooperation? It’s hard to imagine how a release that disastrous could occur without plenty of warning. If nothing else, the stink should have been obvious.

At this point, the traditional thing to do is to nod sagely and observe that if they simply had better communications, the problem could have been avoided. While that observation may be true, it is definitely useless. Of course they weren’t communicating! Why not?

In Star Wars, our heroes at least had the excuse that they landed in the garbage disposal because they were trying to avoid pursuing Storm Troopers. In the resultant rush, they didn’t really have a chance to sit down and calmly discuss their options. At Soak, Luke didn’t have that excuse. There was no rush and no panic, other than the ones that he manufactured.

Effective communications comes from building trust, and trust comes from taking the time to build connections with employees and from, yes, communicating. The problem is that, as CEO, people don’t typically drop by to chat. If you want to get people talking to you, you need to seek them out. Luke didn’t do that. By comparison, IBM’s founder, Tom Watson, was legendary for showing up unannounced at different IBM locations and just dropping in to chat with different people. He was trusted as few CEOs have ever been: employees believed that he cared about them personally.

Luke, on the other hand, talked only to the people he’d worked with in other companies. When he came down to engineering at all, it was mainly to exhort them to do more or complain that they weren’t doing enough. When it became clear that the release had problems, the engineers had mixed feelings about talking to Luke. They couldn’t decide whether he would yell at them and go ahead anyway, threaten them and go ahead anyway, or simply ignore their input completely and go ahead anyway. The VP of Engineering wasn’t able to help them figure out which one it was either, so they decided to simply say nothing.

This is, perhaps, not the best way to establish strong and effective communications with your team.

Now, the fact is, Luke was certainly communicating with the rest of the company. His particularly choice of what to say and how he said it served to build a foundation of mistrust, not a foundation of trust. Sadly, in this environment, the speed of trust has nothing on the speed of mistrust.

Worst of all, Luke’s response, that he “should have pushed back harder,” only confirmed that mistrust. From the perspective of engineering, the release failed due to a number of serious problems that Luke and the rest of senior management were unwilling to address. Acting as if just yelling and demanding more would have changed anything was telling everyone in the company that Luke still didn’t acknowledge the severity of the problems.

The net result: nothing has changed since the release. The metaphorical walls are continuing to close in, Luke is ineffectually pushing back, and one after another the top people at the company are resigning. While Luke may end up with a company full of people he can push around, it’s not at all clear that any of them will be able to push a product out the door.

The situation is not totally irreparable, although it’s getting close. Luke needs to take the time to sit down with his people and actually talk to them and listen to their answers. He needs to take the time to actually get to know more employees than just those with whom he worked in the past. He has a lot of mistrust to overcome and doing that will not be easy. Whether he succeeds or not really depends on whether he is willing to recognize how little trust people have in him, and whether or not he’s willing to work to change that. Until he makes those changes, trust gets the dirt road and mistrust gets the superhighway.

Which is running faster in your company, trust or mistrust?