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Category: Becoming a leader

Only 9% of leaders can rely on their peers

Only 9% of leaders can rely on their peers

Bill Belichick, Tom Brady of the Patriots would never have won Superbowl 51 if the rest of the team wasn’t onboard with their plays. Can you imagine if each player had their own plan on how to win? Chaos would ensue. And the Falcons would have been champion.

In sports, just like in business, each player must agree on the strategy to win.

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We suck at choosing and saying no

We suck at choosing and saying no

Having ideas on what to do is easy. What most business leaders find challenging is the act of choosing and saying no to distracting opportunities. This is necessary to keep an organization focused on their key goals.

Why does this matter?

Because companies without a clear strategy fall behind their competitors. Researchers have found evidence that revenue declines when the list of competing priorities grows. So with limited resources, we are most effective when focusing on a few things rather than everything.

And because less is more. During Jack Welch’s reign at GE, he divested 117 business units and re-invested the money in the few businesses where GE could attain the position of No. 1 or No. 2 industry leader. In the process, GE’s market value shot up 4,000%. That’s focus.

Why is it so hard to choose?

Fact is, we do not know if our choice today will actually produce the desired results tomorrow. We also do not know if there will be unintended consequences as result of our decision. Add to the fact our eyes are bigger than our stomach, we tend to try many options and say yes to more opportunities than we can handle.

Forecasts alone don’t help

To compare strategic choices, we often perform forecasts to see how they may impact the future. Yet researchers have found that organizations which rely on forecasting do not operate differently than those that don’t.

In Implanting Strategic Management, Harry Igor Ansoff reviewed how organizations faced the petroleum crisis in the 1970’s and reported that “many firms which do forecasting including scenario building exhibit similar behavior as reactive firms.” 

He attributed the problem to forecasting systems and processes (time spent observing, interpreting, collating, communicating information to managers), to verification delay (organizations waiting for trigger events to happen), to politics (some managers may feel threatened), to rejection of unfamiliar (managers refuse to accept seriousness of a vague threat which has no precedent or they are unfamiliar with).

In other words, forecasts are not the end all be all some data scientists like us to believe. Strategic choices are affected by each leader’s personal preference, impact on their department’s future, and what the organization is actually able to achieve. Since all these extra decision factors are much more subjective, a strategic decision on what the company should do for the next 5 years becomes very challenging.

There are too many unknowns

In complex organizations, a decision often has many unintended consequences. They may frustrate people not included in the decision making process, cause chaos in a part of the organization we neglected to review, or even push customers away. In many cases, side effects will not be visible until after the decision.

Take Starbucks in the late 2000’s as example. Chasing growth, it introduced more products and prioritized speed over personal attention. In the process, it alienated some of its fans who enjoyed a cozy coffee shop atmosphere and personal connection with baristas. As result, it had to close 600 stores as customers took their cups to competing shops.

Executives at Starbucks likely failed to foresee how prioritizing speed and efficiency while adding more products alienates customers.

Organizations recognize this challenge. A strategy professor at Harvard Business School shared in an interview that most organizations send their leaders to executive education prioritize the need to learn how to think holistically:

“They need people to be better strategic thinkers. Need them to think in an integrated systemic way. At the end of the day, if we do this, what else does it impact? Is it aligned with where we want to go? To better tackle problems wrestling with systemic implications.”

When we lack a clear understanding of how a decision might affect the organization, we delay it. Hoping that time will shine more light on the situation.

Our eyes are bigger than our stomach

In a survey by Strategy&, it was reported that 64% of executives report having too many conflicting priorities, with 56% finding it challenging to allocate resources in a way that supports their organization’s strategy. It’s clear leaders find it difficult to make trade-offs.

Why? One reason is that many leaders believe their organizations can always take on one more initiative, tackle one more opportunity. We fail to recognize the limits of our abilities.

A former CEO at US Airways always reminded his executives that “Just because the lid came off the cookie jar doesn’t mean we need to get a tummy ache.

Tackling too many priorities at once has also proven to negatively impact revenue. Paul Leinwand, the strategy consultant who led the survey for Strategy&, reveals that “as an executive team’s priority list grows, the company’s revenue growth in fact declines relative to its peers.”

Top leaders therefore work to keep their teams distraction free.

An executive at Caterpillar shared that “as a leader you constantly have to drive the organization to stay focused on those few things that will make the biggest difference.”

Similarly, a CEO of a Credit Union reported that one of his biggest responsibilities is to “say no to incremental business. To fire customers who don’t help move the company to where it wants to go. To focus energy on the core vision.”

Saying no: A way of life

Speaking with executives and strategy researchers, it became clear some leaders find it easier to choose, make trade-offs, and stay focused on their core objectives than others.

When asked how they achieved such discipline, one described it as his “way of life,” while another mentions it being a “philosophy guiding his everyday.”

Along with discipline, top leaders are also extra clear about what they want. In an interview with a senior consultant at the Boston Consulting Group who worked with Jack Welch at GE, he shared that one of Welch’s strengths as his ability to “keep his organization extremely focused. He said yes or no. Never maybe. Other CEOs said maybe.”

There is no easy solution or an app to help us make strategic choices. An organization’s ability to focus depends on its leaders’ self-discipline and boldness to make trade-offs.

Unfortunately, most leaders fail. Michael Porter, strategy professor at Harvard University, described in an interview how the “worst mistake, most common one, is not having a strategy at all… There are so many barriers that distract, deter, and divert managers from making clear strategic choices.”


 

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3 practical tips on maintaining team trust

3 practical tips on maintaining team trust

Maintaining trust with the team is in my opinion the foundation of leadership. So today, I’m going to share three tips on how to maintain trust day-to-day.

1. Don’t rush meetings

I get it. Everyone’s busy and there are fires to fight.

Most of us wished the meeting ended 5 minutes ago, so we can all get back to work.

However, rushing conversations creates a culture where nothing but the most urgent matters are discussed. Team members will avoid raising up concerns that are just starting to cause harm. Personal issues and frustrations are also skipped, since most wouldn’t want to bother their busy manager with it (until they’re ready to quit).

In other words, rushing conversations fails to allow people to raise emerging thoughts and problems. There is thus no opportunity to catch and resolve issues before they become big fires.

So next time there’s a meeting or a 1-on-1 chat, let’s not rush it. Let’s instead allocate a generous time slot for questions and concerns.

2. Listen

Managers much more famous and capable than I have said this before, so I’ll save my words on this point: Avoid speaking over people, interrupting them, or talking without listening.

In my experience, actively listening is much more powerful at effecting change than speaking at team members. If I wish to make a point, I ask questions to help the other party think through an issue together, and keep my mouth shut.

It still surprises me how powerful listening is.

3. Make time to observe

On countless occasions, I’ve heard team members complain about how leaders don’t understand their problems (I work hard to be a venting channel for people). That leaders seem clueless to their daily challenges.

In those situations, I empathize with both team members and managers. Fact is, managers are a level removed from daily challenges of their subordinates, so have a hard time understanding their problems. They lack context.

Yet it’s the manager’s job to understand their team’s problems. To represent and advocate for their needs.

In my opinion, the best way to keep tap on the team’s daily challenges without throwing ourselves back onto the front line (although that can’t hurt either, if one can afford it), is to make time everyday to observe the team’s work. Observe interactions between team members, with other teams, with customers, and ask about their challenges over lunch.

The danger in not observing the team is not becoming ignorant. It’s that our perception of the team’s challenges will bias toward the most vocal (or whiny) team members. A tiny snapshot of the team’s actual situation.

So to avoid sounding out of touch, let’s make the time to observe the team regularly.

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3 tips on staying creative day in, day out

3 tips on staying creative day in, day out

I often find myself unable to dream or think outside the box during business hours. Day in, day out, I’m stuck in a ritual of fighting fires and managing chaos.

Yet the startup relies on everyone, including myself, to innovate.

So what to do?

I’ve experimented with many different strategies to this effect: From watching a TED talk every morning to working at a coworking space once a week. Here are three tactics I’ve had success with:

1. Work somewhere else

Once a week, I schedule an afternoon to work at a location other than my office. I make sure no meetings are scheduled and block time off on my calendar.

Sometimes, I wander to a coffee shop. Other times, I find a coworking space. I’ve even managed to work at client offices and friends’ workplaces. Once I phone interviewed a candidate at a shopping mall.

Working in different environments stimulates different parts of my brain. No longer in my comfort zone, I pay attention to elements I usually don’t at my desk. I compare how similar activities get accomplished at different places, by different people.

In one case, when I found myself working at a busy coffee shop, I noticed how a new barista found himself overwhelmed and receiving little help from peers. He failed to find paper towels after spilling some milk, and struggled to operate their payment system. The line grew longer while no peers offered to help the young man. I couldn’t help but think whether the manager even gave him a tour of the shop, and why nobody mentored him. It was probably a very demoralizing day for the new barista.

That’s when I thought of my own team’s onboarding process and realized many new team members may also feel overwhelmed. This gave rise to a formal team member onboarding process including scheduled trainings, mentor assignment, and even the creation of best-practices for other managers.

2. Chat with someone unlike you

I’ve had my most creative ideas by chatting with people from other teams and different walks of life.

People I don’t interact with daily, who have differing priorities, help me see my own problems from a different angle. I find this particularly valuable when trying to grasp a new problem, and when brainstorming solutions.

A chat with our marketing data scientist is how we created a cross-team data analysis meetup. I realized we were facing similar challenges after chatting with the individual about data acquisition and quality issues. My team faced these issues with client projects, while he faced similar issues working with our own company’s data. Very early into our chat, we knew we could share best-practices and learn from each other. In the end, the internal analysis meetup was attended by data scientists from three groups: Our client facing group, our marketing team, and our finance team. Together, they found a venue to help each other and share learnings.

3. Keep a daily journal

After reading the “7 Habits of Highly Effective People,” I struggled to keep tap on my progress. I had no idea whether I was improving. I thus decided to start a journal to record highlights of my day and reflect. I now spend the last 15 minutes of my day journaling.

This exercise has allowed me to compare reality versus ideal. Reality is what happened, what I did. Ideal is what I wanted to happen.

For instance, I always compare what I managed to get done in a day versus what I planned to get done. This helps me diagnose why I failed to get to certain tasks, or how I was able to find free time. Over time, I got really good at knowing what is a reasonable to-do list.

Another element I record in my journal is my reaction to emergencies and fires that arise throughout the day. I often find my reaction to bad surprises less than ideal, driven by emotions rather than my rational mind. Journaling allows me to reflect on how I should have reacted to the event. And if this were to happen again, how I can make sure I stay in control. I give my conscious mind an opportunity to recognize mistakes and correct itself.

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A little bit of success is dangerous for startups

A little bit of success is dangerous for startups

It can be dangerous to think we’ve made it.

Over my startup career, I’ve witnessed many instances where a little bit of success masked important problems and triggered precocious scaling. Resulting in costly mistakes.

The following are three scenarios I’ve learned to watch out for.

1. Positive feedback ≠ Guaranteed sale

Most startup founders have talked to at least one prospective client before building a product. If not a prospective client, then maybe an investor or industry expert. Insight from these individuals helps to gauge the likelihood of an idea becoming a business success. Call it market research. A critical step.

Yet market research can be misleading when the wrong questions are asked and when people are too nice.

For instance, before embarking on my first startup project, I asked for feedback from hospitality and tourism executives about whether forecasting travelers’ intentions (when and where a person would go and do) would be valuable. Almost all parties gave positive feedback and were interested in helping us design the tool. We therefore spent 6 months developing a prototype. As we went back to the same group of prospective customers, asking for a partnership to test and develop the platform, nobody signed up. Nobody wanted to put their job on the line by investing time and money into an unproven tool.

Beyond assessing the viability of a new product, companies also perform market research continuously evolve their product. The risk of being misled by customer feedback is therefore a constant threat.

At the latest startup I worked, we regularly asked customers how to make their lives easier, what features they’d like to see, what frustrated them. Yet even after developing features they had asked for, some customers still canceled their contracts with us.

Why? In my experience, some people are too nice and want to avoid conflict. If a client knows that they’re moving away from our platform eventually, because they fundamentally don’t need what we offer, or want to bring it in-house, it can be difficult for them to be honest and express that intention during a call. It has the potential of making the existing relationship awkward. So they say nice things to keep us at bay.

In my opinion, a much more accurate way to gather market intelligence is to observe customers, rather than asking questions.

Examples of startups that were misled by feedback abound. Here are two high profile ones:

  • Quirky: The community led invention / engineering business wanted to develop and sell novel products its users voted for. Yet votes didn’t turn into sales. It blew $185M.
  • Boo.com: The company burned thru $185M dollars in 18 months. They gained positive feedback and support from top fashion houses, newspapers, and even investors before even launching, but failed to actually build something of value to customers.

2. Getting funding ≠ ready for growth

I’ve often witnessed a tendency for startups to scale up operations right after a successful funding round.

As soon as the money hits the bank, dozens of new positions open up, the list of product features to develop swells, and the marketing budget grows exponentially.

In the best case scenario, this growth is proportional to growth in demand and the company scales effectively. Yet in reality, many startups outstrip demand. They end up cutting costs and laying off people as fast as they hired them.

Why? Let’s start at the source of the money. Rational investors invest in a company based on its growth potential. How investors assess “growth potential” varies, but is likely based on a company’s historical performance. So some founders interpret a VC investment as a vote of confidence for their business strategy, their business model, their product.

Yet investors are not customers. Getting funding does not mean that we have a successful business. Otherwise 9 out of 10 VC funded startups wouldn’t have failed.

We need to be careful.

So what do we do after getting funding? In my opinion, it’s best to continue testing market demand. Observe what product features and changes resonate with users. Experiment with small scale marketing campaigns to see what’s most effective at converting customers. Hire people only when we absolutely need to. Essentially, work as if we didn’t have funding. Be cheap.

Only scale up when there’s proven demand.

So what do we do with the extra cash? As we operate on a shoestring budget, we’re bound to break the limit of what we can support. The extra cash allows us to scale up supply when demand outstrips it. The latter part is key: Only scale up when there’s proven demand.

While this sounds easy, it is not. Investors look for a fast return on their money. Many will pressure companies to scale and grow asap. They want to see 100% growth month-to-month. It can be difficult to resist this urge.

A couple high profile cases of startups that scaled up too quickly and flopped include:

  • Fab.com: The flash-sale design retailer raised millions within months of launching. It then missed its aggressive sales target within a year. It thus had the option of scaling growth back and get the business model right in the U.S., or keep expanding globally with a target of 100% YoY growth. All board members except one pushed for the latter. The rest is history: It blew $336M in 3.5 years.
  • Color.com: The photo/video sharing app raised over $40M before even launching. They likely felt like a success from day 0. Yet they failed to acquire users, managed to spend $15M in a matter of months, and finally got acquired by Apple for a paltry sum of $7M.

3. Having early adopters ≠ everyone wants it

Some founders may still be careful about scaling up after receiving funding, but not many will refrain from it with a fast growing user base.

Startups solving a painful problem can experience fast customer growth very early on. These early adopters often overlook the immaturity of the solution and are willing to invest time and energy to make it work for them. The old solution is simply too painful.

Seeing this demand, the startup then scales up its operations and plans for hyper growth.

Yet I now know having early adopters doesn’t mean the rest world is ready for us. The number of early adopters, people willing to pay for an immature product, is limited. It plateaus and peaks. To scale up operations when the product only appeals to early adopters will inevitably outstrip demand. A better plan is to build a product that appeals to the masses before scaling.

Another threat to startups with disruptive solutions is the launch of competing products after they’ve proven a business case. These late entrants have the potential to create a mature product in less time by learning from the pioneer’s mistakes. They can offer a better product for cheaper. Strategy Professor Michael Porter explores in detail the benefits and risks of first-mover advantage in Competitive Advantage.

Nebula.com is an example of a startup that found early success, yet failed to find customers beyond early adopters. It blew $38M.


Recommended exercise

Ask yourself: Is capacity outstripping demand?


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