I’ve seen this before…

June 27, 2009

Why are some people so good at “seeing” things and how did they get good? In my opinion, “experience” is really just the development of a personal set of cognitive heuristics for dealing with what’s in front of you. In basic terms, you develop a sense of “I’ve seen this before and I have a pretty good idea of how it goes…”

This idea off pattern recognition, evolution, ecosystems and systems thinking has always fascinated me. Back when I was still in school, I can remember the effect the reading Peter Senge’s The Fifth Discipline and James Moore’s The Death of Competition had on my thinking about business and relationships: the interconnectedness of it all. Some of their thinking is dated and gets a little abstract, but the core ideas, that there are a limited number of truly distinct patterns of interaction out there is a useful one.

This was brought to mind this week as I’m reading Your Inner Fish by Neil Shubin (on my favorite new toy – Amazon Kindle DX!). He is a paleontologist describing the evolution of human physiology. Great book, but the relevant point that sparked this post was a series of quotes he made regarding his learning process as a field worker locating and identifying potential fossils.

He starts by describing his essential blindness compared to experienced colleagues. The following are a few quotes that lay out his progression in awareness and thinking:

“Finally, one day, I saw my first piece of tooth glistening in the desert sun. It was sitting in some sandstone rubble, but there it was, plain as day. The enamel had a sheen that no other rock had; it was like nothing I had ever seen before. Well, not exactly – I was looking at things like it every day. The difference was this time I finally saw it, saw the distinction between rock & bone. … All of a sudden, the desert floor exploded with bone…as if I were wearing a special new pair of glasses and a spotlight was shining on all the different pieces of bone.”

“ Over time, I began to learn the visual cues for other kinds of bones: long bones, jaw bones and skull parts. Once you see these things, you never lose the ability to find them.”

“Twenty years later, I know that I must go through a similar experience every time I look for fossils someplace new…I’ll struggle for the first few days…The difference is that now I have some confidence that a search image will kick in.”

“One of the joys of science is that, on occasion, we see a pattern that reveals the order in what initially seems chaotic. A jumble becomes part of a simple plan, and you feel you are seeing right through something to find its essence.”

This lays out beautifully the progression you see in people’s lives and careers, IF they are paying attention.

The point is that as you get “better” (more observant, more experienced, etc.) you are developing mental heuristics. Your mind is being trained to think in new ways and short cut many steps based on experience, building new pathways in the brain. Malcolm Gladwell coins this “thin-slicing” in Blink.

I see two ways you need to develop and apply this pattern recognition concept. The first is simply getting better at it within a domain. This is essentially what everything above is really about. Develop deep knowledge and you can then get very good at a subset of things.

The second is to me what separates really excellent and creative thinkers and problem solvers from those who aren’t. Can you abstract and generalize patterns and apply them to new venues? Are you good at analogy?

Most problems are not new and many apparently unrelated problems are very often quite similar. This is what Senge gets at in the Fifth Discipline. There are a limited number of system archetypes and components that describe most systems, whether they be human, animal or natural.  

Effective general managers and consultants need both abilities. I have seen people promoted too quickly without broad experience struggle in that they are “learning on the job” at too high a level. Understanding all the moving parts of a $20MM business is easier to learn, but is much more like running a $1BB business than is going from running a $1BB function in a company to running a similar size/budget business. The business owner has more complex networks they are navigating.

Having said that, you will never have all the experience you need. So how do you manage learning curves? Well, being good at analogy and applying prior learning in other areas to a new problem is very effective. If you can’t you’ll struggle…a lot. (Curiosity, drive etc. all help a lot too!)

In my coursework, I try to teach people generic skills around problem solving  that are broadly applicable so they can be flexible in their thinking as we all have different cognitive styles. In part, this is to force people to apply themselves to answering questions themselves. If I tell you something you may or may not remember it, but even if you do you aren’t likely to understand it. If you go figure it out on your own, however, you’re likely to “never lose the ability to see” what you’ve learned as Shubin points out.

So, what’s the “so what?”

1)     Developing experience and expertise is about developing a sense of pattern recognition. This allows you to “see” things more clearly and with less work over time.

2)     You have to struggle through the hard work of developing this ability. It comes from doing. A guide can tell you what to look for and mentor you along the way, but the insight has to be yours or you won’t really own it.

3)     Being able to extend your insights into analogous environments is very powerful. Particularly if you want to be a general manager.

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Problem Solving 101

June 16, 2009

Much of my teaching is focused on how to effectively define a problem, how to go about solving it using discipline and various techniques and then how to frame to recommendations so that others will take action. I have written on this in the past as well.

Too many books I see on the problem solving side take an overly complicated approach, particularly for readers trying to go from “not so good” to “pretty good/good”. The typical tome is much more of an expert practitioners guide and makes things more complicated than they need to be.

I really appreciate Problem Solving 101: A Simple Book for Smart People because it doesn’t fall into this trap. It takes a light-hearted and practical approach to demonstrating a simple but powerful set of basic tools.

Ken Watanabe worked for McKinsey, a leading strategy consulting firm. He distills the basic components of theirs (and everyone else’s) basic problem solving structure into problem definition, analysis structure and solution definition. He does this using a few simple (but not simple-minded) examples that were originally developed for 6th graders. It’s a very quick read (digestible in a short plane flight) , useful and worth a read whatever level of skill you believe yourself to be.


Malcolm Gladwell’s Outliers

March 25, 2009

When I was growing up, my best friend Pete’s dad always told us we needed to “work, work, work”. It’s such a family joke, that when one of Pete’s kids was born his mother in law joked whether the baby needed to get right to “work, work, work.”

 

I was reminded of this and a few other things in reading Malcolm Gladwell’s Outliers: The Story of Success. If you are at all interested in history, cultural influence on macro patterns of development, education and economic development then I highly recommend Outliers.

 

Gladwell sets out to understand what explains “outliers”, which he defines as individual success stories that lie well outside the norm and cannot be explained by normal circumstances. The conventional approach to explaining these successes is a Horatio Alger-esque emphasis on the rugged individual’s personal capabilities and persistence. Gladwell asks us to pause and consider whether this is really what’s going on in most cases.

 

His answer is fascinating and points to several critical factors that tend to tilt the field in certain groups and people’s favor. The point is not a deterministic rendering of “it is what it is”, but rather taking the deeper findings and applying them to creative solutions that lead to enhanced opportunity for everyone.

 

Two major factors that he describes influencing outcomes are opportunity and hard work. The latter is heavily affected by one’s cultural situation. These seem obvious, but there are patterns to certain groups’ successes that are alternately discouraging and hopeful.

 

“Opportunity” is very subtle…

 

Bill Gates is a classic example of entrepreneurial zeal. But how did a such a young man go so far so fast? It turns he was probably one of only a handful of teenagers in the US who had access to nearly unlimited computing time as was his friend Paul Allen. Both their school and the University of Washington offered almost unique access. Personal computing was on the verge of taking off. They were uniquely placed to see and exploit a new technology. There literally were not many people who could have been Bill Gates. Most didn’t know enough about programming.

 

Gladwell demonstrates that an unusually large number of computer innovators were born within 2-3 years of each other (Gates, Allen, Jobs, Ellison, Joy, McNealy etc.) They were born in a Goldilocks moment if you will. Old giants don’t see opportunity while a whole new ecosystem is emerging. A similar explosion of large scale entrepreneurship happened in the 19th century with railroads, steel and other infrastructure. A similarly tight range of birthdays bounds that generation’s giants.

 

Certainly others had similar opportunities and didn’t become Bill Gates. But the number of people who did is in the hundreds or thousands, not the millions. Very few people had the confluence of influences and market opportunities that these entrepreneurs did.

 

Hard work matters, but not all hard work is the same…

 

Gladwell convincingly (in my opinion) shows that “genius” is over-rated relative to work and softer emotional intelligence characteristics. Many studies show there is a magical threshold of ~10,000 hours of effort that tends to define “mastery” of a discipline. Additionally, certain factors bear a heavy influence on one’s ability to get to these levels of mastery.

 

A major factor is culture. Each of us is rooted in a particular culture that carries tendencies to views on a wide array of subjects. Gladwell focuses on views towards work effort and type of work.

 

First, how consistently and hard are you inclined to work? There’s a “stick-to-it-ivness” required to get really good at things. Studies he cites point out that in music, art, math and most disciplines there is no clear correlation between natural genius and success. Instead people who really grind to get better do.  Those who don’t, don’t. Read the book for details.

 

Second, what kind of work are you doing? Working really hard at menial labor won’t get you ahead. He explores the difference between Irish or Italian immigrants and Eastern European Jews in late 19th century New York. One group brought experience in skilled labor (clothing/sewing/knitting) and turned that into an explosion of entrepreneurialism in the garment district. Were they “smarter” or harder workers than other groups? Probably not, but they were urban/city dwellers in their home countries and brought commercially viable skills with them. Their hard work allowed them to get ahead because of the skills they brought with them from Europe (an intersection of opportunity & hard work).

 

Third, where you’re from matters. Different agricultural traditions lead to different views of effort and focus. Rice farming requires incredibly precise work year round from the entire family unit and if you are more diligent and more precise than your neighbor you will most likely have higher yields. Wheat farming is much more seasonal and outcomes are driven by natural factors beyond a farmer’s control. There are implications for the attitudes towards success and hard work that develop and they persist long after leaving the field or even the native country.

 

So what?

Gladwell offers a number of interesting implications, in particular for education. Read to find out the results KIPP schools get from applying this continuous effort based view to changing the school calendar and curriculum. Hint: It’s pretty impressive or he wouldn’t be citing it.

 

Part of why I liked the conclusions he reached is that it meshes with my views on hard work and creativity. A major determinant of long term success in my mind is effort. Continuous creative effort generally overcomes a lot of obstacles.

 

 

It also speaks to the need to stick with things longer than many modern students want to. Everyone wants to rotate through jobs quickly to “learn faster”. It’s important to remember that you have to actually do something for awhile to really learn it. There is a distinct difference for me in offering consulting advice to businesses after I had to run my own. I have a much better understanding of what I know (and don’t know). So stick with things long enough to actually learn some deeper lessons.


Driving to Yes or No: Case Study

March 1, 2009

In my last post I talked about taking a more investigative approach to growth opportunity evaluation. In this one, I’ll discuss both what it looked like leading a venture using this methodology while touching on what it meant from an executive level.

 

I had to eat my own cooking when I took a position leading a “growth opportunity” at 3M. We had adopted a phased approach to allocating budget and resources to opportunities through a venture board structure (ie: limited capital allocated to competing business plans). In the “opportunity” phase, an idea received modest funding to answer high level questions. If the opportunity proved compelling, then it could progress to being a “venture” at which point it would receive higher funding for a pilot or launch year. After that a division would have to own the P&L. I think it’s a good process. Divisions compete for funding new ideas, but take it seriously because they know they will eventually have to own the financial results.

 

My experience was with a new business format opportunity based on an aftermarket car care model that quietly developed in Asia. One of the wonderful things about a diversified global business like 3M’s is that each country unit has incentives to develop innovative new business models based on local market conditions.

 

My challenge was to determine whether we could take our traditionally product based business and brand into retail “do-it for me” services. Our product line included window tint, paint protection film, waxes, polishes etc. This was clearly a global question, in part because 3M China had developed successful 3M branded service centers with partners and also because the Asian car markets were all growing so aggressively with first time, inexperienced car owners.

 

I developed my “issue tree” outlining what I thought the big questions were and also worked through a reverse P&L as well as assumptions list (see last post).  Among my major assumptions (in no particular order) were that 1) we could develop the skills and knowledge necessary to win, 2) that we could have a broad enough portfolio to be relevant to consumers, 3) that brand mattered 4) we could hit defined revenue and income targets and 5) that we had sufficient alignment globally to get it done internally.

 

I went through three phases. The first was a study phase that cost us largely my time and a little research. We easily passed the hurdle at this phase gate. I think of this type of review as passing “the laugh test”. We had executive support and they were interested in the opportunity, so this gate was more of a check in.

 

For the second phase, we needed to do much more work on business model, detailed market understanding and a risk assessment. As a part of each gate, you have to define success metrics and detailed plan and budget for the next phase. Part of my plan included Michele, the kids and I moving to Shanghai, China for an extended stay in 2006 to understand the Asian business.

 

To short cut the better part of a year’s work, here’s what I determined and why I think the process and methodology was a good one. In the end, I recommended a retrenchment of the existing opportunity in China and placing better controls on its use of brand and avoidance of the franchise law for several reasons:

 

1.      The team had been very creative and had excellent results, but the Chinese regulatory environment related to franchising changed in 2005 in ways that were disadvantageous to potential franchisors. Note that at the time KFC and McDonald’s didn’t franchise there either. They owned.

2.      Direct ownership did not seem viable to me given the speed of change in the market, our conservatism operationally and financially and our lack of direct experience in retail services. In addition, we couldn’t find a viable partner or acquisition target.

3.      The reality of company politics regarding brand and legal issues, lack of internal alignment globally and several other internal factors told me that this was not do-able for us.

 

There is a lot more detail than this, but fundamentally I didn’t see it happening for this opportunity. Here’s why I think the process worked.

 

1.      Two years prior to implementing this process I think this would have gotten potentially large funding and failed slowly and painfully. It was sexy, represented “breakthrough thinking” and “business model innovation” and all sorts of other applicable buzzwords.

2.      It could have been sold well and gone OK for a few years until it fell under its own weight. Typically, to be cleaned up by the next manager as the first one would have moved on to bigger things based on the buzz from their cool work. (No one ever really knows the financials of someone else’s business)

3.      We got to a “quality” no, based on data and as a result executives didn’t need to revisit the question. Note here that I always could make the math work. The sheer growth in China could carry very conservative assumptions to a positive financial case. I recommended not proceeding because of the work around the “softer” assumptions that were critical to success.

4.      Corporate was happy that a real effort had been made to answer key questions credibly and reliably.

5.      Another benefit of the process to the company was exposing talent to senior management in bake-offs that exposed the quality of people’s business acumen and drive. It highlighted how many “administrators” versus “leaders” there were.

 

In the end, we went forward as a business unit with a “federated” approach globally while laying out guidelines and serving as a knowledge and best practice sharing hub. Each country took its own approach within guidelines that we laid out. We didn’t try to force a uniform process or business model on each country unit and as a result, the business has continued to grow across 3M. We learned a great deal that has infused other business decisions as well, including some significant acquisitions (lesson: we needed other’s existing expertise and portfolio to be successful quickly). We were fortunate to have a leader who was pro-active in learning and then taking action.

 

The few caveats I have include:

1.      No process is a substitute for talent. A poor team will kill a great opportunity. This is a place to put your best people, not turf out your problems.

2.      It doesn’t work if opportunities aren’t protected. Nothing kills innovation or creativity like strangling it when things get tough.

 

I think this process is a good one. My only caution is to not fall so in love with a process or set of tools that you check your brain at the door.


Driving to Yes or No; How to Reach More Rationale Business Investment Decisions

February 23, 2009

Business investment decisions and strategy choices get so complicated. At least we like to make them that way. It justifies the large salaries and tremendous amount of time that goes into PowerPoint slides and Excel models. I’m not really that cynical, but when you’ve sat through as many PowerPoint death marches that end with a recommendation to invest and you’re not sure what you’re investing in, you get a little jaded.

 

In my prior life working on corporate and business unit level strategy at 3M several of us got turned on to the work of Rita Gunther McGrath as well as some excellent work from the Corporate Strategy Board in this area, primarily a 2003-4 report entitled “Strategic Assumptions Prioritization” that focused on Air Products corporation. McGrath is well known for her work on entrepreneurialism and growth. Her 1995 Harvard Business Review article “Discovery Driven Planning” proposed a useful (to those of us who bought in) and compelling model for how to think about prioritizing and shepherding a portfolio of growth opportunities to kill/launch decisions.

 

Often, internal capital allocation decisions and “bake-offs” between ideas can lead to PowerPoint template hell. Lots of disconnected slide or excel workbook templates that only apply to certain opportunities, not to others and the resulting desultory compliance in generating useless “analysis”. We asked ourselves: “how do I make the process genuinely useful and also more ‘fair’ as we looked at unlike opportunities (i.e.: a product vs. a service)?”

 

Based on our research and own internal needs, we devised a process based on several key steps. The first was defining a “reverse P&L/income statement”, the second was documenting the most important assumptions that drove economic success in the reverse income statement and third was conducting research to better understand the accuracy of the key assumptions and refining them as you better understood them. McGrath’s article in HBR nicely describes this and I’ll summarize in a minute.

 

The major shift for the business I was in was institutionalizing this at a business unit level and better preparing executives to challenge teams’ assumptions and also be more equipped to evaluate unlike opportunities fairly in a common process.

 

I’ll summarize the challenges, basic principles and then offer a quick summary of my experience with this at both a business unit strategy level as well as

 

Challenges and rationale

1.      Most business evaluations are set to get you to an ROI or NPV type assessment early on. For truly innovative programs, this is almost impossible. You don’t know what you don’t know. The result is that better understood opportunities (i.e.: “easier” ones) always float to the top.  Air Products (the subject of the CSB report) developed a new method for evaluating these more challenging opportunities.

2.      Many losing propositions get launched and fail for what I think of as “knowable unknowns”. You could have found out cheaply if you had really tried.

3.      Knowing what to focus on can be hard. Everything seems important at first.

 

Principles

1.      Define success as specifically as you can up front. This can mean revenue, profit margin, market share etc. Make it tangible.

2.      Write down all the significant assumptions and then rank their importance and “known-ness” (i.e.: certainty vs. uncertainty) to achieve a loose prioritization.

3.      Build a plan and timeline around the most important assumptions.

4.      Focus research and efforts on cheaply and effectively validating and invalidating these assumptions.

5.      Be creative in finding “proxies” for your assumptions.

6.      Pilot/test ideas quickly to learn about assumptions that can’t simply be “researched”, but do it efficiently.

7.      Never, never, never forget that a good plan with a bad team won’t succeed. Planning is no substitute for talent.

 

Benefits

1.      It much more clearly surfaces the key assumptions for everyone involved. Some programs get killed almost immediately once you agree on a key assumption and it doesn’t pass the “laugh test”. Other “far out” ideas become reasonable when you see the assumptions and say “we could do that!”

2.      This process is good at allowing flexibility across opportunities. Assumptions can be very different and get you to “apples to apples” comparisons.

3.      It forces you to more clearly articulate a “thesis” for the opportunity.

4.      It clearly aligns with gate-based decision processes. If you think generically in three phases (idea, pilot and launch) this gets you through them. An initial list of assumptions w/ a reverse P&L for $100 million may need a brief discussion to get $50K in seed funding to increase confidence that yields $1 million in pilot funding and the pilot will give you clarity on the potential $15 million investment required to scale. The process should be systematically reducing doubt as you move through the process.

 

My next post will be on my experience both at the BU strategy level and as an internal entrepreneur going through the process with a growth venture.


Edward Tufte and the Visual Display of Information

February 19, 2009

For those of you interested in deeper exploration of how to more effectively display ideas, particularly relating to data, I highly recommend the work of Edward Tufte. Tufte is an award winning author and emeritus professor at Yale where he taught courses on data analysis and display. His books and teaching are challenging and force you to move beyond powerpoint and overly simplified forms of information display.

I often teach principles of simplicity in message and communication. Tufte is very effective at pointing out and teaching how to make “simple” powerful without being “simplistic”. There are very data rich and complex ways to show information that are also intuitive and easy to understand. His writings are rich with examples and are beautifully built. The books themselves are works of art.

His site has multiple commentary threads that are worth reading. In addition, I recommend checking out his essay on the tyranny of powerpoint.