Category Archives: Advice

Birds of a Feather Fail Together: the Business Case for Diversity

Diversity is good for business. Equal opportunity is not only morally and ethically right, it’s also a better way to run a business. Here are some reasons why, and points to consider.

What’s intuitively obvious

DiversityIt’s pretty much accepted wisdom that when people come together in a common business, it’s better for them to have different skills and experience that the same thing. You want somebody good at sales, somebody good at marketing, somebody who likes managing the money, somebody who can produce whatever it is you sell, right? That’s aside from gender, ethnic, religious, age diversity. The idea is commonly accepted.

Go from there to the obvious parallel with diversity of vision, background, outlook, and experience within a single business culture. Think for just a moment about the larger vision involved in branding and marketing, expansion, and growth. Which is more likely to produce new ideas, early alerts of changes, awareness of new markets and new products: the birds of a feather who flocked together, or a group that includes different people with different backgrounds and ideas?

A collection of studies

I caught The Business Case for Diversity on the business2community blog. Fascinating. Here are some highlights:

  • Diverse companies outperform non-diverse companies by 35%, according to a McKinsey study cited in that post.
  • Sociologist Cedric Herring found that companies with the highest levels of racial diversity had, on average, 15 times more sales revenue than those with the lowest levels of racial diversity. Herring found that for every percentage increase in the rate of racial or gender diversity, there was an increase in sales revenues of approximately 9 and 3 percent, respectively.
  • A study at the Kellogg School of Management6 found that diverse teams outperform homogeneous ones because the presence of group members unlike yourself causes you to think differently.
  • In a Catalyst report called The Bottom Line: Corporate Performance and Women’s Representation on Boards7, researchers found that Fortune 500 companies with the highest representation of women board directors performed better financially than those with the lowest representation of women on their board of directors.

Diversity is good for business

The bottom line, for me, is the bottom line: diversity is not just the future, not just the way the western world is going, not just a natural result of trends and technology, and not just morally and ethically right. It’s also good business.

(Image: Flicker Creative Commons, by croptrust)

Remarkable Real Research on How Life Goals Matter

What? A 75-year-study on adult development? Psychiatrist Robert Waldinger absorbs the Harvard Study on Adult Development. Here he shares insights on how life goals affect happiness, and what ultimately is happiness.

The study itself is remarkable. Waldinger credits luck and the persistence of several generations of researchers. About 60 of the original 600 men are still alive. Since 1938 they – a group of Harvard undergrads and another group of poor kids from Boston – answered questions, took exams, shared their lives with researchers on a regular basis.

So what keeps us happy and healthy as we go through life? Listen to this TED talk.

Click this link for the original on the TED site.

Chris Anderson on What Makes a Great TED Talk

For a video today I found this delightful TED talk about TED talks. TED, which stands for technology, education, and design, has become an amazing collection of great 5-to-20-minute talks, some of the best anywhere. If you want examples of great public speaking, excellent presentations, you go to TED. So when I was at the TED site browsing and saw this one about what makes a great TED talk, I couldn’t resist. And I was surprised, at first, but this makes so much sense.

TED founder Chris Anderson talks about what makes a great TED talk, and it’s not what I would have thought. It’s not the story you share, the secret you disclose, or finishing with an inspiring call to action. “No,” he says …

Your number one task as a speaker is to transfer into your listeners’ minds an extraordinary gift, a strange and beautiful object, that we call an idea.

You can click here for the original on the TED site.

You Need to Understand the Business Principle of Displacement

DisplacementImagine a bucket of water full to the brim, on a table, right next to a phone and a computer. Now take a brick and drop it into that bucket. Imagine what happens. Water splashes out, right? And that’s probably bad for that phone and computer next to it.

Business Principle of Displacement

That simple story is how I explain the business principle of displacement, in small business, startups, and entrepreneurship. I write it out as:

Principle of displacement: everything you do rules out something else that you don’t do.

The reason this matters so much is that we can’t do everything. So we have to do the most important things. We can’t please everybody. So we have to please the most important, biggest volume groups.

When you decide to add outlier features – used by a few, requested by a few – to a product you are also distracting your team and your product from the main function. And displacement is a legitimate concern as you deal with strategy. Can we expand into schools, from mainly offices? Can we sell to consultants as well as users? In normal growth strategy you have to sort through lots of questions, many possibilities, all with the awareness that you can’t do everything.

Paradox and Strategy

There’s a lot of paradox in managing focus, displacement, and growth.

On the one hand, if you don’t change, you suffer. You can’t just stay focused on the main thing. You have to deal with new possibilities, which sometimes means new products, or new markets.

On the other hand, if you are constantly after the latest shiny new thing, you risk losing focus on what matters most. You don’t want to lose your core while you’re looking to expand.

What I like about real-world business strategy, for startups and small business, is that there is always an other hand.

Entrepreneurship and Leadership with Mark Maples

My Friday video for this week is on entrepreneurship and leadership from the Stanford Ecorner. If you haven’t been there for a while, check it out. There is a new interface, and it’s a great collection of speakers on entrepreneurship, startups, business, and investment.

Here’s the intro from the site:

Silicon Valley veteran Mike Maples Jr. shares heartfelt advice urging aspiring entrepreneurs to “only do things that you think have a chance to be legendary.” By committing to always doing exceptional work and being around inspiring people, Maples says you will reap the cumulative benefits of a lifetime of excellence, and be able to enjoy it again whenever you look back.

http://ecorner.stanford.edu/embeddedPlayer.html?mid=3749&width=500

This is a two-minute excerpt from a longer talk.

My Dumb MBA Mistake

I’ve made a lot of mistakes. You can’t build a business from scratch without making mistakes. It’s an entire category on this blog, more than 150 posts. This dumb MBA mistake wasn’t my worst, but it’s one of the easiest to explain afterwards, and I hope one that might help others avoid making it too. There is a moral to this story.

Mexico-City-Kainet-Flickr-ccIt was August of 1981, early morning, in the office of John Lutz, managing partner of McKinsey Management Consulting in Mexico City. I was three months out of Stanford with an MBA degree, working for McKinsey Management Consulting in Mexico City.

The McKinsey offices sat in a very stylish high-profile office building overlooking a critical freeway junction over Chapultepec Park, linking the fancy Las Lomas residential area with Polanco and the Paseo de Reforma main business district. The streets were wet from rain overnight, and the freeway was, as almost always, jammed. The sky was dense, a mixture of rainclouds and smog.

I needed to quit. It was so embarrassing. I didn’t like to see myself as the archetypical fancy MBA blowing off the first job. I was 33 years old, married, and my wife was expecting our fourth child. I was way too mature for this stuff. But still …

I had arranged a job waiting for me with Creative Strategies International in San Jose. From where I was, returning back to the San Francisco peninsula, Silicon Valley, seemed like returning from exile back to paradise. I liked Creative Strategies, and liked living back in the states. I wanted out of McKinsey.

I really didn’t like the job with McKinsey. It was stupid to have taken it. It was a job meant for a 26-year-old single person blinded by ambition and unencoumbered by relationships. Like most professional firms, success involved putting up with a corporate culture that spent 12 to 14 hours a day in the office, whether or not there was work to be done. The firm actively discouraged families by encouraging long-term business travel but without families, and by running 5-day strategy meetings at beach resorts and forbidding families coming along, even at the family’s own expense. I was not supposed to disagree with partners on … well, you get the idea.

I certainly didn’t belong. I’d been entrepreneurial for 10 straight years, making my own way with freelance journalism and, later, my own consulting, and I wasn’t up to faking awe for the partners. And as a family, we didn’t belong in Mexico City. I had loved that place for nine years in the 70s, it had been good to me, but I was done. My wife is Mexican, she grew up in Mexico City, and had family there, but she was tired of it too. The city was too big, too hard to deal with. We had left in 1979 and shouldn’t have gone back in 1981. I fell for the money and prestige, stupidly, because it wasn’t enough to keep me.

So, back in the office with John Lutz, did I tell him why I was leaving? That I didn’t like the job, had made a bad decision, didn’t like Mexico, I’m sorry, it won’t work.

No. I didn’t. I told him I needed a lot more money.

This is one of the best arguments ever for telling the damn truth, even when it’s embarrassing. I’m still embarrassed, but I’m older now, and, well, I think this is a good lesson to share.

So they gave me more money, and then how dumb did I look?

I still left, and I left looking really stupid. Why didn’t I just tell the truth in the first place?

So there’s the moral to the story. You’ll be in a situation where you’re tempted to slant away from the truth to make it easier, but remember before you do how bad you’ll look if the other side answers the wrong issue, forcing you to admit it was never the real problem. So here there is. It bothered me for a long time but that was 25 years ago or so, and hey, I’ve made a lot of other mistakes since, the sting has worn off on this one. I hope you find the story useful.

(Image: Mexico City via Kainet Flickr CC)

Invention is the Mother of Necessity: Technology and Productivity

Productivity SoftwareHave you heard the standard cliche: “Necessity is the Mother of Invention?” In business technology and productivity, in my experience at least,  the old standard is reversed: the new truth is that Invention is the Mother of Necessity.”

For example:

  1. Spreadsheets and Budgeting: When I started in business analysis back in the middle 1970s we didn’t have spreadsheets, and a budget was rarely more than a list of numbers on a yellow pad processed with a calculator and a pen. Then came Visicalc, and shortly after that Lotus 1-2-3 and then Excel. Now, not at all by coincidence, everybody in business does a whole lot more budgeting and spreadsheets than we ever would have imagined back then.So what’s happened is that because spreadsheets made budgeting more accessible, the world started demanding more budgets. To me, this is a good thing. Budgeting is good for business. You could argue, however, that maybe the world of small and medium-sized business was better off when the world summarized budgets into a few key items.Ultimately, in this case, I think it’s obvious that we do more budgets because budgets are easier to do
  2. Desktop publishing and business documents: I’m pretty sure I’ve seen the same thing happen with desktop publishing. Before desktop publishing appeared with the Macintosh and the Apple Laserwriter in the middle 1980s, people put business correspondence onto simple pages printed onto letterhead paper. Nowadays we take desktop publishing tecniques for granted. People routinely merge graphics and text onto simple memos and letters and standard business documents, without thinking twice about it.

Did This Improve Productivity?

That’s an interesting question. Ten years ago I would have been tempted to say no, that it hasn’t improved productivity.  More recently I’ve changed my mind.  Running a company makes me sure that we benefit from the power of more detailed budgeting, and running through the daily process of management makes me pretty sure that business documents are generally better communicators with desktop publishing than without.

What do you think?

Creativity and Clutter – Friends or Enemies?

ClutterDoes clutter affect creativity? I can give you quotes that say it does, and research that says it doesn’t. There’s lots of anecdotal evidence for either side. What do you think? My own experience goes either way. So I decided to look into this question on the web.

Some Research Shows Creativity and Clutter go Together

For formal research, the first thing a web search turns up is a study done by University of Minnesota Psychologist Kathleen Vohs. According to this web summary, the researchers put subjects into either tidy or messy rooms and asked them to generate creative ways to use a ping pong ball. Here’s what they found:

Participants in both tidy and messy rooms generated about the same number of ideas, which Vohs believes indicates they exerted about equal effort. Yet further analysis revealed that the participants in the messy room suggested more creative ideas for the Ping Pong balls (on average their suggestions were 28% more creative) than those developed by the participants in the tidy rooms. Even more striking, the messy room people had five times (!!!) as many ideas deemed by judges to be “highly creative” than those in the tidy room. Moreover, the effect has been replicated and extended by other researchers at other universities examining how messy environments lead to quicker solutions to brainteasers and the production of creative drawings than research participants working in tidy surroundings.

Other Research Shows Creativity and Clutter Clash

Jeff Goins, in Clutter is Killing Your Creativity (And What to Do About It):

The relationship between clutter and creativity is inverse. The more you have of the former, the less you have of the latter. Mess creates stress. Which is far from an ideal environment for being brilliant.

In the Uncluttered, Erin Dolan summarized a Princeton study on the impact of clutter:

The conclusions were strong — if you want to focus to the best of your ability and process information as effectively as possible, you need to clear the clutter from your home and work environment.

My experience goes either way.

I’ve done a lot of programming in my day. That includes a complete general ledger system, a spreadsheet-like business forecasting system, Forecaster, all of my company’s spreadsheet template products, and a third of the code in the original Business Plan Pro. And all of that programming was done from very messy, cluttered, desks and office space. I’d like to think I always had a clean computer and a focused mindset. But my space was messy. It used to drive my wife, and some of my office mates, crazy. So I was cluttered and creative.

More recently, especially the last eight years, I’ve done a lot of writing. I’ve finished three published books and more than 4,000 blog posts, plus an online course and videos. During this more recent period, I’ve focused on fighting the clutter in my workspace, keeping my desk clear, and my papers organized. I’m convinced that all of this helps my creativity.

My hypothesis is that it has to do with the individual, our specific natures, and particularly, how we focus. In my most productive programming times I focused into the computer itself, the code, so much that the externals became insignificant. During my more recent writing years, we all multitask much more, including me. And clean work space helps me avoid distractions.

The real question is: What works for you. Don’t listed to experts. Figure it out.

Bogus Experts Give Bad Startup Advice

iStock_000000316874Small_thumbHow many self-styled startup experts have actually started a company? How many have gotten a startup to critical actually know what they are talking about? The online world of startup experts is infested with people who don’t know what they don’t know. I guess these people read the same tired clichés that sit in rich overabundance all over the web, and over time take on what they read as if it’s what they experienced. So clichés run around masked as expertise. Which makes for a lot of bad startup advice.

Bad startup advice

Here’s an example for you. The idea that passion alone can make a startup successful is absurd, but extremely common. It’s all over the web. Comments, blog posts, and updates are full of this illusion. We see it in angel investment pitches for the angel group I’m in. Watch a few episodes of Shark Tank and you’ll see it there, as entrepreneurs talk about how passionate they are and the sharks just roll their eyes. This again?  The truth of the matter is that passion, although it does help get through the long days and late nights, doesn’t make that much difference. What matters is giving value, offering something people will pay for, showing up every day, and doing the work. And I wonder how many of those people who advise others to “just follow your passion” have ever actually built a business. “Do what you’ll love and you’ll never work a day in your life” is a naive cliché. Ask anybody who actually did successfully start a business. There was a lot of work involved.

Another example? The way-too-common assumption that startups have to get funded is just wrong. The latest available SBA statistics show about 450,000 new businesses start up in the U.S. every month. But in an average year, only 70,000 or so get angel investment, and fewer than 5,000 get venture capital. Real people start businesses using grit, savings, credit card debt, loans on house equity, and loans or investment from family. The normal process of a startup is not, not by a long shot, a process of going from idea to funding without a ton of hard work in between. Not does it take investment to make a startup. Some need it, and many others don’t. It depends on the business.

And a third example is a pet peeves for me, the idea that education doesn’t coexist with entrepreneurship. Why bother to get an education if you’re going to be an entrepreneur. I ranted about that one last month, in Young Entrepreneurs: They are Lying to You. For every Bill Gates, Steve Jobs, and Mark Zuckerberg there are 10 million normal people wishing they’d stuck it out and gotten their degree.

Not that expertise is bad

However, for the record, I don’t mind it when someone shares expertise and experience accumulated from being close to startups, as sometimes happens with attorneys, business school profs, small business development center (SBDC) counselors, and others. They can be legitimate helpers. And of course there are functional experts who  have expertise to share on marketing, writing, design, development, finance, and so on, without having started a business. But they should declare their expertise and stick to it. They should not reinforce the clichés.

But certainty is bad. These are startups

The level of certainty I see, way too often, is amazing. Having read a bunch of blog posts about Steve Jobs, Mark Zuckerberg, or Richard Branson doesn’t make anybody an expert – but so-o-o-o many people act like it does. There are people who draw from the enormous overabundance of startup advice available and repeat the common clichés, because they sound good. So they tweet, post, write, and comment. And they perpetuate the clichés with an air of certainty.

I think certainty itself, related to startups, is a sign of inexperience. There are no general rules that apply very well to startups. There is always room for “on the other hand.”