Entrepreneurial Culture: Creating it is the CEO's job!

Sometimes, we treat corporate culture as something that “just happens.” By the time we realize we want to influence it deliberately, it’s often too late to change it very much. An entrepreneurial CEO has no such problem, however. Culture begins to be set the moment a company gets formed, but an entrepreneurial CEO can influence it tremendously. Read how in my Harvard Business Review article on the Entrepreneurial CEO and Building Culture.

You can find the article on corporate culture and how it begins as entrepreneurial culture here: http://blogs.hbr.org/cs/2010/07/advanced_entrepreneurship_your.html

Turn problems into opportunities

One of the most important skills you can develop in life is the ability to turn problems into opportunities. Let’s face it, life throws problems at us pretty much all the time. Some philosophies say that problems are the universe’s way of helping us learn to accept reality. Or perhaps they’re tests meant to give us the chance to show our strength and fortitude.

My take is a bit different. A problem is simply an opportunity by another name. Maybe it’s the old “God moves in mysterious ways” philosophy, or maybe it’s just that no matter what happens, if you survive, you’ll find a way to persevere. Either way learning to systematically find the opportunity within a problem is a key skill to going as far as your life circumstances will allow.

This week’s Get-it-Done Guy episode is all about turning problems into opportunities and how to find the opportunity beneath the problem. You can find it at http://getitdone.quickanddirtytips.com/how-to-turn-problems-into-opportunities.aspx

Advanced Entrepreneurship: How to Approach Strategy

Even first-time CEOs often realize that they should be thinking about strategy. But what is strategy? Strategy is different from vision or tactics, but how? And how should the CEO approach strategy? My current HBR.ORG article helps you understand the entrepreneur’s job description and how an entrepreneur should approach strategy.

The Entrepreneurial CEO's job description

Earlier this week, I began a series of articles on the Harvard Business Review blog site that will deal with the job description of the entrepreneur. The series arose because while people talk a lot about what qualities make up a good entrepreneur, the world is strangely silent on how an entrepreneur should actually spend their time. They always run around like the sky is falling, and they’re busy beyond belief. But doing … what? And how do they know what they’re doing is actually moving the company forward, versus just being whatever activity caught their eye at the moment.

Read my HBR.ORG blog post on Advanced Entrepreneurship: The Entrepreneurial Job Description.

Planning for operational growth

A key element of working less and doing more is preparing enough for the future so you have systems in place when the demands on you grow.

If your business is lucky enough to be on a growth path, you still have to deal with setting up operations before the growth happens. Otherwise, you get caught unable to deliver on the extra sales you’ve generated. If you need examples, look no further than AT&T’s inability to deliver adequate data coverage in major markets since the introduction of the iPhone, five years ago. I was interviewed by Latino Business Review on the preparing for operational growth. It’s interesting that the article characterizes me repeatedly as “conservative” in my business practices. I wouldn’t consider my advice conservative; I’d just call it common sense. If you’re growing into a country or product line you have no experience with, why in the world would you make a huge bet with no data? Far better to make a small bet that lets you collect the data, and then commit major resources.

Read the article here: http://www.latinobusinessreview.com/business-features/operations/think-medium-term-planning-operational-growth

Business has a lot to learn from theater people

We wrapped up Evil Dead: The Musical this weekend. I am sad. I miss rehearsal every night. I miss singing and dancing. I miss wondering if that is water in the makeup, or whether Zach’s drool was a bit too enthusiastic. Part of why I decided to start acting was the suspicion that it would be good for me socially and emotionally. I couldn’t have been more right.

The amazing thing about the experience was how quickly we created a feeling of community, shared goals, and closeness. We were all working together on a project much larger than any of us could possibly have done alone. Most people on the project were under 25 (and many were still in college). No one had any formal training in teamwork or group dynamics. No one was using models from Leadership 101, or Good to Great, or … or, frankly, any of the 80,000 business titles that purport to teach people to work together.

And yet, the production demonstrated teamwork that most businesses would kill to have. How could a student theater group on a shoestring budget with no education or background in training or group process pull this off? It really gives me pause.

Perhaps good teamwork isn’t a matter of training. Perhaps there’s something structural that can produce teamwork, simply by its very nature.

I’m intrigued, and I don’t know the answer. What makes the teamwork “just happen” when flesh-eating zombies are involved, when it takes pushing, shoving, pulling, tearing, and training to do the same thing when soul-eating corporations are involved? What do you think?

Can a corporation be "entrepreneurial?"

A friend of mine posted a Facebook entry saying his 30,000+ person company is encouraging people to be entrepreneurial. I replied with a remark that I couldn’t imagine a less likely place to find entrepreneurial behavior.

Much to my surprise, he was surprised that I was surprised. But that’s not surprising. It turns out that at his consulting company, they are encouraged to come up with ideas for new products and find new customers. That fits his definition of “entrepreneurial.”

It didn’t fit mine, and I took this as an opportunity to try to define why I had my reaction. Here’s my thinking about what constitutes “entrepreneurial.” Please chime in.

I think we have different definitions of “entrepreneurial.” I hear a lot of corporations use the word “entrepreneurial” as a synonym for “we’re letting you think for yourself and propose creative solutions.” While I applaud that impulse, in my mind, it should be a standard mode of engagement in business and not considered anything to be given a special name.

For me, what you’ve described is being given license to propose new product lines. It fits my definition of “new business development,” and it may or may not be entrepreneurial.

In my definition of entrepreneurship, entrepreneurs (a) are free to change their business offerings, (b) have control over their business model, (c) must raise their own resources and enjoy a corresponding participation in the upside, (d) create an organization, organization structure, and its attendant policies and procedures.

Furthermore, often, entrepreneurs operate in unknowable or cutting-edge spaces. They are introducing new products without the knowledge of whether markets exist.

In essence, an entrepreneur’s product is an organization and business model.

If you can go out to Staples and propose a joint venture where you provide flat-rate actuarial consulting to any insurance company that buys more than $1000 worth of office supplies, with you (personally) pocketing 10% of the revenues, that would be entrepreneurial, in my mind.

If you had the ability to acquire smaller consultancies and attempt a “roll-up,” (without needing corporate approval) that would be entrepreneurial.

If you were to discover that restaurant consulting were more lucrative than actuarial consulting and decide to reposition your job to target restaurants based on your theories/dreams/data about the business model, that would be entrepreneurial.

If your business model is limited (e.g. hourly charging with X% overhead charged back to the parent company), if your ability to raise funds and build an organization is limited (e.g. hiring six people with completely different policies, procedures, dress codes, health plan, etc.), and if your upside is limited (e.g. you can’t create a multinational division and then take home the bulk of the profit as your own bonus), then I would consider you to be in a creative business development capacity, but not entrepreneurial.

Similarly, some people consider franchise owners as entrepreneurial. While they take a risk and share in the upside, I would call them “small business people” and not “entrepreneurs.” They generally don’t have control over their processes, capital structure, organizational structure, or brand/marketing/etc. so while they certainly do start a business with their own funds, they’re sufficiently constrained that they’re essentially employees who shoulder the risk and receive a bonus based on profits.

I don’t think there’s any one agreed-upon definition of entrepreneurship, but in the entrepreneurship circles where I travel, resource scarcity and control over structure, process, and business model are key elements separating entrepreneurial environments from corporate environments.

Stephen Wolfram's "Alpha" isn't a Google killer; they're in different businesses.

My friend Bob Kerns blogged about Stephen Wolfram’s “Alpha” project. The project aims to take on Google by creating a web-retrieval engine that can answer specific factual questions directly. Type in, “how many angels can dance on the head of a pin?” and it will go out to the Web, retrieve the answer, and tell you. Bob doesn’t think Alpha will be able to challenge Google. I agree.

I’d never heard of Wolfram’s “alpha” before, but the sensationalistic headlines, in my humble opinion, show a total misunderstading of Google’s business model.

Google is in the advertising business, not the search business. Search is one of many distribution channels they have for that advertising. It lets them offer targeted ads, because what people search for can be used to target ads to people who might want to buy a product or service.

They’ve also figured out that if they give away products that involve high information content (mail, word processors, spreadsheets, etc.), targeted ads can be delivered unobtrusively in the margins, deduced from the information a person is working with.

It makes sense for Google to develop better programs in the information-processing space than Microsoft and give them away for free, since that drives eyeballs to Google’s ads. You’ll notice Google isn’t building the G-Box 360; there’s no information content there to be analyzed and monetized.

The Google phone gets you more deeply involved with your Google platform on mobile devices. My guess is that it’s a just-in-case move, anticipating the possibility that mobile devices will develop into a big chunk of the information processing market (and thus advertising eyeballs).

Alpha may be able to answer factual questions directly, but it’s not necessarily even in the same space as Google. Factual questions aren’t likely to be very good at generating enough context to do good ad targeting. If I ask, “what is the tensile strength of steel,” you don’t have much information to use to target ads. You don’t know why I want that information.

When I Google, however, I am typing in words associated with the actual information I need. I type in broader phrases, loaded with context. If I’m searching for “steel for skyscraper construction,” it’s easier for Google to find a host of relevant ads based on the query words and on the content of the top pages matching the query.

It’s the very fuzziness of Google’s search that makes it a good business for monetizing with ads.

A modest proposal for rescuing the auto industry

You know, I just can’t help feeling outrage, depression, and cynicism at the Big Three auto companies asking for a taxpayer bailout. Twenty years ago, we read cases in business school about how American auto manufacturers had already fallen behind foreign imports in production capability, cost structure, and market responsiveness. At the time, this was not new information.

And now, the Detroit top brass are showing up to Congress, hats in hand, for mega-billion-dollar cash flow loans that they project will last them … oh, a few months. And they’ll do what, exactly, in those few months? Why in the world should we believe that the same people who willfully ignored their competitive situation for two generations have any relevant skills, abilities or motivation to fix any of the problems? Aren’t they exactly the people we know won’t solve the problem?

Yeah, they’re saying they’ll reduce their salary to $1 until the mess is cleaned up. How generous of them. Are they taking huge stock grants instead (Iacocca did, back when he reduced his salary to $1 when saving Chrysler. That part of the story doesn’t sound as noble, so it’s often glossed over)?

Even if they’re genuinely giving up their compensation, they’ve taken home seven- or eight-figure salaries for years. They’re way, way past the point of needing another dime as long as they live. What a sacrifice, to reduce their salaries. I say they’re not going nearly far enough. How about giving back a big chunk of what they’ve been paid over the last twenty years, since it’s now apparent they did a piss-poor job at CEOing.

Startups can’t afford the luxury of incompetent, overpaid CEOs

In the startup world, we don’t have much money to pay CEOs. So we look for CEOs who are passionately committed to the success of our idea, our customers, and our company. We give them stock options, sure, but honestly, that’s not what we count on to motivate them. We count on them loving what they do enough to go the extra mile. And not in a private jet. In fact, founder-CEOs often put in their own money to fund the company and work for free until the company is proven viable.

So here’s my proposal…

I’m happy to have taxpayers bail out Detroit, but with a condition: we auction off the CEO jobs at Ford, Chrysler, and GM. The highest bidder gets the job. They receive a total compensation package equivalent to a shift supervisor at one of their plants. No stock, no options, and no bonuses. If they want better health insurance, for example, they pay for it themselves. Why would anyone take this job? Simple. It’s the chance of a lifetime to do something that almost no one in the world will ever have the chance to do: reshape an industry.

It’s pretty clear to me that the logic of “pay the CEO big money” isn’t getting competent, committed people into the position. It’s getting incompetent leeches whose main interest seems to be in feeling self-important while relieving the company of the burden of millions of dollars of vaule.

By having people ante up real money to take the position, we would quickly narrow the playing field to people who genuinely care, are excited by the opportunity, and who are being driven by the challenge or the love of the industry, not by personal greed. And remember, this isn’t the string bean industry, it’s the auto industry. There are many superbly successful businesspeople in the world who are passionate about cars as an industry. I’ll bet we would be surprised at the number of excellent candidates who stepped forth.

I’ve had enough with this absurd logic that says, “you can’t motivate people unless you pay them.” That’s bull pucky. It may be true for assembly line workers, because those jobs are mind-and-body-numbingly dehumanizing, but when it comes to C-suite jobs, I’ve met hundreds of people in those jobs whose motivations have everything to do with passion, challenge, creating, and doing a job well-done. Most of them are already rich enough that they don’t need to work, anyway.

In fact, even Warren Buffett acknowledges this. He points out that the CEOs of Berkshire Hathaway subsidiaries are extremely successful, already independently-wealthy people. They don’t need money and aren’t motivated by it. That’s why they do such a good job.

The least we can do is take Buffett’s example and get CEOs motivated by passion, superb skill, and challenge to turn around an industry that’s had none of the above for a long time.