People often think that the best way to predict the future is by collecting as much data as possible before making a decision. But this is like driving a car looking only at the rearview mirror — because data is only available about the past.
You don’t want to have to go through multiple marriages to learn how to be a good spouse. Or wait until your last child has grown to master parenthood. This is why theory can be so valuable: it can explain what will happen, even before you experience it.
That’s a hallmark of good theory: it dispenses its advice in “if-then” statements.
There are a determined few who never lose sight of aspiring to do something that’s truly meaningful to them. But for many of us, as the years go by, we allow our dreams to be peeled away. We pick our jobs for the wrong reasons and then we settle for them. We begin to accept that it’s not realistic to do something we truly love for a living.
At a basic level, a strategy is what you want to achieve and how you will to get there.
The trap many people fall into is to allocate their time to whoever screams loudest, and their talent to whatever offers them the fastest reward.
The paper, which has been one of the most widely cited of the past 3 decades, focused on a problem known as agency theory, or incentive theory: why don’t managers always behave in a way that is in the best interest of shareholders? The root cause is that people work in accordance with how you pay them. The takeaway was that you have to align the interests of executives with the interests of shareholders.
On one side of the equation, there are the elements of work that, if not done right, will cause us to be dissatisfied. These are called hygiene factors. Hygiene factors are things like status, compensation, job security, work conditions, company policies, and supervisory practices. You have to address and fix bad hygiene to ensure that you are not dissatisfied in your work.
Interestingly, Herzberg asserts that compensation is a hygiene factor, not a motivator.
Compensation is a death trap. The most you can hope for (as CEO) is to be able to post a list of every employee’s name and salary on the bulletin board, and hear every employee say, “I sure wish I were paid more, but darn it, this list is fair.” Compensation is a hygiene factor. You need to get it right. But all you can aspire to is that employees will not be mad at each other and the company because of compensation.
If you instantly improve the hygiene factors of your job, you’re not going to suddenly love it. At best, you just won’t hate it anymore.
Motivation factors include challenging work, recognition, responsibility, and personal growth. Feelings that you are making a meaningful contribution to work arise from intrinsic conditions of the work itself.
The point isn’t that money is the root cause of professional happiness. It’s not. The problems start occurring when it becomes the priority over all else, when hygiene factors are satisfied but the quest remains only to make more money.
But after it was finished, I rarely saw the children in it. The truth was that having the house wasn’t what really motivated them. It was the building of it, and how they felt about their own contribution, that they found satisfying.
The pursuit of money can, at best, mitigate the frustrations in your career — yet the siren song of riches has confused and confounded some of the best in our society. In order to really find happiness, you need to continue looking for opportunities that you believe are meaningful, in which you will be able to learn new things, to succeed, and be given more and more responsibility to shoulder.
It’s rarely a case of sitting in an ivory tower and thinking through the problem until the answer pops into your head. Strategy almost always emerges from a combination of deliberate and unanticipated opportunities. What’s important is to get out there and try stuff until you learn where your talents, interests, and priorities begin to pay off. When you find out what really works for you, then it’s time to flip from an emergent strategy to a deliberate one.
To convince senior management of the idea’s potential, they need to come up with a business plan. They are acutely aware that for management to approve the project, the numbers had better look good — but the team often won’t really know how customers will respond to the idea, what the true cost will turn out to be, and so on.
By the time they have learned which assumptions were right, it’s too late to do anything about it. In almost every case of a project failing, mistakes were made in one or more of the critical assumptions upon which the projections and decisions were based. But the company didn’t realize that until it was too far down the line in acting on the ideas and plans.
Before you take a job, carefully list what things others are going to need to do or to deliver in order for you to successfully achieve what you hope to do. “What are the assumptions that have to prove true in order for me to be able to succeed in this assignment?”
How you allocate your resources is where the rubber meets the road.
Real strategy is created through hundreds of everyday decisions about where we spend our resources. Watch where your resources flow. If they’re not supporting the strategy you’ve decided upon, then you’re not implementing that strategy at all.
Everything related to strategy inside a company is only intent until it gets to the resource allocation stage. A company’s vision, plans, and opportunities — and all of its threats and problems — all want priority, vying against one another to become the actual strategy the company implements.
In theory, they should champion products and processes that will be key to Unilever’s future success 5-10 years ahead. But the results of those efforts, only available many years later, will garnish the record of whoever is in that specific assignment at that time — not the person whose insight initiated it. Instead, the HPLs focus on delivering results they know can be seen and measured within 24 months. As long as they have something to show for their efforts, they know they’ll have a shot at an even better next assignment. The system rewards tomorrow’s senior executives for being decidedly focused on the short term — inadvertently undermining the company’s goals.
The danger for high-achieving people is that they’ll unconsciously allocate their resources to activities that yield the most immediate, intangible accomplishments. This is often in their careers, as this domain of their life provides the most concrete evidence that they are moving forward.
A strategy is created through hundreds of everyday decisions about how you spend your time, energy, and money. With every moment of your time, every decision about how you spend your resources, you are making a statement about what really matters to you.
It will be incredibly tempting to invest every extra hour of time in whatever activity yields the clearest and most immediate evidence that we’ve achieved something. Our careers provide such evidence in spades.
When it seems like everything at home is going well, you will be lulled into believing that you can put your investments in these relationships onto the back burner. That would be an enormous mistake. By the time serious problems arise in those relationships, it often is too late to repair them. This means, almost paradoxically, that the time when it is most important to invest in building strong families and close friendships is when it appears, at the surface, as if it’s not necessary.
93% of all companies that ultimately become successful had to abandon their original strategy — because the original plan proved not to be viable.
When the winning strategy is not yet clear in the initial stages of a new business, good money from investors needs to be patient for growth but impatient for profit. It demands that a new company figures out a viable strategy as fast as and with as little investment as possible — so that the entrepreneurs don’t spend a lot of money in pursuit of the wrong strategy.
Planting saplings when you decide you need shade.
To accelerate it faster, shareholders pour lots of capital into these initiatives. But all too often, this abundant capital gives fuel to the entrepreneurs, allowing them to recklessly pursue the wrong strategy aggressively.
Just as his company was finally taking off, his marriage fell apart.
He sought the returns on an investment he hadn’t made. No one intentionally deserted him in his hour of need; it was just that he had neglected them for so long that they no longer felt close to him and they worried that any intervention might be considered an intrusion.
“Talkative” (often college-educated) parents spoke 2.1K words to their child, on average. By contrast, parents from less verbal backgrounds spoke only 600 per hour. If you add that up over the first 30 months, the child of “talkative” parents heard an estimated 48M words spoken, compared to the disadvantaged child, who heard only 13M. The most important time for the children to hear the words is the 1st year of life.
Language dancing involves talking to the child about “what if,” and “do you remember,” and “wouldn’t it be nice if” — questions that invite the child to think deeply about what is happening around him. And it has a profound effect long before a parent might actually expect a child to understand what is being asked.
In short, when a parent engages in extra talk, many, many more of the synaptic pathways in the child’s brain are exercised and refined. This makes the subsequent patterns of thought easier and faster.
A child who enters school with a strong vocabulary and strong cognitive abilities is likely to do well in school early on and continues to do well in the longer term.
It’s mind-boggling to think that such a tiny investment has the potential for such enormous returns. Yet many parents think they can start focusing on their child’s academic performance when they hit school. But by then, they’ve missed a huge window of opportunity to give their kid a leg up.
If you deter investing your time and energy until you see that you need to, chances are it will already be too late. But as you are getting your career off the ground, you will be tempted to do exactly that: assume you can defer investing in your personal relationships. You cannot. The only way to have those relationships bear fruit in your life is to invest long before you need them.
The insight behind this way of thinking is that what causes us to buy a product or service is that we actually hire products to do jobs for us.
Every successful product or service, either explicitly or implicitly, was structured around a job to be done. Addressing a job is the causal mechanism behind a purchase.
If you work to understand what job you are being hired to do, both professionally and in your personal life, the payoff will be enormous. One of the most important jobs you’ll ever be hired to do is to be a spouse. Getting this right is critical to sustaining a happy marriage.
This may sound counterintuitive, but I deeply believe that the path to happiness in a relationship is not just about finding someone who you think is going to make you happy. Rather, the reverse is equally true: the path to happiness is about finding someone who you want to make happy, someone whose happiness is worth devoting yourself to.
This principle — that sacrifice deepens our commitment — doesn’t just work in marriages. It applies to members of our family and close friends, as well as organizations and even cultures and nations.
We all recognize the importance of giving our kids the best opportunities. Each new generation of parents seems to focus even more on creating possibilities for their children that they themselves never had. But helping our children in this way can come at a high cost.
Wall Street analysts hawkishly monitor financial metrics and ratios that track the “efficiency” of capital used in a business.
Then, in 2005, Asus announced the creation of its own brands of computers. In this Greek-tragedy tale, Asus had taken everything it had learned from Dell and applied it for itself. It started at the simplest of activities in the value chain, then, decisions by decision, every time that Dell outsourced the next lowest-value-adding of the remaining activities in its business, Asus added a higher value-adding activity to its business.
Unlike resources, which are often easily seen and measured, processes can’t be seen on a balance sheet.
Managers can’t be there to watch over every decision as a company gets bigger. That’s why the larger and more complex a company becomes, the more important it is for senior managers to ensure employees make, by themselves, prioritization decisions that are consistent with the strategic direction and the business model of the company. It means that successful senior executives need to spend a lot of time articulating clear, consistent priorities that are broadly understood throughout the organization.
Companies in the pharmaceutical, automobile, oil, information technology, semiconductor… have increasingly pursued outsourcing without considering the importance of future capabilities. They are encouraged to do this by financiers, consultants, and academics — they see how quickly and easily they can reap the benefits of outsourcing, and don’t see the cost of losing the capabilities that they forgo in doing so.
The tables truly have turned. At the beginning, American companies outsourced simple things to drive costs down and get assets off their balance sheets. As is often the case, each of the decisions by themselves seemed to make sense. Now, however, they must outsource sophisticated products because they can no longer make them.
First, you must take a dynamic view of your suppliers’ capabilities. Assume that they can and will change. You should not focus on what the suppliers are doing now, but, rather, focus on what they are striving to be able to do in the future. Second, and most critical of all: figure out what capabilities you will need to succeed in the future. These must stay in-house — otherwise, you are handing over the future of your business.
Processes are what your child does with the resources he has, to accomplish and create new things for himself. These include the way he thinks, how he asks insightful questions, how and whether he can solve problems of various types, how he works with others, and so on.
Resources are what he uses to do it, processes are how he does it, and priorities are why he does it.
I worry a lot that many parents are doing do their children what Dell did to its PC business — removing the circumstances in which they can develop processes.
Are they just going along for the ride? When we so heavily focus on providing our children with resources, we need to ask ourselves: Has my child developed the skill to develop better skills? The knowledge to develop deeper knowledge? The experience to learn from his experience?
The nature of these activities — experiences in which they’re not deeply engaged and that don’t really challenge them to do hard things — denies our children the opportunity to develop the processes they’ll need to succeed in the future.
The end result of these good intentions is that too few reach adulthood having been given the opportunity to shoulder onerous responsibility and solve complicated problems for themselves and for others. Self-esteem — the sense that “I’m not afraid to confront this problem and I think I can solve it” — doesn’t come from abundant resources. Rather, self-esteem comes from achieving something important when it’s hard to do.
I like to listen to their banter about the experiences they had growing up, and which had the greatest impact on their lives. I typically have no memory of the events they recall as being important. And when I ask them about the times when Jim and I sat them down specifically to share what we thought were foundationally important values of our family, the kids have no memory of any of them.
Your parents most likely weren’t thinking consciously about teaching you the right priorities at the time — but simply because they were there with you in those learning moments, those values became your values too. Which means that, first, when children are ready to learn, we need to be there. And second, we need to be found displaying through our actions, the priorities and values that we want our children to learn.
Children need to do more than learn new skills. The theory of capabilities suggests they need to be challenged. They need to solve hard problems. They need to develop values.
In other words, a typical manager gets it wrong a lot. They may strive for zero-defect quality in manufacturing or services, but a 25% “defect” rate in picking the right people — what many consider their most important responsibility — is somehow considered acceptable.
They had honed them along the way, by having experiences that taught them how to deal with setbacks or extreme stress in high-stakes situations.
He wanted to become CEO of a successful company. But instead of setting out on what most people thought would be the “right,” prestigious stepping-stone jobs to get there, he asked himself: “What are all the experiences and problems that I have to learn about and master so that what comes out at the other end is somebody who is ready and capable of becoming a successful CEO?”
People who hit their first significant career roadblock after years of nonstop achievement often fall apart.
Most of us have — or had — an idyllic image of what our families would be like. The children will be well-behaved, they’ll adore and respect us, we’ll enjoy spending time together, and they’ll make us proud when they are off in the world without us by their side.
Culture is a way of working together toward common goals that have been followed so frequently and so successfully that people don’t even think about trying to do things another way. If a culture has formed, people will autonomously do what they need to do to be successful.
Management doesn’t need to dive into the details of every decision, because the culture — almost as an agent of management — is present in the details of every decision.
“Outstanding” employees only: doing an “adequate” job leads to your getting a “generous severance package,” so the company can hire an A-player in your place.
Children might feel “success” in the short term by getting what they want in beating up a sibling, or talking back to a parent who finally relents to an unreasonable demand. Parents who let such behavior slide are essentially building a family culture — teaching their child that this is the way the world works, and that they can achieve their goals the same way each time.
Left unchecked long enough, “once or twice” quickly becomes the culture.
The safest road to Hell is the gradual one — the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts.
The problem is, life seldom works that way. It comes with no warning signs. Instead, most of us will face a series of small, everyday decisions that rarely seem like they have high stakes attached.
When it compared Netflix’s numbers to its own, Blockbuster’s management concluded, “Why would we bother?”
Netflix, on the other hand, had none of those concerns. There was nothing weighing it down — no marginal thinking. It assessed the opportunity using a completely clean sheet of paper. It didn’t have to worry about maintaining existing stores or propping up existing margins; it didn’t have any.
The right way to look at this new market was not to think, “How can we protect our existing business?” Instead, Blockbuster should have been thinking: “If we didn’t have an existing business, how could we best build a new one? What would be the best way for us to serve our customers?”
As Henry Ford once put it, “If you need a machine and don’t buy it, then you will ultimately find that you have paid for it and don’t have it.”
Thinking on a marginal basis can be very, very dangerous.
The marginal cost of doing something “just this once” always seems to be negligible, but the full cost will typically be much higher.
The costs of taking the high road are always clear like that. But the costs of taking the low road don’t seem that bad at the start.
Because life is just one unending stream of extenuating circumstances.
That business purpose and business mission are so rarely given adequate thought is perhaps the most important cause of business frustration and failure.
In short, we need to aggregate to help us see the big problem. This is far from an accurate way to measure things, but this is the best that we can do.
Because of this implicit need for aggregation, we develop a sense of hierarchy: people who preside over more people are more important than people who are leaders of fewer people.