Management
CEO = Vision? Unlikely.
Jun 17th
Those of you who might have read my previous post, will be familiar with my frustrations with the matrix organization and how the problem boils down to a lack of leadership . At the end of my post I came to this conclusion: “What comes to me from this discussion is the need to better define the difference between leadership, management, talent, and vision.” I think the challenge many organizations face is an assumption that leadership, talent, management and vision can all exist in the CEO. I’ve come to believe that is not true and apparently someone else agrees with my point of view. Umair Haque recently posted an article on the Harvard business blog on the subject of Redefining the CEO Agenda for the 21st Century . Umair’s post focuses in on Google and how they’ve successfully outmaneuvered Microsoft by securing an ad outsourcing deal with Yahoo!. Umair boils the post down with a quote from Google CEO Eric Schmidt :
“Or consider what Eric Schmidt said today: that Google has a “moral imperative” to help publishers benefit from advertising. That’s a living example of one of the principles we’ve discussed – good beats evil – being used to make real-world strategic decisions.”
The concept of a CEO using the word moral imperative is something relatively unheard of and yet it’s what sets them apart from the competition. Umair continues the thought in his post:
“And that’s how Google ends up in a league of it’s own. Schmidt’s quote is important because it’s a vivid demonstration of Google having the courage to question business as usual – in fact, this time, Schimdt is challenging perhaps the foundational orthodoxy of industrial-era business.”
I think Umair is right on point with what sets Google apart from the competition and it ties back to my previous post about the concept of differentiating the various traits we assume a leader has: vision, leadership, talent, and management. Rather than dredge these out over the course of a single blog post let me focus in on the key point I feel Eric Schmidt embodies – Vision .
Vision is something that great companies have. When you get employees from one of those company together in a room and ask about the company vision you should get the same answer from everyone. The challenge many organizations face is that most people expect the vision to come from the CEO. Perhaps the CEO is the person that articulates it best but often times a CEO is disconnected from the market, customers and day-to -day operations; essentially no where near to the right place to formulate the correct vision.
Occasionally you hear the term visionary CEO associated with innovative or entrepreneurial companies (such as Google). But what about the rest where you don’t see that moniker used? Does that mean they have no vision? Many will claim that they have a vision however you’ll find they have either a) difficulty getting consensus on what it is or b) a slick marketing driven statement. What these companies really need is to acknowledge that their CEO is not visionary or nor sufficiently engaged in the business to drive that vision.
Let’s be real, there are a lot of demands on the CEO’s time and managing the company vision might not always take priority. In these scenarios the CEO needs to outsource the responsibility for the company vision to someone who is publicly acknowledged as the visionary. By not doing so the CEO does a disservice to themselves and one of two things happens, they either encourage rouge operations based on the random visions of employees, or worse end up with many interpretations of what they should be doing. Sometimes companies pass on the vision to the fluffily titled ‘Evangelist’ sometimes it’s the CTO , or the head of product; I’d argue that this is really a half measure and potentially detrimental. How many VP’s do you know that have slashes in their titles? VP Marketing/HR/Investor Relations, VP Finance/Legal, VP Product/Engineering… doesn’t make sense does it? When it comes to Vision, that all important corporate compass, it needs to be an all-consuming passion for the individual knighted with the responsibility for guiding the organization.
Perhaps if more companies had leaders declaring their “moral imperatives”, we’d find ourselves in a refreshingly competitive enviroment where employees have no question as to what defines corporate success. One can only dream.
Organizational Entropy, The Matrix and a Lack of Leadership
Jun 4th
There’s a great conversation starter over on the Harvard Business Blog today on the matrix organization. I’m not sure how the matrix organization has stayed popular, but I think it’s one of the big challenges with businesses today. Gill Corkindale writes in her piece how the idea of matrices became popular in the 1970′s:
“…Companies realized that vertically aligned structures did not address cross-functional or business-wide needs. Matrix structures broke down the hierarchies, allowing teams to share information across task boundaries and enabling managers and staff to build their knowledge and experience across projects.”
The idea that many people can come together and make collective decisions is a noble one, but isn’t that what leadership is for? A matrix organization, where people aren’t sure who they report to, who to go to when a decision needs to be made, devolves to an excellent training ground for company politicking. Let’s say I have a project and I know that if I approach the natural person to get it done my idea will probably get killed. That’s where I can realize the beauty of a matrix organization. I can approach one of the many other mailable people involved in the process and convert them to my way of thinking, eventually contributing enough influence to make it happen. How good is that? It’s great for me and my idea but a dreadful position for the company to be in. The last thing any organization wants is the kids playing mommy and daddy against each other – and yet, that’s what matrix organization encourages.
What the article points out that I didn’t know, is that by the 1980′s management realized that the matrix organization was creating more problems than it solved. If that’s the case, how is it that in 2008 we’re still grappling with the challenges of matrixed organizations? One could argue (as Gill does) that it’s because we’re in a very different business environment. We have to deal with many more cross functional areas than ever before. The information age has made put many people in business on a even footing to contribute to a conversation. That’s the challenge of organization 2.0, the natural state of the organization is matrixed.
Entropy exists in everything and at the end of the day its the job of a company’s leadership to ensure that entropy (matrices) doesn’t take hold in their organizations. Perhaps the best qualities in leaders is not necessarily vision, nor financial acumen. Perhaps the best leaders are moderators, perhaps they act as judge and jury, and perhaps their strength is in keeping people focused. As Gill comments in her piece companies have been slow to train for these skills. What comes to me from this discussion is the need to better define the difference between leadership, management, talent, and vision. It seems that most matrixed organizations are probably lacking in leadership.
Photo Courtesy of brandon shigeta via Flickr
The Profitability of a Process Owner
Apr 3rd
A business concept I’ve been ruminating on recently is the idea of how to make the most efficient and profitable service based business. The more I think about the idea the more I become convinced that there is a fundamental difference between being a process owner vs. a service provider. I think it comes down to the idea that when you own a business process you own the consumer rather than if you were delivering a service that acts as an input to assist with the process.
Don’t get me wrong, it’s not that I’m arguing that there’s no money in providing services but it’s my belief that service providers have little to no leverage in the transaction. It’ll probably help me illustrate my point if I provide some examples:
Process Owner = Delta,
Service Provider = Travel Agent
Process Owner = Google
Service Provider = SEM (pick any company)
Process Owner = ReMax
Service Provider = Zillow
Process Owner = Fidelity
Service Provider = Morningstar
If you think about these examples, or find others, you’ll likely notice that the companies that generate the most money are the process owners. Even though all of the companies listed above provide a service of some kind, its the ones that control the function that’s being performed that earn most of the money. I’m not arguing that service providers aren’t successful businesses just that when you control a business process your business will scale much faster.
The idea of creating a service based software business is one of the hottest topics on the web today. The idea of building content based web pages has taken a back seat to the Software as a Service (SaaS) concept. What I think makes the idea of SaaS so interesting is its low cost of entry (readily available web dev tools), and (based on my theory above) its practical application as a business process. Some great examples of SaaS companies include Salesforce.com, 37 Signals, Google Apps, and most recently Adobe has jumped into the fray with Photoshop Express.
I recently read a great post on building a SaaS business on the Will Price blog. Guest author Lars Leckie summarized an interesting approach to building and monitoring performance of a SaaS company from the perspective of Josh James the CEO of Omniture. One of the most interesting points made in the post was in regard to creating efficiencies in the business:
“…it is not until later that investments in efficient infrastructure and operations hit their ToDo lists. This outline displays a strong focus on finding a product market fit and then adding gas to the fire as the market opened up.”
In essence Josh was advocating that you need to build a good product that has market demand, sell the crap out of it, and when it gains traction take it to the next level through investment in infrastructure and operations.
Some of you may take issue with the fact that I included ReMax/Zillow in the example above considering Zillow’s baby steps into the real estate market. I included it on purpose as I’m trying to illustrate a point. One reason the realtor market is in upheaval is precisely because companies like Zillow, who started by providing business intelligence, are now trying to own the process. Realtors are facing the same challenge that travel agents faced 10 years ago when Expedia hit the scene. The travel agent community had all the leverage as they owned the process for booking travel and with the advent of Expedia, a market shift occurred and now we find ourselves in a world where we rarely use an agent. The same is happening in the real estate space. Zillow is in the midst of migrating its business from being an information portal to being a SaaS model for prospective buyers. Like Seattle based Redfin it’s only a matter of time before Zillow pours on the gas and leverages their built in community to become the Expedia of the real estate world.
I’m all for the idea of owning the business process. In my daily life looking at online products and thinking up new ones, I’ve added a new question to my list: “Can my client do his/her job without my product?” If the answer is even close to yes I go back to the drawing board.
Rethinking Expertise
Jan 28th
I have to admit that I’ve arrived gracefully late to the Podcast party. I’ve never been a fan of proprietary systems and as such have had a personal grudge against Apple for the way in which they force their users into the Apple system. Having said that I think Apple is an amazing company when it comes to technology, design and marketing. It stands to reason that considering my geek status I’d eventually get hooked onto the iPod train.
The past Christmas I added the iPod Touch to my Wish List at Amazon throwing caution to the wind under the safe assumption that no one would buy it. As you’ve no doubt ascertained I was wrong, and I now am the proud owner of a 16Gb Touch. When I first hooked it up I had anticipated I’d use it to watch movies on the train ride to the office but after exploring the podcast directory in iTunes I’ve become engrossed in the concept of Podcasting.
While I was whittling down my list of 85 podcasts I came across an interesting discussion on the Invisible Hand podcast about expertise. The show discusses Harry Collins new book “Rethinking Expertise” and had some interesting insights into what makes someone an expert. The concept I found most interesting was the idea that there are two types of experts, interactional and contributory.
Let’s take the second type first. The basic idea behind a contributory expert is someone who is a true expert in a subject. If their expertise is statistics they can do complex statistical functions such as running logarithmic regressions. If their expertise is functional MRI, they can sit behind the machine and give you a full body scan and then open up the side to fix the machine if it breaks.
Conversely an interactional expert is someone who knows enough about a subject that they can speak intelligently about a subject but cannot actually employ the skills that would make them a true contributory expert. It was mentioned that if you had a contributory expert speak with an interactional expert they would be unable to ascertain that the interactional expert did not possess the skills needed to actual contribute to their field of expertise. The only test to see if someone is an interactional or contributory expert is to ask them to perform a task that only a contributory expert would know.
As I think about this it becomes abundantly clear that many if not all of most business I work with are comprised of interactional experts. It’s better characterized as industry expertise, but is a concept that is well worth understanding. Companies need to understand the role of their employees and the skills needed to make them a success. I’m sure there’s an optimal balance of interactional and contributory expertise and its probably something we need to look at to develop a smart organization.
If you want to hear more check out the podcast at theinvisiblehandpodcast.com and if you want to buy the book support the Invisible Hand by buying through their Amazon affiliate link which is available on their site.