Strategy

Everyone I talk to these days about the industry and the future of new media hears my opinion on the characteristics a business needs to be successful in knowledge based economies. In full disclosure I’ve only thought about this in terms of my industry but I wouldn’t doubt its applicable to other industries.

The Concept:

The basic theory is that a business lives along a continuum of potential for success. In my mind you can imagine this continuum as a piece of string with one end tied to a helium filled balloon and the other tied to a weight. In this example the balloon represents profitability, a concept I define as rewarding more that just shareholders, I’d also include customers, and employees. The weight in this example represents the company, the bigger the weight the bigger the company. If you imagine any successful business the balloon is big and it sails up into the air taking the company with it. If you take a large organization with a huge expense base it even though the balloon may be big the weight might be proportionally bigger the company falls.

Enough fundamentals, back to the string. If you look closely at a piece of string you’ll find it’s made up of multiple strands of string woven together. It’s this weaving together that gives the string the strength, much more strength than each individual strand is able to muster by itself. Back to the balloon example, if our string tying the balloon (profits) to the weight (company) were to have many of its strands broken the entire string might break making the weight fall to the ground. In my mind all businesses are tied to profitable success by a 4 stranded string. Each of these separate yet influential strands form the foundation for what is necessary to achieve success: Information, Smarts, Technology, and Demand. To have the strongest string and therefore the best potential to succeed a company needs to master each of these components.

Hopefully the string theory made it easier to understand my concept because I’m leaving it here and spending the rest of this post speaking to the those four strands which I call the Corporate Quadrangle. Why quadrangle? Well its meant to refer to the charts that are used to measure companies on this continuum. The results that come from assessing companies on the scale often result in a quadrangle shaped descriptor of the company. While its still early in the definition of this theory I’m curious to know if each component has a threshold for success and if so what shape should we be aspiring to?

The Components:

Regardless, as I mentioned above and as you can see in the chart, the quadrangle is made up of 4 separate components that all companies need to be successful: Information, Smarts, Technology, and Demand. Let me address each of these components individually:

• Information: This covers a lot of ground but mainly it’s a catchall bucket to cover the data that a company owns. In the information economy data = dollars and the more information you have the more valuable you are. A company like Amazon has massive amounts of data on user preferences (e.g. if you bought this you’d like that), and a product database that’s unrivaled in the market. Anyone can open an online retail operation but Amazon makes their information work for the business not as a byproduct of business.
• Smarts: I would imagine this is self explanatory but Smarts refers to the intellectual capital that makes up the workforce of an organization. There are some organizations that work hard at talent management and are led at every level by dynamic, knowledgeable and contributory experts. What’s important about this topic is that Smarts is a skill that’s needed across the organization in every function. Companies need smart engineers, leaders, support staff, HR, finance, etc. Not all intelligence is specific to the industry in which you operate; leaders need to know how to lead, managers need to know how to manage, you need cunning lawyers, diligent finance, in short the organization needs Smart talented people.
• Technology: One of the biggest challenges for many new media companies is on the technology side. It’s one thing to have a good idea, it’s entirely different thing to do it well. Whether that technology is a simple ordering system, or an ad delivery mechanism, the goal to which all technology should strive is invisibility. A technology becomes invisible when you are so engrossed in the task it was designed to do that you’re not thinking about how the technology could be improved. If you ever talk to an Ophthalmologist you’ll learn that they hate doing eye exams what they love doing is surgery. It’s the same with engineers, they’re less concerned with maintenance and usability, instead they’re excited by pushing the boundaries of technology. Be cautious when you hear they convincing you that we need an AJAX, to them it’s cool but what does it really mean for the user.
• Demand: This is a no duh to most but it’s a really important factor in a nuanced way. Obviously the business you build needs to have a growing demand but it also needs to be demand to which you can scale. Businesses tend to serve growing markets (I don’t know many people opening businesses to serve a declining market), and as such your business needs to scale at the same rate as that market. Many people refuse to follow the market because of a fear that following the demand with a scalable solution will put too much risk into the business. If you learn anything from this post I’d hope it’d be to not be afraid of scaling your business. Google is a great example of success on this front, they are a company that has no fear challenging the limits of delivering information to 70%+ of the online population. They see the growth potential not the risk.

On Execution:

One thought that may come to mind is what about execution? You could implement all of the above but you still need to execute. It’s not really part of the quadrangle, but its a concept that affects all of the aforementioned principles. The reality is that if you have succeeded in implementing all of the elements of the Corporate Quadrangle then you shouldn’t have to worry about execution. However, lets be realistic, most companies fail in at least one of the elements and rarely hit home runs in any specific area so execution is an issue that needs to be monitored. My take on execution is that it’s not something you can force to happen, my belief is that you need to hit focus on the key elements of the quadrangle and execution happens. As a concept execution is more of a tool to monitor progress because in reality it’s difficult to gauge where on the continuum your company falls. One of the main indicators that something is wrong is an evaluation of whether you’re executing on your goals. But here’s the rub (and why I hate execution), you need to set appropriate goals to be monitored. I don’t know how many companies set marginal goals that don’t address macro industry issues. SMART (Specific, Measurable, Attainable, Realistic, Time-bound) goals are horrible for corporate success, they confine success measurement to tactical details such as “launch version 2.0″ and avoid having
your employees think at a high level about company goals, “own the retail space”. If you think about how you are personally evaluated can you make a subjective guess whether you’ve contributed to a high level corporate goal?

Final Thoughts:

As I look back at the organizations I’ve been a part of it’s the ones that succeed along the continuum that have been the most fun, the most rewarding. The challenge today is that businesses tend to be stuck in a rut, it takes hard work to operate successfully in all four elements along the continuum. Many companies suffer from entropy and are willing to put up with meager growth, and profits if it means they can avoid confrontation. They tend to put up with toxic employees, make excuses for technology, justify sub-par candidates, and refuse to scale to demand. If anything companies that fail to succeed just make it easier for companies who are successful in the elements of the quadrangle to compete in the market.

Your thoughts?

Where does your company fit along the continuum? on a scale of 1-10 (10 being amazing).