The three questions to ask when you're thinking of creating something

These notes, taken by Blake Masters from Silicon Valley legend Peter Thiel's Computer Science class on startups, are completely worth reading - whether you work in a startup, are thinking of joining a startup, are thinking of creating your own startup, or just thinking.

Of the many interesting nuggets and insights in the notes, (the difference and difficulty of taking a brand new idea from 0 to 1, versus taking an idea from 1 to n - with n being infinity and the different stages of technological progress and advancement), I wanted to call out from Masters' notes Peter Thiel's three questions you need to ask when evaluating your idea.Hélio Oiticica, Metaesquema No. 348, 1958

Here is Thiel's take:

The path from 0 to 1 might start with asking and answering three questions.

First, what is valuable? Second, what can I do? And third, what is nobody else doing?

The questions themselves are straightforward. Question one illustrates the difference between business and academia; in academia, the number one sin is plagiarism, not triviality. So much of the innovation is esoteric and not at all useful. No one cares about a firm’s eccentric, non-valuable output. The second question ensures that you can actually execute on a problem; if not, talk is just that. Finally, and often overlooked, is the importance of being novel. Forget that and we’re just copying.

 The intellectual rephrasing of these questions is: What important truth do very few people agree with you on?

The business version is: What valuable company is nobody building?

Earlier in the week I posted about the proliferation of tablet devices that are primarily designed for and used to consume content, rather than create content and the implications of this growth for career management. In a world where people want to consume and consume and consume, I argued, that to have real lasting and sustainable value and advantage that you want to be a creator, not just a consumer. I still believe that, and I also believe it can be really hard for lots of folks to actually create things - blog posts, presentations, podcasts, videos - whatever.

And after reading the notes from Thiel's talk, I think these same three questions about startup formation and practicality of an idea can even be applied to more mundane, or day-to-day scenarios like content creation.

What is valuable?

What can I do?

What is nobody else doing?

Try thinking really hard about those question and you have a start at least or a guide to moving from consumer to creator. And the good thing is for most of us the 'right' answers to those questions can be drawn from a much narrower context than Thiel was probably thinking about (the entire world). 

You can probably get by with just finding what is valuable, achievable, and novel in your own company, or city, or industry, or even your group of friends for that matter. 

You can be a content creator, and I think, you and definitely your kids, need to become creators too.

Differential advantage via technology? It's hard to find that on a shelf

One of the most widespread and influential technologies of the last 40 years that has not only improved business but actually helped create entirely new businesses is the seemingly mundane shipment tracking number.

That crazy-long string of 15 or 20 letters and numbers that somehow, as if by magic, allows you to determine the location and stage in the shipment process of all the crap essential items you order from Zappos, Amazon, or Warby Parker. If you are old enough to remember what ordering goods from catalogs or mail-order was really like before the days of tracking numbers then I think you'll agree how dramatic an improvement it is, and how it enables businesses to make commitments and consumers to make plans.

FedEx who recently celebrated their 40th anniversary, created the tracking number and invented scores of related technologies and processes that surround the tracking number which remains the core of their shipment process today. It is a fascinating story of innovation that you can read about in this recent piece on Wired.com, Tracking 40 Years of FedEx Technology.

The tracking number, and the associated network, communications, applications, and database technologies that make the number accessible and intelligent to the shipper, retailer, and consumer alike truly represents an amazing story of technological innovation. But it is a kind of innovation that sometimes we lose sight of, particularly those of us who talk about things like 'enterprise' software - systems like ERP or Supply-chain, or even HCM solutions. 

The vast majority of these enterprise systems, and the ones that people (mostly) spent time talking about, are commercial off the shelf solutions. A software company has built these solutions, usually with the insights of customers, partners, and their own internal teams of experts, and then attempts to sell what normally is the same exact system to as many customers as they can.  That's the software business, essentially, and it makes tons of sense for both the customer and the vendor. 

For the vendor, developing, marketing, maintaining, and updating one main version of the solution is simpler, more efficient, and over time, allows them to spend more time and R&D on building new features and capabilities, which potentially benefit all customers. And for the customer, having to not be in the business of creating their own custom solutions for things like Payroll, Accounts Payable, collecting job applications, and asset tracking is a huge boon as well. For only a very few specialized companies, none of these things are fundamental to their core business models.

But having these types of enterprise off the shelf systems in place, configured, and deployed can only do so much for an organization when you factor in the these two elements - that the same solutions are available to everyone in the market, including their competitors, and mostly the processes they support are not core to their differentiating value proposition. Or said differently, a dozen of your competitors probably run the same ATS as you, that looks and feels kind of the same, and candidates hate theirs as much as they hate yours. No advantage gained, (or ceded, admittedly). Yes you can do a 'better' implementation of generally available solutions, and that might make you a little faster to process an applications or more efficient at taking payment discounts than the other guys, but these kinds of advantages are mostly tangential to whatever your 'real' business is about.

So if true technological competitive advantage is hard to come by simply from commercial off the shelf software, then where can it come from?

Let's go back to the FedEx example. Here's some idea of where from the Wired.com piece:

FedEx’s 40-year history is about far more than an unimaginable number of overnight deliveries. It’s a case study in creating a service, then pushing technology forward to ensure that service actually works on a large scale. When it absolutely, positively has to be there overnight, you need powerful technology. And sometimes you have to create it.

In its relentless pursuit of efficiency, FedEx has pioneered and developed technologies later embraced by everything from cellular industry to online retailing and distributed computing.

“On a day to day basis, shipping 10 million packages, you have to have technology,” (FedEx CIO) Carter said. Even if that means creating it yourself.

The advantage comes from technology that surrounds the essence of the business model - the fast, reliable delivery of customer shipments. The technology that enables that mission, that others can't easily duplicate, is where and how technology helps lead to real success. And all of it had to be created from nothing.

The FedEx technology story really is quite amazing and a great reminder that many of the real innovations in technology, and the differential competitive advantage that can be derived from them, usually starts from a blank sheet of paper, and almost never can be found on any vendor's shelf.

Email Chains and The Price is Right $1 Bid Strategy

I bid one dollar, Bob.

Email threads with more than three people Cc'ed remind me of the classic game show, The Price is Right.

No matter the subject, the email thread starts more or less in the same way. The writer poses a question, asks for feedback on the matter in question, and sits back and waits for responses. And the responses she gets are usually pretty predictable.

An Alpha dog type on the copy list chimes in immediately with their opinion. Sort of a strike first and strike quick kind of mentality that they hope frames the discussion. They want their opinion or position to be the default simply by virtue of being the first one that is revealed. This strategy can be successful - they have staked a claim to the high ground and need to be pushed off by anyone who responds after them.

Next, someone, let's call them Beta dog,  will either (gently) question Alpha dog or offer an alternative approach to try and take or re-take some territory and mindshare. 'What about this way?' they will ask. Alpha dog will immediately respond, (possibly with a 'Sent from iPhone' footer), re-stating their position and making sure that no one else gets a 'I agree with Beta dog' in the mix before they remind everyone they are running this conversation.

Then as the thread progresses, and depending on how many folks were included on the original message, you will get a few 'I agree with Alpha or Beta' messages. These add almost nothing to the conversation, save for reminding us that the senders are indeed still alive, and despite the fact they have nothing to say about the discussion, they want to be sure to be included on future, similar discussions that they will also contribute nothing useful towards.

Almost every time I get pulled in to one of these mass email threads I like to lay back and wait. I want to see what Alpha dog says. I wait to see if anyone wants to step up and challenge. I like to observe if any of the players on the edges want to get into the mix. 

I want the last word after everyone has had a chance to state their case, reveal their intentions and interests and show their cards. I like to jump in then.

It's like being the last bidder on The Price is Right. That spot, if you could get there and not run out of time, was the prime position to be in. You held the cards. You had the knowledge of everyone else's position.

If everyone bid too low, you'd drop in with the 'Highest bid on the board plus $1' bid.

If you thought everyone was too high, you'd drop a classic 'I bid one dollar, Bob', and wait for your shot at the Showcase.

Both strategies give you a great chance to win. But you have to be patient. You have to bide your time to let everyone else show what they are thinking. 

And once they do, you can drop the $1 bid on everyone, and more often than not, win the game.

Your customers as characters

Most organizations exist to sell something - a physical product, or some type of service, or a combination of the two. They spend tremendous amounts of time, energy, and resources creating these product/service offerings, perfecting them as far as it is possible, offering them for sale, identifying the target consumers for these offerings, and finally investing varying amounts of additional time, energy, and resources attempting to convince these consumers to make a purchase.

Sometimes it goes really easily for the provider - the product is new, even revolutionary, or it solves a problem in such a new, elegant, and powerful way that the product seems to sell itself. Think the original iPod, or later, the iPad. Or the product has an embedded, loyal, and rabid fan base just waiting to get the latest or newest version of the product. Think a new installment in a successful movie or video game franchise like Star Wars or even Angry Birds.

But for most products or services on offer, the customer needs some convincing - they have time, flexibility, other competitors' options to consider - the 'sale' is certainly not assured, and the difference between winning and losing often comes down to which not (only) has the better product, but which one actually understands the customer's problem more deeply, and can speak more precisely and convincingly about how their solution can solve that specific problem.

I know that sounds really, really obvious and basic, but I think that all too often providers can lost sight of that simple truism - focused too much, and sometimes single-mindedly on the product or service itself, and not how that product or service would actually exist in the customer's environment. Adding one more feature to the product, tweaking some minor element of the service package, or poring endlessly on ad copy, website design, or the 'tone' of the company Twitter account. When the customer has lots of options and choices, these incremental additions or improvements probably do less to sway decision makers than the providers like to think. Once the 'essential' or expected capabilities or services are present, and in a mature market they usually are, the provider that can connect, almost on an emotional level with the customer has the best chance of winning.

How can providers get better at making that kind of connection, and focus more on solving a problem rather than delivering a product?

This piece, about home furnishing provider IKEA's strategic approach offers at least one suggestion:

Göran Carstedt, president of IKEA North America, summoned his top executives to a large meeting room to share his strategic plan. They arrived prepared for a flashy PowerPoint presentation complete with charts and graphs. Instead, Carstedt told them a story about a mother. He depicted a detailed scene of her and her husband getting two kids off to school in the morning. She gets up, makes coffee, wakes up the children, makes breakfast, and so on. Then he paused and moved to the heart of the matter: “Our strategic plan is to make that family’s life easier by providing them with convenient and affordable household items in an accessible location. Period.

Carstedt, in short, wanted IKEA to enter the scene, to populate it with IKEA-supplied usefulness that customers would appreciate having in their homes as they conducted their daily lives. He wanted his executives, in effect, to write IKEA into their customers’ story in a way that improved the story for the characters that populated it. Brilliant! As Carmen Nobel, senior editor at Harvard Business School Working Knowledge, notes, “IKEA has made very clear choices about who they will be and to whom they will matter, and why."

That, in a nutshell, sums up why people might be inclined to go with an IKEA table or dresser or bed, from among the literally hundreds of available options. Thinking more deeply about how their products interact and exist in the flow of their customer's lives allows IKEA to rise above a simple provider of easily substitutable products. Somehow, just by thinking of themselves as a fundamental an important element in a customer's home, they are freed to think more fully, and holistically about the products and how they will play a role in the customer's story.

A good lesson to take to heart I think, for providers of all kinds of products and services.

Happy Tuesday!

2012 Rewind: On Culture, Strategy, and Talent

Note: I am winding down the last, waning days of 2012 by re-running a few posts from this year that either I liked, were (reasonably) popular, or just didn't get a fair shake the first time around.  If that is not your sort of thing, then come back on January 2, 2013 when fresh and tasty content resumes. Thanks for reading in 2012!

First up, a post from February on Culture, Strategy, Talent and Rock, Paper, and Scissors.

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If Culture Eats Strategy, then what Eats Culture?

I still play Rock-Paper-Scissors.

For a simple game, it is incredibly nuanced and complex. Like all good games, there is no sure way to win, and no sure way to lose. Some day I hope to hone my skills to the point where I can compete for big bucks on the R-P-S circuit.

Why mention Rock-Paper-Scissors? Choose wisely

It came to mind from thinking about two things - one, another run around the park for the popular 'Culture Eats Strategy' meme, (ok, it is not really a meme, I just couldn't think of a better word. Sorry.). This line of thought posits that without the 'right' or 'good' or 'well managed' company culture, that it does not really matter much what the business strategies are, that decreased or lacking employee engagement levels caused by that poor culture will effectively short-circuit and lead to failure even the best, most intelligent strategies. It makes plenty of sense, is fairly hard to argue against, and tends to play to the part of us that simply likes to believe if we create great places to work, great experiences, and happy/engaged/satisfied employees that everything else might just fall into place.

But like the Rock-Paper-Scissors game, that is non-linear, and where any choice you make can potentially be trumped by another choice, is it possible that while Culture may eat Strategy, that there might be something out there that might eat Culture?

How about Talent?

A few days ago mega fast food franchise company Yum! Brands, (think, Pizza Hut, KFC, Taco Bell), announced its latest quarterly earnings, and one of the highlights was the company's strong growth and performance in China, with an expansion of locations and same-store sales up 21% on the quarter. On the quarterly earnings call, Yum! CEO David Novak was asked about the company's successes in the often difficult to crack Chinese market, and his explanation of the reasons behind this excellent performance curiously did not attribute it at least primarily to some kind of superior business strategy, or wonderful organizational culture. No, he talked about Talent. From the transcript of the earnings call:

I think our whole formula for success in China has been geared on great local management team with phenomenal local operating capability. And we've always had one rule, we never want to expand any further than or faster than our people capability.

But we're like the Procter and Gambles, the king of marketing talent in the United States. We see ourselves as the leader in operating talent in China. The second big thing on people capability is just our development operations. Our development team -- we have 700 people in our development team. And we have the best retail management base in China. This is a huge competitive advantage as we go forward. 

Let that sink in a minute. People capability. The leader in operating talent. The main reason Yum! is winning in China.

Later in the discussion Novak does talk about the importance of flagship locations, and arriving first to local markets, both clearly business strategy type decisions, but the overall emphasis and the main reason for success and ongoing competitive advantage is finding, developing, and pipelining great local managerial talent.

Talent. Not culture, not strategy, not some innovative marketing or social media outreach.

It is a very interesting take, and I'd recommend reading the full transcript of the earnings call, (come on, you have time, lay off Facebook for ten minutes).

What do you think - if culture eats strategy, could it be that talent eats them both?