Protecting what isn't damaged

It's World War II and your job is to help the military devise a strategy for reducing the shockingly high loss rate of planes in battle. Dozens and dozens of planes are being lost due to ground-based enemy anti-aircraft weapons, as well as in air combat.

And of the planes that do make it back to their air bases safely, most have received at least some damage, with many of the damaged planes requiring substantial repairs to make them air-worthy again.

You show up to the air base, and as you begin examining the damaged planes you make an interesting observation - most of the planes that made it back have sustained damage to the wings, fuselage, and fuel systems, but most do not exhibit signs of damage in the engines or front of the cockpits.

A bunch of shot-up planes but a fairly consistent of measurable and repeatable characteristic - damaged fuselages but not engines. Wings that have sustained hits but with clean and intact cockpits.

Your recommendation to the military brass to reduce the rate and number of lost planes?

Well it seems intuitive that better armor and protection on the parts that have sustained the most damage would be the best strategy. I mean, you have evidence all around you - blown apart wings, fuel systems, etc. These parts are obviously sustaining heavy damage in battle, and need shoring up.

Makes sense, right?

Except that it is almost completely wrong, and due to the research and conclusions made in WWII by Abraham Wald, the opposite of the best strategy.

Wald concluded that the Air Force shouldn't arm or add protection to the areas of the planes that sustained the most damage on the ones that came back. By virtue of the fact that they planes came back at all, those parts of the planes could sustain damage.

Wald's insight, that the holes from flak and bullets on the bombers that did return represented the areas where they were able to take damage led him to conclude that these patches were the weak spots that led to the loss of a plane if hit, and that they must be the parts to be reinforced. 

Wald's suggestion an recommendation seemed unconventional, but only if you could get past what you could 'see', a bunch of blown apart wings and fuselages; and think about what you couldn't see, the planes that crashed as a result of the damage they sustained.

The big lesson or takeaway from this tale?  As usual, probably not much of one, with the possible exception is that it serves as a compelling reminder not to always focus on the obvious, the apparent, and what seems like the easy explanation.

Note - some of Wald's notes on this research can be found here.

Forecast, Upside, Pipeline and Staying on Offense

I ended last week with a piece titled Playing Offense on Social Media, a story about how sometimes being aggressive, even snarky, but essentially leaning forward and playing offense in social media can be a good strategy for organizations, (and even individuals), that are active in social media and social networks.

To continue the 'offense' theme, I want to share another similar take, this one from the world of sales, (and even if you are not 'in' sales, let's face it, we are all selling something), titled 'Play Offense When Predicting Revenue', from the Feld Thoughts sales blog.  

In the piece, Brad Feld shares a simple way to change the way sales managers think about their sales pipeline, essentially instead of assigning a generic 'probable close rate' to every deal in the pipeline, e.g., 'We have 10 active deals, we think 75% will close this quarter', Feld recommends sales teams divide the pipeline into three buckets as follows:

Forecast - These are the deals we BELIEVE (in CAPS), will close this quarter. We are committed to them, and any deal in this group that does not close, will be subject to a detailed review and post-mortem

Upside - These are deals that MIGHT close this quarter. We are working them, but can't commit to a close this quarter.

Pipeline - These are deals that WILL NOT close this quarter, but are being worked. These should move into the Upside or Forecast buckets soon, or will fall out as lost opportunities.

According to Feld, the positioning of deals into these discrete categories, most particularly the 'committed' portion of the forecast bucket, creates more accountability in the organization, and provides a better mechanism for inderstanding the sales process, the customer decision cycle, and the skill and capability of the sales team.

Then the sales team and managers revisit this list each week. Sometimes deals  fall out of Forecast into Upside based on new information. Last week you thought there was a 100% it was going to close (forecast), now you no longer have certainty but there's still a chance. And, if there's no way it'll close this quarter, it should go in Pipeline.

This discrete planning helps allocation your efforts - most of your short term energy should be on Forecast deals, some of your short and some of your long term energy on Upside deals, and the balance of your long term energy on the Pipeline.

I kind of dig it, simple, keeps the team focused, and as we like to say around here, keeps you playing offense, not just sitting back and wiating for (hopefully) good things to happen.

Forecast, Upside, Pipeline - what other parts of your business could benefit from this simple breakdown?

Have a Great Weekend!

Operationally Competent, or How to Reserve a Seat at the Kid's Table

We all love Apple, right?

I mean what's not to love, (putting aside for the moment it's tricky and ongoing problems it the supply chain and workers that may or may not exhibit the tendency to hurl themslves from the roofs of factories at an alarming rate), they have redefined the smartphone market, created the tablet market, and converted legions of fans worldwide and morphed from 'the other guys' in computing, to a global and incredibly profitable industrial colossus.

Apple's 2nd quarter in 2012, one that was rated a 'miss' and a disappointment by many analysts just happened to offer up these kinds of figures:

Quarterly revenue - $39.2B

Quarterly net profit $11.6B

35 million iPhones sold

11.8 million iPads sold 

4 million Macs sold

That's some miss.

And with the latest iteration of the iPhone set to drop in September, Apple certainly figures to continue the insane sales and earnings momentum.

Just imagine how much they would earn if they cared about sales and profits.

What's that you say? Of course they care about sales and profits.  Well, take at look at this recent quote from Apple Senior Vice President of Industrial Design, Johnathan Ive:

"We are really pleased with our revenues but our goal isn't to make money. It sounds a little flippant, but it's the truth. Our goal and what makes us excited is to make great products. If we are successful people will like them and if we are operationally competent, we will make money," he said. 

Makes sense right, and is completely logical for a product company. Focus on making great products first, last, and at all times, and it is likely that financial success will follow. Not terribly profound either, until you did a little deeper into the piece, and find that little nugget that Ive, Apple's guru of design, imparts about the rest of the organization and the process, i.e., those parts of the company not involved in 'making great products'.

What does Ive and Apple feel they need out of those functions, (and in theory, people).

Operationally competent. Not wonderful. Not fantastic. Not 'best in class'. Just operationally competent. 

Don't screw it up for us product builders. Don't get in the way. And, by implication, don't ever forget which side of the table you sit on.

Sure, Apple is kind of an outlier. It's products continue to enjoy such love and popularity in the market that it would be kind of hard for the 'operationally competent' folks to rain on the parade. 

But, if you really think about it, not screwing up might be the extent of their potential contributions as well. 

It's always tough sitting on a General & Administrative Expense line, but it stings a little bit more when you see the differences between you, the G&A guy, and the real earners.

Builder of Great Products v. Operationally Competent.

Choose wisely.

More on the Talent-Strategy-Culture triangle

A few weeks ago I posted about the ongoing discussions on the relative importance of three distinct, but interrelated aspects of organizations (Talent/Strategy/Culture) that combine to define, set the direction, and ultimately determine the success or failure of the enterprise. In that piece, I proposed it might be that Talent, or perhaps worded differently, people capability, might actually trump both Culture and Strategy as being the primary determinant or most accurate predictor of ongoing success.Throw it to Jordan on the block

The theory, (it probably actually doesn't deserve to labelled a 'theory', perhaps 'notion' is a better term), is that without the raw talent, the right people with the right skills in place, that even the best company cultures can't progress from being 'fun' or 'happy' into truly successful, and also that the sharpest most on-point business strategies can't be executed.  Why I think I like this idea so much is due all the time I spend watching sports, specifically the NBA, where perhaps more so than many other team sports, sheer talent more often than not plays a disproportionate role in driving wins and championships.

In the NBA, teams that win titles almost always have one (or more), of the league's most talented players, the kinds of players that can essentially take over in close games, can rally the team by setting an example for effort and dedication, and help to make the other players around them better, by virtue of their sheer ability. Essentially to win in the NBA, you need superior talent. It doesn't mean you will win of course, (see Heat, Miami - 2011 NBA Finals), but without it, the best team spirit, (culture), and coaching, (strategy), will only take you as far as the talent can carry you.

While culture is critical, and strategy is essential, having the talent makes it all work, makes the culture rise to more than a 'oh look how cure, there's a foosball table in the break room', and elevates the strategy from just words on a PowerPoint or a tagline on a website.  

So how do you go about landing that essential, superstar talent you need? Dang, that's a problem.

Well, having a fantastic company culture helps. Great talent wants to be in a place that they feel will challenge them, where they sense a greater purpose, and can learn from and engage with great colleagues. And it really helps to actually be a successful company already, or to have a story, (a strategy even), that resonates and can be envisioned, and that great talent can see themselves as a part of. Yep, it is kind of hard to attract and retain great talent without a great culture and a winning strategy.

Which I think is the reason why all these Culture vs. Strategy vs. Talent type arguments persist, because no matter what position on the triangle you take you are right.

And also wrong.

Rock-Paper-Scissors.

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?

Have a great weekend!