Five Timeless Lessons From Bill Gates, Andy Grove, and Steve Jobs

THE STRATEGIC RULES OF THREE GIANTS

Bill Gates, Andy Grove and Steve Jobs have been the subjects of many books, and Gates and Grove have even written their own bestselling books. Strategy Rules, a new book coauthored by Harvard Business School professor David Yoffie and MIT Sloan School of Management professor Michael Cusumano, offers a new take on these three giants of entrepreneurship and technology by bringing them together into one how-to guide on strategy. According to Yoffie and Cusumano, the three men, although vastly different in personalities, followed the same five rules for strategy and execution:

  1. Look Forward, Reason Back. The first rule was to look forward into the future and then reason back to the actions required today. A vision of what the world could be was only the beginning for these three men, however. Perhaps even more important was the ability of all three to determine — in detail — what needed to happen immediately to turn vision into reality.
  2. Make Big Bets, Without Betting the Company. Gates, Grove and Jobs were bold leaders, but they were not reckless, write Yoffie and Cusumano. They knew how to time or diversify their big bets so that even huge strategic bets were not irreversible.
  3. Build Platforms AND Ecosystems. Another important rule, the authors write, was to build platforms and ecosystems, as opposed to pursuing a product strategy. Build Platforms AND Ecosystems. Most industries think in terms of products. Technology companies, however, succeed when they build industry platforms, not stand-alone products. Bill Gates would not be among the world’s richest men and Microsoft would not be the dominant company it became if Gates had sold his product — the DOS operating system — to the client that had requested it: IBM. Instead, in exchange for a much lower payment from IBM, Gates kept the right to license the system to other companies. The rest is history.
  4. Exploit Leverage AND Power. All three men, according to the authors, could play Judo and Sumo. Judo requires using the opponent’s strength. Gates, Grove and Jobs could each find a way to turn the strengths of their opponents into weaknesses. One notable example was Jobs’ successful negotiation with the music companies for a license to their music. Paying little attention to the tiny company (only 2 percent market share in its own industry!), the music companies negotiated an agreement highly favorable to Apple and which would be the foundation of the iTunes revolution. At the same time, the three did not hesitate to freely use their power, once they had it, to dominate their competitors, just as a Sumo wrestler uses his pure strength to dominate his opponent.
  5. Shape the Company Around Your Personal Anchor. Personally, the three men had vastly different strengths and interests. Gates was the software coding genius, Grove a precise engineer and Jobs a wizard at design. The companies they built reflected these strengths.

At their peaks, Microsoft, Apple and Intel were collectively worth $1.5 trillion. More than just business behemoths, however, these three companies and their founders changed the world, and our lives, in dramatic ways. Whether an entrepreneur dreaming of creating the next life-changing company or the manager of a multi-billion global company, any business leader should explore and adapt the lessons offered by the business practices of these three extraordinary business leaders.

Tips From the Top

In September of 2004 Michael Feuer began writing a column for Smart Business magazine called Tips From the Top. Fred Koury, CEO of Smart Business, had invited Feuer to write the column after reading Feuer’s employee newsletter which he sent out to the staff at OfficeMax during his time as CEO of the company.

Feuer’s column includes his observations and lessons learned as the Founder and CEO of OfficeMax and covers a wide range of subjects over 10 years and more than 125 columns written. Recently, Feuer and Smart Business editor Dustin Klein collected these columns together as an e-book by the same name. The book is organized by subject and includes gems of wisdom on:

  • Managing People
  • Communication
  • Overcoming Challenges
  • Building Value
  • Innovation
  • Competition
  • Leadership
  • Customer Service
  • Evaluating Opportunities
  • Negotiating

We have invited Michael Feuer to join us on May 21st at our Soundview Live webinar entitled, of course, Tips From the Top. Join us to hear what Feuer has learned over the years as an entrepreneur, CEO, and through his more recent experiences with Max-Ventures and Max-Wellness.

The Power of Strategic Sacrifice in a Complex World

dolessbetter

OPTING TO CUT THE COMPANY DOWN TO SAVE IT

John Bell begins his book Do Less Better with the scenario of a troubled company — a regional player in 10 different categories, suffering through four consecutive years of losses, carrying higher than average payroll and inventory costs (the latter exacerbated by more than 1,000 SKUs), and starting to lose the support of impatient shareholders tired of pouring money into a losing cause.

What’s the next steps for a new CEO hired to turn around this sinking ship? If you’re like most new CEOs, Bell writes, you will do exactly what your predecessors tried to do: generate more revenues and cut costs. The difference is that you will do these things better. “You are kidding yourself,” Bell writes. “Strategically, doing more of the same… better is a pathway to incremental improvement, at best. Incremental improvement is never enough to fix strategically weak companies like the one I have described.”

The Greater Sacrifice

Instead of trying to do the same better, Bell believes a much more potent strategy is to make the tough decisions and cut the company down to a more efficient and focused size. Many companies are straining under the weight of their complexity and dispersion of resources, he writes.

He should know. The scenario above was real, and it was Bell who was tasked with saving the company.

Avoiding the incremental, top line-driven strategies described above, Bell and his team embarked instead on a no-holds-barred campaign to reduce activities and costs significantly. They did this by first eliminating the six poorest-performing product lines (out of 10). Even that, however, was not enough. A “greater sacrifice” was needed. “We didn’t want to do it,” Bell writes, “but we would have to divest two of the remaining sacred cows, two product lines with significant sales revenue and growth potential.”

The result was a company that went from 10 to two categories, from 1,000 to 35 SKUs, from more than 500 to 200 employees, and from $75 to $50 million in sales. However, the newly trimmed company was now focused almost entirely on its Nabob Coffee brand. Within three years, the company reached $100 million in sales (95 percent in coffee, 5 percent in tea) and would eventually boast 13 straight years of earnings growth before being sold to Kraft.

Cutting 300 employees and, probably more frightening for most CEOs, reducing the top line by $25 million was no small sacrifice. But as with gardens, courageous pruning, Bell argues, is what leads to growth. Many companies are hurting or, at best, stagnating because their leaders are afraid to, in the words of Bell, “kill their darlings.”

Bell offers one of his former clients, the Campbell Soup Company, as an example of a company that suffers from the refusal to cut loose a traditional business activity. Most consumers today are in the market for ready-made soup. There is not much call for condensed soup, although it has always been a staple of the company. Bell believed Campbell could break out of its stagnation, as other soup companies continue to grow around it, by stopping condensed soup and starting a brand new activity: soup bistros. There is a great market for gourmet soup cafés, inspired somewhat by the Starbucks chain of gourmet coffee shops, and Campbell would be the natural choice to start such a chain. The response from the Campbell Soup executive who listened to Bell’s idea was swift: “We aren’t in the restaurant business. Our mandate is to figure out how to bolster sales of condensed soup.”

For Bell, the first step to a new strategy is a new mindset from leaders, a mindset based on the courage to go small. It’s counterintuitive and may hurt in the short term, but for leaders considering such a move, reading Do Less Better is a great place to start.

How Leaders Achieve Maximum Results in Minimum Time

Laura Stack makes an amazing claim in her book Execution IS the Strategy. She states that strategy must emerge out of execution, and she provides four premises for this approach.

  1.  Interdependency – strategy and tactics are part of the same over-arching process, with an inherent relationship.
  2. Fluidity – strategy must be more flexible in its tactics now than in the past.
  3. Speed – strategy must be executed more quickly than ever before to be effective.
  4. Validity – strategy must still be appropriate and strong, or none of the first three premises matters.

Laura then provide the 4 keys to efficient strategic execution, which she calls the L-E-A-D Formula:

Leverage – do you have the right people in place to achieve your strategic priorities?

Environment – do you have the organizational atmosphere, practices, and culture that will allow employees to easily support your strategic priorities?

Alignment – do your team members’ daily activities move them toward the accomplishment of the organization’s ultimate goals?

Drive – are your organization’s leaders, teams, and employees agile enough to move quickly once the first three pieces of this list are in place?

To learn more about how execution and strategy interact, and how to apply the L-E-A-D formula to your organization, join us on May 30th for our Soundview Live webinar How Leaders Achieve Maximum Results in Minimum Time with Laura Stack. Bring your questions and fill the room with your team members.

Navigating the ‘Great Deflation’

THE DEMOGRAPHIC CLIFF 

How to Survive and Prosper During the Great Deflation of 2014-2019

Economist Harry Dent was almost a lone voice in the wilderness as he predicted that by the 1990s, Japan’s economy would be in decline rather than conquering the world. Not that Dent is necessarily a doomsayer. He also predicted long before others the burst of U.S. consumer spending from the mid-1980s to the mid-2000s, when most economists saw the U.S. economy in decline.

The secret to Dent’s success is his core belief in the predictability of people’s spending habits as they age. Economists know what people will be buying at age 25, 50 and 75… and 90. This may seem blindingly obvious, and yet it was this simple demographic fact that drove the contrarian burst of consumer spending in the 1990s and 2000s that Dent had predicted. He simply overlaid his data that showed consumer spending peaking at age 46 (expensive house, dependent children with college tuitions) with population statistics, to realize that spending would start rising around 1983 and peak in 2007-2008.

The ‘Great Deflation’

As far as what demographics tell us for the future, one needs to look no further than the title of Dent’s latest book, The Demographic Cliff. The world economy is about to go off a cliff and in fact has already started. Between 2014 and 2019, the bubbles will be bursting around the world, and there will be deflation as never before seen, Dent writes. Again, the core reason is simple: the peaks of boomer generation spending have crested, and it’s downhill from here until 2024 to 2026.

This “Great Deflation” comes as no surprise for Dent, who believes that global economic cycles rotate through four roughly 20-year seasons (or more specifically two 40-year boom and bust cycles). Basing his description on the work of early 20th-century Russian economist Nikolai Kondratieff, Dent describes the four seasons as follows: “a spring boom with mildly rising inflation; a summer recession with inflation rising to a longer-term peak with major wars; a fall boom with falling inflation, powerful new technologies moving into the mainstream, and a credit bubble that leads to high speculation and financial bubbles; and then finally the winter season with the bursting of the bubbles, debt deleveraging, and depression.” For Kondratieff, the seasons occurred in 60-year cycles, but longer life spans and the shift to a mass-consumption consumer society has stretched the cycle to 80 years, Dent writes. The last spring began in 1942 with the growth in spending by what Dent calls the Bob Hope generation. Which means that winter has begun.

The Demographic Cliff, however, is not intended to be just a sky-is-falling book; its subtitle is “How to Survive and Prosper during the Great Deflation.” The second half of the book is filled with how to respond to the Great Deflation. For example, finishing the book in September 2013, Dent writes that his analysis foresees a major stock market correction after the first quarter of 2014. “So you should be looking to sell stocks soon after this book comes out in early January,” Dent writes. For real estate, he suggests that baby boomers will want to buy vacation homes in 2016 or after. Dent follows up his in-depth advice for individuals with equally in-depth advice for businesses and governments — governments that must give up their monetary stimulus “drug” habit.

The Demographic Cliff is not a quick read, but it may be the best investment of time that one could make — before it’s too late. As Dent writes, “If you see the change of season coming, it’s no problem to adapt. If you don’t, you’re in trouble.”

Work, Progress, and Prosperity in a Time of Brilliant Technologies

THE SECOND MACHINE AGE A New Era Going Full Steam

For most of us, the Industrial Age refers to the late 19th-century explosion of large companies with large factories that fundamentally changed the way we live and work. Yet, as authors Erik Brynjolfsson and Andrew McAfee explain in the opening pages of The Second Machine Age, their brilliant study of digital technologies, the Industrial Age was actually launched in 1775 — an era that for most Americans evokes colonial leaders with white wigs and tri-corned hats, not dirty factories belching dark smoke into the skies and thousands of smudge-faced children working dawn to dusk. What happened in 1775, of course, was James Watt’s invention (or, more accurately, the refinement) of the steam engine. The full impact of Watt’s steam engine on our society would not be felt until much later.

For the authors, humanity has reached a similar “inflection point” for the computer age. Companies have been buying computers for more than 50 years. Time declared the personal computer the “Machine of the Year” in 1982. But it is now, in the second decade of the 21st century, that “The full force of these technologies has recently been achieved,” the authors explain. “By ‘full force,’ we mean simply that the key building blocks are already in place for digital technologies to be as important and transformational to society and the economy as the steam engine.”

What Computers Can Do and Can’t Do

In a wide-ranging discussion of the joys and challenges of this “second machine age” — when, in the words of the authors, “computers and other digital advances are doing for mental power… what the steam engine and its descendants did for muscle power” — the authors give numerous examples of the opportunities created by digitization.

A GPS-based app called Waze is one example. A standard GPS will give you the standard route to your office based on its downloaded maps. However, Waze sends back to the company’s servers information transmitted by sensors on the smart phones of its members already on the road; this information can then relay to the person about to leave for work that, for example, an accident has closed down the main road on his usual route. Waze is one illustration of how technological capabilities only now available can truly make life better.

At the same time, the authors dismiss the notion that computers will be ruling the world. In an eloquent chapter called “Learning to Race With Machines,” the authors argue that ideation is out of the reach of computers. “Scientists come up with new hypotheses,” the authors write. “Chefs add a new dish to the menu. Engineers on a factory floor figure out why a machine is no longer working properly. Steve Jobs and his colleagues at Apple figure out what kind of tablet computer we actually want. Many of these activities are supported and accelerated by computers, but none are driven by them.”

The Good and the Bad

The Second Machine Age is a celebration of the “bounty” that the exponential digitization capacity offers. However, Brynjolfsson and McAfee are also not afraid to point out the potential downsides to digitization, notably what the authors term “spread,” which is the “ever-bigger differences among people in economic success — in wealth, income, mobility and other important measures.”

But the Industrial Revolution also brought serious, unacceptable consequences — widespread pollution and the scourge of child labor, to name just two, that a combination of democratic government and technological progress were able to overcome. The authors are convinced that the same combination of technology and the right policies can effectuate a similar result: a better life for all of us.

Know Your Talent Better Than You Know Your Customers

THE DECODED COMPANY

Using Big Data in Human Resources

What if companies knew as much about their employees as they knew about their customers? That is the provocative question at the heart of The Decoded Company — a book written by a group of entrepreneurs connected to a technology-driven health care marketing agency called Klick Health. Klick Health CEO Leerom Segal and his co-authors are great believers in the potential of big data — the myriad of information that is quietly and continuously collected from you as you go about your business as a consumer. Surprisingly, while companies have near-unanimously embraced the use of big data technology for their customers, very few attempt to find out more about their employees.

Three Principles

Using their own experiences as leaders of a fast-growing technology company, the authors describe in their book three fundamental principles for decoding your organization — that is, truly understanding in real time the individual skills, motivations and successes of employees, recognizing the challenges they face, and supporting each individual or groups of individuals as needed.

  • Principle 1: Technology as a Coach and a Trainer. According to the authors, most organizations use technology as a referee rather than as a coach. Technology allows companies to monitor what employees are doing and to whistle the fouls when they fall behind or fail. In decoded companies, technology is a      trainer and coach — preparing employees for the game (to continue the metaphor), then watching from the sidelines and jumping in to coach as      needed. One coaching idea proposed by the authors is the hiring of a “concierge” — someone who might use some of the traditional HR tools, such as career counseling or performance reviews, but whose one and only goal is to design a customized solution for each employee that helps them perform and grow. Technology as a trainer, the authors explain, means using “data and systems to watch blind spots, identify teachable moments, and proactively intervene with just-in-time training.”

 

  • Principle 2: Informed Intuition. The second principle is that technology does not replace but rather augments the intuition of leaders born from their      experience and knowledge, thus allowing them to make better decisions. The      capture of ambient data — ongoing information about what employees are doing or saying — is vital. (One example of the creation of ambient data is your Facebook activity. Facebook tracks with whom you communicate on their site, how often, from where and through which method, such as posting or chat message. This ambient data determines which Facebook friends end up on your newsfeed.) After analyzing a combination of ambient data and selected self-reported data, such as performance self-evaluations or monthly results, managers in decoded companies use their intuition to seek solutions to employee challenges. Bank of America discovered that the performance of call-center employees improved based on whom they talked to  during overlapping lunches. The bank thus decided to create more opportunities for employee conversations by changing a policy that had restricted overlapping breaks.

 

  • Principle 3: Engineered Ecosystems. The third principle is to use data to set up the culture and the environment that enables employees to work at their highest levels. Engineered ecosystems are both data-driven and talent-centric. For example, the authors describe how Google — which, as the company that tested 41 shades of blue for one of its toolbars, is notoriously data-driven — launched a major initiative to identify the most important traits for its managers. The results seemed at first less than earth-shattering: The eight identified traits included not micromanaging, expressing interest in employees’ success, having a vision and a strategy, and having the technical skills to advise the team. The data, however, not only identified the traits but also ranked their importance, and this is where Google’s leaders uncovered a truth about its culture that was contrary to everything they believed: technical expertise, once thought to be the keystone of a great Google manager, is the least important trait that a manager can have. Everything else comes first.

While Segal and his co-authors use Google and numerous other companies in a variety of industries as examples, it is their own success at Klick Healthcare that make The Decoded Company an authoritative, balanced and real-world exploration of the human resources potential of big data.

Keeping Business Simple

Checklists are a modest way to reduce failure, ensure consistency, and safeguard comprehensiveness. We use checklists to do the grocery shopping or to plan a weekend project. What if there was a checklist for running a successful business?

Jim Kerr provides an “executive checklist” for those dealing with the extreme complexities and challenges of the 21st century business world.

  1. Establish Leadership – the foundation for change.
  2. Build Trust – a vital component for enduring achievement.
  3. Strategy Setting – translating vision into action.
  4. Engage Staff – the way to gain support and accelerate success.
  5. Manage Work through Projects – a means to strategic alignment.
  6. Renovate the Business – a way to become “of choice.”
  7. Align Technology – it’s at the core of all we do.
  8. Transform Staff – the people part of enterprise-wide change.
  9. Renew Communications Practices – transparency improves performance.
  10. Reimagine the Organization – the expressway to the future.

To learn more about this checklist, how it works and how to use it, join us for our Soundview Live webinar with Jim Kerr on April 10th, entitled A Guide for Setting Direction & Managing Change. Put this eventon your must-do checklist.

Lessons from Leading CEOs on How to Create a Culture of Innovation

QUICK AND NIMBLE

Out of the Mouths of CEOs

What are the core elements of an effective culture that encourages and enables innovation, and how can leaders create such a culture? These two questions are at the heart of Quick and Nimble, a new book from New York Times feature writer Adam Bryant. Bryant replicates the process he used for his previous book on leadership, The Corner Office, by interviewing more than 200 CEOs, then gathering their insights into focused chapters on key topics.

Leading Innovation

In the first part of Quick and Nimble, Bryant outlines the basic elements identified by the CEOs he interviewed as essential to an effective innovation culture. A sample of these elements include:

  • A simple plan. Complex objectives and goals won’t be understood and will therefore fail to inspire and focus employees.
  • Values. Behavior in the organization must be driven by clearly communicated values.
  • Respect. Interactions between all leaders, managers and employees must be built on unwavering respect.
  • Team focus. All members of the organization must be ready to do their part for the team.
  • Frank feedback. Misunderstandings and disagreements are unavoidable, but they need to be resolved through honest and open “adult conversations.”

In the second part of the book, Bryant shifts to guidelines for leaders who want to build on the cultural foundation of their organizations and foster innovation. These guidelines include the importance of:

  • Constant communication to keep employees focused on priorities.
  • Training managers on key managerial skills, behaviors and habits.
  • Offering learning opportunities to high-performing employees by moving them around the organization.
  • Surfacing problems that might be hiding under the surface.
  • Knocking down silos.

The Wisdom (and Wit) of CEOs

At the beginning of the book, Bryant writes that he structured each chapter “much like a dinner party conversation, with me as the host, guiding the conversation with a large group of CEOs.” The metaphor is apt, as the reader can imagine a circle of CEOs gathered around a dinner table, adding their insights and stories to the discussion at hand. The chapter on having values as the guiding “rules of the road” is a case in point.

Lars Björk, CEO of data software firm QlikTech, shares the values that drive his fast-growing company: challenge (the conventional); move fast; be open and straightforward; teamwork for results; and take responsibility. Robert LoCascio, CEO of software company LivePerson, recounts the challenge of changing a culture that had become hierarchical and bureaucratic. The major changes he introduced — beginning with asking leaders to move out of offices — did not go over easily: one-hundred twenty employees and three-quarters of the management left the company, either voluntarily or not.

To reinforce the values through stories (one of the most effective reinforcement techniques), City National Bank CEO Russell Goldsmith describes how he organizes a quarterly American Idol-inspired “Story Idol” for employees (Goldsmith, it should be said, is a former movie industry executive). Other CEOs share the clever expressions that summarize the culture, such as LinkedIn’s “next play,” which echoes the phrase Duke basketball coach Mike Krzyzewski yells to his players at the end of any play, offensive or defensive. Like Krzyzewski, LinkedIn CEO Jeff Weiner doesn’t want his team celebrating what they’ve just accomplished or lamenting what they failed to do: Just move on to the “next play.”

For health care supply company Medline Industries CEO Andy Mills, a favorite expression is “kissing frogs.” Mills often tells employees that “they have to kiss a lot of frogs,” which means that they should not be afraid to take long shots that might not pan out. After, the frog might just be a prince.

Filled with the wisdom — and wit — of 200 successful practitioners and well organized into focused topics of discussion, Quick and Nimble is an insightful, comprehensive and entertaining overview of the role of culture in building an innovative company.

Building Brand Loyalty

People everywhere describe their relationships with brands of all kinds in deeply personal ways—we hate our banks, love our smartphones, and think the cable company is out to get us. What’s actually going on in our brains when we make these judgments?

Through their original research, customer loyalty expert Chris Malone and social psychologist Susan Fiske found that we relate to companies, brands, and even inanimate products in the same way that we naturally perceive, judge, and behave toward one another.

Early humans developed a kind of genius for making two specific kinds of quick judgments: What are the intentions of other people toward me? And how capable are they of carrying out those intentions? Social psychologists call these two categories of perception warmth and competence, and they drive most of our emotions and behavior toward other people—and in today’s modern world, toward businesses too. As a result, we become devoted to certain companies, brands, even products, but we also have high expectations for loyalty from them in return.

We’ve invited Chris Malone to join us for our Soundview Live webinar on March 11th. Join us for How We Relate to People, Products & Companies to learn:

•             How the social psychology concepts of “warmth” and “competence” apply to the way we perceive and relate to companies and brands.

•             From in-depth analyses of companies such as Hershey’s, Domino’s, Lululemon, Zappos, Amazon, Chobani, Sprint, and more.

•             How and why we make the choices we do.

•             What it takes for companies and brands to earn and keep our loyalty in the digital age.

Make sure to bring your questions for Chris, to post during the webinar for him to answer, and invite the rest of your department or team to join you.