Managing Up

I gave a short talk a few weeks ago on some of my thoughts on being effective at managing up.

 Managing up is critical.  Bosses want to be assured that you care, that you're getting results and that you're contributing to moving the business forward.  With that in mind, here are the three tips I gave on managing up:

1.  Have a Point of View.  That is, have an opinion, hopefully a strong one, on how you should grow your business, both for your group and the company as as whole.  You may not get your way, that's life, but you should always have a point of view.  Be interested and passionate and opinionated.  Don't be annoying and try to push all of your ideas through but have an opinion and advocate for it.

2.  Drip Your Insights.  I like to say that "insights are just as important as results".  Obviously results are what everyone wants and they should be the primary tool for measuring success or failure.  But when you get results, you should be able to tell your boss exactly how you did it.  You should have insights that are repeatable and scalable.  Of course, the opposite is also true.  When you're not getting results, you should be able to tell your boss exactly why.  It's ok to not get results in the short term if you're showing that you're making massive gains and getting smarter every day and closer to success.  As you gain these insights, be sure to "drip" them to your team, your clients, your boss.  Send emails, share them in meetings, write them on a whiteboard.  Sharing your development and how you're getting smarter is critical to managing up.  Show that you're obsessing over figuring out how to hit your goals.  And that you're getting smarter everyday -- when you're getting results and when you're not.

3.  Build Trust.  This one is the hardest and I'm reluctant to give too much advice on how to build trust.  People do it in their own way and you should build trust with your boss in a way that works for you.  But one thing that's clear is that you're never going to be the lynchpin in your organization if you aren't trusted.  One way I've built trust in the past is to effectively walk the fine line between being a complainer and being a trusted advisor that speaks up when it's needed.  In short, you have to learn to not sweat the small stuff.  Your boss has a lot to worry about -- likely a lot more than you.  Taking problems on yourself and not complaining upstream makes your boss's life easier.  But, when a problem is important enough, raising it up the ladder is also critical.  When you've proven you can balance what's important and what's not your boss will be inclined to shift the more important projects in your direction.

The Business Model Test

A simple way to think about the viability of a new business idea is to use the logic test and the economic test:

  1. The Logic Test: does the business make sense?  Is it easy to explain the value it will provide and how it will make money?  You can't understand its viability if you can't understand these things.
  2. The Economic Test: once you've established that the business idea makes sense, now consider whether it can work profitably.  Space travel is a good example of a business that passes the Logic Test but not the Economic Test.  Certainly there would be a lot of people that would like to travel to space for the weekend, but with the current technology it simply can't be done profitably.  Kozmo.com -- the famous dot-com bust -- that promised free, one-hour delivery of things like CDs, DVDs, candy and magazines is another example.  It's just not possible to deliver a pack of gum to someone within an hour at a profit.

Once these two tests have been passed, there are of course dozens of other factors to consider.  But I've found this framework to be helpful in discussing a new idea's viability.  

Bottom's Up Management

Joel Spolsky had a great post the other day laying out his unique approach to management at startups.  I’d recommend reading the entire post when you get a chance but I’ve re-blogged some of the key excerpts below.

Most TV management is of the “command and control” variety. The CEO makes a decision, and tells his lieutenants. They convey this important decision to the teams, who execute on the CEO’s decision. It’s top-down management. All authority and power and decisions flow from the top. How could it work any other way?

This system probably works very well when you are trying to organize a team of manual laborers with interchangeable skills to sweep up the ticker tape in the street after the Giants parade BECAUSE THE GIANTS WON THE SUPER BOWL IF YOU DID NOT NOTICE.

The “management team” isn’t the “decision making” team. It’s a support function. You may want to call them administration instead of management, which will keep them from getting too big for their britches.

Administrators aren’t supposed to make the hard decisions. They don’t know enough. All those super genius computer scientists that you had to recruit from MIT at great expense are supposed to make the hard decisions. 

Think about how a university department organizes itself. There are professors at various ranks, who pretty much just do whatever the heck they want. Then there’s a department chairperson who, more often than not, got suckered into the role. The chairperson of the department might call meetings and adjudicate who teaches what class, but she certainly doesn’t tell the other professors what research to do, or when to hold office hours, or what to write or think.

And yes, you’re right, Steve Jobs didn’t manage this way. He was a dictatorial, autocratic asshole who ruled by fiat and fear. Maybe he made great products this way. But you? You are not Steve Jobs. You are not better at design than everyone in your company. You are not better at programming than every engineer in your company. You are not better at sales than every salesperson in the company.

A couple thoughts:

This is a great post.  I love the idea of flipping management on its head in a knowledge organization.  Your most junior employees are highly paid and extremely intelligent.  They should have lots of authority over how they do their jobs.  But often what works in theory doesn't work in practice.  Employees need a strong vision from the top and often need to be motivated to push through the challenges that inevitably come up.  While I agree that "management" can come from the bottom up, strong "leadership" from the top remains critical.

One final note:  I see Joel's point on this, but the analogy of a university isn't a good one.  Most universities are extremely inefficient, particularly compared to a tech startup.  I wrote a post a while back on the inefficiencies of the university system.

Success at Work

On Friday I was asked to walk a small team through some of my thoughts on what makes individuals successful at work.  After the session the team was asked to send me their key takeaways.  There were some interesting trends in what they sent back.  I'm posting their takeaways here – in their own words.

  • real failure is highly valuable
  • strive to be the lynchpin
  • make boss’s job easier
  • always bring energy and positivity
  • insights are just as valuable as results
  • consistent habits are important (going to the gym at the same time everyday)
  • always add insight, value, be interesting
  • biggest takeaway – the importance of becoming a “lynchpin” for the company, and for your boss.
  • results and insights are equally important; always search for insights on how to improve next time, even if the results aren’t really there this time
  • in conversation, try to make the majority of it insights; always aim to add helpful/interesting things to increase value
  • simplify the goal; break it down into more achievable parts
  • 3 things that ensure added value: be good at what you’re doing, like what you’re doing, and make it worth paying for
  • become the lynchpin – work towards becoming indispensable to my boss
  • reflect on the work that I have done and think about whether or not someone/something else can do the same or better at a lower cost
  • simplify the goal – this will allow me to focus and create a clear path towards actually achieving it
  • communicate with insights not empty words – always think about how I can add value to a conversation rather than just fill in space
  • key to career growth isn’t necessarily being the smartest/ most intelligent person. Core values such as Trust, Collaboration, and willingness to work towards manager’s goals are some of the key attributes that help in career growth.
  • always remind yourself to be on the learning curve – to better yourself + add value to the company
  • always ask yourself – Why am I best suited to do the job that I am supposed to do? What can I do to better myself in order to do that job better?  If you don’t know the answer to both these questions your career path is probably not on the right track

Some Thoughts on the Super Bowl

Being from the Boston area, I'm a pretty big Patriots fan.  So watching last night's game was miserable.  Though, being objective, I have to admit it was a great game to watch.

A few things came to mind while I was trying -- unsuccessfully -- to get some sleep after the game.

Rob Gronkowski's ankle injury had a huge impact.  When a big tight end can't make quick lateral cuts, it's almost impossible for him to be an effective receiver.  Brady's interception was clear evidence that Gronkowski's ankle had an impact.  I don't recall ever seeing a linebacker defending a receiver that far down the field.  The ankle injury allowed a slower defender to cover him and freed up the corners and safeties to cover the Patriots’ receivers.

On the last drive of the second quarter, Brady ate up the Giant defense with his typical quick, short passes.  He was 10 for 10 on the 98 yard drive, virtually neutralizing the Giants' pass rush.  The Giants made a big adjustment at the beginning of the second half by rushing only 3 linemen; putting one man on Gronkowski and a tight zone on the rest of the receivers.  Brady had plenty of time to throw but nobody was open.  The Patriots couldn't adjust to the new scheme quickly enough and as a result could only put up 7 points in the second half.

Making quick adjustments is critical in business and sports.  The game you’re playing in today is going to be much, much different in six months or a year.  

Check out James Surowiecki’s New Yorker column this week on RIM and the fall of the BlackBerry; a company that, much like the Patriots on Sunday, couldn’t adjust until it was too late.

My Favorite Interview Question

This changes over time, but here’s my favorite question to ask a job candidate:

How do you see yourself adding value to a company?  That is, when you get a job, a company is going to invest in you and pay you (hopefully a lot), so, ideally, what would you like to be doing on a weekly, monthly, quarterly basis to ensure a high return on that investment? 

Typically, you can learn several things from their answer:

  1. What they like to do
  2. What they’re passionate about
  3. What they’re good at
  4. What differentiates them
  5. How they see themselves fitting into an organization 

Of course I would never qualify or disqualify a candidate based on the answer to one question, but the answer to this question usually tells me a lot.

The Razorblade Strategy

Yesterday I wrote about how I'm long on Amazon. One of the reasons is that they’re in the process of aggressively implementing the Razorblade Strategy.  The Razorblade Strategy is when one item is sold at a low price in order to increase sales of a complimentary good.  It was made famous by Gillette -- they sell their razors for next to nothing and the blades at a high premium.  This creates a profitable recurring revenue stream, and recurring revenue is generally better than one-time revenue.  Printer companies also do this very well.  Printers cost almost nothing and Hewlett-Packard, as an example, makes nearly all of its profits on the sale of the toner (again, recurring revenue).  I remember reading that one ounce of HP print toner costs more than one ounce of Dom Perignon...

The price of Amazon's Kindle has nosedived over the last several months -- you can get one for $79.  Rumor is that they’re even losing money on manufacturing the devices.  They're hoping that by lowering the price more people will buy a Kindle and then buy the profitable digital media to put on the device.  This is a perfect example of the Razorblade Strategy at work and exactly why I believe they’ll compete well against Apple in the digital media space.

Typically, the major risk involved with the Razorblade Strategy is when the price of the complimentary good falls.  But with Amazon's scale and dominance in media there's relatively little risk for them there.

Amazon should race as fast as they can to get a Kindle in the hands of every consumer.  Good execution of the Razorblade Strategy, and a price of $79 versus Apple’s cheapest iPad at $499, is a critical and promising step in that direction.

Employee Promotions & The Peter Principle

Recently I made the following comment on a blog post:

I recall watching an interview with Bill Gates.  The interviewer asked him what was the biggest mistake he made when he was building Microsoft. Because I admire Bill Gates enormously, I was on the edge of my seat to hear his answer...

His answer: the biggest mistake he made was assuming that their best engineers would also make good managers.

Of course it's intuitive to promote the best tactical performers but given how often this fails I'm amazed at how companies -- big and small -- continue to use this approach.

A few days later, I came across a theory known as the "Peter Principle":

The "Peter Principle" states that in a hierarchy every employee tends to rise to his or her level of incompetence, meaning that employees tend to be promoted until they reach a position at which they cannot work competently.

It's easy to see how management allows this to happen in their organizations.  If someone performs well it's only logical that they go onto the next step in their career path.  But of course it's extremely dangerous for companies to operate with a bunch of employees that can't do their job well, much less competently.

The solution to this, I believe, it to shake up the old fashioned "career path culture" and build a culture that values the "do'er" and not the manager.  To promote this type of culture, companies should setup formal incentive systems that reward the employee without promoting them into management.  Incentives can include:

  • Salary, bonus, equity increases
  • Allow them to work on the coolest projects or largest accounts
  • Allow them to work on exploratory or strategic projects
  • Let them work side by side with senior management and/or the CEO
  • Give them the best mentorship and training

Most cultures, especially in large companies, value the managers -- employees want to be "in management".  It's critical to setup values and formal systems that disrupt this type of culture to avoid mediocrity and the dangers of the Peter Principle.

Managing Email

I posted my approach to managing email in the comments of A VC the other day, thought I'd post it here as well.  I'd love to make the switch over to Gmail at some point, but right now it doesn't jibe well with my approach to emailing.

  • using Outlook
  • setup as many junk mail filters as possible so most email doesn't make it to my inbox in the first place
  • go through my inbox every night and either delete, respond and delete or file it in a folder or leave it in the inbox to do later (often I don't get to every night but I do it at least a few times a week)
  • this leaves me with an inbox full of important emails that I need to address at some point
  • many of my colleagues keep thousands of emails in their inbox (important and unimportant), I don't know how people can manage it this way
  • my strategy centers around good spam management and the "delete" button, I spend a lot of time deleting
  • Gmail doesn't make sorting or deleting emails easy, you either have to check a small box with your mouse or use an awkward keyboard shortcut that is slow and unreliable
  • in Outlook it's easy to sort emails by sender or subject line and it's easy select multiple emails to delete, and you can just hit your keyboard's "delete" button and they're gone 

Emailing is a pain but it's the best system we have, for now.  I've read that several companies have committed to phasing it out over the next few years.  That should drive some much needed innovation in the way we communicate at work.

Beware of the Low Hanging Fruit

One of the most significant challenges that comes with the launch of a new initiative is knowing whether or not it truly has long term potential.  

To make this assessment even harder, when most initiatives launch there's always some low hanging fruit that can give you the perception that the initiative is working.  Smart engineers or good business people can usually prioritize the quick wins and grit their way to some success in the first few days or weeks of a launch.  But what's hard to evaluate is what will happen once all of that low hanging fruit has fallen off the tree.  A couple ways to help address this:

  1. Ask each team member to create one perfect case study of success out of the initiative as fast as they can.  Rather than going out and getting 30 wins, ask them to get one win and dive into the detail.  Why did that win work?  What were the challenges in getting it there?  What might make this win different than others?  What might make it similar?   By diving into intense detail and building a case study on a winning opportunity, managers will be able to understand the strengths and challenges that they didn't know about at the beginning or can't see just by looking at results.  So often the true path to success lies in the detail.
  2. Keep a simple to read and easy to update log of initiatives; include learnings (what worked/didn't) and results against your goal.  Use this log to set a benchmark for future initiatives.  Over time, this log will help you get a good feel for when the initiative has turned the corner on the low hanging fruit and is picking up steam or fizzling out.

Low hanging fruit is a good thing.  It can help build momentum and excitement around a new initiative and is often a great way to pick up insights that help a team move faster or prioritize more effectively.  But it can be a trap that leads to over-investment.  The simple steps above have helped me avoid that trap in the past.

Crisis Management Framework

Here's a very simple framework I use when dealing with a crisis at work.  The framework has worked well for me in the past.  Sometimes simply having a framework for dealing with an unexpected event can inspire confidence and help you get your clients and team focused on solutions.

  1. What happened?
  2. How did it happen?
  3. What are we doing to fix?
  4. How are we going to prevent it from happening again?  (include both short term solutions and long term solutions)

Missing Projections

Here's an interesting framework to use when considering why a group or company misses projections.  I'm sure it's not perfect, but it's interesting to think about it this way.

When you've missed goal by:

50% - Blame the strategy (it's way off)

20% - Blame the manager (you have an execution problem)

5% - Blame the team (they're either not paying attention or they're not accountable)

5 Ways to Grow Your Business

Here are 5 rules that I try to follow each day to help me stay focused on growth:
  1. Train yourself to never blame your team, your boss, your product, your customers, your competitors or the market; this kind of perspective forces you to innovate.
  2. If you're answering emails and returning phone calls all day you're not initiating.  Don't be satisfied for one second with an empty inbox.  Set aside time to initiate and create, on your own, every single day.
  3. Always be a few steps ahead of your customers; satisfy them with the product they've bought, but spend most of your time leading them towards Version X.
  4. The balance of getting results today but also building for the future is one of the biggest challenges you'll face.  Get comfortable with it, this never gets easy.
  5. Separate what you do each day into two buckets: business as usual (BAU) and incremental growth (i.e. growth that comes from incremental work that you haven't done yet).  Focus 80% of your time on the latter.

Talk to Everyone

Over the last several weeks I've been lucky enough to talk with at least a dozen founders of web startups.  It's fun to hear their passion, ask them challenging questions and talk about where they see their products and companies going.  The thing that they all have in common is that they love to talk to about their businesses.  This is a key component of success in business.  Talk to everyone.  It reminds me of an experience I had earlier in my career. Several years ago when I was working with a biotechnology startup we we were looking for a commercial application for a diagnostic device that we were developing.  One of the promising applications was to measure levels of e. coli in meat.  We believed that we held a market advantage in two areas:

  1. We could measure these organisms more accurately; specifically, we could reduce the number of false negatives (i.e. if the meat was tainted with e. coli, we were more likely to catch it)
  2. Our tests were significantly quicker; they didn't require incubation, we could do a test in four hours versus the standard 10 hours

We flew out to Kansas to meet with a potential customer, a large meat processor.  We took a tour of their plant, talked to them about our product and everything seemed to be going great.  They were interested in the device, it seemed we had identified a pain point that we could address.

But that night, after a few drinks and a lot of steak, we began to hear a much different story.  It turned out that the beef companies were actually not interested in reducing the number of false negatives -- because it would increase the number of positive tests.  And when there are positive tests, they have to shut down the plant, send people home and clean the entire line.  This is extremely costly to them and they didn't want any more line stoppages than they already had.  This seemed counter-intuitive to us.  If the company let meat with e. coli out their doors and someone got sick, they'd be in big trouble.  Surely they were interested in more accurate testing, right?

Not exactly.  It came down to the law of small numbers.  From our contact's perspective, the odds that the e. coli in the meat would survive the ride to the distribution plant and then the ride to the supermarket and then the ride to a customer's home and then the 5 or 10 minutes on the customer's 500 degree grill was extremely unlikely.  Frankly, it wasn't a problem worth really worrying about.

Further, the time advantage we were excited about wasn't all that valuable either.  We learned that the plant works in 8 hour shifts, and as long as the meat was tested and ready for the next shift, 10 hours was fine with them.  Our time advantage was a 'nice to have' not a 'must have'.  And in order to truly win in this business, our product needed to be a 'must have'.  In short, by talking to the right guy, we found that we didn't have a market for our product.

The insight we gained from our trip to Kansas wasn't easy to get.  We had to fly out there and talk to a real insider, off the record, to determine that we didn't have an advantage.  And that's really the moral of this story...when you're working on a startup, talk to everyone that you possibly can.  Insiders, outsiders, friends, family, users, anyone that will listen.

You'll be amazed at how much you learn from bouncing ideas off of other people.  So often, businesspeople get burnt because they just don't know what they don't know.  Talking to everyone prevents you from getting burnt.

Business Review Agenda

Some colleagues have been asking me about the best format for a business review.  I thought I’d post my recommended agenda here:

  1. Where Are We Now
    • High level overview of business
    • Metrics we track – Leading & Lagging
    • Actuals
    • What’s working/what’s not working
  2. Where We Want To Be
    • Goals by week, month, quarter
    • Current gap to goal
  3. How We’re Going To Get There
    • Initiatives
    • Pipelines
  4. Why you should believe we can get there
    • Success Story (Case Study)
    • Proof Points
    • Qualitative Progress/Testimonials

The thinking here is that the person you’re presenting to wants to understand how you look at the business, how you’re doing, how you’re doing against goal, what your plan is to close the gap and, finally, some proof as to why they should believe in you.  Obviously, any smart manager will poke holes in each section and look for your weaknesses.  But generally speaking if you have a plan you believe in and can do each of these things well the meeting should go pretty smoothly.

Insulting Steve Jobs

I'm on a Steve Jobs kick lately; last week I wrote about how someday there may be statues of him all over the country. I came across this great video of him responding to an insult from someone in the audience at the 1997 Apple Developer Conference, just after he was renamed CEO.  If you listen closely, you'll notice that in his response he does far more than respond to the heckler.  He  lays out Apple's philosophy on product development that would fundamentally drive their outrageous success for the next 15 years.

Start with the consumer.  The consumer must drive the technology.  It's five minutes long but definitely worth watching.

 

[youtube http://www.youtube.com/watch?v=FF-tKLISfPE]

Statues of Steve Jobs

One of my management professors in business school once told my class that someday we'll see statues of Steve Jobs all over the United States.  

It was his view that Jobs literally saved the U.S. and its economy by recognizing the commercial potential of PARC's mouse-driven graphical user interface (GUI) back in the early eighties.  The invention of GUI led to the personal computer and put the U.S. in a position of power in the software and computing industry.  At a time when it seemed America was rapidly losing in every major industry (automobiles, electronics, manufacturing, etc.), winning in software and computing may be the reason the U.S. continues to be a global economic powerhouse (by most measures the list of the top software and technology companies is still dominated by American companies).

Regardless of whether he deserves the statues might be debatable, but his outrageous success as a businessman is not. The Economist had an article covering his resignation as CEO of Apple this week.  In it, they included a timeline of his career.  I pulled out a few examples and added some of my own to illustrate what an absolute business legend Jobs has been.  Amazing.

1976 - Co-founds Apple, launches first personal computer

1980 - Apple goes public

1984 - Launches Macintosh

1985 - Ousted as CEO after boardroom coup

1985 - Founds Pixar

1997 - Renamed Apple CEO

1998 - Launches iMac

1999 - Launches iBook

2001 - Opens first Apple Store

2001 - Launches iPod

2003 - Launches iTunes

2006 - Pixar sold to Disney for $7.4 billion

2007 - Launches iPhone

2010 - Launches iPad

2011 - Apple surpasses Exxon Mobil as most valuable company in the world

For more on Jobs, check out Jim Keenan's recent post that includes some of his favorite quotes on business. Some great stuff in there.

Disruption, Illustrated

I came across a two very neat examples of disruption over the past few weeks. The first is from Digital Music News and graphically depicts music distribution by medium since 1981, it's fascinating to watch cassettes and CDs grow exponentially and then disappear just as quickly.  Depending on your browser you may need to slide your mouse over the image to turn it on.

30years.gif (550×500)

The second is from Chris Dixon's blog and illustrates recent disruption in the video game market.  Below are images of the instructions to play Angry Birds versus the most recent version of John Madden Football, arguably the most successful video game for the last ten years.

Over time the incumbent often builds complexity into its product to satisfy customers, to give them more.  But at the same time that complexity can leave new customers behind.  This creates the opportunity for a new entrant like Angry Birds to swoop in and provide a far more easy to use product for the majority of consumers.  At last check Angry Birds had sold more than 200 million downloads.

Angry Birds

Madden NFL 12

Leading Metrics

A couple weeks ago Techcrunch had a post titled, Don't Be Fooled By Vanity Metrics. In it, Eric Schonfeld calls out the difference between what he calls "vanity metrics" and "actionable metrics".

Vanity metrics are things like registered users, downloads and raw page views. These metrics, he says, are easily manipulated and don't necessarily tie to the metrics that really matter. Actionable metrics are the ones that matter. These are things like active users, engagement, revenue, profits, etc. He argues that startups should publish the actionable metrics from the start, instead of trying to fool the press and others with impressive, less meaningful numbers.

I'm always very, very careful about trusting any metrics that come from a startup and are published on a technology blog, vanity or otherwise. Entrepreneurs are very good at stretching or morphing the truth to tell the right story (they're probably not being written about in Techcrunch if they're not good at this). And in an interview with a tech blogger there's little fear of consequences from not telling the truth and big upside from stretching it. That said, if the metrics are accurate and honest, I think both vanity and actionable metrics are critical for any startup to track and manage to.

Instead of vanity and actionable, I've always referred to these metrics as leading and lagging. Leading metrics are indicators that have a strong correlation to more important lagging metrics. The simplest example of this is to apply leading and lagging metrics to a salesperson. For a telemarketer, number of dials is a leading metric for the lagging metric sales. If it takes 50 dials to get a sale, you can track the number of dials a salesperson is making to have a good sense of what sales will look like in a given period. If your salespeople aren't making enough dials or some of them aren't converting at 50:1, then you can make changes quickly. In web startups, leading metrics can be things like: registered users, unique users, emails sent, email response rates. Lagging metrics are closer to $$$ -- things like transactions, revenue driving clicks, number of revenue driving users, and ultimately, revenue.

Determining the right leading metrics to track is critical for any company. It helps management get a sense of how individuals, groups and the company as a whole is performing in real time, allowing for far more intelligent strategic decision making and tactical management.