Look To The Inexeperience Curve

With business audio books an important point needs to really stand out and catch you, because before you know it the reader is on to the next segment. This concept stood out for me the other day while listening to Maverics at Work.

As a leader probably one of the most important things you can do is to walk in stupid every day. You need to keep challenging the organization and yourself to seek out unexpected ideas, outside influences, and new perspectives on old problems. Every day something changes. Look to the inexperience curve. The more you know about something, the more important it is to challenge assumptions and habits that built your success in that area. This will help you think in a new light and drive innovation in your organization.

(By the way - don't confuse leader with manager - they are not related. You don't have to manage people to be a leader in your organization.)

Re-thinking Performance Metrics

Last year due to the startup I was working on, I spent a lot of time trying to understand ROI - Return on Innovation. Its one of those metrics where the companies that have this metric think they have it down, but is it really measuring what they want it to? Is number of filed patents or number of 'launched' products really a measure of your return on innovation?

Since then, I have spent a lot of time thinking about how metrics are changing and shifting in the new economy. What non traditional metrics could be used to better measure and drive performance in an organization? I think one of the issues with most traditional metrics or even the various definitions of newer metrics such as return on innovation is that they tend to ignore the people factor - your customers and employees.

John Hagel has created some great thoughts for new performance metrics including Return on Attention (ROA), and Return on Information (yet another ROI). His most recent thinking is around ROS - Return on Skills or more accurately Return on Talent:

For me, talent is ultimately about the ability to deliver superior value through one’s activities, whether it is the janitor or the CEO. There are no caps to talent - no matter how good people are at what they do, there are infinite opportunities to deliver even more value. Talent is ultimately a function of human capital, intellectual capital, social capital and structural capital working together to amplify the value that can be delivered.

What other metrics could be explored? I think it would be interesting explore ROCS - Return on Customer Service, or ROA - Return on Authenticity. Next step - how to define and create measures to support these. What other types of metrics do you think could help drive performance in the new economy?

The Myth of Market Share?

J Scott Armstrong from the Wharton School of Business and co-author Kesten C Green have published a new study that discusses how too much focus on competition and gaining market share can harm profitability.

Sound management thinking has often stated that if a company must chase market share if they are to achieve greater profitability. Beating the competition is a common mindset in corporations. Jack Welch, the former CEO of General Electric, famously stated that GE would not be in any business in which it could not be first or second in market share, and who would refute the success of Jack Welch?

Scott's work goes back as early as a study published in 96 which showed that for competitive-oriented objectives were negatively correlated with ROI. In other words he more managers tried to be the biggest in their market, the more they harmed their own profitability. Although the results of this study were criticized and ignored, they are now back with more research to back up the original claim. Plus there are now some very real world examples that have been very public which seem to back this claim...

Toyota:
Toyota is a profitable company and expects to build more vehicles than any other automaker in 2007, but grabbing market share is apparently not one of its goals. An Associated Press story on Toyota's imminent rise to the top described Kazuo Okamoto, executive vice president, as being "nonchalant" about Toyota's achievement. "We aren't that concerned about vehicle numbers," Okamoto told the AP. "But we are determined to go at it to develop cars that make a lot of people happy."

Nintendo:
In a December 4, 2006, article in The New Yorker by James Surowiecki, the magazine's business writer. Surowiecki describes how Sony, with its PlayStation 3, and Microsoft, maker of the Xbox 360, are beating each other's brains out trying to capture the biggest share of the video-game market. Meanwhile, third-place Nintendo, with its new game console called Wii (pronounced "wee"), has quietly become the most profitable game console company in Japan.

To me this has a lot to do with Blue Ocean Strategy and thinking. Focusing on the competition whether it be about the products you make or the services you offer is a red ocean strategy, and not optimal for success. This study appears to back this concept nicely. Focusing on competition and therefore existing market share puts you into a red ocean. Blue ocean strategy allows you to create new market share, so you don't have to think about the competition beyond determining the right new direction to follow. What do you think about the 'Myth of Market Share'?

Guild Based Management

The Autumn issue of Booze Allen's Strategy+Business has a great biographical article about entrepreneur Joi Ito. Near the end of the article there is an interesting discussion about how his current obsession with World of Warcraft - a MMORPG (massively multiplayer online role-playing game), is allowing him to experiment with new org design and team management techniques through his WoW guild. This guild is made up of (currently) 250 members from all backgrounds from around the globe including a "raid leader" who is an emergency room nurse, and another important player who is an unemployed bartender.

Mr Ito: "I'm playing with all different kinds of management ideas I've had for companies, with a bunch of people who are actually very dedicated. They will set their alarm clocks for 3 a.m. to run a raid of 40 people. They are committed to each other like people in a normal company wouldn't be committed to each other. So as a test bed for these ideas this is actually pretty amazing".

Personally I am not a member of this online gaming sub-culture, (my wife would kill me) but this concept of guild base management fascinates me. Developing that level of passion in work, and utilizing the concepts to manage, and collaborate has interesting possibilities, as we experience a shrinkage in workforce, globalization, virtual work, and managing people and teams with this level of efficiency.