Category Archives: entrepreneur

How to Try Before You Buy a Company

While lots of mergers fail, and if you had to pick one reason – it is companies rushing in without really vetting the potential match.

It seems there is news everyday about a proposed merger or acquisition between two companies. While buying another company is certainly a viable strategy for helping your company achieve your long-term vision, the statistics about the failure rate of acquisitions is certainly sobering. One KPMG study found, for example, that 83% of all M&A deals end in failure.talk to us

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Moats and Machines: How Warren Buffett Analyzes a Business

Warren Buffett knows great financials are critical to the success of any business, they are really just outcomes from having a strong “machine” and an impenetrable “moat” for your business.

When you ask most CEOs about their vision for their business, they usually give you an answer built around metrics like number of customers, market share, or profitability.

But what I would argue is that while all of those numbers are critical to the success of any business, they are really just outcomes that result from having a strong “machine” and a “moat” for your business.contact us now Continue reading Moats and Machines: How Warren Buffett Analyzes a Business

Are You an Owner or an Operator: Why You Might Need To Fire Yourself?

A word of caution for any entrepreneur who has founded a business and remains active in it: you might need to fire your CEO – yourself.

Of course, every owner of a growing business knows what it’s like to play multiple roles. But let’s focus on the distinction between two of them: owner and CEO.

Continue reading Are You an Owner or an Operator: Why You Might Need To Fire Yourself?

Why Netflix Doesn’t Tolerate Brilliant Jerks

What do you do when someone who is unquestionably brilliant is also a jerk?

We all work with someone who is unquestionably brilliant. You know the type: the person who consistently comes up with great insights and ideas and who can cut to the quick far faster than anyone else in the organization. It’s hard not to step back and admire how the person’s brain works.contact us now

At the same time, such people can begin to think their gifts place them above everyone else in the organization. They tend to hog all the airtime at meetings by intimidating and maybe even ridiculing those who might have the audacity to offer their own take on a situation–thus suppressing collaboration and participation throughout the rest of the organization. They also follow their own rules and are evenabusive to the rest of the staff. They aren’t nice people to be around. In other words, these people are jerks–which creates real issues within your organization.

But since they are brilliant, what should you, as the leader of the organization, do about it?

Netflix CEO Reed Hastings has been very clear about what his organization does with its brilliant jerks: It gets rid of them. As he has said in the past about them: “Some companies tolerate them. For us, the cost to effective teamwork is too high.”

What Hastings came to realize is that regardless of how smart or even how productive such employees might be, they can actually begin to rip an organization apart from the inside if they don’t buy into the organization’s values and embrace working collaboratively.

In my upcoming book, Great CEOs Are Lazy, I call these folks “cultural terrorists” because of how destructive they can be to an organization. Certainly, your first option should potentially be to use coaching as a way to polish a brilliant jerk’s prickly edges. Obviously, you can’t make anyone a nicer person, but perhaps you can make the person aware of how damaging her behavior is to peers and see if she is willing to make changes accordingly.

If these folks are unable to change their behavior, however, then they leave you no choice but to exit them from the organization. By doing so, you’re making a powerful statement to the rest of your team about how important your culture is–what is tolerated and what is not. The longer you let them remain, the more damage they cause inside your culture and to your own reputation as a leader. People will lose trust in your abilities, which can undermine all the hard work you’ve done to build a strong team in the first place.

When you exit a cultural terrorist, it should be known within the organization that the person is no longer with you because of her behavior, not due to her performance on the job. This will set a tone about the kind of culture you want to build and the kinds of behaviors you’ll accept–and the kinds you won’t.

There are organizations where brilliant jerks are welcomed and where they thrive. For example, I know of several prominent consulting firms where individual contributions are valued more than teamwork. And that’s OK if that’s the kind of organization you’re trying to build.

But if you’re like Netflix and believe there is greater collaborative power through teamwork, then you need to act now when it comes to dealing with your brilliant jerks. You can’t afford to wait until after the damage has been done.

 

How to Avoid Mission Drift and Stay True To Your Purpose

Mission drift is an irresistible force. You need to build in measures to help you avoid suffering from this crisis of identity. If you don’t, you might end up running a company that is very different than the one you intended to build. contact is we help you grow

As every company gets older and matures, especially around its tenth anniversary and after, it can be become difficult to remember the reasons why it was founded in the first place. When you look to those organizations that have been around 30 to 50 years and older, it can be really hard to believe you’re talking about the same place.

For example, did you know that Harvard University’s founding purpose was to “prepare ministers of upright character”?

It would be tough to argue that Harvard still operates by that same purpose today even though it’s in the exact same place it was founded back in 1636. So what happened?

In short, mission drift.

This is something that threatens every organization out there and, unless you put some safeguards and preventative measures in place, you could find yourself running an organization you don’t even recognize anymore.

What makes this challenging is that mission drift isn’t something that happens all at once. Think of it more as being nibbled to death by ducks. It happens one little decision at a time, where you go astray by just a bit. Maybe it’s a decision about chasing revenue from a customer that doesn’t really fit with your mission. It doesn’t seem like a big deal at the time. But, when you add that decision up with all the others like it, you can’t believe how you got where you ended up.

Take another example, this time from the retail sector. Entrepreneur Dov Charney founded his company American Apparel back in 1997 because he was tired of seeing American manufacturing shop being shipped overseas. He started his company to create jobs by starting making clothes in the U.S. again.

But over time, the business experienced mission drift. Eventually, rather than focusing on creating American jobs, the company became known for its sexually charged ads. For his part, Charney became known as the Hugh Hefner of retail as the business continued to shift away from its original mission. More recently, the company declared bankruptcy, which should serve as a sobering reminder of what can happen when you lose touch with the values you began your business with.

So how do you avoid mission drift and keep your organization on the right path? Here are a few tips:

Your Board Tip one is to enlist a board that is fully in line with the organization’s mission. Make sure they buy into your purpose and then charge then helping make sure they say something if they think a decision is out of alignment with your values.

Your Executive Team The second tip is to hire executives and leaders who also buy into the mission, purpose and values of the organization. Then exit the people who don’t–regardless of how great a performer they are. While that might be a painful decision to make to your bottom line in the near term, it will pay off big time over the long run.

Embed Mission into Your Culture You can also use stories and symbols as ways to embed your mission and purpose into your organization DNA in such a way that everyone in the organization can make their own course corrections on a daily basis.

Similarly, everyone in the company should use the mission and purpose of the company as their North Star of sorts as they make their decisions. Everyone needs to be encouraged to act on the notion that if something requires him or her to act against those values, they quite simply shouldn’t do it.

Measure the Mission And finally, constantly measure how true you are acting when it comes to your mission. You need only look to the great retailer Nordstrom for inspiration in how to do this. Every day, Nordstrom posts a list of the top ten salespeople in the company: everyone knows who the rainmakers are. But just as importantly, the company also publishes the letters from customers who are saluting those employees who stood out in supporting the company’s mission, which is is to “provide outstanding service every day, one customer at a time.” Seeing those letters every day is a way to measure how well Nordstrom is tracking to its mission.

One day, for instance, the company posted the letter from a customer who couldn’t believe how, after she called a store to see if they had found a diamond that gotten loose from the customer’s engagement ring, the staff at the store scoured every inch of floor looking for it. More incredibly, they also went through every dirty vacuum bag until they found it. How’s that for supporting your mission?

The key again is that as your company gets going, you need to build in measures like these to help you avoid suffering mission drift. If you don’t, you might end up running a company that is very different than the one you intended to build.

 

 

One Trial Learner Failure Isn’t an Option

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Great CEOs accept that in order to innovate, then failure isn’t an option – it’s required and part of a healthy learning process. However, they make sure they are a “One Trial Learner.”

If you hang out with CEOs all the time like I do, you hear a lot of talk about some are worried about making mistakes. I’ve found that some CEOs spend a lot of time trying to avoid making them–then find themselves stuck in a loop of over-analysis.

Great CEOs, on the other hand, think very differently about mistakes. They have accepted that if they want to innovate by doing things better and more profitably, they will inevitably stumble at some point. They also make sure that they are a “One Trial Learner.”

What I mean by this is that great CEOs try a lot of different things–many of which don’t pan out. They make mistakes. But the goal is to use those errors as learning experiences that will help you avoid making those same mistakes again in the future. They are also careful to make sure that those mistakes are not below the water line–ones that can sink the business.

I remember one CEO sharing a great piece of insight with me when he said: “I will make a lot of mistakes, but my goal is to make none more than once.”

This is not only a great mantra for personal productivity, but also for organizational productivity. To be an innovative organization, you need to embrace the concept of being a One Trial Learner which means you as an organization need to be trying lots of things and making lots of mistakes along the way. The trick is to learn from the mistake and not make it again.

If you want to innovate, you need to be willing to make mistakes–only you shouldn’t be making the same one twice. It’s all about taking what you learned from the experience of making the mistake and integrating that into advancing your organizational thinking. This turns rapid failure into rapid learning.

Don’t Touch the Stove!

It’s like back when you were a kid and your mom told you not to touch the stove whenever it was on. But you did it anyway, right? But most likely, you did it only once because you learned from that mistake with a burnt finger. That’s what being a One Trial Learner is all about.

New Coke Died Quickly

The beverage giant Coca-Cola certainly acted like a One Trial Learner in the wake of its disastrous introduction of New Coke back in 1985. But with some hindsight we can understand why they made the decision to launch the new product, and ditch the “classic” version they had built the company around, because taste tests showed that consumers wanted a sweeter flavor comparable to what Coke’s rival, Pepsi, was offering.

Coke was trying to innovate and reinvent itself–which is actually a commendable strategy that too many firms don’t have the courage to undertake. Yet in this case, New Coke ended up becoming a gigantic mistake because the folks at Coke underestimated the brand loyalty they have developed among their customers for that original flavor. When they ditched that in favor of the new recipe, it quickly became a nightmare of epic proportions for the company.

But Coke quickly rebounded by bringing back the original recipe in less than three months, then called Coke Classic, and also ditched New Coke a few years later. While every business school professor out there uses this story as a lesson of what a company shouldn’t do, Coke did learn from its mistake because it has never messed with its flagship recipe ever again. They proved to be a One Trial Learner.

Ryanair Listens and Learns

Another example of a One Trial Learner in action involved the budget European airline Ryanair. The company’s business plan is all about offering a bare bones option: to keep their fares as low as possible, customers basically have to pay for just about everything, including food, beverages, and their baggage. But the airline apparently went one step too far when it talked about introducing a plan that would require customers to actually pay to use the lavatory on the plane. While it made sense on paper–that certainly would have become another profitable revenue line on each flight–it was simply too much for its customers: they basically revolted at the very notion of paying to go to the bathroom.

To their credit, Ryanair listened to their customers and ditched the pay-to-pee idea and began looking for other ways to both shave costs and make money. And they did it quickly.

Learning Culture

The final point is to build a culture that embraces smart failure and quick learning. You cannot shoot the person that dares. Rather–they should be celebrated and the organization should seek to learn from the risk they took, and create something better. The only thing people should be castigated is taking stupid risks or worse, making the same exact mistake multiple times.

The point is that if you want to build an innovative organization capable of cutting-edge breakthroughs, you need to be willing to make mistakes and learn from them – that’s what being a One Trial Learner is all about.

 

Warren Buffet’s Secrets to Stop Worrying

Warren Buffett, who has billions of reasons to be worried, uses these six steps to free himself from worry and you can too.

We all know Warren Buffett is one of the most successful investors of all time. He has literally made billions of dollars through the savvy investments he’s made over the years through his firm Berkshire Hathaway. But with all that money at risk, it makes you wonder how Mr. Buffett could ever get any sleep: most of us would be worried sick.

Think about it. Mr. Buffett, for instance, has placed massive bets on the railroad industry. But what happens if a trail carrying some toxic waste derails? What will happen to his railroad stock? Similarly, what would happen to the significant investments he’s made in banks and financial services companies if another recession were to strike? It’s enough to drive you bonkers.

And yet, Mr. Buffett is as cool as a cucumber. Despite all that money on the line, he simply isn’t consumed about worrying about it. But why?

The answer is that he’s adopted the secrets of Dale Carnegie’s sometimes-overlooked gem of a book called “How to Stop Worrying and Start Living“. While Mr. Carnegie is probably better known for his other books about public speaking and gaining influence, Mr. Buffett has learned to adopt several of Mr. Carnegie’s tips for living a worry-free life.

  1. Isolate the Problem – The first key in preventing worries from overtaking your life is to create “day-tight” departments around the different areas in your life. Just like you can seal off a damaged or leaky section in a ship to prevent it from sinking, you need to isolate the different parts of your life–your business, your relationships, or your finances–so that they don’t spill into each other. Even if you’ve had a hard day at work, for example, you need to find a way to be the best dad you can be once you get home.
  2. Understand the Problem  – If something has gone awry with some aspect in your life, don’t overreact to it before you get all the facts. It’s easy to fear the unknown, so make time to understand what’s caused the issue. The better you understand something, the less you’ll worry about it.
  3. Prepare to Accept the Worst – After you know what kind of issue you’re facing, figure out what the worst possible outcome could be resulting from it. Then make peace with it. If you can accept the worst-case scenario, then you’ve simply eliminated any reason to continue worrying about it.
  4. Make a Decision – Once you’ve accepted what the worst possible outcome of a situation could be, then you can actually start thinking about how you actually might create a better outcome. Weigh the facts you have available and make a decision about how you might do that. And rather than get stuck in some kind of worry-vortex, where you become paralyzed because you feel like you don’t have enough information, make a decision once you feel like you’ve got 75% of what you need.
  5. Act – There’s an old saw that involves five frogs sitting on a log. One frog decides to jump off. So how many frogs are left on the log? The answer is five–because deciding and acting are very different things. After you’ve made a decision on what you could do to potentially improve the situation, act on it because taking action will immediately reduce your level of worry.
  6. Let It Go – After you’ve done everything you can to deal with a worst-case scenario, then it’s time to simply accept what’s happened. There’s no use worrying about it once you can’t do anything about it. Make peace with the issue and move on to the next one.

If Warren Buffett, who has billions of reasons to be worried, can use these six steps to free himself from worry, you can too.

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Simple Is Hard: Design Secrets of Jeff Bezos and Steve Jobs

According to many iconic leaders, simple is hard, but it’s also an incredible advantage. So if you make time to make things simple, your customers will thank you.

The French philosopher and mathematician Blaise Pascal once penned a letter to a friend in which, at the end, he wrote: “If I had more time, I would have written a shorter letter.”

This quote is quite famous and, like many well-known quotes, often gets attributed to other luminaries such as Abraham Lincoln or Winston Churchill. But what Pascal meant when he wrote those words was that he had simply scribbled down what he was thinking as he wrote rather than spend the time to plan and process his ideas before he picked up his quill and ink bottle.

Pascal of course couldn’t edit as easily as we can with the help of our word processing software, so he meandered and digressed as he scratched the words into his piece of parchment, which resulted in a longer and denser letter than he might have liked to have sent.

But this exact same thing happens all the time when it comes to designing our business processes and systems. When we don’t do the necessary work up front to create a design that is simple and elegant, we end up building products and services that are complex and cluttered. Put another way: Simple is hard.

Simple is hard.

This is actually something that great business leaders understand quite well. Think about how Jeff Bezos helped design the way Amazon.com works–especially if you are an Amazon Prime member. Every time you return to purchase something, everything –your address book, credit card information, shipping preferences–is all ready to go with literally one click of a button. It’s incredibly simple to use and it shouldn’t come as a surprise that when Amazon introduced one-click shopping, the company’s revenues skyrocketed.

But what might go unappreciated is how much work Bezos and his team put into making that design so simple. They very likely invested thousands of hours in user testing to streamline the process that we now benefit from. Again, simple is hard.

Consider also any Apple product you’ve ever handled. Not only are they gorgeous to look at, they’re incredibly intuitive to use, so much so that Apple famously doesn’t even ship user manuals. Apple products are so simple to use, even children can literally pick them up and operate them.

But if you know anything about Steve Jobs, you know that he was fanatical about design and he spent countless hours obsessing over even the most minute design detail as a way to simplify it and make it easy to use. Repeat after me: Simple is hard.

Simple is a competitive advantage.

Now think about the processes and systems in your business. How much time are you spending up front to make them simple and intuitive for your customers to use? Have you fallen into the trap of relying on a user manual as thick as your forearm while making the assumption that your customers will just figure it out?

It’s worth thinking about, especially if your competitors are offering an easier-to-use alternative. If you had to reenter all of your billing and shipping information every time you placed an online order, versus just clicking a button, where would you spend your money?

Or what kind of device would you rather buy: one that you can pick up and start using right out of the box, or one that makes you fall asleep trying to pick your way through a user manual? Customers like simple. And simple wins in the marketplace.

Simple is hard, but it’s also an incredible competitive advantage. So make the time up front to think hard and write a shorter letter; your customers will thank you.

Never Waste A Good Crisis

The best leaders never waste a good crisis because it affords them the chance to make the kind of large wholesale changes their organization needs. They let the fire do some of the work for them to make the organization receptive to change.

In your journey as a CEO or entrepreneur, you will inevitably face a significant crisis at some point. Maybe it will be the loss of a key employee. Or perhaps it will involve getting in trouble with your bank or the failure of a new product launch. The point is that something will go wrong in a way that you never planned for.

In the wake of such a crisis, it’s the natural tendency of CEOs and entrepreneurs to step in and fix the problem. We want to put the fire out. Maybe that’s jumping in to find a replacement for the person who left or even worse, take charge of your R&D team. While those moves might help stop the bleeding, they aren’t likely to push your company forward over the long run.

That’s why I want to change your thinking on this topic. I believe that the best leaders never waste a good crisis because it affords you the chance to make the kind of large wholesale changes you organization needs that you’ve also been putting off for too long. To put that another way, sometimes the best move is to let the fire do its work so that you can rebuild something stronger from the ashes.

Let’s return to the example of losing a top employee; let’s say your best salesperson. While it might seem like the obvious solution is to rehire for that position, the smart CEO asks some questions instead: Is there a better way to go about this? Maybe you should hire two new junior people instead? Maybe the clients that ex-salesperson worked with warrant your VP of Sales stepping in to take over? Or, just maybe, you’re better off losing that client anyway.

Another scenario might be that, due to a massive market disruption, you need to make dramatic changes in your headcount. Now, nobody likes laying people off–which is why most organization lay off the smallest number of people they can. But what if the smarter decision is to cut deeper by getting rid of all of your C players, and then hiring back fewer, but far more productive A and B players instead? In this case, you would have used a crisis to upgrade the overall talent level in your organization.

The point is that when you encounter a crisis, it primes your organization to go through major changes it might not otherwise be capable of making.

Think about your organization like an oilrig in the middle of the ocean. If you were to order your employees to jump off into the cold salty water, miles from shore on any given day, they’d look at you like you were crazy. But if you explain that you’re in the middle of a real crisis–like if the oil rig is on fire–you’re sure to get far different results.

There’s an element of psychology at work here in that when we encounter crisis in our lives, we’re also programmed to deal with change in a way that, in more normal times when everything seems fine, we tend to reject.

That’s also why it’s critical for you, as a leader, not to minimize the extent of the crisis–which is another natural thing for us to do. If the company loses it’s biggest customer, for instance, you might be tempted to prop up the troops by saying something like, “It’s not a big deal, we’ll find another customer to take their place.” But that would be wasting an opportunity.

What you could do instead is be quite direct about the consequences of the crisis. As a result, the organization should expect several major changes to come about. That’s how you can turn a negative situation into a positive one because you can prime the organization to do things it might not otherwise have been capable of undergoing. And this type of transparent leadership will serve you well through tough times.

A crisis allows you to bring about change at a much faster rate than you would normally be able to bring about–which is why you should never waste them. So next time you get some bad news, resist the urge to go and fight fires. Take a step back instead to see if there might be a silver lining in the form of a big organizational change you probably needed to do to avoid the crisis in the first place.