How Can Start Ups Grow?

Another perspective that might be lost in the rush toward innovation…

“Assistant professor Mukti Khaire believes that small companies can grow by developing intangible social resources such as legitimacy, status, and reputation. In an interesting twist, her research on this insight is that these intangible resources may be best acquired by following a road of conformity in how your company is organized and presented to the outside world…

“These social resources are acquired by mimicking the structures and activities of established firms, and by affiliating with high-status customers respectively,” she wrote…

How Can Start Ups Grow?

I’d like to see this research layered on top of the disruptive innovation research to see if there’s any correlation between doing something new but appearing to be the same old reliable thing.

jetBlue Apologizes, The Others Don’t

Another reason I like jetBlue: they care enough to apologize deeply for their mistakes. Here’s how the email began…

We are sorry and embarrassed. But most of all, we are deeply sorry.

Last week was the worst operational week in JetBlue’s seven year history. Following the severe winter ice storm in the Northeast, we subjected our customers to unacceptable delays, flight cancellations, lost baggage, and other major inconveniences…

Spreading the Toyota Way in America

With Toyota about to unseat Ford and GM as the top car seller in America, maybe the Toyota Way will finally be taken seriously among American managers, including those working for Toyota

…analysts say Toyota’s recent and embarrassing surge in vehicle recalls was partly a failure by Toyota to spread its obsession for craftsmanship among its growing ranks of overseas factory workers and managers…

“For Americans and anyone, it can be a shock to the system to be actually expected to make problems visible,” said Ms. Newton, a 38-year-old Indiana native who joined Toyota after college 15 years ago and now works at the North American headquarters in Erlanger, Ky. “Other corporate environments tend to hide problems from bosses.”

Netflix’s Competitive Advantage

I’m developing a new course, Introduction to Internet Business Strategy, that I’m pretty excited about. Ironically, though everyone in the Internet industry discusses strategy, it’s difficult to find any standard references on the topic. This presents a great opportunity for me to plunge in and synthesize the basics as well as to examine what role design has played so far.

Netflix home page One company I’m reverse engineering is Netflix. The store-less video subscription service claims to bethe world’s largest online movie rental service, providing more than 6.3 million subscribers access to more than 70,000 DVD titles.” They have an impressive physical presence too: “Netflix operates 42 shipping centers located throughout the United States… On average, Netflix ships 1.575 million DVDs each day.” And though they compete against giant Blockbuster as well as smaller chains and neighborhood shops as well as video-on-demand services, earnings have doubled each year the past three years.

So how do they do it?
Continue reading

I am in Love with John Hagel

…or at least his writing. In his latest post he offers an alternative to Porter’s three generic strategies and looks at the Siemens/BenQ situation through this lens

I have anticipated that all companies over time will unbundle into three much more focused business types – infrastructure management businesses, product innovation and commercialization businesses and customer relationship businesses.

…in my terminology, BenQ had become very successful as a focused infrastructure management business, leveraging not only low wage rates in Asia but rapid incremental innovation to deliver increasingly sophisticated and reliable products in markets around the world. It has developed world class capabilities in terms of managing high volume, routine processing activities and designing products for manufacturability.

All well and good – very consistent with the broader themes I have described. But the Siemens acquisition that took effect in October of 2005 came out of left field. Now BenQ was diversifying from a focused behind the scenes manufacturer and designer into a full-fledged product innovation and commercialization company with its own brands and distribution operations in Western companies.

He then widens this lens to look at Chinese businesses…

…Many Chinese companies unfortunately suffer from something that I have described as Western envy. Despite enormous success in pioneering innovative business models and business practices, many entrepreneurial Chinese companies still have a sense of inferiority and want to look like larger Western companies with their own manufacturing, R&D and sales and marketing operations. The irony is that, just as many Western companies are unbundling (in part offshoring and outsourcing to more focused Chinese companies), many Chinese executives are tempted to build more tightly bundled operations that mimic the model many Western companies are abandoning.

Pfeffer and Sutton on Prototyping Organizations

In Why Managing by Facts Works, Pfeffer and Sutton urge us to manage-by-evidence rather than gut instinct. This is less an argument against Blink-style decisions than it is an argument for prototyping…

…treat the organization as an unfinished prototype. Executives who use evidence-based management best encourage their employees to learn even as they act on what they already know. They regard their companies as a work in progress — one that constantly needs to be tested, probed, and experimented with, to be certain that it is evolving in the right direction. They never view their companies as “not broke, so why fix it?” They are confident enough to act on what is already known (even when knowledge is vague and incomplete), and humble enough to change course, if need be, when new information comes along. 

They interpret Web 2.0 companies as the evolved form of evidence-based investing: “By and large, venture capitalists only fund Web-based companies that already have proven the ability to attract customer traffic.”

Incidentally, Bob Sutton’s blog is full of more not-so-common sense.

Successful small business units, schools

William G. Ouchi on decentralized management:

I had spent 35 years studying the management of very large companies, and one of the most consistent principles is decentralization. In a competitive world, you must make decisions in the smallest operating units possible, or you will go out of business…

…We have a research project under way now in which we’re interviewing 527 principals with local autonomy and visiting their schools. We’re focusing on inner-city high schools, which have proven in the past to be the hardest schools to improve. We’re finding that control over the budget gives principals control over three key school decisions: the staffing mixture, curriculum, and schedule.

The Five Functions of a Team

In retrospect, when Christina bought me a copy a The Five Dysfunctions of a Team, there were a few reasons it didn’t exactly rise to the top of my to-read pile: It addresses a non-fiction topic in the form of a story, which can sometimes feel contrived. It looks at the topic through a negative lens, which rubs optimist-me the wrong way. And if all that weren’t bad enough, it has a number in the title.

I’m glad I got over all that, because it’s a very good little book, a very fast read that offers a simple but powerful model to help groups of people work together with the trust and commitment needed of a team. The negative perspective is actually effective in highlighting poor team behavior. Though having absorbed it, I’m trying to put it into action using the positive version the author offers toward the end, which one might call the Five Functions of a Team…

Stewart: ultimately, it’s all about values, and not an MBA

The Management Myth by Matthew Stewart argues against the value of Winslow Taylor’s methods, an MBA education, and much of management theory. His tone is often snarky and flip, which is a shame because it undermines the delivery of some great ideas, such as this discussion of values:

…as anyone who has studied Aristotle will know, “Values” aren’t something you bump into from time to time during the course of a business career. All of business is about values, all of the time. Notwithstanding the ostentatious use of stopwatches, Taylor’s pig iron case was not a description of some aspect of physical reality — how many tons can a worker lift? It was a prescription — how many tons should a worker lift? The real issue at stake in Mayo’s telephone factory was not factual — how can we best establish a sense of teamwork? It was moral — how much of a worker’s sense of identity and well-being does a business have a right to harness for its purposes?

Someone else pointed this out to me recently by saying, “We know that McDonald’s has values. Because if they didn’t, they’d be selling crack.

Management Advice: Which 90% is Crap?

I like everything Bob Sutton has written, including this anti-bullshit manifesto:

I wish I could wave my magic wand and provide you with a 100% reliable and shock-proof “management advice crap detector.” Alas, life is too messy and uncertain… But we’ve found five guidelines that can increase your hit rate, that will help you do a better—if imperfect—job of deciding which advice to ignore, study more closely, and perhaps implement on a trial basis.

  1. Treat Old Ideas As If They Are Old Ideas.
  2. Be Suspicious of Breakthrough Ideas and Studies.
  3. Understand The Incentives For The People Who are Selling You The Idea.
  4. Are They Telling You That “All The Best Companies” Or “Most Of The Fortune 500” Do It?
  5. Most of The Best Ideas Are Remarkably Simple.

Why Your Employees Are Losing Motivation

Sirota, Mischkind, and Meltzer suggest some ways individual managers can motivate employees…

1. Instill an inspiring purpose.
2. Provide recognition.
3. Be an expediter for your employees.
4. Coach your employees for improvement.
5. Communicate fully.
6. Face up to poor performance.
7. Promote teamwork.
8. Listen and involve.

Wal-Mart enters the consulting biz

This is interesting…

Wal-Mart Stores, whose all-in-one retailing model has forced scores of competitors to close their doors over the last 40 years, is turning to an unusual business plan: helping its rivals.

The giant discount retailer, under increasing assault by critics, announced a wide-ranging effort yesterday to support small businesses near its new urban stores, including the hardware stores, dress shops and bakeries with which it competes.

Wal-Mart said it would offer those businesses financial grants, training on how to survive with Wal-Mart in town and even free advertising within a Wal-Mart store.

Wal-Mart will hold seminars to coach the businesses on how to compete with the giant discount stores — by, for example, intensifying customer service, for which Wal-Mart often receives low marks. An annual report on trends in Wal-Mart’s business will be distributed exclusively to those companies.

Setting cynical PR claims aside, this plan both makes a lot of sense and very little sense. Teaching businesses unfamiliar with differentiation is great, and just what they need to compete with Wal-Mart. But who wants customer service advice from a company that sucks at customer service? I’d bet the best form of training would be a collection of video case studies (no classrooms, no books) of small businesses that continued to succeed even after Wal-Mart came to town. Simply amplifying messages from managers of successful small businesses will be more valuable — and more authentic — than anything Wal-Mart itself could say.