Are you a gatekeeper or competition enabler?

If I were hiring a business manager, I would ask candidates to explain whether they view their role more as a gatekeeper for the organization or an enabler of competition?

Gatekeepers decide what the organization does and doesn’t do. They view themselves as the judge of the competition and their ideas usually win, at least in terms of what the organization does, not necessarily in the marketplace.

Competition enablers are open to let good ideas come from anywhere. They create systems that try more ideas and let the best ideas earn their way in our out.

They understand that customers are the best judge of this competition.

Leaders of highly innovative companies like Google, Amazon and even McDonald’s have tended to be competition enablers.

Mature businesses that struggle to stay relevant, tend to have gatekeepers in charge.

Think of Blockbuster as Netflix offered to partner with them. Blockbuster leaders could have easily said, you know this doesn’t seem like something customers would want, but let’s try it and see, because we could be wrong.

Instead, they acted as gatekeeper and said no, customers don’t want to wait for their movie to arrive in the mail. They want to be able to come in on Friday night and pick one out.

By the time they realized they were wrong enough, it was too late.

A common comeback to that is, but that Netflix deal was probably one of dozens of decisions Blockbuster faced and the rest didn’t work out. How would they be able to predict that this one would?

That’s the beauty of being a competition enabler. You don’t have to say no and worry about picking right or wrong.

You just have to ask, how can we try this so we can find out? Can we do it in a small test?

It’s a lot like picking stocks. You can do a lot of analysis and invest all your money in 2-3 stocks and hope for the best. But most folks learn that strategy banks more on luck than skill, because no amount of analysis can turn up information that simply isn’t known, yet.

A better strategy is to spread the bets out more, knowing you can always be wrong.

And, for every example that you can give of someone who did well picking 2-3 stocks, I can give you 10 more who did not.

I’ve worked for several mature businesses that struggle to stay relevant. The Board never realizes the root cause is that they keep hiring gatekeepers instead of competition enablers.

The Croods

I finally got around to watching The Croods with the family last night. I enjoyed it.

This animated feature follows a caveman family that has survived until now by fearing everything, including new ideas, as they encounter someone who has survived by using his brain to adapt to the world around him. Good timing, because the world is changing (earthquakes and volcanoes) and what has kept the Croods alive up until now doesn’t work any more. The new guy, Guy, helps them survive as the world changes around them.

In one scene, Guy introduces the Croods to fire. They are dumbfounded. What is it? Is a part of the Sun? Does it talk?

Guy tells them that he makes it, so the father, Grug, picks him up and tries to squeeze more out of him and injures him in the process. That was a clear case of mistaken cause and effect.

What I thought was funny about this scene is that reminded me of new managers, business consultants and politicians. They come into a business or elected office with the attitude that they know best and what has worked for them in the past will work for them here, not realizing that what has worked for them in the past was luck.

They create a plan forward to solve problems they have diagnosed, not realizing that what they believe to be the causes of the problems is based on their mistaken cause and effect.

They then seem bewildered when their solutions have the same effect as Grug trying to squeeze fire out of Guy’s body. Not only does it not work, but it ends up damaging the very thing that can help.

Driving blind

Here’s another good Seth Godin blog post (in its entirety):

Confusing loyalty with silence

Some organizations demand total fealty, and often that means never questioning those in authority.

Those organizations are ultimately doomed.

Respectfully challenging the status quo, combined with relentlessly iterating new ideas is the hallmark of the vibrant tribe.

I’ve worked with leaders who claim they wanted you to challenge them, but beware. While I believe many of them meant it when they said it, when they were actually challenged it was a different story and typically a career-limiting move for the challenger.

I would also add that my experience lines up with Seth’s observation. Those who demanded fealty were doomed.

This is not surprising. As I’ve mentioned before, all problems can be traced to a problem in feedback. Leaders who are not genuinely open to challenge are not open to feedback. It’s like they are driving a bus without the feedback of the seeing the road. Of course, they will eventually drive into the ditch.

Experience Matters

I strongly agree with what Thomas Sowell wrote in his recent column, The Need to Explain:

The most successful Republican presidential candidate of the past half century– Ronald Reagan, who was elected and reelected with landslide victories– bore little resemblance to the moderate candidates that Republican conventional wisdom depicts as the key to victory, even though most of these moderate candidates have in fact gone down to defeat.

One of the biggest differences between Reagan and these latter-day losers was that Reagan paid great attention to explaining his policies and values. He was called “the great communicator,” but much more than a gift for words was involved. The issues that defined Reagan’s vision were things he had thought about, written about and debated for years before he reached the White House.

I think that we’ve been missing a sorting out process to find folks like Reagan.

It took Reagan decades to hone his communication skills, develop an understanding of the material and learn how to communicate it so that it made sense to people.

One example of this is the book, Reagan: In His Own Hand. This is a collection of the scripts that Ronald Reagan wrote himself for 5-minute long weekly radio addresses syndicated in the 1970s. The book shows the edits Reagan made to his text as he deliberately crafted each address to be easily grasped, memorable and meaningful for the folks listening.

I recommend reading the book. Many of the addresses are instructive still today. I learned a great deal about economics, domestic policy and foreign policy from it. As a lad, I trusted the garbage the media fed me about Reagan not being the brightest bulb, however what I read in this book made me realize I was wrong to have trust them.

Reagan’s writings were deeper, yet easier to understand, than anything that I had heard or read from the media. Reagan’s communication skills still remind me of this quote:

I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity. -Oliver Wendell Holmes, Jr., Supreme Court Justice, 1902 – 1932

After reading Reagan’s scripts, I realized that the media — and much of the world — exists in the simplicity on this side of complexity, while Reagan was on the other side. The media simply couldn’t fathom it.

Our political processes do not favor folks like Reagan. They favor folks like Barack Obama and Mitt Romney. Sowell continues in his column:

One of the secrets of Barack Obama’s success is his ability to say things that will sound both plausible and inspiring to uninformed people, even when they sound ridiculous to people who know the facts.

Questions for Presidential Candidates

Below are some questions I would like our Presidential candidates to answer. I’ve pulled some of them from posts in my blog category, “Questions for Politicians“.

If you are a reporter who will have the chance to ask the candidates questions, please feel free to steal these.

If elected, you will take an oath to preserve, protect and defend the Constitution of the United States of America. Please describe what that means to you.

What does ‘freedom’ mean to you?

What process, or processes, are legitimate ways to change the Constitution and the scope of government?

Where does Congress derive its power to pass legislation?

Do you believe the powers of Congress are specific or do you believe Congress can pass any law it sees fit? Why?

Can you provide two examples of where you think the Federal government has exceeded its power in the past and why you think this?

Why do you think that the U.S. is the wealthiest country ever?

What criteria should be used to evaluate spending taxpayers’ money?

What criteria should be used to evaluate existing spending programs? Please provide an example of an existing spending program and the criteria you would use to evaluate its effectiveness.

Do you know what the knowledge problem is? Do you believe it’s real or imagined?

Can you explain how you believe wealth is created?

Good innovation model at Coke

In a September 22 HBR Ideacast (Harvard Business Review’s podcast), Coca-Cola CEO, Muhtar Kent, says this as a side note about innovation at Coke:

…for us, innovation is not only inside the four walls of the company.  We have incubation projects [in] many parts of the world, because we think that the Coca-Cola company and system is too big to have embryonic ides flourish.

So, we have outside [projects], in parts of the world, innovation/incubation projects.

I’ve seen my share of embryonic ideas die.  Some even showed promise.  With some adaptive business folks in charge, they may have grown into something.

But, inside a big company, there are many reasons to say no.  Arnold Kling and Nick Schulz wrote about this in their book, From Poverty to Prosperity, which I wrote about here:

Corporate decisions are made by committees.  In a typical committee, no individual has the power to say “yes” to a new project.  On the other hand, almost every member of a committee has the power to veto a new project.

Observers of organizational behavior have noted that in committees one is more likely to be regarded as intelligent and a good team player by one’s peers by arguing against a new idea than by arguing in favor of it.  Middle managers who fight for new ideas are regarded as troublemakers, even if they succeed in convincing corporations to undertake the projects they propose.

I’ve seen this in action.  For example, I’ve seen projects killed that threatened a powerful leader’s turf (of course, that’s not the reason they made passionate pleas against the project).  Or because the project was a pet idea of previous leadership.  Or, the project didn’t fit into some arbitrary slogan the leader had for running the company (e.g. “We’re in the widget business, not the gidget business”).  I’ve also seen these shutdown just due to impatience.

Because of this, I recommend that companies do just as Coke does, separate innovation from the bureaucratic organization.  In reality, it’s hard to put any new project out of the reach of meddling bureaucrats.

Ultimately, it takes the realization by leadership that few of these projects will succeed, that none will add significantly to next quarter’s earnings (think more like 5 to 10 years) and, most importantly, leadership needs to protect these external projects from the meddling bureaucrats.

‘…a devalued government’

Peter Schiff explains it well (HT: Carpe Diem) in his testimony before the Congress on Jobs Committee:

In fact, some of what he said is very reminiscent of this most excellent video of Daniel Hannan from 2 years ago, dressing down then British Prime Minister for trying to spend his way out of the recession:

It may be hard to believe after watching the video, but Hannan supported Obama and still supported him through the first stimulus package.  I wonder if he has changed his mind? What he says at about the 2 minute mark would aptly apply to Obama’s latest jobs bill proposal.

Prime Minister, you cannot carry on forever squeezing the productive bit of the economy, in order to fund an unprecedented engorgement of the unproductive bit.  You cannot spend your way out of recession or borrow your way out of debt.  You know and we know and you know that we know that its nonsense.

Addendum:  At the 12:35 mark of the first video, Schiff asks a question that I like to ask my liberal friends who want to raise taxes on the rich:

What percentage of my income do you think would be fair to take?

The hemming and hawing that goes on after that is priceless.  No answer was given.  Just airs of indignity, which often masquerades as argument, to shame Schiff for asking such a question.

Like Schiff, I’d like to know.  I want anyone who would like to raise taxes to tell me what they want to raise it to.  That way when we get there and we won’t have to keep hearing that we should pay more.  When they run out of our money, we can remind that they told us that X% would be enough so they now need to figure out how to get spending under control.

A source of our stagnation?

Does anyone disagree with what Rep. Ryan has to say in this video (HT: W.E. Heasley)?

 

46 seconds in Ryan nails it:

Every dollar that companies spend lobbying for a better tax deal, is a dollar they are not spending making a better product.

The graphic at 1:17 is telling.  The U.S. ranks second behind Japan in combined federal, state and local corporate tax rate of 39.2%.  Japan has been stagnant since the late 80s.

Most folks don’t understand that they pay corporate taxes.  They see that as a tax on the wealthy.

But, most of us own corporations through our retirement and investment accounts.  Here’s a simple way to estimate the amount of corporate taxes that are paid on your behalf each year.

Find the total value of your retirement and investment accounts.  Multiply that by 2% and 4%.  That’ll give you a rough ballpark low and high range of the corporate taxes that you pay.

So, someone with $250,000 in investments will pay between $5,000 and $10,000 in corporate taxes. This is a tax that most investors never realize they pay.

Add that to the income and payroll taxes that you pay directly (and are paid on your behalf by your employer) and you’ll get a better sense for how much total tax paid you paid.

A lower corporate tax rate will help everybody.

I’m a skeptic about most politicians, but I like what Ryan says here.

Leadership

Thanks to my brother for sending me the link to Ken Robinson on the Principles of Creative Leadership on the Fast Company website.  The best piece of it:

The role of a creative leader is not to have all the ideas; it’s to create a culture where everyone can have ideas and feel that they’re valued. So it’s much more about creating climates. I think it’s a big shift for a lot of people.

I found the rest of the article somewhat vague.  But I agree with this paragraph.  Leaders of many organizations — government, companies, non-profits, clubs, charity events, etc. — could benefit from learning this.

Leaders often mistakenly believe their role is to come up with the new ideas to move their organization forward.  They believe they need to chart a course.  The followers don’t help, they also often believe this.  It’s tempting to try to be the hero and to expect leaders to try to be heroes.

But it is also ineffective and risky.  Certainly, it appears to have worked in a few circumstances.  Steve Jobs pops to mind.  But, I would be willing to bet that there are some unsung heroes even in his success stories.

It’s not ineffective and risky for leaders to come up with new ideas.  It’s ineffective and risky when its only their ideas that get attention and organizational resources for several reasons.

Why?  Because so many successes are the result of accidental experiments.  Somebody’s track record isn’t necessarily a good predictor of their future success.  The folks who do have a good number of successes probably have more trials and failures as well.

The reason why this leadership style isn’t prevalent is because few people believe this.

I think back to this and this post on Felix Dennis, publisher and billionaire.  He has come up with a number profitable ideas in his day.  But, the true secret to his success is how he has harnessed the ideas of others.

Buffett’s Business Leadership

While I’m not a big fan of Warren Buffett’s thoughts on government and social policy, I do admire his business savvy.  His results are tough to argue with.

Here’s Buffett’s leadership styles in one simple paragraph from the latest Berkshire Hathaway Letter to Shareholders:

At Berkshire, managers can focus on running their businesses: They are not subjected to meetings at headquarters nor financing worries nor Wall Street harassment. They simply get a letter from me every two years (it’s reproduced on pages 104-105) and call me when they wish. And their wishes do differ: There are managers to whom I have not talked in the last year, while there is one with whom I talk almost daily. Our trust is in people rather than process. A “hire well, manage little” code suits both them and me.

He doesn’t seem all too interested in hiring for a specific set of credentials – other than business management ability:

Berkshire’s CEOs come in many forms. Some have MBAs; others never finished college. Some use budgets and are by-the-book types; others operate by the seat of their pants. Our team resembles a baseball squad composed of all-stars having vastly different batting styles. Changes in our line-up are seldom required.

And he relies strongly on the incentives of ownership:

…the directors who represent you think and act like owners. They receive token compensation: no options, no restricted stock and, for that matter, virtually no cash. We do not provide them directors and officers liability insurance, a given at almost every other large public company. If they mess up with your money, they will lose their money as well. Leaving my holdings aside, directors and their families own Berkshire shares worth more than $3 billion. Our directors, therefore, monitor Berkshire’s actions and results with keen interest and an owner’s eye. You and I are lucky to have them as stewards.

This same owner-orientation prevails among our managers. In many cases, these are people who have sought out Berkshire as an acquirer for a business that they and their families have long owned. They came to us with an owner’s mindset, and we provide an environment that encourages them to retain it. Having managers who love their businesses is no small advantage.

Cultures self-propagate. Winston Churchill once said, “You shape your houses and then they shape you.” That wisdom applies to businesses as well. Bureaucratic procedures beget more bureaucracy, and imperial corporate palaces induce imperious behavior. (As one wag put it, “You know you’re no longer CEO when you get in the back seat of your car and it doesn’t move.”) At Berkshire’s “World Headquarters” our annual rent is $270,212. Moreover, the home-office investment in furniture, art, Coke dispenser, lunch room, high-tech equipment – you name it – totals $301,363. As long as Charlie and I treat your money as if it were our own, Berkshire’s managers are likely to be careful with it as well.