Be a Disrupter (Before Someone Else Eats Your Lunch!)

Among the many newsletters I receive each day there was one that caught my eye this morning.  There was an article on Amazon and how their ambitions on the supply chain should have logistics companies worried.  E-commerce has been steadily gaining market share from traditional bricks and mortar retailers, nor accounting for 9.5% of the total US retail market.  Another article I read last night talked about how grocery stores are facing tighter margins and reduced earnings because of things like Amazon buying Whole Foods and selling more groceries online as well as the rise of online services that make it easy for any small restaurant to allow for internet or app based ordering and pooled deliveries.  Millennials are just not buying cars the way other generations did, but they are more comfortable with the idea of ordering what they want from their phone.  Some traditional retailers are turning to offering delivery to meet this trend.  Some retailers will innovate, but others will follow in the fate of retailers like Sears, Toys R Us and Circuit City into massive store closures or bankruptcy.

Let’s face it, most of us are busy enough trying to meet our short to medium term business objectives.  Who has time to find the next big technology or trend in our industry?  And besides, being the leader can be a risky thing.  It’s never fun to put your career on the line for a relatively untested idea. What if you guess wrong?  Why not let those small start-ups live on the bleeding edge while you sit back and wait to see what ideas gain traction?

We need to make sure that there is a culture of Intrapreneurship in our organizations.  We all have red tape and redundant processes that are “the way we have always done things”.   Our managers and staff need to be empowered to question those processes and be encouraged to come up with alternatives that we support and allow to be experimented with.  I don’t mean letting them just try anything – customers can not be negatively impacted.  At the same time, front line managers must be given some leeway to green light ideas that can be quickly executed.  Nothing stifles creativity more than having a drawn-out process where all changes need to work their way up to senior management and then back down again.  Give your functional managers the ability to approve experiments within a reasonable boundary so that these trials can happen quickly.  Some projects will have impacts across the organization or be capital intensive enough that senior management needs to be involved but look at ways that the process can be shortened.  Smaller companies with a flatter structure will be acting on these sorts of ideas more quickly and start taking your customers away as a result.

Intrapreneurship needs to be something that we build into the recruiting process.  Offering the ability to create new businesses can give you a significant advantage when it comes to hiring the best and the brightest.  This is a strategy that companies like P&G and Google have used for years.  Offering the freedom to have ideas supported (and later rewarded) can provide a way to attract better new hires than just throwing more money at them.

One thing to keep in mind is most of these ideas and improvements will not be big, especially not at first.  How many start ups get to huge valuations within the first year?  Almost none of them!  And many that do become successful probably would not get approved in the typical corporate review process.  Think of many of the great baseball teams – how many of them rely solely on the home run to win pennants?  If that was the way to do it, then this year’s New York Yankees should be miles ahead in the AL East with their new incarnation of the Murderer’s Row.  Unfortunately for them, they are sitting 4.5 games back of the Red Sox.  You are going to get better results relying on small ball to get runs and then when a home run does come around it is just a bonus.  And don’t to try to force things.  In Thursday’s game between the Yankees and the Royals, veteran KC player Alex Gordon ignored the stop signal at third, tried to create a run and got gunned down at home for the final out of the game.  The same thing can happen to your business when it only tries for the next “big” thing.  The reality is that none of us know what that will be (and if you really do know what it is, why aren’t you already doing it?) Encourage those smaller improvements – streamline your billing process, find a way to do routing better.  Those smaller things will add to the bottom line and give you the resources to fund the big ones when they appear.  Besides, having several smaller bets means that failure on any one of them will not threaten your business but going all in on a potentially big one could.  At the end of the day, innovation is like portfolio theory.  By diversifying your holdings, you reduce the overall risk profile.  Most disrupters stated as a small idea that ended up growing beyond what it’s creator hoped for.  So, encourage that innovation within your company and pay attention to what’s going on around you.  That way you remain nimble enough that if someone else does start to eye your lunch you can create and implement solutions that allow you to remain differentiated from the rest of the market.  It’s not going to be easy to give up some of that control, but it will be significantly less painful to give it up on a small initiative than it would be to have to bring in something big because that’s the way the market has gone while you stood pat.

Keystone Habits: What are yours?

Four years ago, I read a book entitled The Power of Habit: Why We Do What We Do in Life and Business by Charles Duhigg. I have since re-read this powerful book four times, and purchased a couple of the books cited by Duhigg in the book itself. It introduces the reader to the concept of Keystone Habits. Keystone Habits can be defined as foundational habits which have the power to transform nearly every facet of your business (and perhaps your life).

As an example of a corporate Keystone Habit, Duhigg details the tenure of Paul O’Neill at the helm of Alcoa (the world’s third largest producer of Aluminum at the time). When Mr. O’Neil joined Alcoa in 1987, the company had suffered through a long period of stagnation, and appeared to be on the patch to succumb to the increasing pressures of global market place. Obviously, this put O’Neill under immense pressure to deliver results.

However, Mr. O’Neill quickly figured out that in order to stimulate growth, profits, and employee morale, he had to find a way to motivate the entire company aside from typical financial incentives. In his first public analyst meeting, instead of focusing on the regular ratios, projections and competitive discussions, Mr. O’Neill decided to focus on something which can now be described as a ‘Keystone Habit’, and that was Worker Safety. He told the group of analysts that instead of focusing his attention on margins, input hedging (and stock price), he intended to transform the company into one of the safest companies in America. The goal – Zero Injuries.

Obviously, the analysts in attendance were skeptical (and puzzled), as was most of Wall Street. In hindsight, many didn’t realize that this focus, had the effect of uniting everyone from the Boardroom to the Factory Floor. The results? During his tenure from 1987 to 1999, Alcoa’s market value rose from $3 billion to $27 billion, while net income rose from $200 million to $1.84 billion. Better yet, Mr. O’Neill successfully transformed the company into one of the safest industrial organizations in the world!

What can we learn from this? When companies go through the process of developing its Mission, Vision, and Values, typically at least one important stakeholder group is left out of the mix (either directly or indirectly). Customers, Employees and Shareholders should all be ‘captured’ in corporate goals and missions. Further, the majority of corporate mission statements are excruciatingly vague, in essence they become placeholder text (in fact, if you google some of them – they are placeholder text). What if your company decided to scrap that vague mission statement and focus on something that is not only going to drive profits, but also employee purpose and customer satisfaction?

Here are some examples of mission statements from some leading North American Transportation companies:

  • “You’re Safe With Me”
  • “Safety: An Obligation Without Compromise”
  • “Work Safe = Home Safe”
  • “We own it. Every mile. Every job. Every day.”
  • “Delivering On Our Promises”

These are just a few examples I could find. Does your mission need updating? Are your daily, weekly and monthly habits in need of retooling? The start of a brand new year is a great opportunity for that.

Turn Mistakes into Compound Interest for your Business

We all strive for the golden ring of Six Sigma, and making as few errors as possible.  Making mistakes has become taboo as we compete in the global marketplace against German and Japanese firms that emphasize efficiency, consistency and reliability.  But what if that quest is stifling entrepreneurialism and innovation?   What if creating an atmosphere where employees are afraid of making mistakes is costing us on the bottom line?

Let’s face it, all of us have made mistakes throughout our careers.  Most them were small and easily corrected, but some may have been huge and had immense repercussions.  At the end of the day we are all humans and imperfect beings.  What’s more important is asking the question – did we learn from the experiences to ensure that we didn’t make the same mistake twice? How capable are we of introspection? The old saying “Fool me once, shame on you. Fool me twice – shame on me” comes to mind here.  For many of us it was our reaction to our mistakes (or the mistakes of others) that proved our worth and moved us forward.  The legendary UCLA basketball coach John Wooden once said “If you are not making mistakes then you’re not doing anything.”  So, if learning from those errors helped you in your career, don’t you owe your employees some leeway to make mistakes as well?

Yes, there are certain positions, tasks, or customers that you have no room for error – making a calculation error on the budget or overcharging your largest customer on fuel surcharge are examples of mission-critical errors.  However, each business has areas where perfection isn’t necessary and doesn’t pose a real threat.  We have previously discussed Kanban systems of continuous improvement.  Implicit in the concept of improvement is the possibility of being wrong occasionally.  Amy Rees Anderson in a 2013 Forbes article put it this way – “mistakes are not failures, they are simply the process of eliminating ways that won’t work, in order to come closer to the ways that will.”

Making a mistake means that the employee went outside of their comfort zone and entered a state of learning, which is where new discoveries are made, and lessons are learned.  However, many of us are reluctant to allow employees to make mistakes and the root cause tends to be a lack of trust.  That comes from two sources.

The first one is our own belief in being better at running all facets of our business than anyone else.  Why else do we all carry our phones with us on vacation and constantly monitoring and checking our e-mail?  It’s rooted in the belief that we are better at making decisions than everyone else.  It’s that attitude that’s holding leaders back from becoming greater leaders.  We can’t run successful businesses if we insist on doing everything ourselves.  Let’s face it, there are only 24 hours in a day and eventually we must sleep.  Short bursts of being a hero are possible, but it can’t be sustained over the long run.  Eventually we get tired and need to be recharged.

I was recently talking with a regional VP of a major bank who had just come back from a vacation.  She told me that for the first time ever she did not bring her phone with her on a trip.  A week before leaving she gave her people notice that she was only available by email up until a certain date and that any emails received while she was away would just be deleted.  Her reasoning was she had a team below her that she had empowered to make decisions and she trusted them to do so.  I spoke with her three days after she had come back, and she still felt rested!  How many of us have come back from a vacation only to feel like we had not even gone away?

The second reason for not trusting people to make mistakes stems from how we hire people.  Sometimes we just take the first reasonable candidate to fill the short term need instead of putting an emphasis on trustworthiness during the interview process and setting the expectations from the start.  Yes, it is painful to have to use existing staff to backfill vacancies but if you are just taking the first warm body that seems capable for the job, is it any wonder that we don’t trust them to make decisions, much less make mistakes?

We can all start by setting a culture where a degree of risk taking is acceptable.  Obviously, a VP is going to have more leeway than a customer service representative.  Given that constraint we need to make certain that we allow some room for experimentation so that a culture of continuous improvement can take place.  So how do we do that?

First, encourage people to own their mistakes and learn from them.  That means not lowering the boom on them whenever an error happens.  Do that and they will never develop the habit of looking objectively at the mistake, recognizing what they did wrong and understanding why that choice was the wrong thing to do.  Let them hold themselves accountable for their mistakes and acknowledge them.  If they are more worried about getting ripped into because of a mistake, then they will just hide them and never learn from them.  This will also result in you only knowing about mistakes when they become large and potentially costly instead of when they are small and easily fixed.

Second, make sure that the person who makes the mistake either fixes them or at least is involved in the correction.  I once heard someone say that lessons aren’t lessons unless they hurt a little bit.  Keep in mind that for most people the self-induced shame of having messed up is probably enough, you probably aren’t going to help things by piling it on, especially if it is a relatively small issue.

Finally, work with that person to develop safeguards to ensure that the same mistake will not get repeated.  Do a root cause analysis with that person so that they get an insight into what went sideways and why.  Most of your employees are more than smart enough to determine the root cause, they just might need some help with the framework.  By going through that process, they will gain insights that they can use in the future to start catching errors before they happen.  And guess what, an employee that can do that means better decision making in the future and just maybe you can join that bank VP in taking a vacation where you come back rested or even just go home at night and not feel that you need to constantly monitor things.  By being able to let people take on those new responsibilities you are going to free your own time up to take on items that will either grow your business or just contribute more to the bottom line.  Making mistakes – who thought that it would be a win-win proposition?