Comparing or not comparing – on the difference between excellence and success

Photo by Aloshbennett

There is a difference between success and excellence.

Success is often measured by comparison to others. Excellence, on the other hand, is all about being the best we can be and maximizing our gifts, talents and abilities to perform at our highest potential

This quote is from a post by Jon Gordon and is definitely one of the most captivating posts I have read recently.

I am a big believer in consternating on ourselves and not on anybody else. It is not that we should ignore all the others, but we should just not focus on them so much. Being the best and doing the best we can is much more important. This is something I am sure about when it comes to the personal life, but I am more and more convinced, it is also relevant to the business-professional life as well.

You probably would not believe me, so I will refer to others, smarter than me. The first, Anthony Tjan, from the Harvard Business Review blog, writing about what looking at others might do to a company:

Most small businesses think that big companies have limitless resources and tons of money, and accordingly can do whatever they want. At the same time, most large companies think that all small ones are entrepreneurial, acting quickly, and bursting with creativity. Neither of these common beliefs is true. Most big companies do not throw a lot of resources at every project, and most small companies tend to become stagnant when they are through with their initial, entrepreneurial stage

 Second, from the Manifesto: “Hit the Ground Running” by Jason Jennings:

Dos and don’ts of america’s best new CEOs

The Don’ts – Don’t study the competition.

Managers are fascinated with figuring out what the competition has up their sleeve. Most of the time, though, studying of the competition isn’t really justified. It’s simply an exercise in saying “See, we don’t suck as much as they do.”

According to the best new CEOs, studying the competition won’t help you to hit the ground running.

I find these ideas so true. So much of our studies in the MBA is outward focused. What are our competitors are doing? How can we imitate them? What are the benchmarks and best practices of the industry? Let’s analyse our competitors…

I am not saying doing all of these things is not important. It might be very important. I am just saying that it is good to try and sometime focus on excellence. On being the best at what we are doing. On giving the best effort we can give. With no relation to what others are doing. If you look at some of the best successes in the last few years, they come from companies that looked at the market and did not ask themselves – how do we compare? How can we do what are competitors are doing, just differently or better. It comes from companies that reinvented the game. That left the confines of the industry and created new industries where they excel. Itunes; Google; Twitter; Iphone; are just some of the examples that spring to my mind.

It is time for us to excel. What did you do today in order to excel, not only succussed.

Elad

Setting your priorities straight

Photo by ➨ Redvers

When I was an instructor in the Israeli Air-force I used to give a workshop about time-management. The concept “time-management” is a little misleading. It gives us the illusion that time can actually be managed, when in fact, it can’t. Time is given. It will pass if we want it or not. And it will do it at the same pace it always did, no matter what will do. So, we need to manage our decisions given that time.

Every time I gave that workshop there was a least one person who would come up to me and tell me: “Look, I am swamped. I just have too many things to do and not enough time”. I always gave those people the same response: “You don’t have a time problem, you have a priorities problem”.

Because time-management is about choosing your priorities, being consistent with them over time and accepting that this process will inherently include some tradeoffs. There will be things you will not be able to do. But until you get your priorities straight you will face problems.

I like to take principals like the time-management-priorities one and see where I can apply them in other facets of life. Now, after almost completing two session of my MBA program, I think that I can confidently say that “getting your priorities straight” is the key concept that describes my learning this session. Because all the courses I studied this session, had this one concept in common. You have to make choices. And you have to be consistent about them. Or in other words, you have to set your priorities straight.

In finance you can see it in the choice between risks and returns. Do you want higher risk or higher possible returns? What is the level of returns you are seeking for? You have to make a choice. And until you set your priorities, your goals, your preferences, be them as they may, you cannot make the right choice. And in order to deliver real value, you need to make consistent decision over time.

Operations management – does my company need to cooperate with others in the supply chain or not? Do I need a pull or a push based production line? Is responsiveness or effectiveness more important? Well, it depends on your priorities. But whatever you do – you have to make sure, that all other parts of your organization and even you suppliers and buyers, are in tune with the same priorities and are consistent with the same decision.

How do you determine your IMC (integrated marketing communication)? Or how do you decide if you are going to concentrate on growth or retaining current customers? You guessed it – decide what your priorities are and make consistent decisions about them. And most importantly – as in time-management – you make choices that lead to tradeoffs that are inherent to the decision making process.

Finally strategy, the mother of all priory decision disciplines. To quote our strategy professor:

“Strategy is Making choices… since you have limited resources, you cannot do everything (and expect to do them well)… that are genuine… ‘real choices’ that are ‘difficult’ and consistent. A ’set of choices’ that different elements strengthen and reinforce each other”

And for me, all of this is the essence of another great idea I believe in. The idea of the comparative advantage. Because comparative advantage is not only about actual competition, but it is more about recognizing what is more important, where can I make the biggest contribution – to myself and to society – and going with it all the way. That is why I try, once in a while, to assess what my priorities are and what my comparative advantage is.

When is the last time you sat with yourself and asked your self – in a personal or professional setting – what are your priorities?

Elad

Revisiting averages…

I was listening today to a podcast from the Mckinsey Quarterly titled “The Granularity of Growth“. The basic idea is that in an industry, not all companies, segments and products have the same growth rate. Which is off course, obvious. But when so many times we use the term “average growth rate of an industry” in the decision mechanism, this realization holds many implications. Not only does the range of the growth in the industry vary, but it is also internally skewed across the segments, a fact that could lead to different decision regarding acquisitions and new ventures & products.

That made me think – where have I heard this concept before? And it immediately came to me – Hans Rosling’s amazing talk about statistics, where he takes Africa’s average GDP and breaks it into different countries that are so varied and different from each another, that just talking about “the problems of Africa” becomes immediately inaccurate. And again, this has many practical implications.

And this led me to what companies do all the time. Look for the average customer. I already discussed some of the implications of such thinking. But a few of the discussions in our latest marketing classes and a case we are working on, crystallized it even further for me. “Our average customer”. “The average satisfaction rate”. Very dangerous concepts. Because by responding to the average, we are missing the different groups that have different characteristics.

Average is easy and convenient to use. It is intuitive for us to grasp. But whenever you see an average, you should be suspicious. You should ask yourself – does it really represent the full picture or does it create a middle category that does not really exist.

Beware of the average, I know I started to.

Elad

Consistent choices

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I was just reading this fascinating post about: “How Nintendo Delights Its Customers“. In it, the writer, Peter Merholz discusses the success of Nintendo’s Wii. Here is a short quote that caught my eye:

As it turns out, Nintendo’s Wii has been the runaway success. Since coming to market in November 2006, over 50,000,000 units have been sold, far surpassing the 30 million XBox 360s, and 23 million Playstation 3s. Instead of playing the faster-better-greater race, the technology in the Wii was essentially on par to the prior generation of consoles, apart from some common and inexpensive sensors in their “Wii-mote” controllers. Nintendo opted to differentiate on experience, providing innovative gameplay through these controllers that afforded immersive interaction. What’s widely known is how this move drove top-line growth, attracting new audiences to game playing, and thus moving more units. But an even more interesting financial story appears when you dig a little deeper. At launch, the XBox 360 Premium Edition was priced at $400, though cost $525 to produce. The Playstation 3 was priced at $600, costing $800 to produce. Wii cost closer to $158 to produce, and was priced at $250.

My thoughts:

1. I think Merholz makes a very valid claim. Costumer experience mind set is so important especially in today’s competitive environment. Doing more with less is a great way to create a competitive advantage. As Merholz says: “Too often, services firms try to solve problems by acquiring additional technologies”. Making more with what we have is the challenge. This is something you, as a manager can do to tomorrow morning – ask yourself what do I have that I am using? How can I enrich costumer experience with things I have but am not currently using?

2. And that brings me to my second thought. If there is one thing I feel I learned in the last few weeks of taking a strategy course is that strategy is about making consistent choices and tradeoffs and understanding that you cannot do everything at a remarkable level.  Nintendo’s decision to go with an inferior technology might seem risky, but coupled with its consistent approach to make more out of the inferior technology and to price the console at a lower price it all makes sense. It is interesting to look at one of the comments for the post:

While I agree that Nintendo has opened an untouched market (namely women and older gamers), I think that it has lost a lot of what used to make it great. While the controller was truly innovative, its games have been incredibly disappointing for traditional gamers. In this first round of interactive controlers I think that many traditional gamers bought the system because of its controller and the company’s catalogue of Nintendo only games. I do not believe gamers will make that mistake again, and while the Wii has sold a number of units, I would be interested in seeing how many games people actually bought. For myself, after initially purchasing a few games in the first few months of getting the console, I realized that the Wii seemed to be targeted at very young children or people who didn’t like video games in the traditional sense of the word. As a result after the first few months I have never bought another Wii game nor even used the system

This is exactly the point. Competing with Sony and Microsoft for the traditional gamer would have been much harder. Nintendo made a tradeoff, understanding that it can’t be everything for everybody. This is strategy at its best –consistent, tradeoff, not trying to do everything for everybody.

3. The third point I think this story illustrated is about how companies can redefine the market.  I think it is amazing that Nintendo succeeded in changing the customers for the console industry by creating a product that speaks to non traditional customers of the console industry.   Our non-customers are just, or maybe as important as our existing customers.

Elad

How does a Judo Fighter act at home?

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 This week’s strategy class dealt with competition and the question of how to approach it. We discussed different methods, most prominent of them being Judo Strategy. This theory takes the ideas of Judo (momentum, balance, leverage) and applies them to the strategic business world. The analogy is very intuitive and I think it really helps in understanding how companies should approach competition (from both directions).

But as I was sitting in class thinking about this, it occurred to me, that this theory creates a frame of competition. If you are a manager, and you spend most of your day thinking about your competition in terms of battles, Judo and so forth, what happens to you when you start thinking about your employees? What is the frame of mind you approach when you try to think about internal procedures? How hard it must be for a manager to change the frame of mind he uses to think when he starts thinking about his employees? And off course, treating our employees as strategic enemies is not a good idea.

This got me thinking on a subject I touched upon a number of times in this blog. The difference between managers and leaders, the expectation that all managers will do both and the problems that this approach creates.

I don’t think there is simple solution to the fact that this framing exists. But, the solution will be closer when we realize that leaders and managers are different, both in the talents needed for their success and in what they need to concentrate on. Off course, I do realize that some roles, especially those on high levels of organizations require people who should be able to do both. These people have to make sure that they are actively making a difference in their thinking about each of these roles. Even the Judo fighter steps out of the ring in the end of the fight, takes his gear off and goes home to his family. The Judo fighter actively changes his state of mind before going home. We need to make sure we do that.

Elad

The resistance to free is futile

Photo by Kalandrakas

The notion of Free is becoming more and more prominent in our economy and in business thinking. More services are becoming free and some things, like information, are starting to be free as a standard. I discussed this phenomenon a while back here on my blog, especially the validity of business models that rely on advertising.  

I started thinking about this again after reading Malcolm Gladwell review of Chris Anderson’s new book, “Free: The Future of a Radical Price” and Seth Godin’s take on the two. This is the gist of Godin’s view:

The first argument that makes no sense is, “should we want free to be the future?” Who cares if we want it? It is. The second argument that makes no sense is, “how will this new business model support the world as we know it today?” Who cares if it does? It is. It’s happening. The world will change around it, because the world has no choice. I’m sorry if that’s inconvenient, but it’s true.

While I do agree with Godin that free changes a lot I am not sure that his take is fully accurate. You have to agree with Gladwell’s take on the example of Youtube:

YouTube is a great example of Free, except that Free technology ends up not being Free because of the way consumers respond to Free, fatally compromising YouTube’s ability to make money around Free, and forcing it to retreat from the “abundance thinking” that lies at the heart of Free. Credit Suisse estimates that YouTube will lose close to half a billion dollars this year. If it were a bank, it would be eligible for TARP funds

I was just reading an article for the strategy course I am currently taking at my AGSM MBA and in it the writers describe how E-bay reacted to the public auction initiative that was started by Yahoo!. Yahoo!’s product was free and E-bay originally thought that was going to be a problem. But it turned out, like in the Youtube case, the free attracts, as Anderson and Gladwell call it: “Crap”. If it is free to post an auction, you start auctioning stuff that their possibility to sell is close to 0. Even though in E-bay, the payment was about 25 cents, this payment still held barriers that made their service better. It turned out, free was the wrong way to go.

So, what is the lesson here? Gladwell says that:

The only iron law here is the one too obvious to write a book about, which is that the digital age has so transformed the ways in which things are made and sold that there are no iron laws.

Godin, says something similar:

In a world of free, everyone can play.

My personal take is that the rules are changing. On one hand, you have to realize that some industries will have to remodel their business to a world of free. Like newspapers, book publishers, and probably even the music industry. On the other hand, you cannot ignore the physiological effect of free (research shows that when people pay for something, they enjoy it more). And you cannot ignore the fact that even if there are things for free in the industry people will still not be willing to pay for special, unique and scarce. As Godin puts it:

People will pay for content if it is so unique they can’t get it anywhere else, so fast they benefit from getting it before anyone else, or so related to their tribe that paying for it brings them closer to other people. We’ll always be willing to pay for souvenirs of news, as well, things to go on a shelf or badges of honor to share

This means we should be careful. We should not ignore free. But we should not fall for the trap it represents. Free has advantages and disadvantages. We need to further study how free works because it works for certain industries and it does not for others. One thing we can’t do. We can’t allow the past to control our future. Fighting free, where it is relevant, will not work. Resistance is futile.

Elad

David and Goliath

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I love the story of David and Goliath since I was a little kid. You must admit, it is the basic story of the underdog. Lately, as I was reading other interpretations of it, I understood how loaded with ideas and morals this story is. Then, Last week I read this fascinating article by one of my favorite writers, Malcolm Gladwell, called: “How David Beats Goliath“. And took another spin on the ideas I have already been exploring. In it, Gladwell makes two very interesting points. This is the first one:

When underdogs choose not to play by Goliath’s rules, they win. David can beat Goliath by substituting effort for ability—and substituting effort for ability turns out to be a winning formula for underdogs in all walks of life.

There are so many implications for this idea and many of them are mentioned in the article itself and I don’t want to ruin the read for you. One thing that I thought about immediately is companies’ strategy and some of things I learned and wrote about in the last few weeks.

From all the cases I have been reading lately in my strategy class, one thing is clear. In order to win against the big ones, you cannot try to be like them. You got to be different. You got to create a comparative advantage and then exploit it. Dell, Southwest, SAS, Airborne. All examples of companies who went against the big guys and won. Not because they tried to be better than the big guys. But because they were different. They came up with something new.

This is what I wrote just a few weeks ago:

But this also creates temptations. To imitate and not innovate. To be like somebody else, because it is safe. Because it is easy. This is a temptation we should be careful off.  Do you want to out-Apple Apple? Is that possible? Companies tried to out-Southwest Southwest and failed.

The same logic goes the other way. If you are the big guy, watching the little guy get bigger, your reaction should not be imitating him. You are a big guy. Little guy’s strategies will not work for you. When Dell started with the direct selling model, HP, Compaq and IBM tried it as well and failed. Their structure was not suitable for direct marketing.

The second point is about real time. To fully understand it, you should really read the article, but here is the gist of it. When talking about the Federal Reserve setting interests, one of the interviewees in the article says:

The world runs in real time, but government runs in batch. Every few months, it adjusts. Its mission is to keep the temperature comfortable in the economy, and, if you were to do things the government’s way in your house, then every few months you’d turn the heater either on or off, overheating or under heating your house.

Two thoughts on this point:

The first is a something I have been lately thinking about a lot. It is one of the most prominent things every manager should do. Investigate the information he already has. There is an abundance of information in every organization just lying there because people gather it anyway. You can make a lot out of it.

The second thought is about the challenges facing governments in the future. I think three concepts are important here: real time, transparency and aggregation of information. Governmental bodies which will be able to harness the power of real time and aggregation while keeping and improving transparency will be the most successful bodies for our society.

Elad

Why you should go and observe someone else’s work?

Photo by Timothy Valentine

Last week in our strategy class we were talking about competitive advantages. We learned about the two main ways you can create competitive advantage – cost advantage and differentiation. Then, as an answer to a student’s question (I don’t remember what it was exactly) the professor said something like this: if you are looking for how to create cost advantages – you need to look for answers in the operations class. If you want to create differentiation advantage – you need to look for answers is the marketing class.

I can’t say I agree.

I think one of the major problems companies are facing today is to create ways disengage from this kind of thinking. To create synergies between operations and marketing. And finance, accounting and HR for that matter. The thought that the advantage of the company, whatever that is, lies in one aspect or one discipline of the business is counterproductive and for me, counterintuitive. With everything we know about the importance of diversity in the creation of innovation, about the effects of social capital derived from interaction between different parts of the business, even thinking about competitive advantage as being the responsibility of one part of the business is dangerous.

I am sure our professor acknowledges that as well. All the examples of successful companies we keep seeing are examples of companies which succeeded to do both cost and differentiation advantages. Doing both requires coordination.

More than that. In the operations class we learn about things like TQM and Six-Sigma. These are concepts that not only reduce cost, but also increase quality and can create differentiation. Marketing decisions can have cost implications. The fact the Apple chooses (or choose) to create the I-pod with a very limited user interface (which I find terrible) is a marketing decision. But I am sure it has operations and cost implications. Design of the product can be a competitive advantage – who does it? Marketing or operations.

In the words of Guy Kawasaki:

The separation of engineering and marketing is artificial. It presumes that engineers build feature-laden crap that no one cares about but engineers. Maybe mediocre engineers do this. Great engineers create with a customer in mind. Fantastic engineers create with themselves in mind as the customer. Every Nokia engineer should give their prototypes to their mothers, fathers, and kids. That would fix everything. The user interface of almost every phone is unintelligible. Anyone could have done an iPhone—it’s not like Apple has a monopoly on design.

I understand the need to simplify concepts for MBAs. But the fact that we study each and every one of the courses separately is enough to create silos of thinking instead of integrative thinking. I think all disciplines, and especially strategy, should embrace an integrative look.

No matter where you work and what is your pre-defined role in your company, you should try to schedule an hour, a day, a week – with another department – to understand their work, their needs and their problems. What you will learn will be invaluable to your work.

Elad

Contradictions

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This post will be different than usual. I don’t really have a point. Just a philosophical question. In the last few weeks in my MBA I have felt like I am under constant attack of mixed messages.

One of the main things you learn in the MBA is that no company is invincible. So many companies have failed because they were reluctant to understand that their current advantage is what might bring them down. They relied too much on the past and did not consider the possibility, that the future will be quite different. And our professors keep ramming this idea into us.  ”Past profitability is a poor indicator of future profitability” says our Strategy course slides.

But at the same time, one thing you keep learning and studying is how to try to forecast: future sales, future demands, and future trends. Half of our assignments deal with some kind of forecast of the future. The same strategy class talked about the fact the historically, some industries were less profitable than others.

Two thoughts on this:

In his novel “1984″, George Orwell’s descries the notion of Doublethink: the act of simultaneously accepting as correct two mutually contradictory beliefs. This is I have been feeling lately. They say that the ability to Doublethink is a trait of great people. I am trying to be great.

Maybe the answer lies in the middle. Understanding that both the past and the future are not reliable. The past is something we should study carefully. But we should not trust it blindly. The future is something we should try to forecast. But we should accept that we can’t.

Elad

Competitive Advantage

Last week I attended a Strategy class. In one of the slides on his presentation our professor wrote the following definition for “Competitive Advantage”:

The ability to create more economic value than competitors

   * There must be something different about a firm’s offering vis-à-vis competitors’ offering

   * If all firms’ strategies were the same, no firm would have a competitive advantage

   * Competitive advantage is the result of doing something different and/or better than competitors

Two things jump out to me in the definition:

1. I don’t see Competitive Advantage as the ability to create more economic value than competitors. I think competitive advantage is how we create value differently than competitors. There is a big difference. Our competitors don’t have to be our enemies and it does not have to be a race. We can both be different.
2. Coming from a strategy professor I am not surprised to find such an emphasis on the importance of strategy, but I don’t think that: “If all firms’ strategies were the same, no firm would have a competitive advantage”. There is the little issue of implementation. And similar firms, with similar mission, vision and goals, handle implementation differently.

Same same but different. One of the readings on that same course (“The fundamental dimensions of strategy” by Frederic Frery) included this statement:

“Because the value of any strategic concept resides in its ability to create competitive advantage, the concept becomes irrelevant as soon as it is extensively adopted. In a hypercompetitive context, the better a strategic idea, the shorter its life”

We live in a society of imitators and imitation. From popular culture to workplace behaviour to academia to business.  And in some ways, that is not a bad thing. When a company comes up with a new idea, it is quickly copied, sometimes in better ways. The bar is constantly rising. What was new last week is the excepted average next week. This creates challenges. How to create innovation and differentiation that will last? Or on the other side how to let advantages go, because we live in the age of temporary advantages.

But this also creates temptations. To imitate and not innovate. To be like somebody elase, because it is safe. Because it is easy. This is a temptation we should be careful off.  Do you want to out-Apple Apple? Is that possible? Companies tried to out-Southwest Southwest and failed.

And what it true in strategic business life is even more accurate in your personal and professional life. As Peter Bregman accurately articulates:

 Trying to distinguish ourselves by being the same as others, only better, is hard to do and even harder to sustain. There are too many smart, hard working people out there all trying to excel by being the best at what everyone else is doing. It’s simply easier to be unique

What is going on with your Competitive Advantage?

Elad