Continuous improvement, the past, feelings and rituals

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Nametag Scott wrote an interesting post a few days ago under the concept: “You don’t need an idea – you need an I did”. In it he discusses the idea of continuous improvement or Kaizen (which I wrote about in the past). One part of the post really made me think:

2. What will you do differently next time? Kaizen is the Japanese term for continuous improvement. That’s exactly what this question is all about: Honoring your current performance, yet challenging yourself to envision an enhanced future.

In my first five years as a professional speaker, I employed this philosophy as a post-speech ritual. Once my presentation was over, I’d take fifteen minutes to write a stream of consciousness list. Every thought, every feeling and every evaluation of my performance, I wrote down.

What worked? What didn’t work? What killed? What bombed?

This simple ritual grew into a profitable practice for continuous improvement of my performance as a speaker. How could you apply the same reflection process to your job performance?

I find this particular advice powerful because of three reasons:

1. It acknowledges the past, but puts it behind. Scott says: “I’d take fifteen minutes to write a stream of consciousness list”. That is it. 15 minutes. We fret a lot about the past on analyze every aspect of it. We let out attention be captured by it. While it is important not to ignore past mistakes and make sure we learn from them, the focus should be on the future. Feedfoward instead of feedback.

2. It acknowledges the importance of feelings, not thoughts. Scott says: “Every thought, every feeling and every evaluation of my performance, I wrote down”. Yes, we can and should look at things rationally, but we should also look at them emotionally. When are too focused on the numbers, on the performance on the outcomes, we tend to lose touch with our own humanity. I am not suggesting to sit and cry for fifteen minutes after every failed performance, but I am suggesting that we need to recognize the importance of feeling in our performance and decision-making.

3. It emphasizes the importance of rituals. Continuous improvement is all about rituals and habits. Aristotle said: “We are what we repeatedly do. Excellence, therefore, is not an act, but a habit”. Yet, most of us trust ourselves to do the right thing, to make the difficult analysis, to put things on the table, to learn from our mistakes. If all of these things were so easy, they wouldn’t be so valuable. There is strength in rituals not only in our personal lives but also in our professional lives. What kind of rituals or habits does your company or team has? What challenges do these rituals or habits help your overcome?

Elad

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Shorts: Amar Bhidé on the deference of human judgment in favor of computer models.

Today, I heard HBR.org Ideacast titled Bringing Judgment Back to Finance where Amar Bhidé, author of a recent HBR article The Judgment Deficit and of a book titled A Call for Judgment: Sensible Finance for a Dynamic Economy was interviewed about the ideas in his article and book.

It is a fascinating cast and I would let you listen to it. I wanted to point to what in my view was the main idea. Over-reliance on computer models, both in finance and in other areas of life, is dangerous. While computer models and arithmetic based rules are important, they should not replace human judgment.

I must admit that when I prepared my No More Rules! presentation and wrote the MIX hack under the same title, I haven’t even considered cases where the rules are no man-made, but computer made. This, of course, leads to a different set of complexities (Hey, this is what the computer says). I think however, that the message is the same. We need people who think, how develop skill, judgment and practical wisdom. Rules, guidelines and arithmetic models are tools that should help human make decision, not replace them.

Interesting stuff!

Elad

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Absolutely clear expectations about everything

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Rosabeth Moss Kanter has an interesting post today on HBR.org called: Four Things Groups Want that Leaders Can’t Give — and One They Can. To spoil the message, the four things are: Absolutely clear expectations about everything, Perfect certainty about the future, Yes all the time, The ending at the beginning. And the one they can is TLC — tender loving care. You got to love that.

I want to concentrate on the first thing “groups want that leaders can’t give”:

Absolutely clear expectations about everything. Expectation-setting sounds good as a leadership principle but is difficult in practice, especially when leaders try to tell people about things they haven’t yet encountered and do not yet have the experience to comprehend. No matter how much leaders try to define expectations, lay out the nature of likely events, or describe the steps that the group will be going through, it’s not enough. As the work unfolds, leaders are likely to hear, “Why didn’t you tell us X, Y, or Z?” Even when leaders pull out the opening memo with X, Y, and Z spelled out in detail, some people deny that they received it. All leaders can do is strive to be thorough, to communicate repeatedly, and to document the flow of events.

I agree with Kanter completely but I think it is important to note that the fact that we can’t set expectations about everything does not mean we shouldn’t set them at all. Like with many other things in life, it is a matter of choosing the right issues to focus on. More than a year ago I wrote a post about the importance of expectations and got into an interesting debate in the comments about what it actually means. I think that debate revolves around the point I want to make here. No one can set expectations for every possible scenario. In fact, that collides with second thing “groups want that leaders can’t give”: perfect certainty about the future. That is why expectations should be used as templates not as clear rules. When we think about setting expectations, somehow, the picture that comes to mind is one of micromanaging. Instead, expectations should be less about the task itself or how to do it and more about the process of communication and about the guidelines for decision-making.

No. there wouldn’t be clear expectations about everything. Actually, there wouldn’t be about most things. But, if we recognize a number of key issues, the vital signs of our business if you will, and set our expectations around these issues and about how and when to communicate, those are things that groups might not want, but they certainly need.

Elad

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Compromise or tradeoff?

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Two seemingly unrelated posts I read this week made me think again about an issue that I think is at the heart of business strategy and leadership. Tradeoffs and priorities.

In the first post, Hugh MacLeod describes the decision Howard Schultz of Starbucks tells about in his book, Pour Your Heart into It: How Starbucks Build a Company One Cup at a Time. Sometime in the 1980’s it was a really bad year for coffee crops. Starbucks had to make a choice. Either raise prices or start using cheaper coffee. Research said that using poorer coffee will only be felt by 10% of customers (as a non-coffee drinker, this number surprised me a little) while raising prices would be felt by all costumers. This is how Hugh described what happened:

The accountants, predictably, recommended that they go with the cheaper coffee option. Numbers don’t lie etc, it was better to tick off 10% of their customers than 100% etc, cheaper coffee was the “obvious” thing to do etc etc.

Howard didn’t do that in the end. Instead, he raised the prices accordingly, and left a note in every store, telling people why his company was forced to regretfully raise their prices. And he also told them about the option he could’ve taken but chose not to i.e. cheapen the coffee.

And you know what? The customers understood his reasoning, and stood by the business.

Eventually wholesale coffee prices came down again, allowing Starbuck’s to lower their prices as well. The company weathered the storm and the brand ended up all the stronger for it. Life was good again.

Sorry, Bean Counters. Numbers do lie. Sometimes pathologically so…

The other post was written by Jon R. Katzenbach and Zia Khan on HBR.org. they describe what they call “Proud to be Cheap: The “Secret Sauce” of Low-Cost Winners”. Most companies engage in cost cutting and try to reduce costs. But some companies, Katzenbacha and Khan claim, have it as part of their D.N.A:

In a nutshell, it is a culture that is “proud to be cheap” in good times and bad. Their people cut erasers in half, turn off the lights when they leave the building, bring their lunch to work, fly in the back of the bus, and stay in Day’s Inns. More important, they are always on the alert for ways do things on the job more cheaply, without compromising quality and service standards. Nothing is wasted, nothing is redundant, and nothing is overlooked when it comes to doing it on the cheap.

These seem to be two very different stories. But actually, they are the same. It is the stuff success is made of. Tradeoffs. Priorities. Consistency. Average is the most dangerous path. If you do something, go all the way. Pure you heart into it. Make everything about your concept. Build the decision around it. Sure, at times it might not seem like a good idea. At times, everybody will tell you that you need to settle. That principles are good but they don’t provide a living or they don’t satisfy the shareholders they will say. I think it is all nonsense. Ignore Everybody.

The problem with stories about companies’ strategies and CEO’s decisions is that sometimes they seem distant. How many of us are going to be CEO or make decisions that have so much impact? In this case? Every day. Every one of us makes many choices every day. And each of these choices could be comprise or could be a tradeoff. What will your next decision be?

Elad

<a href=”http://www.amazon.com/gp/product/0788195336?ie=UTF8&tag=thecompaadvan-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=0788195336″>Pour Your Heart into It: How Starbucks Build a Company One Cup at a Time</a><img src=”http://www.assoc-amazon.com/e/ir?t=thecompaadvan-20&l=as2&o=1&a=0788195336&#8243; width=”1″ height=”1″ border=”0″ alt=”” style=”border:none !important; margin:0px !important;”

Business is a mystery, not a puzzle – information overload and judgment

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Umair Haque, a fascinating writer (which I quoted in my No More Rules! Presentation), wrote a captivating piece in HBR.org the other day. He discussed the famous Efficient Market Hypothesis (definition from Investopeida):

An investment theory that states it is impossible to “beat the market” because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments.

Haque, who constantly writes about the need for a new economy based on value creation instead of the old one that was consternated on creating money for itself, offers a new idea:

I’d like to advance a hypothesis. Call it the Efficient Community Hypothesis. It says: where efficient markets incorporate “all known information,” efficient communities incorporate “the best known information.” An efficient market is a tool for sorting the largest quantity of info. But an efficient community is a tool for sorting the highest quality info. On its own, the EMH is simply about informational efficiency: that prices incorporate “all known information.” Where it falls down is in terms of informational productivity: whether prices incorporate accurate, valid, and reliable information — high quality knowledge, instead of low-quality noise. Incorporating all known information doesn’t mean incorporating good information.

Haque deals with a very important point. Let’s assume for a minute that when the EMH was originally hypothesized it was correct (even though there is a debate about that). Well, there is no doubt today that the world has changed dramatically. Just think about the differences in quantities between the information that was available, let’s say, 30 years ago, and the quantities available today. There must be a law of diminishing returns at work here. At some point, the more information we put in, the less we gain from it. And sometimes when we abundance of information happens, just as Malcolm Gladwell tries to convince us in Blink: The Power of Thinking Without Thinking, decisions become worse, not better.

But it is even deeper than that. The EMH assumes that information is the only thing we need in order to interpret the market. If we only have all the information, we can come with the right answer – the price. It is kind of a puzzle. Give me all the information and I will give you the answer. But the stock market represents companies that work in the real world. And the real world is, well, uncertain. And yes, it is also more uncertain then it used to be 30 years ago. Even if you do give me all the information, I still need to use judgment in order to give you an answer. And it might be right, but it might not. In an article called “Open Secrets”, that is now part of his book, What the Dog Saw, Gladwell writes:

The national-security expert Gregory Treverton has famously made a distinction between puzzles and mysteries. Osama bin Laden’s whereabouts are a puzzle. We can’t find him because we don’t have enough information. The key to the puzzle will probably come from someone close to bin Laden, and until we can find that source bin Laden will remain at large.

The problem of what would happen in Iraq after the toppling of Saddam Hussein was, by contrast, a mystery. It wasn’t a question that had a simple, factual answer. Mysteries require judgments and the assessment of uncertainty, and the hard part is not that we have too little information but that we have too much.

So what Haque rightly calls for is judgment and trust and expertise on a more common basis. Knowing that we have a lot of information, that a lot of it is irrelevant and that the future is unpredictable, we need two things. First, just like in the case of the doctors described in Blink trying to decide if a patient is a risk for a heart attack, simplify our decision making process. As Gladwell says, they are swimming in knowledge, but lacking in understanding. The simplification helps their judgment. Second, we need people with more practical wisdom, ability to infer judgment and to make decisions that accept the uncertainty.

And that second issue throws me back to my point about rules. In my presentation, No More Rules! I claim that the wide spread use of rules is killing people’s practical wisdom. It is killing their judgment. Just when we have more information than ever and when we need simple good judgment more than ever, we are creating cogs that follow automated rules and formulas that treat the world like a puzzle. Life and business, is mystery, isn’t it time we face up to it?

Elad

Decision tools

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This is the third post in a series of post I am writing after reading Blink: The Power of Thinking Without Thinking by Malcolm Gladwell (for former post see 1, 2).

One of the sentences that struck me as the most important in Blink comes from the afterword. This is it:

The key to good decision-making is not knowledge. It is understanding. We are swimming in the former. We are desperately lacking the latter.

This sentence is built upon a number of stories in the book (and connects to other writings by Gladwell about the perils of too much information). One of the leading stories it refers to is the story of how Cook County Hospital improved the decision-making of its doctors by telling them to focus only on three pieces of information in the entire sea of details they had about patient in order to make a decision whether he was a risk for heart attack. Even though all doctors felt that this was the wrong way to go, as they were ignoring precious information, it turned out that by focusing only on three issues, doctors made much better decisions that not only saved money, but more importantly, saved lives.

I have written before about the dangers of using the information and measurements we have just because we have them. As we continue to develop in terms of technology, we will have more and more data and information. As Gladwell says in Blink:

We take it, as a given, that the more information decision makers have, the better off they are. If the specialist we are seeing says she needs to do more tests or examine us in more detail, few of us think that’s a bad idea… extra information isn’t actually an advantage at all; that, in fact, you need to know very little to find the underlying signature of a complex phenomenon.

In my mind this connects perfectly with the idea of Vital Signs. This is what I wrote almost a year and a half ago:

I believe the challenge of managers in the next few years, especially in the more subtle fields that are hard to measure will be to create the right vital signs.

I am I the process of reading Switch: How to Change Things When Change Is Hard by the Heath brothers and one of the main concepts of the book is about scripting change. They describe the importance of making people aware of the basic decision principles to guide their specific behavior. They give example of major changes accomplished by ordinary people who harnessed the power of simplifying the decision-making. How? By creating scripted concepts that help decide what is important and what is not.

Reading Blink and Switch just strengthened my understanding of this concept. People are cognitive misers. They are not able and do not want to deal with large amounts of information. As Blink (and Switch) show, when they are faced with so much information it actually affects their judgment, usually in a negative way. The most successful people are not going to be those who can master and absorb large amounts of information. It will be those who will know how to distill this information into a few major signs that help guide decision-making. Thus, our rule as managers is to find the vital signs and make them crystal clear. We need to make sure that we are tackling the right issue. Not lack of information. Lack of decision tools.

Elad

No explanation, just gut

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This is the second post in a series of post I am writing after reading Blink: The Power of Thinking Without Thinking by Malcolm Gladwell (see the first post here).

As someone who is going to graduate with an MBA from a business school in a few months I respect the power on analysis. I respect the use of data and the importance of facts and figures. I have deep appreciation for forecasting models and analysis models and to rational, structured approach to decision-making and strategy. In God we trust, for everything else we need data.

At the same time, if there is one thing that I learned over the last year and half is that the although modern technology allows us to be exposed to so much data and even sometime turns it into information for us it does not guarantee that data and information will be transmitted into knowledge or even will allow us to make better decisions. Sometimes, we have to trust of judgment and gut feeling. Cause sometimes, the best decisions, those which represented a big risk but were also a big opportunity, cannot be explained rationally with analysis and data.

Gladwell writes in Blink:

When we ask people to explain their thinking – particularly thinking that comes from the unconscious – we need to be careful in how we interpret their answers…when it comes to romance, of course, we understand that. We know we cannot rationally describe the person we will fall in love with: that’s why we go on dates – to test our theories about who attracts us. There are times when we demand an explanation when an explanation really isn’t possible.

And Roger Martin writes a post on HBR.org called Management by Imagination:

We need to get away from all those old sayings about measurement and management, and in that spirit I’d like to propose a new wisdom: “If you can’t imagine it, you will never create it.” The future is about imagination, not measurement. To imagine a future, one has to look beyond the measurable variables, beyond what can be proven with past data. While Motorola was projecting future sales volumes of “feature phones,” Mike Lazaridis, founder of Research in Motion, was imagining what executive life would be like if you could receive your emails on a handheld device. How compelling would an ordinary phone be if you could have a BlackBerry attached to your belt? He couldn’t “prove” that this would be a good idea. There was no data on the demand patterns for smartphones, because smartphones existed only in his imagination. But a mere 11 years after the launch of the product of his imagination, RIM leads Motorola by an ever-accelerating margin in sales, market share and profitability.

And this is what I wrote a few months back:

It seems to me that success, in art, science or business, comes from integrating intuition and analysis. That is one of the reasons diverse teams have trouble working in the short-term (they speak different languages – one of intuition while the other analysis) but in the long-term, they tend to outperform homogeneous teams (which do not take the full picture).

Thus, if we are unable to use both (and most people will struggle doing it consistently) we need to complete our own biased point of view, with the opposite point of view. Or just remind ourselves to re-check the other point of view every once in a while.

Reading Blink in many ways just made me realize that it is not only that intuition is important; it is many times much more powerful than the other methods. The problem, obviously, is that we don’t know when that is. It is easier for us to think that rational thinking is always superior. That more information, more facts, more analysis, more questions will lead to better results. Blink, and many other examples, reminds us, that this is not true. And that is a lesson that we need to teach that rational part of our brain again and again.

Maybe trust is not only for God.

Elad