Tag Archives: Business

Let My People Go Surfing by Yvon Chouinard

Summary

  1. Patagonia exists to challenge conventional wisdom and present a new style of responsible business. We believe the accepted model of capitalism that necessitates endless growth and deserves the blame for the destruction of nature must be displaced. Patagonia and its two thousand employees have the means and the will to prove to the rest of the business world that doing the right thing makes a good and profitable business. Make the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis.

Key Takeaways

  1. History
    1. Chouinard started off making pitons and replaced the European attitude of “conquering” mountains with the American view of leaving no trace
    2. We were our own best customers from the start. We made the tools, gear, clothes that we wanted.
    3. We didn’t have much competition – no one else was foolish enough to want to get into that market!
    4. Kris McDivitt when she became CEO of Patagonia – I had no business experience so I started asking people for free advice. I just called up presidents of banks and said, “I’ve been given these companies to run and I’ve no idea what I’m doing. I think someone should help me. And they did. If you just ask people for help – if you just admit that you don’t know something – they will fall all over themselves trying to help. So, from there I began building the company. I was really the translator for Yvon’s vision and aims for the company
    5. We had to surround ourselves with people we wanted to spend a lot of time with, who would be our product’s first customer. They had to come to work on the balls of their feet and go up steps two at a time, dress however they wanted, even barefoot, have all the flextime to surf the saves when they were good or be home with a sick child. We needed to blur that distinction between work and play and family
    6. I couldn’t find any American company we could use as a role model
    7. I’ve always thought of myself as an 80 percenter. I like to throw myself passionately into a sport or activity until I reach about an 80% proficiency level. To go beyond that requires an obsession and degree of specialization that doesn’t appeal to me. Once I reach that 80% level I like to go off and do something totally different; that probably explains the diversity of the Patagonia product line – and why our versatile, multifaceted clothes are the most successful.
    8. You can’t wait until you have all the answers to ask! I had faith the product was good, and I knew the market, so we forged ahead to shift our entire line of polypropylene underwear to the new Capilene polyester. Our loyal customers quickly realized the advantages of Capilene and Synchilla, and our sales soared. Other companies, just introduced rip-offs of our bunting and propylene clothes, had to scramble to keep up.
    9. I abide by the MBA – management by absence
    10. I was the outside guy, responsible for bringing back new ideas. A company needs someone to go out and get the temperature of the world, so for years I would come home excited about ideas for products, new markets, or new materials. I also began to see the environmental degradation happening. Some countries were in so much trouble that they were eating their seed corn
      1. Great term for being too short-sighted. Have to be planting your tree farm continuously, can’t be eating your seed corn
    11. Before he could help us, he said he wanted to know why we were in business. I told him the history of the company and how I considered myself a craftsman who had just happened to grow a successful business. I told him I’d always had a dream that when I had enough money, I’d just sail off to the South Seas looking for the perfect wave and the ultimate bonefish flat. We told him the reason we hadn’t sold out and retired was that we were pessimistic about the fate of the world and felt a responsibility to use our resources to do something about it. We told him about our tithing program, how we had given away a million dollars just in the past year to more than 200 organizations, and that our bottom-line reason for staying in the business was to make money we could give away.
  2. Values
    1. Never exceed your limits. You push the envelope, and you live for those moments when you’re right on the edge, but don’t go over. You have to be true to yourself; and you have to know your strengths and limitations and live within your means. The same is true from business. The sooner a company tries to be what it is not, the sooner it tries to “have it all,” the sooner it will die. It was time to apply a bit of Zen philosophy to our business
    2. The Iroquois have a 7-generation planning. As part of their decision process, the Iroquois had a person who represented the seventh generation in their future. If Patagonia could survive this crisis, we had to begin to make all our decisions as though we would be in business for 100 years. We would grow only at a rate we could sustain for that long.
    3. I’ve hard that smart investors and bankers don’t trust a growing company until it has proved itself by how it survives its first big crisis. If that’s true, then we’ve been there
    4. We have controlled our growth to what we call organic growth. We don’t force our growth by stepping out of the specialty outdoor market and trying to be who we aren’t. We let our customers tell us how much we should grow each year. Some years it could be 5% growth or 25%, which happened during the middle of the Great Recession. Customers become very conservative during recessions. They stop buying fashionable silly things. They will pay more for a product that is practical, multifunctional, and will last a long time. We thrive during recessions
    5. Some crises were created by management to keep the company in yarak, a falconry term meaning when your falcon is super alert, hungry, but not weak, and ready to hunt
  3. Product Design Philosophy
    1. Our philosophies aren’t rules, they’re guidelines. They’re the keystones of our approach to any project, and although they are “set in stone,” their application to a situation isn’t. in every long-lasting business, the methods of conducting business may constantly change, but the values, the culture, and the philosophies remain constant. At Patagonia, these philosophies must be communicated to everyone working in every part of the company, so that each of us becomes empowered with the knowledge of the right course to take, without having to follow a rigid plan or wait for orders from the boss. Living the values and knowing the philosophy of each part of the company aligns us all in a common direction, promotes efficiency, and avoids the chaos that comes from poor communication. We have made many mistakes during the past decade, but at no point have we lost our way for very long. We have the philosophies for a rough map, the only kind that’s useful in a business world whose contours, unlike those of the mountains, change constantly without much warning
    2. Having useful and high-quality products anchors our business in the real world and allows us to expand our mission. “Make the best,” period.
    3. Quality = degree of excellence
    4. Function of an object should determine its design and materials
    5. The more you know, the less you need
    6. Good design is as little design as possible
    7. We’ve found that each new line requires the hiring of 2.5 new people. The best-performing firms make a narrow range of products very well. The best firms’ products also use up to 50% fewer parts than those made by their less successful rivals. Fewer parts means a faster, simply (and usually cheaper) manufacturing process. Fewer parts means less to go wrong; quality comes built in. and although the best companies need fewer workers to look after quality control, they also have fewer defects and generate less waste
    8. I’d rather design and sell products so good and unique that they have no competition…The value of our products even seems to grow over time. In Tokyo there are stores that deal only in vintage Patagonia clothing
    9. When I’m working on a problem, I never think about beauty. I think only how to solve the problem. But when I have finished, if the solution is not beautiful, I know it is wrong – Buckminster Fuller
    10. Because of our commitment to quality, we run at such a slow pace that we’re the turtles in the fashion race. Our design and product development calendar are usually 18 months long, too long to be a contender in any new fads
      1. Use their slow cycles quality to their advantage by “missing” fads
    11. It’s almost as if every idea has its own time
  4. Production Philosophy
    1. Coming in second, even with a superior product at a better price, is often no substitute for just plain being first. This doesn’t mean we should be “chasing” trends or products. It applies more to “discovering” a new fabric or a new process. Again, the key word is discovering instead of inventing. There’s imply no time for inventing. Maintaining a sense of urgency throughout a company is one of the most difficult challenges in business. The problem is further compounded by having to depend on outside suppliers who may not have the same sense of expediency. I constantly hear people giving lame excuses of why something is impossible or why a job didn’t get done on time
    2. To stay ahead of competition, our ideas have to come from as close to the source as possible. With technical products, our “source” is the dirtbag core customer. He or she is the one using the products and finding out what works, what doesn’t, and what is needed. On the contrary, sales representatives, shop owners, salesclerks, and people in focus groups are usually not visionaries. They can tell you only what is happening now: what is in fashion, what the competition is doing, and what is selling. They are good sources of information, but the information is too old to have the leading-edge products. There are different ways to address a new or idea or project. If you take the conservative scientific route, you study the problem in your head or on paper until you are sure there is no chance of failure. However, you have taken so long that the competition has already beaten you to market. The entrepreneurial way is to immediately take a forward step and if that feels good, take another, if not, step back. Learn by doing, the process is faster
    3. The designer must work with the producer up front. this applies to every product. This team approach is concurrent rather than assembly-line manufacturing. A concurrent approach brings all participants together at the beginning of the design phase. Only about 10% of a product’s costs are incurred during the design phase, but 90% of the costs are irrevocably committed
    4. This level of quality requires a level of mutual commitment much deeper than the traditional business relationships. Mutual commitment requires nurture and trust, and those demand personal time and energy. Consequently, we do as much business a we can with as few suppliers and contractors as possible. The downside is the risk of becoming highly dependent on another company’s performance. But that’s exactly the position we want to be in because those companies are also dependent on us. Our potential success is linked. We become like friends, family, mutually selfish business partners; what’s good for them is good for us. The best often finds us attractive business partners because they know our reputation for quality, long-term relationships, that we’ll pay a fair price, commit to fabric purchases, and keep their sewing lines running at an even clip
    5. I think of Patagonia as an ecosystem, with its vendors and customers an integral part of that system. A problem anywhere in the system eventually affects the whole, and this gives everyone an overriding responsibility to the health of the whole organism. It also means that anyone, low on the totem pole or high, inside the company or out, can contribute significantly to the health of the company and to the integrity and value of our products…The whole supply chain has to be a functioning, interconnected system.
    6. You identify the goal and then forget about it and concentrate on the process
  5. Distribution Philosophy
    1. At Patagonia we sell our products at a wholesale level to dealers, sell through our own retail stores, through mail order, and through e-commerce, and do it all worldwide
    2. We fulfill orders at 93-95% throughout the selling season. This has been determined to be “ideal” because to fulfill at lower rates loses too many customers but to get to 98% is inefficient for inventory. You might have to double inventory to achieve a 98% fulfillment rate
    3. The customer should only have to make one phone call. Just as the Patagonia production philosophy requires on-time product delivery from its suppliers, so Patagonia must deliver its products on time to tis customers, and “on time” means when the customer wants it. Our model for customer service is the old-fashioned hardware store owner who knows his tools and what they’re made for. his idea of service is to wait on a customer until the customer finds the right widget for the job, no matter how long it takes.
    4. In owning our own retail stores, we’ve learned that it is far more profitable to turn that inventory more quickly than to have high margins or raise prices. This was especially true when we had to pay high interest rates on our loans. You want sharp customers who know the market and its customers. They place small orders from suppliers but more often. You don’t want to waste expensive retail space to carry extra inventory. You display the products as if it were a showroom but keep the backstock in the basement or nearby stockroom
    5. Key benefits of having a working partnership with a few good dealers
      1. We don’t have to expend the effort, time, and money to seek out new dealers
      2. We limit our credit risks
      3. We minimize the legal problems associated with cutting off a dealer whose bad service is a reflection on us
      4. We develop loyal buyers who make a commitment to the line and either carry a broad representation of the line, or in the case of a small specialty shop, in-depth inventory
      5. We maintain better control over our product and image
      6. We receive better information about the market and our products
    6. Our dealers win because they have a product line that sells year after year, protection from market saturation, a stable pricing structure, expertise from us in buying, merchandising, and displaying our products, being part of Patagonia’s synergistic marketing and distribution program.
    7. Marketing Philosophy
      1. Patagonia’s image arises directly from the values, outdoor pursuits, and passions of its founders and employees. While it has practical and nameable aspects, it can’t be made into a formula. In fact, because so much of the image relies on authenticity, a formula would destroy it. Ironically, part of Patagonia’s authenticity lies in not being concerned about having an image in the first place. Without a formula, the only way to sustain an image is to live up to it. Our image is a direct reflection of who we are and what we believe.
      2. Our guidelines for all promotional efforts
        1. Our charter is to inspire and educate rather than promote
        2. We would rather earn credibility than buy it. The best resources for us are the word of mouth recommendation from a friend or favorable comments in the press
        3. We advertise only as a last resort and usually in sport-specific magazines
  1. Financial Philosophy
    1. Who are businesses really responsible to their customers? Shareholders? We would argue that it’s none of the above. Fundamentally, businesses are responsible to their resource base. Without a healthy environment there are no shareholders, no employees, no customers, and no business
    2. At Patagonia, making a profit is not the goal, because the Zen master would say profits happen “when you do everything else right.” In our company, finance consists of much more than management of money. It is primarily the art of leadership thought he is balancing of traditional financing approaches in a business that is anything but traditional. In many companies, the tail (finance) wags the dog (corporate decisions). We strive to balance the funding of environmental activities with the desire to continue in business for the next hundred years…We avoid, at all costs, to go on a growth at any cost (suicide) track
    3. We recognize that we make the most profit by selling to our loyal customers. A loyal customer will buy new products with little sales effort and will tell all his friends. A sale to a loyal customer is worth 6-8x more to our bottom line than a sale to another customer
    4. Quality, not price, has the highest correlation with business success
    5. Whenever we are faced with a serious business decision, the answer almost always is to increase quality. When we make a decision because it’s the right thing to do for the planet, it ends up also being good for the business
    6. Returns and bad quality in manufacturing cost millions of dollars each year. But what is the cost of a dissatisfied customer?
    7. By growing at a “natural rate,” by growing by how much our customers tell us they want our products, we do not create artificial demand for our goods by advertising. We want customer who need our clothing, not just desire it.
    8. We never wanted to be a big company. We wanted it to be the best company, and it’s easier to be the best small company than the best big company. We have to practice self-control, growth in one part of the company may have to be sacrificed to allow growth in another. It’s also important that we have a clear idea of what the limits are to this “experiment” and live within those limits, knowing that the sooner we expand beyond them, the sooner the type of company we want will die
    9. We have little to no debt and this allows us to take advantage of opportunities as they come up or invest in a start-up without having to go further in debt or find outside investors. In any age when change happens so quickly, any strategic plan must be updated at least every year. An inflexible plan is centralized planning at its worst. It is oblivious to changes in reality
    10. We win with the government as well. We don’t play games, we aim to pay our fair share but not a penny more
  2. HR Philosophy
    1. A master in the art of living draws no sharp distinction between his work and his play; his labor and his leisure; his mind and his body; his education and his recreation. He hardly knows which is which. He simply pursues his vision of excellence through whatever he is doing, and leaves others to determine whether he is working or playing. To himself, he always appears to be doing both. – LP Jacks
    2. A business that thrives on being different requires different types of people
    3. We provide on-site childcare because we know parents are more productive if they’re not worrying about the safety and well-being of their children. Ours has an infant care room for children as young as 8 weeks and rooms progressively for toddlers to kindergarteners. The staff-to-child ratio in all parts of the center exceeds what is required by the state, and the caregivers are highly trained, and most speak more than one language to the kids. We encourage parents to interact with their child by breast-feeding, having lunch together, or visiting at any time. More than once we have had a father who fell asleep with this child at naptime. The first few years of a child’s life are recognized as being the most important learning period of their entire lives. When their brains are actively growing is the best time for them to learn cognitive skills, including problem solving and sensory processing, and language, social, and emotional skills. They are also learning physical skills, including gross and fine motor skills, as well as perceptual skills. Our child development facility is producing one of our best products, excellent kids. The babies are constantly being held and handled by lots of caregivers; they are being raised by a whole village, with lots of stimulation and learning experiences. As a result, when a stranger says hello to them, they don’t run and hide behind their mother’s skirts
    4. There are more than 500 employees in Ventura and more than 60 children in the center. We charge the parents rates that are comparable to local child-care centers, because we fund it with another $1m in subsidies. But what appears to be a financial burden is in fact a profit center. Studies have shown that it costs a company an average of 20% of an employee’s salary to replace an employee – from recruiting costs, training, and loss of productivity. 58% of our employees in Ventura are women, and many occupy high-level management positions. Our center helps us retained our skilled moms by making it easier for women to progress in their careers. Both moms and dads are motivated to be more productive, and the center attracts great employees.
    5. One cautionary tale we learned: if you’re going to have a child development center, you also need to give at least 8 weeks of paid maternity/paternity leave (we actually offer 16 weeks fully paid leave and 4 weeks’ unpaid for the mother, as well as 12 weeks fully paid paternity leave). Otherwise, many young parents still unclear on the concept of parenthood dump the baby in the nursery as soon as possible and go back to work and to pay for the new car or whatever. Those first few months are extremely important for children’s bonding with the parents instead of child-care workers.
    6. The child development center, with tax subsidies, pays for itself, ad the cafeteria requires only a small company subsidy. Patagonia is consistently included in a list of the 100 best companies to work for and for working mothers. Why on earth would anyone run a company that was hard to work for?
  3. Management Philosophy
    1. We never order employees around, so they have to be convinced that what they’re being asked to do is right, or they have to see for themselves it’s right. Some independent people, until the point arrives that they “get it” or it becomes “their idea,” will outright refuse to do a job.
    2. In a company as complex as ours, no one person has the answer to our problems, but each has a part of its solution. The best democracy exists when decisions are made through consensus, when everyone comes to an agreement that the decision made is the correct one. Decisions based on compromise, as in politics, often leave the problem not completely solved, with both sides feeling cheated or unimportant, or worse. The key to building a consensus for action is good communication. A chief in an American Indian tribe was not elected because he was the richest or had a strong political machine; he was often chosen as chief because of his bravery and willingness to take risks and for his oratory skills, which were invaluable for building consensus within the tribe. In this information age it’s tempting for managers to manage from their desks, staring at their computer screens and sending out instructions, instead of managing by walking and talking to people. The best managers are never at their desks yet can be easily found and approached by everyone reporting to them. No one has a private office at Patagonia, and everyone works in open rooms with no doors or separation. What we lose in “quiet thinking space” is more than made up for with better communication and an egalitarian atmosphere. Animals and humans that live in groups or flocks constantly learn from another. Our cafeteria, besides servicing healthy organic food, is convenient for everyone and is open all day as an informal meeting place.
    3. Systems in nature appear to be chaotic but in reality, are very structured, just not in a top-downs centralized way. Like in an ant colony, no one ant is in charge of a colony, there is no central control. Yet each ant knows what its job is, and ants communicate with one another by way of very simple interactions; altogether they produce a very effective social network. A top-down central system like a dictatorship takes an enormous amount of force and work to keep the hierarchy in power. Of course, all top-down systems eventually collapse, leaving the system in chaos
    4. A familial company like ours runs by trust rather than on authoritarian rule. I’ve found that whenever we’ve had a top manager or CEO leave the company, there is no chaos. In fact, the work continues as if they were still there. It’s not that they were doing nothing but that the system is pretty much self-regulating
    5. A study found that the most successful CEOs in America (not the celebrity CEOs) all enjoy working with their hands. They solved problems for themselves rather than looking for a repairman. The longevity of a CEO’s career is directly proportional to his or her problem-solving skills and ability to adapt and grow with the job
    6. If for whatever reason we have another downturn in our business like we had in 90-91, our policy is to first cut the fat, freeze hiring, reduce unnecessary travel, and generally trim expenses. if the crisis were more serious, we would eliminate bonuses and reduce salaries of all top-level managers and owners. Then shorten the workweek and reduce pay, and finally, as a last resort, lay people off
    7. How you climb a mountain is more important than reaching the top.
    8. You might think that a nomadic society packs up and moves when things get bad. However, a wise leader knows that you also move when everything is going too well; everyone Is laid-back, lazy, and happy. If you don’t move now, then you may not be able to move when the real crisis happens. Teddy Roosevelt said, “In pleasant peace and security, how quickly the soul in a man being to die.” Bob Dylan says, “He not busy being born is busy dying.” New employees coming into a company with a strong culture and values may think that they shouldn’t rock the boat and shouldn’t challenge the status quo. On the contrary, while values should never change, every organization, business, government, or religion must be adaptive and resilient and constantly embrace new ideas and methods of operation.
  4. Environmental Philosophy
    1. Anyone who thinks you can have infinite growth on a finite planet is either a madman or an economist. – Kenneth Boulding
    2. Elements of our environmental philosophy
      1. Lead an examined life
      2. Clean up our own act
      3. Do our penance
      4. Support civil democracy
      5. Do good
      6. Influence other companies
    3. Every time we’ve elected to do the right thing, it’s turned out to be more profitable
    4. I have a definition of evil different than most people. Evil doesn’t’ have to be an overt act; it can be merely the absence of good. If you have the ability, the resources, and the opportunity to do good and you do nothing, that can be evil
    5. When you get away from the idea that a company is a product to be sold to the highest bidder in the shortest amount of time, all future decisions in the company are affected. The owners and the officers see that since the company will outlive them, they have responsibilities beyond the bottom line. Perhaps they will even see themselves as stewards, protectors of the corporate culture, the assets, and of course the employees
    6. It seems to me if there is an answer, it lies in these words: restraint, quality, and simplicity. We have to get away from thinking that all growth is good. There’s a big difference between growing fatter and growing stronger
    7. The ship’s carpenter on Shackleton’s lifeboat the James Caird took only three simple hand tools with him on the passage from Antarctica to South Georgia Island, knowing that, if he needed to, he could build another boat with those tools. I believe the way toward mastery of any endeavor is to work toward simplicity; replace complex technology with knowledge. The more you know, the less you need. From my feeble attempts at simplifying my own life I’ve learned enough to know that we should have to, or choose to, live more simply, it won’t be an impoverished life but one richer in all the ways that really matter.

What I got out of it

  1. A really fun read on someone who never wanted to get into business but ended up founding a very successful and robust one. Grow appropriately, infinite growth is impossible, live simply, treat your people/suppliers/customers well, be the first customer for your products and know them intimately

An Elegant Puzzle: Systems of Engineering Management

Summary

  1. This book starts with organizational design – it gets the right people in the right places, empowers them to make decisions, and then holds them accountable for their results. Next are some tools of management – from systems thinking to vision documents, metrics, reorgs, and career narratives. Approaches touches on how you might need to adjust how you manage as the organization scales. Culture is covered next and touches on how to nurture an inclusive team. Last is a focus on careers – interviewing hiring, and performance management

Key Takeaways

Organizations

  1. When I want to solve a problem quickly and cheaply, I think about process design. If process is too weak a force, culture too slow, and there isn’t much time, then organizational design is a good option
  2. One of the fundamental challenges of organizational design is sizing teams
  3. Managers should support 6-8 engineers and managers-of-managers should support 4-6 managers
  4. A team is at least 4 people as this diversity helps attack and solve complex problems in a more efficient manner
  5. Keep innovation and maintenance together as this leads to higher morale and will avoid creating a two-tiered class system of innovators and maintainers
  6. 4 states of a team and the general solution. Teams want to climb from falling behind to innovating, while entropy drags them backward. Each
    1. Falling behind – add people
    2. Treading water – reduce WIP
    3. Repaying debt – add time
    4. Innovating – add slack
  7. Consolidate your efforts as a leader. Don’t “peanut butter” the situation by trying to evenly spread yourself out. Spend the most time on the teams that need the most help. Adding new individuals to teams disrupts that team’s gelling process, so have rapid growth periods followed by consolidation/gelling periods
  8. Do not separate high-performing teams. They can tackle new problems but should stay together. Shifting scope works better than moving people because it avoids re-gelling costs, and it preserves system behavior. You can also try rotating individuals for a fixed period into an area that needs help
    1. Campbell – Teams > Individuals > Problems
  9. You obviously don’t want to stop growth, but you can concentrate that growth such that your teams alternate between periods of gelling and consolidation
  10. Counterintuitively, you can slow a team down by shifting resources to it, because doing so creates new upstream constraints. Slack is a beautiful thing. It gives people and teams time to improve areas and do it with minimal coordination costs
  11. The real system killer is not system rewrites but the migrations that follow those rewrites
  12. You only get values from projects you finish. To make progress, above all else, you must ensure that some of your projects finish
  13. Funnel interruptions into an increasingly small area, and then automate that area as much as possible. Ask people to file tickets, create chatbots that automate filing tickets, create a service cookbook, and so on.
  14. Projects and tasks must have owners – “Who owns X?”
  15. Block out large chunks of time each week to focus. Telecommute, block out 8-11 each morning, experiment until you find something that works for you. The best solution is a culture of documentation – read documents, and a documentation reach that actually works. Try to get off the “critical path” – don’t be a gatekeeper. This is a significant implementation bug rather than a stability feature to be emulated (except for very important legal/financial/other matters that should have a gatekeeper.)
  16. Organizational debt – the sibling of technical debt and represents things like biased interview processes and inequitable compensation mechanisms, systemic problems which prevents your organization from reaching its potential. Responding to this is central to being an effective leader. A great way to attack this is to focus on a few areas you want to improve and if you’re making progress, feel good about it. You can slack off on the other areas (for now). You can’t do it all at once
  17. Succession planning is thinking through how the organization would function without you, documenting those gaps, and starting to fill them in. This is often overlooked but is vital for the long-term success of your team and organization. First step is to figure out what you do – write down what meetings you attend, what your role is in those meetings, recurring processes, individuals you support, emails you send, requests coming in, to-do lists, external relationships. Taking 2-3-week vacations is actually a beautiful thing – you can see what slips through the cracks and these items can be the start of next year’s list.

Tools

  1. Change is the catalyst of complexity and these tools are meant to help lead efficient change – systems thinking, metrics, and vision
  2. Creating an arena for quickly testing hypotheses about how things work, without having to do the underlying work beforehand, is the aspect of systems thinking that I appreciate most
  3. Problem discovery – problem selection – solution validation – execution – problem discovery…
  4. For problem discovery look at – users’ pain, users’ purpose, benchmark, cohorts, competitive advantages/moats
  5. Must align on strategy and vision in order to scale effectively. Strategies are grounded documents which explain the trade-offs and actions that twill be taken to address a specific challenge. Visions are aspirational documents that enable individuals who don’t work closely together to make decisions that fit together cleanly
  6. No extent of artistry can solve a problem that you’re unwilling to admit
  7. Vision – vision statement, value proposition, capabilities, solve constraints, future constraints, reference materials, narrative
  8. Define goals through a target, baseline, trend, time frame
    1. See John Doerr on OKRs
  9. Since value is gained when a project is completed, you must celebrate completions, no matter how small
  10. Rolling out the change can be difficult/awkward but here are 3 steps to help
    1. Explanation of reasoning driving the reorganization (particularly those who are heavily impacted)
    2. Documentation of how each person and team will be impacted
    3. Availability and empathy to help bleed off frustration from impacted individuals
  11. The 3 rules for speaking with the media
    1. Answer the question you’re being asked – reframe difficult questions
    2. Stay positive
    3. Speak in threes – three concise points, make them your refrain, and continue to refer back to your three speaking points
  12. Failure modes – domineering personalities, bottlenecks, status-oriented groups, inert groups
  13. Presenting to senior management
    1. Communication is company-specific
    1. Start with the conclusion
    2. Frame why the topic matters
    3. Everyone loves a narrative
    4. Prepare for detours
    5. Answer directly
    6. Dive deep into the data
    7. Derive actions from principles
    8. Discuss the details
    9. Prepare a lot, practice a little
    10. Make a clear ask
  14. Communicating with teams/peers
    1. Be a facilitator, not a lecturer
    2. Brief presentations, long discussions
    3. Small breakout groups
    4. Bring learnings to the full group
    5. Choose topics that people already know about
    6. Encourage tenured folks to attend
    7. Optional pre-reads
    8. Checking-in – your name, your team, one sentence about what’s on your mind
    9. Every quarter I spend a few hours categorizing my calendar from the past 3 months to figure out how I’ve invested my time. This is useful for me to reflect on the major projects I’ve done, and also to get a sense of my general allocation of time. I then use this analysis to shuffle my goal time allocation for the next quarter

Approaches

  1. Work the policy, not the exceptions – consistency is a precondition of fairness so cultures which allow frequent exceptions are not only susceptible to bias, but also inefficient
  2. Collect every escalation as a test case for reconsidering your constraints. This approach is powerful because it creates a release valve for folks who are frustrated with edge cases in your current policies – they’re still welcome to escalate – while also ensuring that everyone is operating in a consistent, fair environment; escalations will only be used as inputs for updated policy, not handled in a one-off fashion. The approach also maintains working on policy as a leveraged operation for leadership, avoiding the onerous robes of an exceptional judge
  3. Velocity – when folks want you to commit to more work than you believe you can deliver; your goal is to provide a compelling explanation for how your team finishes work. Finishes is particularly important, as opposed to does, because partial work has no value, and your team’s defining constraints are often in the finishing stages.
  4. Management, at its core, is an ethical profession. To see ourselves, we don’t look at the mirror, but rather at how we treat a member of the team who is not succeeding. Not at the mirror, but at our compensation policy. Not at the mirror, but at how we pitch the roles to candidates
  5. Strong relationships > any problem. Start debugging problems from the relationship angle before anything else. With the right people, any process works, and with the wrong people, no process works
  6. Instead of avoiding the hardest parts, double down on them
  7. Do the right thing for the company, the right thing for the team, and the right thing for yourself, in that order
  8. The best management philosophy never stands still, but – in the model of the Hegelian dialectic – continues to evolve as it comes into contact with reality. The worst theory of management is to not have one at all, but the second worst is one that doesn’t change.
  9. Long bones have growth plates at their ends, which is where the growth happens, and the middle doesn’t grow. This is a pretty apt metaphor for rapidly growing companies, and a useful mental model to understand why your behaviors might not be resonating in a new role. Execution is the primary currency in the growth plates because you typically have a surplus of fairly obvious ideas to try and there is constrained bandwidth for evaluating those ideas. What folks in the growth plates need is help reducing and executing the existing backlog of ideas, not adding more ideas that must be evaluated. Teams in these scenarios are missing the concrete resources necessary to execute, and supplying those resources is the only way to help. Giving more ideas feels helpful, but it isn’t. Away from the growth plates you’re mostly working on problems with known solutions. Known solutions are amenable to iterative improvement, so it would make sense for execution to be highly valued, but I find that, in practice, ideas – especially ideas that are new within your company – are most highly prized.
  10. Leadership is matching appropriate action to your current context
  11. As managers looking to grow ourselves, we should really be pursuing scope: not enumerating people but taking responsibility for the success of increasingly important and complex factors of the organization and company. This is where advancing a career can veer away from a zero-sum competition to have the largest team and evolve into a virtuous cycle of empowering the organization and taking on more responsibility. There is a lot less competition for hard work. Aim to grow scope through broad, complex projects
  12. You need to learn how to set your own direction – talk to peers and see what they’re thinking about, read technical papers, cast the widest net possible so that you understand the problem space
  13. For every problem that comes your way – close out, solve, or delegate

Culture

  1. An inclusive organization is one in which individuals have access to opportunity and membership
  2. Useful metrics – retention, usage rate, level distribution, time at level
  3. Useful programs – recurring weekly events, employee resource groups, team offsites, coffee chats, team lunches,
  4. Ingredients for a great ream – awareness of each other’s work, evolution from character to person, refereeing defection, avoiding zero-sum culture
  5. The best learning doesn’t always come from your manager – create a community of learning with your peers
  6. Humans are prone to interpreting events as causal, but it may be more appropriate to see problems in terms of a series of stockpiles that grow and shrink based on incoming and outgoing flows

Careers

  1. Interviewing tips
    1. Be kind to the candidate
    2. Ensure that all interviewers agree on the role’s requirements
    3. Understand the signal your interview is checking for
    4. Come to your interview prepared to interview
    5. Deliberately express interest in candidates
    6. Create feedback loops for interviewers and the loop’s designer
    7. Instrument and optimize as you would any conversion funnel
  2. If you like an interviewee and will extend an offer, have everyone who interviewed them send them an email or letter saying how much they enjoyed meeting them
  3. Have interviewers write up their feedback on candidates individually
  4. The most sacred responsibilities of management are selecting your company’s role model, identifying who to promote, and deciding who needs to leave
  5. If hiring from within, some necessary ingredients are: an executive sponsor, a recruiting partner, self-sustaining mission, a clear career ladder, role models, dedicated calibrations (performance reviews)

Appendix

  1. Teams have a limited appetite for new processes: try to roll out one change at a time and don’t roll out the next change until the previous change has enthusiastic compliance
  2. Process needs to be adapted to its environment, and success comes from blending it with your particular context

What I got out of it

  1. Some great tools, ideas, perspective on how to manage a quickly scaling organization

V > Λ: The Inverted Hierarchy

My Years With General Motors by Alfred P. Sloan

Some brilliant insights into human nature and organizational impact (annual car models, coordinated policy with decentralized authority, a policy of filling the gaps, how to incentivize employees with their bonus/compensation plans, the importance of sound dealer relations, and more). Too long of a book in many ways but worthwhile for anyone interested in business or GM’s history

Uncontainable: How Passion, Commitment, and Conscious Capitalism Built a Business Where Everyone Thrives by Kip Tindell

Summary

  1. The purpose of The Container Store is clear: to improve the quality of our customers’ lives through the gift of organization, fueled by our 7 Foundation Principles. Those principles begin with our commitment to our employee-first culture, of course, but they also ensure that we ultimately create value for ALL of our stakeholders, including vendors, customers, community, and shareholders – so that everyone associated with our business thrives

Key Takeaways

  1. The 7 Principles: We use principles rather than rules because rules are too rigid. I often tell my people that retail is like real life – it’s far too situational to use the typical phone book sized procedural manual. Instead, just use these principles to guide you. Once we agree on the ends, you are free to choose the means to achieve those ends. Employees are their most productive when they use their own unshackled, intuitive genius to handle any situation. That goes for everybody in the company, whether it’s our finance people negotiating with a bank, a salesperson helping a customer, or a distribution center employee talking to a truck driver in the 110-degree Dallas heat. All employees can make decisions based on the same set of values, principles, and information as everyone else 
    1. 1 Great Person = 3 God People (or much more!)
      1. Pay up for the best people (up to 50-100% more!) and allow them to fail.
      2. The best people demonstrate the following traits:
        1. Commitment and accountability
        2. Planning, organizing, and attention to detail
        3. Communication IS leadership
        4. Professionalism
        5. Problem solving
        6. Teamwork/”wake”
        7. Ability and attitude
      3. Being part of a great team is one of the the best human experiences
      4. Once you hire the best people, give them space to run, even if they fail. Trust people and help hem grow into the type of people they want to be
    2. “Fill the other guy’s basket to the brim. Making money then becomes an easy proposition” – Andrew Carnegie
      1. Carnegie thought that this was his one beacon, his one guiding light, that he attributed all his business success to
      2. The more win-win relationships you create, the more you’ll succeed
      3. What we’re trying to do is create synergy. That’s the most pleasurable, joyful way of doing business. Those who make the most money for the longest time adopt this form of capitalism – creating these mutually beneficial, long-term relationships. So why don’t people seek out win-win situations more often? I’m convinced it’s because of their own insecurity. If you’re secure in yourself and your own abilities, you won’t feel threatened by filling the other guy’s basket. You won’t worry that someone else will succeed more than you will, or somehow will use your own spirit of fair play against you. On the contrary, you’ll be open hearted and supportive. You’ll realize that helping other people succeed is actually the best way to succeed yourself. That’s why it’s so important to be mindful of our wake. With every action we take, we’re not just affecting other people far more than we realize. We’re also creating powerful waves and endless ripple effects that ultimately find their way back to us. 
      4. It’s hard to overstate how crucial these close relationships are to our success – it’s why our vendors give us exclusive, custom-made products, fast delivery, and high quality. And it’s why they give us great pricing. We can’t beat the mass merchants on volume, but we can always beat them on relationships 
      5. Our vendors often tell us, “Your people know our products better than our own employees do!” Because many of our vendors started as entrepreneurs, we filled their basket with encouragement, product ideas, and, when times got tough, deep loyalty
    3. Man in the Desert Selling
      1. Discover all the customer’s problems and solve them. Don’t assume you know what they need. Truly understand what they’re trying to solve for and do that. Often times customers don’t know what solutions are available and need to be coached 
      2. Strong long-term relations, built on affection, hard work, trust, and respect, are a huge key to success in business and in life
      3. We all benefit from giving – life is full of win-win propositions
    4. Communication IS leadership
      1. We must practice consistent, reliable, predictable, effective, thoughtful, compassionate, and even, yes, courteous communication every single day to successfully sustain, develop, and grow our business
      2. We share company goals, financial details, daily sales results, real estate expansion plans, marketing plans, major initiatives, sales campaign results, company-wide leadership meeting notes, product information – truly, the list goes on and on. and this communication comes in many forms: scheduled meetings, off the cuff encounters, voice mail, video, company conference calls, email, and old-fashioned written memos – any way possible. And, of course, the daily ongoing communication that happens between employees – sharing perspectives and insight – is a key component of our communication/leadership-driven culture 
    5. The best selection, service, and price
      1. Stick to what you know and do it well
      2. Competitive advantage to sell the hard stuff because you need more knowledge and better trained staff to sell it
      3. Having low prices and high margins creates a tremendous economic incentive to turn those high margin products into your biggest sellers. It’s another thing the world thinks is impossible. I’m mystified that so many retailers put so much effort into building up the volume of their low-margin, commodity-type products – mostly because that’s the way things have always been done. But why not perfect the selling methodology of your highest-margin products? Why not give those products the best shelf space, train employees in those products more, advertise them more, and work harder with vendors to create high margin for both of you? In others words, why not spend more time in the gold mine rather than the copper mine? It’s the best way for any business to succeed. 
    6. Intuition does not come to an unprepared mind. You need to train before it happens
      1. Must blend logic and intuition – and intuition requires proper training
      2. One reason training is more important at TCS than other retailers is because our motto is “we sell the hard stuff.” We actually tell our buyers to look for products that are hard to sell. Why? Because we know other retailers won’t touch those products, giving us an exclusive and yet another reason for our customers to shop with us. It may seem crazy to base a store around things that are hard to sell, like our elfa shelving system. But we make it work, selling tons of products like elfa that make people come back for more – a new shelving system for every closet in the house (like potato chips they can’t stop eating). And we make it work because our deep commitment to employee training creates unparalleled customer service. 
    7. Air of Excitement 
      1. Create a culture, an environment, that people are excited about and can thrive in. You can copy a company two-dimensionally, but you can’t copy its heart and soul
      2. The smartest thing you can do is hire your customers. DO that long enough and they’ll end up running your business
      3. All about natural laws of human behavior
      4. Hosts an annual “we love our employee’s day” held every Valentine’s day, an annual chili cook off, and an annual distribution center derby
      5. Celebrate mothers on Mother’s Day and fathers on Father’s Day, host baseball games, celebrate Halloween, have family movie night every year, and great holiday parties every December. 
      6. Sometimes it’s the little touches that matter the most. Like finding your desk decorated with balloons and signs on your birthday, receiving a heartfelt card on the anniversary of the day you joined the company or an engraved silver spoon when you have a baby. These days, people often spend more time with their coworkers than with their own family, so we encourage our employees to bond in ways very much like a close-knit family
      7. Some people may say that these events detract from more “productive” work, but this is classic zero-sum thinking. What conventional business minds don’t understand is that all the positive feeling this activity generates is really the fuel that drives our company. Without it, we’d be just another retailer with no spark, no air of excitement – and, I’m quite certain, no profits
  2. Conscious Capitalism
    1. Serve all stakeholders
    2. Profit is not the #1 priority which paradoxically leads to higher profits
    3. There are 4 key tenets:
      1. Having a higher purpose beyond generating profits
      2. Harmonizing the needs of all stakeholders to create win-win outcomes for all
      3. Having leaders who are motivated primarily by serving the firm’s higher purpose and creating value for all stakeholders
      4. Creating a conscious culture based on qualities like trust, accountability, transparency, integrity, loyalty, egalitarianism, fairness, personal growth, love, and care
  3. Other
    1. You get your best ideas when relaxing, when mind and body can wander
    2. Women make better executives as they are better listeners and communicator
    3. TCS never had any layoffs. They aim to make their employees better people overall. Treating employees with respect and affection is the fastest and most effective way to gain success. If you take better care of your employees, they take better care of the customer, which leads to more customer loyalty and financial success. Business is all about making sure everyone thrives
    4. A company is stronger if it is bounded by love rather than by fear
    5. “Our Wake” – the ripples our actions make are greater than we can imagine
    6. Positively spring-load every counterparty relationship so that when down times come, which they always do, you have built the trust and respect to come out stronger. In this case, everyone conspires to assist you
    7. Kip describes the culture at TCS as “yummy” which he means to say is caring, communicative, and “feels good”
    8. As important as what you do is how you do it – be clear, open, honest
    9. Companies take on the traits of their top people
    10. When Kip was young he kept a “Philosophy Epistle File” – a common journal for storing inspiring quotes and ideas
    11. A person’s first 25% of effort is mandatory, but after that it is due to the boss and culture
    12. Good management is wise allocation of resources – say “no” unless it is a top priority
    13. Price is mostly an issue about perception rather than reality
    14. At the time of publication, TCS achieved a 21% CAGR over 36 years
    15. At the moment of commitment, the world conspires to assist you
    16. As a manager, you need to help our employees understand the values our company is based on, then help them develop attitudes and behavior consistent with those values
    17. Why do so many companies die young? Mounting  evidence suggests that corporations fail because their policies and practices are based too heavily on the thinking and the language of economics. Put another way, companies die because their managers focus exclusively on producing goods and services and forget that the organization is a community of human beings that is in business – any business – to stay alive. Managers concern themselves with land, labor, and capital, and overlook the fact that labor means real people. 

What I got out of it

  1. Some great perspective on culture and how important it is in building a business, purposely sell the hard stuff, also makes clear how hard it is to swim against the tide, no matter how dedicated and hard you work (offline retailer with finite shelf space going up against the rising tide of ecommerce)

Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries by Safi Bahcall

Summary

  1. “I’ve always appreciated authors who explain their points simply, right up front. So here’s the argument in brief: The most important breakthroughs come from loonshots, widely dismissed ideas whose champions are often written off as crazy. Large groups of people are needed to translate those breakthroughs into technologies that win wars, products that save lives, or strategies that change industries. Applying the science of phase transitions to the behavior of teams, companies, or any group with a mission provides practical rules for nurturing loonshots faster and better.”

Key Takeaways

  1. The Bush-Vail Rules: Many of the lessons in this book are adapted from how Vannevar Bush at DARPA and Theodore Vail at AT&T’s Bell Labs handled and fostered loonshots
    1. Separate the phases
      1. Separate your artists and soldiers
        1. Create separate groups for inventors and operators: those who may invent the next transistor vs. those who answer the phone; those who design radically new weapons vs. those who assemble planes. You can’t ask the same group to do both, just like you can’t ask water to be liquid and solid at the same time
      2. Tailor the tools to the phase
        1. Wide management spans, loose controls, and flexible (creative) metrics work best for loonshot groups. Narrow management spans, tight controls, and rigid (quantitative) metrics work best for franchise groups
      3. Watch your blind side: nurture both types of loonshots
        1. Make sure your loonshot nursery seeds both types of loonshots, especially the type you are least comfortable with. S-type loonshots are the small changes in strategy no one thinks will amount to much. P-type loonshots are technologies no one thinks will work.
    2. Create dynamic equilibrium
      1. Love your artists and soldiers equally
        1. Artists tend to favor artists; soldiers tend to favor soldiers. Teams and companies need both to survive and thrive. Both need to feel equally valued and appreciated. (Try to avoid calling one side “bozos.”)
      2. Manage the transfer, not the technology: be a gardener, not a Moses
        1. Innovative leaders with some successes tend to appoint themselves loonshot judge and jury (the Moses Trap). Instead, create a natural process for projects to transfer from the loonshot nursery to the field, and for valuable feedback and market intelligence to cycle back from the field to the nursery. Help manage the timing of the transfer: not too early (fragile loonshots will be permanently crushed), not too late (making adjustments will be difficult). Intervene only as needed, with a gentle hand. In other words, be a gardener, not a Moses.
      3. Appoint and train project champions to bridge the divide
        1. Soldiers will resist change and see only the warts on the baby-stage ideas from artists. Artists will expect everyone to appreciate the beautiful baby underneath. They may not want have the skills to convince soldiers to experiment and provide the feedback that is crucial for ultimate success. Identify and train bilingual specialists, fluent in both artist-speak and soldier-speak, to bridge the divide
    3. Spread a system mindset
      1. Keep asking why the organization made the choices that it did
        1. Level 0 teams don’t analyze failures. Level 1 teams assess how product features may have failed to meet market needs (outcome mindset). Level 2 teams probe why the organization made the choices that it did (system mindset). They analyze both successes and failures because they recognize that good outcomes don’t always imply good decisions (got lucky), just as bad outcomes don’t always imply bad decisions (played the odds well). In other words, they analyze the quality of decisions, not just the quality of outcomes.
      2. Keep asking how the decision-making process can be improved
        1. Analyzing a product or a market may be technically challenging, but it is a familiar and straightforward exercise. Analyzing why a team arrived at a decision can be both unfamiliar and uncomfortable. It requires self-awareness from team members; the self-confidence to acknowledge mistakes, especially interpersonal ones; and the candor and trust to give and receive delicate feedback. The process is likely to be more efficient, and less painful, when it is mediated by a neutral expert from outside the team.
      3. Identify key influences – people involved, data considered, analyses conducted, how choices were framed, how market or company conditions affected that framing – as well as both financial and nonfinancial incentives for individuals and for the team as a whole. Ask how those influences can be changed to enhance the decision-making process in the future
      4. Identify teams with outcome mindset and help them adopt system mindset
    4. Raise the magic number
      1. Reduce return-on-politics
        1. Make lobbying for compensation and promotion decisions difficult. Find ways to make those decisions less dependent on an employee’s manager and more independently assessed and fairly calibrated across the company.
      2. Use soft equity (nonfinancial rewards)
        1. Identify and apply nonfinancial rewards that make a big difference. For example, peer recognition, intrinsic motivators
      3. Increase project–skill fit (scan for mismatches)
        1. Invest in the people and the processes that will scan for a mismatch between employees’ skills and their assigned projects, and will help managers adjust roles or employees transfer between groups. The goal is to have employees stretched neither too much nor too little by their roles.
      4. Fix the middle (reduce perverse incentives for middle managers)
        1. Identify and fix perverse incentives, the unintended consequences of well-intentioned rewards. Pay special attention to the dangerous middle-manager levels, the weakest point in the battle between loonshots and politics. Shift away from incentives that encourage battles for promotion and toward incentives centered on outcomes. Celebrate results, not rank.
      5. Bring a gun to a knife fight (engage a chief incentives officer)
        1. Competitors in the battle for talent and loonshots may be using outmoded incentive systems. Bring in specialist in the subtleties of the art – a chief incentives officer.
      6. Fine-tune the spans (wide for loonshots groups; narrow for franchise groups)
        1. Widen management spans in loonshot groups (but not in franchise groups) to encourage looser controls, more experiments, and peer-to-peer problem solving
    5. For anyone championing a loonshot, anywhere:
      1. Mind the False Fail
        1. Is a negative outcome due to a flaw in the idea or the test? What would you have to believe for it to be a flaw in the test? How might you evaluate that hypothesis
      2. Listen to the Suck with Curiosity (LSC)
        1. When you have poured your soul into a project, you will be tempted to argue with critics and dismiss whoever challenges you. You will improve your odds of success by setting aside those urges and investigating, with genuine curiosity, the underlying reasons why an investor declines, a partner walks, or a customer choose a competitor. It’s hard to hear no one likes your baby. It’s even harder to keep asking why
      3. Apply system rather than outcome mindset
        1. Everyone will make wrong turns in navigating the long, dark tunnel through which every loonshot travels. You will gain much more (and feel much better) by trying to understand the process by which you arrived at those decisions. How did you prepare? What influenced you? How might you improve your decision-making process?
      4. Keep your eyes on SRT: spirit, relationships, time
        1. When championing a loonshot, it’s easy to lose sight of what’s important, of why you are doing with what you are doing. A little obsession can be good. Too much can backfire. What’s helped me, on occasion, to pull back from the edge – to create a more sustainable and productive level of obsession – is stepping back to think on SRT

What I got out of it

  1. A beautiful and powerful framework for how to foster and handle loonshots. Important for any size company or venture

Small Giants: Companies That Choose to Be Great Instead of Big by Bo Burlingham

Summary

  1. Burlingham studies 14 companies which have chosen to be the best in their field, rather than growing for growth’s sake. They have all decided to remain privately held, with the majority of the stock in the hands of one person or a few like-minded people. These companies are all committed to being the best at what they do. More important than profits or growth. They understood that bigger does not necessarily equal better. They had a firm understanding of what they wanted and didn’t let the allure of scale get in their way

Key Takeaways

  1. The 14 companies studied include: Anchor Brewing, CitiStorage, Clif Bar, ECCO, Hammerhead Productions, Righteous Babe Records, Union Square Hospitality Group, Zingerman’s Community of Businesses, OC Tanner, Reell Precision Manufacturing, Rhythm & Hues Studios, The Goltz Group, WL Butler Construction,
  2. Danny Meyer, USHG
    1. I’ve made much more money by choosing the right things to say no to than by choosing things to say yes to. I measure it by the money I haven’t lost and the quality I haven’t sacrificed.
    2. Meyer’s 3 criteria to start a new restaurant
      1. It would have to be capable of becoming as extraordinary a restaurant as Union Square
      2. It would have to enhance the value of Union Square Café
      3. It would have to bring more balance to my life, not less
    3. One goal of our strategy was to provide opportunities for employees to move around, which served two purposes. First, it gave people room to grow and find new challenges without leaving USHG. That, in turn, allowed me not only to retain talent I didn’t want to lose but also to use that talent to get some of the mother yeast into any new project. Blue Smoke opened with a chef who had eight years at US Café, a GM who’d done the same, a service director with 5 years at Gramercy, a pastry chef with 3 years at Tabla and 11 Madison, and on and on. We just belief that if we can start out having a high comfort level with the culture, the thing can become whatever it’s going to become and it will be good.
    4. Enlightened Hospitality
      1. Neurotic desire for others to have a good time, to show that you care about them personally. You don’t just want them to be satisfied, you want them to be happy. It’s a step beyond service, and it requires the company to develop an emotional connection with customers through individual, one-on-one, person-to-person contact
      2. It’s an emotional skill – letting customers know you’re on their side
      3. Commitment to 5 core values
        1. Caring for each other
        2. Caring for guests
        3. Caring for the community
        4. Caring for suppliers
        5. Caring for investors and profitability
        6. (in descending order of importance)
    5. 3 pillars
      1. Integrity – the company is what it appears, and claims, to be. It does not project a false image to the world
      2. Professionalism – the company does what it says it’s going to do. It can be counted on to make good on its commitments
      3. Direct, human connection – the effect of which is to create an emotional bond, based on mutual caring
        1. It’s generally not the people at the top of the organization who create the intimate bonds. It’s the managers and the employees who do the work of the business day in and day out. They are the ones who convey the spirit of the company to the outside world. Accordingly, they are the company’s first priority – which, from one perspective, is ironic. For all the extraordinary service and enlightened hospitality that the small giants offer, what really sets them apart is their belief that the customer comes second.
      4. Must have the right context – community, culture, time. The “terroir”, like in wine, shapes the company. The company must be deeply rooted in their communities, exhibiting symbiotic relationships with the communities in which they’ve grown up, and the vitality of those connections is part of their mojo
  1. Mojo
    1. Mojo = relationship with employees. Indeed, the relationship between the employees and the company is the entire basis for the mojo they exude. You can’t have the second without the first. Unless a significant majority of a company’s people love the place where they work; unless they feel valued, appreciated, supported, and empowered; unless they see a future full of opportunities for them to learn and grow – unless, that is, they feel great about what they do, whom they do it with, ad where they’re going – mojo is simply not in the cards. Why? Because everything else that makes a company extraordinary – a great brand, terrific products or services, fabulous relationships with customers and suppliers, a vital role in the community – depends on those who do the work of the business, day in and day out
    2. Person in charge must have deep and intimate relations with the employees – who they are and what they do
    3. Spontaneity / Magic is the key for mojo
    4. Leaders have a very clear idea for what the good things in life are all about – exciting challenges, camaraderie, compassion, hope, intimacy, community, a sense of purpose, feelings of accomplishment, and so on – and they have organized their businesses so that they and the people they work with can get it. When outsiders come in contact with such a business, they can’t help but feel the attraction. The company is cool because of what’s going on inside it is good, it’s fun, it’s interesting, it’s something you want to be associated with. From that perspective, mojo is more or less the business equivalent of charisma. Leaders with charisma have a quality that makes people want to follow them. Companies with mojo have a quality that makes people want to be part of them.
    5. No greater challenge than making mojo last – succession planning is vital
    6. I don’t believe it’s possible to for a company to have mojo without leaders who feel so enthusiastic about what their companies do. If they don’t love the business, if they don’t feel that what the business does is vitally important, if they don’t care deeply about being both great and unique in providing whatever product or service they offer, nobody else will either. You can’t measure mojo by how big a company is and how much profit it generates. A company’s growth and the consistency of its financial returns may tell you something about the management team but they say little about whether or not the business is contributing anything great and unique to the world. Instead, small giants focus on the relationships that the company has with its various constituencies. The relationships are rewarding in and of themselves but also because their strength reveals the degree to which people are inspired by the company and its ability to inspire them is the best measure of how they perceive the value of what the company does. If they are as passionate about it as the founders and leaders, the financial results are likely to follow. But they also know those relationships are fragile. They depend on a level of trust and intimacy and that’s easily lost. All it takes is a little neglect. That usually happens when the leaders focus on growth, not as by-products of a well-run business but as goals to pursue for their own sake
  2. The Goltz Group
    1. Goltz – major lesson learned is to let people off the hook in ‘out of their control’ situations. There is a difference between mistakes (forgive immediately) and hazardous conduct
    2. Business can be summed up in 2 words: leverage and control
    3. An entrepreneur is an artist whose medium is business
    4. One of the least recognized hazards of business is boredom
    5. Business, for me, is a sort of puzzle. We believe there’s a solution to every problem and we think we can figure it out fi we can just visualize what needs to be done. That usually means coming up with a different way of looking at the situation. You need a kind of peripheral vision. You try this angle and that angle, searching for what everybody else is missing. You don’t always find it, but when you do, the experience is tremendously satisfying
  3. Anchor Brewing
    1. Fritz Maytag of Anchor Brewing was always the Brewmaster. Must know key processes inside out. His role is to make sure that everybody at anchor gets the idea that we have a theme and to remind people what they’re up to and to set standards.
  4. UNBT
    1. UNBT was founded on the heretical notion that a company’s growth has organic, almost preordained, limitations, and if you exceed those limitations and grew too fast, you would undermine your ability to provide excellent customer service, create a great workplace for your employees, and maximize shareholder returns. “We could grow faster, but it would cost us everything. In the bureaucracy of growth, you lose your distinctiveness. Banks which maintain their discipline and maintain their focus could go on delivering superior returns indefinitely.
      1. JBS Haldane On Being the Right Size
      2. What will kill this company is a bunch of people running around with their noses stuck in rule books and manuals
      3. It was Schmitt’s responsibility to create an enjoyable work environment. He was simply unwilling to growth for its own sake. He believed that as long as he kept his eye on the ball, growth would take care of itself. It was a matter of logic and principle, and he said he would apply the same approach even if he were in an altogether different business. It’s like you’re sailing down a river on with many tributaries running off. Yes ,you pause to consider each tributary and whether it is part of your voyage, but keeping you on course is the knowledge of where you want to be at the end of the trip
  5. Clif Bar
    1. I’m sure my enthusiasm is contagious
    2. 5 aspirations
    3. Sustaining the brands
    4. Sustaining the business
    5. Sustaining the people
    6. Sustaining the community
    7. Sustaining the planet
    8. Other
      1. Control + Time = Freedom
      2. Aim to be the employer of choice wherever you have facilities
      3. Must articulate, demonstrate, and imbue company with a higher purpose. Remind people in unexpected ways how much the company cares about them: mutual trust, respect, and collegiality between employees
      4. The power of having no hidden agenda is massive
      5. Leaders acutely aware of the little worlds they create internally – the small ecosystems which emerge at their companies
      6. Empower people to own/feel the pain from their job. Teach – Equip – Trust. This unleashes full potential and builds trust
      7. Question everything, chart your own course, have a deep passion for what you’re doing, intimately connect with your community/suppliers/customers/employees/own management, 
    9. Growth is a decision, not a necessity, but you will face enormous pressures to grow from customers, employees, investors, suppliers, competitors
    10. Success means you’re going to have better problems
    11. Keep control and don’t bring on outside investors who will interfere
    12. Avoid acquisitions – merging cultures is too hard
    13. Continuous pressure to keep best employees engaged and challenged. Creating opportunities for employees and opening up new possibilities for the business are the goals, not growth. Growth is a natural by-product of the company’s success in pursuing its central purpose and reason for being, whatever that may be
    14. Be picky about who you do business with – fire bad clients and only partner with good (win/win) clients
    15. They all sought to have a deep impact, which leads to an intimacy with all their stakeholders – one of the great rewards and great generators of mojo they exude
      1. No conscious effort to sell. Simply present what you do, who you are, and you’ll get the right customers

What I got out of it

  1. Enjoyed the book – especially Danny Meyer’s portions and the idea that mojo comes from trusting relationships with all constituencies, especially employees.

7 Powers: The Foundations of Business Strategy by Hamilton Helmer

Summary

  1. Helmer sets out to create a simple, but not simplistic, strategy compass. His 7 powers include: scale economics, switching costs, cornered resource, counter positioning, branding, network effects, and process.

Key Takeaways

  1. Strategy: the study of the fundamental determinants of potential business value The objective here is both positive—to reveal the foundations of business value—and normative—to guide businesspeople in their own value-creation efforts. Following a line of reasoning common in Economics, Strategy can be usefully separated into two topics: Statics—i.e. “Being There”: what makes Intel’s microprocessor business so durably valuable? Dynamics—i.e. “Getting There”: what developments yielded this attractive state of affairs in the first place? These two form the core of the discipline of Strategy, and though interwoven, they lead to quite different, although highly complementary, lines of inquiry.
  2. Power: the set of conditions creating the potential for persistent differential returns. Power is the core concept of Strategy and of this book, too. It is the Holy Grail of business—notoriously difficult to reach, but well worth your attention and study. And so it is the task of this book to detail the specific conditions that result in Power
  3. The Mantra: a route to continuing Power in significant markets. I refer to this as The Mantra, since it provides an exhaustive characterization of the requirements of a strategy.
  4. The Value Axiom. Strategy has one and only one objective: maximizing potential fundamental business value.
    1. For the purposes of this book, “value” refers to absolute fundamental shareholder value—the ongoing enterprise value shareholders attribute to the strategically separate business of an individual firm. The best proxy for this is the net present value (NPV) of expected future free cash flow (FCF) of that activity.
  5. Dual Attributes. Power is as hard to achieve as it is important. As stated above, its defining feature ex post is persistent differential returns. Accordingly, we must associate it with both magnitude and duration.
    1. Benefit. The conditions created by Power must materially augment cash flow, and this is the magnitude aspect of our dual attributes. It can manifest as any combination of increased prices, reduced costs and/or lessened investment needs.
    1. Barrier. The Benefit must not only augment cash flow, but it must persist, too. There must be some aspect of the Power conditions which prevents existing and potential competitors, both direct and functional, from engaging in the sort of value-destroying arbitrage Intel experienced with its memory business. This is the duration aspect of Power
    1. Benefits are common, and they often bear little positive impact on company value, as they are generally subject to full arbitrage. The true potential for value lies in those rare instances in which you can prevent such arbitrage, and it is the Barrier which accomplishes this. Thus, the decisive attainment of Power often syncs up with the establishment of the Barrier.
  6. Complex Competition. Power, unlike strength, is an explicitly relative concept: it is about your strength in relation to that of a specific competitor. Good strategy involves assessing Power with respect to each competitor, which includes potential as well as existing competitors, and functional as well as direct competitors. Any such players could be the source of the arbitrage you are trying to circumvent, and any one arbitrageur is enough to drive down differential margins.
  7. The 7 Powers
    1. Scale Economies
      1. Scale Economies—the First of the 7 Powers The quality of declining unit costs with increased business size is referred to as Scale Economies.
        1. Benefit: Reduced Cost
        1. Barrier: Prohibitive Costs of Share Gains
    1. Network Economies
      1. Network Economies: the value of the service to each customer is enhanced as new customers join the “network.” In such a situation, having the most customers is everything,
      1. Industries exhibiting Network Economies often exhibit these attributes: Winner take all.
    1. Counter-Positioning
      1. Counter-Positioning: A newcomer adopts a new, superior business model which the incumbent does not mimic due to anticipated damage to their existing business.
      1. This chapter introduces Counter-Positioning, the next Power type. I developed this concept to depict a not well-understood competitive dynamic I often have observed both as a strategy advisor and an equity investor. I must confess it is my favorite form of Power, both because of my authorship and because it is so contrarian. As we will see, it is an avenue for defeating an incumbent who appears unassailable by conventional wisdom metrics of competitive strength.
      1. But nearly always, these featured the same outcome: the incumbent responds either not at all or too late. The incumbent’s failure to respond, more often than not, results from thoughtful calculation. They observe the upstart’s new model, and ask, “Am I better off staying the course, or adopting the new model?” Counter-Positioning applies to the subset of cases in which the expected damage to the existing business elicits a “no” answer from the incumbent. The Barrier, simply put, is collateral damage. In the Vanguard case, Fidelity looked at their highly attractive active management franchise and concluded that the new passive funds’ more modest returns would likely fail to offset the damage done by a migration from their flagship products.
      1.  
      1. What are the potential causes of such decrements? They could be numerous, but over several decades of client strategy work, I have noted two that seem common. The first involves two characteristics of challenges to incumbency:
        1. The challenger’s approach is novel and, at first, unproven. As a consequence, it is shrouded in uncertainty, especially to those looking in from the outside. The low signal-to-noise of the situation only heightens that uncertainty.
        1. The incumbent has a successful business model. This heritage is influential and deeply embedded, as suggested by Nelson and Winter’s notion of “routines,” and with it comes a certain view of how the world works. The CEO probably can’t help but view circumstances through this lens, at least in part. Together these two characteristics frequently lead incumbents to at first belittle the new approach, grossly underestimating its potential.
      1. As noted in the Introduction, Power must be considered relative to each competitor, actual and implicit. With Counter-Positioning, this is particularly important, because this type of Power only applies relative to the incumbent and says nothing regarding Power relative to other firms utilizing the new business model.
      1. Though this isn’t always the case, I have noticed a frequently repeated script for how an incumbent reacts to a CP challenge. I whimsically refer to it as the Five Stages of Counter-Positioning: Denial Ridicule Fear Anger Capitulation (frequently too late)
      1. Once market erosion becomes severe, a Counter-Positioned incumbent comes under tremendous pressure to do something; at the same time, they face great pressure to not upset the apple cart of the legacy business model. A frequent outcome of this duality? Let’s call it dabbling: the incumbent puts a toe in the water, somehow, but refuses to commit in a way that meaningfully answers the challenge. Counter-Positioning often underlies situations in which the following developments are jointly observed: For the challenger Rapid share gains Strong profitability (or at least the promise of it) For the incumbent Share loss Inability to counter the entrant’s moves Eventual management shake-up (s) Capitulation, often occurring too late
      1. Such reversals are rare in business, because contests typically take place over extended periods and with great thoughtfulness on all sides. Even a momentary lapse by an incumbent won’t present a sufficient opening. The only bet worthwhile for a challenger is one in which even if the incumbent plays its best game, it can be taken off the board. A competent Counter-Positioned challenger must take advantage of the strengths of the incumbent, as it is this strength which molds the Barrier, collateral damage.
    1. Switching Costs
      1. Switching Costs arise when a consumer values compatibility across multiple purchases from a specific firm over time. These can include repeat purchases of the same product or purchases of complementary goods.
      1. Benefit. A company that has embedded Switching Costs for its current customers can charge higher prices than competitors for equivalent products or services. This benefit only accrues to the Power holder in selling follow-on products to their current customers; they hold no Benefit with potential customers and there is no Benefit if there are no follow-on products.
      1. Barrier. To offer an equivalent product, competitors must compensate customers for Switching Costs. The firm that has previously roped in the customer, then, can set or adjust prices in a way that puts their potential rival at a cost disadvantage, rendering such a challenge distinctly unattractive. Thus, as with Scale Economies and Network Economies, the Barrier arises from the unattractive cost/benefit of share gains for the challenger.
      1. Switching Costs can be divided into three broad groups:
        1. Financial.
        1. Procedural.
        1. Relational.
      1. Switching Costs are a non-exclusive Power type: all players can enjoy their benefits.
    1. Branding
      1. Branding is an asset that communicates information and evokes positive emotions in the customer, leading to an increased willingness to pay for the product.
      1. Benefit. A business with Branding is able to charge a higher price for its offering due to one or both of these two reasons:
        1. Affective valence. The built-up associations with the brand elicit good feelings about the offering, distinct from the objective value of the good.
        1. Uncertainty reduction. A customer attains “peace of mind” knowing that the branded product will be as just as expected.
      1. Barrier. A strong brand can only be created over a lengthy period of reinforcing actions (hysteresis), which itself serves as the key Barrier.
      1. Brand Dilution. Firms require focus and diligence to guide Branding over time and ensure that the reputation created remains consistent in the valences it generates. Hence, the biggest pitfall lies in diminishing the brand by releasing products which deviate from, or damage, the brand image. Seeking higher “down market” volumes can reduce affective valence by damaging the aura of exclusivity, weakening positive associations with the product.
      1. Problem is, the qualities that make Branding a Power also make it hard to change; the considerable risk is dilution or brand destruction.
      1. Type of Good. Only certain types of goods have Branding potential as they must clear two conditions:
        1. Magnitude: the promise of eventually justifying a significant price premium. Business-to-business goods typically fail to exhibit meaningful affective valence price premia, since most purchasers are only concerned with objective deliverables. Consumer goods, in particular those associated with a sense of identity, tend to have the purchasing decision more driven by affective valence. Here’s the reason: in order to associate with an identity, there must be some way to signal the exclusion of alternative identities.
        1. For Branding Power derived from uncertainty reduction, the customer’s higher willingness to pay is driven by high perceived costs of uncertainty relative to the cost of the good. Such products tend to be those associated with bad tail events: safety, medicine, food, transport, etc. Branded medicine formulations, for example, are identical to those of generics, yet garner a significantly higher price. Duration: a long enough amount of time to achieve such magnitude. If the requisite duration is not present, the Benefit attained will fall prey to normal arbitraging behavior.
    1. Cornered Resource
      1. Cornered Resource definition: Preferential access at attractive terms to a coveted asset that can independently enhance value.
      1. Benefit. In the Pixar case, this resource produced an uncommonly appealing product—“superior deliverables”—driving demand with very attractive price/volume combinations in the form of huge box office returns. No doubt—this was material (a large m in the Fundamental Equation of Strategy). In other instances, however, the Cornered Resource can emerge in varied forms, offering uniquely different benefits. It might, for example, be preferential access to a valuable patent, such as that for a blockbuster drug; a required input, such as a cement producer’s ownership of a nearby limestone source, or a cost-saving production manufacturing approach, such as Bausch and Lomb’s spin casting technology for soft contact lenses.
      1. Barrier. The Barrier in Cornered Resource is unlike anything we have encountered before. You might wonder: “Why does Pixar retain the Brain Trust?” Any one of this group would be highly sought after by other animated film companies, and yet over this period, and no doubt into the future, they have stayed with Pixar. Even during the company’s rocky beginning, there was a loyalty that went beyond simple financial calculation.
      1. Our general term for this sort of barrier is “fiat”; it is not based on ongoing interaction but rather comes by decree, either general or personal.
      1. Another way to put this is that a Cornered Resource is a sufficient condition for potential for differential returns.
    1. Process Power
      1. I save it until last because it is rare. I will use the Toyota Motor Corporation as a case.
      1. Perhaps the best way to think of it is this: Process Power equals operational excellence, plus hysteresis. Having said that, such hysteresis occurs so rarely that I am in strong agreement with Professor Porter’s sentiments.
      1. Benefit. A company with Process Power is able to improve product attributes and/or lower costs as a result of process improvements embedded within the organization. For example, Toyota has maintained the quality increases and cost reductions of the TPS over a span of decades; these assets do not disappear as new workers are brought in and older workers retire.
      1. Barrier. The Barrier in Process Power is hysteresis: these process advances are difficult to replicate, and can only be achieved over a long time period of sustained evolutionary advance. This inherent speed limit in achieving the Benefit results from two factors:
        1. Complexity. Returning to our example: automobile production, combined with all the logistic chains which support it, entails enormous complexity. If process improvements touch many parts of these chains, as they did with Toyota, then achieving them quickly will prove challenging, if not impossible.
        1. Opacity. The development of TPS should tip us off to the long time constant inevitably faced by would-be imitators. The system was fashioned from the bottom up, over decades of trial and error. The fundamental tenets were never formally codified, and much of the organizational knowledge remained tacit, rather than explicit. It would not be an exaggeration to say that even Toyota did not have a full, top-down understanding of what they had created—it took fully fifteen years, for instance, before they were able to transfer TPS to their suppliers. GM’s experience with NUMMI also implies the tacit character of this knowledge: even when Toyota wanted to illuminate their work processes, they could not entirely do so.
  8. The Path to Power: “Me Too” Won’t Do
    1. Here’s the first important takeaway from our consideration of Dynamics: “getting there” (Dynamics) is completely different from “being there” (Statics). In other words, to assess which journeys are worth taking, you must first understand which destinations are desirable. Fortunately the 7 Powers does exactly that: it maps the only seven worthwhile destinations.
    1. The first cause of every Power type is invention, be it the invention of a product, process, business model or brand. The adage “‘Me too’ won’t do” guides the creation of Power.
    1. Planning rarely creates Power. It may meaningfully boost Power once you have established it, but if Power does not yet exist, you can’t rely on planning. Instead you must create something new that produces substantial economic gain in the value chain. Not surprisingly, we have worked our way back to Schumpeter.
    1. Power arrives only on the heels of invention. If you want your business to create value, then action and creativity must come foremost. But success requires more than Power alone; it needs scale. Recall the Fundamental Equation of Strategy: Value = [Market Size] * [Power]
    1. Invention has a powerful one-two value punch: it both opens the door for Power and also propels market size.
  9. Other
    1. By far the most important “value moment” for a business occurs when the bars of uncertainty are radically diminished with regards to the Fundamental Equation of Strategy, market size and Power. At that moment, the cash flow future makes a step-change in transparency.
    1. A primary driver of opacity is high flux: if a business is in a fast-changing environment, then the information facing investment pros tends to have much higher uncertainty bars regarding future free cash flow. But high flux also attends the sort of conditions which orbit the “value moment.” So if the 7 Powers can lead to alpha by identifying Power in these situations ex ante, it also promises to be useful in doing the same for those inventors on the ground trying to find a path to satisfy The Mantra.
    1. The 3 S’s. Power, the potential to realize persistent differential returns, is the key to value creation. Power is created if a business attribute is simultaneously:
      1. Superior—improves free cash flow
      1. Significant—the cash flow improvement must be material
      1. Sustainable—the improvement must be largely immune to competitive arbitrage

What I got out of it Helmer provides a simple, but not simplistic, strategy framework in which to analyze, build, invest in companies. SSCCBNP – scale economies, switching costs, cornered resource, counter positioning, branding, network effects, process. The book is well worth reading and re-reading. The real world examples he gives relating to his framework are helpful to better understand it all.

High Growth Handbook: Scaling Startups from 10 to 10,000 People by Elad Gil

Summary

  1. Elad discusses some key topics that entrepreneurs face from initial stages of a company to exit. He gets great insights from some of the best known entrepreneurs which is helpful to better understand how to navigate complex situations that naturally arise through this process

Key Takeaways

  1. Most startups, once they hit product market fit, shift more towards distribution focus rather than product focus. Distribution has proven to beat out product time and again 
  2. Coming out with a second hit product is often harder than the first but you need to keep iterating or else you’ll get left behind
  3. Pricing power is a key aspect of a moat. If you can’t raise prices, you’re in trouble. This is enormous leverage as it drops right to the bottom line and can fund new efforts, hiring, research, and more. Higher prices = faster growth
  4. Role of the CEO
    1. The CEO sets the vision of the company and communicates that to all stakeholders while hiring, growing, and fostering the culture.
    2. They are chief psychologist and need to be responsible for capital allocation.
    3. You must manage yourself, your reports, and your Board.
    4. You must learn to delegate more, audit your calendar, say “no” more often and make time for things you enjoy.
    5. Learn from an experienced executive, trial by fire, have dinner often with CEOs at other companies, get an executive coach.
    6. You must be able to get perspective and keep the big picture in view – this means focusing on the right things.
    7. Hold regular 1-on-1s, weekly staff meetings 
    8. Should write a “How to Work with Me” document which will help others quickly understand how you like to work 
      1. Great example of how Johnson of Stripe wrote her document
    9. Can’t have too many things be mandatory so must choose carefully 
    10. As a leader, you have to state the obvious and you have to do it often. Make sure people are on the same page. Create documents which outline your overall vision and strategy and shorter term documents for how you’ll get there. You must codify a set of behaviors and principles and adhere to them. You need planning procedures earlier than you think and they must start at the top and flow all the way down 
    11. There are five main jobs for the CEO
      1. Chief product officer
      2. Primary face of the company
      3. Steward for senior executives
      4. Chief strategist
      5. Cultural leader
        1. You do not want to preserve culture. You want to steer and guide it overtime
  5. Role of the Board
    1. Choosing your Board, particularly your independent director, is of utmost important.
    2. The book has some great examples of how you should approach, what you want at varying stages, etc.
    3. The Board’s role is advisory and they should come in asking, “how can I help?” and pose questions rather than demand action.
    4. It should be a collaborative open relationship rather than a hierarchical one.  
    5. One of your mantra’s has to be “do no harm”
    6. Board meetings exist to help the company and ensure proper corporate governance for all stakeholders.
    7. Board meetings should start with
      1. Board matters which should be a quick, high-level overview of key metrics which impact the strategy and the high-level vision
      2. Follow-up items from last Board’s meeting
      3. End with strategic initiatives which should take up most of the time.
      4. Send out the slides before the meeting so everyone has a chance to review them and think about everything
    8. Keep your Board to five or six people if possible as it starts getting political and unwieldy much beyond that.
    9. You have to set expectations early that there won’t be fancy PowerPoint decks just a sheet of paper with the key metrics and strategic points you want to talk about
    10. As a CEO and founder you have to manage the board
  6. Hiring and Training
    1. When hiring people, you should ask the same questions for people interviewing for the same roles so that you can calibrate. The faster you can interview and offer a job the higher your candidate conversion will be
    2. At the beginning, you should hire through your network and this will take a lot of time and effort. As you grow, you can use outside recruiters or bring someone in house to manage it all
    3. When someone is brought on board, send out a welcome email, have a care package waiting for them (such as a hoodie, a onesie for their baby, their laptop etc.)
    4. Assign them a mentor or a buddy for the first couple months and make sure they feel true ownership over whatever they were hired to do
  7. How to hire Executives, COO
    1. Your job as the CEO is not to know everything but to make sure all problems are solved. Hire people that complement you and can do certain things better than you ever could. These high level issues are perfect for a COO. 
    2. Great executives are thinking about and preparing for issues that will come up in 6-12 months. They’re not fighting today’s fires but figuring out how to solve others before they even start
    3. You must hire someone with the right experience. If your company is too large or small for a certain hire, the executive will be bored or over their heads
    4. There is no perfect Org structure and if you’re growing very quickly, you will literally have a different company and 6 to 12 months. So, you should optimize for the current needs rather than trying to optimize for where you think the company might be in a couple years.
    5. Reorgs, while difficult,  will happen both at the company level and at the functional level but they must be handled delicately, thoughtfully, and quickly 
    6. Rapidly growing companies should look to have a position that “fills the gaps.” Someone who reports directly to the founder or CEO and can help cover bases and fix problems until a bigger team and an executive is hired and built out. Fast growing companies are chaotic on the inside and that’s why a position like this is so powerful. Finding a good person, having them understand the problems, building out their team, and scaling takes time so you really need to be looking out for at least a year and hiring someone to fix the problems you think you’ll run up against.
    7. Early on make sure you have the proper scaffolding for your organization so that it doesn’t break when you scale. it doesn’t need to be large or require tons of people but it should be thoughtfully built out
    8. You can compromise on skill or experience when hiring quickly but never compromise on culture – no jerks. Say your culture and values so often that you get sick of it. Reward people on performance and culture to align incentives
  8. Other
    1. Product managers are the CEOs of a certain product lines and are responsible for addressing customer needs, desires, wants, and creating products to match that
    2. When fundraising, don’t over-optimize for a valuation. Raise money at a fair price and that way you can grow into it organically. In addition, later fundraising could be easier because metrics are more realistic and manageable to meet
    3. Right of First Refusal for secondary share offerings and/or a mandate in your charter discussing this could be helpful if you grow and employees want to diversify and cash out

What I got out of it

  1. A supremely helpful and insightful book for anyone thinking of starting a company, in the midst of starting one, or far along the path. Will come back to and reference often

Great reference website for more resources

Founders at Work: Stories of Startups’ Early Days by Jessica Livingston

Summary

  1. Jessica Livingston interviews some of the biggest technology entrepreneurs about their experience in the early days of their companies. You’ll get firsthand knowledge about the whole process and be able to pick up patterns across time (it’s always more work than you think it’ll be, almost none of these entrepreneurs foresaw how big their companies would eventually become). “Why the disconnect [between startups trying to seem like formal companies but actually operating far faster, often better]? I think there’s a general principle at work here: the less energy people expend on performance, the more they expend on appearances to compensate. More often than not the energy they expend on seeming impressive makes their actual performance worse. A few years ago I read an article in which a car magazine modified the “sports” model of some production car to get the fastest possible standing quarter mile. You know how they did it? They cut off all the crap the manufacturer had bolted onto the car to make it look fast. Business is broken the same way that car was. The effort that goes into looking productive is not merely wasted, but actually makes organizations less productive. Suits, for example. Suits do not help people to think better. I bet most executives at big companies do their best thinking when they wake up on Sunday morning and go downstairs in their bathrobe to make a cup of coffee. That’s when you have ideas. Just imagine what a company would be like if people could think that well at work. People do in startups, at least some of the time. (Half the time you’re in a panic because your servers are on fire, but the other half you’re thinking as deeply as most people only get to sitting alone on a Sunday morning.) This book can help fix that problem, by showing everyone what, till now, only a handful people got to see: what happens in the first year of a startup. This is what real productivity looks like. This is the Formula 1 racecar. It looks weird, but it goes fast.”

Key Takeaways

  1. Apparently sprinters reach their highest speed right out of the blocks, and spend the rest of the race slowing down. The winners slow down the least. It’s that way with most startups too. The earliest phase is usually the most productive. That’s when they have the really big ideas. Imagine what Apple was like when 100% of its employees were either Steve Jobs or Steve Wozniak.
  2. In this book, you’ll hear the founders’ stories in their own words. Here, I want to share some of the patterns I noticed. When you’re interviewing a series of famous startup founders, you can’t help trying to see if there is some special quality they all have in common that made them succeed. What surprised me most was how unsure the founders seemed to be that they were actually onto something big. Some of these companies got started almost by accident. The world thinks of startup founders as having some kind of superhuman confidence, but a lot of them were uncertain at first about starting a company. What they weren’t uncertain about was making something good—or trying to fix something broken. They all were determined to build things that worked. In fact, I’d say determination is the single most important quality in a startup founder. If the founders I spoke with were superhuman in any way, it was in their perseverance. That came up over and over in the interviews. Perseverance is important because, in a startup, nothing goes according to plan. Founders live day to day with a sense of uncertainty, isolation, and sometimes lack of progress. Plus, startups, by their nature, are doing new things—and when you do new things, people often reject you. That was the second most surprising thing I learned from these interviews: how often the founders were rejected early on. By investors, journalists, established companies—they got the Heisman from everyone. People like the idea of innovation in the abstract, but when you present them with any specific innovation, they tend to reject it because it doesn’t fit with what they already know. Innovations seem inevitable in retrospect, but at the time it’s an uphill battle. It’s curious to think that the technology we take for granted now, like web-based email, was once dismissed as unpromising. As Howard Aiken said, “Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats.” In addition to perseverance, founders need to be adaptable. Not only because it takes a certain level of mental flexibility to understand what users want, but because the plan will probably change. People think startups grow out of some brilliant initial idea like a plant from a seed. But almost all the founders I interviewed changed their ideas as they developed them. PayPal started out writing encryption software, Excite started as a database search company, and Flickr grew out of an online game. Starting a startup is a process of trial and error. What guided the founders through this process was their empathy for the users. They never lost sight of making things that people would want.

Summary

  1. Very rich read which provides great insights into how these entrepreneurs think, how they reacted and adapted to situations, and how persistent and creative you have to be to survive. Highly recommend for anyone thinking of starting their own business or in the midst of it now. Many parallels and patterns to learn from