An innovation stack is a series of interconnected skills, competencies, products, services, that allow you to solve a problem in a way nobody else has and few others can.
An innovation stack is at the core of the most successful companies of history. They solve problems that nobody has been able to solve before. It forces you to be creative even if you don’t want to be
Words matter and in this case the author considers an entrepreneur somebody who is a crazy explorer. The perfect problem for the entrepreneur is one that can be solved but whose solution is not yet known
It is difficult to get feedback so try to parse through where there could be feedback failure and what that means for your product or service.
Making things a little bit difficult so the user really has to pay attention and struggle a little bit really helps damn remember and process what they’ve learned ( ikea effect)
There is a subtle yet profound difference between having low prices and the lowest prices. Low means always giving value to the consumer whereas the west is always relative where are you always have to keep an eye out on the competition and what they’re doing. Your prices should arise out of your innovation stack. You should seek low prices in order to build customer trust, corporate alignment, and competitive advantage. Every company the author studied sought out low prices
Disruption is an overused word today. The author found that the vast majority of successful companies brought new people into the market rather than simply stealing from the incumbents. The focus should be on building and not destroying. Copy when you can, but come up with new solutions when needed
VC’s fund expansion, not exploration
If you’re going to do something brand new, you will be afraid. You can’t get rid of this, but you can learn to effectively deal with it. There is no expertise for those who are truly innovative but these people share stubbornness and perseverance. They care deeply about the perfect problem they are solving for. When you solve a problem you care about, it brings you energy
Business people survive by copying what already exists and do so successfully. We survive because we can replicate. This is natures solution to entropy
Timing is everything m. Right feels early. It a critical component of your innovation stack doesn’t exist yet, work on other things until that step becomes feasible
The world is a series of interdependent innovation stacks. When something new is presented, a whole new world of possibilities is unlocked
You need to have every element in the stack for it to truly work. You can’t pick and choose and this is why copying a truly innovative company is quite hard l. Each element impacts every other element,/8 this quickly becomes an exercise in mathematics where the likelihood of copying 10 things correctly is really low
History is the best place to learn about innovation stocks. These are the truly world changing companies
Stay laser focused on your key customers and the innovation stack that serves them. This is much better than focusing on what the competition is doing
Getting statistics on a market that doesn’t exist yet is difficult if not impossible. Remembered that invisible does not mean not interested
Customers who trust you is more valuable than customers who love you.
There are no answers for the new. We all start at square zero when trying to solve something that hasn’t been done before
What I got out of it
Very helpful book to help frame different types of businesses, questions, answers, innovations. Creating interdependent, interlocking innovations makes you nearly impossible to compete with, especially when you are solving a problem that hasn’t been solved before
The “purple cow” concept is at the core of JB Hunt’s culture and way of thinking. Essential products and services that can’t be copied, unique,, doing things differently, earning above the cost of capital, an intense focus on solving the customer’s problems , embrace the more difficult business, do stuff that other people have trouble doing, be adaptable
Beware overcrowded spaces – have an intense desire to offer specialized and unique services that allow you to do what others wouldn’t or couldn’t
Differentiation, better customer service, a refusal to stand still, natural expansion with homegrown talent
Boring things – even if excellent – quickly become invisible
JB Hunt’s founder was impatient, wanted to maintain frantic growth at all costs, an idea man, was all over, didn’t want to let go
You learn a whole lot more from the struggles in the valley than you do on the mountaintop
Never feed problems while starving opportunities
Decision theory makes it clear that for a given set of costs and benefits, selecting alternatives with lower down-side risk, other things being equal, increases the expected payoff
We’ve never been concerned about cannibalizing one part of a company to offer a better solution to the customer. If there’s a better solution for the customer, we need to offer it. most companies won’t do that. We are not in business to support our trucking company. We are in business to support our customers with the best answer possible in that market
Must constantly adapt and iterate so that you never become stale and optimized for an environment that no longer exists. How you perceive a business segment can affect how you change the curve of the product life cycle
The customer is most certainly not always right. They are always to be respected, listened to, and served, but only when a return is generated
3 criteria needed to develop core competencies: provides potential access to a wide variety of markets; that it makes a significant contribution to the perceive customer benefits of the end product; and that it is difficult to imitate by competitors
Selling JBHT rather than just one segment results in more satisfied and loyal customers. Our bonus structure rewards leaders based on the company’s overall performance. When the company performs well as a whole, everyone reaps the rewards. Ironically, one of the things the original DCS leaders rebelled against was that bonus structure. There are legitimate arguments to do it other ways, but we find our approach fosters a one-for-all-and-all-for-one mentality. We incentivize the company’s success, not just the success of any one part of it. Sharing the wealth with those who helped create it has worked for JBHT for nearly 40 year.
We measure the quality of a team’s results against its peer groups, not against other JBHT units, so we put the emphasis on being “best in class” not “best within JBHT.” We’ve found this helps eliminate the popularity contests, lead to better decisions, and allows us to celebrate contributions that otherwise might get overlooked
Growth is key, growth is oxygen
A good message is clear, actionable, consistent. Give the what/why, not the how
What’s unique is that variables like time, growth and the influx of new people haven’t caused an erosion of our culture. Instead, they have added to it and strengthened it. We’ve been open to change, while staying true to our core; flexible enough to stretch with new ideas, but solid enough to maintain our identity. I credit this to the dynamic interplay between our culture and our leadership and management.
Intermodal – more than one mode of transportation to reach the final destination (ship to train to truck…)
Trucks first complemented and then competed with the railways
“partner with the enemy” became the right choice for railways and trucks as it gave the customer more options, increased efficiencies, grew the pie (win/win/win)
Developing Intermodal opened up new business lines that are now multi-billion dollar segments
Grassroots and top-down – go to local colleges and universities to recruit good students and home grow them. From the top-down, Hr goes to the company’s leaders and asks them for the names of 2-3 people they have in mind as their successor. Having a good understanding of the existing talent pool also allows us to know when we need to look outside the company, as was the case when we shifted our approach toward technology and engineering. Growing organically is really healthy and really great for your culture, but you do have to inject outside thinking strategically and purosefully from time to time.
What I got out of it
A great look inside the culture of a compounder who has grown steadily for decades now
Through Socratic dialogue and real-world life lessons, a successful businessman (Mr. X) shares his wisdom and learnings with a skeptical young student, Nick.
Strategy ROIC > project ROIC
Longer term, more fluid and dynamic
Capital allocation is the study of opportunity cost. This skill is extremely important as it helps usher in resources to the highest return areas. This will not and cannot solve all problems, but if structured and incentivized correctly, can alleviate many ills
What I got out of it
Really fun fiction book that gets across many important capital allocation, business, and financial ideas across in a narrative format. This short summary does not do the book justice – what took several books to convey many financial / capital allocation topics in a dry fashion, this book was able to do in a fun, narrative manner. This could and maybe should be the entry point into the world of finance and capital allocation
My goal is to present the essential Porter in a form that can be more easily digested and put to work than the original. But, to extend my metaphor, if you really want to digest these critically important ideas, you have to be willing to chew on them before you swallow. Strategy is not fast food, and neither is Porter.
“The essence of strategy,” Porter often says, “is choosing what not to do.”
“What Is Strategy?” (1996), one of the most-cited and best-selling HBR articles of all time, and “The Five Competitive Forces That Shape Strategy” (2008),
Strategy explains how an organization, faced with competition, will achieve superior performance.
The goal of strategy is to earn superior returns on the resources you deploy, and that is best measured by return on invested capital.
Strategy is a path, not a fixed point. An effective strategy is dynamic.
One of the important lessons about strategy is that if you’re pursuing a different positioning, then different metrics will be relevant. And if you force everybody to show progress on the same metrics, you encourage convergence and undermine strategic uniqueness.
The essence of strategy is to create your own path.
A business model highlights the relationship between your revenues and your costs. Strategy goes an important step further. It looks at relative prices and relative costs, and their sustainability. That is, how your revenues and costs stack up against your rivals’.
The most common error of all is that competitive success comes from “being the best.” This mind-set is highly intuitive. It is also self-destructive, leading to a zero-sum race to the bottom. Only by competing to be unique can an organization achieve sustained, superior performance.
Porter’s prescription: aim to be unique, not best. Creating value, not beating rivals, is at the heart of competition.
Properly understood, competitive advantage allows you to follow the precise link between the value you create, how you create it (your value chain), and how you perform (your P&L). Competitive advantage is commonly understood as the weapon you use to trounce rivals. For Porter, it’s fundamentally about creating value, and about doing so differently from rivals. In this way, competitive advantage is about how your value chain will be different and your P&L better than the industry average. Competitive advantage lies in the activities, in choosing to perform activities differently or to perform different activities from rivals.
Where does superior performance come from? Porter’s answer can be divided into two parts. The first part is attributable to the structure of the industry in which competition takes place.
These five forces—the intensity of rivalry among existing competitors, the bargaining power of buyers (the industry’s customers), the bargaining power of suppliers, the threat of substitutes, and the threat of new entrants—determine the industry’s structure,
When you analyze the power of suppliers, be sure to include all of the purchased inputs that go into a product or service, including labor (i.e., your employees).
We now have a complete definition of competitive advantage: a difference in relative price or relative costs that arises because of differences in the activities being performed
While not every single activity need be unique, robust strategies always involve a significant degree of tailoring. To establish a competitive advantage, a company must deliver its distinctive value through a distinctive value chain. It must perform different activities than rivals or perform similar activities in different ways. Thus the value proposition and the value chain—the two core dimensions of strategic choice—are inextricably linked. The value proposition focuses externally on the customer. The value chain focuses internally on operations.
Making trade-offs means accepting limits—saying no to some customers, for example, so that you can better serve others. Trade-offs arise when choices are incompatible. Because a successful strategy will attract imitators, choices that are difficult to copy are essential.
Trade-offs play such a critical role that it’s no exaggeration to call them strategy’s linchpin. They hold a strategy together as they contribute to both creating and sustaining competitive advantage.
Fit has to do with how the activities in the value chain relate to one another. At one level, the idea of fit is completely intuitive. Every general manager knows the importance—and the difficulty—of aligning the various functional areas needed to compete in a business. But fit goes beyond simple alignment to amplify a competitive advantage and to make it more sustainable. Its role in strategy highlights yet another popular misconception: that competitive success can be explained by one core competence, the one thing you do really well. Good strategies depend on the connection among many things, on making interdependent choices. A common piece of advice for managers has been to focus on their core activities and to outsource the rest. Fit challenges that bit of conventional wisdom.
Fit has to do with how the activities in the value chain relate to one another. Its role in strategy highlights yet another popular misconception, that competitive success can be explained by one core competence, the one thing you do really well. The fallacy here is that good strategies don’t rely on just one thing, on making one choice. Nor do they typically result from even a series of independent choices. Good strategies depend on the connection among many things, on making interdependent choices.
You can think of fit as an amplifier, raising the power of both of those effects. Fit amplifies the competitive advantage of a strategy by lowering costs or raising customer value (and price). Fit also makes a strategy more sustainable by raising barriers to imitation.
Fit means that the value or cost of one activity is affected by the way other activities are performed.
But once you appreciate the role of fit, you will stop and think much harder about outsourcing. Instead of trying to determine which activities are core, Porter asks a different question: Which activities are generic and which are tailored? Generic activities—those that cannot be meaningfully tailored to a company’s position—can be safely outsourced to more efficient external suppliers. However, Porter argues that outsourcing is risky for activities that are or could be tailored to strategy, and especially for those activities that are strongly complementary with others. The fewer elements that remain in the company’s value chain, the fewer the opportunities to extend tailoring, trade-offs, and fit
In competing to be the best, imitation is easy, and advantages are temporary. The more a company competes on uniqueness, the less susceptible it is to imitation, and advantages can be sustained over long periods of time. Great strategies are like complex systems in which all of the parts fit together seamlessly. Each thing you do amplifies the value of the other things you do. That enhances competitive advantage. And it enhances sustainability as well. “Fit,” Porter says, “locks out imitators by creating a chain that is as strong as its strongest link.”
Continuity over time – if your company can achieve this, it has a robust, stable core but is also able to innovate and adapt
Typical Steps in Industry Analysis
Define the relevant industry by both its product scope and geographic scope.
Identify the players constituting each of the five forces and, where appropriate, segment them into groups.
Assess the underlying drivers of each force.
Step back and assess the overall industry structure.
Analyze recent and likely future changes for each force.
How can you position yourself in relation to the five forces?
In the early years, a shareholder asked CEO Herb Kelleher if Southwest couldn’t raise its prices by just a few dollars since its $15 price on the Dallas–San Antonio route was so much lower than Braniff’s $62 fare. Kelleher said no, our real competition is ground transportation, not other airlines.
Early in his career, Porter identified a set of generic strategies—focus, differentiation, and cost leadership—that quickly became one of the most widely used tools for thinking about key strategic choices. Each of the three reflects the most basic level of consistency that every effective strategy must have. Focus refers to the breadth or narrowness of the customers and needs a company serves. Differentiation allows a company to command a premium price. Cost leadership allows it to compete by offering a low relative price.
My advice is to concentrate on deepening and extending a strategic position rather than broadening and ultimately compromising it. Here are some thoughts about how to grow profitably without destroying your strategy. First, never copy.
Expand geographically in a focused way. If you’ve penetrated your strategic opportunity at home, there’s always the rest of the world.
Two questions will tell you whether you’re dealing with a disruptive technology or not. First, to what extent does it invalidate important traditional advantages? Second, to what extent can incumbents embrace the technology without major negative consequences for their business? If you stop and ask those questions, you’ll see that true disruptions are not so common.
For a nonprofit, there is no directly comparable metric, so you’ve got to create one. A major challenge for every nonprofit is to define its goal or goals in terms of the social benefits it seeks to create. And then it must develop a value metric that looks at the results achieved versus the costs required to achieve them.
What I got out of it
An excellent overview. Great way to frame strategy and to help hone in on where you should focus – being unique, not the best
What is a star venture? It has two qualities. One, it operates in a high-growth market. Two, it is the leader in that market.
The answer is not to work or invest in the great majority of ventures. The key is to select the ventures that are likely to succeed anyway. Without superhuman people. Without perfect balance between the skills of the people. Without blood, toil, tears and sweat.Without the need to keep chopping and changing before the correct formula emerges. The useful answer is not ‘people, people, people’. The really potent, consistently successful answer is ‘positioning, positioning, positioning’.
There is another clue as to whether or not a niche market is viable, and it is simply this: is the niche highly profitable? Does it generate a lot of cash? Leadership in a niche is not valuable unless, sooner or later, the niche is very profitable and gushes out cash.
A leading firm should have higher prices, or lower costs, than a similar business that is a follower. Why higher prices? Because the customers prefer the product. Why lower costs? Because the firm can spread its fixed costs over a much greater volume of business than competitors can.
About 1 in 20 start-ups is a star. So stars are rare. But they are not so rare that, with a bit of patience and careful thought, you can’t discover one – or create one yourself. If you look intelligently for a star, you will find it.
My own experience is that, as I have made more money and started more successful ventures, the less I have worked. Hard work is either a red herring, or negatively correlated with success.
A cash cow can be turned into a star when the concept of the product category is transformed – David’s vision of personal organisers as upscale fashion accessories reinvented the whole market.
A star that is fast losing market share, or an ex-star that has lost it, may be an attractive prospect.
It’s not as unusual as you might expect to find a hole in the market – even a market as big and profitable as gin. Seek a hole and sooner or later you will find one.
Ecologists know that two species of animal that try to exist in exactly the same way become deadly enemies. If two species compete head-on for food, only one of them can win. The other species must change either the food it seeks or the way it hunts for it. If it does neither, the weaker species will die out. It is the same with business, except the time to extinction is compressed. Any business that imitates another slavishly will not be successful. The numbers are against it. It will be competing in the same market as the market leader. It will be smaller. It will have less appeal to customers. It will be less profitable and usually loss-making. It will have to do something different, or die.
Imitation, even of a highly profitable and savvy player, won’t lead to a star business. There are only two exceptions. One is geography – a player may be imitated in a new country or region where it is not present, and sometimes the advantage of being first and the differences in the local market’s preferences can lead the imitator to a star position that can be defended even against the business imitated. The other exception is where the follower has more money or a much better approach than the originator.
There are seven steps necessary for creating a star venture.The seven steps give you an easy template for devising your star.
Divide the market.
Select a high-growth niche.
Target your customers.
Define the benefits of the new niche.
Ensure profitable variation.
Name the niche you plan to lead.
Name the brand in a way that complements the category name. Make the name short, memorable, easy to recognise, appealing to the target market and associated with the niche.
Many great innovations simultaneously divide markets and combine the attributes of two previously unrelated markets.
Start with the markets you and your friends know. How could you turn them upside down, inside out, to create a new category? Here are 32 useful triggers. Some of them are opposites, using one extreme or another to create a new niche. Go against the conventional wisdom of the main market. Many of these triggers are related or similar, but they are included just in case they prompt an idea that otherwise might not occur to you. Don’t be overwhelmed by the list – it’s there to help, not to hold you up. If you can’t relate to a prompt, pass swiftly on to the next.
YOUR IDEAL PRODUCT DOESN’T EXIST
MARKET VERSUS NICHE
BIGGER PRODUCT VERSUS SMALLER PRODUCT
EMOTIONAL VERSUS FUNCTIONAL – Emotion is warm and expensive. Function is no-nonsense, rational, inexpensive, stripped down to the essentials. Can you create a new niche by going ‘emotional’ in a market that is mainly ‘functional’?
HEALTHIER VERSUS TEMPTING
SAFE VERSUS RACY
CONVENIENCE VERSUS PURITY
SAVING TIME VERSUS EXTENDING TIME
FIXED VERSUS MOBILE
UNISEX VERSUS SINGLE SEX
MASCULINE VERSUS FEMININE
GO GREY – Education: universities for those aged 50-plus?
LOW VERSUS HIGH SERVICE, AND DIFFERENTSERVICE
DIY VERSUS PROFESSIONAL SERVICE
PERSONALISED VERSUS UNTAILORED
BUNDLED VERSUS FOCUS AND SUBTRACTION – Focus is by far the best way to create a new star venture.
EXPERT VERSUS INEXPERT USERS
CENTRALISED VERSUS DECENTRALISED USE
TOTAL COST VERSUS INITIAL PRICE
FIRST PLACE VERSUS THIRD PLACE
SECOND PLACE VERSUS THIRD PLACE
OWNED VERSUS RENTED VERSUS FRACTIONALLY OWNED
NARROWED EXPERTISE VERSUS ADDED EXPERTISE
ORCHESTRATING A SUPPLIER ALLIANCE
ONLINE VERSUS OFFLINE, OR A DIFFERENT DISTRIBUTION CHANNEL
ENTREPRENEURIAL JUDO – This is a different kind of prompt, courtesy of the management guru Peter Drucker. The idea is to catch the leading players in a market off balance by turning their strength into a weakness.
IDEAS FROM OTHER INDUSTRIES – Identify an industry that has a peculiar practice that somehow seems to work well. Could you adapt the practice to a completely different context?
IDEAS FROM OTHER PLACES
We cannot create a new star without creating a new category. The new niche must be oriented towards the target customers and must offer a sharply different basket of benefits from the main market. The more the benefits of the new category vary clearly and substantially from the existing market, the greater the chance that the new venture will fly. There are three ways of varying the benefits:
increasing one or more benefits of the product in the main market to a marked degree;
creating one or more new benefits that do not currently exist in the main market; and
subtracting benefits that exist in the main market.
To launch a star venture successfully, three conditions must apply.
Your target customers want something different from the main market.
You understand what it is that they want and can provide it with a new product category.
The new category can be supplied profitably, because you can charge more for it, and/or because you can subtract elements of the main market product that are expensive to provide, so that the new category has lower costs than the main market.
Make things happen reliably, consistently, economically. Make the venture a machine.
The delivery formula has been cracked when all the following events always happen.
Products are delivered to the same high standard, on time, every time.
This year’s product is measurably better than last year’s.
This year’s product costs at least 5 per cent less to make than last year’s.
Volumes can be doubled within a year without panic or loss of quality.
Work is delegated to the lowest-level person who is fully competent to do it.
Everyone increases his or her skill level significantly each year and works better and faster.
The workplace exudes calm, order and discipline.
Standards and procedures are written down, clear, unambiguous – and observed!
Logos, colours and designs are attractive and consistent.
Budgets are always met or exceeded.
Cash is always higher than planned.
The firm is a machine – smooth-running, reliable, relentless, self-maintaining and self-improving.
Nobody is indispensable. If the best people leave, the firm rolls on regardless. New leaders come to the fore.
The way to maximise your chance of take-off is to form four small teams – each comprising a founder and two other employees – charged with masterminding each element of take-off: customer attraction; the commercial formula for fat margins; delivery; and innovation.
At least 90 per cent or more of a star’s value over the long haul derives from its growth. For businesses that grow for a very long time, such as McDonald’s and Coca-Cola, the number is over 99 per cent. Nearly everyone hugely underestimates the growth potential of stars. Typically, the growth potential is underrated not by 100 or 200 per cent but by 1,000 per cent or 10,000 per cent.
Almost all founders of star businesses underestimate their growth potential and value. Two action implications: never sell a star business (while it remains a star); and demand much faster growth.
The nub here is that you should generally ‘outsource’ as much of your operations as possible, retaining only the few things that you do uniquely well. In particular, get other people to make things for you. Since you probably won’t be investing in factories, offices or other physical cash sinks, what’s left is expense investment – the costs of your people, plus external marketing. The joy of stars is that they take modest investment to get to cash break even. Thereafter, investment can be funded out of the star’s own cash flow.
Be willing to accept lower profits to build a dominant market position. As long as you remain cash-positive, short-term profits are totally irrelevant to the long-term value of the business. Build by far the best product and service in your niche, moving further away ahead of would-be rivals.
The trouble with founders who remain executives is that it is very difficult to shift them, even when they are palpably acting in the interests of the managers rather than the owners.
Growth is everything. Star ventures should grow at least 20-50 per cent each year in their first decade. This rate of advance is so far beyond most people’s experience that enormous effort is required to impose ‘unreasonable expectations’.
Profits also rise because of the market growth, but profits should rise faster than sales. In a normal market, profitability is constrained by competition. In a star market, profitability is constrained only by what customers will pay.
Only puny secrets need protection. Big discoveries are protected by public incredulity. Marshall McLuhan
What I got out of it
Niche that is growing 10%+ each year, leader in that market
“E-Myth \ ‘e-,’mith\ n 1: the entrepreneurial myth: the myth that most people who start small businesses are entrepreneurs 2: the fatal assumption that an individual who understands the technical work of a business can successfully run a business that does that technical work…Those mundane and tedious little things that, when done exactly right, with the right kind of attention and intention, form in their aggregate a distinctive essence, an evanescent quality that distinguishes every great business you’ve ever done business with from its more mediocre counterparts whose owners are satisfied to simply get through the day. Yes, the simple truth about the greatest businesspeople I have known is that they have a genuine fascination for the truly astonishing impact little things done exactly right can have on the world. It is to that fascination that this book is dedicated.”
Contrary to popular belief, my experience has shown me that the people who are exceptionally good in business aren’t so because of what they know but because of their insatiable need to know more. The problem with most failing businesses I’ve encountered is not that their owners don’t know enough about finance, marketing, management, and operations—they don’t, but those things are easy enough to learn—but that they spend their time and energy defending what they think they know. The greatest businesspeople I’ve met are determined to get it right no matter what the cost.
So if your business is to change—as it must continuously to thrive—you must change first. If you are unwilling to change, your business will never be capable of giving you what you want. The first change that needs to take place has to do with your idea of what a business really is and what it takes to make one work.
That myth, that misunderstanding, I call the E-Myth, the myth of the entrepreneur. And it finds its roots in this country in a romantic belief that small businesses are started by entrepreneurs, when, in fact, most are not. That Fatal Assumption is: if you understand the technical work of a business, you understand a business that does that technical work. And the reason it’s fatal is that it just isn’t true. In fact, it’s the root cause of most small business failures! The technical work of a business and a business that does that technical work are two totally different things! But the technician who starts a business fails to see this. To the technician suffering from an Entrepreneurial Seizure, a business is not a business but a place to go to work.
The Entrepreneur / Manager/ Technician
But it’s a three-way battle between The Entrepreneur, The Manager, and The Technician. The entrepreneurial personality turns the most trivial condition into an exceptional opportunity. The Entrepreneur is the visionary in us. The dreamer. The energy behind every human activity. The imagination that sparks the fire of the future. The catalyst for change. The managerial personality is pragmatic. Without The Manager there would be no planning, no order, no predictability. The Technician is the doer. “If you want it done right, do it yourself” is The Technician’s credo. The Technician loves to tinker. Things are to be taken apart and put back together again. Things aren’t supposed to be dreamed about, they’re supposed to be done. If The Entrepreneur lives in the future and The Manager lives in the past, The Technician lives in the present. Put another way, while The Entrepreneur dreams, The Manager frets, and The Technician ruminates.
It is self-evident that business, like people, are supposed to grow; and with growth, comes change. Unfortunately, most businesses are not run according to this principle. Instead most businesses are operated according to what the owner wants as opposed to what the business needs. And what The Technician who runs the company wants is not growth or change but exactly the opposite. He wants a place to go to work, free to do what he wants, when he wants, free from the constraints of work Unfortunately, what The Technician wants dooms his business before it even begins.
“If you want to work in a business, get a job in somebody else’s business! But don’t go to work in your own. Because while you’re working, while you’re answering the telephone, while you’re baking pies, while you’re cleaning the windows and the floors, while you’re doing it, doing it, doing it, there’s something much more important that isn’t getting done. And it’s the work you’re not doing, the strategic work, the entrepreneurial work, that will lead your business forward, that will give you the life you’ve not yet known…“Don’t you see? If your business depends on you, you don’t own a business—you have a job. And it’s the worst job in the world because you’re working for a lunatic! “And, besides, that’s not the purpose of going into business. “The purpose of going into business is to get free of a job so you can create jobs for other people.
The Technician’s boundary is determined by how much he can do himself. The Manager’s is defined by how many technicians he can supervise effectively or how many subordinate managers he can organize into a productive effort. The Entrepreneur’s boundary is a function of how many managers he can engage in pursuit of his vision.
You come face to face with the unavoidable truth: You don’t own a business—you own a job! What’s more, it’s the worst job in the world! You can’t close it when you want to, because if it’s closed you don’t get paid. You can’t leave it when you want to, because when you leave there’s nobody there to do the work. You can’t sell it when you want to, because who wants to buy a job? At that point you feel the despair and the cynicism almost every small business owner gets to feel.
“The true question is not how small a business should be but how big. How big can your business naturally become, with the operative word being naturally? “Because, whatever that size is, any limitation you place on its growth is unnatural, shaped not by the market or by your lack of capital (even though that may play a part) but by your own personal limitations. Your lack of skill, knowledge, and experience, and, most of all, passion, for growing a healthy, functionally dynamic, extraordinary business. “In short, businesses that ‘get small again’ die. They literally implode upon themselves. “Not right away, necessarily. But over time they die. Atrophy and die. They can’t do anything else. “And the result of that is enormous disappointment, lost investment, shattered lives, not only the owner’s but those of the employees, the families of both the owner and the employees, the customers, the suppliers, the lenders, all of those people whose lives have somehow been intertwined with the life of this small business, and now with its death.
“Simply put, your job is to prepare yourself and your business for growth. “To educate yourself sufficiently so that, as your business grows, the business’s foundation and structure can carry the additional weight. “And as awesome a responsibility as that may seem to you, you have no other choice—if your business is to thrive, that is. “It’s up to you to dictate your business’s rate of growth as best you can by understanding the key processes that need to be performed, the key objectives that need to be achieved, the key position you are aiming your business to hold in the marketplace.
A Mature company is founded on a broader perspective, an entrepreneurial perspective, a more intelligent point of view. About building a business that works not because of you but without you.
IBM is what it is today for three special reasons. The first reason is that, at the very beginning, I had a very clear picture of what the company would look like when it was finally done. You might say I had a model in my mind of what it would look like when the dream—my vision—was in place. The second reason was that once I had that picture, I then asked myself how a company which looked like that would have to act. I then created a picture of how IBM would act when it was finally done. The third reason IBM has been so successful was that once I had a picture of how IBM would look when the dream was in place and how such a company would have to act, I then realized that, unless we began to act that way from the very beginning, we would never get there. In other words, I realized that for IBM to become a great company it would have to act like a great company long before it ever became one. From the very outset, IBM was fashioned after the template of my vision. And each and every day we attempted to model the company after that template. At the end of each day, we asked ourselves how well we did, discovered the disparity between where we were and where we had committed ourselves to be, and, at the start of the following day, set out to make up for the difference.
The Entrepreneurial Perspective adopts a wider, more expansive scale. It views the business as a network of seamlessly integrated components, each contributing to some larger pattern that comes together in such a way as to produce a specifically planned result, a systematic way of doing business. Said another way, the Entrepreneurial Model has less to do with what’s done in a business and more to do with how it’s done. The commodity isn’t what’s important—the way it’s delivered is. Thus, the Entrepreneurial Model does not start with a picture of the business to be created but of the customer for whom the business is to be created. It understands that without a clear picture of that customer, no business can succeed. To The Entrepreneur, the business is the product.
The Business Format Francise
The Business Format Franchise not only lends its name to the smaller enterprise but it also provides the franchisee with an entire system of doing business. And in that difference lies the true significance of the Turn-Key Revolution and its phenomenal success. The true product of a business is the business itself.
Armed with that realization, he set about the task of creating a foolproof, predictable business. A systems-dependent business, not a people-dependent business. A business that could work without him. Unlike most small business owners before him—and since—Ray Kroc went to work on his business, not in it.
The system integrates all the elements required to make a business work. It transforms a business into a machine, or more accurately, because it is so alive, into an organism, driven by the integrity of its parts, all working in concert toward a realized objective. And, with its Prototype as its progenitor, it works like nothing else before
The system isn’t something you bring to the business. It’s something you derive from the process of building the business.
It is critical that you understand the point I’m about to make. For if you do, neither your business nor your life will ever be the same. The point is: your business is not your life. Your business and your life are two totally separate things. Once you recognize that the purpose of your life is not to serve your business, but that the primary purpose of your business is to serve your life, you can then go to work on your business, rather than in it, with a full understanding of why it is absolutely necessary for you to do so. This is where you can put the model of the Franchise Prototype to work for you. Where working on your business rather than in your business will become the central theme of your daily activity, the prime catalyst for everything you do from this moment forward.
Pretend that the business you own—or want to own—is the prototype, or will be the prototype, for 5,000 more just like it. That your business is going to serve as the model for 5,000 more just like it. Not almost like it, but just like it. Perfect replicates. Clones. In other words, pretend that you are going to franchise your business. (Note: I said pretend. I’m not saying that you should. That isn’t the point here—unless, of course, you want it to be.) Further, now that you know what the game is—the franchise game—understand that there are rules to follow if you are to win:
The model will provide consistent value to your customers, employees, suppliers, and lenders, beyond what they expect.
The model will be operated by people with the lowest possible level of skill.
The model will stand out as a place of impeccable order.
All work in the model will be documented in Operations Manuals.
The model will provide a uniformly predictable service to the customer.
The model will utilize a uniform color, dress, and facilities code.
How can I create a business whose results are systems-dependent rather than people-dependent? Systems-dependent rather than expert-dependent. It is literally impossible to produce a consistent result in a business that depends on extraordinary people. No business can do it for long. And no extraordinary business tries to! Because every extraordinary business knows that when you intentionally build your business around the skills of ordinary people, you will be forced to ask the difficult questions about how to produce a result without the extraordinary ones. You will be forced to find a system that leverages your ordinary people to the point where they can produce extraordinary results over and over again.
Your Business Development Program is the vehicle through which you can create your Franchise Prototype. The Program is composed of seven distinct steps: 1. Your Primary Aim 2. Your Strategic Objective 3. Your Organizational Strategy 4. Your Management Strategy 5. Your People Strategy 6. Your Marketing Strategy 7. Your Systems Strategy
I believe it’s true that the difference between great people and everyone else is that great people create their lives actively, while everyone else is created by their lives, passively waiting to see where life takes them next.
In that regard, your Primary Aim is the vision necessary to bring your business to life and your life to your business. It provides you with a purpose. It provides you with energy. Your Strategic Objective is a very clear statement of what your business has to ultimately do for you to achieve your Primary Aim. It is the vision of the finished product that is and will be your business. In this context, your business is a means rather than an end, a vehicle to enrich your life rather than one that drains the life you have.
The commercial is saying, “Buy Chanel and this fantasy can be yours.” What’s your product? What feeling will your customer walk away with? Peace of mind? Order? Power? Love? What is he really buying when he buys from you? The truth is, nobody’s interested in the commodity. People buy feelings. And as the world becomes more and more complex, and the commodities more varied, the feelings we want become more urgent, less rational, more unconscious. How your business anticipates those feelings and satisfies them is your product.
“If you want it done,” I tell them, “you’re going to have to create an environment in which ‘doing it’ is more important to your people than not doing it. Where ‘doing it’ well becomes a way of life for them.”
Your Marketing Strategy starts, ends, lives, and dies with your customer. So in the development of your Marketing Strategy, it is absolutely imperative that you forget about your dreams, forget about your visions, forget about your interests, forget about what you want—forget about everything but your customer! When it comes to marketing, what you want is unimportant. It’s what your customer wants that matters. And what your customer wants is probably significantly different from what you think he wants. The question then becomes: If my customer doesn’t know what he wants, how can I? The answer is, you can’t! Not unless you know more about him than he does about himself. Not unless you know his demographics and his psychographics. Demographics and psychographics are the two essential pillars supporting a successful marketing program. If you know who your customer is—demographics—you can then determine why he buys—psychographics…And so, while the VP/Marketing and the VP/Operations and the VP/Finance each have their own specific accountabilities, they share one common purpose—to make a promise their customer wants to hear, and to deliver on that promise better than anyone else on the block!
“To do what? “To deliver the promise no one else in your industry dares to make! “That’s what marketing is, Sarah. That’s what your business must be. Alive, growing, committed to keeping a promise no competitor would dare to make.
That your Primary Aim and your Strategic Objective and your Organizational Strategy and your Management Strategy and your People Strategy and your Marketing Strategy and your Systems Strategy—all of them are totally interdependent, rather than independent of one another. That the success of your Business Development Program totally depends on your appreciation of that integration. And that your Prototype is that integration. If you understand all of that, then this book has been worth our time.
What I got out of it
Sounded like a pretty cheesy book but I got way more out of this than I expected. The entrepreneur/manager/technician, work on your business rather than in your business, continuous learning, get free from your job so that you can create jobs for others, build a “franchise” – something that can be replicated over and over again without fail (a systems thinking approach that is effective even if you never open another office/shop/etc…)
Reed Hastings recounts Netflix’s origin story as well as some of the cultural aspects that have made them the dominant media company of the past decade
If you want to build a culture of freedom and responsibility, the first step is to increase your talent density (hire great people, pay them top dollar, cull the mediocre), increase candor, and then remove unnecessary policies and rules (vacation, expense reports, dress codes, treat people as if they were responsible adults with good judgment…)
Removing mediocre performers has a surprisingly large impact on the culture, output, and happiness of everyone who remains, boosting already high performers even higher
Give feedback often start with employees giving the leader ship feedback get rid of jerks understand that you’re trying to leave people feeling optimistic and positive not be down because of your brutal honesty
Netflix’s travel and expense policy can be summarized in five words: act in Netflix’s interest
You are replacing rules and policies with leadership great people and common sense. For example the unlimited vacation policy must be followed up by the manager talking about what makes sense for the team so that you don’t hurt the company or your colleagues don’t take vacation in certain times we can only have one person out from our team at any given time etc.
For freedom and responsibility to really work there has to be repercussions that are known. For example at Netflix if you’re caught abusing the travel and expense policy you’re immediately fired no one strike you’re just out
Speed in every facet of decision making has tremendous second order effects
Big salaries, not big bonuses, are beat for innovation since people’s minds aren’t preoccupied with their target KPI or whatever metric their bonus is reliant upon. Bonuses and incentives are great for more mechanical and routine work but not so great for the creative. Pay top of salary estimates
Shining sunlight on mistakes, especially made by leaders, builds trust, encouraged others to take risks, and enhances velocity. if you have proven you’re confident and effective admitting your mistakes builds trust and likability whereas ineffective people shining a light on their mistakes only further a Rhodes peoples trust him
Don’t seek to please your boss but seek to do what is best for the company
Only a CEO who is not busy can truly do their job. You need to decentralize decision making as much as possible which enhances peoples accountability and excitement at work and allows the CEO freedom to think and beat the company
Adequate performance receives a generous severance package
The keeper test is important to build talent density. If someone on your team just told you they were leaving for another company would you fight for them? If not probably best to give them a generous severance package
Only say things about people that you’d be comfortable saying to their face
Lead with context, not control
Netflix’s north star is to be a company that is adaptable and flexible. They almost always pay more if that means getting additional flexibility
Pyramid and the tree – most organizations are structured like a pyramid but if innovation and creativity are your competitive advantage the structure like a tree is more effective. The boss is like the roots that helps keep the organization grounded and he is at the bottom setting the context rather than at the time controlling everything
What I got out of it
Freedom + Responsibility + Talent Density; candor, trust, shining spotlight on mistakes, do what’s best for the company and not for your boss, adaptability/flexibility > plans
Writings taken from Bezos’ annual shareholders letters with a bit of organization and context
In fact, when we lower prices, we go against the math that we can do, which always says that the smart move is to raise prices. We have significant data related to price elasticity. With fair accuracy, we can predict that a price reduction of a certain % will result in an increase in units sold of a certain percentage…Our judgment is that relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices creates a virtuous cycle that leads over the long term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon.com. We’ve made similar judgments around Free Super Saver Shipping and Amazon Prime, both of which are expensive in the short term and – we believe – important and valuable in the long term
Our pricing objective is to earn customer trust, not to optimize short-term profit dollars. We take it as an article of faith that pricing in this manner is the best way to grow our aggregate profit dollars over the long term. We may make less per item, but by consistently earning trust we will sell many more items. therefore, we offer low prices across our entire product range. For the same reason, we continue to invest in our free shipping programs, including Amazon Prime. Customers are well informed and smart, and they evaluate the total cost, including delivery charges, when making their purchasing decisions. In the last 12 months, customers worldwide have saved more than $800m by taking advantage of our free shipping offers
Invention comes in many forms and at many scales. The most radical and transformative of inventions are often those that empowerothersto unleashtheircreativity – to pursuetheirdreams
Our heavy investments in Prime, AWS, Kindle, digital media, and customer experience in general strike some as too generous, shareholder indifferent, or even at odd with being a for-profit company. “Amazon, as far as I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers,” writes one outside observer. But I don’t think so. To me, trying to dole out improvements in a just-in-time fashion would be too clever by half. It would be risky in a world as fast-moving as the one we all live in. More fundamentally, I think long-term thinking squares the circle. Proactively delighting customers earns trust, which earns more business from those customers, even in the new business arenas. Take a long-term view, and the interest of customers and shareholders align.
A dreamy business offering has at least 4 characteristics. Customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time – with the potential to endure for decades. When you find one of these, don’t just swipe right, get married
I’m talking about customer obsession rather than competitor obsession, eagerness to invent and pioneer, willingness to fail, the patience to think long term, and the taking of professional pride in operational excellence. Through that lens, AWS and Amazon retail are very similar indeed
In business, every once in a while, when you step up to the plate, you can score one thousand runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments
Many characterized as AWS as a bold – and unusual – bet when we started. “What does this have to do with selling books?” We could have stuck to the knitting. I’m glad we didn’t. Or did we? Maybe the knitting has as much to do with our approach as the arena. AWS is customer obsessed, inventive and experimental, long-term oriented, and cares deeply about operational excellence
Most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being too slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.
Recognize true misalignment issues early and escalate them immediately. Sometimes teams have different objectives and fundamentally different views. They are not aligned. no amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision. So, opt for “disagree and commit.”
…We show him this problem and he looks at it. He stares at it for a while and says, “Cosign.” I’m like, “What do you mean,” and Yosanta says, “That’s the answer.” And I’m like, “That’s the answer?” Yeah, let me show you.” He sits us down. He writes out 3 pages of detailed algebra. Everything crosses out, and the answer is cosign, and I say, “Listen, Yosanta, did you just do that in your head?” And he says, “No, that would be impossible. Three years ago I solved a very similar problem, and I was able to map this problem onto that problem, and then it was immediately obvious that the answer was cosign.” That was an important moment for me because it was the very moment when I realized I was never going to be a great theoretical physicist, and so I started doing some soul-searching. in most occupations, if you’re in the ninetieth percentile or above, you’re going to contribute. In theoretical physics, you’ve got to be like, one of the top fifty people in the world, or you’re really just not helping out much. It was very clear. I saw the writing on the wall and changed my major very quickly to electrical engineering and computer science.
The way you earn trust, the way you develop a reputation is by doing hard things well over and over. The reason, for example, that the US military, in all polls, has such high credibility and reputation is because, over and over again, decade after decade, it has done hard things well. It really is that simple. It’s also that complicated. It’s not easy to do hard things well, but that’s how you earn trust. And trust, of course, is an overloaded word. It means so many different things. It’s integrity, but it’s also competence. It’s doing what you said you were going to do – and delivering. And so we deliver billions of packages every year; we say we’re going to do that and then we actually do it. And it’s also taking controversial stances. People like it when you say, “NO, we’re not going to do it that way. I know you want us to do it that way, but we’re not going to.” And even if they disagree, they might say, “We kind of respect that, though. They know who they are.”
What I got out of it
Inspiring and motivating – a peek into an incredible thinker, his vision, his thought process
Dee Hock gets to the root of what being a Chaordic organization means
Our current forms of organization are almost universally based on compelled behavior – on tyranny, for that is what compelled behavior is, no matter how benign it may appear or how carefully disguised and exercised. The organization of the future will be the embodiment of community based on shared purpose calling to the higher aspirations of people.
There is no ultimate being. There is only becoming
Paradox and conflict are inherent characteristics of chaordic organizations
Forming a chaordic organization begins with an intensive search for Purpose, then proceeds to Principles, People, and Concept, and only then to Structure and Practice. It can’t be done well as a linear process. Each of the six elements can be thought of as a perspective, a sort of “lens” through which participants examine the circumstances giving rise to the need for a new concept of organization and what it might become. The most difficult part is to understand and get beyond the origin and nature of our current concepts of organizations; to set them aside in order to make space for new and different thoughts. Every mind is a room filled with archaic furniture. It must be moved about or cleared away before anything new can enter. This means ruthless confrontation of the many things we know that are no longer so.
Purpose – a clear, simple statement of intent that identifies and binds the community together as a worth pursuit. Should speak to people and make them think that, “If we could achieve that, my life would have meaning
Principles – behavioral aspirations of the community. A clear, concise, unambiguous statement of a fundamental belief about how the whole and all the parts intend to conduct themselves in pursuit of the purpose. A principle is a precept against which all structures, decisions, actions, and results will be judged. A principle always has high ethical and moral content. It never prescribes structure or behavior; it only describes them. Principles often fall into two categories: principles of structure and principles of practice
People – when a sound body of belief is reasonably complete and agreed upon, the group can then begin to explore the people and organizations that would need to be participants in the enterprise in order to realize the purpose in accordance with the principles. This sounds simple, but rarely is. When people set aside all consideration of existing conditions, free themselves to think in accordance with their deepest beliefs, and do not bind their thinking with structure and practices before considering meaning and values, they usually discover that the number and variety of people and entities to participate in governance, ownership, rewards, rights, and obligations are much greater than anticipated. They usually find their deepest beliefs require transcendence of existing institutional boundaries and practices. Determining the people and institutions required to realize the purpose in accordance with the principles brings realization of just how narrow and restrictive existing institutions are in relation to the exploding diversity and complexity of society and the systemic nature of seemingly intractable social and environmental problems.
Concept – a visualization of the relationships between all the people that would best enable them to pursue the purpose in accordance with their principles. An organizational concept is perception of a structure that all may trust to be equitable, just, and effective. It is a pictorial representation of eligibility, rights, and obligations of all prospective participants in the community. The feedback part of the process never ends. Developing a new concept calls into question purpose, principles, and people. Every part of the process illuminates all subsequent and preceding parts, allowing each to be constantly revised and improved.
Structure – the embodiment of purpose, principles, people, and concept in a written document capable of creating legal reality in an appropriate jurisdiction, usually in the form of a charter and constitution or a certificate of incorporation and bylaws. It is the written, structural details of the conceptual relationships – details of eligibility, ownership, voting, bodies, and methods of governance. It is the contract of rights and obligations between all participants in the community
Practice – deliberations, decisions, and acts of all the participants in the community functioning within the structure of purpose in accordance with principles. long before the structural work is finished, everyone realizes they need not worry about the practices of the community
If you can accomplish all this, profit becomes a barking dog begging to be let it
What I got out of it
Dee Hock’s most distilled thinking on his concepts of business, creation, chaordic, and more – essentially, a manual for creating value, regardless of your field
Chaord comes from the combination of two words: chaos and order. This exemplifies the behavior of any self-governing organism, organization, or system which harmoniously blends characteristics of order and chaos; patterned in a way dominated by neither chaos or order; characteristic of the fundamental organizing principles and nature
Organizations moving from command and control to community with shared purpose calling to the higher aspirations of people. In a truly chaordic organization there is no destination. There is no ultimate being. There is only becoming
Community is not about profit, but benefit. We confuse them at our peril. When we attempt to monetize all value, we methodically disconnect people and destroy community. The nonmonetary exchange of value is the most effective, constructive system ever devised. Evolution and nature have been perfecting it for thousands of millennia. It requires no currency, contracts, government, laws, courts, police, economists, lawyers, accountants. It does not require anointed or certified experts at all. It requires only ordinary people, caring. True community requires proximity; continual, direct contact and interaction between the people, place, and things of which it is composed. Throughout history, the fundamental building block, the quintessential community, has always been the family. It is there that the greatest nonmonetary exchange of value takes place. It is there that the most powerful nonmaterial values are created and exchanged. It is from that community, for better or worse, that all others are formed. The nonmonetary exchange of value is the very heart and soul of community, and community is the inescapable, essential element of civil society…Nonmonetary exchange of value implies an essential difference between receiving and getting. We receive a gift. We take possession. It is a mistake to confuse buying and selling with giving and receiving. It is a mistake to confuse money with value. It is a mistake to believe that all value can be measured. And it is a colossal mistake to attempt to monetize all value
Through the 16 years of successful failure, the sheep had continued to read avariciously – poetry, philosophy, biography, history, biology, economics, mythology – anything that satisfied his curiosity about connectedness and relationship. He mastered nothing, nor did he wish to, but new ways of seeing old things began to emerge and new patterns to reveal themselves. The preoccupation with organizations and the people who hold power within them had slowly become an obsession
Leader presumes follower. Follower presumes choice. One who is coerced to the purposes, objectives, or preferences of another is not a follower in any true sense of the word, but an object of manipulation. Nor is the relationship materially altered if both parties accept dominance and coercion. True leading and following presume perpetual liberty of both leader and follower to sever the relationship and pursue another path. A true leader cannot be bound to lead. A true follower cannot be bound to follow. The moment they are bound, they are no longer leader or follower. The terms leader and follower imply the freedom and independent judgment of both. If the behavior of either is compelled, whether by force, economic necessity, or contractual arrangement, the relationship is altered to one of superior/subordinate, management/employee, master/servant, or owner/slave. All such relationships are materially different from leader/follower. Induced behavior is the essence of leader/follower. Compelled behavior is he essence of all the others. Where behavior is compelled, there lies tyranny, however benign. Where behavior is induced, there lies leadership, however powerful. Leadership does not imply constructive, ethical, open conduct. It is entirely possible to induce destructive, malign, devious behavior and to do so by corrupt means.
The first and paramount responsibility of anyone who purports to manage is to manage self; one’s own integrity, character, ethics, knowledge, wisdom, temperament, words, and acts…The second responsibility is to manage those who have authority over us; the third responsibility is to manage one’s peers – those over whom we have no authority and who have no authority over us – associates, competitors, suppliers, customers – the entire environment; the fourth responsibility is to manage those over whom we have authority (if we hire good people and induce them to practice our concepts, they will take care of themselves for the most part)
Management expertise has become the creation and control of constants, uniformity, and efficiency, while the need has become the understanding and coordination of variability, complexity, and effectiveness
Healthy organizations induce behavior. Unhealthy organizations compel it
Following Nature’s Lead
All things are a seamless blend of chaos and order
Particularity and separability are infirmities of the mind, not characteristics of the universe
Desire to command and control is a death wish. Absolute control is in the coffin
A principal thing they have in common is penalty for failure to evolve. Organisms resistant to a changing physical environment are biologicall obligerated; they physically die out. Organizations resistant to a changing social environment are economically destroyed; they socially die out. In truth, organisms and organizations are not separable. Nor can the physical world be separated from the social. In the deeper, larger sense, distinctions such as “physical, biological, and social” or “organism and organizations,” however useful for the insular, limited purposes, are deceptive in the extreme. All things are irrevocably interconnected in a cosmic dance drawn on by energy in the form of light from the sun
“The Cartesian/Newtonian world view has influenced thought far beyond the physical sciences, and accounting is no exception. Double entry bookkeeping and the systems of income and wealth measurement that evolved from it since the 16th century are eminently Cartesian and Newtonian. They are predicated on ideas such as the whole being equal to the sum of the parts and effects being the result of infinitely divisible, linear causes…Quantum physicists and evolutionary biologists, among others, now believe that it is best to describe reality as a web of interconnected relationships that give rise to an ever-changing and evolving universe of objects that we perceive only partially with our limited senses. In that “Systemic” view of the world, nothing is merely the sum of the parts; parts have meaning only in reference to a greater whole in which everything is related to everything else…Why should accountants continue to believe that human organizations behave like machines if the scientists from whom they borrowed that mechanistic world view now see the universe from a very different perspective? The language of financial accounting merely asserts answers, it does not invite inquiry. In particular it leaves unchallenged the world view that underlies [the way] organizations operate. Thus, management accounting has served as a barrier to genuine organizational learning…Never again should management accounting be seen as a tool to drive people with measures. Its purpose must be to promote inquiry into the relationships, patterns, and processes that give rise to accounting measures.” – H. Thomas Johnson
Neither the institutional nor the technical thinking made sense. It had always seemed to me that one of the principal tricks of evolution was to preserve the substance of the past by clothing it in the forms of the future. We would follow
Old Monkey Mind and I had spent countless hours trying to understand information and its relevant to organizations, asking our endless questions. What is the significant of the “inform” part of information? What is the nature of that which is received from external sources and “forms us” within? What is the nature of that which forms from within us which we then feel compelled to transmit, and how does it form others when it is received? What allows formation of information, permits it to endure unaltered, yet be available at any time for transformation in infinite ways? Why and from where came the universal, perpetual urge to receive and transmit information – the incessant desire to communicate? Is it an urge at all, or is it an unavoidable necessity – an integral component essential to life? Indeed, is it the essence of life itself? Or is ti a principle beyond life itself? Could it be the fundamental, formative essence that gives shape and distinction to all things – part of an inseparably whole universe? It helps to think what information is not. Certainly, it is not just another “thing”; one more finite, physical entity. Certainly, information is far more than digits and data. They may be components of it – the shape it sometimes takes. They may be of it, but they are not it. In a rare insight, Gregory Bateson proposed that “information is a difference that makes a difference.” If something is received that cannot be differentiated or, if once differentiated, makes no differences, he asserts it is just noise…Thinking about a society based on information and one based on physicality requires radically different perspective and consciousness. However, we prefer too often to ignore the fundamental differences and carry over into the Chaordic Age of managing information, ideas and values, concepts, and assumptions that proved useful in the mechanized, Industrial Age of machine crafting, the age of managing things; concepts such as ownership, finite supply, obsolescence, loss by conveyance, containment, scarcity, separability, quantifiable measurement, statistical economics, mathematical monetarism, hierarchal structuralism, and command-and-control management…As Sir Francis Bacon put it precisely centuries ago, in admonishing those who opposed the mechanistic concepts of Newton and Descartes: “They that reverence too much the old times are but a scorn to the new.”
It seems a principle of evolution, perhaps the fundamental principle, that the greater the capacity to receive, store, utilize, transform, and transmit information, the more diverse and complex the entity. It holds true from neutrino, to nucleus, to atom, to amino acids, to proteins, to molecules, to cells, to organs, to organisms. From bacteria, to bees, to bats, to birds, to buffalo, right on through to baseball players. CRUSTTI didn’t stop there. In time, information transcended the boundaries of organisms and led to communication between them, and eventually to complex communities of organisms
I = DC^2
The capacity to receive, store, utilize, transform, and transmit information equals societal diversity times societal complexity squared
We must begin with noise. Noise, in its broadest sense, is any undifferentiated thing which assaults the senses. It is pervasive and ubiquitous, whether auditory, visual, or textural. The supply of noise is infinite. Noise becomes data when it transcends the purely sensual and has cognitive pattern; when it can be discerned and differentiated by the mind. Data, in turn, becomes information when it is assembled into a coherent whole which can be related to other information in a way that adds meaning. (Bateson’s definition of information as “a difference that makes a difference.”) Information becomes knowledge when it is integrated with other information in a form that is useful for deciding, acting, or composing new knowledge. Knowledge becomes understanding when related to other knowledge in a manner that is useful in conceiving, anticipating, evaluating, and judging matters beyond the reach of information. Understanding becomes wisdom when informed by ethical, moral, and beneficent purpose and principle, along with memory of the past, and projection into the future. The fundamental characteristics of the opposite ends of this spectrum are very different. Data, on one end of the spectrum, is separable, objective, linear, mechanistic, and abundant. On the other end of the spectrum, wisdom is holistic, subjective, spiritual, conceptual, creative and scarce.
The labyrinthine Department of Justice, like all mechanistic, Newtonian, Industrial Age organizations, was fat on data and information and starved for understanding and wisdom
When there is an explosion in the capacity to receive, store, utilize, transform, and transmit information, the external world changes at a rate enormously greater than the rate at which our internal model evolves. Nothing behaves as we think it should. Nothing makes sense. At times the world appears to be staging a madhouse. It is never a madhouse. It is merely the great tide of evolution in temporary flood, moving this way and that, piling up against that which obstructs its flow, trying to break loose and sweep away that which opposes it. At such times, we experience extreme dissonance and stress. At the heart of that dissonance and stress is paradox. The more powerful and entrenched our internal model of reality, the more difficult it is to perceive and understand the fundamental nature of the changed world we experience. Yet without such perception, it is extremely difficult to understand and change our internal model.
Competition and cooperation are not contraries. They have no opposite meaning. They are complimentary. In every aspect of life, we do both. Schools are highly cooperative endeavors within which scholars vigorously compete. The Olympic Games combine immense cooperation in structure and rules with intense competition in events. As the runners leap from the blocks, competition and cooperation are occurring in a single, indistinguishable blur. Every cell in our bodies vigorously competes for every atom of nutrient swallowed and every atom of oxygen inhaled, yet every cell can sense when the good of the whole requires they cooperate by relinquishing their demands when the need of other cells is greater. Life simply cannot exist, let alone reach its highest potential, without harmonious existence of competition and cooperation.
Visa is not about credit at all, but of exchange of monetary value
Realization that money is now about data / information was instrumental in restructuring his thinking about money, banks, and credit cards
[Convincing Bank of America to join] – The bank should be the leader of a movement, not the commander of a structure
Can an organization be patterned on biological concepts and methods? The question seemed to contain its own answer. Such an organization would have to evolve, in effect, to organize and invent itself.
It should be equitably owned by all participants
Participants should have equitable rights and obligations
It should be open to all qualified participants
Power, function, and resources should be distributive to the maximum degree
Authority should be equitable and distributive within each governing entity
No existing participant should be left in a lesser position by any new concept of the organization
To the maximum degree possible, everything should be voluntary
It should be nonassessable
It should induce, not compel, change
It should be infinitely malleable yet extremely durable
For decades, Visa has been in the background, invisible to most people. The results of the best organizations is transparent, but the structure, leadership, and process are transparent.
The core of Visa was an enabling organization that existed for the sole purpose of assisting owner-members to do what they wished with greater capacity, more effectively, and at less cost
We reduced our thoughts to the simplest possible expression: the will to succeed, the grace to compromise
Although Visa arose from thinking about organizations as living, biological systems, I missed completely the need for an institutional immune system to thwart the viruses of old ways.
The concepts used did not belong to me. They belonged to evolution – to all people
The most abundant, least expensive, most underutilized and constantly abused resource in the world is human ingenuity
Mr. Carlson never promotes anyone. He “borrows” them for new assignments so that they can withdraw without feeling a failure if the new situation is unsuitable. If it proves productive, titles and rewards will follow
Understanding requires mastery of four ways of looking at things – as they were, as they are, as they might become, and as they ought to be. Mastering all four perspectives and synthesizing them into a compelling concept of a constructive, peaceful future is the true work of the genius that lies buried in everyone, struggling to get out. And the world is crying out for it. In our frantic attempt to know everything through use of the rational mind alone, we have fractured knowledge into hundreds of incestuous specialties and fragmented those specialties into thousands of isolated, insular trades and disciplines. The world is filling iwth people who know more and more about less and less. Within each specialty, we dismiss as largely irrelevant all things, events, and ways of understanding outside the ever narrower boundaries of our discipline. We can ignore all relationships not essential to our ever narrowing perspective. We can ignore all consequences not immediately affecting or affected by our ever more constricted pursuit. We can abdicate responsibility for even thinking about them. We can each decide and act with our ever smaller intellectual prisons and narrower mental cells, and defend our acts with logical, efficient, methodical rationality. Never mind that the sum of the whole is social, commercial, and biological madness.
Perspective is the Achilles heel of the mind, distorting everything we think, know, believe, or imagine…Our internal model of reality is how we make sense of the world. And it can be a badly built place indeed. Even if it is magnificently constructed, it may have become archaic. Everything that gave rise to it may have changed. Society and the natural world are never stagnant. They are constantly becoming. When it becomes necessary to develop a new perspective on things, a new internal model of reality, the problem is never to get new ideas in, the problem is tog et the old ideas out. Every mind is filled with old furniture. It’s familiar, it’s comfortable. We hate to throw it out. The old maxim is so often applied to the physical world, “nature abhors a vacuum,” is much more applicable to the mental world. Clear any room in your mind of old perspectives, and new perceptions will rush in. Yet, there is nothing we fear more. Weareour ideas, concepts, and perceptions. Giving up any part of our internal model of reality is worse than losing a finger or an eye. Part of us no longer exists. However, unlike most organs of the physical body, our internal model of reality can be regenerated but never as it was. And it’s a frightening, painful process. It is our individual perspective, the view from our internal temple of reality, that often so discolors and distorts perception that we can neither anticipate what might occur nor conceive what ought to be.
True power is never used. If you use power, you never really have it
The inevitable tendency of wealth is to acquire power. The inevitable tendency of power is to protect wealth. The tendency of wealth and power combined is to acquire ever more wealth and power. The use of commercial corporate form for the purpose of social good has become incidental.
A bit of carbon in iron makes powerful meta; a bit of truth in a lie makes powerful deceit
It is enough that error by corrected. It is excessive to insist it be admitted
Mistakes are toothless little things if you recognize and correct them. If you ignore or defend them, they grow fangs and bite
Businesses, as well as races, tribes, and nations, do not disappear when they are conquered or repressed, but when they become despondent and lose excitement about the future. When institutions reach that stage, people withdraw relevance from them and from those who purport to manage them. THey turn away. They stop listening.
What I got out of it
A simply superb book, one of the deepest most interconnected books I’ve read in some time