Tag Archives: Leadership

Good Strategy, Bad Strategy by Richard Rumelt

Summary

  1. Good strategy almost always looks this simple and obvious and does not take a thick deck of PowerPoint slides to explain. It does not pop out of some “strategic management” tool, matrix, chart, triangle, or fill-in-the-blanks scheme. Instead, a talented leader identifies the one or two critical issues in the situation—the pivot points that can multiply the effectiveness of effort—and then focuses and concentrates action and resources on them. A strategy is like a lever that magnifies force. Some fundamental sources of power used in good strategies: leverage, proximate objectives, chain-link systems, design, focus, growth, advantage, dynamics, inertia, and entropy.

Key Takeaways

  1. The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors. A leader’s most important responsibility is identifying the biggest challenges to forward progress and devising a coherent approach to overcoming them.
  2. A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them.
  3. Strategy is about how an organization will move forward. Doing strategy is figuring out how to advance the organization’s interests.
  4. The most basic idea of strategy is the application of strength against weakness. Or, if you prefer, strength applied to the most promising opportunity.
  5. Having a coherent strategy—one that coordinates policies and actions. A good strategy doesn’t just draw on existing strength; it creates strength through the coherence of its design.
  6. The creation of new strengths through subtle shifts in viewpoint. An insightful reframing of a competitive situation can create whole new patterns of advantage and weakness. The most powerful strategies arise from such game-changing insights.
  7. Good strategy is unexpected
  8. Good strategy requires leaders who are willing and able to say no to a wide variety of actions and interests. Strategy is at least as much about what an organization does not do as it is about what it does.
  9. Half of what alert participants learn in a strategy exercise is to consider the competition even when no one tells you to do it in advance. Looking just at the actions of a winning firm, you see only part of the picture. Whenever an organization succeeds greatly, there is also, at the same time, either blocked or failed competition.
  10. Copying elements of its strategy piecemeal, there will be little benefit. A competitor would have to adopt the whole design, not just a part of it.
  11. The hidden power of Wal-Mart’s strategy came from a shift in perspective. Lacking that perspective, Kmart saw Wal-Mart like Goliath saw David—smaller and less experienced in the big leagues. The network replaced the store. A regional network of 150 stores serves a population of millions! Walton didn’t break the conventional wisdom; he broke the old definition of a store.
  12. Having a true competitive strategy meant engaging in actions that imposed exorbitant costs on the other side.
  13. To detect a bad strategy, look for one or more of its four major hallmarks:
    1. Fluff.
    2. Failure to face the challenge.
    3. Mistaking goals for strategy.
    4. Bad strategic objectives.
  14. A hallmark of true expertise and insight is making a complex subject understandable. A hallmark of mediocrity and bad strategy is unnecessary complexity—a flurry of fluff masking an absence of substance.
  15. A leader’s most important job is creating and constantly adjusting this strategic bridge between goals and objectives.
  16. The second form of bad strategic objectives is one that is “blue sky.” A good strategy defines a critical challenge. What is more, it builds a bridge between that challenge and action, between desire and immediate objectives that lie within grasp.
  17. Bad strategy is vacuous and superficial, has internal contradictions, and doesn’t define or address the problem. Bad strategy generates a feeling of dull annoyance when you have to listen to it or read it.
  18. Strategy is scarcity’s child and to have a strategy, rather than vague aspirations, is to choose one path and eschew others. There is difficult psychological, political, and organizational work in saying “no” to whole worlds of hopes, dreams, and aspirations.
  19. Good strategy is coherent action backed up by an argument, an effective mixture of thought and action with a basic underlying structure I call the kernel. The kernel of a strategy contains three elements:
    1. A diagnosis that defines or explains the nature of the challenge.
    2. A guiding policy for dealing with the challenge.     
    3. A set of coherent actions that are designed to carry out the guiding policy.
  20. John gave me a sidelong look and said, “It looks to me as if there is really only one question you are asking in each case. That question is ‘What’s going on here?’ ” John’s comment was something I had never heard said explicitly, but it was instantly and obviously correct. A great deal of strategy work is trying to figure out what is going on. Not just deciding what to do, but the more fundamental problem of comprehending the situation.
  21. Furthermore, a good strategic diagnosis does more than explain a situation—it also defines a domain of action.
  22. Good strategy is not just “what” you are trying to do. It is also “why” and “how” you are doing it. A good guiding policy tackles the obstacles identified in the diagnosis by creating or drawing upon sources of advantage. Indeed, the heart of the matter in strategy is usually advantage. Just as a lever uses mechanical advantage to multiply force, strategic advantage multiplies the effectiveness of resources and/or actions. The coordination of action provides the most basic source of leverage or advantage available in strategy. A strategy coordinates action to address a specific challenge.
  23. The idea that coordination, by itself, can be a source of advantage is a very deep principle. It is often underappreciated because people tend to think of coordination in terms of continuing mutual adjustments among agents. Strategic coordination, or coherence, is not ad hoc mutual adjustment. It is coherence imposed on a system by policy and design.
  24. Folly is the direct pursuit of happiness and beauty. —GEORGE BERNARD SHAW
  25. One of a leader’s most powerful tools is the creation of a good proximate objective—one that is close enough at hand to be feasible. Proximate objectives not only cascade down hierarchies; they cascade in time.
  26. IKEA teaches us that in building sustained strategic advantage, talented leaders seek to create constellations of activities that are chain-linked. This adds extra effectiveness to the strategy and makes competitive imitation difficult. What is especially fascinating is that both excellence and being stuck are reflections of chain-link logic.
  27. When someone says “Managers are decision makers,” they are not talking about master strategists, for a master strategist is a designer.
  28. At the core, strategy is about focus, and most complex organizations don’t focus their resources. Instead, they pursue multiple goals at once, not concentrating enough resources to achieve a breakthrough in any of them.”
  29. Increasing value requires a strategy for progress on at least one of four different fronts: deepening advantages, broadening the extent of advantages, creating higher demand for advantaged products or services, or strengthening the isolating mechanisms that block easy replication and imitation by competitors.
  30. Follow the story of Nvidia and you will clearly see the kernel of a good strategy at work: diagnosis, guiding policy, and coherent action. You will also glimpse almost every building block of good strategy: intelligent anticipation, a guiding policy that reduced complexity, the power of design, focus, using advantage, riding a dynamic wave of change, and the important role played by the inertia and disarray of rivals.
  31. A new strategy is, in the language of science, a hypothesis, and its implementation is an experiment. As results appear, good leaders learn more about what does and doesn’t work and adjust their strategies accordingly.
  32. Joe Santos’s comments imply that incumbents had difficulty understanding Starbucks because it was vertically integrated—because it roasted, branded, and served its own coffee in its own company restaurants. Starbucks did not vertically integrate to purposefully confuse the competition. It did so in order to be able to mutually adjust multiple elements of its business and to capture the information generated by each element of its business operations.
  33. To guide your own thinking in strategy work, you must cultivate three essential skills or habits.
    1. First, you must have a variety of tools for fighting your own myopia and for guiding your own attention.
    2. Second, you must develop the ability to question your own judgment. If your reasoning cannot withstand a vigorous attack, your strategy cannot be expected to stand in the face of real competition.
    3. Third, you must cultivate the habit of making and recording judgments so that you can improve.

What I got out of it

  1. Good strategy is simple. Good strategy is unexpected. Good strategy focuses on a small handful of critical factors and helps outline a path forward – it defines a domain of action. Good strategy creates exorbitant costs and ultimately blocks the competition. Good strategy is coherent and “chain-linked”

America’s Most Successful Startups: Lessons for Entrepreneurs by Max Finger, Oliver Samwer

Summary

  1. How to start, build, grow a successful venture

Key Takeaways

  1. Types of opportunities – paradigm shift, new product / business model / me-too product
  2. Opportunity recognition – markets that change and are receptive to change, badly understood (big and misunderstood), fast growing, incumbent players cannot move, little competition
  3. Process of Opportunity Recognition – intuitive, analytical
  4. Seek a mission-critical pain killer, not a vitamin
  5. Be extremely specific in defining your customer
  6. Great entrepreneurs tend to be generalists – breadth > depth
  7. Founders need to understand the market, product, and execution. Need to be focused on value creation, not control
  8. Risk Identification and Elimination – raise money to reduce key risks – market, technical, people, financial
  9. Decision making – the implementor should be the decision maker
  10. Flexibility – In the planning process, understanding the variables is more important than the plan. It is as important to understand the other players’ plans as it is to figure out your own plans
  11. Focus is paramount – with limited time and resources, specialization is key – should be saying “no” to 9/10 things
  12. Focus and speed are a startups’ key advantages
  13. Split every problem to its smallest atomic problem
  14. Be as useful as you can to others, have vision, form win/win alliances
  15. Focus all your efforts to satisfy the first 20% of the market segment. the others will follow
    1. Design partners, best references, proven success
  16. People – overqualified so the company can grow into their skills
  17. Processes must be scalable – at some point speed becomes a liability and the need to build systems to scale operations becomes obvious
  18. Management needs to live 3-6 months in the future

What I got out of it

  1. Interesting that Oliver Samwer, of Rocket Internet, started his entrepreneurial career from an academic angle. He certainly doesn’t abide by all the lessons – culture, for example – but fascinating to see the lessons he pulled out and applied (ruthlessly)

The Messy Middle: Finding Your Way Through the Hardest and Most Crucial Part of Any Bold Venture by Scott Belsky

Summary

  1. The volatility of this tug-of-war is hard to stomach. You must pay less attention to the day-to-day incremental advances and more on achieving an overall positive slope. And that’s entirely determined by how you navigate the messy middle. The middle of the journey is all about enduring the valleys and optimizing the peaks.

Key Takeaways

  1. One of the greatest motivators is a sign of progress. Hardship is easier to tolerate when your work is being recognized (either through external validation or financial rewards), but long journeys don’t show progress in the traditional sense. When you have no customers, no audience, and nobody knows or cares to know about what you’re making, the greatest motivators have to be manufactured. Rather than fight the need for short-term rewards, you must hack your reward system to provide them. As you craft your team’s culture, lower the bar for how you define a “win.” Celebrate anything you can, from gaining a new customer to solving a particularly vexing problem. What should you celebrate? Progress and impact. As your team takes action and works their way down the list of things to do, it is often hard for them to feel the granularity of their progress and you need to compensate. Celebrate the moments when aggressive deadlines are met or beaten. Pop champagne when the work you’ve done makes a real impact.
    1. Give your team the gratification of seeing their progress rather than just moving on. At Behance, we had “Done Walls” that were decorated with a collage of completed project plans, checklists, and sketches that literally surrounded us with the sensation of progress. And whenever I’m presenting a forward vision presentation to my team, I try to start with a few slides recapping what the team has already accomplished. Progress is the best motivator of future progress, but it must be merchandised sufficiently so that people feel it. While
  2. It’s dangerous to celebrate accolades or circumstances that are not linked with productivity, like getting “press” that you paid for or winning awards that are not representative of your impact.
  3. For strong companies, financing is a tactic. For weak companies, financing is a goal.
  4. Society has a grand immune system designed to suppress new ideas. To keep the water running and sustain life’s other necessities, society’s natural resistance to ingenuity surfaces in the form of doubt, cynicism, and pressure to conform. It takes tremendous endurance to survive such resistance.
  5. As a leader, you can’t always provide answers. And you shouldn’t, as the correct solution may still be premature. But what you can do is always add energy. This ability to turn negative conversations into positive ones is a trait I’ve always admired.
  6. A friend who worked for Google cofounder and CEO Larry Page told me that when teams presented product and business goals to Larry, he would often reply, “What would it take to achieve 100x of what you’re proposing?”
  7. When you feel lost in ambiguity, ask a different question. The perfect question is a key to clarity. It unlocks truth and opens minds.
  8. Playing the long game requires moves that don’t map to traditional measures of productivity.
  9. To foster patience for yourself and those you lead, pick a speed that will get you there, and then pace yourself. Celebrate persistence over time as much as the occasional short-term wins you have along the way.
  10. The easy path will only take you to a crowded place. Be wary of the path of least resistance. It may look compelling in the short term but often proves less differentiating and defensible in the long term. Shortcuts tend to be less gratifying over time. The long game is the most difficult one to play and the most bountiful one to win.
    1. The best way for a start-up to “disrupt” an industry is to be a thesis-driven outsider—someone who hasn’t been jaded by the industry but has a strong opinion for what should change. You then just have to stay alive long enough to become an expert so you can compete with the different skills and practices you bring.
  11. Across so many teams I’ve worked with, I’ve marveled at just how quickly an idea takes hold when someone proactively does the underlying work no one else clearly owned. There is rarely a scarcity of process or ideas but there is often a scarcity of people willing to work outside the lines. Those who take initiative to contribute when it wasn’t their job become the leadership team of the newest stuff.
    1. The future is drafted by people doing work they don’t have to do. You need to be one of those people—and hire them, too. There is too much wondering and talking, and too little doing. So don’t talk: do. Care indiscriminately. If you’re willing to actually do the work, you’ll have more influence than those who simply do their jobs.
  12. James Murphy, the founder and front man of LCD Soundsystem, said it well: “The best way to complain is to make things.”
  13. Pinterest’s Ben Silberman describes this process as “always reflecting backward and incorporating forward.” As he explains it, “I actually think you learn a lot more from your successes [than your mistakes]. There are a million reasons why something can fail, but usually very few reasons why something can work. When you want to learn to be a great runner—do you study slow people or fast people? I think taking time to understand why things succeed—whether they are your successes or others—is time well spent . . . you learn the most from things that go really well by asking why. Those are the things you want to understand and do more of.”
  14. Great teams are more than the assembly of great people. On the contrary, great teams are ultimately grown, not gathered.
  15. You can always get more resources, but resourcefulness is a competitive advantage. Resources become depleted. Resourcefulness does not.
  16. Hiring
    1. Past initiative is the best indicator of future initiative. Look beyond the formal résumé and ask candidates about their interests and what they have done to pursue them. It doesn’t matter what the interests are—bonsai cultivation, writing poetry, whatever! Instead, gauge whether the candidate has a history of being proactive in advancing their interests.
  17. Hire people who have endured adversity.
  18. Your second conversation with a potential hire should feel a lot more interesting than your first. First impressions count for a lot, but if you can’t continually build on that energy, the relationship isn’t likely to have legs beyond the initial spark. I call this kind of fire-starting ability aligned dynamism, which is when ideas vary but energy levels and a value for the mission align; this is the source of the embers that will keep burning long after the initial flint.
  19. Be frugal with everything except your bed, your chair, your space, and your team.
  20. Not only does a strong culture tolerate some necessary ruckus, it gains its edge from it. People disagree and fight for their beliefs only when they are engaged enough to care.
  21. Perhaps one of the most important unspoken roles of a leader through the messy middle of a project is that of internal marketer. For all the emphasis around obsessing over your customers and your public brand and message, there is surprisingly little focus on the internal brand and message.
  22. Present your ideas, don’t promote them.
  23. When it comes to speed and efficiency, the greatest risk is taking a shortcut in the one area that distinguishes you the most.
  24. Simplicity / Design
    1. Simple is sticky. It is very hard to make a product—or any customer experience—simple. It is even harder to keep it simple. The more obvious and intuitive a product is, the harder it is to optimize it without adding complication.
    2. Great products don’t stay simple by not evolving; they stay simple by continually improving their core value while removing features and paring back aspects that aren’t central to the core.
    3. Forcing yourself to have a “one feature in, one feature out” guideline will help you develop your product with a bias toward simplicity. While simplicity benefits your newest customers and the majority of your current customers, it also benefits your own process to grow your product and solve problems as they arise.
    4. Beware of creativity that compromises familiarity.
    5. The only time you should force new behaviors or terminology is when they enable something better
    6. Effective design is invisible.
    7. Never stop crafting the “first mile” of your product’s experience.
      1. I’d argue that more than 30 percent of your energy should be allocated to the first mile of your product—even when you’re well into your journey. It’s the very top of your funnel for new users, and it therefore needs to be one of the most thought-out parts of your product, not an afterthought.
      2. Optimize the first 30 seconds for laziness, vanity, and selfishness.
      3. Your challenge is to create product experiences for two different mind-sets, one for your potential customers and one for your engaged customers. Initially, if you want your prospective customers to engage, think of them as lazy, vain, and selfish. Then for the customers who survive the first 30 seconds and actually come through the door, build a meaningful experience and relationship that lasts a lifetime.
      4. If you feel the need to explain how to use your product rather than empowering new customers to jump in and feel successful on their own, you’ve either failed to design a sufficient first-mile experience or your product is too complicated.
      5. The absolute best hook in the first mile of a user experience is doing things proactively for your customers. Once you help them feel successful and proud, your customers will engage more deeply and take the time to learn and unlock the greater potential of what you’ve created.
    8. As you’re building new products and experiences for customers, consider how they will be novel—even gamelike—before they prove useful.
    9. You need to prime your audience to the point where they know three things:
      1. Why they’re there
      2. What they can accomplish
      3. What to do next
    10. Empathy for those suffering the problem must come before your passion for the solution.
    11. But be sure to define the purpose of every feature in your product before determining its fate. Is it to strengthen engagement, appease a very small set of important customers, or get new customers in the door? Features with a different purpose require a different measure.
    12. Build your narrative before your product. – The narrative is not a description of what your product is or does, it is the story of how and why it must exist.
      1. Our narrative was that technology needed to empower creative people to make ideas happen. By uploading their portfolios, creatives could get more exposure and attribution for their work, resulting in more job opportunities. We called it “creative meritocracy,” the idea of creative people getting opportunity based on the quality of their work rather than what agency they worked with, where they went to school, or whom they happened to know.
  25. Ollie Johnstone and Frank Thomas, two of Walt Disney’s chief animators, once said of Walt Disney himself that “there were actually three different Walts: the dreamer, the realist, and the spoiler. You never knew which one was coming into your meeting.”
  26. Contrary to logic, you don’t want to attract all of your customers right away. You want your first cohort of willing customers to be quite small so that you can communicate directly and provide an incredibly high level of touch. At the start of your business, you want to iron out the kinks. As you expand, you want to do so slowly.
  27. Networks are served, not led
  28. The best advice doesn’t instruct—it provokes. The benefits of soliciting wisdom from others is indisputable, but the real value of advice comes from reconciling its contradictions.
  29. As someone who believes wholeheartedly that self-awareness is the greatest competitive advantage for a leader, I love the idea of developing tools and norms that promote it.
  30. The science of business is scaling; the art of business is the things that don’t.
  31. Relationships
    1. In the early days of Behance, I used to write personal emails to a handful of customers every day introducing myself, giving some suggestions for the portfolio they posted on Behance, and offering to answer any questions directly. Many of these exchanges became relationships that lasted years and yielded customer insights that we would have never garnered from a dashboard.
    2. Genuine relationships with and between our members was our competitive advantage against other technology companies like Squarespace and Wix that sought to commoditize websites and online portfolios.
    3. Our in-person events for five thousand people around the world would generate tens of thousands of social media posts, and the images would ultimately reach hundreds of thousands of people. But more important, these events prompted conversations and relationships that went far beyond our brand as a service and instead made it a lifestyle.
  32. In your work, try to find the things you love that nobody else cares about.
  33. There are two ways to build a network and source signal: growing surface area or going deep. In the beginning of your career, optimize for surface area. As you become more focused and a source of signal in your own right, you’ll want to shift from seeking surface area to going deep with a smaller group of people whom you respect. Rather than meeting as many people as possible, you’ll want to focus on the people you deem the most competent. You also need a margin to mine circumstantial opportunities and explore the unexpected.
  34. The busier and more ambitious we get, the more protective and intentional we become of our time—but sometimes it’s too much. Ambition shouldn’t override opportunity.
  35. Ego is rust. So much value and potential are destroyed in its slow decay. Achievement rarely ages well, unless you keep sanding it down.
  36. I was struck by the man’s sense of peace and happiness. His smile and mannerisms carried no weight to them—the man seemed so incredibly content with his world. So, that’s what it looks like to end on your own terms, I thought to myself. It’s not just about moving on when you’re performing at the level you always wanted to be remembered for—the desire to “end on a high.” It’s about moving on when you feel fully satiated and can therefore allow yourself to pursue something different.
  37. One of my favorite sayings from ancient times is “Wealth is ultimately feeling like you got your full portion.” When I finish a project, I aspire to feel full. And when I lay dying, I hope to look back on what I would consider a full life.

What I got out of it

  1. Some valuable and deep insights on the building process and how to navigate through the “messy middle.” Topics around leadership, design, simplicity, and doing things that don’t scale will stick with me

The Five Temptations of a CEO: A Leadership Fable by Patrick Lencioni

Summary

  1. Many CEOs put the success of their organization in jeopardy as they’re unwilling to face themselves and the 5 temptations of a CEO

Key Takeaways

  1. Temptation 1 – placing ego over achievement.
    1. Running a company is simple, but people make it complicated as they’re not willing to face their own issues, revealing their temptations for others to see and help with. Don’t trade the lack of short term pain for long term success
  2. Temptation 2 – popularity over accountability
    1. Have to hold people accountable or they won’t know how seriously to take you and you won’t be consistent
  3. Temptation 3 – certainty over clarity
    1. Have to set vision and expectations for yourself and entire team. Can’t hold people accountable if they don’t have clarity on their expectations
    2. Clear and timely decisions are so important. Nearly any decision is better than no decision
  4. Temptation 4 – harmony over conflict
    1. Healthy dialogue and conflict is necessary to grow
    2. Must benefit from all the ideas and feedback from your team
  5. Temptation 5 – invulnerability over trust 

What I got out of it

  1. A fun, short read that highlights the importance of an achievement oriented mentality, accountability, clarity, healthy conflict, and trust

Purple on the Inside by Kirk Thompson

Summary

  1. 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

Key Takeaways

  1. 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
  2. Differentiation, better customer service, a refusal to stand still, natural expansion with homegrown talent
  3. Boring things – even if excellent – quickly become invisible
  4. 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
  5. You learn a whole lot more from the struggles in the valley than you do on the mountaintop
  6. Never feed problems while starving opportunities
  7. 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
  8. 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 
  9. 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
  10. 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
  11. 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
  12. Incentives
    1. 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. 
    2. 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 
    3. Growth is key, growth is oxygen
  13. Culture
    1. A good message is clear, actionable, consistent. Give the what/why, not the how
    2. 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.
      1. Antifragile
  14. Intermodal – more than one mode of transportation to reach the final destination (ship to train to truck…)
    1. Trucks first complemented and then competed with the railways
    2. “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)
    3. Developing Intermodal opened up new business lines that are now multi-billion dollar segments
  15. Hiring
    1. 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

  1. A great look inside the culture of a compounder who has grown steadily for decades now

No Rules Rules by Reed Hastings

Summary

  1. 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

Key Takeaways

  1. 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…)
  2. Removing mediocre performers has a surprisingly large impact on the culture, output, and happiness of everyone who remains, boosting already high performers even higher
  3. 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
  4. Netflix’s travel and expense policy can be summarized in five words: act in Netflix’s interest
  5. 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.
  6. 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
  7. Speed in every facet of decision making has tremendous second order effects
  8. 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
  9. 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
  10. Don’t seek to please your boss but seek to do what is best for the company
  11. 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
  12. Adequate performance receives a generous severance package
  13. 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
  14. Only say things about people that you’d be comfortable saying to their face
  15. Lead with context, not control
  16. 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
  17. 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

  1. 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

Invent & Wander: The Collected Writings of Jeff Bezos

Summary

  1. Writings taken from Bezos’ annual shareholders letters with a bit of organization and context 

Key Takeaways

  1. 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
  2. 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
  3. Invention comes in many forms and at many scales. The most radical and transformative of inventions are often those that empower others to unleash their creativity – to pursue their dreams
  4. 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. 
  5. 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
  6. 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
  7. 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
  8. 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
  9. 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.
  10. 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.”
  11. …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. 
  12. 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

  1. Inspiring and motivating – a peek into an incredible thinker, his vision, his thought process

Tape Sucks: Inside Data Domain, A Silicon Valley Growth Story by Frank Slootman

Summary

  1. Frank Slootman talks about his time and leadership style

Key Takeaways

  1. Being cash positive, we really didn’t need the money for operations, but a strong balance sheet reassures enterprise customers so they buy gear from a small supplier.
  2. This fear-based behavior can scarcely be overstated. Large enterprises consistently prioritize their buying decisions to minimize the risk of embarrassment backlash. Huge premiums are paid in the misguided name of “playing it safe.” Dominant suppliers carefully cultivate and nurture this incumbent bias.
  3. From the perspective of an operations guy, there is a lot of riff-raff in venture capital: posers, herd mentality, technology infatuation, too much education, not enough experience to appreciate what grit and focus it takes to grow a business out of nothing. To have a fighting chance, you want to be with the best firms, and the best partners in those firms. Odds are already exceedingly low for venture success.
  4. In hindsight, it helped explain how some of our breakthroughs came about: they ended up betting on Moore’s law, the microprocessor subsystem, and avoiding the entrenched bottlenecks in the storage subsystem
  5. The famed Austrian economist Joseph Schumpeter is usually associated with this term, but the basic idea goes back all the way to the works of Karl Marx. The notion (which has experienced a recent resurgence via Clayton Christensen’s writings on disruptive innovation) is that in order to create something, you have to destroy something else in the process. So, creative destruction is an axiom of business: you are not going to grow much without exacting a proportional decrease in business somewhere else. You better know whose livelihood you’re going to mess with.
  6. A challenged product sector is obviously a much better starting point than attacking a category that is favorably regarded. When picking a fight, don’t seek out the most formidable opponent.
  7. Many technologies are conceived without a clear, precise notion of the intended use. There is plenty of hoping and praying going on that some new technology will magically find a suitable problem to solve. Often, we think we know, vaguely, in the abstract—but the truth is we have no clarity on how our technology stacks up in that use-case, relative to alternatives. Start with the application or use case, not the technology. Don’t make it an after-thought. Ass-backwards, it is awfully hard to successfully recover from a technology-led venture that cannot locate its target.
  8. It is remarkable how little our strategy changed from dollar zero to a billion in sales. The most important thing we did throughout the journey: resist the ever-present temptation to muck with the strategy.
  9. Making yourself “scarce” is something to ponder.
  10. You simply cannot invest intelligently in revenue generation if you do not understand how to ramp effectiveness and make the underlying economics work. It should be obvious that a sales force that loses money will only accelerate cash burn—in the absence of deep pockets, not a game to be played for very long.
  11. If you have aspirations to go public, you cannot do so without a predictable model that you control. It is also a way to weaken competitors. At Data Domain we hired away the best of the best from our competitors—not only did we gather strength, we weakened them at the same time.   Ulysses S. Grant once said that victory is breaking the enemy’s will to fight. Our version of victory was a great salesperson quitting the competition and joining our band of brothers. Breaking their will to fight (prompting “surrender”) was one thing, but getting them to defect outright and rally to our cause—this was crushing for incumbent morale.
  12. Your power is in your own sales function and product—keep that in mind. The channel is a powerful, entrenched fixture in the industry, and one that demands respect. If you don’t bring the channel in, they will bring in your competition.
  13. Yet, there comes a time when the venture must pivot from conserving resources to applying them rapidly, as fast as you know how to do effectively—when that cross-over time comes is not always obvious. The irony is that most ventures seem to spend too much early on, and not enough later on when they could grow faster and pay for it. The question becomes “can you grow faster?” And, if not, why not? That should be a good board meeting discussion. The turning point comes when your sales activity is solidly paying for itself, and is clearly becoming more profitable with increasing volume. Now you have a virtual money machine and you want to start opening the floodgates.
  14. Accounting is the bastardization of economics. It can be puzzling to see early stage ventures focusing on P&L profitability, as that mentality can choke off growth in a hurry. You should not care much about profits early on. Instead, you care about maximizing growth while maintaining sufficient cash balances to sustain it.
  15. I have seen startups managing for profitability prematurely—a huge mistake. They simply do not appreciate the dynamics of an early stage, high growth operation versus a large, steady-state company. Big company thinking: check it at the door.
  16. Trust your team—nothing else scales.
  17. After suffering through a few instances of this mismatch at Data Domain, we adjusted our search algorithm and began looking for candidates who did not have the resume yet but did have the potential and desire for a career break to get to the next level. We called them “athletes”: candidates with the right aptitude and behavior profile but without the prerequisite experience.   Put differently, we started looking for people who we thought had their best work still in front of them, rather than behind them.
  18. Speed is the essence of a startup: we have to be able to take mistakes in stride, and self-correct in the normal course of business.
  19. Newly hired salespeople were stunned that they could pose a question online, and responses started piling up within minutes.
  20. CEOs can’t manage from behind the desk—you need to be the first guy or gal over the barricades, gloves off. You need to know from experience what it’s like getting your nose bloodied; otherwise, your troops can’t relate to you and you can’t relate to them.
  21. I staked out the Greater Boston Area and made more sales calls in the Northeast than anywhere else. Why? It was the home of our principal competitor at the time, EMC. We wanted to show our people we could beat them in their own backyard.
  22. If you don’t naturally swarm to the action, you need to learn that attitude.
  23. People can instantly finger a phony. Let them know who you really are, warts and all—show your humanity, your passions, your likes and dislikes. What do you feel strongly about? Can they still remember what you said a week later? Are you leaving a room with more energy than when you entered it? Not sure? Then you didn’t.   For most of us, it is work to become an authentic leader. By authentic I mean being who you really are versus acting out some burnished version of you.
  24. Software development actually suffers from diseconomies of scale: the more engineers, the slower it goes.
  25. Don’t be a pleaser, and don’t be an appeaser. Do what you think is right. Do anything less, and you only have yourself to blame.
  26. He had this style about him leaving no doubt that while he would share his point of view, he was not making recommendations or prescriptions: you, the CEO, were the judge. It actually made it easier to seek him out, as he didn’t demand you follow his point of view. He impressed on me that the role of the board was to hire and fire the CEO, and that he would not hesitate to pull either trigger!
  27. I found this advice priceless. You might as well spend all your time on winning—nothing else matters. Of course, a good board wants you to do exactly that. It obviously doesn’t mean you should blindly bat away all opinions coming at you, but just try them on for size and merit, and go from there. Keeping good council is strength; caving in on perceived pressure is weakness.
  28. Our drive for a set of values in the organization came about gradually, as more people came into the company. We started writing them down and describing them:   Respect   Excellence   Customer   Integrity   Performance   Execution   The first letter of each of the six values spells the word R-E-C-I-P-E.
  29. Becoming a value-led organization doesn’t happen automatically. We imported somebody else’s culture with every person we hired, and therefore had to undo a bunch of stuff. We called it “re-programming.” People learn culture based on what behavior they observe around them, good, bad, or somewhere in between. The magic begins when you start displaying what you mean by them in practice, when the consequences are real.   One aspect of compliance was that we told new hires upfront that while we might be somewhat patient and forgiving on performance, we would not be on conduct. Conduct is a choice, not a skill set. If someone made the wrong choices in the face of all the guidance received, it could and would be a dismissible offense.
  30. I’d go as far as to say that company culture is the only enduring, sustainable form of differentiation. These days, we don’t have a monopoly for very long on talent, technology, capital, or any other asset; the one thing that is unique to us is how we choose to come together as a group of people, day in and day out.
  31. They don’t “work for you”—we all work for the company. As a manager, you are there to help them succeed.
  32. Strong references (who voluntarily become your “promoters”) are priceless marketing collateral.
  33. Early on, when employee candidates asked us what our culture was like, we invariably said “blue collar.” Not a lot of flash—if it doesn’t directly aid our cause, we don’t spend money on it. Extravagance was frowned upon, and becoming self-congratulatory was avoided; these things weaken the focus and muscle of the company. Setting the tone comes from the top. Humble and hungry is what we wanted to be.
  34. Somebody once asked me how he or she would know whether they were a driver, and I answered, “you better find out before we do.” In other words, be more demanding of yourself. Are you increasing the company’s speed or not?
  35. No strategy is better than its execution. When you get better at execution, the strategic issues will crystallize more as well. Like art being 99% perspiration (versus inspiration), business is 99% execution (versus strategy). A company can go a long way with an average strategy and superior execution, but they will not go far without great execution, no matter how brilliant the strategy.
  36. Startup CEOs are more like plow horses than racehorses. A racehorse gets pampered all week, to be taken out of the barn for a few minutes to race on Saturday afternoon; startup CEOs live 12+ hours a day behind the plow. It doesn’t feel so glamorous when you get home at 11 at night and you need to get up at 5 am to catch a flight out of town.

What I got out of it

  1. Love Slootman’s no non-sense mentality and learned a lot from his explanation of his time at Data Domain

The Mythical Man-Month: Essays on Software Engineering by Frederick P. Brooks

Summary

  1. This book is a belated answer to Tom Watson’s probing questions as to why programming is hard to manage…Briefly, I believe that large programming projects suffer management problems different in kind from small ones, due to division of labor. I believe the critical need to be the preservation of the conceptual integrity of the product itself. These chapters explore both the difficulties of achieving this unity and methods for doing so. The later chapters explore other aspects of software engineering management….The Mythical Man-Month is only incidentally about software but primarily about how people in teams make things. There is surely some truth in this

Key Takeaways

  1. A rule of thumb, I estimate that a programming product costs at least three times as much as a debugged program with the same function…Programming system component costs at least three times as much as a stand-alone program of the same function.
  2. First, one must perform perfectly. The computer resembles the magic of legend in this respect, too. If one character, one pause, of the incantation is not strictly in proper form, the magic doesn’t work. Human beings are not accustomed to being perfect, and few areas of human activity demand it. Adjusting to the requirement for perfection is, I think, the most difficult part of learning to program. Next, other people set one’s objectives, provide one’s resources, and furnish one’s information. One rarely controls the circumstances of his work, or even its goal. In management terms, one’s authority is not sufficient for his responsibility. It seems that in all fields, however, the jobs where things get done never have formal authority commensurate with responsibility. In practice, actual (as opposed to formal) authority is acquired from the very momentum of accomplishment. The dependence upon others has a particular case that is especially painful for the system programmer. He depends upon other people’s programs. These are often maldesigned, poorly implemented, incompletely delivered (no source code or test cases), and poorly documented. So he must spend hours studying and fixing things that in an ideal world would be complete, available, and usable. The next woe is that designing grand concepts is fun; finding nitty little bugs is just work. With any creative activity come dreary hours of tedious, painstaking labor, and programming is no exception.
  3. The challenge and the mission are to find real solutions to real problems on actual schedules with available resources.
  4. More software projects have gone awry for lack of calendar time than for all other causes combined. Why is this cause of disaster so common? First, our techniques of estimating are poorly developed. More seriously, they reflect an unvoiced assumption which is quite untrue, i.e., that all will go well. Second, our estimating techniques fallaciously confuse effort with progress, hiding the assumption that men and months are interchangeable.
    1. Key point – men and months are not interchangeable, but we make assumptions that they are
  5. Fifth, when schedule slippage is recognized, the natural (and traditional) response is to add manpower. Like dousing a fire with gasoline, this makes matters worse, much worse. More fire requires more gasoline, and thus begins a regenerative cycle which ends in disaster.
  6. For the human makers of things, the incompletenesses and inconsistencies of our ideas become clear only during implementation. Thus it is that writing, experimentation, “working out” are essential disciplines for the theoretician.
  7. The second fallacious thought mode is expressed in the very unit of effort used in estimating and scheduling: the man-month. Cost does indeed vary as the product of the number of men and the number of months. Progress does not. Hence the man-month as a unit for measuring the size of a job is a dangerous and deceptive myth. It implies that men and months are interchangeable.
  8. The bearing of a child takes nine months, no matter how many women are assigned. Many software tasks have this characteristic because of the sequential nature of debugging.
  9. Since software construction is inherently a systems effort—an exercise in complex interrelationships—communication effort is great, and it quickly dominates the decrease in individual task time brought about by partitioning. Adding more men then lengthens, not shortens, the schedule. 
  10. For some years I have been successfully using the following rule of thumb for scheduling a software task: 1/3 planning 1/6 coding 1/4 component test and early system test 1/4 system test, all components in hand.
  11. Programming managers have long recognized wide productivity variations between good programmers and poor ones. But the actual measured magnitudes have astounded all of us. In one of their studies, Sackman, Erikson, and Grant were measuring performances of a group of experienced programmers. Within just this group the ratios between best and worst performances averaged about 10:1 on productivity measurements and an amazing 5:1 on program speed and space measurements! In short the $20,000/year programmer may well be 10 times as productive as the $10,000/year one. The converse may be true, too. The data showed no correlation whatsoever between experience and performance. (I doubt if that is universally true.)
  12. I have earlier argued that the sheer number of minds to be coordinated affects the cost of the effort, for a major part of the cost is communication and correcting the ill effects of miscommunication (system debugging). This, too, suggests that one wants the system to be built by as few minds as possible.
  13. The dilemma is a cruel one. For efficiency and conceptual integrity, one prefers a few good minds doing design and construction. Yet for large systems one wants a way to bring considerable manpower to bear, so that the product can make a timely appearance. How can these two needs be reconciled? Mills’s Proposal A proposal by Harlan Mills offers a fresh and creative solution. Mills proposes that each segment of a large job be tackled by a team, but that the team be organized like a surgical team rather than a hog-butchering team. That is, instead of each member cutting away on the problem, one does the cutting and the others give him every support that will enhance his effectiveness and productivity.
  14. Even though they have not taken centuries to build, most programming systems reflect conceptual disunity far worse than that of cathedrals. Usually this arises not from a serial succession of master designers, but from the separation of design into many tasks done by many men. I will contend that conceptual integrity is the most important consideration in system design. It is better to have a system omit certain anomalous features and improvements, but to reflect one set of design ideas, than to have one that contains many good but independent and uncoordinated ideas.
  15. The purpose of a programming system is to make a computer easy to use…Because ease of use is the purpose, this ratio of function to conceptual complexity is the ultimate test of system design. Neither function alone nor simplicity alone defines a good design. This point is widely misunderstood. As soon as ease of use is held up as the criterion, each of these is seen to be unbalanced, reaching for only half of the true goal. Ease of use, then, dictates unity of design, conceptual integrity. Conceptual integrity in turn dictates that the design must proceed from one mind, or from a very small number of agreeing resonant minds.
  16. Architecture must be carefully distinguished from implementation. As Blaauw has said, “Where architecture tells what happens, implementation tells how it is made to happen.”
  17. Not trivial, however, is the principle that such mini-decisions be made consistently throughout.
  18. In most computer projects there comes a day when it is discovered that the machine and the manual don’t agree. When the confrontation follows, the manual usually loses, for it can be changed far more quickly and cheaply than the machine.
  19. The project manager’s best friend is his daily adversary, the independent product-testing organization. This group checks machines and programs against specifications and serves as a devil’s advocate, pinpointing every conceivable defect and discrepancy. Every development organization needs such an independent technical auditing group to keep it honest.
  20. The second reason for the project workbook is control of the distribution of information. The problem is not to restrict information, but to ensure that relevant information gets to all the people who need it.
  21. The purpose of organization is to reduce the amount of communication and coordination necessary; hence organization is a radical attack on the communication problems treated above.
  22. The means by which communication is obviated are division of labor and specialization of function.
  23. On larger projects it is very rarely workable, for two reasons. First, the man with strong management talent and strong technical talent is rarely found. Thinkers are rare; doers are rarer; and thinker-doers are rarest.
  24. Practice is the best of all instructors. —PUBLILIUS
  25. Experience is a dear teacher, but fools will learn at no other. —POOR RICHARD’S ALMANAC
  26. The linear extrapolation of such sprint figures is meaningless. Extrapolation of times for the hundred-yard dash shows that a man can run a mile in under three minutes.
  27. Fostering a total-system, user-oriented attitude may well be the most important function of the programming manager.
  28. First, writing the decisions down is essential. Only when one writes do the gaps appear and the inconsistencies protrude. The act of writing turns out to require hundreds of mini-decisions, and it is the existence of these that distinguishes clear, exact policies from fuzzy ones.
  29. Chemical engineers learned long ago that a process that works in the laboratory cannot be implemented in a factory in only one step. An intermediate step called the pilot plant is necessary to give experience in scaling quantities up and in operating in nonprotective environments. For example, a laboratory process for desalting water will be tested in a pilot plant of 10,000 gallon/day capacity before being used for a 2,000,000 gallon/day community water system.
    1. Scaling Effects
  30. In most projects, the first system built is barely usable. It may be too slow, too big, awkward to use, or all three. There is no alternative but to start again, smarting but smarter, and build a redesigned version in which these problems are solved. The discard and redesign may be done in one lump, or it may be done piece-by-piece. But all large-system experience shows that it will be done. Where a new system concept or new technology is used, one has to build a system to throw away, for even the best planning is not so omniscient as to get it right the first time. The management question, therefore, is not whether to build a pilot system and throw it away. You will do that. The only question is whether to plan in advance to build a throwaway, or to promise to deliver the throwaway to customers. Seen this way, the answer is much clearer.
  31. Structuring an organization for change is much harder than designing a system for change.
  32. Things are always at their best in the beginning,” said Pascal. C. S. Lewis has stated it more perceptively: That is the key to history. Terrific energy is expended—civilizations are built up—excellent institutions devised; but each time something goes wrong. Some fatal flaw always brings the selfish and cruel people to the top, and then it all slides back into misery and ruin. In fact, the machine conks. It seems to start up all right and runs a few yards, and then it breaks down.
  33. A good workman is known by his tools. —PROVERB
  34. The most pernicious and subtle bugs are system bugs arising from mismatched assumptions made by the authors of various components.
  35. Many poor systems come from an attempt to salvage a bad basic design and patch it with all kinds of cosmetic relief. Top-down design reduces the temptation. I am persuaded that top-down design is the most important new programming formalization of the decade.
  36. Add one component at a time. This precept, too, is obvious, but optimism and laziness tempt us to violate
  37. Lehman and Belady offer evidence that quanta should be very large and widely spaced or else very small and frequent. The latter strategy is more subject to instability, according to their model. My experience confirms it: I would never risk that strategy in practice.
  38. How does one control a big project on a tight schedule? The first step is to have a schedule. Each of a list of events, called milestones, has a date. Picking the dates is an estimating problem, discussed already and crucially dependent on experience. For picking the milestones there is only one relevant rule. Milestones must be concrete, specific, measurable events, defined with knife-edge sharpness. It is more important that milestones be sharp-edged and unambiguous than that they be easily verifiable by the boss. Rarely will a man lie about milestone progress, if the milestone is so sharp that he can’t deceive himself. But if the milestone is fuzzy, the boss often understands a different report from that which the man gives.  Sharp milestones are in fact a service to the team, and one they can properly expect from a manager. The fuzzy milestone is the harder burden to live with. It is in fact a millstone that grinds down morale, for it deceives one about lost time until it is irremediable. And chronic schedule slippage is a morale-killer.
  39. The preparation of a PERT chart is the most valuable part of its use. Laying out the network, identifying the dependencies, and estimating the legs all force a great deal of very specific planning very early in a project. The first chart is always terrible, and one invents and invents in making the second one.
  40. Most of the big last gains in software productivity have come from removing artificial barriers that have made the accidental tasks inordinately hard, such as severe hardware constraints, awkward programming languages, lack of machine time. How much of what software engineers now do is still devoted to the accidental, as opposed to the essential? Unless it is more than 9/10 of all effort, shrinking all the accidental activities to zero time will not give an order of magnitude improvement. Therefore it appears that the time has come to address the essential parts of the software task, those concerned with fashioning abstract conceptual structures of great complexity. I suggest:
    1. Exploiting the mass market to avoid constructing what can be bought.
    2. Using rapid prototyping as part of a planned iteration in establishing software requirements.
    3. Growing software organically, adding more and more function to systems as they are run, used, and tested.
    4. Identifying and developing the great conceptual designers of the rising generation.
  41. The gap between the best software engineering practice and the average practice is very wide—perhaps wider than in any other engineering discipline. A tool that disseminates good practice would be important.
  42. The development of the mass market is, I believe, the most profound long-run trend in software engineering. The cost of software has always been development cost, not replication cost. Sharing that cost among even a few users radically cuts the per-user cost. Another way of looking at it is that the use of n copies of a software system effectively multiplies the productivity of its developers by n. That is an enhancement of the productivity of the discipline and of the nation.
  43. No other part of the conceptual work is so difficult as establishing the detailed technical requirements, including all the interfaces to people, to machines, and to other software systems. No other part of the work so cripples the resulting system if done wrong. No other part is more difficult to rectify later. Therefore the most important function that software builders do for their clients is the iterative extraction and refinement of the product requirements. For the truth is, the clients do not know what they want. They usually do not know what questions must be answered, and they almost never have thought of the problem in the detail that must be specified.
  44. I would go a step further and assert that it is really impossible for clients, even those working with software engineers, to specify completely, precisely, and correctly the exact requirements of a modern software product before having built and tried some versions of the product they are specifying. Therefore one of the most promising of the current technological efforts, and one which attacks the essence, not the accidents, of the software problem, is the development of approaches and tools for rapid prototyping of systems as part of the iterative specification of requirements. A prototype software system is one that simulates the important interfaces and performs the main functions of the intended system, while not being necessarily bound by the same hardware speed, size, or cost constraints. Prototypes typically perform the mainline tasks of the application, but make no attempt to handle the exceptions, respond correctly to invalid inputs, abort cleanly, etc. The purpose of the prototype is to make real the conceptual structure specified, so that the client can test it for consistency and usability.
  45. Incremental development—grow, not build, software. I still remember the jolt I felt in 1958 when I first heard a friend talk about building a program, as opposed to writing one. In a flash he broadened my whole view of the software process. The metaphor shift was powerful, and accurate. Today we understand how like other building processes the construction of software is, and we freely use other elements of the metaphor, such as specifications, assembly of components, and scaffolding. The building metaphor has outlived its usefulness. It is time to change again. If, as I believe, the conceptual structures we construct today are too complicated to be accurately specified in advance, and too complex to be built faultlessly, then we must take a radically different approach. Let us turn to nature and study complexity in living things, instead of just the dead works of man. Here we find constructs whose complexities thrill us with awe. The brain alone is intricate beyond mapping, powerful beyond imitation, rich in diversity, self-protecting, and self-renewing. The secret is that it is grown, not built. So it must be with our software systems. Some years ago Harlan Mills proposed that any software system should be grown by incremental development. That is, the system should first be made to run, even though it does nothing useful except call the proper set of dummy subprograms. Then, bit by bit it is fleshed out, with the subprograms in turn being developed into actions or calls to empty stubs in the level below. I have seen the most dramatic results since I began urging this technique on the project builders in my software engineering laboratory class. Nothing in the past decade has so radically changed my own practice, or its effectiveness. The approach necessitates top-down design, for it is a top-down growing of the software. It allows easy backtracking. It lends itself to early prototypes. Each added function and new provision for more complex data or circumstances grows organically out of what is already there. The morale effects are startling. Enthusiasm jumps when there is a running system, even a simple one. Efforts redouble when the first picture from a new graphics software system appears on the screen, even if it is only a rectangle. One always has, at every stage in the process, a working system. I find that teams can grow much more complex entities in four months than they can build. The same benefits can be realized on large projects as on my small ones. 
  46. The differences are not minor—it is rather like Salieri and Mozart. Study after study shows that the very best designers produce structures that are faster, smaller, simpler, cleaner, and produced with less effort. The differences between the great and the average approach an order of magnitude.
  47. My first proposal is that each software organization must determine and proclaim that great designers are as important to its success as great managers are, and that they can be expected to be similarly nurtured and rewarded. Not only salary, but the perquisites of recognition—office size, furnishings, personal technical equipment, travel funds, staff support—must be fully equivalent. How to grow great designers? Space does not permit a lengthy discussion, but some steps are obvious:
    1. Systematically identify top designers as early as possible. The best are often not the most experienced.
    2. Assign a career mentor to be responsible for the development of the prospect, and keep a careful career file.
    3. Devise and maintain a career development plan for each prospect, including carefully selected apprenticeships with top designers, episodes of advanced formal education, and short courses, all interspersed with solo design and technical leadership assignments.
    4. Provide opportunities for growing designers to interact with and stimulate each other.
  48. Turski and I both insist that pipe-dreaming inhibits forward progress and wastes effort.
  49. Capers Jones, writing first in a series of memoranda and later in a book, offers a penetrating insight, which has been stated by several of my correspondents. “NSB,” like most writings at the time, was focused on productivity, the software output per unit of input. Jones says, “No. Focus on quality, and productivity will follow.” He argues that costly and late projects invest most of the extra work and time in finding and repairing errors in specification, in design, in implementation. He offers data that show a strong correlation between lack of systematic quality controls and schedule disasters. I believe it.
  50. Representation is the essence of programming.
  51. Fixing a defect has a substantial (20 to 50 percent) chance of introducing another.
  52. Vyssotsky: “I have found it handy to carry both ‘scheduled’ (boss’s dates) and ‘estimated’ (lowest-level manager’s dates) dates in the milestone report. The project manager has to keep his fingers off the estimated dates.”
  53. The subsystem boundaries must be at those places where interfaces between the subsystems are minimal and easiest to define rigorously.
  54. Featuritis. The besetting temptation for the architect of a general purpose tool such as a spreadsheet or a word processor is to overload the product with features of marginal utility, at the expense of performance and even of ease of use. The appeal of proposed features is evident at the outset; the performance penalty is evident only as system testing proceeds. The loss of ease of use sneaks up insidiously, as features are added in little increments, and the manuals wax fatter and fatter.
  55. If one believes, as I have argued at many places in this book, that creativity comes from individuals and not from structures or processes, then a central question facing the software manager is how to design structure and process so as to enhance, rather than inhibit, creativity and initiative. Fortunately, this problem is not peculiar to software organizations, and great thinkers have worked on it. E. F. Schumacher, in his classic, Small is Beautiful: Economics as if People Mattered, proposes a theory of organizing enterprises to maximize the creativity and joy of the workers. For his first principle he chooses the “Principle of Subsidiary Function” from the Encyclical Quadragesimo Anno of Pope Pius XI: It is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organizations can do. For every social activity ought of its very nature to furnish help to the members of the body social and never destroy and absorb them. . . . Those in command should be sure that the more perfectly a graduated order is preserved among the various associations, in observing the principle of subsidiary function, the stronger will be the social authority and effectiveness and the happier and more prosperous the condition of the State.

What I got out of it

  1. The importance of thinking in parallel vs. series, adding margins of safety (things always go wrong, so do you bake that into your assumptions or do you pay for it dearly at a later point?), adding more software developers generally makes projects even later, as few minds as possible to make the system easy to use (top-down design one of the most important aspects to consider), the importance of testing and iteration at every step along the process (grow, don’t build software), sharp rather than fuzzy milestones

Skunk Works: A Personal Memoir of My Years of Lockheed by Ben Rich

Summary

  1. Ben Rich, CEO of the Skunk WOrks after legendary Kelly Johnson stepped down, describes what makes the Skunk Works so special and some behind the scenes looks at how they operate

Key Takeaways

  1. Ben Rich took over Skunk Works from legendary Kelly Johnson. Rich’s first big test was his confidence in stealth when those around him were doubtful of its potential 
  2. Kelly deeply believed that an airplane that was beautiful would fly the same way 
  3. Engineers had to live with their design through production. They were expected on the floor and couldn’t abdicate responsibility just because a design had been approved. Engineers spoke to designers who spoke to manufacturing who spoke to quality and then to flight testing. Quality reported directly to the CEO
  4. To save time, they built the plane vertically which allowed them to work in parallel rather than in series 
    1. Advantageous Divergence
  5. 14 Skunk Works mantras
    1. The Skunk Works manager must be delegated practically complete control of his program in all aspects. He should report to a division president or higher.
    2. Strong but small project offices must be provided both by the military and industry.
    3. The number of people having any connection with the project must be restricted in an almost vicious manner. Use a small number of good people (10% to 25% compared to the so-called normal systems).
    4. A very simple drawing and drawing release system with great flexibility for making changes must be provided.
    5. There must be a minimum number of reports required, but important work must be recorded thoroughly.
    6. There must be a monthly cost review covering not only what has been spent and committed but also projected costs to the conclusion of the program.
    7. The contractor must be delegated and must assume more than normal responsibility to get good vendor bids for subcontract on the project. Commercial bid procedures are very often better than military ones.
    8. The inspection system as currently used by the Skunk Works, which has been approved by both the Air Force and Navy, meets the intent of existing military requirements and should be used on new projects. Push more basic inspection responsibility back to subcontractors and vendors. Don’t duplicate so much inspection.
    9. The contractor must be delegated the authority to test his final product in flight. He can and must test it in the initial stages. If he doesn’t, he rapidly loses his competency to design other vehicles.
    10. The specifications applying to the hardware must be agreed to well in advance of contracting. The Skunk Works practice of having a specification section stating clearly which important military specification items will not knowingly be complied with and reasons therefore is highly recommended.
    11. Funding a program must be timely so that the contractor doesn’t have to keep running to the bank to support government projects.
    12. There must be mutual trust between the military project organization and the contractor, the very close cooperation and liaison on a day-to-day basis. This cuts down misunderstanding and correspondence to an absolute minimum.
    13. Access by outsiders to the project and its personnel must be strictly controlled by appropriate security measures.
    14. Because only a few people will be used in engineering and most other areas, ways must be provided to reward good performance by pay not based on the number of personnel supervised.
      1. There was a secret 15th rule – don’t work with the navy
  6. There was so much secrecy around many of the skunk Works projects that inefficiency and obscurity was a feature not a bug. They had to fail their assembly locations plans and blueprints so well that it added in Normas friction and costs to their overall process
  7. There were of course technical and governmental problems but they succeeded and the stealth fighter became phenomenally profitable, making Lockheed billions of dollars 
  8. No other manufacturer came close to building the intimate relationship between designer and user like skunk works did. They had the pilots responsible for flying the F1-17A part of the production process 
  9. They developed homegrown talent that was able to get up the learning curve very quickly through proper training motivation and incentives
  10. Stealth plus precision missiles was a quantum leap in warfare rendering nearly useless billions of dollars spent on defense systems by the Russians and other enemies
  11. Kelly was of Swedish origin – “as stubborn as a Swede”
  12. The greatest compliment Kelly ever got was from a British colonel that said, “this old Swede can see the damn air!” That’s how efficient his designs were and how intuitive he was with aerodynamics and airplane design 
    1. Hologram in the Head
  13. Kelly believed that if he didn’t have the hell scared out of him as a test flight pilot at least once a year he wouldn’t have the proper perspective to design airplanes. He was one of the leading experts in nearly every aspect of the design and build of airplanes. Nothing ever got past him and he was frustrated by those who try to cover up their mistakes rather than own up to them
  14. One of Kelly‘s key mantras was to have everybody as close to the production floor as possible – even a stones throw away was too far as he wanted structural changes and questions to be addressed immediately. Any delays were to be reported to Kelly immediately and stock items were to be used in place of special parts, even at the expense of added weight – the potential for delay was too great if too many special parts were used 
    1. Velocity
  15. Kelly was strong as an ox and challenged people to arm wrestling. He hardly ever lost 
  16. The U2 spy plane was another great success and allowed the US to get reconnaissance data on the Soviet union without fear of being shot down. This was the greatest success and greatest bargain, allowing policy makers to know what they were truly up against 
  17. The black bird may be the pinnacle of 20th century aviation and Kelly considered it his crowning achievement
  18. The SR 71 blackbird was the most advanced plane of the 20th century. However, they stopped building them in the 1970s and it was officially retired in 1990. The incredible thing is that the titanium skin and the speed at which it flew cause such he got the metal was annealed on every flight, making it stronger overtime
  19. A lot of the technology, planes, and ships that the Skunk Works built allowed for a much smaller team to have the same impact as a past larger team would have. However, in terms of an officer’s prestige, ego, and future prospects, more and bigger was better so they had a hard time attracting ambitious and capable officers to these smaller yet more effective teams. Their stealth ship, Sea Shadow, fell into this category.
  20. An interesting paradox about stealth technology is that it is built to disappear, but it can’t be more quiet than the background noise or else they stand out just as much as if they were using no stealth at all
  21. They were two people set to potentially take over for Kelly when he retired. Ben was Kelly’s favorite since he was technically great but more importantly a good leader straightforward and someone who had big ideas and big vision. There are many great engineers but a few good leaders
    1. Alloying
  22. Don’t build anything you don’t believe in
  23. Skunk Works would likely not be able to exist without a parent organization who they could push and pull talent from. This helps keep the team streamlined and focused without growing excessively large and bureaucratic 
  24. Another important skunk works mantra is to stick with suppliers who perform well. Switching suppliers just because of cost eats up expenses in different ways and is almost never worth it. Form long lasting relationships with good suppliers 

What I got out of it

  1. Exciting book to get behind the scenes of one of the most innovative and important aerospace groups of the past 50 years. A lot to learn from in terms of leadership, velocity, and management organization