This is the third post in my series on communicating with your board.  You can find the previous posts here and here.

Consolodating key financial information on a single page is a great tool for communicating some of the most important data about the company in a quickly-grasped snapshot.  Because of this, it’s not only good for your board, but your employees as well.  Presenting the data this way makes it much easier for an audience to understand the financial health of the company without pouring over the complete set of financial statements.  It also gives you the chance to make clear to your audience what you believe are the highest priority financial metrics for the company at any time.

Creating such summary information doesn’t let you skip the troika of financial statements (P&L, balance sheet and statement of cash flows), but it’s no additional work either - another page in your spreadsheet refering to data in the complete statements almost always does the trick.

While the exact format of such a one-page statement should be discussed with your board, the format below describes one that is used in a company that I work with, proposed by another director.  I’ve come to like it a lot and always keep the spreadsheet on my desk a few days before and after the respective board meeting so I can quickly refer to it as I think about the progress of the company.  It has three sections:

1. Finance
2. Headcount
3. Subjective updates that either have an impact on the current period or will likely have an impact on future periods

I’ll go into each one separately . . .

Finance

As is true for much of the operating life of companies, the focus should be on cash.  As such, you should list the key spending areas of the company - the big line items - and sum them up to come up with the gross burn rate for the previous period.  As I mentioned in my previous posts in this series, it’s good to have numbers for previous periods as well.  You should include the last two (for a total of three) to five (for a total of six) months as a minimum in this table.

Once you’ve established the gross burn, you should summarize any cash infusions into the company.  Generally speaking, these will only include a few line items, like investment income, financings and collections.  By subtracting this sum from the gross burn, you’ll derive the net burn for the company.  Again, this should be reported for the previous months as well.

In this section, it’s also a good idea to list the key balance sheet entries and any bookings numbers (so the forward potential for revenue is observable).  For the balance sheet items, I like to see accounts receivable, accounts payable and any deferred revenues.  Of course, given the structure of the company and accounting methods, other data may be important in this section.  Capital equipment should be included if you’re running a business that requires a lot of it.

Finally, for bookings, you should list the bookings for the previous month, quarter and year-to-date.  It’s also a good idea to list the similar data for comparable periods a year earlier.

Headcount

In this section, you should summarize headcount by department.  There is no reason to break your small company into too many small departments here, you can simply lump them together by function if departments don’t work out.  In the cart, you should list the actual headcount as of the time of the last report, any additions or deletions since then and the current headcount.  You should also list the headcount plan per department and indicate any delta between the numbers.

Updates

Finally, you should add a few lines of important data that either had an impact on this current summary or will ikely have an impact on future performance.  Items like tax filings, lawsuits, delayed products, loans being called, key people leaving or being hired, etc, should be listed here.

So, in the end, the consolodated report will look something like this (Google Spreadsheet):

Again, it’s short.  At the most, it should cover a single page.  It’s also easily derived from the financial statments that you already have - your spreadsheet editor will do all the heavy lifting.  In the end, it will improve communication with your board and your company and it will help to make sure your board is up to speed at all times.

I’ll state again that you should discuss the format of this type of information with your board.  It doesn’t make sense to present a summary that doesn’t fit the specific needs that the group has and the format can be easily changed to make it work well.  As Chris Wand over at Ask The VC says in his recent post, Concluding Thoughts About Good Board Packages,

While it’s tempting to look for an example of a “perfect” board package and then replicate it, the perfect board package isn’t something that can be easily copied because it’s company specific and requires a thoughtful case-by-case approach.

Popularity: 53% [?]

Have you ever attended a meeting where, regardless of the the topics covered, everyone left feeling deflated and depressed?  Or maybe, you had a one-on-one with your manager where your first instinct at the conclusion of the get-together was to go home and cry or spend the evening at a bar?  Almost everyone has, of course, because we’ve almost all had the occasion of working for someone who doesn’t have the slightest clue about how to motivate people.  Sometimes, in fact, these people do just the opposite.

I’ve been in meetings (come to think of it, I may have even run some of them) where the person in charge gave an impassioned speech that was followed by fruitful discussion and was on the path to conclude in a seemingly upbeat and positive way.  One that would cause people to leave energized with a strong desire to go out and solve big problems or make tremendous progress.  Instead, though, these meetings were concluded with a few words that sucked the air out of the room and the energy from people’s drive.  They create a motivational black hole from which no positive energy could escape.

There are simple concluding phrases that have such an impact, like “do your job” or “work harder.”  Sometimes these messages need to be communicated one-on-one of course, but in groups they’re almost sure to kill the mood.  My favorite motivational black hole message is the profound, “don’t screw it up.”  There are few more innocuous (from the manager’s point of view) messages that can be as deflating as this one.  It implies that screwing up may, in fact, be a possible intent of people’s actions.  “Gee, thanks Mr./Ms. Manager, if you hadn’t told me that, I might have decided that the screw-it-up path was the right one to follow - I’ll watch out for that now.”  After hearing this, does anyone think their manager has complete faith in their ability to succeed?  Doh!

Yesterday, I ran across some notepads with the message below.  I think every new manager should get stationary like this - maybe with some guidelines on how to use it, too <g>.  Just looking at it cracks me up and reminds me of the importance of simple messages. 

BTW, if you’ve never checked out the excellent messages from Despair, Inc.  You should.  You’ll laugh out loud, but the message comes through clearly.

Popularity: 7% [?]

Jason over at Innovation Zen has a great post up titled, The Process of Empowerment.  Empowerment is, perhaps, the most important tool a manager has in building strong and successful people and teams.  From the post:

[empowerment is] the process that provides greater autonomy to employees through the sharing of relevant information in the provision of control over factors affecting job performance.”

Effectively empowering employees results in instilling a fire-in-the-belly drive and motivational energy that can ignite people to achieve far beyond what they are capable of without it.  Again, from the post:

. . . when they have been legitimately empowered, it is more likely that their efforts will pay off in both personal satisfaction and the kind of results that the organization values.”

Knowing how to empower people is a tool that should be in every manager’s quiver.

Worth checking out.

Popularity: 7% [?]

Managing is hard.  It often involves loads of responsibility without commensurate control; it is sometimes thankless and unrewarding; and it always involves working with people that have a variety of often divergent goals and personalities.  And, just when you think you have it all figured out, the team or project changes and you need to adopt a new set of rules.

I don’t use the word rules here arbitrarily.  Every manager needs rules.  If not for their team, at least for themselves.  Rules help a manager bound the actions of his/her team and keep the team moving in the same direction, even when its members seem to all have a different compass.  Rules also help a manager get things done in a somewhat repeatable fashion and to keep his/her sanity while doing it.

I find basic rules calming.  They may not always accomplish what I hope they do, but they certainly make me feel better.  Many years ago I established a rule for myself for how I would use simple questions in my practice of management.  For me, keeping these questions straight became a cornerstone of my management style - the simple questions I asked and how and when I asked them set the baseline for the culture of the group and how things worked within it.

As you might expect, the questions were simply, how, what when and why . . .

• The first questions are directed to the manager him/herself.  It’s the manager’s job to be able to answer the basic questions of what and why.  That is, what needs to be done and why the group needs to do it.  Answering these questions and making those answers profoundly clear to the group is the most important part of how a manager leads.  Good and meaningful answers will compel the team to rise to the occasion and carry the successful completion of the project as their own.  They can be motivational and exciting.  Ultimately, they paint a picture of what can be if great things are achieved with the project and they make people feel great being a part of it. 
• The next question is directed to the group now charged with the project at hand.  The manager needs to ask the group when the project will meet certain milestones, the biggest of which is, of course, “when will it be done?”  By letting the group members determine when milestones will be achieved, they become deeply involved with the project, taking it on as their own.  Generally speaking, they also usually know a lot more about what needs to be done than the manager and are better equipped to answer this question correctly.
• Inevitably, milestones will be missed and new information that will feed back into the direction of the project will be discovered.  It’s then the manager’s job to ask why.  It’s very important that the manager and team understand why problems have occurred so that adjustments can be made to the project or even the team, itself.  It’s also almost guaranteed that new information about the project and how it is being completed will be learned along the way.  This information needs to be exposed as soon as possible to have the most positive effect on what is happening.
• Hows are questions asked by the group members of themselves.  Hows form the basis of the key challenges of the jobs of each member of the group.  Each person being able to manage how things are done for their part of the project is motivating.  Completing a task as outlined and planned by oneself is even more motivating.  When people are told what to do and how to do it, they’ll almost never get motivated by the project.  If they get to invent, plan, discover and implement themselves, though, they will be driven by their ownership of their work and will take pride in its successful completion.

That’s it.  Pretty simple.  Of course that doesn’t encapsulate the entire range of management questions that need to be put forward, but it’s a great start.  Keep in mind that it’s not only the particular questions that make this basic rule powerful, it’s how and when you ask them.

Additionally, remember that none of these questions gets asked just once.  They should be asked throughout the execution of the project.  For very senior groups they might just be asked once in a while.  For junior ones, they should get asked much more frequently, even multiple times per week.  Asking the questions, including those directed to the manager, keeps the group aligned, informed and motivated.  A simple management rule that goes a long way.

Popularity: 7% [?]

In my younger days as an entrepreneur (entrepreneur in training?) - all those many years ago - I had plenty of temper and virtually no control.  I mistook any disagreement with my opinions as a personal attack and felt I had to vigorously defend my position at all times and usually very loudly.  While I’m sure that I can blame something my parents did or didn’t do for this deep-seated and subjugated rage, it probably had more to do with the fact I often felt that I didn’t know exactly what I was doing and I was afraid that people were going to find out.  Getting loud and obnoxious was my way of trying to mask this fear, along with my insecurity, and to feel like I was in control.

There you go.  There’s enough business therapy in that paragraph to save you a bundle at the psychologist’s office.

Not every manager has to deal with such demons.  There are loads of people with the wisdom and self-assurance to find their path to excellence without making fools of themselves or, at least, not wasting so much time.  My guess is that I’m not alone in the camp of having to work these things out, though.  In my case, I was very lucky.  I had an older and wiser mentor who took me aside after making a fool of myself and made me repeat the mantra, when you yell you lose power.  At first, I didn’t get it, but I eventually came around to snatching the pebble out of my master’s hand.  Yelling just shuts down the discussion.  Less information is put on the table for fear of the negative response and people don’t even think about commenting on actions or decisions because of the likely reprisal.

Because my mentor was a patient man, he just chocked my slow progress up to my being dense and kept at me.  Every Friday evening, he reviewed the number of times I had lashed out that week and gave me informal goals for the coming weeks.  Slowly, but surely, I learned and eventually moved on to more advanced concepts like, just shut up and listen, and, make sure you understand what the other person is saying before you pass judgement.  Revolutionary.

It was a real epiphany for me.  I started to listen and my responses turned from loud retorts to probing questions.  More got done, the groups I led moved faster and people started to be interested in telling me what they thought and how they were doing.  Discussions got better, more issues and advantages were exposed before they became crises and my direct reports began to enjoy their jobs more.  My job as a manager got easier, too.  Funny how seemingly small changes can have such a major impact, huh? 

Listening, probing and responding thoughtfully are important for everyone no matter what they do or who they interact with.  For managers, though, these skills are absolutely critical.  In fact, they represent the the most important and basic skills of a successful manager.  If you find yourself in a situation like mine a local mentor is a real asset.  If one isn’t around, though, changing the way you operate to adopt these principles isn’t hard.  Review your performance after each meeting and interaction.  It’s not a formal process, but the reflection will help you make minor adjustments for the next time.  The results will definitely be worth the effort.

Popularity: 6% [?]

I’ve mentioned before that it’s likely that your board remembers less about your business between meetings than you think.  As much as you think that your business is the most important thing in the world to them, your directors are probably on more than one board and many are on several at any given time.  So, with all the various pieces of information they are dealing with, they may not remember everything or sometimes get some facts and figures mixed up between companies.  As such, it’s important to remind your board about the relative nature of what you report to them each time you give them updated information.

What do I mean by this?  All information, especially numbers, should be given in context.  When new numbers are being reported, they should always be linked with plans, forecasts, and previous results.  As always, any communication tool that’s good for your board is likely to be a good one for the company in general, allowing people less familiar with the inner workings of the day to day business to grasp the significance of the data being presented.  You shouldn’t have to do a lot of extra work for your board, but you may want to consider the presentation of data with the board’s unique circumstances in mind.

In this post, I’m going to give some examples of how to report sales numbers.  The problem with sales reporting is that they come in multiple forms and have to account for many components.  There are planned, forecasted and actual sales.  Sales by territory and by channel.  There are sales by product and service and, further, by product line or service area.  There are probably half a dozen other ways to cut the numbers as well.  The goal is to put as much of this data into as condensed a format as possible.  Here are some charts that do that.  Please excuse my obvious US territory bias in these charts.

The rows in this chart obviously represent each territory that you sell into.  The columns give a view of the plan, presumably set before the period and likely before the year began, and the actual data for completed quarters. If a quarter is not yet over, you can use ”actual” column to show the results of the quarter to date.  If you run your business on periods other than quarters, you can, of course, change the headings of each column to whatever period fits.

Presenting the data this way gives the reader a full view of where you are, where you were planning to be and what the future should look like.  If you adjust your plan during the year, you can, optionally reflect it here or on a chart that compares the old and new plan.  Too often, the old goals are tossed when a new plan is adopted.  In my mind, this is an error because the original numbers are too quickly forgotten.  You can’t learn from or remember why the plan changed if it is left in the dust.  It’s good to reflect on the original plan after the individual periods and the year is over.

Many companies sell their wares through multiple channels.  Ideally, this would be another dimension to the report above.  Since that presentation is difficult, though, we have to settle for an additional chart in which we break down the numbers by channel.  The chart looks just like the one above with “channel” replacing “territory.”    Of course, you may need to further break down each channel by territory.  I leave this extrapolation to the reader <g>. Again, showing plan vs. actual both forward and backward in time is critical to understanding the meaning of the data.

The final use of the basic chart outline above is for product line reporting.  For this, “product line” replaces “territory.”  While small companies will not always break down bookings per product line (although they should as soon as it’s applicable), it’s a good idea to separate product and service sales very clearly.  This basic division of numbers (which will probably also be found on the P&L) tells a lot about the business.

Forecasting sales is fundamental to making good investment decisions inside a company. If you don’t know where and when revenue will be coming in, you won’t be optimizing your use of capital.  Forecasts can come in many forms, but should at least include the following information:

For more information on the “pipeline stage”, see my post here.  The “expected close date” is the currently forecasted date for closing the deal and the “sale value” is the total bookings expected for this sale.  The “previous close date” is a very important part of the forecast.  It tells the reader that this sale was previously forecasted to close at another time.  Like the other charts, any data on what should have been or what will be substantially increases the value of any data being given.  Without this, there’s no accountability for the forecast unless the reader remembers the previous forecast or asks further questions about every deal.

The final sales-related chart that I like to see as a board member with a failing memory describes the deals that took place during the previous period.  These are deals that closed and the company reported as a booking.  A chart like this one contains all of the critical information.

Here, the closed deals are listed by company name and amount with whether the deal was the first sale into that customer, an add-on to an initial deal or a renewal of a subscription-based earlier sale.  Obviously, the terms aren’t important, but any concept that applies to your particular business is.

• A new deal is just that, a first sale into that particular customer.  Whether you include different divisions of the same company as the same customer is up to you.
• An add-on deal is where you’ve sell additional product or service into a customer as a follow-on to an original deal.
• A renewal happens when either a time-based license is renewed or, perhaps, a service agreement is extended.

These charts can usually be condensed into a few pages.  Small companies with a handful of deals will probably even be able to get them all onto a single page (aside from the huge forecast that might take additional volumes <g>). 

Of course, these are just examples and they may not all completely apply to your business.  They represent the way that I have seen reporting done successfully and in a compact form.  You should discuss the representation of information with your board and decide on the best way of getting comparative data communicated.  I highly urge you, though, to find a way to not only show current period data, but to do so in context, showing comparative data for other periods and versus plan as well.

Popularity: 49% [?]

Among the all time greats of classic management mistakes is rewarding the efforts and achievements of an outstanding individual contributor with a management role.  To be sure, moving a leading individual contributor into management is sometimes a good thing to do and is appropriate, but often making such a move, especially as a reward, can represent a huge error.  Interestingly, this is a mistake made by both small and large companies, alike.  The compelling nature of the move drives almost all managers to consider it at one time or another and the desire to fill management ranks with good people while recognizing the contributions of key individuals often makes those responsible blind to some of the issues involved.

Here are the issues at play:

1. Just because someone’s a great individual contributor doesn’t mean they know anything about how to manage - Management is a skill unto itself (a set of skills, actually) and is only partly related to the application-specific knowledge (the understanding of what the group to be managed produces or delivers) required for the job.  Just because a person knows how to do the job, doesn’t mean that he/she knows how to manage others in doing it.  Management skill requires some natural ability and a good deal of training, some of it on the job.  If the individual hasn’t had it, they will struggle and, perhaps, fail.  In the end, the group won’t get what it needs and the individual’s failure will likely have a negative impact on whatever they do next in the organization.
2. Management skills are misunderstood or underestimated - Many small organizations assume that management = bureaucracy = overhead and is, therefore, a waste.  Good management gets more out of individuals than they can get out of themselves.  Good management makes projects run more smoothly and significantly increases the odds of meeting schedules.  Good managers always increase the productivity of a group to a level higher than adding another individual contributor to that group can.
3. When a great individual contributor moves into a management role, you lose that person’s direct contribution - This is often ignored as part of the calculus in making the move.  In doing so, an organization may lose not only its best contributor, but may also lose all of the indirect benefits that the individual brought to the team - motivation, competition, drive and education.  Changing the role of the individual from a peer to a manager may cause the loss of the influence of their actions on the group, especially if someone else isn’t ready to step up and fill in some of the roles being vacated by the individual.
4. In a growing organization, it’s difficult to find as many experienced managers as you need - As an organization grows, the need to fill management ranks becomes obvious quickly.  Where better to reach to fill these roles than internally?  Who better to fill them than the your best people?   The easiest path is not always the best, though.  Often, it’s better to bring in experienced management as an organization grows.  Those new managers can then be part of the team that trains others internally for the next management openings.
5. Society values and rewards those who manage more than those who are individual contributors - This is a big problem.  It prevents individuals from feeling like they can be successful without having some kind of management role and keeps companies from compensating individuals as highly as they do managers.  As such, individuals have an expectation that they will earn their way into management roles as a result of their efforts.  In fact, their adoption of a management role should be somewhat detached from their efforts as an individual contributor.  Companies should also establish career tracks that offer positions that have virtually equivalent compensation for those valuable contributors that stay on an individual contributor track.  In this way, strong individual contributors will feel less like they have to move into management to be rewarded financially.
6. Any experienced manager will tell you that management is more of a punishment than a reward - If you’ve been there, you know what I mean.  ’nuff said.

When someone has the natural skills to manage and the desire to make the move, it’s great when the organization has the opportunity to give that person the opportunity.  Too often, though, such a move is made to recognize the efforts and success of an individual or there regardless of their knowledge, experience or training in management skills.  To make sure that both the organization and individual are successful in a move to management, any move should include an acknowledgement by both parties that there are new and unique skills required in the management job and the expectations on performance and metrics for success are different from the previous role.

Additionally, organizations should attempt to adopt a culture that has implicit and explicit rewards for those individuals who would prefer to remain lone contributors.  This individual contributor career track should include organizational recognition of these individuals as key employees, in a sense, glorifying the role.  Also, the role should warrant higher compensation levels so it does not seem like moving to management is the only way to make more money.

Popularity: 7% [?]

Incentives differ from rewards in that they are known up front.  While a reward is granted to recognize an action or achievement that has already taken place, the goal of an incentive is to induce behavior that results in such an action or achievement.  In this way, an incentive works like a carrot, motivating an individual or a group to achieve a desired objective.  That is, if it’s done right.

Sales as a function and sales people as individuals tend to be driven by ego and, therefore, competition and recognition.  Not that people in other corporate roles aren’t competitive or don’t like to be recognized; it’s just that for sales people, competition and blatant recognition is implicit and somewhat necessary in their jobs and, likely, a big part of their psyche.  In this way, incentives which both create competition and recognize achievement, are great tools to drive a sales force in a particular direction.  If you can find that thing that everyone wants, sales people will compete for it and move in the desired direction.  Winning drives ego, which further drives competition.

Sometimes, a great incentive is as simple as bragging rights.  In one of my companies that had a larger direct sales force (many territories throughout the world with hierarchy within each territory), we gave a trophy to the territory that had the most bookings each year and one to the territory most over quota.  Very simple, but hugely motivating.  It was a blast to see the winning team encircle the trophy for a group picture AND see how many of the sales people in the winning territory hung that picture on their office walls.  In a sense, it was even better seeing the losing territories vow to win the trophy in the next year.

Sales clubs (often called President’s Clubs or Chairman’s Clubs or similar), a junket to recognize the top sales performers each year, are more complex and expensive, but are huge.  Those who go get their egos stroked and truly feel rewarded.  They commit to themselves (and their spouses who also enjoy the lavish reward) that they will earn the reward again the following year.  Those that don’t make the cut usually have their competitive juices boil over and recommit themselves to earning a seat at the table in the next go-around.

Like any apparently good thing, you can take this type of structure too far.  I did this a few years back when my company at the time, Viewlogic Systems, was doing very well.  We were routinely ahead of plan, the stock price was moving northward, we had several industry-leading products and everyone was happy.  In our exuberance to motivate the sales team even further, we put in place an additional incentive - the number one sales person, in terms of software bookings for the year, would drive away with a new Porsche.  We had pictures of a Carrera on everything.  On sales training materials, on compensation plans, at sales meetings and, of course, all over the internal sales web site.  Sales people bought Matchbox Porsches to keep on their desks.  The incentive did everything it was put in place to do - it motivated the people and gave them another big rallying point in competing to be number one.

There was just one little problem.  We put a small failsafe into the deal.  To win, you had to not only have the highest bookings in the world, but you had to be a certain percentage over your quota.  At the beginning, this seemed like a no-brainer.  Come the end of the period though, this was the undoing of similar incentives current and future.

The problem was that no one achieved the percentage over quota required to win.  So, I was stuck.  Should I give the car to the person with the highest bookings even though they didn’t meet the other criteria, or should I stick by the book and not give the car to anyone.  As amazingly stupid as it seems to me today, I chose to do the latter - no one got the car.  I squirm in my seat thinking about what a moron I was.  By not rewarding someone with the car, I killed most of the motivational potential of such an incentive for years to come.  I likely took with it the motivational component of many other incentives in place as well.  I stuck a rusty nail into the balloon and it exploded.  I’m such an idiot.

The real mistake was setting up the incentive wrong.  here’s what I learned:

1. Make sure someone’s going to get the incentive - set it up so that there is nothing that can ever prevent the awarding of the incentive put in place.  That means all criteria for the award need to be relative, not absolute.  Once it’s in place, you’re committed to awarding it to someone, otherwise the incentive won’t work the next time around.
2. If you’re uncomfortable with the cost, size or significance of the incentive, don’t do it - incentives, sales incentives in particular, are playing into the hands of people who are already naturally competitive and are desirous of any public recognition.  They don’t have to be big.  Sure, it’s nice when they can be, but you just don’t need to go overboard to get the desired effect.
3. Make sure that the metrics that are used to measure achievement are really, really clear and easy to understand - if every eligible sales person for an incentive needs to build a spreadsheet to calculate where they stand, you have a problem.  Not only should the metrics be clear and simple, but every person should be able to figure out where they stand in comparison to their “competition” on a fairly regular basis.  This simplicity and comparison is what keeps the motivation effect going.

I’m sure that I’ve missed a few hundred other potential mistakes in implementing this basic management tool.  Please tell me you’ve seen someone who’s made an even more moronic move than me.  Do you have other stories?  Lessons?  Here’s your place to vent, reveal, blame or even confess . . .

[Note 1: Rewards can have a subtle incentive effect when given publicly.  People generally assume that similar actions or efforts will be recognized in the future if they perform or deliver in a similar fashion.  In this way, rewards work as a carrot as well in some cases.]

[Note 2: Be careful when applying incentives like those mentioned here to groups other than Sales.  Sales people become sales people because of their unique skills and, more importantly, the way they think and handle the emotional roller coaster that is part and parcel to selling.  Not all people are the same and, as such, incentives like these may backfire if applied to them.]

Popularity: 13% [?]

iinovate has a great podcast with accompanying YouTube videos of an interview with Eric Schmidt, CEO of Google.  They have broken out one segment where a luminary, in this case Andy Grove of Intel fame, asks a question.  Grove queries: 

“From the outside it looks like Google’s organizational structure is best described by . . . Brownian motion . . in an expanding bottle.  Does [Eric Schmidt] think it will work forever.”

I find Schmidt’s answer to be revealing.  It’s so convenient to think of Google, its inner workings in particular, in some uniform, consistent way.  I know that I’m certainly guilty of this.  The stories of days off to innovate, corporate massage therapists at everyone’s disposal, cappuccino machines in every closet and Guitar Hero duels whenever employees feel the urge are captivating.  It’s also easy to let visions of this environment overtake the realization that real work gets done in spades within the company’s walls.  Schmidt states that legal, finance, M&A, investment and even sales are all run in “a very traditional way.”  Further, he says that it’s only the “creative side” that gets all the attention and can be described as Brownian motion which, he thinks, is a reasonable description. 

Doh!  Of course.  That makes complete sense.  There goes my fantasy about the insides of the company being in some kind of total, but managed chaos.  I guess there is no tooth fairy after all.  Next, someone’s gonna tell me there’s no Santa Claus.

Check out the iinovate post for the other, longer part of the interview.

Thanks to Guy Kawasaki for pointing it out.

Popularity: 24% [?]

The old adage in sports is that defense wins games.  It’s one that has shown itself to be true for all time and for all sports.  Unlike many analogies that hold true between sports and business, though, this one does not.  If you play defense in business, you will lose.  It’s almost guaranteed.  There is no gentleman’s agreement between companies that your competitors will wait for you to move first.  To be successful, you need to take the initiative and move first and fast.

This has never been more true than today, when there is very little sustainable differentiation to be found in any fast-growing market.  Even in slower-growth markets, differentiation is much tougher and defensive strategies will allow more aggressive competition to catch up.  Just ask Boeing, a huge company that gave up it’s unilateral dominance of the commercial skies when it defended its existing commercial business position for years instead of advancing it at the same pace it had for decades.

To be clear, what I mean by offense in business has to do with how strategies are set and tactics executed, for sure, but even more importantly, how a company is managed.  A company or better put, its employees, are on the offense when they are aggressive, flexible, agile, fast, willing to take risks and excited by change.  A culture with these attributes will move fast and overcome obstacles and challenges quickly.  Any culture that routinely accepts people moving overly deliberately and digging in their heels will slow over time and become less competitive.  Once such a culture exists, it’s also very difficult to reverse without major organizational changes.

When I speak of taking an offensive stance in business, I’m not just referring to selling and marketing.  I believe that in order to maximize success, one needs to constantly push all aspects of business - product development and release, support, service delivery, capital formation, third-party relationships and even human resources.  Drive every part of your business further and faster and you’ll find that subtle advantages will begin to emerge.  These advantages won’t be static, either, because, over time, they will compound, making the company better and a substantially stronger competitor in the market.

Are there downsides to such an approach?  Sure thing.  When you’re driving hard and moving fast you open yourself up to the possibility that you will quickly execute a poor tactic or strategy.  If you remain nimble, though - a part of taking an offensive approach to everything - you will generally catch crash-and-burn situations before they happen.  In fact, such situations become part of your thinking and business wisdom, further enabling you to make faster decisions in the future. 

At all times, a business should think of itself as its own greatest competitor.  If the focus of a business is simply staying ahead of the outside competition it lets that competition set the standard.  Good companies work to set the industry standard and to stay ahead of their competition at all times.  Great companies go way beyond this point.  They are never happy with their leadership position and are willing to question everything and make sweeping changes in order to get even further ahead.  If you find that you compare yourself too frequently with your outside competitors and that you wait to see what move they make next, you’re probably being defensive and will ultimately be in a tough spot.  If, however, you routinely take stock of the entire marketplace and aggressively work to create success in new and unique ways, including challenging your own leadership position, you will be much more likely to have long term success.

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