hello delight

The battle of Leaders vs. Managers wages on in lots of business press today.  It's had me thinking lately: What's more important for an innovation-fueled start-up, a leader or a manager?

To start, my definitions.  A manager is concerned with maintaining the status quo.  He's concerned with managing complexities, detecting changes from the normal, and correcting back to the normal.   A leader is concerned with initiating change, setting vision, and aligning people.  Neither is superior and both are required in most organizations.

For simplification, I've boiled the life of a start-up down to three phases and provided some manager vs. leader thoughts on each.

1) Ideation
During the Ideation phase, the start-up is concepting plans, studying the market opportunity, calculating finances, receiving advisory from his network, and assigning go/no-go decision gates.  Clearly, leadership is key as all these tasks involve vision.  Despite the large amount of balls in the air, there is very little to manage, it seems.  Yet this suggests that perhaps I'm not looking hard enough.  The opportunity for management to the Ideation phase could very well be as a disinterested third party to the leader.  The manager should be able to make hard, fast decisions regarding the interpretation of market cues.  This one is a tie.  Leaders 0, Managers 0, Tie 1.

2) Survival.
During the Survival phase, the start-up is prototyping, looking for first revenues, refining, and looking for initial profits.  Leadership, in my opinion, takes a back seat to management.  Complexities abound.  The vision should be set although it must be monitored for errors dutifully by the manager.  Should vision change be necessary, the re-establishing of the vision is the domain of the leader.  This phase is marked by focus on cost-control and efficiency, more domain of the manager.  This one goes to the manager by a hair. Leaders 0, Managers 1, Tie 1.
 
3) Growth
During the Growth phase, the start-up is hiring, adapting its product to the market, seeking new sources of capital, and evaluating its capital structure.  Leadership is important in this phase for the purpose of aligning individuals under his vision.  Hopefully, the changes to the vision are few at this point.  The leader is quite involved in capturing the imagination of potential funders and key to the growth phase.  However, the manager is critical.  Complexities are everywhere.  Failing to manage these complexities will kill the start-up.  Another one for the manager. Leaders 0, Managers 2, Tie 1.

I'm aware this is a super-simple analysis of a much larger issue.  The point isn't to establish a clear victor in the Leader vs. Manager debate.  It's simply to point out that over the lifetime of a start-up, the relevant critical contributions of a manager and a leader oscillate.  This insight is important as start-ups try to move from Ideation to Survival and on to Growth.

 

Taylor Davidson and I have an ongoing debate on his site about the role of strategy in entrepreneurial success.  Nothing particularly groundbreaking but good conversation none-the-less.

A couple of Taylor's latest comments to me:
"I would say entrepreneurial success has always fallen more on execution than strategy.  Leading me to ask, what is a "strategy" entrepreneur?"

Brilliant question and one that I don't know that answered very well.  Here is my attempt:

"Lots of good questions in that; wish I had that many good answers. :) I'll try to focus on the strategy entrepreneur question.

At the risk of entering a conversational black hole...

It's not so easy to say strategy trumps execution or vice versa in an endeavor, although I'm definitely guilty of that. There is evidence that a firm with solid execution and poor strategy has less chance of short run success versus a firm with good strategy and poor execution. Think MySpace or Friendster. Or even think Twitters problems in the beginning. A truism I had a professor tell me once is that "you can buy execution...if you can buy it and so can your competitors then it's not strategy." The strategy vs. execution thing gets more blurry in the long run as more operational efficiencies correlate more strongly to success (eg profitability). Compare the lack of strategy, but superb execution, displayed by Japanese car manufacturers (circa 1985) with their German counterparts. These are the Michael Porter debates, rehashed, but the general idea I take from it is that you really have to be excellent at operationalizing a solid strategy.

As it relates to smaller-scale entrepreneurs, the point is that strategy or execution is more important based on the innovation model the entrepreneur is pursuing. If an entrepreneur is going for marginal improvements or expansion for an existing offering, sure, execution is key. But if you're going for something seriously new and disruptive, it's got to be strategy. That's even sorta from the tao of Google. We have to agree that early adopters will put up with more headaches if the strategy is genuinely new."

Please feel free to join the discussion.

It's got to be a good time to be an entreprenuer, right?

Succeeding in an entrepreneurial venture is a function of several factors.  Drucker believed these were market focus, financial planning, a competent management team, and finding a role for the founder.  These are very operational items and certainly key to success.  But for a start-up, it's equally important to plan the positioning on which you're going to compete.  

As often as we devalue it at the exepense of operations, that's the role of strategy and ultimately the root of entrepreneurial success.

Finding strategic positioning comes from two places:  1) Finding positioning opportunities that have been overlooked by incumbents, or 2) Capitalizing on change.  The former is more likely the case for an incumbent firm expanding horizontally or vertically into a new market based on its existing capabilities.  The latter is a firm responding to new markets, new needs, new distribution channels, et al to serve a market previously under-served.

So what's the better play for a start-up?

It has to be capitalizing on change.  This requires agile DNA, something inherent in most all start-ups.  By being able to act in ways unconcerned with collateral damage, an entreprenuer has much flexibility and potential.  So assuming that's the case, strategy becomes about recognizing change and finding ways to capitalize on them.

Alas, it's a good time to be an entrepreneur.  Everything is changing.  Maybe things are going back to old ways or maybe things are going forward to uncharted territory.  Yesterday's ideals of cheaper, faster, and better are being supplanted by meaning, sustaining, and fairness.  Success is dependent on capitalizing these dimensions in ways that transcend financial and physical capital.  It's not going to be easy, certainly, but there is hope.

There is an interesting article in the times yesterday about Angel investors.

The basic thesis:
"ENTREPRENEURSHIP is as vibrant as ever in the American economy, but the capital that finances new companies is still in retreat. Venture capital is running at the lowest levels in more than a decade, and angel investors, who invest in far smaller companies than venture capital funds do, are holding back, too."

That's a mouthful.  It continues:
"The reasons for the cutbacks begin with the recession. Angel investors — typically individuals with more than $1 million who join together to back start-up companies — have seen their net worth decline. And these days, many angels find they need to offer additional support to companies they’ve backed in previous years, rather than take on new commitments."

That's old-school marketing and economics at work.  When times are tough, entrench.  It's also an opportunity for forward-thinking entrepreneurs.

Out of difficult times, significant innovation often occurs.  However, I think we're looking for yesterday's breakthrough innovations with the same lens as 2001.  Maybe you don't have access to invest in the next Google, Zappos, or Zara.

But that's ok.  When most investors consider breakthrough innovation, they're likely considering an investment that creates a new core product which fills an otherwise unfilled need.  Or, they are seeking a radical process change which makes some process more efficient and scalable.

And that's a short-sighted view of innovation and investment.  What about investments in higher order innovation such as management, business model, or social value creation?  Investments don't have to be limited to innovation in products and processes.

The difficult part is making these sorts of innovations attractive to investors.  Taylor Davidson, Michael Lewkowitz, and Marc Dangeard (among countless others) have contributed lots to this conversation and I think it's time to pick it up again.

How do we align incentives for providing financial capital to non-traditional uses of capital?  It's the funding question of 2010 and onward, I expect.

There is a very cool article in the New York Times today about a campaign that Heathrow Airport is doing:

In short:
"Travelers passing through London's Heathrow Airport this week may be surprised to encounter, in the middle of its bustling Terminal 5, the writer Alain de Botton, author of popular books including “How Proust Can Change Your Life” and “The Art of Travel,” seated at a desk and tapping away at his laptop computer. His typing appears in real time on a screen behind him, and a placard explains — in what apparently is both a literary and aeronautic first — that Mr. de Botton is serving a one-week appointment as Heathrow’s “writer in residence.”

That's very and the type of marketing I'd love for more brands to do.  It's unscripted, authentic, and could blow up in their face.  It seems to be lacking customer engagement since the stories are only told from de Botton's perspective.  But, nonetheless, Kudos!

In the new era of 21st century economics, banking is an industry ripe for a disruptive innovation.  Banking 1.0 is dying.  Branches, products, services, and communication strategies must evolve to Banking 2.0 – banking built on 1.0 principles plus participation, transparency, and conversation.  

In Banking 2.0, marketing must evolve greatly.  Banks must recognize that they must give at least as much as they receive to their customers.  This cycle of reciprocate benefits is the first core idea of Banking 2.0.  All communications strategies and tactics should be designed to ladder-up to this idea.  

The second core idea of Banking 2.0 is the importance of brand.  Brand strategy is one of the most effective tools in a bank's arsenal to combat negativity, establish its point of view, and make its offering distinctive.  The brand must be meaningful to two distinct groups of stakeholders.  The Corporate Brand must speak to stakeholders in the community about its vision and mission.  The Offer Brand must speak to customer’s about product and service offerings.  Especially in the Offer Brand, technical differentiation on interest rates, fees, and the like are very useful during certain stages of the purchase cycle but are not enough to sustain long-term growth strategies alone.  Those are not particularly meaningful dimensions on which to compete in 21st century economics.

Perhaps the greatest example of a bank that understands Banking 2.0 is Caja Navarra from Pamplona, Spain (http://www.cajanavarra.es/en/home.htm).  Caja Navarra has branded itself as practicing “civic banking”.  They’ve executed campaigns designed to illustrate transparency such as sending each customer a letter stating how much money they’ve made off their customer’s money each year, inviting them to choose a social cause, and donating part of the money to that cause.  Caja Navarra is also very active in investment in civic projects, helping local communities, and providing resources for local entrepreneurs.  Caja Navarra has also provided its customers with blogging tools to blog about locally-sensitive social issues on its sites.  To date, there are over 800 blogs.

I think it will be very interesting to watch which US banks take the lead in the transition to Banking 2.0.  I'm betting it will be a small community bank, maybe someone like Umpqua Bank.

Disclaimer: This is going to seem a little rantish, and it is, but it's also a critique of certain publisher activities.

I find a lot of value in imediaconnection.com.  They have pretty good writings on digital marketing and the like.  What they do very poorly, is user centered design.  Most all of their articles are probably around 4 pages.  The article starts near the fold, making room for an ad at the top.  The article only uses 40% of the width of the page, ads on the right.  I have to hit next 4 times to read the article amidst all these intrusive ads. 

So my workaround is the print friendly version.  The ads are there too, and it's not a problem.  In the print friendly, I can easily scan the ad but they don't do too much to interrupt me.

I'm sure the four page layout of the conventional version is about selling displays.  As an advertiser, are they really getting much from that when the rest of the site induces a behavior that is all about scrolling and skipping ads? 

As Seth says, this thing is broken.

Taylor Davidson (@tdavidson) at Unstructured Ventures has written quite a bit about the concept of a personal API as a way to scale yourself.  I love this concept and thought I'd pick it up today.

If we simplify the concept of a personal API greatly, we can say there are two basic functions the API has to be able to do:
1) Request information
2) Respond to information

The former is possibly where the most research has been placed to date.  I equate this with something like the reverse of the Netflix or Amazon recommendation engines, albeit on a small scale.  The idea is that I have a personal API that disaggregates the signal from the noise in digital streams of data.  Presumably, this API would know the properties of what makes data meaningful to me and then seek them out.  The end result of this half of the API is still limited by scale as it takes me to process the data and refine the API to seek out better, more concise data.

The latter is most interesting.  The concept is not unlikely HAL.  I could program an API that would respond to inquiries as though it were really me.  I suppose there are early incarnations but I'm not sure where.  One area that may be suitable for discovery with Respond APIs could be in the auction market.  The variables to an auction are fairly few yet very personal.  In its most simple form, the API need only concern itself with reservation prices and an index of utility.

Where personal APIs get interesting is when the former and latter type begin to interact in order to "scale doing" as Taylor puts it.  Using the simple auction API to respond to auction inquiries, you can see how the data consumed by the request API could inform my reservation price as well as the utility of the item.  This is roughly the concept used by automated program trading systems, I expect, although these aren't used on a personal level that I know of.  The personal API has to account for emotion and irrationality, two very difficult concepts to model.

One distinction that I think is important to note is that a personal API is not a passive listening agent, in my opinion.  It's an active agent that I configure.  It's almost a manifestation of the scientific method or a decision-modeling theory.  But, it's not Bing and it's not Kosmix.  It's a way to scale "my" decision making and resulting action in an active way - not a way to simply filter out irrelevant messages.

There is a piece on Branding Strategy Insider today about The Love Strategy.  Here is a bit:

"Then "love" must be a powerful marketing strategy, right?
Not really. What differentiates the winners and losers in most categories is purely a question of who was first in the mind. Kleenex, the first pocket tissue, was launched in 1924 and has been the leading pocket-tissue brand ever since.
Isn't that what happens when you fall in love with a person? If you are truly in love with that person, then you can meet a million other people who may be superior in one way or another, but still you won't switch. Loving a person blocks your interest in finding another person to love.
Loving a brand blocks your interest in exploring other brands in the same category. This is an enormous advantage for the "first brand into the mind." Gatorade in sports drinks. Red Bull in energy drinks. The iPod user isn't actively looking for another MP3-player brand to fall in love with. Ditto the BlackBerry user. The Nintendo DS user. The Amazon user. The Twitter user. The Google user."

So far, I agree with most of it.  I don't think it exactly "blocks your interest" but I understand the point.  Love is very powerful and represents the emotional connection that brands desire.  Brands don't desire 100% loyalty; they're ok with brand polygamy.

The article continues:

"Without some help from a leader brand that does something stupid, it's exceptionally difficult for a No. 2 brand to overtake a leader. You can't fall in love with the No. 2 brand in the category until you first fall out of love with the No. 1 brand. That's why No. 2 brands should not promote "love" or other emotional attributes.
A No. 2 brand has two choices: Be the opposite of the leader or launch a marketing campaign to undermine the leading brand. Years ago, we called the latter strategy "repositioning the competition."

This is where he loses me.  Love is not a first, or early, mover advantage.  Love comes from what you do.  Love is not dependent on market share.  I love NAU clothing but they're not in the top 1000 clothing companies, I'd expect.  But they connect with me.  As since I love them, others are likely to love them as well.

One last quote:
"People follow a similar pattern. When you are in love with a person, you don't continually compare that person with other people you meet. The same holds true for brands."

Really?  My wife definitely loves me and definitely compares me with my friends who have dinner on the table at 6, manicured yards, washed cars.  That's the point of love.  We can make honest assessments and better ourselves.  The same goes for brands.  They're not perfect and we don't expect them to be.  We just expect them to be better than the alternatives and trying to get better.

Where's the love ya'll?

There is an article in the WSJ today called "Parsing the Productivity Jump".

An excerpt:
"A preliminary estimate of Q2 nonfarm productivity showed a strong 6.4% increase, compared to 5.5% consensus. Unit labor costs fell 5.8% compared to -2.5% consensus. The larger-than-expected fall in labor costs stemmed from the fact that hours worked fell 7.6% but output fell just 1.7%, indicating workers are either putting in more unpaid overtime or are being more productive in an effort to hold on to their jobs. Though that may not seem to be a basis for a sustainable recovery, it's historically how recessions have ended. Manufacturing sector productivity rose 5.3%, breaking a streak of four consecutive declines."

Wow.  The WSJ would have us believe that workers working without pay, overtime, to hold on to their jobs will get us on the road to recovery.  Is that really the way we should recover?  This smacks of the same old tired economic principles from the corporations who just don't get it yet.

Productivity, while important, is not the greatest metric for recovery (nor is GDP, in my opinion).  An increase in the amount-of-stuff produced per stuff-producing-person doesn't instill a ton of hope in me for the future.  After all, it's largely our consumption of stuff that got us into this mess.  Without getting into the pros and cons of a country making lots of stuff, the simple fact is that stuff is largely made elsewhere.  Productivity studies don't account for that very well.  

I'd like to see the WSJ report on innovation, ideas, and imagination as a beacon of recovery.  Sustained growth will come from the mind and not the hands.  

Solutions per solution-producing-person - that's a productivity index I can get behind.