Are MBAs killing businesses?

Screen Shot 2016-06-02 at 4.29.32 PMThere was a great article on the Harvard Business Review site yesterday that said that companies that have a founder’s mentality deliver returns to shareholders that are three times higher than in other companies. It goes on to say that a founder’s mentality has three traits that are insurgency, an owner’s mindset, and a frontline obsession.

The article that goes on to show that as a company gets bigger, it loses its founders mentality. While I was reading it, I suddenly thought that there is another thing that happens as companies get bigger; they hire more MBAs.

Now before I get jumped on for inventing a correlation between the number of MBAs that a company has, the loss of its founder mentality, and inevitable slow decline to irrelevancy let me say that I have an MBA. Not only that, I actually taught MBAs at York’s Schulich School of Business for seven years. And what did I learn and what do we teach?

Well there certainly isn’t much in an MBA about insurgency. We’re more likely to teach students how important it is to understand and develop process and ensure it is followed so that we can have a consistent level of quality. I don’t remember any courses on insurgency, just frameworks like Porters Five Forces, the BCG Matrix. Lots of analysis and risk reduction instead of radical wild ideas.

As to an owner’s mindset, students are more likely to learn about accounting, finance, and driving shareholder value through short term profit maximization. I just checked Rotman’s site and even in their specialization in Innovation and Entrepreneurship, there is no course that looks like it focusses on ownership thinking.

As to a frontline obsession, an MBA will spend a lot more time understanding the concept of materiality and how to look at the big picture than to obsess over operational details. In fact people who obsess over frontline details are told they are too operational, not strategic enough and they don’t get promotions.

The article says that owners “abhor complexity, bureaucracy, and anything that gets in the way of the clean execution of strategy. They are obsessed with the details of the business and celebrate the employees at the front line, who deal directly with customers.” That doesn’t sound very MBA like to me. MBAs celebrate process and analysis, not details.

So my hypothesis is that MBAs are being taught the wrong things. They are taught the things that make businesses predictable and safe instead of dynamic and bold. And when companies hire too many of MBAs, they begin to lose their founder’s mentality, they become predictable and safe, and they begin a slow decline to a merger (aka death).

What’s with Ambiguity?

AmbiguityFor some reason, I’ve had three conversations within the last few days, all on the subject of ambiguity. This isn’t a concept that we talk about all the time so I have found it odd that I’m encountering it more on a daily basis.

The first conversation was with a friend whose life is undergoing change. She is transitioning from one long term job into a more entrepreneurial life and she is very unsettled, not being sure how the transition will evolve.

It has been a long time since she has been in such an ambiguous situation and for one who thrives on having a very well defined to-do list, the idea of not knowing what to put on that list is causing emotional turmoil.

The second conversation was with another friend who was trying to figure out how to improve the teaching of leadership in a modern workplace. She knew that the transition from the industrial economy to the knowledge economy had changed how we need to lead and was exploring concepts that explained that change.

Resolving ambiguity came up as a key to success in leadership roles in the knowledge economy. It is much harder now to identify and measure success so leaders need to help employees in their struggles to turn ambiguous situations into actionable plans.

And finally, I was attending a presentation by students who had just finished an internship course at U of T. A number of students expressed both surprise and dismay that when they started their internship, they weren’t told exactly what they had to do. They had to figure it out themselves.

School, with its highly defined system for measuring success, doesn’t lend itself to ambiguous situations that are encountered in the workplace.

As time goes on, I suspect more and more of us will have to face high levels of ambiguity on a daily basis. Success will come to those who can not only cope with it but who can embrace ambiguity and figure out for themselves how to achieve success.

The death of logic and facts

Logic and FactsAs time goes on, I become more and more convinced that logic and facts don’t matter. This is tremendously upsetting as I’ve grown up to favour the logical over the emotional. In fact I actually get turned on by facts. (Yes, how nerd-like can one be?)

The death of Rob Ford and the ascendancy of Donald Trump (Drompf?) brought this to the fore. Here are two politicians whose brazen manipulation and ignorance of facts didn’t hurt them at all in political battles. What they understand is that all that matters is emotions. And they did a great job appealing to the basest of human emotions.

I blogged about some of this this yesterday on LinkedIn which I’m experimenting with as a blogging platform. Today though I was reading an article in Harvard Business Review on the Science of Emotions which really focussed my thinking.

Because emotions are messy, hard to predict and difficult to use in marketing, this group created a standard lexicon of emotional motivators that can be used by marketers. This will allow companies to use data analytics to identify emotional motivators and use statistical modelling to determine the most profitable customer motivators.

This is all slightly upsetting to think that I am being manipulated like this all the time. But then I thought about what I buy. For some odd reason, I have an emotional attachment to Apple products because of their design. My hyper-logical son is quick to point out though that I’m buying a closed system at tremendous cost and that it doesn’t make logical sense. But I love Apple products. There’s that emotional reaction.

And I wear a lot of Patagonia clothing. Not because it’s the best manufactured outdoor wear but because I love the image they portray and how I identify with their image.

But does this mean logic and facts are dead? Maybe not dead yet but failing. If we can turn emotional appeal into a science then maybe we have merged emotion and logic in a way that will turn consumerism fully into a new wave religion.


Sitcom Startup Ideas

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In a startup world full of ideas, it’s difficult to separate the Sitcom Startup Ideas from the good ideas. I must admit that I didn’t coin the phrase but am copying something that Paul Graham wrote in his post on How to Get Startup Ideas. To quote his post for those of you too lazy to click on the link, “Why do so many founders build things no one wants? Because they begin by trying to think of startup ideas. That m.o. is doubly dangerous: it doesn’t merely yield few good ideas; it yields bad ideas that sound plausible enough to fool you into working on them.”

And from the research I’m doing, it seems that most ideas that people start Techno with are ideas that could be classified Sitcom Startup Ideas. But there is a problem here as you could think of AirBnB as a Sitcom Startup. After all it was started by a few guys in San Fransisco who couldn’t pay rent so they put up a website to rent out three air mattresses. And Uber was started by another three guys who couldn’t stand waiting in the rain to get a taxi.

I suspect that Sitcom Startup Ideas are in the eye of the beholder. One VC’s sitcom is another’s documentary. After all, Bessemer passed on FaceBook, Google, and EBay. Not only did they pass, they ran away from these ideas and their founders as if they were nuts. You can see the list of all their epic fails here.

Paul Graham goes on to say that: “If you look at the way successful founders have had their ideas, it’s generally the result of some external stimulus hitting a prepared mind…..The verb you want to be using with respect to startup ideas is not “think up” but “notice.” “. Now I don’t want to criticize Paul Graham as he is much more successful than I will ever be but I don’t get the difference between thinking and noticing. After all, AirBnB and Ebay, were not noticed, they were thought up and then noticed.

I’m struggling to come up with a methodology of separating the Sitcom Startup Ideas from the good ones. (If I am successful in doing this maybe it will atone for my earlier bad ideas.) What I have seen as a trend is the good ideas are the things that come out of something the inventor or someone the inventor has actually talked to, would pay for in time or money. When founders stray from something someone would pay for then they risk creating a lousy idea.

And ‘someone’ is not a concept but a person, an actual living person who would put time or money towards purchasing whatever flows from the idea. I’m not married to this concept and still paying with it as it keeps me coming back to an expression I’ve been using lately: “Don’t find the problem, find the budget.”

Where do good business ideas come from?

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I’m doing a piece of research with U of T that looks at where good business ideas come from and it’s making me look back at some of the very bad business ideas I’ve had over many years. It seems that age doesn’t prevent me from having bad ideas.

Several years ago I decided to try to solve the problem of strategy execution that bedevils many companies. This was a problem that I had had when I was CEO of Synamics. We could come up with strategies (whether they were good or not is another matter) but I felt we fell short in their execution. At the time I wished I had software to help keep track of whether my strategy was being executed effectively or not but I never got around to creating it.

Fast forward a few years and I kept seeing articles, many of them in the Harvard Business Review that reported that strategy execution is the biggest problem in business today. Even polls of CEOs will confirm that strategy execution is their biggest problem. So I figured, this is a problem that I had as a CEO and HBR says that this is the biggest problem in business today, so maybe this is a good idea for a business.

‘They’ say that when you’re starting a business you should look for a problem to solve, not create a product that goes in search of a market. So here I was, trying to solve a well documented problem. But was it successful? No, not even close. I teamed up with Mike Tobias at Mercanix to launch software and services to address problems in strategy execution and we bombed.

And when I say bombed, I mean that we couldn’t even find anyone to talk to. We went out to the market aggressively but met blank stares. I’ve spent some time analyzing what we did wrong and in the process I’ve learned a lot about launching new products. What I discovered when I did the analysis was that there really isn’t a market for what we created. But wait a second, this is documented as the biggest problem in business today but there is no market for a solution?

Well as it turns out, most companies haven’t assigned the generic function of strategy execution to anyone. (If you want to check this out, take a look at how many of your LinkedIn contacts mention strategy execution in their bios. According to my stats there are 100 people doing strategic planning for every one that is doing any strategy execution.) Most companies don’t have any one individual responsible for strategy execution as a job function. Instead they say that everyone is responsible.

So when no one person is responsible for something there is no one looking to buy software and services, even if the problem is the biggest one the company is experiencing. And with no one responsible for buying solutions, there is no one to talk to when you call up a company. So there is no market and you’ve come up with a bad idea.

It’s obviously not enough then, to base a company around a personal need or even around published problems. And if these aren’t enough of a source for an idea, then I’m trying to find out exactly where good ideas come from. The research I’m doing is telling me a lot but I thought I would ask the question in case any of you can add to the conversation. If you have any feedback, let me know. Where have your good business ideas come from?


Extreme Value

Extreme ValueI was thinking the other day about extreme value as a result of reading a blog about which retailers will survive when the middle class is eliminated. You can picture them. They are the Saks, Nordstrom,  Tory Burch, Tiffany’s, Versace and John Varvatos of the world.

While luxury retailing continues to grow , mid-priced retailers are struggling. Abercrombie & Fitch, Aeropostale, American Eagle, Ann Taylor, J. Crew and the Gap as examples of brands which are struggling to differentiate and prosper.

I don’t think that this is particularly due to the loss of a middle class though but of a polarization in business strategy. Product developers and retailers have found that the most money is to be made delivering extreme value. As we get more sophisticated, the tendency is for us as consumers to search out products and services that add value to an extreme degree on one dimension of the quality, cost, speed triangle.

Consumers are tending now to look for extremes in value, sometimes in quality and other times in cost and it really doesn’t matter which socioeconomic group one is in. The best business strategies are exploiting those extremes.

The same thing is occurring in politics. As you look at the US primaries, several candidates on both sides, Trump and Carson for the Republicans and Sanders for the Democrats are exploiting the voter search for extreme value.

Extreme value hiring is also in full force with companies outsourcing to get the lowest cost on one end of the continuum and paying exorbitant salaries for talent on the other end.

This is happening because we have moved from mass marketing to highly differentiated, highly segmented markets. You can differentiate on both ends of the extreme value curve but not in the middle.

So how does this apply to work? Well if you want to be successful, you had better be defining yourself on the talent end of the extreme value curve. If you don’t then you’ll eventually be outsourced as employers will look for extreme value on the cost dimension when faced with an average bunch of prospects.

Where Gender Inequality Starts

Gender Inequality

We’re doing something wrong in promoting gender equality and I think it starts all the way back to how we name babies. We have a patrilineal naming tradition that asserts to a baby girl that her father is more important than her mother. To me this is the beginning of gender inequality.

As my daughter is now expecting my first grandchild and it is to be a girl, I want her to start life thinking that she is just as important as any boy who is born. To do that I’m advocating a new tradition that a girl’s last name be the same as her mother’s last name.

I’ve written an essay that got published in the Globe and Mail today. It explains a new solution to stop gender inequality at birth.

Pass it on and be a part of a new trend towards true gender equality.

Check out the essay here.

Bonehead Circles

Bonehead CircleOne of my faithful readers pointed out a comment I made in my last post about Open Dialogue. It was when I referred to my reluctance to speak up recently about a bonehead move by a co-worker.

He said that in his experience, “Maybe the problem is that boneheaded moves slip by because nobody actually pays attention to boneheads in the first place. The other thing is that some bonehead invited the bonehead to participate in the dialogue, so we’re faced with a self-perpetuating bonehead circle of life.”

And that one comment opened up a whole new window to business behaviour. There are bonehead circles that arise in business when one bonehead hires another one, and then another one, and before long you have a group of boneheads.

If you’re thrust into a circle of these boneheads, it may seem surreal. You might wonder why everyone around you is thinking or acting in such a strange way. This is not quite as bad though as when you start to agree with them or act in the same way. Then you must wonder, have you become a bonehead too?

I think this is what happens over time. You get one or two boneheads in a group and entropy sets in. Sooner or later everyone begins to think and act in the same way and you have a bonehead circle.

That’s when the problems start. Bonehead circles can’t see problems or opportunities. They don’t recognize danger or come up with new, innovative and creative ideas. When you’ve got a bonehead circle no one is able to criticize other members of the circle.

And the inevitable result is like watching a good business get flushed down the toilet, boneheads and all.

Open Dialogue

Open DialogueI was naughty the other day and am feeling slightly guilty about it. Essentially, I found myself not willing to share my honest opinion and thus breaching all my rules about open dialogue.

I have always said it is better in a startup and in working with a close team that everyone be free to open up, share his or her opinion in a constructive manner and let the chips fall where they may. Honestly and open dialogue being the best policies.

But I have been criticized for being too critical. (What’s with that?) And since I’m constantly trying to remind myself to use more emotional intelligence (not being noted for that skill), I hung back and didn’t share my honest opinion.

This has led me to struggle with trying to figure out the best balance. How do you practice open dialogue but not be seen as being critical when someone is about to pull a totally boneheaded move?

Some people are great with criticism and others totally shy away from it, abhor it. Do you change your behaviour for those who don’t like criticism or do you just let loose and figure it is their problem.

I can hear those of you who are emotional intelligence gurus trying to tell me that you can deliver a critical message in an open manner and not turn the recipient into a quivering pile of goo. But sometimes it is easier just to stop with the open dialogue and shut up.

What I have decided is that we really need a Festivus Pole at work, available every day. It can be used just like during Festivus, for airing of grievances.

That way, if you’re touching the pole you get a complete bye on critical dialogue. And maybe the pole might even make you think best about how to communicate criticisms in a constructive manner.


Startup Failure – We Need a New Word

startup failureI came to the realization the other day that we need a new term for startup failure. For some reason, articles such as this one, seem to link childhood failure in school and on the sports field with startup failure. But the linkage is just not there.

Let’s look at how we use the term failure.

If you take a course in school and do not pass, this is called a failure. And this is one place where the term is properly used. You have failed to pass.

Now in school again, if you lose a game of baseball, some people call this a failure but it is actually only losing a game. You haven’t failed when you lose a game because you can’t win every game the way you.

And look at the field of scientific research. I have a friend who is researching malaria. He has been at this for over 30 years. Is he a failure because he hasn’t cured malaria yet?

When you look at startups, we use the term startup failure to describe all sorts of different situations. If you look at the stats, something like 75% of startups fail, quite like batter stats in baseball.

But these aren’t really failures, they are startup attempts that are just like times at bat or scientific experiments. The problem with the term startup failure is that is lends such a negative connotation and a sense of shame to the entrepreneur.

When someone tries a new business venture they start out with a thesis or proposition that they need to test in the market. They try a bunch of tests until they get it right.

Some entrepreneurs get it right faster than others and they succeed. Others might be trying something more difficult and it may take longer but if they run out of money, they stop trying.

This unfortunately is called a startup failure when it really isn’t a failure. Much like a scientific experiment it is the act of stopping trying.

The Germans solve the problem by having so many different words that their meanings are nuanced and have much less chance of connecting with an negative emotional response. In German, academic failure is Schulversagen and liver failure is Leberversagen.

Startup failure in German is covered by the phrase Startfehler which effectively means Startup Error and this is closer to the mark but not there yet.

Since I have such a huge following in the blogosphere (not) I’m going to invent a new word which will immediately catch on. Going from the German for Stop Trying – “Stoppen zu versuchen”, I’m going to propose we use the term Versuchen for failure.

Thus a failed startup is now a versuchen startup. You can use the term in ways such as “I really versuched that startup” or “he’s a serial versucher.”

I feel better already.