Category: Organization in the Collaborative Age

How The Definition of Entrepreneurship and Start-Up Can be Confusing

I am fascinated by the fact that the concept of entrepreneur and start-up is not understood identically by all, and how this leads to damaging confusion. According to Wikipedia, “Entrepreneurship is the process of designing, launching and running a new business“. Any kind of business is understood here. However, most of the literature on the subject of entrepreneurship and startups has definitely a stricter sense: the business must be of the exponential potential growth nature.

Hence in the world of start-ups, business-angels and other venture capitalists, only businesses that have this exponential potential will be considered, because those are the ones that can pay back the initial investment. But most businesses that entrepreneurs create on a day-to-day basis are not of this kind: they are rather possibly niche, or subject to linear growth only.

Business angels and Venture Capitalists look down at those other entrepreneurs thinking that they are not true entrepreneurs. And when I seek advice about how to build a business, most of what’s available in terms of literature is only applicable to exponential-growth start-ups: it revolves around the issue of scaling, of financing while not making any profit, etc.

On the contrary, I believe that it is perfectly respectable to create a business that intends to put its dent on the universe and be highly influential while remaining relatively small. And it is quite as hard. And it is not because the business does not grow exponentially that it is a failure. Of course this business can’t then be financed by the same markets and they should not give the hope of unrealistic returns to attract the relatively easy money available for exponential startups. But still it make make its mark and provide a sustainable influence in its surroundings.

Why should non-exponential businesses and their entrepreneurs be neglected and despised? At the end they make the most of the economic activity.

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How We Need to Listen to Customers When Developing Products

Seth Godin writes: “You don’t find customers for your products. You find products for your customers“. I would like many more start-up founders and entrepreneurs listen to this and follow this statement.

Of course there is the myth of Steve Jobs developing products without listening to focus groups, but still he was developing products for the sake of customers, with a huge focus on design and utilization. Too many founders develop a product that they think is genius, only to find out that no-one has any need for it or would see any reason to buy it.

Listening to customers might bring more incremental change than disruptive change, but on the other hand, it is also essential to develop something useful that brings value to the customer. It’s definitely the way to go, and confront reality the earliest possible.

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How Goodhart’s Law Makes Us Aware of the Downside of Measurement

Goodhart’s law basically says that ‘When a measure becomes a metric, it ceases to be a good measure’. This is quite powerful, and observable on a daily basis in all sorts of settings.

This law has profound implications about target-setting in organizations and many other situations. In the very recommended post ‘Goodhart’s Law and Why Measurement is Hard‘, the author explores measurement in complex situations. And in effect, complexity ruins the interest of measurement, because of the retro-actions of measurement on the system. Goodhart’s law is thus fundamentally an observation from complex systems that evolve as a result of self-measures.

Goodhart’s law is mostly important in organizational settings: it is important to measure, but as soon as a measure is in place, it becomes a target and therefore, drives behavior – sometimes in a unfavorable manner. The only response is either, to measure but not publicize the metric; or use some version of a balanced scorecards with several balances metrics.

In any case, beware the Goodhart’s law when defining metrics in your organization!

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How to Organize an Executive “Retreat” (or rather an “Advance”?)

I love Seth Godin’s post on how to organize a company retreat ‘How to organize a retreat‘.

It starts by remarking that the word itself is a bit strange – it looks a bit like executives are trying to hide. Seth Godin proposes rather to use the term ‘Advance’. We could also use the term ‘Re-centering’.

An executive retreat is about taking some time building the team and thinking about the future of the organization, or some bold initiative. It is thus mainly about connecting at the emotional level, and I invite you to read Seth Godin’s recommendations again about how to achieve this and not some kind of boring event.

I would like to add a recommendation: keep it small, keep it tribe-like. Don’t envisage huge events, but make sure connection happens at the right level.

Careful when you think about your next executive “retreat”. Take some time to think about how what you want to achieve, and “Advance”!

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How the Priority of a Company Should be to Survive

I noted this interesting quote: “a business professor at INSEAD, the renowned global business school, hammering to his students: “You know what should be the priority of a company? It’s not growth, or anything else. It is to survive!”” from a post on Facebook business model by Frederic Filloux. In my experience as an entrepreneur and wathcing also our industrial clients be born, live and die, I find this assertion quite true.

In particular, over-extension in growth is often a very fatal situation: the burden of debt can’t be repaid when the industry comes down or when execution does not follow. Focus on survival, prudent management should definitely be essential priorities.

I am always amazed on how tough it is to be profitable and build substantial reserves to cover downturns, and how quick things can go down when there is a downturn. There is an essential non-symmetry that is very difficult to overcome even when ones reacts quickly and massively to a downturn, cutting costs.

Finally it is all about natural selection: extinction is the rule, and survival is the exception. Substantial growth is the uber-exception, so when it happens, care should be exercised!

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How Non-Compete Constraints on Employees Are Non-Productive

There is always a heated debate on the interest for an organization to introduce non-compete clauses in its employment contracts. I truly believe that those clauses are counter-productive.

As an aside to an interesting post explaining why Facebook’s business model is flawed and won’t change ‘“Do no harm” to Facebook’s business model’, Frederic Filloux quotes “A Stanford professor told me once that the absence of a non-compete clause in California’s labor laws has been a key factor to the rise of Silicon Valley against the startup ecosystem of the East Coast.” And indeed, it appears that California does not allow those clauses, whereas in the rest of the US and of the world they tend to be widespread (in France their impact is limited by the fact that the employer must compensate for the application of the clause, which makes it onerous).

I believe those clauses are stupid, in part because they stop innovation, they are difficult to apply in reality, and they create all sort of resentment between the employee and the employer. They should be limited to issues of commercial nature. In the collaborative Age, any impediment to the creation of teams to innovate and solve complex projects should be removed for the system to be effective.

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What Makes an Expert Really Different

We hear so much about expertise these days, that it becomes important to remind ourselves what features distinguish an expert from someone simply experienced in a field. In short: an expert is not only very experienced, but he/she must be able to:

  • transmit knowledge
  • change the policies and the rules.

And this is a very operational criterion used by many organisations to define the expert level in a trade.

The ability to transmit knowledge is essential, as it demonstrates reflection and full understanding of the material. In addition, transmitting knowledge is an excellent way to deepen one’s knowledge, so this is clearly a self-accelerating competency.

The ability to change policies and rules is another feature of being able to transmit knowledge, albeit this time in a more institutional setting. It demonstrates the ability to stand for one’s knowledge, work out the internal politics and convince the organisation to change based on knowledge.

Of course, the issue of expertise in a complex world is that it is mainly based on consideration of the past, however I find this definition of what makes an expert special quite useful and operational. Are your experts really ‘experts’?

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How An Appeal Process Should be Guaranteed When Your Account Gets Cancelled by a Major Internet Player

Monopolistic services such as Facebook, Amazon, Google have to strike a fine balance between fighting abusive usage of their services (of which there is a lot), and providing the opportunity to access them to all. Recently a few papers about Amazon switching off the account of some authors publishing on the platform have raise the issue in this particular remit: ‘Amazon self-published authors: Our books were banned for no reason‘ – and I am particularly sensitive to that particular area, being active in publishing.

The capability offered by Amazon to self-publish is an amazing opportunity for would-be authors. It is possible to publish without going through the selection criteria of publishers, do it electronically only and not have to bother about hardcopies. Some self-publishing authors have become professional, deriving significant income from their books. It has created vocations and allowed many people to write and publish that would not have otherwise.

As with any system there are ways to abuse it – part of the compensation provided by Amazon is based on the number of pages read by readers of the e-book. There are ways to inflate this number. And Amazon will ban abusers… and maybe some that do not intend, or do not abuse the system, but have a usage pattern that is too close.

The issue here is not that Amazon or the likes cancels the account of abusing users – they should do it – but that if you have not abused the system there are no clear ways to appeal. It is very difficult to reach the client support service. It is the same for other services as Facebook, etc.

This situation is quite similar to being condemned without having had a fair hearing. Dominating internet services should be mandated to set up appeal processes where users can raise their issue, if needed publicly, so that they can receive due consideration. The availability appeal process should be mandatory and this right protected by law.

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How to Address the Challenge of Measuring Personal Productivity in the Collaborative Age

Following up from our previous post on the mystery of overall economic productivity, let’s address the issue of personal productivity. This is issue is addressed in a rather long post by Seth Godin ‘Business/busyness‘.

busynessFor people immersed in the new economy, the concept is quite difficult: “If you had a factory job, it wasn’t your job to worry about productivity. Somebody else was in charge. You did what you were told, all day, every day. Now, more than ever, you’re likely to be running a team, managing a project or deciding on your own agenda as a free agent. Time is just about all you’ve got to spend.”

In any case, just keeping busy defeats the purpose of productivity. “Busy is not your job. Busy doesn’t get you what you seek. Busy isn’t the point. Value creation is.

You only get today once. Your team does too. How will you spend it?”

Seth Godin then goes into explaining that productivity being the measure of output produced by the time taken to produce it, it all comes to measuring the value created. And it’s where is gets somewhat difficult. While “likes and friends are not an output“, on the contrary, meaningful conversations with team members in your project have value and require time. Thus, measuring actual productivity is difficult. Are we spending time on bureaucratic tasks or actual tasks that create value to a client?

Measuring productivity, financially or otherwise, remains a major challenge even at personal level. However at that level, we can pick and choose the measurement yard we prefer: money, relationship quality, or maintaining our garden.

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How Companies Should Promote Senior Management from Inside

A few interesting points can be noted from the very interesting post by  Dom Moorhouse: ‘Identifying and developing your senior leadership team | Five buckets‘. In this post, we will develop his thoughts about the senior management team. The post is specifically applicable to service companies such as consulting companies, but the concept can probably be applied to a wider range of businesses.

Dom Moorhouse states: “As a general rule-of-thumb – backed up by some tough lessons learned personally – I would strongly encourage you to develop your seniors, as feasible, from within your company as opposed to hiring from outside. The risk of external hiring grows the more senior the position.” The rational is that this practice is much less risky specifically on the critical issue of values alignment.

I would personally temper a bit this affirmation. It depends on the life phase of the business. If a transformation is required with an influx of new ideas from outside, hiring a senior executive from outside might be the right course. However it general it is quite right that it is preferable to hire from inside. Therefore, an active development and promotion scheme needs to be implemented to achieve this objective.

Have you thought in your business – if you are beyond the start-up phase, how you will identify and develop the future senior managers?

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Five Conditions for Large Organisations to Develop Innovation Through Acquisition

Large companies seem to be considerably advantaged when it comes to innovation thanks to their unlimited resources to buy and bond together smaller organisations and startups. However this can often be a mirage.

In the past months I have been involved as a creator of small companies, as Business Angel for startups, and also with very large companies in strategic reviews to develop new businesses. Large companies have the great advantage of unlimited resources (at the scale of startups or small companies) when it comes to put together a new business through multiple acquisitions. However at the same time they are probably not the best soil for new ideas (refer the previous post on ‘How Large Should Creative Organisations Be?‘).

Keeping innovation sprouting in a large companies trying to develop a new business by acquisition requires:

  • First, a relative isolation of the innovative branch from the rest of the business and its bureaucracy. It needs to remain independent and enabled,
  • A certain level of stress to be maintained, otherwise, as I have observed, confort and overhead will grow tremendously without real commercial development.The unlimited resources and cash is a great advantage to develop new businesses; at the same time it can be a bit too confortable,
  • An industrial logic to the shopping spree around a driving idea that makes sense,
  • Keeping competition for the services offered by the innovative branch to the original business to detect new offerings and competitors,
  • Exchanges of personnel between the historical activity and the new activity to produce progressively an understanding; however this must be carefully limited and people from the original organisation carefully vetted for their adequacy.

Developing a new activity by acquisition in a large organisation is no easy fit. It requires a lot of management attention. The ‘ugly duckling’ syndrome is never far. Apply those principles to overcome the issue. Any additional idea?

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How Large Should Creative Organisations Be?

In this excellent blog ‘Bigger to feel safer‘, Seth Godin discusses the arguments for and against size in creative organisations.

Bigger organisations feel safer, get safer because of bureaucracy but that often comes at the expense of less risk-taking, thus less creativity. “In other words, hiring more people makes their useful creative productivity go down“. This is the opposite of productivity of the Industrial Age. Seth Godin’s conclusion is that “the natural scale of the [creative] enterprise is smaller than you think.”

I particularly like this quote by the way: “While the bureaucracy may benefit from more scale, the work doesn’t”

Thus in conclusion, truly creative organisations (or creative organisation subset) should remain small. They need to involve several individuals (creativity increases with exchange) but not too many (refer to Jeff Bezos Pizza rule). This is a great news for really creative organisations that are start ups!

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