Business Insight Zone

A while back I introduced a simple metaphor I use to think about changes in the business world:

• Landscape and weather in the business world.

The idea is simple: some things, like Generally Accepted Accounting Principles, form the durable “landscape” of business, while others, like market fluctuations, should be regarded as temporary “weather.” Just like in real life, if you get caught in a hurricane, it could ruin you. But so long as you avoid the worst of the weather and abide by the realities of the landscape — don’t walk off a cliff, don’t try to build a skyscraper over the deep ocean — you’ve got a good chance to prosper.

These days, it seems to me that I see ever more news suggesting a wave of changes to the business landscape. The obvious ones — energy prices, the massive repricing of U.S. real estate — we’ve discussed before. But here are two more from today’s reading.

The average TV viewer is now out of the demo.

From Variety (via Darren Barefoot) — “TV viewers’ average age hits 50“:

According to a study released by Magna Global’s Steve Sternberg, the five broadcast nets’ average live median age (in other words, not including delayed DVR viewing) was 50 last season. That’s the oldest ever since Sternberg started analyzing median age more than a decade ago — and the first time the nets’ median age was outside of the vaunted 18-49 demo.

One of my favorite adages in business is this: “If something can’t go on indefinitely, it won’t.” Sure, it seems obvious . . . except that people act contrary to this obvious truth all the time. As Darren rightly says in his post, “The writing seems to be on the wall for live television. As producers and advertisers react to this, expect some creative and hyper-irritating new advertising strategies.”

The only thing I might take issue with is “creative,” since I’ve been underwhelmed with the creativity coming out of the major networks in recent years. I might say “desperate” instead.

Microsoft no longer dictates your OS from on high.

From the NYT’s “Bits” blog (via James Fallows) — “Et Tu, Intel? Chip Giant Won’t Embrace Microsoft’s Windows Vista“:

Intel, the giant chip maker and longtime partner of Microsoft, has decided against upgrading the computers of its own 80,000 employees to Microsoft’s Vista operating system, a person with direct knowledge of the company’s plans said.

The person, who has been briefed on the situation but requested anonymity because of the sensitivity of Intel’s relationship with Microsoft, said the company made its decision after a lengthy analysis by its internal technology staff of the costs and potential benefits of moving to Windows Vista, which has drawn fire from many customers as a buggy, bloated program that requires costly hardware upgrades to run smoothly.

Time was, Microsoft was the landscape of the desktop PC world, and it more or less dictated the weather as ewll. Any predictions of a steep decline in that realm would be premature, but it’s worth noting that previous versions of the Windows operating system, especially the NT and XP editions, rolled out and penetrated the market despite users’ objections.

Microsoft has long been in a position to say “Welcome to your new OS” whenever it rolled out a new version of Windows. But the wide backlash against Vista — which has been building for quite a while now — may indicate a change in that.

What other changes to the business landscape do you see?

~

Related:

• Landscape and weather in the business world.
• Economic forecasting: How’s the weather for YOU?

~

(Photo by jmagnusphoto.)

Some months ago I had the very good fortune to attract the attention of Dave Livingston, and ever since then I’ve been profiting from his steady stream of blog comments and e-mails, not to mention his long, thoughtful, kaleidoscopic blog posts. Dave’s writing (and his consulting business) benefit from his 25+ years in business, particularly in planning roles, with IBM and FedEx.

You can find recent examples of Dave’s comments (as dblwyo) via these links:

• Hopes and fears wrestle with reality in the financial markets.
• Book Review: Why Work Sucks and How to Fix It
• Methodology or Mythology?
• The greatest challenge of business: Both/And thinking.
• What are the “Hilbert Problems” of business?

No special agenda here except to say that (a) I love how the social media allow us to discover and engage with smart folks like Dave, and that (b) I think it’s important to express gratitude to those who enrich our own experience — in business, in private life, online, in person, you name it.

So . . . thanks, Dave!

It’s not over until you’ve crossed the finish line.

Not partway.

Not half of it.

Not “almost there.”

Not “should be before the end of the week.”

Not “if everything runs on schedule.”

Not as soon as something else falls into place.

Not “except for a few details.”

Not “as soon as we bring everybody into the loop.”

Not “as soon as we agree on deliverables.”

Not “once it finishes compiling.”

Not “as soon as Finance approves the paperwork” or “as soon as the VP signs off on it.”

Not “as soon as the new quarter starts.”

Not “once we fill that position.”

Not “first thing tomorrow.”

Not anything but . . . DONE.

~

(Photo by Neeta Lind.)

Michael Lewis’s terrific book Moneyball is as much about management and innovation as it is about baseball. So whether you’re a baseball fan or not, please stick with me for a second as I talk about one of Moneyball’s lessons.

In the book, Lewis describes how Billy Beane, the general manager of the Oakland Athletics, identified on-base percentage (OBP) as the key underpriced asset for major-league hitters. If you wanted a hitter with a high batting average or lots of home runs or lots of runs batted in (RBIs), you paid a premium for that hitter. But you could get players who lacked those things — yet who had high OBPs — on the cheap.

(For the non-baseball fans in the crowd, the crudest definition of OBP is this: it’s the percentage of the time that a batter doesn’t make an out, regardless of whether he walks, gets hit by a pitch, drives a ball into the centerfield seats, or whatever.)

Why OBP?

What made OBP so special, back in the late 1990s when Beane isolated it as a key metric? Two things — one positive and one negative:

1. The positive: OBP is the hitting statistic that maps most linearly to runs scored. Higher OBPs translate directly to more runs scored — in all settings, and regardless of the types of hitters involved.
2. The negative: For a variety of reasons, OBP is hardly as glamorous as the “triple crown” statistics of batting average, home runs, and RBIs. Therefore it was routinely overlooked as a differentiating factor for hitters . . . even though the list of the top 50 all-time OBP leaders includes a high number of the top 50 all-time hitters.

A little more on that second point: The home-run binge that ran from the mid-1990s through the mid-2000s demonstrates the abiding fascination of baseball fans for the home-run hitter — a point made initially, and most forcefully, by one George Herman Ruth. And over the course of many years, MVP voters have disproportionately rewarded the hitters considered “run creators” for their high numbers of RBIs.

The old love affair with batting average.

Across the game’s history, compiling an average of .300 — that is, getting a hit in three of every 10 at-bats — has been seen as an unquestioned mark of a good hitter, regardless of whether the hits were singles or doubles or triples or homers. And in the early days of the game, that made sense: extra-base hits were hard to come by and walks were regarded as an aberration rather than a beneficial outcome in themselves, so batting average really did express a lot about a hitter’s worth.

In Honus Wagner’s heyday, runs were hard to come by,
and extra-base hits were much rarer than today.

Thing is, the math changed in the 1920s, when Babe Ruth and other power hitters started showing a more modern approach at the plate: more patience, more power. The thinking should have changed, too, so that the emphasis fell to OBP and slugging average (essentially, what fraction of a base a batter averaged per time at-bat). But the old triple-crown stats — batting average, homers, RBIs — were already firmly engrained, they were easy to grasp, they were easy to compute, and they seemed to capture enough information for evaluating a hitter.

What helps us WIN?

Fast-forward seven decades to Billy Beane. He and his mentor, Sandy Alderson, understood that they would never have the budget to hire proven home run champions, RBI champions, batting champions. Yet they could find out-of-the-way hitters who didn’t do anything flashy in the triple-crown categories, but who quietly racked up the OBP, and therefore quietly — and cheaply — helped a team win.

The formula worked. Although the Athletics never made it to the World Series in the 2000s, for several years running, they made the playoffs alongside teams with payrolls two and three and four times as large. They did this in large part because they abandoned the old, easy-to-measure, not-very-meaningful ways of evaluating hitters, and replaced them with smarter, more-meaningful, out-of-the-ordinary ways.

Now, here comes the business application: What do you measure in your organization? How do you evaluate your people, especially in roles outside of sales that often lack clear yardsticks?

Do your measures have real meaning?
Or are you just continuing to measure what you’ve always measured?

Many companies, in my experience, have their own version of “batting average” that they like to point to, even though there’s some more-meaningful “OBP” metric that they should be using.

What about you?

~

(Moneyball cover via Wikipedia; Honus Wagner image via Wikimedia Commons.)

The longer I study the financial markets, the more I see an epic battle between

• the rational operation of markets along the lines of classical economic theory and
• naked emotion spread across large groups of people handling large pools of money.

Case in point: this week’s large stock-market declines. Before the markets opened this morning, the Dow was down 5.05% for the week; the Nasdaq was down 5.71%; and the S&P 500 was down 4.44%. Some of these have been in reaction to sustained bad news from the likes of GM and Citigroup.

From where I sit — not handling large pools of money, mind you — it seems crazy that GM’s or Citigroup’s investors would act surprised by their continued bad news.

True, we may not be in a recession by an economist’s definition, but clearly times are tight for many American businesses and consumers, and — just as clearly to my mind — neither GM nor Citigroup has been especially well run over the past few years. (We could add number of other big companies to this list — and yes, I am looking at you, Lehman.) On top of that, even setting aside the effects of speculation, the basics of supply and demand suggest that oil is going to stay expensive for a long time, for values of “a long time” up to and including “forever.”

But people want to hope for the best, especially when it comes to their own money. And they so dearly want things to be better that they’ll take the bet that they’re going to be better, even when that bet doesn’t make sense from a purely rational standpoint.

Which is why we have behavioral economists.

I think things aren’t quite as bad as some pundits, and some politicians, would have us believe. I think things aren’t as good as, say, Secretary Paulson wishes they were. It’s not just that the truth lies somewhere in the middle, but that it roams all over the place, depending on complex interactions of hard numbers (housing starts, jobless claims) and wild emotions which, in my humble opinion, nobody really understands.

I’ve decided to stop being surprised by the fluctuations, and instead to prepare myself for more of them — whether they make sense or not.

~

Related posts:

• American Airlines, Ford Motor, and the price of oil.
• What does the future hold for the Detroit car makers?
• Does Citi need Hurd-style change? Bill Miller thinks so.

~

(Photo of the Amsterdam stock exchange by Petrick2008.)

Y’all please pardon me while I toot our own horn.

This makes the third year in a row that Hoover’s has found itself in the Top 10 Best Large Companies to Work For in the annual survey conducted by the Austin Business Journal.

Last year, we were in 7th place; this year, we’re up to 4th place.

Speaking as an eight-year Hoover’s veteran, I can tell you that St. David’s Healthcare, Austin Regional Clinic, and Hilton Austin — the companies that placed ahead of us in the survey — must be doing something seriously right, because Hoover’s is the friendliest and best place I’ve ever worked.

Here’s the whole list:

1. St. David’s Healthcare.
2. Austin Regional Clinic.
3. Hilton Austin.
4. Hoover’s, baby!
5. Heart Hospital of Austin.
6. Wells Fargo.
7. State Farm Insurance.
8. Silicon Laboratories.
9. Dresser Wayne.
10. Goodwill Industries of Central Texas.

Go, us!

Many of y’all know I’m a fairly heavy Twitter user/addict. Like a lot of Twitter users, I’ve been frustrated by the service’s very, very, VERY patchy availability over the past few months. Earlier today I was so frustrated after Twitter ate a message for the umpteenth time this week that I paused to consider — actively consider — how much trouble it would be to switch to some other service like Pownce or FriendFeed.

But I follow hundreds of interesting people on Twitter, and am followed by hundreds in return. There’s a built-up network there — ivy covering the brick, so to speak — that it would take a long while to replicate anywhere else, if indeed it could be replicated at all. It’s hard to port the Twitter experience out to some other setting or tool, which the folks running the service (and those funding them) must know quite well.

But what if you DON’T have high switching costs?

Consider another service I often use in tandem with Twitter: Is.gd. This is one of those URL-shortening tools, and I like it better than others (Snurl, TinyURL, etc.) because the interface is better (no need to use the mouse) and because it genuinely gives you THE shortest possible URLs.

But a little while ago I couldn’t connect to Is.gd. Don’t know why — and don’t really care. Maybe it was just a fluke, although I find that I can’t get in as I write this, either.

Probably the folks at Is.gd are tearing their hair out right now, trying to figure out how to restore service. They have a nice little tool, so in general I’m willing to give them the benefit of the doubt. But they also have no special claim on me — no built-up history, no ivy covering the wall — which means that the friction for me to switch to some other service is . . . not just minimal, but nonexistent.

Eggs, baskets, etc.

We all know the old adage, “Don’t put all your eggs in one basket,” but many businesses have done very well for themselves putting all their eggs in one basket. (Example: Harry Winston stores. You’d never go to them unless you’re in the market for seriously high-end jewelry. But if you ARE in that market . . .)

But here’s the key: if you’re going to put all your eggs in one basket . . . GUARD THAT BASKET.

Am I the first person to figure this out? Hardly. But given my experience with the downtime of online services, I’d say this old, old lesson bears much repeating.

~

(Photo by Irene2005.)

A Broken System

The thesis of Why Work Sucks and How to Fix It is as provocative as its title. Cali Ressler and Jody Thompson seriously believe that businesses can achieve new levels of success — and that employees can achieve new levels of personal happiness — when businesses start treating employees like grownups, by holding them responsible for the results of their work rather than any of the trappings that we’ve come to use as proxies to tell us how hard people work.

I know, “results.” Crazy, huh?

What are the proxy measures we so often use? Things like how many hours you spend in the office, how “busy” you seem to be, and how heavily booked you are into meetings. As the authors emphasize again and again, none of these things actually indicate how good a person is at a job or how well they are performing in the job. Probably we’ve all known people who spent 12 hours a day in the office, yet never seemed to deliver on their projects — or, worse, who actually created more work for others than they ever took care of themselves. And we all know people who wear their busy-ness like a badge.

A Focus on RESULTS

Too many companies — too many of us — have put up with these varieties of nonsense for reasons that have a lot to do with habit and tradition and not much to do with actual productivity. This devotion to the status quo has cost us untold amounts, in terms of both foregone productivity and thwarted human fulfillment. Ressler and Thompson want us to discard these old ways of being for a new paradigm, the Results-Only Work Environment (ROWE), which promotes results as the be-all and end-all of business, and demotes appearances, trappings, rituals, and everything else to the point that they are no more than optional add-ons to our work experience.

Crucially, in a ROWE the option for adding on these trappings lies with workers, not with management. Management sets the stage by making it very, very clear what sort of results are expected and in what timeframe, but then it frees up workers, both individually and in teams, to achieve results by whatever legal methods work for them. If your graphic designer can work up a logo for a new promotion while sitting in her jammies at her grandma’s house in Manila, who cares? The work got done — the result was achieved — and the business need was met. Even better, the designer is likely to be far more loyal to your company because you let her go visit her old grandma without making a big deal about it, and because you trusted her to get the work done remotely.

The ROWE idea takes full advantage of modern Internet technology, and it embraces the reality that much of today’s knowledge-work can be achieved just as well (if not better) in an environment outside the typical corporate cube-farm.

Embracing Massive Change

Mind you, ROWE also implies huge changes for management — new routines, new areas of focus, and new ways of thinking about everything from staff meetings to “managing by walking around” to performance evaluations, raises, and promotions. Although they don’t spend very much time detailing these implications, the authors are candid and unapologetic about them. In their view, if a ROWE brings better business results while making life easier for workers, it ought to be followed, starting as soon as possible, by every company that can possibly follow it. Q.E.D.

Their assurance about this is not based in theory or abstractions, because they’ve spent the past few years implementing the ROWE method at a little outfit called Best Buy, where the entire corporate staff now adheres to ROWE principles. (Best Buy CEO Brad Anderson wrote the foreword for the book.)

The baker’s dozen of “Guideposts” that spell out these principles are deceptively simple. They include:

• “People at all levels stop doing any activity that is a waste of their time, the customer’s time, or the company’s time.”
• “Employees have the freedom to work any way they want.”
• “Nobody talks about how many hours they work.”
• “Every meeting is optional.”

If the first three examples don’t choke many corporate managers, that last one surely will. You can almost hear the sputtering: “But, but, people have to be in the weekly staff meeting!”

Oh, really? It’s really that important?

The Unexamined Myths of the Old Way of Business

Ressler and Thompson have spent years of work — and they spend the bulk of this book — posing those pointed questions to the Old Way of working. Is it really important that people attend the weekly team meeting? What if they spent that time serving customers or working shoulder-to-shoulder with other team members instead?

Is it really important that you keep track of people’s time? What if someone incompetent works a zillion hours of overtime but still doesn’t get the job done? Shouldn’t you fire that person and hire someone who will deliver results, regardless of how long (or not-long) it takes them?

Does it really show “commitment” to the company to come in on Saturday, come in before 8:00 on weekdays, stay past dinnertime, and so on? There are some very good companies where such overwork is seen as a negative, not a positive, if it hampers the happiness-with-life and overall effectiveness (i.e. the ability to deliver results) of the worker.

The authors raise these awkward questions to bring the focus back to results, and to show how the Old Way of doing things arises, in many cases, from the workplace assumptions of the Industrial Age, rather than from a sober assessment of the way things work today. In a factory setting, one well-trained worker will produce more than another primarily by dint of working more hours on the line, but that’s hardly true — or at least, it’s not necessarily true — of most of the information-driven jobs we see in the modern office setting.

The Dread Affliction of “Sludge”

As Ressler and Thompson go to great lengths to describe, our twisted notions about what constitutes “hard work” and “commitment” often come out in the form of what they call “Sludge.” Sludge is what happens when your co-worker gets in at 9:45 a.m. and you say, “Well, look who decided to join us!” Sludge is what happens in the break room when Jimmy says to Jenny, “Man, every time I want to stop by Meg’s desk and get a quick answer on something, she’s always out taking care of her kid.”

Here’s the point: if Meg isn’t getting her work done, she should be fired. It doesn’t matter if it’s because family duties overwhelm her or because she sits at her desk and reads Craigslist all day. And, more to the point, in the overwhelming majority of cases where the Megs of the world are getting their work done, no one should have the right to criticize her because she happens to want to pick up her child from school. If she’s delivering results, who cares? Jimmy should send her an e-mail and expect an answer by tomorrow — and, by the way, he shouldn’t handle his work such that it all lives or dies based on whether Meg’s at her desk at a given moment. (What would he do if Meg came down with appendicitis?)

A Vision of a Better Future

A Sludge-free working experience is the major goal of the ROWE, and Ressler and Thompson do a good job of preaching this gospel. They pepper their short book with many first-person tales from workers (at Best Buy and elsewhere) who have suffered under the Old Way and benefited from the ROWE method. At times they may go on too much about Sludge,* or about how ROWE principles should be applied to absolutely everybody everywhere,** but that’s a small price to pay for the bracing dose of fresh thinking that this book delivers.

Transforming your company into a ROWE isn’t as simple as snapping your fingers; indeed, the authors spend plenty of time going over details of how it works, and they have an active consulting business dedicated to implementing ROWE for clients. But the principles behind it are breathtakingly simple:

• Give up your old fetish of constant control.
• Embrace the possibilities of modern technology to untether people from old, tedious ways of working.
• Free people up to do great work — work that truly delivers results.

Crazy, huh?

~

Related Posts:

• The Results-Only Work Environment (ROWE): a first look.
• What’s YOUR working day like?

~

NOTES:

* Or maybe I’m just lucky to work at Hoover’s, where Sludge must run way below average, at least if Ressler and Thompson’s horror stories from the field are any indication.

** An example kept coming to mind as I read this book: Many years ago, I was responsible for the receptionist staff in a busy office on the campus of my beloved alma mater. Most of these receptionists were undergraduates who took the job as a work-study gig — which was fine by me, since I had done the same thing when I was their age. And most of them had no trouble at all understading the demands of the job. But a couple of them had to be reminded more than once that there was a crucial difference between arriving in the office at 7:59 a.m., which was great, and 8:03 a.m., which was real trouble in that we often had VIPs walking in the door for 8:00 a.m. appointments.

Now, maybe in a ROWE the relentless focus on results would make it clear eventually to new receptionists that they really should be there promptly at 8:00. But in the actual environment of that actual office, we didn’t have time to let them to arrive at their own conclusions about the most results-oriented time to arrive, or to come to the conclusion that it was A-OK to come in at 8:05. Our clientele expected better.

This was especially true since plenty of these kids were 19 years old and had never held an office job before. My experience told me then — and tells me now — that they needed to be told, “You’ve GOT to be here promptly at 8:00.” In fact, I was doing them a favor to clarify that particular expected result, which happened to have everything to do with what time they arrived at work. I hope I never delivered the message unkindly, but I’m don’t think that the trust-everyone-always message of ROWE applied in practical terms in that setting.

That said, I stand prepared to be enlightened.

~

What do you talk about at the pub?

My friend Lisa from Twitter posed a question and some related thoughts about social media (Web 2.0, call it what you will) this morning. Read her tweets from the bottom up:

Lisa’s onto something, and to my mind it goes beyond the typical talk about online privacy. I think it gets at a basic reorganization of the way we think about our social interactions. So please bear with me while I unspool a little off-the-cuff theory.

Here’s one drastically oversimplified model of how our social interactions in the public/business sphere have evolved over time:

• In the old days,* most people knew many of the people with whom they did business — knew them pretty well, knew them from the community, maybe went to church with them or knew them from the Grange or the Elks lodge. We still get the flavor of this sometimes, for example if we have a favorite barista or bartender at our regular coffeehouse or pub. It can be the same if you have a long-term relationship with a lawyer, accountant, doctor, or the like that bridges business and friendship.
• As cities have grown and as populations have become more mobile, more of our business transactions have become transient, or at least impersonal. Through much of the 20th century, the prevailing model for business comportment was one of unfailing propriety, in part because such caution was appropriate when you didn’t know many of the people with whom you were doing business. Unless you were a titan of industry whose moods would be indulged, you toed the line for what was generally held to be “professional” behavior.
• These days, social media tools and other means of instant communication allow us to choose from a much wider range of definitions for what constitutes “professional” behavior. The boundaries are as porous as we want them to be.

As I think about this last stage — the stage we’re in now — it occurs to me that, in the United States at least, this transition has been paired with much more tolerant social standards across the board. Twenty or thirty or fifty years ago, someone’s single motherhood or homosexuality or atheism simply would not be addressed in polite business conversation, whereas now these things have, in many cases, lost any sense of taboo.

But Lisa raises excellent points in the tweets I quoted: Although openness is generally a fine thing, there are times at which, and topics about which, we don’t need to share everything about ourselves.

Before I philosophize further, let me hand the mike over to you:

How do you decide where to draw the line between public and private,
especially in your use of social media?

Do we share too much today in our public conversations?

~

* I’ll leave it to you to decide if these were the “good old days” or the “bad old days.” Probably some of both.

~

(Pub photo by misocrazy.)

You may recall that a while back I offered some communications pointers to American Airlines chief Gerard Arpey. He’s a smart guy — at least if this Fortune article is any indicator — and I think that overall he’s doing pretty well for the company, considering the financial struggles created for it by the high price of fuel.

And before I go further in criticizing AA, let me say two positive things:

• I flew American to and from Seattle last week, and everything went off without a hitch. The flight-attendant crew on the way back, particularly, was as good as you’ll ever meet.
• A Hoover’s colleague recently had an American flight cancelled that would have seriously delayed the start of her family’s vacation. But as soon as she called American, the folks there “bent over backwards,” she says, to make things work for her — ultimately going so far as to book her onto another airline’s flight so that her family could start its vacation on time.

Okay, that’s enough for Mr. Nice Guy. Read more