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Simplicity and the storm before the calm

My Financial Times column 12/27/10

Lew Wasserman, the Hollywood mogul who ran MCA, used to wait in his office until everyone had gone home and then walk around looking for papers left on his agents’ desks. If he found them, he would sweep them into the bin. A messy desk, he thought, implied a messy mind. I have always coveted this kind of organisational stringency but somehow never managed to achieve it. But this is the time of year to dream again of personal organisation and productivity.

Personal organisation is the weight loss industry of business. Everyone wants it and everyone knows how to achieve it. But we are always looking for the next gizmo or system that promises to make it easier, from Filofaxes to iPhones, from Stephen Covey’s Seven Habits of Highly Effective People to David Allen’s Getting Things Done.

But just as we know the answer to weight loss, eating less and exercising more, so we know the key to personal productivity. Do more by doing less. It sounds rather Zen but the idea is simple. The most successful professional lives are those that are highly focused. They are not a cacophony of conflicting obligations, deadlines and political machinations. They involve the streamlined pursuit of a single goal.

One might begin with Steve Jobs. Apple’s success over the past 13 years since Mr Jobs returned as chief executive might be reduced to a single idea: making the complex simple. For a company of its size, it has a remarkably small line of products, with just a few variations on each theme. It is evidence of Mr Jobs’ habit of saying “no” much more than he says “yes”. Organisationally, Apple’s executive team, centred on Mr Jobs, Tim Cook, his chief operating officer, and Jonathan Ive, his design chief, have succeeded in achieving vast scale from a relatively small core group based in Cupertino, California. Decision-making is highly centralised and the organisation flat. Apple is no corporate democracy but the effect from the customer’s perspective is that you always know exactly what you are getting.

Mr Jobs’ clarity of thought and purpose is reflected in his dress, the jeans and black turtleneck; his car, always German, always silver; even the washing machines in his house. In an interview in Wired in 2007, Mr Jobs explained the process for choosing his washing machine. He and his family were dissatisfied with their American machine. So they spent two weeks discussing the problem over dinner. They talked about design, function, water usage, environmental impact and finally decided on buying appliances from the German manufacturer Miele. Imagine how many distractions you have purged from your life to focus so intently on the design and function of a washing machine.

For many of us, our days are like whack-a-mole, flailing at problems as they emerge, hoping that one good wallop does the trick but fearing that nothing is ever well and truly solved. Multi-tasking is another term for it. It often seems that the division between those who focus on one task at a time and those who multi-task is a theological one; each side claiming to be more productive. Academic research, however, suggests that the relationship between multi-tasking and productivity follows an upside-down U-curve. A little multi-tasking improves our productivity. But then we plateau and too much multi-tasking, too much work and too many relationships to manage slows us down. We would be better off taking Mr Jobs’ washing machine approach, taking a problem, going deep to solve it once and for all and then moving on.

 

 

Friends who moved from Connecticut to California this month told me of the relief they felt as their moving truck took away all their possessions. They had sold their house and were moving into a rented apartment above their office, and could not wait to start afresh without the burdens of ownership. Which manager does not crave that elusive sense of mental lightness, the clean break, the clean desk, the same old problems finally dealt with and only new opportunities ahead? Mr Wasserman tried to impose it with his nightly desk purges. But it is not the only way. 

The English writer Patrick Leigh Fermor found a different path in his wonderful book A Time to Keep Silence, when he goes on retreat to the Abbaye of St Wandrille de Fontanelle in northern France. At first he is frustrated by the silence and inaction, his mind still racing at city speed. Then he is overcome by tiredness and sleeps longer than ever before. Finally he reaches a state “full of energy and limpid freshness”. His “desire for talk, movement and nervous expression” had “languished and finally died for lack of any stimulus or nourishment”. By the end of his stay, he was in that state every manager wants to be in January, free of the “hundred anxious trivialities that poison everyday life” and suddenly more productive than ever.

 

How to turn slack time into profit

My Financial Times column 12/20/10

We all have slack in our lives, hours when we could be working rather than loafing, talents that go unused and physical assets that sit rusting away in garages, lofts and storage units, which might better be sold or rented out.

If we were managers of factories, supply chains or computer networks we would call this slack “latent capacity” and try to do something to reduce it. What inhibits us tends to be idleness, lack of human networks, an inability to price the value of what we have, and the risk of letting others use it. All these barriers are being eroded by technology, creating the possibility for companies and individuals to exploit their latent capacity in previously unthinkable ways.

London’s airports may respond to the latest snow fiasco by investing millions in extra snow ploughs that will sit idle for most of the year. A better solution might be to co-ordinate all the snow ploughs already rumbling around southern England belonging to local authorities, companies and individuals, to clear the runways. Gatwick had the right idea when it flew in the Swiss to help. One lesson from the recession ought to be that we should be much more efficient with the resources we already have rather than taking on debt to acquire unnecessary assets.

A good example from the holiday season is Toys R Us, the American toy retailer. One of the hardest challenges for toy companies has always been that they do so much of their business around Christmas and yet must take on full-year leases for their stores. Toys R Us’s solution has been to open pop-up shops, 600 of them in the US this Christmas, each around 4000 sq ft, much smaller than its permanent stores, but in shopping malls and high streets where it does not have a year-round presence. These pop-up shops are staffed by 10,000 temporary workers. The abject state of commercial property means landlords are delighted to accept the renters’ terms, to fill their sites for at least a few weeks.

Pop-up shops are an evolution of the fashion trunk show, a way for a designer to take his wares to places he may not have the resources to reach otherwise and target groups of customers without the fixed expense of a store.

On a more personal level, there is an abundance of new companies seeking to use the latest web services, involving location, personal ratings and auction-based price setting, to help individuals monetise their latent capacity.

They are taking an old idea and giving it new life. You can now rent out your own car through services such as Whipcar, or the parking spot in front of your house through Parkatmyhouse.com. You can rent your neighbour’s leaf-blower or lawnmower through Loanables.com. The sophistication of these sites, and the level of trust they inspire, varies widely, but the trend seems powerful.

Then you have companies like Solvate, an inspired means of finding freelance workers to do specific tasks. Calling itself “America’s premier on-demand workforce”, Solvate allows you to find people capable of doing all kinds of work, ranging from the purely clerical to 3D modelling and social media programming. Solvate matches a broad array of talent with those who need it in a much more efficient way than the traditional temping agency. For some of those who loan out their services through Solvate it is full-time work. But for others, it is a way of monetising their latent capacity, their nights and weekends and those talents their day job has no use for.

In manufacturing, using latent capacity is an issue of cost, efficiency and return on assets. The further you move away from the factory floor, the more latent capacity leads us to think about choice and exploiting our competitive advantage. It also quickly becomes a philosophy of resource conservation. For small companies in particular, the focus should be on providing a service or product. Instead, their managers must waste huge amounts of time on bureaucracy and building a support system. It is the equivalent of every person on a street having their own ride-on lawnmower. One would do, and everyone could use it.

For any manager considering ways to exploit their company’s latent capacity, or to employ that of others, there remain several obstacles. The first is regulation. It would be wonderful, for example, if we could buy prepared food from each other. If someone in town made terrific lasagne, I’d happily buy it from them rather than go through the agony of trying to make it myself. But there are strict rules requiring that food made for sale is prepared in commercial kitchens, which render my lasagne dream impossible. Another obstacle is our need for ownership. The number and kind of cars sold each year probably has as much to do with the primacy of cars as a status symbol as our need for flexible, personal transport. Issues of privacy and trust also get in the way. A company considering renting out spare office space or technology infrastructure may be leery of what its lessor might do. But these challenges are not insuperable, especially when the potential rewards of efficient use of our time, assets and talents are so vast.

 

Family constraints have their benefits

My Financial Times column 12/13/10

One of the keenest criticisms of modern business is that it places unreasonable burdens on families. Demanding employers and the proliferation of always-on communication devices, such as the BlackBerry, plunder whatever morsels of family life remain. Children are left to scratch out their own emotional educations when both parents must work to sustain a middle-class way of life.

And yet just last week, the latest round of investment in the fast-growing Brazilian bank BTG Pactual revealed that alongside the private equity firms and sovereign wealth funds were four families: Britain’s Rothschilds, Colombia’s Santo Domingos, Italy’s Agnellis and Panama’s Mottas.

It seems paradoxical that the micro-problems of making a living while raising a family seem to be intensifying while the macro-benefits accruing to families that pile up wealth over generations seem to be expanding. Technology was supposed to threaten elites by making information and networks freely accessible. Yet families, those most impenetrable of secret societies, remain as strong as ever in the business world. What can the managers of non-family businesses learn from their success?

Randel Carlock and John Ward, professors at Insead and the Kellogg School of Management respectively, have studied family businesses around the world and report their findings in a new book, When Family Businesses are Best. The best family businesses excel at two things: balancing emotion and reason; and retaining a long-term perspective.

“Families are about love and emotions, and businesses are about making money and accomplishing tasks,” Prof Carlock told me from Hong Kong, where he was lecturing to groups from Asia’s many family-run businesses. “These two systems operate on completely different views of the world. So if a family is to run a business they must become ‘professionally emotional’.”

Non-family businesses can fool themselves into thinking that they only make decisions based on reason. A chief executive can initiate a merger telling the markets it makes hard financial sense, says Prof Carlock, when all along it’s about his ambition. Family businesses do not have this luxury as any confusion between reason and emotion can destroy not just the business but the family as well. Consequently, they are compelled to find ways of acting that are more emotionally mature.

The recent feud and resolution between the L’Oréal heiress Liliane Bettencourt and her daughter, Françoise, demonstrated how toxic family relationships can become when poorly mixed with business and questions of inheritance.

Profs Carlock and Ward argue that family businesses exist to achieve four kinds of goal: a financial one; a social one, linked to a family’s reputation and legacy; an emotional one, achieved only if the business strengthens rather than frays family relationships; and a spiritual one, linked to how we create meaning in our lives. “Public companies focus 99 per cent of their time on the financial goal,” says Prof Carlock. “Very few CEOs get bonuses based on their company’s reputation or how they make people feel,” he adds, unless the achievements are tied directly to financial metrics such as customer or employee retention.

Another way to think about it is to ask how many CEOs spare a moment to consider the effect of their behaviour on employees 20 or 30 years in the future. The founder of a family business may consider exactly this when he holds his newborn grandchild. Profs Carlock and Ward call this sense of long-term responsibility “stewardship”, a desire to create a business that is important to one’s family, employees, customers and community for many years to come.

One of Prof Carlock’s favourite examples is Beretta, the Italian firearms maker, which has been owned by the same family for 500 years. It is still headquartered in the Lombardy valley where it was founded and employs both traditional, local craftsmen and the latest technology to make its guns.

Similarly, Cargill, the Minneapolis-based multinational, is 90 per cent owned by descendants of the families that founded it in 1865. One of the secrets of its success has been the family’s detailed attention to governance, balancing the needs and interests of the family with outside expertise to deliver financial results.

Pictet, the family owned Swiss private bank, has clear criteria for family members wanting to join its management, partly because if it gave preference to underqualified sons and daughters, it would struggle to hire the best people to fill other positions.

The lesson from all these companies is a classic tale of constraints leading to better decisions. If your employees are your family, and your shareholders your grandparents, it forces you to make decisions of far greater emotional depth than if such ties did not exist. And such depth of consideration tends to lead to much stronger businesses over the long haul.

 

Cloud Computing is Not a Passing Shower

My Financial Times column 12/6/10

One way you can be sure a revolution is under way is when generations fundamentally disagree. Cloud computing is one of those technological phenomena that has sneaked up on the wider world of business and now has people on either side of a generational divide bickering over its value. The idea is that we can now use computer services as if they were a utility, like electricity, drawing on software and hardware when we need them, rather than each of us owning our own generators and distribution networks.

For digital natives, the cloud is as natural to computing as the keyboard. The cloud is Facebook, Zynga and Gmail. To an older generation, the cloud is WikiLeaks and data breaches. For managers trying to weigh up whether this is a fad or here to stay, where you stand may just be a function of your age.

I realised this at a recent conference where cloud computing was under discussion. The older people in the room railed about how moving a company’s operations to the cloud represented a fatal loss of control over your data. The younger audience members sat shaking their heads that anyone could doubt a technological shift with such gobsmackingly obvious advantages. There was nothing either side could say to persuade the other.

Cloud computing means dispensing with much of your own software and hardware and accessing it virtually as and when you need it. Rather than owning your own servers, you rent whatever server space you need for a monthly fee. Instead of installing a CD into your computer loaded with software, you access whatever software you need through your browser. Instead of storing your data on your computer or phone, you store it virtually and access it with a password. The likely benefits are extraordinary flexibility and access to far greater resources of people and information. In bean-counter terms, the cloud turns technology capex into more manageable opex.

So what’s the problem? It seems to be the loss of control. A manager who controls sensitive data on customers and pricing, for example, may be loath to remove that from his own hard drive and place it in the cloud. A chief executive discussing the possibility of moving to cloud services with his head of IT will almost certainly be told it’s a terrible idea. Far better to have one’s own servers and one’s own people maintaining them than relying on some abstraction like “cloud services”. Whom do you call in the cloud when your system fails?

The truth is, though, that objections to cloud computing are merely delaying the inevitable. Of course there are security issues to be overcome and technical fears to be allayed, but the basic ideas behind cloud computing seem irresistible: pooling resources to drive down cost and accelerate innovation and liberating people from the tether of physical software.

Pat Toole, chief information officer of IBM and an evangelist for cloud computing, likes to say of the cloud “it isn’t rocket science but it is computer science”. By this he means that the challenges of cloud computing for business have existed in every phase of computing, challenges around cost, utility and security. For now, Mr Toole says, some workloads are evidently better suited for the cloud than others. Work that requires collaboration, for example, can be made much easier through the use of virtual desktops and web-based services. More data sensitive areas, such as enterprise resource planning and transaction processing, may not yet be ready for prime-time on the cloud. But these are problems that companies will eventually make fortunes by solving. Until then, managers should pick and choose which aspects of their business will benefit from moving to the cloud, and which will not.

To reassure the hesitant, some large players are already all but living in the cloud. Li & Fung, one of the world’s biggest supply-chain operators, now communicates between its many clients, factories and suppliers through a web-services platform, where clients can place orders and pre-qualified suppliers can bid to fulfil them. Factories are audited in real time with hand-held computers. The company has created a platform of networked technological processes accessible to myriad participants who can now act far more quickly and at lower cost than they could via e-mail. That’s the essence of the cloud, and it is hard to see its impact not spreading.

For smaller companies, the risks of cloud computing are generally fewer. Their data is probably less valuable and less susceptible to theft, and they have much more to gain from access to technologies they could never have afforded before. They can purchase sales and customer support services on an as-needed basis, rather than investing in their own expensive infrastructure. And they can analyse customer data in a way only large corporations could afford to in the past.

These are remarkable changes and far more than silver linings.

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