Warning!! Difficult / impossible relationship around the corner

July 19th, 2010

In my business I have the chance to work with all sorts of people with a wide variety of backgrounds, qualifications, cultures, educations and skills. I feel quite fortunate to be able to say that 99.7% of the clients I work with are smart, fair, ethical and decent. I don’t want to appear to be the “glass half empty guy” but I wanted, for a moment, to focus on the “.3%”. Why? Because of the amount of my energy they consume.

I often wonder if, in the process of doing business with these folks, if I have ignored any warning signs that might have allowed me to walk away or to better negotiate specific (pain advoidance) points. I came accross a blog by Steve Nguyen entitled “People with a Situational Value System” in which Mr. Nguyen, using observations from the hospitality industry, points out one of his warning signs- people that treat the wait staff poorly while behaving perfectly civily with their dinner guests.

After reading his article I guess I need to take all my new prospects out to lunch!

To read the rest of the article

How to Think Like a Bootstrapper

June 22nd, 2010

How to Think Like a Bootstrapper
Scott Allen

I just read this article by Scott Allen and, although it is directed to small businesses, I believe every point he makes applies to most of us and our businesses.

Bob

Jun 18, 2010 –

It may be the high-growth, venture-funded companies that get a lot of press, but the fact of the matter is that the vast majority of businesses are started for under $10,000, usually provided by the entrepreneur’s friends and family, credit cards, or their own pocket. While it’s true that bootstrapped companies have a slightly higher failure rate than better-funded companies, the difference isn’t significant, and there are lots of bootstrapped businesses that succeed, just as there are many well-funded companies that flop. Good management practices are far more important to your success than big piles of cash are.

Here are a dozen tips to help you start and grow your business with little or no capital.

The most important question before you start is: how much will it cost to make your first sale? Consider everything: product research and development, operational overhead, marketing, cost of goods, etc. If it all adds up to more money than you have, you’re not bootstrapping. Rethink your model – can you really bootstrap, or do you need a bigger stack of working capital?

Cash flow isn’t the most important thing — it’s the only thing. For the bootstrapper, cash is like oxygen. When it stops for more than just a brief period, you die. Learn everything you can about accelerating cash flow and apply as much as possible to your business. Focus on cash — not on profits, market share, or anything else. Be super-realistic — even pessimistic — when it comes to revenue projections. You have no margin for error on the back end — you have to build it into your estimates on the front end.

Start with partners, not employees. Payroll is most companies’ biggest expense. Without a big pile of cash, you can’t afford it, period. Find people who are willing to work for equity, or at least deferred salary, when first starting out. Don’t hire any paid employees until profits allow you to pay them. Of course, this means that you have to have all the core competencies for the company covered in your core team. Find people whose strengths cover your weaknesses.

Develop continuous, passive income, even if that’s not your core business. Your main business may be big-ticket, one-time sales, or project-based services. These are rollercoaster rides that may be wildly successful, but may also frequently bottom out for extended periods. In your business model, be sure to include an offering that creates steady positive cash flow — subscriptions, consumables, automated product sales of information products, etc. It may seem like a distraction at first, but the first time that rollercoaster bottoms out, you’ll be glad you made the investment.

You’re not in the business of lending money. So don’t. If a customer says they have cash flow issues themselves, that’s what credit cards are for. If payment plans are common in your market, find a financing company to partner with and let them handle it. Get payment — even partial — up front whenever possible. Require a deposit that at least covers your hard cost of the sale. Don’t make excuses — just make it your policy and be clear about it up front.

Use credit for cash, not capital. It’s perfectly sensible to borrow money to manage short-term gaps in cash flow, such as using vendor credit to delay payment until you can receive payment from your customers, or paying for something that will quickly generate profits that exceed the interest, such as a marketing campaign. What you don’t want to do is borrow money to gamble with. You wouldn’t (or shouldn’t) put a cash advance on your credit card to gamble in Vegas…don’t do the same in your business. You may very well have to personally guarantee those loans, and that’s how entrepreneurs end up in personal bankruptcy, not just closing the business and moving on.

Do without it until you can no longer do without it. Postpone any and every purchase as long as you possibly can. Share office space, supplies, equipment, etc. The longer you can wait to make the purchase, the more time you have to discover the best deal, or to clarify your needs and find which product or service is best suited to them. Also, particularly with technology purchases, prices tend to go down, not up. This also may mean doing things like having a founder’s spouse keep the books and using free contract templates instead of hiring accountants and lawyers at first. Sure, it has risks, but so does spending available cash on those services rather than on things that will generate revenue.

Don’t try to beat the big boys at their own game. Large companies have access to capital, massive distribution channels, widespread brand recognition, and established customer relationships. They also have baggage — bureaucracy, formalized risk management, overhead, massive investments in their current business model and brand. Forget about massive retail distribution (for now) — sell direct and/or focus on close relationships with a small number of niche resellers. Take advantage of your ability to be agile, to make decisions quickly and put them into action immediately.

Don’t sell what you can’t deliver. Manage your growth. Big companies can deal with manufacturing capacity, customer service problems, or even major product issues by throwing cash at the problem. You can’t. While it may not feel like it when you’ve been struggling, there really is such a thing as too much business. Make your current customers your top priority. While potential new customers may be disappointed about not being able to obtain your product or service, they’ll understand. Sure, you may miss out on some potential business, but you won’t risk crashing and burning because of reduced quality control or poor customer service. I recently heard a business owner tale a cautionary tale about his experience of growing too fast. At one point, he called his own customer service line to see just how bad the problem was, and the automated attendant told him his expected hold time was 14 hours!

Don’t gamble what you can’t afford to lose. Don’t finance your business with a second mortgage on your home unless you’re willing to be homeless. Don’t bet the whole company on one opportunity. No matter how much you believe, no matter how good the opportunity looks, until you have the money in the bank, nothing’s a sure thing. That said, take advantage of the fact that you don’t have nearly as much to lose as big companies do. You won’t destroy billions of dollars of market value with a poor quarterly report. Employees who come to work for a startup know they’re taking a risk, while those working for a large company are usually expecting more stability. You can take chances that they can’t because you really don’t have as much at stake.

Establish relationships to support your growth before you need them. Sooner or later, you’re going to have an urgent need for resources or expertise outside of your company. It may be your first business tax return, a big order that requires additional resources to deliver, an urgent legal question, etc. Figure out who you want to use and establish a relationship with them in advance, so that they’re ready to go when you call them. If you have to scramble to figure it out when the need or opportunity presents itself, your risk of problems goes up dramatically.

Focus on the customer. Create raving, passionate fans by consistently exceeding their expectations. It’s far cheaper to keep customers than to acquire new ones. And happy customers are both your cheapest and most effective advertising. Develop your relationships with them above and beyond the sale. Learn about their business and refer people to them. Connect with them on LinkedIn. Check in with them on a regular basis with no sales agenda – just to see how things are going.

Bootstrapping is really more of a business philosophy than it is just about a shortage of capital. Even if you have capital at your disposal, or if you’re well past the startup stage, applying these ideas will help you reduce your risks and achieve smart business growth.

Scott “Social Media” Allen is a 25-year veteran technology entrepreneur, executive and consultant. He’s coauthor of The Virtual Handshake: Opening Doors and Closing Deals Online, the first book on the business use of social media, and The Emergence of The Relationship Economy. His latest venture, NFN8 Media, maintains a growing portfolio of niche content and community sites. He enjoys working with entrepreneurs and serves on the advisory board of several startups.

How to Leverage the Pain vs. Gain Mentality

June 16th, 2010

How to Leverage the Pain vs. Gain Mentality
August 20, 2007 by Stephen Shapiro

I came accross this blog by Stephen Shapiro–about the power of language. His articlecasued me to think about my choices and word selections. I hope you find this valuable.

Bob

In an earlier blog entry, I discuss the power of language. I want to explore this a bit further today.

Here’s my variation of the “Asian disease problem” mentioned in that earlier blog entry:

Which would you prefer?

■OPTION 1: A guaranteed gain of $75,000?
■OPTION 2: An 80% chance of gaining $100,000 with a 20% chance of getting nothing?
When I give a speech and ask the audience this question, 75% choose Option 1. This percentage is consistent across all groups, regardless of who is in the audience.

Ok, what about the following? Which would you choose?

■Option 3: A certain loss of $75,000?
■Option 4: An 80% chance of losing $100,000 with a 20% chance of not losing anything?
When audiences answer this one, 99% choose option 4.

This once again supports the premise that people will take risks to reduce losses, yet will be more risk averse when it comes to increasing gains.

Interestingly, when you look at these options, even though most people choose options 1 and 4, options 2 and 3 give you better returns. On average, you will gain $80,000 with option 2 and will lose $80,000 with option 4.

Look around and you may begin to see examples of advertisers focusing on losses rather than gains, with stellar results. For example…

How many mattress commercials have you heard that say, “Buy our xyz bed and you will get your best night’s sleep ever.” Yawn. Boring. The commercial may put me to sleep, but it’s not going to get me to buy a bed.

Consider this actual advertisement. “If your mattress is 10 years old, it weighs twice its original weight due to the dust mites that accumulate over the years.” Ouch! This makes me want to replace my mattress now.

Instead of selling customers on how great your product or service is, show them the downside of using a less reliable alternative. As a friend of mine says, “If you need open heart surgery, would you shop for a cardiologist based on price?” She then launches into the risk associated with not getting it (your product/service) right.

What examples have you seen of great sales pitches, advertisements, or anything else that uses this concept?

P.S. One place where this concept apparently does not apply is on TV game shows. I see people on “Deal or No Deal” risk a certain $500,000 for a 50% chance of winning $1 million. Their interviewing process must do a great job at finding the few people who really do take risks to increase their gains.

Why You Should Love Failure

June 8th, 2010

May 17, 2010

Why You Should Love Failure

Posted by Donna Fenn at 3:58 PM

I spent part of last week at a conference called MultiMania in Kortrijk, Belgium, speaking about young U.S. entrepreneurs and learning about their European counterparts. One of the most striking things I discovered is that while young people in Europe do have the desire to start their own companies, many are faced with a major stumbling block that is largely cultural: fear. Not fear of taking the leap into the world of entrepreneurship, but fear of failing at it. The topic also came up at SXSW last March at a panel discussion on “How to Teach Entrepreneurialism Globally.”

On all fronts, the consensus seems to be that it’s awfully tough to encourage entrepreneurship in environments where failing is viewed as catastrophic and humiliating, as it is in many parts of the developing world as well as in Europe. Not that we are universally in love with failure here in the U.S., but somewhere along the way, many of our entrepreneurs seemed to start wearing their failures as badges of honor – evidence of risk-taking, resilience in the face of adversity, and the ability to dust yourself off and start over again.

But there’s something else going on here as well, I think, and it’s a concept that Srikumar Rao lays out brilliantly in his new book, Happiness at Work. It’s about valuing process over outcomes. In other words, while you most certainly start a business with a big goal in mind, the true value of the entrepreneurial experience comes from what you do every day to achieve that goal. If you love the process and learn from it, then achieving the goal itself almost becomes secondary. In fact, you may discover that your accumulated knowledge can be leveraged more effectively toward an even worthier goal. It’s that laser focus on the process – not obsession with the end goal – that ultimately leads to success.

Great entrepreneurs understand this intuitively and I’m beginning to believe that this is particularly true of our younger entrepreneurs. Last Friday at Elliot Bisnow’s excellent DC10 Conference, I listened to Trip Adler (Scribd), Adam Smith (Xobni), and Drew Houston (Dropbox), speak with incredible enthusiasm and pride about the failed ventures that ultimately led them to their current successful businesses. “The worst thing is not having your idea fail,” said Houston, “it’s when it takes a really long time to fail.” That’s where fear comes in again: we’d rather hold on for dear life to something that doesn’t work than admit failure.

So I left Europe with fingers crossed for the same type of youth entrepreneurship revolution that we’re experiencing here in the U.S. Some notable bright spots: Fraser Doherty (otherwise known as Jam Boy) who started SuperJam with his grandmother’s jam recipe and experienced his fair share of failure before taking the UK market by storm; and a little Belgian design company called Elevenfeet whose co-founder Wouter Doornaert summed it all up perfectly: “So what if I fail? At least I’ll have a story to tell.”

Forget Your Elevator Pitch — What’s Your Dumbwaiter Pitch?

May 21st, 2010

Umair Haque On:Global Business, Competition, Economy

Forget Your Elevator Pitch — What’s Your Dumbwaiter Pitch?

So you’ve got an elevator pitch — a short, pithy description of why your business is special, exciting, and unique. Yawn. Today, elevator pitches are the economic equivalent of speeches at a beauty pageant: predictable, often vapid, always bland.

Here’s a suggestion. Try a Dumbwaiter Pitch instead. It’s an exercise I often do with startups, giant corporations, social entrepreneurs, and investors. Its goal? To strip an organization right down to its bones, and see how compelling it really is.

What’s the one-word description of your business? That’s right: just one word. The most common answer is: hmming, hawing, and silence. The second most common answer is an imaginary benefit. The third most common answer is a raw product — just another mass-produced, meaningless commodity. All three answers reveal a business with whose foundation, its economic concept, is confused, muddled, and perhaps even nonexistent.
Let’s go through a few examples.

What’s the Dumbwaiter Pitch for a soft drink company? “Happiness” is Coke’s latest answer. Of course, the link between soft drinks and happiness is tenuous at best, and probably totally nonexistent in reality. Let’s get real: the Dumbwaiter Pitch for a soft-drinks company isn’t “happiness.” It’s just “sugar-water.” And in a world where the costs of obesity on the one hand and poor nutrition on the other are ever more apparent, that’s a weak, uncompelling proposition.

What’s the Dumbwaiter Pitch for Vertu — the Nokia subsidiary that makes luxury mobile phones? “Luxe” doesn’t work — it takes more than merely ostrich leather to make high-end tech, as Apple’s groundbreaking software so vividly keeps demonstrating. Blinged-out versions of a $50 phone that sell for 100x the price? The only Dumbwaiter Pitch for that set of economics is “consumption.” And that highlights the problem with the very foundation of the business, its economic concept. In a world where consumption must rebalance sharply, Vertu’s concept has reached its expiry date.

What’s Foursquare’s Dumbwaiter Pitch? If it’s “gaming,” there are plenty of more involving games, more powerful substitutes around. If it’s “connection,” who’s connecting? There’s a long way, it seems, to go before real connections are made. The Dumbwaiter Pitch highlights the need for Foursquare, while cool, to get serious about next-gen economics.

What’s Twitter’s Dumbwaiter Pitch? I’d say: “alerts.” And that’s powerful in a roiling, seething world where risk and volatility are vastly amplified. Information that alerts you to possibilities and opportunities matters more than ever before. You can’t get alerts anywhere else: not at Google, Yahoo, or Microsoft. Twitter is one of the few companies in the economy with a solid, compelling Dumbwaiter Pitch.

In simplicity lie the seeds of explosively powerful propositions. In complexity, only confusion, incoherence, and uncompetitiveness.

Reductive, simplistic, restrictive? Think again. Nearly every disruptive business, in fact, has a Dumbwaiter Pitch as pure, simple, and powerful as Niagara Falls. Google? Search. Apple? Beauty. Lego? Creativity. Conversely, companies that aren’t sharp-eyed enough to see that their real Dumbwaiter Pitches are lame, tired, or just plain evil — well, they usually end up facing extinction. Wall Street’s should have been “wealth” but it was really “looting” — pow! Big Pharma’s should be “health” but it’s really “pricing” — zap! Big Food’s should be “nutrition” but it’s really “obesity” — bang!

The Dumbwaiter Pitch is so powerful because it cuts through the obfuscation, glad-handing, and double-talk so beloved of boardrooms and beancounters and asks them to get straight to the real point. And, of course, like the sharpest of scalpels, it reveals where there never was any meat on the bones to begin with.

Only businesses with a razor-sharp, laser-focused vision — and a disruptive economic concept — can craft a Dumbwaiter Pitch. Do you have what it takes? What’s the one-word description of your business?

Why Is Business Writing So Awful?

May 17th, 2010

Why Is Business Writing So Awful?
Nearly every company relies on the written word to woo customers. So why is most business writing so numbingly banal?

By Jason Fried | May 1, 2010
Laurent Cillufo

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Tips on negotiating, setting goals, lead generation, and more

What’s bad, boring, and barely read all over? Business writing. If you could taste words, most corporate websites, brochures, and sales materials would remind you of stale, soggy rice cakes: nearly calorie free, devoid of nutrition, and completely unsatisfying.

One of my favorite phrases in the business world is full-service solutions provider. A quick search on Google finds at least 47,000 companies using that one. That’s full-service generic. There’s more. Cost effective end-to-end solutions brings you about 95,000 results. Provider of value-added services nets you more than 600,000 matches. Exactly which services are sold as not adding value?

Who writes this stuff? Worse, who reads it and approves it? What does it say when tens of thousands of companies are saying the same things about themselves?

When you write like everyone else and sound like everyone else and act like everyone else, you’re saying, “Our products are like everyone else’s, too.” Or think of it this way: Would you go to a dinner party and just repeat what the person to the right of you is saying all night long? Would that be interesting to anybody? So why are so many businesses saying the same things at the biggest party on the planet — the marketplace?

If you care about your product, you should care just as much about how you describe it. In nearly all cases, a company makes its first impression on would-be customers or partners with words — whether they’re on a website, in sales materials, or in e-mails or letters. A snappy design might catch their attention, but it’s the words that make the real connection. Your company’s story, product descriptions, history, personality — these are the things that go to battle for you every day. Your words are your frontline. Are they strong enough?

Unfortunately, years of language dilution by lawyers, marketers, executives, and HR departments have turned the powerful, descriptive sentence into an empty vessel optimized for buzzwords, jargon, and vapid expressions. Words are treated as filler — “stuff” that takes up space on a page. Words expand to occupy blank space in a business much as spray foam insulation fills up cracks in your house. Harsh? Maybe. True? Read around a bit, and I think you’ll agree.

Luckily, there are exceptions. Wonderful exceptions. These are companies with a personality and a point of view. They care enough to have their own voice. They want to communicate, not just say something. They have a story to tell, and they want to tell it well. They write to be read.

Woot is one of those companies. Woot is a Dallas-based business that sells one item a day at a deep discount. Here is how the company describes itself on its website:

Woot.com is an online store and community that focuses on selling cool stuff cheap. It started as an employee-store slash market-testing type of place for an electronics distributor, but it’s taken on a life of its own. We anticipate profitability by 2043 — by then we should be retired; someone smarter might take over and jack up the prices. Until then, we’re still the lovable scamps we’ve always been.

Don’t you just love these people? Or maybe you hate them. Either way, I’m pretty sure you have an opinion about Woot based on this paragraph. With just a few sentences, Woot instantly set itself apart from the liquidation crowd.

Indeed, how the company communicates is a big part of how Woot built such a successful business. Woot’s deal of the day sells out just about every day. I especially love the company’s response to the “Will I receive customer support like I’m used to?” on its FAQ page:

No. Well, not really. If you buy something you don’t end up liking or you have what marketing people call “buyer’s remorse,” sell it on eBay. It’s likely you’ll make money doing this and save everyone a hassle.

It’s kind of kidding and kind of not. Some people may be offended, but big deal. Woot isn’t trying to sell to every customer. It’s trying to sell to the customers that can laugh along. Those are the people who understand what Woot is about. The company uses language as a filter.

Another favorite of mine is Saddleback Leather in San Antonio. Dave Munson, the company’s founder, clearly loves his products and his words. Here’s how he sets the scene when describing the quality of the company’s bags:

You know how when a magician exposes to the world how other magicians trick people, all of the other magicians get mad at him for spilling the beans? Well, I’m about to spill the beans and ruin it for all of those companies trying to trick you into buying their not so high quality leather…You’re about to learn what to look for and what to look out for as you shop for your next leather piece. By the way, if I soon die by a chopstick to the neck, you’ll know why. I’m a marked man.

He then dives into great detail about what makes a great leather bag great. From the type of leather and where it comes from to how it’s tanned to breakable versus nonbreakable parts (“How much is a billion dollar submarine with a plastic hatch worth?”) to the number of seams, and so on. It’s compelling and interesting. It holds your attention.

And check out how he explains his guarantee:

All of our products are fully warranted against all defects in materials and workmanship for 100 years. If you or one of your descendants should have a problem, send it back to me or one of my descendants and we’ll repair or replace it for free or we’ll give you a credit on the website (be sure to mention the warranty in your will).

Consider his choice of words. A 100-year warranty that his descendants will honor if one of your descendants needs a repair. And then he reminds you to include the warranty in your will. Who wouldn’t want to do business with this guy? And it’s all backed up with the Saddleback tag line: “They’ll Fight Over It When You’re Dead.” Beauty.

When you’re done reading this article, hit Google and search for leather bags. Then read through some of the sites you find. I bet you’ll be bored to death pretty quickly. Then visit Saddleback’s site. I bet you’ll be smiling just as fast.

Here’s one more example of writing done right: Polyface farm in Swoope, Virginia. Polyface is run by Joel Salatin, a pioneering farmer, author, and prophet of clarity. The Polyface Guiding Principles page is a study in straightforward language with a healthy hint of attitude:

Plants and animals should be provided a habitat that allows them to express their physiological distinctiveness. Respecting and honoring the pigness of the pig is a foundation for societal health….We do not ship food. We should all seek food closer to home…This means enjoying seasonality and reacquainting ourselves with our home kitchens.

I especially love his take on what it means to be a farmer:

We’re really in the earthworm enhancement business. Stimulating soil biota is our first priority. Soil health creates healthy food.

Joel knows where he stands. When you read his site, you do, too. Even though Joel is a “full-service end-to-end” farmer, he’d never say it like that. He’d consider that description disrespectful to his customers, employees, plants, and animals.

The quality of the writing on sites like Woot’s, Saddleback Leather’s, and Polyface’s gives me the chills. It’s not how they look; it’s how they read. These are businesses that care about what they say and how they say it. They don’t write to fill up space on a page. They write to fill up your head. There is nothing inherently interesting about liquidators, leather, or farmers. They can make themselves boring, or they can make themselves interesting. Words do that job. Woot, Saddleback, and Polyface have all chosen to be interesting and engaging. They don’t hide behind jargon. They aren’t insecure. They aren’t afraid to tell you who they are.

I can already hear some of you saying, “Sounds great. But I can’t write.” So hire a writer. But make sure that writer truly understands your business. Remember: It’s not about telling a story. It’s about telling a true story well.

Of course, words alone won’t do it. Words are two dimensional. Your products and services provide the third dimension — depth. But when it all comes together, you’ve got a package that’s hard to ignore.

Jason Fried is co-founder of 37signals, a Chicago-based software firm, and co-author of the book Rework, which was published in March

A Little Less Conversation

April 29th, 2010

With constant, ever-increasing demands on our time, each of us must work hard to remain effective and not just “busy.” I came accross this post by Joel Spolsky and it really hit home with me. I began to practice a lot of what Joel suggests and it is having a big and very positive impact. So much so that I wanted to share this with you.

Bob

Have you ever invited employees to a meeting just so they wouldn’t feel left out? If so, you may be an overcommunicator.

By Joel Spolsky | Feb 1, 2010
Josh Titus

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Cross-functional or Dysfunctional? On every project, one person should be in charge of the flow of communication. You want the decision-making process to look like Figure A — not Figure B.

Joel Spolsky is the founder and CEO of Fog Creek Software in New York City.

When was the last time you scheduled a meeting and invited eight people instead of the three people who really needed to be there simply because you didn’t want anyone to feel left out?

When was the last time you sent a companywide e-mail that said something like, “Hey, attention coffee drinkers: If you finish the pot, make another!” even though there is actually only one person who violates this rule (and she’s your co-founder)?

When was the last time you got into a long discussion over the color palette for the new brochure with a programmer, who has nothing to do with the brochure but sure knows that he doesn’t like orange?

These are symptoms of a common illness: too much communication.

Now, we all know that communication is very important, and that many organizational problems are caused by a failure to communicate. Most people try to solve this problem by increasing the amount of communication: cc’ing everybody on an e-mail, having long meetings and inviting the whole staff, and asking for everyone’s two cents before implementing a decision.

But communications costs add up faster than you think, especially on larger teams. What used to work with three people in a garage all talking to one another about everything just doesn’t work when your head count reaches 10 or 20 people. Everybody who doesn’t need to be in that meeting is killing productivity. Everybody who doesn’t need to read that e-mail is distracted by it. At some point, overcommunicating just isn’t efficient.

It’s a particularly insidious problem for fast-growing start-ups. When you’re really small and you’re just starting out, you don’t have that many people, so keeping everyone in the loop on everything doesn’t really take that much time. But as you get bigger, the number of people who might potentially get involved in any particular discussion increases, and the amount of stuff you’re doing as a company increases, and the amount of time you can waste overcommunicating becomes a serious problem.

As companies expand, the people within them start to specialize. At such a point, some managers will conclude that they have a “keep everyone on the same page” problem. But often what they actually have is a “stop people from meddling when there are already enough smart people working on something” problem.

It’s not that Bob in Accounting doesn’t have anything useful to say about the photography for the new advertising campaign. Yes, Bob has a master’s in fine arts. Yes, Bob is an amateur photographer. And maybe he even has better taste than do the people in marketing. Still, Bob shouldn’t be telling the marketing manager what to do, because it’s just not efficient. In fact, it’s highly inefficient.

The cost of overcommunication within organizations was fleshed out by Fred Brooks in his 1975 book, The Mythical Man-Month. Brooks helped run the OS/360 project at IBM, building a giant operating system for the company’s mainframes. In those days, computers were large, room-size, water-cooled machines, sometimes with a massive 256,000 bytes of main memory. OS/360 was probably the largest software project ever attempted to that point. And it was monumentally late.

Every time some aspect of the project fell behind schedule, IBM assigned a few more people to the task. And what Brooks noticed, which still surprises people, is that this didn’t work. His observation came to be known as Brooks’ Law: Adding people to a late project tends to make it run later still.

Read that sentence again, because it’s not intuitive. Brooks discovered that adding people to a project will put it further behind schedule.

How can that be? Well, when you add a new person to a team, that person needs to communicate and coordinate with all the other people on the team. This doesn’t sound like a big deal, but it is. The new kid doesn’t know what’s going on, so somebody else on the team — somebody who just last week was doing productive work — has to stop his or her work and show this newbie the ropes.

The bigger the team, the worse it gets. When you have a team of one person, you have no communication requirements. None.

Add a second person, and now you have a single connection: Adam and Mary have to talk to each other once in a while.

Now add a third person, say, Srinivas, and suddenly we’ve gone from one connection to three, since Srinivas has to talk to Adam and Mary.

Add a fourth person. I’m running out of names here to help me out — OK: Britney. If we add her, and she needs to coordinate with all of them, you get six connections.

For the mathematically inclined, the formula is that if you have n people on your team, there are (n2-n)/2 connections. This chart illustrates how this becomes a problem:

People Connections
1 0
2 1
3 3
4 6
5 10
6 15
7 21
8 28
9 36
10 45

As you can see, the communications costs start to rise pretty rapidly until, on large teams, all anyone ever has time to do is to coordinate with everyone else — and no one gets any work done. In 2006, Moishe Lettvin, a former programmer at Microsoft, wrote a blog post describing the year he spent coordinating the list of items that would be featured on one menu in Windows Vista — the menu you use to turn off your computer. (See The Windows Shutdown Crapfest.) Lettvin figured that 43 people all had a voice in designing this one menu. Forty-three! By Brooks’s formula, that means managing 903 connections. Lettvin says he spent so much time on coordination tasks that, in 12 months, he produced fewer than 200 lines of code.

As the boss, you need to design ways to reduce communications paths. Eliminate companywide mailing lists — or at least charge $1.50 to post to them. Stop having large meetings. You need a culture in which people don’t get uptight because they weren’t included in a meeting, which means you need a culture that rewards people for doing their jobs and frowns on meddling in other people’s work.

And on every project, assign one person to make sure that communication happens — but only the right communication. Otherwise the team will just start having long meetings with everyone there and, frankly, people will socialize, and bloviate, and speechify, and argue about things they don’t really care about just to hear their own voices.

I think this is probably one of those cases in which the old, 1950s style of management accidentally got something right. In those General Motors–style companies, they at least had an idea for how information needed to move up and down neat, regimented org charts, which showed a modicum of recognition that the right answer is not that every single person in the organization needs to pay attention to everything.

When you started your company, you probably did a great job of communicating. Everybody told one another everything. And your customers loved it, because when they called in to ask about their purchase order, everybody knew where it was. But as you get bigger, you can’t keep telling everybody about every purchase order, so you have to invent specific communications systems so that exactly the right people find out and nobody else. Not because it’s confidential. Because it’s a waste of time.

The Transition Curve

April 19th, 2010

The Transition Curve

By Michael · Comments (0)

Crossfit Dublin

The Transition Curve is the physical representation of the emotions we experience in the pursuit of a task. This is relevant to your experience at CrossFit, work or in any of your relationships. Keep in mind, to some degree, you go through this curve on a daily basis. It happens to a different extent depending on the meaning of the event.

At the start of a task you are in “Uninformed Optimism” and have a ton of excitement to get things going. You feel that your success is inevitable. This is the excitement of starting a new job or when you start dating a new person everything is just great. As you start to experience some failure you start to slide down the curve into “Informed Pessimism”. This is where you start to ask yourself why or how you were fooled into getting so excited. You decide to suffer through things at this point because you are stuck in it now but your attitude is generally negative and your results suffer as a result.

As your lack of commitment pushes you further and further down the curve you hit the “Crisis of Meaning”. This is where total burn out occurs and realize it is time for a change. Fight or flight. You either renew your commitment to what you are doing, focus on the positive and begin to achieve again or completely walk away. The latter is aptly named “Crash and Burn”.

When you decide to stay and learn to fight you start to feel success again. You understand better the challenges you will face and you are better equipped to deal with trials in the future. At this point you feel what is called “Informed Optimism” as you have the confidence of experience.

You cannot avoid the transition curve in life or any of its stages, but you can learn to more successfully navigate it. This is done by decreasing the peaks and valleys of the curve, understanding it and knowing which stage you are at and why. When you are feeling success, use this time to prepare for when you will struggle by using that high energy to do things you usually avoid so they don’t pile up on you later. The opposite is true when you are feeling low. Push yourself down the curve so that you can have your crisis of meaning faster and look hard at what you are doing and why you are doing it. Think about what got you through a challenging time before and how you were able to do it.

Whether you use it in a workout to remain poised when your lungs are going to come up and out your throat, or in everyday life when you are staring down that all too familiar curve ball, the Transition Curve is a valuable and effective tool for success.

Don’t Give Away Your Waffles

April 19th, 2010

By: Carol Tice | March 8, 2010 8:00 AM |

waffle.jpgI got the word this week: The Blue Ocean Cafe has closed. This cozy little diner, on the ground floor of a local condo complex in my small town, was much beloved. Why? The breakfast-focused eatery offered free waffles.Why is it out of business? It offered free waffles.

The sad tale of Blue Ocean illustrates the perils of promotions based around free stuff. They can really backfire and take your business down the drain.

I suspect the original intent was for the waffles to be free for just a short initial run, while locals were discovering the restaurant. It was designed to break loyalties to other local breakfast spots. And it succeeded in spades. Soon, every business meeting and mommy meetup in town was being held at Blue Ocean. Other local diners lowered prices on some items to try to compete. 

It was the greatest marketing tool ever–at the 4th of July parade, the owners handed out laminated waffle-shaped placards advertising the free waffles. I’ve still got mine on the fridge. Adorable.

And, since waffles were pretty much one of two main dishes along with scrambled eggs, the restaurant was probably losing money on nearly every transaction. We all knew it couldn’t go on forever. This isn’t like Adobe, where they give you the cheap Acrobat, because it hooks you into buying Flash or Creative Suite. They had no move-up product…they were just giving their core product away.

After many months, Blue Ocean set a date–the free waffles were ending. That lasted about two weeks. After being reduced to an empty, echoing shell, the restaurant owners caved: free waffles were back.

Another attempt was made–they made the waffles free but only with other purchases of a certain amount. This rule put many customers into a huff. They expected the waffles to be free in any case. Feelings were hurt.

Ultimately, the restaurant couldn’t make money with its free offer, and it couldn’t keep customers without it. Talk around town is that a rent hike was the last straw. It’s hard to sustain a rise in costs when you’re giving away your core product.

In this age of freemiums and books preaching the power of free stuff, Blue Ocean provides a cautionary tale: construct your free offer carefully. In the downturn, many retailers feel pressure to lower prices or offer giveaways. But remember, free offers should bring customers in, build loyalty, and then prep them to move up to something you get paid for. Otherwise soon, your retail space may be free for another entrepreneur to rent.

Email is Making Us Stupid

April 12th, 2010
 

E-mail is Making You Stupid

The research is overwhelming. Constant e-mail interruptions make you less productive, less creative and–if you’re e-mailing when you’re doing something else–just plain dumb.

By Joe Robinson   |   Entrepreneur MagazineMarch 2010
 
Within the heart of your company, saboteurs lurk. Disguised as instruments of productivity, they are subverting your staff’s most precious resource: attention. Incessant e-mail alerts, instant messages, buzzing BlackBerrys and cell phones are decimating workplace concentration. The average information worker–basically anyone at a desk–loses 2.1 hours of productivity every day to interruptions and distractions, according to Basex, an IT research and consulting firm.

That time is money. Computer chip giant Intel, for one, has estimated that e-mail overload can cost large companies as much as $1 billion a year in lost employee productivity. The intrusions are constant: each day a typical office employee checks e-mail 50 times and uses instant messaging 77 times, according to RescueTime, a firm that develops time-management software. Such interruptions don’t just sidetrack workers from their jobs, they also undermine their attention spans, increase stress and annoyance and decrease job satisfaction and creativity.

The interruption epidemic is reaching a crisis point at some companies and shows no sign of slowing. E-mail volume is growing at a rate of 66% a year, according to the E-Policy Institute. More people are texting. More are using Facebook or Twitter for work.

“It’s worse than it’s ever been,” says Michelle Rupp, owner of NRG Seattle, an insurance brokerage with a staff of 12 who feel pounded by the avalanche of messaging. “It’s so hard to stay focused. Everything bings and bongs and tweets at you, and you don’t think.” 

Yes, it is possible to blunt the interruption assault. But business leaders must go on the offensive in a realm most are oblivious to: interruption management.

The Myth of Multitasking
Human brains come equipped with two kinds of attention: involuntary and voluntary. Involuntary attention, designed to be on the watch for threats to survival, is triggered by outside stimuli–what grabs you. It’s automatically rattled by the workday cacophony of rings, pings and buzzes that are turning jobs into an electronic game of Whac-a-Mole. Voluntary attention is the ability to concentrate on a chosen task.

As workers’ attention spans are whipsawed by interruptions, something insidious happens in the brain: Interruptions erode an area called effortful control and with it the ability to regulate attention. In other words, the more you check your messages, the more you feel the need to check them–an urge familiar to BlackBerry or iPhone users.

Technology is an addiction,” says Gayle Porter, a professor of management at Rutgers University who has studied e-compulsion. “If someone can’t turn their BlackBerry off, there’s a problem.”

Climbing Out of the Inbox


E-mail multiplies like rabbits, each new message generating more and more replies. Want fewer distractions? Send fewer e-mails. Here are some helpful rules.

• Turn off all visual and sound alerts that announce new mail.

• Check e-mail two to four times a day at designated times and never more often than every 45 minutes.

• Don’t let e-mail be the default communication device. Communicating by phone or face-to-face saves time and builds relationships.

• Respond immediately only to urgent issues. Just because a message can be delivered instantly does not mean you must reply instantly.

• Severely restrict use of the reply-all function.

• Put “no reply necessary” in the subject line when you can. No one knows when an e-conversation is over without an explicit signal.

• Resist your reply reflex. Don’t send e-mails that say “Got it” or “Thanks.”

• Use automatic out-of-office messages to carve out focused work time, such as: “I’m on deadline with a project and will be back online after 4 p.m.”

The cult of multitasking would have us believe that compulsive message-checking is the behavior of an always-on, hyper-productive worker. But it’s not. It’s the sign of a distracted employee who misguidedly believes he can do multiple tasks at one time. Science disagrees. People may be able to chew gum and walk at the same time, but they can’t do two or more thinking tasks simultaneously. 

Say a salesman is trying to read a new e-mail while on the phone with a client. Those are both language tasks that have to go through the same cognitive channel. Trying to do both forces his brain to switch back and forth between tasks, which results in a “switching cost,” forcing him to slow down. Researchers at the University of Michigan found that productivity dropped as much as 40 percent when subjects tried to do two or more things at once. The switching exacts other costs too–mistakes and burnout. One of the study’s authors, David Meyer, asserts bluntly that quality work and multitasking are incompatible.

Brian Bailey and Joseph Konstan of the University of Minnesota discovered that sleeve-tugging peripheral tasks triggered twice the number of errors and jacked up levels of annoyance to anywhere between 31 percent and 106 percent. Their interrupted test workers also took 3 percent to 27 percent more time to complete the reading, counting or math problems. In fact, the harder the interrupted task, the harder it was to get back on track. (A Microsoft study suggests it takes a worker 15 minutes to refocus after an interruption.)

The damaging effects spread well beyond the office cubicle. Kate LeVan, a communications consultant in Evanston, Ill., coaches executives whose brains are so scrambled by electronic interruptions that they stumble during key face-to-face interactions: board meetings, investor pitches, sales presentations. “They can’t have an extended conversation for more than a few minutes,” LeVan says. “That’s the impact of having all this data going back and forth. They have problems in conversation because they can’t focus.”

Here’s how the brain behaves when your attention slips away from a task: The hippocampus, which manages demanding cognitive tasks and creates long-term memories, kicks the job down to the striatum, which handles rote tasks. So the gum-chewing part of the brain is now replying to the boss’s e-mail. This is why you wind up addressing e-mails to people who weren’t supposed to get them. Or sending messages rife with typos.

The striatum is the brain’s autopilot. And no part of your business should be allowed to run on autopilot.

Paying Attention to Paying Attention
In her 2009 book Rapt, Winifred Gallagher argues that humans are the sum of what they pay attention to: What we focus on determines our experience, knowledge, amusement, fulfillment. Yet instead of cultivating this resource, she says, we’re squandering it on “whatever captures our awareness.” To truly learn something, and remember it, you have to pay full attention.

E-interruptions are making it so hard to do that that Google, Microsoft, IBM and Intel are members of the Information Overload Research Group, formed in 2008 to collaborate on research, develop best practices and host forums to share new approaches. It’s self-preservation as much as anything; computer engineers were among the first to show symptoms of e-interruption exposure. 

Ten years ago, Harvard Business School’s Leslie Perlow famously chronicled the interruption of a high-tech software company. Its engineers were interrupted so often they had to work nights and weekends. After studying the workplace for nine months, the source of the dysfunction became clear: No one could get anything done because of the bombardment of messages. Perlow came up with an intervention: Quiet Time. For four hours in the morning, the 17 engineers worked alone. All messaging and phone contact was banned. In the afternoon, communication could resume. Given time to concentrate, the engineers got a project for a color printer completed without the graveyard shift.

Intel is using Quiet Time at two of its sites. Other companies, including U.S. Cellular and Deloitte & Touche, have mandated less e-mail use, encouraged more face-to-face contact and experimented with programs such as “no e-mail Friday.” The results often are surprising: employees build rapport with colleagues–and they save time. Co-workers can settle something in a two-minute phone conversation that might have required three e-mails per person. Each change reverberates throughout a company, especially since–as a University of California, Irvine, study found–44 percent of interruptions an employee experiences are from within the company.

Nearly everyone needs such boundaries to get anything done in this 24/7 work world. Count Chad Willardson among the converted. He’s a senior financial advisor at Merrill Lynch Private Wealth Management Group and operates a financial services practice with a partner for Merrill in Riverside, Calif. He used to check for new messages every five minutes, a potential 96 interruptions during an eight-hour day.

“The more I checked e-mail,” he says, “the more anxious I would feel over every request and question.” Now he checks e-mail manually, and only four times a day at prescribed hours–the schedule that Oklahoma State University researchers describe as optimum. He says he gets a lot more done, is more in control of his calendar and feels much less stressed.

In fact, stress-management seminars often reveal executives driven to wits’ end by their own inboxes. During one session at the aerospace company Lockheed Martin, many managers vented this frustration–until one raised his hand. “It’s not a problem for me,” he said. “I’ve gotten my e-mail checking down to twice a day.”

He explained that his staff knew he preferred to communicate by phone and they don’t send him e-mail unless it’s important that the information be in writing. And because he checked e-mail only twice daily, they had been weaned from the idea that they’d get an instant reply.

Chances are this wasn’t just good for the manager, but for all his employees, too. By modeling interruption-management, he was likely reducing the volume of interruptions throughout his division. Everyone understood that he viewed excessive messages as a drain on his performance–and by extension, theirs.

One thing was clear that day at Lockheed: When the manager volunteered his solution, it was as if he’d levitated. Other managers looked stunned. And envious.

Joe Robinson, a business coach and trainer, is the author of Work to Live and the audio CD The Email Overload Survival Kit.