At first, I was glazing over a little bit. The idea of ‘leaders of tomorrow’ is one of those phrases that’s been so co-opted by the business schools and business press of the world, it almost doesn’t mean anything anymore. But as the conversation continued, I started to realize just how massive of a challenge she was talking about.

The idea of leadership is a weird animal. It’s mostly internal personality characteristics that manifest themselves in significant ways. Good leaders see the world from a unique perspective, they get things done, they make people feel valuable. It’s easier to reflect that someone is a good leader, rather than project that they will be a good leader.

After a lot of thinking and conversations, I believe that what makes a ‘leader’ has to do with their levels of curiosity, confidence and inspiration. Of course there are lots of other characteristics at play, but those elements seem to be the three traits I see over and over that define people and how they become these strong leaders. There are many talents good leaders learn over time, these three feel a little more innate.

Now the interesting thing about these characteristics is that they don’t have formal outputs, they’re personality components. They drive how we react internally to our external environment. You see evidence if these characteristics through storytelling. These personal stories help explain the energy that moves people between moments, the ‘why’ not the ‘how’ or the ‘what’. For example, you spotted an opportunity somewhere because you are curious about the world you live in, you were able to attack a problem because your had confidence you could solve it, or you designed/built something because you were inspired and were moved to action. Etc, etc.

So, as the conversation continues, I start to realize just how curiosity, confidence, and inspiration work like the physical engine in a car or a virtual engine in a video game. They need inputs to produce outputs, and, depending on their design, they deliver radically different things.

This is the point at which I started to think about how the idea of leadership has changed. People that are twenty years old today grew up with massively different inputs than people who are forty, (and in someways we’re culturally trying to fit them into this classic leadership definition.) These people may lead in the same style, they make some of the same decisions, but the way they find their confidence, inspiration, and curiosity to make those decisions is so different, we can’t even know how it works yet.

Today, anyone curious and inspired enough can have massive amounts of data from completely different industries to consider, they have global networks they can learn from, and possibly most importantly, they can operate in near-real time. Our connected world is probably the greatest force in upending the classical definition of a leader. The problems they will tackle and outcomes they will know will probably be drastically different, but I still think those three characteristics will survive (they’ll just function very differently).

I’m definitely not doing the conversation justice, but You can see how it’s easy to focus on a lot of misleading elements when we try to identify leadership. It’s easy to go for major achievements and heroic moments, but the ‘why’ behind the ‘what’ always will tell a deeper tale.

There’s much more to think and write about here…this is sort of a beginning.

What do you think?

The thing that’s inspiring to me is that you rarely read about a company being bought because it has a great culture. Bankers and M&A people don’t really know how to value a company’s culture that well. And if you can’t value something, it’s hard to price it – everything gets messy in the valuation, so you usually a stick with things that are more numbers-oriented. Companies usually like to pay for things they can count: market share, channel access, IP, scarce resources, etc. Cisco is a great example. From the late-90′s to mid-00′s, Cisco was on a major buying spree to pick up any patents or technologies in their space. They usually bought technology cheaper than they thought they could build it, they rolled it into a product road map and slowly, consistently grew the orb.

That sort of acquisition strategy works great if your a tech company, but not if you’re an online retailer. There’s almost nothing you can do to force customers to come back to your site over and over except serve them better than anyone else can. Amazon gets this, and I think they also get that good service starts with strong culture. Tech companies buy other companies because many times they need some technology they coolant manage to build themselves. By that same logic, culture seems even harder to create (and maybe more valuable) than some of the most brilliant IP. Getting the right culture is like catching lightning in a bottle. It’s the right people at the right place at the right time. You can invest in R&D to build specific IP, but it’s almost impossible to invest with the same intention and build a great culture.

All of this thinking on company culture lead me to one last thought. If traditional retail was all about location, location, location (can your customers find you), and if the early days of the web were all about access, access, access (can you offer all the long tail of goods your consumer could possibly want), retailing on the web now is about personality, personality, personality (brands than connect deeply with how their customers think and feel). Let’s face it, if in three clicks or less we can find anything our hearts desire, isn’t the next frontier buying those things under terms that are personal to us? (Think Zappos and their shoe returns, Woot and their one-item-a-day geekfest, or Amazon and their Prime shipping).

As the internet gives us more and more options, we seem to create more and more fractions in an attempt to create meaning in this ever-expanding sea of access. That’s happening everywhere online; content, services, networks, you name it. Today, it seems perfectly normal to go to the same (online) store everyday just to check out the one item they’re selling at a discount. This sort of evolution can’t come from a well constructed sensical strategy that makes good business sense, it has to come from a company with personality and a culture that’s just crazy enough to try.

(People especially seem to love numbers that go up; The Dow, Twitter Followers, Facebook friends, salaries, and so on.)

None of this is really much of a revelation, but the idea is still significant. Measurement is the bridge that links innovation to execution. It’s how you understand if your good idea is actually good, and it’s how you’ll move from concept to constant.

Given all this, I was really interesting to learn about Goodharts Law (via Boing Boing.) It’s a little wordy, but it basically states that people pay attention to the things that are measured, and because of this extra attention things that are measured change. (That’s is basically more or less what I wrote earlier.) I have to admit, I’m sort of surprised that this maxim hasn’t surfaced sooner, since 60% of the business articles in the past five years seemed to have been about innovation and/or metrics.

So where do we go from here? Well for me, this all makes a pretty good case for being very careful how you design your measures – what you monitor, how you think about it, and how you share this with a larger audience. The small but important point is that no one really said measuring things makes them any better, it just gives them more attention. Where it goes from there is all a matter of design.

Measure the change you want to see – it’s the law.

It’s true, those GPS manufacturers are in a pretty bad place. TomTom, Garmin, and other GPS manufacturers had their share price free fall on Google’s free GPS announcement. Why would anyone pay for a device, if they could the same functionality in their phone for free?

I think there’s more than just paid vs. free. I think the difference lies in the difference in perspective a device company has from a service company. If you’re a device company your customer buys a ‘thing’. Once they buy that thing, they’re a cost to retain until they buy again; customer service, upgrades, anything. Garmin has changed nothing about my GPS since I bought it. In the three years we’ve owned that GPS Garmin has never evolved the experience. Sure they’ve fixed bugs, but I will never get a better experience until I buy another device.

It would be a completely different relationship if Garmin was a service company. A service mindset realizes that you only have a customer if you serve them. So beyond the service being free, Google will actually interact with the customers differently that Garmin. If I were to use a Google phone as a GPS, I have assurance that Google will constantly upgrade the service. They’ll be adding ads I’m sure, but I’d also expect them to improve screen flows and consistently refine the experience.

So when people talk about the dark days for physical GPS manufacturers, I don’t really think it’s a free vs. paid argument, I think it’s about how you serve your customer. I have a lot of confidence that if Garmin or any of those players really turned out a significantly better in-car GPS experience, they could hold on to their market share. That doesn’t mean adding photo albums, or fitness feaures…do you honestly think I’m going to go running with my car’s GPS? It means you have to be brilliant at the basics, that’s what people pay you for. Garmin sells a simple touchscreen device. They could deliver a software upgrade and overwhelm their entire customer base and make a big deal about it. If you’re a device company, you can’t see that. Upgrading the interface would just be foolish, you’ve already earned those customers. Something like that would just be a sunk cost.

Good luck guys. It’s going to be a long year.

Strategy is an act of design….You can’t analyze your way to real strategy. You have to create it from data, guts, empathy, creativity, and a little thin air.
- Roger Martin

I love this quote, (full article here). I don’t think good strategies are always an entirely linear and rational act. We post-rationalize things so great businesses feel like they were ordained by some higher power, but that’s not how the world actually works.

I’ve always liked the idea of these two moments working together, it’s kind of a nice reminder to not over-promise what you can offer. It’s also reinforces the importance of having continuity between your identity/packaging and your product. At one time or another, we’ve all been really excited to buy something only to be disappointed later with the results of what we’ve bought. In that case, the first moment was won, but the second was lost…you have to nail them both, I like this act of bringing things into harmony.

From here I started to wonder what actually happened next. It struck me that those marketing moments are missing a bigger, more important truth – you’ve bought something, you’ve tried it…now, knowing what you know, would you buy again? Would you repeat? If you’re in the business of thinking hard about FMOT and SMOT, shouldn’t you also be worrying about the Third Moment of Truth?

(Important note: The world doesn’t need any more clever marketing phrases, that’s not really the point here. It’s a term that references the other two moments…I’m using it for the thought exercise. Also, the core concept isn’t new – companies obsess over repeat purchase.)

Ok, so if you argues that the First Moment of Truth was about believing a product was for you, the second moment was confirming, or knowing, it was for you, would the final more important moment be about preferring what you’ve had over what you could have? Framing these things linearly might look roughly like this…

What I sort of think is interesting is that you make different investments to get people to try something than you do to get them to love it. And while consumers move across that line left-to-right, companies have to earn those capabilities right-to-left.

I think getting product experience right is more about culture than it is about execution. When an organization agrees on an idea, it can motivate around it and execute against the concept. (This is sort of the reason someone in P&G coined the First Moment of Truth and the Second Moment of Truth….and why P&G does this type of thing very, very well.) If CPG companies had lingo and agreements around product experience, I wonder how different the products we use today? It’s really hard to agree on what passes for ‘excellent’ vs. ‘good enough’. WOuld these companies deliver differently if they had to ‘win on the third moment of truth’?

Maybe everyone gets this already, it’s pretty straight forward. But if everyone got it, wouldn’t every car door close like a BWM? Wouldn’t every airline have amazing service? Wouldn’t every burger taste like In-n-Out? You see there’s the rub, I don’t think most companies worry (or spend) as much on their offer and they do on their marketing…and I wonder if that’s a cultural problem more than it is a business problem.

I sort of live for these moments in presentations. It’s probably the same attraction that keeps baseball fanatics glued to their television for hours of what appears to be a pretty boring game. After waiting patiently, and watching things slowly play out, something goes very wrong, At that point, all hell breaks loose. At that point, you see who’s the power player in the room, who’s done their homework, and who’s completely out to lunch. This part of the meeting was pretty mush a wash, that argument basically threw itself out the window. This presenter had just committed a pretty common error, one I now refer to as a Large Market Fallacy.

I’ll get to the details on LMF, but first a slight detour.

When I was in undergrad, I remember that some odd curriculum requirement forced me into a course on Logic. I think I was somehow dodging some history requirement, and the class ended up providing me with one of the few textbooks I kept beyond school. There was this fabulous section in the book that listed out scores of logical fallacies. Things like red herrings, slippery slopes, etc. were explained in detail. The book did a great job of taking pretty common arguing topics out of context and explaining why the arguments were problematic. This is where my head went when the overall market hit the trillions, (really?)

Ok, back to the market sizing.

I read a great piece in the WSJ around Large Market Fallacies earlier this year. (They weren’t using the phrase, but that was essentially the problem). This author used a great metaphor around selling a can of coke to every kid in China. The general idea is that people created flawed plans when they assume that the market holds an opportunity just because the market is massive. These business plans just want 5% of a MASSIVE market, which seems totally reasonable, right? I mean, 5% is a small share, so how could they fail.

I often wonder how people end up in this situation. For sure there are many reasons, but I have to believe that you only drive down this road if you don’t intend on executing the plans your making. If your on the line for these projections, you have a wholly different approach to things.

Ok, so enough ridicule, how do you get around this type of thing. Some markets are actually huge, how might you go about entering? Well, try to make the market small. Think about finding a niche (or creating one). Either cut it down to something digestible, or use a DDP and build a bottom-up estimate of investment versus return. (ex. “In the first year we’ll hire 50 sales people and we estimate that those 50 people will generate $20M in revenue.)

It’s not about being a hero in the business plan, it’s about getting closer to figuring out how you’ll actually launch your venture/product/service. If you just serve up a large market with no logic around how you’re going to success, there’s a pretty good chance you don’t really know who your customer is.

A small side note: I really, really wanted to refer to this sort of thing as a Chinese Market Sizing. Partly because I’ve seen it a lot when people size market opportunities in China (it’s a massive market and the plan has no idea how things really work there). However, taken out of context, I’d just sound like an ass, but still I think it would be a hilarious scenario.

You: “What was the problem with the plan?”

Me: “Chinese Market Sizing”

You: “Ohhh, Too Bad.”

Funny how your perspective really influnces how your solve you problems.

That moment has stuck with me over the years, and probably has done a decent amount to deprogram my b-school education. I was surprised at the automatic leap I had made to equate profit and success. I know that successful businesses are usually sustainable and profitable, but I had let something else define what success means. And when someone else defined success they implicitly defined what we would measure to be successful.

Its pretty fascinating that people are really good at optimizing what the measure. The act of tracking anything socially elevates its importance. And if we think something is important, we make sure we tend to it. On the job accidents, profitability, CO2 emissions, return on investment, net promoter…you name it, we can track it. Things get sticky though when the ideals we measure conflict with each other. Is profitability more important than customer satisfaction? Is avg. purchase price more important than how many people I tell about what I purchased?

I’ve been noticing lately how the airlines measurements get them in trouble time and time again. There’s the standard bullshit we all sort of laugh about when they push back from the gate for an ‘on-time departure’ only to sit on the runway for an hour. Last week, I noticed a new one. Since some airlines charge for every bag checked, the overhead storage space on the plane has become even more of a premium. As passengers filed on the plane, a flight attendant told a man he would have to gate check his bag. He smugly replied, “I guess no one else wanted to pay that $25 bag surcharge either.” We had so many bags to gate check that the plane left late. So in this case, the airline didn’t make any extra money (they don’t charge for gate check), the flight left late, and everyone was miserable. Way to go, Delta.

Dave Carroll of the band Sons of Maxwell have been getting a lot of attention because of one of their airline horror stories. Apparently United broke some of their music equipment in 2006. After no one at United helped them repair the damage, they wrote a song about it and posted it on You Tube. So what would might have been a $2k repair bill for United turned into a decent sized fiasco, 2.4M people have watched that video in 6 days. (That’s the population of Houston.) Good news for the Sons of Maxwell, bad news for United.

I guess it’s no surprise that the airlines who are thriving in today’s environment (southwest, virgin, jet blue), are the ones who have figured out that the customer experience (and how they measure it) are arguably one of the most important pieces of their strategy.

If you think about it, how you measure success is probably more important than how you define success. If you goal is to go east, and you measurements reward your for going west, where do you think you’ll end up?

That statement sort of offended my sensibilities at first. How can business models just happen? They take time, they’re complicated, and most of the time they fail. Also, edge economies are less proven. Wouldn’t that require more big brains and lots of ‘innovation’? It felt odd to say those models just happen.

Then, last week, I was doing some client work with experience models. I think I made my own offhanded statement saying something like “well if there’s nothing to experience, there doesn’t seem to be any value to pay for.” Not a real lightening rod of a thought…but then I realized; no experience, no value…no value, no business model. I was starting to get it.

So I went back to Haque’s article, and things made more sense. It’s all about what type of value are you delivering – connections, experience, physical goods, service, piece of mind, whatever. If you create that (and it’s valuable to someone), the business model will happen. It’s not that the business model doesn’t matter, it’s just that the model is only part of the platform. Without the value, you have no (real) model.

I was left wondering why this concept had been so difficult to digest at first, seems straight forward enough. I decided it was tough to swallow because business models just don’t change that often, and new business doesn’t mean new model. You may sell something new to the world over the web, but if it’s just about web fulfillment, it’s not a new model (which is fine). In fact most businesses are buying into proven models and spending all their resources making that model survive.

All this just takes me back to why prototyping is so important for building a new venture. It’s abou tfiguring out the need and the value first and then building a model that will complement the core promise. By prototyping, you’re committing to exploring different ways of delivering value. If you do it right, you’re not too invested to learn. If you do it right, you’re making room for some serendipity. If you do it right, you aren’t looking for shortcuts, you’re looking for answers.