Aug 09

The Large Market Fallacy

Last week, during a new product presentation, I had an all too familiar moment. We had reached the point in the meeting where it was appropriate to review the business logic behind the concept at hand. At this point the presenter threw up a massive sheet of numbers and calmly commented to the audience, “well, overall this is a $4 trillion dollar market, so we think if we only capture 5% of the market, we’ll earn around $200M in the first year.” She didn’t even blink. (I changed the numbers to protect the innocent…the sad part is they’re lower than the actuals.)

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.

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Jul 09

Speaking of measurements…

…and I just was. I noticed a really nice twist on the old restaurant secret shopper scheme. According to this article, Five Guys Burgers & Fries hires secret shoppers to find people who are doing things right. So instead of feeding a fear-based culture of screwing up and getting caught, they find ways to highlight people who are getting it right. And by doing secretly, they’re probably getting around the apple polishers who only do it right when they think it counts….because really, it always counts.

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

Jul 09

Airlines, mind your measures

Four years ago, I was at work sitting through lunch meeting around the health of our office. At the time what we were producing was great, and moral was high…but profitability was sort of lagging. My coworker deadpanned, “I supposed you can’t be considered successful until you’re considered profitable.” I sort of chuckled at the time, because I figured it was his way of basically stating that we were screwing up. I mean, isn’t the only way a business can be successful is if it’s profitable?

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?

Jun 09

Business Models Happen

So I’ve been following Umair Haque for a while. A few months ago he made a comment that stuck with me, but didn’t sink in until just recently. He was discussing edge economies, so not traditional established businesses, rather new organizations creating value in a new ways. When discussing these bold new businesses he sort of made an offhanded comment that “business models just happen“. Wait, what?

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.

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May 09

Mingus was a Manager

In this great era of “leaders” and “innovators”, the word “manager” seems to get a bad rap. Lately, the idea of a manager is positioned in opposition to the idea of a leader – Managers follow rules, leaders break rules, etc. It’s often painted as a simple cog or a facilitator, which is so sad. Good managers are orchestrators. They know how to bring out the best in people and help guide them through rough situations, comparing the two is sort of a silly. I’ve always been inspired by thinking of managers as designers. (A post on Ryan’s blog this week reminded me of one of my favorite articles.)

I like that concept because it reminds me how managers use the constraints they have to effect change. They look for underlying meaning and momentum in the work and then expose it to make things happen. The best manager, just like the best designer, becomes invisible as the work gets better. In my view, they both should be very ego-less jobs. Unfortunately, that’s rarely the case. Oddly, When I think about great managers, I usually think about Charles Mingus.

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