Don Keough sparks a revolt at Coke by rejecting a plan without a full evaluation

From Donald Keough's book "The Ten Commandments for Business Failure." This is regarding Commandment Four: Assume [Your] Infallibility.

Earlier I mentioned being fortunate in having a team of managers who individually thought my executive infallibility was not so infallible. One very important instance occurred right after the Berlin Wall came down in 1989.

If you want to fail, do what I did.

We were in a meeting with the head of our German operations and Claus Halle, also a German, who was head of all our international operations. During a review of a routine annual business plan, the German management team put a project on the table that called for the company to invest roughly half a billion dollars or more in this new democratic state of East Germany [now part of the Federal Republic of Germany]. The project cut deeply into the total budget that was being put together, and apparently I was tough, to a fault, in rejecting it. After the meeting Claus came to me and said the head of the German management team wanted to resign.

I was shocked. Why?

Claus responded, "You didn't listen clearly to what he had to say. Much of this investment would come from the German bottlers. You don't know the potential of East Germany. You've never been there. You rejected it out of hand without considering that this could be a great opportunity."

Claus went on, "At the very least, you should talk to them again. But I'd like to ask you to do more. Come with me to see East Germany for yourself, first hand, and make up your own mind."

We went to East Germany. We went everywhere. And everywhere I saw opportunity. My mind was completely changed. We assembled everyone involved together, and I apologized for being so narrowly focused and so intransigent. Together, we made plans then and there to buy several plants in the East....

Our ultimately profitable experience in East Germany and in the rest of the Eastern European countries is further proof that one cannot know enough about a country or a business situation from a briefing book in the comfort of one's headquarters offices. (pp 63-65)

Top salespeople are not discouraged by failure

Steve Martin (the sales expert, not the comedian)'s post for HBR.org entitled "Seven Personality Traits of Top Salespeople" contained a fascinating nugget for The Mistake Bank:

Less than 10 percent of top salespeople were classified as having high levels of discouragement and being frequently overwhelmed with sadness. Conversely, 90 percent were categorized as experiencing infrequent or only occasional sadness.

Selling Style Impact: Competitiveness. In casual surveys I have conducted throughout the years, I have found that a very high percentage of top performers played organized sports in high school. There seems to be a correlation between sports and sales success as top performers are able to handle emotional disappointments, bounce back from losses, and mentally prepare themselves for the next opportunity to compete.

Handling emotional disappointments and bouncing back from losses. Especially with the turmoil occurring in corporations today, those seem to be characteristics that many people, not just salespeople, should work on developing.

Now here's guy who's also not easily discouraged... and I'm remembering that I think he got what he wanted in the end:

"Kitchen Confidential" Anthony Bourdain about the cost of not paying your dues

From Newsweek's "My Favorite Mistake" series. This story is from chef-author-TV host Anthony Bourdain.

I was lucky enough to go to the Culinary Institute of America in my 20s, and my big mistake was that I was offered a chef’s job very quickly after I graduated, and I took it. I did that rather than going to France—or even staying in New York, but taking a low-level position at a great restaurant and putting my nose to the grindstone. Once I started down that path, years later I was still working in a procession of not-good restaurants. The lowest of the lows is cooking food for people you hate in a restaurant you hate, with no pride.

I was about getting the biggest paycheck then, so I could see music, smoke expensive weed, do cocaine, that kind of life. It was less important to me that I would get good at my craft. I deluded myself into thinking I was good. And by the time it occurred to me that I’d never worked for a three-star chef, I didn’t have the skills. It was late in the day....

A lot of young cooks who have read Kitchen Confidential ask me for career advice. I tell them if you’re serious about cooking and your craft, do the opposite of what I did. [But] I learned a lot of important skills from my mistake that served me well in both publishing and television. I think the skills I learned as a junkie are skills of determining if this person is full of shit or not.

This is important: from something Bourdain regrets, from something he urges others not to do, he learned "important skills that served [him] well."

Jim Wolfensohn: don't ask if you will succeed, ask if trying is worth the risk

From Peter Bregman's blog post on Jim Wolfensohn, former president of the World Bank, concerning Wolfensohn's acceptance of a university friend's request to join their fencing team for the national championships, knowing he had no chance of winning. That experience propelled a love of fencing, and eventually a spot on the Australian fencing team in the 1956 Olympics.

Most people, when they explore an opportunity, next step, or decision, ask: "Will I succeed?"

But Jim asks a different question: "Is it worth the risk?"

The difference in those questions is the difference between never fencing at all and fencing in the Olympics. When Rupert asked Jim to fence in the championships, there's no chance he could have succeeded. Failure was the inevitable outcome. But was it worth the risk? For Jim, it certainly was.

Jim's approach to life is to take a risk, learn from it, and take his new knowledge and understanding to the next risk. Failure is an essential part of his strategy.

Really taking risks requires failing. You have to fear failure enough to work hard to make the risks pan out successfully, but not so much that you don't take the risks in the first place. Viewed through the lens of learning, failure is at least as beneficial as success. Working only on things you're pretty sure will work significantly limits what you can achieve. Instead, take risks. And then see what happens.

Movie director Chris Weitz: "Animals never do what you want them to"

From Terry Gross' Fresh Air interview with director Chris Weitz ("A Better Life") as broadcast on June 22, 2011. Weitz discusses why he used computer-generated wolves in his movie "New Moon," part of the "Twilight" series:

GROSS: And one more thing about "New Moon." There are werewolves in it. The main werewolf is played by Taylor Lautner, but then there's, like, when they're actually the wolves, are those, like special-effect wolves? Are those, like, computer-generated graphic wolves or...?

Mr. WEITZ: Yes.

GROSS: So you didn't have to worry about directing large, unusual animals?

Mr. WEITZ: No, it's - we - it's best not to deal with animals because they never do what you want them to do.... In "The Golden Compass," we had mostly CGI animals, but I thought it would be very clever of me if the people who had gone through the sort of process to separate themselves from their spirit demons, with those people, we used actual animals.

And then I learned the joy of working with actual animals, especially multiple animals, which is that half of the time, they're looking for food or copulating.

(Soundbite of laughter)

Mr. WEITZ: And that wasted a lot of takes.

Don Keough: Miscalculations are part of the price of staying in business

From Donald Keough's book "The Ten Commandments for Business Failure":

The way forward will always generate some failures. Walter Isaacson in his wonderful biography of Einstein tells a story about what Einstein said he needed in his new office at Princeton.: a desk or a table, a chair, some pencils, paper, and a very large wastebasket "for all the mistakes I will make." In business, you can make a good argument for mistakes like Steve Jobs' Lisa or PowerMac Cube because the highly creative Apple environment that spawned them also produced big winners like iPod and iPhone. You can even justify those mistakes that have become the folkloric case studies in how-not-to-do-it courses in business schools all over the country, such as the Edsel or 45-rpm records or even New Coke. These failures, for all the valuable lessons that they teach us in hindsight about management blunders, are simply risks that just didn't work out. Such miscalculations, costly though they might be at the time, are part of the price of staying in business. As Peter Drucker pointed out nearly fifty years ago, it is management's major task to prudently risk a company's present assets in order to ensure its future existence. In fact, if a company never has a failure, I submit that their management is probably not discontented enough to justify their salaries.

pp.22-23

Learn from your predecessors--the only way, if you're a CEO or President

Following on from yesterday's post on not learning from predecessors:

Imagine that you have a job that's so exclusive that not only could you not find a book teaching you how to do it, you'd be hard-pressed to find anyone in your town, or state, who could give you much help.

The job of corporate CEO is like that. So is President of the United States. In each of these positions, learning on the fly seems costly. Is there an alternative?

Yes there is. If only it were used more often.

This question was taken up in two recent articles. In the January 2009 Harvard Business Review, Thomas Friel and Robert Duboff discuss "The Last Act of a Great CEO." The last act being an outgoing CEO's sharing knowledge, experience, and perspectives on the job with her successor.

And an opinion piece by Sheryl Gay Stolberg in the New York Times, also in Jan 2009, remarked on the rarity of gatherings like then President-elect Obama's lunch with four other living presidents ("The Very Elite Club that Never Meets").

Friel and Duboff write this about new CEOs learning from their predecessors:

It is difficult to imagine a richer source of information and advice for a new CEO, even on a purely personal level. Being successful as the chief executive of a major enterprise is hardly a straightforward matter; the right combination of style, skill, and focus can vary dramatically depending on the context. One CEO we interviewed put it simply: “You can’t really understand this position until you’re in it.” At the very least, the departing executive has a unique and relevant point of view on the dynamics of the board of directors and the executive team. Often he or she has the most strategic and current understanding of the issues the company faces.

Stolberg's article hits the same theme:

“One thing historians have talked about for years is that there should be a better way for sitting presidents to use the experience of former presidents, and it doesn’t happen enough,” said the presidential historian Michael Beschloss. “The reasons are varied: sometimes personal antagonisms, shyness, the feeling that the former president is too removed from today’s politics to know very much. The result is that there is a reservoir of wisdom and experience that is not relied upon.”

I have an idea that might help. Or, rather, my wife Maura had the idea and she let me borrow it. Companies, and the executive branch, need to create narrative repositories like The Mistake Bank. A repository would be a place for presidents or CEOs to recount events. (Especially mistakes, since we learn very well from mistakes.) and what they learned from them. The repository would be available only to successors. New CEOs and presidents, or experienced ones, could dip into the repository when they had a question or issue they wanted some perspective on.

Choosing not to learn from a predecessor

It's been a while since I posted one of my own mistake stories, so here's one:

I joined a company as VP Sales & Marketing after it had been purchased by a private equity firm (another Mistake Bank story entirely). My predecessor was leaving the company and our tenures overlapped by a few weeks. He made sure I knew he was available to talk whenever I wanted.

I did spend some time with him, but not too much. I asked him for summaries of the existing accounts, but got frustrated with the pace and the selection--he started doing them in alphabetical order, and I wanted them from largest to smallest.

One reason was I had (at least thought I had) a very different strategy to pursue from the past sales strategy. There was also the feeling (not explicitly confirmed) that he was being moved out because his vision wasn't suitable for the future.

There was also a visceral feeling of rivalry that got in the way. Why did I want to share my thoughts with this person who had done this job, with whom I'd be compared for the next months and years? It was easier to just keep my distance.

Which I did. A few weeks later, he was gone, and we only talked once or twice since then.

If I had it to do over, I would have spent more time quizzing him about the culture of the company. How are things done here? How do you lead people in this environment? I would try to test out my strategy: could this work? What obstacles and issues might get in the way of achieving this strategy? If you were me, what would you do right now?

But that's for another time. In this case, I didn't ask any of those questions, and it's impossible to know how much effect had on our results the next several years.

Conan O'Brien discusses lessons from his "Tonight Show" failure

This is from O'Brien's commencement speech for the 2011 graduating class of Dartmouth College. The failure story starts at 15:37.

Coca-Cola's Don Keough on learning from the failure of New Coke

In 2008, the New York Times interviewed former Coke President Don Keough. Keough is also the author of "The Ten Commandments for Business Failure." One piece of the interview:

Q. [In the book] you listed several examples of mistakes that you made at Coca-Cola, chief among them New Coke. But you also wrote that the best way to fail was to quit taking risks. So was New Coke worth the risk?

A. I wouldn't want to do it again. But it was an enormous learning experience, and oddly enough, it turned out to be positive for the Coca-Cola Company. Our sales increased when we brought the original formula back. The reaction from our customers was overwhelming. Once we realized that we had made a mistake, I went on television and simply said that we don't own this brand, you do. You've made it clear that you want the original formula back, and you're getting it back.

You can read more about the New Coke story--at least Coca-Cola's version of the story--here. A fuller version is here.

Commencement speaker states: learning from failure is limited "at best" (!)

I read something yesterday that struck me as so wrong it couldn't go without a response. This is from a commencement speech by Krista Marks (founder of the Kerpoof children's learning site) presented at the University of South Carolina and reprinted in Brad Feld's blog:

There is a belief that failure is somehow good – somehow beneficial. You hear people say, failure builds character, or fail early fail often. This is not only wrong – it is dangerous. What you learn from failure is limited at best – you learn what didn’t work. It tells nothing of what will. In contrast, what you learn from success is how to succeed. This is infinitely more valuable.

A perfect example is the success you celebrate today. How many people do you know who started with you, but aren’t sitting next to you today? How often did you have a friend or roommate who would moan and whine at the one or two times during the semester that they actually had to work hard, long hours – knowing that as an Engineer this was your daily reality? This is significant.

In fact, you now know one thing for certain. You know that with talent and determination and hard work, you can accomplish what few others can. You succeeded. In the future, taking on truly hard things – things that seem impossible – you will not be in uncharted waters. On the contrary, you will build more success.

That’s key. Success breeds success. It is not a question of whether you will achieve more success. The question is what it will look like.

"It's not only wrong - it is dangerous." This sentence calls into question pretty much every word that's been written or said on this site. And I disagree with it utterly. Let's break down Marks' first paragraph:

"What you learn from failure is limited at best - you learn what didn't work." Wrong. If you reflect honestly and with a will to improve, the lessons are almost unlimited. For example, you learn what you would have done differently that could have impacted the outcome - that's about self-improvement. You learn which assumptions you made didn't turn out as expected - that allows you to make better assumptions next time, and to validate those assumptions earlier and more cheaply (even, possibly, inviting "faster failure" next time). You learn, sometimes, that failure is holding on too long to a pet idea... or letting it go too soon. And on and on.

"What you learn from success is how to succeed." Embedded in this statement is an extremely dangerous assertion - that success can be readily replicated: just do what worked last time. This is delusional. The reasons that some ventures succeed, in this complex world, involve a lot more than what we can control. Sometimes we happen to find ourselves in high-growth markets, with lots of wind at our back. Sometimes competitors make big mistakes. Sometimes we are lucky. (God bless luck!) Most importantly, if we take on a new challenge, even in an area we know well, the chances that it will play out as it did when we succeeded earlier are, well, zero.

In my most charitable reading of Marks' words, she is saying that you should focus on success vs. failure because it is more productive to feel good about yourself than to beat up on yourself. Success builds confidence, and confidence informs success.

Yet failures do not have to debilitate. They can also strengthen. Knowing, for one thing, that no one is perfect should also help us deal with inevitable setbacks.

But the most important thing about not disregarding things that didn't go our way is learning. Very few companies or individuals scrutinize their successes for things that they should do differently next time. They are too busy basking in their good feelings or enjoying the rewards of their success. And they should do that.

Mistakes and failures are typically not times for celebrating. But after we absorb and mourn the bad news, they give us a moment to scrutinize what we're doing, to question our assumptions, and put plans together to do better next time.

If what Marks is saying is that we shouldn't seek out failure - we should always try to succeed - I can agree with that somewhat (though great entrepreneurs try out crazy ideas, many of which fail despite their best efforts, and some of which wildly succeed).

But saying there's not much we can learn from failure... that's not just throwing the baby out with the bathwater, it's also getting rid of the bathtub, the plumbing, and everything else.

"Spider-Man": lessons learned from disastrous previews

As part of the pre-relaunch hype for the musical "Spider-Man: Turn Off the Dark," composers Bono and the Edge discussed with the New York Times some of what they'd learned from the initial, disastrous previews:

Bono said they had “some of the best days of our lives daydreaming about what you could do on a stage” with [director Julie] Taymor and their fourth collaborator, the playwright Glen Berger.

But they had no idea how much time it would consume.

“The hours and weeks and months,” Bono said with a distinct melancholy flattening his voice, in an otherwise empty private room at the Spotted Pig restaurant in the West Village, in which he is an investor. “If we thought it would take this long, there is not a chance on earth we’d have done it.”...

In hindsight, Bono said, starting preview performances of “Spider-Man” on Broadway in November without an out-of-town tryout was “a terrible decision” that put enormous pressure on Ms. Taymor. But such a test run was impossible, Bono added, because the show’s aerial technology and massive, pop-up sets were built to fit its New York home, the Foxwoods Theater.

“Looking back,” Bono said, “we, through inexperience, had no sense of the implications of that decision. That the first time anyone saw a full run-through of the story, songs, staging, and show was the first night of previews. Can you imagine that? No one had seen the whole thing before everyone saw it.”

There are lots of lessons to be learned from a disaster like "Spider-Man." It's good to know that some of the principals are already thinking about them. What do you think?

HBR article on lessons from gamers lauds failure as "an antecedent to success"

The May 2008 Harvard Business Review features an article called "Leadership's Online Labs," in which the authors discuss the results of a study of high-performing users of Massively Multiplayer Online Role-Playing Games (MMORPGs), like World of Warcraft. In these games, participants worldwide take on roles and participate in quests and adventures. These games require the players to act in concert to achieve their objectives, planning together and using their varied capabilities to, for example, storm and take control of a castle against determined adversaries.

The article focuses on how the lessons learned by the MMORPG standouts could be applied to business. One passage in the article was very relevant to this site:

Trial and error play a big role in accomplishing game tasks. Failure, instead of being viewed as a career killer, is accepted as a frequent and necessary antecedent to success.

In one incident that we recorded from EverQuest, seven guild members prepared for a brand-new quest that required them to get their team across a large lake protected by a gruesome and hostile creature. Although they had formulated a strategy based on information gathered in advance, everyone seemed comfortable with the high likelihood of failure, at least initially. After a first attempt, in which the whole team nearly drowned and was forced to retreat, members quickly began plotting a new strategy in the spirit of a fundamental gamer maxim (one not heard very often in business): Let's try that again.

Frequent risk taking allows players to practice the art of weighing odds calmly in uncertain environments. Confronting risk routinely and with a level head will be an important leadership skill as the real-world business environment becomes more uncertain and as success comes to depend more on innovation than on execution. Organizations can help prepare leaders by fostering a culture in which failure is tolerated. They can expose leaders to risk by mimicking the structure of games, breaking down big challenges into small projects. Failure, after all, is clearly more palatable for the individual and more affordable for the organization when it happens at the project level rather than on a larger scale.

Steve Blank: "In Silicon Valley, honest failure is a badge of experience"

This story is from Steve Blank's 2011 Commencement speech to the graduates of Philadelphia University:

After I left the military, I ended up in Palo Alto, a town south of San Francisco. Years later this area would become known as Silicon Valley.

For a guy who loved technology, I was certainly in the right place. Endlessly curious, I went from startups in military intelligence to microprocessors to supercomputers to video games.

I was always learning. There were times I worried that my boss might find out how much I loved my job…and if he did, he might make me pay to work there. To be honest, I would have gladly done so. While I earned a good salary, I got up and went to work every day not because of the pay, but because I loved what I did.

As time went on, I was a co-founder or member of the starting team for six high-tech startups…
With every startup came increasing responsibility. I reached what I then thought was the pinnacle of my career when I raised tens of millions of dollars and became CEO of my seventh startup… a hot new video game company. My picture was in all the business magazines, and made it onto the cover of Wired magazine. Life was perfect.

And then one day it wasn’t.

It all came tumbling down. We had believed our own press, inhaled our own fumes and built lousy games. Customers voted with their wallets and didn’t buy our products. The company went out of business. Given the press we had garnered, it was a pretty public failure.

We let our customers, our investors, and our employees down. While it was easy to blame it on others…and trust me at first I tried… in the end it was mostly a result of my own hubris—the evil twin of entrepreneurial passion and drive.

I thought my career and my life were over. But I learned that in Silicon Valley, honest failure is a badge of experience.

In fact, unlike in the movies, most startups actually fail. For every Facebook and Zynga that make the press, thousands just never make it at all.
All of you will fail at some time in your career…or in love, or in life.

No one ever sets out to fail. But being afraid to fail means you’ll be afraid to try. Playing it safe will get you nowhere.

As it turned out, rather than run me out of town on a rail, the two venture capital firms that had lost $12 million in my failed startup actually asked me to work with them.

(Hat tip Maura)

Charlie Crystle audio story - not knowing he didn't need outside experts to be successful

This story is from Charlie Crystle, who founded Chilisoft, a web infrastructure provider which in 1999 was sold to Cobalt Networks for $70 million. He and two partners later started Mission Research, which offers low-cost business software to support nonprofits.

His new venture is Jawaya.com, a social search site. You can sign up for the private beta of Jawaya here.

Charlie describes moving his business to Seattle and hiring a team of experts on the advice of a consultant... and later realizing the business did better with the old team of non-experts.

Charlie Crystle - not realizing he didn't need to hire outsiders to succeed (2:10)

Transcript:

There was a series of mistakes around personnel that I definitely made. It started out that I didn't know what a great professional was. I didn't know what I didn't know. So when I moved everything out to Seattle, I hired a consultant to help me out. He was telling me we needed to hire a CEO and get a management team, and who the good players were in town. We ended up hiring this management team, they really weren't great performers. You know, they had resumes, but... We didn't know what we didn't know.

It turned out that, for instance, we got more press and more interesting press and more momentum before we took venture capital than after. Before we hired a management team and a VP of Marketing than after.

For me the lesson there was: we knew how to do it. We just didn't know we were doing the right thing. We ended up deferring to people that we thought knew better than we did, and sort of ignored the fact that we had really good results. Then again, we didn't have anything to compare it to. It's one of those things where, you want to trust other people, but you don't have anything to measure it against.

Author Paulo Coelho on not trying to follow guidelines

Renowned author Paulo Coelho ("The Alchemist" and many others) as part of the Berghs School 2011 Exhibition. Coelho says he reached a turning point in his life during one college assignment: when he stopped obsessing about following guidelines and pleasing his instructors and instead did his best and was committed to the results.

This is an example of a "deliberate mistake" working out quite well indeed. Coelho challenged his own assumption that success equated to deducing and exactly matching the teacher's expectations, and from that found that relying on his own voice and instinct creates a more profound kind of success.

Paulo Coelho – on the fear of failure. from Berghs' Exhibition '11 on Vimeo.

Transcript:

Every time that I have to present a thesis or a paper, when my school asked me to do this, I said, "I have to please my teacher, I have to follow exactly what she or he taught me." That was the wrong approach, in my opinion.

So one day I decided to write about things that really touched my heart. And I remember while I was studying law, they asked me...I don't remember exactly what was the paper for, but I decided to write about Caligula, the Roman emperor, and this constant struggle between our good part and our evil part. I wrote about Caligula and I said, "I'm lost. Nobody's going to accept this." I'm going to be...not punished, but they are going to give me a very low degree. It happened exactly the opposite. They said, 'This is quite original.'

I just wrote about Caligula because...I was fearing not to follow the teacher's instruction. At the same time, I said I have to break with this idea. Because I have something different to say. The subject is important, but you don't really need to follow the guideline. Because the guideline, at the end of the day, is just to discuss the subject.

So this Caligula paper for me was a turning point. And since then, my fear of failure... it still exists, because you don't get rid of this in your lifetime. But I'm never paralyzed by my fear of failure. I say OK, I'm doing my best. And from the moment I say, "I'm doing my best," after sending a new book, or a new article, to the publisher or the newspaper. I sit down, I breathe, and I say, "I did my best. I put in all my love, I did it with all my heart." Whether they are going to like it or not, it is irrelevant. Because I liked it. I'm committed to the thing I did.

So far, no one ever refused or criticized anything, because when you put love and enthusiasm in your work, even if people don't see, they realize it is there. That you did this with all your body and soul. I encourage you to do this. And don't worry about fear of failure - actually, this is a human feeling. The important thing is to move beyond this fear, and do what you think you should do.

The NYT's Jill Abramson publishes a mea culpa within a book review

In a brief section of her 2008 review of Bob Woodward's Bush-era books, Times Managing Editor Jill Abramson includes a stark and forthright admission of error. She owns her missteps related to the Times' buttressing the administration's position on weapons of mass destruction (W.M.D.) as a pretext for the Iraq war:

In “Plan of Attack” Woodward acknowledges an error of his own: he admits he should have pushed The Washington Post to publish a front-page article about the flimsiness of the intelligence on W.M.D. I was Washington bureau chief for The Times while this was happening, and I failed to push hard enough for an almost identical, skeptical article, written by James Risen. This was a period when there were too many credulous accounts of the administration’s claims about Iraq’s W.M.D. (including some published in The Times and The Post).

[Hat tip Capital New York. This piece also includes more context on Abramson's role in the editing of the Times' Iraq War pieces.]

Ann Curry's rookie mistake

From Newsweek's "My Favorite Mistake" series. This story is from TV newscaster Ann Curry.

After more than 30 years in television news, my list of mistakes is pretty long, beginning with my first exclusive in Medford, Ore. I put myself through journalism school with the help of some small scholarships. I was working as a cocktail waitress, and thought, there’s got to be a better job than this. I became a general-assignment reporter at a local TV station, and I was the first woman to ever be a reporter for the station. I had a lot to prove. Before I got the job, the top producer pulled me aside and said, “You shouldn’t become a news reporter—women have no news judgment. And besides, you can’t carry the camera.”

This was small-town television, so I was both the camerawoman and reporter. It was a massive story, about thousands of dollars that were missing from the city budget. I had an exclusive interview with the city manager. As he was talking, he was sweating like the guy on Broadcast News. I knew the interview was good, but when I got back to the station, I discovered I forgot to load the film into the camera. Imagine what I felt like! I drove back to City Hall, and begged him to do the interview again. He looked at me, rolled his eyes, and gritted his teeth. He answered the same questions, but some of the drama of the interview was lost. I guess the lesson was not to let your exuberance make you lose focus.

M&T Bank CEO Robert Willmers astutely diagnoses his company's failings during the financial crisis

This is an excellent example of a leader showing a "sense of agency." It's an excerpt from a letter from M&T Bank CEO Robert Willmers that accompanied the bank's 2008 Annual Report, and explains why M&T's results, despite being better than many banks' during that awful year, were unacceptable. In short, M&T focused more on its competitors than its customers, got greedy and deviated from its mission. That a CEO would admit that, in writing, shows a maturity and a sense of agency that has proved rare in the banking community in the wake of the financial crisis.

The italics below are mine, to indicate where (in my view) Willmers really took accountability and owned up to mistakes.

UNDERSTANDING 2008

How should the [bank's 2008 financial] results best be understood? One is tempted to portray them in modestly positive terms, to emphasize that we continued to do a great many things right over the course of 2008, absent which we would not have been able to report even the lower net income noted above. Nor is there doubt that, at least to some extent, our own situation was hostage to far larger forces. Even those of us who believed that the economic and financial system problems which began to emerge in 2007 were deep and serious could not have anticipated the unprecedented events about which we now speak matter-of-factly. Few imagined the demise of storied Wall Street financial institutions, the placement in government conservatorship of the secondary mortgage market companies Fannie Mae and Freddie Mac, the direct investment of taxpayer dollars in major financial institutions, including an international insurance company, a government stake in the automobile industry, a more than-doubled increase in the government-insured level of bank deposits and the extension of such insurance, under near-emergency conditions, to investment funds not previously covered. The Nobel laureate novelist V.S. Naipaul has recalled the newspapers of his Caribbean youth as having unfailingly promoted their work as accounts of “extraordinary events and amazing occurrences.” As applied to what’s happened over the past year, such would be no overstatement.

It is true, as well, that the year past was one for which a report of any earnings at all can be said to distinguish us. After all, 2008, officially a recession year, saw major banks of national reach sold at fire sale prices, after reporting billions in losses —and the U.S. banking system as a whole (ie., the 8,384 financial institutions whose deposits are insured by the federal government) appears poised to have recorded its first quarterly loss since 1990. That we were able, as noted above, to continue to generate positive results from growth in our average earning assets and fees reflects the fundamental strength of M&T.

It will not do, however, to claim that we’ve succeeded because we’ve avoided failure. The key question suggested by the figures above must not be how we avoided disaster but why we did not do better. It is an answer with a number of separate parts but broad, unifying themes.

During what we now know as the “bubble” years of 2004–2007, many banks tried desperately to maintain earnings growth by facilitating the extension of credit, especially through home mortgages and home equity loans, to less-than-prime customers. M&T, in some limited but nonetheless significant ways, was not immune to this temptation. Last year, this space noted the decision to purchase, for $131.7 million, three bonds known as collateralized debt obligations, backed by subprime mortgages —and whose value we were forced to write down by $127.3 million in 2007. Similarly, the specific drags on our 2008 earnings —noted above but deserving of emphasis—largely represented departures from our traditional community banking model, a model based on lending in the markets where we live and work to people and enterprises whom we know. In contrast, the investments which proved problematic shared the following characteristics: they were transactional in nature, outside our market footprint, far from our branches and not associated with deposits. Some, moreover, were businesses with which we were not familiar and in geographies in which we’d only been doing business a short period of time.

[Hat tip to Justin Fox at HBR.org]

Disclosure: I am an M&T customer. For some prior references to the bank in my writings, check here, here and here.

Toyota acceleration incident report cites company's "skepticism and defensiveness" to customers and regulators

The Toyota "North American Quality Advisory Panel," put together in the wake of the sudden-acceleration incidents in 2009-2010, has released its report, and it's fascinating reading of how a large company's strengths can turn into weaknesses under stress. [A copy of the full report is available at this link.]

The panel cites several factors that contributed to the crisis, including Toyota's centralized reporting structure, which led to miscommunication and delayed responses, and an unwise policy of categorizing safety as a subcomponent of quality. But most striking to me was a lesson that can apply to many companies I'm familiar with: they didn't take seriously complaints and feedback from customers and regulators - until it was too late to stave off a full-fledged crisis. To use John Kotter's term, they did not "let the outside in" at Toyota, which led them to minimize and push back against unintended acceleration complaints. Here are several excerpts from the report:

Truly listening to customers requires carefully considering, processing, and internalizing their feedback, even when it may be inconsistent with the company’s instincts....

The Panel has observed that Toyota did not adequately apply the key principles of the [Toyota Production System] and the Toyota Way to its management and decision-making practices. The Toyota Way is founded on the core pillars of continuous improvement and respect for people. A fundamental principle of continuous improvement is genchi genbutsu, which means that one must “go and see” the source of the problem in order to determine its root cause. The Panel feels that Toyota applied this and other aspects of the TPS and the Toyota Way too narrowly in two respects.

First, while it is clear that Toyota applies the [Toyota Production System] process and the Toyota Way to problems or flaws found internally, Toyota does not appear to treat feedback from external sources, including customers, independent rating agencies, and regulators, the same way. For example, it doesn’t appear that Toyota applied genchi genbutsu as quickly and thoroughly as it could have in investigating and seeking out the root causes of customer complaints regarding issues such as [Unintended Acceleration].

Second, Toyota did not apply the principles of TPS and the Toyota Way adequately to identify and avoid repeating management decision-making errors with the same thoroughness and dedication with which it applies them in its manufacturing process. Although Toyota is in the car manufacturing business, it—like most modern corporations—is also a decision factory. Toyota’s reputation in North America increasingly will be based as much on the quality of its decision making as on the quality of its vehicles.

It seems to me that Toyota has a tremendous opportunity to learn from this situation, to become more open to feedback and critique, and to, as the panel recommends, bring the power of the Toyota Way and the TPS to improve its management and information-sharing processes. Will they take that opportunity?

Great leaders must "own their missteps"

I've been reading Justin Menkes' book "Better Under Pressure: How Great Leaders Bring Out the Best in Themselves and Others," and it's the best business book I've read this year by far.

I have to confess that I wasn't initially sure I'd love it. "How to be a CEO" studies have gotten boring. But Menkes' focus on personal accountability (rather than CEO self-aggrandization, swagger or getting power) has been a real surprise and very helpful for this site.

His idea of a "sense of agency" is a real revelation. (From the book: "Sense of agency...refers to the degree to which people attribute their circumstances and the outcomes they experience to being within their own control.") Leaders with this sense do not feel that issues are someone else'e problem or out of their control. They are not defined by their circumstances. They find a way to make their circumstances better.

And they are not afraid to make mistakes. But rather than seek to offload blame on others, they, in Menkes' term, "own their missteps," even if they weren't 100% responsible for them.

Let's face it, for anything bigger than tripping on a crack in a sidewalk, very little that happens wrong is 100% our fault.

Menkes' lesson, one that I think is embodied in the stories on this site, is that when things go wrong, the strongest leaders look inside, say what they could have done differently, learn those lessons, and improve their work going forward. As he writes, there's a stage of every senior leader's career when she is catapulted out of her comfort zone and into the unknown. For example, a VP of Engineering is asked to take over the company's sales function. At that moment, her long-nurtured expertise (as stated in Milton Glaser's fabulous video) is not helpful to her development.

Menkes writes, "leaders adjusting to a significant increase in responsibility invariably make many mistakes. Those who ultimately excel recognize and own these missteps quickly and use the experiences to grow into their positions of elevated authority and increased complexity. But for this learning curve to occur, it is absolutely crucial that they accept their role in these mistakes. If they have a low sense of agency, they cannot, and will fail."

Because at the end of the day, if you are the leader (even if you are merely the "CEO of your own job"), casting about for blame or deflecting criticism to others only serves to delay the fixing of the problem and to blur the important lessons you could have been learning.

This result happened to Jeremy (whose story was covered in this earlier Mistake Bank entry): for two years, his underperforming team continued to miss targets, and Jeremy continued to blame those he had hired, colleagues, everyone else but himself. And until he "owned the missteps," he wasn't going to make it.

Flip videocam founder Jonathan Kaplan on how to deal with hiring mistakes at a startup

From David Pogue's blog, noting comments of Pure Digital (inventor of the Flip videocamera, bought and subsequently retired by Cisco) founder Jonathan Kaplan at Pogue's Columbia Business School course:

If you hire someone bad, fire them immediately and give them a big severance package so they feel good about you. We gave our workers four to six months’ severance, even if they’d worked only four months. You might think that’s crazy. But it was our mistake to hire that person. And it’s not that much money, really.

Interesting advice. At a startup, every employee is crucial. There's no place to hide someone who's not working out. It's terrible to fire people, especially when it was your mistake to bring them on in the first place. Kaplan says, pay them generously and move on. I like it.

NB: Kaplan is opening a grilled cheese chain, The Melt, in the summer of 2011. If it ends up anywhere near us, my son George and I will be there.

Designer Michael Wolff: Fear of failure as fear of scarcity of ideas

This video is by co-founder of the Wolff Olins brand consultancy Michael Wolff. He points out that fear is a very useful emotion, and narrows down fear of failure in creative people as a concern they'll have no other ideas to turn to - a baseless fear, in his opinion.

Michael Wolff – on the fear of failure. from Berghs' Exhibition '11 on Vimeo.

More information on the Berghs Exhibition here.

And here is a bonus video featuring Michael Wolff - not focused on failure, but interesting nonetheless:

Carol Burnett - "from the things that don't work out, that's when I've really learned"

You can find this quote all over the web.

"I have always grown from my problems and challenges, from the things that don't work out, that's when I've really learned."

None of the sites I looked through listed an original source, but as best I can figure it, it's from Carol Burnett's 1988 autobiography titled, "One More Time."



[Hat tip @PeterMoreton]

A few lessons on mistakes, failure and learning - from a 10-year-old

I learned a lot from my 10-year-old son, George, this past week.

First of all, he appeared in his elementary school musical, "Dear Edwina Jr.," a fun and often hilarious piece of children's theatre. (George was in the chorus.)

Acting in a musical, especially for kids, is something that is "hard before it is easy.". Imagine the group gathering for its first rehearsal. No one knows the text or the songs. No one knows where to stand, never mind how to keep out of each other's way in the dance numbers. Most of them are just learning how to sing and act.

Yet, a few weeks later, with the great help of teachers, directors, etc., and after hours of rehearsal, the kids are able to make a fun, memorable experience out of words, music, dancing, props, etc. It's not perfect, and is more delightful for that reason, but it is good, and the journey the kids have taken is something they'll remember for a long time. The most impressive lesson may be the value of work and perseverance: that something you can't do initially eventually can become something you can do, and do well.

The second observation concerns our recent beach weekend. George was entranced by the wooden skimboards in a beach store and, being that we'd forgotten to pack beach toys, we were in the market for some stuff to play with.

(Above: skimboards from ZAP Skimboards)

We could tell that skimboarding was probably harder than it looked. So my wife looked up some how-to videos, like this one:



Then we took the board to the beach. George and I took turns, mostly falling on our butts. However, we started to get the hang of it. Then, later, as we walked back to our hotel from the beach, he said something really impressive, without a hint of discouragement:

"I sure am learning a lot, because I'm failing a lot. I'm not a pro yet," George said, "but I'm getting better."