Wednesday, November 30, 2011

Michael Bloomberg recalls being fired 30 years ago

TechCrunch's "Founder Stories" series recently presented an interview with Mayor Michael Bloomberg of New York City. Mayor Bloomberg is a highly successful tech entrepreneur as well as a 3-term mayor of the Big Apple. He discusses the role of hard work, as well as luck (he mentions luck twice), in his success.

While I was watching the interview, I thought about this quote from Paul Schoemaker: "The school of hard knocks is a great teacher, even if the tuition is very high, precisely because the lessons make such a deep imprint." At least three times in the interview Mayor Bloomberg refers to his being fired from Salomon Brothers more than 30 years earlier. In spite of his subsequent triumphs, the occasion of his firing still gnaws at him, still gives him something to prove. Here's the entire interview:

You can find Mayor Bloomberg's story of his firing in this excerpt of "Bloomberg by Bloomberg" from the New York Times.

Monday, November 28, 2011

Lessons from mistakes "make a deep imprint"

From Paul Schoemaker's "Brilliant Mistakes: Finding Success on the Far Side of Failure":

The school of hard knocks is a great teacher, even if the tuition is very high, precisely because the lessons make such a deep imprint. We need emotion born of direct, difficult experience to internalize, remember, and learn.

(c) 2011 Wharton Digital Press

Tuesday, November 22, 2011

Thinking about deliberate mistakes

As we prepare for the US Thanksgiving Day holiday, I am thankful for the book I'm reading right now, Paul Schoemaker's "Brilliant Mistakes." Here's a quote (one of many excellent observations in the book):

Companies strive for error elimination, hiring advisers and relying on sophisticated management tools such as Six Sigma. It’s little wonder, then, that most decision-making books follow suit, encouraging you to focus narrowly on mistake avoidance today rather than provoking you to plan for the stream of decisions that you will face tomorrow.

Schoemaker feels so strongly that in complex, dynamic environments (like any business) deep-rooted assumptions are the seeds of decline, he challenges us to make "deliberate mistakes" - violating one of these deeply-held beliefs (in a limited, experimental setting), to measure whether it is still valid.

The idea of deliberate mistakes causes me to think of Cynthia Kurtz's story work. Cynthia was adamant that any observation she made (or that I made) about a project we were doing should be countered with an alternate view. If I thought a set of stories pointed to a positive view of the client, Cynthia would counter, "What would a pessimist say?" And after exploring that for a few minutes, I could equally well make the case that those stories also had an ominous subtext. Evaluating situations in this way began to illuminate their complexity, as jewels that shone differently depending on which facets were held to the light.

I spent many months working with a large wireless carrier, helping them make sense of stories their customers were telling them in customer-service calls. It struck me that many of the leaders, upon hearing of an issue, would very quickly formulate a strong hypothesis about what was going on, without any specific evidence.

In one case, we were trying to investigate a situation where an alarmingly large number of customers, when they were changing their rate plans, were dropping their data packages. The immediate reaction was this: "customer service representatives are not trying hard enough to sell the value of the data packages."

I tended to identify more with the customers, given that I had little history with the company, and saw a few different possibilities. I tried to use Cynthia's approach to add nuance to the problem: "What would your customer service rep think is going on here?" "What is the customer's view of this?"

The managers I worked with on this project - lower- and mid-level managers - were receptive. They could easily place themselves in the shoes of the customer, or the rep. A few alternate hypotheses surfaced quickly: customers might not be getting value out of the data package, and the rate plan change caused them to do this evaluation; customers might have a fixed budget and could not keep the new plan and the package without raising their bill; customers might be looking specifically for ways to lower their bill.

Soon we had six hypotheses that we could test. Yet, on this and other projects, the complex truth had to fight against simple judgments, and it was a hard fight. If the practice of deliberate mistakes could be ingrained in companies like this one, we could spend more time trying stuff out and finding what works instead of arguing our own viewpoints.

Which arguments, at the end of the day, don't matter to the business.

Friday, November 18, 2011

Seth Godin: Keep exerting "righteous effort," especially after failing

In "After You've Done Your Best (and It Didn't Work)," Seth Godin writes this:

Early in our careers, we're encouraged to avoid failure, and one way we do that is by building up a set of emotions around failure, emotions we try to avoid, and emotions that we associate with the effort of people who fail. It turns out that this is precisely the opposite of the approach of people who end up succeeding.

If you believe that righteous effort leads to the shame of personal failure, you'll seek to avoid righteous effort.

This is precisely what Carol Dweck finds when she studies people with the "fixed mindset" - setbacks cause their effort to decrease, not increase, because they seek to avoid failure (or give themselves excuses for it), rather than learn from it.

It also sounds quite a bit like what Mona Simpson said of her brother Steve Jobs: "He was never embarrassed about working hard, even if the results were failures."

Thursday, November 17, 2011

Olympus scandal connected to culture of hiding mistakes

Olympus Corp, one of Japan's business titans, has been roiled by a scandal involving overpriced corporate acquisitions intended to provide a cover to write down investment losses carried on the books since the 1980's. NPR's Morning Edition covered the story from Japan, including interviews with Japanese business observers who traced the root of the problem to a failure of governance, and an intense culture of loyalty, in which revealing mistakes was tantamount to dishonoring your predecessors. Some quotes:

"Olympus never came clean on its losses, choosing instead to hide its mistakes with a series of overpriced acquisitions."

"The insider mentality at Olympus is reminiscent of Tokyo Electric Power, whose Fukushima Daichi nuclear plant became the worst nuclear disaster since Chernobyl.... The overriding instinct at such firms is to hide mistakes at all costs. 'The sense that we have to be loyal to our predecessors, that we can't blow the whistle, we can't criticize, because of these bonds of loyalty."

You can listen to the entire story here: "Olympus Scandal Could Hasten Disclosure Changes," NPR Morning Edition, 16 Nov 2011.

Wednesday, November 16, 2011

My article, "Making Big Decisions and Mastering the Consequences," is on the 99% site

The two stories I reference in the article (they came from here, of course!) fall under the category of "brilliant mistakes." You can read the article here.

"Lay it on me": Confronting a negative customer situation

I really like this story from MP Mueller, president of advertising agency Door Number Three, on soliciting feedback from customers, even if it's negative. The story appears in the New York Times "You're the Boss" blog.

Many leaders ignore this kind of feedback, and certainly don't seek it out. Mueller shows how "corrections are more warmhearted than perfections."

I got a call from a fast-growing bank that was looking for a new agency. The bank had been referred to us by another client, who we were told “was singing our praises.” Which was interesting because I distinctly remember a very rough lunch I had had with that client a few years ago.

He had called me one day to say, “We need to talk.” From the tone of his voice, I knew it wasn’t going to be pretty. We met for lunch, and I said, “Lay it on me.” And he did. I listened, took notes, and promised him a response that day. He and I soon discovered that his marketing person had been throwing Door Number 3 under the bus for things she had failed to do.

But listening, acknowledging, giving him a response with solutions and not pointing fingers made a difference. He and I now go to lunch twice a year or so — an unexpected, but sweet, bonus of working on those existing relationships.

Tuesday, November 15, 2011

Paul Schoemaker discusses "Brilliant Mistakes"

More than five years after his terrific HBR article (written with Robert Gunther), "The Wisdom of Deliberate Mistakes," Paul Schoemaker of the Wharton School has published a book on the subject. "Brilliant Mistakes: Finding Success on the Far Side of Failure" extends the thinking from the article, and is a great gift to those of us who want to improve how we, as Schoemaker says, "invite mistakes into our lives." One of the key values of mistakes, he states, is to overturn our assumptions and allow us to see reality more clearly.

The Wharton School has posted an interview with Schoemaker on its site (you can see the video below). Knowledge@Wharton is also conducting a "Brilliant Mistakes Contest" if you'd like to share your story.

Here are some choice quotes:

A brilliant mistake is an action you take or a prediction you make that turns out to be wrong. This hurts you initially, but then it also opens up new vistas, and it may result in innovation and discovery. You start to see the world -- or yourself -- differently. For example: You get fired from a job unexpectedly and it prompts a lot of learning. Or you enter a new market or a new technology, and initially, many things don't work out well, but the benefits eventually make that "mistake" more than compensate for its cost....

You have to look at the conditions that favor these brilliant kinds of mistakes. If there is a lot of uncertainty, and the world has changed on you and your old ways of thinking are not quite the right ones, then you have to create more space to discover new approaches....

Very few people want to say they favor mistakes. However, I was also struck [by the fact] that many very successful people have not only a tolerant approach to mistakes, in music or in sports, but they actually embrace them, to some extent. They have an intuitive sense that these mistakes are, as James Joyce put it, "portals of discovery." These are new venues, new avenues for having insights that otherwise you wouldn't get. That's the key: The mistake is an expensive way to get to new insight. But if that is the only way to get to that insight, it may still be worth pursuing.

I've posted my "brilliant mistake" here.

Related post: Benefiting from deliberate mistakes

Monday, November 14, 2011

Does thinking about mistakes cause us to wallow in regret?

I wanted to acknowledge the News and Tribune of Jeffersonville, Indiana, and its columnist Terry Stawar. Stawar wrote a column called, "My Favorite Regrets" which covers a number of topics we've pointed to here, such as the Newsweek series My Favorite Mistake, the various Steve Jobs-related stories about failures and decisionmaking, and a reference to yours truly.

Stawar's piece then seizes on regret as a theme, specifically the need not to beat oneself up over past mistakes. He writes:

Regrets are rooted in self-blame. According to the late psychologist Albert Ellis, such feelings result from irrational demands either on the world or ourselves. When we insist that the world be a different place than it really is, or that we be perfect and never make mistakes, we are setting ourselves up for undesirable feelings and behaviors. Since humans are fallible, most of us do the best we can (given what we know at the time) and only hindsight shows that there were better options. Instead of second-guessing ourselves and feeling terrible, Ellis taught that it would be best if people adopted a more rational perspective, which acknowledges disappointment, but eliminates the need to catastrophize.

I agree with this, but I struggled with this piece of advice: "Psychologist Kase says 'Focus on what you want, and what you can do in the current moment, rather than on past mistakes. When you experience regret, you are caught in the past.'"

The best mistake-learners I know are not seized with regret. Rather, when they experience an outcome that they didn't expect, they analyze what happened (especially the parts they can fix) and move forward putting that knowledge to use. Simply moving ahead without thinking about the past is a recipe for delusion and running in place. Worst of all, you risk making the same mistakes over and over again.

Now that's something to regret.

Thursday, November 10, 2011

Poster child for the fixed mindset: David Brent of "The Office"

I love the British "Office" and Ricky Gervais' character is possibly the most outstanding example of the bad manager archetype ever captured. He is constantly looking for affirmation of his knowledge and capabilities. The fact that he lacks these in spades is the basis for much of the comedy on "The Office."

Carol Dweck in her book "Mindset: The New Psychology of Success."describes the concept of the fixed mindset, where you believe that you are defined by your innate traits; one side effect is that you see yourself as superior to others due to your natural gifts:

Tom Wolfe, in The Right Stuff, describes the elite military pilots who eagerly embrace the fixed mindset. Having passed one rigorous test after another, they think of themselves as special, as people who were born smarter and braver than other people. But Chuck Yeager, the hero of The Right Stuff, begged to differ. “There is no such thing as a natural-born pilot. Whatever my aptitude or talents, becoming a proficient pilot was hard work, really a lifetime’s learning experience.… The best pilots fly more than the others; that’s why they’re the best.”

With the fixed mindset, failure is anything but a learning opportunity; it's a verdict on your worth as a person. Given that, it's not surprising that people with the fixed mindset crave affirmation and positive feedback, and are often devastated by negative feedback.

With that, I wanted to share a bit of my favorite episode of "The Office," in which David Brent hires a customer service trainer to teach his staff how to improve their customer service. But Brent can't help butting in, disrupting the class and undermining the trainer, to show that he knows more about the subject than the trainer himself. He is looking for more than attention, he's looking for admiration and validation.

When I first watched this episode, I laughed hard over and over. But, at the same time, I had this curious parallel reaction: "Hey, I've been David Brent. I've been in this same situation before and acted the same way. Oh, my...."

Yes, it's true, I am a recovering member of the fixed-mindset club.

Wednesday, November 9, 2011

Jim Marshall's wrong way fumble recovery

I had forgotten about old-time Minnesota Viking Jim Marshall's story until reminded of it in Carol Dweck's book "Mindset: The New Psychology of Success." Here's how Dweck captures the story:

Jim Marshall, former defensive player for the Minnesota Vikings, relates what could easily have made him into a failure. In a game against the San Francisco 49ers, Marshall spotted the football on the ground. He scooped it up and ran for a touchdown as the crowd cheered. But he ran the wrong way. He scored for the wrong team and on national television. It was the most devastating moment of his life. The shame was overpowering. But during halftime, he thought, “If you make a mistake, you got to make it right. I realized I had a choice. I could sit in my misery or I could do something about it."

Marshall played 15 more years, appeared in 4 Super Bowls, and set the record for most fumbles recovered in a career (only one went the wrong way).

Here's the play itself, from 1964:

Tuesday, November 8, 2011

A consultant grows, and grows deeper into debt

Adrianna Gardella of the New York Times writes a terrific series entitled "She Owns It," featuring stories of women entrepreneurs. In a two-part post, she profiles consultant Carissa Reininger, whose struggles with managing growth and cash flow should be required reading for anyone wanting to scale up a people-based business like consulting. Here are a few nuggets from part 1, where Reininger describes how the situation spun out of control:

“I had no start-up capital, no experience, and no real idea what I was doing.” Still, Ms. Reiniger said the company grew quickly and sales rose from $29,000 in 2005 to $1.1 million in 2007 — when cash flow became an issue. “It was literally, money in, money out,” she said. Silver Lining never had a line of credit. Instead, Ms. Reiniger said, “I had a credit card with a $17,000 limit.” She said Silver Lining’s small-business clients had their own cash flow issues, which didn’t help matters.

By late 2006, Ms. Reiniger said, Silver Lining’s financial woes prompted her to start “calling people and making ridiculous deals.” For example, she would request a loan of, say, $50,000 and promise to pay it back in 60 days — at a 20 percent interest rate....

She said she entered a dangerous cycle — borrowing a sum from one person and paying it back, with interest, with a loan from someone else.

Ms. Reiniger said that from 2006 until 2008 she completely ignored the reality of her situation. “Admitting that I didn’t have a grasp on our finances and that I was going into debt every month was not going to support my image,” she said, adding that the company had a “rock star” reputation. But while Silver Lining’s annual revenues were $1 million, the company was spending more than that.

It got to the point where Ms. Reiniger said she couldn’t bear to look at the company’s QuickBooks records.

And here's a bit of Part 2, which covers Silver Lining's recovery:

After two years of trying to ignore her predicament, Ms. Reiniger was forced to acknowledge it. One wake-up call came, she said, from the husband of a creditor who went to Silver Lining’s offices in Edmonton, Canada, and threatened her and her employees. Some shell-shocked employees began to quit, and Ms. Reiniger was forced to lay off others. She was soon down to two employees from a high of 25. In a misguided attempt to grow her way out of debt, Ms. Reiniger had expanded from Silver Lining’s original Toronto office, adding outposts in Vancouver and Edmonton, Canada, and Las Vegas. In 2008, she decided to close all but the Toronto office.

Silver Lining had made its living coaching other small businesses on how to set and reach financial goals. Now, Ms. Reiniger’s own business was struggling to manage its growth. The irony contributed to her reluctance to face her financial problems head-on. She wasn’t sure what to do: “I needed either slower growth or more money,” she said.

Part 2 also includes a great discussion of pivoting a business model and how to regain the trust of creditors.

UPDATE: Here's Part 3 of the story.

Monday, November 7, 2011

Dweck: exceptional people convert setbacks to successes

From Carol Dweck's marvelous book "Mindset: The New Psychology of Success," a summary of her research about the effects of mindset on approaches to learning. Dweck differentiates between people with "fixed mindsets," who feel that intelligence is fixed, and those with "growth mindsets," who believe intelligence can be improved through work and study. Growth-mindset individuals see mistakes and failures as learning opportunities, while fixed-mindsetters see them as negative reflections of their capabilities.

Dweck's work underpins much of the research about learning from mistakes, and has been well-represented on this site.

The other thing exceptional people seem to have is a special talent for converting life’s setbacks into future successes. Creativity researchers concur. In a poll of 143 creativity researchers, there was wide agreement about the number one ingredient in creative achievement. And it was exactly the kind of perseverance and resilience produced by the growth mindset. [p.11]

Saturday, November 5, 2011

From "The Progress Principle": "You can't create a problem-free bubble" - Manage your team through inevitable setbacks

From "The Progress Principle: Using Small Wins to Ignite Joy, Engagement, and Creativity at Work," by Teresa Amabile and Steven Kramer.

A manager creates a climate of psychological safety by focusing on the work and what can be learned from it, rather than berating subordinates for errors. More generally... a manager can sustain virtuous cycles of progress and positive inner work life in the face of inevitable setbacks that occur in any complex project. Contrast this to the blame and fear that prevailed throughout Karpenter Corporation. As a member of Karpenter's Domain team said, "Around here, not finding a solution is perceived as not being competent!"

This highlights an important fact. By its very nature, meaningful work is hard; people often get the greatest satisfaction from overcoming the most difficult challenges. Failure is inevitable along the path to innovation. Though you should try to minimize obstacles and setbacks under your control, you can never create a problem-free bubble for your people. You can't nourish inner work life if you drive yourself and your team crazy trying to avoid all problems. Rather, focus on providing people with the catalysts and nourishers they need to overcome the obstacles they will inevitably face. [p. 177]

[Excerpted from "The Progress Principle," by Teresa Amabile and Steven Kramer, Harvard Business Press, (c) 2011. Reprinted by permission.]

Thursday, November 3, 2011

J. Hilburn: Learning lessons from starting a clothing business

In a New York Times article describing how custom clothier J. Hilburn is attempting to move into online sales without alienating its direct sales channel, founders Hil Davis and Veeral Rathod describe some of the mistakes they made when starting up:

[Before starting J. Hilburn,] Mr. Davis and Mr. Rathod knew nothing about the clothing industry. Armed with $650,000 from friends and family, the two opened with the help of four direct-sales representatives whom Mr. Davis's wife had known. While the first representatives found customers, the inexperience of the founders showed.

They chose their first factory, in China, because it had produced two high-quality samples and assured them it could produce more. But after J. Hilburn started ordering in quantity, things did not go so well, a problem worsened by time and language differences.

"We let two shirts be the proof of concept when one of us should have been over there," Mr. Davis said. "Our first 400 shirts came back wrong because we were the idiots who didn't get on a plane to watch over the factory."

They did visit their second factory before selecting it, only to have it fall behind on complicated orders. Each day, they later learned, the needle workers put the most difficult shirts back on the bottom of their pile, delaying delivery. After the partners announced that customers would get a free shirt for every four days an order was late, they received a standing ovation one day in a Dallas restaurant from customers who called them the "free-shirt guys."

They had fabric-buying problems as well; Italian mills were not accustomed to selling quantities as small as of 100 meters.

Mr. Rathod and Mr. Davis had to retrain their entire supply chain in an industry they did not know. Had they known then what they know now, Mr. Davis said, "we could have started this business for 40 cents on the dollar."

But they learned. Sales rose from $1 million in 2008 to $3.25 million in 2009 and $8 million in 2010, a year in which they sold 60,000 shirts (which start at $89). And they built their squad of style advisers to about 1,000 today from the original four.

Wednesday, November 2, 2011

Why do losing sales deals last longer than winners?

An interesting post by Michael Liebow on Selling Power ("To Improve Sales Performance, Fail Faster") says this:

Looking at a knowledge base of deals assembled from a variety of companies and industries and totaling more than 10,000 opportunities, the numbers are striking. Winning deals on average took only 75 days to close, while losing deals took 175 days to close out ― 100 days longer.

We've looked at the idea of "chasing losses" in another post. Rather than quickly cutting losses, we tend to chase them, hoping things will turn around and validate our initial beliefs. In the above study, salespeople and sales managers "chased their losses" twice as long as they pursued wins.

Liebow continues:

This culture of bravado makes cleaning a sales pipe nearly impossible. Yet what can only be described as losing fodder must be cleaned out of the pipe if an organization ever hopes to leverage its investment in the sales process. Thus, the trick to winning is to find a way to allow for a clear quantitative assessment of the pipe and clean it so that your best people across your organization are available to spend precious resources, time, and cycles on the deals with the highest likelihood of winning.

Salespeople, like all of us, need to face problems squarely in order to be successful. Figure out your losing opportunities, and stop working on them. Now.