Friday, April 27, 2012

Urban Outfitters apologizes for web outage, with kittens!

Urban Outfitters ran an online sale this week which they promoted with an email blast (see below).

During the sale, their website crashed. And to their credit, the company sent another email out apologizing for the outage, and adding free shipping. If I had tried to order something that day and was unable to, this email would have made me feel better:

This is evidence that you can turn a negative into a positive with some humility and a sense of humor. A deal-sweetener doesn't hurt either.

Thanks to the Listrak Email Marketing blog, which posted on this (and from which I got the screenshots).

Thursday, April 26, 2012

From "Reverse Innovation": PepsiCo India's experience of trial and error

The new book "Reverse Innovation: Create Far From Home, Win Everywhere" by Vijay Govindarajan and Chris Trimble, describes the phenomenon of new products being born in emerging markets, with radically different value propositions and price points, and spreading to developed markets. This approach is the reverse of the traditional model for Western companies, which create (expensive) products at home, and then adapt them to developing markets.

This excerpt describes some of PepsiCo India's experience developing a new snack cracker named Aliva. It beautifully highlights the inevitability of mistakes when you are trying something new, and that persistently pushing through and learning from those mistakes are hallmarks of a successful product launch.

From its inception to its 2009 launch, the Aliva project took nearly four years. Aliva was evaluated against criteria that took full account of potential uncertainties. Such latitude was indispensable. Aliva had to make its way through a predictably fraught gestation. There were plenty of bumps in the road, and plenty to learn on the way.

Aliva's most vexing challenge was its packaging. Packages are hugely important to snack food performance. If snacks had remained in the era of the general-store cracker barrel, great branding opportunities would never have materialized. Aliva's packaging needed to be as distinctive as the shape of the cracker. The packaging had to communicate that Aliva was both healthy and fun. Decisions about the package would have implications for Aliva's texture and shape, the way the cracker was produced (through baking), and the attractiveness of the offering at the point of sale.

The Aliva bag featured a number of innovations. [Program manager Vidur] Vyas claims that nothing like it had ever been tried before. It was to be made from new materials on brand-new - and untested - machinery. The bag was designed to be flat on the bottom. Unlike typical snack bags in the United States, it could stand up straight on a retail shelf, tabletop, or counter. The packaging material was therefore heavier and stiffer than conventional plastic film. It turned out that a more rugged package could actually be made using only two laminate layers, not three. This solution was both more cost-effective and environmentally friendly.

The package specifications needed to address certain constraints of local infrastructure. It often took a long time to distribute perishable goods through a vast, predominantly rural retail network. Crackers can spoil more quickly than other types of snacks. Aliva therefore had to be protected from spoilage as well as breakage. A rugged, lightproof, hermetic package was key.

Vyas and his team endured a perfect storm of complications on the way to satisfying these needs. Because the Aliva bag was a first-of-its-kind package design, it seemed that every element of the package's structure and manufacture either had to be invented or endlessly troubleshot. To start with, the new packaging machinery was touchy. In limited test runs, things seemed fine. But once Aliva launched, in May 2009, problems cropped up during production-scale runs, particularly with the heat seal at the top of the bag. So, new material had to be designed. This required help from squadrons of global experts on polymers and lamination technologies.

There were nettlesome challenges on other fronts as well. Because Aliva would rely on a new baking system, which had only recently been used for the first time to produce cookies in PepsiCo's Mexico region, Vyas's team needed time and technical guidance to learn how to operate it reliably.

Finally, the team aspired to create a cracker in an eccentric triangular shape. The cracker's unique design was considered an important aspect of the values the brand would communicate. The triangle shape was meant to connote speed, stimulation, and taste. The triangle's curved edges were meant to connote health. At first, however, the crackers suffered unacceptable levels of breakage. Coming up with a workable version - a cracker with a low rate of breakage and a pleasing combination of textures - required innumerable trials.

But if Aliva's journey to market had an unusual share of difficulties, that is only because it was forging entirely new paths in a number of areas. To its credit, PepsiCo patiently tolerated a high degree of necessary experimentation... with packaging, with the baking system, and with the architecture of the cracker itself. (pp 167-168)

From "Reverse Innovation: Create Far From Home, Win Everywhere," by Vijay Govindarajan and Chris Trimble. Published by Harvard Business Review Press. Excerpted by permission.

Tuesday, April 24, 2012

Daniel Kahneman: It's "more enjoyable to identify the mistakes of others"

More wisdom on mistakes and self-knowledge from one of the best books of 2011, Daniel Kahneman's "Thinking, Fast and Slow":

It is much easier, as well as far more enjoyable, to identify and label the mistakes of others than to recognize our own. Questioning what we believe and want is difficult at the best of times, and especially difficult when we most need to do it, but we can benefit from the informed opinions of others.

Part of what I'm trying to figure out here is if we can make it a little easier to look inside ourselves, to get a better idea of what we "believe and want," so we can make better decisions and sidestep avoidable mistakes. Another objective is to get us to think about how to make better mistakes, so that given our difficulty in truly knowing what drives us, we can find that out by trial and error with lower cost to ourselves and others. Finally, by sharing others' mistakes, I hope you can learn more about your own situations and maybe take that learning into account in your own decision-making.

Check out the complete collection of our Kahneman-related posts.

Friday, April 20, 2012

TerraCycle's Tom Szaky makes a tough decision

An undertone of this project is decision-making. Each decision point is an opportunity to make a mistake. Avoiding decisions are mistakes in themselves. Yet in a complex environment there is no playbook for assuring a decision leads to a good outcome.

It's rare to get a peek into someone else's significant decision-making process, so kudos to TerraCycle CEO Tom Szaky, who discussed a key business decision in the New York Times "You're The Boss" blog this week.

TerraCycle has been trying to add a new type of business to its existing one - collecting juice pouches and remanufacturing them into consumer goods such as purses. In this case, the juice companies (such as Capri Sun) subsidize TerraCycle's costs for collection. The new business (called World of Waste, or W.O.W.) involves engaging consumers to cover the costs to collect and recycle other products for which the manufacturers aren't willing to pay TerraCycle to collect.

Enhancing TerraCycle's information systems to support this new model has caused delays in the program's introduction. Those delays are the subject of Szaky's post. I was most interested in the section where he talked about the management debate between investing in enhancing the existing juice pouch business model versus adding this new, quite different model:

I have made a firm decision that W.O.W. will not be delayed again. Not everyone on my senior management team agreed with this decision. The essence of our debate was whether we should spend all of our resources building our existing infrastructure (which is proven but dependent on one source of funding, our brand partners) or whether we should take three or four months and improve our I.T. infrastructure so that it can handle the new demands of W.O.W. (with a new system, W.O.W. would allow us to receive funds directly from consumers and thereby diversify our revenue). Of course, W.O.W., if it works, would not start generating real revenue until 2013, because we would not be able to introduce it, at best, until late in the third quarter of this year.

The arguments on both sides are compelling and logical. On the one had, it makes sense to strengthen a proven business model and have it immediately generate more revenue, which can in turn help drive our ability to invest further in the company. On the other hand, adding a new revenue generator and a major extension of our offerings could open us up to new customers and bring a big new revenue opportunity.

So far, my experience in business (which admittedly is limited, given that I’m 30) has taught me that taking such gambles is a worthwhile endeavor — even if the odds are against you. I have also found that in such moments it is difficult to make decisions that everyone on the team will support. Perhaps this is why most organizations have a leader and are not run by committee.

Dialogue, debate, decide, fall in line. This is a classic decision process. As Szaky says, there is a leader so these hard decisions can be made. And when he says "taking such gambles is a worthwhile endeavor - even if the odds are against you," he is saying that the bold decision energizes the team and makes it work like crazy to make the decision successful. (For more on this point, check out my article on The 99 Percent.)

Thursday, April 19, 2012

Lyndon Johnson biographer Robert Caro finds his career-long theme via a mistake

This is from the New York Times profile of Robert Caro, written by Charles McGrath, published in advance of Caro's fourth volume in his monumental biography of Lyndon Johnson, "The Passage of Power: The Years of Lyndon Johnson." McGrath's article points out that many turning points in Caro's career came as a result of mistakes:

There was never a plan," Caro said to me, explaining how he had become a historian and biographer. "There was just a series of mistakes."

In the following excerpt, McGrath explains how Caro first became interested in the subject of getting and wielding political power, a theme that he has carried through five massive books over more than 40 years of writing:

In order to marry, Caro needed a job. The Times offered him one as a copyboy for a salary that he now recalls as "something like $37.50 a week." The New Brunswick Daily Home News and Sunday Times offered him $52 a week to be a reporter, and Caro took it. Another mistake, except that it led to an early lesson in power politics. The paper's chief political writer was on leave to work for the Democratic Party in Middlesex County during an election. When he became ill, Caro took his place. He wrote speeches and did P.R. for one of the party bosses. On Election Day he rode around with this man to the polling places, and at one point they came upon the police loading some black people into a patrol wagon. "One of the cops explained that the black poll watchers had been giving them some trouble, but they had it under control," Caro recalled. "I still think about it. It wasn't the roughness of the police that made such an impression. It was the - meekness isn't the right word - the acceptance of those people of what was happening. I just wanted to get out of that car, and as soon as he stopped, I did. He never called me again. He must have known how I felt."

The fascination and revulsion Caro found in that scene, in the privileges and unwritten rules of power, made a lifelong mark. Soon after that, Caro fixated on the behind-the-scenes opoerator Robert Moses, initiator of many 20th century New York public works projects (Triborough Bridge, Lincoln Tunnel, Cross Bronx Expressway, etc., etc.). That led to Caro's first book, "The Power Broker: Robert Moses and the Fall of New York" (winner of the Pulitzer Prize), and, then to his 40-year study of another power broker, Lyndon Johnson.

Wednesday, April 18, 2012

Entrepreneur Randy Minchew: listen to what the numbers tell you or else

Entrepreneur Randy Minchew posted on the My Venture Pad blog some lessons he has learned from his own mistakes ("Mistakes From Past Ventures I Won't Be Making Again"). Here's a taste:

Lesson 1: Respect the numbers.

I used to rely on my intuition too much when it came to pulling the trigger on a deal. What I found was that, while my intuition is great for helping me employ the right people, it’s not enough to make financial decisions.

A great example was when I started a restaurant. My wife (and business partner) told me that, based on the startup costs, our new restaurant would have to serve 800 people a day in order to make a profit. I promptly told her to stop being negative and explained that I had a gut feeling that we could make it work. The business went bankrupt in two years. I now have a great respect for the numbers (and others’ input!).

Minchew also offered some advice for others, which I wholeheartedly agree with:

People make mistakes in many of their everyday ventures; it happens. The important part is applying the lessons that you learn from these mistakes and considering them in future initiatives. And while you’re at it, don’t be ashamed to share them with others. You might save them from sharing in the same frustrations.

The act of sharing mistakes with others so they can learn is one of the main points of this site. Thanks, Randy, for sharing yours.

You can read his entire post here.

Tuesday, April 17, 2012

Mistake stories come alive when we discuss them

Recently, my wife and I were driving south to visit family, and on the drive we listened to the "This American Life" episode featuring the retraction of the Apple Foxconn story (which we discussed in an earlier post).

There's a lot going on in the story - the role of journalism, journalism versus theater, telling truth versus fiction. The episode took an hour, and then for the next hour or hour and a half, my wife and I talked about the story - what it meant to us, what we thought about it. The heroes and villains, and what really was our perspective on all these actions. After that, I had a much deeper understanding of the story and my reaction to it than if I had listened to it alone.

I think that's an important lesson for anyone who wants to learn from others' mistakes: you can get even more out of them and maybe substantially more if you share them with others. Because it is in discussion that we make sense of complex and ambiguous situations that frequently come up in business, in life and certainly around the issues of making mistakes and failure. Absorb these stories, share them, discuss them. Come to your own conclusions, and please share your comments on the site; it helps all of us get a bit smarter.

Thursday, April 12, 2012

Thinking you can emulate Instagram is a mistake

Amid all the hype this week over Instagram's acquisition by Facebook for a cool $1 billion, it's worth pointing out the following. Your business will not be able to take advantage of many of the factors that enabled this 12-person company (12 people!) to quickly gain 30 million users and the attention of the biggest social software dog on the planet. Those factors include impeccable timing and a specialty (mobile) that fit a particular weakness of its acquirer.

You'd be better off scrutinizing failed ventures for things that their leadership actively did that you would not want to emulate. Sidestepping avoidable mistakes gives you a chance to succeed, at least modestly, with virtually any business. The difference between a modest success and a blockbuster will, for the most part, depend on things that are part of your environment or conditions peculiar to the time. They don't call it "catching lightning in a bottle" for nothing.

One feature of Instagram's leadership that I do think is instructive is their ability to nimbly adjust their product as they got feedback from users on where the market was headed. That's a habit we all could use to emulate.

Fred Wilson on "Coming of Age" as an investor

This post is from Fred Wilson's AVC blog. We've reposted many stories from Fred (you can find a selection of them here). It's not a mistake story per se, but a recollection of mistakes of inexperience he made, and which he is seeing from young venture capital investors today. I especially like the generous and optimistic tone of the post.

Coming Of Age 
I’m out here slingin bringin the drama,
tryin to come up in the game
and add a couple of dollar signs to my name
- Memphis Bleek Coming Of Age by Jay-Z

I'm not going all Ben Horowitz on you. But imitation is the finest form of flattery and I do like how Ben rolls on his blog and in the venture capital business.

I'd like to talk this morning about how hard it is the come up in the venture capital game. I work with a bunch of VCs who are in their early 30s and have less than five years in the business. They work hard, put in ridiculous hours, are on top of all the latest trends, companies, technologies, etc. They meet with tons of companies every week, work hard for their portfolio companies, and are on planes flying around to the important confereneces and demo days. I can assure you they are working harder than I am.

But when it comes to winning deals, they have a distinct disadvantage. They can be working on a deal for a year or more, and then when the entrepreneur decides to raise funds, a more experienced VC such as myself can swoop in, spend a week or two building a relationship with an entrepreneur, and take the deal away from them. I've seen it happen. I've done it myself.

They make rookie mistakes. They let a reporter hang out with them for a week thinking they can trust them. They talk when they should be listening. They overpay for deals thinking that will win the deal for them. They use their phones in board meetings. They fight with entrepreneurs over meaningless things.
When I see these things I cringe. Because I've been there and done that. I spent the first ten years (maybe 15) of my time in the venture business as a young VC trying to make it in the game and not really knowing how. I've made all of these rookie mistakes and more. I feel for them, I often mentor them, and I really enjoy working with young VCs.

When a young person asked me about getting in the venture capital business, I advise them not to. I think VC is an experienced person's game. Startups are not so much. Startups are a great place to be in your 20s and 30s. VC is a great place to be in your 40s and 50s.

I look at Ben and his partner Marc and think "they did it right." They got into the venture capital business when they had all the experience one could ever want working with startups. They don't lose deals to more experienced VCs. They win deals over more experienced VCs.

But of course many young VCs made the decision to get in the game at an early age and are committed to making it work. They are going to have to take their lumps. Make the mistakes. Learn from them. Continue to work harder for less results to show for it. And lose deals they should win.

One of the things I did not do very well that many of these young VCs are doing much better is building relationships with more experienced VCs. As I said, I work with a bunch of them. Teaming up with a more experienced VC can help you win a deal, you can learn from them in the board room, and you can ask them for advice when you screw up.

Going back to where we started this post to end it, I like how Jay-Z and Memphis Bleek partner up in Coming Of Age. That's the way to do it.

[JZ] Hahahh I like your style
[MB] Nah, I like YO’ style
[JZ] Let’s drive around awhile

Wednesday, April 11, 2012

"Mistakeville" is hosting a mistake-story contest

The new site Mistakeville, a place to share mistake stories, is holding a mistake story contest in the month of April. One winner per week will win a $25 Amazon gift card. Here's the link to enter. Please check it out!

Tuesday, April 10, 2012

"Strategy + Business" magazine says "Netflix wasn't all wrong" in its strategic changes

The saga of Netflix's shift to streaming from its start as a video-by-mail company continues to unfold. As we've noted in several posts, Netflix and its chairman, Reed Hastings, were derided for the split of the two businesses, the dramatic pricing changes (subscribers who had both streaming and video-by-mail - like me! - saw up to a 60% increase in their monthly bills) and the way they communicated it to their customers.

Now, several months down the line, the opinions of Netflix's moves are more mixed. In Booz & Co.'s Strategy + Business magazine, authors Ken Favaro and Kasturi Rangan provide an early reassessment of Netflix's mistakes.

Favaro and Rangan criticize the timing of Netflix's moves, but note that

Netflix likely judged correctly that its mail business was going to be cannibalized and ultimately replaced by streaming. But no one can really know for sure how fast that might happen. Moving too early can be disastrous, as Netflix learned, but moving too late can be even worse — as companies such as Kodak, Research in Motion, and Nokia have discovered.

In the end, they admit that, while Hastings made avoidable mistakes in communication and assessing customer reaction, it's impossible to make a bold strategic move without breaking some glass:

Customer reaction to any change in a company’s value proposition is difficult to know a priori, even with the best market research. Having the agility to change your choices when new information comes to light is essential to strategy success. This type of agility, no matter what mistakes Netflix made, may save the company in the end.

Monday, April 9, 2012

Predicting the future is hard; ask a psychic

In the July-August 2007 Harvard Business Review, Paul Saffo explained in his article "Six Rules for Effective Forecasting" (link) that "prediction is possible only in a world in which events are preordained and no amount of action in the present can influence future outcomes." He goes on to write, "Above all, a forecaster's task is to map uncertainty, for in the world where our actions in the present influence the future, uncertainty is opportunity."

This belief was reinforced in an August 2007 news item from my local business newspaper, the Central Penn Business Journal:

...Business owners between 200-212 N. Second Street in Harrisburg will have to pack up if city officials approve plans for an 18-story office, parking and retail building at that location.

Four businesses would be affected: Cobalt Hair Salon, 2nd Street Psychic, Chilly Willy's ice cream parlor and the Tom Sawyer Diner....

Psychic Angie Tom, who owns 2nd Street Psychic, was in Europe and could not be reached. A psychic who works for Tom said she did not see this coming and could not say what Tom would do in the future.

If psychics can get caught off guard, then we must live in a world rife with uncertainty.

Thursday, April 5, 2012

WSJ's Middle Seat columnist Scott McCartney: "Never call home happy" from a business trip

The Wall Street Journal's "Middle Seat" columnist, Scott McCartney, related his own tip in an article entitled, "25 Ways to Make Traveling Easier, Starting with a Single Shoe":

Never call home happy. I learned this the hard way many years ago. Out of town covering a big news event, I called home giddy. I was enjoying a fine meal with a large contingent of reporters. My wife listened quietly while I recounted the excitement of the story and the fun we were having over wine. And then I heard all about the two kids who had been throwing up all day. Big mistake on my part.

There are several travel-related stories on the site - you can find them here.

Tuesday, April 3, 2012

From FailCon: Designing for Failure - Lessons from Jetpack Joyride

This post was contributed by FailCon, an international conference on common business
failures and how to recover from them. FailCon has a blog that discusses subjects near to our heart.

I recently sat in on a post-mortem presentation at GDC by Luke Muscat of Halfbrick games, the creator of Fruit Ninja and Jetpack Joyride.  While he discussed dozens of ingenious tidbits on how to keep people feeling challenged, spending money, and generally having a good time, one thing stood out as especially relevant to us: Jetpack Joyride is designed to make the player fail. Over. And Over. And Over.  In fact, it relies on the user not only failing but enjoying it so much that they stick around and share it with friends.  With millions of downloads, clearly it’s working.

So just how have they made inevitable failure so fun, and what can the rest of us learn from this?

Reward Failure:  In Jetpack Joyride, with your ultimate death comes an immediate reward screen recognizing your progress, any mission goals you accomplished, and offering you a slot machine chance for any coin you picked up.  This can be pretty easily practiced with yourself and employees, too.  When encountering a failure (either personal or amongst employees), focus less on the problem that happened and more on what risks were taken, what was learned, and how this is going to improve the process down the road.  Keep yourself and the team feeling engaged with the organization, and show that each failure does contribute to the final product.  Make it very clear that taking well-informed, relevant risks is a good thing.

Always Have A Next Step: Immediately after exploding, Joyride shows you what your current missions are, to remind you that there is still more to get done.  This is by far the most important take-away for business leaders.  The quickest way to recover from a personal failure is to know what the next step is.  Before taking a big risk, set up a contingency plan: know exactly what things might help in a recovery, and have a short and easy to-do list on the side.  That way, when failure rears it’s ugly head, you can smile and nod and turn your attentions immediately to the next step, without having to worry about getting stuck in a rut.

Reduce the Barrier To Retry:  Joyride is a quick game with a one-tap ability to replay after failing.  Make failing that easy in your organization.  Use the Next Steps tips to always have a way for people to start again.  More important, make sure no one is dwelling on the failure.  The worst thing you can do is hold it against someone, having a three-strikes rule or anything like that.  This will make each re-entry more frightening.  Discuss what happened promptly, incorporate the lessons, and then move on to something new.

Most people design a business for success; it keeps everyone positive and envisioning a clear final goal.  But businesses rarely reach the first goal they sit; dozens of road blocks come up along the way, and you need to be able to recover and pivot quickly.  While you should keep strong goals in your mind, designing for failures - making them manageable and recoverable - is safer and more realistic for yourself and your company.

Monday, April 2, 2012

World-class safety programs use "fresh eyes & high standards" - shouldn't you?

From "Blow-Ups Happen," part of the Economist's March 2012 special report on the future of nuclear power:

After Three Mile Island, the American Nuclear Industry set up its Institute of Nuclear Power Operations. INPO, headquartered in Atlanta, regularly inspects power plants, using its own staff as well as engineers from other operators, and offers lessons learned from mistakes throughout the industry so that all plants benefit from what happened at any one of them. INPO brings fresh eyes and high standards, and its reports can be scathing.

Let's set aside the question of whether even a world's best safety culture can make nuclear energy safe enough.  (The Economist report does a terrific job of wrestling with that question.)

Imagine that you are in a business that does not have the same risks. Would it not benefit you to, as INPO does, "offer lessons learned from mistakes" and "bring fresh eyes and high standards" to evaluating your own performance and the strengths and weaknesses of what you manage?