Story: Can't anyone here set a thermostat?

Following on from last week's post on Dietrich Dörner's The Logic Of Failure: Recognizing And Avoiding Error In Complex Situations, I had this experience at a client site recently.

The conference room was too warm, so I took off my jacket. Our host went over to adjust the thermostat near the door. Within fifteen minutes the room was too chilly, and on went my jacket again. Then the director came in and adjusted the thermostat up. Ten minutes later it was too warm, and I took my jacket back off. We were in the room two hours and it never settled into a comfortable temperature despite several more readjustments.

The moral is that, as  Dörner pointed out, people have difficulty understanding control situations in which effect lags cause. In this case, the room took a while to cool down after the thermostat was set lower. The host tried to compensate this by moving it down a larger degree, hoping that this would result in faster response, when in fact it resuled in a far cooler room. The director then overcorrected, and the room was too warm. It's good to have a healthy dose of humility when dealing with complex situations. We control much less that we think we do, and the controls we put in place often give us more than we want. Better to watch and wait for a while, and make small, incremental movements.

Failure Forum: Learning from Redline Entertainment, Best Buy's Media experiment

This first appeared on Matt Hunt's blog. Reposted by permission.

In the early 2000s Best Buy launched their first entertainment media label Redline Entertainment.  The goal was to help grow the organization vertically into the entertainment industry.

As an entertainment label Best Buy would sign artists to create new material, produce the content, and provided distribution of the final products into retail outlets – Best Buy stores and others.  This was a new area for Best Buy but it was tangent to their core business of selling electronics, appliances, and media.  Coming off of a successful national expansion Best Buy had strong momentum and it was hungry for opportunities to continue to grow their business.

Jennifer “JJ” Schaidler had unknowingly altered her career when she took the lead role in building out Redline Entertainment.  As with many innovation projects the team had a good plan in place but without all of the pieces together it would be almost impossible to test individual hypothesis.  Redline’s success didn’t hinge on just one element but on a series of organizational errors that JJ documented for the company in what came to be known as the Redline Whitepaper.

What makes JJ’s story unique is that she not only was willing to own her mistakes but she was willing to document them and share them with others inside the organization.  Many executives would cower from this idea as career suicide but not JJ.  During my tenure at Best Buy, JJ’s Redline Whitepaper had provided an example of what good innovation work should look like: build your hypothesis, test your hypothesis, and share the results of your tests – good or bad.  This is JJ’s story.

1. So Redline Entertainment was going to be Best Buy’s entertainment media label.  How did that idea come about?

Our Senior Vice President of Entertainment, Gary Arnold, had the idea of growing our business by creating our own label and developing our own content.  This was right around the time that Best Buy had purchased Musicland (including Sam Goody) and Future Shop in Canada.  The idea had come from two concepts:  1) that the combined entities offered a huge distribution channel and 2) the artists were becoming increasingly frustrated with their labels and their binding contracts.  The plan was that Best Buy could go straight to the artists and offer distribution but allow them to own their masters.

At that same time, Best Buy was defining the ecosystems that they wanted to grow and expand into diverse businesses –even non-retail businesses.  Entertainment was one of those ecosystems.  Starting a label seemed like an adjacent idea where we could bring the leverage of the enterprise with all of the storefront assets.  We had been developing direct relationships with the artists and had connections within the manager community.

A critical piece to the puzzle was that Redline also had a distribution relationship with RED distribution (no affiliation).  RED was the independent arm of SONY distribution and they were in theory able to get Redline products into Target, Wal-Mart and all the rest of the music retailers.  That foot print would allow us to offer the same distribution as a major label.  The advantage would come from additional marketing and advertising from the Best Buy entities.

Ultimately the competitive nature of the other retailers was the undoing of Redline.  They knew that the products from Redline came from Best Buy and they didn’t want to support a competitor.

2. When you committed to the project did you consider what would happen if you failed?  What kind of odds were you giving yourself for success?

I actually thought there was a likelihood of failure but it didn’t concern me.  My perspective was that the company was growing so fast that it would find a place for me.  In retrospect, I should have been more concerned.  Only after I had taken this new role was it clear to me that going back to my old role as Vice President of Advertising wasn’t an option.

3. Where there ever expectations set by the company for what would happen if things didn’t work out?

No.  Truthfully we had never done these types of innovation projects before so it wasn’t discussed.

4. How long did the project last?  What was the ratio of the time spent planning vs. executing?

Around two years.  The planning phase was really getting the business plan approved and that took 3-6 months.  Execution or “signing” of artists and projects were started before the plan had full approval.

5. Was there ever a clear indication that they project wasn’t going to succeed?

Yes, there were several factors that popped up where we knew that we had problems: 1) our inability to get significant radio air play for our artists – radio was still a driving force behind sales, 2) the resistance/refusal from Target / Wal-Mart to buy Redline products, and 3) the lack of incoming revenue while signing on new projects.  If we were starting our own external company we would expect there to be a lag while building the portfolio of business but within a corporation there quickly needed to be something that was showing a positive return.

6. What was the most difficult task in shutting the business down?

For me the most difficult task was letting go of our people.  The truth was that they didn’t do anything wrong.  It wasn’t their fault.  Many people did find other roles at Best Buy so we were pretty successful at transitioning but for those that didn’t make the transition it was painful.

7. After you had shutdown Redline you did something that had never been done before at Best Buy, you wrote a formal whitepaper on what had been learned through the project.  Can you explain why and how that happened?

In a budget presentation with the President, he commented that “I’d be happy to lose $7m dollars on Redline if we really learned something from it.”  In addition, he was always referencing the Clay Christensen book – Innovator’s Dilemma.  I read the book and believed that Best Buy was exactly in that classic problem.  So I wrote the white paper as a way of illustrating to the company that we would need to change how we do innovation if we wanted to succeed.  At that same time Best Buy had hired the consulting firm Strategos to help build out an innovation process.  I participated in that work and witnessed many of the same problems repeating themselves.  When Best Buy hired Kal Patel, he read the white paper and encouraged others who were trying to innovate read it.  It ended up taking on a life of its own.  That was good because in one sense – it was a $7m white paper.  Too bad I didn’t get any royalty payments on it!

8. Have you used the lessons from Redline’s failure in your work since then?

I still get emails from time-to-time from people asking me to send it to them.  The frequent comments are that not much has changed since it was written in 2002.  The bottom-line is that innovation inside of large organizations is very difficult.  It takes people that are willing to take risks and willing to fail.  When a company is growing and has the funds to support innovation it makes it less risky.  Public corporations that need to report quarterly profits are also extremely tough.  When the numbers aren’t looking good, new ideas that just haven’t had enough time to turn a profit are the easiest to cut.  In our estimation Redline needed five years.  It only had two.  There was no appetite to wait that long.

Following her role with Redline JJ went on to lead many other strategic initiatives at Best Buy, including the initial launch of the Best Buy & Carphone Warehouse joint venture – Best Buy Mobile.  She continues to take risks in order to drive innovation in her work and in her career by continually defining new opportunities.  JJ is currently General Manager for Brightstar – the world’s largest specialized wireless distributor and mobile service company.

Founders who sold or didn't sell reflect on their decisions

In the New York Times, this article provides a very cool window into the minds of entrepreneurs who sold (or didn't sell) their companies. The founders' recollections provide a glimpse into some deep stuff, including how our significant decisions look upon reflection, what is a mistake, etc. Here's PayPal co-founder Max Levchin recalling his next startup experience:

His next company, Slide, was a different story. It made social apps and sold to Google for $228 million. Google shut it down a year later.

“The honest truth about Slide was we were a five-year-old company that had wandered through the desert for a long time wondering what business to be in,” said Mr. Levchin, who later started a new software company, HVF. “I wanted to top PayPal and it didn’t work.”

And here's Ben Horowitz on selling the company he co-founded, Opsware:

“I spent eight years, all day every day, trying to build this thing, and all of a sudden it’s gone, it’s just over,” he said. “It’s a little bit like something dies.

“That decision was one of the most isolated and alone decisions you ever make,” said Mr. Horowitz, who now advises entrepreneurs as a venture capitalist at Andreessen Horowitz. “On the surface it looked good, but I tell you after I sold the company I had total seller’s remorse.”

And Philippe Courtout on cc:Mail:

Mr. Courtot received a second acquisition offer, this time from Lotus Development for $55 million in cash.

Under Lotus, cc:Mail grew from four million users to 24 million, until IBM acquired Lotus in 1995 and shut down cc:Mail. Microsoft Mail eventually became Outlook.

“I should not have sold,” said Mr. Courtot, who is now chairman and chief executive of Qualys, a security company that went public last year. “That was my biggest regret. We could have moved much, much faster and brought it to the cloud. But such is life.”

Mistake Bank Bookshelf: "The Logic of Failure"

This week’s selection on the bookshelf is an amazing book I discovered thanks to a tweet from Roxanne Persaud (@commutiny), The Logic Of Failure: Recognizing And Avoiding Error In Complex Situations by Dietrich Dörner. It was published in English in 1995, but is still (apart from a couple of dated references to the difficulty computers have playing world-class chess) amazingly current.

Dörner is professor emeritus of psychology at the University of Bamburg. In the book, he discusses many psychological simulations that illustrate how difficult it is for people to manage in complex environments. In the experiments, subjects are given a complex objective – say, to manage the well-being of an African tribal community by allocating water, seeds, etc. – and the ability to make periodic interventions. Due to the many psychological biases and blind spots we have, this task is very difficult, and very few participants can successfully keep things as good as they had been before the simulation began (many result in the collapse of the society). Participants develop tunnel vision, overcorrect for mistakes, and act before thinking. I have done some of these exercises and have suffered a similar fate. The few successful subjects observe before acting, develop an understanding of the interrelation of the system’s parts, and manage side effects. The average performance in this simulation might be cause to keep us humble about our ability to successfully intervene in the developing world.

One factor complicating the ability to manage complex systems is the time lag between cause and effect that these systems demonstrate. When a change is ordered, the result may not be seen for days/weeks/months, and may even be obscured by other factors. Dörner’s illustration of the difficulty subjects had with a relatively simple task containing such a lag (regulating the temperature in a room by adjusting a dial) will give pause to anyone thinking about proposed technological solutions to manage global warming.

There is a powerful amount of insight in this book. Some examples:

If, the moment something goes wrong, we no longer hold ourselves responsible but push the blame onto others, we guarantee that we remain ignorant of the real reasons for poor decisions, namely, inadequate plans and failure to anticipate the consequences….

This tendency to “oversteer” is characteristic of human interaction with dynamic systems. We let ourselves be guided not by development within the system, that is, by time differentials between sequential stages, but by the situation at each stage. We regulate the situation and not the process….

Clear goals will give us guidelines and criteria for assessing the appropriateness or inappropriateness of measures we might propose.

The Logic of Failure is a wise book with ample lessons. While it points out where our instincts get us into trouble, its point of view is generous and sympathetic. As a companion to Kahneman’s Thinking Fast or Slow or Taleb’s Antifragile, it is highly recommended.

A few companies are suing ex-employees for using "negative know-how" in a new job

This is from the book I'm currently reading, Orly Lobel's Talent Wants to Be Free: Why We Should Learn to Love Leaks, Raids, and Free Riding:

Thomas Edison once protested, "I haven't failed. I've simply found 10,000 ways that do not work." In the world of trade secrets, a remarkable example of the controversial expansion of the types of information and knowledge that can be deemed secret in the battles of our talent wars is negative know-how [JC emphasis]--the knowledge of what not to do. An example of negative know-how is when an ex-employee will not undertake a series of failed ways to get to a certain chemical result, but tests other unknown ways until she strikes success [as we've pointed out before, trial and error is not random]. Claiming theft of negative know-how is described as one of the strangest developments in trade secret law. When courts protect negative know-how as the property of an ex-employer the consequence for inventors who move to a new firm can be liability for not repeating past mistakes and failures. 

Certainly, if companies are claiming ownership of their former employees' knowledge of what not to do, learning from mistakes must really be important. Right?

A mini-mistake story by Venture Capitalist Fred Wilson

Fred posted on absorbing losses in the VC market last week, and he started his post with a tiny, compelling story:

When I was early in my career, I casually mentioned to an older VC that I had yet to lose money on an investment. He replied "that's not good, you aren't taking enough risk." I have gone on to lose a lot of money over the years. And made a fair bit too.

The mistake young Fred made was not testing the boundaries. To his mentor, not losing was a sign of over-conservatism, with the result of missing out on potential big wins. This reminds me of the hockey skating story Ashley Good related earlier this year.

Musician Dev Hynes: "The best can be something you didn't think you could even do."

From Melena Ryzik's interview of producer/songwriter Dev Hynes in the NY Times:

Are you in a position to turn people down, as a producer?

Yeah, but I kind of hate doing it, because my whole thing is: I want to try everything in the world. So there’s not many people that I want to ever turn down, because I think: “Cool, yeah. So we make a bad song. That’s like the worst thing that can happen.” Which, in the scheme of bad things in the world, is not that bad. That’s why I make a lot of music and do a lot of different things. No one’s dying from bad collaborations. But the best that can happen is something that you didn’t think you could even do.

A.A. Milne talks the value of strategic sloppiness

In a recent discussion with Paul Schoemaker, he mentioned the value of "strategic sloppiness" - in other words, not being too perfect; allowing some disorder to come into your work to allow collisions that may generate new solutions. The epitome of this approach is Alexander Fleming's unclean lab that spawned the discovery of penicillin.

Then I stumbled across this quote from Winnie-the-Pooh author A.A. Milne that sums up the value of strategic sloppiness. It is quoted in the new book Talent Wants To Be Free by Orly Lobel:

One of the advantages of being disorderly is that one is constantly making exciting discoveries.

How to develop a new, productive habit

When you find a pattern of mistakes, disrupting that pattern often involves making a new, more productive habit. For example, when I ran into trouble keeping all my tasks and meetings straight, I adopted the Getting Things Done method. It took a number of weeks till the method was ingrained in my daily routine.

Building a new habit isn't easy - we can slip up even if we know the habit is in our best interests. That's because building a habit - i.e., making something automatic - requires a lot of cognitive energy, something our brain actively tries to conserve. But it can be done. These tips came from a post on the Penguin Books blog by author Kelly McGonigal. She is the author of The Willpower Instinct. For more explanation, see the original post.

1. Choose a tiny habit - changing one small thing at a time is easier than trying to make a huge change all at once. 
2. "I will" power is stronger than "I won't" - focus on positive changes rather than negative ones.
3. Find your "want" power - reminding yourself why you are making this change will help you maintain your enthusiasm.
4. Expect resistance - part of you will question what you are doing; use that as fuel to continue, not as a reason to stop
5. Forgive your mistakes - you won't be perfect, and beating yourself up will only make it easier to give up on what you are trying to do.

I am reminding the folks trying 3Minute Journal that the journaling habit will also take time, and that these lessons may help.

A journaling tool to track mistakes and accomplishments... and more

The #2 most read post on this site (out of more than 500) is "Why Journal Your Mistakes?" From that original post:

When something goes awry, all you need to do is write it down. Classify it as a Mistake and move on. Then, weeks later, after the intensity and emotions of the moment have dissipated, you look back at it, think about it. What happened? Think about your role - recognize that mistakes and failures are owned by groups, but self-improvement is your task alone. (This is having a sense of agency.) What could you have done differently that could have affected the outcome? Next time your face a similar circumstance, how will you handle it?

Since I wrote that post, I've learned that there are many more reasons to journal - tracking accomplishments/setbacks, as a way to measure the quality of inner work life (from The Progress Principle by Teresa Amabile and Steven Kramer); increasing mindfulness (Chade-Meng Tan's Search Inside Yourself); even measuring gratitude.

Dave Kaylor helped me put these ideas into a site that I've been using for more than a year to track my own progress. It's made a great difference in my outlook and day-to-day effectiveness. We've now released the tool so others can use it. It's called 3-Minute Journal and you can use it for free. If you'd like to be one of the early users of this and provide feedback so we can continue to improve the tool, please sign up here: 3-Minute Journal.

There is a startup guide available on the 3-Minute Journal blog. That's where I'll be posting on how to use the tool and things we find out through this beta process. 

Mistake Bank Bookshelf: "Brilliant Blunders" by Marco Livio - the consequences of scientific mistakes

This week's entry in the bookshelf is Brilliant Blunders: From Darwin to Einstein - Colossal Mistakes by Great Scientists That Changed Our Understanding of Life and the Universe, by Marco Livio.

Livio profiles the work of Charles Darwin, Lord Kelvin, Linus Pauling, Albert Einstein and Fred Hoyle. A greater roster of 19th and 20th century scientists would be difficult to create. Livio first sketches out the subject's research, then examines a large mistake each made. These stories don't follow the typical inventor narrative - where the scientist makes a mistake and then, by overcoming it or following where it leads, achieves a breakthrough. In each case, the mistakes either follow or sit alongside a breakthrough. They are significant and frequently held onto tenaciously by the scientist, even in the face of evidence to the contrary. One blunder, Einstein's concept for a cosmological constant, was accepted (especially given its esteemed author), then discredited by evidence of an expanding universe and has, lately, somewhat come back into fashion. If you want to learn about how complex and convoluted scientific progress can be, read this: "Why Einstein Was Wrong About Being Wrong."

My favorite section of Brilliant Blunders concerns Linus Pauling's attempts to decode the structure of DNA - the major scientific race of the 1950s. Pauling, the most honored chemist in the first half of the 20th century, was widely expected to solve the mystery of genetic reproduction. We all know how that story ended. There are traces of the Innovator's Dilemma in Pauling's story - too tied to the theories that made his reputation, and complacent, he was outflanked by a nimbler, disruptive competitor (Crick and Watson and the frequently neglected Rosalind Franklin). There are lots of lessons in Pauling's story about how our biases contribute to mistakes. And I've never read a pithier postmortem review:

Pauling's wife, Ava Helen, asked him after all the hoopla surrounding the Watson and Crick model had subsided: "If that was such an important problem, why didn't you work harder on it?"

Possibly the greatest message from Brilliant Blunders is that scientific progress (indeed much important progress) requires competition, collaboration and dialogue (for more on this, see one of my favorite books, Smart World). Each of the scientists, despite his genius, made significant mistakes that, if unchallenged, would have greatly slowed the advance of their fields of study. Instead, others disputed, probed and created alternative explanations that, in combination with the breakthroughs from the "blundering" giants, provided a much greater understanding of our world.

What can we learn from "Disaster Lit"?

Interesting interview over at HBR.org of author Neil Swidey, about his upcoming book, Trapped Under the Sea: One Engineering Marvel, Five Men, and a Disaster Ten Miles Into the Darkness, about a diving disaster in Boston Harbor in the 1990s. In the interview, Swidey's book is lumped into a genre called "disaster lit" including books like Into Thin Air and The Perfect Storm. Interestingly, Swidey points out Krakauer's assertion in Into Thin Air that "The urge to catalogue the myriad blunders in order to ‘learn from the mistakes’ is for the most part an exercise in denial and self-deception."

And while that may seem to be an indictment of this site, I tend to agree with Krakauer's assertion - if you are talking about disasters that occur when attempting to climb Mount Everest. His theme is that amateurs have no place climbing Everest, because of the inherent, uncontrollable risk the mountain and environment offer. The risk in climbing Everest is not an issue of inadequate human design - Everest is simply more powerful than your plan. Trying to insure against disaster by studying other's mistakes causes you to take a much larger risk - underestimating the mountain and the power of randomness.

We can learn from many classes of mistakes and disasters, when we make the same mistake over and over again, when we ignore "near misses," when we lack a clear objective. But not all.

I would agree that there's little to learn from the Everest disasters that can help you avoid future ones, if you are inclined to challenge that mountain. If the mountain wants to take you, it will.