Will Kindle Fire's Mayday Spark a Service Revolution?

Amazon warms up the customer experience

One of the hottest Christmas gifts this season is Kindle Fire HDX. It’s a souped-up tablet that includes a new feature garnering a lot of attention. It’s the Mayday button, and it connects you to a live customer service agent over a video link. Press the button, and within fifteen seconds an agent appears on your screen offering help. You can see and hear them, but they can only hear you. The agent has full access to your device, so they can view screens, take control, demonstrate capabilities, or troubleshoot problems. Mayday is available 24/7, 365 days a year, free of charge, and with no time limits on how long you and the adviser chat. Amazon CEO +Jeff Bezos says the company goal with Mayday "is to revolutionize tech support."¹

It’s a smart move, and only part of Kindle’s simple three-part strategy.²  Amazon’s first strategy is to sell premium products at non-premium prices, and the second is making money when people spend on Amazon books and videos. In other words, give away the razor but make it up on the razor blades. The third strategy is fostering customer delight with Mayday. It becomes an important differentiator, especially with Kindle’s target buyers—older, less tech-savvy, avid readers. Amazon handles the burden of helping tech-challenged users, so the new Kindle just may be Santa’s perfect gift for an elderly mom or dad.

The devil is in the details

But along with innovation comes ironing out operational wrinkles. Generally reviews are very positive, but some customers report technical glitches, while others are suspicious about agents having full access to everything, including passwords (Amazon notes screen sharing can be paused).³ Sharing privacy concerns, many corporate IT departments have disabled Mayday links on company Wi-Fi’s to prevent Amazon agents from seeing potentially sensitive documents.⁴

A variety of other issues have yet to reveal their consequences and only time will tell. Christmas Day customer service demand will likely be off the charts as new customers unwrap and try their new toys, which means Amazon may be hard-pressed to meet their promised 15-second service level response time. It’s also not clear how Amazon will deal with multiple languages or serving the hearing impaired. Then there’s the issue of creepy customers, although Amazon says agents are trained to terminate sessions that go off track. Will being telegenic become a job requirement for technical support?⁵ Not all agents have the stunningly good looks of the actors portrayed in Amazon’s TV spot, and unlike call centers, agents’ facial expressions and body language are suddenly under scrutiny on every interaction. How does all this play with labor laws and employee feedback?

Despite the challenges, putting a live, smiling face on customer care is revolutionary. Seeing faces, even those of total strangers, affects us in subtle but profound ways. Neuroscientists have known for years that our first skill as babies is to recognize faces, but they’ve recently discovered that our brains are wired far more extensively for social connection than they previously thought. Experiments show our brains activate reward centers when we see photographs of people who want to chat with us online. Surprisingly, the effect holds true even if the people are total strangers and we’re not that interested in talking to them.⁶ Experts believe our hunger for human connection is a primary driver in how we think, feel, and act, and simply viewing faces satisfies some of those needs. Tapping this deep psychology and delivering a helpful service experience creates a uniquely positive memory with the device and the brand. Amazon’s step toward replacing impersonal call centers with Mayday’s new paradigm could indeed raise the bar on a key factor that drives customer loyalty.

Mayday catches fire

While some techies scoff, saying it is nothing more than a sales gimmick, others think Mayday opens up new frontiers in customer service. They see it as a new era of data integration that will enhance the customer experience.⁷ Software help desk tool vendors are already buzzing about imitating Mayday-like capabilities in future releases.⁸ And industry watchers are thinking about Mayday as a method to collect customer feedback, encourage usage, offer advice, and upsell.⁵

Assuming Amazon can work out the details, making customer care more personal with video can have profound effects on customer loyalty by connecting with our basic human nature. Whatever the outcome, the new Kindle Fire HDX has set the service world ablaze imagining the possibilities.  

Excel-lens is a publication of Service Excellence Partners. Our unique approach helps founders at early stage companies better scale operations and manage growth. Contact us today.

Sources:
1. Dan Seifert on September 25, 2013, “Amazon launches Mayday, a virtual Genius Bar for the Kindle Fire HDX: Amazon is including live tech support with its new tablet, no pants required” The Verge. 
2. Todd Bishop on September 25, 2013. “Jeff Bezos explains the next step in Amazon’s strategy — the ‘hardest and coolest’ part” Geekwire. 
3. Timothy Stenovec on October 2, 2013. “The Mayday Button May Actually Convince You To Buy The Kindle Fire HDX” Huffington Post. 
4. Matt Hamblen on September 26, 2013. “New Kindle Fire HDX's tech support button could push IT to yell 'Mayday!'” Computerworld. 
5. Software Advice, December 11, 2013, “Is Amazon’s Mayday Support Model Right for Your Organization?” CSI: Customer Service Investigator. 
6. Matthew D. Lieberman (2013). Social: Why our Brains are Wired to Connect, Crown Publishers, New York. ISBN: 978-0-307-88909-6
7. Neal Schact on September 29, 2013. “Did Amazon Just Fire Another Shot Heard 'round the World?” Nojitter. 
8. Joe Panettieri on November 26, 2013. “Amazon Kindle MayDay Button: Can MSP Help Desks Respond?” MSPMentor 

Aristotle's Approach to Startups

How an ancient practice keeps entrepreneurs from deluding themselves and their investors 

Thousands gathered this week in San Francisco at the Lean Startup Conference to hear industry luminaries share their expertise on how to launch successful startups. Conference hosts blogged about how innovative “Lean Startup” methods can reduce risk by rejecting the traditional path of extensive business planning and huge upfront investments. Instead, today’s top entrepreneurs formulate and test hypotheses, adjusting their new offerings quickly and cost-effectively with fast development cycles. 

That’s right, the heart of today’s hottest management trend is a 2,500-year-old idea that you first learned in grade school. It’s the scientific method, one of Aristotle’s lasting contributions to humankind. He promoted the radical idea that new knowledge can be gained from empirical study of the natural world. Throughout the ages, Ibn al-Haytham, Roger Bacon, Descartes, and many others went on to perfect the concept. (1) Eventually, a 19th Century scientist and philosopher named William Whewell defined the five-step method commonly used today: formulation of a question, a hypothesis, a prediction, experimentation, and analysis of data to confirm or reject the hypothesis. (2) 

Lean Startup is the scientific method 

Today’s Lean Startup approach employs the scientific method to answer essential questions about new products, business models, and early market demand. Rather than generating lengthy market research reports, entrepreneurs list their hypotheses on a one-page “business model canvas.” Then, applying agile development techniques, founders work closely with customers to quickly test hypotheses and refine product features, pricing, marketing, and delivery. Following this path helps entrepreneurs prove that their products, key business processes, and economics all work on a small scale before they seek funding for rapid expansion.  

This approach is not just for startups. Big companies General Electric, Toyota, and Comcast all use Lean start-up practices to develop new products and services with small teams, (3) an intrepreneurial practice that helps them avoid the bureaucracy inherent in large organizations. Many leading firms run ongoing, low-cost experiments, and then learn all they can from them, only committing massive money and resources when and if the business ideas demonstrate traction. Jim Collins, author of Good to Great and Great by Choice, calls this “firing bullets, then cannonballs.” He says following this critical discipline can help companies outperform financial benchmarks by a factor of ten or more over the long term. (4) 

Angel investors and venture capitalists can also benefit from Lean Startup methods. It’s estimated that as many as 90% of new high-tech ventures fail, (5) meaning investors typically waste billions every year on ideas that go nowhere. The new approach limits risk for investors because it helps them methodically validate ideas using someone else’s (the founders’) boot-strapped funds. Financiers then avoid investing in ideas that arise from hopes and dreams alone, and substitute them with scientifically proven models based soundly on “dollars in and dollars out.” 

Pass the pie in the sky

Perhaps the scientific method’s greatest contribution to startups is helping entrepreneurs overcome their own human shortcomings. All people suffer a cornucopia of flawed thinking—Wikipedia lists no less than 92 decision-making, belief, and behavioral biases.

Unfortunately, entrepreneurs tend to be in a class by themselves when it comes to bias. Being an entrepreneur often involves a steadfast belief in an idea that will be bigger than Google, regardless of what anyone else thinks. While that level of confidence is admirable, even infectious, it’s almost always self-deluding. Whether applied in the physical sciences or in business, the scientific method helps minimize bias and errant conclusions through repeated experiments, rigorous peer reviews, and credible evidence. In the end, objective reality always trumps subjective belief. 

After a history of bad decisions and so much money wasted on dead ends, entrepreneurial approaches are changing. Increasingly, investor’s say “Prove it” when entrepreneurs claim to have the Next Big Thing. Thanks to the scientific method, the Lean Startup approach can do exactly that.

Excel-lens is a publication of Service Excellence Partners. Our unique approach helps founders at early stage companies better scale operations and manage growth. Contact us today.

Sources:

1. De Lacy O'Leary (1949), How Greek Science Passed to the Arabs, London: Routledge & Kegan Paul Ltd., ISBN 0-7100-1903-3
2. History of Inductive Science (1837), and in Philosophy of Inductive Science (1840) 
3. Lean Start-up Conference program, http://leanstartup.co/full-program 
4. Jim Collins and Morten T. Hansen (2011), Great by Choice: Uncertainty, Chaos and Luck—Why Some Thrive Despite Them All, USA: HarperCollins Publishers, ISBN 978-0-06-212099-1
5. Max Marmer, Bjoern Lasse Herrmann, Ertan Dogrultan, Ron Berman. Start-Up Genome Report Extra. s.l. : Stanford University, 2012.

Discipline, More Than Creativity, Fuels Growth

Most entrepreneurs shun formality, but structure at the right time enables faster growth.

Zappos is known for its creative workplace

Inside most start-ups, free-wheeling innovation and agility abound. The fewer the rules, the better. And why not? Unencumbered by bureaucracy, entrepreneurs can let their imaginations run wild, create breakthrough products, and make tons of money.  Most entrepreneurs scoff at rigorous planning, analysis, or financial modeling found at larger companies—it just slows them down.

Thought leader, entrepreneur, and consulting associate professor at Stanford University Steve Blank agrees, saying today’s “lean start-ups” require less formality. (1) Rather than spending months on research and business planning, entrepreneurs list their educated guesses about the business opportunity and then validate them with prospective customers. Instead of old-fashioned project management that delivers a finished end product, engineers in start-ups practice “agile” development, constructing products incrementally through frequent iterations and customer feedback. Lean start-up approaches favor less structure, smaller teams, and highly creative environments.

But early traction does not guarantee long-term success. Once a new product shows potential, it must be property marketed, delivered, and supported at scale. The company must generate positive cash flow to be sustainable, and eventually pay a return to investors. These activities are very different than those taking place during the early creative process.

Stanford’s Start-Up Genome Project offered entrepreneurs a roadmap for successful company development. (2) After studying thousands of new ventures, researchers identified four distinct “Marmer Stages,” each with its own challenges and milestones:

The Discovery and Validation stages match the creative process described by Steve Blank: quick development and refinement of ideas, leading to early sales. But things change during the Efficiency and Scale stages. After verifying market acceptance of their initial product, founders must hone their business models, customer acquisition processes, and delivery processes. They must get funding, hire staff, and build infrastructure to support fast growth. Instead of spending “right brain” time imagining and creating, entrepreneurs must now spend “left brain” time analyzing and structuring.

Eventually all companies must evolve their management systems if they want to continue growing. (3) Informal management styles that worked well in the beginning break down as the company expands out of the entrepreneurs’ personal span of control. (4) Founders soon realize they can no longer do everything themselves; they must delegate tasks and coordinate the work of multiple groups. At this point, disciplines they implement serve to make organizational goals explicit and stable. Effective management systems facilitate goal alignment, resource allocation, accountability, learning, and control.

Surprisingly, it's not creativity that rockets a start-up to success. Instead, research shows that greater discipline accelerates early-stage growth. Studies at Stanford and the University of California Berkeley concluded that deploying management systems associated positively with successful, high-growth start-ups. (5) Studying seventy-eight firms over a five-year period, they showed new ventures that implemented management systems grew at three times the rate of those that didn’t:

“Think about a car: the faster it goes, the more sophisticated the technology required to keep it under control. At the very elite racing levels, Formula 1 teams have highly complex and extensive systems infrastructure both on and off the tack. The same logic applies to growth with start-ups. The faster they need to go, the more management systems infrastructure they need.”

But timing is crucial. The Start-Up Genome Project found one of the most frequent causes of early business collapse was “premature scaling,” that is, ramping up before sales traction supported it. (2) Examples included hiring too many specialists, managers, and salespeople too quickly, and spending too much on marketing before validating the product-market fit. Just as entrepreneurs must adopt new disciplines to scale the business, they must also be disciplined about when to do it.

It seems counter-intuitive, but discipline, not creativity, is what ultimately drives growth. Creating and validating ideas is essential in the beginning, but a shift to effective and efficient execution at the right time becomes paramount. Entrepreneurs must understand this critical transition and adjust accordingly if they want the wild success that compelled them in the first place.


Excel-lens is a publication of Service Excellence Partners. Our unique approach helps founders at early stage companies better scale operations and manage growth. Contact us today.

Sources:

1. Blank, Steve. Why the Lean Start-Up Changes Everything. Harvard Business Review. May 2013, pp. 65-72.

2. Max Marmer, Bjoern Lasse Herrmann, Ertan Dogrultan, Ron Berman. Start-Up Genome Report Extra. s.l. : Stanford University, 2012.

3. The Five Stages of Small Business Growth. Neil C. Churchill, Virginia L. Lewis. May-June, 1983, Harvard Business Review, pp. 1-11.

4. Edward Lowe Foundation. The Significance of Second Stage. Cassopolis, Michigan : Edward Lowe Foundation, 2012.

5. Antonio Davila, George Foster, and Ning Jia. Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator. California Management Review. May 2010, pp. 79-105.

Reduce the Finger-Pointing... Naturally

Where do organizational “white space” problems come from? Our DNA. But we can also use our genetic predisposition to solve them. 

Chances are you’ve experienced it. When you call a company for help, you get the proverbial runaround. After explaining the problem and hearing “That’s not my department” several times, you’re transferred endlessly, leaving voice mails that go unanswered. It’s totally frustrating. Nobody takes responsibility because your issue falls between the cracks--into the "white space."  

You may work in an organization that behaves this way. Within your group, people perform tasks smoothly, but there’s friction with other groups. All too often, work doesn’t flow. Stuff gets “thrown over the wall,” there’s finger-pointing when things go wrong, and customers pay the price. The “white space” between the boxes on the organization chart is usually where the ball gets dropped.¹ 

White space issues can paralyze. Legendary for silos, General Motors’ white space issues led to long, costly product development cycles and poor quality. Rather than cooperating, some departments wouldn’t even speak to each other. Flawed management philosophies such as Management by Objectives and pay-for-performance made the situation worse, causing sub-optimization—an insidious game of “I win, we lose” between functions. In a failed attempt to change, GM implemented a complex, matrix-management scheme that confused who was in charge, diluted accountability, and put the company in decline.² And GM isn’t alone. So widespread are white space effects in industry that quality master W. Edwards Deming highlighted them in point nine of his famous Fourteen Points for Management: “Break down barriers between departments.”³ 

Experts cite the lack of a “systems view” as the cause for white space problems. Most managers perceive the organization’s work as vertical and functional rather than horizontal and cross-functional. Consultants Geary Rummler and Alan Brache observed, “(Managers) often don’t understand, at a sufficient level of detail, how their businesses get products developed, made, sold, and distributed.”⁴ Author Peter Senge observed the same, noting, "we tend to focus on snapshots of isolated parts of the system, and wonder why our deepest problems never seem to get solved."⁵ Hence, lacking a broader understanding, managers concentate on activities within rather than between groups, and chasms slowly form. 

But the root causes may go much deeper than a lack of perspective. Psychologist Jonathan Haidt believes moral judgment is based on automatic, not conscious reasoning.⁶ Buried within the human psyche is hardwired social behavior that influences our choices and actions. Haidt identified five behaviors:

• Caring/harm—deep fondness for people with whom we have biological or social attachments, and the violence we can do to those we don’t
• Fairness/reciprocity—our need for mutual exchange and even-handed application of punishment and reward 
• In-group/loyalty—close association with our tribe’s identity and suspicion of other tribes
• Authority/respect—our tendency to obey those in positions of power
• Purity/sanctity—our desire for social order through conformance and control

Where did these innate responses come from? Evolution. Our survival as a species depended on our ability to live in groups and cooperate with one another. Imagine the outcome if we had never learned to hunt, share resources, or protect our kin through collaboration. These five moral threads made possible group cohesion, coordination, and harmony. During a millennia of natural selection, they became our operating system for creating ever larger and more successful organizations—first tribes and clans, and then nations and empires. 

Our evolutionary success, however, has sown the seeds of our modern-day destruction in business. We create white space problems because it’s natural for us to do so. When firms get larger and competition for internal resources becomes intense, the organization splinters. Our survival instincts take over. We subconsciously revert to our evolutionary roots and protect our own tribe at the expense of the larger community. 

It takes many generations to evolve even the smallest biological changes. But if our core behaviors are intrinsic and immutable, how can we solve the white space problems we create? One solution is to introduce new tribes within the organization to counter their effects. 

Process management methods use cross-functional teams to traverse the white space. For example, leading manufacturers create new product introduction teams including representatives from R&D, manufacturing, product marketing, finance, and customer service. Often these groups are project-centric, small (7-9 people), co-located, headed by a strong leader, focused on transcendent goals, and adherent to disciplined processes. A senior executive carefully forms the team and supports their efforts through high-level reviews and behind-the-scenes functional diplomacy. Through deliberate process design, the five underlying social threads are present—bonding with fellow group members, fairness in equal representation, forming an in-group with its own identity, obedience to powerful leaders, and conformance to an orderly process. By following natural tendencies, individuals in the new tribe execute a smoother process across functions, suppressing the effects of white space between their tribes of origin.

We can’t change our DNA, but if we understand it, we can use it to our advantage. Capitalizing on our innate behaviors, we can mitigate white space issues by using new process management techniques. Doing so subverts silos and streamlines workflows for the better. 



Sources:

1. Rummler, G. and Brache, A. (1995) Improving Performance: How to Manage the White Space on the Organization Chart, Jossey-Bass Publishers. ISBN 0-7879-0090-7
2. Whitacre, E. (2013) American Turnaround: Reinventing AT&T and GM and the Way to Do Business, Hachette Book Group. ISBN 978-1-4555-1300-0
3. Deming, W. E. (1982) Out of the Crisis, Massachusetts Institute of Technology Center for Advanced Engineering Study. ISBN 0-911379-01-0
4. Rummler, G. and Brache, A. (1995)
5. Senge, P. M. (1990) The Fifth Discipline: The Art & Practice of the Learning Organization, Doubleday. ISBN 0-385-26094-6 
6. Haidt, J. (2012) The Righteous Mind: Why good People are Divided by Politics and Religion, Pantheon. ISBN 978-0307455772

Is your Company Leading or Firefighting?

Some companies never seem to have their act together. Others run like well-oiled machines. How does yours operate?  

Organizational behaviors exist on a continuum. From most chaotic at the base to most disciplined at the apex, the maturity pyramid shows where companies tend to fall. It was conceived by quality guru Philip Crosby¹ and later used in various forms by Hewlett-Packard,² the Baldrige Performance Excellence Program,³ and others. Where does your organization fit? 

1. Firefighting. The organization is highly reactive, relying on heroics to get things done. Success depends on circumstances, individual strengths, and plenty of luck. Getting sales is the primary focus, and any customer who buys is considered valuable. While the environment may be very creative, there’s typically a lot of stress and finger-pointing, customers are often disappointed, and mistakes are frequently repeated. The company does little to no planning, except possibly annual budgeting, and has limited employee training. 
2. Control. The organization becomes more aware of processes and takes steps to ensure consistency and repeatability. Checklists, inspection points, and reviews begin to appear, and more often groups coordinate their work. Sales qualification gets better as the company understands some customers are more valuable than others. Some metrics are in place, and annual planning begins to include goals and key initiatives. Execution is spotty, but improving. The company considers employee training important and screens new hires. 
3. Continuous Improvement. The organization uses formal techniques to systematically improve products, services, and the processes that produce them. Managers and staff are mostly proactive, with the exception of dealing with the occasional hiccup. Metrics are aligned and used extensively, and planning includes a clear vision with short-term and long-term goals. The company successfully executes about half of its planned initiatives. Market segmentation begins to drive development, marketing and sales strategy, and offerings get consistently better. Training is structured and delivered enterprise-wide. Executives carefully construct and manage supply and distribution chains. 
4. Optimization. The organization’s plans and processes are well aligned and integrated, and potential risks are often identified and resolved in advance. Through a history of continuous improvement and targeted innovation, the company has developed “core competencies” that create competitive advantages and open up entirely new markets. Despite its size, the organization is customer-focused, agile, and routinely introduces successful products and services. Enterprise-wide change initiatives are executed effectively. The company plans and manages human capacity and capability over a multi-year horizon. Cross-functional teamwork is high and organizational learning is methodical and widespread. 
5. Leadership. A market-maker, the organization uniquely balances the "yin and yang" of creativity and discipline. The company experiments incessantly with breakthrough ideas, carefully evaluating the ones that work, and only then scales up and introduces them. Competitors struggle to keep up. The press lionizes the company’s methods as “best practices." Despite perennial successes, the company remains on guard against complacency. It quickly detects disruptive shifts in technology, world events, and competitive innovations and mounts strategic responses. 

It’s probably no surprise that firefighting produces erratic outcomes. These companies tend to be new, small, or niche players, and they must fight to survive. Organizations with control orientations experience better success rates. Their customers are more often satisfied and buying again, and results are stable and predictable. These companies are “up-and-comers.” Firms doing a good job of continuous improvement are gaining ground, responding to market changes and becoming top competitors in their industries. Studies have shown that over a five-year period, these firms grow revenues and operating incomes twice as fast as those with control or firefighting behaviors.⁴ Companies optimizing performance are highly regarded and generally maintain top market positions. Examples include Boeing, IBM, Fed-Ex, and Toyota. Finally, a very small number of leading firms dominate their markets for fifteen years or more, producing at least ten times the return on shareholder equity than anyone else in the sector.⁵ They include Southwest Airlines, Intel, and Progressive Insurance. 

Where do you see your organization? Be honest! Chances are you rank your company towards the lower end of the pyramid. That’s where the majority operate. 

So what does it take to move up? As it is with individuals, healthy organizational behaviors are the result of good habits, born of discipline. When the right disciplines are combined into an effective strategic management system, excellence soon becomes a matter of habit. Along the way, greater discipline does not suppress creativity, but gives it necessary direction and boundaries. Senior leaders who progressively implement just enough structure at the right time, in the right place, and for the right reasons create beneficial habits and relentless progress.



Sources:

1. Crosby, P., 1979. Quality is Free. New York: McGraw-Hill. ISBN 0-07-014512-1. 
2. Hewlett-Packard Process Consulting services, 1999. 
3. Baldrige Performance Excellence Program, 2013, 2013–2014 Criteria for Performance Excellence (Gaithersburg, MD: U.S. Department of Commerce, National Institute of Standards and Technology, http://www.nist.gov/baldrige/publications/business_nonprofit_criteria.cfm).
4. Hendricks, K. and Singhal, V. March, 2000 “The Impact of Total Quality Management (TQM) on Financial Performance: Evidence from Quality Award Winners” DuPree College of Management, Georgia Institute of Technology
5. Collins, J. and Hansen, M. T., 2011. Great by Choice: Uncertainty, Chaos and Luck—Why Some Thrive Despite Them All. Cumulative stock returns, dividends reinvested. Invest $10K on 12/31/1972 and hold until 12/31/2002. © CRSP, Center for Research in Security Prices, Booth School of Business, the University of Chicago.

Remembering HP: Habitual Performance

“It’s just how we do things around here.”

I still recall the conversation between the Hewlett-Packard worker and the Tellabs manufacturing VP.  It was 1993, and we were on trip to HP’s Loveland Manufacturing Center, a key production facility in northern Colorado. Back then I sold HP test equipment in Illinois, and we were hosting a group of Tellabs executives on a benchmarking visit. My sales colleagues and I were building relationships and sharing manufacturing “best practices” with the hopes it would motivate them to buy more HP gear.

We were touring the production area and one of my customers pulled aside a passing worker, asking him about some charts hanging on the wall. The guy stopped for a few minutes and pointed to the diagrams, describing what each meant. “This one shows the count of defects by type. It looks like they were having a problem with the solder application. And over here, it looks like the adjustment dropped the defect rate by about 30%.”

A bulletin board labeled “PDCA Storyboard” prompted the interaction. A management presentation earlier in the day talked about the division’s Total Quality Management journey. HP used “Plan-Do-Check-Act” as its corporate improvement method, and the PDCA Storyboard showed the step-by-step progression. The presenter had made the bold statement that the quality practice was everywhere. It had become entrenched in the division’s operating system.

The Tellabs VP smiled and said, “So you’re saying you don’t work here but you can tell what this operation is doing?”

“Yeah. I’m on one of these quality teams in my area. We use PDCA to increase our yields, too.”

 “Come on. You’re not just a ‘plant’ walking by, an expert trying to impress us?” the executive chided him.

His response was working-man authentic. “No,” he said, shrugging. “It’s just how we do things around here.”

I could tell my customer was satisfied. He shook hands with the worker and thanked him. Without saying a word, I knew what he was thinking: It’s true. HP really is this good.

As a company HP was well respected, but it wasn’t because it was the most inventive. It didn’t come up with SPC or kanban or anything else the Tellabs executive hadn’t heard of. It wasn’t because HP only used the most advanced technology. The tour showcased some shiny, new equipment, but most was conventional and well used. It wasn’t because the company didn’t make mistakes. Over the years, the exec had dealt with the occasional HP hiccup. But where Tellabs and others would talk about fundamental change, HP would do it. And do it well.

HP had great people and great discipline. The company had a knack for studying something interesting, trying it on a small scale, refining it, rolling it out consistently, and making it all natural. Author Jim Collins calls this empirical creativity matched with fanatic discipline; direct engagement and practical experimentation followed up with utterly relentless execution in accordance with consistent aims, performance standards, and methods.¹ HP’s behavior, like other dynasty companies Collins studied, allowed it to dominate the test equipment industry for nearly seventy years.

Things have changed since 1993. The HP division became part of the Agilent Technologies spin-off, the manufacturing unit was offshored, and the HP brand has lost some of its luster since the time of “Bill and Dave.” Tellabs also changed. After heady growth, the company suffered from the telecom bubble burst; painful cutbacks, management changes, and eventual renewal as a networking products company.

I’ve changed, too. A career in sales led to marketing and operations, eventually leaving HP to start three companies and work for two more. Sparked by my time at HP, I spent many years exploring why some organizations performed consistently better than others. I learned and applied lessons in my own companies and others through the Baldrige program and the occasional consulting gig.

I’m convinced high performance boils down to simple, disciplined management systems that make people, planning, execution, and learning all more effective. It's true for organizations large and small, no matter the sector. But success always depends on great leadership and the tenacity to see it through. When excellence becomes a matter of organizational habit, long-term success is assured. 

And that’s what reminded me lately of the wisdom and discipline of a great company. Years ago they made it all happen, captured in one simple remark:

“It’s just how we do things around here.”

Footnote:

1. Collins, J. and Hansen, M. Great by Choice: Uncertainty, Chaos, and Luck--Why Some Thrive Despite Them All. Harper Business, 2011. ISBN 0062120999.

Scaling Up? Think Hamburgers.

Your new venture is catching fire and you need to ramp up operations quickly to handle demand. Where should you look for pointers? Try McDonald’s, Burger King or Wendy’s.

The Start-Up Genome Project analyzed thousands of high tech start-ups and found that successful companies progressed through four predictable phases. Dubbed the “Marmer Stages,” each involved a different set of objectives; Discovery was crafting and testing the idea, Validation was refining product features and generating initial orders, Efficiency was making customer acquisition and delivery processes repeatable, and Scale was ramping up and generating aggressive growth.¹ A successful mantra was “nail it, then scale it”—confirming that the product, marketing strategy, and business model all worked before stepping on the gas with big capital, staff, and infrastructure investments.

So what happens when the time comes for a start-up to scale in a big way? Suddenly the game changes from “tinkering” to “ramping,” generating volume quickly to establish market position and cash flow. It may sound silly to high tech entrepreneurs, but fast food franchises offer unique insights—they’ve made scaling up a science. Intel CEO Andy Grove looked closely at McDonald’s. In the late 1970’s, he believed Intel’s success depended on making their embryonic microprocessors as reliably as hamburgers, saying “We have to systematize things so we don’t crash our technology.” He kept a hamburger box on his desk with a mock logo, McIntel, to remind everyone of the strategy to grow with profitable scale.²

Franchisers offer four great lessons for quick and efficient early-stage expansion:

1.    Simplicity. Ordering “off-menu” may be fine for high-end restaurants, but fast food stores limit choice to what’s on the menu. Subway’s deli-style assembly and Burger King’s “Have it your way” only apply to a narrow range of options. Lesson: To scale, new companies must limit choices in the product offering. In the Validation stage, start-ups often “pivot,” experimenting with the product and pricing before they find something that sells. But every new version comes with added complexity, time, and hidden cost—documentation, training, software, accounting, and support. Pick your target; you can’t be all things to all people, so choose ONE profitable segment and stick to it. Rationalize your product line so that at least 80% of your sales come from just a few versions, and resist the temptation to add more. Product simplification is better for sales, too. Studies show too many choices confuses people, slows decision making and lowers satisfaction.³

2.    Standardization. In the fast food world, uniformity in supplies, equipment, training, software, and work processes promote consistency and quality, no matter where the franchise is located. Standardization also leads to economies of scale, which allows franchisers to improve performance and lower costs in their supply and distribution chains. Customers value predictability, which causes repeat visits, recurring revenue, and brand reinforcement. Lesson: As sales gain traction, consistency becomes essential to grow profitably and keep customers coming back. In the Efficiency stage, further refine product specifications, value propositions, and delivery processes, documenting best practices. Redesign if necessary to meet financial targets. Implement standard metrics and process checks to ensure consistency and quality. Consolidate anything that gives you purchasing leverage.

3.    Leadership. An industry expert states that if a franchise has a proven business concept with sound training and support, 40% of a franchisee’s success will come through their own hard work and talent.⁴ McDonald’s is renowned for careful selection and training of its franchise owners. Applicants must demonstrate past business success and financial resources (a new store typically requires a $1M+ investment). If they make the cut, they spend three days in a McDonald's restaurant, working and learning about the business. If they advance, franchisees must then spend a nine months at Hamburger University before opening a store.⁵ Lesson: Good leadership and development are essential for ramping up. Growing companies tend to promote from within and skimp on management training.  As a result, teams struggle and executives spend valuable time firefighting. In the Scale stage, look beyond top technical skills and choose leadership experience or attributes instead. Then, take sufficient time to develop the knowledge and skills required for good management.

4.    Strategic Management Systems. Opening new stores is a key business process for franchisers, meaning they take a systematic approach to planning, screening, contracting, implementing, and supporting new franchises. They deploy advanced Point of Sale (POS), staffing, and inventory management systems in each store to track real-time metrics, fill work schedules, and optimize supply chains. Visibility to rich data in turn facilitates learning and adjustment at corporate headquarters. Effective management and communication methods also promote execution across a distributed network. Many franchisers use regional or district managers to continually communicate, coordinate changes, and resolve issues with franchisees. Lesson: Entrepreneurs must develop mature management systems to support expansion during the Scale stage. Create a deployment plan and develop the right infrastructure. Define a small set of the most important metrics and implement systems to track, analyze, and report them. Develop enterprise-wide planning, execution, and review practices to align the increasingly complex organization, drive changes, and institute continuous learning and improvement. 

Start-ups are by nature quick-moving and creative, but adopting disciplines like those used by fast food franchises makes growth rapid and profitable. Making this transition is critical for early stage companies, and high volume operators can offer important lessons for every growing enterprise.

Footnotes:
1.    Compass blog: cracking the code of innovation, 2012. http://blog.startupcompass.co/tag/lean%20startup
2.    V. McElheny, 1977. “High Technology Jelly Bean Ace,” New York Times.
3.    B. Schwartz, 2005. The Paradox of Choice: Why More is Less, Harper Perennial, ISBN 0060005696.
4.    G. Nathan, 2012. “Best Practice in Franchisee Selection,” Franchise Relationships Institute. http://www.franchiserelationships.com/articles/BestPracticesinFranchiseeEvaluation.html
5.    L. Magloff, 2013. “What You Need to Open a McDonald’s,” Chron http://smallbusiness.chron.com/need-open-mcdonalds-10513.html

The Best Meeting Agenda

Planning is easy. Execution is hard. How can a monthly meeting keep an organization persistently on track to achieve its goals? 

Nobody likes meetings, including me. People perceive them as time-wasters. Many have gone to “no PowerPoint” talks, got rid of chairs, or eliminated meetings entirely. In my view, these are extreme measures. Meetings serve a purpose. They provide important venues to communicate, learn, and make decisions. Yes, cut back on the number of meetings, but make the ones you keep more productive. 

I think the best meeting agenda is called a Monthly Business Review (MBR). It’s a formal meeting (yes, preparation is required) designed to check progress on key plans, projects, and business performance. What makes it the best? Unlike other meetings, the MBR ensures the organization executes its business plan. The alternative, of course, is to do what most companies do: make a plan, and after a few weeks just go back to what people were doing before the planning session. 

For an MBR, all functional heads and the CEO attend. A scribe and a timekeeper are assigned. Each manager has 15 minutes and may present only three slides. During the meeting, the scribe records issues and ideas that come up on a flip chart, and unless something requires immediate resolution, the topic is parked until the review is complete. The timekeeper also plays an important role. He or she prods managers to stay on topic lest the MBR lose focus and become interminably long. Here’s the agenda: 

• Welcome and Opening Remarks (CEO, 5 minutes) 
• Company-wide Dashboard Review (CEO, 10 minutes) 
• Functional Round-Robin (15 minutes each VP): 
• Dashboard Review
• Updates
• Successes
• Needs
• Hoshin Review (15 minutes for each strategy owner)
• Action Items (15 minutes)
• Other Items/Wrap-Up/Schedule Next Review (10 minutes) 

The first essential element is the dashboard, consisting of the top ten metrics at the enterprise level and for each function. The company-wide dashboard may list things like revenue, expenses and customer satisfaction, whereas the marketing dashboard may include impressions, web visits, and lead conversion rate. Each measure is color-coded: green says everything is going well, yellow indicates things may be going off track, and red means take immediate action. Red signals get special attention; the manager describes the problem’s root causes and the actions being taken. Dashboards show cause-and-effect relationships, allowing managers to view the organization as a living system. The review also keeps managers focused on keeping the fundamentals under control. It provides context for decision making; if a new idea or initiative doesn't positively impact a key metric, it’s probably not that important. 

The second essential element is the Hoshin Review. Hoshin kanri, a Japanese breakthrough improvement method, is an incredibly powerful tool for driving organizational alignment and change. During annual planning, the executive team collaboratively defines a mission-critical, breakthrough objective, along with supporting strategies, owners, and performance targets. An example hoshin objective may be, “Transform the sales process from a direct to a channel marketing and sales model” with goals to “increase annual revenue by 3x and reduce customer acquisition cost by 50%.” The objective is broken down into 3-5 major strategies and goals, such as “Recruit, contract, and implement third-party marketing relationships; goal of 3 by June 1.” Assigned strategy owners then form cross-functional teams and develop implementation plans. During the MBR, the Hoshin Review checks status, surfaces and removes any barriers to execution. 

Order is important: business fundamentals before hoshins. Why? If the basics are out of control, working on more advanced initiatives makes no sense. Make sure the foundation is solid prior to reaching for the breakthrough. 

Towards the end of the session, the scribe reviews any issues or ideas surfaced on the flip chart during the meeting, distilling them into action items, owners, and deadlines. Any outstanding action items from previous meetings not already addressed are also checked to make sure nothing falls through the cracks. 

Obviously some meeting preparation is involved. Functional leaders meet with their teams in advance, rolling up data, interpreting signals, and planning actions for their dashboard metrics. Hoshin strategy leaders check progress on their project plans. The CEO must also prepare. He or she must review the top-level, enterprise-wide metrics and be ready to help executives prioritize next steps. 

Work behind the scenes is also important. If the CEO notices chronic red signals or sluggish execution on hoshin strategies, he or she should meet separately with executives for 1-on-1 coaching sessions. Accountability for progress and results is important to maintain, but CEOs should avoid calling out individual struggles during the actual review. 

So what do you think? If you had to arrange a meeting, wouldn't an MBR be one of the most valuable? If the goal is moving the organization forward, perhaps there’s no better agenda.