new dog old trick

Getting to Plan B - a book review

Getting to Plan B: Breaking Through to a Better Business Model, by John Mullins and Randy Komisar, is a very good new book for both entrepreneurs and those running more established businesses. It's an important book because it fills what had been a major hole in the literature on entrepreneurship, business planning and strategy. Too much of the literature of entrepreneurship treats successful start-ups as ideas that sprang full-formed from the brow of a brilliant and insightful founder or founding team. The reality is that the majority of start-ups go through much searching and experimentation before finding the combination of business model factors that allow them to be successful. Getting to Plan B talks about that process of experimentation, exploration and learning that leads entrepreneurs from their unworkable Plan A to the Plan B (or C, or D, ... or Z) that allow their start-up to become successful.

The book has several strengths. One is that each chapter has several mini-case studies of companies that had to find their own Plan B - ranging from well-known high tech start-ups like Google to not-for-profits like GlobalGiving to airlines like Ryanair and beyond. Some of the examples are well known and others are much more obscure but all illustrate key elements of the authors' approach to experimenting to find a workable Plan B.

Another strength of the book is the way it points out that it's not just brand-new start-ups that need to evolve to Plan B - in today's "big shift" driven global market even established companies cannot milk a successful business model for an extended period of time without taking major risks. Every established organization should be continuously testing its overall business model and/or the business models of the individual lines of business, products, services, etc. that make up the business.

But how to test the model? How do you know if you're closing in on a workable or better Plan B? That leads to the two major contributions of the book. The first is providing a structured, repeatable process or model for how to test a business model to determine if it will work. Essentially, Mullins and Komisar propose treating the entire exercise as a structured, iterative experimental process. They provide a model for the conditions to be tested (their business model framework) and some tools by which to do the testing. The most important tool is the dashboard on which the elements to be tested are listed and the results of the test(s) are recorded.

Finally, Mullins and Komisar define what a business model is and define how to test the various components of the model. Their business model definition is solely quantitative and focused on five components:

• revenue model
• gross margin model
• operating model
• working capital model
• investment model

Each component is defined in a separate chapter and supported by examples of two or three companies and how that particular element of the business model contains a key to the company's success. All the discussions are good - the one on the working capital model is particularly useful (you can never stress too often that "cash is king").

It's funny that given how much we all use the term "business model" that there doesn't seem to be a widely recognized definition for the term. I love that Mullins and Komisar establish a firm definition and then show how to test a business model to determine if it's going to work. I think this may turn out to be the most important contribution of the book.

It's slightly disappointing that Mullins and Komisar didn't acknowledge or cite the similarity between their approach to testing a business model and the assumption-driven planning approach called discovery-driven planning developed by McGrath and MacMillan. Also, the process of structured experimentation that the book discusses is very similar in intent to the Lean Start-up approach advocated by Eric Ries and discussed in an earlier post on this blog.

All in all, this book is a major contribution to the literature on entrepreneurship and business planning. Strongly recommended.

A Powerful Tool for Organizational Learning: After-Action Reviews

Matthew May has a good post on After-Action Reviews (AARs) over on the American Express Open Forum. When Peter Senge says that AARs are "arguably one of the most successful organizational learning methods yet devised" you know that they are a big deal.

May's post summarizes the steps to ensuring successful AARs. Powerful stuff. Tools like AARs are central to the new organizational forms and management techniques that we need in the post-"Big Shift" enterprise. We used the term post-mortems for the AARs we did after development projects - our only problem is that we didn't hold them often enough. One of the best sales VPs I have worked with used to insist that his sales teams debrief every sales call in something very much like the form the Army uses in its AARs.

AARs should be one of the most used tools in every entrepreneur's management tool kits.

Dan Pink on the power of intrinsic motivation

Dan Pink in a very interesting TED talk about the power of intrinsic motivation, how much of what we practice in management of people is wrong, and what an evidence-based approach to managing 21st century organizations might look like.

Creating a culture of winning

For some reason, lots of executives and CEOs get all squirmy when someone says the phrase "corporate culture".  It's just too touchy and feely and squishy.  Yet it has been demonstrated over and over that improving a corporate culture (or establishing it right in the first place for you entreprenuers) is one of the most highly leveraged ways for a CEO to improve overall corporate performance.    As a case in point, yesterday's Wall Street Journal had a good article on the importance - and lasting impact - of establishing a solid culture in an organization. 

The article is an interview with John Schuerholz, the General Manager of the Atlanta Braves since 1990.  When Schuerholz went to Atlanta, the Braves had been losers a lot more than winners for as long as anyone could remember.  Shortly after he arrived, they began a streak that has now reached 14 years of making it to the playoffs, which is a streak of sustained excellence that few sports teams - or businesses - have matched or exceeded.  The interview allows Schuerholz to speak about a number of things, including some of the keys to transforming a losing culture into a winning culture.

Some of the key points he makes revolve around the importance of people.  Getting people on board who share your vision, communicating clearly to everyone in the organization, letting everyone know they are important to the success of the organization, creating trust, etc.  For example:

I have a goal for this organization, and it's clear. And I have a game plan about how we can reach that goal. Did we have to change some people? Sure. Did we have to alter some programs? Absolutely. But the most important thing was to create a level of confidence and reliability and trust. Honoring each other, respecting each other. So that the rookie-league manager knew we cared for him and relied upon him as much as we did on [Manager] Bobby Cox.

And also:

It really turns on one significant principle, and that is surrounding yourself and filling your organization with quality people and providing them with a clear vision, an uncompromising game plan.
<snip>
We don't have some magic dust that we sprinkle on our organization. My responsibility is to hire the guys who sit across the hall from me who run our scouting and player-development functions....You hire the right people in those positions, and you trust them in their ability to hire and to construct processes and programs and motivate people. [If you] communicate with people in an honest and clear and forthright way, you're going to have good results....Sure, we make mistakes. Sure, we make bad judgments. But fewer of them, I think, than is expected in this business.

Some of these comments, and others in the interview, will really resonate if you are a fan of the book Good to Great.  And if you are in any business where people are your key assets, where their talent and energy are what make the difference between winning and losing, you should go Read the Whole Thing (as they say).  If you're a WSJ subscriber, that is. 

Coming soon: The Real Story of Informix Software and Phil White

Just saw this on Jeff Nolan's weblog.  I'm jealous that he got a pre-publication copy for review.

Link: Venture Chronicles by Jeff Nolan: Book Review: The Real Story of Informix Software and Phil White.

Steve Martin (the author of this upcoming book) is an old buddy who worked in sales at Informix for a number of years before moving on to even greater success as a sales VP and now as an author and speaker.  My company was an Informix OEM and Steve was our sales rep.  Phil White was a  charismatic leader who fell prey to the "dark side" in his quest to keep Informix growing.  I'm looking forward to reading Steve's take on the rise (and fall) of Phil White and Informix and will report in more detail once I'm able to get a copy of the book.   

Disaster Planning and Recovery

A few thoughts on disaster planning and recovery for business...

FEMA checklist

Entrepreneurial Mind on disaster planning

Chubb insurance recovery checklist from Inc.com

There are other good resources around the web - find them.  Now.  Use them.  Now. 

A few other thoughts come to mind after reflecting on the recent hurricanes.

1.  Planning is one thing, practice is another.  Football teams don't just create a game plan in a conference room and then teach it to their players in a classroom - they go out and practice the plays.  The military doesn't just engage in creating war plans - they train their people to execute the tactics used in the plans and then the practice at the individual level, the squad level, the platoon level, the ship level, the squadron level, up to theatre-scale maneuvers involving units from navy, marines, army, and air forces plus forces from allied services.  And, after the game or the exercise, they review and debrief, looking for lessons learned and ways to improve their performance the next time they execute this play or this plan. 

Plans created in a conference room to satisfy a requirement (e.g. for when the insurance inspector asks to see your company's evacuation plan for earthquake or fire preparedness) or to qualify for funding (when a city or state has to tick a box on a FEMA form to qualify for Federal matching funds or grants - hello New Orleans) which are then never practiced (or even communicated) are useless - maybe even worse than no plan at all. 

If you are serious about having your facilities, your information, your staff, your customers protected and prepared for a disaster you MUST combine planning with instruction and practice. 

When was the last time you ran an unannounced dry run of your facility disaster plan to simulate a fire or earthquake that destroys the building during the night?  Would your people know where to report?  How would they be informed of what happened?  Who would be responsible for getting your systems back up and running?  Who would communicate key information to customers - and how would they do it?  If your staff can't answer those questions you are not prepared.  What about if it were a broader problem than just your facility?  What if it were an earthquake that leveled an entire section of your community?  What if it were a suitcase nuke that required an open-ended evacuation of your entire city?  If there is anything that Katrina and Rita should remind us it's that these low probability events do happen and that we are responsible for being prepared. 

2.  Do you have an information back-up plan that has been rigorously tested - on a regular basis?   Where is your off-site storage?  If it is in the same town where you are based - what happens to your ability to recover your data and get your business back up and running if the disaster that hits is one that impacts an entire community or region a la Katrina?  Oh, and by the way, if you use systems that are hosted elsewhere, figuring that this gives you an additional level of protection, have you checked where and how your service provider backs-up all of your data and systems?  You wouldn't want to find out after an earthquake or tornado that your backup data site was across town and leveled in the same disaster that destroyed your building.  Or, even worse, imagine that you were sitting high and dry and safe in your offices in Omaha the morning after Katrina and then found out that your offsite data backup vendor's servers were sitting unusable in windblown, waterlogged facility in New Orleans.  Is your information in multiple, widely separated physical locations?  The critical backbone of so many companies today is their information - could you recover if your data were destroyed even if your physical facilities and staff were unaffected?

3.  Have you done an insurance review recently?  If not, why not?  Waiting for more evidence that it might be a good idea?  You are on the remedial program, aren't you. 

4.  Don't rely on government - not local, not state, not federal.  You - and only you - need to have planned and prepared for how to protect your business.  If it turns out that government executes on its responsibilities well - that's a great extra benefit.  If it turns out that government resources can be substituted for yours (e.g. an SBA loan or a FEMA grant) after a disaster, great.  But don't count on it.  Cynical?  Maybe.  Realistic?  Maybe you should ask business owners in New Orleans, Gulfport, Biloxi. 

This week's Carnival of the Capitalists...

Ideologic has this week's Carnival of the Capitalists.  The usual three ring circus of posts from all over the business and economics landscape. 

Part 2 - Clayton Christensen Interview

A while back I posted a link to the first part of an interview with Clayton Christensen on the Gartner Group web site. They have posted the second half of that interview - if you are in to Christensen's great work on innovation and disruption please take a look at the full interview.

The Smartest Guys in the Room

Over my driving vacation one of the books I finally got around to reading was The Smartest Guys in the Room. Bethany McLean and Peter Elkind did a great job pulling together the story of Enron up to the time of the bankruptcy. Even with all the time that has passed and all of the information that I have seen on Enron, it is almost sickening to read the story from beginning to end.

The focus of the story is really on Ken Lay, Jeff Skilling, and Andrew Fastow along with many other senior Enron executives. Lay comes across as appallingly disconnected from what's really going on inside the enterprise he helped to create and was supposed to be running during much of the 90s while Skilling is arrogance and hubris personified and Fastow is greed personified (not that there wasn't lots of arrogance, greed, and hubris shared among the entire executive team at Enron). I realize that I'm late to the party with this book, but it really is a book that anyone interested in corporate governance and ethics must read.

The one major player in the Enron tragedy that's not really focused on in the book is the Enron Board of Directors. These folks were supposed to be providing oversight and guidance and governance to the executive team at Enron. It's pretty clear from everything that happened that they were grossly (and maybe criminally) incompetent in carrying out these duties. I think there's another great book in the Enron story that's waiting to be written that gets inside of the operation of the Enron board and inside the interaction between the outside board members, the inside board members, and the rest of Enron management. While we're waiting for that book, you owe it to yourself to read this one.

Drucker's Rules of Executive Class

There was a short Peter Drucker piece in last Tuesday's (1 June) Wall Street Journal (subscription req'd) that I saved but couldn't get around to posting on until today. WSJ.com - The Rules of Executive Class. The article is summarized from an article by Drucker in the June issue of The Harvard Business Review (and you can find a free summary of the article on the HBR website that pretty much lists all of the copy that's included in the WSJ article).

The article is a list of eight practices common to great executives. The list reflects Drucker's usual sense of pragmatism - there's nothing sexy about the items on the list; the eight practices are just hard-hitting, common, every-day basic blocking and tackling. But, like someone once said about common sense, there's nothing so uncommon. I see nothing exclusive to executive greatness about these practices, they seem like the practices of great leaders at any level in any type of organization or group. In fact, my belief is that these practices must be either adopted or learned by a leader during their formative years, well before they reach the executive level, although even the greatest leaders continue to learn and "sharpen the sword" as they advance and gain experience.

One thing that's great about this article is that if we could somehow hold our executives to this set of practices we could do away with so much of the existing or proposed regulation on executive/corporate behavior. Excessive CEO compensation would take care of itself, Sarbannes-Oxley would be unncessary, long term and short term goals would be more easily brought into some sort of balance, and it would be a heck of a lot easier for Jim Collins to find more companies for a follow-on edition of Good to Great. We can never develop enough rules and post-facto legislation to contain executives that consciously violate these principles; much better to pay attention to developing and promoting based on adherence to these practices.

Since the full text of this article is available on the HBR site, I'm going to include the full copy of the WSJ article below for the benefit of those who don't have a WSJ subscription. But then, if you really care about business, the economy, jobs, management, entrepreneurship, globalization, and such you already read the WSJ, right? Don't miss the ninth bonus practice at the very end of the article. It may be the most important of all.

An effective executive does not need to be a leader in the sense that the term is now most commonly used. Harry Truman did not have one ounce of charisma, for example, yet he was among the most effective chief executives in U.S. history. Some of the best business and nonprofit CEOs I've worked with over a 65-year consulting career were not stereotypical leaders. They ranged from extroverted to nearly reclusive, from easygoing to controlling, from generous to parsimonious. What made them all effective is that they followed the same eight practices: