Joke: Absentee

The new hire calls in sick on Monday. And then the next Monday. And then the Monday after that.

His boss calls him into his office. “Do you plan on being sick every Monday? What the hell is going on?”

The guy explains that every Monday he has to drop off his kids at his sister’s house. She always gives him a cup of coffee. She sends the kids into the backyard. Her robe falls open revealing her luscious breasts. They spend the rest of the day making passionate love.

“That’s sick,” says the boss.

“Well, I told you I was sick,” replies the new hire.

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The Long Tail

Chris Anderson

Power laws

Amazon and the few

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Push and pull

Telemarketers from the vendor with a push strategy call to sell you insurance as you sit down to dinner. The Hard Rock Café displays Bo Diddley’s guitar pick and plays throbbing music to pull you in. The itinerant Kirby vacuum cleaner salesman pushes; the Gilroy Garlic Festival is pull. Push is generally someone else’s idea; pull is what you think you want.

The Industrial Age was pushy. Owners predicted what would people would buy, built the factory, made large quantities to take advantage of economies of scale, and then tried to convince people to buy. Today change is so rampant and the future so unpredictable that Dell doesn’t build your computer until you order it. You cannot set up in advance when you don’t know what the future holds.

 

PUSH PULL
Assumes you can predict demand Assumes world is unpredictable
Anticipate Respond
Rigid, static Flexible, dynamic
Conform, core Innovate, edge
Monoliths, components glued together Small pieces, loosely joined
Program Platform
Get better at what you are currently doing Get better at whatever comes along
Standard content Standard interfaces

New management disciplines for the pull world all involve how organizations relate to one another (outsourcing, orchestration, productive friction). This, in turn, makes one think about where strategic advantage comes from. China is rapidly becoming the center for business management innovation, and this is the source of continuing advantage; copycats won’t catch you if you’re always ahead of them.

All of this is nurtured by networks stitched together with responsive, modular IT. 

Value, i.e. what it takes to stay ahead, used to reside in killer products or shrewd finance. In the pull world, value results from talent. Talent, in turn, is the result of maintaining relationships. The leading organizations of the future will be those with the ability to create and retain talent. Developing talent will become the role of the firm – and the way people choose who they want to work for.

 

Business
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Shareholder value

Investors set shareholder value: it’s what they estimate a firm’s share are worth. 

The two ways to increase shareholder value are (1)  boosting competitive advantage (differentiating yourself from your closest competitor) and/or (2)  maintaining your advantage longer (sustaining advantage with barriers to competitive entry or customer exit.) Managing for shareholder value means focusing on strong, sustainable competitive advantages. 

 

Two factors account for the slope of the curve: management’s forecasts and investors’ discount for risk. The space under the line is the present value of future earnings, discounted for risk.

 

Got that? The value an investor is willing to pay for his perception of profit over time. Think of it this way:

Perception is the key factor in valuation. Profits can soar, but if investors think the company is headed into the toilet, they won’t pay much for its stock. In fact, the company can have a track record of loss after loss, but investors are buying the future, not the past. If they think the company is going to kick ass for a good while in the future, they will bid up its stock. 

Increasingly, investors value intangibles: reputation, brand, social capital, operational savvy, and so on. Owning billions of dollars of plant and equipment limits flexibility and sometimes ties a firm to low-margin manufacturing, dragging down earnings potential. 

More: Living on the Fault Line by Geoffrey Moore

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80/20

80/20 or Bust

20% of the sales force makes 80% of the sales

20% of the products account for 80% of the profits

20% of the defects cause 80% of the problems

20% of the suppliers provide 80% of the stock

20% of the staff causes 80% of the problems

 

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Intangibles

Often what we can’t see is worth more than what we can.

Google stock is selling for $450/share which makes its market capitalization $137 billion. That’s Google’s value to investors because it’s what they are willing to pay.

Googles’s book value (assets less liabilities) is $23 billion.

Where’s the $114 difference between market value and book value come from? It’s the premium investors are willing to pay because they expect Google to be worth that much and more in the future. It is 100% intangible.

A quarter century ago, intangibles accounted for less than a third of the value of the S+P 500 companies. Ten years ago, intangibles made up more than 80% of the value of the S+P.

Managers who refuse to manage intangibles because they are sometimes tricky to measure are keeping their eyes on the wrong thing. Are they trying to add value or add numbers?

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The Mythical Man-Month

Fred Brooks wrote The Mythical Man-Month about the lessons learned as the senior software engineer behind OS/360, at the time the slickest operating system ever written.

What became known as Brooks’ Law states, “Assigning more programmers to a project running behind schedule will make it even later, due to the time required for the new programmers to learn about the project, as well as the increased communication overhead. When N people have to communicate among themselves (without a hierarchy), as N increases, their output M decreases and can even become negative (i.e. the total work remaining at the end of a day is greater than the total work that had been remaining at the beginning of that day, such as when many bugs are created).”

He also noted:

  • To make a user-friendly system, the system must have conceptual integrity, which can only be achieved by separating architecture from implementation.
  • To avoid disaster, all the teams working on a project should remain in contact with each other in as many ways as possible (e-mail, phone, meetings, memos etc.) Instead of assuming something, the implementer should instead ask the architects to clarify their intent on a feature he is implementing, before proceeding with an assumption that might very well be completely incorrect.
  • Brooks muses that “good” programmers are generally 5-10 times as productive as mediocre ones.

Brooks’ Law seemed both whimsical and radical back in ’75. It didn’t seem right that adding people to a project would slow it down. A programmer told me it was like a woman having a baby in nine months; it didn’t mean nine women could not produce baby in one month. Brooks was saying more that that. He recognized that the output of knowledge workers was not directly related to the hours they worked.

Today we recognize that a great knowledge worker may produce as much value as a hundred of her less gifted peers.

Schools may mix the student with off-the-charts promise with his average classmates to avoid the appearance of favoritism.

In business, it pays to devote special attention to superlative performers.


Knowledge workers can goof off and still be productive.

Factory workers, particularly those on production lines, produce the same amount of value each hour. Most manual labor is similar: the best performer may produce 125% of the norm, but never 500%. Managers were lulled into equating hours and output. An employee who knocked off work early was presumed to be a slacker. Kibitzing in the coffee room was regarded as downtime.

Knowledge work is different. Google recruiters figure a top engineer can produce two hundred times more value than the norm! Assume that top engineer sits on a beach for six months and then, in the course of a few minutes, comes up with Google’s new $5 billion innovation?

Business
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ROI

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The 90/90 Rule

The first 90% of the job takes 90% of the time. The remaining 10% takes the other 90% of the time.

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The Dancing Bear

In The Inmates Are Running the Asylum, Alan Cooper likens software to a dancing bear. You don’t expect agile dancing. It’s amazing enough that the bear can dance at all.

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Haig’s response

When Alexander Haig (“I am in control here”) was running for president, one guy came up to him and said he refused to share hands.

Haig replied, “Some people are assholes.”

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It’s always something

On the original Saturday Night Live, Gilda Radner, in the role of Roseanne Roseannadanna, would conclude an absurd commentary with “It just goes to show you, it’s always something.” Whenever the complex adaptive foreces turn against you, this quote form Rosanne Roseannadanna is always approops.

Never mind.

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