For those of you who haven’t yet seen the Susan Boyle video, I promise you will be glad you watch it in its entirety here.

I can’t think of a story that unfolded so fast, so well, and the only reason I found out about this one was because there has been so much chatter about it on the internet.

I don’t watch reality TV shows often, but I know who Simon Cowell is, and now that I have watched this video a few times myself, I think that as Susan got through her song, Simon was smiling (which I have never seen before) because he knew they had gotten to someone who would have never gotten her shot had it not been for that show, and that because of the show he created, a 47 year-old woman from a little village in Scotland fulfilled her dream right there on that stage last Saturday night.   Her life will never be the same, and Simon knew that before she did.

While you ought to have to have at least some admiration for the typical kids that go on that sort of show for their guts and ambition,  the Susan Boyle story really stands out from that crowd as someone so unlikely, and yet, as we now know so deserving of a chance.

Which brings me to what it has to do with rethinking and it has to do with hiring.  Right now in this recession, people are getting laid off all over the place, but some people are still hiring.  I have hired lots of people over the years, and when I have looked at resumes in the past, I would look for some basics and I often look for “standard” qualifications, quickly dismissing lots and lots of resumes without much thought.

When times are good (which they were for nearly 20 years with the asterisk of the dot com correction), that’s probably a good approach, as really good people are hard to find and you can be very picky that way.  Today, however, I expect the climate is already so different, that an unusually high number of really great people are out there, and in many cases they are wanting or needing to change careers (like a lot of bankers and auto workers in the US), so their resumes may not be an obvious fit for some roles.

My bet is that there are lots and lots of Susan Boyles out there right now, so don’t be so quick to dismiss candidates who seem completely unfit for a given role, because when you find them, you will probably have a smile bigger than Simon’s.

-Ric

There are what I would call “the usual suspects” of great companies that people talk about often, from Netflix, to YouTube, to Ebay, and so on, but most of us also have our own favorite companies that are less well known. This is the first of what I expect to be a series of posts about companies that not everyone knows about, but which I think most people can learn a few things.  Today I am going to write about Concept2 (makers of rowing oars and rowing machines) which is one of my all-time favorites.

I have been rowing competitively, off and on, for more than 25 years, and when I started, it was wooden boats and wooden oars, and the coxswain, the person who sits in the stern calling out specific instructions (not “stroke! stroke! stroke!” as is commonly believed) and steering used to yell into a miniature old-fashioned megaphone with a headband  that looked more like orthadonture than anything sports related, and the practice machine, the rowing ergometer, was a huge metal contraption that bordered on torture (in fairness some rowers might still view the ergometer as torture, but it’s more precise, scientific torture that more closely resembles rowing).

Today, while the coxswains are still small, and the workouts no less grueling, little about the equipment is the same.  The oars and boats are mostly fiberglass, the coxswains now have an electronic device (the “cox box”) that is connected to speakers in the boat (so less yelling, typically) and there is an automated stroke rate counter, and the rowing ergometers are now lightweight, relatively portable with sophisticated computers.

Concept2 isn’t responsible for all of the changes in the rowing world, but they are responsible for some of the biggest innovations in the oars and the rowing ergometers.  Moving the boat through the water is “what” rowing is about, and “how” it is done through training on the machines, and pulling the oar through the water are made better and easier by Concept2.  So they have really great products, which is the first key to being in touch with customers.  In the case of the oars, the rowing oar went through some minor changes over time, but as you can see, for over 100 years an oar still looked pretty much like an oar, only shorter.  The people at Concept2, after figuring out fiberglass was a better material, also figured out that changing the shape of the blade (the part that goes into the water) to resemble a hatchet or cleaver, was a better oar.  And while the first rowing machine they made (which was basically a bike wheel with black plastic flippers for wind resistance) was an improvement, today they are amazing. But Concept2 does so many other things that makes it easy to love them.  They do all kinds of things for the rowing community.  They have online ergometer records (times for specific distances, by age group) free rowing logs and to go with those, they frequently have competitions that you can participate in as an individual or as a team.  For example, every year they have  a Holiday Challenge to row 200,000 meters between Thanksgiving and Christmas (which is a GREAT way to fight holiday weight gain), and when you do it, you get a prize, and there are different tiers for different age groups and abilities.  They also have million meter clubs where for every million meters you log on the ergometer, they give you a certificate and some sort of prize like free socks.  All of the online logging is on the honor system and it think it’s partly the nature of the rowing community, but the honor system works.  The other piece is that while some rowing clubs are well funded, most are not, and so I love how much Concept2 has done to keep their costs down to help keep their oars and ergometers as affordable as they have.

Finally, another test of a company I love, they continue to innovate and remain in touch with what their customers want as technology becomes more ubiquitous. For example, their rowing ergometers now have a card (like a credit card with a computer chip) that allows you to keep track of your progress, and when you travel, if you take your card with you, most gyms around the world have a Concept2 ergometer, you can just slide your card in and it will continue to keep track of all of your information (which of course you can also download to your computer) from stroke rate, to distance, to times, etc.

So to summarize, Concept2 is very much in touch with what their customer values and their continue to deliver better and better products to meet those needs, and they continue to make efforts to innovate, and build community, and help their customers afford their products so that everyone on, and off, the water can compete (or not) based on their abilities and interest.  What’s not to love about Concept2?

-Ric

Don’t be fooled by the logos in this post, I think you will find it relevant.

Lots of projects start with metrics and deep quantitative analysis, and people who have worked with me in recent years know how much I love to get quantitative, but I always start by making sure everyone is clear and specific about the outcome people want, and then ask what will cause that outcome.  It sounds pretty basic, but I see the mistake made almost every day.

Twenty years ago I was a paralegal in the corporate division of one of Seattle’s biggest law firms, working for an attorney named Steve.  Steve told me that one of his big clients needed to start operating a new business and that would require a 50-state filing, a pretty self-explanatory effort that would license them to do work across the US.  So I went out and did the research for the cost to file in each state and came back with the price tag, by state.  One of the states was very expensive, and Steve pointed to that state and asked “what’s the enforcement provision?” which is a question that has since echoed in my head many times since that day.  Steve’s point was a simple one; yes it’s legally required to be licensed in that state, but if there is no specific penalty for not having the license (the enforcement provision), why would we bother to pay the fee and get the license?

NOAA recently got a new leader, Jane Lubchenco, and one of the issues Dr. Lubchenco will have to address is the severely threatened salmon populations in the Pacific Northwest.  Already the debate has started about what was done during the Clinton administration and the Bush administration, and what the right measure of success is for this problem.   That’s the wrong question to start with and in my opinion if NOAA and Dr. Lubchenco stay on that path, she will find herself in a one-legged kicking contest.  That’s because she doesn’t control enforcement, and enforcement is what will cause the desired behavior, and that is what will get the outcome we need.

Enforcement on this issue starts at the Washington Department of Fish & Wildlife.  Having been born and reared in the Pacific Northwest, I grew up reading the annual rules and regulations for a variety of activities managed by WDFW.  My Dad and I have always had all of the necessary licenses,  stamps, punchcards, parking stickers, and so on (and yes, the list does go on)  needed to legally participate in these activities.  But one of the things that troubles me, particularly as salmon, steelhead, and crab populations get more pressure and lose habitat, is that I haven’t seen a game warden anywhere for over 20 years.  I see people poaching crab and fishing where they aren’t supposed to (both sport and commercial people), and they often say they didn’t even know a license was needed  (that’s just sport fishers). I think it’s not so different from running a stop sign – people see others get away with it, and then they get away with it, why would you ever stop at a stop sign again if it’s never enforced or unless you see a car coming?  It seems a lot of people think like my old boss Steve.

No one wants NOAA to be more successful than I do, but until there is better enforcement in the Pacific Northwest, there’s no way Dr. Lubchenco will succeed by any measure because NOAA alone doesn’t control the outcome of the situation.  I think there are some pretty simple ways to get more people to buy licenses, which will provide better funding to WDFW, which will allow better enforcement, and then we will be on the right path.

-Ric

Somewhat understandably because of the way Hank Paulson, umm handled, the first round of bailout funds, it now appears that many of the institutions that took funds from the Troubled Asset Relief Program (TARP) thought it was free money with no strings attached.

So when Wells Fargo announced this week that it would be repaying TARP funds before the end of the year, Wall Street cheered and their share price jumped.  The second wave of news revealed that the real reason for the seemingly miraculous turnaround was the $500,000 limit in cash compensation for executives of organizations that participate in TARP.    Basically these bankers don’t want to participate in capitalism if they can’t get a King’s ransom for it.  I talk a lot about value and linkages, and clearly banking executives value getting paid a lot, and I wouldn’t be surprised if there’s a correlation, if not a cause, between a certain minimum pay and bank performance.  I can live with that.

The part that got my dander up, and it is up, was hearing that the banks that took TARP funds are now pushing back on paying the  significant premiums they agreed to pay when they took the money.  They are refusing to make a payment they agreed to when they took the money. . .Do you think people buy cars from schlunky used car dealers with outrageous interest rates because they like it? NO! They do it because no one else will loan them the money because they have crummy credit ratings and the schlunky car dealer is their last resort (in some cases I think it is actually because they are bad at math, but I will come back to that).  And do those people on Main Street driving those used cars get to refuse to make payments they agreed to?  I don’t think so.  Who are these people running these banks behaving like this and why don’t we get rid of them like we did with Rick Wagoner at GM?

But it gets worse.

Now the banks are being pressured to sell off their worst mortgages, their toxic assets, what industry analysts have said is more than $1 trillion in the US, and the banks are saying “no” to that as well.  The issue is that the banks value these assets much higher than the investors are willing to pay. The New York Times reported this morning that Frank Pallotta, a former Morgan Stanley mortgage trader said that because the gap is so wide “if every bank was forced to sell at the market clearing price, you would have only five banks left in the market.”   I am sorry if the timing isn’t convenient for these banks to sell their toxic assets, but as I understand it, many of them would have died without TARP anyway, so they lost their right to decide whether it is, or is not, good timing.

As I understand it, to be a great banker, you need to be good at math, and understand risk.  Clearly, the bankers that got us into this mess failed at that simple formula (I get that it’s slightly more complex than that).  I am not an expert in banking, but my question to Frank Pallotta is, “why can’t we have just five banks?” let’s rethink that and see if, in the long run, that is a good solution.

This is all about getting the outcome we want, and as usual, I don’t care “how” we get there.  We already saw what a disaster relief funds without strings were, if Treasury gets lax and fails to enforce what was agreed to up front, I don’t know why we would expect a different outcome.

-Ric

Someone who wants to start a business inside of an already existing and successful business, an intrapreneur, may expect it to be easier than a classic startup because there is an existing infrastructure to leverage.  But just as certain things are already in place, there are also other factors that the classic startup entrepreneur doesn’t have to confront.  Twice I have been an intrapreneur inside of public companies, first with CRM vendor Onyx Software in 1999 when we built a business for one of the first subscription CRM solutions (many would call this a cloud service today) for small and medium businesses, and then in 2003 at Microsoft with the Motion business architecture methodology and tools whose success led to the 2008 Harvard Business Review article “The Next Revolution in Productivity” and the book Rethink.

Having gone through this twice, I have seen some patterns, and here is what have to say to the aspiring intrapreneur – coming up with a great idea is the easiest part of the journey.  Here’s what else you need (and some of these apply to basic entrepreneurs, but not all):

1. Business case.  You need to illustrate that you actually understand how to execute (competition, risks, funding model, timing, etc.)

2. Luck. No matter how great your idea is and how perfect the timing, you need luck around every corner.

3. Outside advocate. Especially if you are not a senior executive in your organization, it can’t just be you banging on the side of a garbage can lid to make this work.  When your senior executives hear enthusiasm for the idea from the outside from someone they know and trust that makes it credible and real for them.  So figure out who they listen to and figure out how to get to them.  Jonathan Roberts from Ignition gave me this tip, and it remains some of the best guidance I have ever gotten.

4. Inside advocate. You need an executive sponsor to give you air cover when someone tries to shoot you down, which will happen.

5. Fast scale. If you have an idea that will generate $5 million in the first year, that’s pretty exciting to many businesses, but it has to be a LOT bigger than that for a big public company to get excited about it.

6. Fit. How does it fit into the existing momentum, models, and culture of the organization today?  Does it require a different skill set to build it?  A different target market to sell to?  Might it pose a threat to business partners?  The more disruptive the idea, the more compelling the business case has to be.

7. Evidence. As you pitch the idea inside and outside, PowerPoint slides alone won’t cut it.  It is much harder to shoot down an idea when there is hard evidence to back it up (revenue, cost cutting, increased customer satisfaction, etc.)

8. Political awareness. It is a simple reality that big companies are political and not everything that goes on is based on sound business fundamentals.  When you see something happen that doesn’t make sense in terms of the progress of your idea, be very careful before you make your next move, you are probably into the political waters and you need to be sure you know who your friends and enemies are.

9. Funding. Getting people excited about an idea is an important step, but funding is the language of genuine support in business.

10. Patience. Big organizations aren’t very agile, so you need to set your expectations for a long journey of ups and downs.

In my two cases, it was much harder than I expected, and there were all sorts of surprises and setbacks, but success made it all worthwhile.  Good luck!  You are going to need it.

-Ric

It’s pretty simple, the higher your cholesterol, the higher your risk of death.  Your cholesterol level is easy to measure and mostly a factor of your genetics and family history, but your own day-to-day regimen of diet and exercise can, in some cases, play a major factor.  I happen to have very high cholesterol, and my doctor thinks it’s mostly because of my family history.  Lucky for me, there are now drugs to manage high cholesterol.

Companies, almost across the board, today have an increased risk of death and I can argue that there is a loose analogy to cholesterol in the sense that risk is pretty easy to measure, and some of it is a factor of industry (like family history), and some of it is a factor of behavior (like diet and exercise).   So when I look at an organization like The New York Times, right now their cholesterol risk is high but not dangerous, yet, and a lot of their troubles are because of their industry (family history).  The branch of the family that went to online news seems to be on a better path, but the printed paper branch of the family is struggling.  It’s not the fault of The New York Times that their industry is losing momentum, and because they make a great product, I expect that behavior and others will steer them away from higher risk.  Their situation is understandable and excusable for now.

In tough economic times, it is also understandable that the auto industry is starting to see higher risk across the board, but it is inexcusable that an organization like GM didn’t manage their risk better, and I blame their struggles on bad behavior.  The risk signs have been there for a very long time, even when the industry was strong.  They are not in a commodity business, so their product needs to appeal to specific sets of customers, and it flat out failed to do that.  To make matters worse, their risk is so out of control right now, given how long it takes a manufacturer to turn out a better product, I don’t think bailout money is close enough to a cholesterol drug to lower their risk to keep them alive.  I hope I am wrong.

The one I cannot understand or excuse is the banking situation. It is largely a commodity business, where the understanding and measurement of risk is among the most mature, they still managed to have such bad behavior to get some of the highest risk of all.  I know they even have the actuarial tables to track and report the risk, and re-insurance companies to spread risk, especially for disasters.  I remember years ago my Dad got booted by his auto insurer for two no-fault accidents.  Thankfully he was re-instated, but clearly that insurance company tracked the risk not just of his background history and age, but also his specific behavior and once the risk got too high their equations kicked him out.  And oh, by the way, I don’t hear about auto insurance companies being in any trouble – so why just home banking and insurance?  While I am not a banking expert by any measure, mortgages also have very knowable risk getting into them, and the customer behavior in making payments is also pretty straightforward.  So even as mortgages were bundled and sold and re-sold, with tools in place to know the risk of each mortgage, it’s unbelievable to me that we are where we are.  The good news is that I believe done correctly, bailout money will get this industry back on solid ground, but they should really have been the last ones to need it.

So if “what” you need to do is Manage Risk, understand how easy it is to know and measure, what parts of it you can manage through behavior, and how much are simply a factor of your industry, and from there decide how much rethinking you need to do to stay alive, and safe.

Now if you will excuse me, I am going to have my daily dose of simvastatin and hop my rowing machine.

-Ric