The Danger of Teams

May 8, 2015
A lot is said about the power of Teams and about consensus based decision-making. Working with more or less democratically organized teams seems to be the standard mode of operating in most companies.
How much is said about the danger of teams and the disadvantages of seeking consensus?
First of all, usually people talk about The Team, and: you are either in it, or you are not. So although a team suggests cooperation and inclusion, it also excludes a lot of people, who are not on The Team. The notion of having a team, deciding who’s on it, and making sure the team is successful seems over valued. The team should be a means to an end, such as implementing the company strategy, not an end in itself. In my experience teams are kept together for much too long, even when it has become clear that the team dynamics are not advantageous, and far too much energy is spent on fixing the team, rather than on fixing company issues. All energy is spent on off-sides, team meetings, assessments, external help, rather than on customers, the product and on growth.
This would perhaps all be worth it if teams would make better decisions than individuals, but this is arguably not the case. On the contrary.
How decision-making works
Some background on decision-making, from the must-read book by Nobel Prize winning author Kahneman: Thinking Fast and Slow. He won a Nobel Price in Economics, but Mr Kahneman is a psychologist and his research was on Decision-making. He is not optimistic about the quality of decision-making. In fact for most decisions the outcome is better if you have a monkey throw a dart at a dartboard to select an option. In particular he is fearsome of decisions made by experts or by teams.
Gorilla
In thinking in general, and in decision-making in particular we have two systems we can use.
System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control. When system 1 gets into trouble it feeds system 2 with impressions, intuitions, intentions and feelings. System 1 has biases, has limited understanding of logic and statistics, and is lazy. It sometimes replaces difficult questions or choices by simpler ones, and easily jumps to conclusions.
System 2 allocates attention to the effortful and more complex mental activities that demand it. The operations of system 2 are often associated with the subjective experience of agency, choice and concentration. System 2 is also credited with the continuous monitoring of your own behavior – the control that keeps to polite and alert and it is the source of doubt and judgment.
Why teams lead to bad decisions
Biases are a major reason for bad judgement. And bias is strengthened in teams by Priming effects like Framing (presenting information in a certain way, Halo effects (the one who brings his point across first or most assertive is usually followed). Another form of bias that often causes disturbance in teams and is not easily controlled is “availability bias”: members of a team usually feel they have done more and contributed than their share, and also feel that the others are not adequately grateful of their individual contributions. When individuals are asked what their contribution has been, the total almost always exceeds 100%. Typical System 1 thinking. This system is heuristic (it works with “rules of thumb”). Only when system 2 is engaged with its focus on content and analytics a more realistic picture arises. Unfortunately this seldom happens in discussions. Or, as psychologist Jonathan Haidt said: “The emotional tail wags the rational dog”.
Another problem, where a team could add value, but usually does the opposite is: collecting and analyzing information. Instead of bringing all available information to the table, team members often feel reluctant to do so. Social pressure plays a role here, which leads to people to silence themselves because they fear the disparagement of powerful others. Synergy is usually an illusion. In fact, even when they would speak up, their influence would be limited: information held by all or most group members has a lot more influence than information held by one member. This is called “the common-knowledge effect”.
This is actually quite comforting for decision makers. It is only natural to build the best possible, coherent story with limited information available to you. With little information it is easier to construct a story that makes sense. The reason behind this: our almost unlimited ability to ignore our ignorance.
So we have bias, we have limited excess to information, and we overestimate what we know. As if that was not enough: we are naturally negative and resistant to change.
Negativity and loss aversion are purely human emotions, and they tend to win from positivity and curiosity. It is an evolutionary survival mechanism, and causes us to be driven more by the aversion of losses than to achieve goals. In a team this gets stronger and is reflected in goal-setting. Therefore goals will be set without much ambition: not achieving a goal is a loss, exceeding the goal is a win, but the aversion to the failure of not reaching the goal is much stronger than the desire to exceed it.
Funny example for golfers: after analyzing 2.5 millions puts by professional golf players it was discovered that putts to avoid a bogey were significantly more successful to putt to achieve a birdie.
In a team, this behavior leads to resistance to change. Plans for change or reform almost always produce many winners and some losers while achieving an overall improvement. However, potential losers will be more active and determined that potential winners. The outcome will be biased in their favor and inevitably more expensive and less effective than initially planned.
The conclusion, as we can also read in Cass Sunstein’s book Wiser: Groups usually do not correct individual mistakes, as is the general consensus, but actually amplify those mistakes.
How to fix it
So is there no hope? Of course there is. The alternative is avoiding teams as a goal, but organizing knowledgeable, committed and responsible individuals in changing teams or  ecosystems with some simple rules and a clear process for collecting and assessing information.
Ecosystem
If people in organizations, as animals in nature acknowledge their interdependency and take responsibility, adaptation to changing environments is enabled. Divergent perspectives will be respected and valued. Conflicting opinions will be seen as options based on data and members’ individual knowledge, to be evaluated and ultimately decisions will be by those who have been authorized to do so. To create such an environment you have to pay attention to several rules:
Rules
Rule 1. Assigning authority and taking responsibility.
The accountable leader will have to surround himself with knowledgeable people, and ask who will take responsibility for what. To the individual who is responsible for something authorization needs to be assigned. It might help to agree that these authorizations are by definition temporary. Individuals should not become attached to them, or feel they own them. Always the starting point should be: what is best for the organization at a certain point in time.Compare this to a national soccer team. Even if you are selected to join the team, you don’t know if you will play. And if you play, you cannot be sure of your position on the field. It all depends on fitness for the job, on the adversary, on the available alternatives and on a lot of other circumstances. But everyone’s goal is to bring the cup home.
Rule 2. Differences
Leaders create a safe space to disagree by his own behavior and by making explicit the expectation that conflicts can be surfaced and resolved. Teams need to commit to listening with respect, debating and deciding. This needs some ground rules that need to be enforced. One of them is to tolerate the discomfort of divergent and passionate viewpoints, despite the tension it may raise for the team. Another one is that ultimately agreement between all is not necessary. The responsible person can, or maybe should say: “Thank you all for your input and for the discussion. I will let you know what I have decided.” After that the whole team must commit to executing the decision as best they can.
Rule 3. Interdependence
A key opportunity for interdependence exists if team members support each other’s goals, and seek each other’s  expertise and perspectives. Feedback, especially on behavior should be given directly to anyone and by anyone. Complaining to others afterwards, creating kongsi’s or lobbying for support in upcoming meetings is undesirable behavior and should not be tolerated.
Rule 4. Engage others
Teams can become insular and self-referential. It might be necessary for the leader to re-assign responsibilities, swap team members, encourage an inward-looking team to ask stakeholders for input and alignment on both operational and strategic matters. This can be done by inviting other stakeholders or subject matter experts to attend meetings, exchange information or just listen in.
Kahneman believes in rule based decision-making. Select the most important variables and come up with a simple algorithm, and score the variables, based on collected data. An example: the apgar score for newborns. Selection of candidates, chosing stocks to pick? Follow the best algorithm you can come up with and refrain from sticking to your first impression or your intuition.
Process
The best way to deal with coming to new ideas and new solutions is to create a two stage process: first collect as much information as you can, preferably anonymous, or brainstorm for new solutions. In the second stage critically select the best solution from those identified in the first stage.
And finally: if there are people with irrational or destructive behavior and personal motives, no ecosystem, no rules and no process will help you. You will have to confront them and ultimately remove them.

Why we all (should) hate “How”

March 25, 2014

So much can be read from the way people talk. The choice of words is something worth paying attention to. Are they constantly talking about I rather than about We? No need to explain what it means. Although: here context plays a role, too. Are you having a discussion about Strategy and choices? Than the I-sayers might have more focus on their own agenda and personal feelings than on the collective ambition and the team. Are they we-sayers when talking about Execution, Objectives and responsibilities? Make sure people take responsibility for what they promise to accomplish, for the effort they put into it, and for the results.

I have similar experiences with the word „How”. Usually How refers to the process, and as soon as people, for instance in a Management Team, start diverting attention from the content to the process, you can conclude that they either lack the content, and have no opinion about the subject at hand, or they are stalling. Both pose serious problems for decision-making. The question Why a decision should or should not be taken is the crucial one.

When executing, it is the other way around. When someone has taken responsibility for implementing a decision, focus from his Peers or his Manager on How he should do this will most likely not lead to better results, but reduces the responsible person to someone who does not feel trusted with the task.
Not letting your employees figure out how to go about their business is an excellent way to make them stupid. Treat them like kids and you will have a Kindergarten on your hands instead of a company. or an Army – which in some circumstances (like War) has it use too.
Slide1Talking about Words, War and Companies: don’t we all love the idea of People, Planet, Profits, as sketched by Peter Frisk? Or for the realists, like Ben Horowitz: People Product Profits? And don’t we usually see the exact opposite? More along the lines of Politics, Paranoia and Pay-for-Preceived-Performance? Now that is something we want to do something about. An excellent Why (we want to do it differently).

And what about “How”? Does it have any use? Sure it does. In: „How can I help?”


How to build a business – demotions

March 14, 2013

There has been a lot of publicity lately about demotions and salary cuts for older employees in IT Services companies like Capgemini, whose market value does no longer justify their salaries.

 

Like they did not see that one coming.

 

What is this fuss all about?

 

Of course people are aware that the number of years you are with the company and the number of times you had your salary raised has no correlation to the value you will bring to the clients. Many years with the company? Maybe that has given you insights in the internal organization, or maybe you can manage or coach younger colleagues. That is not very interesting for a client, who wants practical knowledge, results and tangible benefits.

 

 

Especially now, with a much more dynamic and flexible labour market, clients are much more critical and service providers see rates that feel the pressure of the crisis. So how could they have put themselves in this situation? Probably everyone has always been focused on the short-term, because collective labour agreements have dictated that salaries be raised every year, because clients were never the most important stakeholder in companies like this?

In The Netherlands we have almost four hundred collective labour agreements. In only six of them demotion as an instrument is part of the agreement. Unions, whose members are to be found under the older employees, have every intention to keep treating demotions as a taboo.

 

The whole idea of demotion is not new of course. In 2000 the Wetenschappelijke Raad voor het Regeringsbeleid published a report suggesting that “the salary profile and the productivity profile” are getting out of sync. Their solution: more flexibility in salaries, no automatic correlation between age and salary increases, and ultimately demotion.

 

So what is the alternative and how could they have prevented this?

 

First of all, is seems more logical to correlate pay directly to productivity or market value. This can be done by paying basic salaries, plus additional components for both individual market value (measured through billable revenues) and company performance.

 

The question both companies and their employees will have to start asking themselves is how they can influence revenues per employee. Market value is determined by what clients are willing to pay based on the perceived benefits – although most people seem to think rates are determined by smart sales people. The employee feels he has limited influence on his market value. This of course is not true.

It can be increased by development though experience, training and smart matching. The first two are up to the professional. Matching – placing the professional on the assignments where he or she can add most value – is usually done by sales people. Unfortunately usually the match is made based on competences in CV’s and not on Character, Values, Culture and soft skills.

 

Our solution: make groups of professionals responsible for their own success and value. Self Steering teams determine what kind of professional education and training they need, and they are stimulated to build a network of clients. With some commercial training they are able to help the sales people not only with leads and opportunities, but also with better matches for proper rates.

The budget available for salaries and other compensation has a direct correlation with the revenues generated. The team members together determine their  own salaries. Demotion: a concept of the past.


How to build a business – the American Dream

October 29, 2012

The American Dream: it does not exist.

From rags to riches on the basis of an excess of ambition and talent is a nice story, but in practice there is more to it. Malcolm Gladwell, who previously wrote books like The Tipping Point and Blink published an entertaining book about why some people are much more likely to succeed than others. Outliers.

The summary: origins, environment, and coincidence are just as important as intelligence, talent, ambition and perseverance. It would like to add (Gladwell does not): the ability to recognize opportunities and to grab them with both hands. I have written a blog about this ability – Effectuation – earlier.

Therefore, contrary to the stories that usually circulate about highly successful people – a story that focuses on intelligence and ambition, Outliers argues that if we want to understand how some people succeed, we must study in detail things like their background, their generation, their family, their place of birth, and even their birth date. These usually drive the coincidences that make them who they are. There is also such a thing as “making enough hours”. This is the “10,000 hours theory”, developed and popularized by Dr. Anders Ericsson, who basically found out that spending massive amounts of practice hours on a specific subject will lead to expert mastery in that field, more than talent will. Or the other way around: virtually no one who did not spent ten thousand hours of something, became really good at it. Whether a person has the opportunity to make those hours depends on… coincidences and perseverance.

The story of success is much more complex and interesting than it appears to be at first.

The logic that Gladwell uses to explain the success of the Beatles, Bill Gates, Asians in Mathematics, Jewish takeover lawyers and others is peculiar and interesting. It is all about coincidences. For Gates: the availability of sufficient computer time at exactly the right time, for the lawyers: they were all born from garment makers around 1930, they do not have to fight in the war, were not eligible for the WASP Wall Street firms, and had, around 1970, sufficient experience with acquisitions, which until then were not fancy. Before 1970 Yankee law firms refused to do this inferior work, which after the ‘70s was considered to most prestigious legal work.

So it boils down to: talent, ambition, and ten thousand hours of experience. Character and competence. We should start asking our candidates whether they have ten thousand flying hours. For those who join us as Professional (sometimes call the “professor” role) this will not be a problem. For entrepreneurs (the pilots in the plain), the headhunters, the networkers and sales-people that might be a challenge.

 

Thousands of hours experience with a specific task, seems contradictory to what Ricardo Semler propagates in his book The Seven Day Weekend.

The title is misleading. Weekend does not mean doing nothing but: do things that you like and make you happy. Semler, then CEO of Semco, a company with roots in Sao Paolo,  introduced a style of leadership that took liberalism and democracy as a starting point. Why do most people in most countries agree that democracy is the best way of governing, but why are most businesses organized along dictatorial line? Companies and the Roman army have many similarities. Companies and kindergartens have many similarities. What are the similarities between armies and kindergartens? 1. Decisions are made for you. 2. Personal initiative is not really appreciated and 3. Hardly anyone really enjoys it.

Semler turns it around: If employees care first and foremost about their self-interest, if Management refuses to impose (or even take) decisions, if there is a culture of transparency and trust, intrinsic motivation and peer pressure will do the rest. This involves making employees responsible for a lot more than putting in the hours.

It has taken decades to turn his business around to a democratic, innovative and successful enterprise, where employees determine their own working hours, their own salary, their location and decide who will be their bosses and their colleagues.

How nice is that: A company where people may attend the meetings they want to attend and all business information is available for everyone.

Employees are no longer just a means of production, but adult people with talents and ambitions who are asking, as many times as possible, the question “why?”.

It would be quite something if this could work, and I am convinced that it can work. I am not so sure if we have the patience and time to make all the mistakes, and to accept everyone making all the mistakes that are part and parcel to such a process.

 

But then, why not? If we are able to select and interest only the most talented people, with the highest integrity, and if we can all be fully transparent about our intentions, we will get there. First we will be looking for people with 10,000 hours on the clock.


How to build a business – Employees and Contracts

July 18, 2012

Building a business requires creating and activating a network of Partners, Associates and Employees. We are striving for a healthy mix of people who share a DNA and a sense of purpose, but who might have different needs and possibilites, depending on their personality, the stage in their career, the desire for short or long term reward (cash versus value) and the appetite for risk.

For capable people with skills and ambition who want to be surrounded by people they can work with and learn from and who prefer or require a monthly income, becoming an employee can be the most appropriate choice. We call them intrapreneurs. This relation needs to be formalized in an employment contract. Contracts are not pretty. Despite network organisations, work2.0 and despite all good intentions basically they arrange and exchange of time for money.

The good intentions are that we want all our people to be independent, that is: responsible for their own choices and their own success, we know they are reliable professionals, who do not compromise on quality, and who are connected to a network of peers they like to work with and work for. This is our DNA. The intention is also to make sure they have an adequate monthly income and that there is no limit to what they earn, based on how successful they are.

Now try to stick all that in an agreement. What we did is: we offer all our professionals on the payroll a basis salary, and then we make a budget available that is equal to 50% of what their personal turnover is. Out of this budget they can make choices on for instance education, a company car, laptop, et cetera. The difference between salary plus costs and their personal budget will be paid as a bonus, if a set of OKR’s (Objectives and Key Results) are met. A nice combination of security (for the employee), limited risk (for the employer), freedom of choices on personal development and reward and intrapreneurship. Or so we think.

Of course a contract describing this level of freedom and responsibilities within the boundaries of the labor laws results in quite an extensive document. You would think that the more experienced employees, with several previous employers, would be most critical, especially because in their case the base salary usually is lower than what they were used to – be then the upside is higher than anywhere else. The opposite is the case. Last week we lost a prospective employee, who seemed really talented and a perfect fit, due to this contract.

The base salary was higher than what she earned in her previous job, we explained the model, the role, the responsibilities, the budget, the holidays, the risk, the fiscal implications. All better than where she came from. She did not sign. I am confused. Either she was not what we thought she was, and she did not understand it, or it was too good to be true and she became suspicious that their might be a snag. Or maybe we are a more average company than we think we are, or than we want to be, and people just expect a salary in exchange for their time.

The last option a refuse to accept.

Researchers like David Marsden (Professor of Industrial Relations and a Senior member of the Centre for Economic Performance) at the London School of Economics will tell us that in the Network Economy their is not only the contract between employer and employee, but also the psychological contract and the economic or incentive contract. Maybe I should go to London and try to understand. Or better, let me go to Brazil and visit Ricardo Semler. He did it the other way around in his company Semco, letting his employees choose what they do, where and when they do it, and even how they get paid. He wrote a book about it called Maverick, the success story about the world’s most unusual workplace.

So that’s where I will go if only because the weather in Sao Paolo is more attractive than in London.


How to build a business – Themes 2012

December 13, 2011

The year is almost finished. That makes it time to look forward. We had some discussions in our management team, in our network, and with external media partners to talk about what themes will be or should be on the agenda in 2012.

Below the result

Themes for Professionals

  • Intrapreneurship: Most professionals – capable talented people who are on the payroll of companies – we speak to are looking for opportunities to develop themselves and their careers, and believe the most important steps they have to take involve development from professional to entrepreneur (or intrapreneur). Wikipedia about intrapreneurship: In 1992, The American Heritage Dictionary acknowledged the popular use of a new word, intrapreneur, to mean “A person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation”. Intrapreneurship is now known as the practice of a corporate management style that integrates risk-taking and innovation approaches, as well as the reward and motivational techniques, that are more traditionally thought of as being the province of entrepreneurship.

 

Independent Professionals: Once a professional has taken the step to become independent, and thus in a sense an entrepreneur, the themes highest on the agenda are

  • Growth: on the one hand there is growth as in; Personal Development, on the other hand the growth of their business through more professional services, such as acquisition or sales, personal marketing and risk mitigating services on the fiscal, legal, and pensions side.
  • The Shift: another theme we picked up is the interest of especially independent professionals, to make the move from ambition to Purpose & Mastery.

 

Entrepreneurs: among entrepreneurs the prevailing themes (next to “what the impact of the economic crisis, the credit crisis and the euro crisis really is”) are

 

 

CIO

  • Business Execution: IT is now beyond the first two phases (more efficiency through IT in the backoffice, and more efficiency in IT), and can now become in integral part of a business strategy. Technology and Information deployed to create value. IT needs to build better cases for business value, it needs to play a role in driving customer centricity (and track customer sentiment, usage, and profitability through analytics), and it needs to leverage business analytics to foster innovation.
  • Business Technology Integration: Making money with technology. CIO’s need to be much greater strategic partners for the businesses they support Business Model Transformation. CIO looses and business takes control.

And then there are the technology driven themes like:

  • Mobility: Bring your own device, Client/Consumer interaction, Mobile payment
  • Consumerization: the trend for new information technology to emerge first in the consumer market and then spread into business organizations, resulting in the convergence of the IT and consumer electronics industries, and a shift in IT innovation from large businesses to the home. For example, many people now find that their home based IT equipment and services are both more capable and less expensive than what is provided in their workplace. The term, consumerization, was first popularized by Douglas Neal and John Taylor of CSC‘s Leading Edge Forum in 2001 and is one of the key drivers of the Web 2.0 and Enterprise 2.0 movements
  • Social: Social Media, If you don’t have a strategy by now, you’re behind. Globalization and tech savvy millennials are forcing firms to rethink how relevant current and future customers will find their firms. Put together a social media panel or team, Think about how you can effectively manage the data you collect
  • Cloud: ‘nough said, but still a theme for years to come.
  • Big data: ‘Big Data’ is a term applied to the rapid growth of data that has resulted from more automated collection methods and greater capacity for storage and processing. This exponential rise is driven by the proliferation of sensors for gathering data automatically, including those in mobile phones, and more activity taking place online, which can be more easily recorded. Although the use of large data volumes for business is not new, some things have changed, creating new opportunities for innovation. There are three key changes that have brought the issue of data onto many more agendas. Firstly, data storage, processing power and cloud services continue to make large scale data analysis more and more accessible. You no longer need to build your own data centre to use this technique, expanding the pool of users. Secondly, there are many more opportunities to capture data, from sensors in phones and RFID tags in products, as well as a greater social acceptance of contributing manually entered data to social services. Thirdly, it is now possible to analyse unstructured data, so it is not necessary to run your business with detailed customer forms or electronic point of sale terminals to benefit from this form of analysis. Natural text in emails, photographs and sound can all be analysed and ‘mined’ for insights, rather than only structured, coded information that needed to be captured electronically or manually coded.

 

CFO

  • Cash: CFOs believe they should play lead roles in managing financial risks, designing the capital structure, optimizing working capital, and managing investor relations. They also think they should more frequently play lead roles in managing capital investments and revising the dividend policy
  • Growth: Growth remained the top priority for CFOs globally in the first quarter of 2011. With capital supply and efficiency gains largely accounted for, companies now appear focused on growth in a post-recession environment. New products and services, acquisitions and foreign market expansion are expected to be the key drivers behind this growth. Across EMEA (Europe, Middle East and Africa)2, growth through product and market expansion tops the agenda for the majority of CFOs, with a focus on both raising capital expenditures, as well as making strategic acquisitions.
  • Refinancing
  • Acquisitions: With improved access to capital in most economic regions, and with the risk appetite of CFOs consistently increasing around the world, it is no surprise that strategic acquisitions top the priorities list for many CFOs globally. However, despite expectations of increased M&A activity in 2011, there is concern that activity will be constrained by several key factors. In North America, CFOs are wary of unleashing the more than USD 2 trillion in collective balance-sheet cash that has remained on the sidelines since the recession. This limited spending appears to be the result of concerns about the economy and consumer demand, industry regulation, and a shortage of attractive investment opportunities. In EMEA, CFOs continue to expect M&A activity to increase in 2011, with the improving economic outlook and availability of financing. However, the ability for companies to secure targets with the right strategic fit and at the right price is increasingly becoming the limiting factor for CFOs. A similar story is unfolding in Australia, where the majority of CFOs intend to pursue M&A opportunities in 2011 but cite that the greatest hindrance to undertaking an acquisition has been the inability to identify a suitable target.
  • Emerging Markets: Investing in emerging markets

 

 

 

CHRO

  • Performance Management: Move from administrative role (hire to retire), HR directors can play a boardroom role by identifying the decisive factors that play a role in strategy execution.
  • Commoditization of HR: HR services will turn into commodities. HR resources will be outsourced together with the payroll activities, or replaced by do-it-yourself tools from the cloud. Before the term “Chief HR Officer”  has become widely accepted, he or she will have the same fate as the CIO… early retirement. Recruitment can be done online, the Linkedin network will offer plenty opportunities to interact with candidates. References, assessments, salary benchmarks and training can be obtained online. So unless the CHRO becomes Chief Talent Officer, Chief People Officer or Chief Performance Officer, with a direct relation to the company’s strategy, he will be commoditized, or outsourced.
  • Workforce Analytics: Workforce Analytics and – Planning
  • Talent: Will there really be a war for Talent?

 

 

CEO

  • Growth: Growth in an uncertain economy
  • Customer retention: Customer retention: In a world of eroding customer loyalty, customer retention must be a top-down, high priority, company wide mission
  • Reputation: Guarding your reputation
  • Technology: Technology and Innovation
  • Talent:
  • Risk: Risk management and investments, Contingency
  • Strategy Execution: Strategy Execution (Strategy consulting is dead…)

 

 

ExComm

  • Steering Teams: ExComms as teams: cooperation/interaction between boardmembers
  • Value Creation: Strategy is not about power and money, but about Value Creation – and not only shareholder value. Strategy development and execution with value and purpose in mind will be a theme
  • Innovation. in order to survive, companies – especially those operating in an increasing dynamic and digitalized environment, with knowledge being the most indispensable and important resource for innovation – need to establish trusted relations to aligned communities, networks and stakeholders. The notion of “embeddedness” is introduced to mark the increasing challenge of substantially integrating firms into their surrounding communities so as to assure the absorption of their exploitable knowledge. Innovation 3.0 (social Innovation) goes beyond Technological innovation, or Open Innovation (defined as “Innovation 2.0”) and clearly beyond Closed Innovation (defined as “Innovation 1.0”).

Non-execs: Consultancy, Contingency and Contacts instead of control and advice.

We expect to read and write articles about these themes – especially those that are on the agenda of different stakeholders –  and we will no doubt see them pop up in conferences and seminars. And just maybe there will be some others, like “how to grow after the crisis”, or “the next Big Thing after Social Media”.

 


Building a business – When it rains it pours

October 18, 2011

It has been an interesting week.

We had the first meeting with our Board of Advisors. A few months ago we decided that it would be a good idea to have a small group of senior people, with a mix of Corporate Boardroom background, Entrepreneurial experience and business & technology management experience to advice us on our Strategy and Structure, on our Reputation on the world and on our business model and operational challenges. At the same time we want this group to know and understand so much about our business that they can provide intelligence and leads on where we should use or extend our network.

The three advisors are Peter Wakkie, lawyer, former boardmember of Ahold, and now member of the Supervisory Board of ABN-AMRO, TomTom and BCD Holdings. Peter is a relative outsider to the content of our business, but his feedback is in an excellent position to advice on how the corporate world sees us. His feedback is both direct and spot-on. Hennie Wesseling is a former CIO of TNT. He knows the business technology world inside out, and can help us sharpen our proposition and focus. Gerrit Schipper is both entrepreneur and boardmember. The companies he worked for have a large technology component.

The most important lesson from this first meeting probably was: focus on the top of the market. Even if you do a lot of work with a much more operational character: you will get the interesting assignment from executive and through non-executive directors. So: you can do a lot of different things, but you do not have to mention all those things. Find and interest the top boardroom advisors on Business and Technology strategy, and guarantee smooth execution of those strategies. If you cannot explains to a CEO which strategy, which risks to consider and which choices make most sense in the light of his business strategy, there is little use in trying to be the one to execute it.

I am probably better at advising than at being advised. When you think you have it all figured out, others with a different perspective see plenty of room for improvement. Annoying when you hear it, also stimulating when you think about it back at the office, and very useful when you something with it.

The next day I was called that Qhuba has won a FD Gazellen Award for fastest growing companies. So we did get somewhere the past few years. Sometimes we forget that it is not obvious that companies grow fast, that plans lead to success. Instead we have the tendency to focus on what could have gone better, where we could have been. What’s the use of a prize? Well at least some people – again with a different perspective – look at your company, and at it performance and plans. If they decide you did something special, that is stimulating. In this case, KPMG, ABN-AMRO bank and Graydon did the research and interviews. Of course, in marketing terms it is a hundred times more relevant what others say about you, than what you say about yourself.

Last Friday afternoon we came close to reaching an agreement with Deutsche Bank.  Compared to earlier conversations with other banks, they seem to be more interested in what we are doing, why we are doing it and how we are doing it. The proposal was not exactly what we were looking for, but this week I expect a term sheet with better conditions, and the kind of flexibility that will enable further growth.

And finally we have been talking about assignments to several new clients that have the size, the ambition and the kind of Business Technology Integration challenges that suit us best. When Philips, Heineken and a Private Equity funds call us for help, we are getting where we wanted to be.

When it rains, it pours.