Steve Jobs and the Purpose of the Corporation – Ben W. Heineman, Jr. – Harvard Business Review

from, October 12, 2011 at 08:02PM (

Steve Jobs and the Purpose of the Corporation

In the torrent of commentary following Steve Jobs’ death, few have noted that his career and his company say something profound in the endless debate about the purpose of the corporation. Apple existed to “delight customers” first — benefits to other stakeholders, including shareholders, followed.

For more than a quarter century, the mantra, of course, has been that corporations’ primary focus should be on shareholders and the primary goal should be to “maximize shareholder value.” The famous Michael Jensen and William Meckling article in 1976 argued that the solution to the principal-agency problem — business leaders advance their own interests not those of shareowners — was to make the goal of the corporation the highest return to shareholders and to align shareholders and business leaders through stock options grants.

Although many business people and business school professors would still say that maximizing shareholder value should be the goal of the corporation, there have also been many critics over the years. Among the questions they raise: shareholder value over what time frame? Does stock price accurately reflect intrinsic value? How does the concept help business people make critical trade-offs between short and long term or between competing, legitimate concerns of stakeholders — employees, suppliers, customers and shareowners?

One of the most recent and most trenchant critiques comes from Roger Martin, dean of the Rotman School of Management at the University of Toronto, in his book Fixing the Game (Harvard Business Review Press 2011). In essence, Martin argues that agency theory and the goal of maximizing “shareholder value” have had significant and harmful side effects. Pressures from institutional investors for stock price increases, as well as stock-based compensation for executives, have led many business leaders to manage to the “expectations market” of the public stock exchanges. This in turn has led to narrow short-termism, accounting manipulation, cutting of ethical and legal corners, failures to invest in the long-term, and to the financial crisis. (For my co-authored account of problems raised by the rising power, and new types of, institutional investors see “Are Institutional Investors Part of the Problem or Part of the Solution.”)

Martin argues that, instead, the primary purpose of the corporation should be a return to management in the “real market,” not the “expectations market,” and that this means “customers are the focus, and the central task of companies is to find ever better ways of serving them.” Martin’s manifesto is: “We must shift the focus of companies back to the customer and away from shareholder value. In other words, we must turn our attention back to the real market and away from the expectations market. This shift necessitates a fundamental change in our prevailing theory of the firm.” (Emphasis mine.) Martin cites Thomas Edison and Henry Ford as people who created customer value through “innovations in products, services and business models.

And, of course, Steve Jobs. Without repeating the hundreds of thousands of words written about Jobs and Apple since his death, there can be no question that his deep commitment was to make innovative, robust and beautiful products that delighted customers. He took the time necessary to meet his own exacting standards. He spent extra funds to ensure that the product was right (replacing plastic with glass on the iPhone, for example). He believed deeply in his own capacity to define new products that customers didn’t even know they wanted, in the process overturning other real markets in, for example, personal computers, music, cell phones, tablet computing and animated movies.

At least in my view, there can also be no question that Jobs was not focused on shareholders or taking short-cuts or short-term actions to maximize shareholder value. Apple has paid no dividends since 1995. It hasn’t used leverage. It holds $76 billion in cash with nary a thought of a buy-back. It is hard to argue that fundamental business decisions were driven by stock options (although there is the issue of options back-dating in the debit column).

Obviously, Apple shareholders have done just fine, with Apple and Exxon Mobile today changing places back and forth as the U.S. company with the highest market cap. Yet this has been a long process of product design, introduction and success. Ten years ago, Apple was not even in the top 100 U.S. companies by market cap ($7B then; around $340B now). And dramatic increases have occurred in the last five years as the suite of Apple products gained popularity (with share price quadrupling in that period).

But this is at it should be. Those, like Roger Martin, who argue that the purpose of the company should be to create goods and services that serve important customer needs — and to do so with efficiency, risk management and integrity — would further say that the long term shareholder value will follow, as it has in Apple’s case.

So, as people reflect on Steve Jobs’ legacy, surely one fundamental issue should be his attitude toward corporate purpose — with his devotion to customers, not shareholders, and his ability to withstand short-term pressures in the name of product excellence. As he enters the pantheon of great business leaders, it is hard to argue against his vision of the purpose of the corporation, given his remarkable success in carrying it out. Future debates on this fundamental subject must put Jobs’ conception at center stage.

The Rands Test

from Rands In Repose, October 11, 2011 at 10:17AM (

It’s hard to pick a single best work by Joel Spolsky, but if I was forced to, I’d pick The Joel Test. It’s his own, highly irresponsible, sloppy test to rate the quality of software, and when anyone asks me what is wrong with their team I usually start by pointing the questioner at the test. Start here.

It’s a test with 12 points and as Joel says, “A score of 12 is perfect, 11 is tolerable, but a 10 or lower and you’ve got serious problems”. More important than the points, his test clearly documents what I consider to be healthy aspects of an engineering team, but there are other points to be made. So it is completely an homage to Joel that I offer The Rands Test.

I was employee #20 at the first start-up and the first engineering lead. Over the course of two years, the team and the company exploded to close to 200 employees. This is when I discovered that growing rapidly teaches you one thing well: how communication continually finds new and interesting ways to break down. The core issue being the folks who’ve been around longer who also tend to have more responsibility. As far as they’re concerned, the ways they organically communicated before will remain as efficient and simple each time the group doubles in size.

They don’t. A growing group needs to continually invest in new ways to figure out what it is collectively thinking so anyone anywhere can answer the question: “What the hell is going on?” This is the first question The Rands Test answers. As I’ll explain shortly, the second question The Rands Test helps you answer is selfish. The second asks: “Where am I?”

12 Points

Let’s start with bare bones versions of the questions and then I’ll explain each one.

  • Do you have a 1:1?
  • Do you have a team meeting?
  • Do you have status reports?
  • Can you say No to your boss?
  • Can you explain the strategy of the company to stranger?
  • Can you explain the current state of business?
  • Does the guy/gal in charge regularly stand up in front of everyone and tell you what he/she is thinking? Are you buying it?
  • Do you know what you want to do next? Does your boss?
  • Do you have time to be strategic?
  • Are you actively killing the Grapevine?

(Note: While I’ll explain each point from the perspective of a leader or manager, these questions and their explanations apply equally to individuals.)

Do you have a consistent 1:1 where you talk about topics other than status? (+1)

I think you’d be hard pressed to find anyone who would suggest 1:1s are a bad idea, but the 1:1 is usually the first meeting that gets rescheduled when it hits the fan. I’m of the opinion that when it hits the fan, the last thing you want to do is reschedule 1:1 time with the folks who are likely either responsible for it hitting the fan and/or are the most qualified to figure out how to prevent future fan hittage.

Furthermore, as I wrote about in The Update, The Vent, and The Disaster, conveyance of status is not the point of a 1:1; the point is to have a conversation about something of substance. Status can be an introduction, status can frame the conversation, but status is not the point. A healthy 1:1 needs to be strategic, not a rehashing of tactics and status that can easily be found elsewhere.

A 1:1 is a weekly investment in the individuals that make up your team. If you’re irregularly doing 1:1s or not making them valuable conversations, all you’re doing is reinforcing the myth that managers are out of touch.

Do you have a consistent team meeting? (+1)

The team meeting has all the requirements of the 1:1 — consistency and a focus on topics of substance — but don’t give yourself a point just yet.

Status does have a bigger role in a team meeting. As we’ll talk about shortly, the Grapevine is a powerful beast and a team meeting is a chance to kill it. I have a standing agenda item for all team meetings that reads “gossip, rumors, and lies” and when we hit that agenda item, it’s a chance for everyone on the team to figure out what is the truth and what is a lie.

After that’s done, my next measure of a team meeting is: did we make tangible progress on something? I don’t know what you build, so I don’t know what’s broken on your team, but I do know that something is broken and a team meeting is a great place to not only identify the brokenness, but also to start to discuss how to fix it.

If you’re killing lies and fixing what’s broken in a team meeting, give yourself a point.

Are handwritten status reports delivered weekly via email? (-1)

If so, you lose a point. This checklist is partly about evaluating how information moves around the company and this item is the second one that can actually remove points from your score. Why do I hate status so much? I don’t hate status; I hate status reports.

My belief is that email-based status reports are one of the clearest and best signs of managerial incompetence and laziness. There are always compelling reasons why you need to generate these weekly emails. We’re big enough that we need to cross-pollinate. It’s just 15 minutes of your time.

Bullshit. The presence of rigid, email-based status reports comes down to control, a lack of imagination, and a lack of trust in the organization.

I want you to count the number of collaboration tools you use on a daily basis to do your job — not including email. If you’re a software engineer, I’m guessing it’s a combination of version control, bug tracking, wikis, CRM, and/or project management software. All of these tools already automatically generate a significant amount of status regarding what has tactically gone down each week.

When someone asks for a status report, my first thought is: “I’m already generating piles of status on these various tools, why not just ask those?”

Well, there’s a lot of noise in those tools. Well, write a report that takes out the noise — collaboration tools are built around reporting. The status information is out there. In what managerial textbook does it say it’s a good idea to “Distribute the task of figuring out what is going on to the people who are performing the work?” That’s, like, your job.

Well, what I really want is your high level assessment of the week. Three things that are working, three things that aren’t, and what we’re going to do about it. Ok, now we’re talking. I can do a strategic assessment of the week, but why don’t we just put that at the beginning of the 1:1? That way when you have questions (and you will), we can have a big fat debate.

But I’d like to have a record I can review later. Super, feel free to write down anything we talk about.

Yes, status reports are a hot button for me. I’ve written hundreds of them and each time I’ve begun one, I start by thinking, “Why in the world do I feel like I’m performing an unnecessary act?” Status reports usually show up because a distant executive feels out of touch with part of his or her organization and they believe getting everyone to efficiently document their week is going to help. It doesn’t. Emailed status reports say one thing to 90% of the people who wrote them: “You don’t value my time”. This leads us to our next point…

Are you comfortable saying NO to your boss? (+1)

Perhaps a better way to phrase this point is: do you feel your 1:1 with your boss is somehow different than every other meeting you have during the week? Part of healthy communication structure is when information moves easily around the team, organization, and company, and if you walk into a meeting with your boss always on your best behavior and unwilling to speak your mind I say something is broken.

Yes, he or she is your boss and that means they write your annual review and can affect the trajectory of your career, but when they open their mouth and say something truly and legitimately stupid, your contractual obligation as a shareholder of the company is to raise your hand and say, “That’s stupid. Here’s why…”

Easier said than done, Rands.

Ok, don’t say it’s stupid.

Here’s the deal. I believe that leaders who think they’re infallible slowly go insane with power created by the lie that being wrong is a sign of weakness. I screw up — likely regularly — and I’ve been doing various forms of this gig for twenty years. While it still stings when I stumble upon or others point out my screw-ups, I’d sooner I admit I fucked up, because then I can figure out what I really did wrong faster, and that starts with someone saying “No”.

Can you explain the strategy of your company to a stranger? (+1)

Moving away from communications, this point is about strategy and context. If I was to walk up to you in a bar and ask what your company did, could you easily and clearly explain the strategy?

This is the first point that demonstrates whether you have a clear map of the company in your head, and you might be underestimating the value of this map. If you’re a leadership type, chances are you can draw this map easily. If you’re an individual, you might think this map is someone else’s responsibility and you’d be partially correct: it is someone else’s job to define the map, but it’s entirely your responsibility to understand it so you can measure it.

As we’ll see with the following questions, The Rands Test isn’t just about understanding communications, it’s about understanding context and strategy. How do you think the employees of HP and Netflix feel given the strategy flip-flops over the past few months? Safe or suspicious? Let’s keep going…

Can you tell me with some accuracy the state of the business? (Or could you go to someone / somewhere and figure it out right now?) (+1)

It’s a brutal exaggeration, but I think you should independently judge your company the same way that Wall Street does: your company is either growing or dying. Have you ever watched the stock price of a publicly traded company the day after they announce that they are going to miss their earnings numbers? More often than not, no matter what spin the executives have, the stock is hammered. It’s irrational, but what I infer when I see this happen is that Wall Street believes the company has begun a death cycle. If the executives can’t successfully predict the state of their business, something is wrong.

I realize this isn’t fair and there are myriad factors that contribute to the health of the business every single day, and I encourage you to research and understand as many of those as possible. But when you’re done, I’d also like you to have a defensible opinion regarding the state of the business, or at least a set of others whose opinion you trust.

This is a picture that you are constantly building, and this is an easier task if you’ve given yourself a point on the prior question regarding company strategy. If you have a map of what the company intends to do, it’s easier to understand whether or not it’s doing it. This leads us to…

Is there a regular meeting where the guy/gal in charge gets up in front of everyone and tells you what he/she is thinking? (+1) And are you buying it? (+1)

Our last point regarding context involves the person in charge. In rapidly growing teams and companies there’s a lot going on — every single day. When the team was small, the distribution of information was easy and low cost because everyone was within shouting distance. At size, this communication becomes more costly at the edges. Directors, leads, and managers — these folks tend to stay close to current events because it’s increasingly their job, but it’s also their job to take steps to keep the information flowing, and it starts with the CEO.

On a regular basis, does your CEO stand up and give you his impressions of what the hell is going on? Whether it’s 10 or 10,000 of you, this is an essential meeting that:

  • Gives everyone access to the CEO.
  • Allows him/her to explain their vision for the company.
  • Hopefully allows anyone to stand up and ask a question.

If the value of this meeting isn’t immediately obvious to you, I’d suggest that you are one of those lucky people who already has a good map of the company as well as a sense of the state of the business. That’s awesome — here’s a bonus point for you: does the CEO’s version of the truth match yours or is he/she in a high Earth orbit with little clue what is actually going on? Give yourself a point if it’s the former and if it’s the latter, what does that say about the state of the business? Growing or dying?

Can you explain your career trajectory? (+1) [Bonus: Can your boss? (+1)]

Next, switching gears a bit, give yourself a point if you — right this very moment — can tell me your next move. You’re already doing something, so explain what you’re going to do next. It’s a simple statement, not a grand plan. One day, I’d like to lead a team.

Part of a healthy organization isn’t just that information is freely moving around; it’s what the folks receiving and retransmitting it are doing with it. You’re going to mentally file and ignore a majority of this information, but every so often a piece of information will come up in a 1:1, a meeting, or a random hallway conversation, and it will be strategically immediately useful for you to know what you want to do next.

  • Angela got a promotion and her team is great and I’ve always wanted to be a manager.
  • Jan just opened a requisition and his group is working on technology I need to learn.
  • They fired Frank. That creates a very interesting power vacuum…

You can argue that even without a plan you’d make the same opportunistic leap, but I’ve found that having a map is usually a better way of getting to a destination.

There’s a bonus point here as well. Does your boss know what you want to do next? He or she likely has even more access to the information moving around the company, and whether they like it or not, have equal responsibility to figure out how to get you from here to there.

Do you have well-defined and protected time to be strategic? (+1)

If you gave yourself two points on the prior question, congratulations, I think you’re in better shape than most, but there’s one more point. Are you making progress towards this goal? Can you point to time on your calendar or even just in your head where you are growing towards your goal?

I like being busy. Like really busy. Like getting in, grabbing a cup of coffee, and suddenly finding the coffee is cold, it’s 6pm, and I forgot to eat busy. Busy feels great, but busy is usually tactical and not strategic. This is why I’m constantly maintaining my Trickle List — it’s my daily reminder of doing work that is larger than right now.

If you have time where you’re investing in yourself while you’re at work and your boss is cool with it — give yourself a point.

Are you actively killing the Grapevine? (+1)

When Grace walks in your office, you know she knows something by the look on her face. She moves to the corner of the office and starts with, “Did you hear…?” and the story continues. It’s a doozy, full of corporate and political intrigue, resulting in your inevitable response: “No. Way.”

Being part of a secret feels powerful. In a moment the organization reveals a previously hidden part of itself, and in that moment you feel you can see more of the game board. So, that’s why they fired him. I was wondering. Grace finishes with the familiar, “Don’t tell anyone,” which is ironic since that’s precisely what was asked of her 15 minutes ago.

There is absolutely no way you’re going to prevent folks from randomly talking to each other about every bright and shiny thing that’s going on in your company. In fact, you want to encourage it. 1:1s and meetings are only going to get you so far. The thing you can change is the quality of the information that’s wandering the company.

In the absence of information, people make shit up. Worse, if they at all feel threatened they make shit up that amplifies their worst fears. This is where those absolutely crazy rumors come from. See, Kristof is worried about losing his job so he’s making up crazy conspiracy theories that explain why THE MAN IS OUT TO GET HIM.

Without active prevention, the Grapevine can be stronger than any individual. While you can’t kill the Grapevine, you can dubiously stare at it when it shows up on your doorstep and simply ask the person delivering it, “Do you actually believe this nonsense? Do you believe the person who fed you this trash?” Rumors hate to justify themselves, so give yourself a point if you make it a point to kill gossip.

Magnitude and Direction

There is a higher order goal at the intersection of the two questions The Rands Test intends to answer: Where am I? and What the hell is going on? While understanding the answers to these questions will give you a good idea about the communication health of your company, the higher order goal is selfish. I’ll explain.

I think of the two lines of questions as a vector. A simple vector can be drawn as two points connected by an arrow, but a vector is far more interesting. It’s a geometric object that describes both direction and magnitude. Understanding how information moves, how you communicate with your boss, and being able to describe both your career strategy and that of your company sketches a vector in your head. The first point is you at this very moment and the other point is where you want to be. The distance and direction between the two start to explain how you’re going to get there. I love vectors because they draw a picture about a complex problem and I hope as you were answering the questions above this mental picture began to appear in your head.

Like the Joel Test, the point of the Rands Test is not the absolute score, but the score is good directional information. If you got a 12, I’d say you’re in a rare group of people who have a clear picture of their company and where they fit in. Between 8 and 10, you are likely troublingly deficient in either communications, strategy, or your development – it depends where the points are missing. Less than 8 and I think you’ve got a couple of problems.

There are a lot of different scenarios I expect folks to find themselves in as they explore these questions, which is why it’s tricky to proscribe specific action. Your company may be doing well, but you may be unhappy and have no clue what you want to do next. You might love your job, but have no idea whether the company is actually growing. Your course is dependent on what you care about and the Rands Test points out good places to start.

How To Make Companies Think Long-Term

This blog post is part of the HBR Online Forum The CEO’s Role in Fixing the System.

In my latest book, Fixing the Game: Bubbles, Crashes, and What Capitalism can Learn from the NFL, I wrote about the negative impact of executive stock-based compensation on corporate short-termism. Eliminating stock-based compensation would help reduce the incentive for executive leadership to focus on the short term. But there is a residual problem which has long frustrated me. The answer finally popped into my brain (funny how that works). As usual, the solution won’t be easy to pull off (but that has never stopped me).

The residual problem I’m talking about is corporate short-termism. Many companies face quarterly or even more immediate pressure from their shareholders (increasingly made up of hedge funds, program traders, and day traders) to deliver short-term performance. Worried that short-term-oriented arbitrageurs will put their company in play and short-term-oriented shareholders will gain majority or effective control of the company, ending their ability to steer the long-term trajectory of the company, they focus on making short-term decisions to protect their positions. The paradoxical result is that they never get around to taking those long-term-oriented decisions.

To solve this problem I needed to focus on the time value of the capital. The value of capital is (obviously) related to time: if I loan you a dollar to use for a week, it is worth more to you than if I give it to you for a day. You will be willing to pay more for the capital for a week than for a day, probably something approximately seven times as much.

For corporations to make the required long-term investments in production, marketing, etc., they need capital to use for years, not days, at a time. So capital that is provided to them for a short period is worth less to them then capital that is provided to them for a long time. If an investor buys a share and holds it for 10 years, it is worth more to the company than a day trader who buys a share one day and sells it the next.

It follows that companies should value shareholders relative to both the volume of shares they hold and the length of time they have held their shares. A huge hedge fund that buys 2% of the shares of the company but holds them for two days is worth less to the corporation than a long-term investor that holds a fraction of 1% of the shares for a decade.

Since the value is in direct proportion to the time held, it is easy to calculate the value and then the frame-breaking thing to do is to assign voting rights based on that value. (I wouldn’t alter economic rights; each share would own the same share of the company; but I would calibrate the voting rights.) The voting rights associated with each share would be that share times the number of days it has been held by that shareholder. So if a shareholder buys 1 share and holds it for ten years, he/she votes 3,650 shares. If a day-trader or risk arbitrageur buys a share and holds it for a day, he/she votes 1 share.

In the case of a potential takeover, if the takeover arbitrageurs buy up (say) 30% of the shares of the company in anticipation of making a quick buck by pressuring or forcing the company to agree to be taken over, instead of being able to swing 30% of the vote, they might be able to swing 3% of the float. In order for the takeover to succeed, the longer-term shareholders would have to see the takeover being in their interest too. And they may; preventing takeovers is not the issue. Having takeovers proceed only if the longer-term shareholders feel it is appropriate is the goal.

This would enable the company management to focus to a great extent on the long term without threat of the short-term investors controlling its destiny. But it still maintains the discipline of long-term investors. If they aren’t satisfied, they can bring more voting power to bear than any risk arbitrageur.

A time-based voting system would also help generate a more productive way to think about shareholder value creation. At present, shareholder value (per share) is assumed to be best represented by the current share price. Hence shareholder value creation is defined as the increase from the current share price to a new, higher share price (with dividends assumed as reinvested).

This creates a managerial problem for companies with overvalued stock. Let’s imagine a stock that has run up from $50/share to $90/share over the past three months based on positive early sales performance on a new product introduction. If the expectations about future performance have risen bubble-like above anything realistic, it is not possible for managers to manage or invest in a way that will meet the inflated expectations of $90/share. This often results in the management team making risky moves, which undermines the value of the shareholders for whom, ironically, the management team made the moves in the first instance.

A time-based voting system would cumulate the shares from the longest held shares to the shortest and determine the purchase price of the median share. That median purchase price (let’s assume $60/share for the above company) would define the share price on which management should feel obligated to earn a return above the cost of equity (let’s assume 10%, so $6/share). This definition of shareholder value creation would help keep management from taking extreme and risky action to earn a return on the shareholder who has just purchased the last share at the highest price. This would re-establish the focus of management on creating long-term value for the shareholders who are willing to hold their shares for the long run — a perfect match.


The Three Questions That Lead to Profitable Growth

This post is part of the HBR Insight Center Growing the Top Line.

Self-awareness is not always pretty. We go to some lengths to avoid it, tucking our stomachs in as we pass a mirror, weighing ourselves at the most favorable times, and favoring people who compliment us. No real harm done. However, when management teams do the same in their businesses, great harm can occur, for self-awareness is the first building block of successful growth strategies.

Hubris, false confidence, and the tendency to downplay contrary data are at the root of many of the great growth blunders and missed opportunities in the history of business. Yet, our research at Bain reveals, it is the rare management team that passes our three tests of true self-awareness. Here they are, in the form of simple questions that we find altogether too few management teams can answer.

1. What is our core? This may be the most important question in business. It’s essentially the same as asking, “What is our competitive advantage?” Analysis of company performance shows that over 80% of profitable growth comes not from general market characteristics but from performing better than the other companies in your industry. That’s the cold truth even in hot markets.

The three biggest determinants of that advantage are

  • Achieving “leadership economics” — leadership in the strongest part of your business (the core of the core), not just in market share but also in market influence and in the ability (and incentive) to outinvest competitors;
  • Having customers more loyal to your company than to your competitors; and
  • Having a clear, simple, and repeatable model at the center of your strategy.

The companies that have all three are not always the most glamorous, but they are usually the ones that adapt and endure. These are companies like IKEA, Tetra Pak, Singapore Airlines, Tesco, Apple, Enterprise Rent-a-Car, Nike, and Vanguard.

Yet, how much effort do most executives spend in deep reflection on the true underlying drivers of competitive advantage? How much more is spent looking for the next hot market?

In my 15+ years as co-head of the Bain strategy practice, I have led countless workshops with executive teams in which we have asked each team member privately to identify the most important factors differentiating their company from its competitors and how those factors relate to their company’s strongest capabilities. It is the rare management team that agrees on the answers, and many have not even discussed these issues in any systematic way for a long time. They are like the couple that has not talked about their relationship for years, taking their core for granted, only to discover that they are worlds apart.

2. Do our management team, frontline employees, and core customers agree on how we are most differentiated in the marketplace? This sounds like an easy one, but surveys show that fewer than half of employees in even the average company believe they understand the strategy of their business and what it’s built on. Moreover, we have found that while 80% of managers believe they are highly differentiated in their core market, only 8% of customers, when asked, agree. Closing the gap in perception between the CEO and the front line is the first step toward self-awareness — and the first step toward unlocking a flow of powerful insights needed to adapt and grow.

3. What is the historic success rate of our growth investments and what do the successful ones have in common? I once worked with a company that, having examined its past 10 years of growth investments, was shocked when it compared how much was spent (over $10 billion) with its success rate (below 18%). What’s more, the firm was surprised to find that the most successful ones all followed a similar pattern. Companies can learn a great deal by doing painful post mortems of this kind. The average success rate is only 20 to 25%, we found in a study we did of growth initiatives in nearly 200 companies, whereas the success rate at the best companies, which create a successful repeatable model, is fully two to three times higher. You can interpret many of the outcomes of competitive battles — such as Nike versus Reebok in the period between 1990 and 2005 — as the triumph of one company that had deliberately applied a repeatable model over a competitor that had not.

If you want to pursue profitable growth, you must first do the hard work of self-reflection before turning to the sexy part of gazing out at the heavens.


AbstractThe results showed that, through using personas, designs with superior usability characteristics were produced. They also indicate that using personas provides a significant advantage during the research and conceptualisation stages of the design process (supporting previously unfounded claims). The study also investigated the effects of using different presentation methods to present personas and concluded that photographs worked better than illustrations, and that visual storyboards were more effective in presenting task scenarios than text only versions.

Research Paper – Real or Imaginary: The effectiveness of using personas in product design – Frontend – User Experience Design Consultancy


The world's funniest analogies

Well, I don’t know about that, but as an analogy enthusiast, I did enjoy reading through this list. Some favorites:

Her vocabulary was as bad as, like, whatever.

From the attic came an unearthly howl. The whole scene had an eerie, surreal quality, like when you’re on vacation in another city and Jeopardy comes on at 7:00 p.m. instead of 7:30.

He was as tall as a six-foot, three-inch tree.

John and Mary had never met. They were like two hummingbirds who had also never met.

That first one…I can’t decide if it’s bad or the best analogy ever.

Tags: language   lists


Three Ways to Turn Setbacks into Progress

People can’t do their most productive, creative work unless they are highly engaged in their projects. According to the progress principle, of all the events that can keep people engaged and happy at work, the most important is simply making progress on meaningful work. The progress can be great or small, and the meaning can be as noble as trying to cure diabetes or as common as providing a useful service to a customer.

There is a dark side to the progress principle. Of all events that can destroy engagement, joy, and productivity at work, having setbacks or being stalled in the work is number one. Our research revealed that, on 76% of peoples’ very best days — days in which they were happy and highly engaged — they had made some degree of progress in the work; only 13% of those best days had setbacks. By contrast, only 25% of people’s worst days showed any progress, while 67% had setbacks. Even worse, the negative effect of setbacks on engagement is two-to-three times the positive effects of progress.

The obvious lesson for managers is that they should do everything in their power to support the daily progress of their workers, and reduce impediments to progress as much as possible. But there will always be setbacks. The innovative work that contemporary organizations need for survival is often hard and complicated, so problems are inevitable. What can a manager do to keep people engaged, productive and creative when things do go wrong? Here are three suggestions:

First, don’t treat setbacks as failures, but rather as challenges and learning opportunities. It is common wisdom that we learn from our mistakes, but too many managers seem to forget this and try to assign blame when things go wrong. Listen to the words of Alvin, one of the 238 participants who took part in our research:

“So far every solution I’ve developed for this project does not meet with the cost constraints. I’m becoming very frustrated with not finding the acceptable answer. Around here, not finding a solution is perceived as not being competent!”

Clearly, Alvin had a difficult problem to solve, but rather than being able to sense any forward progress, he was beaten down and made to feel incompetent. Contrast this quote from Tim, who worked for a different company with a very different attitude about setbacks:

“I showed the project manager the results I got and told him that there was a mistake in one of the trials. He said that is all right, as long as we know what we did.”

In the end, Tim and his team had a stunning success, while Alvin and his team never found an acceptable answer.

Second, don’t constrain the solution in advance. Be open to learning and to changing direction based on that learning. In complex, creative work, an acceptable answer cannot be specified in advance. People need the freedom to look for alternative ways of framing the problem, if they are going to take advantage of what they learn along the way.

Third, focus on small, achievable wins. If people are having regular successes, then the sting of setbacks will be less. Focusing singlemindedly on “big, hairy, audacious goals” may occasionally lead to great success, but all too often it leads audacious failures. Of the 26 teams we studied, Tim’s team was the most successful and the one with the most engaged and happy people — even though its project was technically very difficult. That team reported nearly five progress events for every setback; the team leader, and his technical directors, knew how to set intermediate (and achievable) goals. In contrast, Alvin’s team, which was one of the least engaged and happy, reported nearly two setbacks for every step forward. Just imagine how different the experience of working in these two teams must have been.

These three actions won’t completely neutralize the negative impact that setbacks have on workers’ engagement, but they will go a long way toward reducing it. More importantly, these actions can help turn today’s setbacks into tomorrow’s successes.

Have you ever had a setback at work that ended up leading to a breakthrough — or even to a small win? How did it happen?


Customer experience problems: what WE see vs. what YOU see

Recently while purchasing an item in a store here in Manhattan, the salesperson asked me for my email address – for my receipt, I thought.

store1.pngA couple of days later, here came two separate promotional emails from the store: SALE! NEW! WOW! BUY!

I contacted customer service and told them that I had never given permission to be on a spam list. ‘So sorry, we’ll take you off immediately,’ came the response.

A few days later, you can guess what arrived: WOW! SURVEY! BUY AGAIN! I contacted customer service again and said “please stop” again.

Here’s what they wrote back:

Thanks Mark – that email is tied to your purchase, so we classify that as transactional rather than marketing. …

What? Who cares how it was classified inside the company – I asked for it to stop.

This is a brilliant encapsulation of what’s wrong with so many companies’ customer experiences: what the company sees is different from what the customer sees.

Let’s take the example above:

The company sees its own view from the inside: marketing team over here, sending “marketing” emails – promotions for all recent customers. And product team over there, sending “transactional” emails – surveys and promotions related to specific products. If a customer opts out, they just turn off the “marketing” spigot.

The customer sees a bunch of email spamming his inbox immediately after a purchase. He asks for it to stop, but more comes.

Here’s how to solve customer experience problems like this: get the company to see what the customer sees. If the executives inside the company could just “see through the eyes of a customer,” it quickly would become clear how to improve the experience.

Building a successful company these days means creating a good experience from the customer’s perspective, not from the company’s perspective.

And that’s why to invest in customer experience. (This is what my company Creative Good does, by the way. Drop us a line.)

from Good Experience

Breaking Dev: Mobile Apps Must Die

In his Mobile Apps Must Die presentation at Breaking Development in Nashville TN, Scott Jenson made the case fro moving beyond mobile applications and illustrated what a future with apps could be. Here’s my notes from his talk:

  • The history of mobile phones has been copying the desktop and then realizing it just doesn’t work right.
  • Apps are a holdover from the desktop.
  • Native vs. Web treadmill. We take for granted that native is better than Web. Once you make a few apps, you realize there’s a lot of porting pain. So you move to the Web where you quickly realize Web apps are not good enough. Then you go back again.

How People Think About Mobile

  • Fanboi: use a single platform and everything will be just fine. But at some point the paradigm changes
  • Uber Capitalist: if you have enough money, you just port and shut up. Even Google has admitted, it cannot port all apps to every platform.
  • Web Pragmatist: just let me get my job done.
  • Web Enthusiast: wants things to get better and works as a change agent.

Problems with Apps

  • Even though there is a nice integration of Web and native applications possible, people will still focus on native apps. Native apps end up sucking up all the oxygen. Think of it as App Myopia.
  • It is pretty clear things will move towards the Web and the APIs coming to the Web will give us more control.
  • Yet the best we can ever do on the Web is always about 2-3 years behind native applications. We shouldn’t aspire to be as good as native apps. We should aim to be better than them.
  • App management: Apps require too much user attention. The fact Apple had to invent the app folder indicates how bad it is. We are sitting around doing garbage collecting of apps and over time developing a high bar for what apps we’ll stick with/download.
  • Are we really going to have one app for every Website?
  • Apps put a lot of pressure on the user. They need to figure out which one they want, install it, and then actually use it (long term use is rare).
  • Once you realize a lot of problems are about information access –the app model doesn’t hold up very well.

Moving Beyond Apps

  • “On demand” apps is a generic idea. When you are in an area– can we have a discovery protocol for finding relevant content? Have a peek at what’s available around you and decide what you need.
  • Objects we want to interact with are ultimately more important than apps. Just in time interaction allows us to get information from things when we need them. Apps aren’t even close to supporting this model.
  • Break the browser ghetto. You have your hands tied behind your back.
  • Window parity: the browser is viewed as one app not as the apps running inside it. WebOS supported a window parity model but now it’s gone.
  • Background processing: Need this to manage any meaningful interactions.
  • Fingerprinting: Understanding more about the device you are running on.
  • Implement the Dam Spec!: Companies like Google & Apple are motivated to drag their feet on making the Web browser more capable.
  • An anti-phone could be based entirely on the mobile Web (created as Chrome or Opera). Think of it as Linux for mobile devices.
  • Discovery Service: how do you extract meaning from the digital information around you? We need ranking in addition to indexing.
  • A discovery service is the next ‘Google’
  • Just in time interaction won’t happen through apps.
  • Smart devices will overwhelm apps.

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from LukeW | Writings on Digital Product Strategy and Design

What It's Like to Really Blindly Use an ATM

“Find hole below? How far below? Is this a hole? No, that’s not it. That doesn’t feel like a hole at all! I’ll just start sticking the plug anywhere…” In case you’re wondering: it takes eleven minutes, and that includes one unintentional almost-withdrawal of 40.000 dollars. Unfortunately this man would be referred to by many interaction designers as a ‘corner’ or ‘edge case’.

via @ThijsNiks

from | the product usability weblog

Web Log = Blog. Search Log = Slog?

Web logs started as records of web surfing; a person would find something interesting and write a little blurb about it guiding others to the otherwise hidden tidbit. One of the underlying motivations (I’m not passing judgement) was to gain social standing; to demonstrate one’s interestingness by associating with the interesting items you had found.

This is all well and good, but if you really want to know what someone has been thinking about lately, few records of online activity could be more revealing than search history. Could I convince you, perhaps, that I am an interesting, well-rounded, individual by revealing what I’ve been Googling lately?

Like so?

Eh, maybe not.

links for 2008-09-26

  • An excellent (if you like Econ, or care about the current economic situation) presentation by four smart guys at Princeton: Crisis on Wall Street, Thoughts on a New Financial Architecture, How We Got Here and Some Lessons, and Notes on the Bailout. Worth a look, even if you don't understand all of the terms. Slides available at

links for 2008-09-25

  • Lawrence Lessig spends 12 minutes pointing out that Sarah Palin's experience is objectively far more slender than that of all but two incoming VPs ever, despite her assertions to the contrary. The rashness and inappropriateness of her selection is thrown into sharp relief. (The only reason it takes 12 minutes instead of 4 is that he lists the experiential qualifications of past VPs.)

Please read “Little Brother” by Cory Doctorow

On our most recent trip to Northern California (for me just ended, for the daughter and her lovely mother continuing a few more blessed days) I left the books at home and brought Stanza on my iPhone. Among many other works available to read for free via Stanza is Cory Doctorow’s “Little Brother.” I haven’t finished it yet, the ride from Los Angeles to Oakland being barely an hour each way, but I can already tell that you should read it. Now. Go. And when you are done, if you liked it or thought it was worth reading or know someone who ought to read it, buy a paper copy and hand it off to a friend who is less likely than yourself to read a book online or on their phone.