Ars Technica published a great article this week “The rise and fall of AMD: How an underdog stuck it to Intel.”
The article follows the rise and fall of AMD over the years in its attempt to wrest a market leadership position from Intel (a war it was never able to win) and gives many anecdotes about the leadership style of the company founder and CEO Jerry Sanders. I want to share this article because it’s a good read and because it captures the essence of how a company behaves when a Big Innovator is at the helm.
As you might know if you’re familiar with my work, the Innovator style is one of four management styles that we all possess to some degree. You can read more about these styles (Producer, Stabilizer, Innovator, and Unifier) in Part II of my book Organizational Physics: The Science of Growing a Business.
Our best Innovator qualities are our ability to anticipate change and to be imaginative, charismatic, and inventive. Without the Innovator force, we would have no ability to adapt to changes in our environment and we would quickly become irrelevant or extinct.
When the Innovator force is really high, we call it a “Big Innovator” or “Big I.” The Big I shows up in some predictable and telling ways, and this description of Sanders is a perfect example:
On June 10, 2000, Advanced Micro Devices (AMD) wanted to party—and party big. The company’s CEO, Jerry Sanders, arranged to rent out the entire San Jose Arena (now called the HP Pavilion) and then paid big bucks to bring in Faith Hill and Tim McGraw, the husband-and-wife country music superstars.
Employees “could bring anybody, your wife, your kids, your friends—it was big doings. There were celebrations, gifts and awards,” recalled Fran Barton, who served as AMD’s chief financial officer from 1998 to 2001. The boss even got in on the fun. “[Sanders] was on a high wire, he did a unicycle ride. It was totally Hollywood. He could really put on a show when he wanted to put on a show.”
And why not celebrate in style? AMD’s successful Athlon chips—Ars named the Athlon its “CPU of the Year” in 1999—had finally put the screws to archrival Intel, and in 2000 the company earned nearly $1 billion in profits.
By 2005, years of solid chip design and technological execution had the company walking with a swagger, as seen in marketing stunts which challenged Intel’s then-current server processors to a “dual-core duel.” Nowhere was this attitude more apparent than AMD’s 2005 lawsuit against Intel for anti-competitive business practices.
When a Big Innovator feels momentum, there is no greater joy to them than rallying people to […]
I really appreciate the framework of the Lean Startup approach and I’m a big fan of the movement. One thing I notice that’s missing from it is a discussion on the lifecycle stages of the customers that the lean startup should be targeting/getting feedback from. Here’s what I mean:
The Product Lifecycle goes like this: Pilot it, Nail it, Scale it, Milk it, Kill it.
The Market Lifecycle of customer types goes like this: Innovators, Early Adopters, Early Majority, Late Majority/Laggards.
In order to navigate from the temporary organization of a startup, find the business model, and scale it, the disruptive entrepreneur should seek to align this sequence of steps together. I.e., Pilot it for Innovator Customers. Nail it for Early Adopters. Scale it for the Early Majority, and Milk it for the Late Majority/Laggards like this:
Put another way, you DON’T want to be Piloting a project for a Late Majority/Laggard clients or misaligning the other stages. Why not? Because those Late Majority/Laggard clients are old and stable. They are outstanding at telling the entrepreneur what the market needs now (or 5 years ago) but tend to be incapable of identifying where it’s going to be 5 years from now. To find that out, you have to go to the fringe — those Innovator and Early Adopter Clients that aren’t currently served by the status quo. That’s where the true disruption lies.
Late Majority/Laggard clients also have a vested interest in maintaing the status quo. So even if the entrepreneur has a visionary champion within that Late Majority/Laggard client, he or she is going to be blocked by the surrounding inertia within that large, stable organization. The Late Majority/Laggard client is also subjected to broad market forces and quarterly financial targets that may require it to shift directions. So even promises of “yes, build this for us at this price and we’ll roll it out to our distribution network” aren’t worth the email they were written on when market forces change.
A great example of this principle in action is Square, a great disruptive force in the mobile payments space. Notice that Square DID NOT go to Visa, Mastercard, and Paypal to find the initial product market fit. They went to taco truck vendors, independent artists, and others SOHO’s who were NOT served by the status quo. If CEO Jack Dorsey did go to Visa or Pay Pal to practice the Lean Startup methodology and find the product market fit, he would have […]
I came across a phenomenal obituary written for Frosty Westering by Chuck Culpepper at Sports on Earth today.
Frosty was the football coach for the Division III Pacific Lutheran football team and he was remarkable. He coached for over 32 seasons without a losing record in any. He never mentioned playoffs or titles to his players but won four national championships and four runner-up finishes on two levels. He died on Friday at age 85 surrounded by a loving family.
Tears welled up in my eyes and my throat got caught when I read it. I want to share this story about Frosty for that reason alone. But I also want to share it because it’s a wonderful portrait of a strong Unifier leadership style in action.
The Unifier style is one of four management style dimensions that we all possess to one degree or another. You can read more about these styles: Producer, Stabilizer, Innovator, and Unifier in Part II of my book Organizational Physics: The Science of Growing a Business.
Our best Unifier qualities are our ability to create rapport, understand and motivate others, build cohesive teams, and create sound organizational cultures based on caring, empathy, and loyalty. Without the Unifier force, we would have no ability to respond to change efficiently because the organization couldn’t act as a whole.
Let’s see how the Unifier force shows up in coach Frosty’s leadership style so that you can learn to recognize it, develop it, and manage it in your own life and work:
His players implored him to belly-flop into a California hotel pool, and he complied – at age 75. He once took a running plunge into the mud during a soppy game in Oregon. He adored when players pulled pranks on him, insisted players use his first name – Frosty! – and corrected them if they used “Coach.”
He sometimes halted practice to have players spend five minutes gazing beyond the giant evergreens to Mount Rainier. He sometimes halted practice to have players go to other sporting fields and cheer on, say, the soccer team. He always halted two-a-day practices in August and instructed players to go help freshmen move into dormitories.
He believed deeply in singing. His players sang before games, after games. Sometimes they sang to the mock direction of the coach’s cane. Always they learned to sing without embarrassment, for it had become uncool to refrain from the refrains. For his 300th win in September 2003, an offensive lineman led the team in James Taylor’s “Steamroller.” During warmups for the NCAA Division III national championship game […]
I lost 35 pounds and several sizes in three months. I didn’t do it by dieting. I did it by changing the way I eat. There’s a difference.
What led me to this was thinking about my health in a whole new way. After trying to navigate large amounts of conflicting nutritional information and trying on new diets over the years (many of you can relate), I had an insight based on the Organizational Physics principles I teach every day.
I took the Universal Success Formula from Chapter 1 of my book Organizational Physics: The Science of Growing a Business and made a slight modification to the terms. The original formula looks like this:
If you’re new to the Universal Success Formula, all you need to know is that any system is acted upon by entropy and will eventually fail unless new energy is added to the system. Once you decrease entropy, the energy available for integration and success increases.
For example, imagine that you have a friend in the hospital. He can’t go out in the world and be successful (high integration) because most of his available energy has to go towards healing his illness (entropy). Once he recovers, entropy will be lower and he’ll have more energy to re-integrate into the world and thrive.
Applying the same concepts to health and diet, the Universal Success Formula can be worded like this:
Think of your health as a highly organized system — body and mind — which is acted upon by entropy over time and fails unless it continues to have new energy sources that you can assimilate. Entropy, in this case, can mean inflammation, congestion, and any other state of less-than-optimal functioning in the body. Vitality is synonymous with integration. It is a state of high energy in which you are thriving in relationship with your environment, continuing to obtain energy from it. When inflammation-related entropy is high, for example, it’s harder to convert new energy sources and vitality is naturally lower.
Put another way, at any given point in time, the body/mind has a finite amount of energy. It must get new energy or fuel from external sources. Food is fuel. Water is fuel. Thought is fuel. Relationships are fuel.
Good fuels are those that the body/mind can easily convert into new energy and that don’t increase entropy in the system. Bad fuels are those that the body and mind can’t convert easily, increasing entropy over time. […]
Simon Sinek is the author of Start with Why and the creator of concept he calls “The Golden Circle.” The Ted Talk he gave on the topic is incredibly popular, almost 10 million views as I write this.
The concept of the Golden Circle is simple. It looks like this:
Sinek purports that great organizations seem to create their foundation by first addressing Why they exist, then How they go about their mission, and then finally, What they do.
Let me say first that I really appreciate what Sinek is doing — inspiring leaders to think about the soulful calling of their organizations and to rally others to a bigger cause beyond just selling widgets. And he does a masterful job of calling out that people don’t buy what you do, they buy why you do it, and that it’s critical to attract customers who believe what you believe. Awesome.
However, the truth is that great organizations build their core ideology by first defining and reinforcing Who they serve and the customer problem or need that they solve in the marketplace. Then they address and reinforce Why they exist, then How they go about their mission, and finally What they do.
So a modified more accurate Golden Circle should really be drawn like this:
How do I know? Two reasons:
1) A business doesn’t exist to promote its beliefs. It exists to produce results for its customers (Who it serves). Understanding who your customer really is and the problem or pain they seek to solve is what differentiates a company in the marketplace and keeps it focused on the highest goal — creating customers.
It’s an easy trap to fall into. You get so caught up in your own beliefs — how you think the world should be versus how it really is — that you lose sight of who your customer is and the pain point that they really want solved. That’s why you exist. To solve a need in the marketplace. If you’re not solving needs, then you’re quickly going to go out of business regardless of how inspiring your vision statement is.
2) Leading with Who is what also allows the business to successfully navigate what in his Ted Talk Sinek calls the “Law of Innovation Diffusion.” This law is a term used to describe how innovations spread in the marketplace through a series of […]
The right formula is pretty damn valuable. Especially for Krabby Patties. Way back in 1936, the founder of social psychology, Kurt Lewin, came up with a formula to explain individual behavior. I’m going to share it with you…but don’t go running off because it looks complicated. It’s not.
B = f(P,E)
It means this: An individual’s Behavior is a function of that Person’s personality, capabilities, training, experience, etc. and his/her existing Environment.
Makes sense, right?
So what’s the problem? The problem is that most management thinking today seems to have totally forgotten the critical importance of the surrounding environment when it comes to performance management.
Businesses measure and invest tons of money in individual training and skill development. They study and implement crafty new performance incentive programs. They run personality profile tests — all that crap.
But what great organizations do differently compared to the rest is they give equal attention to the inner structure, processes, and core ideology (i.e., the environment) of the organization itself.
The truth is that each of us is governed by the environment in which we live and work. If the surrounding environment is designed well, then a C player is going to look and perform like a B+ player. And if the surrounding environment and opportunity is top-notch, then A players are going to flock to that organization to apply their talents. The corollary is that if the surrounding environment is designed poorly, then even A players are going to show up like C players.
Let me give two examples to drive this point home. One from a famous and controversial study at Stanford and the other from the NFL.
The Stanford Prison Experiment
Environment controls behavior. This famous study conducted at Stanford University in 1971 tried to answer the question, “what happens when you put good people in an evil place? Does humanity win over evil, or does evil triumph?” by designing a mock prison experience.
The answer they found is that the environment controls behavior. In fact, the planned two-week investigation into the psychology of prison life had to be ended prematurely after only six days because of what the situation was doing to the college students who participated. In only a few days, the guards became sadistic and the prisoners became depressed and showed signs of extreme stress.
This study is controversial due to a lack of controls and an accused generalization of the results. When the BBC tried to partially replicate the same study, what they found was the importance of leadership in acting as a counterweight against the force of tyranny. That is, a strong and noble leader can make […]
I read Who Moved My Cheese for Kids to my 9-year-old son recently. It’s a fun little book, based on the eponymous bestseller, about four characters who live in a ‘maze’ and look for ‘cheese’ to nourish them and make them happy. You probably know how the story goes already (it was a bestseller) but if not, or you’ve forgotten, here’s a quick synopsis:
Two of the characters are mice named Sniff and Scurry and two are little people – beings the size of mice who look and act a lot like people. Their names are Hem and Haw. The ‘cheese’ is a metaphor for what you want to have in life – whether it’s a good job, a loving relationship, money, possessions, health, or peace of mind. The ‘maze’ is where you look for what you want – the organization you work in, or the family or community you live in.
In the story, the characters are faced with unexpected change. Eventually, one of the little people deals with it successfully, and writes what he has learned from his experience on the maze walls. When you come to see the handwriting on the wall you can discover for yourself how to deal with change, so that you enjoy less stress and more success (however you define it) in your work and life.
There’s a lot of truth in the book and I thought it would be fun to relate the four characters to the four PSIU forces of Organizational Physics. That way, the next time you’re managing a Hem, Haw, Sniff, or Scurry, you’ll have a better sense for how to handle it.
As a refresher, here’s a matrix that shows the traits of the four universal PSIU forces. If this concept is new to you, you can quickly get a sense of it using the world’s fastest personality test (it takes less than 15 seconds to get a good sense of someone’s style).
And here are the four Who Moved My Cheese characters mapped to each force:
In a nutshell:
- Sniff is an Innovator style. He’s got the ability to sense and respond to changes happening in the environment much more quickly than the other […]
Every time you issue an order to someone, you deplete your reserve of authority and you also deplete their reserve of power. How should you give an order to your subordinates? It’s pretty easy actually. Don’t.
Instead of thinking that your leadership role means having power over others, think instead of having power with others. Put another way, the order shouldn’t be given by you to them but should come from a shared awareness of the situation itself.
For example, let’s say that you just got word that your company is about to lose a big deal in NYC. You’re the CEO and you’ve called a meeting with the VP of Sales.
The VP of Sales comes into your office and you bark out an order, “Get on a plane to NYC and save that deal. Go!!”
Fast? Yes. Effective? No.
Why isn’t that effective? Because every time you issue an order to someone, you deplete your reserve of authority and you also deplete their reserve of power. Let me explain.
Authority is the authorized right to say “yes” and “no” to something. Clearly, a boss has more authority than their subordinates. But like an artesian well with a fixed amount of water, each time the boss draws upon his or her authority, they take some water from the well. If they keep being “bossy” and playing the authority card, that well will soon run dry and they won’t have any authority left at all.
For example, I have authority over my kids. But if I were to over-play the authority card and issue orders like, “Clean up your room because I’m in charge,” then I’m already doomed. My kids might listen to that once, maybe twice, but soon their reaction is going to be, “So what? You can’t make me. In fact, I think you’re an idiot.”
If I try to revert to even more authority, our relationship will deteriorate faster. I will be constantly issuing orders, following up, and feeling frustrated that those orders are not instantly followed. Thank you, but I prefer being happy and highly effective over being exhausted and unhappy.
Remember, each time you draw on authority, you lose a finite resource. So use it sparingly and only in emergencies.
The other thing that happens when orders get issued is the “orderee” feels a loss of power. Power is the ability to exercise self-determination and creativity, and to help or hinder a situation.
Here’s an example. Think of the last time you were issued an order by an authority figure. Your reaction might have easily been something like, “What a jerk! He’s not even seeing the situation […]
Don’t measure yourself for golden handcuffs or you might just get stuck wearing them. A Little Book of f-laws is a free collection of 13 common sins of management by management consultants Ackoff, Addison, and Bibb.
One f-law in particular stands out for me as something that’s all too true. It’s about the tendency to measure and focus on the wrong things because they are easy to track.
Instead, what we should focus on — in business and in life — is identifying what it is that we truly do want, even if it’s hard to measure.
In a society that seems to excel at measuring and celebrating empty accomplishments, it’s a great f-law to keep top of mind:
“Managers who don’t know how to measure what they want settle for wanting what they can measure.
For example, those who want a high quality of work life but don’t know how to measure it, often settle for wanting a high standard of living because they can measure it. The tragedy is that they come to believe that quality of life and standard of living are the same thing. The fact is that further increases to an already high standard of living often reduce quality of life.
Unfortunately and similarly, the (unmeasurable) quality of products or services is taken to be proportional to their (measurable) price. The price of a product or service, however, is usually proportional to the cost of producing it, not to its quality; and this cost tends to be proportional to the relative incompetence of the organization that produces it.
Like economists, managers place no value on work they do not pay for because they can’t measure it. Work that has no quantifiable output includes some of the most important work that is done, for example, raising children and maintaining a home. On the other hand, economists place a high value on work that destroys value, because the cost of such work can be measured. Hence the paradox: a prolonged war is a very good way of raising gross national product but reducing quality of life.
When it comes to life goals it’s even more basic than that. Managers don’t know what they want because they never think about it. One executive told his psychotherapist he was depressed because he felt he wasn’t successful. To the therapist he looked successful: good job, great salary, lovely family and beautiful home.
She asked how he would know when he was successful. He couldn’t answer. He just kept on striving without knowing what he was striving for. But I agree that, if they get as far as measuring, the measurement is usually quantitative and limited to how much they earn. […]
Data is for Q4 2012. See Asmyco.com for source and notes.
Two things that I love about this chart:
- First, it’s just a great visual representation. All data should be so beautiful.
- It reflects how Apple truly is an ecosystem company. Note that even though the revenue of hardware sales dwarfs the combined sales of digital services (i.e., music, apps, and software sales which are still huge in their own right), it is these digital services that extend the Apple ecosystem and make it large and vibrant. And of course, the larger and more vibrant the ecosystem, the more value it creates.
You can see the same “ecosystem economics” in another great brand — Amazon. Both Amazon and Apple are in the business of getting customers into their ecosystem by creating value to customers, and then consistently reducing the friction for new transactions to occur.
Once you buy a Kindle, or sign up for Amazon Prime, there’s very low friction for you to make future purchases (i.e, it’s easy for Amazon to extract new energy in the form of money, brand clout, and capabilities from its surrounding ecosystem). And just like a Lion prefers hunting grounds with lots of Antelope, the more digital services each brand offers, the more consumers desire to be a part of that ecosystem.
Keep this concept in the front of your mind when you’re scaling your own business — think in terms of creating ecosystem economics around a core value proposition where there’s low transaction friction and high customer engagement over time. Don’t be a product company. Be a systems company.
“It’s possible to rehabilitate large-scale damaged ecosystems.”
– John D. Liu
“Green Gold” is a film documentary about how farming cultures in Africa, Asia, and South America are reclaiming once fertile land from the desert. I’m inspired to share it for three very important reasons:
It’s a great synopsis of systems thinking in action. Small changes have big repercussions. Every action has an equal and opposite reaction… even continents away. And every part of the global system is interconnected and interdependent with the rest. Once you set up the ecosystem the right way, it organically grows, prospers, and flourishes over time. In the words of an expert interviewed in the film, “The world gets more and more complicated all the time, but the solutions to fix the world’s ecosystems remains relatively simple.” The same thing is true for your business growth. If it seems complicated, the solutions are simple. Be a systems thinker, eliminate entropy, apply the right force of change, know what steps to take next. Design your system or business so that it can scale organically…even without your direct involvement.
It’s a wonderful example of an individual leveraging his strengths and passions to solve a big problem in the world. The filmaker, John D. Liu, is one of the world’s foremost experts on ecosystem reconstruction. But guess what? By background, he’s just a contract documentary filmmaker. John has no formal training in ecology, biology, farming, or permaculture. He stumbled across a solution to the complex global problem of desertification. Seeing solutions that work and inspired to take action, he learned what he needed to learn while leveraging his talents of filmmaking and curiosity. This is a very powerful example of Your Genius Zone in action.
It inspires positive, concrete action in the face of accelerating climate change. According to the UN, some two billion people depend on ecosystems in dry land areas, 90% of whom live in developing countries. The scientific consensus is that the rate of desertification is increasing around the world. As this map shows, it’s a pretty big fucking deal:
So doesn’t it make sense to invest in restoring once vibrant ecosystems? The techniques are simple. The dividends are long-term and catalyze a positive impact on every aspect of society — food and water availability, renewed harmony with the land, quality of life – and act as a powerful counterweight to climate change. As they ask in the film, “If it’s possible to restore large-scale damaged ecosystems, then why don’t we do just that?”
If you’re feeling like your business will never scale, quit it. Just look at the humble beginnings of some of the world’s most iconic brands below. Then remind yourself that nothing is more powerful than consistency of vision and action sustained over time.
The 1st Disneyland
The 1st Google
The 1st Walmart
The 1st Apple
The 1st Coke Bottling Plan
The 1st Nike
The 1st Kinkos
The secret to scaling your business is to design it so that you play to your personal strengths and passions. Doing so allows you to be naturally consistent in your vision and actions over time, even against seemingly impossible odds. Then, when others look at what you’ve created over the past 10, 20 or 30 years, it’s hard for them to even conceive of the humble beginnings in which you began.
In this regard, be like Walt Disney, Larry Page, Sam Walton, Steve Jobs, John Pemberton, Phil Knight, and Paul Orfela. Don’t fight against yourself. Be true to yourself and design a business model to support it.
Nilofer Merchant (who I think is a smart and savvy systems thinker) wrote a piece for HBR recently titled When Ted Lost Control of Its Crowd.
It’s a good synopsis of how Ted diluted it’s brand by creating licensed TedX events around the world with little or no control as to the quality and content of the speakers at those events. Then she explains the steps Ted took to address it.
You can avoid this same mistake in your own business by thinking through how to manage/engage “with the crowd” without causing a catastrophe failure to the brand (as almost happened and could still happen to Ted).
The goal of the model I’m going to share is to clarify what should remain “closed” and proprietary to the system and what should be “open” and have more freedom and autonomy.
Here’s what you do. Draw a horizontal arrow with the words “open/autonomy” on the left and “close/protect” on the right:
Next, list the functions of your organization (i.e., sales, engineering, marketing, strategy, product development, finance, admin, operations, etc.) and place those functions on a continuum following these rules:
1) Functions that can cause systemic harm should be placed on the right side of the arrow. I.e., the greater the systemic risk, the farther to the right they get placed and the more centralized control is placed on them.
2) Functions that are closest to the customer and require flexibility/adaptability to thrive should be placed on the left side of the arrow. I.e., the “closer” to the customer, the farther left they get placed and the more decentralized autonomy they have.
For example, the function of Strategic Marketing (the act developing new markets, and developing and protecting the brand) should be placed more to the right. That’s easy to understand because if a company was to choose the wrong market strategy or engage in activities that harm it’s brand, it’s a systemic risk. The business can quickly lose everything.
But a function like Community Engagement (the act of engaging with and listening to it’s brand constituents) should be placed more to the left. Why? Because this function is very close to the customer. If you try to control this messaging, you get Corporate PR Gobbleygook that doesn’t serve the brand. You put up to many obstacles that prevent the company from actively listening and responding to the market in an authentic way. Different functions. Different placement on the continuum of control vs openness.
Now to TedX. Where TedX got off track is that it treated Strategic Marketing like an open/autonomous function when it should be treated like a closed/protected function. Then, to compensate, it treated Community Engagement like a closed/protected function (blathering PR corporate speak) […]
I love this video snapshot of Brasil’s Semco. It’s a great representation of how a CEO play’s to his strengths and passions by designing the entire business to be a self-regulating system. The “system” honors the innate human drive to be creative and productive while cutting out the BS and getting rid of the dead weight.