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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

This article is for managers who want a better grasp of personality styles and how to quickly read and understand them in themselves and others.

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, […]

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 […]

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 […]

Data is for Q4 2012. See Asmyco.com for source and notes.

Two things that I love about this chart:

1. First, it’s just a great visual representation. All data should be so beautiful.
2. 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 […]

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 speaking at Ted.

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:

“Open/Autonomy” “Close/Protect”

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 […]

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.

There are few things that will bring as much power and benefit to your personal and professional life as the practice of quietly appreciating the strengths of others.

To drive this point home, I’d like you to recall a time in your past when you weren’t accepted for who you are. Maybe this was within your family of origin, in a work setting, at school, or even on a sports team. C’mon, I know you have at least one period in your life like this. When was it?

From your vantage point today, wasn’t that experience exhausting? Didn’t you spend more time and energy worrying if you’d ever fit in than you did on working towards your goal? Didn’t that period in your life pretty much suck?

You’re not alone. A recent Gallup Research poll shows that employees who feel accepted by their managers and peers feel highly engaged in their jobs while those who get negative feedback (or even worse — are ignored all together) are actively disengaged:

Source: Gallup Research.

It doesn’t take a genius to realize that higher engagement leads to higher productivity, creativity, and job performance. When we don’t feel accepted for who we are and we don’t have the opportunity to play to our strengths, it costs us a tremendous amount of energy and saps our productivity and morale.

By the way, I think this experience is pretty common for entrepreneurs. Many of us felt like we didn’t fit into the existing structures and so we create our own. But that’s for another story.

Now I’d like you to imagine something different. You’re a fly on the wall at ACME Corp. ACME is an average-performing company with an average […]

“Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window.”
– Peter Drucker

When was the last time you got away from the office to take a good, long look at the trends that will likely impact your business, customers, and suppliers in the next five years?

I’m willing to bet that it’s been too long. With so many pressing demands on your time, energy, and focus right now, it can feel nearly impossible to step away from the day-to-day and invest some serious thought cycles in what might happen over the long term.

Of course, you already know that the best leaders and executives do actually invest the time and energy in thinking about and anticipating the future, and they do so on a regular basis. You also know from experience that, when you do step away from the day-to-day to really think, it turns out to be time very well spent indeed.

So what should you be thinking about when you’re doing strategic planning? MBA programs have something called a PESTEL analysis for strategic planning. With it, you look at what’s happening in the Political, Economic, Social, Technological, Environmental, and Legal environments and how anticipated changes will impact your business, customers, and suppliers. I can’t argue that these are reasonable sectors to examine and reflect on when thinking about your strategy. However, the PESTEL analysis also totally misses the most important factor to address!

When doing strategic planning, the most important question to ask is this: “DEMAND: Will there be more or less demand for what we do five years from now?” This is the most important question because, as I explain in detail in the book Organizational Physics: […]

The next time you notice yourself stuck in a rut — or any time you feel like you’re not experiencing sustained momentum towards your goals — ask yourself three important questions:

1) Am I certain this is what I want?
2) Am I expecting to get it?
3) Am I open to receiving it in new and unexpected ways?

I was reminded of these questions at a lecture I attended recently by Dr. Larkin of the Applied Neuroscience Institute. His talk was a reminder that, when you listen to and act on your inner answers to these questions, you can snap right out of a rut and get back on the road. Here’s why these questions are more powerful than you might think:

1) Am I certain this is what I want?

This is a big one. Do you really want this thing? If so, why? Oftentimes we find ourselves pursuing things because we think we have to, not because we really want to. You can’t fight against yourself, so stop trying. It just won’t work.

The hard part can be discerning what it is you truly want – and often feeling trapped by circumstances, or the belief that can’t have what you truly want. Neither of these is true. You know in your heart what it is you truly want (versus what your family, friends, the “experts,” or the media tell you to want). Ultimately, it’s a question of how clear you are on your true desire and how committed you are to making it happen. The key here is getting in touch with your higher-order goal.

Let me explain. For the past several weeks I’ve had a goal to do a dozen pre-recorded webinars. It’s been one frustrating circle jerk of incompletions.

First I wrote the scripts. […]

Over a decade ago, Jim Collins wrote a brilliant article Turning Goals into Results: The Power of Catalytic Mechanisms that is a must read for every CEO. It ties directly into one of the core tenets of Organizational Physics — take a systems approach to change…

“Most executives have a big, hairy, audacious goal. One dreams of making his brand more popular than Coke; another aspires to create the most lucrative Web site in cyberspace; yet another longs to see her organization act with the guts necessary to depose its arch rival. So, too, most executives ardently hope that their outsized goals will become a reality. To that end, they write vision statements, deliver speeches, and launch change initiatives. They devise complicated incentive programs, formalize rules and checklists, and pen policies and procedures. In other words, with the best intentions, they create layer upon layer of stultifying bureaucracy. Is it any surprise that their wildly ambitious dreams are seldom realized?

But companies don’t have to act that way. Over the past six years, I have observed and studied a simple yet extremely powerful managerial tool that helps organizations turn goals into results. I have recently codified it; I call it the catalytic mechanism. Catalytic mechanisms are the crucial link between objectives and performance; they are a galvanizing, nonbureaucratic means to turn one into the other. Put another way, catalytic mechanisms are to vision what the central elements of the U.S. Constitution are to the Declaration of Independence—devices that translate lofty aspirations into concrete reality. They make big, hairy, audacious goals reachable.”

Read the full article…

Yahoo is in the news this week because the board just hired Marissa Mayer away from Google to be its new CEO. Mayer, who by all reports is highly intelligent and creative, excels as a product visionary. Yet not surprisingly, short-term value investors are upset about this hire. This is because they want Yahoo to focus on cutting costs and milking the company for cash until a strategic buyer can be found. So who’s right and what’s the best strategy for Yahoo? Before I answer, let me explain how we can answer this question.

In Organizational Physics, we use a simple code called PSIU to tell what’s right, what’s wrong, and what to expect from situations or decisions. Like DNA, PSIU explains why things “show up” the way they do. It can be used to understand individual styles, analyze organizational design, and even to anticipate organizational problems well in advance of when they occur. PSIU can also be used to understand and design a business strategy in a simple, elegant, and effective way.

Effective strategy design starts with a simple premise. Play to your strengths. What is your organization exceptional at? Basically, a business can have a strategy that capitalizes on:

• Better customer service than its competitors (P)
• Cheaper costs than its competitors (S)
• Higher innovation than its competitors (I)
• Stronger organizational culture than its competitors (U)

No single company can be the best in all four. Why? Because any given strategy consumes finite time and energy. It’s expensive and time consuming to invest in any given track. Great companies recognize where they will place their focus and what they will sacrifice.

For example, Zappo’s focuses its strategy on having a stronger organizational culture (U) and providing better customer service (P) than its competitors. […]