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The Secret to Managing Everything

The secret to understanding management is this: Complex adaptive systems (such as people and organizations) must (1) shape and respond to changes in the environment and (2) do so as whole organisms, including their parts and sub-parts. If they are unable to do so, they will cease to get new energy from the environment and will perish.

Intuitively, this makes sense. For example, imagine a family of four. If the family is to survive and flourish, it must shape the environment by getting resources such as money, food, and shelter. It must also respond to the environment, including to changes that are economic, societal, ecological, and so on. At the same time, it must pay attention to the all the parts that make up the family system – things like the act of cooking, cleaning, commuting, paying the bills, and taking the kids to school. It must take into account the different and often conflicting needs of the individual family members. It must also give focus to holistic dynamics so that the family acts like a single, unified whole – for example, making sure that there’s plenty of love, warmth, laughter, support, and nurturing for all of its members.

If the family isn’t able to shape or respond to the environment, or if it loses focus on the parts or the whole, it will quickly run into trouble. If the pattern continues, then the family will disintegrate. Just imagine a family that doesn’t have income, or a family that can’t perform its daily routine, or that can’t respond to new economic changes, or whose members are always fighting among themselves. Obviously, it’s not a family you’d want to be a part of. It is not resilient or adaptive to change. It costs all of its members more energy than they get in return. Such a family is on the precipice of complete failure.

The same is true for every organization. It must be constantly shaping and responding to change while focused on the parts and the whole. Therefore, I am going to classify observable behavior, at its most basic level, as either shaping or responding to change while focusing on the whole organization or on its parts or sub-parts. I call this the Adaptive Systems Model of organizational behavior.

The dimensions of behavior within the Adaptive Systems Model exist on a relative and time-dependent scale. For example, if there’s a high drive to shape the environment, then at the same time, there will be a lower drive to respond to change. If there’s a high drive to focus on the parts, there will be a lower […]

By Lex Sisney|2021-05-18T05:34:14-07:00November 5th, 2011|Articles|1,006 Comments

How Square Went Against Popular Strategic Advice and Won

There’s a popular view among technology startups that a smart business strategy is to build a product that’s designed for the leading industry giant to acquire. It usually sounds something like this: “We’re building the next-generation router that Cisco will need to add to its product line. Our strategy is to build the product, get them to adopt it, and ultimately have them buy us out.” Like a lot of things in life, just because this view is popular, doesn’t mean it’s right. In fact, gearing your strategy towards the leading industry giant is usually dead wrong. Here’s why and how to choose a better strategy.

The Story of Square

You may have heard of a company called Square Payments, Inc. Square is a mobile payment solution company that allows anyone to accept credit card payments using their mobile phone. In just over a year since its launch, the company had nearly $1 billion in processed payments. It has recently accepted an undisclosed investment from Visa, the leading credit card processor. The insider consensus is that, if Square continues to execute its strategy, it will revolutionize how we pay for things in the real world. It could be as disruptive to payments as iTunes was to music. How did this all happen in such a short amount of time?

The story of how Square came to life is a great one. Square was created by Jack Dorsey (Jack also happens to be the co-founder and Executive Chairman of Twitter, but that’s a different story). When you learn the story of Square, it becomes clear that Jack didn’t start out to revolutionize the payments industry. His original goal was much more modest. Dorsey’s former boss and good friend (and eventual co-founder), Jim McKelvey, lost a sale for his hand-blown glass because he had no way of accepting credit cards. The problem was one many people had: the barriers to setting yourself up to accept credit card payments were too high. So Dorsey set about to see if he could create a better system.

By Lex Sisney|2021-05-18T05:34:42-07:00November 2nd, 2011|Articles|1,066 Comments

The Pre-Startup Checklist

Before a startup ever launches, you should have a checklist of critical items in place. These items have nothing to do with writing a business plan or forming the articles of incorporation. In line with the old saying “well begun is half done,” without these basic requirements, the venture won’t get off to a successful start. Even worse, ignoring this checklist can lead to your investing a lot of capital, time, and energy – only to find out that you’re doing the wrong thing, with the wrong team, at the wrong time.

The Real Difference Between Startup and Pre-startup

I’m going to define the core difference between startup and pre-startup using a single word: commitment. Commitment means that the entrepreneur and founding team have taken a real risk to make the business happen. They are clearly and unequivocally in. It’s Dodge City or Bust. Without commitment, the venture will remain stuck in pre-startup mode – as an idea that will never be actualized.

For example, I recently had coffee with an old colleague who wanted to talk about his new “startup.” He had written a business plan, registered a domain name, and was seeking advice on raising capital and building the technology. He was still working at his day job, where he planned to stay while building on the idea in his spare time. As we talked, I could tell that what he really wanted was someone with whom he could discuss the idea – to explore it further and get another perspective. He was still just trying it on and not yet fully committed.

You can always tell if someone is committed to a new venture by his or her actions. Have they taken a significant risk such as quitting their day job or putting their own money into it? Are they excitedly and constantly talking about the opportunity? Are people rallying around their cause and vision? These are all great signs of commitment – and that’s when you know you’re in startup mode. With them, a new business can be born and has a chance of success. Without them, you’re still in pre-startup or it’s a non-starter.

By Lex Sisney|2021-05-18T05:35:05-07:00October 31st, 2011|Articles|713 Comments

The Stages of the Execution Lifecycle

Navigating your company up the execution lifecycle ¹ and keeping it in optimum shape is a great challenge. This article will show you how to do it successfully.

The stages of the execution lifecycle become easier to understand with a little pattern recognition. Basically, every business must shape or respond to its environment and it must do so as a whole organization, including its parts and subparts. If it doesn’t do this, it will cease to exist. Recognizing this, we can call out four basic patterns or forces that give rise to individual and collective behavior within an organization. They are the Producing, Stabilizing, Innovating, and Unifying (PSIU) forces. Each of these expresses itself through a particular behavior pattern. The combination of these forces causes the organization to act in a certain way.

Just like the other lifecycles, the execution lifecycle exists within a dynamic between stability and development. The basic stages of the execution lifecycle are birth, early growth, growth, and maturity and, from there, things descend into decline, aging, and death. The focus within the execution lifecycle should be to have the right mix of organizational development and stability to support the stages of the product and market lifecycles. That is, the lifecycle stage of the surrounding organization should generally match the lifecycle stage of the products and markets. If it’s a startup, the surrounding organization is the entire company. If it’s a Fortune 500 company, this includes the business unit that is responsible for the success of the product as well as any aspects of the parent organization that influence, help, or hinder the success of the product.

The surrounding organization should act a certain way at each stage of the product/market lifecycle, as you’ll see below. Note that, when a force is or should be dominant, it will be referenced with a capital letter:

• When piloting the product for innovators, the company should be in birth mode and be highly innovative and future-oriented (psIu)
• When nailing the product for early adopters, the company should be in early growth mode and be producing verifiable results for its customers (Psiu)
• When beginning to scale the product for the early majority, the company should be standardized and operations streamlined for efficiency (PSiu)
• When fully scaling the product for the early majority, the company’s internal efficiencies should be harnessed, as well as the capability to launch new innovations and avoid the commodity trap (PSIu)
• When […]

By Lex Sisney|2021-05-18T05:37:49-07:00October 28th, 2011|Articles|3,857 Comments

Lifecycle Strategy: How to Tell if You’re Doing it Right

In my previous post, I introduced the product, market, and execution lifecycles and why a successful strategy must align them. Now we’ll take a look at the four key indicators that will tell you if you’re on the right strategic path. The key indicators, which must be taken into account at each lifecycle stage, are Market Growth Rate, Competition, Pricing Pressure, and Net Cash Flow.

Let’s take a visual walk around the figure above and see how the key indicators work. First, notice that when you’re piloting your product for innovators in quadrant 1 you should be in negative cash flow. The total invested into the product to date should exceed the return. The market growth rate should be low because you’re still defining the problem and the solution for the market. Therefore, the competitors within your defined niche should be few both in number and capabilities. Consequently, the pricing pressure will be high because you haven’t defined the problem or the solution, so you have no ability to charge enough money for it at this stage.

By Lex Sisney|2021-05-18T05:38:26-07:00October 19th, 2011|Articles|1,088 Comments

Lifecycle Strategy: Product, Market, Execution Fit

Everything has a lifecycle. It is born, it grows, it ages, and it ultimately dies. It’s easy to spot a lifecycle in action everywhere you look. A person is born, grows, ages, and dies. So does a star, a tree, a bee, or a civilization. So does a company, a product, or a market. Everything has a lifecycle.

All lifecycles exist within a dynamic between system development and system stability. When something is born, it’s early in its development and it also has low stability. As it grows, both its development and stability increase until it matures. After that, its ability to develop diminishes over time while its stability keeps increasing over time. Finally, it becomes so stable that it ultimately dies and, at that moment, loses all stability too.

That’s the basics of all lifecycles. We can try to optimize the path or slow the effects of aging, but ultimately every system makes this progression. Of course, not all systems follow a bell curve like the picture above. Some might die a premature death. Others are a flash in the pan. A few live long and prosper. But from insects to stars and everything in between, we can say that everything comes into being, grows, matures, ages, and ultimately fades away. Such is life.

What do the principles of adaptation and lifecycles have to do with your business strategy? Everything. Just as a parent wouldn’t treat her child the same way if she’s three or thirty years old, you must treat your strategy differently depending on the lifecycle stage. And when it comes to your business strategy, there are actually three lifecycles you must manage. They are the product, market, and execution lifecycles.

The product lifecycle refers to the assets you make available for sale.
The market lifecycle refers to the type of customers to whom you sell.
The execution lifecycle refers to your company’s ability to execute.

In order to execute on a successful strategy, the stages of all three lifecycles must be in close alignment with each other. If not, like a pyramid with one side out of balance, it will collapse on itself and your strategy will fail. Why? Because aligning the product, market, and execution lifecycles gives your business the greatest probability of getting new energy from the environment now and capitalizing on emerging growth opportunities in the future. (I discussed in a previous post that the goal of any strategy is to get new energy from the environment, now and in the future.) As you’ll see, aligning all three lifecycles also decreases your probability of making major strategic mistakes.

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By Lex Sisney|2021-05-18T05:39:04-07:00October 18th, 2011|Articles|1,050 Comments

Success Goes to the Best Adapted

It’s not survival of the fittest. Success goes to the best adapted.

Every potential business strategy has the same ultimate aim. This is true whether you are trying to sell your business, go IPO, enter a new market, raise venture capital, hire top-notch talent, fend off competitors, manage increasing regulations, win an industry award, or create the next hot startup. It doesn’t matter what the strategy is — the goal is always the same. This goal is also independent of time or context. It’s just as true in recessionary times as it is in boom times. It was true one million years ago and it will be true one million years from now. So what is this goal of strategy?

The ultimate goal of any strategy is to acquire new energy from the surrounding environment now and in the future.

The evidence for this comes from the most fundamental tenet of evolution: adaptation. Before we continue, let me clear something up about evolution. When most people think of evolution they think of Darwin. And when people think of Darwin, they usually recall the term “survival of the fittest.” However, Darwin himself never used that term. Well, that’s mostly true … Darwin only used the term late in his life to refute the notion that success goes to those most fit. Instead, what Darwin made clear is that survival (and prosperity for that matter) goes to those most adapted to their environment. If there’s good adaption or integration with the environment, then the species will flourish. But if the environment changes and the species can’t adapt, it will fail. That’s why you’re reading this – and not some brontosaurus.

Why is adaptation with the environment so important? Because that’s where new energy comes from. Without new energy, a system will perish. For example, if a man is stranded on a desert island, unless he can find new sources of energy like food and water, he’s quickly going to die. Just like a business with no new sales will quickly die.

In Organizational Physics, “energy” is simply a measure of available or stored power. In a business this includes all forms of available or stored power including money, resources, and market clout. Basically, a good definition of energy is anything useful and desirable that can be made productive. In fact, begin to think of your business as an energy conversion system. For example:

• Money is really just a form of stored energy. It’s used to make the exchange of products and services (other forms of stored energy) more efficient. But money is just a tool. If one business wanted to trade its pigs for some cows in barter, both the pigs and cows would be similar energy sources too.

• Resources include power sources that the organization has available to […]

By Lex|2021-05-18T05:40:15-07:00October 14th, 2011|Articles|1,063 Comments

Exit the System – The First Step to Strategic Change

During one cold winter in Minnesota, I worked as a college intern for the mayor’s office in St. Paul. There are two things I still remember about the job. One, my twenty-year-old Toyota Corolla had a broken heater and so the commute from my apartment at the University of St. Thomas to downtown St. Paul felt like a prolonged, icy slap in the face.

The second thing I remember is how totally caught up in the political system everyone was at the mayor’s office – certainly the mayor, but also the assistants, wonks, and even the janitor. Politics at the mayor’s office — who’s doing what, who’s saying what, how the political winds are moving — was all encompassing.

For example, the state newspaper published an opinion piece about some mundane issue… I think it was the style of the new streetlights. If I hadn’t set foot in the mayor’s office, I would never have given this a moment’s thought. I’m sure the rest of the population didn’t care either. But in the mayor’s office, that article caused a flurry of activity, debate, and crisis management fit for a minor natural disaster. At least three, intense meetings were called to address the issue. I remember thinking, “What’s wrong with you all? Don’t you know that no one but you actually gives a shit?”

The same thing is true for any system – including your business, your family, and your life in general. When you’re standing inside the system, small things take on great significance. It’s only when you see them from outside the system that you can put them in the proper perspective. Some time ago, I ran a large affiliate marketing company. Looking back, I can easily see how caught up in that system I was. I lived and breathed affiliate marketing all the time. If some random affiliate in Hogeye, Indiana, wrote a critical review of my company on a 100-person affiliate blog, I would respond in full crisis mode, just like the mayor of St. Paul.

One of my favorite sayings is: “You can’t see the picture when you’re standing in it.” You first have to stand outside the system. If you’re going to respond to a “crisis” or attempt to change or improve the status quo, you’ll want to look at it with a fresh set of eyes and a bird’s eye view. If you try to change a system from within – therefore without seeing it as a comprehensive whole in an even larger context – you’ll simply perpetuate what’s already there.

By Lex Sisney|2021-05-18T05:40:53-07:00March 27th, 2011|Articles|Comments Off

Beyond the Traditional “Moral” Code, or How To Know You’re Making the Right Decision

Imagine that one of your clients, who is also a good friend of yours, owes you a good amount of money. You have sent multiple bills, have casually reminded him, and even had an earnest conversation. From your perspective, he seems well off and able to honor his debt. What’s the right or moral thing to do?

Morality is a complex and challenging thing to understand. On the one hand, a society or family can’t function long without a shared moral code. We all support the social norms we believe to be right or just. On the other, we often fight against norms that silence our individual expression. In other words, no one likes to be on the other end of a sermon they didn’t request. In addition, what’s understood as right and wrong actually shifts over time and with changing conditions. Just ask your grandparents.

While the world loves to judge the rightness and wrongness of everything, most of us don’t think about morality too much, nor do we reflect on the nature of our decisions. When we do so, it’s usually motivated by a sense that our life is falling apart. Then we tale a step back, reflect, and seek to make a change. Whatever the change is, it usually involves the development of a new moral code or compass – a set of beliefs, actions, and choices that feel more in alignment with who we want to be – in the hope that our life becomes congruent once again.

If you do a quick scan around the world, you’ll find as many different views on morality as you do cultures. Among these you’ll find benevolent self-interest, the golden rule, the Ten Commandments, karma, a general feeling of right and wrong, the law of the land, the expectations of others, looking out for #1, obeying authority, making it up as you go, and any combination of the above.

By Lex Sisney|2021-05-18T05:41:36-07:00March 21st, 2011|Articles|Comments Off

Knowingness vs. Analysis

When you’re involved in making an important decision, do you rely on knowingness, analysis, or both?

I’ve been catching up with season four of the hit TV series Mad Men. One scene captured the difference between knowingness and analysis really well. In it, Don Draper, the creative veteran, is in an argument with a Dr. Faye Miller, a psychologist who specializes in researching why people make the decisions they do.

Dr. Miller has just conducted a focus group of young, single women to gather research on a skin care cream. As the women talk candidly, the conversation quickly turns to men and relationships. Dr. Miller’s conclusion is that the product should be positioned as a way to help young women find husbands. Her method is proven, scientific, and verifiable.

But Don Draper isn’t convinced at all. He argues that analysis can only capture what’s been known before. He tells her, “How do you know that’s the truth? A new idea is something they don’t know yet, so of course it’s not going to come up as an option. Put my campaign on TV for a year, then hold your focus group again, and then it will show up in the results.” Throughout the series, Don has proven himself to be a “knower.” When he gets an intuitive hit that the campaign is right, it usually is.

Although Mad Men is set fifty years in the past, I think it’s safe to say that an analysis-based, by-the-numbers approach has grown to permeate much of our culture. It’s prevalent in the standardized testing of our children, in the MBA programs of business schools, and in how we allocate dollars to everything from a new TV pilot (if the TV pilot doesn’t “test” well, it won’t get funded) to, like Mad Men, deciding on new product positioning and advertising.

The problem with an analysis-only approach is that it actually prevents discovery of something new. I recently heard an NPR interview with Malcolm Gladwell where he talks about an interesting psychological study that shows what happens when people have to justify a decision. (And yes, I’m relying on an analytical approach to convince you that relying on an analytical approach is a bad idea).

By Lex Sisney|2021-05-18T05:42:12-07:00March 7th, 2011|Articles|Comments Off

What Warren Buffett Can Teach You About Hiring

Warren Buffett’s 2010 Annual Letter to Berkshire Hathaway shareholders was recently released. It’s as outstanding as ever and worth a read. There’s a footnote in the report about their hiring a new business manager that I really loved:

“When we issued a press release about Todd’s joining us, a number of commentators pointed out that he was ‘little-known’ and expressed puzzlement that we didn’t seek a ‘big-name.’ I wonder how many of them would have known of Lou in 1979, Ajit in 1985, or, for that matter, Charlie in 1959. Our goal was to find a 2-year-old Secretariat, not a 10-year-old Seabiscuit. (Whoops – that may not be the smartest metaphor for an 80-year-old CEO to use).”

The reason I loved this footnote is that I believe too many businesses make the mistake of consistently valuing past direct experience over transferable skills and upside potential.

By Lex Sisney|2021-05-18T05:43:00-07:00February 28th, 2011|Articles|Comments Off

How to Keep Everyone on the Same Page – The Rule of Three

I met with the CEO of a fast-growing high tech company this week. This company (we’ll call it Company X) has grown from $100M to $400M over the past three years and plans to be a billion dollar business within the next three. We got together to discuss the challenges of keeping everyone in the company focused on the most important things. It’s a classic challenge. In fact, if you ask any leader of a fast-growing organization what are his or her three biggest challenges, you’ll hear “keeping everyone on the same page” as one of the top responses. How you help to do that is the subject of this article. And a powerful answer lies in the rule of three.

In the 4th century BC, Aristotle spoke about the rule of three – how the human mind tends to easily remember three things but forgets four or more. Every great communicator through the centuries has recognized and used the rule of three:

“Veni, Vidi, Vici” (I came, I saw, I conquered) – Julius Ceasar

“Friends, Romans, Countrymen” – William Shakespeare

“Life, liberty, happiness” – Thomas Jefferson

“Blood, sweat, and tears” – Winston Churchill

Notice too how common sayings are also often structured by the Rule of 3:

“Body, mind spirit”

“Tall, grande, venti”

“Learn your ABCs and 123s”

“Reduce, reuse, recycle”

“The 3 Rs – reading, writing, arithmetic”

Similarly, Company X has used the rule of three to help its staff focus on the most important things, as well as to recognize and stop work that isn’t focused on those things. Here’s how they did it.

By Lex Sisney|2021-05-18T05:44:27-07:00February 21st, 2011|Articles|Comments Off

Bam! Ninja surprise! – How to Win Friends and Influence People in the Social Media Era

Two weeks ago, I switched newsletter providers to MailChimp. MailChimp is known as a low-cost SOHO email provider with cheeky humor and copious references to Ninjas.

Over the past few years, they’ve been getting a lot of buzz and customer goodwill. Curious to give them a try, I signed up, dropped my old provider, and hoped for a smooth transition. Setting up my campaign was straighforward. It’s when I pressed “Send” that the trouble started. The MailChimp interface promptly said: “Sending: Started at Jan 30, 2011 10:57 pm” — and there it hung for over an hour.

I re-queued the campaign and tried again. Same problem. Frustrated, I emailed their customer service. A day later, I received a response. The customer service rep politely informed me that they weren’t sure what was causing the problem and the development team would have to investigate. Two days later, I received another email saying the development team wasn’t sure what the problem was either, that they canceled the email in the queue, and that I should try again. Like Groundhog Day, I tried again and got the same problem.

Now feeling very frustrated, I jumped on Twitter and broadcast to the world, “Anyone else think that MailChimp sucks? I’ve been stuck in queue for 72 hours. Is it growing pains?” About 3 minutes later, I received a reply via Twitter from MailChimp. We traded tweets back and forth and they provided some basic diagnostics — all over again. When the problem couldn’t be solved, they asked me to contact customer service using “online chat perhaps?” Now fuming, but deciding to give it one more try, I hopped onto a MailChimp online chat.

By Lex Sisney|2021-05-18T05:45:18-07:00February 14th, 2011|Articles|Comments Off

Give Winning Presentations Everytime

You have a big presentation coming up. Perhaps you’re raising money for your new start-up or you’re competing to win a lucrative new contract. In any case, there’s a lot riding on the presentation. You want to make sure you’re at your best and that your message meets the needs and expectations of your audience.

I’ve given many presentations over the years. I’ve done presentations to raise over $50M in venture capital, to close new sales contracts, and even to teach meditation to kids. I think the hardest part of any presentation is the opening. If you can get that right, then the rest of your talk flows easily. But if you get the opening wrong, you’ll never fully recover. Here’s a simple technique that I’ve found very powerful to start your presentations off on the right foot and to tailor your message to any audience, be they VC sharks or indifferent kids. ☺

To start, you’ll need a partner or a coach. Get together in person or on the phone and brainstorm a list of ten to twenty questions that you think the audience wants answered in your presentation. Put yourself in their shoes. How do they view the world? What problems do they have? What situations and challenges are they currently facing? And, of course, what do they want to get out of your presentation?

By Lex|2021-05-18T05:45:44-07:00December 27th, 2010|Articles|Comments Off

The Last Question (the answer to entropy)

By Isaac Asimov

This is by far my favorite story of all those I have written.

After all, I undertook to tell several trillion years of human history in the space of a short story and I leave it to you as to how well I succeeded. I also undertook another task, but I won’t tell you what that was lest l spoil the story for you.

It is a curious fact that innumerable readers have asked me if I wrote this story. They seem never to remember the title of the story or (for sure) the author, except for the vague thought it might be me. But, of course, they never forget the story itself especially the ending. The idea seems to drown out everything — and I’m satisfied that it should. Read the Story.

PS. The Physics of Success shows that success is really a function of how entropy impacts a system. I love this story by Asimov because it puts “success” in the grandest and most far reaching terms possible while making it clear that entropy always wins. Choose your definition of success wisely.

By Lex|2019-12-13T13:46:36-08:00December 26th, 2010|Articles|Comments Off

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