success Archives - Organizational Physics by Lex Sisney

Q: Is capitalism doomed?

I originally published this article in January 2011 but it seemed like a good response to this question. The bottom line is that if humanity is going to survive and thrive, we must restructure our economy and society towards decentralized local production.

Good managers run their businesses by the numbers. But imagine for a moment that your business is Earth. As the manager, you’re responsible for hitting your quarterly and long-term targets. These include providing increasing levels of prosperity, health, and happiness for all of Earth’s inhabitants, managing the use of non-renewable resources, and ensuring that future generations of stakeholders thrive. You run a dashboard report and here’s a scan of what you’re working with:

– The human population is forecasted to reach 9 billion, up from 6 billion in just forty years.
– The American middle class, once a driver for economic prosperity, is in rapid decline.
– More than 80% of sewage in developing countries is discharged untreated, polluting rivers, lakes, and water supplies.
– Antibiotic resistance is increasing, posing a major threat of new super diseases.
– Nearly 70% of the world’s fish stocks are depleted or over-exploited.
– The rate of species extinction is now 100-1,000 times greater than suggested by the fossil records before humans.
– The world is getting hotter, the ocean is 30% more acidic than 260 years ago, and extreme weather events are intensifying.

You stop reading, knowing that you could spend a lifetime just reviewing the statistics. Your own gut (something you’ve come to rely on as a good manager) also tells you something is off. Modern life just doesn’t seem that high functioning for most of those in your home country. Everyone has more technology, more pressure, but less overall happiness. It’s time to take action. What do you do?

Like any good manager, you take the stats and group them into a pattern. As you scan across the many sectors of the Earth’s man-made systems, you notice something suspicious. No matter what the sector – food, water, health, technology, government, finance, entertainment, trade – you notice a consistent trend. Everything follows the same pattern. It looks something like this:

Centralized production occurs where production is owned and controlled by large producers or aggregators of goods and services which are in turn distributed to the market and made available for sale. And therein lies the problem and the solution.

The problem is this: In order to be more efficient, production always becomes more and more centralized. This makes sense. Organizations try to make the most use of their resources. By getting larger and more systematized, they are able to acquire more resources more efficiently, achieve economies of scale, and have a better chance to […]

By Lex Sisney|2021-05-18T02:36:06-07:00July 15th, 2012|Articles|Comments Off

The Happy High Achievers

Are you happy in your job? The data says you’re probably not. I can also speak from experience. For most of my life, I operated under a false assumption that the more successful I became, the more happiness I’d feel. But what I found was just the opposite. At one point in my early thirties, I had the experience of attaining everything I had once dreamed of. But instead of feeling elated and happy, I felt burdened, stressed, and beaten down by constant and competing demands. In my experience in the Young President’s Association, a worldwide group of successful CEOs, I found that very few were actually genuinely happy as well.

Why is this? Why doesn’t greater success seem to lead to greater happiness? There’s an interesting study on success and happiness by Dr. Vance Caesar of the Caesar Group that sheds some light on this phenomenon. In an ongoing study of high achievers (the top 2-3 percent of individuals in a given field) across all walks of life, Dr. Caesar discovered this: Only 1 out of 10 high achievers (.2 to .3 percent of the total pool) rate themselves as authentically happy. Imagine that: If you gather ten thousand top achievers from all walks of life—the rich, the famous, the talented—only a handful will actually consider themselves happy.

What’s the difference between a happy high achiever and the rest? In his research, Dr. Caesar identifies eight attributes that dictate both success and happiness. Most of these are fairly easy to recognize and intuitively make sense. They include a driving sense of purpose, a compelling vision, and the intrinsic feeling that your work is meaningful. Other attributes include beliefs and behaviors that create inner peace, a regular process involving the three Rs (review, renewal, and recommitment), and outstanding discipline. Additionally, happy high achievers generally work with mentors and coaches.

It turns out that one of the secrets of the top of the top—the tiny fraction that is both successful and happy—is that they mastered the game of energy management to such a point that they get more than they give from all of their key relationships. That may sound confusing at first so allow me to explain.

As we’ve discussed, everything is a system and every system exists in relationship to other systems. What happy high achievers recognize is that everything in life is ultimately an exchange of energy. After our health, the single greatest factor that energizes us or depletes us is the quality of our closest relationships. If you’ve ever been in a “vampire” relationship that sucks all the energy out of you, you know it can take days to recover from even a brief encounter. On the other hand, if you have a best friend who always seems to […]

By Lex Sisney|2021-05-18T04:56:16-07:00March 11th, 2012|Articles|2 Comments

Where Are Your Energy Drains?

According to the laws of physics, your success is determined by how you manage energy – and there’s a universal success formula to prove it. Quite simply: success is a function of integration over entropy. Your goal is always to have high integration and low entropy. In “How to Choose the Right Strategy“, I explained how to create high integration in your company. What gets too little attention in business, however, is the havoc that high entropy plays on a system. It truly is the ultimate killer. Or as physicists Sir Arthur Eddington aptly put it in the early 20th century, “The law that entropy always increases holds, I think, the supreme position among the laws of Nature. If someone points out to you that your pet theory of the universe is in disagreement with Maxwell’s equations — then so much the worse for Maxwell’s equations. If it is found to be contradicted by observation — well, these experimentalists do bungle things sometimes. But if your theory is found to be against the second law of thermodynamics I can give you no hope; there is nothing for it but to collapse in deepest humiliation.”

So if there’s anything you should be doing in your business that you’re probably not focused enough on, it’s cultivating an awareness of entropy and a commitment to reducing it. Personally, I didn’t appreciate the significance of entropy in my own business until I ran into it. Hard.

In 1998, at the age of 28, I co-founded an affiliate marketing company in Minnesota and moved it to Santa Barbara, California. By 2001, the company was soaring like a rocket, generating incredible growth rates (much easier to do for a small company than a large one but it’s still a very exciting time), and was adding staff and customers as fast as we could to scale. During this period, everyone who associated with the company, from the staff to the customers and even people on the street, seemed genuinely blown away by its energetic, passionate, and committed culture.

As co-founder and CEO, I would often walk into the office and feel lifted two feet off the floor by the collective energy and enthusiasm of the group. I had installed a giant train whistle on the wall that the sales team would blow every time there was a sale. While the bankers on the second floor weren’t too happy with the frequent “blassssssssssssssssstttttttttttttttttt” of the whistle, we would all cheer loudly. It was a heady and intoxicating time.

Most of us had a feeling that the company had a growing opportunity in front of it and that we had the capabilities to execute on it. It was also relatively easy to make and implement decisions and there was a […]

By Lex Sisney|2021-05-18T05:49:57-07:00February 27th, 2012|Articles|Comments Off

The Universal Success Formula

If you want to understand how something really works and what makes it successful, it’s not enough to break it down into its individual components. Instead, you need to look at how it operates as a system. By definition, a system is a series of interacting, interrelated, or interdependent elements forming a complex whole. And there’s absolutely nothing you can think of that is not a system. For example, you’re a system (specifically, a complex adaptive or living system). You have a body, which is a physical system comprised of other systems (immune, circulatory, digestive, etc.). If we were to look closely at any one of these, we’d see that they’re comprised of even smaller systems. And of course, your physical system is also an element in a larger system. You have a mental and an emotional system; you’re part of a family system, a community system, an economic system, a government system, an ecological and planetary system, and so on. Everything is a system.

When it comes to the study of what makes something successful, what we’re really asking is what causes a complex adaptive system to fail or succeed. Success simply means that the system (e.g., you, your family, your company, or whatever you choose to identify as the system) attains a desired goal. Failure means it does not. Winning the Super Bowl…being happy…earning a billion dollars – as long as you can measure it quantitatively or qualitatively, it’s a valid definition of success. And because everything, large or small, is a system, we can use the same universal principles to understand if it’s likely to fail or succeed. That’s pretty cool.

What actually does cause any system to fail or succeed? The answer is System Energy Management. This means just what it sounds like: System Energy Management defines how energy behaves within a system.

The Universal Success Formula

Entropy. It’s a bitch. Two laws of physics dictate how energy is used within a system. They’re called the first and second law of thermodynamics. Engineers use the laws of thermodynamics to design everything from buildings and bridges to microchips and spaceships. We can also use these same laws to understand how energy behaves within an organization.

The first law of thermodynamics is called “Conservation”. It tells us that, at any given point in time, the potential energy available to a system is finite. Whether we’re referring to your family or your business, this has a finite amount of potential energy available to it. In order to get new energy, the system must acquire it from the surrounding environment — just like you must get food from the refrigerator or your business must get sales from its customers.

The second law of thermodynamics is called “Entropy”. It […]

By Lex Sisney|2021-05-18T05:50:30-07:00February 20th, 2012|Articles|2 Comments

The Misaligned Organization and What to Do About It

In 1993 I was a college student in St. Paul, Minnesota. I drove a twenty-year-old canary yellow Toyota Corolla with bald tires, a broken heater, and a misaligned chassis. Because my spending priorities then were the necessities of college life (pizza, beer, girls, and rent), I never invested in making the car safe to drive.

Navigating that car on the icy roads of thirty-below Minnesota winters required a certain ability to go with the flow. But eventually, my refusal to to replace the tires and align the chassis caught up with me. Driving late one winter night … it’s easy to guess what happened. Wipe out. Crash. Car totaled.

Thankfully, no one was hurt.

I share this story because it’s easy to tell when a car is misaligned. The car squeaks, there’s friction and a loss of power, and it’s difficult to steer where you want to go. Similarly, if you know what to look for, it’s easy to tell when your business is misaligned. If you act early on, you can avoid a crash and even improve performance fast.

What It Means to Have an Aligned Organization

Well after I had sold that old Toyota, I received some more equally important lessons on the value of organizational alignment. In my late twenties to mid-thirties, I personally led two companies into compound annual growth rates (CAGR) exceeding 5,0000% per year. From startup to $4M and $12M in two and four years respectively. While this may be chump change to some entrepreneurs, these periods of rapid growth were priceless learning for me. They also provide a valuable lesson that’s applicable to companies of all sizes and at all lifecycle stages.

The surprising thing is that, in order to get that kind of exponential growth, I didn’t have to fight, cajole, or struggle for years. Instead, the leadership team and I created the right internal and external alignment for growth to occur. Because we got the alignment right, the businesses executed extremely fast. The same lesson holds true for you. If you can get the internal and external alignment right for your business, you’ll dramatically increase its probability of thriving and executing very quickly. I’m not guaranteeing 5,000% CAGR. In fact, I’m not even recommending you try for that — it’s much wiser to shoot for more sustainable rates of growth. But the act of creating alignment is essential to every business. Get it right and your company can execute swiftly and powerfully. Get it wrong and you won’t get back on the growth curve until you do get it right. Alignment is the key.

At the most basic level, “external alignment” means that the company’s unique capabilities are well integrated with growing market opportunities. […]

By Lex Sisney|2021-05-18T05:21:42-07:00February 10th, 2012|Articles|2 Comments

The Motivation Myth: Or, How to Get Your Employees to Work Harder, Faster, Smarter

I received a call the other day from a high tech CEO looking for advice. His company is seven years old, brings in about $10M in revenue, and serves a very narrow niche in silicon wafer manufacturing. During the past year, his company pre-sold a new product concept to one of their largest customers. This new product is very innovative and promises to open up a brand new market and transform the company into a $100M-a-year business in three years. The product is due for its beta implementation in six months and you can imagine that the CEO has a lot riding on the outcome.

The reason for his call was that he was feeling a lot of anxiety and frustration. His biggest area of concern was that his employees didn’t seem to “get it.” They weren’t working hard enough, didn’t seem truly motivated, took long lunch breaks, went home early, and were making bone-headed mistakes – mistakes that the CEO (who is very technically savvy himself) would have to constantly step in and fix. “What should I do?” he asked me. “What will motivate them to perform faster, better, and smarter? Should I offer more stock options? Cash bonuses? Fire some people and set an example?” “No,” I told him, “None of those things are going to really solve your problem. If you want higher performance, the solution is to quit trying to motivate your employees and find out what already motivates them.”

The Myth of Motivation

Quit trying to motivate people. There’s absolutely nothing you can do to motivate others. People are already intrinsically motivated, engaged, and interested. In fact, when you try to motivate people by offering incentives, threats, bribes, and rewards, you’re actually creating a disincentive to work and lowering job satisfaction and productivity.^1.

If you doubt that people are naturally motivated, or perhaps you’re thinking of someone who doesn’t appear to be engaged, creative, or interested at all, I challenge you to look a little deeper. When you do, you’ll see that everyone is highly engaged, motivated, and proficient at something. Here’s one small example. I have a friend whose ten-year-old son is really struggling in school. He’s a sweet kid but at school he acts listless and disinterested and seems unable to keep up with his homework. Last year, the school principal called the parents in and explained that their son was going to be asked to leave the school unless some drastic changes took place. Based on the recommendation of the school counselors, the parents placed the child on medication, hired a tutor, put him into therapy, and created a series of incentives and punishments around his school work. So far, the boy […]

By Lex Sisney|2021-05-18T05:22:29-07:00February 6th, 2012|Articles|2 Comments

Mastering Team-Based Decision Making

Every business has mass, which is a measure of its resistance to change. The challenge in getting an organization to change direction is the fact that its mass isn’t neatly self-contained. Rather, it’s scattered throughout its people, systems, structures, and processes – and the collective inertia causes resistance to change. In order to get the organization to execute on its strategy, you’ve got to get the mass contained and headed in one direction.

Having aligned vision and values, as well as an aligned organizational structure, is the first step. If you have misalignment in these areas, then no matter what, you’re not going to get very far. At the same time, alignment in vision, values, and structure alone won’t cause the business to move. They just help to hold the mass together and keep internal friction low. Making the organization come alive and move quickly in a chosen direction requires that two things be done well: making and implementing decisions. In fact, the secret to organizational momentum lies in continually making good decisions and implementing them quickly.

The Most Important Process in Your Business

Every business relies on multiple processes (sales, customer service, finance, product development, marketing, etc.). These can be highly visible or nearly invisible, organic, haphazard, detailed, flexible, constant, or changing and either a boon or a burden. When a process is performing well, it allows the work to get done better and faster. When it’s not, you feel like you’re swimming upstream.

While your business has many different processes – some working well and others maybe a total clusterf#@*k – it’s the process of decision making and implementation that’s most critical to your success. Why? Because at the most fundamental level, a business is simply a decision-making and implementation system. Think about it — every problem and opportunity require a decision to be made (and yes, deciding to do nothing is a decision too) and a solution to be implemented. If the business does this well — if it continually makes good decisions and implements them fast — then its momentum will increase and it will be successful. If it does the opposite — if it makes bad decisions, or if it makes good decisions but implements them slowly, or my personal favorite, makes bad decisions and implements them quickly — then it will fail. Just as a haphazard sales process results in lost sales, poor fulfillment, and an inability to scale, a poor decision-making and implementation process results in poor decisions, flawed implementations, and an inability to scale the business.

What’s ironic about the process of decision making and implementation is that most businesses don’t even think of it as a process. (In case you’re asking… decision making and implementation are not two distinct things. They’re […]

By Lex Sisney|2021-05-18T05:23:17-07:00January 24th, 2012|Articles|Comments Off

The Key to High Performing Teams

Growing up, I had a good friend whose dad was very successful. They lived in a gorgeous home on Lake Minnetonka and I was lucky to spend time a lot of time there, hanging out and enjoying their largesse. Among the things I vividly recall about their home was a refrigerator magnet that read, “Behind every successful man is a wise woman.” I remember that magnet because it made my fourteen-year-old self wonder, “Hmmm, is Mrs. B trying to tell the world that she’s equally responsible for all this magnificence?” and “Is it really true that all successful men have a supportive woman behind them?” or “Maybe it’s her way of putting her husband in his place…” I didn’t have the answers then. But looking back, I can see that this message (dated and cliche-ridden as it is) is worth pondering and has implications for marriages and businesses alike.

The Secret to a Successful Marriage

Marriage or partnership is an exemplary opportunity to match and leverage complementary PSIU forces. No one can be predominantly change-driving, change-responding, focused on the parts, and focused on the whole all at the same time. For much of human history, sexual and gender differentiation resulted in men playing the part of PsIu while women played the part of pSiU. That is, men were responsible for bread-winning (P) and strategy or career advancement (I) while women were responsible for organizing domestic life (S) and taking care of children and family (U). In short, the left side of the PSIU chart shows the classic “feminine” functions and the right side the “masculine” ones.

In the United States in the 1970s, when baby boomers shifted to a dual-income family model and women entered the professional workforce en masse, women joined men on the Producer and Innovator (or traditionally “masculine”) side of the chart. The result? Couples started outsourcing their Stabilizer functions to housekeepers, bookkeepers, and organizers and their Unifier functions to babysitters and marriage counselors – all to keep the family together!

Today, as many of us have outgrown long-standing assumptions about gender and marriage, we can see that the point is not about gender roles. Rather, it’s that all four forces must be present for a family – however you define it – to thrive. Specifically, what all successful and harmonious unions have in common is that both partners naturally complement each other. For example, a partner who is a PsIu will tend to harmonize well with someone who is a pSiU. If one partner is naturally externally focused on career innovation and the other is internally focused on domestic harmony and organization, the partnership can really work. If one partner is naturally better able to focus on short-run needs […]

By Lex Sisney|2021-05-18T05:30:34-07:00December 1st, 2011|Articles|1,050 Comments

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.

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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.

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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.

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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

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