Category: Mental Models

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What makes you special?

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In the last few months of the year teams around the country are looking at the year ahead, setting budgets and targets and trying to work out what do do and where they should focus their time and energy.

Should you focus on where you want to go – your goals and the end result?

Do you need to know where you are going so that you know when you are there?

Will having the right vision and mission statement and doing lots of motivating, team building activity help you succeed?

Is getting the right people on the bus the secret?

One way to see through the euphoric fog of motivational management is to consider what makes you special.

What is it that is distinctive about your business – the qualities and attributes that mean you will do better than others in your space?

John Kay, a leading economist, came up with the concept of distinctive capabilities in the 1990s.

He argued that distinctive capabilities are what you have, not what you would like to have, or hope you have.

You might start with a number of capabilities when analysing what is distinctive about you. Are you cheaper than the competition? Do you have smarter people? Is your reputation better?

Key said that there were only a few types of distinctive capability – and they stemmed from how innovative you were, how you structured yourself and what people thought about you.

He termed these innovation, architecture and reputation.

So, what do distinctive capabilities such as these have in common? How can you score them and see whether you should focus on them or not?

There are four questions to ask yourself. Is what you do:

  1. Hard to make and build? Does it take a long time or is it difficult to get the ability to build and maintain your capability?
  2. Hard to do? Is it possible to turn your activities into a recipe – something that can be recreated or adapted elsewhere?
  3. Hard to copy? Is what you do protected – either by laws or by its nature – a trade secret for example. Can it not be replicated easily.
  4. Hard to buy? Is it possible to buy what you do on the open market or is it something unique to you?

If what you do is impossible for others to make, do, copy or buy from anyone other than you then congratulations – you are on your way to a monopoly.

For most organisations, however, you will be somewhere on a range.

A strategy that works will focus on those capabilities that fall on the right hand side of the range when answering those four questions.

Whether you looking at yourself as an individual, a business unit or a business group, the chances are that you will get better returns by building on the distinctive capabilities you already have, rather than what you want.

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Why do you do something?

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People do things for reasons.

The reasons are the benefits you get – the things you have gained, are gaining or expect to gain from taking a particular action.

All these reasons and benefits, the associated hopes, dreams, goals, objective, prizes, are packaged by economists into one, rather dull word – utility.

Utility is what’s in it for you.

Understanding how utility is created is crucial when trying to make a decision, or when getting someone else to make a decision.

One way of doing this is by drawing a utility tree.

For example, around this time of year, many families are thinking about options. They want their kids to go to a good school – but what should they do?

Say they have to move – and they have two options. They can buy a place or rent a place. If they buy, they can buy a big house or a small house. If they rent, they can settle for an OK house.

Whether they buy or rent, as long as the house is in the right area, they are fine for schools – so the outcome is the same in all cases.

What makes the difference when choosing between the options for this family?

Lets say one partner wants a big house. The other, more familiar with their finances, doesn’t want the associated costs because they will stretch them too much.

A smaller house would make one partner happy, and the other could deal with it – but it’s not a preferred option by any means.

Both of them, however, really don’t want to rent again and deal with the issues of agents, commissions and having to have regular inspections.

These reasons are the utilities associated with the situation.

Now, if you keep all this in your head, it’s really hard to have a mature discussion that doesn’t end up in an argument.

Instead, drawing a utility tree helps to make the options, outcomes and utilities involved clearer.

The key thing is to consider each option you have by itself, using the same criteria to evaluate each option and making sure that you look at it from enough points of view to be happy you have thought through it properly.

For example, seeing the tree in the picture above clarifies the situation more than describing each person’s point of view in words.

The point of view someone takes, their perspective, is crucial in being able to understand what will and what won’t move them.

We can often only see things from our point of view.

Making good choices, however, whether in personal situations, when making investments or when persuading someone else to make one, often need you to see things from another person’s perspective.

What this also means, quite often, is that the best solution will need to be a compromise. For example, you might be able to persuade your partner to have a smaller house, as long as you can also have a nicer car.

Understanding utility simply means that you can better understand what people want and what they will do – and that means you are more likely to get what you want as well.

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Why choice makes it harder to choose

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There are two kinds of people: those who choose quickly, and those who take time to choose.

In his book The Paradox of Choice, Professor Barry Schwartz argues that the amount of choice available to us now is making people unhappier and more dissatisfied.

The people who take time to consider their options fare worst here.

There are too many to look at, too many criteria to compare and it’s a struggle to find one that is perfect.

Just looking at more options makes you perceive something you already have as less valuable.

As a result, having choice just makes one afraid of making the wrong decision.

Fear of regret then drives decision making, paralysing people into doing nothing.

We’d be happier, according to Barry, if we:

  • Restricted the amount of choice we had voluntarily.
  • Aimed to be good enough rather than the best.
  • Had lower expectations.
  • Required that all decisions were final and could not be reversed.
  • Paid less attention to what other people do.

If you’re on the other side of the table and you want to improve your sales then instead of focusing on how best to meet what you think people need, make it easier for them to choose what you do.

If choice is paralyzing, simplifying and making it easier to choose will help more people make a decision.

This will help even more in four situations:

  1. When products are complex.
  2. When comparing options is difficult.
  3. When you’re not sure what you prefer.
  4. When you want to make a quick decision.

In summary, when you next need to decide between increasing choice, or making it easier to choose, try the latter.

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Can you figure out what really gets results?

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How do you set things up so that you can get results?

Take an example that many people have to deal with – meeting sales targets for their business unit.

The results are expressed in monetary terms – you want to add X in sales by the end of the year, so what does that break down into by month, by week and by day – depending on how the business you are in makes its money.

If you are in a retail business, with transactions happening every day, then a daily system of monitoring profit and loss may be enough to tell you whether you are in or out of the money. Depending on how far away you are from target, then you can take action to change things.

In this case you are in a business where results can be measured in great detail, so you simply monitor the end of the process.

But what if you operate in a different kind of business – say you sell large and complex systems – power stations, for example, or provide ad-hoc consulting services. The results in such businesses expressed in financial terms may not be as predictable.

So what happens then?

The markets and analysts like companies with smooth lines trending upwards. They don’t like surprises or lumpiness in results. So, the companies give them what they want – managing their reporting so that you get the effect of a smooth line, even if the underlying business is lumpy.

This takes you from monitoring results to manipulating results.

The logical thing to do might be to consider the other end of the process.

If the results are hard to predict – you still need to do something every day to get them.

You need to pick up the phone, engage with someone, create something – the daily activity is what eventually produces those results.

Is it possible that measuring aspects of daily activity that correlate with results can help get results better than measuring the results themselves?

In other words, measured daily activity could lead to results which can then be measured in financial terms.

The point is this – in order to track how you are doing, you need to measure and monitor something every day.

There is no point in measuring something daily that does not lend itself to being broken down into a daily measure.

Instead, find something that you can measure daily that correlates with the result and measure that instead.

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What is data?

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The information business is a complex one.

The chances are that virtually all the business intelligence you have now is stored and processed on a computer.

And that carries responsibilities and creates obligations.

So, what is data?

The long version is here but in short:

Data is information that is processed by a machine, recorded on something (including paper), filed somewhere or can be accessed later including information held by public bodies.

Basically… everything.

Data turns personal when you can identify a person from it. Even if you need it and something else to identify someone it’s still personal. If it contains an opinion about the person, it’s also personal.

An example of this from the ICO is that water meter data, even if addressed to the occupier, is personal because it could be used to tell the habits of that person and identify the address they live in and so is personal.

Personal data turns sensitive when it has something that the person would consider private, or that could be used to discriminate against them in some way.

It’s very broad, so that even something publically visible, but covers them. Even if the person makes the information about them public, it’s still personal and sensitive.

What this means is that almost anything you do in modern business that requires using a computer and working with other people is going to involve thinking about data.

When the UK leaves the EU, the rules are likely to stay the same.

Being clear about this definition will help you get started on what you do with the data – how you keep and use it.

Note: You may be one of those people that worries about the use of ‘data is’ versus ‘data are’. ‘Data is’ sounds better…

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Happiness is just around the bend

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It’s true – your life is getting worse.

If you’re in the period between being an adult and heading towards middle age, that is.

The U-curve of happiness is a theory that says we are happiest when young, as children.

Happiness levels decline as we grow and turn into adults, reaching a low in middle age.

But what about children, you might ask. Surely parents are happy?

It turns out that they aren’t, not really.

The sleepless nights and physical exhaustion that comes from having children, and then the sleepless nights and mental exhaustion that comes when they turn into young adults means that people score low on happiness measures around that time.

But then, as you come to terms with life, things become better.

As you get older, happiness increases once again, as you get to do what you want to do once again, and get some of your time back.

The U-curve theory has its critics – many people do not have happy childhoods, many people have a difficult and lonely old age and many people don’t live in free and prosperous countries.

It may be something that only applies to rich and generally healthy population groups.

What this tells us, however, is that our expectations of the future are made up of socially constructed ideas.

You might think that parenthood might be the happiest time of your life. But the experience itself might not be, even though you wouldn’t change a thing.

It is easy to assume that older people have little to contribute – but today people are living and working longer than ever.

We are experiencing a time when three generations can work in the same organization together – all at different stages of happiness in their lives.

Even if the theory is wrong, the thing with a U-curve is that it’s pretty helpful when trying to come to terms with a situation.

After all, however bad things are, you know they could always be worse.

And when you’re at rock bottom, you know the only way is up.

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How to build trust in your organization

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Trust is a rule of thumb – a way to deal with situations where we are asked to give or do something when we don’t have enough information or control to be certain of the outcome.

There are many definitions and approaches to trust – so what are the things that create trust or destroy it – and what actually happens in our brains when we trust someone?

The neuroeconomist Paul Zak carried out a number of experiments that helped explain how brain activity is affected by trust and what organizations should do to increase trust.

He found that there was a chemical in the brain called oxytocin. The amount of oxytocin is related to trust – the more it is produced, the less fear and more trust you have towards a stranger.

Creating an environment that promotes oxytocin production can lead to higher trust in people and build trust in your organisation.

Zak found that managers could improve trust by doing eight things – all of which might seem obvious in retrospect, but which are now supported by the science. Doing these things better should improve oxytocin levels across your organization.

Start by praising people more when they have done a good job – and do it soon after they have done it. People like it when their work is noticed and appreciated.

Make sure that everyone can do what they are asked to do – that it’s not too hard or too easy. People work best when they are challenged and stretched, but not when they are stressed or bored. Performance is all about setting achievable goals that need you to push yourself.

People like to be in control. Many people would give up pay for more freedom and control over how they do things. They also work better when they feel like they have created something rather than when it is imposed on them.

You also work more on things you care about. Clearly what you are interested in needs to be aligned with what the company needs to get done – but the more you can get people contributing in areas that they are interested in and care about, the better your chances of getting good work out of them.

It’s important to keep people informed. Secrets, closed groups and rumours can all act as a drag on performance. Open and frequent communication, regular discussions, updates and feedback can all help keep people feel like they know what is going on and can get on with their job.

Working in silos or mostly alone isn’t very helpful. It’s important to create opportunities for people to connect and work with others, through working groups or project teams, for example. There is a link between the social ties at work and job performance.

There is a difference between a job and a career. People do jobs, but they invest in a career. The latter takes time and effort and is a journey of personal and professional growth. Managers who can see that and help their people to grow will increase trust.

Finally, people like to help others. Asking for help lets people cooperate and work together – and once again has an impact on trust.

Lenin once said Trust is good, but control is better, and that didn’t end out that well.

Keld Johnson has a better approach, saying Control is good, but trust is cheaper.

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How to tell a story that makes your point

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How do people in an organization get a sense of shared meaning and understanding?

They tell stories.

Stories and accounts of what happened in the past, stories of what could happen in the future, stories of what will happen if you do, or don’t do something all make up the organizational story book.

This collection of short stories helps a person understand the culture and essence of what an organisation is – which emerges out of the actions, behaviour and justification of its members.

So, what kind of stories work?

There are six basic plots that have survived over the ages.

1. The Quest

The quest is a story where an individual or group set off, face challenges and setbacks, and eventually succeed and find fame and fortune.

This is often the story of individual entrepreneurs – Branson, Zuckerberg and so on – they all started with ambition or an idea and then moved heaven and earth to make it happen.

2. The Contest

The contest is a struggle between two forces – often good and evil. Who is good and who is evil depends on your point of view.

This is often the story of takeovers and mergers and boardroom battles. Take Proctor and Gamble, for instance.

A battle has been waged between the activist investor Nelson Peltz and David Taylor, the CEO, who have different views on how the $235bn company should be organized.

The two sides may have spent over $60 million between them on the campaign and, for the time being, the CEO and Board may have won – supported by the large numbers of small shareholders.

But Peltz may be back – the institutions back him, after all.

3. The Conquest

The conquest is a story of winning through force and power – but then being seen as saving the day.

Take Jack Welch, for example.

He was given power at GE, at the time a moribund conglomerate with disparate interests. He instituted dramatic, even draconic measures.

He sold off business units in markets where GE wasn’t number 1 or number 2 and insisted that the entire organization be structured around performance and competitiveness.

The result was a re-energized, re-focused and more driven organization that is now once again a force in sectors ranging from turbines to finance.

4. The Downfall

The downfall plot is one where a successful person or organization slips from grace, primarily because of their own shortcomings.

This is the story of the financial crisis. Once proud financial institutions were sucked into the frenzy of lending money without underlying assets – greedy for commissions and growth.

In the UK, the government had to rescue institutions such as Lloyds, RBS and HBOS – banks with a hundred year operating history, and they are still recovering from that period.

5. The Disaster

The disaster story is different from downfall – because the events that cause failure are outside the person or organization’s control.

The classic story here is the impact of the internet.

Blockbuster, HMV, Staples – all the high street and big box stores that flourished in the late part of the last century and thought this dinky little computer toy thing called the internet would never catch on are now part of history.

6. The Scam

In the scam, the main characters turn out to be not what they seemed – they were either incompetent or foolish, or they were hiding something that then came out.

Bernie Madoff, a one time darling of Wall Street, was exposed as a fraudster after creating the largest ponzi scheme in history – nearly $65 billion.

Summary

Three of the plots are stories of success: quest, contest and conquest, while the other three are stories of failure: downfall, disaster and scam.

There is no shortage of stories around us – but the ones we pick and choose to tell and re-tell will create the common meaning and understanding that is shared by people in an organization.

Stories have more impact than almost any other form of communication – we seem hardwired to listen and learn from them, right from the time we are children.

Choose the ones you tell carefully.

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How to see things afresh

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Mark Twain said that once he had learned the analytic knowledge required to navigate the Mississippi, the river lost its beauty.

The problem with being an expert is that you know too much.

And that knowledge gets in the way of being able to see or experience what is in front of you.

A friend of mine, an editor, says that it’s difficult to watch a film now and just enjoy the story – because the urge to take it apart and dissect it is too much.

One answer, apparently, is to get drunk quickly, and that makes it easier to sit through the experience.

Then again, this is not a new problem.

Toys ‘R’ Us, for example, has 64,000 employees and 1,600 stores in the US but that didn’t stop it having to start bankruptcy proceedings, unable to compete against the likes of Amazon.

Organizations that were once brilliant at what they did, presumably staffed with experts, have simply become irrelevant as the world changed around them, but their maps did not.

So, what can you do to try and see the world as it rather than how you think it is?

It might help to start by avoiding meetings.

Too many meetings are too long and are spent waiting for someone else to stop talking so you can say what you think.

A better approach might be to try and stay in beginner’s mind.

The Zen teacher Shunryu Suzuki says in his book Zen Mind, Beginner’s Mind “In the beginner’s mind there are many possibilities, in the expert’s mind there are few.”

Instead of meetings, it may be better to engage in dialogue.

A formal version of this is Bohm Dialogue, a form of talking proposed by David Bohm, an American theoretical physicist, who suggested engaging in a free-flowing, non-judgemental group conversation that helps people to come to a common understanding of everyone’s point of view.

One technique for facilitating it is to borrow from Improv, the art of spontaneous theatre based around “Yes, and…”, where someone says something and you have to start your next sentence with “Yes, and…” and then make your point.

This suspends judgement, as you have to build on the previous statement rather than stopping to critique it.

Another approach is the Japanese method of seeking opinions from the most junior member present first.

This means that they can speak without having to say something that might contradict what their boss said if they went second – in which case they might not say anything at all instead.

The point is that becoming an expert takes time.

And then, perhaps frustratingly, it’s going to take even more time and practice to become a beginner again.

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The future of working and leading

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Many things seem quite clear and simple – because that’s just the way they are right now.

Take people in an organization, for example. You might think that there are two types: workers that do the work and leaders that decide what work needs to be done.

That approach to organizational structure comes out of the needs of an industrial, factory based society – where machines needed to be tended, things needed to be assembled and people had jobs that involved doing a few, repetitive tasks over and over again.

That world just doesn’t exist for many people any more.

The kinds of challenges organizations and societies face are more complex and nuanced now.

There may be an underlying trend, an upswell, a hint that our future economies will be based around more decentralized, democratic technologies than now.

At the moment, it feels like the world is controlled by a few giant corporations.

Take information, for example.

The four giants: Google, Amazon, Facebook and Apple dominate what we find, buy, share and see. They seem unassailable, billion dollar firms that are virtual monopolies in the current economy.

They may, however, be swept away in the future by shared, decentralized platforms that we all can own and operate using technologies such as blockchain.

People may prefer to deal with community owned businesses or social enterprises.

And that trend has an interesting application to organizational development.

Will organizations in the future stay hierarchical, controlled by a small number of leaders who make all the decisions?

Or will the organizations that perform in the future have more blurred lines between workers and leaders?

Despite an increasingly technological world, people will still choose to work with people much of the time for tasks that are complex, creative or need the application of thought.

There may not be much space in organizations for leaders who don’t contribute work. Conversely, workers who don’t learn how to lead and perform in teams may find themselves replaced by machines.

In this future, networks of committed and creative people may create the products and services we use every day.

It may be that the organizations of the future are going to be decentralized networks of individuals who share leadership and work – with performance in the market emerging out of their collective behaviour.

Do you know how you will fit in?