Getting Back To Business

Getting Back to Business Why Your Business Is Struggling & What to do About It

Matt Donnelly

Matt Donnelly

Getting Back to Business

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Getting Back to Business Why Your Business Is Struggling & What to Do About It

Matt Donnelly

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cover image: http://www.morguefile.com/archive/display/2351 Getting Back to Business Copyright © 2009 by Matt Donnelly All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means without written permission of the author.

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For Amy, Kylie and Timmy – the best family a guy could ask for.

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Table of Contents Introduction .....................................................................11 Survey says........................................................................13 Part I: Thinking................................................................19 1. ASKING GOOD QUESTIONS...................................................21 2. WHAT EVER HAPPENED TO IMAGINATION? ............................25 3. MAKING BEAUTIFUL MUSIC ................................................33 Part 2: Leading.................................................................37 4. MAPPING THE DOWNWARD SPIRAL.......................................39 5. A CORPORATE IDENTITY CRISIS............................................41 6. WHY LEADERSHIP IS RISKY.................................................47 7. LOOKING IN THE MIRROR....................................................51 8. COMPANIES ARE COMMUNITIES............................................53 9. YOUR TOP PERFORMERS ARE READY TO BOLT WHEN THE ECONOMY IMPROVES..............................................................57 10. WHAT'S YOUR SIGN?.......................................................61 11. SIGNS OF ZERO-SUM THINKING..........................................67 12. WHY YOUR EMPLOYEES WORK..........................................69 13. AN EASY WAY TO MEASURE BUSINESS SUCCESS ...................75 14. WELCOME BACK, BOSS....................................................79 15. A CAUTIONARY TALE.......................................................85 16. WHY YOUR COMPANY WILL FAIL.......................................91 9

17. STATUS QUO MANAGEMENT HAS GOT TO GO.........................93 Part 3: Competing............................................................95 18. DON'T GET DRUNK ON SUCCESS ........................................97 19. WHO ARE YOUR COMPETITORS?.......................................101 20. HOW BARNES & NOBLE MISSED AMAZON.COM ...............107 21. COUNT YOUR (BUSINESS) COSTS......................................111 22. GO WHERE THE CUSTOMER VALUE IS................................113 23. NO WAFFLING: WAFFLE HOUSE GETS THEIR CUSTOMERS.....117 24. ZAPPOS.COM: A LABOR OF LOVE.....................................119 25. CUSTOMER COUPS D'ETATS.............................................121 Closing words for leaders and managers......................129 Notes................................................................................131

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Introduction This isn't a business book. At least not in the traditional sense. It isn't anywhere close to 75,000 words. It doesn't have a lot of fancy formulas and methodologies – in fact, it doesn't have any. It doesn't have any answers, only questions. If you're looking for easy answers to improving your business, you won't find them in this book. Rather, you'll find stories, examples, exhortations, musings and a lot of questions – all designed to help you think long and hard about the past, present and future of your business. I'm convinced from many years of experience in the corporate world that what ruins many organizations isn't a lack of talent, or a lack of good intentions, but rather the lack of asking good questions and doggedly pursuing the answers. I'm excited about this journey we're about to take together, and I'd like to know if this little book truly makes a difference in your business and in your life. I'd also like to invite

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you to join the continuing conversation about the topics covered in this book. You can do both at www.dayonelabs.com.

Matt Donnelly Melrose, Mass. October 2009

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Survey says... A whopping 41% of small business owners pay their employees just to keep the chairs warm. And 45% of small businesses say they aren’t profitable. – George S. May Company, August 20091

Forrester says 57% of large North American companies employed an executive in charge of customer satisfaction in 2008, up from 27% in 2006. – Wall Street Journal, July 20092

Frequent dialogue with employees may be the best way to raise their spirits, a new survey suggests. Nearly half (48 percent) of executives interviewed recently cited better communication as the best remedy for low morale. Not surprisingly, one-third (33 percent) of respondents said lack of open and honest

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communication with staff members tops the list of management missteps that can erode morale. – Accountemps, Nov. 20083

Nearly half of U.S. employers (48 percent) say stress caused by working long hours is affecting business performance. However, only 5 percent are addressing this concern, according to Watson Wyatt’s 2007/2008 Staying@Work report. Similarly, more than one-quarter (29 percent) of employers believe stress caused by widespread use of technology such as cell phones and personal digital assistants is greatly affecting business performance, but only 6 percent are taking action to confront the issue. – Watson Wyatt, Feb. 20084

In a recent survey, more than half (53 percent) of employees interviewed said the level of office politics in their workplaces has increased compared to five years ago; just 12 percent of respondents reported a decline. While most workers don’t

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advocate jumping into the political fray, a majority agree that a little knowledge can be power: More than half (54 percent) say it’s wise to be aware of political undercurrents in the office without becoming directly involved. – Accountemps, Oct. 20085

An overwhelming majority of employees (90-95%) are not allergic to work . Most of the problems in dealing with employees derive from the behavior of management who inadvertently depress or destroy the enthusiasm that employees naturally bring to their j obs. – Sirota Survey Intelligence, April 20086

Job seekers don’t mind setting their sights on greener pastures even while on their current employers’ payrolls, according to executives interviewed recently. Three-quarters (75 percent) of respondents said they would be comfortable looking for a new

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job while still working. This compares with 69 percent in a 2002 survey. – Accountemps, March 20087

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95% [of employees] would like their manager to analyse their task problems together with them, 41% experience this.

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86% would like their manager to create the right context prior to implementing a decision, this is the case 42% of the time.

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82% would like their manager to listen to their ideas, and encourage them to continue, 56% experience this.

– Krauthammer International, 20078

While 92% of managers say they are doing an "excellent" or "good" job managing employees, only 67% of workers agree. – Rasmussen Reports LLC for Hudson, October 20069

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“[I]n about 85 percent of companies ... employees' morale sharply declines after their first six months—and continues to deteriorate for years afterward.” – Harvard Management Update, April 200610

Only 59% of a manager's time adds value to their organization. -- Mark Ellwood, November 200511

Far from encouraging complacency, a common misconception, recognition for good performance is one of the most powerful inducements to continued good performance and high morale in general. It is a lack of recognition that depresses the motivation most people have to perform. To receive recognition for one’s achievements is one of the most fundamental of human needs. When employee performance is taken for granted by management, as in, “that’s what we expect, why mention it?,” employees and the company both lose. – Sirota Consulting, 200512

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Part I: Thinking

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1. Asking good questions I would trade all of my technology for an afternoon with Socrates. – Steve Jobs13

I have no special talents, I am only passionately curious. – Albert Einstein14

According to Entrepneur magazine, one of the most important traits an entreprenuer has is a committment to doing what he or she enjoys.

What you get out of your business in the form of personal satisfaction, financial gain, stability and enjoyment will be the sum of what you put into your business. So if you don't enjoy what you're doing, in all likelihood it's safe to

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assume that will be reflected in the success of your business--or subsequent lack of success. In fact, if you don't enjoy what you're doing, chances are you won't succeed.15

No disagreement there, right? Now imagine for a moment that you could combine the life experience you have now with the passion for your business that you once possessed. How many times have you told yourself, If only I knew then what I know now, I could have conquered the world or youth is wasted on the young? I'm not going to try to sell you some poison to inject into your face or a pill to make you more virile. What I'm offering is something more permanent, something that will help you turn back the hands of time in your business. I want nothing less than to give you your company back, to remind you of what once was, and to help show you, as vividly as I can, what could be again. How? First by helping you ask the right questions. As a midwife I want to help you give birth to new, transformative insights about where your business should be headed. The ancient 22

Greek philosopher Socrates, probably the most famous interviewer in history, called himself a midwife because he asked his students questions to help them understand themselves and the world around them much more clearly. In Theaetetus, one of Plato's famous dialogues, Socrates says:

It is quite dear that [my students] never learned anything from me; the many fine discoveries to which they cling are of their own making. But to me and the god they owe their delivery.16

Like Socrates, I don't want or expect you to learn anything from me – except how to ask better questions. These questions will lead you to a radical new outlook on yourself, your business, your employees, the marketplace, and your competition. I don't provide a set of just-add-water answers in this book – I couldn't even if I wanted to. This is your own journey: To thine own self be true. At the end of the day, you control much of your own business destiny, even though it might seem that you've been much more reactive and not very proactive lately.

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2. What ever happened to imagination? Look at why big companies die. They implode on themselves. They create all these systems and processes -- and then end up with a very small percentage of people who are supposed to solve complex problems, while the other 98% of people just execute. You can't come up with enough good ideas that way to keep growing. – Shari Ballard, Retail VP, Best Buy17

What exactly am I proposing to do in this book? Quite simply, I want to take you on a journey back in time, to that moment when you first opened the doors of your business. Remember what was going through your mind at the time? There was some fear, surely, and maybe some panic. No doubt your pulse was

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racing. Maybe you had a fleeting thought that you'd done the wrong thing. But despite all of that, the overriding emotions you experienced were pride and love because your dream, the result of all your hard work, had finally become a reality. It was Day One of the rest of your business life. You started off small, and the phone didn't exactly ring off the hook right away, but soon orders came in and you built your business little by little. You hired a few more people as business picked up, and before you knew it you were doing a nice, steady business. That was a few years ago. Today things seem different. Your growth isn't what it used to be, and neither are your profits. Your employees sense that something isn't quite right, and you've even seen a few looking a job postings during their lunch hour. New competitors, both large and small, are entering your market niche, and you're struggling to remain competitive. Suddenly those heady days when you started the business seem like a lifetime ago, and all you want to do, quite frankly, is close up shop and take that extended vacation to Bermuda you kept putting off. 26

Then you stop yourself. Maybe, you wonder, the answer is bringing in a consultant to help your struggling business. You call a few consultants and quickly realize that using a consultant tends to be expensive, time consuming, and seemingly risky, especially because they don't know you or your business as well as you do. (I once heard a consultant say that he “embedded” himself into a company – a bank, in his case – for over a year before he felt comfortable making any recommendations to senior management.) Maybe you pick up a business magazine or even a book or two? But is there one that addresses your specific needs – or even understands those needs? A search on Amazon.com reveals scores of management books, by scores of 'rock star' writers, but you find that none that really address your particular situation. What do you really need? I'd wager that what you need is a crash course in imagination. imagination Imagination? That seems like an odd thing to write, doesn't it? Well, not really. As a writer and teacher who has worked for a number of different companies – large and small, successful and struggling – during my professional life, I have 27

come to understand that the common denominator of companies in trouble tends be a lack of imagination. They generally don't lack talented workers, though those workers are variously bored, angry, and daring themselves to think about greener pastures. These organizations also don't lack the finances to make beneficial changes, although they may not be making the wisest investments at the moment. No, what these struggling companies lack is imagination. And in today's world a company with a lack of imagination might as well have a big bullseye painted on its corporate headquarters. The sharks smell the blood in the water. Now all this talk about imagination might sound a bit out of place in a business book, or at least a luxury in which you can ill afford to indulge, but think about what imagination is. As a writer, I use the power of imagination to bring to life to new and different worlds in the minds of my audience, to paint pictures with words, to refuse to be shackled by the world of what is and dare to proclaim my allegiance to the world of what could be. The world of imagination is the only thing we have working for us when the reality we desire is not the reality right now. Imagination provides us with a compass and a roadmap so we 28

don't get lost between the already and the not yet. It is the GPS of the soul. The Disney people even have a whole group called Walt Disney Imagineering, which, according to their Web site, is “charged with the master planning, creative development, design, engineering, production, project management, and research and development arm of The Walt Disney Company and its affiliates.” It's a mouthful, but if Disney – home of worldrenowned storytellers, cutting-edge theme parks, and breathtaking computer-animated films – believes that imagination (or imagineering) is this important, shouldn't you? Still not convinced? Listen to Albert Einstein: “When I examine myself and my methods of thought, I come close to the conclusion that the gift of fantasy [read: imagination] has meant more to me than my talent for absorbing positive knowledge.”18 That is, Einstein thought it was important to know things, but he felt it even more important to imagine things based upon that knowledge. Meditation, the focused thinking that powers imagination and gives life to your desired worlds, is the flip side of 29

imagination. (You don't have to go off to a mountaintop somewhere and try to achieve spiritual transformation – though that would necessarily be a bad thing in a world gone crazy with distractions piled on top of distractions.) What I'm concerned about here is helping you to act upon a very important truth: A business that knows where it's going will go over, under and around anything that gets in its way. The corollary is also true: A business that doesn't knows where it's going will soon head off a cliff. I've seen both of these scenarios play out. Here's another way to look at it: If you've ever been in love, you know what it means to have this sort of laser-like focus on the object of your desire. You stopped at nothing until you won the love of the one you desired. It's time for you to reclaim that sort of passion for your business. I know you have what it takes to make a change for the better. How? Because you've continued to read this far. I know you want to return to that passion you had on Day One of your business. You want to pull your business out of the financial, emotional, and creative doldrums and drive stronger profits, a healthier corporate environment, and a culture of innovation. 30

Despite skeptical employees, friends, or even family members who are ready to write the epitaph for your business, your commitment to make it into something special again is the most important asset you can bring to the table. And it's this asset that, in the end, will help you see the way forward. Running a business is not an exercise in fatalism. You have choices. And how you choose matters. Just ask Scrooge, who makes this point to the Ghost of Christmas Future in Dickens' timeless classic A Christmas Carol:

“Men’s courses will foreshadow certain ends, to which, if persevered in, they must lead,” said Scrooge. “But if the courses be departed from, the ends will change. Say it is thus with what you show me!”

I think Scrooge happens to be right on the money. Ready to be like Scrooge? Then let's start imagining.

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3. Making beautiful music The place was London and the year was 1742. A 56 year-old organist shuffled, lost in the crowd and lost in thought, back and forth to his home on Brook Street. He had talent, but his performances weren't blockbusters, his debts were piling up, and he knew he faced the very real prospect of being thrown into debtor's prison. All hope seemed lost until two events conspired in his favor. First, one of his affluent friends, Charles Jensen, gave him a libretto, a collection of Bible verses that told the life of Jesus Christ. Then a charity in Dublin asked him to compose a symphony to be performed to raise funds. Little did he know it, but within a year's time he was to be famous. Inspiration took hold, and he did not leave his house for three weeks. Knitting together the verses in the libretto to tell a story in music, he rarely even left his room. His food, prepared 33

and delivered by a faithful manservant, went virtually untouched. He wept because of the intense emotions he experienced. He heart was racing. He wrote the notes on paper as fast as he could. He was caught up in a frenzy of creative activity. Three weeks later, he was finished with his composition, all 260 pages of it. When he tried to explain what those three weeks were like for him, he could only say, “whether I was in the body or out of my body when I wrote it I know not.”19 One of his biographers, Sir Newman Flower, described the finished product as “the greatest feat in the whole history of music composition.” The king of England attended the first performance and was soon standing on his feet, taking the rest of the audience with him. Later, when Haydn heard it, he wept aloud and exclaimed, “He is the master of us all!”20 The composer? Handel. The composition? The Messiah, arguably one of the greatest pieces of classical music in the Western world. The Messiah was the product of a fit of passionate creativity, the result of one man gripped by something that just

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wouldn't let him go. I'm sure you can relate, even if you're not composing symphonies. I know this because you built a company from nothing – you breathed life into an idea and made something tangible, something special. Your baby. Take a few minutes now and remember what it was like in the early days of your company. Think about the glorious madness of those early days. Remember your first account? Remember that overwhelming sense that you were ready to change the world, to make your mark on the industry? What was your Handel experience like? Think for a few minutes about why the company was founded. What was it that you and your colleagues thought you could do better, cooler, cheaper, fill-in-the-blank than anyone else out there? What were the bold plans you had when you opened your doors? Where did you want the company to be in 5 years? 10? 20? Write it all down. Dig through old notebooks, blogs, newspaper clippings, whatever paper trail you left behind, and do whatever you can to go back in your mind to what was happening

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in those early days. Re-read your original business plan. Remind yourself of why your company exists, of all the big goals you wanted to accomplish. Welcome your successes, but remind yourself that your company has a lot of unfinished business. Walt Disney famously said, “"Get a good idea and stay with it. Dog it, and work it until it's done and done right."21 A good idea led to the creation of your company. Have you stayed with it? Have you been dogging it and working it until it's done and done right? Or have you gotten distracted with rules, policies, procedures, office politics, dress codes, tribalism, greed, laziness, cynicism, and so on? There's a term I like to use for that: majoring in the minors. Are you as a company focusing on what's really important? It's not too late to change.

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Part 2: Leading

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4. Mapping the downward spiral Research by Weitzel, Jonsson, and Johnson shows that organizations typically progress through five stages before going out of business.

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Blinded: Inability to see entropy setting in

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Inaction: Not taking corrective action, even when decline becomes noticeable

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Faulty Action: A wrongheaded approach to reversing the decline

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Crisis: Last chance to turn around the company's fortunes; all hope of reversal is about lost

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Dissolution: Company goes out of business22

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Fortunately the first four of these five stages are reversible. How? The most important thing to do is to start asking the right questions. As Anthony Robbins puts it, “Successful people ask better questions, and as a result, they get better answers.”23

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5. A corporate identity crisis When you think of corporate identity, what comes to mind? Mission statements? Employee testimonials? All of those things should come to mind, for sure. But when I did a search for corporate identity in Google in early 2009, most of the top results were related to corporate logos. Yes, logos. A lot of people seem to think that corporate identity is about what goes on the company stationary, and not about its core values. They should know better. Corporate identity is about much more than fancy artwork or even a catchy slogan. It goes to the very heart of why the company exists, even beyond brand. It's the result of extended reflection on one question: What are we all about? For many years Southwest Airlines has been an airline success story. While their competitors suffered operating losses and even went out of business, Southwest turned a profit year after year for more than 30 years. Their secret? According to a 41

team of researchers, part of the reason for their sustained success was that everyone, from the CEO to the mechanics, understood what the corporate mission was. In fact, most of those answering the research questions gave virtually identical answers. Clearly Southwest did an excellent job in articulating their corporate mission. As one author wrote after eight years of researching the company, “high levels of shared goals, shared knowledge, and mutual respect” were key factors in setting Southwest apart from it competitors.24 This is critical because corporate identity is intimately related to corporate purpose. Like Southwest, leading companies understand the importance of understanding their corporate identity. For example, Best Buy has this statement on their website:

We make technology deliver on its promises.

It might surprise some of you that so far we haven't mentioned consumer electronics (although, we just did) because Best Buy is associated so strongly with 42

technology. And don't get us wrong; we love the stuff. It's just that we think technology should serve people, and not the other way around. You might say that we love technology, but we're not in love with technology. Technology makes a lot of promises, and we're here to make it live it up to those promises. For people.25

This is a clear statement of corporate purpose. Best Buy has been successful in a highly competitive consumer electronics because they understand, as a company, that what really matters is not just selling the latest and greatest gadgets at reasonable prices, but making sure that the people who buy and use those gadgets can get the most out of them. This clear statement of purpose helps shape Best Buy's corporate identity. Another example is Staples:

Staples is the world's largest office products company. We're committed to making it easy for our customers around the globe to buy a wide range of office products, including supplies, technology, furniture, and business 43

services. With $27 billion in sales, Staples serves businesses of all sizes and consumers in 27 countries throughout North and South America, Europe, Asia and Australia.26

Staples focuses on making it easy to buy technology. This simple corporate mission statement informs all the company does. My favorite example comes from the online retailer Zappos.com, which was purchased by Amazon.com in 2009:

What are Zappos’ core values? 1

Deliver WOW through service

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Embrace and drive change

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Create fun and a little weirdness

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Be adventurous, creative, and open-minded

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Pursue growth and learning

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Build open and honest relationships with

communication 7

Build a positive team and family spirit

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Do more with less

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Be passionate and determined

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Be humble27

If you're of a certain age, you might not have heard of Zappos.com, but that probably won't be the case for much longer. Since its founding in 1999, Zappos has outmaneuvered JC Penney, Foot Locker and its other rivals to become the world's leading online shoe store. Now they're branching out to clothing, accessories, housewares, eye wear and even electronics. Their CEO, Tony Hsieh, believes that the company's almost fanatical commitment to customer service will take them well beyond shoes:

We just want the Zappos brand to be about the very best customer service and the very best customer experience. Hopefully ten years from now people won't even realize we started out selling shoes online. So we've even had customers emailing asking us will we start an airline or

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run the IRS and we're not going to do any of those things this year, but I wouldn't rule out a Zappos Airlines 20 or 30 years from now that's just about the very best customer service.28

Thus the first question that any company should ask – and keep answering – is this: What are we all about?

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6. Why leadership is risky Not everyone can be a leader, of course. And fortunately, not everyone is. Companies need both managers and leaders. But it's critical to understand that successful companies cannot be led by managers. They must be led by leaders. Sharlyn Lauby, President of ITM Group, makes a helpful distinction between managers and leaders:

Managers

Leaders

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Work within the existing culture

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Create vision and excitement

Maintain existing

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Set a direction

relationships

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Align people

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Plan and budget

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Build new

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Organize and staff

relationships and

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Control and

structure

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problem solve

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Motivate and inspire 29

As John P. Kotter put it in a Harvard Business Review article, leadership is “about learning how to cope with rapid change” by setting direction, aligning people, and providing motivation.30 Risk-taking is what separates great business leaders from also-rans in the business world. Great business leaders understand that taking risks is vital to growing a business. I like what President John F. Kennedy said: “There are risks and costs to a program of action, but they are far less than the long-range risks and costs of comfortable inaction.”31 Perhaps Ray Kroc, the founder of McDonald's, put it most succinctly: “If you’re not a risk taker, you should get the hell out of business.”32 Risk is often thought of as a bad thing, but it depends on what you mean by risk. If by risk one means a reckless leap into the dark without any realistic chance of success, then yes, risk is a bad thing. But if risk means trying something new that has large upside potential, then risk might not be such a bad thing. In fact, it might be vital. The truth is that every venture comes with some risk. 48

Leaders have to understand when risk is a good thing and when it isn't – in other words, they need to understand the value of taking calculated risks. Sometimes the most dangerous thing a company can do is not to take risks, and that's where leadership comes in. Perhaps this is especially true in larger, more established companies, where the 'startup spirit' seems to be long gone. As Neal Thornberry puts it, “Large companies often discover a host of inherent defense mechanisms against creative and new ways of doing business. ”33 Larger companies tend to take fewer risks, which is why up-and-coming companies often overtake them. Notice I said that large companies tend to be more conservative – the qualifier is important. Companies that do have leaders often avoid this hardening of the creative arteries and continue to exhibit a vibrant corporate culture rich in innovation and excitement. Established corporations can benefit from corporate entrepreneurship (also known as intrapreneuring) – ways to regain something of the creative energy that was so white hot in the formative days of the organization but has gradually 49

dissipated or cooled off with the passing of years. If you're married or have been married, you understand that the same thing can happen in marriages, as both people become less focused on passion and more focused on raising children and growing their careers. The good news is that in both marriage and the business world, all hope is not lost. There are any number of ways to restart the magic, to infuse new ideas into an established corporation. One way is to partner with business schools to develop specific training for Clevel executives and other managers in how to think about the business in new ways. Another is to reach tap your customers as a source of new product ideas. This process is what Patty Seybold and others call outside innovation.34 Seybold has an incredibly useful blog of the same name (http://outsideinnovation.blogs.com/) that gives advice and recounts corporate success stories in this growing area.

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7. Looking in the mirror It's a good thing that business consultants and others have paid considerable attention to corporate culture in recent years, but they've done so primarily from an ethical perspective. Really, with all of the corporate scandals in recent years, who can blame them? Corporate culture can kill in other ways, too. It creates and maintains a framework wherein certain activities and beliefs are what the American philosopher William James called a “live option” – meaning that they are more likely to be pursued or adopted than others. You have to know the contours of your current corporate culture, even as you seek to change that culture for the better. So how do you do that? The first thing you need to do is to step outside of yourself and see your corporate culture through the eyes of your peers, customers and prospects. Think of it as

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cultural triangulation – you can zero in on some important insights as you get multiple perspectives. Or, changing the metaphor, you need to look at your business through a lot of mirrors. While mirrors of various kinds have been around for over 8,000 years35, they're still considered a luxury in some parts of the world today. That means some people today live their lives seeing only glimpses of themselves in the blackness of still waters. They never can get a clear view. For example, famed actor Sidney Poitier (Lilies of the Field, In the Heat of the Night, Guess Who's Coming to Dinner), who grew up in the Bahamas, didn't see his face in the mirror until he was 10 years old.36 Mirrors are important because they let us see who we really are – in some cases, literally warts and all! On an automobile, they help us see past our blind spots and gain clarity and perspective on the traffic moving around us. In business, mirrors are held up to you by your peers, customers, and prospects – if only you have the courage to look into them. So how do you find these mirrors? Just ask your peers, customers, and prospects what they think about your company. 52

8. Companies are communities This shouldn't come as any big surprise, but nothing you do at work takes place in a vacuum. Consider these facts: You work for a specific company in a specific vertical market (or several vertical markets), one that is or is not doing well against rivals, one that has a specific corporate culture and one that has a certain reputation in the industry and among its employees. In other words, you are part of a community – or perhaps even a subcommunity, if your company is large enough. A community or subcommunity is just a group of people working together toward a common goal. Communities are all around. There's a European community, an open source software community, and even a LEGO community. Most people are part of all sorts of communities, both personal and professional, even if they don't think of it in those terms.

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Communities can be personal, professional, or both. While I don't want to push this or any metaphor too far, it does seem clear that communities are like organisms because both of them adjust – for good or ill – to changes in their environment. For example, one corporate community might adjust to changes in the economy by producing lower-cost products, while another might decide to focus on higher-cost products because they reason that the wealthy always tend to have money to spend! In either case, the company is adjusting, even evolving, in light of changing conditions in its environment. What makes a community, a company work well? What causes it to suffer? The answer in both cases is the same: People. Jono Bacon, the well-regarded community manager of the Ubuntu Linux project, put it this way:

I am a firm believer that positive culture is largely driven by positive personalities. Communities are vessels of dependent relationships: we have thought leaders for the entire project, sub-communities with their own thought leaders, people who follow those leaders and people who 54

listen to those followers. At each step in the chain we need to encourage positive participation both in the cogs of the machine, but also in the personality and outlook of the those who drive those cogs. It has been an explicit desire of mine in the Ubuntu community to not only ensure that the machine is simple to interact with, but to encourage people to bring their positivity, excitement and enthusiasm to the machine so the community feels like a fun and inspiring environment to be part of.37

Bacon gives us lots to ponder. Just make a quick list of a few of the key phrases in this one paragraph:

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Positive personalities

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Dependent relationships

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Thought leaders

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Positive participation

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Positivity, excitement and enthusiasm

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Do these phrases describe your corporate community? If not, keep reading. I'm sure you've haven't spent hours thinking about the sort of context in which your working life plays out. You've been too busy just trying to put out fires around the office and building the business. Still, it's important to understand what you're up against as you identify needs and try to lead positive change. If you haven't gotten into the habit already, you need to start thinking more strategically at work if you want to get things done. You need to understand more and more about the dynamics of the community – the company – in which you need to operate. This is a vital part of leadership. You ignore this larger “theater of operations” at your professional peril.

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9. Your top performers are ready to bolt when the economy improves I want to be the first to tell you that there are several top performers in your organization — you know, the folks who are constantly coming up with new ideas, selling more to clients than the other guys, etc. — who are on their way out. As soon as the economy turns around and the job market improves, they’re out of there in a New York minute. Their resume is polished, they’ve got recommendations from others in your office and they’re just waiting for the right moment to bolt. Why? There are a number of reasons:

• You don’t show them any appreciation

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• You dismiss their new ideas just because they’re new ideas — or worse, you take credit for them • You make them work 60 hours a week even though you know they have young children • You don’t include them in your social circle • You keep promising them a raise even though you know there’s no money in the budget • You’re a self-involved jerk

I could go on. But the truth is out there: They’re gone as soon as they get a better offer. And if they’re talented, they will get offers. Probably more than one. Probably from your competitors. How can you keep them around once the economy picks up? Try this:

• Apologize • Make amends • Be honest

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• Reconsider at least one of the ideas they had that you dismissed out of hand

Notice that I didn’t say to offer them more money. Why? Because your top people know things are tough (they’ll wait for a raise, though not forever). What they don’t know — at least as of this moment — is that you give a bleep about them or what they’re trying to do to help build the company. So suck it up and make it right. Before it’s too late. You’ve been warned.

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10. What's your sign? I enjoy looking at signs in the storefronts you can see on Main Street in any city or town. Even apart from their colors, lines and shapes, sometimes signs provide an interesting insight into the health of a business. This can give a whole new meaning to the term bad sign. For example, I've seen quite a few signs that boldly proclaim things like Voted Best Mexican Restaurant in 2003 or Voted 9th Best Place to Work. I don't know whether to laugh, cry, or scream when I see these. Think about it: Why hasn't it been voted the best Mexican restaurant since 2003? Has the quality suffered since then? Did it undergo a change in management? I'll keep looking for this year's winner, thank you very much. As for the business that proudly agrees it's the 9th best place to work in the state, is it not just raising the unfortunate

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point that there are eight other companies – maybe even direct competitors – that are even better companies to work for? Words matter. Grammar matters. Even on signs. Don't even get me started on businesses that don't understand when and how to use the possessive – as in 30% off sale in all our store's. Really, it's not that hard to review something before you put it in front of your customers. In fact, a recent study showed that three out of four executives said just one or two typos on a resume would be enough to disqualify a job seeker38 – the same applies with a customer seeker. What's astounding to me is that a signage is one of the things that's easiest to get right, which makes bad signage that much more inexcusable. There are lots other businesses with signs that need attention, and a few minutes online will yield a rich harvest. While I understand the business' need to advertise, signs like these have unexpected consequences – they can expose a lack of attention to detail (especially when it comes to grammar and spelling), contentment with past accomplishments, creative

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stagnation, or all of the above. In many cases the business owners haven't stopped to think about how the sign will be perceived by a customer – does it show the company in the best possible light? I've never walked into one of these shops and asked the owners to explain themselves, but I've been tempted. But my point here isn't to pick on those unfortunate businesses with inadequate signage. Those signs can be easily fixed in most cases. What I want to ask you about is your own personal sign – your 'message' to your employees and customers. What does it look like to a watching world? Your personal sign? No, I'm not talking astrology here. Your personal sign is the you that you put out there in the world. Does it fit with where you want to take yourself and your business? Or is it giving others the distinct impression that you're just going through the motions in life, weighed down by anxiety, fear, uncertainty, hopelessness, etc.? It goes without saying that optimism is vital for any business leader. After all, if you're not excited about the future of 63

your business, why should you expect your employees and customers be excited about it? I'm not saying you ignore reality and place your head in the sand, but I am saying that pessimism, apathy, and anger have a way of spreading like a cancer through an organization, choking off any chance of sustained success. Maybe Loren Gray's right that instead of talking about optimism in business, we talk about resilience.39 Pollyanna doesn't live here. Resilience differs from optimism in that it doesn't tempt individuals to sugar-coat reality. Rather, resilience encourages contingency planning to overcome any potential obstacles that could get in the way of business success. Or, as a resilient person once put it, you hope for the best while expecting the worst. And plan for it. Here's a sign40 that sheds more light on what resilience means:

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At first glance, this sign looks worn and broken – and it is. But if I told you that this sign – and the associated gas station and convenience store – were battered by a tornado that ripped through Twin Oaks, Oklahoma, on March 12, 2006, you'd instead draw your attention to another part of the sign: WE ARE OPEN. In other words, despite the adverse circumstances, the owners of the gas station are proclaiming to their customers (and possibly to themselves) that they'll rebuild and carry on. Before we can look at turning around your business, we have to start with you. No one, myself included, will try to tell you that the business difficulties you're facing are easy. The change you yearn for won't be easy, and in most cases there aren't just-add-water answers. 65

But you have to start somewhere, and that somewhere is with you. What can you do to change the personal sign you're showing to the world?

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11. Signs of zerosum thinking I’ve always been a believer that the best way to gain influence is to share power. This seems counterintuitive to many people in the business world, where their work week is all about playing their cards close to the vest, stiff-arming would-be collaborators (often including their own staff) to keep them in the dark, and generally acting as a human black box. I see this me-me-me attitude again and again. Human beings are just not born sharers. We do share under certain circumstances, especially when we have no choice, but we don’t like it very much. It seems far better to use all the toys in the sandbox — or at least to know that we could use all of the toys if we wanted to. We need lots of practice to break free from this instinct, to let cultural evolution trump biological evolution.

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My son is going through a stage where he refuses to share, and he can’t be reasoned with. (Fair enough, he is 2 years old, but you get my point.) Are you acting like him? In the office are you known as a team player, someone who wants to make everybody better and more valuable to the organization, or do you see the workplace as a zero-sum environment — a realm where one person always ‘wins’ at the expense of others? In truth, there’s enough incipient opportunity for all, if only folks would stop hoarding their toys and start sharing. As the cliche reminds us, there’s no I in team. How can your organization encourage this kind of collaboration? The right software can help, but you need your leaders to show the way by making it clear that, in the words of President John F. Kennedy, a rising tide lifts all boats.

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12. Why your employees work Sirota Survey Intelligence spent 33 years speaking to millions of employees about their work lives, and the results were published in their influential book The Enthusiastic Employee: How Companies Profit By Giving Workers What They Want (2005). The researchers at Sirota found that most employees join a company because they want three needs to be met:

•

Equity: Being treated justly in relation to the basic conditions of employment with respect to: Others in the organization, Minimum personal/societal standards

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Achievement: Doing things that matter (that are important to them) and be enabled to do them well; Receiving recognition for accomplishments and taking pride in them

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•

Camaraderie: Having warm, interesting, and cooperative relations with others in the workplace; Achieving a sense of community, belonging, collegiality41

Moreover, the researchers found that employees are “continuously evaluat[ing] how well the company is doing on: Delivering what was promised when they were a job seeker [and] [d]elivering on what they now need and want as an employee.”42 How is your company doing in these areas? Are these ongoing employee evaluations going to be in your favor? If you've picked up this book, you probably already know the answers. All employees will try for a time to make a difference. It's human nature. They want to find psychological fulfillment at work. In the 1950s American psychologist Abraham Maslow created what he called a hierarchy of human needs.43 The needs form a pyramid, with the most basic needs at the base:

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S elf-actu alization Estee m Lo ve/B e long in g S afety P h ysiolo gical

Maslow's particular hierarchy of needs has been scrutinized, debated and amended over the past fifty years, but no one has refuted or even denied his main insight that human beings – your employees, your colleagues, and yourself – do have basic needs like these as they move through life. Tony Hsieh, the CEO of Zappos, who has been influenced by the work of Maslow and others, concludes that human beings – our employees, peers, and customers – aspire to happiness as their greatest goal, which means that successful corporations must be in the business of facilitating happiness.44

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Pay special attention to the Esteem and Self-Actualization layers of Maslow's pyramid and some of the key words and phrases there: self-esteem, confidence, achievement, respect of others, respect by others, creativity, problem solving. How are you, as a leader, helping your employees achieve or experience those things? Is your company supporting or undermining the psychology of its employees? Are you supporting or undermining the psychology of your peers or employees? This makes a huge difference because companies employ human beings, not robots. Human beings who are faced with a psychologically stultifying work environment tend to react in two radically different ways. Some will just give up trying and resign themselves to their situation because they need the paycheck, which is a psychological need for food and water that's more basic than Esteem in Maslow's hierarchy. As Neal Thornberry writes,

Unfortunately, many CEOs look around their own company, and see very few entrepreneurally-minded folks. Perhaps [these folks] never showed up to work 72

because of their dislike of large company bureaucracy and politics. Or those who did show up were either pushed out or learned to stop pushing. America may love its entrepreneurs, but large companies have a way of eroding their entrepreneurial underpinnings.45

This is bad enough. But perhaps what should worry you even more are those other employees who know they have other employment options and will exercise those options when their current employment situation becomes untenable. Or maybe they already have. As a leader, are you prepared to lose – or continue to lose – your best people to the competition without a fight? You can't turn your business around without your employees. They helped you build your business, and they're the only ones who can help you save it.

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13. An easy way to measure business success How can you tell which companies are going places and which ones don't? That's one of the easier questions to answer: Just ask their employees. Or, failing that, sit among the employees for a week, just listening and observing. What do you observe? Is there joy there? Passion? Commitment? Or are employees swept up in turf wars, fears about job security, and petty grievances with coworkers? The truth is, when there's a lack of passion in a company, it becomes the worst-kept secret among employees. Indeed a lack of leadership creates a giant sucking sound that can easily be heard by those with ears to hear. It's the sound of employee interest and motivation being drained away until high turnover – or, worse, apathy – infects the organization like a cancer. Today a whopping 77% of employees surveyed in the United States are 75

unhappy with their current jobs.46 It turns out that many corporate leaders not only don't communicate with their employees, but many of the employees don't even know the leader's name – and vice versa. A 2006 survey of workers in the United Kingdom revealed that nearly half had never spoken to the company leaders, and a quarter of employees didn't know the leader's name. About half of the employees surveyed said that the company's leaders didn't know they existed. In perhaps the understatement of the year, the lead researcher said, “This apparent anonymity could be hindering business growth and damaging staff motivation.” Again not surprisingly, a majority of employees said that if they had a better relationship with the company's leaders, they would be more motivated and the company would grow.47 The opportunity cost of a passion vacuum in your company grows with the speed and power of a compounding lack of interest. Soon the word whatever appears on the lips of cynical and jaded employees, who quickly become skilled in doing what they think managers want, rather than what's best for the health and growth of the business. That trend is the kiss of death for any 76

company if left unchecked.

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14. Welcome back, boss Your employees want you back. You know, the old you, the fun you, the creative you. The you that made them want to come to work. The you that made your company a place where ideas took flight. The you that made them want to be better, to be more creative, to be more passionate than they ever thought they could be. Somehow, though, you lost your mojo, and your employees know it. Some are mourning the change, some are angry, and some feel betrayed. Your role as a leader is to cast a vision for the company, even in (or especially in) companies with a so-called “flat” organizational structure. Leaders still set the tone for a company, sending important signals up and down the corporate food chain about how things are to be done. “Leaders who create job assignments, work environments, and visions help employees be

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both competent and committed to their work.”48 Today a majority of companies suffer from a lack of leadership. Boy, that sounds like a provocative statement designed to sell more books, doesn't it? Could it possibly be true? Consider this: In a recent survey of 800 executives conducted by The McKinsey Group, a whopping 77% of respondents said their company had no formal strategic planning process. This means that nearly 8 out of 10 organizations rely on ad hoc methods to move their business forward. If they're not driving the strategic planning process, and therefore not giving direction to managers and staff, just what are the leaders doing? I think the obvious answer is that leaders who don't lead really aren't leaders at all. One area where the lack of leadership is most glaring – and yet most needed – comes in the area of strategic planning. Strategic planning is the process by which companies lay out their road map for continued business success. Whether it's the road less traveled or a well-worn path, a strategic plan shows how a company will head toward a destination – introducing new products, growing revenue, and gaining market share along the 80

way. The good news is that in the one-quarter of companies where leaders do lead, a full 79% of executives in those companies said they were happy with their corporate strategy. The McKinsey researchers also found that companies which actively tracked the results from their strategic initiatives were much more likely to have buy-in from their executive team.

René Dye, a senior practice expert in strategy in McKinsey’s Atlanta office, could only draw one conclusion from the research. "We are not convinced that companies do a good job of articulating that they know what they want to achieve.”49 McKinsey's research supports the findings of Ferdinand Fournies, whose book Why Employees Don't Do What They're Supposed To and What You Can Do About It became a New York Times bestseller a decade ago. Fournies, a management consultant, interviewed 25,000 managers to understand what it takes for employees to perform at their best. One of his key findings is that employees need to know what's expected of them. Employees who go into work every day without a clear job description and set of expectations tend to experience higher 81

levels of stress and job dissatisfaction. In a word, leadership is more important than ever. As Stever Robbins wrote:

What you don't say may be sending as loud a message as what you do say. If you don't give praise, people get the message they're unappreciated. If you don't explain the rationale behind decisions, the message is that you don't trust them. And if you don't tell people where the company wants to go, they don't know how to help it get there.50

The leader is the quarterback, the pitcher, the point guard. He or she calls the plays, draws up the blueprint for success and personally sees to it that everyone else on the team buys into the vision. A leader is a teacher, a mentor and a visionary who employees gladly want to follow. He or she is approachable and accessible, not squirreled away in an office, protected by layers of gatekeepers. In the end, a leader not only expects great things to happen, but he or she works alongside their employees to make it 82

happen. As Christina Bielaszka-DuVernay, editor of Harvard Management Update, put it,

People accomplish the most when they have a clear set of objectives. It follows that any group's first order of business is to write down exactly what it hopes to achieve. The person who asks the question "Can we start by clarifying our goals here?"--and who then assumes the lead in discussing and drafting those goals--is automatically taking a leadership role, whatever his or her position.51

Here's what your employees are asking themselves: What are we trying to accomplish? Can we get the magic back? You'd better have good answers.

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15. A cautionary tale Problems can affect the most powerful of companies. And sometimes the bigger they are, the harder they fall. Consider the case of Cisco Systems at the end of 2000, just as the dot-com bubble was in the process of bursting. The company had enjoyed over a decade – over 40 quarters – of growth, and everyone in the company expected the good times to last forever. Who could blame them? Valued at over $500 billion in March 2000, Cisco was for a short time the most valuable company in the world – bigger than General Electric and General Motors – and it had been voted the IT company of the decade of the 1990s in recognition of the firm's meteoric growth. So, true to form, Cisco forecast 50% annual growth for 2001, and CEO John Chambers famously told investors in December 2000, "I have never been more optimistic about the future of our industry as a whole or of Cisco."52

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But economic storm clouds were gathering, and the bottom dropped out of the tech market in 2001. “When the NASDAQ index peaked at 5,132 on March 10, 2000, it stood more than 500% above its level on August 9, 1995, the day of the Netscape IPO. By September 23, 2002, the NASDAQ closed at 1,185.”53 Cisco's stock dropped 88% in 2001. In what seems, at least in hindsight, to be an absolutely stunning oversight, the company's much-vaunted, computer-based models of supply and demand did not account for the possibility that its customers and suppliers would suddenly not have the financial means to buy Cisco products. When in 2001 Cisco's customers did start to scale back their purchases of Cisco equipment and Cisco's suppliers pressed for better deals, Cisco was caught short. Saddled with $2.5 billion in unsold inventory, Cisco posted its first-ever quarterly loss in April 2001.54 Cisco was hardly alone. During the heady days of the dotcom boom in 1999 and early 2000, Web-based companies proliferated and made millions by going public. As a few

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detected at the time, but many saw afterwards, most of these dotcom companies lacked solid business models and quickly burned through their venture capital, forcing them to either quickly reinvent themselves or close altogether. It's estimated that the dot-com bubble crash wiped out $5 trillion in market value of technology companies from March 2000 to October 2002. “The 18-month decline of stock prices resulted in $4.4 trillion of market value loss – including $1 trillion in Silicon Valley's 150 largest companies. It was the largest stock market collapse in the history of industrial capitalism.”55 Why wasn't Cisco able to see that the market for its products was crumbling at the very same time the company's leaders were anticipating huge profits? It comes down to human nature. It turns out that even when they're running major corporations, human beings don't like to give up cherished myths. As sociologist Diane Vaughan wrote about NASA's activities leading up to the 1986 Challenger disaster, people

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may puzzle over contradictory evidence, but usually succeed in pushing it aside--until they come across a piece of evidence too fascinating to ignore, too clear to misperceive, too painful to deny, which makes vivid still other signals they do not want to see, forcing them to alter and surrender the world-view they have so meticulously constructed.56

The business literature is filled with examples of how this resistance to change has caused the downfall of many once-great organizations. There, of course, are examples of companies that have responded to technological change and thrived as a result, but this tends to be the exception rather than the rule. One could cite Microsoft, which due to the leadership of Bill Gates, took on then-market leader Netscape in the Internet browser category in 1995 and eventually claimed market dominance for its competing Internet Explorer browser. IBM is another example, being that extremely rare IT company to move successfully from the

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mainframe era to the mini computer era to the personal computer era and now to the Web 2.0 era. Another example is Xerox, who went from #21 on the Fortune 500 in 1990 to $300 million in losses in 2000-2001 to more than $1 billion in profits in 2007 under CEO Anne Mulcahy.57

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16. Why your company will fail Research done by Jagdish Sheth, the Charles H. Kellstadt professor of marketing at the Emory University’s Goizueta Business School, finds that the average lifespan of corporations is 14.5

years – and declining. At the risk of stating the obvious, this means that most of

the corporations you see around you will not be there in the next generation, and even fewer will survive for two generations. To illustrate this point, consider that only 71 of the 500 companies listed in the inaugural 1955 Fortune 500 list were on that list in 2008.58 Conversely, many of the companies on the Fortune 500 list today didn't even exist back in 1955. From his research Sheth has identified a number of reasons why companies fail.59 There are two categories of reasons – those that are largely or completely outside the company's control – including regulation, deregulation and unexpected

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events like 9-11 – and these reasons that are within the company's control.

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17. Status quo management has got to go During my career as an individual trying to lead change from in the trenches, I'd frequently bump up against policies, procedures, and technologies that seemed designed for a bygone era in the company's history. Jagdish Sheth points out that this is typical of struggling companies. A quick story: I'll never forget, when I worked on an IT project for a state health agency in a northeast state in the mid 2000s, I walked through the office and saw typewriters. Sadly, they weren't for decoration! There was probably a state contract out with a service company, as well as with another outfit to supply the ribbons. Change can be really difficult, even if it is beneficial.

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I'm sure most of us have been curious or frustrated enough with the inanity of a policy or procedure at work to ask our manager (respectfully) why that policy or procedure is something the company mandates. That elicits one of two responses: either a very defensive, “Well, we've always done it that way, so get back to work and stop asking so many questions,” or a more perplexed, “You know, no one's ever asked me that question before. Now that I think about it, I'm not sure why we do that.” Which response will you have next time you're asked this question? And, more importantly, which actions will you take?

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Part 3: Competing

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18. Don't get drunk on success As Jagdish Sheth notes, General Motors is the poster child for this particular form of inebriation, though there are other, lesserknown examples. In the case of General Motors, it was the world's topselling auto manufacturer for a stunning seven decades, from 1931 to 2007, when it was surpassed by Toyota.60 However, the company lost $80 billion from 2004-2009. A look beneath the sales numbers revealed that GM was losing market share for decades. As a 2009 White House report indicated:

GM has been losing market share slowly to its competitors for decades. In 1980, GM’s US market share was 45%; in 1990, GM’s US share was 36%, in 2000, its

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share was 29%. In 2008, its share was 22%. In short, GM has been losing 0.7% per year for the last 30 years. 61

What happened? There are many reasons for the decline of General Motors, most of which are well documented. First there was the company's product quality, which was perceived by both customers and industry observers to be inferior to that of their German and Japanese competitors. Furthermore, GM continued to build large cars in the 1970s, even though consumers were gravitating more and more to smaller, more fuel-efficient imports. Then, in the early part of the 21st century, GM failed to anticipate the popularity of SUVs, and by the time it did change course, gas prices spiked and left GM with large amounts of unsold inventory. By 2007, the once-dominant company had been surpassed by Toyota in global auto sales, and its 2008 sales slumped a further 21 percent.62 When the global economy suffered a significant recession in late 2008, General Motors' financial position became untenable and it filed for bankrputcy in 2009. Emerging from bankruptcy in

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the summer of 2009, General Motors resolved to make more cars consumers wanted to buy, including more hybrid and electric vehicles. In perhaps the understatement of the year, in July 2009 the new chariman of General Motors conceded, “I think one of the things that G.M. has not done very well is change quickly.”63

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19. Who are your competitors? The primary competition for the New York Times is not the New York Post. The primary competition for NBC is not CBS. This might sound obvious, but it has taken 'old' media some time to develop a clear understanding of the competition they face from cable networks and the Internet. The first decade of the 21st century has seen many newspapers either close or dramatically scale back content and circulation. The old ideal of a two-newspaper town has been replaced by a barely-one-newspaper town. The number of people reading the news has actually increased, but these readers are going online to read up-to-the-minute news from all around the world – often free of charge.64 Advertisers, seeing news readers going online, have cut back their print advertising efforts and focused more of their ad dollars online. While the recession that began in late 2008 slowed the online ad spend, no serious

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industry observers expect print newspaper advertising to make a serious comeback. Once a profitable business that newspaper magnate Rupert Murdoch described as “rivers of gold,” print newspapers have now become relics. As early as 2005, Murdoch noted that he doesn't know “anybody under the age of 30 who has ever looked at a classified ad".65 (I always find it quaint to see aging Baby Boomers picking up a hefty Sunday Boston Globe or New York Times at the local supermarket.) In a 2007 letter to shareholders, famed investor Warren Buffet wrote that the "fundamentals are definitely eroding in the newspaper industry" and predicted that the "skid will almost certainly continue."66 In Buffet's estimation, newspaper executives "were either blind or indifferent to what was going on under their noses," though he noted that that's changed – albeit too late. Now these executives are aware that newspapers are "constantly losing ground in the battle for eyeballs" and are at a loss to stop the bleeding. Some have suggested the only way for newspapers to be viable is to become non-prpfit entitites, like NPR, the BBC or

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the Christian Science Monitor.67 Buffet himself concludes that print newspapers could only thrive in a pre-cable and pre-Internet era: "Simply put, if cable and satellite broadcasting, as well as the internet, had come along first, newspapers as we know them probably would never have existed."68 The Economist is right that “newspapers have the most to lose from the [I]nternet” – if they don't move aggressively online and find ways to get on sound financial footing69 The potentially good news for the news industry is that overall online newspaper readership is continuing to trend upwards. According to a 2009 report from the University of Southern California's Annenberg Center for the Digital Future, “Internet users read online newspapers for 53 minutes per week, the highest level thus far in the Digital Future studies. In contrast, Internet users in 2007 reported 41 minutes per week reading online newspapers.”70 Related research shows that “teens are more interested in news than any generation we’ve seen in a long time, only now online sites are their news sources. ”71

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Television news has also undergone a sea change as emerging markets have developed. Most of us are old enough to remember the days when there we three major television networks – NBC, ABC and CBS. For decades, when Walter Kronkite signed off his evening newscast on CBS with “and that's the way it is,” most Americans believed him. The advent of 24hour-a-day cable news networks in the early 1980s, beginning with CNN and then MSNBC and Fox News Channel, changed the rules of the TV news game forever. With greater choice, viewers have been abandoning the traditional nightly news broadcasts on NBC, ABC and CBS for their challengers on cable. According to Nielsen, and reported by the Pew Project for Excellence in Journalism, between 1980 and 2008, “nightly network news viewership has fallen 53%, ratings have fallen 61%, and share 64%.”72 Viewers are also watching reading and watching more news online. Before you scoff at the 'old' media's slow response to the 'new' media, consider your own company's or industry's situation:

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Do you have your own blind spots when it comes to emerging competitors? No industry is safe. Watch your back.

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20. How Barnes & Noble missed Amazon.com According to Jagdish Sheth, competition from non-traditional competitors can change the rules of the game. This happens more than one might think. Consider Barnes & Noble, which reacted slowly to the sea change in the book business brought about by Amazon.com. Later Barnes & Noble rallied, but it has certainly felt the impact of its main rival. According to Business Week, as of July 2009, “The number of physical stores operated by the company, along with those of Borders and Books-a-Million, shrank by 19% between 2002 and 2008. Barnes & Noble’s stock is worth less than half what it was in March 2006, before a recession stifled the book-buying public.”73 Amazon.com opened for business in July 1995, with barnesandnoble.com doing the same two years later. By gaining 107

first-mover advantage over its larger, more established rival, Amazon.com quickly became synonymous with online bookselling. As Amazon cut retail prices and developed increasingly sophisticated online tools – one-click ordering, customer reviews, etc. – consumers began to spend more and more of the dollars they used to spend at Barnes & Noble with Amazon.com. But even while Barnes & Noble struggled to keep up with the new rules of the book game set down by Amazon.com, their rival upped the ante with e-books and their popular Kindle ebook reader. Now Barnes & Noble is set to compete with Amazon.com in e-books, sales of which, according to the Association of American Publishers, grew to $113 million in 2008, up 69% from the previous year.74 Still, many analysts, including Forester Research's Sarah Rotman Epps, believe that the overhead carried by a bricks-and-mortar business like Barnes & Noble will make it that much more difficult for them to compete against an entrenched online-only player like Amazon.com.75 If Amazon.com is to get some serious

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competition, it might come from a fellow online titan like Google, which is said to be entering the e-book space in the near future.76

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21. Count your (business) costs “Good companies accumulate costs during the growth cycle and are unable to reduce it in tough times,” writes Jagdish Sheth. Consider the differences between clicks-and-mortar (online/offline retailers) and pure e-tailers. Many researchers have shown that e-tailers have several distinct advantages over brick-and-mortar stores, most importantly price and selection.77 This is why most of the old brick-and-mortar retailers have morphed into clicks-and-mortar retailers in an attempt to combine the benefits of an in-store shopping experience with the benefits of an online shopping experience. Unfortunately, the 'mortar' piece of the clicks-and-mortar equation – all those hard and soft costs required to operate physical stores open to customers – puts such retailers at a competitive disadvantage from a cost perspective. Jeff Bezos, founder of e-tailing giant Amazon.com, was insistent that the secret to the company's success would be

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providing customers a combination of better discounts and wider selection on the books they purchased.78 What can your company do to reduce operational expenses? Leaner companies tend to win over time, just like fit athletes outplay the armchair athletes.

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22. Go where the customer value is Jagdish Sheth writes, “Technology advances with superior performance-cost ratios provide better customer value.” Read some early coverage of online shopping in the mid 1990s and you'll realize just how far online retailer Amazon.com and e-commerce in general have come. Here's an example from Fortune in February 1996:

But do consumers love the Web? According to Jupiter Communications, a research firm in New York, in all of 1995, more than eight million of us Webheads spent a paltry $132 million buying things there, hardly a drop in the $57 billion home-shopping bucket. Not to worry, say digerati. Online retail will presently achieve that great marketing satori known as a "positive feedback cycle," in which a growing number of users inspire a growing

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number of merchants to offer a growing abundance of goods and services online, attracting even more consumers, and so on. It happened in the early days of radio and TV, we're told. Just give it time. … It seemed to me that the perfect merchandise for sale on the Web would be items that are hard to find in local stores--unusual CDs and backlisted books, say. Indeed, the Web's numerous CD outlets offer a broad selection at acceptable prices. Similarly, some bookstores on the Web are useful, especially for those of us who despair of finding a knowledgeable salesperson at the local B. Dalton. The Amazon.com booksite (http://www.amazon.com), for example, will keep a record of your reading preferences, suggest books, and alert you by e-mail if there's something new by an author you like. You order right online. But like much on the Web, Amazon is a good idea executed poorly: When I told it I liked suspense novels by David Ignatius, the

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suggestions turned out to be no-brainer references to bestsellers in the same genre.79

This just goes to show what most of us have learned by now: the effect of technology, and the Internet in particular, is difficult to predict. One also could make the case that the Internet and the advent of “cloud” computing is challenging the traditional model of software delivery. Now, rather than having applications 'live' on a company's own hardware (servers and desktops), it can live in a central location on the vendor's hardware. Already applications such as Salesforce CRM, Zoho Office, and Google Docs provide organizations with ready access to enterprise-class applications without the added time and trouble of servers, installation, security, and upgrades. While there have been some concerns raised about uptime, data security, and data ownership, these are being addressed as the market matures. Already large clients, including the City of Los Angeles, are weighing the costs

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and benefits of using cloud-based software applications such as Google Docs.80 what are your performance-cost ratios? Maybe it's time to have a long talk with your IT department.

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23. No waffling: Waffle House gets their customers Every so often a press release gets to me. I felt moved to comment when I came across this press release from Waffle House:

In celebration of National Waffle Week, each Waffle House(R) restaurant will name its top 20 Customers. More than 31,000 Customers will be recognized nationwide during the week of September 6-12.81

Why would the Waffle House do this sort of thing? Simple:

“Waffle House restaurants wouldn’t be the phenomenon it is today if it weren’t for our wonderful customers,” says Waffle House President 117

Walt Ehmer. “This is just one of the ways for each restaurant to thank many of its Regulars.”

Waffle House is a great example of a company that understands the value of its customers. It might seem like a truism that customers are vital to the health and growth of a company, but try this exercise: Flip through your last week’s worth of bills, and ask yourself how many of those companies really go the extra mile to tell you they value your business. What’s the percentage? 80%? 60%? 20%? If you lead an organization, what can you do to overdeliver to your customers this month? Then, most importantly, follow up again and again by delivering great customer experiences. Tie it into a viral marketing campaign. In today’s corporate world, you’re only going to get ahead by working with your customers, not by kicking sand in their faces at every opportunity.

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24. Zappos.com: A labor of love I enjoy reading interviews with successful people. One of my favorite people is Tony Hsieh, the CEO of Zappos.com. His company, as you know, was just bought by Amazon.com. There’s a nice piece on Zappos.com in a recent New Yorker. Here are a few takeways: 82

The Customer Loyalty Team, or C.L.T., is the nerve center of Zappos, whose thirty-five-year-old C.E.O., Tony Hsieh, has earned a zealous following by imposing an ethos of live human connection on the chilly, anonymous bazaar of the Internet. Takeaway: Make the Internet warmer and fuzzier, since it can be an anonymous, un-human place. [Hsieh speaking] “Eventually, we’ll figure out a way of spreading that knowledge to the world in general, and that has nothing to do with selling shoes online,” he told me after I visited the company over the summer.

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Takeaway: Zappos.com has never been about shoes. Your company isn’t really about whatever you sell, either — it’s about making customers feel special. A C.L.T. manager named Jane Judd, her eyes damp, described a Q. & A. session she had heard Hsieh conduct with some visiting Time Warner executives. “Our service isn’t everything it could be,” he’d said. “If we didn’t have to think about cost, the reps would personally get on a plane today and deliver that box.” Takeaway: Zappos.com isn’t resting on their laurels. It’s all about their customers.

“I’ve never been into shoes—and I’m still not,” he said. Zappos has begun to expand from shoes, as Amazon did from its base of books, into other categories of merchandise: handbags, clothes. “Kitchenware, housewares, whatever,” Hsieh said. But he’s not really interested in those things, either. “I much prefer experiences to stuff,” he said. Takeway: Selling experiences trumps selling stuff.

“For any company or movement or religion or whatever, if there’s one person that personifies it then that puts that company or vision at risk, if the person, say, dies,” he said. “What’s gonna happen to Apple if something happens with Steve Jobs? That’s why it needs to be about a movement, not about a person or even a specific company.” Takeaway: It’s not about you, it’s about your vision living on when you move (or pass) on.

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25. Customer coups d'etats Jay Goltz, a small businessman from Chicago, wrote recently in the New York Times that customer service is a problem for businesses and consumers. Here's what he wrote:

I don’t think many people would disagree that customer service is not what it used to be and not what it should be. Many people blame it on a particular generation, and others see it as just another example of the decline of civilization.83

Goltz argues that there are three basic reasons for bad customer service:

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Constant churn of part-time staff companies hire to avoid having to pay them expensive health insurance benefits 121

•

A price-crazy retail sector and near-constant sales that make it hard to properly gauge proper staffing levels

•

A lack of true merchants in the stores who happen to like working directly with customers

Kicking sand in the faces of customers has never been a good thing, but now the stakes are even higher. Why? Two words: the Internet. More specifically, all the social media sites. Social media sites – Twitter, Facebook, LinkedIn and the like – can quickly become your worst enemy if you run a business. Well, not if you run a business where you put the customer first. But if you run a business where you treat your customers like dirt, your reputation will

soon be mud all over

the Internet. This is because, according to the Nielsen Global Online Consumer Survey, “90 percent of the respondents said they trust recommendations from people they know, while 70 percent said they trusted consumer opinions posted online.”84 The old conventional wisdom was that one disgruntled customer would tell ten of their friends, but with the massive

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reach of social networks, a bad experience that a company doesn't resolve could be blasted out to thousands or even millions with a few clicks of the mouse. Couple the proliferation of choices for almost any product or service with the rapid spread of reviews (pro and con) about those products and services, and clearly there's no place for companies with poor products and services to hide. The rules of the game have changed dramatically in less than a generation. In 2007 and 2008 Comcast, the U.S. Cable giant, was getting quite a bit of grief from customers who were using a new microblogging tool called Twitter to complain about Comcast's bad customer service. Like lots of other large corporations, Comcast was slower than its customers in realizing how powerful a force Twitter was in sharing short bits of information, so for months the company continued – almost unknowingly – to be the victim of tweets (Twitter posts) about how bad Comcast's service was. Then one day, working outside official Comcast channels, a customer service rep at Comcast named Frank Eliason set up a

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now-famous Twitter account called ComcastCares. From that account he began replying to complaining customers and following up with them until their issues with Comcast were resolved. Over the space of a few months, Comcast began to develop a new reputation for improved customer service. Suddenly the bad press became good press, and Eliason himself became a Web 2.0 celebrity, getting ink in publications such as Business Week.85 Now many companies are providing at least some customer service through popular social networks like Twitter. I tell this story because its leads nicely into a few questions about your customers. Why is customer service so important? Because you can't turn your business without happy customers, and your can't make your customers happy without providing them exceptional service.

Customers are constantly judging companies for service failures large and small, from a glitch-ridden businesssoftware program to a hamburger served cold. They judge

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the company first on how it handles the problem, then on its willingness to make sure similar problems don't happen in the future. And they are far less forgiving when it comes to the latter. Fixing breakdowns in service – we call this service recovery – has enormous impact on customer satisfaction, repeat business, and, ultimately, profits and growth.86

Customer service – which I define as delivering on your promises to customers – is vital to the future of your business. Really there seem to be several reasons why your customers become a problem and not as asset, but they're all related to the fact that your company is not meeting the needs and expectations of those customers – or at least you're not meeting them as well as your competitors. Failing companies refuse to believe that they have a customer service and satisfaction problem – or even worse, they believe in their heart of hearts that their customers are too demanding, too unfaithful, or generally too impossible to please.

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Does any of this ring true in your company? Let me ask you a few questions:

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When was the last time you personally spoke to a customer?

•

When was the last time you sat in on a customer focus group?

•

Do you actively encourage your employees to bring customer feedback into the product development process?

•

Do you have a formal process for resolving customer complaints – or do those complaints, for all intents and purposes, fall on deaf ears?

•

Do you avoid sending out customer surveys because you don't care about the answers?

•

Have any of your five most recent products or services come about largely through customer feedback – or as a result of customer feedback at all? 126

•

How many first-time customers have you had in the last month? Six months? A year?

If you're dissatisfied with your answers, that's great. Not great, of course, in the sense that I'm reveling in your problems, but great because you understand that there is a problem. I believe that many companies fail because those in charge blame everyone but themselves for the problems that afflict their company. And as the old saying goes, pride cometh before the fall.

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Closing words for leaders and managers If you're a C-level executive reading this book, I encourage you to conduct a personal leadership inventory. How are you and your leadership team really doing? What else could you do to be successful in motivating and inspiring your employees? What is your company all about? These questions should be vitally important to you because most of the people reading this book are your employees. Are you sure they're as happy and motivated as you think? Regardless of what you might believe, the odds are good that your company culture is uninspiring, frustrating, and downright irritating – and your employees are looking to you and your leadership team to do something about it. Right now a lot of them are looking for opportunities with your competitors. As if that weren't motivation enough for you, consider that those 129

employees who are looking beyond your organization are some of your best people, folks who would do amazing things for your company if only given the chance. The good news for you is that they're reading this book because they still hold out hope that they can make a difference. Will you let them? Time is running out. If you're a manager reading this book, you might be working in some challenging circumstances. There might be people at your company who you feel are abdicating their responsibility to lead, and you feel the effects of this leadership vacuum. As the old saying goes, manure flows downhill. I hope to show in this book that you can do things to drive positive change from below, especially through your work on various projects. Whether you're a leader, a manager or fill some other role, it's time to look at ways to make companies look and act more like healthy communities of the committed. It all starts when we ask the right questions and then take action.

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Notes

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1http://www.businesswire.com/portal/site/google/? ndmViewId=news_view&newsId=20090826005585&newsLang=en

2http://online.wsj.com/article/SB124864862273182247.html? mod=googlenews_wsj 3http://www.accountemps.com/PressRoom?id=2335 4http://www.watsonwyatt.com/news/press.asp?ID=18643 5http://www.accountemps.com/PressRoom?id=2323 6http://www.sirota.com/download.php? file=The_Impact_of_Bored_Employees_Webinar_April_2008.pdf 7http://www.accountemps.com/PressRoom?id=2182 8http://www.krauthammer.com/Docs/Content/File/com/pr/PR-E-KrauthammerObservatory-0407.pdf 9Cited in http://online.wsj.com/article/SB115922723166973676.html 10http://hbswk.hbs.edu/archive/5289.html

11Cited in http://www.entrepreneur.com/encyclopedia/businessstatistics/article81978.html 12http://www.enthusiasticemployee.com/documents/Sirota_Myths_and_Findings_305. pdf 13http://www.newsweek.com/id/75708 14Quoted in B. Hoffmann (with H. Dukas as collaborator), Albert Einstein: Creator and Rebel (New York: Viking, 1972), p. 7. 15http://www.entrepreneur.com/homebasedbiz/article200730.html 16http://classics.mit.edu/Plato/theatu.html 17http://online.wsj.com/article/SB119844629771347563.html#mod=loomia? loomia_si=t0:a16:g2:r1:c0.327968:b19442763 18Cited in R. Gartner, Kernels for Structured Data (Singapore: World Scientific Publishing Co., 2008), p. 55. 19Quoted in P. Kavanaugh, Spiritual Lives of the Great Composers. Rev. Ed. (Grand Rapids: Zondervan, 1996), p. 30. 20Ibid. 21http://www.disneyfreelibradreamer.com/walt/quotes.htm 22 http://www.jstor.org/stable/4165018 23Quoted in M. Shonka and D. Kosch, Beyond Selling Value: a proven process to avoid the vendor trap (Chicago: Dearborn Trade Publishing, 2002), p. 100. 24Cited in J.H. Gittel, The Southwest Airlines Way (McGraw-Hill Professional, 2005), p. xiv. 25http://www.bestbuyinc.com/about/ 26http://www.staples.com/sbd/cre/marketing/about_us/index.html

27http://about.zappos.com/our-unique-culture/zappos-core-values 28http://sxsw.com/node/1475 29http://www.itmgroupinc.com/DOCs/The%20Importance%20of%20Leadership.doc 30http://harvardbusiness.org/hb-main/resources/pdfs/comm/microsoft/what-leadersreally-do.pdf 31http://kennedy.thefreelibrary.com 32http://en.wikiquote.org/wiki/Ray_Kroc 33http://www.babsoninsight.com/contentmgr/showdetails.php/id/97 34http://www.psgroup.com/books_oi.aspx 35 http://www.optvissci.com/pt/re/ovs/pdfhandler.00006324-200610000-00017.pdf 36http://www.npr.org/templates/story/story.php?storyId=104305795 37http://ostatic.com/blog/talking-community-with-ubuntus-jono-bacon 38http://www.accountemps.com/PressRoom?id=2491 39http://harvardbusiness.org/product/staying-positive-without-the-illusions/an/U0309BPDF-ENG?N=100003&Ntt=project%2Bmanagement%2BLoren%2BGary 40http://www.morguefile.com/archive/display/110372

41http://www.sirota.com/download.php? file=The_Impact_of_Bored_Employees_Webinar_April_2008.pdf 42http://www.sirota.com/download.php? file=The_Impact_of_Bored_Employees_Webinar_April_2008.pdf 43http://upload.wikimedia.org/wikipedia/commons/5/58/Maslow's_hierarchy_of_needs. svg 44http://jaygoldman.com/2009/03/14/tony-hsieh-zappos-ceo-at-sxsw09/ 45http://www.babsoninsight.com/contentmgr/showdetails.php/id/97 46R. Lussier & C. Achua, Leadership: Theory. Application. & Skill Development. (Eagan, Minn.: Thomson-West, 2004). 47http://news.bbc.co.uk/2/hi/business/4740482.stm 48http://conversationstarter.hbsp.com/2007/11/a_leaders_five_key_stakeholder.html? loomia_ow=t0:a38:g26:r6:c0.053209:b17500496 49http://www.cio.com/article/27093/Employees_Want_Formal_Strategic_Planning_Pro cess 50http://blogs.harvardbusiness.org/hmu/2009/03/seven-communication-mistakesm.php?cm_re=homepage-051309-_-body-left-r4-_-management 51http://blogs.harvardbusiness.org/hmu/2009/02/how-to-lead-when-youre-not-the.php 52Quoted in http://www.fool.com/news/foth/2001/foth010814.htm 53http://ssrn.com/abstract=899100 54http://www.latrobefinancialmanagement.com/Research/Governance/Why %20Companies%20Fail.pdf

55http://ssrn.com/abstract=899100 56http://www.latrobefinancialmanagement.com/Research/Governance/Why %20Companies%20Fail.pdf 57http://www.fortunesmallbusiness.com/2008/04/18/news/companies/enduring_greatne ss.fortune/index.htm 58http://www.fortunesmallbusiness.com/2008/04/18/news/companies/enduring_greatne ss.fortune/index.htm 59http://www.apa.org/divisions/div13/Presentations/Why%20Good%20Companies %20Fail.pdf 60http://articles.moneycentral.msn.com/Investing/Dispatch/Toyota-takes-sales-crownfrom-GM.aspx 61http://www.whitehouse.gov/assets/documents/GM_Viability_Assessment.pdf 62http://articles.moneycentral.msn.com/Investing/Dispatch/Toyota-takes-sales-crownfrom-GM.aspx 63http://www.nytimes.com/2009/08/05/business/05auto.html 64Http://www.dailyiowan.com/2009/04/07/opinions/10897.html 65http://www.guardian.co.uk/media/2005/nov/24/pressandpublishing.business1 66http://www.ajr.org/Article.asp?id=4416 67http://www.carnegie.org/reporter/11/nonprofjourn/index.html 68http://www.ajr.org/Article.asp?id=4416 69http://www.economist.com/displaystory.cfm?story_id=7830218 70http://www.digitalcenter.org/pages/current_report.asp?intGlobalId=43 71http://www.digitalcenter.org/pages/current_report.asp?intGlobalId=43 72http://www.stateofthemedia.org/2009/narrative_networktv_audience.php? cat=2&media=6# 73http://www.businessweek.com/the_thread/techbeat/archives/2009/07/can_ebooks_sav.html 74Cited in http://www.businessweek.com/the_thread/techbeat/archives/2009/07/can_ebooks_sav.html 75http://www.forrester.com/Research/Document/Excerpt/0,7211,54463,00.html 76http://www.readwriteweb.com/archives/is_google_getting_ready_to_enter_the_eboo k_market.php 77On selection, see http://sloanreview.mit.edu/themagazine/articles/2006/summer/47413/from-niches-to-riches-anatomy-of-the-long-tail/. One of the authors has posted a pre-publication version here: http://www.google.com/url?sa=t&source=web&ct=res&cd=1&url=http%3A%2F %2Fwww.heinz.cmu.edu%2F~mds %2Fsmr.pdf&ei=sKSRSvDpOaaltgfiibHPBA&usg=AFQjCNGR_Ib6KIDHynLl_38QwHI2l2KXQ&sig2=VK4M-63u5E6YDsXoZzMnEQ 78Cited in http://collopy.case.edu/mbac423f05/projects/MouseClicks.doc

79http://money.cnn.com/magazines/fortune/fortune_archive/1996/02/05/207341/index. htm 80http://articles.latimes.com/2009/jul/17/local/me-public-records17 81http://www.reuters.com/article/pressRelease/idUS183124+03-Sep2009+PRN20090903 82http://www.newyorker.com/reporting/2009/09/14/090914fa_fact_jacobs 83http://boss.blogs.nytimes.com/2009/08/04/why-customer-service-is-so-bad/ 84http://www.adweek.com/aw/content_display/esearch/e3i0a5fa05df2f2bdcf5aed9ffac3 33bb74 85http://www.businessweek.com/managing/content/jan2009/ca20090113_373506.htm 86http://online.wsj.com/article/SB122160026028144779.html