Читать книгу Nimble, Focused, Feisty - Сара Робертс - Страница 10
ОглавлениеIN SPRING 2004, a few months before the company’s IPO, Google released an 80,000-word prospectus to its current and potential investors. The document opened with a letter from co-founders Larry Page and Sergey Brin.
“Google is not a conventional company,” they began. “We do not intend to become one. Throughout Google’s evolution as a privately held company, we have managed Google differently. We have also emphasized an atmosphere of creativity and challenge.”
And so began a long and carefully constructed statement as to exactly what kind of publicly traded company Google intended to be.
Though the letter was inspired by Warren Buffett’s own approach to talking to his investors, Wall Street had never seen anything quite like it before. Buffett is a legend, and investors hang onto his words like groupies. In contrast, here was a young startup—albeit a very promising one with an exciting IPO in the offing—dictating to investors in no uncertain terms how differently it would think and behave as a shareholder-owned entity.
Bold and refreshing to some, the Google founders’ letter to others was an expression of arrogant immaturity. The phrase “Don’t be evil” struck many in particular as a simplistic take on the way conventional companies generate capital and shareholder value. Yet the “founder’s letter” has become a rite of passage in Silicon Valley in the years since, imitated by other startup CEOs, such as Groupon’s Andrew Mason and Facebook’s Mark Zuckerberg, before their own ceremonial IPO. This is despite sniffs of disdain and outright pushback from the establishment. One commentator in 2012, for example, noted that Zuckerberg in his letter used the word “people” forty-one times in eighty-three sentences and the word “business” only seven times, then proclaimed that reality would soon overcome such idealism. “Whether thrust defiantly into the faces of would-be shareholders or proffered delicately as a corporate heirloom of inestimable value, such epistles are doomed to enter into a slow, painful strangulation as market forces have their way.”1
Why would a company’s founders—on the verge of becoming incredibly rich through the good faith of the investment community—bother to articulate and share thoughts and beliefs that go well beyond—or even contradict—the traditional concerns of business?
For the most part, a prospectus is a dry and technical document, heavy on whatever numbers and calculations support a firm’s approach to a particular way of doing business. The prospectus is written in this way because that is what investors look for when they are trying to assess the firm’s capacity to generate profit, gain market share, execute strategy, and earn shareholder returns. The founders of Google, Groupon, and Facebook, on the other hand, feel that something else—something beyond the numbers—has made them successful to this point and will help them continue to be great destinations for investment capital long into the future.
Note that those founders are not describing their vision or culture but something even deeper and more intrinsic to their purpose. I call this nebulous thing their mindset.
PART CANNON SHOT, PART WEDDING VOW
What is a mindset? The simplest explanation is that a mindset guides the way an organization acts and operates, but that’s almost a throwaway description that does not fully capture the power of the concept. In my view, an organizational mindset is the most intangible and yet critical belief to define because it is intrinsic to the organization’s culture, vision, purpose, values, strategy, and way of acting in the world.
Typically, you can see mindset most clearly in action. Yet, in many organizations mindset can be very confusing because it is not concretely articulated. Indeed, mindset can be particularly difficult to divine in organizations run by traditional CEOs who are not very open about what they actually think and feel. Holding a mindset “close to the vest” may protect a CEO from getting “caught out” whenever the realities of the market trump an ideal or view. If the company is forced to act in a way that’s contradictory to its mindset in a particular circumstance, then no one can call it out on that hypocrisy if the mindset is not clear. Yet, this ambiguity also forces the people in the organization to make guesses about the mindset, which leads to inconsistencies in decision-making and approach. On one day, in one division, the organization may be innovative and willing to bend over backwards for the customer. On another day, and under the purview of a different manager, the organization might be risk-averse or inclined to do as little for the customer as possible to avoid hurting the bottom line. What does the organization really think? Who honestly knows? But chances are you’d better be right when you make a decision or choose a path, or you will be in trouble, even though what is right can be different depending on the situation.
Fortunately for employees, customers, and investors alike, this kind of emotional hostage-taking is becoming less common. Founders like Larry Page, Sergey Brin, Andrew Mason, and Mark Zuckerberg are leading in a very different way by being incredibly clear, upfront, and open about the mindset they value, follow, and wish to instill or drive within their organizations.
I think the impulse to do so formally through a founders’ letter comes from a worry that what made their organization special so far is suddenly vulnerable to outside forces. An IPO, after all, is a transformative event. Other than a merger, I can think of no bigger “natural” threat to the values and culture of an organization. As we saw with Apple in Chapter 1, things can change dramatically when new decision-makers—read “shareholders”—become a de facto part of the leadership of the company. Indeed, those shareholders traditionally have very different priorities and desires that can be at odds with or even hostile to the most cherished aims or cold-blooded strategies of the founders or the management of an organization.
Articulating a mindset in such a public and definitive way is part cannon shot, part personally written wedding vow. It says “Back off!” to those who would challenge the core beliefs of the organization or try to change them. And it says “Let’s go!” to those eager to jump on board.
And while a founders’ letter is written to prospective investors, that cannon shot/wedding vow is aimed as much at people inside the company as outside. In fact, founders like Page and Brin intended the message to hit home not only with the 800 or so employees of Google in 2004, or the 53,000 in 2015, but also the employees of Google who are not even born yet. Page and Brin articulated the Google mindset in such a formal and provocative way because it showed their commitment to those principles forever.
A clearly articulated mindset is characteristic of organizations that understand the critical importance of culture. They do this because, as Google Chairman Eric Schmidt and senior executive Jonathan Rosenberg put it, “culture and success go hand in hand.”2
But the genesis of a culture is the mindset that the founders and leaders bring to the organization. The culture is built, in other words, around the way the organization intends to act and operate, which in turn shapes the organization’s strategy, operating model, and business practices, and drives the decisions that get made.
Nimble, focused, and feisty companies like Google don’t become that way by chance. In this chapter, we’re going to focus on the three mindsets that NFF companies have in common. Specifically, they believe that:
1. Fast is better than big,
2. Possibility is more important than profitability, and
3. Being hungry and “outrospective” is critical.
MINDSET #1: FAST IS BETTER THAN BIG
Companies that are nimble are strikingly different from traditional companies. They believe that being agile, flexible, and flat is essential for success in today’s dynamic world.
In contrast, most organizations in operation today retain the mindset that size, efficiency, and momentum are the formula for long-term competitive advantage. Chances are you work for or lead such an organization. We looked at this archaic belief a bit in chapter one with the Blockbuster story, but there are a thousand more lumbering Blockbusters for every nimble rival—although that’s changing as more dinosaurs find themselves stuck in tar pits.
Companies that believe big is better than fast have organized themselves to maximize efficiency and scale to deliver standardized products and processes to mass markets. This formula for success has largely shaped the world we grew up in. I remember seeing McDonald’s signs change over the years. In the early ’70s, they proudly announced that 5 million people had been served. Today, it’s billions upon billions. And each of those customers has eaten the same food across restaurants that look identical, all over the world. Henry Ford, the father of mass industrialization, was incredibly innovative in so many ways, but his defining difference came from grasping the power of being big in a world of millions of consumers longing for the same product. He built his factories to produce that product cheaply and efficiently—and was so focused on that mindset that he refused to alter his design or even the color of his automobile to meet variations in taste.
How do companies like McDonald’s, Ford, and Blockbuster deliver their products to a mass market effectively? First of all, they learn how to break down the work of the organization into the smallest specific tasks that are so simple that errors and variations have been almost eliminated, then they give individuals those tasks, which they call jobs, and get them to do their jobs in the same fashion, over and over again. They also need a hierarchy in place to assure those tasks are being done correctly. Supervisors oversee workers doing the same task. Silos form around tasks that are similar. Managers oversee workers who are collectively doing a variety of tasks. As the number of different jobs increases, the layers of management expand and grow. The flow of information between those silos and layers is strictly controlled, and everyone must do exactly what he or she is supposed to do for the system to function efficiently. When that happens, scale pays off—literally. Margins do not need to be high in order to accrue tremendous profit in such a system.
Is the work engaging? Probably not, or at least not until you reach a level in the hierarchy that gives you a different kind of challenge—managing people instead of processes or overseeing processes that are more complex and strategic. Does the work require creativity, innovation, or passion? Again, not much until you get to higher levels. Creative impulses on the shop floor could throw a wrench into the works and bring the efficient machine to a screeching halt. On the other hand, in these big-is-better companies there is a lot of creativity needed in the marketing department. It’s necessary, after all, to artfully convince consumers that the same product they can get anywhere—one that is not very different from a product they can get from a competitor—actually is meaningful and desirable enough to buy. Why else would you drink Pepsi and not Coke, drive a Chevy and not a Ford, or fill your tank with one particular brand of gasoline over another? The subtle differences between these products must be branded as loudly and brashly as possible.
Naturally, companies that believe big is better than fast have a bias for unbridled growth. What’s better than a store, gas station, or dealership in every city? Answer: a store, gas station, or dealership on every corner. All growth is good because it leverages efficiencies of process, resources, production, delivery, marketing, etc. Revenues and profits grow incrementally at scale as a result.
In a VUCA world, however, the dynamics of markets, competition, capital, employees, and technology have radically changed the rules of the game. As we discussed in chapter one, a company built to make the same product over and over again will not be able to meet diverse needs, or adapt quickly to changes in the market, or respond with agility to the disruptive innovations of new competitors, or engage younger generations of employees and customers who have different priorities and values. Meanwhile, capital and consumers will be drawn quickly to upstart companies that design better processes or fulfill different needs or bring new technologies to bear. Blockbuster, meet Netflix.
Does it sound strange to hear that Google—the behemoth of the internet—prizes being fast over being big? In fact, Google has gone to great lengths to design a work environment that enables agility and fluidity in all its processes and decisions, and actively encourages informal collaboration over formal organization. Most pointedly, it is fanatical in its resistance to the natural and insidious takeover of the company’s culture by conventional rules of management (which are the default mode for responding to almost any confusion, complexity, challenge, or need, as Netflix noted) and the growth of hierarchical chains of command. Why? Because it believes those forces are responsible for slowing down big organizations and making them more cumbersome, inflexible, and unresponsive while killing innovation, passion, and engagement. These are not ideological or ethical arguments to Google but practical ones. Google believes that a culture built on the mindset that fast is better than big serves its strategic aims and will continue to drive the success of the company for the foreseeable future.
There’s good logic behind that mindset. Google creates products that are highly valued by users and customers, but those products can also be duplicated by rivals and new upstarts. So Google works to sustain product excellence through constant improvement and innovation as a way of fending off the competition. In other words, the same product can’t be produced in the same way over and over again at scale and still be successful. Note that Google relies very little on marketing or advertising to make its case with customers and users. It lets the product speak for itself.
Google encourages people to come up with ideas, innovations, and improvements beyond the task at hand because it believes those unplanned outcomes could potentially be bigger and more profitable than anything Google is devoted to doing currently.
Google also understands, better than most companies, that markets can change overnight. Accordingly, it maintains a looseness around assigned responsibilities that allows employees to do work beyond their job description. Instead of forcing people to keep their heads down and “stick to their knitting,” Google encourages people to come up with ideas, innovations, and improvements beyond the task at hand because it believes those unplanned outcomes could potentially be bigger and more profitable than anything Google is devoted to doing currently.
Fundamentally, this mindset is rooted in a profound understanding of the modern dynamics of markets, of what organizations are capable of doing well versus what they don’t do well, and of how employees are best motivated and empowered to contribute to organizational goals. Google’s founders, Page and Brin, did not come from management or business backgrounds and they saw this as a virtue, not a defect. As creative engineers themselves, they knew what conditions fostered good work from such people. In fact, they looked to academia and the college campus, of all things, as ideal models for the type of organizational looseness they wanted to instill in Google. They believed that Google would only thrive and grow if they were able to “hire as many talented software engineers as possible and give them freedom.”3 So they set out to make Google an attractive center for world-class thinkers who then had the time and space to collaborate in an appealing environment, where interactions could occur frequently and in unplanned ways.
To make this possible, they believed it necessary to “reinvent the rules of management”4 and remove the barriers of hierarchy, budgeting, and industrial-era management and oversight. They were contemptuous of formal planning because they believed it does not promote high-quality outcomes but a kind of stubborn, institutional adherence to an inflexible path. They also abhorred the status that gives workers with seniority and tenure more say than others. In their new hires, Google looked for people who were smarter and more capable than current employees and leaders. Anyone could win an argument as long as the reasoning was persuasive. Management levels were flattened. Top executives were never pandered to, and did not get the distinctively better office with the great view. Instead, space was used in a pragmatic way according to the needs of various projects or teams. Meetings were kept small, spontaneous, and fun. Leaders made as few decisions and exercised as little power as possible. Information was allowed to be free-flowing rather than restricted and directed up the food chain.
Brin and Page wanted a culture of Yes at Google, and they disrupted any force within the company inclined to say No. For example, many of us in corporate America have experienced disappointment when bold ideas and inspiring plans get thwarted, watered down, or made pointless by another division or level of management within the organization. The guiltiest department is typically legal, with finance trailing in a close second. Google saw the typical legal department as too risk-averse and negative to fit within the Google culture, so it hired lawyers who were willing to be creative contributors on business and product teams rather than gatekeepers blocking great ideas.5
The results have been extraordinary. Google has experienced unprecedented growth in a short time. But that growth arc does not resemble the slow and methodical approach of traditional companies. Rather Google is able to embrace a “grow big fast” strategy by identifying and seizing opportunities quickly, mobilizing with agility to take advantage, and achieving scale rapidly. This approach to innovation and growth occurs in an atmosphere characterized by a certain degree of chaos, disorganization, and spontaneity—a complaint or criticism that Schmidt and Rosenberg respond to by quoting race-car driver Mario Andretti: “If everything seems under control, you’re just not going fast enough.”6
MINDSET #2: POSSIBILITY OVER PROFITABILITY
“As a private company,” Brin and Page continued in their founders’ letter, “we have concentrated on the long term, and this has served us well. As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly and market expectations . . . If opportunities arise that might cause us to sacrifice short term results but are in the best long term interest of our shareholders, we will take those opportunities. We will have the fortitude to do this. We would request that our shareholders take the long term view.”
I’d like to think the world is full of CEOs who wish they could act this way, if only Wall Street would let them. But part of me fears that, by the time they’ve scaled the heights of a Fortune 500 organization to become CEO, the pressure to meet quarterly expectations has already thoroughly beaten this spirit out of them. Perhaps that’s why new-economy startup founders, with a touch of naïveté in their tone and bolstered with capital from eager investors, are still plucky enough to think that they will be rewarded and not crushed when they voice such a possibility-over-profitability mindset out loud.
There’s a lingering suspicion about such an attitude. It’s probably inherent in any skeptic from Wall Street or from the managerial profession, but it was certainly exacerbated by the excess idealism of the dot-com boom. Remember when Pets.com was said to be worth more than something like GE and GM combined? Despite generating no revenues, having few customers, and offering little more than an idea, pioneering e-commerce companies were valued many multiples over traditional product and manufacturing companies. No one could really explain why—except to point to the vast untapped potential such companies represented. But no one looked too closely below the surface, either, to see if a viable company existed beneath the hype.
A sickening stock-market collapse provided a correction to such thinking but obscured an important point as a result. The pursuit of possibility over profitability provides distinct advantages when it comes to building an enduring and successful enterprise today. This mindset is key to the focused culture of organizations that are now clearly outpacing traditional companies in terms of real growth.
It is not to say that new-era companies abhor profits. They believe in profitability. But they do not pander to the common shareholder mindset of eking all possible gains in the short term at the expense of long-term growth while in the process short-changing and alienating customers. Instead, companies that believe in possibility over profitability trust that if they make customers extremely happy—indeed, if they exceed their expectations, and not just please them but delight them—this will result in far greater returns in the long run. Accordingly, instead of disbursing short-term profits to shareholders, they reinvest in their own business to foster the incremental and disruptive innovations that will tighten the bond with customers for the long haul. As Mark Zuckerberg wrote in his own founder’s letter: “We don’t build services to make money; we make money to build better services.”7
Companies that believe in possibility over profitability trust that if they make customers extremely happy—indeed, if they exceed their expectations, and not just please them but delight them—this will result in far greater returns in the long run.
Amazon is another powerful example of this mindset. Founder and CEO Jeff Bezos is known as the Prophet of No Profits for his obsessive focus on growth over earnings. This has made Amazon a remarkable success story in the history of American capitalism, amusingly described by Matthew Yglesias in Slate.com as “a charitable organization being run by elements of the investment community for the benefit of consumers.”8 In 2013, Amazon’s net income was a paltry $274 million on sales of $74.5 billion, or less than half of 1 percent. It’s hard to imagine investors of any traditional company tolerating such razor-thin margins. Where are the corners that can be cut, the fat that can trimmed, the unrealistic schemes that can be put off to make Amazon more profitable in the short term? Bezos will have none of it and insists that Amazon’s reinvestment in products and services that delight customers is the best way to go.
As Bezos put it in a letter to shareholders, “Our heavy investments in Prime, AWS, Kindle, digital media, and customer experience in general strike some as too generous, shareholder indifferent, or even at odds with being a for-profit company . . . To me, trying to dole out improvements in a just-in-time fashion would be too clever by half. It would be risky in a world as fast moving as the one we all live in. More fundamentally, I think long-term thinking squares the circle. Proactively delighting customers earns trust, which earns more business from those customers, even in new business arenas. Take a long-term view, and the interests of customers and shareholders align.”9
This mindset leads to a strategy that Yglesias sees as truly formidable. “Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way. And the competitive pressure of needing to square off against Amazon cuts profit margins at other companies, thus benefiting people who don’t even buy anything from Amazon . . . if you own a competing firm, you should be terrified. Competition is always scary, but competition against a juggernaut that seems to have permission from its shareholders to not turn any profits is really frightening.”10
For companies like Amazon, customers are always top of mind. Products and services are created with a laser-like focus on customers’ needs and what they value. Such companies not only try to keep lock-step with their customers as needs evolve, but actually try to stay a step ahead. They’re continually solving for customer problems and opportunities rather than starting with the question of how they might open a new revenue stream. They’re infinitely curious about the consumer and what makes her tick. Their decisions never veer far from those desires or potential desires. They know that they need to move quickly to fulfill those needs because the customer can easily find a better solution or a better supplier if the business can’t deliver.
From a long-term growth perspective, Wall Street ought to be very interested in such a mindset and the strategies that result. Companies like Facebook, Amazon, and especially Google are actively transforming the economy. They’re organized embodiments of creative destruction. They’re category killers and category makers. They destroy products, services, and whole sectors that do not effectively identify and deliver value to consumers, and they reshape or invent sectors that do. Of course, they want to make money from their innovations and performance excellence, but they believe that making money and generating shareholder returns is the cart that follows the horse, not the other way around as traditional companies believe. The horse is the innovation and value. The money is in the cart. And the cart is very, very big.
Google has integrated this mindset into its purpose, operations, strategy, and workflow. According to Schmidt and Rosenberg, Brin and Page began Google with a few simple principles, “first and foremost of which was to focus on the user. They believed that if they created great services, they could figure out the money stuff later.”11 Or as Brin and Page put it themselves in their founders’ letter, “Serving our end users is at the heart of what we do and remains our number one priority.” But as Schmidt and Rosenberg add, this is because they believe that if they focus on the user, “all else will follow.”12
Google makes a great distinction between the user and the customer that’s worth noting. The customer—the entity that gives Google money—is predominantly advertisers, at least in the case of their search-engine services. The user is us—or everyone who uses those services. Google doesn’t believe in pandering to the customer, because it thinks this will deflect from the primacy of the user. The user is the target for value that makes the user Google’s true customer. What will the user want? What will the user value? What will the user be blown away by?
If Google focused only on what its advertising customers wanted, those answers would likely be very prosaic and small. Advertising customers want results in the short term and don’t really care about long-term implications. User customers, however, have a different kind of investment in Google innovation. They want constant improvement and big leaps. They want to do the stuff they do now even better and be delighted by what’s next.
That’s why Google very deliberately divides its innovation efforts along a scale that runs from incremental to big bets. Google openly focuses 70 percent of its work, attention, and resources on continuous improvement of products and services in existence. It knows that it must continue to meet and exceed expectations to fulfill the trust that customers and users have in Google, and satisfy their needs. Then, it devotes 20 percent of its work, attention, and resources to emerging products that are showing some signs of becoming successful offerings. This keeps innovations flowing in the pipeline and getting closer to release. And it devotes the remaining 10 percent of the resources, brainpower, and creativity of Google to long shots, or what Google calls “moon shots”—stuff that’s completely new, very risky, and highly likely to fail.13
How many companies ever do that? Today, innovation is a buzzword and many organizations have enlisted innovation-expert leaders to “drive innovation in the organization” or developed venture-capital wings to seed innovative startups that might strike it rich someday. But that kind of innovation, while welcome, seems divorced or separate from the inherent operations of the company. It may be the worst form of window dressing—the high-tech equivalent of diversity initiatives that don’t truly address diversity needs.
Is 10 percent really enough if Google truly believes in the possibility that moon-shot innovations could change its business and transform markets? Well, Google, as I’ve said, is not averse to using money smartly. It has no desire to throw money wastefully against the wall like a handful of wet spaghetti to see what sticks. It believes that the “cost of experimentation and failure has dropped significantly”14 but also that smaller bets combined with deliberately limited resources forces ingenuity because “creativity loves constraints.”15
At the same time, however, the Google mindset, strongly reinforced by Page and Brin at every opportunity, is always to think big. And not just big, but BIG. Google people talk routinely about “10Xing” their jobs and projects—considering how the project, idea, or launch can produce not just incremental results but results that are ten times what is currently happening. Possibility first. Profitability follows. And in a way, this mindset inures Google to the risk of failure. Because the moon shots are not enormous bets, and because they are aligned with thinking big, there is always limited harm and some good to come out of them. As Page puts it, “If you are thinking big enough, it is very hard to fail completely. There is usually something very valuable left over.” And Google makes sure that everyone knows failure is not an executable offense; failure is to be rewarded and reinforced because it is the only way that gold can be discovered.
This way of thinking is drastically different from the way organizations have traditionally operated. For decades, big companies have had a sharp focus on the bottom line. They strive to maximize quarterly profits, bump up shareholder value, exploit earnings potential, and hit targets and bonuses. Profit maximization has become so entrenched in our way of thinking that we rarely question it, let alone strive to change it. This approach sets up a debilitating construct that can cripple a culture. After all, companies reward and promote those who deliver the best results—executors who can maximize earnings and cut costs—leading to a senior team with a financial-first focus.
In contrast, an orientation toward possibility, or what Carol Dweck, a professor of psychology at Stanford University, calls a “growth” mindset, leads to a very different kind of culture, one that embraces employee empowerment and customer focus. Cultures that embody a “fixed” mindset in which potential is seen as limited are more typical of traditional twentieth-century organizations.
In her research, Dweck and her colleagues asked a diverse set of employees at seven different Fortune 1000 companies whether they agreed with a number of questions. For example, “When it comes to being successful, this company seems to believe that people have a certain amount of talent, and they really can’t do much to change it.” High levels of agreement indicated the company had a relatively fixed mindset, while low levels indicated a growth mindset. Dweck and her team then sought to understand how the organizational mindset influenced employees’ beliefs and behaviors, things such as workers’ satisfaction, perceptions of the organizational culture, levels of collaboration, and innovation.
The results proved that the organizational mindset had a dramatic impact on employee perception. Employees at fixed-mindset companies often expressed less commitment to their companies, thought their companies didn’t “have their back,” and indicated that a handful of “star” workers were highly valued at the organization. These employees were less innovative and collaborative, worried more about failing, and often kept secrets and cut corners.
Growth-minded companies had a more optimistic outlook. Supervisors took a more positive view of their employees, rating them as being more innovative, collaborative, and committed to learning and growing. They saw more management potential in their employees.16
Employees at fixed-mindset companies often expressed less commitment to their companies, thought their companies didn’t “have their back,” and indicated that a handful of “star” workers were highly valued at the organization. These employees were less innovative and collaborative, worried more about failing, and often kept secrets and cut corners.
My point is that inculcating a strong organizational way of thinking around possibility (growth) over profitability (fixed) is critically important to organizational success. It not only affects your strategy and approach, but it actually determines the way your people view your company and one another.
Coming from a fixed view—that what we do as an organization leads to a certain range of profitability and must be pursued in order to drive incremental levels of growth—is exactly the wrong approach. NFF companies come from a different starting point. They ask, “What can I make that my customer/user really wants or needs?” By leveraging that growth orientation they create cultures that are positive, engaging, innovative, and supportive. And the money follows.
MINDSET #3: HUNGRY AND “OUTROSPECTIVE”
That imperative to focus on customers and users is actually the driver for the third mindset of NFF companies. Organizations with feisty cultures are “hungry and outrospective” by nature.
What does it mean to be outrospective? Well, I made up the word, but I think you can guess the definition. The perspective of an outrospective company is outwardly directed rather than inwardly focused. What’s outside your company worth looking at? Why, your customers and users, of course. Unlike your employees or, to some degree, your partners and suppliers, customers and users are largely free to buy your services or not. (Unless they’re locked into service agreements—hello, wireless carrier!) So it helps to know what they are interested in, or value, desire, like, don’t like, need, or don’t need.
The other thing that’s outside your company is the world. Interesting things happen there sometimes, occasionally having an impact on what you do and how successfully you do it.
Most companies are inwardly focused. This means that they are predominantly worried about meeting their own internal needs, not the needs of customers, and they are more curious about their own internal processes than they are about what’s going on in the world. How do we know this? Listen in on a meeting. Even if someone brings up a customer concern—let’s say the product doesn’t do everything the customer needs it to do—the response of the company is to filter that complaint through the capabilities the company already has in place, which can be incrementally improved upon as a way of “doing something” to solve that challenge. And if—minutes before the meeting—everyone just learned that the world has fallen apart or aliens have landed in spacecraft, the only relevant question that will get raised during the meeting is likely to be: How do we find a way to continue business as usual?
Often leaders of such companies talk about having a customer focus and an “inside-out” approach. But again, those companies view customers as a means of meeting the company’s needs, not the other way around. And having an inside-out approach means you’re starting from inside and are likely to view everything outside through a very particular (and often peculiar) lens. You gaze at what’s going on in the world and think, how can we get more efficient about our processes or how can we increase our margins?
This mode of thinking, very aligned with the notion of profitability over possibility, is not only inward looking, but it’s also upward looking and backward looking. It’s upward looking because changes to existing processes are likely to be decided by someone above you in the hierarchy. And it’s backward looking because the company is obsessed with an understanding of what it did well in the past, what got it to where it is today, and how to propagate or continue that success in a linear fashion going forward—not with what’s staring you in the face, what’s around the next corner, or what’s out there in some distant region of the world.
In other words, instead of being eager and curious about customers and the world, inward-focused companies have a tendency to be passive about the world, and to see customers in a fixed or monolithic way. Ironically, such companies are often very active, aggressive, and busy in dealing with their internal needs and processes. They are not lazy, just not very aware.
By way of example, imagine a meeting between Google and the Detroit automakers. Actually, this meeting has already occurred, and it went nowhere—at least initially. Google made the overture. It had been thinking about getting into the car business. Why? Well, it spent a lot of time and effort developing the best mapping system in the world, so why not figure out how to incorporate that knowledge—which users value very highly—into a new business? Google had been developing self-driving car technology but decided it would prefer to collaborate with existing automakers than become an automaker itself. According to someone present, “In one meeting, both sides were enthusiastic about the futuristic technology, yet it soon became clear that they would not be working together. The Internet search company and the automaker disagreed on almost every point, from car capabilities and time needed to get it to market to extent of collaboration. It was as if the two were ‘talking a different language.’”17
As Slate.com writer Will Oremus put it, “Detroit automakers speak the language of established industry leaders, trafficking in terms like profit margins, brand image, and liability. Google, despite its size, still deals in the conceptual vocabulary of a tech startup: blank slates, prototypes, moon shots—and, yes, disruption.”18 Google is focused on setting and addressing evolving consumer demand, while Detroit automakers still seek to meet existing consumer demand. These vastly different philosophies show up in every facet of their organizations, particularly culture.
Given the decades-long doldrums of the US auto industry, it’s hard to remember that Detroit was once a hub of stimulating innovation, capital, and energy. A century ago, it was the Silicon Valley of its day. Smart inventors, engineers, entrepreneurs, and business leaders—not to mention capital—flocked to Detroit in the early 1900s to engage in a flurry of activity and build something new, something compelling, something very different: a functioning automobile.
The fact that automobiles were on these creative types’ minds in the first place was radical. As Henry Ford said, “If I asked people what they wanted, they would have said faster horses.” And indeed, horses were everywhere—even pulling trolley cars—while steam-engine trains were taking passengers the longer distances they needed to go. So there was no compelling apparent need at that time to develop an automobile, just a curiosity and hunger to do so and a vision of potential consumer demand based on the value those inventors and business people thought was latent in an emerging market.
Ford, in particular, was curious enough to perceive needs that went deeper than the surface. When he invented an automobile, he didn’t say, “Well, now I have the perfect mousetrap, let the world beat a path to my door.” Instead, he considered the customers or users and determined their perception of value. Price was a big concern. By making his Model T affordable (and by paying his own employees a wage that turned them into automobile consumers), Ford stimulated demand. It’s telling that he later faltered because he didn’t see to other things consumers valued, such as color, style, or variations in model.
Google has this kind of user orientation today. As we’ve discussed, it is very fast, collaborative, and vigorous (Mindset #1). And it is laser-focused on the value-perspective of the customer or user (Mindset #2) over any incremental concerns about profitability. But it is an insatiably curious and outwardly directed company, too. (Mindset #3.)
Companies that are hungry and outrospective do not discover their path by following a limited or narrow understanding of the customer or even the market they are in. They are as curious about that customer as they are about the projects they are focused on, and they are hungry both for insight and for discoveries that will genuinely affect the world, not merely push the needle in the direction it has already been pointing.
Market research does not play a strong role in this process because that approach to understanding the customer is inherently biased toward confirming what the organization already knows or wants to do. In fact, many of Google’s innovations come from combining ideas or innovations in new ways. This sort of genre-mixing is common among artists and pure scientists; it is exceedingly rare in business. Most organizations suppress the curiosity and outward focus that lead to insights arising from seeing patterns or connecting disparate forces or ideas. They would rather focus on the narrow band of problems the company grapples with every day.
This is where the importance of diversity also comes into play. The notion of diversity as a form of political correctness has done a grave disservice to the development of new strategic capabilities in most organizations. How can a company be innovative, discover new things, or possibly understand how the customer perceives value, if everyone in the company thinks the same, and not enough people are representative of the variety of customers? Without a mix of voices, experiences, perspectives, and outlooks, it’s impossible for a company to be sufficiently outrospective in today’s global economy.
Companies need to ask themselves constantly, “What business are we in?” and “How might we continue to best serve our customers or potential customers?” Hungry and outrospective companies disrupt themselves constantly. They don’t stop asking questions—even when there’s no evidence that questions need to be asked. They don’t sit on their own success, navel-gazing on recent achievements and quarterly earnings. They act upon their possibility mindset. They focus on the market and the customer. And they encourage and expect their people to play a major part in the direction of the company, regardless of role or tenure.
BUILDING AND CHANGING MINDSET
Companies that are culture-based and nimble, focused, and feisty are clear about their mindsets and do everything they can to inculcate them in the organization. The leaders drive those mindsets home constantly. It is the singular area in which they correct the thinking of others and do not allow for latitude. They know that if they get mindset locked in, then people will act appropriately within those constraints to deliver better innovations and higher levels of performance.
Those companies also make sure that they bring the right people on board in the first place. Mindsets can be taught and are definitely reinforced by culture, leadership, rewards, etc., but it’s far easier to win those battles if you have mindset alignment from the get-go.
Mindset is the underlying operating system that drives the actions, behaviors, and business practices of the organization. Like rewriting code, it can be difficult to change because whatever mindset is already in place—whether it is explicit or implicit—can be an insidious deterrent to a fundamentally new way of thinking. Nevertheless, mindsets can be shifted even radically. That’s what Satya Nadella, CEO of Microsoft, is trying to do.
Microsoft is now more than forty years old. It’s the second- or third-largest technology company in the world, flipping places with Google depending on the quarter. It made $22 billion in profits in 2014. But a lot has changed since regulators found the company so dominating and threatening that they wanted to break it up. It’s been a long time since a Microsoft product drew much interest, much less killed or made a category. The brightest young engineers do not flock to Redmond the way they once did. Microsoft is seen as a comfortable, corporate environment more than a creative hub of innovation and entrepreneurship. This is in spite of the fact that Microsoft has the biggest research and development engine in the industry, Microsoft Research, with a budget of $11.4 billion in 2014.
Nadella is trying to “end the factional strife inside Microsoft, making the 118,000-strong work force nimbler. He has rallied them around mantras, like making personal computing more personal through wearables and other devices. To better translate Microsoft’s innovation into products people want to buy, he has directed the company’s research group, the biggest in the technology industry, to work more closely with product engineers.”19
Eliminating internal fiefdoms. Flattening out middle management. Making it easier to communicate and collaborate across the organization. Bringing engineers and creative innovators together. Pushing product excellence. Making smaller bets with potentially bigger payoffs. And allowing failure to be part of the process. It’s all starting to have an effect. As an outside member of the technical advisory board says, “There’s an eagerness in the business units to pick up ideas that are going to make a significant difference.”20
Companies that wish to thrive today and over the long term must reinforce or adopt mindsets that work with rather than resist the dynamic forces at play in our fundamentally changed world. In the next section of this book I’ll show you how they do that.
