Building Tomorrow’s Company, Today

Most businesses find themselves precariously balanced between reacting and planning. 

It’s a battle almost always won by the need to tend to the impact of decisions we made yesterday, the consequences of which we couldn’t or didn’t see at the time.

This creates a defensive, reductive view of a company and its possibilities, and usually results in neither the business nor its people fulfilling their potential.

Regular readers here will know that I am an impassioned practitioner of the power of envisioning the future we aspire to create - for ourselves and our business - and then designing and building a model capable of fulfilling that vision.

At the Wired/MDC conference on Tuesday, I listened to the founder of Netflix - Reed Hastings - describe the quite remarkable story of how he and his partners built their company. 

Netflix started its subscriber-based movie and TV show rental business twelve years ago. Today, it has 23.6 million subscribers, and has just passed Comcast Cable in audience size. 

Quite something for a business whose original business model was mail-order DVD rentals.

Except that its original model was not mail-order DVD rentals. 

Its original model was the one it is living today: real-time streaming of movies and TV shows over the internet. 

A model which follows a strategy borne of a simple realization. That the Purpose of a movie rental company is to offer its customers the widest choice of rentable movies whenever they want to watch them. Or as Reed Hastings wrote in 2005, "We rent movies. But the real service we provide customers is convenience."

Back in 1999, when Netflix signed its first subscriber, anyone on the web looking for content was going to AOL.com and listening to their modem sync up to the AOL servers at 56K. If you were lucky, you got mail. And if you waited long enough, a picture or two. You would have waited a long time for a movie. For some movies, you’d still be waiting.

In 1999, the best way to rent movies was to go to Blockbuster. And from Blockbuster’s perspective, they were fulfilling the movie renters' need. Some people got their first choice movie. The stores were pretty close to most people's homes. And as long as you got the movie back within a couple of days, the prices were competitive.

Except, if you looked closely, they were doing it on their terms. Not on their customers. And whenever you build a business based on what works for you, you leave a gap for someone else to build a business that works for the customer.

Enter Netflix.

“They built the railway line over the Alps before there was an engine capable of making the journey.”

One of the rock-like foundations on which the Technology Age has been built is Moore’s Law, which states that computer processing power will double every 24 months. Its accuracy has allowed for technological R&D to produce rapidly iterative design and capability.

Were all of life based on such certainty, our time here would be both richer and poorer. But when it comes to building a scalable business, speed of success is dramatically encouraged by predictability of resources.

Reed Hastings and his partners pulled out a spreadsheet and applied Moore’s Law to bandwidth expansion. Were the same growth-rate to hold true for both, when, they asked, would Netflix be able to satisfy the purest definition of its Purpose, and deliver streaming movies in real-time over the internet?

The answer, their spreadsheet projected, was 2008.

From that day, and every day for the next nine years, they worked to build a business capable of delivering the widest selection of movies as fast as possible to their customers based on current technology. It was a business whose end they had already designed.

The business was home delivery of DVDs, and they used it to create four long-term assets:

1. A brand synonymous with being the best way to bring movies into our living rooms
2. A reputation for a broad, deep and growing catalog
3. A loyal and growing subscriber base
4. A reputation for customer service

Everything else about Netflix 1999-2008, they planned to throw away.

As it turned out, the spreadsheet was right. And so was the strategy. 

In the meantime, Blockbuster - which already possessed all four of the foundations Netflix aspired to create - continued to look backwards.

Driven by its historic success, and an operational model based on number and location of storefronts, Blockbuster convinced itself its approach was right. And if its approach was right, the answer to falling revenues must be to address the fundamentals.

Extended rental periods; reduced late fees; earlier new releases; increased inventory. All of which added cost, cut into margins and did little to arrest declining interest.  Fundamentals in terms of Blockbuster’s business. But increasingly meaningless to its customers. 

Because in the pursuit of its long term strategy, Netflix had discovered that choice and convenience were more important to most renters than immediacy. And so, knowing they didn't yet have the means to satisfy the entire Purpose, they built a model that in the short-run would satisfy two thirds of it. And they started mailing out DVDs to its customers. No more disappointment at the store. No more store in fact. Just ease and choice.

And, even better, Netflix knew this was just a stepping stone. They knew that the third leg of the strategy was just a matter of time. Their spreadsheet said so. They just had to wait for the technology to catch up. 

When, in 2008, it did, Netflix satisfied their ten year old strategy to stream movies straight into the home. It took a couple of hours to download a movie, and the quality was only alright. But, innovation is about improvement, not perfection.

The results are astounding. Today, Netflix is valued at $12.5 billion and has recently committed $100 million to produce its own programming for the first time.

Blockbuster was sold a month ago for $400 million. $87 million of which was debt. From a high of 4,000 stores, its new owners are hopeful they will be able to keep 400 open. 

This week, Comcast announced a new residential internet service that will allow its subscribers to download an HD movie in 3 minutes. 

For Blockbuster, it probably means nothing.

For those waiting for new releases to be instantaneously available in 3D, it’s progress.

For Netflix, it’s just one more step on a journey that began when Reed Hastings pulled out his spreadsheet and designed the future of his company.

For the rest of us, it's perhaps a good reminder to make sure we're clear about what business we're building.

Nine Steps To Attracting and Retaining Creative Talent

Earlier this week I wrote that it takes more than just money to attract creative talent. 

In fact it takes more than just money to attract anyone capable of making a difference. Whether they have creative in their job description or not. Difference being a frame against which to measure the impact of original thought.

Against that context, here are nine steps that will draw difference-makers to your organization. 

1. Pay Fairly. It’s true that it takes more than just money. But it does take money. Beating the market being neither an attractive nor sustainable practice when it comes to compensation. Many companies ignore this truth and apply a famine and feast mentality to paying talent. Under-paying early when the company has the leverage. Then over-paying later, in order to attract or keep talent from the competition. This builds suspicion and destroys loyalty. Instead be relentlessly pro-active in maintaining market parity at every position, with bonuses for extraordinary results. This creates an environment in which financial resentment is not a motivation for your talent to look for new opportunities. Desperate competitors may still over-pay. But when talent feels valued, the premium required to convince them to leave gives you an immediate competitive advantage.
2. Understand The Deflationary Value of Money. In Dan Pink’s excellent book, Drive, the author describes research that shows that many original thinkers are not only un-motivated by incentive based rewards, they actually perform worse. In part this is because when a task becomes ‘work’, talented people tend to feel more constrained. Organizations that tie creativity to money usually have less financial success than those that focus first on defining the intrinsic benefits of solving a client’s problem and frame the challenge in more valuable ways. When you are doing it just for the money - an economic reality in virtually every business - be clear about the impact that has on your most talented people’s satisfaction, and balance how often that is their only reward.
3. Build An Evangelical Business. As a species we are united by our instinct to create. We want to make things. Especially a difference. Google’s success is driven by a simple premise. They want to organize the world‘s information and make it universally accessible and useful. A  goal that has attracted, informed and unified some of the most original thinking of the last ten years. Define the change your company wants to make in the world. No matter how local. Nothing attracts like a clearly defined vision of a better future. And the opportunity to be part of making it come true.
4. Measure Progress. As I wrote a couple of weeks ago, measuring progress is one of the keys to harnessing creativity. A study in the Harvard Business Review showed that a sense of progress is the attribute which people value most in their day. Progress can only be measured on a continuum that has a beginning and an end. Defining the difference you want your business to make provides the latter. The former comes from individual reviews  - a subject worthy of its own post. And annual reminders of how far the organization has come. Celebrating the company’s anniversary with a retrospective comparison of where you were a year ago is simple and powerful. And offers the chance to re-present the vision as a reminder of where the future lies.
5. Engineer Engagement. Gallup Organization research has shown that most people become less engaged with an organization over time. Maintaining inititial levels of enthusiasm is a two part process. The first is staying engaged with your best thinkers. Easier said than done given the temptation to focus energy on solving problems rather than building on successes. The second is being willing to clear the dead wood from the organization. Nothing de-motivates people more than an organization’s willingness to support under-performers. Be relentless about raising standards and expectations. It attracts and provokes greatness. 
6. Invest in Individuality. Google's success is driven by the fact that the discipline required to create some of the most sophisticated software code ever written, has been balanced by a commitment to allow those same engineers to express themselves individually. Organizationally this means that eighty percent of their time is devoted to meeting the demands of keeping Google running. The other twenty percent must be used for solving problems of the engineers own choosing. An investment in individuality that Google attributes for all of their major innovations. Creative companies that charge by the hour have a systemic inability to match this level of investment. But deciding to invest not at all in your talent’s ability to create new forms of value suggests you think either they are not capable of that kind of original thinking, or your organization is not capable of taking advantage of it.
7. Provide Boundaries.  Original thinking requires room to explore new possibilities. It also requires boundaries that focus its capacity to solve relevant problems. In the 1990s, Whirlpool’s CEO, Jeff Fettig, took the company's 25 most revered thinkers and assigned them to a dedicated innovation think-tank in Switzerland. 12 months later they came back with a single idea. A web-based game that linked stationary exercise bikes around the world in virtual races. Exactly. Since then, Whirlpool has invested significantly in training key talent to build and manage a defined and measurable innovation pipeline. Over the last ten years, the revenue generated by products the company defines as innovative has risen from $10 million to over $3 billion, funding further its investment in training, teaching and mentoring its employees. And Whirlpool’s ability to turn original thinking into practical differences has earned it Fast Company’s ranking as the 5th most innovative consumer goods company in the world. And put it on BusinessWeek’s list of, “Best places to start a career.” 
8. Be Open. Be Honest. Transparency is the most over-worked word in the English language at the moment. Which does not make it less essential to attracting and retaining great people. Usually, it’s more effective to think of transparency as a commitment to open honesty, which we have had success applying as: telling what you can, and explaining what you can’t. You can draw the line between them wherever you are comfortable - with the caveat being that comfort is usually a poor measurement of what is in your best interest. Sharing more encourages others to do the same. And to give you the benefit of the doubt. Valuable assets in building loyalty.
9. Say Thank You. The artist in all of us needs to be recognized. So does the human being. And yet most companies are slow to praise. Or even to thank. Which is strange since each of us make a choice where we work every day. It need not, after all, be here. Saying thank you at the end of every day has always seemed to me to be a small acknowledgement that you take neither their talent nor their choice for granted

These steps require investment. Of time. And a little money. The ROI on which will exceed any scale you care to choose today.

Each will make an organization more compelling.

Collectively they will make your company irresistible. And invaluable.

To ‘Win The Future’, American Business Must Unlock Its Creativity

“The first step in winning the future is encouraging American innovation.” 

Barack Obama. State of the Union. January 25, 2011.

It's been almost a month and as yet there are few signs that the President's call to action has resulted in any, well, action.

Innovation is often presented as the silver bullet for a damaged economy or a dying business. But even now America produces more talk about innovation than action. No surprise there because this is a long-term problem to which few people offer practical solutions.

In part because of the Siren call of the status quo - an illusory sanctuary in an economic storm. 

And in part because the practice of innovation is fueled by creativity - an energy source that most business owners view as random and unmanageable. 

But creativity is the greenest energy known to man, producing limitless supplies of possibilities and, when managed wisely, turning ideas into action. The definition of innovation.

The challenge - and now the need - is to unlock the power of creativity every day, and focus its energy by designing the capacity for innovation into the organizational architecture of our businesses.

For innovation does not happen by chance. Like any other business process it is one that requires systems and disciplines, encouragement and environment, measurement and management. 

And it requires investment. Not of capital or profit. But of faith. That a process which can not predict what it will produce, is as valuable as one that can. For only when you have built an organization in which the known and unknown sit comfortably alongside each other, can you be confident that you have a business that is viable today and will be relevant tomorrow. 

This is an architectural feat for which there is a clear and proven blueprint. Applied sensitively to the individual culture of an organization, there are practical steps on which to unlock the latent creativity in your company and embed the capacity for innovation.

Later this week, we'll talk specifically about what those are.

Seeing The Way

Companies are fearful of change. Which drives them to places they would never willingly go if they could see where they were headed. 

This week’s fiasco on Lakeshore Drive in Chicago is a pretty good example of what happens when fear of change makes you do the same thing you always do, even in the face of growing evidence that this will not turn out well. 

On Tuesday night, the people who ended up trapped in their cars were those who believed that so wide a road and so many companions would provide safe passage. 

In fact, it took only one gently sliding bus to block the way and create a situation in which many people became convinced that they would die where they sat. Frozen and alone. Fifty yards from one of the most affluent neighborhoods in the world. On a piece of road that has provided a reliable and predictable way home to hundreds of millions of travelers over the last 100 years.

From habit to hell in three hours. It rarely happens that fast. But it can.

Those that took the side streets found the roads difficult, but passable. It took longer than usual, but they made it safely to their destinations.

Taking the less traveled path requires two steps:

• Recognizing that external forces are creating the need for change
• Working knowledge of possible alternatives

As a business this requires combining a strategic view of where you’re headed, and constant exploration of the best way to get there. 

Which is not always the most direct. Or the most familiar.

The Art of In-House

For fifty years the advertising food chain was linear and static. Agency. Advertiser. Production. You could fight within your peer group. But not above or below. A state of competition that comforted and restricted in equal measure. 

Today that food chain has been blown up. Advertisers produce. Producers develop. And agencies try and figure out at which table they want a seat, while trying to make sure they're not the ones standing when the music stops. 

Seismic evolution or revolution? Your choice. The future being restricted only by your vision of what it holds and your capacity for change.  

For many companies, the vision includes adding new services. A strategy which is flawed only if you believe that the ease with which your suppliers provide them is an indicator of the simplicity of adding them yourself. Which is the same as deciding to extract your own tooth because you have a great dentist. You save the money. But the results are messy.

Service businesses - the definition of every creative company - need to successfully add new capabilities if they are to grow. Indeed, it is a strategy so tried and tested it has a chapter of its own in every MBA textbook: ‘Vertical integration.'

For creative companies, successful vertical integration is the result of making a clear strategic choice about how best to do so based on the structure of your organization and its capacity for change. There are two models:

• Immersion: in which the new capabilities are fully integrated into the core business. This structure is often seen in new companies that incorporate multiple capabilities into a holistic organizational structure from startup.


• Independent: in which the new capabilities are built and developed in their own right, using intimate understanding of the needs of both the company and its clients to maximize the value of the new In-House offering.

Of these, by far the most common is the Independent approach. The successful deployment of which requires avoiding five mistakes. 

Succumb to them - as many companies do - and you throw away brand empowerment, operational scalability, marketing gravity, profitability, creativity and ROI.

Here, in the order in which they are most likely to occur, are the mistakes to avoid when adding In-House:

1. In-House as Add On

Creative companies often act tentatively when moving outside their base capability. This often manifests itself as a failure to commit fully to the operational foundations necessary to ensure the investment in new services will produce a return.

When In-House is built as an add-on, you:

• Cede the advantage to the competition - your former suppliers - for whom your 'add-on' business is their only business; a full-time commitment your competitors invest both heart and soul into every day.


• Expect your staff to behave as clients, while you treat them like staff. The fastest way to have them end up being neither.

2. In-House As Department

For companies that make it past their fear of commitment, the next most common mistake is to treat the newly formed business as a department. Here, the parent commits serious resources - usually time, money and space - but then imposes its own traditional management structures and operating practices. 

This works as well as having your mother select your spouse. She has a lot of knowledge about important issues. But not necessarily those that determine the success of your marriage.  

3. In-House as Subsidiary Brand

This is a stumbling block for so many creative companies who have successfully navigated hurdles 1 and 2.

Fearful that the success of the new business will undermine the brand value of its parent owner, the parent inevitably inserts their name into that of its new offspring. 

This is the equivalent of thinking a take-off powered by a Rolls Royce engine somehow diminishes American Airlines.

That Rolls Royce is a premium brand in its own right requires Rolls Royce to keep making better engines. 

That American Airlines picks you up and safely sets you down using Rolls Royce technology is a win-win-win.

4. In-House as Requirement

Avoiding mistakes 1-3 eliminates the biggest obstacles to turning new in-house capabilities into a successful business. 

What happens next is the pivot point.

Parent companies have awesome influence. Influence that can be misdirected into requiring that its staff will use the In-House services.

This removes the greatest advantage that the new business has - proximity to its potential clients - by exchanging choice for edict; the surest way to motivate creative people to do exactly the opposite of what you want.

Deliver extraordinarily and market gravitationally. The rest will take care of itself. 

5. In-House as Holding Company Aggregator  

Holding companies offer many benefits. A subject for another day.

But not one has yet successfully built powerful, aggregated In-House production services. 

Typically this is because holding companies design from the top down, a view that brings virtually no understanding of the needs of the creative team. 

Or from the middle sideways. Which ensures the business is built to service only the needs of one company. As opposed to those of many.

Adding In-House should take place from the bottom up, and from the future back. Two perspectives from which to ensure you have one eye on the road beneath you, and one eye on the horizon.

iHave

I'm impatient for change. A good quality on which to build businesses. The status quo and self-satisfaction being the two greatest enemies of value creation. However you define value.

I write this post on technology that didn't exist to me this morning, on an app I didn't know about last Wednesday.

I do so, not because I am certain it will improve the quality of the process or the results.

But because I am not.

And because the cost and risk of exploration are acceptable.

Learning what we don't know is more important than learning what we do. A simple truth I am reminded of in every conversation in which I listen more than I speak.

Cost and risk, however, are subjective. And should always be measured against a fixed point of reference. Which is that the cost and risk of maintaining the status quo are always higher than we think.

And deny us the thrill of waiting, four-year old like, for the delivery of this wondrous window into the future that I now hold in my hand.

The iNevitability of iNnovation

I’m counting the days until my iPad is delivered. Three.

Which is one fewer than the number of ways it already needs improving.

1. eBooks should have audio tracks. Music embedded into the digital pages. Background noise that fill out the scene. Spoken recipes as you cook. A whole new medium waiting to be unlocked.

2. The back of the iPad should display the cover of whatever you’re reading. For a hundred reasons. Maybe more.

3. We need a magazine tear-sheet app, which allows people like Chris and Jamie to throw away their boxes of clippings, and organize them digitally instead in a virtual index of ideas and inspirations.

4. Its wireless feature should extend to my thoughts. Because typing is analog technology in its most primitive form.

Evidence that innovation has no limitations.

And requires but one thing.

A refusal to accept the status quo.

Even when it hasn’t yet arrived.

The Power of Simplicity. 20x.

Simon Mainwaring, the marketing and social media guru, tweeted a link the other day to 20 unique and creative logo designs.

In a world added to each day by a new technologcal marvel, it is too easy to assume that all original thought comes attached to a piece of code or a microprocessor.

Simon's tweet, and the compilation put together at Toxel.com demonstrate three things.

1. Technology connects us in new and increasingly powerful ways


2. What it connects us to is more important than how


3. The most powerful connections are the result of simple truths and shared experiences

In support of which I offer you a representative sample of the logos from the Toxel collection. I encourage you to look at the entire set, complete with individual accreditation to the designers and companies in question.

Proof, if we needed it, that there is as much value in innovation as invention.

And further incentive to relentlessly challenge how we look at our own businesses.

Why The Kindle Is A Pocket Calculator

The first electronic calculator was built in 1961. It used vacuum tubes. And a lot of your desktop.

Twenty years later, credit card calculators were promotional giveaways on a par with wall calendars. And most people would have taken the calendar, so ubiquitous had portable maths become.

The Kindle hasn’t had a twenty year run. More like twenty months. And just as it began to move from the ‘Early Adopter’ to the ‘Early Majority’ phase, people are beginning to write its epitaph.

Too small. Too grey. Too late.

Courtesy of better technology created by a company with a plan.

I blush not at all at being an Apple evangelist. They are an extraordinary company in their ability to conceive, design and deliver.

Amazon, on the other hand, has struggled since its inception to differentiate strategically between ‘can’ and ‘should’. A shortcoming that required hundreds of millions of dollars in losses to discover that selling clicks to other vendors at 5 cents each is more profitable than building infrastructure and inventory.

The Kindle is a good product whose time has come and almost gone before it arrived.

A reactive creation by a reactive company.

As evidence I offer you this.

Apple’s iPad uses touch screen technology evolved from three years and 42.48 million units of experience with the iPhone. The iPad screen contains 1000 sensors over its 80 square inches. Anywhere you touch you’re in contact with six or seven.

Amazon’s response? Yesterday, they acquired a company called Touchco. A New York start-up that specializes in touchscreen technology.

Touchco has ‘roughly six employees’ and has yet to turn its technology into a commercial product.

I believe in technology, innovation and possibility. I believe David can beat Goliath on a regular basis these days. And I believe in dreams.

I also believe that if you own a Kindle, you should use it a lot between now and late April.

After that, it’s a doorstop.

All Growth Will End

Today’s announcement of the acquisition of Cadbury by Kraft is more evidence of one of the great lessons I learned from Jim Schrager - my strategy professor at the University of Chicago Graduate School of Business.

All growth will end.

The question is, what then?

Organic growth comes from three sources.

1. A growing economy. A rising tide lifts all boats.

2. A growing industry. Same principle, fewer beneficiaries.

3. Innovation.

When one and two lose their power, innovation is all that’s left. A point Apple has demonstrated powerfully in the last twelve months, during which its share price has risen from $78 to $210. Proof of the power of innovation in any economy. And which the launch of the iTablet next Wednesday will undoubtedly continue.

But when a company’s innovation pipeline is allowed to run dry, it falls victim to weak economies and mature industries.

At that point, all that’s left is transactional growth.

As mature industries, chocolate and processed cheese take some beating. Chocolate has been around for about 2000 years. Processed cheese since 1916. But whatever your passion, neither gets the business heart pumping when it comes to year on year organic growth potential.

Given that, with rare exception, neither Cadbury or Kraft have been able to produce meaningful innovation pipelines, the growth of both companies has for forty years or so been predominantly fueled by merger and acquisition.

Cadbury got into and then out of the soft drink business before settling in 2008 on a strategy that focused on being the biggest and best confectionary company in the world.  Their plan, laid out on their website emphasizes focus, efficiency and under-developed markets. A plan that lacks passion and Purpose. Big for big sake contains neither.

Kraft’s history involves endless name changes, mergers and acquisitions. They have been owned by Phillip Morris and merged with Nabisco.

Twice Kraft have sold off their entire confectionary business. A confused strategy for a company that just spent $19 billion on acquiring another one.

As a growth strategy this deal is a short-term solution. M & A deals rarely produce the kind of results the owners project, and the inherent problems of both companies now become a larger headache for more people.

As a demonstration of long-term planning it demonstrates what might kindly be described as inconsistency.

But as proof that some companies run out of new ideas before they run out of money, it’s hard to beat.

Business Unusual: Boards Summit '09

Earlier today Chris and I hosted a session at the Boards Summit called Business Unusual. It was an exploration of how companies can and must fulfil their long term potential if they are to meet the seismic changes facing creative businesses today.

I opened the presentation with a recap of the issues as we see them, then turned it over to Chris who hosted a compelling conversation with the owners of three companies: Furlined, Epoch and Motion Theory.

The text of my talk is here, together with the extraordinary images from Rodney Smith's work that I used to bring the narrative to life.

-------------------------------------------------------------------------------------------------------------------

Good morning.  Welcome to Business Unusual.

To start, can I ask how many of you have a definition of what business AS usual means today?

Or are comfortable predicting what the rules will be a year from now.  Or five years from now?

The reason that no-one raised their hand is that the advertising food chain is dead. The model on which this industry has depended for fifty years, advertiser - agency - production company - post production and music doesn’t exist any more.

Today, everyone in this room faces a future that is entirely unknown.

One of the themes of the last two days has been the advertising industry’s adaptation to the digital age. Bob Greenberg’s talk this morning describes how the production model needs to adapt to the demands of digital technology.

Clearly, he’s right. He’s also one of the best, and only examples so far, of a company that started as one thing in the advertising supply chain evolving into something quite different. In the ten years since he led the way, you could argue no one has followed him.

But, in my view, talking about digital at all misses the point. It’s not the demands of digital that this industry is responding to.

It’s the demands of the consumer.

Which starts with the inability of traditional agencies to connect clients to audiences with the insight and impact they used to. Which in turn is creating all kinds of opportunities for other companies to step into that void.

Today, some of it is being filled by companies who are mastering the fact that connections to consumers are evolving weekly.

But even companies like Mekanism and Motion Theory and the Barbarian Group are faced with the reality that for all their fluidity and media ambivalence, where we will be as a society a year from now will require a completely new perspective.

Because the differences we’re participating in require a much bigger leap than even the introduction of television demanded.

The first television commercial was broadcast in 1941. To 6,000 homes in the New York metropolitan area. If the media planner had added Chicago to the buy, they would have reached another 50 television sets.

It took television 13 years to reach 50 million people.

It took facebook 9 months to add 100 million users. The same time it took Apple to download a billion iPhone apps.

The world is changing in real time. And when, almost certainly next summer, we are introduced to devices that finally merge entertainment and information into one by combining the best of our laptops and our televisions, it will all change again.

And yet, while the way society communicate undergoes a revolution, the advertising production community is gingerly exploring evolution.

The introduction of AICP Digital for instance, while clearly a step forward, also highlights how far this industry has to go. After all, today, what’s not digital?

The production community is trapped by its past. And can’t yet see its future. Which is no surprise. Give that we’re living through an epoch. A period of history that will be measured by what came before and what comes after.

Which makes the production community its own greatest obstacle.

Creative companies are usually started by people with a single-minded passion for a craft.

After working for someone else, they realize they’d rather work for themselves. Their talent and determination establishes their success. They focus on the work. Which attracts other like-minded people, the business grows, bringing financial success, more talent, perhaps another office, and for a number of years, 8-15 typically, they run a successful, and largely satisfying business.

Of which they are an integral and usually essential part.

Which isn’t a problem until one of two things happens. 

One, the founders start thinking about what they want to do next, even if that is simply less of what they do now. Which reduces the company’s emotional and talent power supply.

Or two, the industry changes overnight, and redesigning the business model means the founders have to see themselves entirely differently.

Because they are the business.

After working for someone else, they realize they’d rather work for themselves. Their talent and determination establishes their success. They focus on the work. Which attracts other like-minded people, the business grows, bringing financial success, more talent, perhaps another office, and for a number of years, 8-15 typically, they run a successful, and largely satisfying business.

Of which they are an integral and usually essential part.

After all, what’s MJZ without David Zander? Radical without John and Frank? Smuggler without Patrick and Brian?

We see this model all the time. It’s why there are very few creative service companies that are more than twenty years old.

A tiny handful that are thirty.

And only one that we can think of that is forty.

Because creative companies almost never outlive their founders.

Which if you think about it as an industry, is an extraordinary waste of human, emotional, financial and creative capital.

After all, why shouldn’t there be great long-term brands in the creative services arena. Why shouldn’t Smuggler, Epoch, Human, or Framestore be just as relevant thirty years from now? Adapting, innovating, leading the change into the beam-me up Scotty world of 2040.

We believe every company has the potential to outlive its founders.  And that would change everything.

Because when no one can predict what the world will look like even five years from now, those are exactly the kind of companies we need to build.

Companies that are fluid and adaptable.

Companies that see Business Unusual as Business AS Usual.

Companies that in our vernacular Plan The Last Day First.

This would represent a sea change. One that would unlock innovation in torrents. After all, creativity is the fuel of innovation, a natural resource in this industry.

It requires four things.

First. That we see the industry differently. Which the last two days have started to bring into focus. And which Bob’s talk provides one lens on. Though one that I think is still too agency centric.

Second. That we see our companies differently. And specifically, that we see what makes them great. Which is usually not what we think. After all, for 100 years Kodak thought they were a film company. They weren’t. They were an image capture company. A difference they realized too late.

Third. That we see ourselves differently. As innovators. Not passengers. Today, you can sit as high on the creativity food chain as you think you have a right to.

And Fourth. That as founders we learn how to make ourselves irrelevant. A condition most business owners avoid pathologically until it is too late to make a meaningful difference. But which is essential if your business is to outlive you.

Today the advertising food chain is one link long.

The advertiser.

What you do about that depends on how you build your company from here.

Faith

I am inspired by dogs.

They are not perfect creatures. One of ours has apparently taken to chewing the curtains.

But they imbue each day with an endless sense of the possible. And given one percent of an opportunity, they will take you along for the ride to joy.

They are resilient, optimistic, and forgiving. And they spend much more time trying, than they do feeling sorry for themselves.

Traits common to a better business and a better life.

In an email from my mother-in-law yesterday, I was introduced to Faith.

This is her story.

I am inspired by dogs.

--------------------------------------------------------------------------------------------------------------

This is 'Faith'


This dog was born on Christmas Eve, 2002. She was born with only two rear legs.  She of course could not walk when she was born. Even her mother did not want her.

Her first owner also did not think that she could survive and he was thinking of 'putting her to sleep'.
But then, her present owner, Jude Stringfellow, met her and wanted  to take care of her .
She became determined to teach and train her to walk by herself.   
She named her 'Faith'.

In the beginning, she put Faith on a surfboard to let her feel the movement.
Later she used peanut  butter on a spoon as a lure and reward
for her for standing up and jumping around.
Even the other dog at home encouraged her to walk.
Amazingly, only after six months, like a miracle,   
Faith learned to balance on her hind legs and jump to move forward.
After further training in snow, she could now walk like a human being.   
 
Faith loves to walk around now.
No matter where she  goes, she attracts people to her .
She is fast becoming famous on the international scene and
has appeared on various newspapers and TV shows.
There is a book entitled 'With a Little Faith' being published about her .
 
Her owner Jude Stringfellew has given up her teaching post and plans to take her around the world to preach that even without a perfect body, one can have a perfect 'soul'.
 
In life there are always undesirable things, so in order to feel better
you just need to look at life from another direction.
I hope this message will bring fresh new ways of thinking to everyone and that everyone will be thankful for each beautiful day.
Faith is a continual demonstration of the strength and wonder of life .

5 Things The Airline Industry Has Taught Us About Better Business

The airline business is pointless.

If there was any kind of alternative to traveling further than 250 miles, we’d all take it. And celebrate.

Instead, we game the system to get the lowest fare possible, hope our upgrade clears, and try to make sure there’s internet access on board to help us forget that as an indicator of man’s achievements, air travel is our only major innovation that’s going backwards. Having experienced Concorde, that’s a realization that hits me every time I fly.

Fifty years after the Boeing 707 was heralded as the first jet airliner, we still fly at exactly the same speed that modern miracle achieved on its maiden voyage. 591 MPH. Imagine where things would be if technological achievement had remained frozen in 1959. Today, New York to London is still 6 hours, give or take, depending on the jet stream.

Maybe that’s the real strategy behind global warming. Heat the planet, create violent weather conditions, jump on board the jet stream. It would make more sense than anything else those that run the airline industry have offered as business rationale.

Let’s look at just this decade. Since 9/11 the industry has:

• Gone through five Chapter 11 reorganizations


• Supported two mergers


• Eliminated about 250,000 jobs


• Been responsible for a mountain of debt and pension defaults.

If over that same period you ignore the tens of billions of dollars written off to goodwill write-downs, and the hundreds of millions of dollars of reorganization costs, then the airline industry only lost around $40 billion.

$40 billion. In an industry trying to make money.

With no competition.

That every one of us will have to use multiple times this year.

And yet. The most recently published quarterly reports have been met by airline executives with rejoicing over the increases they have generated in ancillary revenues. Things like baggage fees and on-board meals. United earns about $14 a passenger in those fees. They also lost $137 million in the 3rd quarter.

What they don’t know is the cause and effect of either number on the other.

In other words, they don’t know if charging for bags increases revenue or drives people to other airlines.

Seems like a fairly rudimentary piece of analysis. If we do this, will be better or worse off?

United don’t know. (No news there for the airline that came up with the profound brand positioning, Rising.  As opposed to the alternative, one presumes.)

Neither do any of its competitors. One of the many reasons why the airline industry has lost more money than it has ever made.

But the airline industry does have value. As a business model. Of what not to do.

1. Don’t sell your services for less than it costs you to provide them. Unless you know you can raise them tomorrow. Not think. Know.


2. Don’t build a business that is entirely dependent on any single resource, especially when controlled by a limited number of suppliers who are ambivalent whether you succeed or fail.


3. Don’t build a business around a small group of people with highly specific, and hard to replace skills. And if you must, align their interests with yours. So that the success of the business is their business - as well as yours.


4. Don't restrict innovation. If your business can't offer a significantly more valuable experience every three years, your customers will find someone who can. Unless you can corner the entire industry. In which case, you don't need anyone's help.


5. Don’t focus on narrow metrics that support what a great job you’re doing while the business is falling down around you.

The truth is out there.

Just don’t expect to find it by looking up.

Changing The World. $25 at a Time.

I had a fascinating breakfast yesterday with two entrepreneurs who exemplify all that is great about the capacity for small businesses to make a big difference.

Each in their own and very distinctive ways have built something extraordinary from nothing, developed careers, supported families and causes, changed the way we see the world, and have done so with decency, integrity and humanity.

And based on our conversation, they’re not done yet.

It was a very invigorating beginning to the day. And as I walked back to my office I thought, not for the first time, that entrepreneurs have recognizable DNA.

A truth which came thundering home when a friend sent me this link last night.

Kiva is an association that lets you lend money to a specific entrepreneur with one simple goal.

To lift them out of poverty.

The picture on the front page is of Nulu Nabunya, a 50 year old Ugandan widow with four children, who is looking for a $525 loan to help her build her knitting business. She has already borrowed and repaid twenty loans and her ambition is to own a sweater factory.

There are 870 entrepreneurs showcased, in countries from Cambodia to Togo, from Mongolia to Peru. Their funding requests range from $385 to $2500.

As I looked at some of the pictures, I was struck by three things.

1. All entrepreneurs are impacted by the same issues. Concept. Customers. Cash flow. And Credit.

Get any one of them wrong and we’re out of business.

2. The ability to see a better future does not require specific economic, geographic, cultural, educational or environmental conditions.

It requires a willingness to believe in the possible.

3. Entrepreneurs live in the real world. Where the ideal meets the practical.

And today, I for one have a different appreciation of what both words mean.

66% = Two Out Of Three

One of the issues we hear from clients most frequently is the difficulty of getting their people to work together.

And until you solve that problem, any hope of making substantive change to your business is on long-term hold.

Long-term as in forever.

The solution lies in two basic instincts we share as a species.

1. We change our behavior when we believe the result makes the effort worthwhile.


2. We want to express ourselves. To have a voice. Sometimes literally.

I can offer you no better proof than this video two friends posted on Facebook yesterday.

I don’t speak Swedish. I suspect you don’t either. It doesn’t matter.

66% is a universal language.

Pass It On

Last year’s university freshman are a historic group. They are the first generation for whom the internet has existed since birth.

If you are reading this blog you have developed a facility for technology that would have astounded you twenty years ago had someone described the communication capability to which we now have access.

Free content on any subject, instantly searchable and accessible from anywhere in the civilized world. Oh, and wirelessly.

For most of us, no matter how comfortable we become, there is a degree of awe that comes with the opportunity to converse like this.

For a twenty year old, they can imagine no other way. They look forward. And ask for more. The difference, as Sir Ken Robinson points out, of being digital natives versus digital immigrants.

A better business embraces the future.

Today, doing so requires a leap of faith to test even the most devoted agents of change. And glasses. Two hurdles most twenty year olds don’t have to contend with.

But for all their hope and exuberance, they’re looking to us to lead. For at least a while longer.

I think it’s time we did. By looking forward. With purpose.

Yesterday was great.

Tomorrow will be better.

Pass it on.

51.9

Last Saturday woke dry and warm. Noteworthy itself this summer. But particularly important that day.

We moved to Millbrook, New York eleven months ago but it has started to feel like home only in the last one. The sale of our house in Chicago had allowed us to finally burn our boats, and the fact we are once again living with our own furniture has had an immediate and reassuring impact. Many of us would like to be less affected by material things. But their impact on the psyche is palpable.

As a species, once we have security we turn quickly to exploration. A powerful formula for building a life and a business.

On this particular Saturday, exploration meant the Go-Kart sitting in the garage. The left-overs of a bygone age when a grandfather could spend $1,500 on a Christmas present for the kids and grandkids without first checking Bank of America’s closing share price.

I’d been ambivalent about the Kart. I’m not mechanical. I have a convertible Audi that continues to satisfy any remnants of a mid-life crisis. And a lot of country roads nearby. The prospect of driving a metal cage with an outboard engine, as my brother-in-law described it, was not compelling.

Until competition entered the frame.

Jon Collins has become a good friend over the last couple of years. We’re from the same generation of Englishmen with all the historical fabric that brings. Shared experiences provide long-term glue. Add common reference points to that, and you’ve got the makings of an important relationship.

Jon and his partner Sarah - as smart and wise as they come - had accepted a second invitation to come and stay for the weekend. And suddenly the Go-Kart took on an entirely different aura.

Go-Karts mean racing. Which means against something. And when that something becomes someone, what had once seemed unnecessary suddenly becomes essential. To compete. To learn. To strive. To share. Perhaps even to win. All get us up in the morning.

By the time of Jon and Sarah’s arrival, I had become intrigued, fascinated even by the mechanics of the thing. I had cleaned the air filter, checked the oil level, topped off the gas tank, tightened the bearings and greased the drive chain.

I dutifully waited until after lunch to suggest we take it for a spin. Jon needed no encouragement. I suspect, like me, he would have been happy if it had been item one on the agenda. And we spent the next hour in happy competition, time trialling our way round the bridle path in the bottom field.

My initial attempt of 00:01:03 displayed a cautious, uncertain approach. Jon’s of 00:58.09 upped the ante. Three or four attempts later, we both hovered in the 00:53:00 range and the goal became a sub 50 second lap.

As human beings we gravitate quickly to goals. We need to measure progress.

As a business owner, having a clear definition of success for yourself and your staff separates companies that excel from those that splash noisily to disguise the fact they’re treading water.

It’s also important to know your own limits. Sometimes you only learn those through trial and error. But make sure you have systems in place to minimize the damage.

Our limit at the moment is 00:51.09.

Jon is certain he was on his way to better that when he flipped over on the tightest turn, causing him and the Kart to end up on their sides with a blown tire and bruised arms and shoulders respectively to show for it. Fortunately, both are now fine.

In the process we learned two important lessons.

1. Listening to cautionary words of wisdom before the event can be life saving. In this case Chris’s rule that we all wear a helmet regardless of our vanity or confidence prevented a very different outcome.


2. Systems are only as good as how you use them. So from now on, everyone wears a seatbelt.

But we also learned there a sub 00:50:00 lap out there.

We’ll be back. Better and faster.

Goal. Trial. Learn. Improve.

A formula for progress in any weather.

Change. Part 4.

When Cortés reached the new world he burned his ships to ensure his men harbored no second thoughts about their new life.

Apparently in 1504 fire was easier to find than a buyer in the real estate market 0f 2009.

Having failed to sell our Chicago home in each of the previous two years, we entered 2009 with twice as much real estate as we wanted and a shrinking economy. From an emotional standpoint, we also had a boat back to our old life. More than once we were tempted by familiarity and fear to jump in and start paddling back to the midwest.

Familiarity and fear are frauds. Say it three times. Pin it on every door you pass through. Tattoo it somewhere prominent. Less serious measures will leave you vulnerable to their siren call.

For as hard as we try to use our brains, we are animals. Ninety percent of our DNA we share with chimpanzees. And the remaining ten can’t do all the thinking all the time. So, much as we might wish to be smart, pragmatic, strategic and wise, chemistry 101 will often prevent it. Particularly when stress is added to the equation. Like that brought about by a once in a lifetime economic melt-down.

The fact is Cortés was way ahead of his time. He still is. Because he knew that when options are removed, we make the best of a situation. And the best is often great.

But given choices, we reflect, cogitate, rationalize, justify, and then often head back the way we came. It’s called human nature. And it has happened this way since before we stood and walked.

A lot of company owners acknowledge the emotional side of change with words. But then act as though someone else had said them.

Better business is built on a foundation of sensitivity to the emotions of everyone involved. Including your own. Sometimes you need to take physical steps to create the environment for progress. Like burning your ships.

We bought 650 West Hutchinson Street on December 1, 1994. Put another way, George W Bush had barely taken the oath of office as the Governor of Texas. No one had heard of Monica Lewinsky. And Barack Obama - in his second year teaching law at the University of Chicago - was three years away from holding his first elected office. The day we moved into the house, we weren’t married, didn’t own a single dog, and had never hired a single person.

Through all that our home had been our ship.

But as Winter turned to Spring this year still we couldn’t cut it lose. And our broker - a sales genius - told us that it might be another year before we’d see an offer. The alternative - and on many days the temptation - was to head back. Familiarity and fear might be frauds. But their short term narcotic effect is powerful.

It was with relief and some surprise that we received a call in mid May. With it came the chance to begin to focus fully on the way forward. Someone had fallen in love with our house.

We started to negotiate. The match was lit. The fat lady was about to sing.

There’s a reason fat ladies with loud voices don’t hold lit matches.

General Misconception

The bankruptcy filing of General Motors sent a shudder through business owners everywhere, I suspect. “There but for the grace of God, etc:”

God, of course, has nothing to do with it. Complacency, ego, hubris, mistakes (genuine and absurd), self-indulgence, shortsightedness, a complete absence of perspective, a systemic inability to innovate, a belief that the company was simply too big to fail and a terrible economy all played their part.

But the truth is that Monday’s news was finally cast in stone by the delusion that prompted the company’s (now former) CEO to stand up last fall and announce that GM was “positioned to lead for another 100 years.”

The delusion that we needed GM more than GM needed us.

A few years ago I took a strategy class at the University of Chicago’s Graduate School of Business from one of the smartest strategic thinkers on the planet. Jim Schrager. He took us through the case study of a company called Head Ski.

You might have heard of Head. Or you might not . Today they sell a few tennis rackets. But back in the 60s they had an effective monopoly on the ski industry. If you skied professionally, you used Head skis. If you skied recreationally, you used Head skis. Gold medalist or 4 year old beginner, the same technology was on your feet.

Metal technology.

In the mid 60s, Head were better than anyone in the world at making metal skis. So when a year or so earlier, their small and insignificant competition had begun to experiment with fiberglass, Head had ignored them. When their small and insignificant competition had begun to sell a few pairs of fiberglass skis, Head had ignored them. When a few up and coming professionals had won a few minor competitions on fiberglass skis, Head had ignored them.

By the time anyone at Head realized they needed to be in the fiberglass ski business, it was too late. Everyone else knew more and did it better. As history came to prove, nothing they tried thereafter could bridge that gap.

Looking back analytically, it’s simple to see the mistake. They missed the innovation curve in their industry. They’re not alone in that.

But that’s not what’s important. What’s important is that in the epicenter of their success, Head was already a dead company.

We went through the case study for more than a day because none of use could believe this. It was inconceivable that a company at the height of its powers had no ability to control its future. Inconceivable, perhaps. True, unquestionably.

The fact is that when successful companies go out of business, it’s not a seismic event that takes them down but a series of decisions. And most of them happened before today.

In other word's success and failure happen over time. And if you don't have a clear plan you will always believe that where you are today is a true indicator of where you will be tomorrow.

It's not. Where you will be tomorrow depends on how well you understand why your customer is your customer.

In Head’s case they lost sight of the fact that their customers wanted the best skis. Not the best metal skis. They started to believe their brand was the attraction. Not what the brand meant to their customers.

GM did the same. All they saw was their own self-image. Part of the American dream.

Well today, they’re living a nightmare. Because they forgot one thing. You don’t get to decide what’s valuable to your customers. They do.

On the day we left the Whitehouse - the company we built for eleven years and then sold -  Chris's penultimate act before turning off the lights and setting the alarm for the last time was to remove from her phone a faded yellow sticky. On it, in her elegant hand, were written four words.

"Stay humble and nervous."

Are you?