Are You A Builder. Or A Window Washer?

Back to work today.

In a year notable for its employment and economic anguish, a sentiment that comes with particular resonance.

Much has been made of the turmoil and disruption that has taken place within most industries. Few have been exempt. However, take a moment to look around and you will see that in most cases the players are still the same.

And despite a lot of talk about change, little has happened except revenue and profit margins have been badly damaged. For the most part, despite all the advice to the contrary, most business owners are hanging on.

I have written before that the problems with windows of opportunity is that we tend to see them after the fact.

When they are closed.

The remainder of 2009 represents the best window of opportunity any of us will see in our professional lives.

The possibilities for what we could do with our businesses, and with whom will never be richer. Nor has there ever been more awareness of the need to change the purpose of our companies so they offer value over the near and long-term future. To our customers and to ourselves.

We can use these next three and a half months to build the foundations of companies that can make dreams come true.

Or we can wait until the window of opportunity becomes clearer.

If you choose the latter, bring Windex.

Or you won’t be able to see the people who made it through, for the finger marks of those who didn’t.

Nantucket - Part 2

Owning your own business is a journey. One that requires two pieces of navigation.

Knowing where you’re going. And knowing where you are.

In that order.

In between, the trick is keeping one eye on the road ahead and one eye on the horizon. Avoiding potholes while seeing all the possibilities makes for powerful businesses that make people’s dreams come true.

Standing at the bow of the Nantucket ferry on Sunday night, Chris was absorbed by the lights that emerged from the mist at regular intervals. Depth perception at sea is difficult at the best of times. On a fog shrouded evening, with only a narrow moon-lit path to guide you, it’s impossible.

Several times we were convinced that a particularly bright light was Sankaty Head Lighthouse on the island’s eastern tip, only to discover as we passed it ten minutes later that it was in fact a buoy, set to mark the shipping lanes on this busy stretch of water.

Finally I pulled out my iPhone and Google mapped our location. The power of hand-held, battery powered, GPS technology. Three hundred years ago, men drowned because there was no way to tell the time at sea. Time being a key determinant of position. Today, the risk is falling overboard while texting.

The answer, in case you’re wondering, is 6.7 miles. The distance at which Nantucket’s lights emerged from the fog on this particular evening.

At 6.8 miles, there was nothing. Thirty seconds later the entire island lay before us. We knew it was there. We could see it on the map on my phone. We were looking for it. And yet, it still caught us by surprise.

Which is how the future works. Here before we know it. A problem for most business owners, who spend today acting as though they control tomorrow. Too late, they find they don’t. The best we can do for what comes next is prepare. There are no guarantees. Only the inevitability of change.

For today’s success to mean something tomorrow, we need to build platforms and develop strategies that maximize the possibilities that we will reach where we’re headed.

On a fog-filled evening in the Atlantic, the Nantucket ferry provides a reassuring platform. And the lady captain had clearly done this before. As an alternative strategy to rowing ourselves across, it had one obvious downside. Expense. $446 round trip with a car. We thought three benefits more than compensated for the cost. Speed, quality of life and probability of outcome.

As we got closer to the harbour, the captain turned on a massively powerful spotlight and swept the water immediately in front of us. As the outer wall came into view she kept the light fixed to a point at its base. The opening was narrower than I expected. Nantucket’s dimensions have changed little since its days as the home of the world’s whaling industry, and both its nautical and land based infrastructure struggle to accommodate the modern trend of bigger modes of transport. At some point one or the other will have to change.

Building infrastructure that can support unforeseeable growth is a long-term view that requires short-term investment. And commitment. It's easier to just keep going. It's also, inevitably wrong.

Safely into the harbour, there was one last manoeuver to undertake, and she turned the ferry on its considerable axis before lining up the bow of the ship exactly in line with the disembarking ramp.

With the gentlest of thuds we came to rest. 27.8 miles from where we had started. Precisely where we had intended. And fifteen minutes early. A snip at $223.

As we left the ferry and headed into town to find some dinner, we were greeted by streets filled with people busy with their own lives. Which for many meant getting ice cream at the juice bar - the crowd outside the door spilling into the road as we drove by.

Building a busines well, is a microcosm of a life well lived. A clear sense of where you’re going, fueled by a personal journey of self-discovery to which we remain ever open.

We ate leisurely, and wandered the shops for a while, eating our own ice cream. Chris radiated contentment - a sense that has come more easily in the past few years as we exchange years for perspective.

Life lessons are hard earned. As I turned the car into the quiet country road that led to The Wauwinet, I had no way of knowing that tomorrow was going to provide me with one of the most meaningful of my own. 

Nantucket - Part 1

I am drawn to water.

A realization I have come to later in life than I wished.

Living beside Lake Michigan for quarter of a century, I was lulled into a false sense of security that proximity to the sea was not important. An assumption that the last few days have proven false.

We spent the weekend on Shelter Island. Hurricaine Danny called to say it was coming over and we should cancel our plans. We ignored it, so it didn’t show. Typical male.

His rudeness was our gift. A fantastic evening at the extraordinary home of Mindy Goldberg and Cary Tamarkin overlooking Shelter Island Sound - a testament to their taste, talent and sustained business success.

At several times during the evening I stood alone and wondered if the moonlit path across the water could be reached from the beach below. The inner child in me hoped so. The man in the white Armani suit worried about the salt stains.

Still, it was an encouraging start. Possibility is the fuel to the future. And I spend most of my time seeing the possibilities for others. Restoring fantasy in our own lives is why summer vacations were invented. And Saturday night was the beginning of that.

On Sunday, I passed another birthday. Quietly and without fanfare. Leaving Shelter Island on the ferry we weren’t sure where we were headed next. For two producers this was unprecedentedly spontaneous behavior. The forecast for everywhere, from Hong Kong to home was set fair for the week. We had a convertible, a full tank of gas, and a million miles on American. The world lay before us. A vast array of possibilities.

We chose Nantucket. Chris’s spiritual home. And a place I’ve never liked.

I spent eleven reluctant vacations with Chris’s family, wishing each time I was somewhere else. Of all the places in the world, Nantucket was top of my list of seen it once, don’t need to see it again.

We hadn’t been back for five years. And I hadn’t missed it one iota. Until two weeks ago when I read in someone’s blog a description of a few days spent at the Wauwinet Inn in early August. Stacy Wall, the endlessly talented and humble film director, was at Mindy and Cary’s party on Saturday. We talked about blogging. He said he preferred the term, writing on the internet.

Aesthetically I agree with Stacy. Writing is a craft. Blogging is casual. But in practice, I find blogging less intimidating. And liberated from the expectation that Writing imposes on me, I find myself becoming more open to the world around me. An openness that found me reading, to my surprise, about Nantucket.

Something stirred inside me that I hadn’t expected. Sights and sounds of Nantucket. Blue hydrangeas swaying on ocean breezes. Cobble-stone streets lined with grey shingled houses, their white windows and fences open and protective in equal measure. And country roads across low lying landscapes, lush and sandy in impossible combinations.

But mostly I felt the pull of island life. Islands that sit exposed to the elements. That require commitment and effort to reach. Their very independence from land demanding a sense of the possible from those that live there.

I have been struck by this in our work recently. Business owners unable to embrace the possibility of what they could be.

Over the last few weeks I have found myself talking to companies whose talent and potential far exceeds their current self-imposed limitations. They have well rehearsed reasons why my ambition for them is too far-reaching. Why my belief in what they could be is unrealistic.

The sense of the possible has left them for now. For some it has gone forever. Decisions seen as temporary have a way of becoming permanent while we are waiting for permission to be great.

Leaving the Orient Point ferry at New London, Connecticut - a convergence of transportation possibilities like few others in the world: boats, ferries, submarines, trains, cars, buses and motorcycles all within a few yards of each other - we turned east and headed towards Hyannis. The Wauwinet had cancellations and a bay view room, at a price unthinkable a year ago, was ours for three nights.

Three hours later, our car stowed safely below, we stood at the bow of the massive Nantucket ferry and headed south into the Atlantic. The evening was warm and fog shrouded, and as we passed the harbor’s outer marker a small group of people gathered on the starboard side and watched quietly as Senator Kennedy’s compound came slowly into view, before settling back into its quiet mourning behind the mist. His schooner bobbed a few hundred yards away, responding to our wake as that of a dog hoping anxiously for the return of its master.

Ahead, the moon found a small gap in the heavy skies, and the path that I had gazed at the night before appeared again on the water, guiding us forward.

The man in the white suit was nowhere to be found.

This time there was only a boy. On a path filled with possibilities. 

A Ticket To No Where

The word strategy gets used a lot.

It’s one of those comfort words that make us feel we’re fully engaged in our business. An invisible force field, inside whose protection only good things happen. After all, who ever went out of business while working on a new strategy.

The problem is that a strategy is not a destination.

Instead, it’s the means by which you move your business.

The temptation to add the word forward to the end of that sentence is one I’ve come to respect. And resist.

Direction is contextual. And requires you know where you have come from. And where you’re headed.

Working on a new strategy without knowing where you want to take your business is like buying a ticket before you’ve decided where you want to go.

Don't be surprised if you're disappointed where you end up.

Value - Part 3

Cost and value are tricky things because they won’t stand still.

Last year, when all of America was complaining about the price of a gallon of gas there were at least two groups who weren't.

Those who read that, adjusted for inflation, a $4.00 gallon costs less in real terms than the 28 cents charged in 1958.

And those who spend enough time in the United Kingdom buying petrol at $10.00 a gallon to think that $4.00 is a pretty good deal.

For most of us, doubling the price of gas had little impact on our habit of driving everywhere. That was because the convenience of driving was more valuable than the extra expense. But it was also because habits have value too. One of which is not having to think about them. A potential change first has to cross the threshold of being worthy of thought. A value system in and of itself.

We had stopped thinking about what it cost to belong to Loch Lomond about a second after the gatekeeper greeted us that first day. And by the time we returned for our third visit, Loch Lomond had become a habit. For the next five years, we showed up Spring and Fall. And in between thought only of the next time.

We met Loch Lomond’s owner, Lyle Anderson, briefly in our second year. Doing so confirmed that the vision articulated in the Club’s written correspondence was reflective of Lyle’s personal love of the place. Limited and sensitive development that would create long term economic viability, while maintaining the intimate atmosphere we valued so much.

Lyle owned a number of big U.S. golf resorts. Truthfully, the kinds of places that have never appealed to us except occasionally as someone else’s guests. But their success
reassured us whenever we started to wonder how Loch Lomond’s economics could possibly work.

The Club sits on 1000 acres on a 999 year lease from the Clan Colquhoun. The definition of a long term strategy. The course had been built before Lyle bought the place from the bank of Scotland, its previous developer having gone bust.

Lyle saw value in the ground that had been laid, figured out what it would take to restore Rossdhu House, the Carriage House and the Garden Cottages, added antique furniture, luxurious fabrics, a high powered management team, first-class marketing and administrative support and must have come up with a huge red number. Huge. And very red.

For the first six years of our $5,000 membership, the annual dues were $1,800 and the 23 rooms cost between £250 and £400 a night. We were conscious of all this because the Club was clearly costing a lot more to run than the revenue that equation could generate. ‘It’s a loss leader for Lyle.” “It’s where he wants to retire.” “He just loves the place. Money’s not important to him.” Rumors abounded among members and staff alike. In every case we all wanted reassurance that this magical place could go on just as it was.

The truth, of course, was it couldn’t. And in early 2004 it was announced that a membership Conversion Plan was underway.

It came in the form of the single most beautiful sales piece I have ever seen. A cloth bound, membership book in its own presentation box containing some of the most stunning photographs of Loch Lomond. Interspersed among the pages were details of the new membership structure.

The Club offered two choices. Pay $75,000 and convert into a full equity membership that in theory would provide a return on your investment in five years.

Or enjoy one final year at the Club and leave.

I know we talked about it. But not for very long. We couldn’t imagine life without Loch Lomond. Our business was doing well. The Club would finance the payment. We’d get a return on our investment. And there’d be half as many members. It would be better than ever.

In six years, an angst ridden $5,000 decision had become a no-brainer at 80 grand.

Inflation and relative economic circumstances play a big part in determining value. But as you get older, how and where you spend your time has a bigger role to play. As does with whom. And in today’s world, privacy comes with a price. I value privacy more than exclusivity. It’s an important distinction in building a business. Particularly one selling a service.

Emotional forces are powerful drivers of value as well. And giving something up requires humility as well as discipline. But in a competitive world, humility is a scarce resource.

To be successful requires a healthy amount of self confidence. Without humility that can turns into short-sightedness. And sometimes arrogance. Bad traits in business and life.

If you bring humility to work with you every day, taking its restraining forces with you on vacation can be hard to do. And perhaps unhealthy. ‘I deserve this,’ is powerful fuel for the entrepreneur from time to time. Payment for some of the challenges faced and overcome.

Leaving Loch Lomond would on some level have been a statement of failure. That we couldn’t afford it. Or didn’t deserve it. Whatever the matrix of value we used to decide to convert, the ticker tape output said “do it.”

So we did. And the results were spectacular.

Over the next three years the Club opened beautiful new rooms in hidden parts of the grounds. A world class spa was built in the Walled Garden. An amazing, sanctuary of a place with a water treatment pool that I quickly dubbed ‘the womb’ for the security and tranquility it provided. The service got even more personal, the result of a bond formed with some of the people who helped us through 9/11 which we watched live on CNN from our room in Rossdhu.

Connections like that are hard to quantify. So we didn’t. We just acknowledged their value and were grateful to be able to come back.

Funny how things change.

In Their Own Words

Having a guiding philosophy by which to run your business every day is a powerful homing device in a forest full of distractions.

For Chris and I, it has long been the Terence Conran quote, "Stay Humble and Nervous."

In the choking economic climate we are living in today, an excess of either can be disastrous.

Humility is a valuable attribute in times of excess. But when the world is inwardly focused, it takes much more effort to attract someone's attention.

And at a time when everyone is hesitant, waiting for something to happen will ensure that at best you're part of the crowd.

Neither is a platform for creating the future you want.

In our case, we have long since accepted that we are skilled in what we do. But inept in communicating that fact. We would much rather talk about someone else's potential.

We have also come to realize that until we face the problem, we are the biggest obstacle we face.

Cometh the need, cometh the Mother of Invention.

In this case, Justin Spooner and Simon Hopkins of Double Shot Consulting. (Even doctors need doctors.) As I've mentioned before, no one understands the possibilities of digital strategies like they do.

In this case, they turned the problem simply and elegantly on its head. If you don't talk effectively about your work, they said. Ask the people that do. Your clients.

So we did. And they have. The first pieces are on our website. Or on Youtube. In the process we put ourselves on camera and found a part of ourselves we didn't know existed.

As a lesson in looking at a problem from a different perspective it's powerful.

As a reminder that we're fortunate to work with amazing clients, it's unbeatable.

Change. The End.

We sold our house on Tuesday. An end to a lot of timelines. Twenty five years in Chicago. Fifteen years in our home. Eighteen months on the market. Two months of negotiation.

I’ve done a lot of deals in the last few years. There weren’t any harder than this. We walked away a number of times. Initially on price - until our broker told us it was this or wait a year. And then increasingly on dignity.

Change is one thing. Capitulation on someone else’s terms is another.

If you are in a situation that you have decided must be changed, creating the conditions in which you can overcome your own fears is critical.

You have to burn your ships. But you also have to make sure you’re not relying on third party, fourth-hand information to make decisions. Humility is a scarce and valuable resource in a negotiation and it evaporates quickly as we sense we are losing control. Add not being heard to the equation and it disappears entirely.

For a while on this occasion we let brokers and lawyers do all the talking. Then our broker did a very smart thing. She humanized us. She asked me to send her an email outlining our view of the deal. Then she passed that on to their broker. Who of course passed it on to the buyer. We got a response, and suddenly each of us was dealing with a human being.

In every future deal I do, I’m insisting on talking directly to the other side. No exceptions. I blogged about this a few weeks ago.

In the heat of an emotional battle, mostly with oneself, it's hard to take even the best advice. But one of the benefits of writing this blog is that it puts what I think down in black on white. It’s hard to ignore that.

Seventeen days ago, we received an email from the buyer's lawyer via ours. It accused us of being liars. I may be a lot of things but telling lies comes very, very hard. I can remember every untruth I’ve ever told. And they haunt me. Needless to say, the accusation went down very badly.

As far as I was concerned, that was it. They weren’t getting my house. My home. My lifeboat. Not those people. Not dead.

Lawyers don’t do deals. You do.

I went back and re-read my blog. Then I re-read the buyer’s email. Its tone did not match his lawyer’s. I see that a lot. Lawyers with big egos thrashing about to make an impression. Often it has the inverse effect to the one their client is hoping for. At best it’s boorish. At worst it’s deal ending. Most of them get paid regardless. I’d rather pay for results than bombastic letters.

Chris and I decided to heed my own advice. We invited the buyer and his family to come to the house so that we could show them round in person, take them through its eccentricities and explain the work we were doing to ensure we handed it over in the best possible condition.

This strategy was not universally supported. In fact we couldn’t find anyone who agreed with it. But we were convinced of two things. Transparency is a powerful lubricant. And the only behavior you can control is your own. If we acted honorably at least we had one foundation we could lean on.

It was a turning point. The instant we met we knew we had sold to the right people. They love our house as we do. And when I handed over the keys for the final time, the fear I felt was not for the future of our former home.

The last few days have been extraordinary emotional. Much more so than I had imagined. And the sense of loss is profound. Twenty-five years is more than half my life. And 650 West Hutchinson Street was the first home in which love was more than just a word to me.

Those are hard things to give up consciously in the belief that the future is better met elsewhere. And on one level, by leaving Chicago and my home behind, I feel I have betrayed places that have given me so much.

But the fact is life had become too easy. Too rhythmic. Too settled. And that is not a foundation for growth and exploration.

And so I step out into the storm and face the unknown. Grateful beyond words for the past I have lived. And hopeful for the possibilities that tomorrow will bring.

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.

"Send Three and Sixpence. We're Going To A Dance."

“My apologies for writing you a long letter. I did not have time to make it shorter.” Variations thereof, have been attributed to writers as diverse as Mark Twain, Pascal and Cicero.

Whoever said it understood the speed of inaccuracy. The sluggishness of clarity.

Being clear takes longer. If it didn’t, eloquence would be less revered.

And because time is money, most people substitute expedience for the opportunity to be precise. After all, why do one thing well if in the same amount of time we can get three items off our To Do list.

Except, clarity provides focus that expedience never worries about. And focus is the key to being in business. And not.

When margins are razor thin, cash flow is week-to-week and credit is non-existent, you must be certain that everything you’re doing is leading you somewhere better. Because in this economy, the cost of not doing so will probably be fatal.

So stop.

Then find a way to get clear about where you’re headed.

Doing so will take much longer than feels comfortable.

The alternative will feel very much worse.
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Today’s title, incidentally, was the urgent message delivered to the commander of a British relief column during Word War I.

Said quickly, it does sound very much like, ‘Send reinforcements. We’re going to advance.”

Stupid? In hindsight, of course.

The trick is to swap hindsight for foresight.

It's much less expensive.

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?

7,6#5$4@3*2f1 Reasons Why Your Systems Are Critical

Fred Wilson blogged yesterday about his recent problems with American Express.

Last I checked there were 133 comments on his post. Fred is apparently not alone in his experiences with AmEx’s declining customer service standards. Things have fallen a long way since the days of Karl Malden.

The issues at American Express can be attributed to many well discussed macro-economic factors, none of which, as entrepreneurs, we can do much about.

But one particular comment on Fred’s post stood out to me as indicative of a deeper issue at AmEx. It’s an issue that I see most business owners fail to address until the problems are so deep rooted that there’s no viable solution.

Their information management systems.

Most entrepreneurs are in a hurry to put some foundations in place and get into business. If they hire great lawyers and accountants they get great operating agreements and financial reporting. If they don’t, they don’t. The rest they learn as they go.

But when it comes to managing the information around which their company operates, they often focus only on their current business needs. And almost not at all on what they might need five years later. As though thinking about it will jinx it. This happens all the time. Even among people paid to think ahead.

Remember the Millennium bug when the world's computers were supposed to come to a halt because most of their operating code had been written with two digit calendar years? After all, who could envision the world reaching the year 2000 all the way back in the uh, 1950s.

A version of this has affected American Express. In their case the issue is the account number structure they used in the 1970s. I’ve reprinted the comment added to Fred’s post this morning:

“I'd had an AmEx Platinum card for nearly 30 years, never missed a payment. Last year I wanted to arrange for the card account to be paid automatically from a bank account. AmEx said sorry, the auto-payment feature wasn't available for my card, even though the feature was offered on their website. I escalated through SEVEN layers of managers, being stone-walled at every level, until the highest VP finally told me that AmEx cards with older numbers were handled on a different computer system which couldn't be upgraded. My only option was to cancel my Platinum AmEx and open a new account, which would have a new number and be hosted on a newer computer system where auto-payment was available. This was so incredibly incompetent that he convinced me that it must be true.”

The issue, of course, is not that American Express physically can’t transfer the data. It’s that they feel that the cost of translating and transferring it to the new systems is cost prohibitive to them.

Even if we forgive them the limitations of their early account numbering system as a result of unforeseeable technological evolution, they’ve compounded the mistake at least twice more - each time exponentially.

The first, by deciding not to perform a comprehensive system upgrade of all their customers when the new system was implemented. The second, by deciding to then highlight the inadequacy of their original planning by offering their new customers better service than the original card members.

Offering your oldest customers less service than your newest is a quick way to making sure your newest become your oldest really fast.

Ultimately, the random, volatile behavior of their customer service department is more indicative of the lack of trust they have in their own philosophy, their systems and ultimately themselves.

If you want your business to last you have to build it to last. If you design a spectacular house and then run the plumbing through cardboard tubes, eventually the Fed Ex guy is going to find water coming through the front door.

Companies work the same way. The outward face of a company is always a reflection of its inner workings. And no amount of customer service training can hide a badly built business.

So take a look at your information systems and think hard about whether they’re built to support your company’s best case scenario ten years from now.

If they’re not, you’re just planning for failure.

Change Your Business? Listen To The Birds.

I was with a group of clients last week who have fully embraced the fact that their business will never be the same. Change is in the air, like never before.

It’s been a long time coming. And there have, so far, been many more words than deeds. As a species we try very hard to intellectualize our environment. Fight or flight? Neither, actually. Can we talk about it instead?

Our ability to analyze complex scenarios and evaluate possibilities is one of the attributes that separates us from other species. The other is imagination. The fuel on which the future is formed.

Where are we going? And how are we going to get there? If you’re not asking those questions it’s probably time to think about doing something else.

But analysis and imagination are not enough. The ability to act is the crucial link between the two. And in this regard, other species leave us in the proverbial dust.

Birds fly south for the winter. There is no meeting to debate the pros and cons. No assumption that they should go north again because that’s what they did last time. It is enough that they know they must go and that south is where they want to end up.

As a business owner you need to know where you are going. And you need to know why. And if the best answers you come up with are ‘south’ and to ‘survive’, then that’s good enough to start moving.

The alternative is to talk about it some more or continue in the same direction.

And when an economic winter like this one arrives, all that will be left are a few frozen feathers.

Bravery + Strategy = Innovation

In late November a client of ours came back from a meeting with one of his biggest customers. He was visibly shaken. Hardly surprising given that they’d just told him their 2009 projections were based on a forty percent drop in revenue. They’d need a lot less from him. Forty percent less.

It was about then that we were all beginning to realize the world had changed. That the futures we had all expected weren’t going to happen. That this wasn’t a recession, or a downturn. That this was life changing.

The auto industry is living through its life change in public. And the debate about whether we should or should not be bailing out the big three will continue until someone asks better questions. ‘What do customers want?’ seems like an obvious one. In an industry experiencing a forty percent decline in sales, the answer apparently is, ‘not this’.

With one exception. Hyundai.

At the beginning of this year, the company launched a program that guarantees they will take back any car bought in 2009 if the customer loses their job.

At a time when cutting costs was everyone else’s strategy, Hyundai made theirs reducing risk. At a time when their competitors were asking for government money to survive until the upturn, Hyundai believed they could create an upturn themselves. At a time when customers wanted confidence, Hyundai made a simple, human statement. ‘We believe in you.’

Hyundai’s sales compared to a year ago? Up 4.9 percent. Number of cars returned? Zero.Cost to Hyundai? Zero.

When all around you are losing their heads, you need both courage and clear thinking.

The result is almost always compelling.

I Cannot Tell a Lie - This Is A Revolution

In revolutions, old stuff gets broken before the new stuff is put in its place. And that frightens people.

This - from Clay Shirky’s remarkable essay strikes me as an absolute truth. His conclusion is that people are so frightened by revolution they demand to be told that what’s happening isn’t really happening. They demand to be lied to.

Which, in my experience, is exactly what happens.

Most business owners argue - with their greatest passion - for their view of the present and the future. Because that’s where they feel safest. They tell themselves a story based on how they want the world to be, and then post-rationalize every piece of information to fit that view.

By the time reality is standing, arms crossed, in front of them tapping its foot, they’re backed in the corner like the heroine in a bad science fiction film. All that’s left is the scream.

It’s time to stop the lie. And to celebrate the unknown. Because that is where the future has always been.

Hope is Not a Strategy

Remember when buying a home was a guaranteed return on investment?

Until some time early last year, the rule was that you bought a home as soon as you could, and as long as you kept it at least three years, you would sell it for more than you paid. In London, you only had to hold it for three months - and in some parts of town three days would do it. The possibility that a house or an apartment might one day be less than the loan we took out to pay for it was literally inconceivable. It just never occurred to us

When the real estate market headed south, we reacted too late because it couldn’t be happening. We had no tools to deal with it. So we waited for the ‘bounce’ and hoped. I think we all know now it’s going to be a long wait.

In this economy, owning a business has a lot of similarities. Most business owners have stock answers to dealing with downturns. And if you owned your own business in the post 9-11 trauma, you learned something about getting through tough times.

But these days the question is not how did you deal with the post 9-11 economy? The better question is what did you do in the aftermath of ’29. As in 1929. The only historical reference we have. These are once in a lifetime conditions and a lot of people are unprepared for that. Like the value of their home, they’re still trying to use an emotional model to deal with it.

Hope. Supported by luck.

But hope is not enough. Nor is it a strategy. To survive in an economy where breaking-even is the new win, you have to get past the emotional barrier that this can’t be happening. For many businesses, that means going back to the days when our first focus was on how to cover payroll. And if you’re not at that point, then here’s what you’re hoping.

That you get work. That it’s profitable. That you get paid on time. That you get paid at all. That you get paid often enough to cover your overhead. That your bank will lend you money if things get tight. That the job you’ve been waiting 6 weeks to come through will come through. That the check is in the mail. That things aren’t as bad as they seem. That things will be fine.

You might be okay with one of those. But beyond that, you need a plan that deals with bad and worst-case scenarios. And does so before you get to that point. Because a plan made calmly is always a better plan.

As Andy Dufresne said, “Hope is a good thing. Perhaps even the best of things.”

But even he didn’t think it was a strategy.