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Archives for September 2009

More Than Profit

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In Built to Last: Successful Habits of Visionary Companies, Jim Collins points out that the most successful companies do not exist first and foremost to maximize profits. He writes:

Contrary to business school doctrine, “maximizing shareholder wealth” or “profit maximization” has not been the dominant driving force or primary objective through the history of the visionary companies.

Visionary companies pursue a cluster of objectives, of which making money is only one — and not necessarily the primary one.

Yes, they seek profits, but they’re equally guided by a core ideology — core values and sense of purpose beyond just making money.

Yet, paradoxically, the visionary companies make more money than the more purely profit-driven companies.

The Purpose of Budgeting

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From Good to Great on the purpose of budgeting in an organization — with implications for your personal budgeting as well:

What is the purpose of budgeting? Most answer that budgeting exists to decide how much to apportion to each activity, or to manage costs, or both. From a good-to-great perspective, both of these answers are wrong.

In a good-to-great transformation, budgeting is a discipline to decide which arenas should be fully funded and which should not be funded at all.

In other words, the budget process is not about figuring out how much each activity gets, but about determining which activities best support the Hedgehog Concept and should be fully strengthened and which should be eliminated entirely.

The point is: we shouldn’t have a mentality of doing “some of everything.” This will distract from doing what is most important. You need to do the right things, and the corollary of that is to stop doing the wrong things. Budgeting is a discipline for making those determinations.

Don’t skimp on what is most important because you need to make room for all sorts of other things, spreading yourself thin. Don’t think that there is virtue in only partially funding things, as though it makes you look more frugal. Instead, fully fund the right things, and in order to make room for that don’t fund at all the wrong things.

And this requires the disciplined thought to identify what the right things are, and what the wrong things are.

On Eliminating Artificial Motivation

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I’m jumping into the middle of a story here from Good to Great (p. 206), but I think you’ll get the point. This has far-reaching implications for many things (including — and perhaps especially — churches):

Of equal importance is what they don’t waste energy on. For example, when the head coach took over the [cross country] program, she found herself burdened with expectations to do “fun programs” and “rah-rah stuff” to motivate the kids and keep them interested — parties, and special trips, and shopping adventures to Nike outlets, and inspirational speeches.

She quickly put an end to nearly all that distracting (and time consuming) activity.

“Look,” she said,”this program will be built on the idea that running is fun, racing is fun, improving is fun, and winning is fun. If you’re not passionate about what we do here, then go find something else to do.”

The result: The number of kids in the program nearly tripled in five years, from thirty to eighty-two.

What's Not Best: Charging a Fee to Get a Discount

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AT&T has a plan where you can save something like $5 per month on your cell bill if enough people in your company have AT&T for their wireless and enroll in the savings program. Something like that.

So I went on to sign up for the savings the other day, and AT&T charged me $36. They charged me $36 to enroll in a program designed to save money. They charged me a fee in order to get the discount.

???

A discount program should, at the very least, produce good-will in the customer. This program does the opposite. Now, AT&T is very close to earning a place on my list of things that should not exist.

Avoiding the Bureaucratic Death Spiral

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In Good to Great: Why Some Companies Make the Leap… and Others Don’t, Jim Collins has a great section on how a bureaucratic death spiral turns exciting, high-potential start-ups into mediocre companies:

Few successful start-ups become great companies, in large part because they respond to growth and success in the wrong way.

Entrepreneurial success is fueled by creativity, imagination, bold moves into uncharted waters, and visionary zeal. [Then] as a company grows and becomes more complex, it begins to trip over its own success — too many new people, too many new customers, too many new orders, too many new products.

What was once great fun becomes an unwieldy ball of disorganized stuff. Lack of planning, lack of accounting, lack of systems, and lack of hiring creates constant friction. Problems surface — with customers, with cash flow, with schedules.

The professional managers finally rein in the mess. They create order out of chaos, but they also kill the entrepreneurial spirit [emphasis added].

Members of the founding team begin to grumble, “This isn’t fun anymore. I used to be able to just get things done. Now I have to fill out these stupid forms and follow these stupid rules. Worst of all, I have to spend a horrendous amount of time in useless meetings.”

The creative magic begins to wane as some of the most innovative people leave, disgusted by the burgeoning bureaucracy and hierarchy. The exciting start-up transforms into just another company, with nothing special to recommend it. The cancer of mediocrity begins to grow in earnest.

How do you avoid the bureaucratic death spiral? You create a culture of discipline instead of a bureaucracy. Collins continues:

The purpose of bureaucracy is to compensate for incompetence and lack of discipline – a problem that largely goes away if you have the right people in the first place [emphasis added].

Most people build their bureaucratic rules to manage the small percentage of wrong people on the bus, which in turn drives away the right people on the bus, which then increases the percentage of wrong people on the bus, which increases the need for more bureaucracy to compensate for incompetence and lack of discipline, which then further drives the right people away, and so forth.

… An alternative exists: Avoid bureaucracy and hierarchy and instead create a culture of discipline. When you put these two complementary forces together — a culture of discipline with an ethic of entrepreneurship — you get the magical alchemy of superior performance and sustained results.

The rest of the chapter is about how to create this culture of discipline. In fact, the whole book is really about that: disciplined people who engage in disciplined thought and then take disciplined action. That’s how you avoid a bureaucracy and create a great company.

Facebook is Finally Making Money

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According to Ad Age:

Scratch Facebook from the list of web 2.0 startups that don’t make money: The world’s largest social network said today it has become profitable.

Co-founder and CEO Mark Zuckerberg said Facebook had crossed the 300 million registered-user milestone and that it had become “cash-flow positive” in the second quarter, ahead of schedule. Previously, Facebook had said it was targeting profitability “sometime in 2010.”

Why Mint.com + Intuit is a Big Idea

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Aaron Patzer, the founder and CEO of Mint.com, gives his thoughts on why he is excited about Mint.com’s acquisition by Intuit (the makers of Quicken).

Mint.com needs to offer two more features to be most useful, in my opinion: (1) the ability to delete the default categories (currently you can create new categories, but can’t delete the ones you don’t want) and (2) the ability to split transactions.

Without those two features, we can’t use it to keep track of our budget. For example, if Heidi goes to Target and buys groceries, toys for the kids, and a DVD, it all gets classified into a single category. You can’t split that transaction into the respective categories that reflect your actual purchase. That makes it impossible to track the grocery budget accurately.

Mint.com is great on so many other fronts. But without those two abilities, it is is simply not functional for us. Hopefully with this acquisition, those functions will be added to it.

By the way: I use the Windows desktop version of Quicken, which does offer the ability to split transactions and delete the default categories that you don’t want. But it has the drawback of only being accessible on a single computer.

So, for example, Heidi has to come to my computer to see our budget status or update any information, since we have Quicken on my computer (I run Windows on my Mac so that I can use Quicken). If we put it on her computer, on the other hand, I wouldn’t be able to see our data or update any information without going to her computer.

So the ability to keep this data online is very important. The unfortunate thing is that no online programs (not Mint.com, Quicken Online, iBank, nor anything else) offer both of the two critical functions mentioned above. On the other hand, the desktop version of Quicken does, but since it is not online the data is not easily accessible within a family.

Intuit can solve this problem by simply taking Mint.com and giving it the two critical features that made the desktop version of Quicken so effective: the ability to create and delete categories at will (including the bad default categories that come baked in) and the ability to split transactions.

Update

My readers have pointed out below that Mint does in fact have the ability to split transactions. So I (gladly) stand corrected. Thank you!

I don’t know if this feature did not exist the last time I gave Mint a detailed look, or if I simply failed to notice the way they’ve implemented it. Either way, this is great news and has me giving serious consideration to Mint now.

A Couple Thoughts on What the Apple Tablet Should Do

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I miss the days of my paper planner. The reason: It was simple.

On a single page I could see my calendar for the day and critical action items for the day. On the other side of the page was a place for notes. In the tabs at the back were my longer-term lists — projects, next actions (that weren’t due on a certain day), and so forth.

Those are the four critical components of any planning system, and they were all right in view. Now that I am electronic, those four components are split across multiple programs. I have no way to get a single, integrated, and simple sight of my calendar, critical actions for the day, and a place to jot notes. Especially when I’m on the go and have to deal with the much smaller screen of the iPhone.

So although I could never go back from the speed of keeping everything electronic, I am continually frustrated — and slowed down — by the cumbersome interface(s) that we have to deal with.

Enter the (rumored) Apple Tablet. My first question for the iTablet (or whatever they call it) is how it will relate to my laptop. And I have an answer, which stems from the above problem.

Among all the various things it will be able to do, there is one main thing I want the iTable to do: I want it to be the electronic version of the physical planner that I used to have.

To do this, first of all it will have to be an extension of my laptop rather than a truly separate device. This means that it will have to easily (and wirelessly, fully, and instantly) sync with my laptop so I don’t have to keep track of which data is where.

Then, without that concern, I want to use it in conjunction with my laptop (at least when I am at my desk) as a second screen that I can use to show an integrated view of my calendar, daily tasks, and daily note capture.

My desire is to look to the iTablet to identify “what’s best” to do next (reviewing calendar and actions), and then to my laptop (plus the attached external monitor, for screen #3) to actually do the work.

That’s the heart of the matter: You need one screen where you do the work, and a different screen where you keep track of the work you are doing / will be doing next.

On top of this, I want to be able to input into the iTablet by writing on it. Just like I could with my old physical planner.

When I leave my desk, I’ll then take just my tablet with me. In those instances, then I’ll use it both as my planner and also for any other tasks I need to do on the go. But it will need to be simple to get back to the “planner view” so I can easily determine what needs to be done next. Gone will be the days of having to both keep track of my work and do my work in the same view.

And that’s the critical principle, so I’ll say it again: there needs to be a separation between the screen where you keep track of your work and the screens where you do your work. That, in a nutshell, is what the iTablet needs to offer.

How to Make Your Data Matter

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Chip and Dan Heath discuss how to make your data stand out by building people’s intuition about your numbers. The key is to drag your numbers into the everyday:

A good statistic is one that aids a decision or shapes an opinion. For a stat to do either of those, it must be dragged within the everyday. That’s your job — to do the dragging. In our world of billions and trillions, that can be a lot of manual labor. But it’s worth it: A number people can grasp is a number that can make a difference.

Here’s one example from the article of how to put a number in a day-to-day context. This is also a good example of the importance of looking beyond stage one in order to avoid being “penny wise and pound foolish”:

Years ago, Cisco Systems was contemplating whether to install a wireless network for its employees (a “duh” decision today but not at the time). The company had calculated that it would cost roughly $500 per year, per employee to maintain the network. Was that worth it? Hard to say since we don’t have much intuition about $500 yearly expenses.

One employee brought the number into daily life, computing that given what Cisco paid its average employee, if the wireless network could save that worker one to two minutes per day, it would be a good investment. Suddenly, our intuition is activated. Can we imagine a situation where the network might save someone two minutes? Almost certainly yes. (Whereas if the network had required 52 minutes of daily savings to pay off, that would have been a hard sell.)