Scaleability – Page 24 – Discipline makes Daring possible.

September 9, 2021

Innovation

When we think of innovation, we tend to think of physical or digital technologies embodied in products or apps.

Management is a technology too.

And as Michele Zanini, co-author with Gary Hamel of ‘Humanocracy‘ observed only last Friday:

“Our research suggests that the longest-lasting competitive advantages come from innovation in management systems and practices, not from business or operating model innovation. So diligently pursuing management innovation pays off handsomely.”

And the good news is that small businesses on the cusp of scaling are best placed to take advantage of this.

September 8, 2021

Founders Syndrome

I learned a new concept this morning: ‘Founder’s syndrome’. Here’s the Wikipedia definition:

The organization is strongly identified with the founder;^[8] and a result sometimes believed to be related to the founder’s ego.^[9]^[10]^[11]
Obsessive leadership style compared to a more standard behavior.^[12]^[13]^[14]
Autocratic decision-making (autocratic management style): Founders tend to make all decisions in early start-up companies, big and small, without a formal process or feedback from others. Decisions are made in crisis mode, with little forward planning. Staff meetings are held generally to rally the troops, get status reports, and assign tasks. There is little meaningful strategic development, or shared executive agreement on objectives with limited or a complete lack of professional development. Typically, there is little organizational infrastructure in place, and what is there is not used correctly.^[11] Furthermore, the founder has difficulty making decisions that benefit the organization because of their affiliation.^[10]
Higher levels of micromanagement by checking on employees or colleagues subject matter work instead of maintaining and evolving the overall company’s picture.^[15]
Entrepreneurs show higher levels of bias (e.g. overconfidence) than do managers in established organizations.^[16]^[17]
There is no succession plan.^[11]
A failing so-called leadership transition^[18] within first couple of years leading to consequences such as trust, moral, unforeseen future for the business.^[19]^[20]
The founder has difficulty with adapting to changes as the organization matures.^[10]
The culture of the leadership team and company plays an important role for success or failure.^[21]^[22]
Often the founder’s idea is central to the initial business and clients of the company, so that if markets change, the need for the initial idea might vanish.^[23]
Key staff and board members are typically selected by the founder and are often friends and colleagues of the founder. Their role is to support the founder, rather than to lead the mission. Staff may be chosen due to their personal loyalty to the founder rather than skills, organizational fit, or experience. Board members may be under-qualified, under-informed or intimidated and will typically be unable to answer basic questions without checking first.^[24]
Professionally trained and talented recruits, often recruited to resolve difficulties in the organization, find that they are not able to contribute in an effective and professional way.^[24]
The founder begins to believe their own press/PR and other marketing related issues.^[25]
The founder, who is usually the CEO or managing director, suffers HiPPO (Highest-paid-person’s opinion), which means that often their ideas, decisions, etc. keep winning over the actual better ideas, decisions, etc.^[26]^[27]
The founder becomes increasingly paranoid as delegation is required, or business management needs are greater than their training or experience.
Falling into two traps:^[28]
- Actions without a goal or
- Wrong actions based on defined goal

The founder responds to increasingly challenging issues by accentuating the above, leading to further difficulties.^[29] Anyone who challenges this cycle will be treated as a disruptive influence and will be ignored, ridiculed or removed. The working environment will be increasingly difficult with decreasing trust. The organization becomes increasingly reactive, rather than proactive. Alternatively, the founder or the board may recognize the issue and take effective action.^[30]

A lot of this looks to me like the classic painful transition from one-person-band, to few-person-band, to full-blown company. Which is really the transition from a small, personal, human-scaled business to a large, impersonal capitalist corporation. The founder wants to keep things personal and true to their original vision. New owners or new management want to make things efficient, corporate and therefore impersonal. As far as the founder is concerned, they want to make it ‘someone else’s business‘. Of course the founder resists.

There is a preventive for ‘Founder’s syndrome’.

Embed the founding vision and personality into the operating processes of your business before you try to scale, with a Customer Experience Score. You’ll be able to scale without managers, even without investors other than the people you serve. The best of both worlds: personal, true to the original vision and magnifying your impact.

Even better, once it’s built into the way your business works, your Score takes on a life of it’s own, nurtured and improved by everyone in the business. It becomes harder for anyone to interfere – even you.

September 7, 2021

Design your business or it will be designed for you

“Design your business or it will be designed for you.” It’s one of my favourite sayings, spoken by Brian Chesky of AirBnB.

But what does it actually mean? How can others design your business for you, when you’re the boss?

When you started out as a one-person band, you did everything. You tried different things to market and sell your services, and to deliver them in such a way that customers came back, or told their friends. You designed the business.

Once demand grows beyond what you can personally deliver, you have to add capacity. And every time you do that, you bring in someone else’s idea and experience of what a business looks like.

You might add capacity by automating some of what you do with software. That job management software, quote generator or CRM tool was designed by someone else, according to their vision of what a business is and how a business works. A vision that is necessarily generic, otherwise they couldn’t sell enough to be viable.

You might outsource some of what you do, your accounts, or your HR for example. Your accountant or sales agent will have their own idea of what a business is and how it works. If they’re any good they’ll try to find out more about yours, but often they’ll fall back on a generic design to fit all industries, or a design learned working elsewhere, or their own design. It’s not your area of expertise, so even though you don’t love it, you put up with it.

You might work with other small businesses like yourself, sub-contracting some of the delivery. But like yourself, they will have designed their own small business, and that design probably won’t match yours. That can prove exasperating and stressful, unless you decide it doesn’t matter that much, and accept the differences.

You might recruit a business partner, co-director, manager or experienced staff to take on some of the work you do. Almost certainly you’ll want them to have experience of business in general and your industry in particular. In other words, they’ll bring with them the design of those other businesses they’ve worked in, plus their own ideas of how to do things. If you’re very lucky, those ideas will chime with yours. If you’re not, you’ll be fighting to maintain your business design, or running through several cycles before you find ‘the right person’.

You might recruit juniors, school-leavers or graduates even, who you can ‘mould’ to suit your business design. But moulding takes time, and even they will have their own ideas of how things should be done. They need almost constant supervision and just don’t seem to get it.

You might hire a business coach or consultant to help you deal with all these problems. They too, come with baggage of what a business ‘should’ look like, learned at the Bank, or at business school, or from building their own successful businesses. They will try and shape your business to fit.

In the face of all this, you have a choice. You can supervise closely, re-do work, fight to correct what everyone else is doing ‘wrong’, or you can accept other people’s designs for your business. The first is exhausting, the second feels like it’s not your business any more.

There’s a step you can take, which can solve all of these potential problems before they happen, which is to take your business design out of your head and get it down as a shareable ‘blueprint’ everyone can work from. The Customer Experience Score for your business. That captures your unique way of making and keeping promises to the people you serve.

Your Score becomes a specification for software, an operations manual for new staff, suppliers and contractors at all levels. Above all it becomes a permanent record of your design for your business, that enables your unique creation to scale, evolve and persist through time.

Design your business, or sooner or later, you’ll be back to working in someone else’s business.

September 2, 2021

Art and business

Letting ‘art’ into a business feels wrong somehow. Surely the point of business is predictability, conformity, delivering to specification? How can you let people ‘do art’ on this without losing these things?

The kind of precision we usually think of when we think about ‘predictability, conformity, delivering to specification’, is really only necessary for manufacturing. Even then, the manufacturing part is only a fraction of what makes up the customer experience.

If art happens in that tense space between rules and license, restriction and freedom, certainty and uncertainty, you can at least control what happens on one side of the space. You can specify ‘the least we should do’, with as much precision as you like. That means there is no downside to the art that can take place, only upside. You can predict that specification will be met at least, perhaps exceeded.

The output of artists constantly evolves, as they explore that space of tension between the rules they’ve set themselves and whatever it is that they wish to express. Each individual work is a specific response to that tension, different from every other, but taken together, the whole body of work is coherent. You can tell it’s all from the same artist.

The thing your business exists to express is your Promise of Value. Everyone in the business is trying to create art in the tense space between your Promise of Value and the floor you’ve defined. Each individual making and keeping of your Promise – or customer experience – is a specific response to that tension, different from each other, but coherent, taken as a whole. You can tell they’re all from the same studio. You can predict that every response will conform to your Promise of Value.

Looked at this way, your job as business owner is not to control individual output, but to define the space – the studio if you like – where your people, your artists, can create output that delights the people you serve.

Why would you do this? Because art commands higher prices than factory-made. People value human.

August 24, 2021

Structuring emergence

The problem with a hierarchical management structure, is that it’s expensive – adding layers of overhead and transaction costs that have to be carried by the revenue-generating part of the business. Even worse, it encourages everyone working within it to focus on the wrong thing – their immediate boss. And that makes work miserable for many, especially those at the bottom of the pyramid.

Alternatives to hierarchy, such as holacracy, co-operation and teal address this by delegating much of the management and decision-making to the people at the coal-face – no longer the bottom, but the cutting edge, where the business meets its customers.

This doesn’t reduce overhead that much because in effect, as Dr Julian Birkenshaw of London Business School observes, these structures “replace a vertical bureaucracy with a horizontal one”. Considerable interaction costs remain as people collaborate and generate consent to create emergent actions. But at least the focus is where it matters, on the customer, client or stakeholder.

It seems to me that what’s really needed is both structure and emergence. A structure that takes the thinking out of doing the right thing most of the time, but allows for emergence at the edges to respond to exceptions and to evolve. The main thing is that both the core structure and the processes for emergence are focused on the same thing – the customer, client or stakeholder.

By now, you know all about my core structure:

Even hierachy works better around this. Replace that with holacracy, co-operation, teal or responsible autonomy, and your business will fly.

Discipline makes Daring possible.

August 20, 2021

Pattern Books

One of the things that put good housing within reach of ordinary people was the pattern book.

Instead of designing and building each house from scratch, an architect could design a basic pattern with variations that any local builder could construct. The first owners could even personalise their home by choosing features from a list – a parquet floor here, a bay window there, a different bedroom layout.

The result was our typical suburbs, from Hampstead Garden Village through to Metroland and beyond. Houses that are enough like each other to give a pleasing sense of uniformity and rhythm, but different enough in their details to be lively.

You are the architect of your business. What if, instead of building each customer experience from scratch, you created a pattern book that your team can start from, and clients can adjust to suit their tastes?

August 16, 2021

Chippendale

In the pre-industrial age, the only way to grow your business was through apprenticeships. Teaching aspiring masters everything you knew one-to-one, or one-to-few.

Once they had mastered their craft those apprentices went off and repeated the process in their own workshops. A few might stay with you if you could get enough work to employ them.

The downside for customers was that everyone tended to make the same, tried and tested stuff for the same local customers. If you wanted to make your mark by producing something different, it was impossible to grow fast enough to keep up with demand.

Thomas Chippendale knew what his gentleman customers in London wanted. He knew that there were similar markets in towns and cities across the country. He couldn’t serve those markets himself, but he could enable other cabinetmakers to do so – with a pattern book that could be sold to both cabinetmakers and gentlemen.

The pattern book specifies the end product – what it should look like, dimensions, some key details. Chippendale knew that of course any master cabinetmaker would know how to construct the pieces. He didn’t need to tell them that.

The result is that each piece produced from the pattern book reflects the skills of the cabinetmaker who used the pattern as inspiration, tailored to the sensibilities of their local gentlemen customer.

‘Chippendale’, but not by Chippendale. A halfway house between handcrafted and factory-made.

Not a bad way to scale your unique approach.

August 11, 2021

What’s wrong with being a boss?

A boss is someone who tells you what to do. Often they also tell you how to do it. A boss’s job is to get more work out of you than they are paying you for.

On the whole, we don’t like how it feels to be on the receiving end of either of these things, which is why we leave big corporates to become ‘our own boss’.

But when we have to work with other people, we have to become ‘the boss’. And it doesn’t matter how much you dress it up as leadership, the job is the same – getting more work out of others than we’re paying them for, telling them what to do and how. It’s uncomfortable. It feels wrong. Especially when we’re a small team that feels more like family. You don’t do these things to family.

It’s also frustrating, because your team know what a boss is, and what a boss does. and they don’t like it any more than you did.

Turning yourself into the thing you hoped to leave behind is not inevitable. If you build a system that enables every person in your enterprise to lead, and rewards them accordingly, you avoid the discomfort and frustration of being a boss. Ironically, it enables everyone to get more work done too. So if you’re focused on impact rather than profit, this is the way forward.

When everyone’s a leader, the boss can happily disappear.

August 6, 2021

500 percent

I realise I forgot to mention the book pictured in my earlier blog this week.

It’s well worth a read, sadly only available on Amazon.

Here’s my takeaway from reading it:

Sustainable improvement only came when the owners, Julian and Andrew did three things:

They re-framed what a business is about: “A business exists to form contracts, and satisfy them successfully.” In other words, it’s about making promises and keeping them.
They re-designed the highest level business processes around that definition to create a framework. In other words, they created a score for people to follow, without telling them where to put their fingers.
They handed over all the work that takes place within that framework to each and every person in the business, along with the lion’s share of the rewards. Each person became in effect a virtual business running the entire end-to-end process of forming contracts and satisfying them successfully, and collaborating with peers to do so. In other words, they enabled people to fulfill all their human needs for purpose, mastery, agency, autonomy and community, not just their basic need to ‘make a living’.

As a result, the business became not just self-managing, but self-leading. In other words, they built a scalable, replicable system for making and keeping promises, that didn’t need them to be there.

If a manufacturing business can do this, then so can you.

And I’d love to help.

August 5, 2021

Handovers

When you grow a business by adding functions – accounts, sales, customer service, warehousing, delivery – you inevitably add overhead. Because every new function you add introduces the need for handovers, often several of them. Running the business becomes a matter of co-ordinating handovers and catching the things that fall between functions, rather than making and keeping promises to customers.

All of this costs money. You’ve introduced transaction costs. At the extreme, the thing the business is supposedly here to do is the thing that suffers – because it’s the only part that can give. So you get turkey twizzlers for school dinners at a higher cost than if a local dinner lady cooked from scratch every day.

The answer is to pick a unit of growth that’s focused on the customer, and replicate it. That unit is the process of making and keeping a promise to them.

Let one Role run the entire process of making and keeping a promise to a customer from beginning to end, with no handovers, no transaction costs, no overhead, and you’ve got a recipe for efficient scalability, that works within the firm and beyond. It’s also more fun for the people running the process.

More efficiency, more impact, more fun. What’s not to like?