Saturday 30 April 2011

How to become an entrepreneur - The abbreviated guide

Step Three: Quit your old job with a steady pay, reasonable hours and a company health care.

Most experts might recommended not be obnoxious about handing in your notice however tempting it sometimes might be. It is considered bad manners which isn't good for business, and perhaps one day you would appreciate the same courtesy should one of your own employees decide to become an entrepreneur, too. Once the decision has been made and you are out of your old job, enjoy the freedom and happiness while it lasts, the real hard work is just about to begin.

If at all possible try completing Step Two before Step Three: Make sure you will have a sufficient cash flow to support your entrepreneurial aspirations.

For example, secure a work contract or get support from an investor. Life will be so much easier when you can purchase the necessary tools of the trade and perhaps even pay little something for yourself and keep the family well fed, which can do wonders to any entrepreneur's morale.

Although many would-be entrepreneurs tend to skip Step One it doesn't mean that you should do it too: Come up with a good business idea, find one or more reliable partners that you can get along with well and have the support of your spouse (should you have one).

All entrepreneurs have strengths and weaknesses so having partners can help to balance the negative while enhancing the positive. You should try to do the same to them, too. Another good thing to remember is that nobody can do everything alone so a good core team of partners will be the corner stone for success. Yes, and a good, realistic business idea is also a corner stone - a solid house usually benefits from having several solid corner stones.

Step Four: Be prepared to work hard, shoulder your responsibilities and never, ever give up without giving everything you got and them some.

If Step Four sounds like too much, please reconsider whether or not you should go through with Step Three. There are many good reasons why most people never complete Step Three.


Coming up next: How to become a successful entrepreneur (still working on it...).

Thursday 28 April 2011

The Customer, the Team and the Company

I was once told that for a consultant the company must always come first, no matter what. I disagreed.

When I'm working in a customer project my priorities are clear: first comes the customer, next my team and then the company. These three are not mutually exclusive, in fact it is just the opposite: these three can, and indeed must be inclusive. It's a triangle of a mutual interaction.


Please stand-by for the obvious.

The customer must come first because without the customer there is no project. The custome is the one who controls the project funding and most importantly the project's core purpose is to benefit the customer. The consultant must look after and protect the customer's interests: the consultant must earn the customer's trust and respect since simply being cheap/expensive expert on the field is not enough to establish a good working relationship.

Always do right by your customer; the "used cars salesman" attitude ~ i.e. bleed the customer dry by making them to pay premium for everything whenever possible while trying to maximise the company profits by using cheapest available people and resources ~ should in my opinion be avoided, but then again I'm not a business/sales manager. Idealistic thinking or not, but I believe that a mutual win-win arrangement over a longer time peried tends to benefit all parties more than the instant gratification like the one that came from killing the goose that laid golden eggs.

Take care of the team because their practical work effort directly determines whether or not the project is ultimately a succesful one. If the team members are overworked, burned out, pissed off, unmotived, untrained and/or under-appreciated it will show in so many ways: their overall morale and attitude towards the customer, each other and other members of the company, the quality and pace of their work, ability to deal with unexpected change and hardship, ability to solve problems, willingness to support team mates, and generally speaking their mental ability to take pride in the results of their work, just to mention few.

On the other hand, a well-motivated team with a good morale and up-to-date training that knows the value of their work, that isn't crumbling under unreasonable workload, that are in control of their own work, and that are all-and-all happy to come to work in most mornings, can really get the job done and do it well. Personally, given a choice I would take a small team of motivated professionals over a larger team of tired techies on any given day.

What about the company, then? A simple if not simplistic logic suggests that a happy customer and a happy team should make a happy company: team has work, company gets paid and customer gets money's worth, which tends to place the company and the team high on the customer's short list the next time customer needs to get a job done. This is not say that the company's role ~ including all the other people directly or indirectly involved with the various phases of the project ~ as a mediator and an enabler isn't vitally important for the outcome of the project.


The point of all this? I don't know... that a business could benefit from a touch of ethics and humanity over selfish shareholder greed? That mutually beneficial long term business relationships are preferrable over short-term rip-offs, low quality work and use-and-toss-away approach to employee management? Or perhaps it is that in the end we are all just people trying to work together instead of resources waiting to be exploited? Might be all of the above, or it could just be some wistful rambling of an idealist.

The flip side? Of course it has to be said that not everything depends on how the team and company performs during a customer project as the customer has a key role to play too. While the company would like to maximise the profits, the customer would like to minimise the expenses, which is all perfectly understandable and part of good business. However, this often leads to a situation where the budget is unreasonably tight allowing not enough time, people nor resources to get the job done right. Sometimes customers hire consultants because they think they need their expert knowledge and then choose to ignore the given expert advice with predictable consequances. It is an unthankful moment to be a consultant saying to the customer "I told you so".

No project is a one-way street; a project success depends on co-operation and mutual respect of all involved parties (a healthy dose of common sense and willingnes to compromise often helps, too) among other things.

Tuesday 26 April 2011

Pointing out the obvious: motivation improves IQ test results and this applies to business... how?

BBC published a news article yesterday about how motivation affects IQ test results. The article is short but brings forth an interesting aspect of intelligence and intelligent people:
Getting a high score in an IQ test requires both high intelligence and competitive tendencies to motivate the test-taker to perform to the best of their ability.
http://www.bbc.co.uk/news/health-13156817

How would this reflect to everyday life and to busines in particular? Well, consider a situation all too often seen in the working life: companies like to hire experienced, well educated and intelligent people thinking that it leads to better results in projects, but after a while results aren't exactly great. Hiring good people simply isn't enough if the company can't keep the people motivated.

Well motivated people drive themselves to go beyond good work to do excellent work. It takes motivation to keep on pushing through problems and hardship until the job is done right when others no longer feel like doing more. Most people with a healthy dose of common sense knows this, so why are there companies and public organisations with poorly motivated staff?

It does not matter how experienced and intelligent a person is if that person lacks motivation. Without motivation easy routine work can become a soul-rotting forced labour, and problems that otherwise would be considered as mere challenges to be conquered are rejected as impossible or at very least unreasonable ordeals. In short, without proper motivation people who normally could and would do, begin to give up because there is no point and they don't care.

Motivating people does not need to be difficult or something special, nor should it require expensive leadership training given to the company management (although it probably wouldn't be a bad thing) about how to be a better superior and a leader. One can get far - in my opinion - simply by being a human and treating others as such, too.

One might begin by not thinking employees as resources but seeing them as people, persons with their individual hopes, dislikes and ambitions. One could try talking with them - not to them and certainly not at them -, not high above from the ivory tower but as peer to peer, learning about what they personally value in their work and in life in general, what values and principles guide their actions and how they would like to improve themselves professionally.

When they do good work, one could thank them and let them know their efforts are noted and appreciated, and when they occasionally fuck up, one might help them to understand where and why mistakes were made instead of aggravating the situation further by attacking them verbally and piling blame over guilt: most people are genuinely sorry after they fail at something and they do appreciate it when their colleagues and superiors offer them support at their moment of self-doubt and need, and they will remember this long after the difficult times are past them, and the lessons they learned may prove invaluable in later life.

Now, one might add to this the more common motivational tools in form of good salary (the business way of saying "we really appreciate you and your work, please don't go and work for the competitor"), bonuses (the business way of saying "thank you for helping us to earn more money and to become prosperous and respected") along with various perks of the job (the business way of saying "you take care of us and we take care of you"), and I think there might be some noticeable changes in peoples attitudes.

However, this will have the desired effect only if done right. For example, if a person has no real personal control over the bonus, the bonus loses the ability to motivate: it is disheartening when your bonus depends on how other people have done their work no matter how well you have done yours. Also when company management decides which perks to offer to employees it might help if people are asked what they would find interesting instead of simply deciding on their behalf what they should do be doing.

But the most important thing, in my opinion, is to see employees as people and treat them as such. It takes so little, and yet it will take so far: mutual respect has much stronger motivational effect than strict corporate hierarchies and the implied feudal "the lords shouldn't socialise with the serfs" -attitude. A word of encouragement from a CEO who knows every employee at least by name has power much beyond actions taken by a CEO who never talks with people below middle management.

And while money is important - hey, life is expensive and we all work for living - I think even more important is that people working in projects are encouraged to take the ownership of their own work, to nurture their professional bride of work well done, to challenge*** them and acknowledge them in their success or support them if they falter.

(*** please note: a deathmarch project is not a challenge; it is a poorly managed financial sinkhole and a waste of collective life that merely motivates people to change jobs) 

So, if a company has hired intelligent, experienced people and yet their performance and results are mediocre at best, it might be a good time to re-evaluate management's motivational approach and how employees feel about coming to work every morning.

Monday 25 April 2011

A little bit about Nokia's fall and more about Clayton Christensen's The Innovator's Dilemma

Clayton M. Christensen wrote a book over ten years ago, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. I first read it in 2004 as part of my studies in the Tampere Polytechnic University. Following the news about Nokia's demise I felt like reading it again.

The question Clayton Christensen presented is at the very core of any business: how come companies that were at the very top of their game eventually failed. These are the companies that dominated their markets and were hailed for their good management and yet, somehow, eventually dropped the ball in a very profound way. This very much reminds me of Nokia these days: Nokia used to be leading innovator with mobile phones, utterly dominated the markets, made billions and yet, Nokia is now in a desperate struggle against Apple and Google and is probably going to sack thousands following the co-operation deal with a former enemy, Microsoft.

A story I've heard few times (don't know how true this is) tells that Nokia had a working touch screen mobile phone some seven or eight years ago, but the back-then management did not think it had any call in the markets. Oops. Around 2004 - about three years before first iPhone - Nokia published 7710 multimedia phone with a colour LCD touch screen, but because it did not become an instant commercial success it was quickly discontinued and all the time and resources spent on the development of the technology was essentially scrapped ... until Apple came along and proved Nokia wrong.

Consider reading the following article by Mikko-Pekka Heikkinen: http://www.howardforums.com/showthread.php/1679550-Knock-Knock-Nokia-s-Heavy-Fall...

But back to Christensen's Innovator's Dilemma.

Why market leader companies almost invariably fail when markets change? How come a company that had a finger so well placed on the market's commercial pulse at one time so easily flatlines in the next generation market? Christensen writes that
Precisely because these firms listened to their customers, invested aggressively in new technologies that would provide their customers more and better products of the sort they wanted, and because they carefully studied market trends and systematically allocated investment capital to innovations that promised the best returns, they lost their positions of leadership.
Now that should give most managers a pause. They are doing things exactly right and then, somehow, it turned out to be the completely wrong thing? Well, yes and no. No, because they in fact did do the right things at the given time and situation and yet, yes because they failed to understand that their status quo would not be permanent. The decisions they did while everything was going so well prevented them to come up with the next good thing.

Christensen talks about sustaining technologies and disruptive technologies. The former is essentially about improved performance of established products that the current mainstream customers value. For example, ever faster CPUs or 3,5" hard-drives with more and more storage capacity: the underlying technology is the same, it just gets more efficient and often eventually exceeds what the customers actually want and need.

The latter, disruptive technologies when they emerge typically offer worse product performance when compared against products in the mainstream markets so why invest time and resources required by development? Because of this: disruptive technologies are not based on the same value proposition as the mainstream technology but instead brings forth a completely different value proposition. Initially disruptive technologies tend to be valued by few fringe customers and products based on disruptive technology are often cheaper, simpler, smaller but more importantly, more convenient to use, as Christensen puts it.

However, what is often overlooked is the fact that once technology is establised the iterations of sustaining technologies quickly catches up and then exceeds what the markets and customers really need. Therefore a disruptive technology that is underperforming today when compared to mainstream technology, is likely to be performance-competitive in the same market tomorrow. For example, consider disk-based hard-drives and solid-state hard-drives few years ago and again today.

Take a moment to think about the following quote from Christensen:
[The] conclusion by established companies that investing aggressively in disruptive technologies is not a rational financial decision for them to make, has three bases. First, disruptive products are simpler and cheaper; they generally promise lower margins, not greater profits. Second, disruptive technologies typically are first commercialized in emerging or insignificant markets. And third, leading firms' most profitable customers generally don't want, and indeed initially can't use, products based on disruptive technologies. By and large, a disruptive technology is initially embraced by the least profitable customers in the market. Hence, most companies with a practiced discipline of listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies until it is too late.
In his book Christensen presents the five laws or principles of disruptive technology stating that "if managers can understand and harness these forces, rather than fight them, they can in fact succeed spectacularly when confronted with disruptive technological change". There are no simple answers, mind you, but rather the important thing is to to attempt to understand the underlying point.

Principle #1: Companies Depend on Customers and Investors for Resources
In short, managers in successful companies tend to think that they control the flow of resources in their organisations, but by doing so they often seem to forget that those resources come from their customers and investors and if the company does not produce what the customers and investors want, they will take their money elsewhere. Christensen says it well:
The highest-performing companies, in fact, are those that are best at this, that is, they have well-developed systems for killing ideas that their customer's don't want. As a result, these companies find it very difficult to invest adequate resources in disruptive technologies - lower-margin opportunities that their customers don't want - until their customers want them. And by then it is too late.
Christensen points out that this makes certain sense as companies whose cost structures have been tailored for competing in high-end markets cannot be profitable in low-end markets as well. One possible solution? Creation of an independent organisation that can become profitable with the lower margins of disruptive technology's emergent market. This way the company can establish a beachhead in the new market while still reaping rewards from the mainstream market.

Principle #2: Small Markets Don't Solve the Growth Needs of Large Companies
Disruptive technologies usually enable new markets to emerge instead of offering better solutions for current markets. It will take time for the new markets to mature and once they have matured they tend to provide products and services that better suite the needs of the customers in the old market. At that point it is already too late for the big companies of the old market to transition to the new market and expect to maintain their market shares. In fact, they are lucky to even survive.

Why then the big companies fail to catch up with a new technology wave? After all, many of them initially started as a small company looking for their fortune in a new market. Much of this follows from the companies way of measuring success through growth: while a $40 million company can achieve 20% annual growth by coming up with $8 million worth of revenue growth, a $4 billion company would require $800 million to achieve annual growth of 20%. Because no new market can provide this it seems to follow that the bigger the company is the more difficult it becomes to see new growth potential in emerging markets.

Personally, I think big companies should see new markets as long term investment opportunities but this comes with risks that some managers just don't want to take. After all, waiting and seeing is so much more safer. I also think that Google has figured this out as it is constantly finding new growth from new markets; however, nothing lasts forever so it is likely that Google's continuing growth already contains the seeds of its eventual downfall.

Principle #3: Markets that Don't Exist Can't Be Analyzed
Probably all business schools are teaching that a proper market research and good planning based on known market attributes followed by timely and determined execution is the road to success. Christensen agrees that this is indeed how things should work - when dealing with sustaining technologies. 

The problem with disruptive technologies is that their markets are only now emerging. They don't really exist and therefore cannot be evaluated in the same way as existing markets are.
Companies whose investment processes demand quantification of market sizes and financial returns before they can enter a market get paralyzed or make serious mistakes when faced with disruptive technologies. They demand market data when none exists and make judgements based upon financial projections when neither revenues or costs can, in fact, be known. Using planning and marketing techniques that were developed to manage sustaining technologies in the very different context of disruptive ones is an exercise in flapping wings.
So a different approach is called upon. Christensen proposes a discovery-based planning which suggests that forecasts are assumed to be wrong rather than right and as such the strategies based on those forecasts are likely to be wrong as well. Instead managers should "develop plans for learning what needs to be known" as a more flexible and realistic approach to mastering disruptive technologies.

Principle #4: An Organization's Capabilities Defines Its Disabilities
Organisations are comprised of people that work in them and yet, Christensen points out that organisations have capabilities that exist independently of the people. First, there are processes as in ways of working and producing things of value. Second, there are organisation's values (which in my experience are not always the same as the ones found in PR-materials) that the organisation's managers and employees use to decide how work should be prioritised.

While people who work in the organisation can be very flexible, the processes and values usually are not. To certain extend this makes sense since a process is usually a practical result of trial and error and embody many best practices that lead to effective work. However, this is true only within certain context: Christensen points out that a process that is effective at managing the design of a minicomputer would be ineffective at managing the design of a desktop personal computer. Similarly, says Christensen, values that cause employees to prioritise projects to develop high-margin products, cannot simultaneously accord priority to low-margin products.
The very processes and values that constitute an organization's capabilities in one context, define its disabilities in another context.
Principle #5: Technology Supply May Not Equal Market Demand
Disruptive technologies, though initially can only be used in small markets remote from the mainstream, are disruptive because they subsequently can become fully performance-competitive within the mainstream market against established products.
This usually happens at a point when both the old and the new technology has exceeded in performance and capabilities what the customers actually need, so they begin to make their purchase decisions based on other values: "the basis of product choice often evolves from functionality to reliability, then to convenience, and, ultimately, to price".

The point is that market leaders tend to keep improving their products over many iterations of sustaining technologies believing that their superior products will keep competition behind them. While doing this they fail to notice that they have over-shot their original customer needs which can have an unexpected consequence in that "they create a vacuum at lower price points into which competitors employing disruptive technologies can enter".
Only those companies that carefully measure trends in how their mainstream customers use their products can catch the points at which the basis of competition will change in the markets they serve.
This was just a short introduction to Clayton M. Christensen's book so I recommend that you read it, if you found the topic interesting. The observations and lessons covered in this book are technology and market independent so in our quest to come up with the next Nokia (or preferabbly several smaller ones) there is much we can learn from it.

Friday 15 April 2011

Thoughts about Data and Information

Question: What is information?

The way I see it, information is data relevant to a given context. In other words, if data can provide an answer to a question, it is information; otherwise it has very little practical value.

Consider an online service that is quietly collecting data about network traffic and user behaviour. Having oodles of data in log files or in database does little good on its own. It is only after someone begins to ask context specific questions that the data begins to acquire practical value by virtue of providing answers.

From this follows that logging and other methods of gathering data may turn out to be waste of time and resources (which often equals to money) if there do not attempt to provide answers to questions. In other words, when designing a service one should also be mindful about e.g. what is being logged and why.

I've seen too many systems that have their logs disabled in production because of the amount of data they collect every day: constant writing in a log file consumes limited disk space and even slows down the overall service performance. So when something goes wrong in the production there are no records because logs are only used by developers and testers to debug the system before going live. And even when logs are enabled in production it often turns out that the data that might be relevant is not being logged at all.

So before implementing data gathering of any kind, someone should think about what questions are most likely being asked when the service is in production and then consider what data would be relevant within that context.