Little Book Wordle

Just for fun, I put my “Little Book of BIG Innovation Ideas” into Wordle to create a word cloud.  It’s interesting to see the word density – as indicated by word size.  Fortunately, “innovation” was clearly the most used word.  Fun.

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Why Being Self-Centered is Good

This may seem like an odd blog entry, but it has been the topic of conversation over many dinners recently.

Although we are taught from a young age that being self-centered is a bad thing, I think that more people would benefit from being this way. Let me explain.

To start off, I am not suggesting that people should be selfish. I think of selfish as being “exclusively concerned with oneself.”

Being self-centered – in my opinion – is entirely different.

Centering is what you base your life on.

My parents are children-centered. For them, my sister and I are the most important part of their life. They live vicariously through us.

I have friends who are spouse-centered. They do everything in their power to please their partner.

Too many of my friends are work-centered. Their job is the most important aspect in their life. They get meaning from their career. It is no surprise that men are twice as likely to die during their first five years of retirement, than they are prior to retirement.

Others are service-centered. They give their lives to charity and others. They sacrifice their own well-being in the name of contribution. Oprah may fall into this category. One of the reasons she claims she put on all of her weight is that she did not spend enough time taking care of herself.

Which leads us to the benefits of self-centering.

Throughout your life, there is only one constant. You. Your children may pass away before you do. Your spouse may, in spite of all of your loving, leave you. Your job (as many people are finding out) is only temporary. Even service to others can be fraught with challenges.  If you center on someone or something else, you may be giving up control of your life.

Only YOU will be around for as long as you live.

Therefore, instead of centering your life on someone or something that may not be around as long as you, maybe you should try being self-centered. This gives you some level of stability in an unpredictable world. Even the Merriam-Webster dictionary definition – “independent of outside force or influence” – supports this notion.

Anyone who has flown on a plane has heard the flight attendant say, “If the plane loses oxygen pressure for any reason, the oxygen masks will drop down out of the small overhead compartment. If you are seated next to someone who might need some assistance, you should put your own mask on first, and then breathe normally as you assist the other person.”

Take care of yourself first. Be centered. Be grounded. Take control of your life and don’t get derailed by circumstances around you.

Being self-centered is NOT the same as being selfish. Those who are self-centered are NOT narcissistic, hedonistic, or self-absorbed. Because self-centered individuals are more grounded, they are able to give even more to others.  They have the potential to be even more generous and to make even greater contributions.

In some respects, this is in line with Maslow’s Hierarchy of Needs (pictured above). Self-actualization (which is where I put self-centering) is the highest level, higher than esteem, love/belonging, safety and physiological needs.  Interestingly, creativity is listed under self-actualization.

What do you think?

P.S. Some may argue a more theological perspective. For example, Stephen Covey (of the 7 Habits fame) authored, “The Divine Center: Why We Need a Life Centered on God and Christ and How We Attain It.” As I try to avoid religion and politics in this blog, I’ll leave this discussion for another time.

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Motivate Like a CEO

The ability to motivate your employees is one of your most important leadership skills. Unfortunately, too many leaders use outdated approaches that only temporarily increase motivation, but with long-term ill effects.

If you are a regular reader of this blog, you know that I almost never promote the books of others.  However, Motivate Like a CEO, by Suzanne Bates is special.

I know Suzanne personally and she is someone who walks the talk.  We work together on a board of directors, and she is one of the most thoughtful and thought provoking people I know.

More importantly, I love her motivation philosophy.  Suzanne asked me to read an early version of the manuscript and provide an endorsement.  After reading the book, I was more than happy to do so.  Here’s what I wrote:

Suzanne Bates does for business what Viktor Frankl’s Man’s Search for Meaning (my all-time favorite book) did for psychology.  Just as Frankl showed that people thrive when their lives have meaning, Suzanne demonstrates that companies thrive when they are designed around a shared purpose.

Today only, if you purchase the book, Suzanne will give you access to a number of “bonus gifts.”

Visit her site for more details.  I know you will enjoy this book.  I did.

P.S. This is my 400th blog entry.

P.P.S. Happy New Year to all of my friends in Asia…and around the world.

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EVA, SVA, and the Economy

While at Accenture, one of our analytical tools was Shareholder Value Analysis (SVA) – a tool based on Economic Value Added.  The premise is that by looking at a company’s financials, we can determine where to best target our innovation efforts.  The analysis can show us, for example, if reducing SG&A will have a greater impact on EVA than, let’s say, COGS.  It will tell us the impact on EVA if we increase sales by a certain amount.   It is a very powerful tool.  You can see the general model by clicking the image on the right.  The analysis is obviously a lot more complex.

This model works nicely in good times.  But does it work today?  What is it telling us?

I asked two of my ex-Accenture colleagues who are experts on SVA the following question:

Cost of Capital is part of the EVA equation. Given the credit crisis, how has this impacted EVA? Is cost of capital going up? If so, what does that mean in terms of where companies should invest then efforts? Or is it going down because the prime rate is so low? What does this mean that from a targeting perspective?

Here are the two responses:

Response #1: On the EVA question, theoretically the Cost of Capital is down given the prime.  But actually it’s up given the credit markets — the Libor is a good proxy (the rate at which banks lend to each other). The B2B rates are even worse, hence all the talk about the credit markets freezing up. In terms of targeting Cost of Capital, that’s a tougher question. Most of the action in EVA around the Weighted Average Cost of Capital (WACC) is related to more or less leverage. So targeting it would mean more leverage and there’s not too many companies that want to go in this direction now. In fact, we may have determined a “ceiling” on how far you can push on that lever.

Response #2: From a mathematical perspective, marginal cost of capital is fairly low these days. The availability of capital, however, is the real issue. In the current market it is difficult to raise capital. Therefore if an enterprise can generate excess cash and can identify opportunities with good returns they should certainly invest. It is no different for an individual. Assuming that a major catastrophe is not looming on the horizon and assuming that one has available cash, this is the time to invest. I should hasten to add that the “classical” capital market theories upon which WACC and EVA are based are NOT, in my opinion, quite valid in a tumultuous market where risk free rates are almost zero and people are simply keeping cash “under the mattress.”

Interesting thoughts.

My follow up question is, “Assumiung WACC is up, what is the relative impact of cost reduction versus revenue growth on EVA?”

What do you think?  I’d love to get many different perspectives on this topic.

P.S. I leave these financial calculations to the data experts (“spades”) and focus my energies on new ideas that solve problems (“diamonds”).

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Best Companies to Work For

Fortune Magazine released their list of the top companies to work for.

#1 on the list is the 7,000 person data storage company, NetApp.  They have some great business philosophies that show they treat employees like owners of the company – a key to creating a truly innovation organization.

The article says…

NetApp early on ditched a travel policy a dozen pages long in favor of this maxim: “We are a frugal company. But don’t show up dog-tired to save a few bucks. Use your common sense.”

Rather than business plans, many units write “future histories,” imagining where their business will be a year or two out.

Five paid days for volunteer work, $11,390 adoption aid, and autism coverage.

The company has gained market share during the slump, hasn’t had layoffs, and has more than $2 billion in cash on hand to help it ride out the global financial crisis.

Clearly they are doing something right.

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