When You Sit on the Fence, You Get Splinters in Your Ass!

During the Q&A section of a presentation of mine on Goal-Free Living, a woman in the audience asked…

“I work in a cubicle in a well known technology firm and I am unhappy. How do I know if it is me or if it is my job? Do I need to change myself or change my job?”

I asked others in the audience for their answer to that question. Most people gave answers that hedged their bet. “Stay at your job while you explore other options,” or “If you are really miserable, find another job quickly and quit this job,” or the most outspoken, “Quit your job now! How could you work another day for the evil empire?”

My answer was a bit different.  I said,  “It doesn’t really matter.”

With the right mindset, every decision is the right decision. If you believe that the path you are on is the right one, then it is. Quitting your job doesn’t change things. You can change jobs all you like, but it won’t matter if you don’t have the right attitude. Conversely you can change your attitude and find new opportunities where you are today, without changing jobs.

We often fail to make progress in life (and business) because we want to wait until we have all of the “answers.”  We want to know all of the facts, look at everything from every angle, and study the details.  In the end, we just sit on the fence.  Instead of answers, maybe what is needed are decisions.

Sadly, many of us suffer from a mild form of  “decidophobia“  – the fear of making decisions.  It is human nature to avoid issues that make us uncomfortable or afraid, and therefore we decide not to decide. Indecision is a no man’s land with no direction and no progress.

Should I change my job?  Should I buy a new house?  Where should I go on vacation?  What should I do with my life?  These all seem like pretty big decisions.  And for most people they are.

We think “Oh, it’s so hard to make these big decisions,” when what’s really hard is the indecision.

In life there are no right or wrong decisions. There are only decisions. When we come to a fork in the road, we tend to overanalyze it. We might say, “I have an opportunity to create this new business venture but . . .” So we end up staying on the same path. Or we may choose a particular path, but then rethink our decision.

One of the reasons we worry so much and wonder whether we are on the right track is that we often see decisions as long term, semi-permanent decisions.

If you are driving your car and you get onto a highway where there are no exits for 300 miles, you had better be certain that you are on the right road. Making the right decision is critical when you don’t have any alternative paths on which to travel. Most people relate to their decisions like hopping onto a road five-years-long with no exits – one road, no options, lots of traffic, and many potholes.

But what if you were on a beautiful winding country road where there are exits every mile, frequent intersections, and a rotary from time to time? What if you had many paths on which to travel, and from which to choose? Then making the right decision becomes less stressful, because you could always change direction. If you drove down a road like this, you would only have to plan to the next fork in the road.

Always move forward. Make decisions.  Movement in any direction is better than stagnation or indecision.

Is Your Organization Anorexic?

The President of a $1 billion company once asked me to describe his organization in one word. My response?

“Anorexic.”

The Vice Presidents who sat around the table nodded in agreement.  They assumed that I meant there was no fat left to cut.  That is not what I meant.

Anorexics often have relatively “high” body fat percentages because their lean body mass erodes along with the fat.

This is what many organizations have done.  An an effort to cut costs, in addition to cutting fat, they also cut large amounts of lean body mass.

Are you thinking of further cost cutting?  If so, what are you eliminating?  Fat?  Bone?  Muscle?  Vital organs?  No company in history has ever “cut” its way to long-term success.

Exercise grows muscle while burning fat.

Innovation is exercise for businesses.  It helps grows the organization while also enabling cost efficiencies.

During the depression, Henry Ford said, “A man who stops advertising to save money is like a man who stops a clock to save time.”

The same is true for innovation.  Although cost cutting may be a necessary short-term tactic, it is NEVER a strategy.  If you are in cost-cutting mode, make sure that your cuts target fat and not lean body mass.  In addition, be sure to exercise your organization,  Invest in innovation now and you will be prepared for long-term growth and success.

P.S. I like this photo. It nicely depicts the obsession that many companies have with measuring everything in sight, yet in the end not measuring anything of value.

Is Your Career Doomed? Mine Might Be.

I spend most of my days thinking about the “innovation bell curve.”  The concept is simple, yet profound.

Budget brands will continue to prosper as mid-market consumers move left to save money.

Although premium brands may suffer slightly, there will still be strong demand for high-end products and services.

It is the middle of the bell curve, the “mid-market brands” that are getting squished as consumers move toward greater value and premium brands reposition themselves (a bit more) toward the mid-market customer.

I’ve been thinking about this model as it relates to my career – giving speeches about innovation

On the right-hand side of this model are the “celebrity” speakers.  These individuals include Harvard Business School Professors (e.g., Clayton Christensen), former CEOs of big companies (e.g., Jack Welch), and major best-selling authors (e.g., Seth Godin).  These individuals charge MUCH more than I do.  But they are also a draw.  For large events, having one of the speakers on the platform will get butts in seats.

On the left-hand side of this model are the “vendor” speakers.  These individuals work for large companies who view speaking as great marketing.  These speakers are often not only free, sometimes they even pay sponsorship dollars to be on the platform.  VPs of Innovation for large consulting firms or presidents of innovation software vendors fall into this category.  They have something to sell the audience.

Where does this leave me?  It certainly leaves me rethinking my business model.  Then again, I am always rethinking my business model.

I am continuing to put more energy into books and products like Innovation Personality Poker®.  These move me towards the left-hand side of the model.  You can take me home for a fraction of the cost of one of my speeches.

I am also staying focused on the corporate market (rather than large conferences) because there is still great demand here.  With group sizes of 50 – 300, celebrity speakers are prohibitively expensive.  And given the small event size, the marketing opportunity is not as great for vendor speakers.  My business continues to boom in this area.

Finally, I am shooting the pilot for my TV show in April.  If all goes well, I may be able to re-position myself in the right-hand side of the chart – a celebrity speaker.  But of course, time will tell.

Where are you positioned?  Who is squishing you out of business?  How can you reposition yourself?

P.S. In a previous blog entry, when discussing the innovation bell curve, I talked about the wisdom of Mr. Miyagi in the Karate Kid.  He talks about those in the middle getting “squished like grape.”  I thought you might like to see the YouTube video…

[youtube]http://www.youtube.com/watch?v=3PycZtfns_U[/youtube]

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”).

Johnny Cupcakes

What do T-shirts and cupcakes have in common? A guy by the name of Johnny.

Today I spoke at an event for the National Foundation for Teaching Entrepreneurship (NFTE).  They are an amazing organization that teaches entrepreneurship to high school kids, many of whom are in the inner city.

I did a breakout session for about 50 students.  We had a blast.

The keynote speaker was Johnny Cupcakes (that wasn’t his given name, but is the name he now uses).

Ever since he was in high school, he has been an entrepreneur.  He bought candy in bulk at Costco and sold it to students.  He bought gag items (whoopi cushions, itching powder) and sold those – until one student had a bad allergic reaction that landed that kid in the hospital.  He made buttons that were sold in a comic book store.  While there, people gave him various nicknames – Johnny Appleseed and Johnny Cupcakes, for example.  One day, as a gag, he made a Johnny Cupcakes T-shirt.  People loved it.  He made more designs.  After selling them out of the back of his car for a while, he started selling them on the web.  His fan-base grew until the point he opened a store on Newbury Street in Boston.  This is a VERY fancy and expensive retail street.

Johnny is a great role model for the students.  He has never had a drink, never did drugs, and has dedicated himself to his business.  He said his happiest moment was when he could hire his mother as his bookkeeper so that she no longer had to do a job she didn’t like.  When I spoke with him after the event, he said he would never sell the company for any amount of money.  The business is now pulling in millions of dollars per year.

What does this have to do with innovation?  Quite a bit actually.

Johnny has dedicated his life to his business.  He even left college to stay focused in his business.  Most of the money he makes he puts back into the company.  He took big risks.  He signed a multi-year deal for $7,000 a month retail space.  You have to sell a lot of T-shirts to recover that kind of money!  He did a brilliant job with word-of-mouth marketing.  He has never done any advertising. But people line up days in advance when he launches a new line of limited edition T shirts.

And this is his brilliance.

Although he had requests to sell his shirts in all of the big stores, he declined.  He wanted his T shirts to be exclusive.  You can (for the most part) only buy his items from his stores and online.  The stores are AMAZING.  They are done up just like a bakery.  He has been meticulous with the details.  Mock ovens that open randomly shooting off steam.  Cupcake scent.  The doors to the storage room are made from huge 10 foot tall oven doors.  The T-shirts are displayed in bakery cases and refrigerators with the motors removed.  The labels in his T-shirts are in the shape of oven mitts.  The boxes are beautiful and are in the shape of a muffin box. He even sometimes throws random things in the boxes of T shirts ordered online (e.g., a battery, 37 pennies, or a baseball card).

I could go on and on.

In previous articles I describe the bell curve of innovation.  Johnny has been masterful at working the right side of the bell curve.  Exclusivity.  Creating an experience.  Limited editions.  Attention to details.  A conversation piece.  Johnny is not about T-shirts.  He is about a life style, a story, and an experience.

If you are not familiar with Johnny’s work, please visit his store or his website.  He’s an inspiration.

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