Building Enduring Businesses
An enduring business consists of the following: a clear core, clear non-negotiables, reducing costs of experiments and a clear organizational structure. Focus should always be on how to make your business as flexible possible, in order to adept to changing circumstances.
Hi there.
Let us start by assuming that you are most likely interested in this article because you are either:
A. working in a company;
B. started your own company;
C. thinking about starting your own company;
D. all of the above.
Whichever case applies to you personally, this article is intended to be a how-to guide for creating sustainable businesses that are built to last. A simple overview that provides you with some of the basics to shape, create and reform your company, organization or business. If you do not have the time or are not willing to read the entire article – we are all really busy, I know – then click here to jump to the end and view the key takeaways.
Nothing stated in this article is either new or untested. Honestly, there is nothing new under the sun and virtually every principle or example you will read in this article comes from a small collection of verified and validated sources (see below for the sources). To quote a famous literary genius: “The Simpsons did it.”. Nevertheless, this comprehensive article is stuffed with information that has taken lifetimes to achieve and will only take about 15 minutes of your life.
Creating and maintaining the perfect company consists of three simply aspects: reduce complexity, increase flexibility and enhance organizational clarity. Let us begin.
STEP 1. REDUCE COMPLEXITY
What happens when you leave things undisturbed? They become a mess. Leave a classroom full of kids alone for only 10 minutes and you know what happens.
The fact that “things” become “messy” when they are undisturbed is called entropy in nature. Entropy basically states that any system in order will tend to disorder when left alone. Some form of energy is required to keep order in the system, and stop it from falling to decay. The same applies to a company, organization or any group of people for that matter.
Gradually, in any company, entropy manifests itself by means of an increasingly complex organization. More procedures, more processes, more people, more layers of management… Slowly but surely, complexity creeps in and starts eating away organic growth. During this process, the client and employee loses out. Without the right leadership, entropy wins.
So the aim of the leadership of any company should be to decrease complexity. How can this be done?
A Clear Core
Humans need a clear sense of purpose in order to optimally perform. This is beautifully put in words in the seven habits of highly effective people by Stephen R. Covey: begin with the end in mind. This is not just reserved to individuals; the same applies to any organization. People need to know what they do it for and why. Shortly put, your company needs a clearly defined core that your employees can rally behind. This core needs to be clearly differentiated and answer the question: why are we better than our competition for our clients? So far for kicking in open doors: having a clear vision is business economics 101. The question should not be, what is your core business? The question is, how do you define it?
How do you know what your company is best at? How do you define your core in a growing, increasingly complex business? The answer is simple. You ask people.
Ask all your employees and preferably external stakeholders including clients to simply answer the question: what makes us better than the competition? This also helps you to identify “hidden core assets”. Hidden assets are core values that are an unmistakable part of your company and culture, but have not been recognized as such. An example is the
Clear non-negotiables
Let’s start first with asking: what are they and why do you need them? A non-negotiable is a principle or rule that provides a clear guideline for decision making. When combined, they tell each employee what to do, and what not to do. They provide the right incentives for each employee to strive for behavior that is considered “good” in a company. Every organization in which a large group of people work together needs to have a set of rules to govern their behavior. It works the same in our society, where we have a comprehensive set of non-negotiables we call “Law”. The law tells us what to do, what not to do, and what happens when you do things that are prohibited. It makes cooperation in large groups possible.
Non-negotiables dictate how to behave in certain situations and most importantly, they will prevent discussions that cost a lot of energy when you are growing as a company. Proper Non-Negotiables reduce complexity. They should naturally come forth from your company values, meaning they can be derived organically (through discussion within the organization) or synthetically (when leadership aims to change course or develop new markets). Some change to the non-negotiables can be expected during the starting phase of your venture. Changing the non-negotiables however means changing how your employees cooperate, and nobody likes to change. Changing or amending your non-negotiables is thus a fine art, which should either be done organically or for very good reasons from leadership.
Below I have listed some non-negotiables that I would adhere to within a project-based organization. As you can see, most of these work best when combined.
1. Win-Win or Compromise
In every (conflicting) situation, there is a way for all parties involved to gain more if you work together. There is always a way. In the very least, compromise. When you believe there is always a winning outcome for both parties, you will think differently about conflict. When either parties loses, this will create an unbalance in the long run where someone tries to “get back at you”. This non-negotiable is taken directly from The seven habits of highly effective people by Stephen R. Covey. It describes a way of working that is based on providing added value to all parties involved, instead of constantly only adding value to oneself. It is the core believe of the book The Go-Giver Sells More, a book that teaches you the art of closing the deal by creating added value for both parties. This non-negotiable will aid in focusing on the (internal) client and its wishes, instead of focusing inward to personal interest.
2. Fail Safely by Experimentation (First time Wrong)
When you have an idea, test it. The only way to truly know whether an idea is good or bad, is to execute said idea. Not modelling, designing, iterating or discussing the idea, but executing the idea in a well-defined experiment where a value hypothesis is defined and metrics to measure the outcome. This is one of the core premises of the Lean Startup, and described beautifully by Jeff Bezos with this quote:
“What you really want to do companywide is maximize the number of experiments you can do per given unit of time. If something’s really big – like the big bet we’ve made on Amazon Web Services – then sure, you can do only a limited number of those, so you spend more time thinking about them and talking them through. Somebody wears the black hat and makes the case for why not to do it, and somebody else puts on the white hat and says why it is actually a good thing to do. But since the outcomes of all these things are uncertain, if you can figure out how to conduct an experiment, you can make more bets. So the key, really, is reducing the costs of the experiments.”
More information on how to execute an experiment as a project, is explained in the principle everything is a project.
3. Focus on people and results, not efficiency
People are important. Results are important. I have seen many instances where managers focus on efficiency, not effectiveness. This will result in companies efficiently performing the wrong work. The reason for this, is that with any large organization it becomes hard to effectively measure difficult parameters. Managers start focusing on time, hours, deliverables, documents: all tangible stuff that is easy to manage. That is not the important stuff however. Focus on what matters: people and results. This means telling people what to do, not how to do it. It means empowering people, giving them space, time and resources to execute projects and set clear goals for all parties.
4. Do it twice, automate
Never perform a task more than once. People tend to underestimate the compounding benefits from automating tasks from the get-go. One should strive to automate all activities and strive to make himself obsolete. A clear focus on automating everyday practices will ensure you will free up a lot of time later on to innovate your company. The only thing you do not have to automate, is socializing with people.
5. Everything has an URL (The Wikipedia Principle)
All information is to be placed in a single, online environment accessible to all employees and clients. It includes putting documents, PDFs, knowledge, lessons learned, minutes of meeting, actions, everything online. This is exactly what Wikipedia has done; the largest open-source encyclopedia the world has ever produced. Consider what this would mean for your company or organization if you would consider all information the same way as Wikipedia has done. And if you can find it swiftly.
6. Focus on finding information, not storing (The Google Principle)
Access to information has more value than storing it. Especially for two types of information that people in an organization generally need most: what and who. Make sure that this information is but 1 click away from your startup screen (as is with Google), and focus on making information easy to access. You can trust your employees to provide the information and fill in the gaps for you (especially if you adhere to the Wikipedia principle). When you have your own internal Google, and you combine this with your own Wikipedia, employees will automatically start writing down how they perform projects. This self-organizing behavior ensures best practices are easily picked up by all parts of your organization.
7. Perfect is the enemy of the Good
Aim to satisfy, not perfect. Striving towards perfection means you will never finish you project. There is always something to improve. Instead you should focus on satisfying pre-determined needs as quickly as possible. Define clear goals for your project that can objectively be measured together with your client, and you will know exactly when you are finished. Satisfying needs works better than endlessly optimizing unobtainable wishes and it saves you an enormous amount of time.
8. Everything is a project
Every task, experiment or todo: whatever activity you can think of is to be defined as a “project”. All projects consist of the following aspects: a Goal, Guidelines, Accountability, Resources and Consequences that encompass all parties involved in executing the project. A project can either be for an external client, or an internal one. Most of the time with “bad” projects, some aspects are not properly defined. For instance, the goal is not clear. Or more commonly: accountability is not defined so there is no way to measure progress or whether or not a project has been performed properly. This non-negotiable ties in nicely with principle 2, fail safely. If everyone is aligned on these principles, discussion will tend to focus on setting a hypothesis that can be tested, instead of degrading into a yes-no argument.
9. KISS (Keep It Simple Stupid)
Less is more.
10. Ask in person, then by phone. No internal emails allowed!
Fun fact: it is generally estimated that people misinterpret 50% to 80% of emails they receive. That means that typically, almost half of all communication in a company is simply miscommunication. How to solve this? Easy. Make the agreement that you will not use email for internal use. Combined with principle 4 (everything has an URL), this is a very effective way of streamlining internal communication.
11. No internal meetings last longer than 30 minutes
Is this really feasible? Can you really cut-off every meeting after 30 minutes? Perhaps not. The point of this non-negotiable is not to give people a reason to walk out of meetings after 30 minutes. The point is to make sure the meeting is prepared, and everyone is aligned on why the meeting is held by means of a clear goal, who is responsible and can make decisions, and which preparations need to be made before the meeting starts. Besides: when a meeting is scheduled to take an hour, it will take an hour, so better to plan it short and accurate to focus on the important matters. The art of meeting is misunderstood, and often underestimated, causing many organizations to not properly understand how meetings should be conducted. It is not strange when virtually nobody has ever been told how to properly conduct a meeting. You can find more about the “art of meeting” here.
STEP 2. INCREASE FLEXIBILITY
The ability to adapt to constant change is the hallmark of evolutionary theory. To not only survive, but thrive in a world of constant change is what makes the best performing companies. There is one large caveat however. Flexibility should always be put in contrast with holding on to core values. It is not about constantly changing, but continuously improving. The goal is not to constantly re-invent yourself, but ensure you are constantly adapting and following your core values to improve yourself. In short, a right balance between focus and adaptation. It is about reducing the costs of experimenting, both in time and money. This, is ultimate adaptability.
Reduce Costs of Experiments
The most common reason why new initiatives or innovative ideas are not carried out in a company boil down to basically to two reasons: a lack of resources (either, time, money or people) or a lack of willingness. There is pretty much nothing you can do to change the latter. Think about a situation that has happened to most of us. We try to convince a stubborn colleague about a new and improved way of working, but there is nothing you can do or say to convince him. Let’s call him Jerry. You go about your merry ways and implement the change anyway. Turns out it was way better. What does Jerry probably say? “Yeah I always thought that was a better idea”.
Some Jerry might even steal your idea! Don’t worry, you’ll think of another.
Most people do not recognize a good idea when it stares them in the face, not even when it is beneficial to them. To quote Henry Ford: “If I would have asked what people wanted, they would have said faster horses.” That is why it is better not to convince anyone. That is why it is better to simply do it. Just do it. The best way to know whether solution A is better than B, is to execute solution A and compare (with clear and proven upon metrics!) it to B. And this is where the resource constraints come in.
No one has the time to execute every single experiment at any given moment. Yet. What we need to do however, is to have a pure focus on reducing costs of experiments and standardize them in order to perform as many as we can. I will let Jeff Bezos, CEO of Amazon explain:
“What you really want to do company wide is maximize the number of experiments you can do per given unit of time. If something’s really big – like the big bet we’ve made on Amazon Web Services – then sure, you can do only a limited number of those, so you spend more time thinking about them and talking them through. Somebody wears the black hat and makes the case for why not to do it, and somebody else puts on the white hat and says why it is actually a good thing to do. But since the outcomes of all these things are uncertain, if you can figure out how to conduct an experiment, you can make more bets. So the key, really, is reducing the costs of the experiments.”
It is this simple, pure and amazing fact that will excel your company to new heights when properly executed. Do not linger on that discussion with Jerry. Simply decide on what the “value hypothesis” is, in other words why you think solution A is better than B, decide on the metrics you will use, and just do it. You verify the results, choose the winner, save countless discussions, time and money while learning something in the process. Everybody wins.
If you wish to know more about this, you can either read “The Lean Startup” by Eric Ries or contact me to learn more.
STEP 3. ENHANCE ORGANIZATIONAL CLARITY
The last part is perhaps the most tangible, yet somehow least understood part. The reason for this is that it ties in directly to our cultural identity. It becomes quite emotional and blurred and people have been used to the “old ways” for so long it is hard to change. Let me try to give you a cynical view of what I mean.
Keeping in mind the assumptions proposed in the beginning of this blog, I assume most of you have a boss working above them. Or better yet, a manager. Yeah, a manager. That manager, also has a manager. This usually goes all the way up, several times, until we get to “the bowser”, usually named the CEO. The ultimate boss. Most decisions and forms of communication will have to be checked, reviewed and passed along several chains of commands and each time these instructions are deformed, altered and interpreted in different ways by everyone involved. But, we need to adhere to the procedures as prescribed by someone who probably left several years ago because “we have always done it in such a way”. On top of this, there are the other peculiarities like having to work a strict time regime. That song (working nine to five) was never meant as a “fun” song ladies and gentlemen. It is weird that we still hang on to doctrines and ways of working that stem from the time almost before the typewriter. But hey, at least we are used to it, right?
Yeah if you could do the same thing you always did, that would be great.
Of course, there are other options. Other options that have been tried, tested and verified time and again. Companies that are organized in a most lean manner, with direct lines of communication to the top and back, greatly adding to the organizations adaptive capabilities. Companies such as the Gore Company, the makers of gore-tex waterproof clothing, which has won a position on Fortune magazine’s annual list of the U.S. “100 Best Companies to Work” since 1984 (from that book, remember?). Their successful “lattice” organization has ensured smooth communication channels time and time again.
This is the basis for the “Family-Doctrine” I propose. This is backed by new ways of working due to the emergence of decentralized technologies, but more importantly the willingness of a new working class to change their behavior.
Meet the Family
Basically, it all boils down to setting the maximum group size to 150. No matter the project, no matter the process, no matter the size or the scope, there is a maximum of 150 people working in it. Period. Every and each single function in the company should be represented in that 150, from the CEO bossman (which I call the Godfather, more on that later) down to the janitors. Before I will engage on the question: “but I work in a company with 100 million people, I will never bring that down to 150”, I will first answer the question why.
Why 150 people?
The reasoning behind the Family Doctrine goes back to basic biology. It is neatly explained in multiple studies and books (I recommend “The Tipping Point” by Malcom Gladwell). Anthropologists have discovered that with a 150 people, you still feel part of a “tribe”. Most people have about 150 people they are close to and regularly see, visit or hang out with. This magical number is called Dunbar's number and ranges arguably between 100 and 250. It has to do with the size of our "limbic system", the part of your brain that mostly regulates social behavior. There are actually Amish tribes that split up at about 150 people into two tribes of 75 in order to maintain family cohesion. The Gore company basically does the same, setting a maximum number of 150 people onto a single project. So but wait, the Gore company has about 10.000 employees, so how does that work?
A Family of Families
In order to grow beyond Dunbar's number, there is a family to direct all families. The only task of this Family is to ensure proper focus, flexibility and standardization across all families. At the helm of the Family of Families is "The Godfather" (basically the CEO), and each subFamily has a "Consigliere". The other members of the family can be called Associates. So how are these members organized? Are these 150 people simply tossed into an office and have them figure it out? The answer is of course, no.
Cornerstone of the Family, a Unit
The family consists of “Units” that are approximation the size of a soccer team (11-16 people) At the head of the Unit is a Pater (or Mater) Familias, who's charged with ensuring psychological safety to each Unit. Each Unit in and of itself has their own sense of purpose and non-negotiables they add to the Family. For instance, it can be a Unit dedicated to innovation. Or HR tasks. Or both. They can focus on several aspects (project execution, product development, process improvement or things like HR, finance, etc.) as long as they function and deliver what they promise. These Units ensure a company is flexible, able to evolve and most of all, self-organizes itself into a form which suits the Family and the employees best.
Tropic Thunder. Classic.
Harnessing the power of new technologies
At the beginning of the 20th century, during the transition from steam to electrical power, many industry moguls were promised their productivity would rise when the power of electric energy was harnessed. This proved not to be the case. Old steam engines and infrastructure were interchanged with electrical equipment but the setup of factories remained the same as they were. It was not until Henry Ford radically changed factory layouts and used the power of assembly lines in combination with electric power that factories could truly increase their productivity.
I believe we are at the same crossroads as back then. I believe most companies have not yet fully realized the potential of all the new technologies and the decentralized way of working it can support. With just a few open source tools, you can be just a few clicks away from acquiring all knowledge and contact details within your company. In fact, to generalize, I believe there are only 3 platforms required.
1. Some sort of LinkedIn for people networking
LinkedIn is the biggest and largest online social network on which everyone is just a single click away from each other. It has all the functionalities to connect people, organize events and share company messages. Families and units can organize themselves around their "LinkedIn" profile and easily reach out to other units around the globe.
2. Some sort of Wikipedia for knowledge storing and sharing
Some managers seem to forget that virtually all human knowledge collected over the last millennia is neatly organized in a thing we call the internet. I mean, what is the first step you normally do when you do not know something? Ask either Google or Wikipedia. I believe the only thing you need to store all your company knowledge (including lessons learned, procedures, policies, engineering tools etc.) is an open source platform such as Wikipedia. Everything should be embedded into that platform, so that you also do not have to share stupid files around or have to busy yourself with version control. Yikes.
3. A business administration for financial (and logistical) needs
For safety reasons, you might want to separate your financial and logistical transactions from your open source software before an intern goes of and buys himself a nice yacht. So for the time being, until I start my own "complete venture platform solutions business", we will have to make due with using the regular financial programs such as SAP.
In the future, block-chain technologies will help to aid more self-organizing behavior in the way we work together. If I had the chance, I would also set up an AI around each platform with fun nicknames such as Jarvis to ask all questions to. But that might be a whole blog in and of itself. So for now, that's it.
REALLY? IT IS THAT EASY?
Yes.
I tried to make this blog simple, easy and short. We all know what happens when you try that. It can be compared to that one time you said “ok just one more beer then”… I have tried to give you some leads on how to implement it by referencing to the sources I used. But, if you are too lazy to read about twelve books and listen to 500 podcasts, you can always contact me to go into depth on these topics.
Until that time, have a lovely DoeDay.
Key Takeaways
Reduce complexity by focusing on your core and establishing clear non-negotiables that define your company culture.
Increase flexibility by making the execution of scientifically verifiable experiments a part of your company culture, thereby continuously improving and learning.
Organize you company in a flat, non-hierarchical manner (the “Family Doctrine”) to ensure smooth communication and enhance adaptability
References, Inspiration & Further Reading
For more information on why the basic principles work: “Repeatability”.
For more information on how to change: “The Innovators Dilemma”.
For more information on the exact steps: “The Lean Startup”.
For more information on the basics of human psychology: “The 7 Habits of Highly Effective People” and “Thinking Fast and Slow”
For more information about the Gore Company “lettuce” structure, try to google "Gore Company “lettuce” structure"