How will you measure your life
The Theory has an opinion
Data is only available about the past
Difference in WHAT to think and HOW to think
A good theory provides if-then statements
Motivation
Incentive/principal agent theory (Jensen/Meckling)
If you want someone to do something just pay them for what you want them to do
Too many anomalies - military very motivated, non-profits, charities, etc.
Two-Factor Theory
Hygiene factors - status, compensation, job security, work conditions, company policies
Bad hygiene will equal dissatisfaction
Good hygiene equals absence of dissatisfaction
At best good hygiene factors make you stop hating it
Motivators - challenging work, recognition, responsibility and personal growth
Answer the following questions: more about building something than having something
Is this going to give me a chance to develop?
Will I learn new things?
Will I gain responsibility?
Strategy
2 sources for options of strategy (Mintzberg)
Anticipated opportunities - you can see and choose to pursue (deliberate strategy)
Unanticipated opportunities - cocktail of problems an opportunities that emerge while trying to implement (deliberate strategy)
Unanticipated fights anticipated for attention, capital, and hearts of management
Stick to plan, modify, or pivot - emergent strategy
Not discrete analytical event - it is a continuous, diverse, unruly process
Having a focused plan only makes sense in certain circumstances
If you’ve found an outlet that offers the requisite hygiene and motivators = deliberate
If not in above situation = emergent/ experiment
As you learn from each experience - adjust
Discovery-driven planning
What has to prove true for this to work? Assumptions embedded in numbers = fail
Rank assumptions in order by importance and uncertainty (top = most important, least certain = bottom)
Quickly, with little expense, test validity of most important assumptions and adjust
Resource Allocation
Grove - to understand a businesses strategy look at what they actually do rather than what they say they will do
Our resources - personal time, energy, talent and wealth
Difference in prioritizing for immediate returns - promotion, raise/bonus RATHER than long term gains - raising children
Strategy is created through hundreds of everyday decisions about how to spend your time, energy and money
Nothing but good intentions, unless it’s effectively implemented
If the decisions you make about where to invest your blood, sweat and tears are not consistent with the person you aspire to be, you’ll never become that person
Good and Bad Capital
93 percent of successful companies had to abandon their original strategy (Bhide)
Successful companies succeed because they have money left over after the original strategy fails, so they can pivot and try another approach (Do not spend all your money on original strategy = fail)
Capital that seeks growth before profits is bad
Impatient for growth and patient for profits
Honda succeeded because it was so financially constrained it was forced to be patient for growth while it figured out its profit model
Investments in relationships with friends and family need to be made long, long before you’ll see any sign that they are paying off
Doing the job right
What causes us to buy a product or service is that we actually hire products to do jobs for us
Company must understand the jobs that arise in people’s lives, then develop products and the accompanying experiences required in purchasing and using the product to do the job perfectly, it causes customers to instinctively pull the products into their lives when the problem arises
Understand the job of the customer
Jobs others are trying to do is very different from the jobs that you think he/ she should want to do
Our effort is often misplaced Work through job-to-be-done lens
Sacrifice deepens commitment
Danger of Outsourcing
Concept of capabilities - resources, processes and priorities
Dynamic and built overtime
Resources - most tangible, people, equipment, technology, designs, brands, information, cash, relationships with suppliers, distributors and customers
Resources can be hired/fired, bought/sold, depreciated/built
1 of 3 critical factors driving business
Processes
Way which employees interact, coordinate, communicate and make decisions are processes
Enable resources to solve more and more complicated problems
Includes ways products are developed/made, and methods by which market research, budgeting, employee development, compensation and resource allocation are developed
Can’t be seen on a balance sheet
Priorities
Defines how a company makes decisions, clear guidance about what a company will invest in or not
What will employees focus on today and what will they not
Company’s priorities must be in sync with how the company makes money
Dynamic view of suppliers capabilities - what are they striving to do
What capabilities must stay in house - otherwise you will hand over future of your business
Learning
People learn when they are ready to learn Not when we’re ready to teach them
Need to do more then learn new skills, need to be challenged
Need to develop values, solve hard problems
Hand over to others (outsource) you are losing opportunities to develop them
Right Stuff
Not born with superior skills, your the best because you honed them along the way
Experiences that taught them how to deal with setbacks or extreme stress in high- stakes situations
Abilities are developed and shaped by experiences in life
Wrestle with the problems you don’t even know you are going to face
Value of giving people experiences before they need them plays out in many fields other than business
If you do not fail along the way, they will not build the resilience to get through life
Experiences must prepare you down the line
Find the right experiences to help build skills you need to succeed
Culture
Schein - a way of working together toward common goals that have been followed so frequently and so successfully that people don’t even think about trying to do things another way. If a culture has formed, people will autonomously do what they need to do to be successful.
Casual Friday’s, free sodas in the cafeteria, or whether you can bring your dog into the office - just artifacts of culture, NOT real thing
Result of shared learning = first time when a problem or challenge arises
Example - How do we deal with customer complaint?
If the decision is deemed “good enough” employees return to same decision and way of solving the problem
Every time you solve a problem, you are learning what matters
Creating an understanding of priorites, how to execute (processes)
A culture is the unique combination of processes and priorities within an organization
Advantage allows an organization to become self-managing
If environment changes substantially, strength of the culture will make it hard to change things
Culture is formed through repetition - must reinforce, it will form one way or another
Full vs. Marginal Thinking
Life comes with no warning signs Case of Blockbuster vs. Netflix
Failure is the end path of marginal thinking
We end up paying the full cost of our decisions, not the marginal
Full cost of something completely new
Leverage what already exists
If you need a machine and don’t buy it, then you will ultimately find that you’ve paid for it and don’t have it
100 percent of the time is easier than 98 percent of the time
Instinct to use marginal costs hides us from the true cost of our actions
Decide what you stand for and then stand for it all the time
Purpose
likeness - what the managers/employees hope they build when they reach each critical milestone on their journey
commitment - conversion to likeness that they are trying to create, do not compromise
metrics - enable everyone associated to with enterprise to calibrate their work, keep them moving together in a coherent way
Likeness, commitment, metrics compromise a purpose
Must deliberately be perceived and chosen, then pursued
The Person I want to become Becoming Committed
Find the right metric
Resolve others challenges rather than your own, do not focus on your problems