Archive for the ‘Powerful Ideas’ Category

The “Power Law” is one of the most useful concepts for making predictions and decisions in business and management.

The power law shows how two variables–one dependent, the other independent–covary. Mathematically, one varies as a function of the other by being raised to a certain power (exponent).

The following diagram shows this type of relationship. Often these are depicted on log or log-log graphs, but I show the “power curve” as an asymptote on both axes of the graph to highlight the non-linearity of the relationship between the two variables.

power-law-basic

A concrete example will help. The great majority of earthquakes are of very low magnitude. High magnitude earthquakes are much rarer than low magnitude earthquakes. In fact, their magnitude varies in inverse exponential proportion to the total number of earthquakes. In practice, this means that there are literally thousands of earthquakes every day around the world, but magnitude 6, 7, and 8 ones are much rarer. The most powerful earthquakes of all, over 9 on the Richter, scale are very rare. They can happen only a few times a century, or even less. This doesn’t mean that the magnitude of any particular earthquake can be predicted. It does however imply that given a sufficiently large sample, we will eventually see a frequency-magnitude distribution that resembles the graph above.

This type of relationship is ubiquitous in nature, and that includes our human and social natures. There was a whole book written on this topic–The Long Tail, by Chris Anderson–with emphasis on the right side of the graph. In his book, Anderson described how the internet has made many businesses or ideas viable which would not previously even have been known. He called this the long tail because there are musicians, artists, artisans, crafts workers, professionals, etc. who can provide their productions and services to people around the world, even though they can’t compete with the more traditional providers who dominate markets by occupying the left side of the power curve. This makes for much more diversity and many more opportunities to get known and appreciated, and to develop a following because it lowers traditional barriers to entry and long-term viability.

This type of relationship is also depicted in the following diagram. I show the relationship between number of clients and the number purchases, interactions, or value of each category of client that characterizes the market and product distributions of most, if not all, companies (including my own clients).

power-law-of-clients-and-value

For instance, I’ve been working with a banking client. This graph shows the relationship between number of clients and the number of products/services that each client has with the bank. The total market size for this bank is about 80,000 potential users of its services. Of these potential users of its services, the great majority, about 85 %, have no business relationship with the bank. Of the 13,000 or so that do use the bank’s services, the majority only use less than 3 of over 20 products and services. As we move to the right, there are less clients, but their interactions with the bank are more intensive. In other words, there are are many fewer clients in categories to the right, but they use many more of the bank’s services, which in turn generate much greater value. On the other hand, there are no actual clients who do all of their banking and meet all of their financial needs and objectives, much less use all of the bank’s services. This is why we can depict the lower right part of the curve as an asymptote. You never actually reach complete saturation or use.

We’ve all noticed these types of power-law relationships in our professional and personal lives, our management and business experiences, and even in some natural phenomena. This relationship is often referred to as the 80/20 law, Pareto’s Law, or Zipf’s Law. It shows up in such truisms as: 80 % of my problems are caused by 20 % (rates can vary) of my people; most of my sales and profits come from a small number of sales reps; only a few of my clients provide most of my revenue and profits; this product category accounts for 45 % of my sales, but 70 % of my profits; etc., etc.

The following diagram is a further illustration of the principle. It comes from an online article by Mark McLean of the Toronto Real Estate Board (TREB) and shows an almost perfect example of a power-law distribution in the number of deals done by different categories of real estate agents who are members of TREB.  We can see that only a very small number of agents in TREB can be considered highly successful, prolific even.

treb-gif

Of those agents having completed 6 or less deals in a year, a similar relationship holds, although it’s less stark:

treb-6-and-under

Whatever we wish to call them, power-law distributions and relationships underlie much of the correlations and dynamics that surround us. We can use them in making general predictions and, along with the S-curve phenomenon I described in a previous post, we have two very powerful tools and concepts for understanding the world around us. Moreover, power laws and S-curves are not only ubiquitous, they tend to show what’s called “self-similarity,” or a fractal pattern. I’ll discuss that third powerful concept next week.

© 2016 Alcera Consulting Inc.

This article may be forwarded, reproduced, or otherwise referenced for non-commercial use with proper attribution. All other rights are reserved and explicit permission is required for commercial use.

By Richard Martin, Expert in Business Readiness and Exploiting Change

One of the most useful ideas for conceptualizing any kind of change process is the S-curve. Perhaps you’ve seen one of these before. It looks like this:

typical-s-curve

The S-curve is the way natural and human phenomena grow and develop over time. For instance, the plot of a growth of bacteria or yeast in a laboratory follows the exact S-curve. Technically, it’s known as a logistic function, and when we plot it as a rate of growth, rather than cumulative growth, it forms a bell curve, although it doesn’t follow a normal, Gaussian, distribution. In other words, when something starts growing or spreading, it first starts very slowly, then it speeds up until it hits it hits a maximum, after which the growth/spread rate slows down until it basically tends to zero.

The S-curve approximates the cumulative growth or spread of just about any natural or man-made phenomenon, such as:

  • Penetration of a new market segment
  • Growth of new product/service category
  • Learning stages
  • Interest in topics
  • Abilities (which tend to plateau after a time)
  • Etc.

One of the more relevant business applications is in strategy formulation and execution. Take a look at the following S-Curve application. It shows how we can map the different phases of a product or market life cycle onto the S-curve. This gives an intuitive understanding that all good things must come to an end or, as I imply in the title of this piece, “What goes up, must (eventually) come down (or at least level off).”

product-market-life-cycle-phases

New products or markets start as ideas, often as an external start up. I pluralize this because there should be a relatively high number of “experiments” and trials underway at any one time within a diversified company. Another strategy is to watch out for promising startups outside the business (or in an internal “skunkworks”) and then invest in them or simply acquire them once they start entering their rapid growth phase. Companies should have businesses (various combinations of product-market mix) in all stages of the life cycle in order to ensure a constant stream of growth generating ideas and strategic business units.

Another important phenomenon to note is the presence of a decline phase. Unless there is continuing investment in a business line or concept, it will eventually go into decline. We don’t necessarily know when, but we DO know it will happen at some point. This is another reason to be constantly replenishing the pipeline at the earlier life cycle stages of startup and rapid growth. The capital needed to invest in future ideas and growth will often come from the “milk cows” that are businesses in the maturity or plateau stage, although the latter can also provide a good source of financial capital through divestment.

© 2016 Richard Martin. Reproduction, forwarding, and quotes are permitted with proper attribution.

 

Diversity is important, but not necessarily for the reasons that are commonly put forward. Yes, it’s important to have a variety of inputs and perspectives so we can maximize our performance and creativity. It’s also critical that organizations be representative of their respective clienteles or constituencies.

More fundamental, however, is the fact that there are a multitude of personalities, preferences, talents, interests, and attitudes. There is simply no “one size fits all” solution to any needs or wants. This has organizational implications but it also has societal ones as well.

If you try to impose a single or limited number of ways of doing things or of fulfilling needs, you will quickly run into the fact that most people don’t think in the same way or necessarily want the same things. The simple example of musical tastes illustrates this observation. Some people like classical music, others, jazz, rock, blues, folk, country, or any other number of styles and idioms. There’s no accounting for taste. One person’s melody is another’s cacophony. We can’t say “this is real music,” while what young people listen to is “just noise.”

We can go even further when we look at other more impactful activities and preferences. I find mixed martial arts in a cage to be quite barbaric. The image of a brute pounding someone underneath him (or her) comes readily to mind. But then, no one has forced any of the competitors into the ring, at least as far as I know. The same goes for someone who willingly gets into boxing, wrestling or other fighting sports. And what about someone who takes up mountain climbing or sky-diving, or who wants to practice a dangerous occupation or who enjoys work that is normally considered unpleasant. I couldn’t imagine myself being a health care professional, for instance.

This is where freedom comes into play. We need freedom—which I define as a “live and let live” attitude—because there are simply too many diverse preferences, talents, and proclivities. What happens between consenting adults is their business, so long as it doesn’t hurt anyone else, no matter what bystanders and other non-interested parties say or think.

If we’re all going to get along and continue to build and develop some kind of community and society, then we simply have to have outlets and possibilities for ALL people. This is why personal freedom and preference should trump everything else. And also why diversity isn’t just about performance and representiveness.

© 2016 Richard Martin. Reproduction, forwarding and quotes permitted with proper attribution.

We live in an era of quick fixes and tsunami-like trends and fashions. It’s easy to become enamoured of the latest management and leadership fads. The first one goes back to the 1950s.

First introduced and advocated by Peter Drucker, “management by objectives” was based on the idea was that roles and functions should be analyzed into separate tasks and components and then assigned to managers as clear results-oriented objectives.

It’s still the basis of most delegation and responsibility assignments. In the military it’s called “mission command.” Both are based on the entirely reasonable idea that initiative, creativity, and job satisfaction are maximized when people are told what to do (what is expected in performance/output terms) and the reasons for doing so. They then can use their freedom of action to find the best ways and means to achieve the objectives.

Unfortunately, management and business strategy are prone to bouts of fashion, imitation, and fads. One year it’s “blue ocean strategy,” the next it’s “edge” strategy. One month it’s “servant” leadership, the next it’s “holocracy,” or some other such facile characterization of organizational and business dynamics and challenges.

We need to get back to basics and adopt a perspective that operates from an underlying understanding of human behaviour and psychology. Management by objectives, mission command, or whatever you want to call these approaches, they all rely on parsing out responsibilities, authorities, and accountabilities on the basis of a rational analysis of projects and objectives. Everything else is noise.

© 2016 Richard Martin. Reproduction and quotes are permitted with proper attribution.

There was an article in today’s Wall Street Journal about learning from failure. I agree with most of what is said, but the article also includes survey results from the last decade which consistently show that the most important cause of “failure” is unrealistic or inaccurate objectives.

Unfortunately with this kind of result, we can’t ascertain how valid the original objectives were. I’ve often observed this phenomenon with my clients when we start working together. Objectives and goals are often vague, abstract or simply unattainable. I call this the “horizon problem”; regardless of how much progress you make, you can never reach the horizon. It’s always there, mocking you.

I advocate defining and aiming for concrete objectives. For instance, simply saying you want to increase revenues or profits is just a way of starting the goal-setting process. You have to then turn this into something specific. What is the dollar increase in sales you are aiming for? How many clients or products or whatever does that represent? What are the markets or segments you’re targeting? Within what timeframe?

You can always revise goals upward as you close in on them. But at least, by making them concrete you have to specify intermediate steps that are measurable and actionable. This way you avoid the “horizon problem.” You can also compare your progress against where you were when you started. If anything, this provides a more realistic basis of comparison and also helps in raising morale, because the progress and improvements are more evident.

Richard Martin is The Force Multiplier. He brings his military and business leadership and management experience to bear for executives and organizations seeking to radically improve performance, grow, and thrive in the face of rapid change, harsh competition, and increasing uncertainty.

© 2015 Richard Martin. Reproduction and quotes are permitted with proper attribution.

There is nothing wrong with conflict within a team. It only becomes a problem when it gets out of hand and prevents decisions on important matters or undermines performance. In addition, lack of conflict can be just as much of problem as too much conflict. It can be a sign of group think or unquestioning obedience to authority.

In fact, conflict is a sign of healthy disagreement and debate about important issues. If managed properly, through respectful dialogue and exchange, then it can lead to higher quality outcomes.

There are four basic types of conflict, and I’ve listed them below in growing order of criticality and difficulty of resolution:

  • Conflict about inputs, priorities, and resources
  • Conflict about courses of action and options to achieve an aim
  • Conflict about objectives and aim
  • Conflict about fundamental values

As long as internal conflicts are limited to the first two and are resolved by clear decisions and communications–which is ultimately a leader’s responsibility–then they are very manageable. Conflicts about aims and objectives are harder to resolve and may require difficult decisions and resentments. The final form of conflict is usually impossible to resolve without one or more parties to the dispute leaving the organization.

You’ll notice I haven’t mentioned “personality conflict.” In my opinion, this is really nothing more than disagreements about fundamental values.

I’m never too busy to discuss your needs or those of anyone else you feel may benefit from meeting or talking to me. So feel free to contact me at any time!

Richard Martin is The Force Multiplier. He brings his military and business leadership and management experience to bear for executives and organizations seeking to radically improve performance, grow, and thrive in the face of rapid change, harsh competition, and increasing uncertainty.

© 2015 Richard Martin. Reproduction and quotes are permitted with proper attribution.

I was recently discussing different approaches to strategy formulation and implementation with my good friend Phil Symchych. Phil is an expert in wealth building for owners of mid-market enterprises. When I presented some of the military principles of strategy, Phil enthusiastically endorsed them and encouraged me to create an approach around the four most important ones.

As a result, I’ve just developed a quick and easy model for applying military principles of strategy and tactics to achieve business success. I’m calling this new model, MOME. It stands for Morale, Objectives, Mass, and Economy. Naturally, I’ve leveraged these principles with my near decade-long experience of applying this philosophy to help businesses grow and prosper in the face fierce competition and rapidly changing wants and needs. Let’s look at each in turn and then at some of the ready applications for the model.

Morale. Military strategists and leaders have long known that MORALE is THE critical human factor in war and conflict. However, it is also foundational for business and strategy. The simplest definition of morale is the “will to victory.” It is the willingness to make sacrifices, persevere, and focus on achieving one’s aims despite setbacks, obstacles, and opposition. Morale is driven by the quality of leadership, the mission, and vision of the organization, and the level of engagement of employees and members to its foundational principles and goals.

Objectives. All military strategists agree that selection and maintenance of the aim is THE most important of all the principles of war and conflict. You need a clearly articulated end state—what does victory or success look like—as well as a specific and concrete mission to get everyone aligned and working to the same end. Moreover, when you communicate these throughout the organization, telling people what outcomes to achieve and not how to achieve them, they become motivated to use their initiative and leadership to overcome obstacles and adapt on the fly to the inevitable changes in situation and conditions. This is why a business needs a concrete vision of where it is heading as well as an engaging mission for customers and employees. The important thing is to be as concrete as possible and to operationalize the vision into a hierarchy of subordinated goals and missions to maximize alignment and focus at all levels of the organization.

Mass. In the British and Canadian military, this principle is known as concentration of force, mainly because they are small forces. But in the US forces and other large forces, they simply come right out and talk about MASS. The fundamental point here is that you must put your money where your mouth is. You have to concentrate for the “big push” or main effort so you attain your objectives as quickly and efficiently as possible. Businesses must be aware of their strengths and weaknesses and focus them to out-manoeuvre competitors in order to offer greater value for targeted customers.

Economy. This is the flip side of mass and concentration of force. There are never sufficient resources to accomplish everything that you want. You have to prioritize. In fact, the best definition of economy is the one developed by economists: Economy is the allocation of scarce resources that have alternative uses. You may have to take a defensive or maintenance posture in some areas of your business so you can free up the resources to invest in the business lines where you want to be on the offensive. By the same token, you have support your objectives and lines of advance with adequate logistical and financial means. There is also the “economic” and financial aspect of your strategy. Whatever you decide to do, it has to be “economical” in the sense of presenting a strong and valid business case.

To see how the MOME model applies in practice, let’s look at the example of an acquisition:

  1. How will this affect MORALE and other group factors in the acquiring company and the acquired? Does this change the combined units’ fundamental mission? Who will stay on and who will be let go?
  2. What are the OBJECTIVES of the acquisition or merger? Have these been clearly articulated and communicated to all stakeholders? What outcomes are you expecting? Are they realistic or more like wishful thinking?
  3. Will the acquisition allow you to generate more MASS for high-growth opportunities or are you just throwing good money after bad? Is this just an ego trip or is it a viable opportunity? What is the main effort of the acquisition process and what are the supporting actions? What is your plan to out-manoeuvre and surprise your competitors, and to apply your center of gravity—i.e., your key strengths—to achieve your objectives?
  4. What are the ECONOMICS of the plan? Where do you need to ECONOMIZE in order to free up lower priority resources so you can create mass on the main effort? How will you prioritize these resources and what are the supporting functions and tasks?

These are just some of the specific questions your plan and strategy must answer so you can create the conditions for success and victory. You can’t leave anything to chance, and where there are uncertainties, you have to guard your flanks and rear areas with sound risk management.

How do YOUR strategy and plans measure up to the MOME model? How is morale in your company? What are your objectives? Do you have mass? Are you economizing in the right areas, and what are the economics of your business? I can help you answer these questions.

I’m never too busy to discuss your needs or those of anyone else you feel may benefit from meeting or talking to me. So feel free to contact me at any time!

Richard Martin is The Force Multiplier. He brings his military and business leadership and management experience to bear for executives and organizations seeking to radically improve performance, grow, and thrive in the face of rapid change, harsh competition, and increasing uncertainty.

© 2015 Richard Martin. Reproduction and quotes are permitted with proper attribution.

In battle the best way to defeat an entrenched enemy is to hit him in his weak spot or, even better, manoeuvre around him completely to make his position untenable (and irrelevant). By the same token, a company can outflank or bypass the competition through innovation and savvy market manoeuving. Here are some questions from Brilliant Manoeuvres to improve your ability to use the indirect approach:

  • Are there customers, segments, or entire markets that are currently inadequately served or ignored by established competitors?
  • Are there existing products and services that could be modified to better meet these needs?
  • Are there components or technologies that could be re-combined or suitably modified to meet these needs?
  • Could you effectively outflank and bypass the competition by exploiting these under-served or ignored needs?
  • What competencies and resources can you bring to bear to exploit these opportunities?
  • What financial, human, technical, marketing, and sales capabilities could you develop or acquire to bypass the competition?
  • Can you keep the risks within acceptable bounds? What means could you use to do so?

Richard Martin is The Force Multiplier. He brings his military and business leadership and management experience to bear for executives and organizations seeking to radically improve performance, grow, and thrive in the face of rapid change, harsh competition, and increasing uncertainty.

I’m never too busy to discuss your needs or those of anyone else you feel may benefit from meeting or talking to me. So feel free to contact me at any time!

© 2015 Richard Martin. Reproduction and quotes are permitted with proper attribution.

I just read an article in the Globe and Mail about how to manage so-called “Millenials.” Never has so much navel gazing led to such hot air with so little logic or evidence to back it up. But other than that I don’t feel strongly about it…

The problem I see with the whole Gen-X, Gen-Y and other assorted generation alphabet soup claims is that they are based on (re)discovering things that have always existed. Young people today supposedly need meaningful work and only respond to good leadership. When was it ever different? And moreover, isn’t that what all people want, at least in some measure?

As an officer in the Canadian Army from 1985 to 2006, I saw a transition to more meaningful and transformational leadership, but it applied to everyone, not just Gen-Xers and Gen-Yers. Someone in their forties or fifties was no more accommodating of incompetent leadership and asinine work than someone in their teens, twenties, or thirties. I know I always wanted meaningful work and a sense of belonging.

Anyone who has read Plato will know that elders have been harping about the supposed lack of respect for authority or their impatience with traditional ways of doing things of the younger generations since at least the 5th century BC. And it’s been going on ever since. Remember the Monty Python skit about the “Young People Today”? It came out in the early 70s, before they’re were Millenials, or Generation Alphabet Soup.

And what about all those previous generations of dreamers and rebels who wanted to change society and intergenerational relations? Weren’t they looking for meaningful work, a sense of belonging, and other intrinsic motivations? Didn’t they respond to competent, transformational leaders who sought to influence them through intrinsic motivation, the power of example, and challenging goals and responsibilities?

The sooner we get off this generational hobby horse, the sooner we can get back to sound principles of leadership, which I’ve written about extensively. People of all ages, backgrounds, and cultures respond to inspirational and competent leadership no matter what the circumstances. No one likes to follow an incompetent leader, except perhaps out of pure curiosity. I know, I’ve had the practical experiences leading soldiers and civilians, business people and managers, around the world in all environments.

Richard Martin is a Master Strategist and Leadership Catalyst. Richard brings his military and business leadership and management experience to bear for executives and organizations seeking to radically improve performance, grow, and thrive in the face of rapid change, harsh competition, and increasing uncertainty.

© 2015 Richard Martin. Reproduction and quotes are permitted with proper attribution.

Call this concentration of force, a key principle of war and strategy.

  • What strategies, initiatives, tactics are getting results?
  • How can you reinforce these to seize and maintain the initiative over detractors and competitors?
  • What are you doing now that is not getting results and that is taking up significant results?
  • Are these activities worth continuing because you’ve only just started them, or have you been putting in significant effort for piddling results?
  • What would be the impact of cancelling or transferring these activities in order to free up the resources so you can focus them on the successful initiatives and incursions?

Richard Martin is a Master Strategist and Leadership Catalyst. Richard brings his military and business leadership and management experience to bear for executives and organizations seeking to radically improve performance, grow, and thrive in the face of rapid change, harsh competition, and increasing uncertainty.

© 2015 Richard Martin. Reproduction and quotes are permitted with proper attribution.