The Upper Hand

Think you’ve got leverage? You might. Now think hard about whether you want to exert it.

The success of a business reveals itself over long periods of time. The same is true of a career, even more so.

At any given time, circumstances may go your way. Cheesy television shows that gloss over the true workings of business may suggest this is the time to seize control of a weakened opponent, play the hard angle of opportunism, lower the boom on the boomless.

Certainly that’s one way to play the game.

You’re a property owner and the market is tight. You can play hardball with potential tenants. Maybe that works and they sign the lease without much choice.

Are you 100% sure that’s a great idea?

You’re a well-educated graduate entering the job market where positions that capitalize on your skillset are abundant. You are offered a very fair salary at an employer where you can grow, learn, and evolve your talent. You ask for 50% more. Maybe they say yes because they have a job that needs to be done right now.

Are you 100% sure that’s a great idea?

You’re a broker of commodity supplies suddenly in demand for construction or renovation. Longtime customers ask for your support in quickly completing a needed project without breaking the budget. You tell them you’d like to help, but new customers are willing to pay three to four times what you’ve been paying for the same materials you have stockpiled in inventory. Maybe you get the new asking price from your original customer and your margin soars.

Are you 100% sure that’s a great idea?

Here’s my take: You’re blowing it.

In all three of the above examples, the true price of hammering home your isolated moment of glory far exceeds the devil’s bargain you might be invoking.

You are sacrificing the establishment of trust.

You are shredding the notion of loyalty.

You are establishing a set of ground rules where the nanosecond leverage shifts, you are going to get swatted with a mirror version of the upper hand you thought was so nifty.

Think I’m wrong? Think business is just a cycle of gamesmanship where everyone longs for effective application of the upper hand? If that’s you, I am sure you are confident in your convictions. Relish the spoils of your conquest, but do us both a favor: Seek others who are like you and leave the rest of us to apply a much longer view.

Deals are short. They come and go. Want to win every single dispute, argument, and arcane point of negotiation? Try to build a brand, reputation, or legacy on that.

One day you will lose the upper hand because no one has it forever. When that day comes, you will get what you get. You put it in motion, you own it.

Am I suggesting that you should rollover and take less than you are due in any meaningful negotiation simply to be nice? No, that’s not the takeaway. Always figure out what you need, convince yourself through the other side’s eyes that your position is reasonable, and then fight for it with cordial determination. At the same time, consider the possibility that the few pennies you may choose to leave on the table today might be a stealth investment in a future windfall you can’t yet see, but might have the foresight to envision.

Being clever is seldom obvious. There are too many other clever people always around you. Being consistent in your values with an obsession for integrity is way more valuable and easier to benchmark.

Wise investors know that equities trade in cycles over decades with an upward trajectory. Timing the market is a fool’s game. You play long. Same with customers, same with brands, same with careers.

Seriously, why?

Because in the next down cycle, you are going to need help. You are going to need to pick up the phone and humble yourself. The question is, will someone answer?

I often say that one of the few good things about getting older is that you’ve accumulated the experience to navigate events with a framework for predicting a myriad of outcomes. Challenges are both temporal and lasting. Knowing the difference provides you with context for better decision-making.

As I also often say, the great tragedy of too many careers is that the learning you wish you had in your earlier years doesn’t come until much too late, and then you’re out of time.

Get ahead of the pack. This won’t be the last boom. A bust is coming. No one knows when, only that it absolutely will happen.

Then another boom and another bust. Rinse and repeat. Those are variables. The constant is you.

Play the long game. Build your network with reciprocal give-and-take. Be the kind of person in business people want to call all the time, not just when either one of you has a temporary advantage. The inspired upper hand is less about brute force, more about wisdom.

I’m 100% sure that’s a great idea.

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Photo: Pexels

Air, Water, Food

AstronautThere’s no time like the present to set goals. Here’s a framework I use for myself and those I manage or advise.

I generally try to classify projects into three levels of priority before I consider adding resources to anything on deck: Air, Water, and Food.

In the unlikely event everything classified under Air, Water, and Food is done and behind us, I might move onto the next realm of importance, but generally, if it’s not Air, Water, or Food, it is going to get a very low priority,

I’m stealing broadly from Maslow’s Hierarchy of Needs, but suppose you were an astronaut in orbit and the red light in the capsule appeared. How do you set priorities? Largely by survival.

Without air, you have seconds to live.

Without water, you have days to live.

Without food, you have weeks to live.

Everything after that is discretionary.

Whether you are setting high-level goals or project priorities, try ranking your options into these categories.

What is Air?

In a services business, it might be customers.

In an e-commerce business, it might be secure uptime.

In product development, it might be an innovative, competitive technology solution that is worth marketing because it will surprise and delight customers.

“Air” initiatives are the items on your to-do list that if not attended to immediately may cause a business to be gone very soon. Sometimes they are obvious. Take the examples above. If you don’t protect your customers in a services business, you don’t have a business. If you don’t have a product worth selling, you don’t have a business. If you are selling online and you are not safely live to the world, you don’t exist.

It’s relatively easy to see the obvious examples of Air, but sometimes they are counterintuitive. I often write about People, Products, Profits—in that order. Are people, or the talent that drives your company, Air? The answer is absolutely yes—we cannot accomplish much of anything without the right team, but none of us has the unlimited capacity to hire everyone we want. It is precisely because talent is Air that it takes discipline to know which people you need now and which may have to wait. Your budget will always create some constraints, as will the availability of people you wish to recruit and the forced ranking of your priorities.

Of all the choices you make, Air should be the least subjective. When you feel it leaving the room, you know you are doing something vitally wrong. Don’t let Air get away from you, or the next two points won’t matter.

What is Water?

In a services business, it might be tailoring what is offered to individual customer needs.

In an e-commerce business, it might be sufficient variety of differentiated listings to attract and retain customers.

In product development, it might be the process management that lets you create a dependable schedule.

“Water” initiatives are what you need to build the business once you are certain the Air around you is sustainable. These are the projects in your organization that are essential, the ones that cannot be postponed unless there is an Air-eliminating crisis to address. Of course, if there are too many crises in an organization, you will never get to Water, and that will only keep you going slightly longer than losing Air.

Consider the example of product development: Air is ideation, the vision that will set your offering apart from those of your competitors. Water is the ability to deliver it. If you can’t create a project plan and product development schedule that you can actualize within your financial means, the concept won’t have any value. You need to be demanding about Water, but you also need to be realistic.

How important is knowing Water when you see it? Take the metaphor to its extreme: Suppose you have an abundance of Air, but you can’t get to Water. How long will you last? That’s how important Water is. It’s not Air, but it’s not far behind. Use discipline when you deem something Water. Everything that isn’t Air can’t be Water, or you’ll never have enough.

What is Food?

In a services business, it might be referrals, reputation, or word of mouth,

In an e-commerce business, it might be reliable customer service.

In product development, it might be the parsing of features and benefits to plan generational updates that improve upon each other.

“Food” initiatives allow you some discretion. You can live a relatively long time with just Air and Water, so you get to decide what constitutes Food and how to procure it creatively. If you make a mistake anointing something Food, perhaps prioritizing one product feature over another, if you’re wrong it probably isn’t the end of the world. That doesn’t mean you can be cavalier about determining your alternatives, but at least you’re out of the realm of immediate time pressure and into a set of choices where course correction is possible, even if you make a sizeable error in judgment.

I often suggest to people that one of the common elements of Food is time. Some people will think time is Air or Water, but a ticking clock is not the same as a clock that is not wound or has no power source. Time is something we all have to navigate, and we never have enough because of the deadlines we establish for ourselves or the demands of meeting customer needs. I prefer to manage time the way a good sports team works the game clock. There is an element of urgency with a game clock, but not desperation. You can use it as a motivational tool, or as a way to outsmart competitors. Time is always critical, but when it is too critical, innovation can take a hit.

Balance the Elements

Have a look at all the conflicting priorities around you. Force yourself to rank them into Air, Water, and Food. Chances are you’ll discover you are trying to solve for Food when you should be trying to solve for Air or Water. That might be why you are going in circles or nowhere at all. I have taken part in some heated constructive conflict about how to classify any given task in an organization, but I have seldom seen the framework for this kind of healthy argument fail to create a productive dialogue.

Agreed priorities are empowering. When you achieve consensus around Air, Water, and Food, you are making critical progress in your team building and goal setting. Measurable success is often lurking in meticulous editing.

Most important, if what you are working on is beyond the scope of Air, Water, Food and you’ve left these priorities behind, stop what you are doing immediately and rethink your course of action. If you haven’t got Maslow working in your corner at that basic level, the battery in your clock may be about to take away all your choices.

Own the clock. Always own the clock.

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Photo: Pixabay

8 Warnings That Your Company is Toast

Last month I reminded you that no big-brand company lasts forever, and few of today’s technology phenoms last long at all. One of my readers emailed to ask if I might dare to note some of the warning signs that suggest company extinction might be zeroing in on your own workplace.

Of course if I knew the full answer to that, I would spend the rest of my career shorting all those imminent losers traded in the public markets. Creative destruction is difficult to see in its earliest phases because it often begins simmering silently in the background when your company is riding a wave of enormous good fortune. Funny how that infecting vulnerability sneaks its nose under the tent precisely when a business seems to be at its healthiest peak.

While the corrosion can be deceptively invisible at first, there are usually festering symptoms we can observe, watching the makings of a crash in slow motion long before opposing forces collide. Here are eight thumbnail questions to help diagnose the severity of your company’s illness and whether it’s likely to be terminal.

What is the company’s R&D budget as a percentage of sales?

If research-and-development spending is declining as your company matures, it’s possible that company is being harvested by its owners as a cash cow. While strong cash flow is an indicator of company health, take notice of how much of your business is being driven by recent successes vs. legacy brands. If new products aren’t breaking, sniff around and see how much of that cash is being invested in next-generation ideas. If increasingly more cash is going to ownership and less to building your company’s future, you may have reason to worry.

Is your CEO surrounded by people who hold the same views of the company’s excellence?

Without gadflies who question everything, you’re likely to keep doing the same things. That could make you a cash cow, a one-hit wonder, or any number of limited-thinking results. Great senior leadership in a company encourages constructive conflict, because no single viewpoint in management can possibly see around every corner or predict a competitive threat. If lots of ideas are flowing, you have a much better chance to reinvent yourselves. Where dialogue is limited and funneling to a singular point of view, trouble is coming.

Does senior management actually use the product or service you produce?

This is the old argument for eating your own dog food. If the people who make and sell something only talk about why it’s great rather than obsess over what will make it even better, it’s likely to stay the same. If there is cynicism around your success and products become passionless widgets, customers will see that soon enough. Your customers can’t reinvent your products, just reject them. If you’re not a fan of what you’re doing, why should they be?

Does senior management regularly sample, investigate, and dissect competitive products?

If you think what you’ve got is the best and don’t even bother to see what could soon be eating your lunch, your lunch will soon be eaten. Be paranoid, be aware of everything competitive, commission and dissect research, never be comfortable that your moat is impenetrable. It’s okay not to use your competitor’s products day-to-day. It’s not okay to ignore them. If you happen to like them better than your own, wake up, the nightmare is about to become real.

In your company’s last earnings crunch, was marketing expense an early and severe casualty?

Marketing is an investment spend. If the money you are spending on marketing doesn’t add value to profitable sales, it should be cut now. If it’s driving profitable sales, it’s downright irresponsible to cut it. Marketing should be seen as a profit center, not a cost center. If there is no measurable return on your marketing spend, you’re already killing the company from within. If the return can be quantified, cutting it in bad times is senseless and irresponsible.

Is great marketing intended to help a mediocre product perform better than it deserves?

Said another way: outstanding marketing helps a bad product fail faster. If the product is garbage, all marketing can do is get it in the hands of early adopters. Once these market influencers trash the product, all is lost. If the product needs refinement before you invest to take it to market, take the extra time to get it right. If the product stinks and can’t be saved, kill it without a dollar of marketing spend.

Does your company culture resist rather than embrace change?

Also earlier this year I suggested that you keep your ears open for the phrase “But we’ve always…” whether it’s uttered in the break room or a key milestone review meeting. If your colleagues have unending excuses as to why you should stick with tried-and-true ways to fail because your company has always utilized a set of urban legends in your planning, you’re going to find it hard to carve a new path into the future. Doing what you’ve always done simply because you’ve always done it that way is a great way to succeed in any business that isn’t dynamic. Go make a list of businesses today that aren’t dynamic and tell me you should remain set in your ways.

Are you patching your platform or re-envisioning a new one?

Never confuse maintenance with progress. Think about just how fast industries are moving. I recently had the pleasure of watching the movie First Man. One of my favorites lines reminded me that it was a mere 66 years from the Wright Brothers first motorized biplane flight at Kitty Hawk (1903) to Neil Armstrong walking on the moon (1969). If you’re anywhere in the vicinity of 60 years old, that doesn’t seem like much time at all. If you’re fixing your biplane while your competitor is building a Saturn V rocket, it doesn’t matter that you’ve happened upon some world-class glue. When the rocket launches, you’re toast.

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Image: Pixabay

What’s Eating Brother Elon?

Let’s start with what needs to be said before all else: I am an enormous fan of Elon Musk. I think he is quite likely the most important and visionary entrepreneur today leading the way in technology, business, and innovation. He walks in the American continuum of Edison, Disney, Gates, and Jobs.  I wrote as much in a post dating back to 2014.

So when a guy as brilliant as Musk goes sideways, I start to ask myself some questions. Like, what’s up with all the weirdness?

Clearly I have no ability to understand what’s going on in this amazing individual’s life, other than to observe the monumental toll that stress can take on even the mightiest of titans. To guess at what might be at the root of Musk’s recent unpleasant run in the headlines would seem a fool’s errand.

While I am unable to fashion an informed evaluation of why Musk appears in many ways to be undermining his own success of late, I am thinking about the learning that might be had from observing his stress. I am reasonably certain he will have no interest in my reflections of what his behavior could be telling us, but perhaps this will provide a mirror for others on what some of this means and how it possibly could be addressed.

Here are five thoughts on that.

Focus Is No Small Trick

Can one person really be an effective CEO at more than one company? It’s hard enough to be a decent CEO period. Now add longevity to the CEO run and enormous competitive forces, and you start to wonder if running both Tesla (after integrating SolarCity) and SpaceX is remotely possible. Let’s also not forget that Musk is additionally CEO of Neuralink and The Boring Company. If you have ever been CEO of a high-growth company or even know one, you are aware that the job requires super-human energy, and even then the clock is always ticking against the corner office. Musk is beyond super-human, not only as a leader but as a founder who tackles some of the most difficult problems of our day. Will he succeed at all of his goals? I am sure a lot of investors and customers are counting on that, but wouldn’t the odds be more in his favor if he narrowed the scope of his personal agenda and delegated authority with a much broader brush?

A Competitive Advantage Is Not Forever

Tesla has created leading-edge, clean-exhaust automobiles. These electric vehicles are as beautiful and luxurious as anyone could have imagined. Most Tesla owners are evangelists for the company and fiercely loyal to the brand. There is no question that Tesla has been an inspired market leader, but all it takes is one visit to the showrooms of other luxury car companies and you start to see that high-end electric cars are on a fast path to becoming commodities under many brands. BMW and Jaguar already are introducing competitive product lines. Others are on the way. Staying ahead of the pack is its own form of madness and a lot less fun than introducing first-of-a-kind category killers. Can playing king of the hill without a summit in sight have a troubling impact on the psyche? How can it not?

Production Efficiency Is as Difficult as Innovation

Why hasn’t a new auto manufacturer in the U.S. survived at scale beyond the Big Three? The bulk of car buyers want cheap—most consumers don’t have an option to spend more, so the entrenched behemoths take small margins to achieve broad sales and then make money in other ways like service and financing. When you are playing with other people’s money, the demands of Wall Street can be insanely demanding. It’s hard to make big bucks selling very few cars. While Model S and Model X are both category-defining luxury cars, they remain low-volume production units with difficult margin economics given their scale. Model 3, the low-cost mass-market entry, is supposed to change the scale of Tesla, but realizing the dream of high-volume, low-cost, low-margin automobile economics seems precisely what is eating away at our hero. Is the problem perhaps not solvable with the reality of capital constraints all businesses face? Is there another business model beyond manufacturing that Tesla might want to explore with respect to the investment burden they carry?

Health Matters

A lot of people at the upper echelons of business take pride in working themselves to death, or at least appearing to do so. I will admit I am personally not beyond this criticism, and have winced more than once when listening to colleagues celebrate the notion of work-life balance even in the most competitive environments. Many leaders demonstrate manic obsession in their devotion to their enterprises, and it is hard to argue a company can be at the top of its game with a standard forty-hour work week. That said, no matter how much we wish to argue the contrary, we are human, our bodies have limits, and when we cross our own lines of practicality, we can become counterproductive. Sleep matters. Nutrition matters. Some relief from stress is necessary to be consistent in exercising good judgment and productive reasoning. When our vitality breaks down, it is only a matter of time before we collapse or the responsibilities we own become compromised.

Authenticity Does Not Require Unrestrained Drama

The modern workforce is not put off when a boss exhibits some vulnerability. Relationships defined by org charts actually can be strengthened when a manager exhibits humility toward his or her own limitations. Leaders who acknowledge that emotions and potential exhaustion set them on a level playing field with peers and subordinates can foster a dynamic environment of trust and support. That doesn’t mean employees and other stakeholders want executives to ramble, wander, or become media fodder. Remember that old saying, “When you’re in a hole, stop digging.” Random proclamations to shareholders and needlessly quirky public appearances can leave deep craters on the social graph. All organizations want some form of predictability in the leaders they choose to follow. When they lose confidence in top management because of repeated, silly, and unnecessary antics that can demoralize their aspirations, they can make another choice. They vote with their feet.

I am rooting for Elon Musk to win, for SpaceX even more than Tesla, because he has proven that not only government bureaucracies can build dependable rockets. That is forcing innovation around reusability in space exploration and keeping admirable government spending on otherworldly travel in check. While I probably can’t put a dent in Musk’s corrective arc (which I want to believe is on the horizon), perhaps I can open the eyes of a few mere mortals to the underlying tension of his story. Perhaps your story of stress and self-expectation has similar subplots of immovable market forces. What could you be doing to course-correct that might give Musk reason to pay attention?