Never mind the 80/20 rule, often it's 99/1
Whilst on holiday in the New Forest last week my family and I spent a day exploring the National Car Museum at Beaulieu. I am in no way a petrolhead, but even I really enjoyed exploring the collection, which includes everything from examples of the earliest cars right through to a Bugatti Veyron!
One car particularly caught my eye - a 1965 AS Cobra. Beautiful in every way. After having a good look around the car’s exterior, I took a look at the cockpit - and saw this dashboard:
What struck me were two things - firstly the number of dials, and secondly which dials were given most prominence. Both these were very different to my car. When I looked closely at what the dials were for I realised that they were nearly all related to how the car's 'system' was performing - oil temperature, oil pressure, water temperature, battery voltage, RPM - whilst only one related to the result - speed. The speedo is tucked away in the bottom left of the dashboard, whilst the other dials are positioned centrally for easier monitoring by the driver.
This made me think of the difference between 'leading' and 'lagging' measures, and the different purposes they serve.
Leading measures seek to predict outcomes by measuring activity and behaviour (oil pressure, battery charge etc), whilst lagging measures are typically results based (speed), and backwards looking - they tell how well you have performed, but not why. Lagging measures for organisations like revenue, growth or jobs created are the result of other actions.
Most organisations I have worked in or with focus their performance measurement almost exclusively on lagging measures, usually in the form of KPIs (Key Performance Indicators). Indeed, most companies are compared and valued on their ability to create favourable KPI results like revenue growth, profit margin, earnings per share etc.
The problem with this approach is that it doesn't tell you if you're doing the right things to produce the result you want. Complementary to KPIs are Key Result Indicators (KRIs) - these are the leading measures that track the activity that will deliver your KPIs.
Why are lagging measures favoured? Quite simply because they are far easier to determine, understand and compare across organisations. In comparison leading measures are harder to determine as they require a deeper understanding of what activities are key in driving outcomes.
The best solution for most organisations is a balanced scorecard of leading and lagging measures, and a strong understanding of the relationship between the two i.e. which of your leading measures drive which lagging measure result? The effort required to derive the right set of leading measures for your organisation can be an exercise in trial and error, but the effort is worth it to develop a better understanding of the dynamics of your business model, and to focus effort and resources on the right activity to deliver the result you desire.
There are more tools and data available to measure business activity and its impact on results than ever before. There is even a new job title for people using a combination of metrics, creativity and analytics to rapidly design and implement tests to find the right activity to drive business expansion - growth hackers. More organisations should adopt the approach of the growth hacker and focus on identifying the link between activity and the outcomes you want to deliver.
So, when deciding how to measure the performance of your organisation remember the dashboards of classic cars - focus on looking after your engine, and your speed will look after itself.
Since I got my first full-time job back in 1999 I’ve worked in many different sectors, in companies both small and large. I’ve worked under great leaders, and been appalled at the behaviour and attitude of others. I’ve been part of big successes, and been unable to prevent failures.
There are countless books and articles telling us how to be successful - what it takes to win in this new information age - so I thought I’d flip the subject around.
Here are my rules for making sure your organisation or project fails.
don’t have a clear strategy
Strategy remains one of least understood yet most used terms in business.
Your strategy should be the guiding set of principles that define what your organisation is trying to achieve, where it will operate, and how it believes it can succeed.
Here are some things that strategy is not:
- budgeting - I’ve lost count of the number of “strategic reviews” I’ve sat in that become simply a discussion about financial projections. Financial results are a result of your strategy, not the strategy itself.
- an annual event - it seems absurd to think that any plan made for the year ahead (or beyond!) will remain relevant for long. Whilst your strategic foundation provides overall direction, you must retain flexibility in how that is achieved. Neither disruptive new competitors, new insights or technologies work to an annual timetable - and nor should you.
- out of your control - although it sounds tempting, “following the customer” is not a strategy. It really means “I don’t know what to do, so I’ll wait for someone to tell me”. This reactive approach is, frankly, a cop-out. Don’t follow - lead. Be the organisation that looks forward and tells your customers what’s coming, and what ‘good’ will look like. Then deliver it.
don’t ask ‘why?’
Thanks to Simon Sinek’s TED talk and book on the importance of ‘why’ in business, there is a new generation of companies emerging with a very clear understanding of their purpose. Conversely, there is now an older generation of firms for whom the question ‘why do you exist’ remains hard to answer. Too often the answer given is “to create long-term value for our shareholders” or some other such nonsense. Hardly a rallying call that inspires.
rely on the HiPPO
The HiPPO - or Highest Paid Person’s Opinion - can be toxic to the culture of innovation, debate and growth that most organisations desire. Of course, ultimately someone has to make the call on difficult decisions. That person is not necessarily the one paid the most, or who sits highest up the organisation chart. Find a way to give those who know your customers or products best a voice. Use data to provide insight. Invite debate and challenge. Accept sometimes that you don’t know best, and that you can get things wrong.
shoot the messenger
All too often the bearer of bad news - whoever is responsible for it - gets blamed for it. As a leader you need to know what’s really going on, so don’t punish those who tell you. Make it easy for information and insight to get to you - don’t rely only your immediate management team but reach out, and - most importantly - listen.
don’t invest in the future
In tough economic times, when budgets are limited and shareholders are nervous, it can be difficult to justify investing in new products or services whose outcomes are uncertain, or even hard to quantify. However, if you don’t invest in innovation who will? Your competition? New entrants? Your customers? The best way to stay ahead is to be the organisation pushing the boundaries and driving the agenda in your sector. Don’t wait to be disrupted - look for disruptive opportunities and make them your own.
obsess over detailed business plans for new projects
Paper plans aren’t as useful as real data and customer feedback. Encourage lean-inspired experimentation and learning to gather real data and insight.
don’t tolerate failure
Things go wrong - not every risk can be controlled, people make mistakes. Learn from failure, and don’t write people off unnecessarily. Wring every ounce of useful insight from mistakes and failures, and use it to improve.
don’t let your people learn
Think wider about what ‘learning’ can mean to your organisation. The broader your team’s knowledge the more likely they are to see opportunities, to generate new ideas, and to develop and grow into future leaders.
focus on the micro- and ignore the macro- risks
It’s easy to spend your time focussing on the small risks that you understand and can manage, ignoring the bigger risks and trends that are less clear and yet far more likely to disrupt your organisation. Don’t be the next Kodak.
ignore your organisation’s values when it suits you
If you don’t consider your organisation’s values when making decisions, then you can’t expect your staff too either. If they don’t, your customers will know and your reputation will suffer accordingly. Your values should not be a marketing play - they should be obvious from your actions. Live and act by the code you establish, and be seen doing it.
So there you have it - my blueprint for failure. Chances are some of these are evident in your organisation - you may even recognise some of these behaviours in yourself…
Over the past few years - on my own search for purpose - I've gone to some amazing events and met some inspirational people. I thought I'd share links to the talks that inspired me the most on my journey. I hope they inspire you too.
When you go to events you never know the talk you'll hear that will change your perspective forever. For most of us at the Happy Startup Summercamp in 2014 this was it. Jack explains his own, unique business philosophy, and how he made that real at his own firm. He also introduced the world to the term "grey-suited mood hoovers"....
I remember reading about Simon in the papers a few months before I saw him talk. Hearing his story firsthand blew me away. Not only does he tell a great story, he's also one of the nicest people you could ever meet.
I went to the Do Lectures whilst still an employee, looking for the confidence to resign and go my own way. This was the first talk I heard at Do, and at the end of it my notes simply said "That's it. Go home, resign". Enough said.
Collyn's insights into how brand and strategy interact was a highlight - she demystified what 'brand' really means for this recovering accountant. Since Do she has walked the walk and launched a business true to her pursuit - Bowndling
Owen - an IDEO Partner - was a great source of insight and energy throughout Do. His talk on what's really important in business - people - struck a chord.
Despite being one of the first people to arrive in West Wales for the Do Lectures, Zach was the very last speaker that year. Boy did he leave us on a high. Needless to say my mind was buzzing on the long drive home...
I am very proud to be a mentor for the Virgin Start-up programme, where I get the chance to work with an exciting young entrepreneur like Gemma, a Dorset-based chocolate brownie genius!
Some recent press links are below:
You can buy her fabulous brownies on her website
Guardian article - March 2013
In March 2013 I wrote an article for the Guardian Social Enterprise Network about how social enterprises can be more successful at bidding for public sector contracts - you can read it here
Well, a week has passed and I'm still trying to absorb the experience that was the Do Lectures Start-up. It was a whirlwind three days full of inspiration and great people, all in the amazing setting that is Fforest.
I won't revisit the details of the event itself, but rather talk about the take-away messages I was left with.
It's no longer acceptable to run a business that doesn't try to make a positive impact beyond the bottom line
We all know that there are huge problems facing the UK and rest of the world. These problems cannot be solved by governments alone, and yet so few companies take their responsibilities beyond the bottom-line seriously. CSR remains a box-ticking exercise for most. This is simply no longer good enough - we need companies built on values that truly drive their actions, and that scale their social and environmental impact along with their bottom-line growth.
Surround yourself with the right people
There were people of all shapes and sizes, backgrounds and areas expertise at Do. What bound us together was our desire to contribute, our open minds and our passion to keep learning. Surrounded by people like this, anything is possible.
The location of Do was a huge part of the whole experience. There is simply no way that the vent would be the same run in a hotel or conference centre. The shared experience of camping, eating and drinking beer together by the light of fire-pits lifted the whole event from the simply amazing to the truly magical.
Big problems can be solved by small solutions
Our groups were all set big issues to address - lack of housing in the UK, kids not spending enough time outside, lack of jobs for young people in rural areas. Without exception each group made progress in developing a solution that would help solve the issue. There were no magic cures here, just realistic, practical and imaginative solutions that would help. With enough of these, we can make real progress in solving these huge problems, step by step.
Understanding the 'why' is as important as the 'what'
People buy from people. They need to understand what you stand for, and why your are doing what you are doing. Your values and motivations are at least as important as what you're doing, and allow you to build genuine connections with all your stakeholders.
You can do a lot in three days!
In the space of three days the 80 delegates heard talks from 21 inspirational people (ranging from teachers and chefs to inventors, designers and entrepreneurs), started 8 ventures (3 of which got funded) and raised £40k in an auction for the new Do School. There was time for plenty of socializing, but not much time for sleep….a short period of focused time can go a long way!
The combination of place, people and time make this a truly special event, and one that will always live with me.
Time to start Doing.
My top speaker quotes
- "navigate with your values" - Andy Middleton
- "think better not bigger" - Owen Rogers
- "sell your pursuit, not your product" - Collyn Ahart
- "be humble - your brand will never be as important as the culture it's a part of" - Collyn Ahart
- "making things is messy" - Mark Boulton
- "the main thing is to keep the main thing the main thing" - Michael Acton Smith
- "ask for forgiveness, not permission" - Michael Acton Smith
- "do something you love with people you love" - Adil Abrar
- "the character of your company is in the mind of the consumer" - Tim Little
- "think big, stay humble" - Jenny Fielding
- "people don't buy what you do, it's why you do it" - Amy-Jo Martin
- "get comfortable with being uncomfortable" - Amy-Jo Martin
- "no-one has all the answers" - Damon Collins
- "it's all about vision, focus and people" - Damon Collins
- "find something you love enough to spend 10 years on it. This is your market" - Kathryn Parsons
- "make work feel like play" - Zach Klein
- "build the company you wouldn't sell" - Zach Klein