The Two Faces of Facebook

March 31, 2009

Facebook is throwing Mom and Dad under the bus. As a recent  NYT article chronicled, many of Facebook’s older users are in open rebellion against the service’s new Twitter-esque functionality that allows customers to broadcast every impulsive thought, feeling and lunch order in a real-time stream of sometimes trivial updates. This works for the kiddos, a generation that’s been putting camcorders in their bedrooms since the early nineties. The rest of us have some dignity:

“The changes just feel very juvenile,” Ms. Rabban says. “It’s just not addressing the needs of my generation and my peers. In my circle, everyone is pretty devastated about it.

Should Facebook care? Not necessarily. The company now has a classic service challenge — diverse customer segments that have outgrown a single service model. Facebook’s younger users value things the older ones find distasteful.  The company had to choose between satisfying one group and annoying the other, or trying some kind of compromise that would frustrate both.  It’s encouraging that Facebook resisted the temptation to do the latter. Most companies end up chasing the dream of making everyone happy, at the cost of a slow slide from excellence to mediocrity in the experience of their most valuable customers.

Ironically, a bit of customer “devastation” may be an encouraging sign. It may mean a company is making a clear strategic bet — in this case, on younger, more tech-savvy users.  Facebook may be able to find a way to graciously serve both segments eventually, but it will have to invest in at least the appearance of different service models.  Short of that, annoying the adults may be a terrific strategy.

A Recession-Proof Business Model (Stop Provoking Your Customers)

March 26, 2009

In a recent WSJ article, an airline analyst was quoted as saying that when everyone else is charging for formerly-free services such as pillows, it didn’t make sense that Southwest wasn’t.  I couldn’t help but think that these analysts might be part of the reason the industry is in such dire straits.

Southwest’s CEO responded that “adding fees is no way to grow an airline — customers hate that stuff.” He’s right. Despite the brave, new economy in which we find ourselves, a few things are still true. One is that it’s hard to sell things to customers who hate you. To state the obvious, this is particularly true when when they have real alternatives to whatever you’re selling. Less obvious, it seems, to companies that think their customers have no choice but to suck up the pain, is that if your customers hate you enough, those very alternatives will show up eventually.

When an industry racks up serious customer pain points — think lock-in periods for cell phones — it’s an invitation for competitors to enter and win by championing the customer.  Usually, this changes the game for everyone.  Southwest is rare in that most of its incumbent competitors (and the analysts who egg them on) have yet to internalize the full source of the company’s advantage. 

Southwest gets a lot of things right. One of those things is its aggressive commitment to meet its customers’ core needs, including low fares, direct flights, and flight schedules that optimize on frequency and flexibility. Another is its ability to meet those needs with enthusiasm and dignity. The fact that it’s pulled it off for the last 30 years while its competitors descended into toxic relationships with employees, unions, shareholders and customers helps explain why Southwest consistently delivers superior financial performance.

These are tough times. My best advice is to ignore the equivalent of the airline analyst in your own life and resist the temptation to try to survive at your customers expense. Let Southwest’s resilience in one of the world’s toughest industries be your inspiration. If your goal is to be around to serve your customers when the economy recovers, a good place to start is to stop provoking them.

Your People Are Not Equal

March 23, 2009

The Times recently did a great interview with Anne Mulcahy, chairwoman and chief executive of Xerox. Mulcahy started her career in sales, but then took an unconventional path to the corner office through the HR department, eventually running human resources for Xerox worldwide. She led the company from losing $300 million in 2002 to making over $1 billion by 2006.

The interview is worth reading in full, and a few comments stood out as particularly useful insights.

Mulcahy speaks to the idea of overvaluing “fairness” in organizations – and the price it can exact from culture and performance. Fairness has earned the right to be a cherished value, but it is often misinterpreted.  When it shows up as similar treatment for all people, regardless of their contribution, it undermines your ability to unleash a true meritocracy:

Not everybody is created equal, and it’s important for companies to identify those high potentials and treat them differently, accelerate their development and pay them more. That process is so incredibly important to developing first-class leadership in a company…

Companies get confused with egalitarian processes that they think are the fairest, and that is not what companies need. Companies need to be very selective about identifying talent and investing in those leaders of the future.

And yet most organizations don’t have good systems for telling people where they truly stand. From Mulcahy’s perspective, this is the real definition of institutional fairness – giving people clear signals about their value.  It may also be at the root of Xerox’s exceptional performance:

You discover quickly how little honest feedback people get in companies, and how important it is for people to have a sense of candid assessment. It became very much a mantra for me, to kind of influence a culture that assessed people accurately and really dealt with people fairly.

This type of system sends a more powerful signal, as well.  By paying close attention to the performance of individuals — by showing your people that you care enough to judge them accurately — you’re  making it crystal clear that what they do matters in a very serious way. You’re affirming the power of individuals to shape the company’s future, which increases the chance that they will. As Mulcahy notes:

There’s nothing quite as powerful as people feeling they can have impact and make a difference.

Chief Culture Officer

March 20, 2009

In an interview for a recent Business Week article, Zappos CEO Tony Hsieh described the source of the company’s exceptional performance and increasingly legendary customer service:

Ask Hsieh to describe his secret sauce, and he’ll tell you that much of Zappos’ success comes down to the company’s culture and the unusual amount of openness he encourages among employees, vendors, and other businesses…

If we get the culture right, most of the other stuff, like the brand and the customer service, will just happen. With most companies, as they grow the culture goes downhill. We want the culture to grow stronger and stronger as we grow.

Hsieh understands that another name for CEO is Chief Culture Officer. When culture is built and protected deliberately by the CEO — as it is by Hsieh, who embodies the values he wants Zappos to compete on, including transparency and excellence — culture sets the stage for a company to thrive.  As Steve Kaufman, a dear friend and colleague who used to run Arrow Electronics, likes to say, “culture eats strategy for lunch.”

Culture drives the millions of invisible choices that aren’t covered in the strategic plan or employee handbook and would be silly if they were, norms and attitudes like unfailing respect for customers and  pride that’s linked to group performance. Culture manifests visibly too, of course, often by leaders who do whatever it takes to defend it. In Zappo’s case, this means that all new hires who complete the introductory training are offered $2,000 to walk away.  People who are the strongest fit with Zappo’s culture don’t take the money.

But culture is the strong, sensitive type. For all its power, it reacts strongly to neglect. When culture is not a high priority for CEOs — which is often the case — culture can lose its swagger, show up unevenly across business units, and quickly stop being a source of competitive advantage. In today’s economic climate where customer retention and customer value are increasingly vital, excellent service will be a differentiator.  Tony Hsieh is a powerful reminder of the role that culture and its stewards will play in that journey.

Building a Better Business Plan

March 18, 2009

I’m often asked for my feedback on business plans, and there’s a strong pattern in the advice I end up giving people. In general, entrepreneurs tend to gravitate towards two kinds of strategic opportunities — either they’re trying to improve on something that someone else is already doing, or they’re chasing a new idea.  If it’s the former, the path forward is relatively clear. It’s not easy, but it’s clear. For the most part, the challenge is to make sure you really can reliably deliver lower cost or better quality.

If it’s the latter, it’s a bit more complicated. Pursuing an open space in the competitive landscape requires close examination of the cause of the opening.  Is it that no one’s been as clever as you? Has no one else been able to see the opportunity and devise a good strategy to fill it? The answer may very well be yes, as Steve Jobs reminds those of us living an iLifestyle.

The alternative, however, is that the space is open because it’s not sustainable to close it. This is not an uncommon phenomenon. The classic example  is premium daycare.  Many people see a gap in the market for exquisitely high-end daycare services.  These are often entrepreneurial parents who have just finished surveying the options for their own children and are frustrated with the quality of their choices.  But after careful analysis, it becomes clear that high-end daycare costs about as much as a nanny.  There still might be a market for that type of offering — until the second child comes along.  For a nanny, the incremental cost of a second child is much lower than for a childcare facility, where an additional child essentially doubles the cost.

I don’t subscribe to the belief that there are no new ideas. But I do believe that many ideas that feel new have already been abandoned by other people for very good reasons. Many open spaces in the competitive landscape have earned the right to stay open.  A shortcut in the business planning process is to challenge its logic early on and ask yourself why other people haven’t taken advantage of the opportunity. Yes, they may not know as much as you do — and they may know even more.

Learning about Leadership from a Toddler

March 16, 2009


Two years ago I would have fled this post and its promise of saccharin-sweet musings. Be spontaneous! Get up when you fall! Own those green beans you’ve smeared on your face!

Becoming a parent is a transformational life change that no only really wants to hear about in detail. This is entirely justified. My child is not interesting to you, not in a capital “I” sense, and I have no illusions that he should be. The science shows that you’re genetically wired to smile at him, but that only buys me a few minutes, if that. And so I will try to make this quick.

My son is a magnificent boy, and learning to be his mother has been relentless and humbling and wonderful, for both expected and unexpected reasons, as is true with any child. The relentless and humbling parts have application beyond the parenting challenge, I think, which is why I’m plowing forward on this one.

Leadership, at its core, is about enabling the success of other people, which means helping people channel the best possible version of themselves. Pulling it off means learning to walk the walk –- learning to unleash that boldest, most courageous, most empathetic version of yourself. To lead is to model the behaviors you want your organization to adopt. Nothing will have more of an impact on your colleagues than demonstrating what it means to bring your best self to the office every day.

Parenting a toddler has taught me the cost of giving that version of me any time off. My son is paying constant attention. He is hanging on my language and choices for evidence of how to be in the world. My obligation is to match the intensity of his interest with an unflagging commitment to show him the way forward. And when I stumble on that path, when my best self is crowded out by impatience or exhaustion or anxiety, he is less likely to find his way. Period. The same dynamics apply to organizations.

I have no illusions that I won’t stumble. The version of me that deserves to be this boy’s mom or that woman’s manager will not always show up for the privilege. But my son has taught me the costs of those missteps, and that my job as a parent and leader is to do whatever it takes to minimize them. My task is to create the conditions for others to thrive –- which starts with the underslept, overcommitted woman in the Elmo mirror.

That’s Funny

March 13, 2009

“Funny,” at it’s core, describes some variance between what you expect to happen and what actually happens. A monkey is dressed like a baby. A prehistoric man has trouble buying car insurance. A prepubescent kid headlines a meeting of serious conservative thinkers. On some basic level, these things are funny.

Over the past few days, I’ve heard myself saying “that’s funny” more often than usual, despite the growing absurdity of our economic moment.  Even with the world upside down, I didn’t expect most of these things, which I’m deciding is a hopeful sign. Some facts still have the power to surprise:

  1. Sears has had an open CEO search for 13 months and is now soliciting people to apply for the job if they feel “up to the challenge.”  Apparently there is very little interest.
  2. Almost all of the top posts under Geithner at Treasury are still vacant — the Herald Tribune reports it’s because the White House has become so worried about potential tax problems that it has nominated only a handful of people. It’s hard to find more compelling motivation for a flat tax.
  3. Ryanair is considering charging passengers for use of its in-flight bathrooms.
  4. Michael Steele is pro-choice.
  5. Ryanair is also launching a new transatlantic service.  Bring your quarters. 
  6. David Brooks is using his extraordinary platform to attach meaning to Michele Obama’s arms, and has named them “Thunder” and “Lightening.”
  7. Ryanair is also pressuring pilots to fly with less fuel. Don’t assume the flotation device will be free. 
  8. After playing an active role in pushing plastic on America, American Express is paying some customers $300 to close their accounts and walk away.  
  9. Jack Welch calls the obsession with shareholder value the “dumbest idea in the world.” 
  10. Real estate may also be crashing in Second Life