Billy's Forty-Third Law: It is important to be a bit ruthless and a touch paranoid

Chances are good there is a psychopath on your management team.

Gardiner Morse, Harvard Business Review

Most of the entrepreneurs I have met throughout the years are great people.  Working with entrepreneurs is the one of the highlights of a career working with business owners. Whether they are pre-start ups, or successful, long term businesses successful entrepreneurs are generally enthusiastic, positive and forward looking people.  There are also two 'negative' characteristics possessed by many successful owners.  In the right measure, these characteristics form an integral part of the entrepreneurial success persona.

As you know I am a geek.  I like useless information, spreadsheets and science fiction.  I recently watched an old episode of Star Trek  called "The Enemy Within." A transporter malfunction splits Captain Kirk into two halves: one meek and indecisive, the other violent and ill tempered. The ‘good’ captain, was indecisive and unsure of himself while the ‘bad’ captain was violent and selfish.    The social premise (and there were several in Star Trek) is that we need both halves of ourselves to survive.  We need both the caring, thinking human being and the cunning violent beast. 

Ruthlessness

This is a ruthless world, and one must be ruthless to cope with it.

Charlie Chaplin

Most of the successful people I know have a trace of ruthlessness.  At the heart of ruthlessness is the ability to make hard, fast decisions and execute them quickly.  Sometimes, people get hurt when these decisions are made.  Decisions to fire people is a prime example.  We have talked about the importance of firing the wrong people in the ninth law The Dangers of Settling.  On paper (or even on a computer screen) this is easy.  In reality firing people is difficult for most people.  A fellow with whom I worked once joked, “The first time you fire somebody is hard…after that you can start to enjoy it.”

I remember my first fire.  My boss was so concerned that he called me to make sure that I was OK.  (I am not very ruthless.)  Ruthlessness is not confined to human resources.  One of my clients went through a ‘demarketing’ program. He systematically went through his customer list and dropped small and unprofitable customers.  The reactions were amazing.  Some of the customers were really upset, even though he found alternative suppliers for the former clients. He had to be ruthless.  Some of these customers were costing the company money and others were tying up valuable productive capacity with low margin, low volume jobs. 
Sometimes we have to act way outside of our own characters. We have to act in a manner not consistent with our nature.  But that little bit of ruthlessness helps the timely execution of those unpleasant decisions all entrepreneurs make from time to time.

Paranoia

Only the paranoid survive.

Andy Grove, Former Intel CEO

 

I may not be ruthless, but I am paranoid.  I have always had a knack for picking apart arguments.  (I have often thought that my ideal job would be leader of the opposition, although the frightening part would be the prospect of becoming premier.) That being said, as someone who has trained and coached thousands of people through the business planning process, I am a great believer that the business plan in a start-up business must prove, beyond a reasonable doubt, which the proposed business concept will work.  Some call me paranoid, and others the voice or reason.
Now some may think that this is not paranoia, but rather extreme cautiousness.  OK…it really borders on extreme pessimism.  There is something about paranoia, assuming that your competition is ‘out to get you’ that resonates with many entrepreneurs.

Just as too much ruthlessness can make you too mean for business, too much paranoia can paralyze you.  You want to have just enough paranoia to keep you on your toes, and prevent you from getting too complacent.  In business, it a safe bet that there is someone out there who wants to steal your customers.  There is another company looking to gain on you through better products, better service or more cost effective processes.  A am sure that Blockbuster never even gave Netflix a second thought.  After all, they sent DVDs by mail!  Now, Blockbuster is broke, and Netflix is huge.  So much for a lack of paranoia. (As a friend of mine once said, “Even paranoids have real enemies.”)

The Entrepreneurial Nature

We entrepreneurs are a strange breed to begin with.  I am a third generation self-employed.   My great-grandfather was a blacksmith and farmer.  My grandfather was a wheat farmer in Alberta.  My dad was a self-employed Electrical Engineer and I am a business trainer and consultant and my brother is a self-employed contractor.  My son, is in the film and television business, where everyone is considered self-employed.   This demonstrates beyond any reasonable doubt that insanity is truly genetic.

Billy’s Forty-Second Law: Learn to tell your story

To influence people, you must learn to tell your story.  Telling your story, warts and all, makes you human and more likeable.  Structuring your story makes you more understandable.

Telling stories is important, and at the same time, it is difficult.  I am working with a client who was asked to put together the story of an investment in a subsidiary company which, unfortunately, went badly.  The reason was for a financier to understand what happened, and how this decision affected the company.  Therefore, my client began to write out his story.  He spent hours trying to unravel exactly what happened, the mistakes he made, where he made them and what the implications of each step in the process.  The result remained an incomplete story filled with missing parts.

Writing is difficult.  Putting your story together is very difficult, and yet is an important communications skill.  I was working with a different client and we were trying to put together a ‘good news’ story based on a recent success the company had with a new client.  We worked together for about an hour to develop a very simple narrative.

Stories are important.  Stories are the things we are made of, both corporately and individually.  There are stories which resonate.  The Horatio Alger…rags to riches story is one of the archetypical good news stories, especially in America. The Steve Jobs narrative is part of what makes the Apple Story.  The Bill Gates rich to richer is not nearly as dramatic. 

Storytelling is ancient…more ancient than writing itself. Stories and myths connect us.  Learning to control the narrative, to make it interesting and to captivate the audience is truly important.  This is the presentation part of the narrative. 

I used to teach presentation skills.  A good presentation has three components…the story, the structure and the delivery. The story is creative, delivery is technique, but anyone can use make their point.  I envision stories to be a bit like a flower.  You start in the middle, and introduce the theme of the story.  Lay out what you plan to tell people and the context in which you plan to tell it.  Then go into your first point…ensuring that you leave the theme, and then return to it. Once you pass through the theme, you can make your second point and so on.  The three part presentation is easy for an audience to remember.  

This structured, whether in a spoken or written form allows the audience to track and understand your story.  This makes is easier to influence, inform and call a client to action.

Billy's Forty-First Law: Sometimes it’s smart not to follow the crowd

If everybody else jumped off the Lions Gate Bridge, would you jump off the Lions Gate Bridge?  (It all depends on the tide and wind conditions)

Sunday February 1, 2015 was Super Bowl Sunday. They anticipate that over 115 million people watched the game.  This does not include the millions watching in pubs and restaurants all across the US, Canada and throughout the world.  None of these people was at the Dubh Linn Gate pub in Whistler BC.  The manager of the Dubh Linn decided that the Pub would remain Super Bowl Free for the entire afternoon.  This despite the huge numbers of Seahawks fans who routinely visit Whistler. How can it be, that a pub could make such a decision?  Are these people crazy or is there something that we are missing. 

Firstly, the pub is not a sports bar.  There are televisions and they will have sports playing without the sound on but this is an Irish Pub.  The Pub’s house band has it in their contract that the televisions be turned off when they are playing. 

Secondly, there were plenty of places in the resort showing the game.  These places were packed with football fans, and those wondering what this spectacle was all about.

So what possessed the manager of a pub to keep the game off during the biggest annual sporting event in the world?  The answer is simple…money. The general manager analysed the difference between Super Bowl Sunday and other Sunday’s during ski season.  She noted that although the pub was full, revenue was actually lower than a typical Sunday.

The problem with the Superbowl, from the pub’s point of view, is that people park.  Some fans were in the pubs at 11:00 AM for a 3:00 PM kickoff and a 6:00 PM end.  This may mean lots of drinking, however; it is less than turning over the seats in the restaurant with skiers on a normal Sunday.  Although the pubs were filled, even the most hard core football fan slows down his, or her, rate of consumption during that long a period.  People also eat less.  They may order snacks, however; they do not order meals. 

At the same time, staffing levels ramp up.  There are more people, and more people who have consumed a bit too much.  This, in turn, increases the staffing costs to the pub.  One local establishment, a bar serving a younger crowd, actually had a cover charge for both the NFC final and the Super Bowl.  The reason, the Seattle factor. (Not only are people from Seattle fans, but the Seahawks are Vancouver’s adopted team.)

So on the Monday after the game, I asked one of the managers what happened with the Great Super Bowl Experiment.  He told me that the patio was full.  This was the usual après ski crowd coming in after a day on the slopes.  He also told me that inside the pub was very slow.  When they compared revenue this year to revenue on Super Bowl Sunday last year, and remember that Seattle was in both games, the revenue was higher without the Super Bowl. Smaller crowds, with faster turnover, provided higher revenue that large crowds with lower revenue.

There are times when good business tactics are counter intuitive.  The decision not to play the Super Bowl at the pub was bold, yet in this case it seems to have worked.  It is great to see an environment analysis, experimentation and results are an important part of the culture. 

This experiment was a success.  It is still important to experiment, and celebrate experiments that are not successful...even down right failures.  To quote business writer Louis E. Boone:

Don't fear failure so much that you refuse to try new things.  The saddest summary of a life contains three descriptions...could have...might have and should have.

 

 

Billy's Fortieth Law: Belief is stronger than logic.

One person with a belief is equal to ninety-nine who have only interests.

John Stuart Mill

I consider myself to be a rational and open minded individual.  I love to investigate and to make rational decisions based on the current facts available.  I see many people who have no rationale for their beliefs, and often use false logic to come to the wildest of conclusions.  Some of these are harmless, and others are potentially dangerous. 

According to VOX,” Americans ages 18 to 29 are more likely to oppose mandatory childhood vaccination and say vaccines can cause autism, according to a new survey.”  This runs against the majority of scientific belief.  But here is my point.  Another study demonstrated that when logical arguments are applied to these beliefs, those holding the belief hold it even more strongly.

So, what has this got to do with business…you may ask?  Understanding your customers’ beliefs is an essential part of consumer psychology and behaviour. Understanding your employees’ beliefs forms an important part of your corporate culture and customer experience. Unfortunately, belief is not rational.  People often feel that the truth shouldn’t get in the way of promoting their own beliefs. 

Suppose you lead an enterprise, and the employees believes “the company does not care about them, they just care about profits.”  The belief affects behaviour.  Your employees might take the following stand:  The Company doesn’t care about me, therefore I needn’t care about the company, the customers or my performance.  If you point out the employees, just how good they have it.  (Or as one boss of mine told me “You’re lucky to have a job!”) You will not change the belief, you may increase the strength of the belief and worsen behaviour.

In marketing, belief has a huge impact on consumer decision and the image your enterprise reflects to the world.  Changing beliefs is tough.  Rational arguments are rarely effective, and as I pointed out earlier, can make positions recalcitrant. 

When internally held beliefs are hurting your company, determine why people believe them.  Acknowledge the problem, and clarify any misunderstandings or down right lies.  Don’t over sell.  If people don’t feel valued, ask them why, and ask them to provide examples.  There may be some veracity in their point of view. 

The public is trickier.  Some people won’t change their minds.  All you can do is attempt to engage fairly and rationally, without being argumentative.  In the example of vaccinations, if I were a pharmaceutical company I would point out the ongoing nature of review and evaluation of my products.  This does not contradict the possibility of danger, but ensures the company is vigilant to such possibilities.  The worst thing to do is to make statements about the testing.  It only looks like justification and not explanation. 

It amazes me how often McDonalds is the target for everything from obesity to labour conditions.  In Vancouver a McDonalds was targeted to protest a "training wage".  This was a rate lower than the minimum wage to encourage employers to hire and provide experience to those without work experience. The McDonalds in question didn't even use the training wage. When this was pointed out to the activists in question, they were unapologetic saying that it didn't matter whether they were using it or not...they had the right to protest. 

To quote Taylor Swift. “Haters gonna hate, hate, hate, hate.”  Unfortunately, it is difficult in the public arena to shake it off.

Belief is strong…faith is strong.  Whether belief in God, an economic system, a company or your local hockey team, peoples strongly held beliefs invoke strong reactions.  These are a reality every business owner and manager must understand and accept.

Billy’s Thirty-Ninth Law: Stretching is Important

The biggest risk is not taking any risk…In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.

·       Mark Zuckerberg

It is important to stretch ourselves both entrepreneurially and personally.   This law actually comes via my High School Wrestling coach, Sam Scorda.  I spent my senior year with a wrestling partner who was not nearly as good as was I.  Coach told me time after time that if I didn’t practice against someone who was better than I was then I would never improve.  It was so much easier wrestling against Collins.  I won every drill in practice, but I didn't win every match in meets.  I learned this lesson after high school.  When I played soccer as an adult…I made it a point to always mark the best player on my team during practice. I got beat often, as some of my team mates were former collegiate soccer players.  However, I improved my game…specifically my defensive skills.  I wasn’t necessarily very good…but I did improve my game.

It is the same in business.  Not only do we have to take business risks to find new opportunities, we have to take ‘skill risks’.  This is where we try to learn something new or try something new.  The reason is that we need to learn how to face disruption. 

Many years ago, I taught a three-hour ‘Time Management’ workshop.  The premise of my program was that poor time management practices came from poor habits in one of eight different areas.  In order to change our time efficacy, we must determine which areas created the problems, and then consciously change our behaviour.  Disrupting our habits was the only way to affect change. 

In times of stress, we revert to habit.  This is true in all aspects of our lives.  Some habits are good…such as getting into the habit of exercising or reading for an hour every day.  Even then, our good habits can become…habitual.  I am very habit oriented when it comes to sports.  When I ski…I usually ski the same runs every outing.  I know the runs, I like the runs, and I know them well.  I know where to hold back and where I can really let those skis run.  The problem is that it is hard to improve when you are doing the same runs.  Different runs, especially those with different terrains stretch our skills and abilities. 

To bring this back to business, to change our business we must begin by changing ourselves.  If we do not, we run the risk of missing potential opportunities.  We also run the risk of becoming obsolete.  (For those of us in our later fifties, this is especially difficult as we know our strengths and weaknesses and we know what we like and dislike.)  To thrive is to change and to change we must grow, improve and disrupt ourselves.

Change is hard.  The older we get, the harder it becomes.  Lee Kun-hee of Samsung once famously said, "Change everything except your wife and kids".  This is the kind of flexibility we need in today’s rapidly changing business world.

Billy’s Thirty-Eighth Law: Every part of the process is important and everyone deserves respect.

The 737, which is made up of 367,000 parts, is assembled at a factory in Renton, Wash., south of Seattle. Boeing delivered 372 of the single-aisle 737s last year — a little more than one a day.

·       NBC News

I was in the pub just the other day, when one of my fellow Old Goats (See the the importance of belonging), a former pilot, was talking about the importance of his profession.  His son-in-law retorted, “If it wasn’t for the tool and die maker (his profession), you wouldn’t have a plane to fly!”

The conversation got me to thinking of the complexity of roles in modern businesses.  There are a myriad of different tasks performed by a number of different people in a numerous of different roles.  In our society, we often value one role over the person performing the role.  In business this is incredibly stupid! 

Think about your own organization.  How many people does it take to get your product / service to your customers?  How many people does it take to run your business?  Each person, whether an employee or a sub-contractor, plays a role in your business.  My business is simple…in fact when I started out I did everything.  I sold myself, wrote the workshop materials, kept the books and, since I was still a proprietorship, I even did my own income taxes.  The only sub-contractor I had was Staples Printing Centre.  

For most businesses and organizations this is not the case.  It amazes me how many people open, and subsequently close restaurants.  On the surface, restaurants seem simple.  By food, mark it up, prepare it and sell it.  In reality a restaurant is a combination of custom manufacturing, high levels of customer care and a highly competitive industry.  Staff turnover is also high.   Successful restaurateurs are strong in marketing, manufacturing (cooking) and human resources.   Restaurants are tough.  Those who run successful restaurants are superb business managers.  (There is an old saying in the restaurant business that 1/3^rd of your revenue goes to food, 1/3^rd goes to staff, 1/3^rd goes to overheads and the rest is profit!)

The point, and there is a point, is to remember those in critical, yet traditionally undervalued positions in any organization.  Doctors and nurses are important.  So are ward clerks.  Teachers and principals are important.  So is the school custodian.  We often respect highly paid roles more than those at the other end of the scale.  Everyone deserves respect.  If there is a position in your organization, commercial or non-commercial, that is unnecessary then it should not exist to begin with.  When a position exists, that role contributes to the organization.  So does the individual performing that role.

I once noticed that those who had the worst jobs were often the worst paid and the worst treated.  (I have often thought that those with the worst jobs should get the higher pay... but that's never going to happen!) Sometimes, nasty jobs have to be done.  Sometimes, pay is a function of ability to pay. I understand all of that.  That said there is never an excuse to treat people badly.  So to all of you retail clerks, security guards, dishwashers, janitors and cleaners… you are important.  Your role is important and you deserve respect.   To all you owners and managers out there… remember it!

Billy's Thirty-seventh Law: The importance of urgency...the effect of scarcity

 Everything I learned about marketing I learned by watching infomercials and direct marketing ads.

The first law about pricing was about the importance of choice.  The second speaks of urgency.  Urgency forces the brain away from the timely rational and towards the impulsive emotional.  This is an important part of all buying behaviour, and has a special effect on price sensitivity. 

When we panic, our brain chemistry changes.  This reaction, part of the fight of flight response, moves our brain into a reactive mode.  This is crucial when confronted with say…a sabre toothed tiger.  It is not so important when the announcer tells us that this is a ‘Limited time offer…quantities are limited…call that toll free number in the next five minutes.  The same brain chemistry kicks in…all be it in a limited way. We react rather than acting rationally. 

The twin of urgency is scarcity.  The laws of supply and demand tell us that where there is high demand, and limited supply, prices begin to increase.  In a great podcast from Planet Money, from National Public Radio in the US there was a great story on the reselling of Nike sneakers.  Those who purchase limited edition shoes early can often double or triple their money at resale. (I have referenced the website below…check it out it is very interesting.)

http://fivethirtyeight.com/features/you-see-sneakers-these-guys-see-hundreds-of-millions-in-resale-profit/

During the 2010 Olympic Winter Games, tickets to the Gold Medal between Canada and the USA sold for thousands of dollars, due to the high demand (the host nation in the gold medal match) and limited supply.

Sometimes, urgency and scarcity just happen.  Sometimes we can work to make them happen.  Limited editions of prints are an attempt to limit supply.  Time limited availability creates urgency.  You can use these techniques to influence demand or supply and therefore move your prices higher. 

Trying to create scarcity can backfire.  In anticipation of demand for the 2015 World Junior Hockey Championships, the Montreal organizers raised ticket prices to a rate much higher than the NHL Canadiens.  The result was empty seats in the stands…taking away for the overall hockey experience.

Scarcity and urgency affect consumer behaviour and price sensitivity.  Creating, or at least understanding these two pillars of your customers' mind will help you develop a more robust pricing policy.

Happy New Years.  I look forward to more posts as the year progresses.  This is a great time for forward planning, change and business development.