For several years I have been studying design thinking and creativity. Much of this material has found its way into the classes I teach. As a result of this work I now believe that design thinking is the best front end process to develop a business concept. I couple it with "business model" to complete the development of a new business.
One issue that has troubled me for about two years is Einstein's comment that "he visualized the theory of relativity before he worked out the formula". Until today I could not understand how one thought visually. Turns out that visual thinking uses the images as metaphors and metaphor is well known to be the highest form of thinking (that produces creativity).
This new understanding came from this superb article, "Picasso and Einstein Got the Picture". If you are interested to understand higher level thinking, read and re-read the article. The article also provides the basis to understand the relationship between mathematics, music and art (another theme I have been trying to understand for a long time.)
The new theme I will be pondering is whether the use of metaphor in thinking can be taught. If math were taught visually I think that might be a good first step. We will see where this goes. Stay tuned for the next 2-3 years to see the answer. Usually takes that long to find a good answer to a question like this one.
I think it is debatable whether the best management thinkers today are at Santa Fe Institute (SFI) or the U.S. Army. Both groups share at least one common interest—complexity--as contrasted with the complicated. SFI's approach to complexity tends to focus on advanced mathematics. The U.S. Army's approach involves design thinking and is comparatively more understandable. Today's post comes from The U.S. Army Marine Corps Counterinsurgency Field Manual via the Farnam Street blog.
When should one plan? Much less often than you think. I am not advocating one go mindlessly through life, although it may be less stressful, but rather that one use alternatives to planning. A quote from the Field Manual:
"Planning applies established procedures to solve a largely understood problem within an accepted framework. Design inquires into the nature of a problem to conceive a framework for solving that problem. In general, planning is problem solving, while design is problem setting.Where planning focuses on generating a plan—a series of executable actions—design focuses on learning about the nature of an unfamiliar problem." (My emphasis)
Planning, a series of executable actions, applies in situations that are deterministic and likely to be expressible in numbers. Sales forecasting, architecture, engineering are some disciplines that are largely deterministic. Much larger are the domains that do not lend themselves to mathematical approaches, such as most things that involve politics, emotion and the arts. In these areas, design thinking is one peferred approach.
If we consider managing a business, perhaps the startup effort to find product/market fit lends itself more to design thinking. Maybe growing a business from $30-100 million in annual revenue is more of a planning exercise, until you need to revamp a product, react to a monster competitor entering the market or adjust for a law change (think Uber). Actually most of the events affecting customers or products are not handled by planning. This type of event is not deterministic in nature. Design thinking and framing the problem correctly are a better approach, which is why you can plan less.
"A Scaling Playbook for Entrepreneurs: Hiring for Growth" is a good article on the different stages of building a company and the type of people that are required at each stage to be successful. The important point in the article is that companies go through stages based on annual revenue and a different type of executive is needed for each stage. What the article does not discuss is how the CEO needs to change at each stage.
Stage 1, $0-10 million. The CEO needs to learn to trust people. In order to do this, one needs to learn to accept the smaller mistakes that don't put you out of business. Sales/traction, customer service and product development are important. In everything else mistakes are inconsequential. Also, learn to use control systems to monitor projects, deadlines and deliverables. (Capital raising is a CEO responsibility.)
Stage 2, $10-99 million. The CEO needs to learn to successfully delegate to managers. He should also be leading the development of more sophisticated KPI and reporting systems to understand the business at the level of individual managers.
Stage 3 $100+. The CEO needs to led the transition of the company to a plan driven organization. Hopefully you had some plan(s) before the company reached $100 million, but now the detailed plan is a necessity in order to communicate objectives, detail timing and properly estimate the capital required. A budget and a 3-year plan are advisable.
Note: I believe the stages based on revenue are:
$0-1 million (proof of concept)
$1-3 million (commercialization)
$3-10 million (scaling)
$10-30 million (delegating)
$30-100 million (management process)
$100-300 million (planning)
>$300 million
I used the other author's stages to match the referenced article.
Last December I wrote a post, "Good Question: What Good is Wall Street". The post generated quite a lot of discussion but not in the comments. The theme of the post was:
"Banks went astray when they diverted so much capital to support trading schemes in the new derivatives....., which was not part of their original mandate as utilities."
Much discussion circulated around the use of the word "utility" and their "mandate to distribute capital".
Now it is one year later, December 2014. What has Washington learned? Maybe the better question is how should Washington be thinking about banking regulation or perhaps how do we better regulate derivatives. This quote from political economist William Tabb is insightful.
“Technological revolutions and political upheavals condition economic possibilities, which then become the givens for sustained periods of seeming stability in which regulatory regimes designed for the conditions of the social structure of accumulation of the era lend a semblance of orderly progress. These institutional forms, appropriate to one stage of development, become a drag on the development of new forces and emergent relations of production. The vitality of market forces create in their wake social problems which, when they become severe enough need to be addressed through spirited struggle out of which new rules, regulations, and institutions form. [My bold emphasis]
A bit of a leap, but I think the crisis of 2008 shows us that in finance we can no longer regulate institutions and must instead regulate financial instruments such as derivatives. Regulation of banks proved inadequate in part because so many of the key market participants were not banks or regulated by the federal government. Now if we no longer regulate banks as the means to control the financial system, why cannot anybody offer deposits, loans, insurance etc. Put $100 million on deposit with a depository, pass a background check and you can be a "bank", an "insurance" company or a mortgage lender. We could use the Bitcoin infrastructure to record transactions, document margin deposits, etc. Loan to equity ratios, derivatives outstanding to equity ratios, return on equity calculations and similar financial reports would serve as the control mechanism. Such an approach to regulation, based on assets, equity capital and profitability would provide the regulatory control, except Bitcoin would be calculating daily ratios and temporarily shutting down businesses that exceeded their permitted ratios. All transactions would be required to be done on Bitcoin or a similar system exclusively. Regulations would have to be simple enough that computers could calculate ratios, a big improvement over the current system. Asset quality would not be regulated but rather would be "managed" by the market.
The big debate would become how much capital does one have to reserve for a particular financial instrument. Maybe we just say, if it is not a debt or equity instrument, then it is a derivative/insurance product and use three reserve requirements. For example when you strip a mortgage, the principal would be classed as a debt but the interest stream would not be a loan and therefore subject to derivative/insurance reserve requirements.
This scenario might appear fanciful. As soon as the market players start trading outside the system of government regulation my scenario looks more attractive. IT technology is transforming how financial markets work and it is time to take a completely new look at regulation.
Note: The Tabb quotation is from Complexity and the Economy by Brian Arthur. Excellent book.
I bought my first cellphone in 1984, the year the "Motorola brick" was released (see photo above). I might still be using it, but there was no roaming in Asia back then. So I used a different, smaller phone in Asia and updated it every time my secretary told me the phone was too old. (She explained very slowly that my image was affected by my phone choice.) Over the years I have found several devices noteworthy:
Palm Pilot
Blackberry with voice
Samsung Note
The first two devices I bought before they were available. I really liked the Note at the CES show in 2011, but the OS and apps were clunky so I did not buy it. I bought an iPhone 4 instead (and retired a version of the Blackberry phone that I had carried since 2002).
In October this year I replaced the aging iPhone 4 with an iPhone 6+. I knew the size would not be a problem because I had spent time with the Note. The phone's best feature is the battery life. I get two days of usage before I need to re-charge. I also like the larger icons on the home page(s), which makes it easier to hit the one you want.
There is one other benefit to the 6+ phone. Since I bought the phone I have not used my iPad once. Not once. Reading on the 6+ is very nice and that was my primary use of the iPad (I don't watch movies on computers.) Using the 6+ means I can carry one less device and charger around. If I could attach a keyboard to my 6+, I would not need a laptop (except maybe when doing spreadsheets).
In summary, the 6+ is a great improvement in the iPhone product line.
"The Emerging Architecture Of Internet Applications" lays the ground work for the future elimination of governments and corporations. May take awhile but an attractive idea. Make sure to read all the referenced articles if you think about a new world order.
"It's Not the End of Apps". Excellent article about the future direction of apps, notification and UI.
From Google+: What did the turkey say to the computer? Google, Google. I hope this was written by someone in marketing at Google :)
The Enterprise Adapts (And That's How It Should Be)
We Are A Collection of Our Experiences
You Have To Make Time For Yourself
Well worth reading in detail, especially if you are approaching forty. Of course the article got me thinking about the big takeaways for me from the last five years. My findings:
Do not deal with organizations that do not put people first. For example, most governments and certain educational institutions, such as municipal public schools, do not focus on serving their real constituency. They focus on re-election, test taking, union voting blocks, etc. This failure occurs for the simple fact that the organizations have misguided priorities. My confidence in the private sector increases every year.
Work on the large problems, what some would call the"impossible" problems or the "wicked" problems. As a friend at MIT said, "those are the only ones [problems] worth working on". Takes no more effort to solve big problems than small problems. Same 100 hours per week.
People prefer to learn from each other rather than teachers; teachers should just be moderators that help guide the discussion to the meaningful conclusions. Also effective is to have the students teach the subject. They easily personalize what they teach as an effective pedagogical device. A hat tip to Babson for this lesson.
Fear shapes our lives (for those that think they have something to lose). Whether it be launching a new business, romance, applying to Harvard, or changing jobs or careers, fear shapes major decisions for many people. Usually recognizing the problem is the hard part, but not in the case of fear. Taking positive action, the solution, is the hard part usually because fears come in groups with multiple hidden fears. The fewer your fears the more successful you likely are in most aspects of life. Note: if you have nothing to lose, you have few fears.
Enjoy every day! Last month I learned this most important lesson. It was the third time to have a chance to learn this lesson. I have enjoyed many, many days in my life, but now I work to have enjoyment in every day.
In the next five years I would like to learn:
That capitalism is widely considered to be moral
That leadership always puts mission ahead of self-interest
That we no longer need to talk about "social" entrepreneurship
