When The Spin Stops

Reality bites.  It bites a lot harder when you avoid it through spin and hyperbole. 

 

The Wall Street Journal reported this week that Theranos CEO and majority owner Elizabeth Holmes is under threat of major government sanction including a personal multi-year ban from the lab testing industry.

Holmes, a darling of the “unicorn” hype machine and a manufactured pop culture executive with outstanding political connections, has given every indication over the past 6 months that she is dedicated to a culture of spin to keep her venture going.

One need only look at the preceding and succeeding headlines of the piling on media tempest to see the realities of a spin machine undergoing a slow-motion train wreck.

First, the hype focuses on Holmes herself–she has an interesting story, and she makes for good press: College dropout, new technology, black turtleneck, mysterious company.

This Woman Invented a Way to Run 30 Lab Tests on Only One Drop of Blood” – February 18, 2014

This CEO Is Out For Blood” – June 12, 2014

Then, there is an expose’ about how the company’s technology might not actually work.

Hot Startup Theranos Has Struggled With Its Blood-Test Technology” – October 16, 2015

That is followed by the righteous indignation of the company and its founder.

Elizabeth Holmes Slams Theranos Critics” – October 21, 2015

But then people start to get wise.

The Cautionary Tale of Theranos: Beware Runaway Stories” – November 15, 2015

And individuals start to question the overall honesty of the enterprise and its founders.

How Theranos Misled Me” – December 17, 2015

Could Theranos Go From Unicorn to Unicorpse?” January 28, 2016

Theranos Sounded Too Good To Be True And It is” – February 2, 2016

Study of Theranos Medical Tests Finds Irregular Results” – March 28, 2016

Theranos wasn’t forthcoming” – April 14, 2016

Finally, as was published this week, regulatory authorities come into the picture, and in the case of Theranos, it wasn’t pretty.  In a tersely worded letter, Centers for Medicare and Medicaid Services (CMS) officials basically told Theranos and Holmes that they are about to get the death penalty.

You can’t spin your way out of that one.  That’s when the spin stops.

So who cares about this?

Well, you should.  You probably work with people who aren’t exactly forthcoming about things that really matter.  You know them–they’re the ones who lead organizations by expounding on ethics but whose honesty and integrity are known to have more holes than Swiss cheese by those who have worked with them.

Those types have the cardinal virtue of likability, which ropes people in with narrative and story and can actually hold quite a portion of the world in thrall.  But narrative can’t overcome a lack of substance forever, and that is what the Theranos story shows.

The Theranos case also illustrates something more general.  Theranos is a high-profile, high-growth, “disruption”-oriented company.  Such companies come with a healthy dose of optimism because they are founded on the principle of swimming upstream.

But…there is a boundary in strategic thought that defines the difference between optimism and spin.  It’s the boundary between honesty and dishonesty and is usually defined by a few markers.

First is personality vs. performance – if you find that the focus of a business strategy is on the charisma and glibness of the organization’s leaders vs. actually confronting performance issues, you probably have a spin problem. A charismatic leader is a great thing, but it can’t be the only thing.

Second is story vs. strategy – if you find that the focus is constantly on getting your story straight vs. actually addressing the merits of the strategy, you probably have a spin problem. This includes an overweening focus on what not to show others (management, boards, investors, the press).  The more you have to artfully conceal–especially from fellow insiders–the more you are probably in the spin zone.

Finally is attacking vs. listening – If you find that your leaders, or the leaders you’ve hired, resort to the classic ad hominem approach when criticized, then you probably have a spin problem.  Somebody questions the numbers and suddenly becomes a “jerk.”  Somebody else brings up an issue with the logic of a strategy and is discredited as “academic.” Yet another person calls into question the sustainability of a company and simply isn’t around at the next meeting. They are attacked, whereas a sound culture listens and responds.  Elizabeth Holmes, in the case above, decided that it would be a good strategy to attack a two-time Pulitzer Prize winning journalist at the Wall Street Journal as publishing baseless trip.  There’s a certain arrogance in that.

These markers all form the boundary between basic optimism (a good thing) and basic spin (a bad thing). They all demarcate boundaries between healthy and sick cultures.

If you look at the Theranos case, you can see failure on all three markers.

What happens when you look at your own culture?  What about your own leadership style?  What side of the boundary are you on?

What happens to you when the spin stops?

It’s All Moneyball…

The search for value is the key to strategy.

 

Michael Lewis’s Moneyball never did provide the answer to the question of where value is in our own lives, but it certainly inspired us to look.

Remember Moneyball?

It was a book by Michael Lewis… a guy who has made a career out of taking mundane subjects (like bond trading, high frequency stock trading, left tackles, and baseball scouting) and making them imminently interesting by melding fantastic stories around the topics.  You may have recently seen one of his works come to the big screen in The Big Short.

Moneyball was Lewis’ take on the search for value and the need to avoid “conventional” wisdom…especially when one faces constraints that conventional thinkers do not.  the story was simple: The Oakland A’s were an anomaly.  They won more games than they were supposed to when their payroll was factored in.  That’s right… dollars in, wins out was considered to be the metric.  Why?  Because all scouts were assumed to be looking at the same components of talent: a traditional view of the “tools” that ballplayers had been evaluated on for years.

Only something happened…someone, somewhere realized that the value of a ballplayers in terms of the game itself wasn’t necessarily correlated with the old school way of looking at things.  Turns out that players who were unorthodox when measured by traditional metrics but really effective at doing things that got them on base more often were actually undervalued by those who scouted and paid ballplayers.

In other words, a key trait was undervalued in the market, and a team like the Oakland A’s that would focus on that trait could find valuable ballplayers with a lower pricetag.  That translated to wins for fewer dollars.

This insight is brilliant for anyone in business: When everybody else is paying for traits, it’s good to try to pay for results.

This is true for my friends who pay up for educational pedigrees that don’t translate to results.

It’s also true for my friends who go after market trends because they are “hot.”  Anytime there is a clear stampede to something, ask yourself why. Is there value left in the equation?

In a world of hype and conventional wisdom, have the patience to seek value.

What do you think?

Why I Don’t Believe In Recruiters

Recruiters are tools…on every level.

 

In case you haven’t noticed, I have a modest disdain for consultants and professionals who come from the “say anything” philosophy of life; I wrote on that here. Spin is a bad thing, confronting the elephants in the room is a good thing, and it’s really that simple.  In this case, I’m going to take it to a whole new level of hate, but that’s just in the spirit of keeping it real.

The title of this article is an homage of sorts to an aggressively atheist song by Art Alexakis of the band Everclear titled “Why I Don’t Believe in God.” In that lyric, Alexakis recounts scenes from a troubled childhood that sapped his ability to believe in anything related to God.  It’s one of those challenging thoughts that we all need at times:  Is our hatred of something related to bad people and experiences or related to a really bad game?

In this case, I’m going to hate on the game, and the players get their dose as well–all based on my subjective experience.

Sometime around 1995, I was deeply entrenched in an upper division football program at my university (yes, mine!). For anyone who doesn’t know, college football is all about the ability to recruit top talent.  “It ain’t the x’s and the o’s, it’s the Jimmys and the Joes” is how it’s been put in one form or another for a long time–meaning a great team comprises great players, no matter the scheme.

In that world, recruiting matters deeply.  Finding the right talent and convincing “it” to come to your football program are the two foundational moves of a healthy program.  It’s not the only thing, but it’s close.

So, one evening at dinner with the team, one of the assistant football coaches gets up from the table and says bluntly, “I need to go lie to some kids.”

He meant, of course, that he needed to go make the telephone calls to budding high school stars that assistant coaches were obliged to make. He needed to go “lie to some kids” about their ability to be better than the incumbent players, right away and on their way to stardom right now. Oh, and by the way, we really care about you and would never try to over-recruit your talent while you’re playing for us.  Just sign on the line, and forget about those other programs.

It was a thoroughly funny statement at the time.  After all, we were all elite players in a good program who had made our choices. In that world, it is the rare player who leaves a team.  And we liked this coach.  But, wow, the truth.

Fast forward 15 years, and that same group of budding football stars is now met with a plethora of headhunters.  The interesting part is that the recruiting pitch is hardly any different. “We have opportunities here.” “The career advancement potential is outstanding.” “The prior guys just didn’t have the horsepower.” “The company is on the upswing.” “We have no internal talent to fill this role.” “The prior fella just left to pursue other opportunities.” You know the drill–lie to some kids.  Only, in this case, it’s “stroke seasoned professionals with a shaded version of reality that could be construed as misleading.”

So, what happens?  Well, two things.  First, the headhunter gets paid, and second, you take the role and, as they say in the auto business, your mileage varies.  Recruiters, like stock touts and sports agents, have almost no stake in your success; their stake is in your decision.  Always be careful when dealing with anyone who only cares about your decision and not your health or success.

So, now we are down to it: Why I don’t believe in recruiters and what to do about it.

I don’t believe in recruiters because I believe the agency issues are real.  They have an incentive to lie, distort, and cheat to convince both sides of a transaction that the placement is good.  And they are doing it at the individual level; they are dealing with lives. The worst among them are no better than a Boiler Room broker dialing for dollars, except in this case, it’s dealing with entire livelihoods, not just components of someone’s savings.  The best among them know that score and go to work feeling icky every day.

Oooh, lie, distort, cheat?  Those are big, bad words, aren’t they? Well, yes, but just like Art Alexakis’s lyric on disbelieving, it’s my experience that leads me to the thought.  I have been on the client side, the candidate side, and  the observer side of headhunter transactions.  I have also witnessed the most corrupt personal ethics from individuals steeped in this profession.

That’s why I don’t believe in recruiters.

So, what is a corporate executive to do about it?

Well, the most important thing to know is that your best talent prospects already know everything I just wrote above.  They won’t be fooled by the players or the game.  You need to get ahead of that if you, in fact, have a great opportunity for them. Every recruiter from LA to New York will have already tried to pry them from their current roles with promises of candy canes and jelly beans.  You need to cut the crap and tell them why yours is the place to be.  Stop relying on recruiters; everybody knows they’re salespeople.  Sell the virtues of your company from the inside–don’t outsource it.

The second thing is to use recruiters for what they are: Market makers. They are exceptionally valuable in that role.  They are tools in your toolkit.

The third thing is to be aware of the perverse tendency of really great headhunters to embed and distort talent needs.  I’ve never met a headhunter who was good at assessing whether a company actually needed a certain type of talent.  I’ve also never met a headhunter who really wanted to know the company’s talent landscape; that’s the company’s job. But I have met really great relationship recruiters who convince executives that they are strategic partners. Here’s the test for you: How many times have your recruiters asked you to assess your internal people’s resumes (no ethical recruiter would try to share a client’s talent with their other clients, right?) to compare to the external candidates you are hiring? Very rarely, I’ll bet.

This post is all about the tendency of a certain professional niche to produce people and actions of questionable moral caliber. If you know this, and ensure that you are sufficiently isolated from it, you can make use of professional recruiters in the right way.  If not, you’ll just be another heavily stroked senior executive who was fooled by the game. Use recruiters, but don’t let them represent you.

Recruiters are tools…on every level.

It Ain’t What You Put Into It That Counts

A foolish focus on the inputs can endanger your strategy, company, and career.

 

Have you ever heard someone say something like,  “I’ve worked 75 hours this week.” (Of course you have.)

Have you ever heard a manager or business leader expound on the dollars spent on something?  “We’ve spent ten million dollars on implementing this effort.”

Have you ever seen an approach to business strategy that focused solely on the available inputs?  “We have two factories, the strategy has to focus on those.”

Worse, have you ever witnessed an approach to strategy that only focused on organization, infrastructure, or edifices?  “Let’s build it and then figure it out.”

I’m betting you’ve seen at least one of these.

And really, what’s wrong with focusing on how much work you’ve done, or the money you’ve spent, or the assets you have in place today, or the capital you could deploy tomorrow? Here’s what:  They are all inputs.

A strategy, whether for wars, countries, companies, or individual careers, is about ends, outcomes, objectives.  A strategy without an objective is a dance.  It can be beautiful, but it is ultimately just a play…kabuki at its finest.

When “being strategic” means focusing on the hours you’ve worked or the dollars you’ve spent, you’ve probably already lost the battle.  Why?

For the professional individual, a focus on how many hours you’ve spent doing your job is frankly just silly.  I have a healthy respect for people who work hard; I really appreciate it.  However, if a person works an 80-hour work week when a smarter person would work only 50 and get the same result, why is the input of 80 hours relevant?  When people start to focus on time, particularly in knowledge work roles (we aren’t talking the factory floor here, folks), the organization will suffer.  It usually signals a transition in the conversation from the “responsibilities” of a role–generate an output that has value–to the “rights” of the individuals–work a reasonable work day.  The conversation for an individual ought to be about the product of the work, not the time spent doing it.

A wise senior leader of a global consultancy I know well once told me, “If you can’t consistently do this job in 60 hours a week, you may not be smart enough for the job in the first place.”  That’s a pretty interesting perspective.  A true pro focuses on the outputs of their work and negotiates the resources to ensure the right output at a reasonable input of their own resources.

For companies and senior leaders, the problem is a little different.  Business strategy is about deploying resources to achieve an objective.  Some senior leaders are exceptionally good at these sorts of things without even thinking about it, but some, frankly, are not.  The ones who are not good at it tend to use strategic planning as a reductionist exercise to meet “non-strategic” objectives–budget numbers, financial incentives, etc.–that in all reality don’t tie to the health of the company as a whole. A focus on inputs at a company level usually comes in the form of binding constraints that aren’t really constraints at all.

Instead of asking the question, “What would it take to win that account from that competitor?”, they say, “How can Ralph from accounting take on this new sales role and try to get some wins?”  When hunting elephants, bring enough gun.

To wit, managers use only the talent and capabilities they have today in thinking about their business strategies.  They focus only on the financial resources they have at this moment to achieve their objectives.  They allow themselves to focus on optimizing their existing pie charts of businesses, assets, resources, talent, etc. vs. thinking about what the future pie can look like.  In other words, they focus on the inputs.

So what?  

For yourself, watch out for a creeping sense of martyrdom about how much you put into your job; instead, focus on what’s coming out of it.  Shift the focus to results attained and only then zoom in on what it would take to sustain them.

For your company?  This is tougher.  First, management teams have to articulate practical business objectives for a strategy to be real.  “Take hill 1221 from the enemy” is a strategic objective; “cover 2500 meters and burn only 5,000 gallons of fuel” is not.  Yet we allow companies to run on goals and metrics (or budgets) that look like the latter, and in some cases, they operate with management not even knowing what hill to take.

All this is to say that it’s healthy to ask yourself whether you are too focused on the inputs of your strategy and not enough on the outputs.  It is not, however, to say that constraints don’t matter; constraints are important, and they should be reflected in any strategy.  To use my analogy above, a strategy that says “Take hill 1221 from the enemy using only a cigarette lighter, five rubber bands, and a Daisy bb gun” is what I would call a good start toward revising your objectives.

On hill 1221, that might get you killed.  In your company, such ignorance of constraints might just get you fired.  It’s the strategist’s job (and we are all strategists at some level) to balance strategic objectives with degree of difficulty and possible resources (not resources on hand…important distinction, that).

A foolish focus on the inputs can endanger your strategy, company, and career.

Now, if you’ve come this far, take a moment to leave a comment.  Hundreds of people read this blog, and your insights matter. 

 

The Alchemy of Apple’s Strategy

Apple created a culture of freedom and playfulness out of a product philosophy of absolute control. It was all about trust.

If I told you about a regime that was run by a notoriously secretive autocrat who locked out all democratic suggestions or changes and brutally suppressed the press, would you link it to the Dalai Lama?

Mohandas Gandhi?

Nelson Mandela?

Jackie Robinson?

No?

I’d have to agree. When your mind turns to suppression, control, and dictatorship, you certainly don’t think of people who represent broken barriers, peace, and freedom.

So how did Apple under Steve Jobs take an approach that was straight out of the totalitarian playbooks and turn it into the most celebrated consumer strategy of all time? How did Apple back up—earn, if you will—its association with the trailblazing freedom fighters above, writ large in its “Think Different” campaign?

Trust.

Trust is what allowed Apple to turn the grayest iron curtain of strategies into the most golden consumer product reputation possible, and trust is what enabled the alchemy of Apple’s strategy. That’s the genius of Apple over the past 20 years.

But Apple is only part of the story here.

The larger story is about why and when control can be exercised over customers (and other followers like employees, vendors, and partners). Control is an expression of power, and power, in the commercial world, is something that is derived from consent. It’s derived through trust.

Consider some of the ways Apple exercises its power:

  • Apple exercises a fanatical commitment to controlling the customer experience – a bit of corporate DNA born directly from the personality of Steve Jobs. Apple tightly controls the product, its customer interface, what peripherals work with its products, and what software runs on its products. It maintains a closed ecosystem.
  • Apple tightly controls messaging, going so far as to sue young bloggers who speculate too correctly about the next product release.
  • Apple is renowned for its aggressive supply chain management, at times driving suppliers out of business through punitive control.
  • Apple uses its massive media appeal to aggressively and maniacally extol the “next great thing” from its own pipeline and subtly denigrate the features its competitors roll out. Who (above a certain age) can forget the “been there, done that” meme from Apple acolytes when Windows 95 launched…?

But this authoritarian behavior comes with a promise: an exceptionally clean (and generally delightful) customer experience. That’s the promise—a distinctive and exceptional experience. And so far, it has been a credible one.

Consumers cede control to Apple and, in return, Apple has delivered on its promises. Like many movements that start small, Apple’s resurgence started with roughly 5% of the PC market – a core group of fanatical followers who had ceded control years ago. Today, an astounding proportion of mobile, music, and computer consumers have bought into the strategy of ceding control and relying on trust.

Apple’s strategy has been one of offering consumers overwhelming simplicity, the message being: Simplicity sets you free. But as we’ve seen, simplicity comes with a tradeoff: a loss of choice.

The Concept

The reality is that Apple has illustrated a very valuable, stable approach to customer engagement and strategy. The degree of control a company seeks to apply to its customers’ experiences successfully relates directly to how much trust the customers have in the company.

I highlight successfully because plenty of companies have tried to control all aspects of customer experience without trust and failed. You can only pursue this strategy for a short while. Companies (and as you know, I relate these concepts to leaders as well in most of my writing) that attempt a high control strategy with low trust must either build trust quickly or stop. Such a strategy is an example of an unstable equilibrium. Customers (and followers) leave you when you are in their kitchen too aggressively and without welcome.

Throwing all this into a matrix (because who doesn’t love a good matrix?) we get something like this:

apple-matrix

These lessons apply to management and leadership as well. As we gain more trust, we can take more control, but when we lose trust, we lose our ability to exert control. The uniqueness of the experience we provide is both a route to building trust with those who matter and a route to highly profitable relationships.

What’s the message for executives thinking about their business, talent, or organizational strategy? Well, it’s pretty simple:  You can be an autocrat, but you’d better have the trust of those around you that that outcome will lift all boats, or else you won’t build anything enduring.

The takeaway: Don’t forget trust.