My daily readings 06/01/2010

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    • The hubris of the Japanese at that time was astounding, though the Japanese saw it as simple, hard-earned pride. I witnessed it every day in Japanese industrial newspapers (which I translated, as part of my job at the time), on Japanese TV, and in discussions with Japanese journalists. (I had a lively ongoing discussion with a former editor at Sankei Shimbun–a co-worker at the time.)
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    • Conveniently not mentioned–even in more thoughtful analysis of the respective strengths of the two countries’ industries beyond consumer electronics–were little things like Boeing aircraft, U.S. medical equipment, U.S. networking and telecommunications equipment, workstations (e.g., those from Sun Microsystems and SGI), and the Intel chips populating Japanese PCs, among thousands of the other examples of U.S. products or licensed U.S. technology.
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    • On Tuesday, Loopt, one of the first services to let people use cellphones to share their location with friends, is taking its concept a step further by introducing Loopt Star, a mobile game that rewards people for frequently checking in to particular places. People will compete to earn “achievements” and become “boss” of certain locations, and Gap, Burger King and Universal Music plan to use Loopt Star to reward loyal customers.
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    • “We respectfully just sort of knocked off those gaming elements, but added new things,” he said.People register for Loopt Star using their Facebook log-ins, so they can share their location and compete in the game with their Facebook friends and alert their friends about recent purchases and special deals.Retailers can choose which actions they want to reward and what the prizes will be. Gap is sending customers a 25 percent discount coupon after they check in twice to a Gap store. Burger King is offering a soda with a sandwich or a coffee with a breakfast sandwich to people who check in three times. Universal Music will send five free songs to people who check into any bar along with two friends.
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  • How to evaluate ideas

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    • Good for Apple. It’s great to see a company make big jumps in the consumer market. There are too many “me too” companies that won’t take a chance and invent the next big thing. Can someone talk Steve Jobs into building a consumer robot? Someone needs to kickstart this market.
    • When the iPhone came out, it was a gold rush for a totally new field of development with almost no experienced devs (just a few companies who wrote programs for Mac knew anything about Obj C). The iPad is instead a windfall for the now existing devs. iPad growth has been very explosive though, and I think I speak for most iPhone devs in saying the platform continues to excite and delight us.
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      • A better definition comes from former Secretary of State Colin Powell who said: “You have achieved excellence as a leader when people will follow you anywhere if only out of curiosity.” For our purposes, we can generalize this to be the measure of the quality of a leader: the quantity, quality and diversity of people who want to follow her.

        So what makes people want to follow a leader? We look for 3 key traits:

        • The ability to articulate the vision
        • The right kind of ambition
        • The ability to achieve the vision
    • I believe that Jobs’ greatest achievement as a visionary leader so far was a) getting so many super talented people to continue following him at NeXT, long after the company lost its patina; then b) getting the employees of Apple to buy into his vision when the company was weeks away from bankruptcy. It’s difficult to imagine any other leader being so compelling that they could do these back-to-back and this is why we call this one the Steve Jobs attribute.
    • However, it’s critical that those executives have “the right kind of ambition”: ambition for the success of the company rather than the “wrong kind of ambition”: ambition for the success of themselves.
    • The first thing that any successful CEO must do is get really great people to work for her. Smart people do not want to work for people who do not have their interests in mind and in heart.
    • Truly great leaders create an environment where the employees feel that the CEO cares much more about the employees than she cares about herself. In this kind of environment, an amazing thing happens: a huge number of the employees believe that it’s their company and behave accordingly. As the company grows large, these employees become the quality control for the entire organization. They set the standard of work that all future employees must live up to. As in, “Hey, you need to do a better job on that datasheet—you are screwing up my company.”
    • A huge part of why he has been so unbelievably strong on this dimension of leadership is that he’s totally
      authentic

      authentic. He would happily sacrifice his own economics, fame, glory, and rewards for his employees. When you talk to Bill, you get the feeling that he cares deeply about you and what you have to say, because he does. And all of that shows up in his actions and follow through.

    • Despite shocking many of his best employees with this radical strategy, ultimately the company trusted Andy. They trusted him to rebuild their company around an entirely new business. And that trust turned out to be very well placed.
      • Let’s look at this one attribute at a time:

        • Articulation of the vision—There is no question that some people are much better story tellers than others. However, it is also true that anybody can greatly improve in this area through focus and hard work. All CEOs should work on the vision component of leadership.
        • Alignment

          Alignment of interests—I am not sure if the Bill Campbell Attribute is impossible to learn, but I am pretty sure that it is impossible to teach. Of the three, this one most fits the bill “born not made.”

        • Ability to achieve the vision—This attribute can absolutely be made; perhaps this is why Andy Grove’s tolerance for incompetence was legendarily low. Indeed, the enemy of competence is sometimes confidence. A CEO should never be so confident that she stops improving her skills.
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      • Does the CEO know what to do?
      • Can the CEO get the company to do what she knows?
      • Did the CEO achieve the desired results against an appropriate set of objectives?
      • I evaluate two distinct facets of knowing what to do:

        • Strategy—At Andreessen Horowitz, we like to say that in good companies, the story and the strategy are the same thing. As a result, the proper output of all the strategic work is the story.
        • Decision making—At the detailed level, the output of knowing what to do is the speed and quality of the CEO’s decisions.
    • The story of the company goes beyond quarterly or annual goals and gets to the hardcore question of whyWhy should I join this company? Why should I be excited to work here? Why should I buy your product? Why should I invest in the company? Why is the world better off as a result of this company’s existence?
    • The CEO doesn’t have to be the creator of the vision. Nor does she have to be the creator of the story. But she must be the keeper of the vision and the story. As such, the CEO ensures that the company story is clear and compelling.
    • A company without a story is a usually a company without a strategy.
    • Some employees make products, some make sales; the CEO makes decisions. Therefore, a CEO can most accurately be measured by the speed and quality of those decisions. Great decisions come from CEOs who display an elite combination of intelligence, logic, and courage.

      Courage is particularly important, because every decision that a CEO makes is based on incomplete information. In fact, at the time of the decision, the CEO will generally have less than 10% of the information typically present in the ensuing Harvard Business School case study. As a result, the CEO must have the courage to bet the company on a direction even though she does not know if the direction is right. The most difficult decisions (and often the most important) are difficult precisely because they will be deeply unpopular with the CEO’s most important constituencies (employees, investors, and customers).

    • Knowing this, the CEO must be continuously and systematically gathering knowledge in their day-to-day activities so that they will have as much information as possible when the decision point presents itself.
        • What are the competitors likely to do?
        • What’s possible technically and in what time frame?
        • What are the true capabilities of the organization and how can you maximize them?
        • How much financial risk does this imply?
        • What will the issues be given your current product architecture?
        • Will the employees be energized or
          despondent

          despondent about this promotion?

        Great CEOs build exceptional strategies for gathering the required information continuously. They embed their quest for intelligence into all of their daily actions from staff meetings to customer meetings to 1:1s. Winning strategies are built on comprehensive knowledge gathered in every interaction the CEO has with an employee, a customer, a partner, an investor, and so on.

      • In order for a company to execute a broad set of decisions and initiatives, it must:

        • Have the capacity to do so – In other words, the company must contain the necessary talent in the right positions to execute the strategy.
        • Be a place where every employees can get things accomplished – the employees must be motivated, communication must be strong, the amount of common knowledge must be vast, and the context must be clear.
    • In well-run organizations, people can focus on their work (as opposed to politics and bureaucratic procedures) and have confidence that if they get their work done, good things will happen for both the company and them personally. By contrast, in a poor organization, people spend much of their time fighting organizational boundaries and broken processes.
    • Netflix’s CEO Reed Hastings put great effort into designing a system that enables employees to be maximally effective. His presentation on this design is called Reference Guide on our Freedom and Responsibility Culture. It walks through what Netflix values in their employees, how they screen for those values during the interview process, how they reinforce those values, and how they scale this system as the number of employees grows.
    • When measuring results against objectives, start by making sure the objectives are correct. CEOs who excel at board management can “succeed” by setting objectives artificially low. Great CEOs who fail to pay attention to board management can “fail” by setting objectives too high. Early in a company’s development, objectives can be particularly misleading as nobody really knows the true size of the opportunity. Therefore, the first task in accurately measuring results is setting objectives correctly.
    • In 2004, we raised our last round of VC money led by Draper Fisher Jurvetson…and Google, one of our great colleagues. Then a year later, in 2005, the company went public. The ideal price was $27 [the stock’s initial offer price] and it closed on the first day at $122. It was great with us for many of the Baidu employees and for all of the Baidu investors. It was a very miserable thing for me because when I decided to take the company public, I was only prepared to deliver financial results that match the price of $27 or maybe a little higher, $30, $40. But I was really shocked to see that the price went to $122 on the first day. So that meant I needed to deliver real results that matches an expectation much, much higher than what I had prepared to do. But in any case, I thought I had no choice. So I put my head down and focused on operation, focused on technology, focused on the user’s experience, and I delivered.
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    • One of Microsoft’s problems, paradoxically, is that it makes a lot of money. It can spend 15% of revenue in R&D—about $9B a year—with no market breakthrough to show for it. Great concept demos and prototypes… and then nothing. (How many new Googles, Facebooks, and Twitters could we VCs fund with that kind of money?…)
    • A bigger problem is Microsoft’s Board of Directors. Ten women and men with distinguished backgrounds ranging from banking to pharma, from university president to venture capitalist. (There’s a lonely entrepreneur there, Reed Hastings, CEO of Netflix. He’s a math whiz, which could explain the NetFlix prize.)
      Three out of the ten members are old-time friends, connected through Harvard (Gates and Ballmer) and Stanford (Ballmer and Marquardt). Such closeness makes it difficult to make painful decisions. Furthermore, it’s not obvious how a research mathematician, the President of Harvey Mudd College—a terrific place for gifted kids—an auto executive, and a banker can parse the finer but essential points of a mobile software strategy. The PowerPoint slides look professional, the occasional demo looks good… but what can a “generalist’’ director do?

      In theory, the directors’ most important function is to hire and fire the CEO. But how independent are the Microsoft directors? How could they get the CEO to open the third envelope?

    • Microsoft didn’t have Apple’s stroke of luck. Fire one if its founders who goes on to start two companies, Pixar and NeXT, and then comes back twelve years later, tempered by the experiences, good and bad, ready to lead the company to an amazingly successful second act. Except for Ballmer’s two-year stint at Procter & Gamble, all he and Gates have ever known is Microsoft.

Posted from Diigo. The rest of my favorite links are here.

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