Posted by willcritchlow
A few years ago, I wrote a post on my personal blog about MBA courses. I have a great deal of respect for the top-flight MBA courses based, in part, on how difficult I found the business-school courses I took during my graduate degree. I’m well aware of the stereotypes prevalent in the startup and online worlds, but I believe there is a lot of benefit to marketers having a strong understanding of how businesses function.
Recently, I’ve been thinking about how to build this into our training and development at Distilled; I think that our consultative approach needs this kind of awareness even more than most.
This post is designed to give you the building blocks needed to grow your capabilities in this area. Think of it as a cross between a recommended reading list and a home study guide.
Personal development: a personal responsibility
I’ve written before about the difference between learning and training, and how I believe that individuals should take a high degree of ownership over their own development. In an area like this, where it’s unlikely to be a core functional responsibility, it’s even more likely that you will need to dedicate your own time and effort to building your capabilities.
Start with financial basics
I may well be biased by my own experiences, but I believe that, by starting with the financial fundamentals, you gain a deeper understanding of everything that comes afterwards. My own financial education started before high school:
- My dad used to give me simple arithmetic tasks based around the financials of his own business before I was old enough to be allowed to answer the phone (when my voice broke!)
- At college, I took some informal entrepreneurial courses as well as elected to study a few hardcore mathematical finance subjects during grad school
- After college, I worked as a “consultant” (really, a developer) for a financial software company and got my first real introduction to P&Ls, general ledgers, balance sheets, and so forth
- Before starting Distilled, I worked as a management consultant and learnt to build financial models and business cases (though the most memorable lesson of this era is that big businesses just have more zeros in the model – at a certain point it doesn’t matter whether you’re working with $ , $ k, $ m or $ b)
So, where should you start your financial education?
In order to take this all in, you will need to set aside some time to work through a few examples and to dig into the definitions, acronyms, and concepts you haven’t heard before. These are not the kinds of post you can simply skim.
This may also be a good time to revisit some basics:
- Khan Academy is a good place to learn basic mathematical skills and MIT for the next level up
- Excel is the tool of basic literacy in the financial world and we have our own guides at Distilled that should be useful if your spreadsheet-fu is a little rusty: Excel guide and interactive Excel module in DistilledU
While working through all of this, you should be aiming to:
- Become comfortable with the language and terminology
- Understand the connections between cash, profit and assets
- Begin seeing the sensitivities in how timing, margins, and business models impact outcomes
Since all of this is pretty dry, be sure to add in some human interest by reading about business models in ‘the wild’ and applying your new-found knowledge to some real-world examples. Amazon is a great place to start because of its unusual focus on free cash flow over profit (for longer reads, I also recommend Bezos’ shareholders letters and The Everything Store).
Management: structures and methodologies
When you’re trying to get things done, it pays to understand the context of the people you’re seeking to influence. Whether you’re an external consultant or embedded in the organisation, the people you’re dealing with will have their own priorities, incentives, and worldview.
Above all, you need to get close to people in order to understand what truly makes them tick.
You can spend a lot of time digging into dry tomes on organisational design if you wish, but I’ve learned a lot of things from reading business biographies in order to understand the thinking of senior management at big business. Here are some of my favourites:
- I already mentioned The Everything Store about Amazon in general and Jeff Bezos in particular
- In the Plex (relevant to our interests: about Google) has all kinds of interesting anecdotes and management challenges
- I am a massive fan of The Hard Thing About Hard Things by Ben Horowitz that documents a lot of the interpersonal and management challenges he has seen and faced over the years
- I was recommended The Five Dysfunctions of a Team by a client-turned-friend who has led large engineering teams – its language of “conflict and commit” quickly became part of my personal thinking
- In a variety of ways, I’ve learned interesting things even from books that I found difficult to read or where I felt as if I wouldn’t like to work for the individuals (including Winning by Jack Welch, Steve Jobs by Walter Isaacson, Who Says Elephants Can’t Dance by Lou Gerstner, and the epic Warren Buffett biography, The Snowball by Alice Schroeder)
Image source: developers.blog.box.com/
The way I work is to highlight sections of a book as I read it (the Kindle is a godsend for this) and then, if I found it interesting enough, to write up a brief book report for my team. This should be somewhere between enough information to persuade them it would be an interesting read and enough to impart its key lessons.
Strategy: the interesting parts
For me, all of this forms the basics of what you need to think about the interesting parts. I’m fully aware (and glad!) that some people become specialists in the details above and enjoy working in them. For me, they serve as tools to understand and to communicate about the way that companies and markets function.
I find that the most interesting learning has elements of storytelling, timeliness, and humanity. During my university studies, I was most excited when I got to hear about theorems developed in the last few years. In corporate strategy terms, it’s important to know your history, but it’s also exciting to realise that we can read the history that’s happening all around us right now.
In rough chronological order, here is some reading material I’ve found interesting recently:
- Only the Paranoid Survive is the story of how Andy Grove chose to lead Intel through the almost complete disappearance of its multi-billion dollar core business in just a few short years. See my notes
- The Innovator’s Dilemma by Clayton Christensen – I’ve written about this before here on Moz and over on our own site
- In writing about The Innovator’s Dilemma, I’ve talked before about the influence Mark Suster has had on my thinking. I find the vast majority of his writing very thought-provoking. I particularly enjoyed his recent presentation on Why it’s Morning in VC which included some great stats about the growth in market opportunity for businesses that think ‘online first’
- For the most cutting-edge thinking about the evolution of strategy in a connected world, I haven’t come across a better thinker than Benedict Evans. His newsletter is one of a handful that I read religiously
Putting it together
Different people learn in different ways, but I thought I’d close with a few ideas for more structured ways of learning:
- Work through the basics by recreating some of the analysis linked to above. Build the Excel, learn the terminology, etc.
- Read a book from the list and write a book report
- Form a study group to discuss a Harvard Business Review case
The more you get into reading about business, the more you’ll realise what a rabbit hole it truly is. I’d love to hear some recommendations in the comments section. I’ve also included a few more resources that didn’t fit into the flow above but that I thought people might like to check out:
- MBA Mondays from Fred Wilson (I recommend you start at the end and work forwards through time). I’ve liberally pulled individual posts into the writing above, but there’s a wealth of further information in this series
- Harvard Business Review produces an incredible amount of content, so you’ll have to pick and choose, but there’s something there for everyone – from written content and video, to deep financial analysis to inter-personal management advice
- I have had The Personal MBA recommended highly to me – though I have to admit that it’s still sitting in my wishlist
When I first pitched this post idea to the Moz editors, they were keen that it contain actual insight itself rather than just links to a bunch of books – something I wholeheartedly support. So, I thought I’d include my notes on Andy Grove’s Only the Paranoid Survive. Here you can see what I meant by taking notes and highlighting sections of a book to discuss with a group. This is a great way of digesting the ideas of a book, especially if they are particularly complex.
Image source: Intel Free Press, Flickr
Only the Paranoid Survive: my notes on a business classic
Documenting his time at Intel, Andy Grove’s book provides a fascinating insight into how he led the company out of the memory business and into the microprocessor business. He details his approach for dealing with what he calls “strategic inflection points” which are those times in the life of a business when its fundamentals are about to change. As he says, this “can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end.”
It’s an incredible story of leadership, management, and strategy, and I highly recommend you read it (even though it’s unfortunately not available on the Kindle – a criteria which is fast becoming my top priority for which books I’ll read).
Written in 1996, the book looks pretty dated (in parts) almost twenty years later. But to illustrate the power of the insights from the man that Fortune magazine called “The best manager in the world”, I wanted to kick off with some quotes from the final chapter of the book. These detail Grove’s support of Intel post-retirement – guiding them on the changes he thought the internet would bring to their business. It highlights the value of the rest of the book by proving that he is capable of applying his theories to the future (which is always the hardest part of making predictions).
Highlighting the era in which the book was written, it starts with a section entitled:
What is the Internet Anyway?
Grove immediately lays out his stall:
I felt that the Internet was the biggest change in our environment over the last year.
And then goes on to predict a number of the disruptions that subsequently came to pass – starting with the effect on advertising:
To do that on a big scale, you have to “steal the eye-balls,” so to say, of the consumer audience from where they get those messages today … to displays on the World Wide Web.
We may be witnessing the birth of a new media industry.
And even mobile (though he doesn’t call it that):
Such an Internet appliance could be built around a simpler and less expensive microchip. Clearly, this would be detrimental to our business.
His presentation, to a group of senior managers at Intel in the mid-90s, clearly met a mixed reception – and I love how much the quotes could be an indictment of my entire career:
Comments on my presentation range from “This was the best strategic analysis you’ve ever done” to “Why the hell did you waste so much time on the Internet?”
Rather than just pointing out problems, he clearly outlines a set of solutions – starting with embedding the internet at the top level of strategic direction:
Intel operates by following the direction set by three high-level corporate strategic objectives: the first has to do with our micro-processor business; the second with our communications business; the third with our operations and the executions of our plans. We add a fourth objective, encapsulating all the things that are necessary to mobilize our efforts in connection with the Internet.
…and hedging with a deliberate attempt to check his hypotheses to make sure they are correct:
So I think there is one more step for Intel to take to prepare ourselves for the future. And I think we should take it now while our market momentum is stronger than ever. I think we should put together a group to build the best inexpensive Internet appliance that can be built, around an Intel microchip. Let this group try to derail our strategies themselves.
Having set the scene, rather than rehash the story itself, I want to jump to the second half of the book. Here Grove details the general lessons he learned and the approaches he has taught since his retirement as a professor at the Stanford University Graduate School of Business.
So many of the lessons concern the ways that senior managers can make sure they stay abreast of the lessons their teams are learning at the coalface. But learning the lessons are so rarely enough in themselves. Grove details a conversation he had with Intel’s Chairman and CEO at the time – Gordon Moore:
I looked out the window at the Ferris wheel of the Great America amusement park revolving in the distance, then I turned back to Gordon and I asked, “If we got kicked out and the board brought in a new CEO, what do you think he would do?” Gordon answered without hesitation, “He would get us out of memories.” I stared at him, numb, then said, “Why shouldn’t you and I walk out the door, come back and do it ourselves?”
Knowing is not sufficient. It’s clear that you still need to work up the courage to make a change somehow. Early on, Grove dedicates a chapter to the necessary methodology of gathering information from the people he calls “Cassandras” who help funnel knowledge of impending changes to senior management:
The Cassandras in your organization are a consistently helpful element in recognizing strategic inflection points… Cassandras are usually in middle management; often they work in the sales organization.
He then goes on to address two potential objections to the particular kinds of action needed at this stage – by middle and senior management. I particularly like the second part – exhorting ‘armchair quarterbacks’ to get out of their comfy seats:
If you are in senior management, don’t feel you’re being a wimp for taking the time to solicit the views, convictions and passions of the experts. No statues will be carved for corporate leaders who charge off on the wrong side of a complex decision…If you are in middle management, don’t be a wimp. Don’t sit on the sidelines waiting for the senior people to make a decision so that later on you can criticize them over a beer — “My God, how could they be so dumb?”
Continuing the theme that it’s necessary, but not sufficient to know what’s going on, Grove calls out common behaviour among senior people who (consciously or subconsciously) know what they need to be focusing on, but continually find themselves drawn in other directions. It reminded me of the adage that your calendar never lies:
At such times, senior managers often involve themselves in feverish charitable fundraising, a lot of outside board activities or pet projects…Frankly, as I look back, I have to wonder if it was an accident that I devoted a significant amount of my time in the years preceding our memory episode, years during which the storm clouds were already very evident, to writing a book. And as I write this, I wonder what storm clouds I might be ducking now.
In this theoretical section that comes after many of the personal stories of his own challenges, Grove lays out some mechanisms for coping with and dealing with strategic inflection points once you’ve seen them coming. In particular, he focuses on clarity of communication:
But when the structure of the industry changes, all of these elements change too. The mental map that you have been carrying with you all these years and relied upon in charting your company’s course of action suddenly loses its validity. However you haven’t had a chance to replace it with a new mental map. You haven’t made the explicit substitutions about how things are done now versus how they were done before, or who matters now versus who mattered then…If senior managers and know-how managers share a common view of the industry, the likelihood of their acknowledging changes in the environment and responding in an appropriate fashion will greatly increase. Sharing a common picture of the map of the industry and its dynamics is a key tool in making your organization an adaptive one.
…and clarity of purpose:
Management writers use the word “vision” for this. That’s too lofty for my taste. What you’re trying to do is capture the essence of the company and the focus of its business. You are trying to define what the company will be, yet that can only be done if you also undertake to define what the company will not be.
…and he addresses head-on the obvious counter to some of his simple examples by saying that he believes oversimplification is a risk worth taking in pursuit of extreme focus:
But the danger of oversimplification pales in comparison with the danger of catering to the desire of every manager to be included in the simple description of the refocused business, therefore making that description so lofty and so inclusive as to be meaningless.
Just before we get to the final section on the internet that I started with to make my broader point about the usefulness of Grove’s framework, he talks about some of the personal pitfalls of leading in the way he describes. I found these two passages to have echoes of ‘the hard thing about hard things’ that I referenced above. First, leading when you can’t know if you’re right:
I can’t help but wonder why leaders are so often hesitant to lead. I guess it takes a lot of conviction and trusting your gut to get ahead of your peers, your staff and your employees while they are still squabbling about which path to take, and set an unhesitating, unequivocal course whose rightness or wrongness will not be known for years.
…and second, the loneliness of this course:
When I started on this software study, I had to take the time I spent on it away from other things…This brought with it its own difficulties because people who were accustomed to seeing me periodically no longer saw me as often as they used to. They started asking questions like, “Does this mean you no longer care about what we do?”
I hope you’ve enjoyed this little tour through my ways of learning about business. I think an awful lot of learning comes down to curiosity and, in my experience, business is an endless source of fascination and things about which to be curious. I look forward to hearing your best links and book recommendations in the comments.
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