You are either growing or you're dying...

As Big Tom Callahan says about business in the movie Tommy Boy "You are either growing or you're dying. There just ain't no third direction." The recession has made everyone in small business painfully aware of this new reality. Now I know that that recession is hard for small business owners, my wife is a small business owner and it is tough out there. Capital is all but gone, costs are increasing, and sales are harder to find than ever before, but that doesn't mean your business has to die. In fact if you are still in business your company was growing and you probably didn't even know it.

Most small business owners will probably think I am crazy for saying that, but the reality is what impedes growth is a lack of understanding as to what "real" growth is and how to find it. For most business owners, growth is a tangible result measured against some benchmark on the space time continuum, e.g. growth of sales over the previous quarter. However, what if "real" growth was intangible? What if "real" growth was measured as the ability to stay in business? Would you know how to recognize areas of "real" growth in your company? Probably not, but why?

The reason why is because the business world doesn't measure upticks in creativity and innovation, so most small business owners won't either. However, I challenge you to think about your business situation for a second... Over the past 18-months have you been able to do the impossible and keep the doors open? How? My bet is that you have done it through looking beyond the tangible and focusing on the perception of value derived from creativity and innovation, I know my wife has.  She has changed the intangible things about her company.  She changed the model, method, and overall strategy of the business she got into as the recession started.

Now, I know what you (and she) are thinking, you're thinking "I kept the doors open and lights on because I slashed payroll, cut costs, incurred additional debt and did it all because my sales were down... which are tangible" and it doesn't take a genius to recognize that is the opposite of growth in the traditional text book sense. However I ask how did you slash payroll? How did you cut costs? My wager is that you intuited or perceived value (an intangible) in people (cut him but not her) and costs (kept the water cooler, but lost the fresh flower delivery) in a way you had never done before. You recognized that to keep the company "growing" you needed to cut back and change things. You realized in order to survive your company has to be more responsive to customers. It has to be doing business with the right vendors. It has to be more creative. It has to embrace innovation and it has to do all these things to buy yourself another day in business. So to put it back into traditional growth terms, despite all the cutbacks your company is still growing one day at a time. It would have to be, or else you would already be dead, because in business there really isn't a third direction!

How did you grow to survive the recession? Where will you grow when it is over? Leave a comment and let me know!

The trouble with RISK...

Unless you have been under a rock lately you have heard of the two biggest events in American (well technically BP is British) business since the recession began. First, Goldman Sachs and those lads there engage in some legal but unethical practices. Second, BP manages to sink a deep horizon oil rig in the Gulf of Mexico and recreate the Exxon Valdez incident only on a much grander scale (I swear if this accident is the result of a drunken individual all oil companies should require mandatory twice daily breathalyzer tests). However, while there are countless ways that these events are different. There is one major way in which they are similar. They are similar because of the risk.

Now we can all agree that drilling for oil, two miles below the surface of the ocean, or gulf as it is in this case, is decidedly risky. And we should all know by now that investing in anything is also inherently risky. However knowing something is risky and truly understanding the risk that goes along with it are two entirely different things. The difference between knowing and understanding risk should matter to anyone owning, managing, or operating any business. The reason being that assuming you reduced all the risks or assuming that an event won't happen leaves you no room to maneuver if it does.

As an example, I will use the NASA model of successful risk management... there is no absolute, there is only probability and possibility. For example, they launch people into space knowing that 1) They may never make it, 2) They make it but something goes wrong up there, 3) They make it, but then they can't bring them back (see Columbia Tragedy) 4) They make it, they make it back, but something goes wrong down here (see Fantastic Four) or 5)They make it and they make it back safely. Those are all the big picture risks that exist in manned Space exploration which by my simple math equates to a 80% chance of complete failure. Would your company take on any project that had only 20% chance of success? How then does NASA or anyone operate successfully within such a risky environment? I argue that are successful because they understand risk to be inevitable and they have a reaction plan for everything.

Therefore in order to move beyond knowing the risks towards understanding the risks there are three things to do, which apply to EVERY business decision:

1) Create a plan to mitigate the risk of everything imaginable. Really and truly think Independence Day alien invasion, think hurricanes in Iowa, blizzards in Egypt, and meteor impacts. Once you are done, think smaller, think tornadoes, think power outages, think floods like Nashville. Once that is done think even smaller, think CEO heart-attack, think computer viruses, think office fire. And so on and so on until you think you have covered it all. Then once you are done with that reduce the risks from the minutiae up to through alien invasion, the risks associated with a fire, flood, and meteor strike are likely to be similar (building location for example) but not the same so by starting small you should be building a base of mitigation for larger events. The most important thing to remember when doing this is that you will miss something. You might mitigate the risk of an office fire by installing a fire suppression system, but what if the system is down for maintenance. That should help you see the importance of step 2.

2) Create a plan for what happens after the Aliens invade, the fire burns down the building, and your CEO chokes on a peanut M&M. By doing this you allow for the possibility of something you didn't think of from happening and you have a plan of action in response. This is what is known in the biz as a business continuity plan, however that sounds like a one and done sort of thing, which isn't helpful. I like to consider it more like a base set of ideas of what to do should the CEO not die, but merely be incapacitated. Now this is where semantics takes over and a lot of people give up on risk analysis. If the CEO is incapacitated but not dead then we should do this, but if he is this, then we should do this etc. However when aspects of risk begin to delve into semantics, reconsider NASA, there is only life or death that defines success and failure for them, you should have a similar big picture definition of success and failure. This way you won't bog down in the infinite semantics of "what if."

**Update, in items 1 and 2, be sure to factor in the Human elements of risk as it plays on your greatest corporate capital, the employee. As this post points out, how you manage employees in a post calamity environment is extremely important. I mean nothing would be worse than a risk related event coming full circle by losing the employees best equipped with the knowledge and skill to improve upon whatever brought about the risk event in the first place.

3) Review steps 1 and 2 often. As Goldman Sachs found popular opinion changed. As BP found out, the technically impossible happened. If you review steps 1 and 2 at least bi-annually you won't prevent the risk of the epic fail, but you will reduce its probability and its effect.

5 simple rules for understanding millenials...

I recently had a conversation the other day with an HR professional who had read my recent blog post on social networking and the benefits it can provide HR. While she agreed in principal that it can have an impact, she relayed a story of how misuse can damage personal and or professional reputations. She relayed the story we have all heard of a CEO who tried to "connect" with the employees by taking down the stodgy business suit "year book" photo that was his profile picture and replaced it with the picture of him camping in jeans and a t-shirt holding a PBR (I still don't understand the hipster resurgence of this swill, but I digress) in one hand and a fishing pole in the other. She then went on to say how this attempt to connect backfired and ended up hurting his personal and professional reputation in the company. She agreed that while HR should not be trolling the Internet for "gotcha" pictures of employees, it is a fact that people forget how conspicuous you really are on the Internet and how by default we make assumptions about people, companies and places as a result of what we see. The old "first impression" argument for controlling social networks from the HR perspective. Now I think many or most of us will all agree that this is a very valid argument. However her remarks got me thinking; What if this view doesn't apply to the "Millenials"? How then does a company make rules and govern people who have a fundamental disagreement with the rationalization of the rules?

My argument is that Millenials, which apparently I am one of according to the date range, have grown up with a level of connectivity which no other previous generation can imagine. As a result, the old norms for communication have been overrun by hundreds if not thousands of one off exceptions to the rules. For example, think about the old protocols such as the 8am-10pm phone call policy. You know, the protocol that says you should only call someone at home between those hours, and that any calls outside that time had better be the result of a life threatening emergency or death. Now imagine that a text comes in at 11pm from a friend, or an e-mail from a colleague in Europe comes in at 5am where you are but 10 or 11am where he is. All of a sudden the old rules don't apply because the phone never rang, and now an exception has been created. As Facebook, Twitter, and other social media and social networks progress we will reach a point where no practical rule exists, because there are hundreds of exceptions. Right now I will argue that the exceptions are the only rules Millenials know. How can that not be the case when nowadays parents and kids text each other to coordinate times, dates, events, pick-ups, drop-offs, etc?

However as an older Millenial, I know the old rules. I am used to literally being told stories of my parents party antics. Of having to call friends when I got home to tell them about what ridiculous thing happened while I was on vacation. In essence, I was told and would share the same stupid, job jeopardizing, PBR drinking stories, but the technology of the day provided an appropriate filter since I could only connect to people one at a time. Current technology provides no such limits and most younger Millenials don't expect it to nor do they care that it doesn't, because it never has. Thanks to standard technology I can now take a video of my friend/coworker doing something that isn't exactly legal, tag him in it, and post it to the wall of a friend who would laugh same as me if only they were there. All that can be done in the exact instant it is happening, aka real time. For the most part my friend/coworker won't care, nor will the mutual friend who received the post, and nor will I as the person who posted it. However if our corporate HR finds it or perhaps someone trying to hire me or either one of my friends sees the video then we are cooked. If, for arguments sake, we were employed then HR would call us in, explain to us that we were wrong, that we damaged our reputations, damaged the company and likely punish us for doing what is normal and natural for us to do. Going further this reaction from HR towards us results in animosity, a feeling of being disconnected, ostracized, a little embarrassed sure, but mostly we would get frustrated because we didn't do anything wrong. Or maybe we know we did "wrong" but we didn't do anything we haven't been allowed to do since we were old enough to be left on our own by our parents.

And that's just it... most of today's policy makers who I will argue mostly come from the Baby Boomer generation, didn't have the technological capability to instantly shatter their whole careers. Let face it the lord knows if they did have the ability they probably would have. So in an effort to find the middle ground I offer up some social networking advice for Millenials and those tasked with setting policy for them.

1) As a policy maker, don't assume Millenials know better. As I show above in many instances they know right from wrong in terms of legal and illegal, but not as it relates to damaging their personal and professional careers. The rules, filters and limits of even just a decade ago no longer apply.

2)As a Millenial, think about what or what you don't want people to know about you before you post anything. Most Millenials won't fall for a Phishing scam, where most non-Millenials will. Why? Because Millenials have been online since birth, they know better than to provide instant access to their bank accounts, social security number etc, but they don't always know that the funny photos of them playing "Edward 40-hands" over the weekend can be just as damaging.

3) As a policy maker, think about the possible exceptions to the rules before you make them. As I recently expressed to someone, most policy is made under the idea that what is good for the goose is good for the gander, but it forgets that ducks and swans inhabit the lake too.

4) As a Millenial, no matter if you are a goose, swan, or duck, when you first get into the water (job market) take a cue from nature and swim behind the mother (your boss), it is for your protection. Or in other words fall in line, at least at first, because you may not be fully aware of the dangers that exist.

5) Finally whether you are a policy maker or a work force Millenial try to understand where the other person is coming from. Generation gaps are no different than any other demographic marker, you should handle it like you would handle any other "diversity" issue... with respect.

Innovation... That's not a bad idea!

Only 47% of senior executives see their companies as more innovative than the competition, and 17% concede that they're even less innovative than peers, according to an Ernst & Young survey of C-suite executives at firms with revenues of $50 million to $5 billion. Among the most frequently cited innovation challenges are lack of appropriate personnel (48%) and "lack of a big idea" (41%).
Source: Ernst & Young

We all want to build an innovative business, but we don't think we have what it takes within our organizations to do. Add to that at the same time we don't follow through with what we need to do to actually innovate. If you feel this way, the following are all the ways you can promote instead of stifle innovation in 2010.

1) Help others innovate- Too often we find ourselves as business leaders telling those in our organizations to come up with innovation and as soon as they do we ready our rifles and shoot them down.

2) View innovation as a core business product- You would never stop making your product better, why would you stop making your company better?

3) Innovation isn't just a way to improve sales- Innovation can come from anywhere, a new quality control procedure, a new more efficient way to file important information, a better system of procurement; if these things make your company better, they are all forms of positive innovations!

4) Support innovation- After you have broken the habit of shooting down innovative ideas (see #1), they still have to grow. Think of innovation like a seed. You can simply plant it and hope it grows, or you can water it, give it nutrients, make sure light shines on it and make sure it grows.

5) Don't handcuff innovation- Really #4 and #5 could be combined, however sometimes we support innovation, giving it time and space to grow, but then handcuff the growth by giving it unrealistic time lines or require it to meet impossible metrics. This isn't to say you should fund all innovation to the hilt, but be realistic with your expectation for innovative ideas.

6) Reward innovation- Innovation makes the company better. If someone attempts to innovate and it doesn't earn or save $1, don't punish the innovator as a failure. Creating a culture which rewards innovation will make it easier for employee's to bring better ideas to the table.

7) If at first you don't succeed, keep trying- No innovation is perfect right out of the box. More than this, not every attempt to innovate will be successful. However simple law of averages says the more innovations you support, the more likely one or more will be a success.

Decisions, decisions... why we are bad at making them and what we can do to make better ones for our businesses. (Part 1)

One of the most important aspects about being a leader in business is making decisions. In the hierarchy of decision types the pinnacle is a strategic decision. These are the decisions that make or break the business. These are the ones that impact the future immediately and often bind substantial resources of the company. The importance of the decision is often palpable and as a result strategic decisions are often the hardest ones for even the most seasoned business people to make.

Considering that no one can 100% accurately predict the future every strategic decision starts out as a 50/50 coin flip. However, there are numerous tomes and pages of research dedicated to the topic of making better strategic decisions. Interestingly, none of the things I have read or any of the research I have seen works in all instances. The main reason for this is that most research is based on case studies and hindsight that prove the researchers point, or on experiments that limit “real world” variables. I don’t know about you, but I have never been able to go back and make a decision, nor have I been able to change the variables surrounding my strategic decisions. So is there anything we can do to make better strategic decisions? Yes there certainly is.

Research shows that the only constant in strategic decision making is the human element. However, as you may figure, it is hard to ever really consider the human element a constant. We all have different experiences, moods, emotions, etc. which research shows impacts our ability to make strategic decisions. Moreover since we are not machines the human condition actually causes us to make bad strategic decisions. Therefore the key to making better strategic decisions is not finding a formula for making strategic decisions but understanding what about us is going to cause us to make a poor decision. In part 2 I will discuss the causes and give the tips you need to make better strategic decisions.