Sweet Verdict: My Genes and Myriad problems

Last week, Judge Robert Sweet in New York ruled in favor of ACLU in the much watched case against Myriad sciences.  There was a 60 minute lead on it today.  Good overviews from legal blog, NYT and PBS.

It is somewhat related to Bilski case awaiting verdict from Supreme court.

In the Myriad case, the issue is whether you can patent something that occurs in nature.  In Bilski, it is about patenting an algorithm (or software or method in general).  I am opposed to both for the same reason – they don’t benefit the society and in many cases slow down progress.  The original idea behind patents was this trade-off between government and inventors: inventors share their invention with the public in return for exclusive rights for some time period, in order to profit from their inventions.  The goal of patent law (blessed by US constitution) was to help future inventors benefit from past inventions, instead of constantly reinventing the wheel.  (I wonder if someone actually reinvented the wheel, but I digress).  Patenting genes is similar to X-ray company claiming monopoly on your bones and preventing anyone else from taking or even looking at your X-ray.  On method patents, the sheer number of such patents coupled with high cost of litigation, has created a minefield for small companies.

The patent law does not allow patents for ‘The laws of nature, physical phenomena, and abstract ideas’. Previous supreme court ruling (Diamond Vs. Chakraborty, 1980)  allowed living things created by humans to be patented. State Street case (1998) allowed patenting of business methods, opening the door for flood of method patents (including one that describes new way to swing a yo-yo!).   The current state of legislature  in US does not allow for fixes to such problems to come from the Congress.  The partisan divide, short term thinking and lobbyist influence will prevent any common-sense legislation from getting any attention.  All eyes are on the supreme court to re-interpret the re-interpretations of prior courts, when it is time to reexamine the entire patent system with a view towards making US more competitive in the face of global competition.

I will get off my soapbox here and hope the supreme court does what the congress can not or won’t.

Bill Gross on failing quickly

The Value of Failure:

Gross, quoting Bill Gates says: “Success is a lousy teacher because it makes smart people think they can’t do anything wrong.” If you learn from failure it’s valuable, if you deny it, it’s useless.

How to Fail:

Quickly. You don’t want to fail by making stupid mistakes, you don’t want to fail by making mistakes you made before, said Gross. You want to fail by making smart intelligent risks that don’t work out.

…

Gross’ 3 Tips for Entrepreneurs:

1). Passion: Only passion will get you through the inevitable rocky ups and downs of startup life.

2). Integrity. Have integrity with people you work with, investors and employees.

3). Upside. I believe in giving everyone in the company a stake. The result is much more motivation.

Amen.

See the video interview here.

Change management and health care bill

Today’s Washington Post lists two mistakes made by Obama in Health care overhaul effort.

The first was to draw a wrong lesson from the Clintons’ failure to pass health care legislation in 1993….The erroneous lesson was that Congress should be given an outline of principles but that the president should stand back and let Congress develop the legislation. …

…Instead of taking the lead to educate the country about the policy, he stood back and allowed the Republicans to distort it as a government takeover of health care that would bankrupt the country….

In other words, he underestimated the opposition to change and over-estimated the capabilities of his supporters to lead.

Obama’s second mistake was to put too much emphasis on trying to sell the policy on moral grounds, providing insurance to 30 million Americans at risk. In the past, large entitlements like social security and Medicare have been sold largely on the grounds that everyone will benefit. Many voters were convinced that this was a Robin Hood project, giving their hard-earned money to people who might not deserve it. Maybe these people without insurance didn’t work as hard and some of them didn’t buy insurance even though they could afford it.

Or, packaging the message was flawed.  Instead of emphasizing shared benefits, Obama focused more on benefit to small portion of the population.

The health-care debate is a good example of change management initiative in many organizations.  You have a crisis everyone agrees needs addressing.  You have leadership and numerous stakeholders with complex web of intertwined interests.  You try moving the organization (country) in any direction, you will hear resistance from the parts most affected.  All this is intuitive, when you take a snapshot at any point of time.

I have to admit, there is one major difference between a corporation and government – the corporation has a clear leader – the CEO – who has can fire people who don’t fall in line (at least in theory).   As a leader, you have to make sure the balance of power is in your favor.  My empirical rule is 2/3 of support is needed to push through any major change (somewhat influenced by Byzantine Generals problem).

Now, back to Washington Post article, I would agree with #1 that a leader can not just step back and let his lieutenants drive the initiative.  A true leader will be be in-charge both emotionally and in navigating around obstacles.  It appears Obama took too much of hands-off approach, which is a no-no, especially in the most risky stages of change management process.  The risky stages are where you are moving from one phase of the process to the next and you need a new burst of energy to fight the battle.  What makes it more difficult is the changing dynamics and strategies required to push the initiative are different throughout the process.

A good reference model I have is from Jeanie Duck (Boston Consulting Group), author of Change Monster, a great book about change management.   She talks about five stages – stagnation, preparation, implementation, determination and fruition.

From "Change Monster" by Jeanie Duck

While packaging the message played into the hands of the opponents,  the biggest blunder by far by Obama was ignoring the big picture and risks of unforeseen events.  With no margin for error in the senate majority (60 votes with no republican on board) and ailing Ted Kennedy, a republican victory in MA would change the equation completely.  This should have been written on Obama’s hand (using Palin’s ink!).   A leader’s role is to urge the troops to march ahead while watching the risks like hawk, ready to dive in at any moment to solve it.  As for as the risks go, senate majority was the biggest one.

If Obama had to do it over again (ah, the luxury of theory), he would have put more resources into urging faster passage in senate, better reconciliation with congress, shoring up few Republican moderates to the cause, stay on the offensive against Republican/Tea Party/Fox opposition.  I talked about the irony of Ted Kennedy in my earlier post.

So, what are the lessons for change management?  Don’t fall asleep at the wheel anytime in the process – especially after small victories.  Use small victories to build momentum to overcome bigger hurdles ahead.  Stay focused on the big picture and risks. Leave the implementation to the troops, but be ready to jump in if the risk level goes up; in other words, adapt your management style to the situation.

JetBlue strategy

A company that I was really fascinated by was JetBlue (JBLU), which tried to be Southwest with luxury by using technology and efficient management.  The founder, David Neeleman, an inspiring leader with deep knowledge of airline industry drove the company’s initial growth phase by using some unorthodox methods.  He was admired by many students of business (on my top 25 people I would like to meet) and seemed to defy conventional wisdom about strategy that you had to choose between differentiation and low-cost.  Here is a talk he gave at Stanford.

About the same time as the talk, I was thinking about how JetBlue had side-stepped unions at the same time letting crew perform multiple tasks.  An image of David Neeleman himself helping people with checking in, stowing luggage on the airplane, serving snacks on the flight etc drove home a point about how JetBlue wanted the crew to behave.  There are no set assigned tasks or tasks beneath your rank.   Why did JetBlue do this?  This type of organizational structure was essential to execute JetBlue’s strategy (the org-chart has to be designed AFTER you have identified the strategy – I will cover this in a later post).

Having chosen the strategy and the org-chart that best suited for executing the strategy, the JetBlue leadership team ignored to see the flip-side of the strategy.  While there are other external factors (luck) that have subsequently affected JetBlue in the late 2000’s, I think ignoring the side-effects of strategy had a big effect on their troubles.   So, what is the flip-side of egalitarianism org-chart (at least on the ground)?  As the old saying goes, when everyone is in-charge, no one is really in charge.   When the crew is trained to pool all their resources to serve the customers, you get a better experience and lower operating costs.  All works well till you hit a new situation that challenges this type of org-structure.  For example, in a crisis like stuck on the tarmac for hours due to decisions by air traffic control.

The crisis at Newark airport was totally preventable if someone at JetBlue had made a decision to return to the terminal after few hours of frustrating wait on the tarmac.  The problem was never encountered before and the culture of JetBlue prevented any single person from taking a leadership role and making the decision.  A top-down organization would have reacted much quicker to such crisis, or at least forced a decision.  The downside of flat organization is the risk of ‘deer in the headlights’ syndrome.

Is there a way to balance the two forces?  Yes, if you recognize that every strategic choice leaves you vulnerable on the flip-side.  If JetBlue had recognized such weakness, they would have implemented a procedure to escalate such decisions or to appoint a leader responsible for making the decisions (Pilot would be a logical choice).   Can you have a loose organization and switch to ‘military mode’ on demand?  Absolutely.  You have to make such events infrequent and clearly define how to trigger that switch.

David Neeleman has been pushed out of JetBlue and their growth strategy has hit some bumps.  Do I think the above was the only problem they had?  No.  It played a role along with their other problems relating to flip-side of strategy.  But the crisis forced out the people who were emotional leaders and hurt the company’s long-term potential – for example, they could have tried to grow by trying to expand into international markets instead of fighting US carriers, a la Apple.

How about them Apples?

More on flip-side of strategy, again looking at Apple.

Apple’s strategy to control end-to-end experience helps them innovate faster, expand into new markets, keep support costs low and enhance their brand as superior experience for the masses.  Kind of like benevolent dictator along the lines of Chinese government.  However, freedom always triumphs over walled gardens.  Google is trying to ride this wave of freedom and here is an insider voicing the sentiments

Controlling what programs can be run and what parts of the stack can be accessed and what developers can say to each other.I think they’re wrong and see this job as a chance to help prove it.

The tragedy is that Apple builds some great open platforms; I’ve been a happy buyer of their computing systems for some years now and, despite my current irritation, will probably go on using them.

Steve Jobs as rightly identified Google as a principal threat, but the actions demonstrate they are not looking at it from strategic perspective.  They think they can out-execute Google and others, which is the typical response of any organization.

The question becomes, for each of the strategic flip-sides, does a company have a viable plan to respond?

strategy…starting up…

Numerous lists (ex: here, here and here) tell you what makes a start-up succeed.  Here’s my own list: strategy, strengths, execution and luck.   A strategy that is in sync with your strengths, strengths that will help you to execute better than the competition, great execution that will increase your chances of luck in the form of market or competition or regulations.   It’s all tied together and should be reinforcing, along the lines of Porter’s view of strategy.

Before I get into discussion on strategies, I have to point out that I am not trying to dissect Porter or Christensen or others who have analyzed how Southwest or Apple or Google mastered the strategy.  These are all good reads and essential for someone embarking on startup journey.  What I will focus on is however, is what is NOT studied as extensively – how strategy can bite you back.

What do I mean by strategy bites?  Strategy, by its nature, is a choice.  It is also a conscious choice made due to lack of resources (holes in strengths in my list).   Sometimes, companies don’t seem be so conscious about the choices they are making, but that is another topic about incompetent management and how luck will help them compensate for it on occasion.   Most people will focus on the choice made and the challenges ahead.  Again, this is essential in order to execute using limited resources.  However, the choices NOT made, or the flip-side of the strategy, gets totally ignored by leaders.  Since strategy forces you to make a series of choices, each of the choices will have costs or side-effects which may not be visible for a long time.  My proposal is to have a process to keep track these choices and know how they will affect you at any given point in the future.

Away from business for a moment, we can see how this played out for the Democrats fighting for the health care bill now.  If they didn’t get desperate to protect John Kerry’s senate seat in 2004 by changing MA law, they probably wouldn’t be scrambling now.  The irony of health care and Ted Kennedy is worth a read.

Some may recognize that being aware of road not taken is another way to manage risks.  Anyone in Wall street now will tell you how important this is, but somehow no one thought it was important between 2002 to 2007.   (well, not really, there was someone paying attention to make a killing as the show 60 minutes covered)

How many companies do this as a rigorous process to periodically review past strategy (cumulative decisions) and evaluate the potential blind spots?  I contend that not many even think about it.  One reason is the traditional view of leadership (along the lines of Dubya) that leaders need to be decisive and looking back only makes them look weak by second-guessing their own decisions.  Another reason is lack of resources and tools to make this exercise worthwhile.

Let me start with Apple since it is the darling of strategy watchers.  They can do no wrong – the genius of tying iTunes and iPod, leveraging iPod to launch iPhone, opening up platform for Apps, leveraging Apps to launch iPad and get into publishing and possibly go from publishing to advertising…. well, you get the picture.  One of the core strategies for Apple has been to control the end-to-end experience by making their own hardware and software and guarding it jealously.  What is the flip-side of this strategy?  Cost.  We have seen this movie before – a great innovator can’t compete with world-wide mob of hungry companies in driving down the cost.  PC won due to combination of cost and scale advantage which were mutually reinforcing, while Apple’s innovations strategy has spiraling to higher costs.  In the new avatar, Jobs has found a way to leverage software to move into new markets (music, phones, iPad etc) to keep the costs low.  This will come to an end sooner or later and downward pressure on prices will start.   How will Apple cope with this inevitable moment?  Will they move upmarket and be happy with diminishing market share or commoditize themselves and move on to newer markets?  Not sure what Jobs has planned, but the pressure on Apple is to ignore this reality and keep expanding.  A prudent approach is to plan for, or at least prepare for the worst case scenario, rather than deny it will ever happen.

Hello world!

Hello World!

This is our first entry for this new blog.

This entry is short, but will add more entries relating to good, bad and interesting (a la Dimitri Martin, Comedy Central) observations about the world in general, but try to focus more on strategy of nations, corporations, product teams or individuals.  Will try to tag them with ‘strategy’ to make them easy to find.

-sb