To make a profit, don’t chase profit

This is a sad story of why a talented Googler decided to leave the company, having lost faith in its ethos.

We shouldn’t judge a company based on the views of one disillusioned employee. This post isn’t really about Google, I’m just using something he says to make a wider point. The part that got my attention was this:

The Google I was passionate about was a technology company that empowered its employees to innovate. The Google I left was an advertising company with a single corporate-mandated focus [trying to beat Facebook and avoid losing the Internet advertising crown].

So what kind of company is Google? An ad company or a tech company? Of course it’s both – they use tech to ‘organise the world’s information’ and generate revenue through advertising. But one trickles down from the other. Tech is what Google is really about. All great companies focus on something higher and if you get that right then profits follow.

When you have an incredibly strong competitor (or you’re just going through a period of bad financial results), it’s so tempting to say ‘SHIT we are losing profit. How can we make more profit?’ But this kind of thinking stifles what really matters – focussing on the mission, innovating and then delivering.

The blog post says that Google has failed to create an exodus from Facebook. I can’t see how they ever will if they try to chase Facebook’s ad dollars and catch up. The focus is in the wrong place.

It seems Google is on the defensive now as the incumbent against the up-start, just as it once was the up-start against Yahoo and Microsoft. Google got ahead of these competitors by doing something new and different, not playing them at their own game. And it did this by having a clear and simple mission which it followed.

The lesson here for all companies is that when you find yourself chasing profit (or a particular competitor,) you’re operating at the wrong level. You need to look higher at the mission and focus on creating a strategy for meeting it. This can lead to innovation that leapfrogs the competition and creates completely new markets, exactly as Google once did and Facebook is doing right now.

Let’s not get into a discussion about Google’s strategy around social networking – there’s plenty of that on the tech blogs. But what do you think about where you should put your attention if you want to build a profitable company?

Measuring the nation’s wellbeing

Good to see the Guardian covering some of the issues that we have been discussing here on this blog.

Although the headline is ‘Happiness at work: why it counts,’ this is about much more than just our work lives. I welcome the government’s call for a ‘Wellbeing index’ to track whether our lives are actually improving as well as simply whether economic activity (GDP) is increasing. Unlike GDP which is just a measure of income, wellbeing is more like an asset on a balance sheet because it is enduring. It is a measure of value that has been created for people and societies (human and social capital.) This forms part of the ‘National Balance Sheet’ idea that economist Umair Haque has proposed and I wrote about recently.

It seems incredible to me that this is actually a new idea. What is the point of the economy and indeed even the government at all if not to improve wellbeing over the long-term? It is about time we actually started tracking ‘that which makes life worthwhile’ as Robert F. Kennedy put it. I would like to see GDP relegated in its importance and the Wellbeing Index expanded into a full balance sheet to show the value that we are building (or destroying) over time for people, societies and the environment as well as financial capital.

There will be some shocks as the government, corporations and society wake up to the fact that much of what increases GDP actually destroys value on our ‘National Balance Sheet.’ But we need to go through this process to learn how to shape our systems and institutions to deliver value where it really matters.

Inspiration Sunday: Why happiness is the new productivity

Here’s an awesome presentation from Vishen Lakhiani the founder of one of the Worldblu Most Democratic Companies – Mindvalley.

There’s so much I love in here:

  • The focus on being happy NOW (not putting off happiness until you’ve achieved other things)
  • Achieving a state of Flow
  • Rituals like ‘ringing the bell of awesomeness,’ ‘the gratitude log’ and even guided group meditations!

All of this has created an incredible workplace at Mindvalley that attracts and grows fantastic people, and that leads to success for the company as a whole.

The only thing I’m not sure about is the idea of sharing 10% of company profits on a monthly basis. I am all for profit sharing, but my fear would be that with it being a monthly thing, people may quickly grow used to it and instead of it feeling like a bonus it could come to feel like an entitlement. I’m sure that it is a motivator but I’m not convinced of the long-term value of it. But it’s part of a mix that’s working for Mindvalley so good luck to them.

Oh and if you’re thinking that all of this wacky stuff is fine for a company whose average age is 24 but not for a ‘grown up’ business, then just remember that these ‘Generation Y’ people are the senior leaders of the future so if you want to have them developing in your company then you need to create the right environment for them NOW.

Using Maslow to create happy employees, customers and more

Chip Conley’s book ‘Peak: How successful companies get their mojo from Maslow‘ is brilliant for two reasons. Firstly it’s an amazing turnaround story of a business (The Joie de Vivre boutique hotel group) on the brink of failure; and secondly it provides an incredibly simple but powerful framework for thinking about what a business offers to its key stakeholders.

Using Maslow’s Hierarchy of Needs, you can think of each group as having a pyramid with three levels. The base needs of a stakeholder group at the bottom, working up towards delivering self-actualising, transforming experiences for them at the top (what Chip calls ‘Peak’ experiences.) Once you have got the base needs covered, it’s these Peak experiences that can truly set a business apart and will lead to success.

For example, the base needs of an employee are to be paid a living wage and have a safe working environment. Working up to the second level they have the human need for recognition for what they do and have good relationships with colleagues. Then above this, right at the top are things like opportunities for mastery of their area of skill and working towards a higher purpose which they truly believe in and transcends both themselves personally and the company.

Any business can expand on these three levels of the pyramid with specific policies and practices, but the key thing is that once the base needs are covered, it’s focussing attention on the higher needs at the top that creates the magic.

For customers, the baseline is a product that satisfies their needs at an affordable price; then moving up from here we have things like listening to and responding to their wishes and right at the top we have experiences that are beyond the customer’s expectations and meeting new needs and wants. Think Apple creating the iPod in the age of the Walkman or a time when a business has really treated you like a VIP and gone out of their way to help you (doesn’t happen too often, sadly, and this is an opportunity!)

Chip goes on to explain how you can use this same principle for investors too and I also think that the same can apply to suppliers and the local community although Chip doesn’t cover this in his book.

I’m working on a new business plan at the moment and have found it a really helpful framework to have a pyramid for employees, customers, investors, suppliers and local community and fill in the three levels for each to show how the company will deliver real value, right up to Peak experiences. It’s a very exciting process as you begin to see how your business steps up from the ordinary to do very special things. I also found that thinking about the top of the pyramid sparked new ideas and made me think bigger and higher about how the business can be awesome.

As an experiment you could try creating a pyramid for each of your company’s stakeholder groups and filling in how base needs, right up to Peak experiences are being delivered at the moment. You’ll probably find some gaps which can be filled in, and you can also reflect on how you’re allocating your energy – whether it’s purely to satisfy base needs or deliver truly transforming experiences. It’s no co-incidence that Zappos – the online retailer bought by for $1BN and famed for its incredible happy working environment and delighted customers has Maslovian pyramids on its walls, and makes Chip’s book required reading for new employees.

‘Betterness’ – the most important thing I’ve read about business in years

Betterness‘ is an essay by Umair Haque – an economist who’s played a big part in shaping my own ideas and beliefs about capitalism and its future. It’s actually been out for a while now but because I follow his blog I didn’t think there’d be much new in there for me. Wrong! It really is an incredibly important piece of work, bringing together and clearly laying out Umair’s radical but completely sensible ideas. I urge anyone in business or thinking of starting up their own venture to read this – it might challenge some very fundamental beliefs about what business and capitalism are actually for.

Here are four of the ideas that stood out for me:

Business and capitalism have ultimately failed in delivering true wealth (not just money, but across the board improvements in health, well-being, societies, the environment and happiness.) Umair offers some stark insights and statistics to back up this point. For example the plateauing (or in some cases falling) of happiness as GDP increases in developed countries and how America has seen increases in obesity and mental illness as it has become ‘richer.’

Personally I see a parallel with personal income and GDP. When you’re very poor (either an individual or a country,) more income does have a real positive impact because you can look after your base human needs (safety, food, water, medicine, shelter) but once these needs are met, increasing money don’t make that much difference and it’s higher things (relationships, well-being, enjoying the environment and having purpose and meaning in our lives) that make us truly happy. But money is like a drug and there is a tendency to believe that what made us happier before will continue as we earn more.

GDP as the primary measure of economic success is flawed and dangerous. GDP is like a corporation focussing solely on its income and not its balance sheet. It leads to a growth of sorts, but does not grow real, long-term value which should be the goal of any organisation or country. Instead Umair suggests that countries need to focus on a ‘national balance sheet’ to measure improvements or declines in human, social, emotional, environmental as well as financial capital. Then we would see much of current ‘business’ for what it really is – an extraction of value from humans, society or the environment to make money, but actually leaving us all worse off in the areas that really matter. It would then divert attention to creating value in all of the areas that matter.

The idea that even successful, ‘good’ businesses today perform at just a fraction of their potential to generate real wealth. Using the analogy of the change in the field of psychology from how can we cure people with psychological problems and get them to a ‘normal’ state to the positive psychology movement which looks at how we can continually better ourselves and build on what’s right to reach ever higher levels of happiness and achievement. The same is true for business which is often defensive and happy to return 5-10% net profit and focus on not screwing up rather than being creative and ambitious in how it can actually deliver true enduring value.

The need for deeper meaning and purpose in business. Umair gives ‘vision’ and ‘mission’ statements a thorough working over to show how most businesses are incredibly thin when it comes to their reason for existence. He suggests that all businesses need to have a much higher purpose – something that transcends their own organisation – and delivers diverse wealth back to people and the planet.

This essay is an inspiring call to arms for how we can radically change business into ‘betterness’ for the benefit of all of humanity. Umair doesn’t believe that there is any organisation in the world that is truly living up to this potential right now. Who will be the first? I personally will give it a damn good try.

Scrap bank holidays? I have a better idea

I couldn’t quite believe this was for real when I read it:

The Centre for Economics and Business Research says each bank holiday costs the UK economy £2.3bn.

They go on to suggest that cancelling all bank holidays will therefore add £19BN to Britain’s GDP. In other words, if we all work a bit more then the country will be better off.

What is really crazy about this is that they acknowledge that Britain is dependent on service industries which tend to shut down for bank holidays. But look at how one of the country’s largest service industries – banking – got us into this mess in the first place. They didn’t screw up and cause a global economic crisis because they took too many holidays. They worked too hard in fact, but at the wrong things. Perhaps if industry leaders had taken more time out to reflect then they might have seen how things were going to play out.

And it’s not just financial services that this applies to. All service industries require creativity, problem solving and innovation. You don’t get this by simply working harder. You get this by creating the right environment for smart people to be motivated and have the space to be productive. Time-off is essential to this – it gives the brain a chance to process. I have personally had great ideas whilst hiking at 4000M and on a scuba diving boat.

Bank holidays in the UK are very special for people in service industries. They’re the times when you get a holiday at the same time as just about all of your colleagues, clients and suppliers so you don’t come back to work having to catch up. Everyone is happier for the time off, and when we’re happy, we are more productive. And shouldn’t being happy be the goal anyway?

I would love to see how the CEBR has factored in these considerations, if at all. The BBC article doesn’t explain how they came up with this figure. I also visited the CEBR website and couldn’t find anything on there either.

I have a much bigger suggestion, and that is to stop using GDP as our primary economic measure at all because it makes us chase the wrong things. I agree with Robert F. Kennedy who said “Gross National Product measures everything, in short, except that which makes life worthwhile.”