Due Diligence: The 7 Deadly Sins and 7 Bountiful Gifts

The first step in a person's salvation is knowledge of their sin. - Lucius Annaeus Seneca

Over the years, I have done a lot of due diligence of “stuff”, whether it be of individuals, teams, merger and acquisition targets, start-ups seeking investment, “fact or fiction” assessments and the like and in the process of conducting so many (and having some conducted on me), I have come up with a process that many have found intriguing and infuriating.

Due diligence in itself is pretty straight forward and pretty much any type is well documented ad nauseum.  For this reason, whenever I conduct due diligence, I am often disappointed when the basic “stuff” is not presented for review, since in absence of a business degree or vast Life experience, a simple Google search can prepare just about anybody for a positive due diligence experience.

So while I look for all the classic stuff such as cash flow, competitive analysis, business plans, sales and marketing plans, investment to-date, principal backgrounds / bios, partnerships, channels, market opportunity, blah blah blah, I ask two questions that either fascinate or infuriate.

The two questions are Why? and How do you know?

The questions matter to me.  How people respond to them provides deep insight into the deadly sins that threaten to derail them or the gifts that they have that provide the potential to create unlimited success.

Here are the 7 deadly sins I am exploring when asking my two questions:

Pride – does the entity being evaluated feel that they are just so awesome that they believe that the laws of business, ethics and morals simply don’t apply to them or applies to them in a fashion that suits them?  Do they feel that their understanding of risk and reward is so perfect that they can ignore the classic warning signs that have doomed many before them?  Do they invite people in to help them and then promptly ignore the help offered because “they know better” or tell the person whom they asked for help how the help will be provided (setting the terms when they are in no position to do so)?

Covetousness – does the entity focus more on the end result (particularly wealth or market dominance) and in doing so forget that there is much discipline, rigor, focus, intelligence and hard work necessary before “the harvest” appears?  Nothing drives me crazier than when questions for data are responded to with things like “I don’t have data but can’t you see how big this opportunity is?”.

Lust – does the entity talk incessantly about power or money as they try to sway customers, investors or team members, forgetting that there are other equally important things being created?  If power and money are the lone sources of inspiration and motivation, success will often become more elusive, especially during times of struggle.

Anger – is the entity quick to anger, especially when things don’t go as planned or when someone points out that they are doing something incorrectly?  Do they insist on “my way or the highway” even when they have gone to someone for help and then walk away in disgust when the other side doesn’t comply, only to realize later that their anger was a major reason for their demise?  Do they often blame others for their own mistakes?

Gluttony – is the entity able to share credit, success, equity, etc. in a fair and appropriate fashion when approaching customers, team members, investors and the like or do they insist on harvesting the majority of the harvest while allowing others to obtain a reward far too small for the risk they assumed or for the contribution they made?

Envy – is the entity so caught up in establishing envy in competitors that they become all form and no function, forgetting that results speak far more loudly than glitzy commercials, dazzling convention booths, slick taglines, sexy mission statements and cool swag?  Does it matter that they believe they have the coolest place to work if they go out of business prematurely because they didn’t focus on what mattered while bragging about stuff that is “neat and cool” but is not the sole reason they existed?

Sloth – is the entity so caught up in the previous sins that they feel that effort is not required where it matters in the areas of strong strategic planning, tactical execution, obstacle anticipation / resolution, communication, team building / execution, knowledge acquisition / application or any other appropriate business rigor?

Oh the pain that comes when I am conducting due diligence and see a phenomenal opportunity that will never see the light of day because of these sins in the form of ego as it empowers the sins that destroy instead of the gifts that enable.

Meanwhile … the gifts ….

While I am researching whether an entity is guilty of these sins, I also seek examples of brilliance in the following areas:

Wisdom – does the entity have the Life / business experience to accomplish what they need to accomplish?  If so, how do they leverage / share it to create breadth and depth in their team?  If not, are they able to put pride and ego aside to acquire wisdom from others and to allow others to be compensated appropriately for sharing their wisdom?

Understanding – is the entity able to process new information in a way that can be applied to make their result better?  Can they work with others (listening more than talking) in order to obtain and apply this information?  Do they show understanding when someone else makes a mistake, not forgetting that they make mistakes also?

Counsel – does the entity proactively seek / accept counsel from those who have more experience or the right data / connections, can they apply it when it is appropriate to do so and can they reject it when it is inappropriate / incorrect?  Saying yes or no to counsel for the right reasons requires courage and humility.  Does the entity have both?

Fortitude – does the entity demonstrate that they can persevere through the difficult times in a positive way that builds relationships / opportunities instead of destroying them?  Do they panic at the first sign of challenge or can they methodically, measurably, strategically, tactically, ethically and morally navigate through difficult times?  Do they keep their eye focused on what matters when weaker people would have collapsed or are they easily distracted / retasked based on the emergency / opportunity du jour?  Most people who tell you that success came quickly and easily with little or no struggle (read: terrifying moments) is either a liar or psychotic.

Knowledge – does the entity believe that knowledge is power and that one must always be attaining and applying knowledge, whether it be in the technology they use, the market they exist in, the customers they target, the competitors that exist, the regulatory changes that occur, the sales and marketing tools / channels that exist, the nature of building strong teams, the state of the investment market, the nature of how information is captured and expressed or any other aspect that can empower or destroy an opportunity?  Do they accept knowledge offered by others and more importantly, do they apply it effectively?

Piety – does the entity demonstrate appropriate levels of humility and servant leadership?  Victory cannot be achieved by being a doormat but is short-lived when one’s hubris is so strong that they run over everyone with the belief that they know / have everything they need and can succeed without the collaboration of others.

Fear – does the entity demonstrate a healthy amount of fear and respect for what they are attempting to accomplish?  I’m not referring to fear that paralyzes and makes one paranoid but rather, the right amount of fear and respect that keeps them grounded in the importance of doing the right things ethically, morally and with proper business rigor.

While none of us are sin-free, it is important that our gifts more than compensate for our sins otherwise the greatest sin is yet to be experienced – the experience of failure in the face of unlimited potential and success and when defeat was snatched from the jaws of victory because our pride or ego made it so.

Bottom Line

As a measurable outcomes guy, data is everything to me and if it can’t be created, provided and rationalized, the due diligence process is pretty much over.  If the entity being evaluated can’t explain to me what they are doing, why they are doing it, how they are getting there, who they are partnering with / targeting and when they plan to get there, they are done and the conversation ends.

But when the data aligns perfectly and the “next big thing” is clearly in front of me, I or the people I represent are still ultimately investing in people and their ability to get stuff done and that’s where understanding the sins and the gifts matter.  On a side note, I measure the sins and gifts mathematically – that’s a long story for another post.

Success doesn’t happen by accident.

The art and science of due diligence, both conducting it and surviving it, is in finding the balance between reality versus fiction and passion versus madness.

Due diligence regarding the financials and other measurables is critical.  Due diligence of the human element is equally important.

Do you live more by your sins or your gifts?

The answer is often revealed if failure comes and if it does, whether you have mastered the art illustrated below instead of the ones you should have mastered?

Blame - The secret to success is knowing who to blame for your failures.

Are you sure you live by your gifts rather than your sins?

How do you know?

To your success, in service and servanthood.

Harry

PS The sins and gifts are adapted from the 1962 edition of the Roman Catholic Daily Missal for those who wish to explore further.

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Addendum – The Double Standard – February 24, 2015

In an interesting conversation with a colleague, we both laughed when we remembered cases of people undergoing due diligence who expected (or insisted upon) little process to be applied against them and yet expected to perform maximum process and oversight against entities that they were reviewing.

We also shared some funny stories about playing cliché bingo with some due diligence targets who were lacking in the areas of facts, knowledge and a basis in reality but they compensated with a superb repertoire of clichés intent on convincing someone to take action in lieu of data.

Ego has the interesting ability to fuel someone to success or to cause them to ignore the essential elements required for success.

Which way does your ego carry you?

How do you know?

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Addendum 2 – Leadership – February 25, 2015

I have always found it important, whether on the execution or receiving end of due diligence, to make sure that the leading partners / principals reach out to the person conducting the due diligence.  Even if the partners / principals are not participating directly (which is unlikely), meeting the person conducting the due diligence, committing any resources necessary, etc., are important elements of relationship building and a successful due diligence experience.

When I or others conduct due diligence and the significant stakeholders don’t care enough to reach out to establish a relationship, when they negotiate only through their minions or when they protest results through their minions knowing that the deal may be “going south”, it tells me that those stakeholders are either aloof, lazy, incompetent, insufficient leadership material, too busy to understand appropriate prioritization or are hiding something.

I wouldn’t want to be accused of any of these things.

Would you?

Backcasting–Avoiding Disaster in Government and Business

Luck is a very thin wire between survival and disaster, and not many people can keep their balance on it. - Hunter S. Thompson

Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success. - Pablo Picasso

This blog is not a typical blog post but is in fact a paper that I wrote that some asked to see.  It is dry and academic - if you don’t like such things, please come back later.

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We live in a world that stands on the pinnacle of science and knowledge and yet despite our deep understanding of things such as human behavior, many things in the world, especially in the areas of business and government, continue to struggle with often-unpredictable results. Governments rise and fall despite their best intentions and businesses, despite their access to knowledge in the areas of business forecasting, customer behavior analysis and such, continue to surprise or disappoint people. Examples include the unexpected success of a small college-centric social media start-up that became Facebook and the quick demise of Blackberry, the company that essentially defined the smart phone market.

Why does humanity, with its access to knowledge, idea frameworks, best practices and technology, still appear to be executing randomly, with poor execution still as likely as strong execution? I submit that John Kingdon’s organized anarchy theory (also known as garbage can theory) explains this supposed randomness perfectly. I also submit that in understanding this apparent randomness that perhaps some of the randomness can be strategically removed to produce a better result.

In his book, Agendas, Alternatives and Public Policies^[i], Kingdon suggests that one can recognize an organized anarchy as having the following characteristics:

• Ill-defined goals, problematic preferences and inconsistent identities
• Unclear technology
• Fluid participation
• Independent streams of solutions, problems, participants, and choice arenas

The difficulty with such characteristics is not so much the existence of them but rather who defines them.

For example, if a business or government leader has specific goals, someone who has conflicting goals or intentions might characterize the others as having ill defined or problematic goals. The technology within the problem domain may be clear to someone with expertise in that domain but may be unclear to others who have experience with different (not necessarily superior or inferior) domains.

When one thinks about the independent streams that Kingdon describes, it almost appears totally random as demonstrated in the attached diagram (click on the image for a higher resolution image).

The diagram demonstrates the “Holy Grail” that comes into existence when all of the streams come together – the opportunity to create public policy or make decisions by governments or businesses respectively. Unfortunately, the diagram also suggests a significant amount of randomness present that makes such a Holy Grail elusive.

Some might suggest that one can simply observe progress along the different streams and prepare to execute as they coalesce, thus removing randomness from the process. Unfortunately, the streams themselves are quite fluid, shifting constantly and so predicting a coalescing of the streams is not easily performed given that the intersection point itself is not static along each of the streams.

In addition, I would like to add an additional stream to the mix, the stream being one of feelings, agendas or motives, both on the part of those whose execution will produce a result (represented as intention) and on the part of those impacted by execution (represented as expectation).

Given that all of these streams coalesce into somewhat of a random collection of events, intentions, problems and solutions, I believe the multiple streams are more accurately represented as a true garbage can as shown in the attached diagram (click on the image for a higher resolution image).

What are the possible ramifications of such random execution?

In a study conducted by Kathleen Tierney of the Disaster Research Center at the University of Delaware^[ii], Ms. Tierney posited that:

“Of the four key disaster phases or management tasks (mitigation, preparedness, response and recovery), mitigation has been studied the least (Drabek 1986a) and is probably the least well understood.”

She went on to say that hazards to government and business that could be avoided but which are not are as the result of:

“Being at the ebb and flow of public and elite interest, and many alternate strategies, including various mitigation approaches, are available to deal with them”.^[iii]

This suggests that disaster avoidance within government and business is almost totally random at best unless an equally random opportunity to address the problem arises.

Alesch and Petak, in their study “The Politics and Economics of Earthquake Hazard Mitigation” ^[iv], noted the following:

“Windows of opportunity are essential for hazard mitigation policy to be enacted. Windows can be pried open with enormous continuing effort but they open automatically in the event of a low probability / high consequence event that demands community attention.”

In other words, the best time to come up with policy decisions within an organized anarchy seems to arrive after a similar disaster has already occurred. This is cold comfort to those who have lived through the previous disaster. It is also complicated by the fact that even when the perfect window has arrived, it must be executed within constraints that exist at the moment in the areas of time, energy and money before the political will fades or the opportunity is diverted to some other perfect coalescing of the streams as described by Kingdon.

If we zoom in on governments for a moment, this problem is exacerbated with the knowledge that the problem or opportunity participants form three distinctive camps with three different sets of problems, solutions and expectations:

The electorate – wanting good schools, hospitals, roads and other infrastructure and wanting it immediately. Electorate needs are often immediate and of short-term duration, with voters tending not to look at the long-term picture.

The politician – wanting to serve their constituents as well as possible (hopefully true but not always) with their primary focus still being on getting re-elected in 4 years (or whatever the term of office is). Their focus on getting re-elected makes their horizon medium term in duration, acknowledging their electorate’s needs while recognizing that a single term in office may not be sufficient to answer to those needs (or their own needs in some cases).

The bureaucrat – wanting to execute their long-term strategic intentions without interference (and sometimes knowledge) of the electorate or the politician. This reflects a long-term need, often seeing strategy in 20-year windows or longer.

The difficulty of such a partnership is shown in the attached diagram (click on the image for a higher resolution image).

So the question becomes this:

If the results of our governments and businesses are in fact truly the random coalescing of all of these streams, representing the dark complexity of organized anarchy, what can we do to avoid an inadvertent total disaster that must be statistically inevitable if our execution is reduced to luck?

I posit that we need a more strategic approach to nullify the randomness that is so well-described in Kingdon’s organized anarchy theory. This strategic approach would have an almost “return-from-the-future” type effect that provides the strategy practitioner with an opportunity to understand the streams as they played out in the future and to work backwards from the end of the streams to identify where the coalescing actually took place.

While a “return-from-the-future” effect exists primarily in the realms of H.G. Wells or Hollywood, I believe there is a way to be accurate in predicting the outcome from random participants, problems, events and the like.

It is through the use of a process called backcasting.

Backcasting is defined as:

“Defining a desirable future and then works backwards to identify policies and programs that will connect the future to the present. The fundamental question of backcasting asks: "if we want to attain a certain goal, what actions must be taken to get there?" Forecasting is the process of predicting the future based on current trend analysis. Backcasting approaches the challenge of discussing the future from the opposite direction.”^[v]

The attached diagram illustrates a high-level mind map of backcasting (click on the image for a higher resolution image).

In the process of executing a backcasting process, one attempts to define a future state as having already occurred and then stepping backward, asking one’s self what has to have happened before the current step in order for the current step to occur. With the previous step defined, one then asks what has to have happened prior to that step in order for the previous step to have occurred and so on until one reaches one’s current state with its collection of participants, problems, solutions and other entities as defined by Kingdon.

The process of backcasting allows the strategic observer to remove the mystery from a future event by forcing the understanding of all the resources in play; knowledge, money, interdependencies and the most seemingly random resource of all, people. It forces the strategic observer to understand the motivators, intentions, intelligence, knowledge and other elements of the participants and in doing so, takes much of the randomness out of the equation.

How effective is such a process?

In March of 2008, the author of this paper, as a long time Wall St. strategy advisor, wrote a blog warning of the coming financial collapse in September of 2008. The blog, entitled “Financial Crisis”^[vi], publicly identified when the collapse would occur and named the two financial institutions, Lehman Brothers and Merrill Lynch, that would disappear as a result of the event. Financial institutions who foresaw the crash and who read blogs such as this one protected their assets while many people and organizations lost everything.

Meanwhile, in the months leading up to the crash, groups such as the US Federal Government and other organizations were predicting that the nation was on the cusp of greatness.

For example, on February 28, 2008, MSN’s real estate column wrote that “now” was the perfect time to buy into real estate^[vii] , encouraging young people and renters with this line:

“Sliding prices and desperate sellers may seem to make this the perfect time for young renters to buy their first home.”

The Insurance Journal released a study on July 23, 2008 entitled “US Entrepreneurs More Optimistic on Taking Risks”^[viii], where they noted the following outlook on entrepreneurs and business:

“Overall, their outlook is very optimistic,” added Donnelly. “People are choosing a new path of self-direction and welcoming what lies ahead.”

Less than two months later, most of these businessmen were wiped out.

And finally, the New York Times on January 23, 2008, quoted^[ix] then Secretary of State Condoleezza Rice when she described the US and global economy this way:

“Its long-term economic fundamentals are healthy,” said Secretary of State Condoleezza Rice of the United States in a speech Wednesday at the World Economic Forum. She declared that President Bush had provided an “outline of a meaningful fiscal stimulus policy.”

The author of the New York Time article closed the article with this prophetic quote:

“As I write this, her speech is continuing, uninterrupted by applause.”

Months later, we experienced the worst economic collapse in world history with its remnants still affecting us today.

Having sat in many Wall St. and government meetings in the months and years leading up to the events of September 2008, Kingdon’s organized anarchy theory was prevalent everywhere. We were plagued by agenda-less meetings that invited people for no other reason than to make it look like they were contributing to “something”, even though without an agenda, why many people were present was a mystery to all of us and without a problem being defined (the pending crash), their contribution was unknown anyway. We executed meetings daily in blind denial of the events that were unfolding.

In the end, some of us recognized that garbage can theory in its purest definition was alive and well, but unfortunately, critical deadlines were approaching that the participants in the garbage can seemed unaware of or uncaring about as they focused on personal agendas that were meaningless and trite (and would mean nothing once the economic collapse arrived).

It was because many of us recognized that garbage can theory was in fact leading us blindly to the abyss that we switched to backcasting theory to predict the time, scope and scale of the pending event, factoring in the same elements as Kingdon describes but doing so in such as way as to remove as much of the randomness as possible.

In other words, garbage can theory will eventually produce a result but sometimes one has to take the randomness out of it using other theories when critical deadlines appear on the horizon.

By taking the key elements of garbage can theory, namely,

• Ill-defined goals
• Unclear technology
• Fluid participation
• Independent streams of solutions, problems, participants, and choice arenas

and my optional additional element of feelings, agendas and motives and evaluating them strategically using a process like backcasting instead of leaving them to the randomness of the garbage can, one has a better opportunity to make policy or business decisions that are more appropriate, more timely and more effective to the people they serve.

More organizations are recognizing the importance of finding time-sensitive solutions and are embracing the less random, more accountable results from backcasting, including but not limited to^[x]:

• fms - The Division for Environmental Strategies Research, Royal Institute of Technology, Sweden
• Global Scenario Group
• Institute for Sustainable Futures
• The London Perret Roche Group LLC
• Pacific Institute
• POLIS Project on Ecological Governance
• POLIS Water Sustainability Project
• Tellus Institute - environmental research group that uses backcasting to develop strategies for sustainability
• The Natural Step
• Sustainability department at the Blekinge University of Technology
• Transport Studies Unit, University of Oxford, UK

Unfortunately, finding solutions to the challenges from garbage can theory increase public accountability and responsibility, something that often contradicts with the public intentions of businessmen and politicians. I wonder if this is why we still prefer the randomness of garbage can theory when more effective practices exist.

Only the writers of our history books will know for sure.

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References (some links may be stale)

[i] Kingdon, J. W., Agendas, alternatives, and public policies, second edition, Pearson, 1995, Print

[ii] Tierney, Kathleen J., Improving Theory and Research on Hazard Mitigation: Political Economy and Organizational Perspectives (pp 367), International Journal of Mass Emergencies and Disasters, November 1989, Vol 7, No. 3, Print

[iii] Tierney , Kathleen J., Improving Theory and Research on Hazard Mitigation: Political Economy and Organizational Perspectives (pp 385), International Journal of Mass Emergencies and Disasters, November 1989, Vol 7, No. 3, Print

[iv] Alesch, Daniel J. and Petak, William J., The Politics and Economics of Earthquake Hazard Mitigation: Unreinforced Masonry Buildings in Southern California, University of Colorado – Institute for Behavioral Science – Program on Environment and Behavior Monograph #43, Print, 1986

[v] Widipedia, Retrieved from URL http://en.wikipedia.org/wiki/Backcasting on November 8, 2013

[vi] Tucker, Harry, Financial Crisis, Harry Tucker – Observations and Musings, Retrieved from URL http://harrytucker.blogspot.ca/2008/03/financial-crisis.html on November 8, 2013

[vii] Editor, February 28, 2008, MSN Real Estate, Retrieved from URL http://realestate.msn.com/article.aspx?cp-documentid=13107821 on November 10, 2013

[viii] Editor, July 23, 2008, The Insurance Journal, Retrieved from URL http://www.insurancejournal.com/news/national/2008/07/23/92136.htm on November 10, 2013

[ix] Editor, January 23, 2008, The New York Times, Retrieved from URL http://dealbook.nytimes.com/2008/01/23/entering-a-no-gloom-zone/?_r=0 on November 9, 2013

[x] Wikipedia, Retrieved from URL http://en.wikipedia.org/wiki/Backcasting on November 8, 2013

Baking Bread, Business and the 100 Meter Dash For People With No Sense of Direction

You don't run 26 miles at five minutes a mile on good looks and a secret recipe. - Frank Shorter

I once asked my mother for her bread recipe and she replied “I don’t really have a recipe.”  When I asked her to recall how she consistently baked the same great bread time after time, she had to give it some thought, replaying the process in her mind in order to recall the ingredients and the steps necessary.  Even when I knew her secret to success, the complexity of the skills necessary to bring it all together clearly manifested once I attempted to recreate the bread that I loved as a child.  “Punching”, “kneading” and “rising” are obviously more complex concepts than this strategy guy thought they would be. :-)

A talented baker can make many minor alterations to the process of bread making, perhaps using different flour, different yeast, different oven temperatures and the like, but there are some basic unalterable tenets when it comes to baking bread.  For example, one does not throw flour in an oven, bake it at 350 degrees for an hour and then add the yeast later.

When it comes to baking great bread, variations of technique and ingredients exist but there are some elements to the science of baking great bread that are immutable.

Business is the same

There are many ways to create a successful business and when one listens to successful businessmen, whether it be Bill Gates, Richard Branson, Elon Musk or others, they all illustrate different methods and styles of creating success.

But within the variants of their individual success models, there are a few basic principles that they all embrace:

1. They know what their end goals look like in concrete, measurable terms.
2. They know the correct order of the steps necessary to get there.
3. They know what resources (financial, human, knowledge) that will bring them closer to or further away from their goals and they know at what point they need to have the appropriate resources in place.
4. They know how to answer the questions “why” and “how do you know” when questioned about their end goals, their milestones, their resource needs and how they set about to find success.
5. Within the context of their execution and intention, they adopt the principles of flexibility and adaptability while keeping their end goals in mind.
6. They have a passion for creating the best result possible and will do whatever it takes to accomplish it.
7. They embrace their passion but reinforce it with facts and not fantasy.

And yet for all the models of success that exist, too many small and medium sized businesses still look like Monty Python’s “100 Meter Dash for People With No Sense of Direction”.

Monty Python

To follow the road to success in business is much the same as following a GPS.  When one asks for a destination, it is highly unproductive (and sometimes physically impossible or even dangerous) to follow the directions in the order one’s ego insists instead of the steps being offered by the GPS.  Making one’s way efficiently to the desired destination requires an intelligent, methodical process, taking each step in the right order, with variants allowed for “meals, fuel, bathroom breaks and photo ops”.

With all the success models available in the world, why is success so elusive for so many?

I believe it is because the need to listen to or satisfy one’s ego is much stronger than one’s desire for success.  When people get angry or affronted with such a suggestion, that is in fact their ego confirming that such an assertion is true.

Fortunately for drivers, when we choose to ignore our GPS, few notice the mistakes our ego created (with the exception of screaming kids and spouses who are hungry or tired).  And while it is true that ignoring the GPS may occasionally produce an unforeseen side trip that turns out to be delightful, that is a rarity that occurs by luck and not by design.

The business world is, unfortunately, not as private or as forgiving.  As this photo shows, sometimes you are the bear and sometimes ……

The Bottom Line

Gerald Weinberg explains in his Bread Recipe Rule that the same ingredients, the same recipe and the same baker will always produce the same bread.  A recipe for success must include the essential ingredient of intelligent, replayable, consistent, predictable, measurable strategy.

When one sets out on the road to personal or professional success, it is essential to find a “baker” who successfully bakes success consistently and then model their behavior.  Many successful “bakers” exist as long as your ego doesn’t prevent you from finding them and learning from them.

If you don’t find a successful baker to learn from or if you find one but choose not to learn from their victories and defeats, there is a strong likelihood that you will still bake something.

But for some reason, it may not smell like success.

What do you think it will smell like?

Are you sure?

How do you know?

In service and servanthood,

Harry

Why Your Business Really Failed

That's been one of my mantras - focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains. - Steve Jobs

Simplicity is the ultimate sophistication. - Leonardo da Vinci

After watching another business go down the drain with some really smart MBAs at the helm, I have to admit that I’m starting to become slightly discouraged (ok … really discouraged) about the number of unnecessary business failures that are occurring.

I’m not talking about business failures where market conditions, bad luck, aggressive competition, faulty legislation, poor data or some other factors contributed to the failure.

I’m referring to a lot of well-educated MBAs, PhDs and the like setting out for success while breaking every rule of intelligent business execution, including failing to establish measurable goals and outcomes, not having realistic tactical roadmaps, ignoring the competition, refusing to take corrective action when required, not seizing opportunities laid before them, not learning from the mistakes of others, etc.

What is the reason for such sloppy business execution?

Such failures are certainly not for lack of education, access to information or because of a shortage of best practices, methodologies, frameworks and brilliant minds.  One could make a lifetime out of study and never scratch the surface of the knowledge available.

In fact, maybe we suffer from the reverse.  Maybe we have too many techniques in the business world such as SWOT, Porter 5 Forces Analysis, PEST, GE / McKinsey Matrix, backcasting and the like and people’s brains are melting under the pressure of trying to memorize all of them.

Or maybe there’s another reason.

And so with that in mind, I offer my “predicting business success model for 10-year-olds” model.  Study it carefully – there will be a test afterward.  Click on the image for a readable version.

Bottom Line

Yeah, I know … a little sarcasm can certainly be discerned from my over-simplified diagram. :-)

But the bottom line is this.

The knowledge generated by our education institutions (including MOOCs – massive open online courses), public and private entities and in Life itself is staggering in width, breadth, depth and quality.

We all have fairly unlimited access to all of this knowledge (with the exception of the awesome database that the NSA has put together).

And most importantly …….. there are many people who create success despite staggering odds. 

So there must be another reason why too many businesses fail when success should have been almost assured and why some businesses succeed when failure was confidently predicted by everyone around them.

Do you know what that reason is?

I have a suggestion but I’m not sure your ego can handle it.

Oooops … did I just answer the question by accident?

Unfortunately, skill in this area cannot be taught although it can and must be learned to be successful in a sustainable way.

In the meantime, please strive harder to not be an inspiration for posters like this:

Or this:

The world needs more people who know what they are doing …. and it needs them in a hurry.

Are you one of those people?

Are you sure?

How do you know?

In service and servanthood,

Harry

PS This applies to politicians as well.  Those studying former Premier Dunderdale’s recent flameout in Newfoundland and Labrador would do well to understand the lessons contained within or run the risk of repeating them.

The World As Seen By The Objective Observer

Dispassionate objectivity is itself a passion, for the real and for the truth. - Abraham Maslow

A creation needs not only subjectivity, but also objectivity. - Stephen Chow

I receive thousands of emails from people asking me how I am able to quickly predict success or failure of governments, politicians, businesses, etc.  Many times when “interesting events” are afoot, I am asked to choose which way I think a particular event will finish.

Many people who are on the receiving end of good news from the models I use are grateful that I was able to ferret out details that they had overlooked or had not even thought about.

Many who are on the receiving end of bad news or whose passion is not in congruence with the reality of my models get very angry that an absolute stranger can spend a little time with them and identify their pain and its source or predict their demise (often within a very specific timeframe).

And a few have voiced the opinion that the use of such models makes me more machine than man.  Such assertions by carbon-based life forms seems illogical to me but that’s only after a first pass through my analysis of such statements.

In the spirit of sharing and for the thousands of people who have emailed me (thank you) and accepting that I cannot reply to everyone individually, I offer this explanation of what my Tarot cards, tea leaves or “insert your favorite divination form here” looks like.

Welcome To My World

Everything I do professionally (and sometimes personally) is through the lens of a model.  The models you are about to see, expressed as mind maps, have corresponding math models that I apply to various scenarios, the output of which is used for the specific situation I am analyzing.  The following models are simple on first blush, obfuscating the complexity of the math models underneath.

For example, this is one of the lenses through which I analyze companies and governments:

 

Which is validated using this methodology (click on the image for a readable version):

 

This is one of the lenses through which I examine the world that employees live in (click on the image for a readable version):

 

This is one of the lenses through which I measure someone’s level of authenticity, a means of measuring how congruent their thoughts, words and actions are (click on the image for a readable version):

 

And this is one of the lenses through which I analyze how governments and companies need to work with the people, not against them or in spite of them (click on the image for a readable version):

 

These are the simple models.  The scenario analysis, result prediction and risk assessment models are more entertaining (and shareable if one has an interest in exploring them). :-)

I seek the answers to many questions via the execution of these models but two questions are the most important to me and which seem to create the most difficulty for people. The two questions are:

Why?

How do you know?

Three things become apparent when I use my models:

1. They are not perfect, although I trust data over emotion and find that it is far more reliable in predicting the future (or analyzing the past).

2. People love or hate my models depending on which side, the good side or the bad side, they find themselves on.

3. I am unable to build a winning NFL fantasy team no matter how hard I try.

All that being said, the use of the models reveals a deep-rooted passion within me that is best explained by Helene Deutsch when she said:

After all, the ultimate goal of all research is not objectivity, but truth.

This simple statement best describes why I do what I do for who I do it for.

And while human beings are fascinating in their complexity and diversity (and maddeningly complex to model), isn’t that what we all seek – truth in business, in government, in our relationships and in ourselves?

In a world filled with complexity, uncertainty and unlimited potential, the ability to discern truth is more important than ever and will determine the future of this planet – good or bad.

All things being equal, I would rather let facts speak for themselves rather than risk myself, my family, my clients, my country and my world to someone’s aggressive, loudly-shouted assertions or opinions (which they mistakenly or intentionally misrepresent as facts).

How about you?

In service and servanthood,

Harry

Addendum – January 22, 2014

I sometimes share the results of my models on my blog as I did in March of 2008 where I predicted the financial collapse of September of 2008 (Financial Crisis) or November of 2010 where I noted that Premier Danny Williams’ sudden resignation left a leadership void in the PC Party of Newfoundland and Labrador that could potentially bring the party and his successor down (Premier Williams and His Legacy).  The latter was proven today with the resignation of his successor, Kathy Dunderdale, over leadership concerns as expressed inside and outside the PC Party.

Models and the data that feeds them are rarely if ever perfect (have you listened to an economist or weather forecaster lately?).  However, there are times when data sees obvious things that emotion or ego refuse to acknowledge.

On a separate note, here is a great article in the Economist  (Who’s Good at Forecasts?) for those fascinated by the art of using models for predictions.

Final Thought - Why Data Matters

On a clear sunny morning some years ago, Kermit Tyler received a telephone call from a radar operator who informed him that he was seeing a larger radar return than he was used to seeing on his equipment.

Since it was a quiet Sunday morning and since he knew that a flight of aircraft was expected at a nearby airfield, Mr. Tyler told the radar operator “not to worry about it”.

It was the morning of December 7, 1941.  The radar operator was observing the arrival of the attacking Japanese planes as they prepared to bomb Pearl Harbor.

Mr. Tyler ignored the data and the rest is history.  In his defense, he was cleared of any wrongdoing as noted in this excerpt from Wikipedia:

Tyler had been assigned to the Information Center with little or no training, no supervision, and no staff with which to work. Tyler was subsequently cleared on any wrongdoing by the Board and no disciplinary actions were taken against him.

Ignoring data because one is not trained to process it or to dismiss it because it seems unimportant are common mistakes made in business and in Life.

Do you want to be remembered as the person who was responsible for the result that followed?

I didn’t think so.

Will the Ignorant Inherit the Earth?

Blessed are..
...the poor in spirit: for theirs is the kingdom of heaven. (5:3)
...those who mourn: for they will be comforted. (5:4)
...the meek: for they will inherit the earth. (5:5)
...those who hunger and thirst for righteousness: for they will be satisfied. (5:6)
...the merciful: for they will be shown mercy. (5:7)
...the pure in heart: for they will see God. (5:8)
...the peacemakers: for they will be called children of God. (5:9)
...those who are persecuted for righteousness' sake: for theirs is the kingdom of heaven. (5:10) – Matthew 5:3-10

Anyone who has studied theology understands that the format of the Beatitudes is always the condition followed by the result.

After a conversation with a friend and business colleague today, I’d like to create my own set of anti-beatitudes that I refer to as the Anti-Success Beatitudes.

They are as follows.

Cursed are ..

… those who prefer fantasy over fact, for reality is inevitable and painful when ignored.

… those who think that the details don’t matter, for the devil is always in the details.

… those who prefer politics over partnership, for they will find themselves without friends when they need them the most.

… those who prefer obfuscation over clarity, for they will be overwhelmed by complexity.

… those who think that values, ethics and morals are inconvenient or fluid, for when all else fails, they are how we are perceived, judged and remembered.

… those who ride coattails, for they will find themselves naked and exposed.

… those who focus on the small and unimportant, for the ignored may become significant and critical.

… those who are ruthless, for they will find themselves without favor when they need one.

… those who prefer academia over Life experience, for wisdom comes from how knowledge is applied and not how it is cited.

… those who think that more process is always better, for they will find themselves owned by the process instead of owning it.

… those who hide their weaknesses or incompetence behind bravado or “the rules”, for they will be revealed at a time most inconvenient.

… those who think that excessive busy-ness is the mark of a winner, for they will find their productivity and Life-work balance diminishing exponentially.

… those who think that a packed calendar is a good one, for they will be owned by it and will suffer as they discover that what matters couldn’t find its way into it.

In the Beatitudes, Jesus promised rewards for those who could identify with the Beatitudes.

In the corporate (or government) world, much can be suggested about the punishment that awaits those who allow their team members to succumb to the Anti-Success Beatitudes.

That is of course, unless they fall prey to the worst of the Anti-Success Beatitudes.

Cursed are ..

… those whose ego is significant, for punishment awaits those who are unable to learn, to adjust, to improve, to share and to serve others because they see not the reason to.

Will the ignorant inherit the earth?

I don’t know but I have a fear that we are definitely trending in the wrong direction.

What do you think?

How do you know?

In service and servanthood,

Harry

Dedicated to P – who lives by the real Beatitudes and not the Anti ones.

The Seven Sins of Business

Those who know me well know that I have an interest in theology in addition to my work in corporate strategy and large-scale enterprise architecture.

In reading the Book of Revelations last night, it occurred to me that the sins attributed to the seven churches apply to many businesses as well.

How many of these “sins” is your organization guilty of?

Ephesus

Has lost sight of its first love, or in business nomenclature, its vision, mission and purpose and drives along aimlessly before running out of resources and momentum.  They have also lost a “love” for those whom they serve, especially their customers and their own team members.  The leaders in such organizations are unable or unwilling to cast a vision that creates excitement and passion for others to embrace while envying others who can create such passion.

Smyrna

Has victory within reach but is at risk of failure because when the squeeze of reality hits, their belief in themselves wavers and their ability to persevere needs to be shored up – but do they have the courage to ask for help in strengthening their resolve?  They also don’t realize the gifts that are before them.  Excessive ego and the inability to obtain help or the reverse, insufficient self-confidence, have destroyed many companies in such predicaments.

Pergamum

Are willing to compromise their corporate and personal morals and ethics to win, not realizing that such a strategy is short-lived and fraught with peril.  Wishy-washy ethics and morals, which are especially important when one is faced with challenge, are a sure-fire way to send a loud message to the public that says “I don’t know what I represent or what I am willing to stand up for”.  Such a message is easily picked apart by those receiving it as well as those looking to take advantage of one’s weaknesses.

Thyatira

Is rotting from within as a result of internal power struggles.  It fails to recognize that such rot from within, with multiple agendas that are not in congruence with the organization and its team members, including in the areas of morals, ethics and execution style eventually destroys the entire organization.  Strong leadership stamps this out early.  Weak leaders tolerate it or in some cases, encourage it because they think, incorrectly, that such strategy strengthens their own potential.

Sardis

Has lost its energy and drive for what matters and is on auto-pilot, with its present course taking it straight into the side of a mountain.  Meanwhile, they are focused on expending energy on what doesn’t matter in order to impress others – they look alive but in fact they are dead and no one seems to have the energy, interest or authority to bring its course back on track to one of success.  In some cases, attempts by outsiders to help are thwarted for fear that “it may make us look bad if someone else saves what we couldn’t or wouldn’t”.  Sufficient ego and energy well-utilized propel us to success.  Excessive ego or misdirected energy kills that same success potential.

Philadelphia

Has a small amount of power with huge potential for leverage and opportunity but  faces risk if it doesn’t take advantage of the opportunities such leverage provides, leaving a large amount of untapped potential on the table.  While they don’t appear to be doing anything wrong, potential unrealized can be as wasteful as doing the wrong thing.  If someone else seizes the opportunity, the potential they once had is lost for good.  Never underestimate the success that manifests when one seizes the moment, otherwise the competition will seize the moment to your detriment.

Laodicea

Despite tremendous wealth and opportunity, their complacency and smugness fills them with over-confidence.  This creates a laziness in execution, causing them to display an exorbitant amount of compromise, with its vision, mission and values blowing in the wind and its corporate execution constantly changing direction based on the opportunity / pressure du jour.  Eventually, no one know what it stands for and its opportunity for success is lost.  This is common in organizations with weak leadership or organizations that lack a strong, clearly communicated business strategy.

Such “sins”, while potentially fatal, can be overcome with corrective action.

However, corrective action in any of these cases requires:

• the right amount of humility
• the right amount of ego to balance against humility
• sufficient amounts of passion (without burning out one’s organization) cast around intelligent vision, mission and purpose
• an effective strategic plan and tactical roadmap for the organization, plans that grow with the organization, that are referenced frequently and that are not merely relegated to a filing cabinet after they are created
• a plan that shows how each team member’s strengths, skills, talents and opportunity for personal and professional growth are recognized and embraced
• an appetite to seize the moment, knowing that if you don’t, someone else will
• a desire to not leave any opportunity on the table that the competition would gladly snap up
• strong ethics and morals, especially in the areas of honesty, transparency, respect and personal accountability
• leaders and team members who have the will to do what it takes to “repent” and to get the organization back on a path to success.

Failure to address one’s “corporate sins” will produce a painful, expensive success at best or apocalyptic failure in a worst-case scenario.

Choosing to be intelligent and proactive in execution allows one to prove another Bible adage to be correct:

No discipline seems pleasant at the time, but painful. Later on, however, it produces a harvest of righteousness and peace for those who have been trained by it. – Hebrews 12:11 (NIV)

Actions and not words make it easy for an outside observer to predict an organization’s potential for success or failure.

What actions are you embracing?

How do you know?

In service and servanthood,

Harry

Success–Not Without Passion

When I am asked to partner with individuals and organizations, there are a few things that I need to see in order for me to collaborate with them.

They have to have a strong vision, mission and sense of purpose, a well-defined expression of their view of the world and their response to a need or opportunity in the world

They have to have a strategic plan with measurable outcomes.  If they don’t know where they’re going, then there is no point in setting out in the first place.

Lewis Carroll expressed it well.

In addition to a plan, they have to have tactical roadmaps that translate strategic plans into measurable goals and milestones.

They have to exhibit a propensity for intelligent execution.  The best laid plans without smart execution are just hopes and dreams.  As some say in business, there is nothing the world loves more than to snack on people’s unrealized dreams, as expressed humorously with this Despair.com poster.

It’s all classic, business 101 stuff.

There is nothing magic here.

But all things being equal, there are two things important to me that separate those who just have great ideas from those who convert their ideas into reality.

One is an appropriate balance of hubris and humility – the ability to learn from others and the acknowledgement that they don’t know it all while at the same time not being a doormat.

The other is a sense of passion – that they are willing to do whatever it takes to translate vision into success.

The latter is really important to me.

Many times when people come to me for help, I may say “no” or “maybe” even when the opportunity looks very appealing.

It’s not because I don’t believe in the opportunity.

It’s because I want to see how badly they want it.

I want to see how they respond to “no”.

Do they say “Ok” and walk away with their tail between their legs?

Or do they say “I don’t accept no.  Here’s why I believe that we need to do this.”

If their passion is not burning hot enough to make their dream a reality, how do I know that they will do what it takes, especially when times get tough?

It’s when times get tough that appropriate strategy, strong plans, intelligence, sharp execution, market opportunity and luck may not be enough.

It’s during those times that passion may save the day, providing the fuel that allows one to persevere through adversity.

It may save your business.

It may save your Life.

As Nelson Mandela once said:

There is no passion to be found playing small - in settling for a life that is less than the one you are capable of living.

But make sure one balances passion with intelligence, otherwise one ends up proving the wrong side of Francois de La Rochefoucauld’s belief when he said:

Passion makes idiots of the cleverest men, and makes the biggest idiots clever.

Be passionate about your business and your Life.

A Life well-lived demands nothing less.

Create a great day – because merely having one is too passive an experience.

In service and servanthood,

Harry

The Impact of a Few Words

Having grown up in Newfoundland, where years ago English was considered a second language to the local “Newfinese” dialect, I am fascinated by words.

Phrases such as “me mudder and me fahder” (my mom and dad), “side be each” (side by side), “got ‘er scald” (got it made) and “how yer gettin’ on, me ol’ cock” (how are you doing, my friend) always bring a smile to my face.

Sometimes when we find ourselves in a new locale, words that seem innocent to us can also get us in trouble.

In my early Wall St. days, one day I was delayed for a meeting by a subway breakdown.  When I arrived, I stuck my head in the boardroom door, apologized for the delay and said I would be right back after freshening up.

When I returned to the boardroom a few minutes later, everyone was very concerned.  Apparently the phrase “I got held up on the subway” that I had dropped before stepping away meant a lot more to them then it did to me.

Then there was the time when, as a very young consultant (and still learning mainland English), that I found myself in Austin, TX.  I was working with a client who loved to take the team out every night for copious quantities of tasty chilli and cold beer.

On my third or fourth day there and after having been awakened very early every morning by intense thunderstorms, I happened to remark to a few team members how the morning thunder was particularly wild in Austin.

There was silence in the room and then someone remarked that a comment like that wasn’t necessary.  After some further exploration and a clarification on what I meant, I had provided them with a humorous story that I am still occasionally reminded of 20 years later.  If I have to explain it to you, I will refer you to this entry in the Urban Dictionary – this is a family-friendly blog after all. :-)

So even a few words can get us in trouble when they don’t seem that impactful to us at the moment.

Where it really matters

I was in a small coffee shop not long ago where the owner had introduced a new contest that made use of QR codes.  There were some technology issues with it and wanting to help, I happened to mention to the owner what needed to be done to fix it.

Her reply “I don’t really care about it – I’m just experimenting with it and don’t have any intention to do anything with it” spoke volumes to me about not wasting my time and I quietly unsubscribed from the contest.

The next day, in the same coffee shop, a woman struck her head severely on an object protruding from the wall and was dazed by the impact.  I happened to mention the incident to the owner and advised her to take care of the object to avoid liability issues in the future.  Her response was “I don’t really care about it – each person has to be responsible for themselves”.

While disappointed by the response, I did notice a common theme in how the owner responded to comments from customers.

“I don’t care.”

So when I received a lecture from an employee of the same coffee shop a short time later slamming “you elite people who spend time in coffee shops instead of working hard like others”, I never even bothered to tell the owner. 

Why should I – she didn’t care.  I took my business elsewhere, as I understand others have as well after receiving similar comments.

A few words is all it takes

All it takes is a few words to show a client, a customer, a colleague, a friend or family member or a complete stranger whether they matter or not.

A few words that only take a few seconds to toss off nonchalantly can mean the difference between a relationship that lasts and produces mutually beneficial results or one that ends early without producing anything of a positive nature for either side.

I find that this is particularly true in business.

The phrases “the client / employee / customer matters” and “I don’t care” only take a few seconds to speak.

What we say reflects what we believe.

What we believe will be reflected in the actions we take.

Therefore, it stands to reason that our choice of words will speak volumes to others about what we expect to contribute to and get from a relationship.

A few words, spoken sometimes without thinking, will produce a result of much longer duration and greater impact than we realize.

Whether it’s a good result or a bad one will depend on the words we choose.

“Let ‘er slide” (“Take care and create a great day” for you non-Newfoundlanders). :-)

Harry

 

From the funny folks as Despair.com: