Strategy. Innovation. Brand.
Understanding the Railroad Cliché
Tax collector.
It’s become a cliché that the problem with railroad companies is that they defined themselves as railroad companies. When other forms of transportation came along, railroad executives missed the opportunity to become multi-modal transportation companies. They boxed themselves out of the next growth industry.
I’ve often heard executives mention railroads as a cautionary tale: don’t define your business too narrowly. Indeed, the idea has become a meme that seems to live independently of us. Like a virus, it simply replicates and spreads.
I didn’t know where this particular meme came from, so I decided to track it down. By tracing where the insight came from and how it developed, I thought I could learn more about how to avoid disruption.
I found the originating article fairly quickly: “Marketing Myopia” by Theodore Levitt published in Harvard Business Review in 1960. I’m sure I’ve read the article before but I don’t remember when. The meme simply planted itself in my head and lived on without further cultivation.
What else did Levitt have to say? Essentially that businesses exist to solve problems for their customers. Too many businesses become enamored of their technology and their production processes and put the customer at the end of the chain rather than at the beginning.
Levitt uses the petroleum industry as a running example of the problem. As he saw it, oil companies define themselves as oil companies, not as energy companies. They focus on finding, extracting, and refining oil and don’t really understand their customers’ issues.
Levitt points out that people don’t like buying gasoline. It’s an interruption and an inconvenience and how can you really tell if you’re getting good gas or not? He writes, “What [people] buy is the right to continue driving their cars. The gas station is like a tax collector….” Levitt predicted that a new technology – probably fuel cells – would soon make it easier to continue driving our cars and that oil companies would be in dire straits.
Levitt also warned that technical research would not protect companies from obsolescence. Technical research tends to focus on improving something that already exists. The issue is that something that doesn’t exist comes along to disrupt existing industries. Fall in love with your technology and you’ll be blinded to the threat.
Similarly, mass production is like a drug. Too many executives believe that they can solve most any problem by scaling up and reducing unit costs. But that simply lowers the cost of something that customers don’t want.
As Levitt writes, it’s ultimately about the customer, “Selling focuses on the needs of the seller, marketing on the needs of the buyer.” Rather than focusing on technology, products, and production, a marketing-oriented company focuses on “satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering, and, finally, consuming it.”
Ultimately, marketing is not about making the product attractive to the customers. It’s about making products that attract customers. When we use the railroad cliché, we sometimes forget that. We may think about definitions and imagination. But it’s really about understanding and it begins with the customer.
Are You Happy? Hedonic or Eudaemonic?
Eudaemonia!
Research on happiness often distinguishes between two types: affective happiness and evaluative happiness. Affective happiness is how you’re feeling now and in the recent past. It’s fairly volatile and can rise or fall quickly. Evaluative happiness measures how happy you are with your life. It tends to be more stable.
Both types of happiness fit into a broader category generally known as the hedonic theory of happiness. This is essentially the pleasure principle – we seek pleasure and avoid pain. It’s fairly straightforward and is often considered the ultimate goal in theories of positive thinking.
But let’s think critically about this. Is pleasure really all there is to happiness? When you overcome obstacles in life, doesn’t that make you happy, even if the process is painful? Can you be happy simply by thinking positively and banishing negative thoughts? Indeed, can you truly banish negative thoughts and emotions?
These questions lead to a different theory of happiness that’s often known as the eudaemonic perspective. In Western thought, the concept originated with Aristotle. The basic idea is that we should lead an actively engaged life, colored by virtue and excellent character. It’s often compared to what Mihaly Csikszentmihalyi calls flow – when you’re completely immersed in what you’re doing. You harness your emotions toward a task and become completely absorbed by it.
When you’re fully engaged, negative thoughts may arise just as easily as positive thoughts. Rather than trying to suppress negative thoughts, you simply let them flow by. They’re part of who we are. In fact, they probably have some survival value. They can spur you to take action against an obstacle, do something unpleasant but necessary, or even just take your medicine.
Indeed, it may well be the case that trying to suppress negative thoughts causes us to have more of them rather than fewer. As Tori Rodriguez reports, a phenomenon called dream rebound may come into play. Researchers at the University of New South Wales divided participants into two groups. One group was asked to suppress a negative thought just before falling asleep. The other group did not try to suppress their thoughts. Those who tried to suppress their negative thoughts reported dreaming about it more frequently than those who didn’t. (Though it’s a different realm, this is similar to Jevon’s paradox).
In my experience, negative thinking produces a second-order effect. First, we have a negative thought. Second, we get wound up about having negative thoughts. OMG, am I a negative person? Why do I have such negativity?
In my opinion, the second-order effect is more damaging than the first. Of course we’re going to have negative thoughts. We can’t avoid them. In fact, they probably help us survive. The trick is to let them pass. As the Tibetans say, thinking is like writing on water. It goes away. Allowing negative thoughts to flow may not lead us to hedonic happiness but may very well stimulate eudaemonic happiness.
Did The Government Create The iPhone?
Government at its best.
I’ve enjoyed and admired Apple products since I got my first Macintosh in the mid-1980s. Apple products are intuitive; they’re designed for people rather than technologists. I think of the company as innovative and dynamic.
On the other hand, I often hear that our technology and pharmacy companies would be much more innovative if the government would just get out of the way. Critics claim that governments are meddlesome nuisances.
Not so, argues Mariana Mazzucato in her new book, The Entrepreneurial State. A professor at the University of Sussex, Mazzucato documents the government-funded research that enabled many of the great leaps forward in information technology and pharmaceuticals.
Mazzucato argues that the state is the true innovator, willing to invest in high-risk endeavors that can affect all aspects of society. By contrast, private companies are relatively non-innovative; they simply take the results of governmental research and commercialize them. In Mazzucato’s view, the government bears the risk while private companies take the profits.
In an extended example, Mazzucato analyzes Apple’s iPod, iPad, and iPhone and the technologies they incorporate. She identifies a dozen embedded technologies and traces the origin of each. In each case, the technology originated in government (or government-funded) projects.
Mazzucato documents government investments from around the world. For instance, we wouldn’t have the iPod if not for German and French investments in giant magnetoresistance (GMR) that enables tiny disk drives. In the United States, the multi-touch screen was developed at the University of Delaware (my alma mater) with funding from the NSF and the CIA.
Mazzucato argues that we do ourselves a disservice by denigrating governments as bumbling meddlers. Private companies invest for the short-term and are relatively risk averse. Governments can look much farther into the future and can accept much less sanguine risk/reward ratios. As I’ve argued before, governments can create fundamental platforms that many entrepreneurs can capitalize on.
Mazzucato struggles with but doesn’t quite resolve the fundamental issue of fairness. Should Apple pay the government back for all the technologies it has capitalized on? One view is that Apple already reimburses the government through taxes. However, the recent ruckus about Apple’s ability to avoid taxes suggests that the reimbursement may not be full or fair. Perhaps Mazzucato can develop a mechanism that will help reimburse governments adequately for fundamental breakthroughs.
As Mazzucato points out, we tend to tell only half the story. We point to the successes of private industry and the failures of the government. If half the story becomes the whole story, we will underfund government research and drive away talented researchers. We won’t take the big risks but only the incremental, short-term risks that private capital can afford. For all of us who love the iPhone, that would be a shame.
(Click here to watch Professor Mazzucato give a TEDx talk).
The Art of Bouncing Back
Never, ever, ever, ever, ever give up.
An ounce of prevention is worth a pound of cure. We’ve all heard the phrase and we know it’s true. It’s better to prevent something bad (cancer, terrorism) than it is to try to cure it after the fact.
But life is full of risks and we can’t prevent all of them. What happens when you can’t prevent something bad from happening? How well do you bounce back? It’s a question of resilience – our ability to manage stress rather than allowing it to manage us.
We aren’t resilient by nature; it’s not an inborn trait. We learn (or don’t learn) resilience through experience and practice. I’ve been reading up on resilience in a number of different articles (click here, here, here, and here). Here are some tips.
Cognitive reappraisal – we all do dumb things or fail at certain endeavors. Failures can leave lasting scars. We think of a dumb thing we did – even long, long ago – and we conclude that we’re just not up to snuff. The next time we do something dumb, it just shows how mediocre we are. We don’t bounce back effectively because, …. well, we’re just not good enough.
But we can also revisit and reinterpret our failures. For instance, I once wanted to be a baseball player. I was a good fielder but I couldn’t hit well. Ultimately, I failed and for a while I was crushed. Looking back on it, however, I realize how lucky I was to learn the lesson early. I refocused on my studies and did reasonably well. More recently, I’ve reappraised my baseball failure. Now when I fail at something, I think, “Well, maybe it’s like baseball….” That helps me bounce back more quickly.
Make connections – all the resilience research I’ve read says it’s easier to be resilient when you have a close network of friends and family. When I’m having a bad day, I sometimes just want to withdraw. But I find that I bounce back better when I’m around other people. Build your network early; you’ll need it sooner or later.
Think positively – it may sound trite but it works. If you think of yourself positively, then a failure is the exception, not the rule. Even a very stressful event isn’t really about you. Your self-image provides a protective layer. A bad thing happened but that doesn’t make you a bad person. If you still perceive yourself positively, it’s easier to bounce back. A major blow can even provide the motivation (“I’ll show them”) to bounce back strongly.
I’ve picked up some other tips about resiliency and I’ll cover them in future posts. What I’m really looking for, however, is the link between resiliency and creativity. I’ve noticed that some of my more creative moments come soon after a setback, a failure, or just a very bad day. I think that resiliency can contribute to creativity but I don’t know quite how. If you see a link between the two, let me know your thoughts.
How Do You Know When An Argument is Over?
I’ve got a bone to pick with you.
How do you start an argument? How do you finish one? I’ve been thinking about those questions lately. It’s not because I’ve been arguing a lot but because I’ve been thinking about how we make decisions and decision-making often involves arguing.
Here’s how not to start an argument: walk into someone’s office and unload on him or her. That happened to me more than a few times during my career. It usually ended badly. When someone unloads on me, I find it difficult to listen dispassionately. Often, I strike back. I’m good with words, including mean-spirited ones.
Equally important, how do you know if an argument is over? I used to bump into colleagues occasionally and wonder, “Am I still mad at him? Is he still mad at me? How should I act?” When I’m thinking about questions like these, I’m not thinking about effective communication.
I think my grandparents, Grover and Addie, had an effective way to deal with these situations. When one was irritated with the other, he or she opened the conversation by saying, “I’ve got a bone to pick with you.” It was always in a neutral tune of voice. The phrasing was also neutral; it didn’t say, “I’m right and you’re wrong and I’m about to prove it.” Rather, it said, “We need to have a discussion and the outcome of that discussion may be that I’m right or may be that you’re right. But we need to clear the air.”
If Grover started the bone-to-pick discussion, Addie would typically respond by saying, “What’s the matter?” also in a neutral tone of voice. Grover would then lay out his case in an almost lawyer-like fashion. Addie listened essentially until Grover laid out his entire case. She rarely interrupted. (Grover did the same when Addie started the bone-to-pick conversation). Then they talked back and forth. From my kid’s perspective, it seemed like they both got equal time.
As they concluded their discussion, one would often apologize to the other. It didn’t matter if it was Grover or Addie doing the apologizing. The other person would always say, “Apology accepted.” And that was the end of it. This simple phrase meant a lot of things, like: “OK, the storm is over, the clouds have parted, we don’t need to re-visit this again, and, if we ever get in an argument again, I promise I won’t dredge this up and throw it at you, so let’s get on with life.” That’s a lot of meaning to pack into two words.
As a little kid looking on, it all seemed so simple and straightforward. Now I marvel at their wisdom and their self-control. Between the beginning and the end of their argument, I don’t really know if they fought “fairly” or not. But I do know that they delimited their arguments. There was a clear start and a clear stop. There were no ambushes; there was no lingering resentment. Just a simple argument and a clear resolution. Perhaps that’s why they stay married for so many years.
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