JPNicols.com

Innovation | Strategy | Leadership

Leadership

Top Ten Geek Week Sneak Peeks – Part 2

by

Today: The GeekWire Summit

Startup technology news site GeekWire held its first birthday party on March 7 with the GeekWire Summit. Speakers included former Microsoft Chief Software Engineer and Cocomo co-founder Ray Ozzie, former Swype CEO Mike McSherry, Hulu CTO Richard Tom, T-Mobile CMO Cole Brodman, Rhapsody President Jon Irwin, venture capitalist/serial founder Oren Etzioni and other great technology minds. Nothing was focused on FinTech per se, but nonetheless here are some highlights and potential implications on the intersection of leadership, advice and technology in financial services:

“How do large companies innovate? They buy small companies.”

– Oren Etzioni

  1. On the rise of social collaboration in the enterprise, Ray Ozzie paraphrased Ethan Zuckerman (who also has a lot of interesting things to say about how we tend to interact with people who are most like us, but that’s another post) in describing the “scopes of voice” as public/private/secret/self :“I think when you get into enterprise and business scenarios, there are some organizations where speaking publicly in a public voice is very useful. Professional services firms promote an internal culture where speaking openly and being known as the professional who knows something about something works a lot better than certain manufacturing company, where the internal norms might be different in terms of secrecy and confidentiality.”  There is still lots of opportunity, but also lots of work to do, since only 27% of financial professionals use LinkedIn, and less than 4% use any other social media methods at all.
  2. Do you think that building a massive base of clients/users/followers is in direct conflict with customizing your messages to be relevant individual users or subgroups? Consider that Hulu  has 1.4 BILLION ad impressions per month, but they offer some innovative ways for users to customize their ad content. Ad Selector allows viewers a choice of three ads from one brand or one ad from a selection of three different brands. Ad Swap allows viewers to find ads that are most relevant.
  3. Great discussion on the state of mobile technology. All on the panel had praise for the Windows Phone platform, but noted that they have a long way to go with a 4.4% market share to Android’s 49% and Apple’s 30%. (IMHO, I think that RIM’s enterprise-centric 15% share is the most vulnerable to Windows, and it’s already down 2% in the last three months.) Former Swype CEO Mike McSherry said that Apple’s Siri natural speech style will help improve text entry over time too. This evolution to more natural interfaces and input styles was also noted at Micosoft Research on the prior day.
  4. Startup investor and advisor Hadi Partovi noted that the cost of sequencing the human genome has gone from $1 billion to $1,000, and predicts it is heading to $100. If that can be democratized, how naive are we about “big finance”?
  5. Facebook’s Director of Engineering Jocelyn Goldfein said that the company rolled out the new Timeline with a team the size of a startup. Facebook video chat? One guy. In Seattle. Although, that may be taking the lean approach a bit too far. (As someone retorted on Twitter “That explains a lot.”) Still– how many consultant engagements, project managers and steering committee meetings do we need to make meaningful change in our business?

“It’s not enough to encourage employees to innovate.

You have to protect them from the cost of failure.”

– Jocelyn Goldfein, Facebook

(P.S. – I live tweeted my new startup idea from the conference: Embedded QR codes in public carpeting. Remember, I get a 20% Founders Fee.)

Yesterday: Microsoft Research TechFest 2012

Free Advice From a Mentor

by

(Note: When I wrote this early in my blog’s history, when I was a senior executive for a Fortune 150 financial services firm. Now with the added perspective of an entrepreneur and consultant, I find the words truer than ever.)

I have mentored dozens of young professionals over the years, and even though each situation is unique, I always end up giving these three pieces of advice. It’s not like I planned it all out, or even wrote it out before now, but here they are:

  1. There is no secret handshake
  2. Focus on getting better, not getting credentials
  3. It all starts with you

There is no secret handshake

The CEO of a venture-backed technology company whom I know well once asked me: “Do you ever get the feeling that when someone comes to you for career advice, what they’re really looking for is the secret handshake?” 

Yes, I have gotten that feeling.

My best mentoring relationships have involved mentees who truly want to improve their performance, learn new skills, take on more responsibility or just learn more about what a potential career path might look like for them.

The best way to ensure that a mentoring relationship with me is short (and not particularly rewarding for either of us) is to mistake it as an opportunity to simply learn the secret handshake.

Do you really think I’ll hire you or connect you with someone merely because you want more money or a better title?

Put some clothes on that naked ambition, you’ll catch a cold.

Focus on getting better, not getting credentials

I often get questions like “Should I get an MBA (or any one of the alphabet soup of certifications in the financial industry: CFA, CFP®, CIMA, CTFA, etc.)?”

My consistent answer to all who ask is that if you want to learn more about that particular area and want to study it deeper, go for it. I’m a big believer of continuous learning, and earlier in my career I worked to get an MBA and put a few initials after my own name.

On the other hand, if you think that simply tacking those initials after your name will open a whole new world for you, you will probably be disappointed.

I still remember a soon-to-be-freshly-minted MBA who wanted to ‘remind’ me that he would have this very important graduate degree by the time of his next performance review, and that he hoped that would qualify him for a promotion.

I ‘reminded’ him that he was still the same person with the same level of performance, so probably not.

It all starts with you

This is kind of a two-for-one. First, I mean that before you start on any exploration of future paths, you need to understand your strengths, your passions, what gives you energy and what saps you dry.

I also mean that the whole process of working with a mentor isn’t a passive activity of absorbing second-hand knowledge through osmosis.

I was very proud and excited when my company asked me a few years ago to participate in the pilot of a program called MentorConnect, kind of an internal match.com to put mentors and mentees together based on specific skills and experiences.

I learned to start by asking mentees to share any relevant standardized test results they may have taken recently (Meyers-Briggs, PDI, StrengthsFinder, DiSC, etc.), and if they didn’t have any, I had them start with StrengthsFinder 2.0. Not only did this help give the mentee and me a logical starting place, it helped to quickly identify those who were only looking for the secret handshake. Those types often would not do the work.

I also recall the bright young assistant who was referred to me by her boss for some career advice a few years ago. She wasn’t sure what she wanted, but she was sure she should be higher in the organization by now. I took her to lunch, and we talked for an hour and a half. I gave her a couple of books to read for our subsequent meetings. I must have followed up three of four times when I ran into her, but she hadn’t quite found the time to even buy the books, let alone read them.

I guess I wasn’t completely surprised when she dropped by a couple of months later to let me know she was quitting the firm.

She was going to work on her MBA.

And no doubt continue her quest for that elusive secret handshake.

You Do Realize This is a People Business, Don’t You?

by

Bankers sometimes have a hard time understanding why their industry has satisfaction ratings right down there with utilities, cell carriers and bankrupt airlines. Maybe it’s because they sometimes have more in common with these business models than they would really care to admit. Companies and industries that score poorly in customer satisfaction tend to treat customers like replaceable cogs in their profit machine, rather than empowered consumers with unmet needs and lots of alternatives.

Source: flickr.com via David on Pinterest

David Armano has an amazing knack for boiling down sometimes complex concepts to compelling and easy to grasp infographics. And while the one above was intended to depict a much broader economic view, I think it works just as well in the narrower context of financial services.

It’s not a Wonderful Life any more

Financial institutions have long since evolved from the folksy image of It’s a Wonderful Life‘s Bailey Building and Loan. Competitive forces drove the financial industry to embrace consolidation, standardized underwriting, securitization, more consolidation, credit cards, ATMs, broader product offerings, specialized segmentation, data analytics, even more consolidation, and countless other changes. Over the long run, much of it was good, and the industry has improved efficiency and profitability over time.

But somewhere along the way, too many institutions (and too many advisors) came to believe in that seductive fiction that has fooled so many other industries– that customers are easily locked in with real or perceived monopolies, contracts, terms and conditions, EULAs, whatever– and that the path to profitability is to leverage that servitude with a cascade of new (and usually involuntary) revenue streams from the indentured.

Many bankers are truly puzzled by the virulent public reaction to their attempts to defray the costs of delivering deposit accounts. After all, they have cost accounting on their side. It has been a well-known fact amongst bank executives for at least 25 years that most checking accounts are unprofitable in a fully-loaded cost analysis. A similar Pareto Principle has long existed across client cohorts as well– the “vital few” subsidize the “trivial many”.

Why recapturing costs alone doesn’t work:

So why not focus on reducing the unprofitability of a large percentage of your clients? Managing the cost to serve is a very real issue for most firms, and I am a firm believer in the need to focus marketing efforts on clients who have a high probability of being profitable in reasonable amount of time.

What I think most firms and advisors misunderstand is that many clients at every tier actually are willing to pay more– if they receive something of value in exchange. And here’s where it get’s a little tricky– the clients get to decide what provides value and what does not– and not every client will choose the same things.

What does work:

This is where data analytics can really add the most value. Finding clients who will willingly choose to consume additional services for additional cost. (If you do it right, you can add $5 in revenue for every $1 in added cost.)

Firms that really do it right focus their efforts across all of the client segments, not just on reducing unprofitability in the lower tiers. Further improving the profitability of the top 20-25% of your clients can improve their subsidization of the masses and reduce the temptation to annoy the majority of your clients. (Banks and checking accounts may have been the original “freemium” business model.)

Let’s go back to the airlines. The ones thriving, both in customer satisfaction scores and in profitability, are improving the customer experience for all of their clients while they simultaneously raise the bar for their most profitable clientele. Doing only the latter creates ill will that will never be offset by increased profitability for the subsidizers.

You do realize that this is a people business, don’t you?

Five Leadership Lessons From The Godfather

by

Godfather

Today Paramount and Cinemark are celebrating the 40th anniversary of the release of The Godfather with a one day showing of the iconic film in 55 Cinemark XD theaters. The movie is my all-time favorite (with the possible exception of The Godfather II). In honor of the anniversary (which is actually later this month), I offer these five leadership lessons from the film:

You need a wartime Consigliere

When Michael was plotting his revenge against the other families, he announced that he was replacing his own step-brother as trusted advisor: “Tom Hagen is no longer Consigliere. He’s going to be our lawyer in Vegas. That’s no reflection on Tom, it’s just the way I want it.” Then to Tom: “You’re not a wartime Consigliere, Tom. Things could get rough with the move we’re making.”

Loyalty, history and track record are important factors in keeping people on your team, but don’t confuse them with having the right people with the right skills and experiences in the right positions at the right time.

–

Just because some businesses might be OK for other people, they may not be right for you

When Don Corleone sits down with Sollozzo, who is seeking financing and political protection in order to expand  his illegal drug business, Don Corleone tells him: “…I must say no to you and let me give you my reasons. It’s true I have a lot of friends in politics, but they wouldn’t be so friendly if they knew my business was drugs instead of gambling, which they consider a harmless vice. But drugs, that’s a dirty business.”

Credit unions buying fintech companies. Fintech companies getting bank charters. Banks and credit unions partnering with fintech companies to create new offerings. None of these are necessarily bad ideas, but expand your offerings because it makes sense strategically, and because you are sure you understand the risks and are sure you can execute.

Don’t do it because it’s an appealing source of new revenue. If you’re simply looking for a new source of revenue, why not sell hamburgers?

 

“Never tell anyone outside the Family what you are thinking again”

After Sollozzo exits the above scene, Don Corleone tells this to his hot-headed oldest son Sonny, after Sonny had asked a question of Sollozzo about his proposal, revealing a potential rift in the family.

In this era of social media communications and 24/7 open-source networking and crowd sourcing, remember to keep some things just within the company. That’s how competitive advantages are created.

–

“Leave the gun. Take the cannoli.”

Experienced hit man Clemenza offers this simple advice to Rocco after he kills the traitor Paulie along an abandoned stretch of highway.

The leadership lesson: Know what’s important to keep close and what is expendable. Sometimes it’s time to move on, and sometimes it’s time to hang on. Know the difference.

–

Make them an offer they can’t refuse

When the singer Johnny Fontane comes to Don Corelone for help in getting a movie role he covets, he is worried that it is already too late since the movie starts shooting in a week. The Godfather confidently reassures him that he will be able to influence the film’s producer: “I’m gonna make him an offer he won’t refuse.”

The old horse’s head in the bed routine is typically not recommended, but you should understand that dealing in the currency that’s important to the other party is the key to influence. Understanding their true wants and needs and worries. If you can help them achieve what they really want, you may very well make them an offer they can’t refuse.

Why Your Team Is Not Successful

by

Struggling to understand why your team is not successful?

As a leader, it’s your job to figure out the answers. Here are five questions to ask yourself:

  1. Is everyone on the team clear about the team’s overall goal and their specific objectives?
  2. Do each member’s objectives tie out to the overall team goal?
  3. Does every member of the team have the ability and the drive to achieve their objectives?
  4. Is everyone held accountable for achieving their objectives?
  5. Does your culture support and encourage constant learning, growth and adjustment?

Is everyone on the team clear about the team’s overall goal and their specific objectives?

A survey conducted by the consulting firm Partners in Leadership found that 84% of respondents “indicated that changing priorities create confusion around the key results the organization needs to achieve“ (emphasis mine). Everyone on your team needs to have a consistent answer to the question “What are our overarching goals?” Otherwise, everyone is not “rowing in the same direction”, as the saying goes.

Do each member’s objectives tie out to the overall team goal?

False success is worse than clear failure. Failure is important, healthy and good. Failure teaches you what did not work if you are brave enough to embrace the lessons learned and make adjustments in the future (see below). False success comes from creating individual victories for the members of your team that don’t add up to team success. Individuals should have goals that are highly aligned with things within their control (sales, audit results, client satisfaction, etc.), but they should also be aligned with the goals and needs of the entire team or organization. There is no real victory in celebrating a bunch of individual “winners” if it doesn’t add up to a team win. Chicago Bulls coach Phil Jackson’s goal was not for Michael Jordan to necessarily average 35 points a game, it was for the Bulls to win the NBA championship.

Does every member of the team have the ability and the drive to achieve their objectives?

It’s important to be brutally honest about the ability (skill) and drive (will) of each member of the team. Skill without will is worthless, and you will be doing the rest of your team a favor by separating those players from your team. Will without skill is preferable, but not everyone can be trained to do the job adequately. Think about moving these players to a role to which they may be better suited.

Is everyone held accountable for achieving their objectives?

Nothing hurts team morale and undermines top performers’ discretionary effort than seeing those around them fail to be held accountable for underperformance. Ensuring accountability without devolving into finger pointing is an art well covered in the book The Oz Principle: Getting Results Through Individual and Organizational Accountability.

Does your culture support and encourage constant learning, growth and adjustment?

Ray Dalio, the founder of acclaimed hedge fund Bridgewater Associates, has written and shares freely an amazing piece of managerial advice which he titles, simply: Principles. It is available in its entirety from the firm’s website. It is a treasure trove of quotables (sure to be shared in future posts), but the relevant advice here is in a section he calls “To Get the Culture Right…”

Create a Culture in Which It Is OK to Make Mistakes

but Unacceptable Not to Identify, Analyze, and Learn From Them

If you can answer yes to each of those questions, your team is surely on its way to success.

Does Your Team Have What It Takes To Thrive In A New Era?

by

In January of 2010 John Kim of Heidrick & Struggles wrote in a blog piece What bank leaders do you need post-crisis?:

There may be little agreement about precisely where we stand in terms of economic recovery generally or financial services recovery specifically, but one thing is certain. When the inevitable recovery gets into full swing the financial services firms that already have in place the skills and the teams to take advantage of it will far outdistance their competitors.

Now, more than two years later, the recovery picture is a little more clear, if not exactly in full swing. The rate of bank failures has been dramatically reduced but the long-predicted consolidation wave has so far been more of a gentle tide. As the economic recovery continues at an almost imperceptible pace– particularly jobs and housing prices– financial firms are challenged to find attractive avenues for revenue growth.

New regulations further complicate the picture, on everything from trading to lending to deposits, and there are still literally thousands of new rules to be written over the next few years.

So what kind of leadership do these challenges demand? I think Kim saw that pretty clearly too:

Before the economic meltdown, the top leaders of financial institutions often fell into one of two types. There was the charismatic personality who motivated, inspired or in some cases dictated through force of his own presence. And there was the hands-on, detail-oriented operator who drove performance through results and significant attention to detail.

Today’s leader needs to be a combination of both types. The operational skills and shrewd judgment of the detail-oriented leader will be needed to achieve focus, leverage strengths, work out bad assets, closely manage risk, and interact more closely with regulators and government. The strategic vision and inspirational ability of the charismatic leader will be needed to take the institution from strength to strength and into appropriate new areas, especially when the economy heats up again. 

About a year ago I gave a talk about the state of the banking industry and how its recovery was linked to the overall economic recovery. Someone in the audience asked how, seemingly, only a handful of banks were smart enough to avoid the ills that plagued so many competitors?

I replied that that was not the question, in my mind. The question was, why did so many firms forget thousands of years of history?

The banks who set themselves apart during the crisis stuck with principals tested over millenia. After all, banking is the second oldest profession in the world. You know, quaint notions like verifying borrowers’ recurring cash flow and insisting on a margin of safety on collateral values. These firms understood that lending was, at its core, a risk management activity (see my post on Why Bankers Need to Think Like Private Equity Investors).

So, how is your team prepared for this new era?

Again, from John Kim’s piece:

These teams will need to be able to make the right decisions rapidly…

They will also break complicated issues down to simple components. No matter how complex a market, a strategy, or other issue appears, the leadership team should be able to frame it in terms of banking fundamentals: liquidity, capital, credit risk, operational risk and cost control.

One of their toughest challenges will be to lead culture change. A renewed focus on core competencies and subsequent growth into adjacent areas will require a new culture, especially at institutions that sought to play across many areas.

Is your team prepared for the new era, or are they still fighting the last war?

What’s the Talent Density of Your Team?

by

Even though some of the business decisions that Netflix management has made recently have not been well received, I still think that many of the firm’s cultural attributes are worth studying.

As Netflix is back in the news again with a new DVD plan, I thought of CEO Reed Hastings’ words in a 2009 slide presentation:

“The actual company values, as opposed to the nice-sounding  values, are shown by who gets rewarded, promoted, or let go.”

“Actual company values are the behaviors and skills that are valued in fellow employees”

The presentation goes on to describe in some detail the nine behaviors that are particularly valued by Netflix (Judgment, Communication, Impact, Curiosity, Innovation, Courage, Passion, Honesty and Selflessness); and details the firm’s uniquely demanding standards for high performance and other aspects of its culture.

But the part I found most interesting was the view that turns on its head the conventional wisdom that growing firms must add significant processes and procedures to deal with increasing complexity, simply because it’s “Time to grow up”.

Instead, Hastings sees the root cause as the decline of “talent density”, as the percentage of high performance employees typically falls with total employment growth. Exacerbating the problem, the increased focus on process actually drives more talent out of the company, as they feel stifled by the bureaucracy and process orientation.

The solution, Hastings says, is to increase talent density faster than business complexity.

” Avoid Chaos as you grow with Ever More High Performance People —

not with Rules”

Not that Hastings advocates absolute freedom from rules. In fact, he lays out two types of necessary rules– those around moral, ethical and legal issues, and those that prevent irrevocable disaster (it remains to be seen whether the public relations flap over the company’s price increases are irrevocable).

Financial firms operate in highly regulated environments, and the inherent financial leverage makes the cost of some errors unacceptable. This means a higher degree of process orientation and policy compliance than many industries, but I don’t think this negates the idea that financial firms should also focus on increasing their talent density.

Especially critical, in my view, is the concept that a company’s actual values are demonstrated by “who gets rewarded, promoted, or let go”.

While firms must reward results more than efforts, leaders have a responsibility to shape the culture of their firm by also celebrating and rewarding the skills and behaviors that led to those results, and sharing those to help improve others’ performance.

I have seen managers who act like hostages to data. “I have to give Joe the big sales award. He hit his numbers, even though he fell into that one big sale at the end of the year.”

Your incentive plans have to be driven by financial results, but if they force you to reward results while being blind to the requisite underlying skills and behaviors, you need to rewrite your plans.

Top performers want to be rewarded on results, but they also want a clear vision of how their skills and behaviors are expected to be applied to get those results.

It’s the leader’s job to set that vision and apply the rewards appropriately.

If you don’t, you will eventually help another firm increase its talent density. With your former talent.

What’s the talent density of your team?

Nine Reasons Managers Struggle

by

Reposted from: Leading Blog: A Leadership Blog: Nine Reasons Managers Struggle.

I will have to check my network, it sounds like we may have worked with some of the same people…

If I could add a tenth reason, I would suggest:

They are on an endless quest for the ‘holy grail’. They spend an inordinate amount of time and energy seeking the magic strategy, business model, product, technology, employee, consultant, marketing campaign (or lately, social media strategy/campaign/expert) that possesses the missing secret sauce for success. Great managers execute, first and foremost– often with less than ideal capital, experience, staffing, etc. Not that managers shouldn’t seek to improve all of those things, but those efforts must not overtake the imperative to execute.

From the original post:

_______________________________________________________

Nine Reasons Managers Struggle.
Former CEO and president of Verison (sic) Wireless Denny Strigl explores nine specific behaviors that leaders do and don’t do to make the serious performer, marginal performers, or failures. In  “Managers, can you hear me now?”  he says it’s all about behavior.
  1. Managers Fail to Build Trust and Integrity. The three major qualities of trust are integrity, openness, and respect. Trust always begins with the manager. Do you say and do things that erode trust?
  2. They Have the Wrong Focus. Focus all your energy on achieving results. Allow nothing to distract you. As the manager, you are the force that keeps your team focused on results. Continually reinforce the Four Fundamentals– growing revenue, getting new customers, keeping existing customers, eliminating costs– and what’s important, unnecessary activities will always creep in. Do you feel you are wasting time, effort, and money by focusing on things that don’t matter in getting results?
  3. They Don’t Model or Build Accountability.  The best way to get people who work for you to be accountable is to show them that you are accountable. Do you have a tendency to blame others or look for excuses? Do you talk about accountability and reward it?
  4. They Fail to Consistently Reinforce What’s Important. Managers are the first to get bored with their message. The people who work for you perform their best when what you say is consistent and frequent. Do you have a core performance message that you constantly talk about with your employees?
  5. They Over-rely on Consensus.  Consensus managers seldom survive long in their jobs. To get buy-in from everyone will likely produce a watered-down version of the original decision or action.
  6. They Focus on Being Popular. Leadership should never be a popularity contest. Managers who try to be popular often lose their focus and waste energy.
  7. They Get Caught Up in Their Self-Importance. Given all the benefits of your position, it would be easy to become absorbed with yourself. On any given day, you might think it really is “all about me.”  Do you have a high need to gain admiration, be in the spotlight and get public accolades?
  8. They Put Their Heads in the Sand. The best managers not only want to hear about problems, but encourage their employees to tell them when they encounter problems or issues they feel are not right. Good managers want open, honest, direct, and specific communication regardless of the information being presented.
  9. They Fix Problems, Not Causes.  Unless the manager fixes the cause of the problems they encounter, valuable time will be spent fixing the same problem over and over again.