Nine Steps To Attracting and Retaining Creative Talent

Earlier this week I wrote that it takes more than just money to attract creative talent. 

In fact it takes more than just money to attract anyone capable of making a difference. Whether they have creative in their job description or not. Difference being a frame against which to measure the impact of original thought.

Against that context, here are nine steps that will draw difference-makers to your organization. 

1. Pay Fairly. It’s true that it takes more than just money. But it does take money. Beating the market being neither an attractive nor sustainable practice when it comes to compensation. Many companies ignore this truth and apply a famine and feast mentality to paying talent. Under-paying early when the company has the leverage. Then over-paying later, in order to attract or keep talent from the competition. This builds suspicion and destroys loyalty. Instead be relentlessly pro-active in maintaining market parity at every position, with bonuses for extraordinary results. This creates an environment in which financial resentment is not a motivation for your talent to look for new opportunities. Desperate competitors may still over-pay. But when talent feels valued, the premium required to convince them to leave gives you an immediate competitive advantage.
2. Understand The Deflationary Value of Money. In Dan Pink’s excellent book, Drive, the author describes research that shows that many original thinkers are not only un-motivated by incentive based rewards, they actually perform worse. In part this is because when a task becomes ‘work’, talented people tend to feel more constrained. Organizations that tie creativity to money usually have less financial success than those that focus first on defining the intrinsic benefits of solving a client’s problem and frame the challenge in more valuable ways. When you are doing it just for the money - an economic reality in virtually every business - be clear about the impact that has on your most talented people’s satisfaction, and balance how often that is their only reward.
3. Build An Evangelical Business. As a species we are united by our instinct to create. We want to make things. Especially a difference. Google’s success is driven by a simple premise. They want to organize the world‘s information and make it universally accessible and useful. A  goal that has attracted, informed and unified some of the most original thinking of the last ten years. Define the change your company wants to make in the world. No matter how local. Nothing attracts like a clearly defined vision of a better future. And the opportunity to be part of making it come true.
4. Measure Progress. As I wrote a couple of weeks ago, measuring progress is one of the keys to harnessing creativity. A study in the Harvard Business Review showed that a sense of progress is the attribute which people value most in their day. Progress can only be measured on a continuum that has a beginning and an end. Defining the difference you want your business to make provides the latter. The former comes from individual reviews  - a subject worthy of its own post. And annual reminders of how far the organization has come. Celebrating the company’s anniversary with a retrospective comparison of where you were a year ago is simple and powerful. And offers the chance to re-present the vision as a reminder of where the future lies.
5. Engineer Engagement. Gallup Organization research has shown that most people become less engaged with an organization over time. Maintaining inititial levels of enthusiasm is a two part process. The first is staying engaged with your best thinkers. Easier said than done given the temptation to focus energy on solving problems rather than building on successes. The second is being willing to clear the dead wood from the organization. Nothing de-motivates people more than an organization’s willingness to support under-performers. Be relentless about raising standards and expectations. It attracts and provokes greatness. 
6. Invest in Individuality. Google's success is driven by the fact that the discipline required to create some of the most sophisticated software code ever written, has been balanced by a commitment to allow those same engineers to express themselves individually. Organizationally this means that eighty percent of their time is devoted to meeting the demands of keeping Google running. The other twenty percent must be used for solving problems of the engineers own choosing. An investment in individuality that Google attributes for all of their major innovations. Creative companies that charge by the hour have a systemic inability to match this level of investment. But deciding to invest not at all in your talent’s ability to create new forms of value suggests you think either they are not capable of that kind of original thinking, or your organization is not capable of taking advantage of it.
7. Provide Boundaries.  Original thinking requires room to explore new possibilities. It also requires boundaries that focus its capacity to solve relevant problems. In the 1990s, Whirlpool’s CEO, Jeff Fettig, took the company's 25 most revered thinkers and assigned them to a dedicated innovation think-tank in Switzerland. 12 months later they came back with a single idea. A web-based game that linked stationary exercise bikes around the world in virtual races. Exactly. Since then, Whirlpool has invested significantly in training key talent to build and manage a defined and measurable innovation pipeline. Over the last ten years, the revenue generated by products the company defines as innovative has risen from $10 million to over $3 billion, funding further its investment in training, teaching and mentoring its employees. And Whirlpool’s ability to turn original thinking into practical differences has earned it Fast Company’s ranking as the 5th most innovative consumer goods company in the world. And put it on BusinessWeek’s list of, “Best places to start a career.” 
8. Be Open. Be Honest. Transparency is the most over-worked word in the English language at the moment. Which does not make it less essential to attracting and retaining great people. Usually, it’s more effective to think of transparency as a commitment to open honesty, which we have had success applying as: telling what you can, and explaining what you can’t. You can draw the line between them wherever you are comfortable - with the caveat being that comfort is usually a poor measurement of what is in your best interest. Sharing more encourages others to do the same. And to give you the benefit of the doubt. Valuable assets in building loyalty.
9. Say Thank You. The artist in all of us needs to be recognized. So does the human being. And yet most companies are slow to praise. Or even to thank. Which is strange since each of us make a choice where we work every day. It need not, after all, be here. Saying thank you at the end of every day has always seemed to me to be a small acknowledgement that you take neither their talent nor their choice for granted

These steps require investment. Of time. And a little money. The ROI on which will exceed any scale you care to choose today.

Each will make an organization more compelling.

Collectively they will make your company irresistible. And invaluable.

Attracting Creative Talent Takes More Than Money

To a creative business, so the theory goes, talent is everything. 

This I have come to understand, is a distorted view. The assets of a creative company being both the original thinkers that it employs, and the methods by which it attracts, harnesses and purposes their creativity. 

For the advertising industry, this is becoming an issue. 

Both because their organizational structures tend to separate and filter at a time when they need to connect and flow. 

And because keeping talent and acquiring talent are not built into the advertising industry’s DNA.

Research recently conducted by the Association of American Advertising Agencies (AAAA), suggests that one third of the industry’s talent will either have left their job or left the industry by this time next year. 

And according to Sir Martin Sorrell of WPP, the advertising industry is also guilty of ‘criminal neglect’ in its approach to recruiting talent.

For an industry that sells original thinking, this is unassisted suicide. 

The good news is that no matter the size of the company, attracting and retaining talent has more to do with your commitment to building a sustainable business, than how much you pay. 

The species to which we belong being compelled at a cellular level towards achievement and progress.

Which means that we only accept the substitute of more money as compensation not for our labor, but for what we sacrifice. Namely, the opportunity to make a difference.

Doubt that? Ask those whose achievements you most admire and whose originality you find most compelling, the source of their core motivation. None will reply money. Not one. 

Financial rewards come to those who make a difference. Which, ironically tends to be those companies who put the difference part ahead of the money part when it comes to attracting talent. 

And who know that to retain that talent, money is but one part of a nine part equation.

Tomorrow I’ll examine all nine parts in detail.

How Creativity Can Help Wisconsin and Its Workers Solve A $1.3 Billion Problem

Solving problems can be done one of two ways. By treating the symptom with a band-aid, regardless of the malady. Or by diagnosing the underlying cause.

The ongoing saga of Wisconsin and its workers is strong evidence of what happens when organizations apply the former. In this case by trying to fix budget problems by focusing only on overhead.

Reducing overhead is an intermittent focus for businesses. In good times companies worry about revenue, convinced that profit will come along for the ride. In bad times, they suddenly become aware of margin and realize again that every dollar is not created equal.

This creates confusion for employees, who find their value has declined without any change in their performance, and long-term issues for management who are faced with an outdated organizational structure. 

The result is an impasse in which ultimately both sides lose.

Imagine instead if both sides came together and used their creativity to solve the problem.

In the case of Wisconsin, this could mean collaborating on what would be needed to grow the economy of the state by the $1.3 billion that currently makes up the budget deficit.

$1.3 billion.

It sounds like a lot of money.

Until you realize this.

The population of Wisconsin is just over 5.5 million people.

And if you gave each of them above the age of 6 the responsibility to increase the value of the Wisconsin economy by their share of the deficit, the amount of value they would each have to generate every year would be...

$130.

Proof that band-aids are good for cuts. But when applied in the wrong situation produce massive, internal bleeding.

Solving problems means two things. 

Recognizing the real problem. 

And applying our creativity to solve them.

Which costs nothing if your organization is built correctly.

11 Ways To Harness The Creativity in Your Business

At its simplest level a business has only two states of being.

Those trying to become relevant to potential customers.

And those trying to take advantage of the fact that, for now, they are.

Whether you are the former or the latter, the capacity to innovate is essential.

Earlier this week, I described creativity as the fuel of innovation. A renewable resource that sits, largely untapped, within every organization. Even those, ironically, that sell it.

Here are eleven keys to harnessing the latent creativity within your company and institutionalizing the capacity for innovation within your organizational DNA.

Separately they will make a measurable difference. 

Collectively, they will allow you to change the world.

1. Understand your true value to your customer or client. Apple has evolved from a computer company into the largest manufacturer of portable electronic devices in the world. Their capacity to innovate is founded on their endless search for un-met - and often unrecognized - consumer needs, supported by a supply chain that is rated as the best in the world. Understanding your value, which is often not what you are selling, means looking at your business through the eyes of the customer. And doing so with determination to see the truth.
2. Provide support at three levels. Organizations are built on three rings. The individual. The group. And the whole. Any practice that does not account for the impact on each ring will fail. Either for lack of front-line support or for lack of resources.
3. Create flexible structures. The tallest buildings in the world sway in the wind. Their architects having long since learned that rigidity brings literal disaster. If you stick rigidly to an organizational flow-chart without taking into account the strengths and weaknesses of individuals you will produce one of two results. A shallow business model capable only of predictability. Or a tall, fragile one in which management’s most pressing concern is papering over the cracks that keep appearing without warning. Build on people’s strengths and provide support for manageable weaknesses. 
4. Cultivate collaboration. Large organizations work more comfortably vertically than horizontally. Specialization and protection of turf being two keys to traditional success. But creativity is maximized when stimulated, challenged and encouraged. And horizontal perspectives are both fresher and more honest than hierarchical views. This requires hiring ‘T’ shaped collaborators - who possess both vertical expertise and horizontal understanding - and opening up internal communication channels, both electronically and inter-personally.
5. Trust in transparency. Creativity is fueled by confidence. In the goals of the company, and the process by which it works to achieve them. Providing your staff with an open and consistent view of what is happening and why, even when being transparent about what you can’t tell them, is both reassuring and liberating.
6. Give your people access to more information than makes you comfortable. Most companies protect their information at all costs, including from their own people. Which suggests two things. You don’t trust them. And they can’t use it to offer you their insight into what it means. Which raises two questions. If you don’t trust them, why do you employ them? And if you don’t value their expertise, why should your customers? This change usually requires re-engineering your systems so that information flows from the front of the organization to the back. Too often we see businesses whose systems feed information into the finance department who then filter it and pass it back to the people on the front line. By which time, its too late to be valuable and too processed to be nutritional.
7. Give people regular feedback. A recent study in the Harvard Business Review revealed that the attribute which people value most in their day is a belief that they have made one thing. Progress. Knowing they made a difference rewards and motivates them to invest more of themselves. But the proof of progress is one that only their managers can provide, since without goals and measurements we can not determine whether something is better. Only different. And innovation is not simply about change. But improvement.
8. Hold accountable. Only by tasking creativity can you hope to innovate. For creativity is unlocked not by limitless freedom as many people think, but by being challenged to solve specific problems. This requires room to think and explore. And a limit to both.
9. Fire sooner rather than later. Not all weaknesses are manageable. Or worth the benefits of the upside. In which case you undermine the confidence and the enthusiasm of those that are performing by enabling the employment of those that are not. 
10. Publicize success. The recognition of achievement is one of the business world’s most mis-understood currencies, the value of which is both ignored and diminished in equal measure. Publicize success often enough that it is habitual. But not so often that it is no longer aspirational.
11. Try. It is an old saw that innovation requires the willingness to fail. But encouraging people to fail has never been a recipe for success. The key instead is to encourage people to try, and to focus on the process rather than the outcome. One of the best ways to do this is to empower small Pilot Programs initiated by a select few, and then publicize them quietly but widely. This creates gravitational interest and exploration, without fear of risk or expectation of reward.

Taken together, these steps will dramatically increase the output of original thought in your business, and create a structure in which the most valuable of it can be focused, refined and applied. 

It will take six months to begin to feel their impact. A year before you can see the results. Eighteen months before you can measure them in the bottom line. 

That is, if you start today. 

To ‘Win The Future’, American Business Must Unlock Its Creativity

“The first step in winning the future is encouraging American innovation.” 

Barack Obama. State of the Union. January 25, 2011.

It's been almost a month and as yet there are few signs that the President's call to action has resulted in any, well, action.

Innovation is often presented as the silver bullet for a damaged economy or a dying business. But even now America produces more talk about innovation than action. No surprise there because this is a long-term problem to which few people offer practical solutions.

In part because of the Siren call of the status quo - an illusory sanctuary in an economic storm. 

And in part because the practice of innovation is fueled by creativity - an energy source that most business owners view as random and unmanageable. 

But creativity is the greenest energy known to man, producing limitless supplies of possibilities and, when managed wisely, turning ideas into action. The definition of innovation.

The challenge - and now the need - is to unlock the power of creativity every day, and focus its energy by designing the capacity for innovation into the organizational architecture of our businesses.

For innovation does not happen by chance. Like any other business process it is one that requires systems and disciplines, encouragement and environment, measurement and management. 

And it requires investment. Not of capital or profit. But of faith. That a process which can not predict what it will produce, is as valuable as one that can. For only when you have built an organization in which the known and unknown sit comfortably alongside each other, can you be confident that you have a business that is viable today and will be relevant tomorrow. 

This is an architectural feat for which there is a clear and proven blueprint. Applied sensitively to the individual culture of an organization, there are practical steps on which to unlock the latent creativity in your company and embed the capacity for innovation.

Later this week, we'll talk specifically about what those are.

Egypt Meet Change

Organizations of all size seek stability. A condition that values order over chaos and the known over the unknown.

But stability - whether benevolent or despotic - is unsustainable, because its presence comes at the expense of change.

And change, as events in Egypt have proved today, is as inevitable as a freight train.

Which ironically makes organizations that incorporate change, infinitely more stable. A reality that Hosni Mubarak is coming to terms with today.

For as he has learned, revolutions build imperceptibly. A string of decisions taken over a period of time that in the short term produce acquiescence and the illusion of stability, but in the long run combust explosively and instantly. Two weeks, after all, being an instant when placed in the context of 30 years.

Incorporating change into an organization requires embedding the capacity for evolution. The process being less violent, the results more predictable, and the risk to those that lead it relatively minimal.

This creates a new kind of stability. One that is both aspirational and sustainable because it invites discussion and values collaboration.

The alternative is to place ourselves at the center of the universe and surround ourself only with those that agree and that which pleases us, while walling off every droplet of dissent.

Which will work for a while.

But the tsunami, when it comes, will wash us away in an ocean of possibility. And the deserted island on which we land, will be one of our own making.

Stable.

And entirely silent.

The Art of Change: The Path To Perfect

Towards the end of last year I wrote a series of pieces on the practical steps companies can take to unlock the economic value of their creativity. A process I called the Art of Change.

The Art of Change, I believe, is the series of steps by which a company transforms itself from what made it successful into what will.

Today, I want to place those steps into broader context and see what you think about a piece of thinking I’m developing.

The greatest challenge we face when building a business is to create an organizational model that possesses a limitless ability to re-imagine the future, and a tireless capacity to make that future come true. This ability separates the fashionable from the formidable. The temporary from the timeless. 

It is a challenge that most creative companies fail. 

Which has created an industry largely divided between a small set of very large, old businesses, struggling to re-define and restructure themselves - at enormous cost to employees, clients, suppliers and shareholders alike. 

And a large set of small, fragile ones. Those who are essentially doing what they have always done. And for whom the world has not yet made that irrelevant.

This is not an industry model designed to create long term value. The choice being to invest in the big and slow. Or the small and frail. 

Better by far, would be an industry in which the ability to see a different future and then to turn that into the practical was not just what it sold its clients but how it ran its businesses. 

Which would produce fluid companies of all sizes and shapes. The long term value of which would depend on their owners’ appetites for growth. Not their reactive willingness to sell the same services for less, or accept lousy business terms as a fundamental business strategy.

There are many reasons for the inability of creative companies to unlock the power of their own talents when it comes to building more agile, fluid businesses. But most significant among them is that they set the bar too high when it comes to turning theory into reality.

This, I have come to realize, is because they ignore a foundational discipline on which, as humans, we base our personal evolution.

Practice.

As children, we fill pages of exercise books with practice signatures long before we unveil our personal mark on the world.

When we take up a musical instrument, try out for a new sport, get a part in the school play, prepare for exams or learn to drive, we practice. In some cases we practice how our breathing affects our performance. Which means that essentially we're practicing living. 

We practice because we understand that there is risk in new things and we want to limit the damage - to our ego or to our safety - until we are confident we can produce a minimum standard. Or decide that this is an endeavor worth pursuing.

This openness to trial and refinement is embedded into the public presentation of most forms of creative expression. We expect the orchestra to rehearse. The writer to edit. The painter and sculptor and photographer to curate. The director to try it multiple ways but show us the best one. 

This is true of software development and product development, which design practice into the cycles by which new offerings are brought to market. For what is prototyping but trial, error, refinement and retrial? Practice by another name.

And this is true in professional sports. The pitcher who throws a new pitch for the first time on a full count with the bases loaded in the bottom of the ninth, is not likely to be making his living in baseball for long. And in American Football, the Hail Mary is in fact practiced desperation.

But when it comes to building a creative business, we seem to be guided by a rule that says there can be no preparation. There can be no trial. We do what we've always done. Or we do something different. Tomorrow.

An all or nothing strategy that creates a threshold for change which is too high for all but the most desperate, or the most risk taking, or the most wealthy. And a start date that it always too soon.

And so faced by a choice between the status quo and the unknown, most creative companies choose neither. Until the status quo looks like Lakeshore Drive last Wednesday morning, and the unknown is no longer a careful journey along side streets, but a white-out blizzard in 60 mph winds.

For creative businesses, the Art of Change is unlocked when you build an organizational model that perfectly delivers what your clients expect today, while you practice tomorrow.

A model that allows you to explore new possibilities and practice new skills off to the side, out of sight of the public eye, until you're confident they should be brought into the open. Or discarded without regret. 

A model that reduces risk and increases confidence, and allows change to be fluid and evolutionary. One that shows progress only through time-lapse photography because the degree of difference between what you did yesterday and what you did today is almost imperceptible to the naked eye. But over time turns a seed into a flower, and dirt into a garden.

I’m curious whether this idea of embedding practice into your business resonates with you? And how you think it can be best applied? Feel free to post as comments here. Or via email if you’d rather practice your public discourse privately first.

Over the next couple of weeks I’ll share some of your observations and add my own insights about where I’ve seen practice work, and where it does not.

Seeing The Way

Companies are fearful of change. Which drives them to places they would never willingly go if they could see where they were headed. 

This week’s fiasco on Lakeshore Drive in Chicago is a pretty good example of what happens when fear of change makes you do the same thing you always do, even in the face of growing evidence that this will not turn out well. 

On Tuesday night, the people who ended up trapped in their cars were those who believed that so wide a road and so many companions would provide safe passage. 

In fact, it took only one gently sliding bus to block the way and create a situation in which many people became convinced that they would die where they sat. Frozen and alone. Fifty yards from one of the most affluent neighborhoods in the world. On a piece of road that has provided a reliable and predictable way home to hundreds of millions of travelers over the last 100 years.

From habit to hell in three hours. It rarely happens that fast. But it can.

Those that took the side streets found the roads difficult, but passable. It took longer than usual, but they made it safely to their destinations.

Taking the less traveled path requires two steps:

• Recognizing that external forces are creating the need for change
• Working knowledge of possible alternatives

As a business this requires combining a strategic view of where you’re headed, and constant exploration of the best way to get there. 

Which is not always the most direct. Or the most familiar.

How The Airline Industry is Mis-Using Creativity

There are three types of change in running a company. Those that fix the problem. Those that make the problem worse. And those that look like the former but accelerate the latter.

If you apply the forces of creativity to them you greatly accelerate the results. A fact the U.S. airline industry is already experiencing.

This week the eight largest U.S. airlines announced their highest profit margins in a decade. Projections are that in 2011 the industry will earn $5 billion. If all goes well, next year that number will rise to $5.6 billion.

Which sounds healthy, until you realize that during the past nine years the airlines lost $60 billion. And 160,000 jobs.

Which means that even if they can sustain these new levels of performance for another ten years or so, by 2021 the US airline industry will have spent two decades producing a net return for its owners of exactly $0.

And that’s the best case scenario.

The worst case is that this turn-around will collapse like a suddenly depressurized cabin. 

If you believe in the power of creativity bet on the latter.

Because the airline industries have used a lot of it to create this turnaround. And most of it has been applied to finding new ways to take advantage of the customer. Bag fees. Change fees. And now potentially, use of the overhead storage compartment fees.

In fact the additional fees charged by the airlines in 2010 are higher than the industry’s actual profits. Which means that without those fees the airline industry is a loss making business.

But, when the gain to a business comes at the expense of its customers, with no improvement provided in return, the inevitable outcome is short-term increases in profitability followed by long term damage to the desire of the customer to be a customer.

Let’s apply positive creativity to this issue.

Peter Drucker once famously said that the Purpose of a business is to create a customer. The ability to provide something that people value and the ability to do so profitably.

But when a business focuses only on price, it makes irrelevant the thing that is actually most important to its customers.

The reason they paid the money in the first place. Whether that is whiter whites, lower taxes or satisfaction of a personal vanity .

And when judged by the results of a purchase, the airlines offer something of inestimable value.

Our lives.

The virtual guarantee that they will get us to our destination safely.

A value proposition on which to change the world. And one which supported by fair pricing, comfortable seats and an investment in the future would radically change their future.

It’s late in the game for the airlines to be re-establishing their core value. Perhaps too late. 

And when airline travel is finally replaced by something that makes sense, something that delivers us quickly, comfortably and safely without destroying the ozone layer and ending the existence of Polar Bears, something that has no need for pat-downs and retinal scans, something that greets its customers with enthusiasm and innovation, something that stimulates and satisfies its employees, and something that creates shareholder value, it is unlikely that whatever that something is will carry the names of any of today’s airlines. So small is the value of those brands in the eyes of their customers.

Unless, of course, the airlines unlock the power of positive creative thought, and apply it to creating long-term value.

For us.

And thus, for them.

Guest Post - Jim Schrager: Does Apple Need Jobs?

I’ve written several times about Jim Schrager who opened my eyes to the difference between strategy and hope at the University of Chicago.

Jim is one of the world’s leading thinkers on why businesses succeed. His resume as a practitioner, teacher and thought leader speaks for itself. I’m proud to call him a mentor and a friend.

Jim reads this blog regularly and wrote a follow up to my Steve Jobs post from last week. As with all great teachers, he answers some questions while raising new ones.  

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Does Apple Need Jobs?

The stock market had a case of the nerves with the announcement that Steve Jobs was stepping aside again for awhile.  As we all know, the market can be at times a rational arbiter of things to come, or an utterly random marker.  Which is it this time?

A change of leadership poses a risk for all organizations.  Some make the transition well, others less so. Strategy is a powerful tool the best CEOs use to think about the future.  Within some boundaries, strategy allows us to process the news streams of the day and select what matters as we think about tomorrow.  One of those boundaries describes what decision researchers call the “task environment. ”That’s a fancy way of categorizing different situations based on the affect people have on it.  Strategy can explain many things in the business world, such as the rise of Toyota, the fall of K-Mart, and the reason why Fortune Brands is changing its portfolio of products.

But when we have a “fashion” business, strategy is much less useful.

Steve Jobs is one of the very few people with the skills required to prosper in the “technology fashion" business.  Like apparel, his business is very creative, and as we note over many decades, success in fashion is very hard to predict.  The folks who can run a business like this are rare, their talents cannot be easily transferred, and when they leave, in almost every instance, the company struggles.

Other fashion business examples beyond apparel include movies, books, TV, and radio.  CEO succession in these businesses poses a special risk.

The reason we watch the leaders of these businesses in a special way is because we know that strategy, used so well in other environments to find the best path forward, won't work in a fashion business. Jobs has had a series of great tech hits, that’s the mark of CEOs who master this tough challenge.  That he has no one else ready to take over is common, because those who can do this are exceptionally uncommon.

Try and find a fashion business that made a smooth transition between leaders, and you won’t find many. Most don't make a transition at all, and simply glide along without the power of new hits until they crash.

Strategy doesn't work here, and we simply must be humble about that.  The stock market is right to know there isn't another Steve Jobs ready to take the controls.

There isn't another Ralph Lifshitz either.

When either of these fashion leaders leaves the stage, it’s fair to expect big changes ahead for their companies.

Written by James E. Schrager, who teaches strategy at the University of Chicago, Booth School of Business.

Is Steve Jobs A Fool?

First, may I wish you all a Happy New Year. My goal is to make more change happen.

There is a story told by former Apple employees of Steve Jobs' instinct for self indulgence.

At 1 Infinite Loop - Apple’s Headquarters in Cupertino - there is a staff parking lot which is notable for two reasons. Its size. And the absence of pre-assigned parking spaces. The strategy being to encourage early arrivals by the simple expediency of offering a shorter walk to the office. 

Steve Jobs is not an early arriver by all accounts. But apparently overcame the penalties for this trait by parking in the spaces reserved for the handicapped. And when in a particular hurry, would park so as to occupy two of them.

This personal inelegance was finally confronted by one of his employees who posted a note on his windshield with a simple suggestion. 

‘Park Different.’

News yesterday that Steve Jobs has to take another medical leave of absence once again raises the issue of his ability to see himself contextually within the company he has built since his return in 1997. And whether Apple is anything like as well designed as the products which have made it such a vibrant business.

To date, the indications are that it is not.

I have long believed that on the day a new product is launched, Steve Jobs (with the money I’ve spent on Apple products I’m sure I’m entitled to a first name based relationship) has a clear vision of the tenth version of that device. What we are sold, is essentially a stripped down version of what Steve already has in his head for the distant future. Which makes both design and construction relatively more impactful, since the company focuses on solving macro level problems, not small iterative ones. 

Thinking on that level is extraordinarily rare since it requires combining the aspirational with the practical. A relationship that most business leaders fail to consummate. Either because they live too romantically or too functionally, and surround themselves with mirrors. Not lenses.

But while each successive Apple product introduction provides us with capabilities that are simultaneously inevitable and awe-inspiring, the management structure of the company has been infused with a particular brand of arrogance. Indestructibility.  As though days like today were not part of a future Steve has been willing to foresee.

The impact of which is that both rumors and realities of Steve’s health have a direct impact on consumer confidence and company valuation. In early trading yesterday on the New Zealand stock exchange - the only one open when news of this latest leave of absence was announced - Apple shares fell 7% in value on the news.

Because when what you’re selling is so clearly presented as one man’s vision, the risk of the man being removed is tantamount to removing the company’s entire operating strategy.

This makes Steve Jobs the equal of most owners of creative businesses who build the company around themselves. An approach which guarantees that the day they are done, so too is the company. A waste of most of that which they and those that work for them have invested.

But, Steve Jobs is a man capable of seeing the future. In ways that would make Nostradamus resentful.

That he is unwilling to incorporate his human limitations into his company’s organizational structure jeopardizes the future of his business.

That his departure, whenever it comes, will take with it the unrealized potential of possibilities the rest of us can only dream of, makes him selfish.

That he knows all this and does nothing to remedy the situation, makes him tragically human.

Building A Valuable Creative Business: Step 3 - Change The Conversation

Yesterday was an interesting day for the future of creativity. An extensive article in Fast Company analyzing in some depth the state of the advertising industry. 

By 1pm it had made its way round the business.

By 2pm I’d received emails from three clients asking whether issues raised in the article had been considered in our most recent recommendations. They had. Relieved clients are happy clients.

By 3pm, I’d received a call from a journalist asking for my thoughts on the article. I said I thought there was one fact that stood out.

The average tenure of a CMO is 22 months.

You want to become more valuable to the economic buyer, solve that problem.

The question is how.

If you’re a regular reader here, you’ll know that I’ve been offering a practical, step by step guide to creating change. The guide begins here.

Step 3 in The Guide to Valuable Creative Business is:

Change The Conversation.

You can’t engender fundamental change in your business or your life in an instant. The organism, human or cultural, won’t allow it to happen easily. Or at all.

Instead, identify your smallest client, the loss of whom would not keep you up at night. The purpose of which is not to minimize your potential loss, but to minimize the resistence you have to overcome in order to take this step.

Ask to meet them in their office. Tell them you’re looking for an opportunity to invest in improving a client’s situation. Then ask them these five questions:

1. Why do you buy services from companies like mine?

2. What’s the best outcome of that work?

3. What’s the worst outcome?

4. What are the three biggest problems your company faces every day?

5. If I told you I was willing to invest $25,000 of our services to help you solve one of those problems, with an agreement that if it works we are paid $40,000 and if it doesn’t we are paid nothing, would that be valuable to you?

The value of this process to you is driven not by whether number 5 creates a new opportunity - one that realizes a 38% return incidentally. But by the knowledge you gain from numbers 1-4. And the confidence that comes from realizing that changing the paradigm starts by changing the conversation. And where it happens. 

 “Most significant changes that happen in society will happen from the bottom up, little phenomena that start locally and then multiply exponentially. Once you do that math, the exponential multiplication results in dramatic change.” Vinod Khosla

What you do with the information you gather, we’ll discuss next time.

The Art of Evolution

A short aside today, before we return next time to the Art of Change.

Dave Rolfe at Crispin Porter + Bogusky blogged yesterday about a powerful initiative that the agency is undertaking. As some people know, we are working with CP+B to help them design, navigate and implement this evolution. 

And while we make it a point not to discuss the specifics of our work with clients, Dave’s post speaks volumes for how successful companies become and remain so.

“We’re eyeing a model that will explore how post-production can best function in the overall creative process.” 

There are two truths on which to build a more valuable creative business. The status quo is where the funerals of once great companies are planned. And the future has no rules. Great companies live in the space between the two. They are pragmatically fearless. 

“We’ve been working like this since the beginning.”

Evolution is a state of conversion. The from being as important as the to. A business that sells subjectivity is built upon core values. Defining them clearly helps you make big leaps feel like small ones. 

“The best in talent will be sought to lead, and the best will be developed within the system.”

The art of growing a talent-dependent company is based on investing in those that can teach. From experience. And achievement. And in those that can learn. From others. And themselves.

“Made to take advantage of and connect the agency's geographic and cultural diversity.”

Geography can be an obstacle. Or a benefit. And culture is the DNA on which sustainable growth depends. First you need to recognize their importance. Then you need systems and processes to unlock the power of both.

CP+B’s evolution presents both threat and opportunity to many other companies. As Jerry Solomon commented at the bottom of Dave’s post, “We should view it as a challenge. If someone can do it better, faster and cheaper they deserve the business. And, if they can't our value becomes greater.”

Precisely.

The Art of Change: Step 2 - Self Awareness

Creative companies are floundering on a commodity based pricing model. One that pays for process not outcome. 

Which is ironic, because a lot of people tell me that it is the process that is broken. That creativity is most powerful in an environment free of restrictions and rules.

Which means that many creative companies live within a model that pays them for a process which they believe hurts the creativity that they are hired to produce.

Which is like being a doctor who believes he is giving poison to his patients. But takes their money anyway.

The good news is it’s not true.

Creativity is borne from restrictions. Of media. Or space. Or time. Those challenges being the fuel on which inspiration depends. 

And applying rules to the process ensures not the process but the outcome. The power of creativity being time and context sensitive.

Small solace to those committed to fighting only their most immediate problems. Shrinking margins, increased competition, a lack of respect. All of which are the by-product of a broader issue. 

Why do companies really pay for creativity?

The marketing industry - and its dependent, advertising - has one purpose. 

To create a relationship between a business and its customer. 

If what you’re doing is not doing that, why are you doing it?

And if you are doing it, why are you not being paid for doing it?

Because there isn’t a business in the world - that you want as a client - who would place more emphasis on your hourly cost than on your ability to help them create relationships with customers.

The cost benefit of which moves beyond the office of procurement, and into the office of the chief executive. A position that has never been filled for very long by anyone whose strategy is to save their way to success.

That you can create those relationships cost effectively is a requirement - the customer who comes at a marketing price tag of a million dollars per, being neither reliable nor scalable.

That your value will far exceed your current pricing methodology if you do so is a given.

Step 2 in The Guide To Valuable Creative Business is, therefore, as simple as this.

Be aware this weekend of how much is being spent by businesses trying to create a  relationship with you. 

And how little of it is impacting you. 

The Art of Change: Step 1 - A New Perspective

Change is difficult. A justification that explains the headlong race into business irrelevancy perpetuated by companies clinging to the status quo.

"Difficulty is the excuse history never accepts," said Edward R. Murrow. A man willing to take on the status quo, and create a new reality based on simple truths.

And the truth is simple. And much as we or others try to dress it, pervert it and twist it to our own needs, it is both resilient and reliable. Waiting patiently for us to come home, rewarding us with the joy that we are back, and reminding us again of the pleasure of belonging to something on which we can count.

For those whose life is devoted to selling creativity, our truth is that creativity possesses the power to change attitudes and behaviors. 

The value of which we deny when we charge only for the time it takes us to create. A perspective which also explains why we are unwilling to rock our own status quo.

For if we see change only as a by-product of what we do and not as the benefit of what we do, we focus only on the act of change. Not the outcome. Rewarding ourselves not for moving closer to our goals, but for simply surviving another day. A business plan that ends inevitably and ironically in change. Uncontrollable. Unavoidable. Unbearable.

But change is not a by-product or an after-thought.

Change is the result of the work we do.

And the better we do it, the more change we produce.

A perspective that we need to harness if we are to define our futures on our own terms.

Which brings us to Step 1 in:

The Guide To Valuable Creative Business.

I. Defining Change.

Email yourself the answers to these questions:

1. If I bought our largest client, what would my three biggest problems be?

2. Would I hire us to solve any of them?

3. What change would I expect to be caused by hiring us?

“A journey of a thousand miles starts with a single step,” Confucius said.

On Thursday, we’ll take step 2.

Changing The Focus

I attended the AICP conference in New York on Tuesday. It wasn’t perfect. But it was a start. And it could become much more than that. I hope so. Industries facing the kind of seismic shifts going on in the world of advertising and marketing need provocation, illustration and guidance. In that order.

One of the themes at the conference was fear. The unwillingness of so many companies to act differently even when living a reality they can’t afford, and hoping that if they can survive, somehow that will equal success.

In the current production company model, $30-50 million in gross revenue generating a 5-8% operating margin is pretty common. 

For agencies, 20% margins are the benchmark. Two thirds of which goes to the holding companies. Some do better. Some worse. 

In both cases the business model is based on selling time.

Shoot days or people. The sell is dressed up in different ways. Director’s reel. Client case study. But the income stream is built on the same premise. 

How long it takes to make the work is more important than the impact it has.

An approach which would radically change our view of value if applied to the rest of the world.

Suddenly a painting that took a year to create, is 52 times more valuable than a Picasso that took a week.

And we would price music based on its length.

Which would instantly make, ‘The Chosen Priest and Apostle of Infinite Space’ the most expensive piece of music in history. If you want to listen to it, start today and you’ll be finished just in time for New Year. It’s two months long. And on the basis that a 3 and a half minute song on iTunes is $1.29, The Chosen Priest will cost you a little under $32,000. 

Price books the same way? Dickens wrote a story a week. Devalue him because of the ease with which he wrote.

And put aside creativity. Would you pay more for a longer or shorter flight to the same place? A longer or shorter dental appointment to cure the same toothache? 

The truth is, time is money. But not in the way that creative companies use it. 

For it is our time that we should value most. The one thing in our lives we can not control. None of us having the capacity to forecast our own death. Or, therefore, to place a ‘unit price’ on the value of a day. The language of procurement and cost consultants.

I believe the madness of creative companies has to stop.I believe that creative companies have to start selling their capacity to cause profound change in people’s attitudes and behaviors based on the value of that change.

I believe creative companies have to define the future on new terms. 

Otherwise, as James Akers, the Senior Director for Worldwide Procurement at Pfizer promised on Tuesday, “we will.”

A call to action for an entire industry.

Next week I’m going to start examining in practical terms how that change can actually take place. And how your company can start to take action that will create a different business model, one step at a time.

The Art of In-House

For fifty years the advertising food chain was linear and static. Agency. Advertiser. Production. You could fight within your peer group. But not above or below. A state of competition that comforted and restricted in equal measure. 

Today that food chain has been blown up. Advertisers produce. Producers develop. And agencies try and figure out at which table they want a seat, while trying to make sure they're not the ones standing when the music stops. 

Seismic evolution or revolution? Your choice. The future being restricted only by your vision of what it holds and your capacity for change.  

For many companies, the vision includes adding new services. A strategy which is flawed only if you believe that the ease with which your suppliers provide them is an indicator of the simplicity of adding them yourself. Which is the same as deciding to extract your own tooth because you have a great dentist. You save the money. But the results are messy.

Service businesses - the definition of every creative company - need to successfully add new capabilities if they are to grow. Indeed, it is a strategy so tried and tested it has a chapter of its own in every MBA textbook: ‘Vertical integration.'

For creative companies, successful vertical integration is the result of making a clear strategic choice about how best to do so based on the structure of your organization and its capacity for change. There are two models:

• Immersion: in which the new capabilities are fully integrated into the core business. This structure is often seen in new companies that incorporate multiple capabilities into a holistic organizational structure from startup.


• Independent: in which the new capabilities are built and developed in their own right, using intimate understanding of the needs of both the company and its clients to maximize the value of the new In-House offering.

Of these, by far the most common is the Independent approach. The successful deployment of which requires avoiding five mistakes. 

Succumb to them - as many companies do - and you throw away brand empowerment, operational scalability, marketing gravity, profitability, creativity and ROI.

Here, in the order in which they are most likely to occur, are the mistakes to avoid when adding In-House:

1. In-House as Add On

Creative companies often act tentatively when moving outside their base capability. This often manifests itself as a failure to commit fully to the operational foundations necessary to ensure the investment in new services will produce a return.

When In-House is built as an add-on, you:

• Cede the advantage to the competition - your former suppliers - for whom your 'add-on' business is their only business; a full-time commitment your competitors invest both heart and soul into every day.


• Expect your staff to behave as clients, while you treat them like staff. The fastest way to have them end up being neither.

2. In-House As Department

For companies that make it past their fear of commitment, the next most common mistake is to treat the newly formed business as a department. Here, the parent commits serious resources - usually time, money and space - but then imposes its own traditional management structures and operating practices. 

This works as well as having your mother select your spouse. She has a lot of knowledge about important issues. But not necessarily those that determine the success of your marriage.  

3. In-House as Subsidiary Brand

This is a stumbling block for so many creative companies who have successfully navigated hurdles 1 and 2.

Fearful that the success of the new business will undermine the brand value of its parent owner, the parent inevitably inserts their name into that of its new offspring. 

This is the equivalent of thinking a take-off powered by a Rolls Royce engine somehow diminishes American Airlines.

That Rolls Royce is a premium brand in its own right requires Rolls Royce to keep making better engines. 

That American Airlines picks you up and safely sets you down using Rolls Royce technology is a win-win-win.

4. In-House as Requirement

Avoiding mistakes 1-3 eliminates the biggest obstacles to turning new in-house capabilities into a successful business. 

What happens next is the pivot point.

Parent companies have awesome influence. Influence that can be misdirected into requiring that its staff will use the In-House services.

This removes the greatest advantage that the new business has - proximity to its potential clients - by exchanging choice for edict; the surest way to motivate creative people to do exactly the opposite of what you want.

Deliver extraordinarily and market gravitationally. The rest will take care of itself. 

5. In-House as Holding Company Aggregator  

Holding companies offer many benefits. A subject for another day.

But not one has yet successfully built powerful, aggregated In-House production services. 

Typically this is because holding companies design from the top down, a view that brings virtually no understanding of the needs of the creative team. 

Or from the middle sideways. Which ensures the business is built to service only the needs of one company. As opposed to those of many.

Adding In-House should take place from the bottom up, and from the future back. Two perspectives from which to ensure you have one eye on the road beneath you, and one eye on the horizon.

The Value of Talent

Sports team are creative companies.

At their best, collections of world-class talent expressing themselves within a strategically designed and sensitively managed system.

At their worst, indulgent, inconsistent and reactive rabbles.

As a case study in long-term excellence, the English football team Manchester United takes some beating. Analytically as well as physically. A painful confession for a lifelong Chelsea FC supporter.

Last week, however, saw the removal of a cornerstone of Manchester United’s business success.

The belief that no one individual is bigger than the whole.

A critical foundation for any valuable creative service business.

Manchester United is a business with a history of having employed some of the greatest talents in its industry. George Best. Eric Cantona. David Beckham. Roy Keane. To name but four.

In each case, their individuality was the fuel of their genius. An explosive combustion the club measured and managed, and always framed within that cornerstone ethos.

And in each case, once the balance tilted, once complacency started to rival contribution, the club severed their ties quickly and decisively. Always before anyone else had recognized the threat.

Last Thursday, Manchester United threw those standards away. Deciding that a 24 year old forward by the name of Wayne Rooney, who has showed periods of greatness during his six years at the club, should be treated differently.

This comes in the wake of Rooney: dramatically underperforming during England’s World Cup this summer; being photographed publicly urinating on a golf course during a round with his English team mates; being photographed publicly urinating in the street outside a Manchester nightclub; alleged to have been repeatedly unfaithful with a prostitute while his wife was pregnant; publicly arguing with his manager - Sir Alex Ferguson - about whether he was injured; scoring one goal since March, and last week announcing his intention to leave Manchester United because of both their “lack of ambition” and his concern at the club’s inability to attract the world’s best players. A damning indictment of previously loyal, and world-class teammates.

Manchester United’s response to this series of self indulgences in the midst of growing pressure from their fans and the press?

To sign him to a new five year contract at more than double his previous compensation.

Thereby throwing away, overnight, one of the foundations on which more than fifty years of success has been built.

As a piece of adaptive preference, I understand why Manchester United would convince themselves this was the right decision. The need for talent being the most common rationale for bad decision making in any talent driven business.

As a Chelsea supporter, I am thrilled they did

Long term success takes a long term to create. But only a moment of self deception to undo.

Define your principles. Then resist, resist, resist the temptation to throw them away when the pressure is on. They will see you through.

Welcome to: Art, Meet Commerce

Since I began this blog I’ve written about issues that affect the leaders of businesses. Both practical and personal.

In my mind, I’ve been vague about the kind of business the blog was designed to help. After really thinking about it, I’ve decided I’m ready to be more focused.

So, I’m going to write about ideas that will help creative companies become more valuable businesses.

And I’m calling it Art, Meet Commerce.

Because after all, that’s the balancing act we all confront when we sell subjectivity.

What makes a business valuable depends on your perspective. It’s the most personal of definitions. And I hope to explore as many of them as I can. And any you suggest.

I’m also conscious that many of these ideas will apply to many kinds of businesses. After all, creativity is the fuel of innovation. And every business must innovate. Or die. There being no company that has survived by maintaining the status quo. 

But instead of trying to reach the broadest audience, I’m going to provide a narrower audience with deeper insight.

An audience that uses the power of creativity to change behavior. Who are motivated to be paid relevantly for that change. And who want to leave a legacy. 

In some cases I’ll write a series about a topic that requires more detail. In others I’ll pull examples from the news and talk about how they apply to creative companies.

You can expect to see a couple of posts a week from me. A realistic output that I can sustain. Probably Tuesdays and Thursdays. With the occasional spontaneous outburst thrown in.

What you’ll read will be unbiased and unvarnished. I’m trying to help. Not please. 

And I welcome dissenting opinions, alternative points of view, and honest, open debate.

Speaking of which, I’ve been watching a lot of Mad Men recently. 

In the infancy of Sterling Cooper Draper Pryce, following Don Draper’s laconic interview with Ad Age, and its ensuing disastrous results, Betram Cooper admonishes Don’s diffidence.

“Turning creative success into business is your work. You failed.”

Is this, in a nutshell, the Purpose of every creative business? And what is a creative business, anyway?

Answers to these, and many other questions will be forthcoming.

Stay tuned. 

And pass it on.

Thanks.

Not Deciding Is A Decision

A story today that seven percent of newborn’s have an email address at birth. By the age of two, 81 percent have a ‘digital footprint’. 

Today, we need not even be sentient before we are defined by others. And the simple truth is that from the moment we are a failed pregnancy test we have two choices. Define ourselves. Or someone else will.

But whereas the multi-faceted talents of humans are often lost when their owners being placed into early boxes, businesses instead benefit from clearly defined intent.

For some companies, the willingness to define themselves comes without supporting action.

The Deepwater Horizon disaster, for instance, focused attention on BP’s claim to be safety conscious. And on corporate behavior that undermined that claim almost systematically. 

But for most companies the failure goes far beyond the incongruity between stated intentions and action. 

It rests instead in the belief that in the absence of a definition, the world has no negative view of you. That your image is for you to define. And no one else.

This is the fantasy of management that believes the absence of a decision is not itself a decision. 

I have seen companies at intimate quarters act on the basis that the availability of a senior executive to attend a meeting was the pivot point in a process.

In the real world, the availability of a senior executive is entirely meaningless to the regard in which that company is held by its customers, suppliers and shareholders. The employees might care, because they’ve been trained to do so. But everyone else is interested only in impact. Whether financial, environmental, social or humanitarian.

And today, impact is created by companies and individuals moving not at enterprise speed but at entrepreneurial or social speed.

And in those companies every minute is spent acting. Because they know where they’re headed. And how they’re going to get there.

So the next time you find yourself waiting for someone at your company to make a decision, remind yourself of one thing.

They already did.

They just don't know it.

Yet.