you've ever tried to check your e-mail while in Europe, you know
about the nasty surprise I encountered on my last trip. Sure,
it's fine with me that they speak French in France ... after all,
it's their country. But why did they have to mess with the keyboard!
keyboard on French computers is intentionally messed up. You need
to press the shift key to type a period, for example. Some of
the letters are where they should be-making it even more annoying.
I didn't know how to type, this wouldn't be a problem. When you're
a hunt-and-peck typist, you're busy looking at the keys. So if
someone intentionally screws up a perfectly good keyboard, you
if you've figured out a winning strategy for typing fast, you're
doomed. You mean to type www.thebigredfez.com and out comes zzz,thebigredfew,co,
which is truly exasperating.
used to be a good typist. I used to be able to surf the Net quickly
and easily and well. I don't want to give that up. I enjoy my
competence. When I get to France and have to take six steps backward,
I get frustrated.
point is that getting comfortable with a winning strategy makes
it incredibly difficult to embrace change.
company with more than one employee has discovered a winning strategy.
It has succeeded at something that gave the founder enough confidence
to hire someone.
I say "winning strategy," I don't mean that the strategy
is perfect, or market-dominating or even good. Just that the strategy
makes the founder (or the long-time CEO) feel like a winner. It's
a strategy that generates results that the people at the company
want to repeat again and again. The winning strategy encompasses
the habits and decisions that are not up for discussion every
day. When Henry Ford thought that it was more profitable to only
make cars in black, that was part of the winning strategy. Today,
of course, Ford couldn't care at all what color you want your
car-it's not part of their core beliefs any longer.
companies got to be big companies because they had a powerful
and profitable winning strategy. The little shop around the corner,
despite delivering only a meager living to its proprietor, also
has a winning strategy, one that the owner sticks with.
many organizations, the winning strategy is astoundingly simple
and well known by all concerned. At others, it is quite subtle
and far more mysterious. Either way, every company still around
today has a winning strategy or is about to go broke defending
an old one.
all of a company's existing mDNA comes from its current approach
to the business-the strategy that made the company successful
in the first place. Not only is the winning strategy baked into
the company's policies and assets, but the people who work at
the company are there because they liked the winning strategy
enough to join the company. Replacing a strategy that's still
working is difficult indeed. However, if a company doesn't replace
its strategy until it is completely obsolete, it will find that
it has neither the time nor the money to find a new one.
the company that made the bikes you likely grew up with, is a
great example of this trap. It had a winning strategy-exclusive
bike shops and heavy, well-made bikes, produced in the United
States. When the market shifted and people started buying cheap,
lightweight bikes at the local Kmart, Schwinn was unable to alter
its strategy in time and went bankrupt.
are companies so loath to abandon what's working today? There
are several good reasons. The first is that following someone
else's path is often an excellent substitute for the perceived
risk of original thinking. If your predecessor has discovered
a strategy that works, you don't have to come up with one on your
own-that might or might not work better. Managers are not personally
responsible if they do nothing except what's been done before-but
if they take initiative, then it's their responsibility.
second disincentive is that sticking with tried-and-true approaches
helps justify past decisions. To try something new is,
at least partially, to denigrate something old.
third reason is that until recently, feedback loops were slow
and unreliable. If you don't have vivid, immediate proof that
your winning strategy is broken, why bother going through the
pain of fixing it?
look at it from the beginning. Any company-every company-goes
through the same process (at first).
new company flounders until it finds a winning strategy. This
is the strategy that lets the company make payroll, make a profit,
perhaps even grow. A winning strategy is fixed in that it doesn't
usually change from day to day. It's not always rational but it's
always based on history. Managers develop a superstitionlike attachment
to the strategy, believing that it is responsible for the company's
past and its future.
you want to teach a pigeon to be superstitious, put it in front
of a bird feeder that dispenses food whenever the pigeon pecks
it. You'll discover that the pigeon painstakingly repeats all
the motions that preceded the pecking-the bird doesn't distinguish
between the activities that caused the food to come out (the pecking)
and the ones that just happened to be performed the first few
times (the twirling or preening).
superstition is similar. It's not unusual at all to find large
pockets of management in complete agreement about what has worked
for their company in the past (and what they expect will work
in the future) based almost entirely on superstition.
example, without any data at all, most people in the segment of
book publishing that creates science fiction and fantasy novels
believe that you must have a drawing of the hero on the cover
of a novel or it won't sell. It's part of their winning strategy,
it has been for a long time and they're in no hurry to find out
if it's actually valid.
a nascent company finds a winning strategy, the people who run
the company pile onto that winning strategy bandwagon. Everything
they do, they do in support of the strategy. They make rules to
ensure that they maximize the winning strategy. They embed those
rules into the company with their hiring choices, their real estate
choices, their manufacturing choices, their policies.
long as the winning strategy stays the same (and the competitive
environment stays the same), the company thrives.
this sounds a little like evolution in animals, it should. The
DNA in a species is constantly being shuffled with and fiddled
upon, and then one day, an organism springs forth that's ideally
fit for a certain ecological niche. The combination of competition
and environment is a perfect match for the winning strategy of
this animal. So the fit animal piles on, generating tons of offspring.
The population explosion continues until the competitive environment
cheetah had a winning strategy-run the fastest. It worked great
until man invented the rifle and the helicopter. Betty Crocker
had a winning strategy as well-make it easy to bake a cake at
home. It worked until working moms discovered that they didn't
even have time to turn on the oven.
or later, every winning strategy stops working. The competition
catches up. Technology changes. The founder quits. When that happens,
one of two things occurs: Either the company has enough time and
enough guts to try to find a new winning strategy, or it fades
are accompanied by a great deal of running around, hand wringing,
layoffs, task forces and frenzy. And, with surprising predictability,
neither approach succeeds.
didn't used to matter very much. A good winning strategy lasted
for a few generations, enough to build a family fortune or at
least deliver a great career. Today, though, because the rules
change so often, winning strategies don't last for long.
that understand their winning strategy have taken the first step
in identifying the pillars that hold that strategy together. Turkish
Air, the national airline of Turkey, for example, has a winning
strategy of flying people into and out of Turkey. No surprise
there. But it's instructive to note that the strategy is limited
to planes and to Turkey. If people suddenly don't want to fly
into and out of Turkey, the airline is in trouble. It would face
similar trouble if planes were replaced by something faster, safer
or more convenient, or if the price of fuel increased by 500 percent
in one year.
your winning strategy and saying it aloud is critically important
in getting ready to change it. The easiest way I can describe
for finding your strategy is to do this: Figure out what changes
in the outside world would be the worst possible things that could
happen to your company. (No fair picking something that affects
every business . . . it's got to be something that is specific
to your industry.)
could lose its viewers to alternatives like cable and the Net.
Procter & Gamble could lose customers to lower-priced generics
if consumers decided that there was no real difference among products
or if they stopped watching commercials. Star-Kist could discover
that there are no tuna left in the ocean. Starbucks would be rocked
by a report that caffeine causes sudden, uncontrollable cerebral
hemorrhaging. In each case, understanding how bad luck (or a competitive
threat) could upset the apple cart brings the winning strategy
(and a company's dependence on it) to the fore.
winning strategy is at the heart of a company's mDNA. Especially
at the beginning, all of the policies, procedures, staffing and
assets of a company are aligned with this strategy. If the winning
strategy changes but the company fails to change its mDNA, stress
sets in, followed soon thereafter by failure.
Stuck Winning Strategy
your company has a chance of adopting a posture of zooming, you
need to understand why you are stuck in your current winning strategy.
Only then do you have a chance to undo the deep aversion people
have to abandoning something that they believe is working.
are entrepreneurs able to accomplish tasks that leapfrog big companies?
Entrepreneurs have no winning strategy to replace, so they're
far more open to finding one. They're less critical of apparent
imperfections and are willing to grab (and run with) the best
available new strategy.
winning strategy is built around a meme. Then, you and your colleagues
build all sorts of new tactics to support that core meme. Replacing
your winning strategy requires more than just changing the original
meme-you've got to rebuild all the tactics as well. And that's
a daunting task.
company's current winning strategy isn't perfect. You may think
it's forever, but it's nonoptimal, impermanent, filled with holes
and inefficient. But it's yours! The idea of switching to an unproven
model-one that has obvious drawbacks and plenty of risk-is way
too scary (and too much work) to get excited about. After all,
there is little or no cost to sticking with what you have. You
won't have to lay off anyone tomorrow. You won't have to hire
unknown people, go to fundraising meetings or take responsibility.
You can happily leverage someone else's proven model.
for you, there are always more entrepreneurs gunning for you.
Unfortunately for you, the changing world will always give someone
open to finding a new winning strategy plenty of angles that make
their newly adopted strategy more powerful than yours.
the formative years of our industrial economy, there was enough
stability that you could ride a great winning strategy for several
generations. Build a great steel mill or car factory or patent
a formula for correcting mistakes on typewritten documents and
you had it made. There are all sorts of cultural institutions
(from big factories to retirement plans) that reinforce our belief
that winning strategies should last a long time. Today, though,
the life cycle of a winning strategy is shorter than ever, meaning
that allowing your current strategy to get stuck is costing you
the "old days," the life cycle of a winning strategy
was plenty long enough. You could start a job, have a career and
practically retire before the winning strategy failed. The prospect
of having to abandon your strategy in mid-career was met with
terror, not glee.
of course, the strategies are coming faster and faster. Worse,
they're often discontinuous. There isn't always a new winning
strategy waiting to take off at just the right moment. ARCO, for
example, was an oil company known for being analytical and smart
about applying that analysis. They invested hundreds of millions
of dollars in solar power when they sensed the winning strategy
of sucking every possible drop of oil out of the ground might
be coming to an end.
(for all of us) their timing wasn't so good. The technology of
solar didn't respond to the money invested by ARCO, at least not
in time for them to develop a new winning strategy that could
replace the old one. Bad timing for ARCO, but of course, evolution
of the wisdom of conglomerates like 3M or GE is that with multiple
winning strategies working at the same time, they can layer the
tails of the strategies so that one is hitting its peak just as
the next one is fading out. ARCO didn't have that luxury, because
they're in only one business.
a conglomerate, though, is not organized to replace a particular
winning strategy at the optimal moment. It's human nature not
to seek out a replacement before you need one.
People Embrace the Current Winning Strategy
people like to think that they're competent. Competent people
have a predictable, reliable process for solving a particular
set of problems. They solve a problem the same way, every time.
That's what makes them reliable.
people are proud of the status and success that comes with being
competent. They guard their competence, and they work hard to
maintain it. Top-down command and control managers like to have
Dylan, on the other hand, zooms. From year to year, from concert
to concert, there's no telling what he'll deliver. Sometimes,
he blows the world away with his insight, his energy and his performance.
Other times, he's just so-so. The one thing that's certain is
that he's going to change.
factory-centric model of work caused us to adopt Six Sigma quality-management
systems. These data-driven approaches to quality are fine as far
as they go, but they tempt us to turn workers into competent automatons.
We're trying very hard not to let anyone be Bob Dylan at work.
to our work at creating competence, the receptionist can no longer
lose your messages, because they go straight into voice mail.
The assembly-line worker can't drop a tool, because it's attached
to a numerically controlled machine. The telemarketer who interrupts
your dinner is unlikely to overpromise, because the pitch is carefully
outlined on paper in front of him or her.
it's much harder to make a bad car, because robots are measuring
everything. It's much harder to be an incompetent directory-assistance
operator, because computers are handling so much of the work.
we've turned human beings into competent components of the giant
network known as American business, we've also erected huge barriers
fact, competence is the enemy of change!
people resist change. Why? Because a new winning strategy threatens
to make them less competent. And competent people like being competent.
That's who they are, and sometimes that's all they've got. No
wonder they're not in a hurry to be Bob Dylan.
On to the New Winning Strategy
companies realize that big successes are often the result of luck,
and that there may be a long time until the next one. So they're
good at piling on.
on is an art. Hasbro knows how to do it, and so does Warner Records.
When you release a product that's on the verge of breaking through,
you need to mobilize every asset you have to leverage it.
year at Toy Fair, the big toy companies introduce far more products
than they expect to produce. Toy Fair is held in February, nine
months before the peak of the Christmas toy-buying season. This
gives the manufacturers a simple luxury: Make the stuff that was
bought by the stores and cancel the stuff that failed.
discovering a new winner and then piling on with all of their
resources, the toy makers are able to take many chances early
while limiting their risks later on.
Potter is another example of piling on. Scholastic releases hundreds
of books a year. They're awfully good at using their winning strategy
(books for kids through a variety of channels) to hunt for breakthroughs.
But after the success of the first Harry Potter book, Scholastic
knew they didn't have the skill or the assets or the resources
to push the character as far as he could go. So they sold the
entire brand to Warner. All the marketing rights (except for books)
now belong to the movie studio.
is pulling out all their stops. They're piling on. If they're
right, they'll generate hundreds of millions of dollars in profit.
You may not like what they do to Harry (why did they change his
glasses?), but they will take the winning strategy and milk it
for all it's worth.
when to pile on (as AOL did once ICQ started to succeed) or when
to abandon ship (as Amazon did with their Junglee shopping service)
is an art.
as a Way of Life
that you have two elephants, a male and a female. Elephants have
a very long gestation cycle and only one offspring at a time,
so the species is noteworthy for how long it takes them to reproduce.
there are no casualties-if every birth is a live one and every
elephant lives a life of average length-how long will it take
for the descendants of this pair of elephants to dominate the
entire surface of the earth? The answer, according to Charles
Darwin, is less than five hundred years. Every few years, the
population of elephants would double. And doubling gets you to
big numbers very quickly.
almost everything dies before its time. If it didn't, we wouldn't
have room for all the elephants. If every business that was started
this year survived, we'd run out of people to staff these companies
in just a year or two. If every project initiated by your company
was a success, you'd be the biggest employer in town within three
years and the biggest company in the world in five.
is part of the process of creation. Failure is the cornerstone
of evolution. With the vast majority of new products and initiatives
going down in flames, the best strategy is not to assume
best, it's to assume the worst. Assume that almost everything
is going to fail and you'll be right. As long as your realistic
thinking doesn't turn into negative thinking that increases your
likelihood of failure, this approach guarantees that you'll launch
more initiatives more often.
of the reasons "hot" companies cool off is that in the
middle of their runaway success, they become too proud to fail.
They're too successful and too busy harvesting their success to
launch new initiatives that are more than likely to fail. As a
result, when the current success falters (as it always does),
they're not ready with something to replace it.
a company or a project enters runaway, management has just a little
time to use the cushion that came with that success to launch
new projects. What an opportunity! Take the innovators who were
responsible for the last success and encourage them to try again-there
are plenty of less imaginative managers who can take their place
running the current successful venture. Don't believe your own
press releases and put all your assets behind these new ventures-they'll
probably fail. But try often enough and you're likely to find
yet another runaway success.
companies in the computer industry are one-hit wonders. They develop
a product, it works and then they milk it for all it's worth.
The structure of stock options is one reason (as long as you can
keep the stock rising for four years, you win), but the other
reason is pride. Software folks know how random success can be,
and there are plenty of good personal reasons not to risk one
success by following it up with a failure.
Selection at Work
an odd species of bird at the Bronx Zoo called the cassowary.
The male's head is covered by a small helmet made out of the same
thing as fingernails (keratin). My six-year-old son thought it
might be for motorcycle safety (always wear a helmet!), but it's
probably something that evolved as a result of sexual selection.
Female birds really get excited about the helmet. The male birds
with big helmets are more likely to mate and thus pass on their
the big-helmeted males and the helmet-loving females give birth,
the new females are also likely to be helmet-loving (it's genetic),
and the males are far more likely to have big helmets (because
their dads did).
time, the helmet becomes more and more common until just about
all the male birds in the species end up with big helmets. Some
have huge helmets!
what's the helmet good for? What possible evolutionary reason
could have led to the creation of this bizarre, wasteful (from
a survival point of view) growth?
fact, it's because the growth is wasteful that it is useful. It
turns out that only very fit birds, birds with extra resources,
could possibly find enough internal energy to grow a helmet. The
sick birds, the struggling birds, the birds with mutational deformities-all
would be hard-pressed to grow a helmet. The lack of a helmet serves
as a signal to the females: This guy is a loser.
need these signals to allow them to communicate fitness honestly.
If they didn't exist, unfit males (who have nothing to lose) would
lie about their fitness and happily mate, passing on genes that
weren't as fit as their competitors.
turns out that a similar process exists in organizations. Why
do big companies allow their purchasing agents to be visited by
highly paid salespeople in fancy Italian suits? Shouldn't they
ask the companies to fire the salespeople and give them a better
price instead? Why not refuse the golf games and the seats at
the U.S. Open? Why do we respond to big booths at trade shows?
answer comes from Darwin. The companies that can waste the time
and money to send these signals are the ones that we believe are
more likely to have the resources to provide good customer support,
more likely to be in business years from now.
dot-com mania that swept our markets through the late nineties
was characterized by a signaling strategy that was unique only
because of its excess. There were hundreds of venture-backed companies,
all looking to get enough traction to file for an IPO and go public.
Since it wasn't revenue or even traffic that was making a company
a candidate for overnight riches, how did a smart executive maximize
her chances of success?
more than two years, the signaling strategy of choice was to waste
as much money as possible by signing up for a sponsorship with
AOL, Yahoo! or another web portal. Ideally, the amount of the
sponsorship would be larger than the competition could spend,
and the media purchased would be as unmeasurable as possible.
The more overpriced and useless the media, the better.
Other than enriching stockholders at AOL and Yahoo!, what good
did this strategy do? It was a grandiose signaling scheme. Competitors,
investors and employees thought, "If a company is well-funded
enough and gutsy enough to do a deal that big and that dumb, well
then they're probably well-funded enough and gutsy enough to end
up as the market leader." If enough people agreed, it might
just become a self-fulfilling prophecy.
is not irrational, just as peacock mating rituals are not irrational.
For a time, it gave potential investors, partners and customers
an excellent insight into the aggressiveness and leadership tactics
of a company.
very easy for an entrepreneur or a salesperson to want to ignore
signaling strategies, especially if they're able to offer a product
or service that's demonstrably better than the competition's.
Yet it's often the suits or the trade shows or the full-page ads
or the backgrounds of the top executives that send the signals
that really matter.
in the book business look first to the reputation of a literary
agent before they read a novel that's being submitted. Physicians
considering whether to test a new drug are certainly influenced
by the marketing track record of the pharmaceutical company behind
it. Signals matter.
I took my first job at a company called Spinnaker, I drove my
stuff from California to Boston to get to the company's headquarters.
Along the way, I dropped a friend off in Chicago. Leaving the
city, I passed a huge billboard for Spinnaker!
was floored. I was twenty-four years old, the thirtieth employee
of the company, and they were already running billboards around
the country. It filled me with pride and enthusiasm to think that
I was working for a company that hot.
when I told this story to the president of the company the next
week did my bubble burst. Turns out that Chicago was the site
of the annual Consumer Electronics Show, the big event where all
the purchasing agents from Target and Kmart and Wal-Mart made
their choices about what was going to get stocked next Christmas.
And Spinnaker had purchased a billboard (just one) strategically
located on the way from the airport to the convention center.
Spinnaker executives really think that someone would be persuaded
to buy their products because of their logo on a single billboard?
Of course not. But they were exactly right in their prediction
that it would serve as an effective signaling strategy for the
buyers who came to the trade show (and one new employee who happened
to stumble on it).
the imperative is to plan for failure, to repeatedly try new winning
strategies and to do it as cheaply as possible. Yet, at the same
time, don't try to skimp on your signaling strategies. Apparent
overspending on high-leverage signals may be the best investment
you make in a new project.
Ways Companies Can Use Signaling Strategies
goal of each of these strategies is to waste money, but to do
it in a way that brings the maximum impact. Because if you waste
the money the right way, you're not really wasting it, are you?
All too often companies waste money indiscriminately. The genes
of those cassowary birds could start growing toenails all over
their bodies, after all, but it certainly isn't going to impress
the female of the species.
course, in some environments, fitness may not mean demonstrating
how successful you are. It may instead involve showing how frugal
you are. So you could signal this to potential employees by doing
all your interviews at Starbucks, and demonstrate it to your customers
by delivering your goods in a plain brown bag, shipped priority
mail. Being so extreme in your lack of wastefulness is a form
of waste in and of itself (it's hard to concentrate at a Starbucks),
so the very irrationality of it serves as a signal.
aren't right or wrong. Instead, they either work or they don't.
Signals that give a company an edge over the competition that
is worth more than the cost of the waste are probably worthwhile.
Signals that show bad judgment (putting money in a wheelbarrow
and lighting it on fire) are probably a waste.
lesson of the cassowary is that sexual selection is as important
as natural selection in creating interesting species. Sending
fitness signals efficiently saves you time and money and, more
important, leads to better mates and more offspring.
Most Important Sex Is with Your Boss
individuals, we know far more about ourselves than anyone else
does. We also know more than we put to use. Unfortunately, we're
not encouraged to be honest about our strengths and weaknesses
and ways we want to contribute. In fact, we're subtly encouraged
not to be truthful about what we're not good at.
order to get people to embrace change, the office has to be not
just safe for people to admit what they don't know, but unsafe
for those whose conduct discourages change.
does a company balance every manager's obligation to hit key deliverables
(this month's sales quota, this number of widgets out the door)
with a need to experiment and fail? The easy answer is to make
zooming one of the deliverables, one of the things that is measured
along with the "real" deliverables. This isn't going
to happen just because one top executive orders it. Instead, it
will take brave bosses who start small and invest in their employees
and make zooming a requirement for job success.
do you create a company culture that encourages change, especially
in established companies? Why does nothing from Saturn translate
at GM? A company's leaders and their memos may say over and over
that they value innovation, but that can be an old, meaningless
saw. Instead, bosses (and eventually, senior management) have
to live it. "Culture" as it is practiced in many companies,
is overrated, while the importance of the day-to-day interactions
between employers and employees are underrated.
time you interact with someone at work, you're swapping memes.
And the most important meme-swapping goes on with your boss, because
you know that your survival (your job) depends on it.
policies are not the best way to create a zooming organization
that learns to evolve. Instead, it's the meme-swapping, the hallway
conversations, the small signals that will create the environment
that allows this to happen.
the memes you're swapping with your boss aren't dramatically enhancing
your personal mDNA and making it more likely that you'll succeed,
it's time to find a better boss.
selection is a major driver of corporate evolution, and one way
to change mDNA in a hurry is through an acquisition. By acquiring
another company, you can dramatically change the way your company
behaves. Alas, far too many acquisitions fail. The reason has
nothing to do with the strategy behind the acquisition. Instead,
it comes straight from the evolution of animals: It's no fun being
a lion cub.
prides of lions consist of a bunch of females (usually sisters
and cousins) and one dominant male. Male cubs are welcome to stay
with the pride until they stop nursing (which takes a year or
so). After that, they have to leave and find their own pride.
king of beasts services his harem and is master of all he surveys.
Except, of course, when he's challenged by another alpha male.
If the dominant male loses to the challenger, the challenger takes
over the pride. No surprise there.
happens next is shocking (but not surprising after you analyze
it). Within thirty days, all of the lion cubs still with the pride
will be killed by the new dominant male.
Because a nursing cub ensures that a lioness is infertile. This
delay in the new male's ability to impregnate the pride means
that it will take longer for his genes to pass on to a new generation.
two imaginary lions, a gentle one who waits until the cubs are
older and an aggressive one who doesn't, the aggressive lion will
spread more of his genes, faster. That means, of course, that
aggressive genes have spread through the lion population, creating
male lions who kill cubs as a matter of course. Selfish genes
spread faster. The gentle gene is no longer part of the lion gene
the same thing happens at many companies. The CEO or her strategic
task force identify a company and acquire it. They then hand it
over to an operating executive with instructions to integrate
the acquired company. The problem is that the new company has
mDNA, but it's not the operating executive's mDNA.
too often, the executive begins by looking at the products or
services the acquired company brought with it. All of these products
(like all products, everywhere) are imperfect in some way. All
embody trade-offs. The executive sees threats. He sees products
that don't carry his memes. It's easy to criticize these products,
of course, and easy to kill them off.
the executive is left with a bunch of employees and few products.
He didn't hire these employees, and like all employees, they're
imperfect. The most senior employees, the ones most likely to
have a significant impact on the company, probably made a lot
of money in the acquisition and they're in no mood to play games
with this executive. They can't bear to see their genes stamped
out, so they leave. This leaves other employees, employees whom
the manager has no stake in seeing succeed. If they leave, he
can hire new employees to replace them-employees who are beholden
to him, chosen by him and carrying his mDNA.
as the alpha lion killed all the cubs so that his genes would
spread faster, the executive kills all the products and fires
all the employees so that his mDNA spreads faster.
this mean your company should stop doing acquisitions? Not at
all. For many companies, acquiring other companies is a key step
in evolving their mDNA. Remembering that the reason you did the
acquisition is to acquire mDNA may help your management team hesitate
before they go out of their way to eliminate the very thing you
this example from McDonald's. It's hard to imagine a company with
better-defined and more consistent mDNA than McDonald's. It has
one giant brand that looks very similar the world over, and it
dominates an industry that it invented.
years ago, McDonald's acquired the struggling Boston Market roast
chicken chain. The reason was simple: It wanted the real estate.
The idea was to fire everyone, stamp out the evil mDNA and build
other restaurants where Boston Market used to be.
company promoted Jeffrey Kindler, who was the top lawyer at Boston
Market, to CEO, and put him in charge of the transition. His job
was to renegotiate leases and gradually shut down the Boston Market
stores. He had a different plan, though.
a year later, Kindler-who had no previous restaurant management
experience-completely turned Boston Market around. In fact, Boston
Market stores have increased their sales at double the pace of
McDonald's stores. And McDonald's is no longer planning to close
down the brand and move on.
fact, the brand is expanding-with an agreement with Heinz Foods
to put Boston Market entrees in supermarkets. Boston Market is
now the only non-McDonald's brand that is succeeding inside McDonald's.
Rather than killing the acquired company's mDNA, McDonald's is
watching Boston Market's mDNA spread. Kindler was just promoted
to be in charge of all their nonburger brands.
the goal of an acquisition is the mDNA, not the product line,
then treating that mDNA like an asset is more likely to lead to
success. Treat the acquired people like heroes. Give them important,
executive positions. Listen to their opinions right away, not
in a year or two after they've proven their loyalty.
biologists continue to debate the origins of sex (it's much more
efficient for an organism just to split like an amoeba or clone
itself without risky and expensive copulation), but despite the
murky origins, the vast majority of visible creatures have sex
in order to procreate. Even bacteria have sex on occasion.
accomplishes two things. First, it allows the DNA from two organisms
to combine in their offspring. Sex is an essential tool for gene
transmission. This seems like the obvious outcome, but it couldn't
happen if organisms didn't find other organisms to swap with.
chromosome swap is very similar to what happens when a company
hires someone. If a struggling company goes outside the firm in
search of a new CEO, people call that "looking for new blood."
It's not too far wrong. When the new CEO shows up, a frantic exchange
of mDNA begins.
senior executives of the company work hard to spread their memes
to the new CEO. They show her the way they "do things around
here." They try valiantly to impress the CEO with their strategy,
their policies, their past decisions and their projects.
the same time that the CEO is being injected with these memes,
the CEO has her own agenda. She was hired, after all, because
of her experience, insight and smarts. So she's trying to figure
out which of her memes to bring to the company and, just as important,
which people are going to stay and which carry such bad memes
(and have such stuck winning strategies) that they have to go.
second thing that sex does is largely overlooked but is at least
as important. It cancels out mutations. In nature, the vast majority
of mutations are not positive. The average human being is born
with at least one significant mutation out of the thirty-five-thousand
genes he or she carries and if those mutations were passed on
unchecked, we would have a much higher rate of birth defects.
When we mate, though, the sex process finds many of the errors
introduced by mutations and corrects them before they're passed
on to our children.
same thing happens at a company. If a new employee can't adopt
the company's winning strategy, if he fights with the memes held
most dear by the company, it's not unusual to find that person
shunted away from a position of authority, or worse, fired. Put
ten engineers on a team, as we've seen, and their teamwork will
weed out most of the negative mutations. Meme recombination works
very much like genetic sex ...the outliers disappear.
is the time to remind yourself of Muller's Ratchet. In an isolated
pond, an organism that reproduces without sex is often busy evolving
into extinction. Why? As we saw earlier, in all species, most
offspring have DNA that is likely to contain a few new mutations.
But, in this case, since asexual reproduction doesn't cancel out
mutations as well, they become part of the offspring. The result
is that over time, harmful mutations accumulate, and in many cases,
the species becomes dysfunctional and disappears.
you spend eight years writing a biography and no one reads it
until it's done, it's likely it's not nearly as good as it could
have been. You've probably embedded the same errors deep throughout
the entire book. If someone had commented on your first chapter,
you would have caught those unwanted errors (the mutations) and
eliminated them from the rest of the book. Have sex or get stale.
exposing your organization to people carrying memes you'd like
to incorporate, you're likely to lose some individuality (the
mutations will be shunned), but you'll benefit by gaining memes
from the talented people. The challenge is to choose which memes
you absorb and which you discard.
tend to have committees (who work to maintain the status quo under
the guise of increasing communication) and teams (who are assigned
to actually accomplish something). Committees are bad because
they eliminate all mutations, even the good ones. Teams, on the
other hand, can be a very useful way of swapping mDNA and removing
bad mutations at the same time.
a person from an organization, while it doesn't have a direct
analogy in animal genetics, is a form of sex as well. Now, however,
instead of adding that person's memes to the mDNA, you're deleting
them. This form of corporate sex is one of the most powerful available
to management. There's probably no faster way to alter a company's
mDNA than to fire the right people.
Selecting the mDNA in Your Company (aka Firing People)
about everyone knows a bully at work.
are annoying, difficult, counterproductive, and sometimes even
dangerous, yet nobody actually seems to want to do anything about
the steady supply of new bullies who emerge on a daily basis.
A bully is a person who uses external force to entice others to
do things his way, regardless of what a rational person might
say is the best course of action.
bullies we feared growing up were physical bullies. They used
their perceived greater strength (or our perception that they
were willing to use it) to get whatever they wanted.
bullies don't stop bullying when they grow up-they just learn
to hide it better. A kid who learns to get his way by bullying
isn't going to abandon this winning strategy just because he or
she has a job.
bully gets what she wants at the expense of the group's well-being.
And because bullies operate from a zone of fear, they're the most
likely to effectively oppose change of any kind.
can keep your company from investing in a profitable new area
because they're insecure-and unsure how it will affect their career.
They can ruin the career of a promising new upstart because they
view that person as a threat. Bullies can make it hard for other
companies to do business with you. Most of all, bullies make it
hard to zoom.
are we willing to tolerate bullies? I chalk it up to fear and
ignorance: fear that if you stand up to a bully, you'll somehow
hurt yourself and the organization, and ignorance about the best
way to deal with the bully. The thing is, most bullies are bullies
because they're scared. And that means that they're among the
first people who will stand in the way of your quest to institute
constant change as a way of life.
bully-free company is faster, smarter, more profitable and more
fun. Stand up to the bullies. If they quit, fine. You'll survive.
And if you replace them with nonbullies, the company will thrive.
people is dramatically underrated as a management strategy. By
firing people who slow your company down, you're doing a dramatic
service to everyone who's still there. Sticking by one or two
powerful people who refuse to zoom can easily lead to the layoff
of 2,000 people.
ago, Ken Olsen, the founder of Digital Computer, steadfastly refused
to embrace both open systems and the personal computer. His board
of directors should have fired him. Instead, they indulged his
obstinacy and saw the entire company fade away and then be sold
there someone with influence at your company who frequently stands
in the way of change? What would happen if that person left?
Your Customers, Choose Your Future
customers do a lot to determine your company's mDNA. If you're
a PR firm that represents crazy, impulsive superstars, you've
organized and staffed to make yourself good at dealing with crazy
and impulsive superstars. If you didn't, there's no way they'd
stay with you. At the same time, though, it's unlikely you've
evolved your skills and staff and assets to make your firm the
ideal choice for a boring corporation. Just down the hall in your
building, on the other hand, is a firm that represents the Russian
Orthodox Church, Exxon and the Washington Philharmonic. Odds are
that they'd last about five minutes if they had your client list.
time you interact with clients, you swap memes with them. They
affect the work you do, the prices you charge, the rate at which
you change and the kind of person you hire.
ago, my company's biggest client (accounting for nearly 50 percent
of our sales) was a big, loud, pushy, angry company. The people
who worked there pushed their suppliers hard, trusted no one,
broke their word frequently and were not the easiest people to
please. We were dependent on their income (and the word of mouth
it generated would bring us even more income), but our interactions
with them were changing our mDNA. We were hiring differently,
interacting with each other differently, and most important, interacting
with our other clients differently.
had no choice. I fired our biggest client.
alternative was to become a firm I didn't want to become. The
alternative was to evolve into a company that specialized in insane
deadlines and cranky clients.
customers demand suppliers that are deeply entrenched in maintaining
the status quo. They demand a level of predictability and staffing
that will make it very hard for you to build a zooming company.
Thus, you choose your future when you choose your customers.
you determine that your future success as an organization lies
in your ability to adapt to changes in the competitive environment,
then you'll need clients that agree with you. Every time you take
money from a client, you're swapping mDNA, and if their mDNA is
slowing you down, you're trading your future success for today's
Tweaks and Tests While Wal-Mart.com Struggles
used evolution as their secret weapon to catch up with and eventually
overtake Kmart. Sam Walton set out to test and measure his way
to success, and the strategy worked. Thirty years later, Wal-Mart
realized that they needed an online store if they were going to
continue their growth and capture dollars that were moving online.
But rather than learning from Sam's success, they ignored his
strategy when it came time to go online.
Amazon started, the company had nothing to lose. Its founder,
Jeff Bezos, had just a few employees with some cheap office furniture,
holed up in Seattle. No reputation, no venture capital.
with little, Amazon experimented like crazy. They had nothing
to slow them down, so the first site went up in just a few weeks.
There was no warehouse because Amazon outsourced that. The customer
service department was staffed by the few people who also worked
in marketing and accounts payable.
day, Amazon tested and measured and improved. Over time, they
gradually added features, acquired companies, closed and opened
new stores. They evolved.
started later. Much later. And the mindset of the Wal-Mart team
was not surprising. They told me that as the world's largest retailer,
they had to think big. They realized that after their site went
up, it would be visited by huge numbers of people, so it had to
be robust. And because people had come to expect one-stop shopping
from their Wal-Mart store experience, it also had to be complete.
one aborted launch, they actually took the site down for a month
while a new executive retooled it for a second launch. That rebirth
has been unsuccessful as well.
hurt their ability to zoom. Wal-Mart fell in love with their permanent
winning strategy of low prices, mass scale and underserved communities.
This is the strategy that made them a star. (They forgot about
the testing and measuring part that led to these memes).
they decided to launch an online store, they assumed that their
current offline winning strategy would work without any changes.
They assumed that they could dictate the terms, and that their
huge brand and reach would take care of any problems that arose.
much has Wal-Mart learned from the online experiences they've
had? Compared to the systems that teach them how customers behave
in their stores, essentially nothing. Wal-Mart isn't evolving
fast enough online, and until they do, they're likely to continue
to fail in this medium. They have a fixed winning strategy online
and it's stuck.
could Wal-Mart have avoided this fate? My advice would have been
to launch a small site, with perhaps ten products for sale. Make
the offers on the products as remarkable as possible (remarkably
cheap prices or remarkably well-written offers or remarkably high-demand
items). Build a permission asset so Wal-Mart could talk with these
early customers and test new offers. As word of mouth spread,
set a small team loose on both evolving those ten offers and adding
that instead of selling every book, as they do now, they choose
to just sell The New York Times top ten bestsellers (Wal-Mart
stores sell more New York Times bestsellers than any other chain
in the world). Instead of selling a wide range of clothing, why
not just Wrangler jeans?
creating offers for specific products, by understanding-through
actual doing-how the processes work, Wal-Mart could create a platform
time, the people at Wal-Mart would learn what was working and
repeat that throughout the other parts of the site. Imagine saying
to a team of ten people, "Each of you gets ten pages. Tweak
them every hour until you figure out what approaches get the highest
yield." At the end of a day they'd have tested eight hundred
different offers. And from that sort of knowledge, Wal-Mart could
grow and continue to evolve its online business with confidence.
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Survival is Not Enough. Also on this site is a bullet
list of the key ideas from the book. If you're enjoying this
book, you can purchase a copy by visiting your local bookstore
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