Business thinker must have a million 2×2 grids for classifying things.  While chatting with my B-school advisor some years ago, I theorized that most business thinking has to get reduced to a 2×2 grid, because people can’t get their minds around anything bigger than what they can draw on a 2-dimensional piece of paper with six strokes of a pencil.  But I digress

I once read an article that said you could sort almost any business action into a 2×2 grid with these axes: Do You Want It? and Do You Have it?

I can’t remember the author’s labels, but they corresponded more or less to the ones I used above.  Preserve what you want and have, Create or Get what you want but don’t have, Prevent what you don’t want and don’t have, and Eliminate what you don’t want and do have.

Not that we should use labels to oversimplify, but they do make it easier to get a perspective on what kind of work you might be doing — whether looking at your company as a whole, or whether looking at a specific task or project you’re working on.

I’ve sometimes asked friends (and clients) whether they want their vocation to be about “adding good or removing bad”.  (I’ve never asked about “preserving good or preventing bad”, though now that I remember this grid, I should consider broadening my question.)

I think it’s an important question.  People are wired differently (or want different things at different times in their life), and someone who really wants to “add good” may well suffer in a career in which she focuses on “removing bad”, no matter how good she is at it.

For example: one of my clients opened a gift store after years of working as a child psychologist.  Her store is mostly about creating new smiles, and she loves the work, even if it doesn’t pay as well as her former job.  The thing that drove her out of child psychology was too many years of seeing suffering children.  Yes, she helped them many of them out of great misery.  But she eventually fatigued of seeing the misery, no matter how good she was at her job.

Of course many jobs and industries spend some time in all four quadrants.  Think of an internal auditor who works to prevent losses or fraud (”prevent it”) working for a toy company that wants to create fun (”create/get it”).  Or think of a sales exec hunting clients and opening up markets (”create/get it”) for a pesticide company (”eliminate it”).

In the end, it’s good to know that the way you spend your day and the things that you achieve line up with how you want to live.  And this grid is a nice reminder to ask the question.

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Please drop me a line if you know who created this grid and wrote the original article!

I’ve been traveling around Honduras for the last four weeks — mostly vacation, but working a little while I’m here, via the occasionally available internet or VoIP connection to the States.

Small business in Honduras is not a model you want to copy, at least not for profitability.  As a travel mate and I noticed while eating at small restaurants across the country, it often takes four conversations just to order and pay for your dinner and drinks: you place a first order at the counter, try again when the server comes by with only half of what you asked for, and try one more time when you flag down the server to re-ask for the brand of beer they said they didn’t have, but that you just saw them serve to someone at the next table.

Finally, when you go up to the counter to pay, they ask what you ordered because they didn’t write it down the first time.  Maybe you remember it all, or maybe you don’t, but the chances are skewed toward you paying for less than you got rather than all or more.  Especially if they served you several of those beers and you lost count.

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Hey, at least this is more consumer friendly than the US grocery store bar code readers that were biased toward store-favoring errors, right?

Three numbers you should know: the cost of customer acquisition, cost of customer retention, and  value of a customer.

Also, know the difference between your average cost/value and your customer-specific cost/value.  Average cost/value is useful for planning and projecting.  But for management and strategy, you’ll want to know customer-specific cost and value.  Why?  Because then you can try to find more prospects that look like them, for the most profit (and probably the most fun).

As part of your marketing or demarketing analysis, these calculations should turn into what your sales team calls “qualifying criteria” for evaluating leads.  A sales team that isn’t obligated to qualify its leads is a sales team that’s going to cost you real money.  But sales teams aren’t usually the kind of folks who like to spend time on analysis.  If you’re the boss, or if you’re the marketing chief, you need to make these numbers happen.  Get to it!

Gather enough data and do enough analysis to make a good decision. Then decide. Then act.

There are many famed quotes on the theme of “how much is enough”:

Lore has it that someone once asked Abraham Lincoln, “How long should a man’s legs be?” and that he answered “Long enough to reach the ground.” Einstein is credited for a quote something like, “Make everything [i.e. theories or models] as simple as possible, but no simpler.” And my 9th grade English teacher, Mrs. Eleanor Ponder, would say this about how long our essays should be: “like a woman’s skirt: long enough to cover everything, but short enough to keep it interesting.”

At their worst, executives have a bias toward either shoot-from-the-hip decision making, or paralysis by analysis. Better off are those who know what level of confidence they need before they can make a decision, and what amount of data and analysis they need to get that level of confidence.

If you know you lean too far in one direction, make a point to ask of your partners (or engineer for yourself) a flag or alert when you need correcting action. Expect that it will take a few tries before the new habit sticks.

[Donald Trump] understood a famous axiom: If you owe the bank $1 million and can’t pay, you’re in trouble, but if you owe the bank $1 billion and can’t pay, the bank’s in trouble. The moment that captured his strategy perfectly came when Trump’s CFO received an $800,000 quarterly insurance bill for Trump’s yacht, Trump Princess, which was, of course, mortgaged. He simply sent the bill to the Bank of Boston, which held the note on the boat, with a reminder that if the Princess sank uninsured, there’d be no collateral for the loan. The bank paid the bill.

– Geoff Colvin in Ex-CEOs should learn from The Donald, Wall $treet Week, 13 May 2008.

I’ve been meaning to blog some version of the “if you owe the bank $x” line for some time, but this week’s W$W article gave me extra impetus.

The broader point for businesses and executives is that there are many ways for someone to hold you hostage.  Owing you too much is just one.  Customers can hold you hostage if you’re their biggest client.  Employees can hold you hostage if they’re the only ones who know how to do something essential for your business.  Neighbors can hold you hostage if they can make your block somehow unattractive to your customers.

You can’t make all these risks go away, but you sure ought to safeguard against the ones you can if they’re big and/or likely.

Hired to replace Robert Dynes in the aftermath of a management meltdown in which UC administrators flouted, circumvented and violated university policies governing pay and perks, the 63-year-old [Mark] Yudof knows his mission when he officially takes over next month.”I’ve really got to get the trains running on time (at UC). There are a lot of things I believe in, like global initiatives and dealing with the deferred maintenance on campus and being absolutely competitive for faculty,” he said in a recent interview in the East Bay. “But I’ve got to get the platform right. I’ve got to regain the trust of Californians and the Board of Regents. I’ve got to get our (number of employees) down and our budgets down. Then we can start talking about what else we want to do.”…

He recognizes that many problems are entrenched at UC. But that won’t deter him.

“There is a saying, ‘A crisis is a terrible thing to waste,’ and that is my view,” he said. “And my view is that some things we probably should have done 10 years, five years, 20 years ago may get done when you have a crisis.”

– Tanya Schevitz, San Francisco Chronicle in Next UC president - homey image, hefty mission, Thursday, May 8, 2008

Your staff is well-aware that you are imperfect. So are your customers.

So stop trying to perpetuate the idea that you don’t make mistakes. Nobody thinks that about you. And stop trying to be perfect. You’re not going to pull it off.

Instead, figure out how good you need to be, and shoot for being that good and a little bit better. Ask your staff and your customers to help you be better — by providing you with feedback on how well (or how poorly) you’ve done, and for providing suggestions on how you can do better. If you get good at this, you’ll find that life is much less stressful.*

Remember that being “good enough” isn’t always about scoring 90% every time you try. Sometimes it’s about scoring 100% nine times out of ten, and getting a goose egg on the last one. Learning to identify, acknowledge, and make amends for mistakes is a skill worth developing. And learning that skill is a much better use of your energy than trying to be perfect.

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*Especially if you’re a business owner.  People who own their own stores have a particularly hard time with this kind of thing.

“I came to see, in my time at IBM, that culture isn’t just one aspect of the game — it is the game.”– Louis Gerstner, Jr., in Who Says Elephants Can’t Dance?

Corporate Culture isn’t a new idea any more.  But I think that its importance is on the comeback.  In 2008, many people are observing that “how we look at the world” is one of the most important things that shape how our lives go.  Add to that two other observations: (1) “how we see the world to be” is something we have to work hard to perceive, since it is so fundamental that we can have a hard time starting to grasp it and (2) “how we look at the world” is something we can change, if not easily.

Same goes for businesses.  “How your company sees the world to be” is a fundamental part of a business’s corporate culture.  It’s hard to grasp, and it is something that can be changed, if it needs to be, and if the company has people willing to do it.  This is true at every level of the corporation, and in every part of the corporation’s mind: strategy, management, and marketing.

I’ll confess. I don’t have a system for backing up my files. Sure, I do make backups (offsite and onsite) at least every few months. And when I’m working on a critical document, I make constant backups by sending copies of my files-in-progress to an offsite mailhost. But I could do better. Odds are, you could, too.

Here’s a quote from and link to a PCWorld article on online backups, Back Up Your Files Online Without Even Trying:

I’m sure that by now all of you back up critical files weekly or even daily, and religiously refresh your full-disk-image backup once every few months, right? No? Well, you’re not alone. And while there’s no substitute for a genuine backup strategy, the move toward desktop-caliber online applications has made it easier than ever to get some degree of backup protection without even trying.

Happy easier breathing to you.

Winning companies make a habit of doing things that are good for their health.  That means choosing work (whether they be projects and clients, or products and market sectors) that adds to the company’s bottom line, assets, and general happiness.

What do you need for a track record of smart choices?

1.  Knowing what works for you.

2.  Evaluating projects (or clients, or products, or market sectors) before you pursue them.

3.  Pursuing only the projects that make sense.

4.  Working the projects you win to make sure you’re doing what you intended.

5.  Measuring your results, during and afterward.

6.  Tuning the process to make it better each time.

If you don’t care where you’re going, it doesn’t matter where you go.  But I suspect you care where you’re going.  And please, remind everyone on your staff (including yourself)  — financial success is measured by net income, not gross income.  And if your staff don’t know how to tell whether their work is yielding red or black net income, think about how to change that.  Pronto.