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Tag: culture

Trust but Verify

Back in my consulting days, I learned a lot of management aphorisms. One that always felt oxymoronic to me was “trust, but verify” — apparently Russian in origin — I came to understand it as a two-part idea:

  1. You should have a trusting and open attitude regarding your colleagues’ conclusions but still spend the time and effort to validate them
  2. That you should not view a colleague checking the assumptions / data behind your work as a sign of lack of trust

Of course, when it stops being a two-sided thing, you get something made for Dilbert:

Trust but Verify

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Apple to buy Intrinsity?

I recently read an interesting rumor off of tech blog Ars Technica that Apple has acquired small processor company Intrinsity – who’s website is, as of the time of this writing, down.

imageIn the popular tech press, very few self-professed gadget fans are aware of the nuances of the chip technology which powers their favorite devices. So, first question, what does Intrinsity and why would Apple be interested in them? Intrinsity is a chip design company known for its expertise in making existing processor designs faster and more efficient. They’ve been retained in the past by ATI (the graphics chip company which is now part of AMD) to enhance their GPU offering, Applied Micro (formerly AMCC) to help speed up their embedded processors, and more recently were used by Samsung (and presumably Apple) to speed up the ARM processor technology which powers the applications on the iPhone and the iPad.

Second question, then, would Apple do it? Questions about Apple are very difficult to answer – in part because of the extreme amount of hype and rumor surrounding them, but also because they tend to “think different” about business strategy. Normally, my intuition would say that this deal is unlikely to make much sense. I’ll admit I haven’t looked at the deal terms or Intrinisty’s finances, but my guess is Intrinsity has a flourishing business with other chip companies which would probably be jeopardized by Apple’s acquisition (especially now that Apple is itself sort of a chip design company and will probably want to de-emphasize the rest of Intrinsity’s activities). An acquisition like this could also be risky as Apple’s core strengths lie in building and designing a small number of well-integrated hardware/software products. While most analysts suspect that Apple contributed a huge amount to the design of the Samsung chip that’s currently in the iPhone, Apple is unlikely to have a culture or set of corporate processes that match Intrinsity’s, and I suspect nursing a chip technology group while also pushing the edge on product design and innovation at some point just becomes too difficult to do (which may partially explain the exodus of PA Semi, Apple’s other chip company purchase, engineers post-acquisition).

Of course, Apple is not your ordinary technology company, and there are definitely major benefits Apple could gain from this. The most obvious is that Apple can avoid paying licensing, royalty, and service fees to Intrinsity (which can be quite large if Apple continues to ship as many products as it does now) if it brings them in-house. Strategically, if Intrinsity is truly as good as they claim (I’ve read my fair share of rumors that the A4 processor in the iPad was a joint development effort from Samsung, Apple, and Intrinsity), then Apple may also want to take this valuable chess piece off the table for its competitors. Its no secret that major chip vendors like Qualcomm, NVIDIA, Texas Instruments, and Intel see the mobile chip space as the next hot growth area – Apple could perceive leaving Intrinsity out there as a major risk to maintaining its own device performance against the very impressive Snapdragon, Tegra, and OMAP (and potentially Intel Atom) product lines. imageThis is a similar move to what Apple did with its equity stake in Imagination Technologies, the company that licenses the graphics technology that powers the iPhone, the Palm Pre, and Motorola’s Droid. Its widely believed that, had Imagination been willing (and had Intel not also increased its stake in Imagination), Imagination would currently be an Apple division – highlighting Apple’s preference to not license technology which could potentially remain available to its competitors, but to bring it in-house.

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So, in the end, does an Apple-Intrinsity deal make sense? Or is this just a rumor to be dismissed? It’s hard to say for sure (especially without knowing much about Intrinsity’s finances or the price offered), but if Intrinsity has key talent or intellectual property that Apple needs for its new devices, then Apple’s extremely high volume (and thus large payments to Intrinsity) could be the basis for fairly sizable financial benefits from such a deal. More importantly, on a strategic level, Apple’s need to maintain a performance lead over new Android (and Symbian and Windows Phone 7) devices could be all the justification needed for swallowing this attractive asset (note: AnandTech’s preliminary review shows the iPad outperforming Google’s Nexus One on web rendering speed – although how much of this is due to the iPad having a bigger battery is up for debate). Its hard to say for sure without knowing much about how profitable Intrinsity is, how much of its business comes from Apple/Samsung, and what sort of price Apple can negotiate, but there is definitely a lot of reason to do it.

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How to properly define a company’s culture

Company culture is a concept which, while incredibly difficult to explain or measure, is very important to a company’s well-being and employee morale. Too often, it comes in the form of vaguely written out “corporate mission statements” or never-ending lists of feel-good, mean-nothing “company values”. Oh joy, you value “teamwork” and “making money” – that was so insightful…

It was thus very refreshing for me to read the Netflix company culture document (HT: Hacking NetFlix, embedded below via SlideShare):

Slidumentation aside, I think the NetFlix presentation does three things extremely well:

  1. It’s not a list of feel-good words, but  actual values and statements which can actually guide the company in its day-to-day hiring, evaluation. Most company culture statements are nothing but long lists of virtues and things non-sociopaths respect. “Teamwork” and “honesty”, for example, are usually among them. But, as the Netflix presentation points out, even Enron had a list of “values” and that wound up not amounting to much of anything. Instead, Netflix has a clear state of  things they look for in their employees, each with clear explanations for what they actually mean. For “Curiosity”, Netflix has listed four supporting statements:
    • You learn rapidly and eagerly
    • You seek to understand our strategy, markets, subscribers, and suppliers.
    • You are broadly knowledgeable about business, technology, and entertainment.
    • You contribute effectively outside of your specialty

    Admittedly, there is nothing particularly remarkable about these four statements. But what is remarkable is that it is immediately clear to the reader what “curiosity” means, in the context of Netflix’s culture, and how Netflix employees should be judged and evaluated. It’s oftentimes astounding to me how few companies get to this bare minimum in terms of culture documents.

  2. Netflix actually gives clear value judgments.  I’ve already lamented the extent to which company culture statements are nothing more than laundry lists of “feel good” words. Netflix admirably cuts through that by not only explaining what the values mean, but also by what should happen when different “good words” conflict. And, best of all, they do it with brutal honesty. For instance, Netflix on how they won’t play the “benefits race” that other companies play:

    A great work place is stunning colleagues. Great workplace is not day-care, espresso, health benefits, sushi lunches, nice offices, or big compensation, and we only do those that are efficient at attracting stunning colleagues.

    Netflix on teamwork versus individual performance:

    Brilliant jerks: some companies tolerate them, [but] for us, the cost to teamwork is too high.

    Netflix on its annual compensation review policy:

    Lots of people have the title “Major League Pitcher” but they are not all equally effective. Similarly, all people with the title “Senior Marketing Manager” and “Director of Engineering” are not equally effective … So, essentially, [we are] rehiring each employee each year (and re-evaluating them based on their performance) for the purposes of compensation.

    Within each of the three examples, Netflix has done two amazing things: they’ve made a bold value judgment, which most companies fail to do, explaining just how the values should be lived, especially when they conflict (“we don’t care how smart you are, if you don’t work well with the team, you have to go”), and they’ve even given a reason(“teamwork is more important to delivering impact for our customers than one smart guy”).

  3. They explain what makes their culture different from other companies and why. Most people who like their jobs will give “culture” as a reason they think their company is unique. yet, if you read the countless mission statements and “our values” documents out there, you’d never be able to see that difference. Granted, the main issue may just be that management has chosen not to live up to the lofty ideals espoused in their list of virtues, but what might help with that and make it clearer to employees about what makes a particular workplace special is explaining how and why the company’s culture is different from another’s. Contrast that with the Netflix presentation, which spends many slides explaining the tradeoffs between too many rules and too few, and why they ultimately sided with having very few rules, whereas a manufacturing company or a medical company would have very many of them. They never go so far as to say that one is better than the other, only that they are different because they are in different industries with different needs and dynamics. And, as a result of that, they have implemented changes, like a simpler expense policy (“Act in Netflix’s best interests”) and a revolutionary vacation policy (“There is no policy or tracking”) [with an awesome explanation: “There is also no clothing policy at Netflix, but no one has come to work naked lately”].

Pay attention, other companies. You would do well to learn from Netflix’s example.


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Innovator’s Delight

imageKnowing my interest in tech strategy, a coworker recommended I pick up HBS professor Clayton Christensen’s “classic” book on disruptive innovation: The Innovator’s Dilemma. And, I have to say I was very impressed.

The book tries to answer a very interesting question: why do otherwise successful companies sometimes fail to keep up on innovation? Christensen’s answer is counter-intuitive but deep: the very factors that make a company successful, like listening to customer needs, make it difficult for successful companies to adopt disruptive innovations which create new markets and new capabilities.

This sounds completely irrational, and I was skeptical when I first heard it, but Christensen makes a very compelling case for it. He begins the book by considering the hard disk drive (HDD) industry. The reason for this is, as Christensen puts it (and this is merely page one of chapter one!):

“Those who study genetics avoid studying humans, because new generations come along only every thirty years or so, and so it takes a long time to understand the cause and effect of any changes. Instead, they study fruit flies, because fruit flies are conceived, born, mature, and die all within a single day. If you want to understand why something happens in business, study the disk drive industry. Those companies are the closest things to fruit flies that the business world will ever see.”

image From that oddly compelling start, Christensen applies multiple techniques to establish the grounds for his theory. He begins by admitting that his initial hypothesis for why some HDD companies successfully innovated had nothing to do with his current explanation and was something he called “the technology mudslide”: that because technology is constantly evolving and shifting (like a mudslide), companies which could not keep moving to stay afloat (i.e. by innovating) would slip and fall.

But, when he investigated the different types of technological innovations which hit the HDD industry, he found that the large companies were actually constantly innovating, developing new techniques and technologies to improve their products. Contrary to the opinion of many in the startup community, big companies did not lack innovative agility – in fact, they were the leaders in developing and acquiring the successful technologies which allowed them to make better and better products.
But, every now and then, when the basis of competition changed, like the shift to a smaller hard disk size to accommodate a new product category like minicomputers versus mainframes or laptops versus desktops, the big companies faltered.

From that profound yet seemingly innocuous observation grew a series of studies across a number of industries (the book covers industries ranging from hardcore technology like hard disk drives and computers to industries that you normally wouldn’t associate with rapid technological innovation like mechanical excavators, off-road motorbikes, and even discount retailing) which helped Christensen come to a basic logical story involving six distinct steps:

  1. Three things dictate a company’s strategy: resources, processes, and values. Any strategy that a company wishes to embark on will fail if the company doesn’t have the necessary resources (e.g. factories, talent, etc.), processes (e.g. organizational structure, manufacturing process, etc.), and values (e.g. how a company decides between different choices). It doesn’t matter if you have two of the three.
  2. Large, successful companies value listening to their customers. Successful companies became successful because they were able to create and market products that customers were willing to pay for. Companies that didn’t do this wouldn’t survive, and resources and processes which didn’t “get with the program” were either downsized or re-oriented.
  3. Successful companies help create ecosystems which are responsive to customer needs. Successful companies need to have ways of supporting their customers. This means they need to have or build channels (e.g. through a store, or online), services (e.g. repair, installation), standards (e.g. how products are qualified and work with one another), and partners (e.g. suppliers, ecosystem partners) which are all dedicated towards the same goal. If this weren’t true, the companies would all either fail or be replaced by companies which could “get with the program.”
  4. Large, successful companies value big opportunities. If you’re a $10 million company, you only need to generate an extra $1 million in sales to grow 10%. If you’re a $10 billion company, you need to find an extra $1 billion in sales to grow an equivalent amount. Is it any wonder, then, that large companies will look to large opportunities? After all, if companies started throwing significant resources or management effort on small opportunities, the company would quickly be passed up by its competitors.
  5. Successful companies don’t have the values or processes to push innovations aimed at unproven markets, which serve new customers and needs. Because successful companies value big opportunities which meet the needs of their customers and are embedded in ecosystems which help them do that, they will mobilize their resources and processes in the best way possible to fulfill and market those needs. And, in fact, that is what Christensen saw – in almost every market he studied, when the customers of successful companies needed a new feature or level of quality, successful companies were almost always successful at either leading or acquiring the innovation necessary to do that. But, when it came to experimental products offering slimmer profit margins and targeting new customers with new needs and new ecosystems in unproven markets, successful companies often failed, even if management made those new markets a priority, because those companies lacked the values and/or processes needed. After all, if you were working in IBM’s Mainframe division, why would you chase the lower-performance, lower-profit minicomputer industry and its unfamiliar set of customers and needs and distribution channels?
  6. Disruptive innovations tend to start as inferior products, but, over time improve and eventually displace older technologies. Using the previous example, while IBM’s mainframe division found it undesirable to enter the minicomputer market, the minicomputer players were very eager to “go North” and capture the higher performance and profitability that the mainframe players enjoyed. The result? Because of the values of the mainframe players as compared with the values of the minicomputer players, minicomputer companies focused on improving their technology to both service their customer’s needs and capture the mainframe business, resulting in one disruptive innovation replacing an older one.

image The most interesting thing that Christensen pointed out was that, in many cases, established companies actually beat new players to a disruptive innovation (as happened several times in the HDD and mechanical excavator industries)! But, because these companies lacked the necessary values, processes, and ecosystem, they were unable to successfully market them. Their success actually doomed them to failure!

But Christensen doesn’t stop with this multi-faceted and thorough look at why successful companies fail at disruptive innovation. He spends a sizable portion of the book explaining how companies can fight the “trappings” of success (i.e. by creating semi-independent organizations that can chase new markets and be excited about smaller opportunities), and even closes the book with an interesting “ahead-of-his-time” look (remember, this book was written over a decade ago!) at how to bring about electric cars.

I highly recommend this book to anyone interested in the technology industry or even, more broadly speaking, on understanding how to think about corporate strategy. While most business books on this subject use high-flying generalizations and poorly evaluated case studies, Christensen approaches each problem with a level of rigor and thoroughness that you rarely see in corporate boardrooms. His structured approach to explaining how disruptive innovations work, who tends to succeed at them, why, and how to conquer/adapt to them makes for a fascinating read, and, in my humble opinion, is a great example of how corporate strategy should be done – by combining well-researched data and structured thinking. To top it all, I can think of no higher praise than to say that this book, despite being written over a decade ago, has many parallels to strategic issues that companies face today (i.e. what will determine if cloud computing on netbooks can replace the traditional PC model? Will cleantech successfully replace coal and oil?), and has a number of deep insights into how venture capital firms and startups can succeed, as well as some insights into how to create organizations which can be innovative on more than just one level.

Book: The Innovator’s Dilemma by Clayton Christensen

(Image credit: hard disk drive) (Image credit: David and Goliath)

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Independent Taiwan

image As many of this blog’s readers know, I was born in Taiwan but raised in the United States. I am a bit ashamed to admit this, but it wasn’t until college that I began to get a real sense of what being Taiwanese meant – the culture, the history, the customs. Sadly, it wasn’t until I started doing research on technology companies that I got a sense of the importance of Taiwan in the global economy.

And it wasn’t until even more recently that I got a real sense of Taiwanese politics. Taiwan is basically split between two parties, the Kuomintang (KMT) – the party of Chiang Kai-shek – and the Democratic Progressive Party (DPP).

Technically, if one were to classify the two parties in Western terms, the KMT would count as the “conservative/right-wing” party and the DPP would be the “liberal/left-wing” party. But, while this difference is real, the main issue that divides the two parties is their stance on Taiwanese “independence”.

The reason I put “independence” in quotes is because the subject is a very nuanced one. Currently, Taiwan is in a state of de facto independence. Although neither China nor the United States will go so far as to say it openly, there is fairly wide acceptance that the Taiwanese government is “sovereign” in the sense that its democratic government rules Taiwan without any real question. The “independence” that divides the KMT and the DPP, however, goes beyond this independent-even-though-nobody-will-say-it status quo. It’s the question of whether or not Taiwan is truly a separate political and cultural entity from China altogether. And, because of the KMT’s origins in China, the KMT is the party which most favors reconciliation with China and greater integration, while the DPP favors stronger terms of independence.

And, while I have many problems with the DPP’s positions and base of support, I am completely opposed to the KMT party line for four main reasons:

  1. The government of Mainland China is a repressive regime with little regard for human rights. The only way I can even begin to understand why people would think that Taiwan would be better off as a part of China is if they didn’t pay attention to the news: Tibet, Tiananmen Square, Uighur Muslims, silencing of political protest, disregard for the health of their own people and trading partners, excessive pollution, support for genocide, the list goes on and on. Yes, plenty of other countries have their fair share of human rights issues, and it’s a perfectly valid point to say that Taiwan at various stages of its past had similar problems which they eventually solved, but that doesn’t change the fact that the Chinese government today is less desirable than an open, democratic one, and anyone who thinks that Taiwan ought to subject itself to such a rule either has no clear idea what the Chinese government has been up to or has something against Taiwanese freedom.
  2. A not-very-similar society and culture is hardly a reason for Taiwan to belong to China. To say that Taiwan ought to reunite with China because of strong cultural ties would be the same as arguing that the United States and India should be colonies of Great Britain. Yes, they speak the same language (although there are many in Taiwan who prefer Taiwanese or Japanese), and some of the same pop music is played in both countries (Asian pop superstar Jay Chou is from Taiwan), but that’s hardly a decent reason to just surrender one’s national identity and government to someone else, especially when the cultures (e.g. phrases, foreign influences, even the writing of characters) have several big differences.
  3. The KMT has a murderous history which the people of Taiwan should imagewant to distance themselves from. This will piss off many KMT, but Chiang Kai-Shek was a contemptible man who butchered his own people and let them starve while he enriched himself. When the Chinese people turned against him and sided with Mao Zedong’s Communists, instead of learning from his mistakes, Chiang repeated them on the island of Taiwan, installing a brutal military rule. The KMT seized all available property and, during the infamous 2-28 incident, butchered political dissidents and native Taiwanese. For years, they suppressed the local culture/dialect, demanding instead that students be educated as if they were mainlanders (Chiang’s plan all along was to re-take the mainland). That the KMT wants to look backwards on these “good old days” strikes me as a somewhat ridiculous basis for foreign policy (not to mention the irony of the party of Chiang Kai-Shek wanting to negotiate “surrender” with the party of Mao Zedong).
  4. The best way to improve Taiwanese economic growth is in achieving independence. KMT supporters oftentimes float the idea that the Taiwanese economy depends on tighter integration with China. While this is certainly true, there is nothing which says that more trade and immigration between China and Taiwan has to mean that Taiwan becomes a part of China. France and Germany have more or less completely free trade and immigration, yet you would be hard-pressed to find a Frenchman who thinks that France should be made a part of Germany. On the contrary, because of Taiwan’s dependence on trade, the issue of independence is especially important. How do you trade or do business when no countries recognize your laws or authority? How do you flourish when few will grant visas to your businesspeople? When your customers find it difficult to travel into your country? Or when pressure by China can cause your telephone area codes to suddenly change?

imageThe DPP, in my opinion, is a backwards party content to play class and identity politics (fomenting racial/cultural backlash against the mainland and the wealthier, more cosmopolitan base of the KMT), argue over trivial things like the official flag of the country (one such example is to the left) and whether or not the map of Taiwan should be depicted with North-South on the vertical or the horizontal axis (to de-emphasize their location next to China), and play to narrow-minded anti-trade/anti-immigration isolationists.

But, despite all of this, I believe that the issue of the hour for Taiwan is independence. And I believe that, because of Taiwan’s relative strength and China’s focus today on economic growth and integration with the global political community, the time for pushing independence is now. Maybe, later, when the need for independence is less and when (hopefully) China becomes more democratic and open, the dialogue and the priorities might change. But, until then, I see the DPP representing the lesser of two evils.

(Image source)

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How to Have a Great Company Culture

This past Thursday, I attended a presentation by Kent Thiry, the CEO of DaVita, a dialysis company and former partner at the management consulting firm Bain & Company. Thiry presided over a stunning turnaround at the firm, but the focus of his presentation was not so much on the corporate specifics but on DaVita’s culture.

Culture is not something I used to consider very much, because, frankly, I thought it was mostly fuzzy BS. And, in fact, many companies deliberately make it that way. They skim books like Jim Collins’ Built to Last and half-listen to human resource fads about how the mere fact that a mission statement and a list of values exists makes a company more productive and lasting — not appreciating that the employees know it’s a sham.

What Thiry had to present was an example of a community. DaVita, as presented by Thiry, was not merely a dialysis company where manufacturers and techs work with doctors and nurses to help treat patients, it was a village, where community members watched out for each other, watched out for the community as a whole, and got together on a regular basis to show each other that they cared. Never before have I seen videos of people proudly singing and dancing to the company song, crying when they discussed how much they loved working for DaVita and working with their co-workers and of course their village mayor (his title is not CEO!) KT (Kent Thiry).

So, how did Thiry help construct such a powerful culture? He attributed it to “show that you care“, no matter if business is good or bad. After all, its really easy to stick to your values and your mission statement and your ideas of community when business is good but what makes or breaks a culture is whether or not you stick to it when business is bad.

Among the tips that Thiry had:

  1. Make hiring and firing decisions based not only business and technical competent, but on adherence to the values of the company
  2. Emphasize that DaVita was a community first, a company second
  3. Spend time honoring those who adhere to the values, not simply pay lip service to them in a vague sense, not simply reward them financially — but actually honor them, with plaques, with ceremony, with recognition
  4. Make people self conscious by having them sing the company song, recite the company motto — because when you do things that make you self conscious you really analyze whether or not your life really stacks up against your values
  5. Establish a practice whereby senior management lead by example — if the C-level management (CEO, CMO, CTO, CIO, etc.) are not following community principles, then why should anyone else?

Thiry then walked through a host of amazing cultural stories to illustrate:

  • The DaVita community (meaning the broader community and not just the corporate leaders) chose to establish a fund to help the children of DaVita employees pay for college
  • DaVita has a practice where senior management and the firm match contributions that the community endorses to charities and noble causes
  • DaVita honors doctors who it considers to have made the biggest impact in their patients’ lives, because that is a broader part of the purpose of the DaVita community
  • DaVita established a practice whereby community members in need receive assistance from other community members
  • Thiry showed off amazing videos of interviews with cancer patients/employees who tearfully described how their coworkers not only raised money to help pay for treatment but sent cards, gifts, helped around the house, etc.
  • One of the most touching stories was of a female employee who died along with her husband, leaving a daughter in college to not only deal with the emotional impact of their deaths, but with huge financial burdens and with her own college tuition. The DaVita community came together to take care of the daughter — paying her tuition so she wouldn’t have to drop out and helping to cover the funerary expenses.

If there are two takeaways from this:

  1. Culture matters. Ask any of DaVita’s workers — or any workers, period. It’s very difficult to be productive or, more importantly, to be happy if you hate the environment you work in. Yes, technical and business competence is necessary, but in no way is it sufficient for creating a good business.
  2. To get a great culture, you have to show that it matters. You can’t just write a values statement and expect a wonderful culture to spring up. You have to stick to it, especially when it is hard to, especially when there are conflicting priorities.
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