It’s well known that the pessimist says the glass is half empty – so his surprises are all positive ones. The optimist says the glass is half full and somehow keeps that attitude despite her negative surprises.

What does the CEO say?
The CEO says “Hey, don’t we have twice as much glass as we need around here?” And I phrased that as a question on purpose.

Maybe you need that extra glass. If your company is growing you have to have a bit more capacity to grow into, otherwise you hit a wall. But, if you have too much extra capacity, your costs get too high and your profit goes to hell.

The CEO’s job is to question the answers – not to answer the questions. Is it really half full – or is it more like a third and everyone just rounds up hopefully? Is there really twice as much extra capacity or are some vital activities getting put off or not measured? How much extra capacity is really needed? In what areas? What is your trend line in the recent past – and how accurate is it in predicting the future? Are there things about the past that won’t repeat?

The answers, off course come from the customers. But they don’t answer in words, they answer with their wallets. And you can’t wait till then to plan. So you’ve got to approximate your answers yet remain flexible. No wonder you get paid the big bucks.

Takeaways:

1. Always question your assumptions.
2. Then look for the hidden assumptions you didn’t realize were assumptions.
3. Come at every significant conclusion from as many independent directions as possible. See if they all support the same conclusion.
4. The key word in #3 is independent. Otherwise you’ll be more and more convinced by a conclusion that is wrong.
5. Learn to live with ambiguity and not be paralyzed.
6. In baseball you can strike out 7 out of 10 times and still be batting 300. [For all you non sports people, that is a very good number.] You can do the same in business ONLY if you catch and correct your mistakes early. Asking lots of different questions helps you do that.
7. The skill of doing this is fairly simple, the emotional maturity it takes to do it continuously is not. That’s really why you get paid the big bucks.

Thanks to Jerry Guirlinger of Mobile Shop Company – talking to him today inspired this post.

[tags] small business, CEO skills, entrepreneur, ambiguity [/tags]

200,000 deliveries a day. 5,000 employees (many barely literate) and an enviable error rate without depending on electronic technology. And such dedication that when Royalty visits, Prince Charles (yes, THAT Prince Charles) adjusts his schedule to fit theirs, because they won’t deviate.
What’s your error rate?

Your dedication level?

Read about the Dabbawala and see if you can think of reasons for their success.

My Reasons:

1. The job description is very clear. The difference between success and failure is obvious, and indisputable.
2. The job description doesn’t change.
3. Everyone is treated as an equal and is paid the same.
4. Just three levels of management. (I think this is possible because of #2 and #3)
5. Each worker has to contribute some of their own capital. Different from an ESOP where capital is usually given to the employees, these workers provide their own, (And I suspect they keep ownership of it.)
6. UPDATE – I agree with Seth Godin that it works because they know their customers which engenders trust and hence responsibility. But I don’t think that’s the only reason it works.

Post your reasons in the comments.

Takeaway:

• When would such a low error rate be a bad thing?

[tags] small business, entrepreneur, error rate, management, productivity, Dabbawala [/tags]

Everyone knows reward is proportionate to risk.

When everyone knows something, it’s usually wrong. And there’s usually a bit of truth in it. Maybe the wrong bit comes from the fact that for everyone to know something it usually has to be dumbed down a lot. But I dirgess.

The fallacy in believing that reward is proportionate to risk is that you’ll believe the more risky something is, the more reward there should be. Not true. Another way to say it is that every reward is associated with some degree of risk. But not every risk has any reward associated with it at all.

The truth is entrepreneurs don’t like risk. Sure they tolerate it, but they like to minimize it. They often see ways to do this that others don’t so they appear to take more risks than they actually do.

The biggest risk in running a company is that customers won’t do what you want them to (buy your stuff at a high enough price point) and they won’t do it fast enough (before you run out of money). Your exposure to that risk is compounded if you don’t track what they do and how quickly they do it. And if you make up reasons for their actions or see patterns that don’t jibe with reality.

Takeaways:

• A good business model (not a business plan) is the best tool I know to minimize risk.
• The CEO’s job is to chart the company’s progress through the “right” amount of risk.

[tags]small business, entrepreneur, business model, risk reward, CEO [/tags]