Net neutrality has received surprisingly strong support from many Silicon Valley innovators, including Google. Given that the lack of regulation has enabled mind-blowing levels of innovation since the World Wide Web emerged in the early 1990s, why will imposing regulation to “protect innovation” help? If it ain’t broke, don’t fix it.”
Many industry veterans agree. Bob Metcalfe is co-inventor of Ethernet technology underlying the development of networks. Unlike Al Gore, his original work was instrumental in enabling use and growth of the internet. Opposed to net neutrality, he has often warned that government regulation could kill the open internet, a “golden goose” of economic development.
Are supporters of net neutrality Pie Chart thinkers or Venn diagram thinkers? A recent 20/20 Outlook post contrasted these two worldviews in an admittedly oversimple way. “Pie Chart thinking constrains your vision to that which already exists… Pie Charts constrain us to a finite perspective; Venn Diagrams encourage us to include more factors… Venn Diagram thinking enables you to break out of the box by forcing you to consider which of several circles you will include.”
Two possible reasons come to mind for why many in the technology sector support more government regulation: (1) lack of knowledge of history, and (2) Pie Chart thinking.
Supporters raise the specter that, if the largest providers are able to charge higher rates for faster service, small businesses and consumers would be harmed by being unable to access the faster service. These supporters must not be aware of how regulatory actions that have hurt innovation over the past century and a half in the U.S. Decades of government regulation in the telecom industry, for example, have on balance stifled rather than helped innovation. Instead of protecting consumers, the government became the protector of the status quo for the largest companies.
While limited historical vision is one cause, Pie Chart thinking seems like a bigger problem. Is it surprising that some politicians and large companies want to gain economic control over the fast-growing technology sector by imposing regulations? No. But is it surprising is that so many of the current and future innovators are supporting it? Yes! They apparently view one of the most explosive technological drivers of economic growth in our nation’s history as a bounded system with finite capabilities.
Rather than imposing regulations, protecting our freedom to act would benefit consumers. Instead of regulating a finite number of players to constrain pricing (Pie Chart), allowing significant ongoing demand from consumers for higher speed traffic to drive the formation of a whole new set of competitors would grow the economic pie and add to the U.S. economy (Venn Diagram).
My 2 cents. If you disagree, I’d like to hear about it.
“Innovation is the specific instrument of entrepreneurship, the act that endows resources with a new capacity to create wealth.” -Peter Drucker
“The only worse design than a pie chart is several of them.” -Edward Tufte
One of my favorite hobbies is oversimplifying the world, and I’ve decided to share my latest instance. Two very different kinds of thinkers exist; I call them Pie Charts and Venn Diagrams. How are they alike, how do they differ, and which one is your default thought process?
A Pie Chart is useful for gaining perspective on the distribution of a resource. It shows the relative percentage that each portion of a finite thing is allotted within the whole. While it can identify how large an opportunity is today relative to other parts, the universe could change tomorrow, e.g., the size of the pie may increase or diminish.
A Venn Diagram illustrates how two or more things are related. Are they separate? Do they overlap? If they overlap, then to what extent? The Diagram evolves as the size of each circle changes, as the degree to which they overlap grows or diminishes, or as a new circle is introduced.
How does using a Pie Chart versus a Venn Diagrams influence our imagination?
Pie Chart thinking constrains your vision to that which already exists. An everyday example is seen in political economics. Portraying the U.S. economy as a zero sum game (i.e. a pie chart) manipulates us into focusing on how someone is taking our piece of the scarce resources that constitute the pie. In business, the outcome of Pie Chart thinking is usually suboptimal. For example, when a company’s only growth option is “more of the same” or “sell harder,” a Pie Chart mindset is behind it.
Remember “think out of the box”? A Pie Chart is the box outside of which we need to think all the time, not just during brainstorming sessions at offsite retreats. Venn Diagram thinking enables you to break out of the box by forcing you to consider which of several circles you will include. The size of each circle is unbounded, and the overlap between them is dynamic. Venn Diagram thinking empowers us to envision how we can grow the pie, while Pie Chart thinking inhibits innovation by limiting our consideration of alternatives.
Understanding the difference between these two modes of thought elevates our vision. Consider the effect of Pie Chart thinking versus Venn Diagram thinking on what we choose to emphasize, on the perspective we bring, and on the outcome we experience:
Pie Charts emphasize how two things are different; Venn Diagrams encourage a search for synergy. Pie Charts constrain us to a finite perspective; Venn Diagrams encourage us to include more factors. Pie Charts divide the whole into its constituent parts; Venn Diagrams influence us to identify common interests and create unity.
How can we apply this heightened vision to lead our companies more effectively? Here are a few examples:
- Organizational Dynamics: Root out instances of narrow, self-interested departmental silos (Pie Chart) and replace them with improved collaboration and common commitment (Venn Diagram).
- Product Management: Notice when product managers focus very narrowly on their own product lines (Pie Chart) and encourage them to see consider whether the combination of their products with additional products and services can accelerate growth (Venn Diagram).
- Strategic Partnerships: When a manager is at an impasse trying to grow the business using available resources (Pie Chart), identify a compelling reason that a partnering company would share needed resources (Venn Diagram).
The title of a popular business book years ago was All You Can Do Is All You Can Do. And it’s true, but sometimes choosing the right thing to do is all-important.
The dilemma for many CEOs is that they stay so busy running the business that they end up with too little time spent thinking about how to accelerate its growth. The old saying often applies: “It’s hard to remember that the original objective was to drain the swamp when you’re up to your ass in alligators.”
Speaking recently with a highly successful CEO who’s grown and sold several companies, he speculated on what determines how open a CEO is to coaching. His experience and mine perfectly aligned: a serially successful CEO will seek input and help from friends far more often than a first-time CEO and founder. Highly successful people learn how to choose advisors they trust in order to achieve the success they desire.
The stumbling block for many a founder and CEO of an established small company is that he or she comes to believe in his/her own abilities so much that they’re unable to accept the help that would take them to the next level. No matter how passionate they may be about accelerating growth, their complete reliance upon their own judgment closes their minds to innovative ideas, even if the source is someone they trust.
If you run an established business, test yourself with these questions:
- If an experienced CEO took a deep look at my company and told me I had to make big changes in order to grow, would I be open to changing?
- If a partnering expert offered to develop an alliance strategy that could double the growth rate of my company, would I listen to learn how?
If the answer to either of these questions is no, your company may already be decelerating or it’s about to hit a bump in the road. Once that happens, it will become even harder to carve out time to consider innovative ways to grow.
Are you focused on maintaining your role as chief problem-solver in your company, or are you passionate enough about growing your company to seek help trusted friends? Sometimes all you can do, by yourself, is not enough.
“…the availability of information about a threat or opportunity has little influence on who wins and who loses. What makes the difference is what a company does with that information.”
— Clayton M. Christensen, Scott D. Anthony, Erik A. Roth in Seeing What’s Next, 2004
Business challenges come dressed as high-impact threats and opportunities, and each demands a response. The strength of your ability to respond is the primary determinant of your next move, whether you opt to: 1. compete (fight), 2.alter direction (flight), or 3. develop an alliance (unite).
The authors of Seeing What’s Next suggest that asymmetries of skills or motivation play a critical role in determining our next moves. “Asymmetries of motivation occur when one firm wants to do something that another firm specifically does not want to do. Asymmetries of skills occur when one firm’s strength is another firm’s weakness.”
In focusing businesses on growth-accelerating strategies, our consistent guidance has been to adopt a three-phase approach: “clarify, comprehend, connect.” Assuming that the CEO has aligned the company around a crisp, clear view of its own skills and weaknesses (i.e. clarify) as a foundation for effective execution, the second step is to evaluate the relative strengths and weaknesses of the competition (i.e. comprehend). When one firm demonstrates strengths in markets in which another firm’s capabilities are weaknesses, and vice versa, a self-fueling partnership (i.e. connect) may be an alternative to fight or flight.
The choices of responding to a significant threat or opportunity are:
Fight (asymmetric analysis highlights your company’s relative strength)
When your company’s processes and offerings are much stronger than competitors, leverage your unique capabilities to increase market share at the expense of competition.
Flight (asymmetric analysis highlights your company’s relative weakness)
When the cost is prohibitive of overcoming a competitor’s strengths that far outweigh your own, refocus on other markets or submarkets where your company can be a dominant player.
Unite (asymmetric analysis identifies complementary strengths and weaknesses)
If it’s clear that combining your resources with those of another company could make both stronger by compensating for weaknesses, the oft-overlooked third option is to create a symbiotic partnership.
The bottom line for any CEO? Develop an eye for asymmetries, then make a rational decision between fight, flight, or unite!
(A more detailed discussion of these alternatives are found in the excerpt “The Innovator’s Battle Plan” that is drawn from the book.)
Competing too hard will kill your business. If you see competition everywhere, you may be strangling your company’s growth.
Working with CEOs and management teams to create growth strategies, I watch for existing practices and attitudes that may hinder growth. It’s challenging enough to launch a new venture or a restart a faltering business without creating internal obstacles that weigh it down. An unrealistic view of competition can severely limit or slow the company’s rate of growth.
A famous CEO mentor was fond of telling me, “If you don’t have a competitor, you don’t have a business.” Competition is a great motivator. If you have a company in a market with no competitors, either the market you’re pursuing isn’t really viable, or you lack the constant competitive motivation needed to keep you at the top of your game, or both.
The diagram above illustrates how your perception of competition can affect your company’s rate of growth. Perceiving no competitors suggests that you haven’t yet identified a winnable market worth pursuing. In this situation, a company constantly chases one-off deals, is too inwardly focused, and may be in too weak a position to accelerate revenue by leveraging external assets through partnering.
The converse obstacle, defining competition too broadly and seeing it everywhere, leads to a lack of focus and an obsession with growing market share one percentage point at a time. A “quarter-inch deep, mile wide” market approach precludes finding a repeatable sales model that leads to higher margins and greater working capital. A better path is to pick one or two close competitors to focus all your competitive energy on.
The bottom line is that an unrealistic view of your company, its capabilities, and its relative strengths and weaknesses vis-a-vis other companies will impede growth. The reality deficit can come from many places, but it falls to the CEO to recognize and remove this obstacle whenever it exists, especially when the CEO is the source. Carefully consider whether you are encouraging your team to view the company through rose-colored glasses (no competition) or constantly raising the specter of competitive doom to motivate them (competition everywhere).
How then do top-performing management teams compete effectively?
- They realize that focusing on competing against too many others weakens their company by draining its resources, so they choose instead one or two closest competitors and focus on winning against them.
- They prioritize “growing the pie” over increasing the size of their slice.
- They stay outwardly focused to learn what the market is telling them about customer demand.
- “Know thyself.” They understand their company’s strengths and weaknesses so well that, when a high-impact threat or opportunity arises that can’t be addressed organically, they create self-fueling partnerships that enable them to respond quickly.
Although I’m not a professional futurist, it’s hard not to notice commonalities found within hundreds of conversations with diverse teams and individuals who are busy defining new businesses. Five interrelated trends seem to be rapidly changing the face of business by disrupting existing models:
Deepening Technology Dependence – Such an obvious observation certainly won’t garner me any futurist credentials. This reliance first began decades ago with large enterprises, but now even the smallest incorporate multiple forms of technology to increase their efficiency and effectiveness. As technology consumption increases among small companies, their influence on the evolution of new technologies will continue to increase.
Ubiquity and Mobility Enabling Distributed Operations – This second trend may be having the most profound impact. If you’re seeking an opportunity to form a new business, simply examine businesses that remain highly centralized and ask, “What if we broke this into parts that communicated with each other and were accessible by mobile devices?” You’ll find that opportunities abound in industries as diverse as utilities, healthcare, and manufacturing.
Loosely Coupled Systems – The decades-long conflict over the efficiency of deeply integrated systems versus the flexibility of modular systems is over, and the winner is… both. Distribution of function across reusable modules delivers economies of reuse. Loosely coupled systems employ web-based connection mechanisms that allow rapid communication while avoiding dependencies that often slow development.
Discovering Trusted Vendors – Large enterprises have maintained their dominance for decades because of their reach across diverse geographies and economic domains. Better solutions from smaller companies have eventually been acquired by companies could successfully sell into the huge bases of customers who’d grown to trust them. Finding a trusted vendor now has evolved into searching the world for products and services that match our requirements, and trust can be built based on massive and readily available customer ratings.
Increasing Irrelevance of Centralized IT – While a highly respected friend’s belief that IT groups will disappear may be overstated, The centralized IT group’s impact on business priorities will continue to diminish. Technology has become so central to distributed business units that they risk falling behind competitors if they wait for or look for direction from IT. The issue is too central to their success to delegate it.
These trends and their effects are intertwined, reinforcing, and multiplicative. Awareness of them provides a context for both evaluating new business initiatives and estimating the life expectancy of existing enterprises.
CEOs rarely (never?) google to find a consultant with ideas to accelerate their business. To help a CEO with strategy, you first have to get on his/her radar, then bring credibility to the initial conversation. The relationship always begins when a CEO tells a mutual friend about a particular business challenge, then that friend introduces 20/20 Outlook as a reliable and trusted source of breakout strategies.
Earlier this month, 20/20 Outlook LLC celebrated its fourth anniversary. While it’s hard to believe it’s been four years, it’s easy to understand enables success. In a business that relies 100% on referrals to gain new business, having wonderful friends and associates means everything. Thank you!
NOTE: In December I started sending the Accelerated Vision CEO Digest once a month to about 400 CEOs and a few other friends. It shares valuable articles of interest to CEOs in a rapidly consumable format, along with an inspirational saying or two. If you’re a CEO (or a wannabe) who’d like to be included, send a note to email@example.com.
If you liked Part 1 of our guest post on The American CEO (“2014 Issues for a 2016 Exit”), you don’t want to miss the exciting climax in Part 2. Feel free to post comments – The American CEO does respond!
Joel Trammell requested a guest post for his American CEO blog, and it’s called 2014 Issues for a 2016 Exit. You’ll find many other great thoughts for CEOs there, and since it’s a two-part article, subscribe there and/or here to make sure you get the second half next week.
Think your non-tech company won’t be impacted by this trend? Has your market been around awhile? Are things likely to continue pretty much as they have? Think again. A recent article in TechCrunch suggests that the market has reached a tipping point that could affect you. Many non-tech companies acknowledge that success increasingly depends upon how well they leverage technology, and they’re making bold moves to acquire software and other technology companies to strengthen their competitiveness. If you’re in high tech, you should check it out; if you’re in another industry, it’s imperative to learn more.
CEOs are increasingly aware that the technology-based operations of their company are critical to gaining market share and growing revenue. Large companies shop for technology that will make them more competitive. Business combinations that would have seemed baffling in the past are becoming commonplace, for example:
- a chemical and agricultural company bought a weather technology company;
- an auto company bought a music app company;
- an insurance company bought a health data analytics company.
As technology becomes increasingly accessible, astute organizations are leveraging this trend with several key business objectives:
- Erase the hard line between online and brick-and-mortar commerce;
- Deepen interactions with customers;
- Gather and incorporate more data intelligence on their business;
- Add critical technical talent.
If you lead a non-Fortune company, following their lead in making startup acquisitions may be imprudent or impossible. However, frequent conversations with astute CEOs suggests taking three straightforward steps:
- Get an outside audit of current software systems to learn how dependent upon technology your company is and whether it’s time to modernize in order to compete more effectively.
- Talk to thought leaders in your network about how the intersection of business objectives and spending on technology work in your market.
- Recognize that, as each operating division begins to understand how critical technology is to their business, information technology (IT) departments are decentralizing (believe it or not, there was a time when mature companies had a mail and logistics department with an actual mailroom.)
Computing has changed the way every type of business happens. Savvy CEOs understand the value of technology to their businesses and are exploiting it in every functional area.