sift everything

Another great story from Brand Autopsy on the The Container Store. John Moore calls this a JumboShrimp story: companies that get bigger by being smaller.

He says The Container Store gains their edge over larger competitors through persistent effort to deliver great customer service. Everything else about them is replicable by other huge companies. The best advantage that comes from being small is the attention they can give their employees so that their employees can give their attention to the customers.

As a result, FORTUNE magazine has ranked The Container Store as one of the “100 Best Companies to Work For.” They’ve been in the top five in five of the last six years.

Moral of the story for small entrepreneurs: Every stage has its advantages - learn to leverage them.

Tribal business is short-form for a movement away from mammoth corporate type jobs toward minute, niche-oriented lifestyle changes.

A great example of this is described in a November 2004 MSN article.

The author paints the picture of Bill Wilson, a 35-year-old financial planner who moved out instead of up.

Bill and his family bought a winery and there are others who see opportunities in agriculture too.

The article says that Membership in the American Cheese Society has doubled since 2001. Small wineries sell more than 66 of wines that cost more the $15 per bottle. In 2003 alone, shipments of wine quadrupled. And none of these niches compete with or work for large agriculture corporations.

By doing this from start to finish on a small scale they achieve exceptionally high premiums. They are leveraging limited acreage and their lifestyle to their advantage.

Hugh MacLeod writes often about marketing and what he’s called smart conversations.

I posted the following comment to Hugh’s riff on the market’s willingness to pay premiums:

“The smarter the market, the harder it is to charge a premium.” Right. One step further, the smarter the market, the harder to charge – anything.

The premise we work from as advisers or consultants is that our markets don’t know as much as we do. They are catching up; every day we work is a day closer to our end. We’re educating our predators.

We’re educating our predators if we aren’t adapting. And I keep thinking about evolution. One of my favourite evolution stories is the one about mono-cellular organisms that want a world they can’t have without cooperation with other, different mono-cellular organisms. So two or three get together and cooperate. Soon they agree to join up permanently. Multiply by a few million – tada – people. Next: business.

Right now it seems we’re at the “hey, let’s join up and be better together” stage. Business has moved from mono-corporate business models, to outsourcing, to today.

As the markets get smarter, maybe it’s time to go inside. Start up some symbiosis. The challenge then is how to get inside: diffusion, osmosis or active transport?

We’ve got millions of bloggers milling around saying they should be recognized; that they need to be inside. Chances are some already slipped through and the business model’s already evolved. What does it look like?

Related to tribal business:

In the 21 September 2004 edition of Reveries, Tim Manners describes little global giants. He quotes Barnaby Feder from the New York Times,

“Big companies are good at identifying the intellectual property that is needed in a niche, but smaller players are often better equipped to get there.”

When economists like Ronald Coase describe companies, two of the conditions they write about are access to information and the costs of doing business. When information was scarce and the costs of interacting with many different business inputs were high, companies got big. Today, with almost costless access to nearly limitless information some companies are scaling back but still delivering in a big way. That explains the size of the two companies Tim mentions.

But, an aspect of information that continues to trouble current economists is it’s value. As I wrote earlier, valuable knowledge is useful knowledge and ironically, in an ever-growing sea of information, capturing useful knowledge seems to be increasingly difficult.

This is a challenge recently described by Mark Kingwell and Clive Thompson:

MARK KINGWELL: … Information ‘is’ now too plentiful to be considered valuable in itself, or in general. But of course particular bits of information are as valuable as ever. The trick lies entirely in finding them, and finding out what purposes we are trying to serve with them.

CLIVE THOMPSON: It’s interesting, in that context, the current rage for ‘intelligent agents’ to filter out the info-glut. The idea seems to be that only a new technology can help keep in check the forces that technology has released.

MARK KINGWELL: I think that the metaphor of the filter is significant. It implies that, if we can just calibrate the filter properly (i.e., educate the writers or critics in the appropriate way), we can make the glut of information serve our chosen ends.

There really isn’t any better technology for sifting than people. This is a meta-human skill. Establishing cognitive links between discrete sources of information is, so far, humanity’s one great hope for employment in an increasingly information based economy.

This explains part of the results observed so far in the sift experiment. The entrepreneurs I’m working with are reaping significant gains from the cognitive links I share with them.

Too much order - no ability to adapt.

Too much chaos - no ability to learn.

Tribal business (1, 2).

Edward O. Wilson says that the greatest challenge today is the description of complex systems. Scientists break down systems but reassembling systems is far more difficult. Wilson says the power of prediction will be the true measure of success.

The ability to predict emergent phenomena will require linking together all we’ve learned through reduction. This is holism or, as Wilson puts it, consilience by synthesis.

Consilience by synthesis is as important in business as it is in science. This is true, because it is true in everything.

We’re all talk the reductionist part of the scientific method. Only a few of us have built the skills needed by synthesist.

We live in a world of specialists and are in desperate need of generalists and cross-walkers. Our world’s too fractured - like a dragonfly eye. We need the whole picture. We need to climb back up.

I’m re-reading Edward O. Wilson’s book, Consilience. He describes the biological conception of scale that I tried to illustrate below. He breaks up the magnitude of action by space and time. So, for example, brain synapses are minute, ultra-fast, and biochemical. But planetary change is huge, majestically slow, and evolutionary. He explains that this conception of action is key to perceiving the unity of knowledge and is the first step toward consilience.

I tried to think of how this concept might apply to business where holistic thinking is increasingly important. The bottom scale is what I came up with.

To understand the complete picture when anticipating a trend, developing a strategy, taking a phone call, or ringing another customer through the till – understand where in time and space this action is occurring. This helps clarify what ought and what ought not be included in the thought process.

Hugh McLeod writes a hopeful piece about the future of corporate blogging:

We want the corporate tipping point to arrive for two main reasons:

1. It validates those of us who got in there early … in the belief that this new medium was the future.
2. When the corporate-mainstream world finally “gets it”, we expect a floodgate of demand from businesses to open for people like us – people who can blog properly, who have a reputation in this sphere, who can steer these wealthy companies down the strange path of this brave new world. Hello, Gravy Train. Hello, being able to make a living doing what you love, for a change.

The tipping point will arrive when two things happen:

1. When the bosses are assured that it actually works, that the return on investment is solid and measurable.
2. When the bosses are assured that blogging won’t open a whole can of worms, that companies won’t lose their grip on being able to make a buck for their shareholders.

GOOD IDEAS ALTER THE POWER BALANCE IN RELATIONSHIPS, THAT IS WHY GOOD IDEAS ARE ALWAYS INITIALLY RESISTED.

The idea that blogs have no ROI is ridiculous. The real issue is about whose territory do blogs encroach on.

There’s two things about which I’ll happily admit utter ignorance: the business model of advertising and how to measure ROI on blogs. Despite my ignorance and despite my deep appreciation of Hugh’s ideas – I think there is one important point Hugh didn’t include. Of course he didn’t have to include it. He wasn’t writing a thesis on this stuff - but I think its key to understanding the nature of the corporate blogging opportunity:

While Hugh did recognize that blogs were first run by folks that saw the potential for blogs early – the mavericks – he didn’t say how long the Gravy Train would run.

A quick look at the history of mavericks suggests this train’s going to be about two box-cars long. The cycle between innovation and common practice is becoming ever shorter. As a result, the skills required to exploit rapidly emerging and rapidly exploited niches are ever more important.

Seeing a niche early – as in blogging first – is one skill. Exploiting the niche is different. And while Hugh might be on the right track, many bloggers haven’t a clue how to exploit blogging when it reaches the corporate tipping point.

Hugh, two questions:

What skills are needed to exploit the gravy train when it rolls? Not the “how-to-be-creative” skills you so eloquently describe – the exploitation skills and the power brokering skills you have just begun to discuss.

How long is the train? How big is the window? With more than 6 million blogs out there, could the train have already slipped by?

Robert Patterson highlighted a young company in PEI: silverorange . Amongst other things these guys are part of Mozilla/Firefox’s image team.

Their CEO Dan James published a letter to his team that expresses a rare understanding of humanity – his company’s humanity in particular.

Keys for successful young companies that Dan underlined include:

· Trust
· Commitment
· Understanding fear
· Play
· Rest
· Pride
· Charity

His line on bureaucracy rings loud:

“The moment we start to have programs and systems to manage people we lose trust. The day we start tracking vacation and sick days we lose our souls and freedom. The day we punch in and punch out is the day the doors might as well be locked for good.”

John Moore at Brand Autopsy (love that photo) has a great post today: Peddling the Soup Peddler. This is the type of post I’d like to emulate in the future.

Ingredients for the soup post:

· Short story
· Concise statement of the challenge faced
· A few principles that point the way forward

These ideas/challenges are also discussed here, here, and here.

I’ve been pondering the relationship between entrepreneurs/young companies and the ideas presented in James Surowiecki’s, The Wisdom of Crowds, and Malcolm Gladwell’s, Blink. Without further synthesis, I’d argue there isn’t one.

Sir Francis Bacon said that “the mind, hastily and without choice, imbibes and treasures up the first notices of things.” It is on this hastily imbibed treasure that Surowiecki and Gladwell have built their arguments. Both argue that people know more than we think they do. This hasty imbibing is “smarter and more sophisticated and certainly more influential than we generally give it credit for (Gladwell).”

Surowiecki argues that a crowd of hasty imbibers is likely to produce judgments “virtually indistinguishable from the inputs of an [expert] with years of experience.” But he also recognizes a paradox – “rapid cognition often works best when there are well-defined rules or structures to guide the people using it.”

Trouble is the world of entrepreneurism isn’t often one of structure and well-defined rules. Entrepreneurs operate on the fringe of the unknown. The prime ingredient in the recipe for chaos is a dash of unknown. Well, this gets us to the point I made in the first paragraph. We need to know more about those “well-defined rules or structures” before we can predict the value of these ideas for entrepreneurs and young companies.

A set of well-defined rules needs to answers questions like: How do we know to trust the answer? How far can we leverage the answers of rapid cognition or crowds? How do we ask the questions we want to ask crowds? Surowiecki recognizes the problem of needing “to know a lot just to understand the question you’re trying to answer. In [some] cases, relying on a group of laypeople may be futile.” How do we know when we’ve got one of those questions?

What we need is a taxonomy of questions: the set conducive to thin-slicing, the set suitable for crowds, and the set requiring expertise. Reading “Can you make my logo bigger?” by McKee Wallwork Henderson there seems to be some indication of where the lines might lie. Number 11 in their list of 13 rules for effective advertising reads:

“Have the courage to overrule the research. Research said that the Sony Walkman wouldn’t work. Research said that New Coke would. Nike and Volkswagen don’t pre-test their ads. General Motors does. Enough said.”

Maybe Nike and Volkswagen can skip pre-testing because blinking is sufficient. Perhaps Sony ignored research on the Walkman because the crowd said they were right. Maybe Coke missed with New Coke because they didn’t know what question to ask the crowd.

Along with a taxonomy of questions, perhaps we also need a criteria for determining if we understand the question we are trying to answer. The criteria might include: clarity of timeline (i.e. short-term vs long-term), clarity and focus of deliverables (i.e. portable music player vs replacement for stereo), magnitude of risk is answer is wrong (i.e. one ad = minimal vs. new line of vehicle = staggering), the pool of needed knowledge is narrow (i.e. new recruit’s resume is in hand and decision is hire or not vs. set of photographs is in hand and decision is to reclaim exhausted oil derrick).

I haven’t been blogging long, but throughout these novice days I’ve picked some of the fads of the craft. One is: Blog it once and never revise it.

I understand why you wouldn’t want liberal revision. Changing the blog threatens the relevance of any previous comments. That’s no good for anyone.

But, on the other hand, good ideas take time to percolate. One of the great benefits of blogging ideas is that others can help in the percolation.

In an effort to resolve fads with practicality, I’ve devised the wheelbarrow experiment. Below is the first of the experiments; hopefully many more will follow. In all cases the wheelbarrow will hold unsynthesised but related material that is gathered over time. This facilitates ongoing research, opens the topic for discussion early, and acts as a holding tank for blossoming thoughts. Subsequent “official” posts will reference the wheelbarrow and any appropriate comments.

Any advice on unforeseen pitfalls in this proposal?

I’ve been reading a fabricated debate at Slate between James Surowiecki, author of The Wisdom of Crowds, and Malcolm Gladwell, author of Blink. I’ll be revising this post, I wanted to get it up while I mull over the fine print some more.

My great interest in these authors is both are discussing the use of information in decision making – and this is a primary concern for sift.

James Surowiecki explains collective judgement:

The collective judgment of ordinary people is … virtually indistinguishable from the inputs of an [expert] with years of experience. Why does this work? The key is that even though each person in the group is making mistakes (often, lots of them), as long as the group is large enough and diverse enough, the errors people make effectively cancel themselves out. And what remains, remarkably often, is the information you’re looking for.

Malcolm Gladwell adds strength to this argument by explaining the value of rapid cognition:

One of the key arguments in my book is that human beings think in two very different ways. Sometimes we consciously and carefully gather all facts, rationally sort through them, and draw what we take to be a rational conclusion (the Standard Model). And sometimes we reach conclusions unconsciously—our mind quickly and silently sorts through the available information and draws an immediate judgment, which may be done so quickly and so far below the level of awareness that we may have no understanding of where our conclusions came from. I call this Rapid Cognition. I think the Rapid Cognition Model needs to be taken far more seriously—that it’s smarter and more sophisticated and certainly more influential than we generally give it credit it for.

The result of their analysis seems to imply that entrepreneurs would benefit significantly from having access to the judgments of their customers or at least their peers when making decisions.

James Surowiecki goes on to explain the conditions under which rapid cognition decisions are best made:

There’s a famous study that was done of expert racetrack bettors that illustrates this point. The bettors were first given five pieces of information about the horses in a race and asked to predict the outcome. They were also asked how confident they were in their predictions. Then they were given, successively, 10, 20, and 40 pieces of information and asked to make predictions. The additional information didn’t make their forecasts any more accurate. But it did make them (falsely) more confident in their forecasts. When it comes to data, frugality is often a virtue.

But … it’s often hard to know in advance which information is, … “central to the outcome of a decision” and which is irrelevant or, even more important, corrupting. And figuring out which information really does matter (so we can make our decision-making more disciplined) isn’t something we can do with rapid cognition. It often requires the careful study of data to see what factors are and aren’t correlated with each other, and it requires an analytic approach that seems to belong more to the Standard Model.

This may underline the need to sift information carefully before rolling it into the hands of decision makers. The case I think most entrepreneurs face is not one of excess information – rather excess opportunities and not enough information to choose amongst them. The example James provides suggests the value of screening the information entrepreneurs must deal with so that the distractions are eliminated.

The big problem, James Surowiecki points out, is that its tough to know when group judgement or rapid cognition or traditional decision models should be used:

More important, there are problems where you need to know a lot just to understand the question you’re trying to answer. In those cases, relying on a group of laypeople may be futile.

… the deep paradox at the heart of Blink, which is that rapid cognition often works best when there are well-defined rules or structures to guide the people using it. As you put it, we need a structure for spontaneity. We usually think of intuition as simply going with your gut, and obviously that is in part what rapid cognition is about. But I think what Blink shows, oddly, is that going with your gut will often lead you astray, if you’re not keenly aware of the flaws that might be shaping your decision. Successful thin-slicing happens very quickly, but it requires a keen sense of self-awareness, too.

This deserves some further thought. But at least between The Wisdom of Crowds and Blink, we are closer to understanding these issues. Malcolm Gladwell writes:

I think ordinary people can be good snap decision-makers, so long as they get a little help. Sometimes that help is best found in the prescriptions put forth in The Wisdom of Crowds. But sometimes I think we can achieve the same goals by tinkering with the environment in which decisions are made.

Update: Francis Bacon may have something to say on the matter too.

He wrote: The mind, hastily and without choice, imbibes and treasures up the first notices of things, from where all the rest proceed, errors must forever prevail, and remain uncorrected.

He cautioned thinkers to beware of the idols of the mind: tribes (assuming order in chaos), caves (individual beliefs and passions), marketplace (words that induce belief in non-existant things), and theatre (unquestioning acceptance of beliefs and misleading demonstrations).

As a solution to these threats, Bacon advocates the repeated testing of knowledge by experiment. This, he said, is the key to the cutting edge of learning.

Now I haven’t done any deeper looking into this, but thin-slicing (as Gladwell advocates) suggests that if rapid cognition is the engine of most decisions and the wisdom of crowds is founded on the rapid cognition of lots of individuals - the real threat is as Bacon describes - that the minds of these individuals are proceeding on uncorrected, hastily structured notices of things.

It seems that both Gladwell and Surowiecki are fighting the modern creation of expertise instead of the employment of expertise, and if this is true, then Bacon’s suggestion for learning - repeated testing of knowledge by experimentation - deserves further consideration.

A bit more fodder for the discussion:

In Human Action, Ludwig von Mises, cautions us to consider all possible outcomes of crowd decisions, not just the positive ones. Allowing the crowd to make decisions does not “prevent majorities from falling victim to erroneous ideas and from adopting inappropriate polices which not only fail to realize the ends aimed at but result in disaster. Majorities too may err and destroy our civilisation.”

Whether or not a crowd of pseudo-experts can come up with something statistically equal to the decision of a full-fledged expert is one thing. But it’s difficult to hold a crowd responsible for the outcomes. And without that responsibility, we all know, people tend to get silly. At least when an expert decides, we know who to hold accountable when it falls apart.

Again: this will be revised.

sift leverages knowledge and thinks on behalf of entrepreneurs.

Knowledge is only valuable when it’s useful. And most entrepreneurs soon discover the paradox of newly emerging opportunities: you know more about your industry than anyone else and you don’t know enough. You use all the knowledge you’ve got, but you desperately need more.

sift brings together knowledge discovered in the world’s of business, science, culture, art, and sports – and helps make it useful.

Because using knowledge is often more about perspective than expertise, sift relies on fetching philosophy and a broad understanding of economics and environmental dynamics to give entrepreneurs a new view on the daily grind.

sift can help you be more tactical and strategic, more thoughtful, and more aware of emerging trends. This will help you leverage your knowledge, develop new products or services, and identify new opportunities.

Just what you need right? Click here.

Dear entrepreneur,

If you’re someone I want to work with, you don’t have time to read this. I’ll keep it short: If you want to keep innovating, you need my help.

My guess is around three years ago you had a bright idea and lots of ambition – it worked out and now you’re enormously busy. Whatever you had was good enough at the beginning when it was just you and your challenges, but today you’re a manager, a coach, a judge, a financier, a borrower, a lender – and have no time to do any of those things well.

While you struggle to keep your head above water, first to go is broad reading, then focused researching, and then, worst of all, strategic thinking. You’re fighting just to keep up.

Most start-ups fail right where you are now. Your business is entering a growth cycle you haven’t seen before and most entrepreneurs don’t have the skills or time needed to see their business through this stage. One of the biggest reasons for failure is the inability to pay attention to the keys that made you successful in the beginning: insight and innovation.

sift can help. sift is about fetching philosophy, mining knowledge, and a return to thinking — on your behalf. I think, you stay innovative and strategic. Sound good? Click here.