Leadership Lessons

Why Amazon Banned PowerPoint

December 23, 2021 By Nagesh Belludi Leave a Comment

One of the distinctive features of the Amazon management system is its use of the long-form to facilitate decision-making. Jeff Bezos has claimed that banning PowerPoint presentations—more specifically disallowing bullet points for sharing ideas—as Amazon’s “probably the smartest thing we ever did.”

Since June 2004, Bezos has forbidden bullet points and PowerPoint at a senior leadership level. Instead of presentations, teams are expected to iterate an approach to sharing information that involves writing memos of running copy, usually a “six-page, narratively-structured memo.” Meetings typically begin in silence as all participants sit and read the memo for up to half an hour before discussing the subject matter.

Ram Charan and Julia Yang’s The Amazon Management System (2019) reproduces the original email from Bezos explaining this dictum:

Well-structured, narrative text is what we’re after, rather than just text. If someone builds a list of bullet points in Word, that would be just as bad as PowerPoint.

The reason writing a good four-page memo is harder than ‘writing’ a 20-page PowerPoint is because the narrative structure of a good memo forces better thought and better understanding of what’s more important than what, and how things are related.

PowerPoint-style presentations somehow give permission to gloss over ideas, flatten out any sense of relative importance, and ignore the interconnectedness of ideas.

Using memos may seem counterintuitive in an age when communication is increasingly visual. However, long-form has a way of forcing rigor to think through ideas properly, reconcile viewpoints pro and con, iron out logical inconsistencies, and consider second-order consequences.

Bezos’s approach is brilliant not just because sentences and paragraphs enable a certain clarity in thought and exchange of ideas. It also inhibits some of the usual shortcomings of brainstorming meetings, viz., interruptions, biases that initiate groupthink, and the tendency to reward rhetorical ability over substance. Forcing all meeting attendees to read the memo in real-time prevents them from pretending to have read it before a meeting and then bluffing their way through the meeting.

Idea for Impact: Think complex, speak simple, decide better.

Bullet points and “decks” are often the least effective way of sharing ideas. Having a narrative structure allows you to clarify your thinking and provide a logical, sequenced argument to support your ideas.

Book Summary of Verne Harnish’s ‘The Greatest Business Decisions of All Time’

December 6, 2021 By Nagesh Belludi Leave a Comment

The Greatest Business Decisions of All Time (2012) is a flatfooted anthology of 18 engaging—and oversimplified—business stories that influenced the course of business. Edited by management consultant Verne Harnish, this tome contains long articles by nine Fortune magazine journalists.

Apple and the Return of Steve Jobs. The 1996 decision by Apple’s board of directors to bring back Jobs revived the company, transformed the consumer electronics industry, and made Apple one of the most valuable companies in the world.
Zappos and Free Shipping. Zappos’s decision to offer free shipping and 365-day free returns lured more mainstream buyers onto the internet. Other retailers had no choice but to provide free shipping (albeit with some restrictions) and absorb the costs.
Samsung and Global Immersion. In the early 1990s, Chairman Lee Kun-Hee instituted a policy to send his brightest young employees on international sabbaticals that exposed them to the local cultures and build business networks. This program later fuelled Samsung’s global ambitions.
Johnson & Johnson and the Tylenol Comeback. Consistent with the company’s “patients come before profit” credo, CEO James E. Burke set the benchmark for crisis management when he decided to pull Tylenol off the shelves nationwide and create a tamper-proof bottle at the cost of $100 million. Johnson & Johnson cemented its reputation for responsible management.
3M’s 15% Free Time Rule and Innovation. 3M Company CEO William McKnight’s extraordinary idea of giving employees free time for “experimental doodling” yielded such innovative products as Post-It notes. 3M quickly diversified its portfolio and entered many consumer- and industrial-businesses. 3M inspired Google’s 20% rule.
The “Intel Inside” Marketing Campaign. To forestall the commoditization of the computer chip, CEO Andy Grove shifted Intel’s image from that of a microprocessor company to that of a producer of a coveted, brand-name product that stood for performance. Intel became a household name that consumers sought when they purchased a computer.
General Electric’s Jack Welch and Crotonville. Welch transformed GE’s sprawling management-training institute in Crotonville, New York, into a focal point of learning for the company.
Bill Gates and His “Think Weeks.” The Microsoft founder’s twice-yearly retreat in rural isolation allowed him to read, reflect, and map out ideas—away from the distractions and the noise of business life.
Softsoap and Impeding Competition. A small Minnesota company called Minnetonka Corp. developed liquid hand soap in the early 1980s. When Softsoap started flying off the shelves, deep-pocked behemoths like Procter & Gamble began to prototype their own variants. Minnetonka’s CEO Robert Taylor developed a smart strategy to block his giant competitors and keep his company’s market share. He purchased the entire U.S. supply of plastic pumps used in the liquid soap bottles for one year—that’s 100 million units from the only supplier. By the time his competitors had access to the plastic pumps, Taylor’s Softsoap’s brand was well established.
Toyota and the Quality Revolution. Toyota’s institutional obsession with waste-reduction, zero defects, and process improvement has transformed manufacturing and inspired excellence in every service industry—including hospitals.
Nordstrom and Customer Service Excellence. Nordstrom built its brand on “above-and-beyond” customer service and problem-solving. The entirety of the Nordstrom Employee Handbook fits on a 5×8 card and contains precisely one rule, “Use the best judgment in all situations. There will be no additional rules.”
Tata Steel and Labor Relations. During a turbulent period of India’s leading steelmaker, Managing Director Jamshed J Irani confronted a bloated cost structure by reducing his 78,000-strong workforce to 40,000 by 2005. In keeping with the Tata Group’s rich philanthropic legacy, Irani offered decent pension plans and invested in labor welfare.
Boeing 707 and the Jet Age. Boeing’s decision to develop the Boeing 707 at the cost of $185 million (more than the company’s market capitalization) “remade a company, an industry, and the very culture of its time.” The 707 was the first transatlantic commercial jetliner in an era of prop planes. It kicked off the Jet Age, revolutionized air travel, and established Boeing as a dominant airliner manufacturer.
IBM and the Customer-Centric Makeover. In 1993, Lou Gerstner became CEO and embarked on an “Operation Bear Hug” to launch new communication pipelines between top executives and IBM’s customers. This helped transform IBM from an inwardly focused bureaucracy to a customer-centric market-driven innovator.
Sam Walton and Walmart’s Saturday Morning Meeting. Walton’s energetic 6:00 A.M. meeting was a pep rally, merchandising workshop, and financial update—all rolled into one. He brainstormed with his store managers on how to improve things week after week and helped metamorphose Walmart from a single, small-town variety store in 1962 into the world’s largest retailer.
Eli Whitney and the Dawn of American Technology. Whitney’s invention of the “saw gin” that worked well with short-staple cotton helped transform Southern agriculture (and sustain the institution of African slavery!) Whitney then popularized the use of interchangeable parts in making firearms.
Bill Hewlett and David Packard and the “HP Way.” The essence of Hewlett-Packard’s management philosophy was an openness and respect for the employees. With a framework of principles and the simplicity of their management methods, they established many progressive management practices that prevail even today.
Henry Ford and the Factory- and Wage-Revolution. When Ford introduced the moving assembly line, his fledging factory was confronting a dispirited workforce, declining workmanship and quality, absenteeism, and annual labor turnover of 370 percent. Then Ford decided to raise wages from $2.50 to $5 a day. The following week, Ford Motors had more than 26,000 job applicants. Ford increased production rates and slashed the per-unit cost of the Model T. Annual labor turnover fell to 16 percent, and Ford’s profits doubled within two years. Every time Ford increased the productivity of car production, he continued to raise wages. His well-paid workers had more to spend—and could afford the very cars they built.

Recommended: Quick read. The Greatest Business Decisions of All Time is a concise and entertaining read, especially if you like getting into heads, the thoughts, and the motivations of well-known business luminaries. The 18 case studies lack rigor and are beset with recency biases, narrative fallacies, and a misplaced sense of causes and effects. Some stories, e.g., the Softsoap one, aren’t well known.

Daniel Gross’s Forbes Greatest Business Stories of All Time (1997) is significantly more engrossing and instructional.

Don’t Be Deceived by Others’ Success

November 15, 2021 By Nagesh Belludi Leave a Comment

Imitating successful competitors is a leading pathway to business innovation. Benchmarking can offer meaningful insights into comparative performance and help discover learnings for improvement. However, adopting others’ best practices can be surprisingly misleading and ineffective.

Four perception biases that come with benchmarking other companies can fail to make yours any better.

Many companies luck into success.

Don't Be Deceived by Others' Success As I’ve noted before, you can’t reproduce others’ luck. Successful companies tend to significantly overvalue the effect of their leaders’ deliberate decisions on their performance and understate the role of chance—being at the right time, at the right place, with the right people. Alas, what worked in their circumstances may not work in yours.

The set-up-to-fail syndrome.

Benchmarking can be remarkably misleading when you make oversimplified comparisons to superstars who may not represent your situation. You could sink your business if you blindly copy celebrity leaders’playbooks in the wrong context, product, strategy, or market.

Companies that benchmark Apple and Steve Jobs and sidestep market research often disappoint themselves when their product launches fail. The leaders of these companies neither have Jobs’s brilliant intuition nor his extraordinarily talented creative team to build what customers want but didn’t know they wanted yet.

In the same way, companies that imitate the 20-70-10 “rank and yank” processes from Jack Welch’s playbook often fail to realize that several factors contributed to their success at General Electric. Welch had a robust organizational culture that insisted on regular and candid employee feedback and robust personnel processes for recognizing and developing the best talent within the company.

Corporate culture is a tricky business.

Your company’s culture—the prevailing way your people feel, think, behave, and relate to one another—cannot be changed easily. One industrial company aborted trying to imitate Google’s culture. This company couldn’t get its managers and employees to be more autonomous and innovative because the company’s and the industry’s ingrained culture did not lend itself to experimentation, risk-taking, and the celebration of fast failure.

Benchmarks look backward, not forwards.

In a competitive, ever so fast-changing world, what has succeeded in the past ten years may not necessarily do so in the next 10. The management guru Tom Peters once warned, “Benchmarking is stupid! Because we pick the current industry leader, and then we launch a five-year program, the goal of which is to be as good as whoever was best five years ago, five years from now.”

A strong focus on “quick wins” can turn out long-term losers.

Benchmarking can make short-term gains but have adverse long-term effects that may not manifest until many years later. By imitating an industry leader, a capital goods company decided to boost efficiency by outsourcing design to its suppliers. Years later, it discovered the debilitating effects of the loss of vital technical knowledge.

Idea for Impact: Best practices only add value when applied in the proper context

Applying best practices in the wrong context is a sure-fire way to hold your company back.

Pay attention to all ideas, mull them over, test what makes sense, adopt what works, and discard what doesn’t.

Sure, help yourself to great ideas wherever you can get them, but be mindful of the context. Try to understand how the top performers’ circumstances and culture may be causing their success. Think through the long-term consequences of any decision you take or any practice you adopt.

How Jeff Bezos is Like Sam Walton

November 1, 2021 By Nagesh Belludi Leave a Comment

How Jeff Bezos is Like Sam Walton

Walmart founder Sam Walton’s brilliant autobiography, Made in America (my summary,) was published a few weeks before his death in 1992. The penultimate page reads,

Could a Wal-Mart-type story still occur in this day and age? My answer is of course it could happen again. Somewhere out there right now there’s someone—probably hundreds of thousands of someones—with good enough ideas to go all the way. It will be done again—over and over, providing that someone wants it badly enough to do what it takes to get there. It’s all a matter of attitude and the capacity to constantly study and question the management of the business.

Jeff Bezos started Amazon just two years later. After eight years on Wall Street, Bezos dreamt up Amazon during a drive from New York to Seattle in 1994. His wife (now ex-wife) MacKenzie drove, and Jeff “tapped out a business plan on his computer along the way.”

Amazon began as a loss-making book e-tailer at the dawn of the commercial Internet and as the dot-com poster child in the late ’90s. It has since evolved into one of the world’s most valuable companies. Amazon has come a long way from its genesis as the curse of bricks-and-mortar booksellers and has diversified broadly into just about every adjacent business it could get its hands on.

Bezos’s and Amazon’s dominant leadership values echo those of Sam Walton and Wal-Mart: frugality, a bias for action, long-term focus, motivating staff to think like owners, and customer obsession.

The Everything Store (2013,) Brad Stone’s excellent chronicle of the rise of Amazon, notes, “In his autobiography, Walmart’s founder expounds on the principles of discount retailing and discusses his core values of frugality and a bias for action—a willingness to try a lot of things and make many mistakes. Bezos included both in Amazon’s corporate values.” On an earnings call, Bezos famously declared, “there are two kinds of retailers: there are those folks who work to figure how to charge more, and there are companies that work to figure how to charge less, and we are going to be in the second, full-stop.”

All along, Bezos has made big bet-decisions that hurt it in the short term but created value in the long term. Amazon’s market capitalization has rocketed up from $4.55 billion in 2001 to $1.08 trillion before the Coronavirus/COVID-19 infected the stock markets. Amazon’s secret, in Bezos’s words, is,

We are genuinely customer-centric, we are genuinely long-term oriented and we genuinely like to invent. Most companies are not those things. They are focused on the competitor, rather than the customer. They want to work on things that will pay dividends in two or three years, and if they don’t work in two or three years they will move on to something else. And they prefer to be close-followers rather than inventors, because it’s safer. So if you want to capture the truth about Amazon, that is why we are different.

Amazon has not been consistently profitable over the years, and that is a deliberate upshot of how Bezos approaches business. Amazon cycles through periods of substantial investments that beget future revenue growth (with low profits) and periods of increasing profits as its investments ebb.

Bezos has maneuvered Wall Street into believing that he is just getting started—his “Day 1” philosophy has become something of a legend. “A big piece of the story we tell ourselves about who we are is that we are willing to invent … and very importantly, we are willing to be misunderstood for long periods of time,” Bezos asserted at Amazon’s 2011 annual shareholders meeting.

Not all of Bezos’s bets have succeeded. However, investors have come to acknowledge that his long-term initiatives will produce rich results several years down the road. Little wonder, then, that Amazon’s stock has defied short-termism by continually progressing upward even during quarters of little or no earnings.

Postscript: Bezos has been, until recently, the world’s wealthiest person since about 2018. Walton was the richest man from 1985 until his death in 1992. His inheritors, the Walton family, are collectively more affluent than Bezos!

Reinvent Everyday

October 26, 2021 By Nagesh Belludi Leave a Comment

General Electric supremo Jack Welch’s advice to Indian-American investor and businessman Vivek Paul:

Every time I land in New York after an international business trip, I imagine that I’ve just been appointed chairman and that this is my first day in the role, and the guy before me was a real dud. Every time I think, “What would I do that was different than the guy before? What big changes would I make?”

When you can think about expectations from a more detached point of view, rather than an immersed point of view, you aren’t overly invested in an entrenched pattern of thinking.

A period of rest, entertainment, or exposure to an alternative environment can dissipate fixation and help you gain a fresh perspective. It makes you think big. Subconsciously, you can push yourself harder and go after bigger, loftier, harder goals.

Idea for Impact: Don’t limit yourself by past expectations.

Tylenol Made a Hero of Johnson & Johnson: A Timeless Crisis Management Case Study

March 11, 2021 By Nagesh Belludi Leave a Comment

Crisis needn’t strike a company solely because of its own neglect or disaster. Sometimes, situations emerge where the company can’t be blamed—but the company realizes quickly that it’ll get much blame if it fumbles the ball in its crisis-response.

Ever since cyanide-laced Extra-Strength Tylenol killed seven people in Chicago in 1982, corporate boards and business school students have studied the response of Johnson & Johnson (J&J,) Tylenol’s manufacturer, to learn how to handle crises. The culprits are still unknown almost 40 years later.

Successful Crisis Management: Full Responsibility, Proactive Stance

Good Crisis Management: The 1982 Response of Johnson & Johnson to the Tylenol Scandal In 1982, Tylenol commanded 35 percent of the over-the-counter analgesic market in America. This over-the-counter painkiller was the drugmaker’s best-selling product, and it represented nearly 17 percent of J&J’s profits. When seven people died from consuming the tainted drug, Time magazine wrote of the tragedy’s victims,

Twelve-year-old Mary Kellerman of Elk Grove Village took Extra-Strength Tylenol to ward off a cold that had been dogging her. Mary Reiner, 27… had recently given birth to her fourth child. Paula Prince, 35, a United Airlines stewardess, was found dead in her Chicago apartment, an open bottle of Extra-Strength Tylenol nearby in the bathroom. Says Dr. Kim [the chief of critical care at Northwest Community Hospital]: “The victims never had a chance. Death was certain within minutes.”

A panic ensued about how widespread the contamination may be. Moreover, Americans started to question the safety of over-the-counter medications.

Advertising guru Jerry Della Femina declared Tylenol dead:

I don’t think they can ever sell another product under that name. There may be an advertising person who thinks he can solve this, and if they find him, I want to hire him because then I want him to turn our water cooler into a wine cooler.

The ‘Grand-Daddy’ of Good Crisis Response

J&J acted quickly, with complete candidness about what had happened, and immediately sought to remove any source of danger based on the worst-case scenario. Within hours of learning of the deaths, J&J installed toll-free numbers for consumers to get information, sent alerts to healthcare providers nationwide, and stopped advertising the product. J&J recalled 31 million bottles of Tylenol capsules from store shelves and offered replacement products free of charge in the safer tablet form. J&J did not wait for evidence to see whether the contamination might be more widespread.
J&J’s leadership was in the lead and seemed in full control throughout the crisis. James Burke, J&J’s chairman, was widely admired for his leadership to pull Tylenol capsules off the market and his forthrightness in dealing with the media. (The Tylenol crisis led the news every night on every station for six weeks.)
J&J placed consumers first. J&J spent more than $100 million for the recall and relaunch of Tylenol. The stock had been trading near a 52-week high just before the tragedy, dropped for a time, but recovered to its highs only two months later.
J&J accepted responsibility. Burke could have described the disaster in many different ways: as an assault on the company, as a problem somewhere in the process of getting Tylenol from J&J factories to retail stores, or as the acts of a crazed criminal.
J&J sought to ensure that measures were taken to prevent as far as possible a recurrence of the problem. J&J introduced tamper-proof packaging (supported by an expanded media campaign) that would make it much more difficult for a similar incident to occur in the future.
J&J presented itself prepared to handle the short-term damage in the name of consumer safety. That, more than anything else, established a basis for trust with their customers. Within a year of the disaster, J&J’s share of the analgesic market, which had fallen to 7 percent from 37 percent following the poisoning, had climbed back to 30 percent.

Business Principles Should Hold True in Good Times and Bad

Johnson & Johnson CEO James Burke - Tylenol Scandal and Crisis Management When the second outbreak of poisoning occurred four years after the first, Burke went on national television to declare that J&J would only offer Tylenol in caplets, which could not be pulled apart and resealed without consumers knowing about it.

Burke received the Presidential Medal of Freedom in 2000. He was named one of history’s ten most outstanding CEOs by Fortune magazine in 2003. In Lasting Leadership: What You Can Learn from the Top 25 Business People of Our Times (2004,) Burke emphasized,

J&J credo has always stated that the company is responsible first to its customers, then to its employees, the community and the stockholders, in that order. The credo is all about the consumer. [When those seven deaths occurred,] the credo made it very clear at that point exactly what we were all about. It gave me the ammunition I needed to persuade shareholders and others to spend the $100 million on the recall. The credo helped sell it.

Trust has been an operative word in my life. It embodies almost everything you can strive for that will help you to succeed. You tell me any human relationship that works without trust, whether it is a marriage or a friendship or a social interaction; in the long run, the same thing is true about business.

Idea for Impact: A Crisis Makes a Leader

The first few days after any disaster or crisis can be a make-or-break time for a company’s and its leaders’ reputation. The urgency experienced during a crisis often gives leaders the go-ahead to enact change faster than ever before.

Admittedly, the Tylenol case study is more clear-cut than most crises because, from the get-go, it is clearly evident that criminals, not Johnson & Johnson, were responsible for the poisoning and the withdrawal of Tylenol from stores was comparatively easier to execute.

General Electric Blame Must Be Shared: Summary of Ex-CEO Jeff Immelt’s ‘Hot Seat’

March 4, 2021 By Nagesh Belludi Leave a Comment

Leadership is tough. Some things work out, and some don’t. Other things end up epic failures. But no company gets anywhere without trying.

In the fullness of time, when the company does well, as suggested by its stock price, such leadership attributes as optimism and foresight are heralded as brilliant. But when things go wrong, these very attributes are the first to get the blame.

“More complete telling of the truth”

Hot Seat: What I Learned Leading a Great American Company (2021) is former General Electric CEO Jeff Immelt’s response to the allegations that his ineffectiveness led to the collapse of the once-mighty company. It’s an engaging book that must be studied after Wall Street Journal reporters Thomas Gryta and Ted Mann’s worthwhile postmortem, Lights Out: Pride, Delusion, and the Fall of General Electric (2020; my summary.)

My legacy was, at best, controversial. GE won in the marketplace but not in the stock market. I made thousands of decisions impacting millions of people, often in the midst of blinding uncertainty and second-guessed by countless critics. I was proud of my team and what we’d accomplished, but as CEO, I’d been about as brilliant as I was lucky, by which I mean: too often I was neither.

General Electric Blame Must Be Shared: Jeff Immelt

Confluence of bad luck, bad timing, leadership mistakes

I’ve previously written a dissertation on what happened at General Electric (GE.) Immelt had a tough act to follow. Under the previous CEO, the exceptional Jack Welch, GE got spoiled by greed and got away with a lack of transparency.

Over the years Jack Welch had collected a group of idol worshippers and sycophants around and outside the company who fostered an unrealistic view of GE and of Jack himself.

Immelt was saddled with Welch’s doomed legacy, but Immelt failed to right-track it in his 16 years at the helm.

Early in his tenure as CEO, Immelt realized the scope of a potential disaster in GE Capital but couldn’t break its bad habits swiftly. In fact, Immelt went about pivoting the company around slow-growth industrial products. Still, as he did so, his strategy entailed relying on GE Capital to deliver easy profits. It was a hard addiction to break, and Immelt couldn’t discard GE Capital easily.

In the short term, GE Capital was our strategy. We had no other engines of growth. We had to keep our heads down and weather the scrutiny. … We would let the rest of GE Capital grow so that we could keep earnings on a steady path, while the industrial businesses could catch up.

On top, Immelt overpaid for acquisitions, most prominently for the French power generating equipment company Alstom. At the same time, his bet on fossil-fuel-based power equipment was spectacularly mistimed because market conditions deteriorated quickly.

In the final years, Immelt’s misfortunes, even in such previously thriving businesses as healthcare and transportation, piled on. When Immelt called Jack Welch after stepping down, Welch told him supportively, “We both know you never caught a break.”

Jeff Immelt Admits He Let Everybody Down.

Immelt’s Hot Seat is a fascinating account of what it takes to lead a significant global business in times of rapid change.

Immelt owns up his many mistakes with a certain self-awareness. He rebukes a few people while acknowledging he should have been more accountable for everything that happened under his watch. But Hot Seat is primarily a then-in-time rationale of his significant decisions.

Interestingly enough, Immelt doesn’t offer insightful misgivings for the lack of transparency in GE’s financial statements, his outsized compensation, and the mischaracterization of insurance charges and pension liabilities.

Be advised, though, there’re so many details in Hot Seat that are unknowable without a first-rate knowledge of GE’s people and business model, starting with the Welch era.

“Every job looks easy (until you’re the one doing it)”

Read Hot Seat: What I Learned Leading a Great American Company (2021.) General Electric’s fall is a complicated story. It deserves to be heard from insiders such as Immelt as it does from journalists and stockholders.

Hot Seat should leave you with a fair-minded assessment of General Electric, Jack Welch, Jeff Immelt, financial engineering, the conglomerate business model, and Wall Street-oriented capitalism itself. These, sadly, many people don’t understand or know completely.

Leadership is Being Visible at Times of Crises

February 25, 2021 By Nagesh Belludi Leave a Comment

Leadership is Being Visible at Times of Crises It’s terrible optics for an elected official to leave his constituency while it’s in the midst of a crisis.

In a grave slip-up for an ambitious politician, Texas Senator Ted Cruz’s giving a lame excuse initially for his Cancún joint made him look insensitive. He was expected to stay and endure alongside his constituents, who were suffering from Texas’s recent freezing temperatures and blackouts.

Of course, Cruz didn’t do anything that hurt anybody, apart from drawing police resources away to shepherd him through the airport. Cruz’s argument—sensible in its own way—was that all he could do was be in regular communication with state and local officials who’re spearheading the crisis response. After all, Cruz has no formal power in the state administration.

As a comparison, King George and the Queen Mother declined to leave London as bombs shattered their city during World War II. As an expression of concern, and commitment to the Allied cause, they even visited sites destroyed during The Blitz of 1940.

Idea for Impact: Leadership means serving as an anchor during crisis times and being available, connected, and accessible during a crisis. Leaders can’t do everything, and they need to delegate responsibilities. However, entrustment should not entail emotional detachment.

A Real Lesson from the Downfall of Theranos: Silo Mentality

February 4, 2021 By Nagesh Belludi Leave a Comment

The extraordinary rise and fall of Theranos, Silicon Valley’s biggest fraud, makes an excellent case study on what happens when teams don’t loop each other in.

Theranos’ blood-testing device never worked as glorified by its founder and CEO, Elizabeth Holmes. She created an illusion that became one of the greatest start-up stories. She kept her contraption’s malfunctions and her company’s problems shockingly well hidden—even from her distinguished board of directors.

At the core of Holmes’s sham was how she controlled the company’s flow of information

A Real Lesson from the Downfall of Theranos: Silo Mentality Holmes and her associate (and then-lover) Sunny Balwani operated a culture of fear and intimidation at Theranos. They went to such lengths as hiring superstar lawyers to intimidate and silence employees and anyone else who dared to challenge their methods or expose their devices’ deficiencies.

Holmes had the charade going for so long by keeping a tight rein on who talked to whom. She controlled the flow of information within the company. Not only that, she swiftly fired people who dared to question her approach. She also forcefully imposed non-disclosure agreements even for those exiting the company.

In other words, Holmes went to incredible lengths to create and maintain a silo mentality in her startup. Her intention was to wield much power, prevent employees from talking to each other, and perpetuate her deceit.

A recipe for disaster at Theranos: Silo mentality and intimidation approach

Wall Street Journal investigative reporter John Carreyrou’s book Bad Blood: Secrets and Lies in a Silicon Valley Startup (2018; my summary) is full of stories of how Holmes went out of her way to restrain employees from conferring about what they were working on. Even if they worked on the same project, Holmes made siloed functional teams report to her directly. She would edit progress reports before redirecting problems to other team heads.

Consider designer Ed Ku’s mechatronics team responsible for designing all the intricate mechanisms that control the measured flow of biochemical fluids. Some of his team’s widgets were overheating, impinging on one another and cross-contaminating the clinical fluids. Holmes wouldn’t allow Ku and his team to talk to the teams that improved the biochemical processes.

Silo mentality can become very problematic when communication channels become too constricted and organizational processes too bureaucratic. Creativity gets stifled, collaboration limited, mistakes—misdeeds in the case of Theranos—suppressed, and collective objectives misaligned.

Idea for Impact: Functional silos make organizations slow, bureaucratic, and complicated

Innovation hinges increasingly on interdisciplinary cooperation. Examine if your leadership attitude or culture is unintentionally contributing to insufficient accountability, inadequate information-sharing, and limited collaboration between departments—especially on enterprise-wide initiatives.

Five Rules for Leadership Success // Summary of Dave Ulrich’s ‘The Leadership Code’

January 22, 2021 By Nagesh Belludi Leave a Comment

The key to success in any discipline is to figure out the few things that must be done really well and to get those basics right. But so many leaders fail on the fundamentals—and don’t even realize it.

The real implication of leadership has been buried deep over the years: leadership isn’t about the position but about who you are and the responsibility you can undertake. Leadership consultants Dave Ulrich, Norm Smallwood, and Kate Sweetman’s The Leadership Code: Five Rules to Lead By (2009) argues that everything you ever need to know about leadership comes down to five straightforward rules.

If you understand these rules and put them into practice, you can’t fail to spur others and enrich teams, organizations, or communities.

Rule 1: Be A Strategist. Deliberate leaders answer the question “Where are we going?” and mull over multiple time frames. They institute a great enough sense of urgency and remove impediments to the new vision. They anticipate the future and work with others to determine how to advance from the present to the desired future. Shape the future.

Rule 2: Be an Executor. The “executor” aspect of leadership focuses on the question, “How will we make sure we get to where we are going?” Effective leaders understand how to make change happen, assign accountability, assess plans, coordinate efforts, and share information that should be incorporated into strategies. Make things happen.

Rule 3: Be a Talent Manager. Leaders who engage talent now answer the question, “Who goes with us on our business journey?” They select the right people for the right job and ensure that people have the right tools and autonomy to succeed. Leaders foster an inviting organization, create a high level of performance and passion, and continuously monitor problems that need to be fixed. Engage today’s talent.

Rule 4: Be a Human Capital Developer. Leaders who are talent developers answer the question, “Who stays and sustains the organization for the next generation?” Leaders take the time to become aware of how future trends could affect their organizations. They position their teams to win by bearing in mind the longer-term competencies required for future strategic success. Build the next generation.

Rule 5: Be Proficient. Leadership demands are more daunting than ever, and the pressure to perform is relentless. Create regular timeouts to review where you invest your time and energy to ensure that you remain capable of self-managing your personal strengths and weaknesses and generating new behaviors to deal with new challenges. Invest in yourself.

As with most “rules-for-success” books, the authors tout their assessment of “hundreds of studies, frameworks, and tools.” But their work is no more than a distillation of notable leadership thinkers’ experiences. Nonetheless, the rules sound right. The five rules are simple, but they aren’t easy. They are sensible and practicable. They’re what you can focus your effort on for maximum return.

Recommendation: Quick read The Leadership Code. It makes a great early book choice for new leaders. It provides a grounded approach to the fundamentals.

Never underestimate the power of key leadership principles that can be well executed. Complement The Leadership Code with Peter Drucker’s The Practice of Management (1954; my summary) and Julie Zhuo’s The Making of a Manager (2019; my summary.)

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Leadership Lessons

Idea for Impact: Think complex, speak simple, decide better.

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Many companies luck into success.

The set-up-to-fail syndrome.

Corporate culture is a tricky business.

Benchmarks look backward, not forwards.

A strong focus on “quick wins” can turn out long-term losers.

Idea for Impact: Best practices only add value when applied in the proper context

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Successful Crisis Management: Full Responsibility, Proactive Stance

The ‘Grand-Daddy’ of Good Crisis Response

Business Principles Should Hold True in Good Times and Bad

Idea for Impact: A Crisis Makes a Leader

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“More complete telling of the truth”

Confluence of bad luck, bad timing, leadership mistakes

Jeff Immelt Admits He Let Everybody Down.

“Every job looks easy (until you’re the one doing it)”

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At the core of Holmes’s sham was how she controlled the company’s flow of information

A recipe for disaster at Theranos: Silo mentality and intimidation approach

Idea for Impact: Functional silos make organizations slow, bureaucratic, and complicated

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