Problem Solving

Be Smart by Not Being Stupid

December 12, 2022 By Nagesh Belludi Leave a Comment

No superhuman ability is usually required to dodge the many foolish choices to which we’re prone. A few basic rules are all that’s needed to shield you, if not from all errors, from silly errors.

Charlie Munger often emphasizes that minimizing mistakes may be one of the least appreciated tricks in successful investing. He has reputedly credited much of Berkshire Hathaway’s success to consistently avoiding stupidity. “It is remarkable how much long-term advantage we have gotten by trying to be consistently not stupid instead of trying to be very intelligent.” And, “I think part of the popularity of Berkshire Hathaway is that we look like people who have found a trick. It’s not brilliance. It’s just avoiding stupidity.” They’ve avoided investing in situations they don’t understand or summon experience.

As a policy, avoiding stupidity in investing shouldn’t mean avoiding risk wholly; instead, it’s taking on risk only when there’s a fair chance that you’ll be adequately rewarded for assuming that risk.

Idea for Impact: Tune out stupidity. Becoming successful in life isn’t always about what you do but what you don’t do. In other words, improving decision quality is often more about decreasing your chances of failure than increasing your chances of success.

3 Ways to … Manage for Creativity

October 21, 2022 By Nagesh Belludi Leave a Comment

Managers can create the conditions for innovation by encouraging a culture of being creative—not just productive—and razing barriers that stifle individual expression.

Get less formal. Foster a culture characterized by a tolerance for failure and a willingness to experiment. Involve everyone and welcome great ideas from everywhere. Make sure everyone feels free to speak out: people will own solutions if they’ve been involved in the decision-making.
Simplify the workplace. Look at things with a fresh eye, as an outsider might—sometimes you’re too close to things to see the truth. Drop unnecessary work, and explore what routines can be phased out or improved. Work with coworkers to eliminate extraneous loops and redundancies if your organization has far too many rules, approvals, and forms. Streamline decision-making.
Defy tradition. If no one can recall why your team does something a particular way, the task is likely more convoluted than it needs to be. Hold a ‘why do we do it that way?’ challenge. Invite colleagues from different teams to come in and look at things in a detached way. Figure out what’s relevant and necessary (and what’s not) and frequently reevaluate the priority list as new things are added.

Idea for Impact: Managing for creativity is a conscious effort in experimentation.

Books in Brief: ‘Flying Blind’ and the Crisis at Boeing

September 24, 2022 By Nagesh Belludi Leave a Comment

Bloomberg investigative journalist Peter Robison’s thoroughly researched Flying Blind: The 737 MAX Tragedy and the Fall of Boeing (2022) offers noteworthy lessons about corporate responsibility and leadership problem-solving.

In a nutshell, starting in the late 1990s, Boeing shifted from a company run by engineers who emphasized product integrity to one run by MBA-types who prized shareholder value over long-term product planning. Inspired by General Electric’s Jack Welch, the company embraced cost-cutting, outsourcing, financial engineering, union-busting, and co-opting regulators. These miscalculated strategies culminated in the 737 MAX disasters and disgraceful corporate responses.

Recommendation: Read Peter Robison’s Flying Blind, but be wary of the author’s broad-brush political biases, which, I found, sidetracked from the storyline. The internal organizational tensions that led to corporate deception and the fateful consequences of federal regulators’ consigning design approvals to Boeing are particularly interesting.

Key Takeaway: Negligent engineering to minimize costs and adhere to a delivery schedule is a symptom of ethical blight.

Make the Problem Yours

September 21, 2022 By Nagesh Belludi Leave a Comment

From a profile of The Gillette Company’s then-CEO Jim Kilts in the 20-Dec-2002 issue of Fortune magazine:

At a meeting with all his division chiefs, Kilts asked for a show of hands: “How many of you think our costs are too high?” Everyone in the room immediately raised his hand. Then he asked, “How many of you think costs are too high in your department?” Not a single hand went up. According to Kilts, it’s a common response among managers of companies in trouble: Everyone knows there’s a problem, it’s just that nobody thinks it’s his problem. And that’s where Kilts comes in: He’ll make it his problem–and yours, if you plan on keeping your job.

Idea for Impact: Make the problem yours. Think and act like an owner.

One of the most underrated skills most employees lack is ownership/stewardship—taking responsibility for results, recognizing when things aren’t working, and getting problems solved.

Plus, teams mirror initiative-takers. When someone starts to take ownership, other people see that, and they’re likely to take ownership of their bits as well.

Do Your Employees Feel Safe Enough to Tell You the Truth?

August 15, 2022 By Nagesh Belludi Leave a Comment

Take any corporate scandal or the Challenger and Columbia disasters, and you’ll find lower-ranking voices that tried to be heard within these organizations to prevent or minimize the consequences of the excesses or the accidents.

Some leaders are too isolated from reality and establish an “all’s-good” guise whereby anything other than affirmative becomes an undesirable—unwelcome even—answer to a performance-related question. Such leaders foster a “good-news culture,” where any truth-teller or devil’s advocate is quickly dismissed. Queries such as the cursory “Is everything okay?” elicit information-free, non-answers like “yes” and “great!”

When leaders are disconnected from reality, they become incontestably right. Employees know the rule of the game is to say what’s safe to say. To not tell the truth. To tell the leader just what she wants to hear. Employees would instead go with the flow rather than speak truth to power.

Consequently, business pressures often lead to shortcuts that go overlooked. Risk is normalized. Leaders who cannot tap into the truth get blindsided when the problems blow up because they didn’t nip the problems in the bud. Leaders have only themselves to blame when things go wrong.

Idea for Impact: Insightful leadership isn’t about the privilege of position but the privilege of information flowing upwards. Wise leaders dare to seek information they don’t want to hear. They know how to ask the right questions, look for revealing details, and set up a culture of openness that makes it easy for employees to tell the truth.

Evolution, Not Revolution

August 1, 2022 By Nagesh Belludi Leave a Comment

Innovation often transpires from synthesizing existing ideas in new ways, as the following case study on the iPod will illuminate.

In some sense, the iPod wasn’t a breakthrough innovation at all. It emerged from Steve Jobs’s “digital hub” approach to integrating iMac software for playing, editing, and managing photos, music, and movies. According to Walter Isaacson’s masterful biography of Steve Jobs (2011,) when Apple designers learned that Toshiba had newly prototyped a tiny 1.8-inch hard drive that could hold five gigabytes of storage (that’s about a thousand songs,) they conjured up a digital music player. Apple found that existing gadgets were “big and clunky or small and useless” with “unbelievably awful” user interfaces.

Sony’s Walkman had previously proven the market potential of portable audio players, having sold 200 million units in the two decades before Apple conceived the iPod. Napster had offered digital audio file distribution for over five years. Finger-driven touchscreens were pioneered in the 1960s, and Citibank rolled out touchscreen ATMs in the 1980s. (Apple didn’t offer touchscreens until 2007 with the iPhone.) Hence, the iPod’s innovation was in bringing all these capabilities together in a way that was easier to use and relevant to the consumer. Dartmouth’s strategy professor Ron Adner writes in The Wide Lens: What Successful Innovators See That Others Miss (2013.)

Apple was three years late [behind Creative, SanDisk, Sony, and Samsung, who had previously launched portable music players]. As we’ll see again in the case of the iPhone, Jobs tended to be late for everything because he wanted everything to be ready for him. Reflecting on catching technology waves in 2008, he said, “Things happen fairly slowly, you know. They do. These waves of technology, you can see them way before they happen, and you just have to choose wisely which ones you’re going to surf. If you choose unwisely, then you can waste a lot of energy, but if you choose wisely, it actually unfolds fairly slowly. It takes years.” Jobs’s discipline paid off.

Idea for Impact: Innovation often builds on existing technological competencies or as a synthesis of smaller innovations.

Is The Customer Always Right?

July 14, 2022 By Nagesh Belludi Leave a Comment

No matter how finicky or rude a customer is, many businesses make employees treat bad customers with unquestioned respect or risk reprobation—even getting sacked.

Per the well-worn business adage, is “the customer is always right?” No, they’re not. Sometimes they’re wrong, and they need to be told so.

Your goal should be to do business with people that you enjoy doing business with. Some customers simply aren’t good customers. They don’t follow directions and complain irrationally. They have unreasonable expectations, and they treat your people rudely.

Idea for Impact: A prudent maxim is, “the customer is usually right.” Put the customer first, but don’t get mistreated by them. Putting the customer first doesn’t mean putting employees second. As a business, you must let customers be wrong with respect and dignity; but employees should be authorized to caution some customers, “After due consideration, we believe your actions are unacceptable. Persist, and we’d choose to lose your business.” Some bad customers are just bad for your business.

Almost always, though, unhappy customers are your greatest source of learning; they can especially offer an honest assessment of the expectations you’re setting. Customer satisfaction with a transaction depends on their expectations going into it.

What if Something Can’t Be Measured

July 4, 2022 By Nagesh Belludi Leave a Comment

During a September-2021 Airlines Confidential podcast (via Gary Leff’s View from the Wing,) former Spirit Airlines CEO Ben Baldanza told an exciting story about the airline industry’s systematic approach to reckon if potential new routes are economically feasible:

For the most part, airlines rely on data—required and reported by the Bureau of Transportation Statistics—on ticket purchases that show the number of people flying a given route and what price. For example, New Orleans, which is home to one of the largest Honduran populations in the U.S., has not had direct service to Honduras. Spirit Airlines will therefore analyze data from Sabre Market Intelligence for 2019 showing O&D (Origin and Destination) traffic between New Orleans and Honduras.

Sometimes, though, there’s no data on historical demand on a route, such as when Spirit Airlines was considering service to Armenia, Colombia. There hadn’t ever been a U.S. carrier flying into the airport, so there wasn’t available traffic data Spirit could access. Instead, Spirit looked at telephone data and migrant remittance statistics to get a sense of ties between the U.S. and the Latin American city. Spirit studied the frequency with which people were calling friends and relatives and how much money and how frequently money was being remitted as a reliable metric to determine if the new route was viable.

Spirit Airlines relies heavily on leisure bookings, especially visiting friends and relatives (VFR) traffic. In the absence of historical yield data for a route being considered, Spirit used fund transfers to Latin America as a stand-in variable.

A surrogate metric or proxy metric is exactly that—a substitute used in place of a variable of interest when that variable can’t be measured directly or is difficult to measure. For example, per-capita GDP is often a proxy for the standard of living, and the value of a house is a stand-in for the household’s wealth. Freight tonnage is often a proxy for economic activity.

Idea for Impact: Relying on intuition for sound decision-making isn’t sustainable, so folks need a systematic approach to making those decisions. Use meaningful proxy and surrogate metrics in your decisions to help overcome inherent biases with what can’t be measured.

Fall in Love with the Problem, Not the Solution

March 25, 2022 By Nagesh Belludi Leave a Comment

Entrepreneurs, don’t get so excited talking about your solution that you forget to emphasize how it solves a problem at all.

Which problem are you solving for the user? What pain-point are you alleviating? Why is your solution relevant to your customers? How will it make their life easier, faster, and cheaper?

After all, every great company starts by solving a painful problem. Focus more on that problem when you’re selling. Not only will this persuade your investors and customers, but it also rallies your team around a shared understanding of the problem and prepares you to ask for the level of resources it should receive.

Idea for Impact: Sell the problem first, not your idea. Often, jumping too quickly to a solution makes you lose sight of the nuances of the problem.

Ideas Evolve While Working on Something Unrelated

March 10, 2022 By Nagesh Belludi Leave a Comment

In the ’90s, Japanese conglomerate Hitachi, through its subsidy Hitachi-Omron Terminal Solutions, introduced the Clean ATM, which cleaned the bank notes during transactions. The Baltimore Sun (11-Dec-1996) notes,

Hitachi has turned its talents to money-laundering of a literal kind, with an automated teller machine that sterilizes and irons yen notes before dispensing them.

Hitachi did not set out to sanitize the money; its engineers were trying to solve the problem of crumpled bills, which tended to jam machines, a company spokesman says. They solved the problem by running the bills through rollers heated to 392 degrees [Fahrenheit, 200 degrees Celsius]—any hotter would singe paper money—and discovered that the process also killed bacteria.

Idea for Impact: Serendipity is central to the creative process. Many ideas evolve when you’re working on something unrelated. Always be ready to discover what you’re not looking for.

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