Is it talent and smarts—or is it luck. How real is the old saw ‘the luck of the draw’? Apparently more than you might think.

Not just luck of the draw, but definitely ‘right place/right time’.

First, I read an article regarding the serendipity-based success of Ustream.tv, a new website.

It started when a “Bay Area couple’s pet Shiba Inu, a kind of Japanese hunting dog, gave birth, and its owners decided to train a Webcam on the newborn pups so they could keep an eye on them from work…after a Ustream employee spotted the Webcast and began passing it around to friends and family, the video went, as they say, viral. It has had 6 million viewers, 4 million in the last week alone, spanning the globe from Egypt to Venezuela. Those viewers have streamed nearly 4 million hours, or 391 years, of doggie video…” Pretty good for a site that normally has around ten million US visitors a month.

A little over a week later I read a review of Malcolm Gladwell’s Outliers: The Story of Success that documents the premise of luck and right time/right place.

Gladwell looks at impact of when you’re born. Consider these high tech legends, Bill Gates, born 1955, Paul Allen, born 1953, Steve Jobs, born 1955, and Bill Joy and Scott McNealy, born 1954.

Coincidence? No. timing offered opportunities that wouldn’t have been there otherwise.

More proof?

“Two-thirds of Canada’s pro hockey players were born in January or February. The same holds true in college and high-school all-star teams. Canada organize kids by age, based on the calendar year. Children born in the first two months of the year are inevitably larger and more coordinated than teammates six to 10 months younger. So they get more ice time, more coaching, and more chances to excel.”

Obviously, luck and right time/right place aren’t any kind of guarantee. It still takes a lot of hard work and effort. Companies can’t count on puppies and kids can’t count on being conceived in the merry month of May.

Companies need to pay better attention to serendipity and look for how it can be replicated or enhanced.

For kids, there needs to be a way to level the playing field, because we’re wasting an enormous amount of talent for silly reasons such as being born too late in the year. As Gladwell says, “When we misunderstand or ignore the real lessons of success, we squander talent,”

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Check out the my advice for the Big Three

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The table below highlights a few of the major structural similarities between evolution and business:

• A business lives and grows within a broad business ecosystem, just like species lives within a larger physical ecosystem.

• The business generates a constant stream of services, much like a species generates a constant stream of organisms.

• Each of these services (or organisms) lives and dies within a smaller ecosystem.

• A successful business generates a large number of services simultaneously and over time, just like a species some live while others die.

• Within the business, a successful service can spawn a number of similar services, each with some small variation from the “mother” service. Most of the services in this next generation do not thrive in the marketplace, just as most organisms do not do not thrive in the physical ecosystem. The few services that do thrive typically then spawn another generation of new services.

Notice that, in this description, the services appear to have a life of their own—surviving in the marketplace, thriving, and spawning new generations of services. Of course we know that the services do not do anything themselves. They are simply vehicles for the creativity and effort of the people (employees) in and around the business who do all the work.

But is this really different from the process of life? The organisms themselves do not do the actual evolutionary work of replication, variation, and selection. Within each organism the DNA and thousands of proteins actually do the work of replication. Similarly, the organism itself does not generate variations. Here again the DNA and its team of proteins (employees?) execute a process of DNA mixing during the replication phase.

Finally, we may think that the organism at least controls its selection as a parent of the next generation. But we can just as easily describe the external ecosystem as the agent, impartially selecting certain organisms based on fitness criteria totally unknown to the organism.

• When the ecosystem delivers a drought, the individual organisms themselves do not choose their personal tolerance to the drought.
  
• When a lion hunts a gazelle, the unfortunate gazelle does not choose to be weaker, slower, older, or less agile than its brothers and sisters in the herd.

To emphasize this unusual point of view just once more, let’s look at Procter & Gamble from the outside, from our vantage point as a part of the consumer ecosystem in which P & G’s products and services must survive.

We know that the products and all their variations do not appear magically on the retailer’s shelf. We know that P & G has thousands of employees manufacturing (replicating) the products and working on new variations for us.

In just the same way, we know that the DNA and its team of proteins do all the work of replication for living organisms. However, from our point of view as consumers, it seems as if new consumer products simply appear on the shelf. In our role as part of the consumer marketplace ecosystem, we select certain products and reject others. The company (species) dutifully records our choices in its records (DNA) and then replicates more products based on our selection.

Bear with me as we continue using this metaphor to understand what lessons the evolutionary process of selection may have for successful businesses.

Next time, we will continue our exploration of the evolutionary selection process. We will delve deeper into more subtle ways that environmental selection forces species to adapt—specifically how the environment forces each species to focus on its comparative strengths.

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With all the layoffs and rumors wreaking havoc on retention policies you might think that hiring good people just got easier.

It didn’t.

With hundreds of responses to every ad, this is the time when your hiring skill really matters; when your ability to recognize jewels where others see only lumps of coal will give you an edge.

Whether the talent market is tight or loose, you should always remember that your next top performer didn’t necessarily

• have the best grades;
• attend a prestigious school;
• work for your competitor or
• even in your industry;
• have a full head of hair that has no gray; or
• fit easily into your comfort zone.

What you want is the person who ‘fits’ your corporate culture, has a great attitude and fills the skills hole in your group—in that order.

One result of hiring talent instead of skills is loyalty.

Real loyalty can’t be bought with either money or stock options, it’s earned through your actions, your willingness to take a chance, to provide the place where the coal has the opportunity to become a diamond.

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See all mY generation posts here.

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First up today is a review from Knowledge @ Wharton Of Dov Seidman’s HOW: Why How We Do Anything Means Everything … in Business (and in Life). The book focuses on building a corporate culture where “”how” matters more than “what” in business, and how “should” matters more than “can.”" Seidman believes that “companies and their people can operate in both a principled and profitable way.” He believes that “A leading company should be a company of leaders.”

Next, and interesting interview on IT World with CIO Tony Scott who is charged with creating a culture of innovation a la Google at Microsoft—wow, talk about a challenge!

Third, a look at Charles Liang, co-founder and chief executive of $600 million Super Micro Computer, a 15-year-old computer maker with 850 employees. Liang is a one-man management band, so the big question is what happens if he goes poof?

Finally, from Business Week, the opportunity to nominate your choice for the best—or worst—Manager of the Year. The worst category offers the most opportunity, but for a greater challenge think about who deserves best. Please share your nominations here, too.

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Previously…. We reviewed in some detail how the lessons of evolutionary replication and variation may provide insights into business. This time we will begin exploring the third of the three basic elements of evolution:

• Replication;
• Variation;
• Selection.

How Does Evolution Pick Winners?

The title question is a trick.

Evolution does not pick winners.

In the first post on this topic we discussed how the environment provides the fitness criteria.

Evolution simply generates a large number of variations. Each variation then “discovers” one specific segment of the environmental topography. With enough variations, evolution can draw a pretty good topographical map of the environment for that species.

In some sense, the species itself is the map of the fitness criteria of the environment. The more closely a species conforms or adapts to the topography of the environment, the better is its fit to that environment.

Good adaptation to the environment is the definition of fitness and survivability.
The simple figure below illustrates how an organism with five features fits its environment. Obviously, it drastically oversimplifies the selection process, but provides a useful starting point for our discussion.

Evolution does not use a calculator to determine fitness. It simply generates millions of organisms, and lets the survivors map the terrain.

We may want to think of each survivor as a single yes/no vote, but evolution does not tabulate the votes to select a winner. Each survivor is a winner in the evolutionary selection sweepstakes, so that winning organism gets to transfer its entire DNA to the next generation.

Evolution may be very harsh, but it is also extremely respectful of each organism. Each survivor wins in toto.

Measuring Fitness—Non-Linear Optimization

Mathematically, we can calculate the fitness of the organism to its environment by measuring the difference between feature points of the organism and corresponding points in the environment. One such calculation is a “least squares” error, which sums the squares of the differences, or errors, between each pair of points.

In addition to the squares algorithm, which measures how well two irregular lines fit each other, mathematicians have developed the linear programming algorithm, which actually calculates the best fit of any set of points (service features) with any other set of points (environmental features).

If this linear programming technique is so powerful, why don’t we just put all the business environmental variables into it and solve for the perfect service?

Because linear programming is much too simple to capture the complexities of the environment for any service.

To be solvable, a non-linear program requires “n” equations with no more than “n” variables, and all variables must be connected in linear relationships.

The real-world environment of survival has many characteristics which defeat a linear optimization program:

• many variables are unidentified;
• most variables have non-linear relationships;
• many variables and relationships change over time;
• many variables work in clusters.

Selection is an arms race.

Many variables are unidentified. In fact, one of the big challenges is to identify which variables participate (or are relevant) to the cluster of fitness criteria for a specific service.

• Does gasoline color affect the demand for it? No, color doesn’t matter.

• Does smell affect the demand for natural gas? Ironically, we know this is true. The smell of natural as is injected artificially, specifically to alert a person to a gas leak. Odorless natural gas is not saleable.

Most variables have non-linear relationships. That is, the service needs some amount of a specific variable, but too much or too little makes no difference to the ultimate fitness of the service. For instance, let’s look at one possible curve for the effect of price on demand.

Below some price, the demand for any product is extremely large. At the extreme low, a price of $0, people will simply use all that they can consume. This typically remains true until the price reaches some threshold value, at which demand now becomes sensitive to it. That is, each penny of increase in the price reduces the demand linearly. Finally, at the far right of the curve, the price reaches a point where the demand drops nearly to zero. This is the classical lazy-S adoption curve.

The price of gasoline is an excellent example of this.

• Below $2.00 per gallon, the demand for gasoline is relatively flat. In other words, prices below $2.00 per gallon do not significantly affect our consumption.
• Above $3.00 per gallon, we start to reduce consumption.
• Above $4 per gallon, we dramatically reduce our consumption.

This has been irrevocably proven in Iran and Venezuela. Both countries subsidize gasoline, with prices well below $1 per gallon. In both countries demand far exceeds availability, so much so that other rationing mechanisms have developed—lines at distribution points, and black markets that offer gasoline at much higher (market) prices, but with easy availability.

At the other extreme, consider markets in Europe, where the price of gasoline is routinely $10.00 per gallon. The obvious results are smaller cars, lower gasoline consumption per capita, and much greater use of alternative transportation. The less obvious results are reduced sensitivity to further price increases. Further increases in the price of gasoline will have more limited effects on consumer behavior because consumers have already made significant adjustments.

All this proves that evolution’s selection process is active  and accurate in the business arena.

We have covered a lot of ground to date, with an introduction to evolution and its three basic functions.

Join us next week when we take a moment to review the fundamental parallels between evolution and business.

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Both Jim Stroup, at Managing Leadership, and Richard Barrett here at MAPping Company Success are discussing the need to avoid wasting resources on projects going nowhere.

Richard calls those projects that won’t die vampires and after reading Jim’s post, he and said, “Yeah, killing vampires is hard. The challenge is not the rational analysis, which that blog describes. It is the emotional act of letting go that causes the difficulty.”

It seems as if I’m always the one that ends up tackling the emotional stuff, so here are some thoughts on letting go.

The unwillingness to let go is anchored in your MAP (the link goes to a blueprint of how to change it).

Letting go is very similar to those team building exercises, variations of which have been around for decades, such as the one where you fall backwards from a height trusting your team to catch you.

It’s scary, not because you’re up that high, but because it requires real trust and the result is outside of your control.

Killing a vampire project is like that.

First, you need to trust that the people around you are giving you straight information with no hidden agendas.

Second, you need to accept that the failure of that version or even the entire project is outside of your control.

Finally, you need to accept that no matter how good you are you won’t always be right.—even Steve Jobs had Lisa and Newton.

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Bloggers know that coming up with interesting topics and original content every day, as opposed to big blocks of quotes from articles and other blogs, is difficult. Writing for Saturday is especially challenging because you never really know who is cruising around or what the mood is.

Additionally, I’m always finding interesting articles I want to share, but they don’t really “fit,” so I’ve decided to offer up those odd thoughts and links on Saturday; hopefully finding at least one thing to pique your interest.

• In my (probably) final comment on this subject I’d like to offer up my congratulations to all those Alaskans who put ethics in front of tradition and ousted Ted Stevens from his Senate seat. The Senate thanks them, too, since now they don’t have to choose between honoring ethics or doing business as usual.

• An interesting post on the problems for women in IT with links to several additional articles and posts. The problems for women in technical fields such as IT are myriad. Few women ever have to worry about the glass ceiling, since they rarely rise that far. Rather think about the glass floor and non-existent elevator; the former prevents entry for most and the latter sees to it that the ceiling remains out of reach to the few who pass the first barrier.

• From the NY Times an advisory on avoiding the ads that inundate you at every turn and every milieu. Lots of useful links to help you and some great final advice that I live by.

• New software from MIT’s Dr. Alex Pentland offers a future promise of a way to analyze your everyday chat to determine the unspoken thoughts that lurk behind the words. The potential improvement in interpersonal communication could be enormous.

That’s it for this Saturday. Please let me know if you like this feature or it should be sent back from whence it came.

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Yesterday I mentioned four basic traits of good culture. Today I want to talk about another one that many people, especially those running startups and small companies, often don’t like and don’t implement.

Process.

The problem is that people frequently confuse process and bureaucracy.

• Process is good—it helps to get things done smoothly and efficiently.

• Bureaucracy is bad—it’s process calcified, convoluted, politically corrupted, or just plain unnecessary.

The hallmarks of good process are

• easy-to-use and flexible method of accomplishing various business functions; and
• informal without being haphazard, and neither ambiguous or confusing.

Occasional surveys (internally asking staff and externally asking vendors and customers how things are working) alert you to when processes start to mutate. By creating a skeletal process and a corresponding graphic in areas where it is needed (financial controls, hiring, purchasing, etc.), you lay the framework for your growth in the future, no matter how hectic.

Bureaucracy stems from people, be it a CEO or first level supervisor, who believes that her staff is so incompetent that it is necessary to spell out exactly how every individual action, no matter how small, needs to be done.

To correct this, the manager responsible must

• must recognize and take responsibility;
• reduce his own insecurity;
• increase his belief in his current staff; and whenever possible
• hire people he thinks are smarter than himself!

Bureaucracy is also fed by people’s fear of change, “We’ve always done it like that.” and similar comments are dead giveaways.

Another significant factor that contributes to unnecessary bureaucracy is the failure to align responsibility and authority.

If a person has the responsibility to get something done (design a product, create a Human Resources department, meet a sales quota), she should have enough authority (spend money, hire people, negotiate with outside vendors) to get the job done.

Giving people responsibility without concomitant authority forces them to constantly ask their superiors for permission, thus reducing productivity, and lowering moral.

The final, and most important difference between process and bureaucracy is that people like working for companies with good process in place, and hate working for those mired in bureaucracy.

But not for long—they leave—making bureaucracy-eradication a major tool in the culture and retention game.

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