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SMB Impossible, Part II

In last month’s post, we got into a meditation on business turnaround principles, as demonstrated by the philosopher Robert Irvine (the host of Restaurant: Impossible). Restaurant: Impossible is my guilty pleasure, my Keeping Up With The Kardashians. And I thought it might be beneficial to try and divine real-world business lessons from a staged, pseudo-realistic makeover show. This is roughly like learning about culture and teamwork from Survivor.

Here is a brief review of the three turnaround principles from last month’s article:

1) Who You Are Is Meaningless; What The Market Wants is Everything

This means that you should get over yourself and your original concept, and make what the market will buy from you at high margins.

2) Knock On The F*#@ing Doors

This means that you should stop pretending that you instinctively know your customer’s mind, and show some hustle with phone calls, surveys, meet-and-greets, and other opportunities that force you to come out from behind your desk to engage the customer.

3) Simplify! Cut Down The Menu and Make Everything Delicious

This means that if you are working your ass of but not profitable, you’re most likely stretched too thin, with too many unprofitable and probably low quality offerings.

And now, let’s pick the conversation back up, and learn what else the great Robert Irvine has to tell us. For the remainder of this article, I consulted heavily with Gary Sutton’s insanely practical turnaround handbook, The Six-Month Fix.

 

4) You Are Ignorant, So Fix Your Ignorance

At the beginning of a standard episode of Restaurant: Impossible, Irvine typically asks the restaurant owner how they started the restaurant. The story usually goes something like this: “Well, I spent 15 years in the manufacturing / software / live bait / other completely unrelated industry, and wasn’t fulfilled. So I took my child’s college fund and all other life’s savings, and went into a business I knew nothing about with a person whose relationship with me I would never want to damage. We are no longer on speaking terms, and I am $25k/$50/$100k/$3M in debt.

The follow-up is always, “What knowledge or experience about the restaurant industry did you have when you started?” Invariably, the answer is, “None.”

Then, “Do you know what your average daily/weekly/monthly food cost is?” –“No.”

–“Do you know what your current food inventory is, and how fresh it is?” –“No.”

There are some businesses that people romanticize. They say, someday I’ll quit the rat race and own a restaurant/bed-and-breakfast/art gallery/eBusiness/really-popular-blog. As if with any of these endeavors, simply hanging the “Open” sign rings the cash register. Restaurants and hospitality businesses are difficult on a good day. The costs are high, the staff typically young and inexperienced, the patrons ungrateful, the economy flaccid, the kitchen chaotic, yada yada yada. Even people who’ve spent years in this industry have a tough time because certain elements like tastes change quickly.

Accept that you are ignorant. Even if you’ve been in your industry for your entire career, accept the philosophical stance that at any point in time, “I know nothing.” Then, get on top of the basics. What are my costs (fixed vs variable)? What’s my breakeven point? What are my product margins? That’s it. Start with your costs and your profitability. Knowing that makes everything easier.

 

5) Forget The Grand Plan, and Stop the Negative Cash Flow

The Six-Month Fix, by Gary Sutton

Once you fix your ignorance, you can proceed to fix your loses. Those managers who are aware of their costs and still losing money are usually under one of the many common illusions in business. These are illusions like, “We’re shooting to acquire this one massive contract, and once it comes in things will get better.” Another is, “We’re just holding together until our game-changer product comes out later this year/next year/in five years.” I’m cribbing heavily from Sutton here.

The illusion in the restaurant business is usually, “We are the only authentically Italian/Lithuanian/Madagascarian/Martian restaurant in at least three miles, so if we can just wait until the economy picks up…” Just as an FYI, the economy is a great scapegoat. I’ve made this mistake too, blaming the economy for the lackluster effects of poor execution. The list of companies that created their greatest profits in the middle of, nay because of, an economic downturn is large and humbling.

This is not the time for holding tight to illusions, egos, misguided concepts or unrealistic assessments of the future. This is the time for adaptation.

There is one caveat: I am not saying that we mortgage our future by killing off investment in future products, or anything like that. Cash is king, but it is not God. We all have to be actively figuring out how our offerings are going to be better tomorrow. That’s what a business is. But we will be judicious about it.

So rank all your current products or services by profit margin, and kill the bottom half of the list. Or see if prices can be raised on low-margin products without affecting sales too dearly. Rethink costly expenses like travel. Find out where your employees hours are being wasted (too many meetings, anyone?). Be open to all options that will save you from having to lay off employees.

 

6) Figure Out Your Core

As Tim Ferriss would council, focus on the 20% of your offerings responsible for 80% of your revenue, and make them outstanding.

In the last section, we discussed one side of the Coin of Delusion: hanging onto an outdated identity or long-shot possibility as a justification for not taking action. Like, “The economy will bounce next quarter.”

The flip side of that delusional coin is the notion of being everything to everyone. The restaurant that promotes itself as a bistro AND pizza joint. And they sell sushi. And coffee drinks. And they’re a music venue…

Diversifying your product (profitably) is fine if it doesn’t interfere with your core business identity. Sutton tells the story of a manager at Home Depot who, as a test, let a vendor sell pantyhose at a kiosk that was near the cash register. The test ended up being wildly profitable, and could be more so if it was expanded. The manager took this idea to his superiors, expecting to be instantly promoted and given a medal for original thought.

The idea was axed, and the manager was asked to remove that profitable kiosk. But why?? Because it’s Home Depot. What home improvement problem is solved by pantyhose, other than the potential attractiveness of the occupants? Their executive management said, correctly, “Fuzzy direction kills more businesses than competition or dying markets.”

There are some very general businesses, but most successful ones find success by distinguishing their product and their customer better than their competition does. This is like a pub that says, “We have many things on the menu but we are famous for how good our hamburgers are, and we tailor our business to the after-work crowd from our working-class neighborhood.”

In any business, you have to be able to do something better than all the other guys, and that something has to heavily influence the purchase decision in your favor. What do you do better than anyone else?

 

7) By the Time You Become Aware of Employee or Culture Problems, It’s Too Late

Of all the elements of Restaurant: Impossible, the one that adds the real umph is the human drama. The owner has their whole livelihood on the line, usually mortgaged many times over. They are typically desperate to turn around their failing business through long hours and pressure on the staff. In every case where Irvine finds business dysfunction, he also finds dysfunction on a managerial, which is to say a basic human, level.

This typically plays out as a Come to Jesus meeting between the manager and the staff. You can tell that it’s the first honest conversation that’s they’ve all had in a while. The manager is resentful that the staff acts lazily and unprofessionally, leaving him/her to clean up the mess and put in all the extra hours. The staff tries to articulate as best they can that they’ve never been properly trained, that there are no established procedures for anything, and that their personal boundaries are violated by the manager’s step-in-an-do-it-myself attitude. Crying is usually involved.

Trust is a tricky subject. Managers can screw up trust very unintentionally. I’ve known very well-meaning managers who put a lot of time and effort into developing a specific company culture, who then inadvertently screw up that trust by stepping in an controlling a process that they’re supposed to have delegated. They can’t help themselves.

Fight opaqueness and politics. Healthy culture does not begin with Foosball tables in the office (although there’s a lot to be said for that). Healthy culture starts with transparent conversations and honest assessments about collective strengths and weaknesses. The moment you feel you need to “puff up” or in any way massage or sugarcoat a communication “to the troops” (I hate that pejorative term), your culture is already dying.

Actually I’m wrong about that. Healthy culture starts with the manager being able to hear criticism of his/her performance voiced by his employees, value it, absorb it dispassionately, and fix it. Some would argue that should be a two-way street, but I disagree. The manager is setting themselves up as a leader. They set the example of how to take the criticism of a transparent conversation and use it to make improvements. “The troops” will do likewise if they have the good example to follow.

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Social Media Psychology: SM Is Worse For You Than You Thought

March 31, 2015 1 comment

For all the time we devote to social media, you would think that it would register some meaningful improvement to our lives. You would expect that social media would do something psychologically beneficial for us: elevate our mood, increase our energy, or help us get more out of the day.

But the more research that comes in, the more social media looks to be a wasteland of clickbait and sadness.

Social Media and Psychology: How to Kill Productivity and Happiness

According to a recent study in Computers in Human Behavior, personal social media use not only correlates inversely with productivity (we already knew this in our hearts), but correlates inversely with happiness as well. The correlation is true regardless of how good a multitasker you are, and regardless of how well you can focus your attention on a subject.

The study notes that to date, we have all kinds of research on how distraction can impede someone’s performance at a task. And though it seems obvious that personal social media use would be classified as a distraction, there is not a lot of present research on whether or not social media specifically impedes performance.

However, the psychology of social media is not just about efficiency. Maybe we are willing to give up some efficiency for something that makes us happy. We must, after all, be getting something out of all the time we spend on social media; if it’s not something tangible like efficiency, then it’s something intangible like happiness.

Except that’s wrong.

Social Media and Happiness: Less (of the Former) Is More (of the Latter)

The researchers also took happiness scale evaluations during their social media usage experiment. Social media lowers happiness, and it does so in two ways.

First, it lowers happiness directly. This largely has to do with self-comparison to one’s peers. As the report hypothesizes:

Many news stories published by popular media outlets are concerned with negative impacts on happiness from social media. One story in particular, entitled ‘‘Facebook: The Encyclopedia of Beauty?’’ discusses the rampant unhappiness that can be found in college-aged females living on campus. The story gives accounts of self-esteem issues and other negative effects from over-usage of social media.

Secondly, social media increases a sub-category of stressors that researchers our now labeling “technostress.” Technostress is defined by psychologists as “‘any negative impact on attitudes, thoughts, behaviors, or body physiology that is caused either directly or indirectly by technology.”

This is not something that’s only experienced by people who are uncomfortable with computers and devices. The article cites a University of Edinburgh study, which found that “the more Facebook friends a user has, the more likely you are to feel stressed out by the social media.” And there is already a very good foundation of research supporting the notion that increases in stress diminish happiness. So, if social media ads stress and stress diminishes happiness, then you can get the rest.

The study revealed that personal social media use lowered productivity by way of causing distraction. This finding is in line with what’s call Distraction-Conflict Theory, which says basically that distractions cause some of the information necessary for the primary task to fall out of short-term memory. This is no surprise to anyone who’s ever used social media.

What was a surprise was that the effect was just a dramatic among poor multitaskers as it was among people who rated themselves great multitaskers. As the report puts it, “This result lends support to the common rhetoric that people are not as good at multitasking as they think they are.”

In Summary

So, in three points, here’s what all this means for us:

1. Social media makes you less productive despite how good a multitasker you think you are.

2. Social media makes you unhappy in the long run, both directly and by adding stress.

3. We’re probably still going to spend all our time on Facebook and Twitter anyway…

That last point is not from the report, but we both know it’s true.

 

 

The Stoics and the Epicureans

October 31, 2014 Leave a comment

The Stoics for the motivation and achievement, but the Epicureans for the style…

Seneca the Younger

I recently got onto Hellenist moral philosophy after reading The Obstacle Is The Way, one of the books recommended by Tim Ferriss. The book is a motivating entree into Stoic thought, and Ferriss himself is a devotee of Seneca, a famous Stoic philosopher.

Several hundred years before Christ, two post-Socratic schools of thought emerged as to the nature of the universe and how we should behave within it to live the optimum life. Many of the teachings these schools reverberate today.

The Epicureans are my sentimental favorite, and they were astonishingly ahead of their time in deducing how the universe actually works. They were adopters of Democritus‘ idea that objects are made of atoms, and that those atoms move through space. They did not know about how light works, but deduced that something traveled from the object to the eye. They came very close to articulating the conservation of mass theory, millennia before Einstein proved that matter and energy were interchangeable.

Epicureans did believe in the gods, but did not believe that they intervened in the actions of the earth. Therefore, they believed that they had nothing to fear from the gods, and therefore nothing to fear from death. Life was simply to be lived, and therefore they concluded that the optimum life was lived as pleasurably as possible. Happiness was the thing to be pursued, as Jefferson (himself an epicurean) pronounces in the Declaration of Independence.

This leads many people to equate epicureanism with hedonism. And, to be fair, if you know anyone today that you’d call “Epicurean”, they usually know where the best food and drink can be found. But epicureans meant “pleasure” mostly to mean freedom from anxiety. Under their moral code, for example, you would not want to steal from your neighbor – not because it’s intrinsically wrong but because it would result in anxiety from the theft and secrecy, and the potential consequences put your happiness at risk. Better to live simply, treat others well, and cultivate friendships. Don’t worry…be happy.

I love the Epicureans for an outlook on life so far from my own. If I were capable of doing away with my needless anxiety and absorbing myself in food, drink, thought and friendship, I’d be right there. I know people like this, and they’re the right people to chill with. As a matter of fact, Epicurean notions are still present today in modern psychotherapy, where a psychiatrist will try to allow a patient to let go of his or her idea of what the world “should” be, and accept it as it is.

The one place where epicurean thought is largely mute is having to do with concepts like achievement, motivation, and personal development. The ancient Greek epicureans did not seek to achieve greatly, instead they secluded themselves in a commune. Politics and industry brought about anxieties that were detrimental to the pleasures of a simply-lived life. For achievement and growth, you have to talk to the Stoics.

Emperor Marcus Aurelius (Visual Approximation)

Rather than a concept of the universe that was atomic and mostly random, the Stoics believed that the universe was created by the gods with a distinct universal order, and everything had a distinct purpose. The purpose (and the only purpose) of a horse, for example, was husbandry.

Remember Silence of the Lambs? When Lecter told Clarice to “read Marcus Aurelius” (another Stoic philosopher)? What did he say? He said that the emperor counsels simplicity. Of each thing, ask, what is it’s nature? It’s purpose?

To the Stoics, everything literally had one defined nature and purpose. The nature and purpose of the human, being the only animal that reasons, is to live its life using his natural capacity for reason. This meant living in accordance with nature, natural order, and therefore the reason allows us to understand what the natural order of the world actually is. With me so far?

The optimum way for a Stoic to live is therefore as virtuously as possible. One must try and become a paragon of virtue, because our sense of logic and reason tells us that it best serves the natural order of the universe for us to do so.

You can see that this concept of morality is 180 degrees apart from the epicurean philosophy. One is sensory, visceral, pleasure-seeking, deemphasizes ambition, reclusive, and seeks a mental framework that avoids anxiety by doing away with the concept of “should”. The other is top-down, orderly, reasoning, taming, and harbors ambition to achieve a highly virtuous and logical life. One looks at obstacles and says, “Don’t worry about it.” The other looks at obstacles and says, “Overcoming this obstacle will lead to further development.”

For us simple folk, we probably unwittingly live somewhere in between these two extremes. But you notice that neither one of these great philosophies looks at obstacles and says, “I must whine for sympathy and feel like I’m doomed.” Nor does either school think that the optimum life is lived by creating maximum anxiety in order to compete for wealth, status, and the purchasing of insignificant stuff. Each philosophy is a study in self discipline and mental conditioning, just in opposing directions.

It was useful for me, and it might be useful for you, to look at the anxieties in your own life and ask, “Am I doing this for a purpose that makes sense, or am I just reaching higher?” And if we find that we are constantly making unreasoned, half-asleep choices about achievement and attitude, how might these models serve as something to strive for?

The Five “People-triggers” Discoveries That Most Changed My Life

August 29, 2014 1 comment

Screenshot 2014-08-29 15.31.58I’ve been writing the People-triggers blog since 2010.  After all that time, I’m not sure I’m any closer to understanding why we do what we do, and why we get out of bed in the morning.

Psychology feels like it’s nipping around the edges of this question. Like the moment anyone gets close to an insight, they stop studying, write a book and start trying to teach everyone how to stay motivated and influence others. In the 70’s, we were sure that Transactional Analysis was a scientific approach to relationships. In the 80’s, we were sure that we needed to praise our children regardless of result because self-esteem correlates with success.

Think of what we’re sure about today. Working from home achieves higher productivity. No wait, it kills collaboration. Group brainstorming produces better outcomes than individual reflection. No wait, it shouts down the introverts and encourages rule-by-volume.

In psychology, today’s bestseller is tomorrow’s bullshit.

That all being said, I’ve looked back at the readings and writings I’ve done over the past four plus years and I’ve found five discoveries-five core principles-that I’m willing to bet will stand the test of time. More than that, they changed my life because I was able to 1) become more effective in producing output, and 2) stop wasting energy worrying about certain things. So, here they are: Read more…

Understanding and Mastering Willpower

March 30, 2014 4 comments

Willpower, by Roy Baumeister and John Tierney

There is a growing community of psychologists and neurologists who are shedding new light on the concept of willpower. If you’re interested in the topic, a great place to start is a book by Dr. Roy Baumeister, a leader in this field, called Willpower: Rediscovering the Greatest Human Strength. Baumeister’s lab at Florida State specializes in the psychology of willpower. Other prominent scientists in this community have studied or commented on this phenomenon, including Daniel Kahneman, Baba Shiv, Sasha Fedorikhin, and Dan Ariely. It was recently popularized in a TED Talk by Dr. Kelly McGonigal.

Baumeister calls it a “rediscovery” because willpower is a concept that has been understood with varying degrees of accuracy through the years. Since ancient times, it was cursorily understood as a “power” unto itself; something to be harnessed and exercised. This is called the “energy model” of willpower. The energy model was incorporated by Freud into the “superego”.

The energy model fell out of fashion when Freud did, until very recently when psychologists started comparing notes with biologists. They noticed patterns in body rhythms and nutrition that corresponded with the psychological ability to self-regulate. It turns out that our ancient understanding of willpower as an energy unto itself was closer to the truth than we thought.

Willpower 101: How It Works

Here’s a synopsis of what scientists know so far: Read more…

Should I Be Doing This? – Unraveling Passion, Talent and Practice

January 24, 2014 5 comments

TalentI show you three groups of recent college graduates. The first group has been identified as intrinsically talented at a certain discipline. The second group identifies themselves as very passionate about a certain discipline. The third group engages in tough, technique-oriented practice for an hour a day, but otherwise has no extraordinary talent or passion for any particular discipline. You are asked to bet $100 on which group will yield the highest average level of success in ten years. On which group do you bet?

When I was in drama school, I had to take some design courses. We had a particularly excellent artist named Curt who headed our design department, and the school routinely produced beautiful production sets and lighting. I remember during a fundamentals class asking if I (or anyone) could teach myself to draw like he could, given enough practice. His understandable if disappointing response was, “I could always just draw.”

Passion

I had a lot of professional doubts during that time which were never fully answered, even to this day. I liked many aspects of theatre–such as acting, lighting design, music composition and direction–none of which I executed with particular distinction back then. Advisors told me that I needed to figure out who I was, and they were glad when I told them that my strategy involved hedging an acting career with some slightly more lucrative technical disciplines. Of all those disciplines I tended to like acting the best, but I don’t think they saw in me any real signs of promise. I couldn’t “just act” the way Curt could “just draw”. Knowing how daunting it would be to try and “make it” as an actor, I spent a lot of time asking myself, “Should I be doing this?”

My father–who very graciously supported me in a theatrical education–gave me very practical career advice: “Find what you love to do, and then find a way to make money at it.” He had a very progressive attitude about professional success: that fulfillment should be the primary consideration. My roommate’s father also had some sage advice, quoting Stephen Covey: “Begin with the end in mind.” He was trying to emphasize the importance of goal orientation and focus.

What was confusing to me–and I later learned confusing to a lot of people–is that I had a very hard time at that age isolating what I loved to do, and therefore had no real vision of “the end” to keep in mind. When I was feeling good about myself, every discipline seemed exciting. When I was feeling unaccomplished or low, every discipline seemed like a different flavor of drudgery.

I developed anxiety about not following the “right” path, the path that was supposed to best leverage my talents. I didn’t really even have a sense of what those talents really might be, and personally and strength-finder testing never gave much direction. I was hungry for a concrete calling; something I could settle into with the assurance that I was mastering the best thing for me to master, and therefore I could engage it with full conviction rather than always having one foot out.

Then I read a very interesting book by Cal Newport called So Good They Can’t Ignore You. Newport turns the idea of preexisting passion on its head. Rather than trying to match a professional end goal to a preexisting passion, it’s actually the mastery of a discipline that brings about the passion. We already know that accomplishment and excellence within a discipline is intrinsically motivating. We’ve discussed this in a previous article about Daniel Pink’s book Drive. Read more…

To Fake It, or Not To Fake It

October 31, 2012 4 comments

Dr. Amy Cuddy is a social scientist at Harvard Business School and an expert on prejudice. Her most recent article (Co-authored with Dana R. Carney) focuses on the relationship between physical postures and hormone levels in the body. It’s attracted enough attention to earn her a TED talk, which is how I first found her.

Since ancient times, we have taken for granted that body posturing reflects a person’s mood at that moment. The West, and in particular the U.S., makes body language observance practically into a fetish. One needs look no further than the recent presidential debates to see pundits over-analyze and misconstrue every twitch and tick of the candidates.

Dr. Cuddy (She must get a lot of grief from fans of the show House) further points out that body language also predicts behavioral outcomes. She cites research in which experiment subjects who viewed 30-second (silent) videos of doctors speaking to their patients could accurately predict which doctors were more likely to be sued based on their non-verbal manner (demonstrating that doctors’ behavior correlates more strongly with lawsuits than does their competence).

Now to the central question: we know that non-verbals can govern how we feel about, and behave toward, other people; do they also determine how we think and feel about ourselves? In other words, do our physicality and posture influence our mood as much as our mood influences our physicality and posture?

Dr. Cuddy designed an experiment in which subjects held a certain body pose for two minutes. They were not told about the nature of the poses, but half of the subjects posed in attitudes of “high power” (e.g. hands on hips, leaned back, arms extended upwards and wide, etc.) and the other half posed in attitudes of “low power” (e.g. contracted core, legs crossed at the knee, hands touching neck, etc.). They than ran a number of tests on these subjects including questionnaires, gambling tests, and saliva tests for endocrine levels.

She found that those who held the high-power poses for two minutes showed more poise and confidence immediately afterword, were more optimistic, and willing to take risks. Most striking, the two groups showed vastly different levels of certain hormones in the saliva tests. Those who held the high-power posers showed a 20% testosterone increase from baseline (low-power posers showed a 10% decrease). This explains the increased feelings of optimism and confidence. Also, high-power posers showed a 25% decrease in cortisol (low-power posers showed a 15% increase). Cortisol governs stress-reactivity – lower levels of the hormone tend to indicate better coping. It seems, amazingly enough, that physicality actually changes body chemistry. Read more…