Thursday, January 22, 2009

Answering the call, building better engines

As we enter a time of new leadership in the White House and a renewed sense of service and participatory democracy, and as we face fiscal challenges that most of us have not seen in our lifetimes, I’m sure I am not alone in wondering how best to contribute to the effort of recovery and forward progress. There are many opportunities for social service, and in as much as consumption drives the economy, ways in which we choose to spend and invest our money that will have the potential to trickle up and infuse the market with the cash and resources it has lost over the past twelve months. Like every citizen who feels a certain call to action, I will contribute in these ways as best I can. But personally, I think the most influence I have to make a positive contribution is based on my ability to help build a prosperous business.

To me, creating a successful business is a matter of leveraging the skills and know-how of a small group of people to deliver a service that provides value worth more than the investment to build it. In my current situation, it is a matter of providing a service to customers that allows them to effectively serve their constituents and provide offerings that lead to monetization and profit. Specifically, it’s a matter of letting publishers provide appealing inventory to advertisers, and helping them deliver an engaging experience to consumers so they want to spend their time enjoying that content (which drives the former). If my business allows publishers to do this in a more efficient manner than they could without my service (or that they could with a competing service), or if it allows them to offer a better and more interesting kind of product, then my business will be successful. It’s simple, really—but not easy.

If the law of conservation of energy can be metaphorically applied to the business value chain, somehow value must be preserved in this ecosystem. If you think of a business as an engine that takes in value and generates greater value, you must account for that discrepancy in the system. The ability of the engine to generate value is based on the capabilities of the people who make it up and their ability to innovate and develop technology to make their internal processes efficient. No matter how great the output of this engine, if it costs more to run than the value it produces, it will soon run out of fuel. And in these times, you either need a very large gas tank or a very efficient engine. My experience is that it has become difficult to fill a large tank, particularly if you can’t show that your engine has the potential for excellent mileage.

As someone responsible for building, tuning and running the engine, I have only a few big levers I can operate to make this work.

  • Build a team that has the right makeup to execute effectively and efficiently. That’s not just a matter of hiring smart people; it’s a matter of finding the right combination of people who will optimally serve the needs of the business. The needs of each business varies, and the needs of a single business will change as the environment changes, so there is no single formula for doing this well.
  • Make sure the team is working on the right thing. Since the efficient engine will excel, lost cycles are like a leaky gasket. One could argue that this type of thinking leads to safe bets that attempt to minimize risk, and this leads to a lack of creativity and innovation. I suppose this could be the case, but even planning for exploration and risk-taking has to be done efficiently, and you have to be smart about where you place your bets.
  • Make sure that the processes we use to build and operate our system are as efficient as possible. This sounds like a platitude, and I suppose it is, but the real complexity of this has to do with optimizing for the situation and the resources available. There are certain things I know I can’t do because I don’t have the expertise or resources in-house, and the cost of attaining those things vs. the operational lift they provide does not warrant the investment right now. Again, this influences who is on the team—the combination of their capabilities must be able to implement the processes that deliver overall efficiency for your current situation. As the situation changes, the calculus for obtaining those efficiencies also changes.

Assuming I can build an engine that is tuned for the current situation and successfully delivers more value than it burns, and thinking back to the conservation of energy, where does the extra value come from? Expanding on the metaphor, while energy in a closed system is conserved, it can change form. I would suggest that in our tuned engine exists potential energy which, based on the innovation, knowledge, and abilities of the team, is turned into kinetic energy. That potential energy comes from the investment made by the business and members of the team to acquire, hone, and coordinate their skills.

Our new president has asked us to become involved in implementing the changes necessary for us to prosper as a nation. I am committed to doing so by helping build organizations that deliver value and prosperity to both the businesses they serve, and also to the members of the team who make up the engine. I realize that I might not be successful in all of my attempts at doing this, but it’s perhaps the most impactful thing I can do. My other endeavor will be to raise my children in such a way that lets them build their pool of potential energy so that it can be transformed into a state that directly serves the world in which they live.

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