# Organizational Physics  ## Metadata - Author: [[Lex Sisney]] - Full Title: Organizational Physics - Category: #books ## Highlights - Law #1: An organization is a complex adaptive system Organizations are complex in that they have many interconnected and interdependent elements, subsystems, or parts. They are adaptive in that they must shape and respond to changes in the surrounding environment. They are systems in that they must respond as a whole organization, not just as a collection of parts. To understand how something really works, it’s not enough to break it down into its components. You must look at it in the context of the complete system. Viewing an organization as a complex adaptive system provides valuable insights into how it functions in its totality. ([Location 340](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=340)) - Tags: [[blue]] - Law #2: An organization is subject to the first law of thermodynamics The first law of thermodynamics states that, at any given point in time, a system has a finite amount of energy. If an organization is to get new energy, it must get it from its environment. For a business, energy is any usable source of power such as money, resources, and market clout. Its environment includes the surrounding system of customers, social norms, regulations, and economies in which it operates. If there’s high integration between an organization’s capabilities and the opportunities in the environment, then the organization can receive an abundance of new energy and be successful. If there’s no integration between them, then there’s no new energy created for the organization and—like a fish out of water—it will soon perish. ([Location 345](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=345)) - Tags: [[blue]] - Law #3: An organization is subject to the second law of thermodynamics The second law of thermodynamics states that everything falls apart over time. This is due to entropy, which is disorder or disintegration. All systems (not just closed systems) are subject to it; none can escape it. An organization’s available energy first flows to manage and counter the disintegrating force of entropy. If entropy in the system is high, then it costs the system a higher amount of its available energy to maintain itself and get work done. Therefore, it has less energy available to drive integration forward in its environment. To get an immediate, intuitive grasp of this principle, just imagine a business with a great market opportunity but which also suffers from high internal friction, politicking, and infighting. It takes a tremendous… ([Location 352](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=352)) - Tags: [[blue]] - Law #4: An organization must shape and respond to its environment and do so as a whole system In physics, a chaotic system is one that seems random in its behavior but is actually driven by some basic repeating patterns or forces that exist from the macro- to the micro-level. In this regard, an organization is like a chaotic system. It has patterns or forces that exist all throughout the organization, from the smallest tasks and behaviors to the largest enterprise. These forces can be mapped in many ways. One of the most effective ways I know is placing them along two basic… ([Location 360](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=360)) - Tags: [[blue]] - Law #5: An organization is subject to the conditions of its environment The driving principle of evolution shows that it is not the strongest or most intelligent that survive but those that are best adapted to their environment. Therefore, the greatest mistake an organization can make is to misread its environment. If it does, it will cease to get new energy and it will fail. Because the environment is always changing, the organization must always be adapting. Successful adaptation requires a constant realignment among the organization’s capabilities to execute (Execution Lifecycle), its markets or customers (Market Lifecycle), and its products (Product Lifecycle). How an organization manages this alignment is the basis of its strategy. ([Location 370](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=370)) - Tags: [[blue]] - Law #6: An organization is subject to the laws of motion Newton’s three laws of motion reveal the principles of movement for physical objects in the universe. The laws explain inertia, acceleration, and reaction. The laws also help us understand and work with the principles of organizational change and momentum. Namely, they explain why an organization will tend to behave the way it does unless a force of change causes it to do something differently. They explain how the mass of an organization naturally resists change and how every action performed in the business creates an equal and opposite reaction that must be managed. How an organization manages its mass determines the speed of its execution. ([Location 376](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=376)) - Tags: [[blue]] - Critically, what type of a captain are you? Are you a Producer style who prefers to focus on a series of short-term goals and drive hard to achieve them? Are you a Stabilizer style who prefers to plan, structure, and organize for an efficient journey and make contingency plans? Are you an Innovator style who senses the storms and opportunities on the horizon and comes up with creative new inventions for superior performance? Are you a Unifier style who values good teamwork and camaraderie? Or are you some combination of these? ([Location 458](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=458)) - Tags: [[blue]] - you must get energy from the environment by aligning your strategy so that the wind is in your sails. To get the wind in your sails and produce new energy (E) in the form of money, resources, and clout, you must align three lifecycles together: the Product Lifecycle (the assets you make available for sale) with the Market Lifecycle (the types of customers you’re targeting) with the Execution Lifecycle (the organization’s ability to execute). If you have good alignment between these three lifecycles, you will have good timing relative to the wind and sea conditions. But good alignment also takes constant readjustment. As the captain, you must make sure that the crew is producing results. You must provide the right level of stabilization so that everything is organized and systematized but also flexible and responsive. You must keep your eye on the horizon and innovate to changing conditions. And you must make sure that the entire system is unified and acts in concert. ([Location 469](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=469)) - Tags: [[blue]] - there are basically two types of captains, just as there are two types of entrepreneurs: one wise and the other foolish. The foolish captain attempts to predict the seas, currents, and seasonal storms; plot the right course; and make a dash for the finish line. This is foolish because there are just too many things outside of the captain’s control. Similarly, foolish entrepreneurs attempt to time the market, quickly attract users, and sell the company off at just the right time. One bad storm will quickly destroy an ill-prepared organization. The wise captain or entrepreneur, recognizing that the sea is always changing and impossible to predict, focuses on building a sea-worthy, sustainable ship from top to bottom. ([Location 486](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=486)) - Tags: [[blue]] - What actually does cause any system to fail or succeed? The answer is System Energy Management. This means just what it sounds like: System Energy Management is how energy behaves within a system. ([Location 532](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=532)) - Tags: [[blue]] - The first law of thermodynamics is called “conservation.” It tells us that, at any given point in time, the potential energy available to a system is finite. Whether we’re referring to your family or your business, this has a finite amount of potential energy available to it. In order to get new energy, the system must acquire it from the surrounding environment—just like you must get food from the refrigerator or your business must get sales from its customers. ([Location 536](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=536)) - Tags: [[blue]] - The second law of thermodynamics is called “entropy.” It tells us that every system falls apart over time. No matter how hard we try, there’s no escaping the irresistible force of entropy. ([Location 540](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=540)) - Tags: [[blue]] - The Universal Success Formula shows that success is a function of two things: integration over entropy. ([Location 554](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=554)) - Tags: [[blue]] - Integration is a measure of how much energy the system is getting from its environment. Energy in this case is anything useful and desirable that can be made productive in the pursuit of the goal (money, resources, clout, etc.). High integration with the environment is good. Low integration is bad. Why? Because when there’s high integration between a system and its environment, the system has aligned its capabilities with external opportunities and can extract available energy. ([Location 557](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=557)) - Tags: [[blue]] - Entropy in the formula indicates the amount of energy required to maintain the system, make decisions, and get work done. ([Location 565](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=565)) - Tags: [[blue]] - The energy available to a system must always flow first to manage its internal entropy needs. Only after those internal needs are met, and if any energy is left over, will it be made available for external integration. ([Location 568](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=568)) - Tags: [[blue]] - make it a habit to regularly sniff out and eliminate energy drains in your life and work. Energy drains are a symptom of entropy. Energy gains are a symptom of integration. Your goal is to keep the gains high and the drains low. ([Location 662](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=662)) - Tags: [[blue]] - As Vaclav Havel so eloquently put it, “Just as the constant increase of entropy is the basic law of the universe, so it is the basic law of life to be ever more highly structured and to struggle against entropy.”3 When we manage the dynamic between entropy and integration with awareness and the right balance, that’s when we meet our potential to be successful beyond expectation. ([Location 687](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=687)) - Tags: [[blue]] - Dr. Caesar identifies eight attributes that dictate both success and happiness. Most of these are fairly easy to recognize and intuitively make sense. They include a driving sense of purpose, a compelling vision, and the intrinsic feeling that your work is meaningful. Other attributes include beliefs and behaviors that create inner peace, a regular process involving the three Rs (review, renewal, and recommitment), and outstanding discipline. Additionally, happy high achievers generally work with mentors and coaches. ([Location 714](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=714)) - Tags: [[blue]] - In a business setting, you’ll find a great mutual fit when an employee feels she is getting more from her job than giving to it, and her managers feel they are getting more from her than they’re giving in total time and compensation. The employee is thinking, “I can’t believe they pay me to do this. I would do it for free … can you believe it?” Similarly, her managers are thinking, “She is one of our top performers. She’s passionate about what she does and delivers outstanding work. I wish I had ten more like her.” The bottom line is that the relationship is net additive, supportive, and energizing to both parties. It just works. ([Location 733](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=733)) - Tags: [[blue]] - The key differentiator, then, between happy high achievers and the rest is that happy high achievers are extremely vigilant about only allowing relationships and activities into their lives that add to their energy. If a relationship or activity isn’t net additive to them, it’s no longer one of their primary ones. It gets shifted or it is gone. ([Location 738](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=738)) - Tags: [[blue]] - If you truly want to be successful and grow your business, then you need to follow the principles of system energy management. Rather than focusing on fighting through the friction and burden of your company, you’ll want to focus on shifting the company so that it’s no longer a burden to you and others. That is, you’ll need to redesign the business so that it becomes net-additive. Then use that new available energy to work on the business, rather than in the business, and allow it to scale. ([Location 770](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=770)) - Tags: [[blue]] - The secret to understanding management is this: Due to finite energy in time, complex adaptive systems (such as people and organizations) must (1) shape and respond to changes in the environment and (2) do so with a focus on the whole, as well as the parts and sub-parts of the system. If they are unable to do so, they will cease to get new energy from the environment and they will perish. ([Location 879](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=879)) - Tags: [[blue]] - The Producing force demonstrates a drive to shape the environment and is focused on individual components or aspects of the system. The Producing force is what makes things produce results. Synonyms are “generate,” “make,” and “transform.” Within a business, this is the drive to generate tangible results such as making the sale, completing the code, and getting the work done. ([Location 919](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=919)) - Tags: [[blue]] - The Stabilizing force demonstrates a need to respond to changes in the environment and is focused on individual components of the system. The Stabilizing force is what makes things controllable. Synonyms are “regulate,” “administer,” and “systematize.” Within a business, this force shows up as the ability to systematize the work being performed, including a drive to create greater efficiencies, improve quality, or reduce liabilities. ([Location 922](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=922)) - Tags: [[blue]] - The Innovating force demonstrates a drive to shape the environment and is focused on the whole system. The Innovating force is what makes things adapt. Synonyms are “create,” “entrepreneur,” and “invent.” Within a business, this is the ability to sense and act on new opportunities, to be disruptive of the status quo, and to anticipate and adapt successfully to change. You’ll notice this strongly in entrepreneurial endeavors, new product development, R&D, and strategy. ([Location 926](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=926)) - Tags: [[blue]] - The Unifying force demonstrates a need to respond to changes in the environment and is focused on the entire system. The Unifying force is what makes things respond as a whole. Synonyms are “integrate,” “harmonize,” and “coalesce.” Within a business, this force shows up as the need to create teamwork, interpersonal connections, and a sound group culture. ([Location 930](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=930)) - Tags: [[blue]] - At the macro level, the four forces dictate the behavior of how a business performs in the marketplace. A high-tech startup requires a very high Innovating force to disrupt the market and a Producing force to build the product. Compare this to a senior citizens’ home. This needs a very high Stabilizing force to make sure that processes and regimes are followed and a high Unifying force to help the residents feel like they’re part of a community. ([Location 937](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=937)) - Tags: [[blue]] - Ideally, the CEO needs to make sure the business is Producing results, Innovating for market demands, and Unifying the team around a consistent vision and values. A good account manager will express a high Unifying force to connect well with diverse types of clients. A good accountant will have a high Stabilizing force that makes it easy to keep the books in order. A good entrepreneur will have a high Innovating force to spot opportunities, as well as a high Producing force to take action. ([Location 944](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=944)) - Tags: [[blue]] - Even work tasks themselves can be understood through the four forces. For example, the product development process needs good throughput (Producing force), attention to detail (Stabilizing force), and strong teamwork (Unifying force). The strategy process needs high creativity (Innovating force). The controller process needs attention to detail (Stabilizing force). ([Location 948](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=948)) - Tags: [[blue]] - The Producer (P) has a high drive to shape the environment and is focused on the parts or tasks that make up the system. Thus, this style moves at a fast pace, takes a short-term view, is results-oriented, and follows a structured approach. The Producer is focused on what to do now and working hard to get it done quickly. To get an immediate sense of the Producer’s qualities, think of a fast-charging, focused, determined, high-energy person who thrives on working long and hard. That’s a Producer style. ([Location 970](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=970)) - Tags: [[blue]] - The Stabilizer (S) has a high drive to respond to the environment and is focused on the parts or tasks that make up the system. Therefore, this style moves at a more methodical pace, takes a short-term view, is process-oriented, and follows a structured approach. The Stabilizer is focused on how to do things and working methodically to get them done the right way. To get an immediate sense of the Stabilizer’s qualities, think of a very structured, process-oriented person who likes to analyze the data before deciding. This person is highly organized, has outstanding attention to details, and takes their time in their words and actions. That’s a Stabilizer style. ([Location 975](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=975)) - Tags: [[blue]] - The Innovator (I) has a high drive to shape the environment and is focused on the whole system. Consequently, this style moves at a fast pace and is results-oriented like the Producer style, but takes a long view and operates in an unstructured way. The Innovator is focused on driving change while finding new and better ways of doing things. The lens they use to view the world is, “Why not?” as in: “Why not do it this way?” or “Why not try putting these two things together?” To get an intuitive sense of the Innovator’s qualities, think of a dynamic, creative, big-picture person who has myriad new ideas and is usually excited by the latest one—until a new one strikes again. That’s an Innovator style. ([Location 981](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=981)) - Tags: [[blue]] - The Unifier (U) has a high drive to respond to the environment and is focused on the whole system. Therefore, a Unifier moves at a more measured pace and is process-oriented like the Stabilizer, but takes an unstructured, freewheeling approach and a long view of change like the Innovator. The Unifier is primarily focused on who is involved and the interpersonal dynamics of the group. To get an immediate sense of the Unifier’s qualities, think of a very likeable, gregarious, warm, people person who is in tune with others. That’s a Unifier style. ([Location 987](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=987)) - Tags: [[blue]] - The Producer views the world as what to do. The energy drains for a Producer are the feeling of not having enough time to accomplish all the work. And guess what? Producers always have too much work to do. In addition, it is their own internal clock that determines when work should be accomplished. The energy gains happen when Producers have a feeling of momentum and achieving results in their tasks and goals. Producers tend to like others who work as hard and as fast as they do and dislike people who don’t. ([Location 1003](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1003)) - Tags: [[blue]] - The Stabilizer views the world as how to do things. The energy drains for Stabilizers occur when they don’t feel they have control over a situation. They experience energy gains like confidence and happiness when things are orderly and accurate. Not surprisingly, Stabilizers like others who are accurate and thorough and dislike those who are not. ([Location 1007](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1007)) - Tags: [[blue]] - Innovators view the world as possibility. They ask, “why not?” The energy drains for an Innovator are having too many ideas to pursue. This may seem counter-intuitive because Innovators love ideas. When they generate too many ideas, however, they can’t find their way out of a paper bag. The gains for an Innovator occur when one of their ideas takes hold and really works. Innovators like people who give them enthusiastic support. This could be as simple as excitement and encouragement for their latest idea or support from investors and employees who buy into their vision. Innovators dislike people who don’t support their ideas. ([Location 1010](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1010)) - Tags: [[blue]] - The Unifier views the world from the perspective of who is involved. Because Unifiers value harmony in the system, they experience energy drains when there is too much conflict, and gains when everyone is on the same page and working well together. Friends are those who add to the team chemistry and interpersonal dynamics. Foes are those who create conflict and destroy harmony in the system. ([Location 1016](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1016)) - Tags: [[blue]] - In my experience, people generally seem to start out with one or two primary styles, can develop a third over time, and are usually weakest in one style throughout their lives. For example, if you were born with a high drive and high creativity, your style is PsIu. If you’ve learned to develop your stabilizing qualities over time through the demands of your school or work, you might show up as a PSIu. However, you’ve always been an introvert and enjoy alone time, so the U is the weakest of your styles. No amount of personal or professional development is going to change that relative balance. ([Location 1021](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1021)) - Tags: [[blue]] - Entrepreneur. Good entrepreneurs have an ability to see the future and act to make it happen (PsIu). They have a very developed innovator capability that allows them to see and anticipate how trends will converge in the future. They’re not just visionary, however; they also have the willingness and drive to act on that vision and produce results that bring a new concept to life. Because of this, as the company grows, a great challenge for most entrepreneurs is when and how to shift out of working in the business to working on the business. ([Location 1032](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1032)) - Tags: [[blue]] - CEO. If an entrepreneur is going to evolve into a CEO, then they’ll need to develop either their S (PSIu) and be a shrewd and calculated operator or develop their U (PsIU) and be a visionary who can rally a larger company and market to their cause. There’s a popular notion among management circles today about the difference between a “wartime” and a “peacetime” CEO. The basic difference is that, in a time of crisis, contraction, or “war,” a company needs a CEO who can analyze the situation, make a bold decision, and be ruthless in execution (PSIu). In times of expansion and growth, or “peace,” however, the company needs a CEO who can build bridges, form alliances, and find new growth opportunities, all while executing on the quarterly goals (PsIU). ([Location 1037](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1037)) - Tags: [[blue]] - Implementer. An implementer (PSiu) is someone who can work really hard and be highly organized. You’ll find them thriving in tasks that require effectiveness and efficiency in high-pressure situations. If this person wants to evolve their career, they can develop their U (PSiU) and become an Operator or a person who can drive results, manage the details, and coalesce a team—very valuable skills for a chief operating officer. ([Location 1043](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1043)) - Tags: [[blue]] - Sales. A good sales person has a high drive to produce results and thrives on winning (Psiu). However, you’ll meet many different styles of sales people. There’s the PsiU who is a great sales manager because they walk the talk and coalesce the entire sales team. There’s the PSiu who is outstanding at working hard, producing accurate contracts, and creating and following a scalable sales process. Compare this to a good client relationship manager who should demonstrate pSiU in that they can follow a process, keep the client on track, and have great interpersonal relationships at the same time. ([Location 1046](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1046)) - Tags: [[blue]] - Engineer. Engineers come in many different types. If your organization uses traditional waterfall engineering, then you’ll want an engineer who can work hard and follow the documentation and standards (PSiu). However, if you use an agile methodology, then you’ll want an engineer who works hard and is a great team member (PsiU) or is highly creative (PsIu) while following a sound agile process that provides the S for the team to follow. A good style for a scrum master would be (pSiU). In this case, they create and follow a sound process (S) and keep everyone on the same page (U). ([Location 1051](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1051)) - Tags: [[blue]] - The simple answer is: Management is the application of force. By “force” I, of course, don’t mean coercion, compulsion, or pressure but rather the application of the Producing, Stabilizing, Innovating, and Unifying forces. In short, to manage it all, you need to understand and use the appropriate force for a given situation. ([Location 1084](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1084)) - Tags: [[blue]] - The art and science of management is recognizing the forces at work within a system and adjusting them along the way. Ineffective management is just the opposite. It occurs when the wrong force, the wrong amount of force, the wrong sequence, or the wrong timing are applied. When this happens repeatedly and systemically, an organization will fail. And notice that there are many more ways for things to go wrong than right! (Yes, entropy is always at work.) ([Location 1137](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1137)) - Tags: [[blue]] - The Producer has a high drive to shape the environment and is focused on the parts or tasks to be done. Consequently, this style moves at fast pace, takes a short-term view, is results-oriented, and follows a structured approach. The Producer is focused on what to do now and working hard to get it done rapidly. To get an immediate sense of the Producer’s qualities, think of a fast-charging, focused, determined, high-energy person who thrives on working long and hard. That’s a Producer. If you put this person in a rowboat and say “Row!” what will they do? Well, they’ll just start rowing straight ahead—and fast! They don’t need to ask questions, plan a route, understand where they should go, or even how long they’ll be gone. They just row and keep rowing until you say “Stop!” ([Location 1165](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1165)) - Tags: [[blue]] - If you’re managing a Big P, you never have to worry about them working hard enough or finding the inner motivation to complete a challenging task. Instead, you need to be mindful that they don’t run too far in the wrong direction. While another style might require the symbolic whip to trigger them into action, the Big P will need a set of reins to slow them down. A Big P needs a high level of autonomy in their tasks and the best way you can support them is to help eliminate obstacles that prevent the work from getting done. Also be mindful that, because the Big P is outstanding at completing the tasks at hand, they may have blind spots around how the work is impacting others, how the big picture has changed, and the intricate details involved. If you praise them for being productive and celebrate and honor their victories, you’ll have a loyal employee. ([Location 1203](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1203)) - Tags: [[blue]] - If your boss is a Big P, you will need to demonstrate your value based on measurable achievements and how long and hard you work. That is, if you’re working long and hard and producing tangible results such as sales wins, products launched, hours billed, or capital raised, then you’ll be in good standing with your boss. If you need a request fulfilled, you better phrase it quickly and to the point and be able to show how it is necessary for completing short-term tasks and goals. The Big P values actions more than words and has little patience for politics, bureaucracy, or anyone and anything they view as standing in the way of what they want to achieve. ([Location 1210](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1210)) - Tags: [[blue]] - Producer qualities allow us to work hard, achieve our goals, and be decisive and effective in our actions. They provide the engine for accomplishment. When taken to an extreme, they turn into Big P—a giant hammer that only sees what’s in front of it, gets overwhelmed by taking on too much, and seeks to alleviate its frustration by pushing things to go faster. ([Location 1225](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1225)) - Tags: [[blue]] - The Stabilizer has a high drive to respond to the environment and is focused on the parts. Therefore, this style moves at a slower pace, takes a short-term view, is process-oriented, and follows a structured approach. The Stabilizer is focused on how to do things and working methodically to get them done the right way. To get an immediate sense of the Stabilizer’s qualities, think of a very structured, process-oriented person who likes to analyze the data before deciding. This person is highly organized, has outstanding attention to detail, and takes their time in their words and actions. If you put this person in a rowboat and say “Row!” what will they do? Well, first they’ll analyze the rowing mechanism and plan the most efficient stroke. Then they’ll want to understand where they are rowing, for how long, what the best route is, when the water and food breaks will occur, and the prevailing winds and currents. Once everything is planned in detail, with two contingency plans in place, then they’ll start to row! ([Location 1234](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1234)) - Tags: [[blue]] - When the Stabilizer trait is overly high, we call it a Big S. A Big S is like a bureaucrat who seeks to control for change by establishing and following procedures. They value efficiency over effectiveness, even to the extreme. The Big S comes into work on time and leaves on time. If they have an office, it’s likely very clean and orderly with files neatly arranged and spreadsheets and objective data readily on hand. The Big S schedules regular meetings and always has an agenda prepared in advance. Their biggest frustration is that others aren’t following the procedures. Their common complaint is that others don’t pay close enough attention to important details. ([Location 1248](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1248)) - Tags: [[blue]] - If you’re managing a Big S, you rarely have to worry about them making errors and omissions. Instead, you need to be alert that they don’t fall into paralysis by analysis. A Big S needs lots of structure in their tasks and the best way you can support them is to give them the relevant data to analyze and then allow them time to process it. Be mindful that, because the Stabilizer is outstanding at understanding the details, they may have blind spots around how the work is impacting others, how the big picture has changed and thus impacts the work being performed, and the real effort involved in executing the plan. If you praise them for being accurate and thorough, you’ll have a grateful employee. ([Location 1274](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1274)) - Tags: [[blue]] - Stabilizer qualities allow us to be accurate, secure, and efficient. They permit a factual, deliberate, and methodical approach to planning and decision making and create a sense of order out of chaos. They promote high quality and follow-through. They also help us to be cautious, thoughtful, and prudent when faced with the unknown. When taken to an extreme, a Big S becomes a liability, however, by always valuing efficiency, even at the cost of effectiveness, and risking paralysis by analysis. ([Location 1292](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1292)) - Tags: [[blue]] - The Innovator has a high drive to shape the environment and is focused on the whole system. Consequently, this style moves at a fast pace and is results-oriented like the Producer but takes a long view and operates in an unstructured way. The Innovator is focused on driving change while finding new and better ways of doing things. To get an intuitive sense of the Innovator’s qualities, think of a dynamic, creative, big-picture person who has a lot of new ideas and is usually excited by the latest one, until a new one strikes again. If you put this person in a rowboat and say “Row!” what will they do? Well, they’ll start to come up with new ideas! “Why don’t we put a sail on this baby? How about a glass bottom? Come to think of it, a 250hp motor would do just the trick; I bet we can find one at the marina. Be right back.” ([Location 1301](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1301)) - Tags: [[blue]] - The Big I gets bored with the status quo easily. Their past creations are never good enough because something new keeps being invented. If there’s nothing new to build or think about, they prefer to destroy what’s already been built. “Hey, let’s tear this old thing down and rebuild it new and better.” When you walk into their office, the first thing you’ll hear about is their latest idea and why it’s important and revolutionary. When this person supervises others, there’s a lot of chaos among the staff, projects, and schedules. They’ll usually have a right-hand person who suffers while trying to keep up with the extreme amount of innovation and who has learned to distinguish a passing notion from a true need for implementation. The reason that the Big I always pursues so many different ideas and opportunities is that they’re afraid of standing still and being trapped. Standing still means risking boredom and there’s not much more terrifying than that. So, to ask a Big I to focus on one thing and complete it is like asking a crack addict to put down the crack pipe. It’s very, very hard and not much fun at all. ([Location 1325](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1325)) - Tags: [[blue]] - The Big I appreciates Producers because they act really quickly to implement their vision. However, sometimes it can be frustrating to have to explain to the Producers why the Big I is changing the strategy again. “Can’t they see it? It’s so obvious!” Besides, to a Big I, Producers are kind of boring and uncreative. They absolutely dislike Stabilizers who are finicky, slow, and say “no” a lot. They distrust other Innovators and view them as arrogant competition. They enjoy Unifiers because they are easy to be around, always have a supportive and encouraging word for their latest idea and can be useful allies in galvanizing support for their vision. ([Location 1340](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1340)) - Tags: [[blue]] - If you’re managing a Big I, you have an outstanding idea generator and a terrible implementer. If you have a good relationship, they’ll want to bounce new ideas off you frequently because they need to talk things through and weigh different possibilities. Often, they can be scattered and inconsistent, so you’ll need to make sure that the work is actually getting done and that the details are being managed well. Because the Big I is capable of generating so many new ideas, they are often unaware of how the changes they propose are hard for everyone else to keep up with. They overlook the intricate details involved in implementation and conveniently forget all the half-completed projects they’ve left in their wake. If you praise the Big I for having great ideas and get excited about them, you’ll have a loyal employee for as long as they don’t feel stifled. ([Location 1346](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1346)) - Tags: [[blue]] - If your boss is a Big I, you will need to demonstrate your value by helping them complete the pieces of the puzzle they see in their mind. Whatever you do, though, don’t attempt to add to or change their vision. That would be like taking their paintbrush and drawing on their half-completed canvas. It’s very risky and the Big I may never forgive you for it. Instead, ask questions, gently point out gaps in the planning, and always try to be enthusiastic about their ideas. Because… ([Location 1353](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1353)) - Tags: [[blue]] - The Big I thinks and speaks conceptually in big patterns and generalities. They see things others just can’t. They promote people who they believe can help them achieve their vision. They fire people who no longer fit the vision or who seem to be creating obstacles to achieving it. If they are away on a long airline flight, you can… ([Location 1358](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1358)) - Tags: [[blue]] - In general, the Big I has a hard time saying “no” to interesting new ideas or appealing opportunities. If you present a proposal to a Big I, however, you might get a “yes” or a “no” depending on how your idea fits or competes with their own vision of how things should or could be. If they say “no”, it’s usually because your proposal doesn’t align with their own version of the current vision. But unlike a Big S, you can’t go back and try again. That’s it. It’s over, unless the Big I can begin to see how your proposal fits into their vision. A “yes,” on the other hand, doesn’t really mean “yes.” It is more like “sure, sounds pretty good, let’s explore it more.” For example, if you were to ask a Big I, “Mr. Jones, what do you think about this new prototype?” and Mr. Jones responds, “Hey, I like it! Very cool! We could also make it do this…” That’s not a legitimate go-ahead signal. When Mr. Jones comes back in two weeks and you show him the progress on the prototype, he’ll… ([Location 1362](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1362)) - Tags: [[blue]] - Innovator qualities are what allow us to sense and adapt to change and to find creative solutions and new opportunities. Innovators are creative and dynamic. They have an innate ability to see things others can’t yet see. When taken to an extreme, the Innovator turns into a Big I and can become overzealous in pursuing too many different strategies, all half-baked and constantly changing. ([Location 1375](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1375)) - Tags: [[blue]] - The Unifier style has a high drive to respond to the environment and is focused on the whole. Therefore, a Unifier moves at a more measured pace and is process-oriented like the Stabilizer, but takes an unstructured, freewheeling approach and a long view of change like the Innovator. The Unifier is primarily focused on who is involved and the interpersonal dynamics of the group. To get an immediate sense of the Unifier’s qualities, think of a very likeable, gregarious, warm people person. If you put this person in a rowboat and say “Row!” what will they do? Well, they’ll want to know where everyone else is! You can’t expect them to row all by themselves. They’ll want a team of people, ideally their friends, to climb in the boat and all row together. ([Location 1384](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1384)) - Tags: [[blue]] - When the Unifier trait is extreme, we call it a Big U. A Big U is like a politician who always seeks to curry favors and plays the political winds to their own advantage. On the one hand, they value and leverage personal relationships; on the other, their words can’t be taken at face value because their loyalty will shift with the prevailing winds. ([Location 1397](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1397)) - Tags: [[blue]] - The answer to most problems for a Big U is to gather input from others and process feelings (their own as well as others’). This takes time and that’s why a Big U tends to move at a slower pace than a Producer or Innovator. Therefore, when getting schedule estimates from a Big U, recognize that before committing to any schedule, the Big U will insist on getting input and buy-in from those who will be impacted. The result will be a very safe, prudent schedule that will account for the needs of all the different constituents. Thus, there are likely several ways to improve the speed or direction of the plan if you’re willing to step on some proverbial toes. ([Location 1404](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1404)) - Tags: [[blue]] - When this person supervises others, there are usually a lot of other Unifiers on the team because the Big U values camaraderie and teamwork. They delegate frequently but don’t tend to follow up too vigilantly because that can create conflict, something the Big U prefers to avoid. ([Location 1410](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1410)) - Tags: [[blue]] - Sometimes a Big Innovator can appear to be a Big Unifier. However, the Big I is really motivated to connect and influence people to move forward their own vision. When the time for selling the vision is through, a Big I will want to retire and be alone. For a Big U, however, being with people is a joy unto itself. ([Location 1412](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1412)) - Tags: [[blue]] - Note: I think this is where I fit in. I love talking to people about big ideas, but I don’t like playing the political games - If you’re managing a Big U, you will need to give them a lot of one-on-one attention and show that you care about them personally. Be aware that, because a Big U can be outstanding at helping a group work in harmony, they won’t work as hard as a Producer, with as much attention to detail as a Stabilizer, or with as much creativity as an Innovator. If you share about your personal life, ask about their own, take them out to coffee or lunch, and give them praise and support, you’ll have a loyal employee. The best way to get a Big U to take action is to allow them to help you. Big U’s love to help people who are important to them because they want those people to be happy and feel good about their relationship with the Big U! If you have a loyal Big U working for you, they can move mountains simply by opening doors and working their personal relationships. ([Location 1430](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1430)) - Tags: [[blue]] - Unifier qualities are what allow us to be excellent connectors, communicators, and bonding agents for a group. Unifiers love to be with people, keep conflict low, and have a harmonious environment. When taken to an extreme, the Unifier style morphs into a Big U and becomes a political animal, saying one thing and doing another to ensure their survival and advancement. ([Location 1444](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1444)) - Tags: [[blue]] - what all successful and harmonious unions have in common is that both partners naturally complement each other (or find alternative ways of bringing all four forces into the relationship). For example, a partner who is a balanced PsIu will tend to harmonize well with someone who is a balanced pSiU. If one partner is naturally externally focused on career innovation and the other is internally focused on domestic harmony and organization, the partnership can really work. If one partner is naturally better able to focus on short-run needs and structures, while the other is better at seeing the long run and creating harmony, that can also really work. Any number of themes and combinations are possible. What matters is that the partners bring in all complementary forces and (for as long as they share love, trust, and respect) they can have a thriving relationship. ([Location 1467](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1467)) - Tags: [[blue]] - If you shift the lens to organizational dynamics, you’ll notice that a highly successful and visible business leader usually has a highly capable and less visible complementary partner. For example, Apple’s late CEO Steve Jobs was recognized for his inventiveness, charisma, and uncanny ability to predict the future of technology and anticipate (even produce) consumers’ desires. Jobs was also famous for his blistering attention to product detail. In one oft-repeated anecdote, we hear that Jobs ordered the original iPod dismantled the night before the press launch when he noticed that the headphone jack did not make a satisfying click when inserted. These are classic traits of the Innovator. Jobs was also infamous for his impatience and high work ethic. These are classic Producer characteristics. As a management style, therefore, Jobs coded as PsIu. Tim Cook was Apple’s COO (now CEO) who, according to most reports, was a perfect complement to Jobs. Cook works at a relentless pace (Producer), is a spreadsheet junkie with ruthless attention to detail on the supply chain (Stabilizer), and is also down to earth, soft-spoken, and good at maintaining relationships (Unifier). As a management style, therefore, Cook is a PSiU. Cook’s production drive met Jobs’ own. They both demonstrated extreme attention to detail, but in different domains. While Jobs was a powerful Innovator, Cook is more of a Stabilizer and Unifier who makes things efficient and smoothes the way with others. Together, they made a powerful complementary team. According to a 2011 profile by the New York Times, “Their complementary skills have helped Apple pull off the most remarkable turnaround in American business, and made it the world’s most valuable technology company.”6 The Times also recognized that a huge void would need to be filled when Jobs passed on: “When Mr. Cook is on his own, he will have to compensate for the absence of Mr. Jobs—and his inventiveness, charisma and uncanny ability to predict the future of technology and anticipate the wishes of consumers” (all Innovator qualities). So while Steve Jobs was celebrated as the world’s greatest CEO, behind the scenes he had a complementary partner and executive team. The necessity of the complementary team gets short shrift in the media, however, which celebrates the cult of the individual. ([Location 1479](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1479)) - Tags: [[blue]] - Instead of letting your interpersonal judgments run wild, learn to judge the force, not the person. By judging the force, you are able to respond to the underlying energy patterns at work, without becoming caught up in personal criticism. You’ll give yourself and others the freedom to be fully seen, heard, and reach full potential; you’ll have more productivity and less drama in relationships; and your entire organization will have a greater chance to flourish. Judging a force is straightforward. Rather than labeling it as good or bad, right or wrong, you simply observe it in action. Is this individual or situation change-driving or change-responding? Are they dealing with the parts or with the whole? Is it a Producing, Stabilizing, Innovating, or Unifying force or some combination? And what force is most needed at this time? By identifying the force, you are better able to discern behavior without getting caught up in the drama. ([Location 1546](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1546)) - Tags: [[blue]] - Each of the four styles has a particular focus and need. Producers are focused on what to do and need autonomy to do their work. Stabilizers are focused on how to do it and need time and data to perform analysis. Innovators are focused on finding new solutions and need excitement for their ideas. Unifiers are focused on the people involved and require time to process relationships and emotions. ([Location 1560](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1560)) - Tags: [[blue]] - Polly Producer storms into your office. She has high energy. She’s talking fast and moving quickly. She’s focused on what to do and is frustrated at the continued delays. Your task is to give the force what it needs. So what do you do? You speed up your pace. You take a structured approach. You focus on the most immediate short-term objectives. You help remove any obstacles that are preventing the work from getting done. Once Polly Producer has had a chance to vent her frustration, she’s once again able to focus on completing the task at hand. In addition, because you’ve met the immediate needs of her strong Producing force, Polly is now able to see things in a new light too. She can have a greater appreciation for all the details (Stabilizing), as well as an improved awareness of other people’s perceptions (Unifying) and the big picture of the overall strategy (Innovating). You can now give Polly plenty of autonomy to complete the task. And because she’s a Producer, you don’t have to worry about the work getting done. You only have to check that it’s the right work and she hasn’t gone too far in one direction. ([Location 1576](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1576)) - Tags: [[blue]] - Sam Stabilizer knocks on your door. Sam speaks and moves at a more deliberate, thoughtful pace. He’s focused on how to complete a task or project. He’s in your office because the recent corporate objectives lack detail. So what do you do? You slow down your pace. You carve out time to really explain things. You give Sam all the information and data involved in the decision. You focus on the short-term practical issues. You help him focus on how to do things more efficiently. You give him plenty of time to analyze the data. After Sam Stabilizer’s needs are met, he can amp up his creativity (Innovator) and production power (Producer) and better connect with others (Unifier). But if Sam was never given the data or the time to analyze it, he would simply be stuck in his Stabilizing force. There’s no sense in berating Sam to work harder, to be more creative, or to be a better team player until you’ve also given him time to analyze and make sense of the data and its implications. ([Location 1585](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1585)) - Tags: [[blue]] - Isabel Innovator makes a grand appearance. She speaks and moves in broad, fast strokes. She’s been thinking about the new project and has some ideas. “Why not do it this way?” she asks. So, what do you do? You amp up your own pace and get excited! You give her the space to go really big picture and take an unstructured, creative approach. Together you explore the broader implications and uncover where new innovations lie. Once Isabel Innovator has had a chance to get excited with someone about her new idea, she may notice that the romance of it starts fading—followed by an increased awareness of the real effort (Producing), details (Stabilizing), and teamwork (Unifying) involved in bringing it to life. The result will be a better, more well-rounded decision. Isabel… ([Location 1592](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1592)) - Tags: [[blue]] - Ulysses Unifier enters your office and wants to chat. He’s focused on who is doing the work on the new project and is noticing that team morale isn’t as high as it could be. Ulysses moves, speaks, and thinks more deliberately and is usually “happy” and gregarious (unless he’s upset and will then need time to process his feelings). In this case, Ulysses seems really upset. So what do you do? You slow down your pace and try to see the world as Ulysses sees it. You give him space to share his feelings and get his perspective on the needs of the rest of the team. You empathize with him. After Ulysses Unifier has had a chance to process his feelings, he’s much more capable of doing the work (Producing), following the process (Stabilizing), and supporting the new strategy (Innovating). If he doesn’t get his Unifier needs met, he’s going to be unproductive. Not only that: his… ([Location 1599](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1599)) - Tags: [[blue]] - And what happens if you don’t adjust and give a force what it needs? Our old enemy entropy starts to rear its ugly head. When the needs of a force aren’t met, rather than dissipating, entropy increases and becomes detrimental to the organization. ([Location 1612](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1612)) - Tags: [[blue]] - the elements to building and managing powerhouse teams lie in understanding the forces at work within a situation, team, or individual; forming complements of forces; and giving the system or force what it needs to be successful. ([Location 1617](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1617)) - Tags: [[blue]] - There are other key elements to building powerhouse teams that are equally important. These include creating organizational alignment with the vision and values and incentives, designing the right organizational structure, having a sound process for decision-making and implementation, and hiring the right style of person for each organizational role. ([Location 1621](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1621)) - Tags: [[blue]] - Every potential business strategy has the same ultimate aim. This is true whether you are trying to sell your business, go IPO, enter a new market, raise venture capital, hire top-notch talent, fend off competitors, manage increasing regulations, win an industry award, or create the next hot startup. It doesn’t matter what the strategy is—the goal is always the same. It’s the same goal in recessionary times as it is in boom times. It was true one million years ago and it will be true one million years from now. So what is it? The goal of any strategy is to acquire new energy from the surrounding environment now and in the future. ([Location 1652](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1652)) - Tags: [[blue]] - Darwin made clear that survival (and prosperity for that matter) is for those most adapted to their environment. If there’s good integration with the environment, then the species will flourish. But if the environment changes and the species can’t adapt, it will fail. ([Location 1661](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1661)) - Tags: [[blue]] - supreme and fitness or capability is always secondary. Why is adaptation with the environment so important? Because that’s where new energy comes from. Without new energy, a system will perish. ([Location 1670](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1670)) - Tags: [[blue]] - Note: Organisms consume external energy to maintain low internal entropy (ordered cellular and tissue environments) and to increase the size of the system with low entropy (ie grow). That is, life turns increasingly large pieces of a disordered universe into order. In the same way, businesses must be efficient at capturing external energy in order to maintain low internal entropy and grow - If your company is operating within a growing market opportunity where there’s a lot of customer demand (i.e., there are a lot of potential new energy sources in the form of money, resources, and clout) and if it can efficiently meet that demand, then it will be successful. But as the market needs change, the company must continuously be adapting to meet those needs or it will cease to exist too. The secret to business strategy, therefore, is to use your company’s capabilities to find and maintain integration with growing market opportunities so that your business can get plenty of new energy now and in the future. ([Location 1688](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1688)) - Tags: [[blue]] - To get new energy from the environment, a business must use its capabilities to find and integrate with opportunities in the environment. ([Location 1693](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1693)) - Tags: [[blue]] - The same holds true for every business. Success is about aligning capabilities with opportunities. ([Location 1699](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1699)) - Tags: [[blue]] - it should be readily apparent that not all opportunities and capabilities are equally valuable. Opportunities exist on a spectrum of growing to shrinking, while capabilities exist on a spectrum of unique to generic. ([Location 1700](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1700)) - Tags: [[blue]] - The best strategy is to align unique and valuable capabilities with a growing market opportunity (the happy place in the upper right quadrant). If the organization can do this, it will have a very high probability of being successful. Why is this? A growing opportunity means there’s a lot of market demand and new energy sources available. At the same time, the organization has developed unique and valuable capabilities where there are few real or perceived practical alternatives. ([Location 1705](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1705)) - Tags: [[blue]] - A less successful strategy is to align unique capabilities with a shrinking market opportunity (the half smile in the upper left quadrant). If you own a market or operate an effective monopoly, you can still be successful for as long as market demand holds. ([Location 1715](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1715)) - Tags: [[blue]] - Another, less effective strategy than the happy place is to serve a growing market opportunity with generic capabilities (the half smile in the lower right quadrant). Just like the last tolerable strategy, you can make this work for a time but it’s not nearly as fun and lucrative as having unique capabilities in a growing market. ([Location 1724](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1724)) - Tags: [[blue]] - It’s important to point out that it doesn’t matter how unique you think your capabilities are. It’s how the market perceives your capabilities that matters. If there are a lot of perceived practical alternatives, it’s harder to be successful. That’s why in crowded industries, the narrower your focus is, the broader your appeal. Often, the most successful practitioners are those who specialize in one particular discipline: the best brain surgeon for meningioma or the best realtor for high-end homes in 90210. Businesses that successfully differentiate themselves create the perception of unique capabilities. That’s why advertising was created. Companies use advertising to try to differentiate themselves from other perceived practical alternatives in the marketplace, calling out what makes them unique and why the market should care. And that’s also why the saying “perception creates reality” is so poignant. Because it does. ([Location 1731](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1731)) - Tags: [[blue]] - The least successful strategy by far is to be in a shrinking marketplace with generic capabilities (the frown in lower left quadrant). If this is your business, then you are suffering, and you will continue to suffer. There is a decreasing amount of available energy in the marketplace. There’s a free-for-all in the competition, who fight for the scraps, and you must adapt or perish. ([Location 1739](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1739)) - Tags: [[blue]] - To recap, the goal of any business strategy is to get new energy from the surrounding environment. The obvious challenge to maintaining integration between unique capabilities and growing market opportunities is the fact that the organization, its products and services, and the market conditions are constantly changing. As Darwin made clear, adapting to change can be a life-or-death struggle. It’s hard to anticipate change, to understand its ramifications, and to adapt in the right timeframe and sequence. It’s challenging to acquire enough resources in capabilities, time, energy, and money to adapt successfully. It’s also difficult to prioritize between the immediate needs of today and investing in the future. Continuously adapting to changing conditions is a big challenge. Despite this challenge, the name of the game in strategy is to always seek to keep your organization tightly integrated with growing opportunities. If you can convert that available energy profitably and make it productive, then you’ll be very successful. ([Location 1747](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1747)) - Tags: [[blue]] - There is a key insight that makes adapting to change and executing the right strategy easier to accomplish. It’s this: All systems evolve in a particular pattern called a lifecycle. By learning to recognize the lifecycle stages of your organization, its products, and the market (as well as the different sets of milestones, challenges, and metrics of each), you can correctly adapt your strategy, in the right time and sequence, and improve your probability of success. ([Location 1756](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1756)) - Tags: [[blue]] - The product lifecycle refers to the assets you make available for sale. The market lifecycle refers to the type of customers to whom you sell. The execution lifecycle refers to your company’s ability to execute. ([Location 1775](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1775)) - Tags: [[blue]] - In order to successfully execute on a strategy, the stages of all three lifecycles must be in close alignment with each other. Why is alignment important? Because aligning the product, market, and execution lifecycles gives your business the greatest probability of getting new energy from the environment now and capitalizing on emerging growth opportunities in the future. ([Location 1777](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1777)) - Tags: [[blue]] - there are three basic prerequisites that you must have before you can pursue any strategy. First, the strategy must be aligned with the company vision and values. Second, the company must have or be able to get the resources—including staff, technology, and capital—to execute the strategy. Third, the company must have or be able to develop the core capabilities to execute the strategy. ([Location 1788](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1788)) - Tags: [[blue]] - Within the Organizational Physics framework, the basic stages of the product lifecycle are: Pilot It, Nail It, Scale It, Milk It, or at any time, Kill It. ([Location 1799](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1799)) - Tags: [[blue]] - In the Pilot It stage, the key actions you’ll want to take are asking a lot of questions and testing your assumptions. At this stage, you should be seeking to innovate with a product that has the potential to disrupt the status quo. You accomplish this by understanding the real dynamics within a market niche and by creating solutions that solve a market problem in a new and better way. At this stage, you must show thought leadership and be able to articulate why your innovative approach is superior. The ultimate goal at this stage is to have early-stage, innovator-type customers who are enthusiastic champions of your approach. ([Location 1804](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1804)) - Tags: [[blue]] - In the Nail It stage, you focus product development on producing tangible, verifiable results for early adopter clients. At this stage, you sacrifice what’s not absolutely essential in the product and relentlessly focus on solving the core customer pain, problem, or need. Your mindset is like a detective’s—you’re investigating what really works and what doesn’t. This requires that you cultivate and collaborate very closely with customer product champions while simultaneously proving and documenting that you have, in fact, solved the market problem. The ideal outcome at this stage is that you’ve built trust and credibility with early adopter clients and you have paying customers who come back to buy more. Customers buying more—repeat buyers, a contract extension, rolling out to more properties, buying additional units, etc.—provides the only real evidence that you have, in fact, nailed it. ([Location 1809](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1809)) - Tags: [[blue]] - In the Scale It stage—because you’ve demonstrated thought leadership and proven that you’ve nailed the product in the prior stages—you’re now in a race to be a niche market leader. You must now accomplish two seemingly contradictory things. First, you must stabilize or standardize the product and distribution to achieve economies of scale. This allows you to increase your margins because you can now leverage customers’ willingness to pay (and because you’ve proven that you solved their problem at the prior stage, they will be willing to pay). Second, you must also create high-value add-on products and services. These add-on products could include new line extensions as well as new… ([Location 1816](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1816)) - Tags: [[blue]] - In the Milk It phase, your key actions are around maintaining the product for late majority/laggard clients. Now is the time to attempt to leverage your past thought leadership, proven capabilities, and standardization to defend and expand your relative market share. But instead of investing for long-range product development in this stage, you limit additional investment to immediate ROI. That is, if required new product investments can’t demonstrate an immediate payback during the Milk It stage, you don’t make them. There’s a constant trade-off to be made between continuing to milk the product and selling it off. The ultimate goal at this stage is to use the cash proceeds, brand position, company resources… ([Location 1822](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1822)) - Tags: [[blue]] - Just as every product goes through a lifecycle that is a trade-off between development and stability, so does every market. The market lifecycle is segmented into the types of customers (or potential customers) you’re selling to: innovators… ([Location 1830](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1830)) - Tags: [[blue]] - The market lifecycle begins with innovators. This is the group that drives change within their industry. As category enthusiasts who tend to be on the lookout for new technologies and new approaches, they are willing to invest time and interest (though usually not money) on vetting them. The key to working with this group is to show thought leadership around why your approach is unique, transformative, and better than the status quo and to be straightforward about what your product can and cannot do. You want to get them excited and invested in your view of the world and your product vision and capabilities. Their… ([Location 1835](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1835)) - Tags: [[blue]] - The next group of customers is the early adopters. This group is seeking a fundamental breakthrough around a core business problem or strategic opportunity. Because you’ve shown thought leadership at the prior stage, this group can now start to see how your product can help them achieve their own vision. That is, if your product seems to match their ideas of what could be, then they will be willing to take substantial risks in time and energy, reputation, and money to help make it happen. They are more conceptual than technical. They also find it easy to imagine, understand, and appreciate the benefits of your approach and can relate its potential benefits to… ([Location 1840](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1840)) - Tags: [[blue]] - If, on the other hand, you can work with select clients within this group to define the core business problem, prove that you solve it, and document this with metrics, testimonials, and case studies, then you are ready to market to the next segment, the early majority. ([Location 1851](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1851)) - Tags: [[blue]] - The early majority segment is known as the practical buyers. According to Geoffrey A. Moore in his book Crossing the Chasm, if a product requires a change in behavior (or a modification of how the early majority customers use other products and services they rely on), then the gap between the needs of the early majority and the prior stage is significant. This gap or “chasm” shows that the psychological profile of the early majority customer is quite different from that of the prior early adopter stage.8 While the early adopters of the prior stage are willing to take risks and act in isolation, the early majority is much more thoughtful and cautious. They like to make decisions by communicating with others and require a complete product that has demonstrated and proven results before they act. For example, while the early adopter would purchase a product that could deliver an 80 percent solution (seeing it as only 20 percent more to go), the early majority would only buy it when it’s complete. The key to capturing the early majority market is to leverage the proof of performance from the prior stage and to standardize the product so that it is reliable, stable, complete, and easy to use. Early majority buyers don’t like risk, which they view as a potential waste of time and money. They require stability and are extremely loyal once won over. Because they spend a good amount of time communicating with others within their own market, they also help to standardize your product across the industry. While the prior stage is driven by the need to achieve a vision or find a breakthrough solution, this stage is all about making sure things are done properly and that the buyer’s own reputation is not put at risk. They will focus on the quality of the product, the infrastructure to support the product, and the reliability of service. They’ll even want to ensure that you have competition in the marketplace so they can verify that they’re purchasing from a proven market leader. They are price-sensitive in that, in the absence of any special differentiation, they will take the good deal. ([Location 1853](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1853)) - Tags: [[blue]] - the last stage is the late majority/laggards. This group is resistant to new products until they have become the industry norm. They wait until something has become an established standard and tend to buy from large, well-established companies. They purchase only when products are extremely mature, competition in the marketplace is driving low prices, and the products themselves can be treated as commodities. Basically, they like to buy preassembled packages, with everything bundled, at a heavily discounted price. The key to selling… ([Location 1870](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1870)) - Tags: [[blue]] - The basic stages of the execution lifecycle are birth, early growth, growth, and maturity and from there things descend into decline, aging, and death. ([Location 1880](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1880)) - Tags: [[blue]] - The focus within the execution lifecycle should be to have the right mix of organizational development and stability to support the stages of the product and market lifecycles. That is, the lifecycle stage of the surrounding organization should generally match the lifecycle stage of the products and markets. If it’s a startup, the surrounding organization is the entire company. In a larger company, the surrounding organization includes the business unit that is responsible for the success of a product as well as any aspects of the parent organization that influence, help, or hinder its success. ([Location 1884](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1884)) - Tags: [[blue]] - The surrounding organization should act a certain way at each stage of the product/market lifecycle, as you’ll see. Note that, when a force is or should be dominant, it will be referenced with a capital letter: When piloting the product for innovators, the organization should be in birth mode and be highly innovative and future-oriented (psIu). When nailing the product for early adopters, the organization should be in early growth mode and be producing verifiable results for its customers (Psiu). As a company progresses from nailing it to scaling it, its sales, service, and delivery methods for its core product should be streamlined and standardized. (PSiu). When fully scaling the product for the early majority, the company’s internal efficiencies should be harnessed, as well as the capability to launch new innovations and avoid the commodity trap (PSIu).… ([Location 1888](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1888)) - Tags: [[blue]] - It should intuitively make sense that an organization should align its internal environment to closely match the products and markets it operates in. The reality is that most companies fail to do this. For example, imagine an entrepreneurial startup that has one nascent product and attempts to launch a new one at the same time. Like a teen pregnancy, it’s way too soon to be having babies. Similarly, the startup needs to reach scalable growth mode (where there’s standardization, positive cash flow, and strong capabilities) before it attempts to launch new business units. But just as a teen pregnancy is bad, having babies as a grandparent is unwise too. For instance, imagine an aging company with a large cash hoard that acquires a smaller, growth-oriented business. Because the acquirer is so aging, heavy, and stable, it smothers the entrepreneurial zeal and doesn’t allow the new acquisition to flourish. The same thing occurs when an aging company attempts its own in-house intrapreneurship but doesn’t allow the new business unit the freedom and flexibility it… ([Location 1899](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1899)) - Tags: [[blue]] - Note: The large company example is exactly what Deloitte did to SFL. They acquired a new company in a major growth market (with execution lifecycles and market lifecycles very well matched), and then forced upon it the bureaucracy and processes of a very mature company. This has prevented a huge amount of growth - our team would probably be bigger now if we had never joined Deloitte - The ultimate goal of the execution lifecycle is to get the business to a strong level of growth and maturity and, before it gets too “old” and begins to fall into the downward side of the curve, launch new business units that grow into their own states of maturity and have their own offspring. If done correctly, the business can keep renewing itself as market conditions change and be productive for a long, long time. ([Location 1914](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1914)) - Tags: [[blue]] - Note: This is exactly what Amazon did. The Amazon store scaled until it was rather mainstream (though not the size it is now), and then it began to launch other business units. Kindle, AWS, Amazon Sellers/Fulfilled by Amazon all sprung up at about this time. And they all started as very lean, autonomous teams - The Execution Lifecycle is where the rubber meets the road. It is the most challenging of the lifecycles to evolve through and it controls and influences every other aspect of your strategy. ([Location 1920](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1920)) - Tags: [[blue]] - When piloting the product to innovators, the organization should be in birth mode and be highly innovative and future-oriented. Naturally, you need a very innovative organizational culture to bring forward new innovations into the world. You can tell if there’s high innovation in the venture if the product idea is disruptive and if the entrepreneur and founding team show a tremendous amount of enthusiasm for it. ([Location 1928](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1928)) - Tags: [[blue]] - If the innovative force isn’t high at this stage, there’s a problem. This is usually an indication that a burning drive, passion, and commitment to the venture are lacking. Without that commitment, the venture will never come fully into being. ([Location 1933](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1933)) - Tags: [[blue]] - The birth mode will last for as long as it’s necessary to uncover the key innovations, establish the basis for thought leadership, and get a real sense of the true product/market fit. This could be as little as a few weeks or months for a venture with a well-defined product/market fit up front. Alternatively, if it’s the long-range research and development unit of a larger company, it could last indefinitely (i.e., until its financing is taken away). Regardless of how long the birth mode lasts, the organization at this stage of the lifecycle needs to allow for a… ([Location 1935](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1935)) - Tags: [[blue]] - Because the venture needs capital, it should be very cost-conscious in its investments. When it comes to the amount of capital it needs, the organization should be consciously given very little or “just enough.” Everyone on the team should be wearing multiple hats and there should be just enough capital to be creative, adaptive, and effective at piloting the product, adjusting it, and entering the next stage of the lifecycle. One of the worst things that can befall a new venture is to have access to too much capital too soon. Having too much capital causes the organization to step into strategic follies such as presupposing demand, ramping up for scale too early, becoming arrogant or lazy, or making large… ([Location 1941](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1941)) - Tags: [[blue]] - Note: More venture startups die of indigestion than of starvation - The culture of the organization in the birth stage should be open, egalitarian, and transparent but with a strong founder or co-founder who seems to possess the product and market vision in their DNA. This person’s innate sense of what the market really needs and what’s required in the product is essential to the venture’s success. If I’ve learned one thing in my experience as an entrepreneur and as a coach to others, it’s that the right entrepreneur for a new venture has a very clear early sense of what the product and market fit really is. In fact, they see the vision so clearly that they know when to say “yes” to feature ideas and when to say… ([Location 1947](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1947)) - Tags: [[blue]] - The birth organization shouldn’t have highly designed systems, procedures, or other Stabilizing forces. If it’s forced to fit into existing systems and procedures too early, this will dampen its ability to be innovative and design the right solution for this new market and product. It shouldn’t be investing in new systems and procedures at this stage either because the product/market fit hasn’t been verified yet. Those investments need to happen later in the lifecycle. For now, things need to be kept as light and adaptable as possible. ([Location 1958](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1958)) - Tags: [[blue]] - To summarize the birth stage: If enthusiasm is waning, if the team is suffering from high entropy, or if the organization can’t find product/market fit before the money runs out or the market window closes, the organization will die a premature death. The company should have a highly innovative leader who seems to know the product/market fit in their DNA. Systems, procedures, and overhead are kept to a minimum. All investments go towards product prototype development and keeping the organization afloat. ([Location 1963](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1963)) - Tags: [[blue]] - When nailing the product for early adopters, the surrounding organization should be in early growth mode, ruthlessly focused on producing verifiable results for its customers. You can tell if the company has entered early growth mode because the focus has shifted from “Wouldn’t it be great if the product did this cool thing?” in the prior stage to “We’ve got to get the product right and make sales now!” What happens in early growth mode is this: The founding team has made a great commitment in the prior stage, has taken risks, has established a… ([Location 1970](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1970)) - Tags: [[blue]] - If there’s not relentless focus on producing results for early adopter clients at this stage, it’s a sign that the organization is off track and is likely pursuing too many opportunities at once or… ([Location 1978](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1978)) - Tags: [[blue]] - the real indicator that a business has nailed the product is that clients pay and then come back and buy more. “More” could mean a continuation of the contract, additional purchases, or increased usage. It’s important, however, not to confuse orders with payments. That is, a client saying… ([Location 1980](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1980)) - Tags: [[blue]] - Sometimes a business will choose to forgo revenue at this stage and, instead, focus on user acquisition. Facebook, for example, didn’t sell advertising at this stage of its lifecycle and chose to focus on user acquisition first. But you’ll notice that the principle is the same: Facebook users give money equivalents (e.g., their time and personal data) to use the service. By focusing first on meeting the needs of its users and growing its user base and usage, the company could choose to defer revenue until the next phase of the lifecycle. During the early growth stage,… ([Location 1983](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1983)) - Tags: [[blue]] - The company culture at this stage should be all about finding the right market fit for the current product. Overhead is light. Execution is fast. The entrepreneur must shift from being a benevolent dictator with a powerful vision to a nosy detective who’s seeking to confirm what the early customer data is revealing. This is a tricky transition. Good entrepreneurs are able to collect and analyze the data, ask probing questions of the clients and prospects, and quickly piece together multiple pieces of information into a coherent whole. If a market fit can’t be found for the current… ([Location 1988](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1988)) - Tags: [[blue]] - Whatever the strategy, it requires that the company be ruthlessly focused on selling and servicing customers. The company leaders must be deeply intimate with early adopter clients. They must know them, understand them, and be champions for them to see those customers succeed with the product and solve their core business problem. This usually requires that… ([Location 1997](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=1997)) - Tags: [[blue]] - Notice this discrepancy: The business must give a great deal of attention and support to its early adopter clients and, at the same time, it hasn’t invested in its stabilizing functions—things like infrastructure, systems, staff, or procedures to do so efficiently. Consequently, the business should only focus on meeting the needs of a few early adopter clients—just enough to verify and validate that the product does, in fact, produce desired and positive results for its customers and to give credibility to the next stage of customers. If the business is getting slammed with a lot of customer demand already, then it should make a conscious decision to say “not yet” to those customers who don’t fit the early adopter profile. Granted, it can be very hard for an early growth business to recognize when to say “not yet” and who to say it to. Customers may be clamoring for the product, throwing money at the business, threatening to go to the competition, and generally creating a feeding frenzy. How can a business possibly say “no, not yet” to all of that perceived demand? The only way a business can say “not yet” is to recognize that it can’t realistically meet the demands of all those customers anyway. If it does take on all clients, then it will create poor results for them. ([Location 2005](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2005)) - Tags: [[blue]] - The reason a business can’t service the needs of all their clients yet is that it hasn’t made the necessary investments in its stabilizing functions—things like infrastructure, systems, staff, and procedures to sell and service efficiently. These stabilizing functions begin to take shape in the next stage of the lifecycle. But why not have them in place now before nailing the product? Because that’s a strategic folly. When a business invests heavily in infrastructure, staff, and systems before nailing the product, it presupposes demand and wrongly assumes an accurate product/market fit. This puts a tremendous overhead burden on the business and makes it much more difficult, costly, and time-consuming to adapt the product to the real market fit. ([Location 2018](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2018)) - Tags: [[blue]] - The business will still need an external funding source at this stage and investments should be made in product development and selling, servicing, and documenting a nailed product solution for those few early adopter clients. The company should still be very cost-conscious at this stage. Creative, roll-up-your-sleeves, out-of-the-box solutions to win business, create demand, and find the right product/market fit are born of necessity. Investments in systems, staff, procedures, marketing, PR, and other elements of scaling should be postponed until there’s evidence that the product/market… ([Location 2025](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2025)) - Tags: [[blue]] - To summarize the early growth stage: The raw enthusiasm from the prior stage should be down slightly because the real work and effort has set in. But commitment to the venture should still be incredibly high. The company should be ruthlessly focused on winning a few key sales and working very closely with those clients to uncover their real spending priorities and to prove and document that their solution is the right one. This evidence will be crucial to scale the business in the coming stages. If the client buys, is satisfied, and then orders more, it’s a sure sign that the product is nailed. The business will need to make a concurrent assessment if that’s the market they really want to be operating in. If the team is not focused on selling and servicing a few early adopter clients, it’s a sign that they are putting the cart before the horse. Overhead should be light and speed should be fast.… ([Location 2031](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2031)) - Tags: [[blue]] - Because the company has been successful in the prior stage, it has satisfied early adopter clients and it has cash flow (or cash equivalents) from operations. When the company is ready to scale the product for the early majority, it must also begin to stabilize its product, sales, support, and operations. This requires the Stabilizing force to increase to complement the Producing force and bring stability, standards, and scalable efficiencies into the business (PSiu). What does the Stabilizing force look like? It’s a combination of a new type of hire—individuals with a healthy S in their style—and the development of systems and procedures… ([Location 2040](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2040)) - Tags: [[blue]] - You can tell the company is ready to scale because demand for the company’s product is increasing in the marketplace. In fact, it should feel like the product is being pulled forward by market demand, rather than having to push demand into the market. This occurs because of the positive experience and proven and documented results of the early adopter clients in the prior stage. Because early majority clients tend to seek references from the early adopters (e.g., “How does ACME perform really?”) and from their own peers, having nailed the product in the prior stage is essential. But now the business must meet a new type… ([Location 2046](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2046)) - Tags: [[blue]] - The surrounding organizational culture at this stage of the lifecycle needs to shift from detective mode to operator mode. For example, if there was a single salesperson in the prior stage, then the company needs to invest in creating a repeatable sales process and hire more salespeople. If the founder performed marketing as a lone wolf in the last stage, then a formal brand identity and marketing communications system needs to be created and marketing staff hired. If the VP of engineering performed product management and engineering management at the same time, then they must focus one of these roles while a dedicated person is hired for the other. If the co-founder in technology operations doesn’t have the experience, desire, or talent to scale those operations, then they must be replaced in that role. Essentially, all… ([Location 2052](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2052)) - Tags: [[blue]] - As the Stabilizing force comes on, the Producing force must continue to drive the business forward. The company should no longer be pinching pennies. Instead, it needs lots of external financing to invest in infrastructure, systems, staff, sales, and outbound marketing so that it can… ([Location 2060](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2060)) - Tags: [[blue]] - It’s critical to make a distinction between “stabilizing the Producing force” and just stabilizing. The Producing force (i.e., producing positive and desired results for customers) is the most important force in any business. The only real purpose of stabilizing is to make the Producing force more efficient and to ensure that the business is controlling for systemic risk (the kind that can destroy the business, such as a lawsuit, theft, or brand damage). With greater efficiencies, the business can produce more results for more clients more profitably. With proper systemic control, the business can help to avoid a calamity. A business must be very mindful, however, that the Stabilizing force not take on a life of its own and run amok with too much heaviness, bureaucracy, or overhead. There needs to be just the right amount of stabilizing so that the company can produce results efficiently for its customers now and in the future and is reasonably well protected from systemic risk. ([Location 2068](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2068)) - Tags: [[blue]] - Navigating this stage of the lifecycle is a very hard transition for an entrepreneur and a business to make. It begins with the people. By nature, most entrepreneurs and early stage employees demonstrate incredibly high Producing and Innovating forces. Naturally, this is what’s required to bring a new venture to life. It needs to be organic, adaptable, creative, fast, and ever pushing the needle forward. But now the business must develop its Stabilizing force and this requires the involvement of new people who also naturally have a bigger S in their styles such as a Producer-Stabilizer (PSiu), Stabilizer-Innovator (pSIu), or Stabilizer-Unifier (pSiU). There is also a requirement to have much more of a stabilizing focus across all areas of the business. Managing a business at this stage is kind of like parenting a teenager. The parent wants the teen to be well adjusted, get good grades, and find their purpose and calling. But the teen just wants to run wild and party with their friends. If the parent clamps down too hard, the teen will rebel. If they don’t clamp down hard enough, the teen will live a wasted youth. Every parent must weigh this inherent conflict and attempt to find the right balance and approach. The same is true for every manager at this stage of the execution lifecycle. ([Location 2076](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2076)) - Tags: [[blue]] - One of two things usually befalls a business at this stage that can cause it to fall off the execution lifecycle curve, experience high entropy, and fail. The first is that the entrepreneur is unable to structure, stabilize, and scale the business and has become a bottleneck to growth. In the past, the entrepreneur has worn multiple hats during the company’s development but now things are too big and too unwieldy for a one-person show to manage. The right new people need to be hired, in the right sequence, and for the right roles. Most new entrepreneurs make some mission-critical mistakes in this transition. They either hire the wrong people, place them in the wrong positions, give up too much control, don’t give up enough control, or generally get frustrated with how their business is performing and their changing role in the company. It’s like a kind of purgatory. If this transition stage has gone on for long enough, the entrepreneur may want nothing to do with the business altogether. In fact, they may be totally burned out and rue the day they ever started it. This decrease in entrepreneurial zeal at this stage is a critical loss because the Innovating force still mostly resides within the founder(s) and hasn’t been effectively cascaded into other parts of the organization yet. The other scenario occurs when venture capitalists or other significant shareholders no longer want the entrepreneur involved with the business—either because the founder has been too slow to scale or has made too many critical mistakes, or because the board feels they’re not the right CEO to take the business forward. If the VCs have control, they’ll force the founder(s) out and insert their chosen hired gun. While the hired gun may, in fact, be able to bring stability to the business, increase cash flow, and execute a… ([Location 2085](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2085)) - Tags: [[blue]] - The right way to navigate the transition is to create an environment where the founder(s) can embrace more stabilization. This means that they and the rest of the leadership team know who to hire; when to hire them; and what, how, and when to delegate. At the same time, the founder(s) can remain engaged, passionate, and committed to the opportunity so that the innovative capability is put to best use. If the business can get this mix right, then it will navigate beyond growth into maturity with its heart still intact. It has a real chance at lasting success. But if it can’t get it right, then it will start to succumb to internal entropy, fall off the lifecycle curve, begin to age prematurely, and ultimately fail. ([Location 2111](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2111)) - Tags: [[blue]] - To summarize the growth mode, the company needs to stabilize how it sells and services customers and develops its product. This requires the company to hire a new style of manager, one with more stabilizing characteristics, and to focus on standardizing and systematizing all aspects of business operations. The new hires, who display different and more “professional” ways of doing things, and the high amount of change in how the business operates can be upsetting to old hands. The transition must be accomplished without losing the entrepreneurial heart or staying stuck in the past way of doing things. If a company can do this, then it will be able to operate efficiently and drive growing revenues and profits from its operations. This stage of the lifecycle requires a lot of investment in infrastructure, staff, systems, and procedures. It also calls for increasing investments in outbound sales and marketing efforts. Growth mode is a very challenging transition to make and, to do it well, the company must have aligned vision and values, structure, systems, and people. If navigated correctly, there will be a collective sense within the business that the company is in the right place at the right time and that the sky is the limit. ([Location 2124](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2124)) - Tags: [[blue]] - During the prior growth stages, the Innovating force needed to back off so that the company could efficiently produce results in its core product offering without unnecessary or untimely distractions. But now that it’s mature, it’s time once again to amp up the Innovating force. This means efficiently producing results for clients while simultaneously driving forward new product innovations that extend the life and margins of the product. The company has a healthy combination of stability and development. It’s increasing sales, profits, market share, and brand awareness. It’s like business nirvana. ([Location 2136](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2136)) - Tags: [[blue]] - unlike the product and market lifecycles that plan for obsolescence, the goal of the execution lifecycle is one of constant renewal. The real objective is to first move up through birth to early growth, growth, and maturity and, once the organization is at a reasonable level of maturity (but before it begins an irreversible decline), to launch new organizations or business units that successfully develop new products for new markets and progress through their own lifecycle stages. Like a species that produces offspring, launching new business units allows a company to be vibrant, useful, and well adapted to its environment over an extended period of time. ([Location 2143](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2143)) - Tags: [[blue]] - As the company matures, it becomes less change-driving and more change-responding and it enters a decline phase. What happens first is that the Unifying force comes on strong and turns in on itself so that employees become more concerned with politicking and promotions than with meeting customer needs. The Stabilizing force continues to grow so that the Innovating force leaves the organization entirely. It has no room to flourish because things are so stable, inward-focused, and heavy that it can’t act to shape the environment. The loss of the Innovating force causes the organization to lose integration with its markets and customers, thereby speeding up its decline. The Stabilizing force continues to increase over time and the company continues to age until it finally loses all integration and falls apart completely in death. ([Location 2155](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2155)) - Tags: [[blue]] - Note: This sounds like a description of Deloitte - It is very common for an aging company past its prime to have a large cash hoard. The cash has been built up over many years of milking one or more core products. In an effort to stimulate growth, the board of directors first authorizes the company to go out and acquire younger companies with promising technology or that are increasing market share. The new acquisitions, however, don’t work to reinvigorate the aging company culture. The entrepreneurs of the acquired companies—sick of the politicking, overhead, and heavy bureaucracy of the parent company—cash in their chips and start a new company or become angel investors or VCs themselves. After enough failed acquisitions, the company itself becomes a turn-around or take-over target. ([Location 2164](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2164)) - Tags: [[blue]] - whether a company is large or small, young or old, if it’s exhibiting signs of aging, then it must reinvigorate itself. It does this by choosing the right strategy and by aligning its vision and values, structure, processes, and people. Unlike a brand-new startup, an aging company first has to release the entropy that is holding it back. If it can reduce the amount of energy lost to entropy, then it will free up more energy to find and execute on the new integration opportunities. If not, it will remain stuck in a quagmire until it dies. ([Location 2172](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2172)) - Tags: [[blue]] - The key indicators, which must be taken into account at each lifecycle stage, are market growth rate, competition, pricing pressure, and net cash flow. ([Location 2190](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2190)) - Tags: [[blue]] - when you’re piloting your product for innovators in the lower-left quadrant 1, you should be in negative cash flow. The total invested in the product to date should exceed the return. The market growth rate should be low because you’re still defining the problem and the solution for the market. Therefore, the competitors within your defined niche should be few in both number and capabilities. Consequently, the pricing pressure will be high because you haven’t defined the problem or the solution, so you have no ability to charge enough money for it at this stage. ([Location 2192](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2192)) - Tags: [[blue]] - As you’re demonstrating thought leadership and winning over the innovator customer types, you uncover the real business problem and begin to nail it for early adopters in the upper-left quadrant 2. Notice that you’re still in negative cash flow at this stage. It is taking considerable investments of time, energy, and money to fund early-stage product development. But as you progress, more early adopters jump on board and the market growth rate begins to increase. The competitors should still be few but because you’re proving that you’re solving the customer problem, the pricing pressure lessens and you’re able to charge more for your product at this stage. That is, you no longer must give the product away for free or cheap like you did at the prior stage because you’re showing that you do, in fact, solve a problem and add value. ([Location 2196](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2196)) - Tags: [[blue]] - As you’ve nailed the product in quadrant 2, you leap across the chasm into the upper-right quadrant 3 and begin to scale the product for the early majority by standardizing it. The market growth rate should be high now and increasing. Also, the number of competitors entering the market will be growing because they see the increasing market demand and either think they have a way to do it better or are content to be a “me-too” follower in a growing pie. Alternatively, they might feel they need to act to defend their existing turf. If you’ve done the sequence right so far, then you’ve established thought leadership at the Pilot It stage; you’ve proven that you’ve solved the problem at the Nail It stage; and you’ve standardized the product early in the Scale It stage, which increases your margins. Now is the time to add new high-value extensions and add-on products and services that increase the life and perceived value of the product in the marketplace. ([Location 2202](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2202)) - Tags: [[blue]] - Quadrant 4 is known as the “commodity trap.” Your goal is to avoid this commodity trap for as long as possible by continuing to create high-value product extensions in quadrant 3. But when you ultimately arrive at quadrant 4 (all markets ultimately do), the market growth rate is slow because the fundamental problem has been solved for most customers. For example, if everybody has an iPod, there’s no longer a growth market for the product. During the preceding stages, a lot of competition has emerged and they are still attempting to compete, often on price. Consequently, the pricing pressure is really high. Despite these challenges, if you’ve done the preceding product/market sequence correctly, you have a cash cow that can print money for new product development and acquisitions until it must finally be sold or killed off. ([Location 2214](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2214)) - Tags: [[blue]] - Financing from external sources is always required to successfully navigate the product through the Pilot It and Nail It phases and to ramp up for scale. “External” simply refers to sources other than the product itself. ([Location 2222](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2222)) - Tags: [[blue]] - Financing early in the Pilot It stage is usually a combination of self-financing and the contributions of friends and family. The entrepreneur takes out a loan, invests proceeds from a previous venture, or gets friends and family to participate as early investors. ([Location 2231](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2231)) - Tags: [[blue]] - Angel investors usually participate between the Pilot It and Nail It stages. This occurs because a product prototype has been developed (this could be as simple as a mockup or screenshots) and the business case is significantly clearer than at the prior stage. Angel investors are willing to take tremendous risk in exchange for a lower valuation on the company and most will seek to help the company figure out how to really nail the product and ultimately get it ready for scale and future investors. ([Location 2236](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2236)) - Tags: [[blue]] - Venture capital investments usually take place between the Nail It and early Scale It stages—once the company has demonstrated that they have nailed the product and understood the market problem and when market demand is clear and the company needs capital to scale. The VC will offer capital and access to resources such as staff, market connections, and expertise to scale the business. Their focus is to invest at a low enough valuation that can generate a significant return on investment later on through a sale of the company or an initial public offering (IPO). ([Location 2241](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2241)) - Tags: [[blue]] - Once the company enters its scale mode and is generating significant cash flow, and if it has a clear opportunity to capture a significant market opportunity, then it will do one of three things to get external financing. One, the company will do an IPO. Two, the company will sell itself to a larger company. In this case, the valuation is usually much higher than the previous technology-only acquisition because the acquirer is buying more than just a technology—it is also buying the future cash flows, profits, and budding brand awareness of the seller. Or three, the company will choose some type of bridge or mezzanine financing that helps to bridge the financing gaps that appear when a company is attempting to scale up but isn’t ready for an IPO or strategic sale yet. ([Location 2251](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2251)) - Tags: [[blue]] - Milk it Stage (Moving from Quadrant 3 to 4) This stage is less about business growth and more about cost cutting, roll-up acquisitions, and financial engineering. Private equity groups use their war chest and access to cheap capital to acquire other companies that can be repackaged for a future sale. Large corporate acquisitions are made as well, but it’s usually for the cash flow that the businesses generate or for the existing patents, customers, or distribution channels. ([Location 2257](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2257)) - Tags: [[blue]] - No strategy is without risk. And when it comes to strategic execution, there are basically five general categories of execution risk. They are Normal Execution Risk, the Face Plant Risk, the Flame Out Risk, the Lost Opportunity Risk, and Stagnation Risk. ([Location 2263](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2263)) - Tags: [[blue]] - The Face Plant Risk happens when an entrepreneur is innovating on a product but targeting straight into a commodity market. The company foolishly spends resources to solve a problem that the market views as already having been solved. The company does not establish thought leadership in quadrant 1 and doesn’t nail it and prove that it can solve the underlying problem in quadrant 2. Therefore, it does not understand the true customer spending priorities and it fails to create a product that meets them. It never establishes profit margins in quadrant 3 and so it comes into a commodity market against better-financed and more robust solutions, quickly getting crushed by those vendors with a more complete service offering. ([Location 2279](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2279)) - Tags: [[blue]] - The next increased strategic risk is what I call the Flame Out Risk. The Flame Out occurs when a company tries to scale prematurely. Usually this happens when the founding team, in a hurry to get cash flow from sales or because they believe the market window is closing, attempts to aggressively ramp up sales without having nailed the product/solution first. Figure 35. Flame Out Risk. Because the company has not nailed the product and proven to the world that they have done so, they do not understand the customer’s real pain and spending priorities. They make a big marketing push and create a lot of market noise, but this does not translate into real adoption and sustainable revenue and profits. In fact, it often results in dissatisfied early majority or later-stage customers who are upset because the product does not do what it promises or what they need and it is rife with bugs and errors. ([Location 2299](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2299)) - Tags: [[blue]] - The Lost Opportunity Risk occurs when a company pilots it for innovators and nails it for early adopters but cannot execute quickly or efficiently enough to get to scale. The market window closes because some other company executes more quickly, nails it, then scales it, captures the leadership position, and reaps the benefits. The lost opportunity company then tries to compete on price and pushes the product into the market as if it were a commodity. But because they have not standardized their product and established market leadership, the product has not created the brand awareness and margins to be successful. It is like a fruit that dies on the vine. ([Location 2329](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2329)) - Tags: [[blue]] - The risk of stagnation occurs any time a business falls over into the downward slope of the Strategy Map into the Milk It stage. This is so because inertia in life and business is a real thing. What was effective at a prior stage becomes a trap in a later one. Figure 37. Stagnation Risk. To restate: The strategic goal is never to drive a product or business unit into the Milk It stage. The goal is to avoid the Milk It stage for as long as it is possible and sensible to do so. But the reality is that all products, markets, and business units that were successful in the past ultimately end up in the Milk It stage. (Those that were not successful die a premature death.) It is why you are no longer using a flip phone. Former growth products and/or business units that reach the Milk It stage can be managed in a straightforward way. The mission of these entities is to maximize cash flow back to the core business or mothership so that it can fund new initiatives and enable a state of perpetual renewal. This requires a mindset in the Milk It stage business unit that is all about efficiency and a shorter-range focus. New investments are limited to those that can generate short-term ROI and the team is incentivized to stay on board until end of life when it is time to kill it/sell it off. It may not be very exciting work, but it is important work for the longevity of the entire organization. ([Location 2349](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2349)) - Tags: [[blue]] - If you ever find yourself leading a mothership that is on the downward side of the Execution Lifecycle, then you will need to go through with the hard work of dismantling the status quo and realigning the organization towards a new and realistic growth strategy, which requires a new structure, culture, and more. Or you will need to find ways to neutralize the legacy structure and environment of the mothership to give the new units as much autonomy as possible until they are strong enough to take over the mothership themselves one day. It is not easy, but it has happened before. ([Location 2369](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2369)) - Tags: [[blue]] - I’m going to define the core difference between startup and pre-startup using a single word: commitment. Commitment means that the entrepreneur and founding team have taken a real risk to make the business happen. They are clearly and unequivocally in. It’s Dodge City or Bust. Without commitment, the venture will remain stuck in pre-startup mode—as an idea that will never be actualized. ([Location 2378](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2378)) - Tags: [[blue]] - You can always tell if someone is committed to a new venture by his or her actions. Have they taken a significant risk such as quitting their job or putting their own money into it? Are they excitedly and constantly talking about the opportunity? Are people rallying around their cause and vision? These are all great signs of commitment—and that’s when you know you’re in startup mode. With them, a new business can be born and has a chance of success. Without them, you’re still in pre-startup or it’s a non-starter. ([Location 2386](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2386)) - Tags: [[blue]] - A superior strategic approach for our small startup is to initially ignore the late majority/laggard clients and instead find those innovative, cutting-edge users. Choose instead to collaborate with the market innovators and pilot the product for them. Show thought leadership, be a disruptor to the status quo, and find a better, easier way of doing things. Then move up the product/market/execution lifecycle and leverage your hard-earned thought leadership and innovator endorsements to nail the product for early adopters. You’ll know you’ve nailed it when the early adopters purchase the product and then come back for more. Why? Because the product is meeting their needs. It’s producing positive and desired results. While it’s pretty easy to sell anything once, nothing gives an endorsement like a follow-on contract or a contract extension. Once you’ve nailed it, you then begin to scale the product for the early majority clients by standardizing, adding new line extensions, and increasing the product margin. It’s a race now to be a niche market leader. Just about at this point, the former startup will become a visible and desirable acquisition target for the original targeted acquirer. Why? Because it did the exact opposite of what the aging giant would have requested! The giant now desperately needs the former startup because it is dominating its niche; it shows good margins, cash flow, entrepreneurial zeal, and thought leadership; and it seems to know where the market is headed. All these are things the late majority/laggard acquirer once seemed to have in abundance but no longer does. As a result (and if the startup still wants to sell), the acquirer will write a really large check for the pleasure. By aligning the product/market/execution lifecycles in this way, a company gives itself a higher probability of success with the same companies it initially consciously ignored. It’s counterintuitive, but that’s what really works. ([Location 2412](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2412)) - Tags: [[blue]] - Block revolutionized the mobile payments space and they didn’t start out by building a product for industry giants like Visa or PayPal. Instead, they designed a compelling solution for those unserved by the status quo—artists, taco truck vendors, and massage therapists. Because they piloted and nailed it for these innovator and early adopter clients, the industry giants have been put on their heels and are struggling to catch up. And they should feel threatened because Block is ready to tap into a whole new market of trustless transactions. Imagine what would have happened if Block had followed popular strategic advice and tried to create a product for the industry giants to bid on and acquire. They would have gone to these behemoths and said, “We’re designing a new mobile payments solution for you. What features and functions should it have?” They would have been bogged down in designing a product for the status quo, not for the next wave of innovative change. The product would have been clunky and it would have attempted to meet the needs of too many conflicting interests. It would have met the needs of the past, not the emerging needs of the future. It would never be where it is today. And although your business is probably in a different market, the principles that apply to it are exactly the same. ([Location 2445](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2445)) - Tags: [[blue]] - Essentially, what the customer-driven development approach recommends is that an entrepreneur go as far as possible from the bottom of quadrant 1 (Pilot it for Innovators) to the top of quadrant 2 (Nail it for Early Adopters) by interviewing, researching, and selling customers in advance before the product development process begins. In other words, customer-driven development tries to limit the cost, risk, and time investment of making poor product or market decisions between the Pilot It and Nail It stages. They are looking for a good product/market fit before the development process begins. If they can discover what the thought leaders really value and what the early adopters’ true spending priorities are before development begins, this lowers the risk and increases the probability of meeting those needs. Product development can become more focused because demand is established before any real money is spent on development. ([Location 2462](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2462)) - Tags: [[blue]] - Agile software development is a product development method that aligns very closely with a customer-driven philosophy. Agile, or iterative, development is a process of taking real-time data from actual use of the product and quickly iterating changes using short release cycles to develop a better product that meets the needs of target customers. Fundamentally, agile is a product development method that attempts to better manage changing requirements; avoid long release cycles; and produce live, working, tested software that has real business value. In an early-stage startup, using an agile approach can help a company quickly and cost-effectively navigate the Pilot It to Nail It stages by eliminating the guesswork, long product release cycles, and overhead involved in trying to do a big product design up front. In larger companies with existing products in scale mode, using agile is an attempt to better meet user requirements, based on data and customer feedback, and to turn that knowledge more quickly into new product features and extensions. ([Location 2469](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2469)) - Tags: [[blue]] - The truth is that there are many other methods that can also help you quickly navigate up and around the lifecycle curve. Customer-driven can work. So can vision-driven. For example, I don’t believe Steve Jobs had ever done a day of listening to focus groups in his entire life. Instead, he had that rare ability to envision something entirely new, intuitively understand the needs of his target customers even before they did, and bring his vision to the world in surprising and beautiful ways. No external customer-driven development of the original iPhone would have worked because customers would have had no frame of reference for it. Walt Disney was the same way. He had a powerful vision and followed his own instincts about what families really valued that wasn’t being provided by other amusement parks at the time. He created magical experiences that no one was expecting. The point is that there are many ways to develop a product but the fundamentals of strategy should always be the same: You must go the long way around the path and create product/market fit in the right sequence. ([Location 2481](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2481)) - Tags: [[blue]] - every element in the venture needs to align with the founding team’s vision and values. This goes hand in hand with commitment because it’s impossible to be truly committed to something that’s not aligned with your vision and values. ([Location 2495](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2495)) - Tags: [[blue]] - In pre-startup mode, it’s most critical that the founding team understands the pain or problems of the target market. ([Location 2504](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2504)) - Tags: [[blue]] - Your pre-startup venture doesn’t need a formal 40-page business plan. It does, however, need to be able to answer some basic questions about who the target customers are, what their pain or need is, how the product will solve it (and how this will be measured), why the venture is truly important, and why you are unique or different from the practical alternatives. You’ll also want to have a good understanding of the likely customer acquisition costs, product pricing, major cost centers, lifetime value of the customer, how customers want to buy the product or service, and from whom they prefer to buy it. All of this information takes focused energy and effort to gather up front. Having gathered this information early on shows that the entrepreneur is serious about the venture, has thought things through clearly, knows what to look for and measure, and can better adapt along the way. ([Location 2514](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2514)) - Tags: [[blue]] - The truth is that all resources and expertise flow from the people involved. If you have the right people, you can uncover the right opportunity, build the right technology, attract the right customers, and get the capital you need to scale. Without the right people, none of this will occur. ([Location 2527](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2527)) - Tags: [[blue]] - There’s another critical process you should engage in before launching a business—and that’s doing an internal entropy scan. As you’re talking, planning, and researching the business, how are the internal friction or energy drains within you and the team? Are people getting more excited as you investigate the business idea further? Is commitment building? Do you trust and respect your potential co-founders and team members? Do they trust and respect you? Can you complement each other without causing a lot of unnecessary, energy-draining friction? Are these the people with whom you want to go into battle? If the answer is “no,” you’ve got a sign of unhealthy entropy and you should not underestimate its impact. My advice: Pull yourself out or cull out the friction-causing team members before the venture gets started. ([Location 2533](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2533)) - Tags: [[blue]] - To summarize the pre-startup checklist, an entrepreneur or founding team needs to prove real commitment; have a strong sense of the underlying problem that the market wants solved (and sense that they can solve it uniquely and profitably); feel alignment between the venture and their vision and values; get the right people on the bus; and have low entropy in the system. If these elements are not all in place, the founders need to go back to the drawing board and find a venture that does meet those requirements. ([Location 2551](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2551)) - Tags: [[blue]] - Once the products or business units are placed in their correct locations on the map, the basic rule of thumb is to work in this order: Move each product/business unit that’s below the execution lifecycle curve back up to the execution lifecycle curve (or sell it, or kill it). Move each product/business unit that is on the curve to the next stage of its lifecycle. The reason for the first step is that those products/business units have high entropy. As you know, high entropy prevents execution and so these product/business units can’t move forward and execute until the entropy is lowered. ([Location 2578](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2578)) - Tags: [[blue]] - Although an organization isn’t a simple object like a ball, you can still use the lens of inertia to view it. In other words, an organization will tend to continue to do what it’s been doing unless acted upon by another force. That is, if your organization is slowed, stymied, or stuck, it will continue to act that way unless you do something to change it. And the greater the inertia, the greater the effort required at getting it to move in a new direction. On the other hand, if your organization is currently experiencing a lot of momentum, then like a train roaring down the tracks, it will be hard to slow down until an equal and opposite force is applied. ([Location 2663](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2663)) - Tags: [[blue]] - Mass is not size or volume. Mass is resistance to change. So the reason an organization, or a person, or a market is relatively hard or easy to move is its inertia or resistance to change. If the organization has a high mass or resistance to change, it will be very difficult to get it to alter its behavior. If the resistance is low, on the other hand, change can come easily. Just because a Fortune 500 company is really “large” does not mean its mass or resistance is necessarily big. Or just because a family of four is relatively “small” doesn’t mean that its mass is automatically light. ([Location 2681](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2681)) - Tags: [[blue]] - when you’re implementing change in one area of your organization, there will always be an equal and opposite reaction in another. If you’re not careful, the opposite reaction can also slow down its speed and direction. ([Location 2704](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2704)) - Tags: [[blue]] - Alignment is what keeps your organization’s mass (M) on track, cohesive, and manageable. There are four basic subsystems through which you accomplish this: (1) Culture or Shared Vision and Values (2) the organizational Structure or design, (3) the decision-making and implementation Processes, and (4) the People and teams involved. Think of these subsystems like a corral or a boundary that helps to keep the organization unified, cohesive, and coherent in both vision and action. I refer to these subsystems together as the Strategic Execution Diamond: ([Location 2742](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2742)) - Tags: [[blue]] - There are few things that will destroy momentum within an organization like a conflict in vision and values, which provide the backbone of its culture. ([Location 2764](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2764)) - Tags: [[blue]] - Vision is the destination or ultimate outcome towards which the organization is ideally collectively working. ([Location 2765](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2765)) - Tags: [[blue]] - values are the norms of behavior that are deemed acceptable during the voyage. ([Location 2768](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2768)) - Tags: [[blue]] - an organization needs a shared and compelling vision so that everyone buys into where the organization is sailing and why. The crew has bought into the vision; they understand their role on the voyage; and they’re eager and determined to make it happen. They must also embody a shared code of values so that everyone is clear on the modes of acceptable behavior and, more importantly, what isn’t acceptable behavior—the kind that will get you walking the plank. Without a compelling vision and clear, authentic, and sustainable values, no company will get very far very fast. ([Location 2771](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2771)) - Tags: [[blue]] - A true conflict of vision and values is an extreme situation that can’t be negotiated. That is, if an individual has a vision and values conflicting with the organization’s, the individual must go (yes, that means leave the organization). ([Location 2776](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2776)) - Tags: [[blue]] - your best course of action when you suspect a potential conflict of vision and values is to prevent that conflict in advance. There’s an old saying that when the head is rotten, it affects the whole body. Put another way, vision and values tend to flow from the top of the organization down. Therefore, you want to be extra vigilant that those in leadership positions have bought into a common vision and values and actually walk the talk. When this occurs, by their very presence, they naturally instill a shared vision and values and help to cascade them throughout the organization. ([Location 2790](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2790)) - Tags: [[blue]] - the company vision and values need to become the centerpiece of your day-to-day communications. There’s a saying that “effective leadership is the art of saying the same thing 1,000 different ways.” When it comes to communicating with your employees about what’s most important, your message needs to continually flow back to the vision and values of the organization. Why do we do what we do? Who do we serve and how are we making a positive difference? When are we at our best? How do we go about our daily work? What kind of behavior do we celebrate and what do we not tolerate? Of course it’s not enough to talk the talk; you’ve got to walk it too and ensure that your team leaders are doing the same. ([Location 2797](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2797)) - Tags: [[blue]] - Warren Buffet put it aptly in a recent Berkshire Hathaway shareholder letter: “Our final advantage is the hard-to-duplicate culture that permeates Berkshire … in businesses, culture counts.” ([Location 2838](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2838)) - Tags: [[blue]] - attempt to avoid misalignment by being clear and committed to a powerful vision and authentic values up front. Fill leadership positions in your team with individuals who intrinsically share that same vision and values and make these the centerpiece of your communications and actions. If you can do this, and be committed to it over time, then your organization can build a thriving culture and accomplish great things indeed. ([Location 2847](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2847)) - Tags: [[blue]] - if I were to ask you a similar question about your business, “Why does your business behave the way it does and how can you make it behave differently?” would you answer “design?” Very few people—even management experts—would. But the fact is that how your organization is designed determines how it performs. If you want to improve organizational performance, you’ll need to change the organizational design. And the heart of organizational design is its structure. ([Location 2860](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2860)) - Tags: [[blue]] - What actually gives an organization its “shape” and controls how it performs are three things: The functions it performs, or the core areas or activities in which the organization must engage to accomplish its strategy (e.g., Sales, Customer Service, Marketing, Accounting, Finance, Operations, CEO, Admin, HR, Legal, PR, R&D, and Engineering). The location of each function, or where each function is placed in the organizational structure and how it interacts with other functions. The authority of each function within its domain, or each function’s ability to make decisions within its domain and to perform its activities without unnecessary encumbrance. ([Location 2873](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2873)) - Tags: [[blue]] - A sound organizational structure will make it unarguably clear what each function (and ultimately each person) is accountable for. In addition, the design must both support the current business strategy and allow the organization to adapt to changing market conditions and customer needs over time. ([Location 2880](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2880)) - Tags: [[blue]] - An organization’s structure gets misaligned for many reasons. But the most common one is simply inertia. The company gets stuck in an old way of doing things and has trouble breaking free of the past. How did it get this way to begin with? When an organization is in startup to early growth mode, the founder(s) control most of the core functions. The founding engineer is also the head of sales, finance, and customer service. As the business grows, the founders become a bottleneck to growth—they simply can’t do it all at a larger scale. So they make key hires to replace themselves in selected functions—for example, a technical founder hires a head of sales and delegates authority to find, sell, and close new accounts. At the same time, founders usually find it challenging to determine how much authority to give up (too much and the business could get ruined; too little and they’ll get burned out trying to manage it all). As the business and ([Location 2894](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2894)) - Tags: [[blue]] - What are the signs that a structure isn’t working? You’ll know it’s time to change things when inertia seems to dominate—in other words, the strategy and opportunity seem clear and people have bought in, yet the company can’t achieve escape velocity. Perhaps it’s repeating the same execution mistakes or making new hires that repeatedly fail (often a sign of structural imbalance rather than bad hiring decisions). There may be confusion among functions and roles, decision-making bottlenecks within the power centers, or simply slow execution all around. If any of these things are happening, it’s time to do the hard but rewarding work of creating a new structure. ([Location 2905](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2905)) - Tags: [[blue]] - Every time the strategy changes—including when there’s a shift to a new stage of the execution lifecycle—you’ll need to re-evaluate and change the structure. The classic mistake made in restructuring is that the new form of the organization follows the old one to a large degree. That is, a new strategy is created but the old hierarchy remains embedded in the so-called “new” structure. Instead, you need to make a clean break with the past and design the new structure with a fresh eye. ([Location 2921](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2921)) - Tags: [[blue]] - Unless you design against it, the demands of today tend to overpower the needs of tomorrow. That’s why the pressure you feel to do the daily work keeps you from spending as much time with your family as you’d like. It’s why the pressure to hit this quarter’s numbers makes it so hard to maintain your exercise regime. And it’s why you never want to have functions that are focused on long-range development (branding, strategy, R&D, people development, etc.) reporting to functions focused on driving daily results (sales, running current marketing campaigns, administration, operations, etc.). ([Location 2933](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2933)) - Tags: [[blue]] - Efficiency means to do things in the right way (repeatable, controllable, scalable). Effectiveness means to do the right thing (trial and error, risk taking, adaptability). Unless you design against it, efficiency will tend to overpower and snuff out effectiveness. Because of this, you’ll never want to have functions focused on effectiveness (sales, marketing, people development, account management, and strategy) reporting to functions focused on efficiency (operations, quality control, administration, and customer service). ([Location 2942](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2942)) - Tags: [[blue]] - There is an inherent and natural conflict between autonomy and control. One requires freedom to produce results, the other needs to regulate for greater efficiencies. The design principle here is that as much autonomy as possible should be given to those functions closest to the customer (functions like sales and account management) while the ability to control for systemic risk (functions like accounting, legal, and HR Admin) should be as centralized as possible. In addition, the autonomy to acquire new customers and meet customer needs should always take precedence in the structure because without sales and repeat sales, the organization will quickly cease to exist. At the same time, the organization must exercise certain controls to protect itself from systemic harm (the kind of harm that can destroy the entire organization). ([Location 2953](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2953)) - Tags: [[blue]] - Your structure is only as good as the people operating within it and how well they’re matched to their roles. Every function has a group of activities it must perform. At their core, these activities can be understood as expressing PSIU requirements. Every person has a natural PSIU style. It’s self-evident that when there’s close alignment between job requirements and an individual’s style and experience then they’ll perform at a higher level. ([Location 2966](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2966)) - Tags: [[blue]] - Organizational structure is akin to the human musculoskeletal system. If a person has a twisted spine or a broken leg, they’re not going to move very fast or be pain free until alignment can be restored. At the same time, without a circulatory and nervous system and other life-giving processes, that person would be a dead skeleton. I’m using this metaphor to highlight that structure and process need each other but they are not the same thing. Many leaders still mistakenly conflate structure with process. They are operating under the erroneous assumption that structure is the enemy to having greater organizational speed, autonomy, and self-organization. Don’t make this mistake yourself. There can be no organization without structure. The secret to unlocking sustained organizational performance is to design the structure to drive forward the current strategy while balancing short range and long range, efficiency and effectiveness, autonomy and control. Then energize that structure with people and processes (next chapter) that bring that structure alive. It is this combination of the right structure, energized by the right people and processes, that allow for self-organization and sustained performance over time. ([Location 2980](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=2980)) - Tags: [[blue]] - Identifying the PSIU code for each function is helpful for two reasons. One, it allows a shared understanding of what’s really required to perform a function. Two, when it’s time to place people into hats and roles within those functions, it enables you to find a match between an individual’s management style and the requirements for the role itself. ([Location 3038](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=3038)) - Tags: [[blue]] - and #2” on the far left of the structure are called business units. The business units represent where revenues will flow into the organization. They’re colored green because that’s where the money flows in. The GM role is created either as a dedicated role or in the interim as a hat worn by the CEO until a dedicated role can be hired. Each business unit recognizes revenue from the clients within their respective vertical. How the verticals are segmented will be determined by business and market needs and the strategy. For example, one GM may have authority for North America and the other for Asia/Pacific. Or one might have authority for the entertainment industry and the other for the finance industry. Whatever verticals are chosen, the structure identifies authority and responsibility for them. Notice that the code for the GM/PsIU is identical to the CEO/PsIU. This is because the GMs are effectively mini CEOs of their own business units or can be thought of as future CEOs in training for the entire organization. ([Location 3049](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=3049)) - Tags: [[blue]] - To the immediate right of the green business units is a black box called “PM” or Product Manager. The function of Product Management is to manage the competing demands of the different verticals (the green boxes to its left) as well as the competing demands of the other business functions (the grey boxes to its right) while ensuring high product quality and market fit and driving a profit. The grey boxes to the right of the Product Management—Operations, Engineering, Marketing Strategy, and Admin—represent the rest of the core organizational functions. Effectively, these functions provide services to the green business units so that those units have products to sell to their markets. The revenue that the business generates pays for those internal services. ([Location 3061](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=3061)) - Tags: [[blue]] - The code for Product Management is pSiU. That is, we need the Product Manager to be able to stabilize and unify all the competing demands from the organization. ([Location 3068](https://readwise.io/to_kindle?action=open&asin=B0BSHDSB6Y&location=3068)) - Tags: [[blue]]