(Taken from the book Super Crunchers)

The idea in brief

“Budgeting – as most companies practice it – should be abolished. Radical? No, simply the next logical step following everything else you’ve already done to eradicate command-and-control hierarchies in your company – and enable it to nimbly adapt to changing market conditions. Abolishing budgets will free up even more or your employees’ creativity, self-motivation and willingess to share information – essential ingredients for any firm’s agility…

Raising the bar

Abandoning budgets doesn’t mean abandoning high expectations. On the contrary, you raise the bar even higher. Instead of demanding that managers and business units meet fixed targets, you ask them to do something much tougher: measure themselves against how well their competitors will have done during the same period.

… rather than taking short-term actions designed solely to save the credibility of forecasts, they focus on improving their long-term competitive position…”

Buy the full article (“Who Needs Budgets?”) from Harvard Business Review

It is dangerous. It is dangerous because profit cannot be predicted. Profit can be wiped out by an nimble competitor or shift in consumer trends. Profit can skyrocket due to unforeseen success.

Past performance is not a good indicator of the future.

The world is becoming more interconnected and more complex. “Winner takes all” and power laws are more common than linear growth.

Be wary of anyone with a crystal ball.

The best defence is innovation. The bible is The Black Swan.

The measure of innovation is the rate of validated learning. In fact, the best way to achieve sustainable profit is validated learning.

Validated learning is THE NUMBER ONE OBJECTIVE.

Only borrow big money if it’s the best way to pursue validated learning, otherwise it’s just a distraction.

Most startups fail. General management (the sort of management taught on MBAs) fails.

Traditional management is not the way things have to be done. It was “invented” by Frederick Winslow Taylor in 1911 (to address the problems of a bygone era). His ideas are so pervasive it’s hard for people to conceive that there are alternatives. It’s summed up brilliantly by this excellent 3 minute video (from another author).

In the Q&A session, one person said that The Lean Startup sounded a lot like “trial and error”. The author agreed but pointed out that what it’s called isn’t important. The important thing is if people do it or not, and largely “trial and error” is undervalued. They don’t teach it in (business) school.

This 15 minute video is the bible for trial and error: Trial, error and the God complex (by Tim Harford, a journalist for the FT).

Lean Startup links:

• #BLNLean on twitter
• The Lean Startup
• Blog - http://www.startuplessonslearned.com/
• Four Myths about the Lean Startup
• Wiki

Where you at Lean Startup? What did you think? Leave a comment!

With this metric: some users spending more time on the site is always good; more users is always good.

Other issues are detailed here. For example, “bounces” count as zero seconds on site. (Some people may argue that penalising bounces is a good thing).

If your web analytics don’t support TTS then you can calculate an approximation: (Average Time on Site) x (Unique Users)

As for all metrics, it’s good to focus on your target audience. If you use Ucom or comScore then you could calculate a multiplier. For example, if you reach 25% more of your target audience then multiply TTS by 1.25

Google does not seek to make as much money as it could in the short run. The most obvious example of this is the Google homepage, considered the most valuable piece of real estate on the Internet… Google displays no advertising on this page, forgoing tens of millions of dollars in revenue and profits to give users a higher-quality search experience.

The soul of the Google machine is rapid innovation, the most important subject discussed at nearly every board meeting of the firm… for innovation is the reason the company raced ahead of others and stays out in front. Its founders are keenly aware that someone, somewhere, is always attempting to find a better, faster, smarter way to do things.”

“At Google, the preference is for working in small teams of three, with individual employees expected to allot 20 percent of their time to exploring whatever ideas interest them most. The notion of “20 percent time” is borrowed from the academic world, where professors are given one day a week to pursue private interests. Because the company lacks the usual layers of middle management, the hierarchical structure found in traditional corporations is non-existent”

“Google is the place with the buzz where the best and brightest engineers on the planet flock to work. They are leaving universities, NASA, Bell Labs, Microsoft and elsewhere for a dynamic setting that more nearly resembles a graduate school campus than a traditional business headquarters.”

Taken from the introduction of The Google Story.

“We will see that, contrary to social-science wisdom, almost no discovery, no technologies on note, came from design and planning – they were just Black Swans. The strategy for the discoverers and entrepreneurs is to rely less on top-down planning and focus on maximum tinkering and recognizing opportunities when they present themselves. So i disagree with the followers of Marx and those of Adam Smith: the reason free markets work is because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or “incentives” for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can.”

“The second group [of companies who made it through recession]… came out of adverse markets not only mere survivors, but actually having leveraged adverse markets to catapult themselves far ahead of their competitors. These firms find ways to embrace downturns that turn adversity into opportunity: they survive and thrive at the same time.

… I found that those companies built around an inside-out mind-set – those pushing out products and services to the marketplace based on a narrow viewpoint of their customers that looks at them only through the narrow lens of their products – are less resilient in turbulent times than those organized around an outside-in mind-set that starts with the marketplace, then looks to deliver creatively on market opportunities. Outside-in orientation maximises customer value – and produces more supple organizations.”

“Level 3 firms… They focus first on the problems their customers are trying to solve, and only then turn to their products, configuring their offerings to address those problems. Further, they conserve resources by allocating them only those tasks that will help customers most…

The most resilient companies – level 4 firms – go well beyond their competitors their competitors… A level 4 firm is more attached to producing solutions to those problems than it is to the products and services it offers. This intellectual, structural and emotional transition means that it is no longer concerned whether the inputs it uses to solve customers’ problems are its own or assembled through a network of partners.”

I’m wondering how this applies to brainstorming. I’ve always associated brainstorming with groups of several people and techniques such as Six Hats. But is this the best way?

In nature, genes are combined from two sources. This is repeated over successive generations. How would this work for memes? Instead of a six people brainstorming in one group, they could split into 3 pairs, brainstorm, and then mixup the pairs and repeat.

Personally, i find it useful to have a couple of days between each “generation” in order to let ideas sink in and stew a bit.

Maybe this all just me being a geek and having an aversion to big meetings. Maybe it partly explains the success of pair programming amongst developers.

Maybe it will help avoid some of the pitfalls of traditional groupthink.