What Happens When A City is Brave

 
In the few months since I started this blog I have profiled brave business leaders and what it looks like to overcome fear in a corporate context but I want to talk today about being a brave city.

A city is different than a corporation because it is the people that makes a city and democracy is the ultimate form of accountability.  Business leaders and eras of leadership can define a corporation and while political leaders can leave a mark it is the people of the city that create the culture and define who a city is.

An interesting case in fear and bravery is Cincinnati.  It happens to be my adopted hometown (I live in a suburb and own property in the city) and I have learned a few things about the culture of the community in the decade and a half since I moved there.

As background, Cincinnati was settled largely by Irish, Italian, and German immigrants - emphasis on the German.  And each people group influenced the city in various ways.  All three contributed to the heavy Catholicism, the Italians contributed to the architecture and the Germans contributed the staunch conservatism.  Not political conservatism - although that is a hallmark of today's political influences, but rather a penny pinching, survive a famine or the Great Depression kind of conservatism.

This DNA manifests as a change aversion deeper than anything seen in other parts of the United States.  At its core this change aversion is rooted in fear.  Fear of trying new things, of stepping out boldly, of trying new modes of transportation, of embracing new industries.  One of the best historical examples is when the 'Queen City' (that is the name we were given by Longfellow when we were the largest city in the West) placed a bet on barges as the nation's transportation future instead of the railroads and subsequently watched Chicago flourish and surpass Cincinnati as an inter-modal and commodities hub.

Or what about the half-finished subway?  That's right, what began as a vision for 7+ miles of subways connecting previously disconnected neighborhoods in 1910 for a sum of $6 million ended in decades of squabbling over escalating costs and questions about the viability of rapid transit in a period of the automobile.  What is left is hollow tunnels that exist to this day with no tracks and no riders.

If you live in Cincinnati, you are sick of hearing the famous Mark Twain quote, "When the end of the world comes, I want to be in Cincinnati because it's always twenty years behind the times."

It is perhaps the weariness of seeing this quote played out again and again that has made a loud and growing group of people stand up and say enough is enough.  The flashpoint is the multiple waves of attacks against the city's plan for a streetcar.

In its current incarnation the plan has weathered multiple elections, changes in mayoral and city council support to the point where $35 million has been spent to relocate utilities, build 10 blocks of track, buy the actual streetcars, among other investments only to see the new mayor halt all construction at the risk of losing $45 million in federal transportation spending.

(overview of current status, cost to complete & abandon - h/t Cincy Streetcar Blog)

For a city that has seen a massive renassiance over the past 10 years it is a line in the sand.  After turning the tide with an emerging start-up scene, the re-birth of a great neighborhood in OTR (Over-the-Rhine), an improving reputation through movies and the media, the city had finally started to shake off the rust belt malaise that had beset it for the past few decades.  Being at the precipice of a new story for the city - one that embraces change, is adventurous, and willing to make bold gambles only makes the current struggles that much more difficult to swallow for emerging Millenials and Gen X'ers who have fallen in love with the city only to watch fear creep back into the city's psyche.

The question for the city now is do we continue to live with the embarrassments of the past century or do we shake off the labels and condescension for a new future.  The rest of the story will be written over the coming weeks and months but what is clear is that there is a growing group of people in the city interested in writing a new story for Cincinnati.  One that isn't rooted in fear and failure but rather on hope, optimism, and bravery.

Nelson Mandela and the Art of Politics

Yesterday I wrote about Nelson Mandela's view on fear and the lesson it provides us today in our busy corporate lives.  Today I want to focus on another Mandela quote that teaches us about a component of living a brave corporate life.

"A good leader can engage in debate frankly and thoroughly, knowing that at the end he and the other side must be closer, and thus emerge stronger.  You don't have that idea when you are arrogant, superficial, and uninformed."

I spend a whole chapter in my upcoming book Corporate Bravery on politics.  Not the politics that we think of from Fox News and MSNBC but the true essence of politics.  Corporate politics has the ability to inject fear into a corporate culture but that doesn't have to be the case.  Politics are an essential part of getting things done since at its core it is just finding common ground between two differing perspectives or positions.

Whether in business or in government the true art of politics has been lost.  Listening to opposing positions, searching for a compromise, using the power of a position to move people closer to a reasonable solution are all lost arts.  However, they are extremely necessary for a functional organization.

This infographic from the Economist highlights the growing divide of politic discourse in our government and unfortunately we imitate in a corporate context what we see played out on television in our government.

Jack Welch had this to say about the lost art of schmoozing - his way of saying politics:

“You have to schmooze.  You can’t suddenly burst out of your office to build relationships when you hear rumbles of trouble from down below, and it’s certainly too late by the time a crisis flares. No, schmoozing has to be what you do all the time as a leader; it has to be a massive part of your job.

Building — in two big fat words — trust and transparency.  And look, we’re not talking about the standard, ho-ho-ho kind of social schmoozing you do with your customers and your team and your boss. That’s easy. That’s like President Obama schmoozing with Nancy Pelosi, or John Boehner schmoozing with Eric Cantor.

Leaders have to do something harder and more essential; something that can feel awkward at first. You have to schmooze with your known “adversaries” too, say, for instance, your union, or the group of employees who hate your new strategy and want the old one back. The resistors that exist in every organization. The perennial naysayers. Smart and annoying. Them.”

Nelson Mandela understood this better than anyone.  He built trust with his adversaries.  They may not have agreed with his position but through the trust that he had built they were willing to work with him to find a better solution.

Nelson Mandela on Fear

With the public ceremony of Mandela's life occurring as I write this, you are probably thinking do we need another tribute to Nelson Mandela.  This post isn't necessarily a tribute as much as it is an opportunity to recap what we learned about fear and courage from Nelson Mandela and how this can be applied to your daily work.

With his recent passing there is no shortage of quotes being repeated from his many public speeches over the years.  There are a couple of quotes that are very relevant to where we are today as a society and a business culture and that I plan to use in the book.  This post will focus on one specifically with another post to follow on the second.

The first speaks to fear specifically.  As a recap of what Mandela had to overcome from a fear perspective to reach the heights that he was able to achieve here is a summary of the ways he had to overcome fearful situations:

• In 1941 he fled to Johannesburg to escape an arranged marriage and found work as a night watchman at Crown Mines, but was fired when the headman discovered he was a runaway.
• In 1947 as his career as an attorney was starting to begin he lost a mentor and daughter in death.
• Working as a lawyer in the anti-apartheid movement, he was repeatedly arrested for seditious activities and, with the ANC leadership, was unsuccessfully prosecuted in the Treason Trial from 1956 to 1961.
• In 1962 he was arrested, convicted of conspiracy to overthrow the state, and sentenced to life imprisonment in the Rivonia Trial.

Despite this and many more hardships underlying the bullet point headlines above he had this to say about fear:

"I learned that courage was not the absence of fear, but the triumph over it.  The brave man is not he who does not feel afraid, but he who conquers fear."

As I have been writing the book Corporate Bravery it there has been a central question that must be answered.  Many want to deal with fear by insulating and inoculating themselves and those they love from the opportunity to experience fear.  And in many ways it is this attempt at dealing with fear that creates its own level of cultural fear in many organizations.  This doesn't mean that we shouldn't try to eradicate situations that create a culture of fear and cause decision making to be driven by it, but that we shouldn't try to avoid situations that are scary in a business context.

Instead, we need to put our employees in situations that can be difficult, and stretch their capabilities.  In a sense interject opportunities for personal fear in a way that allows them to overcome and learn from their decision making processes.  You can never truly make brave decisions unless you have been through the fire and conquered those situations where fear could reign.
 

Fearless at J Crew

What if you could triple the size of your business in 10 years?  Would you be happy?  That could be pretty easy if you were a $1/2 million small business but what if you were J Crew and generated hundreds of millions of dollars in sales in 2003?  That would be an accomplishment.

In a recent article in Fast Company they profiled J Crew with a special emphasis on Jenna Lyons, the President who makes interesting tabloid material in the New York area and in particular the business relationship she has with CEO Mickey Drexler, the former GAP CEO.  That combo did exactly that in 10 years and put J Crew back on the map in the retailing world.

Possibly even more exciting than the result is that they did it by being brave.  They have a risk taking culture with design, understand the value of a long-term perspective, and deeply understand the individuality of their business and the people in that business.  Lets look at their comments from the article for all three areas of bravery.

1. Risk Taking -  one of the key areas that J Crew has been able to revive their brand has been through fresh and exciting design.  But that didn't happen by accident and it took fresh thinking and risk taking to create a buzz necessary to regain its stride:

"Under Drexler and Lyons, J. Crew would become a company of constant and freewheeling experimentation, iteration, adaptation."   

 This is borne out in its constant churning out of new brands that are spun out from great hits and an identification with a niche customer group such as The Ludlow Shop and the Liquor Store that serve as Petri dishes for new products and concepts.

"Before Drexler came to J Crew designers were ordered to develop products that would meet specific merchandising goals.  'We were told we need this bucket and this bucket', says J Crew head of women's design Tom Mora.  'I need a merino sweater that is $48 that has a stripe.' And you are jamming your design into that bucket and that's what you get a design in a bucket.  Drexler told Lyons not only to scrap the buckets but also she says, 'Don't tell me what you're doing, don't show any of the merchants, just go and do it and then show me.' In generating those designs, Lyons' style and manner give her staff implicit permission to take risks."

2. Long-term perspective - Despite spending a little time during the past decade as a public company, J Crew was taken private again 5+ years ago.  It left an interesting mark on their view of how investor pressure creates fear and short-term thinking that is not best for good decision making:

"Its aggravating to be a public company.  People who own stocks could not care less about the long run.  Everyone in the world has a quarterly report.  Your owners and investors are looking for a result.  But it takes 5 or 10 years to build a company." - Drexler  

The article goes on to say, "when I ask Lyons how going private in 2011 helped the company, she immediately cites the freedom to invest more in IT infrastructure - not the first thing you'd expect to hear from a native creative.  'It's hard to make those kinds of capital expenditures when you're public.'"

3. Individuality - In addition to being unique individuals who express their own individuality in a world that can be unforgiving to those who are not the prototypical beauty we get a glimpse of how Lyons and Drexler have been able to create a culture that now only supports individuality but uses it as a competitive weapon.

"When experiments don't work out as well, all Lyons requires is for her staff to assume responsibility 'Jenna really loves people who are themselves, flaws and all"

The last quote from the article doesn't exactly fit neatly into one of the three components of fear cultures but is a revealing anecdote of what creates fear in corporations today.  The quote is from Drexler and speaks to the root of many of the causes of fear in our corporate cultures - and that is protecting what you have....

"America's companies are built to destroy creativity.  If you become the head of a big company today, you're not the youngest person in the world.  You have a contract.  You get a jet.  You have a huge overpaid salary.  You get bonuses.  Do you think that CEO is going to screw around with fast, creative change?  No.  And the board of directors, the last thing they want is someone who's going to change things."

Amazon's Use of Fear

A recent issue of BusinessWeek had a cover story on Jeff Bezos of Amazon.  The article is actually an excerpt of a book on Bezos by BusinessWeek author, Brad Stone.  In addition to being a good historical account of the rise of the company that may actually give Walmart a run for its money it also had a feel good moment by finding Jeff's biological dad and starting the process of reuniting the two men.

While there were a lot of interesting tidbits in the article the thing I found most interesting was Amazon's use (it appears driven by Bezos) of fear as a competitive weapon.

As I read the article I see 4 ways that Amazon uses fear and each are outlined below:

1. Much was made early in the article about the general communications protocol within Amazon.  In addition to the discussion of the infamous position papers that each meeting is required to begin with, is how the CEO's '?' email.  While the intent of the emails are rooted in a relentless drive for customer satisfaction, it appears to have fear-based consequences.  I have been on the receiving end of these types of communications and I am sure if CEOs knew the type & extent of hand-wringing that go on around these types of communication they would think twice before sending.  From the article:

When Amazon employees get a Bezos question mark e-mail, they react as though they’ve discovered a ticking bomb. They’ve typically got a few hours to solve whatever issue the CEO has flagged and prepare a thorough explanation for how it occurred, a response that will be reviewed by a succession of managers before the answer is presented to Bezos himself.

2. Amazon's response to the competition is an area that isn't exactly driven by fear or hoping to capitalize on fear but it is worth noting their approach.  The article focuses on an internal team at Amazon known as the Competitive Intelligence Team.  It is a novel approach of focused, dedicated resources monitoring the activities of the competition.  It is smart to monitor what the competition is doing as long as you can maintain your corporate identity and not just react out of fear.  It appears Amazon understands this balance and the article describes the team as:

focused in part on buying large volumes of merchandise from other online retailers and measuring the quality and speed of their services—how easy it is to buy, how fast the shipping is, and so forth. The mandate is to investigate whether any rival is doing a better job than Amazon and then present the data to a committee of Bezos and other senior executives, who ensure that the company addresses any emerging threat and catches up quickly.

3. The response to the results of this team is where Amazon begins to use fear as a competitive weapon.  The example that BusinessWeek gives is of Diapers.com.  Amazon noticed that they were having a hard time competing with Diapers.com in this particular segment so they pressured and coerced the ownership of Diapers.com to sell to them at $60 million less than what Wal-mart was willing to offer.  The quote from the owners was the following

The [Diapers.com] board convened to discuss the possibility of letting the Amazon deal expire and then resuming negotiations with Wal-Mart. But by then, Bezos’s Khrushchev-like willingness to use the thermonuclear option had had its intended effect. The [Diapers.com] executives stuck with Amazon, largely out of fear. The deal was announced on Nov. 8, 2010.

4.  Amazon doesn't just go after the competition and use threats to get what it wants, it also goes after ex-employees with threats and fear to get what it wants.

Even leaving Amazon can be a combative process—the company is not above sending letters threatening legal action if an employee takes a similar job at a competitor. Masud, who left Amazon for EBay (EBAY) in 2010, received such a threat. (EBay resolved the matter privately.)

A Fearless Cinnamon Roll?

 If you are like me you probably thought Cinnabon was sleepy little chain of mall stores that was tethered to the retailing past but recent articles I read have completely changed my impression of Cinnabon.  It doesn't hurt that its CEO is a great story and a good example of corporate bravery.

Part of this change of mind is because of Cinnabon's Kat Cole.  She has a really cool history which you can read more about in this Entrepreneur article.  She has been active on Twitter and engages customers regularly and has a good grasp on who Cinnabon is and its customers and has a business plan to provide even more for its customers.

I recently read this Q and A in Restaurant News entitled "Cinnabon's President Outlines Growth Strategy" that gives a couple of great insights into how they have resisted allowing fear lead their decision making in two important areas - product innovation and media or public relations.

One of the key areas for growth for Cinnabon is licensing arrangements with consumer brands.  They have 72 such arrangements including Kellogg cereals, Pillsbury, and International Delights to name a few.  Creating partnerships with that many companies for that many consumer products comes with a lot of risks and many brands would never dream of possibly diluting their brand positioning in that way but Kat has some thoughts on that indicating they are not afraid to make a few mistakes and have made smart decisions to limit the possible downsides:

Some people ask questions about all the licensing and co-branding, and certainly we’re not perfect; we’ve made our mistakes. But we’ve had more wins than we have losses, and one of the things we’ve learned is that as long as we pick a partner that is typically No. 1 or No. 2 in their space, and they have the demonstrated ability to deliver a quality that exceeds consumers’ expectations of their product and meets consumers’ expectations of our brand, then it’s a smart move.

The other big question that continues to come up with Cinnabon is the current climate around products with so many calories and the growing concerns around what are called 'indulgent brands' and their impact on waistlines in American culture.  I like how she doesn't shy away from the identity of the brand.  She knows exactly what the brand communicates and doesn't dance around the company's identity:

What’s the future of indulgent brands? How do you justify a brand that’s so indulgent? And I say, look, first of all, we have to have a few agreements. One is that people are going to want to treat themselves. I think most people would agree, whether it’s with burgers and fries or cocktails or doughnuts or whatever it is. The next is that they’re going to want to do that with sweet things. And if you can agree on that, then that says that there’s a place in the market for indulgent brands — ice cream, cookies, cinnamon rolls, whatever it is. That has not changed, actually. Despite all the health trends, we have just had three of the best comp sales years we have had in a decade. Lots of people are buying cinnamon rolls, worldwide. However, what’s changed is they demand higher quality for that indulgence. And of course they want more flexibility in portion size.

She continues on to respond to a common thought process for those critical of indulgent brands:

We have tested whole grain, and you know what? A couple of people think it’s a good idea. A couple, but not enough to make an additional whole product innovation worth it.

A Classic Media Response

One of the eight factors of a fear culture is the media.  While I provide a lot more information related to each of the eight factors in my upcoming book I couldn't let this great example pass by without highlighting it.

You may have heard about the recent fire in a Tesla Model S.  While a car fire should not be a market moving occurrence, this one had a little more meaning.


The backstory;

Tesla has been on a roll lately both in the stock market and in the court of public opinion with the very successful launch of its Model S exceeding sales expectations and the future looking bright for the company as it tries to introduce new lower priced models that can be produced on a more massive scale.  However, the lingering question about the Tesla engineering has been the battery pack and what safety issues may be caused by a battery pack exploding.

This past week we finally found out and within minutes of the story hitting the wire (the embedded video has 3 million views and there are others with a simple Youtube search with similar view numbers) the stock plummeted losing over 10% of its value within a matter of a couple days.  The cry starting to build quickly towards a media statement on the accident but nothing came from Elon swift enough for those in the market and the stock continued to sink.

Then on Friday Elon broke the silence with a master stroke of genius regarding the incident.  He released a blog post detailing the accident along with the emergency response.  You can read the full response at this link but a few key aspects of the response:

1. Elon highlighted the safety features - onboard alert system directing the driver and occupants to exit the car and the firewalls between battery packs preventing the fire from reaching the cabin of the car.
2. Quarter inch armor plating around the battery pack compared to a thin metal sheet protecting the gas tank in a conventional automobile.
3. He contrasted the stats so far with that of a typical combustion engine with a conclusion that is 5 times safer in a Tesla than a typical gasoline powered engine.
4. Provided a copy of the email exchange with the customer where they reinforced that they were very pleased with how everything performed and that they were even more sold on the product

While there was a pressure to rush out a response (even highlighted by the Forbes article linked) to attempt to stem the tide of fear that was building around the company and its engineering they were methodical in gathering all the facts even if it took extra time.  They created a clear, detailed description which added credibility to the message, and then turned a potential negative into a massive selling opportunity by contrasting it with the competition - the traditional automobile.

In full disclosure I just purchased less than 100 shares of Tesla on Monday, but this has been a perfect example of a brave and courageous media response in a situation where fear could have dictated a rushed and inadequate response that would have only created more questions.  It came at a cost as the shares (as of this writing) have not recovered their pre-accident price but they have a long-term perspective not driven by the very fickle short-term whims of the market.

Google's Innovation

Time Magazine this week featured Google's innovation machine and what Google refers to as "moonshots" or innovation that is 10x greater than anything else in the marketplace.

Another key feature of brave companies or corporate leaders who know the face of bravery are those with a long-term perspective.  They understand that enduring companies are built over long periods of time and not quarter to quarter succumbing to investor pressure.

The article had a great quote about Google's view on innovation.  Many companies are more focused on how to incrementally improve on their core products to protect it against competition.  What ends up happening is a myopic view of innovation that prevents companies from making real breakthroughs.  Google's moonshot approach can be summed up in one quote:

"Guys like Larry (Page) don't focus on preserving value; they just work on building new value."

That sounds fine when you have tens of billions of dollars to spend on innovation and create many expensive flops but that can't work for all companies.  But the mindset is an important one and practically, even Google takes a rational approach - they don't just throw billions of dollars at a given category:

"Page has also concentrated on avoiding flops like Wikipedia knockoff Knol and Google Buzz, a Twitter clone almost nobody wanted to use.  He has done this in part by ratcheting down the number of new product introductions and axing existing projects in period 'spring cleanings'.  He has in a memorable phrase, declared his intention to put 'more wood behind fewer arrows'."

The Female Executive You Probably Never Heard Of

Lynn Tilton is the focus of our current post on corporate bravery and there are a lot of brave things to spotlight her for.  Being a single mom and building a private equity empire or focusing on saving American manufacturing jobs could be the focus of her bravery.  But I am using this post to spotlight her individuality.

Lynn Tilton runs the Patriarch Partners private equity firm.  An $8 billion company that has bought or heavily invested in over 70 - largely manufacturing - companies.  If you want a detailed history of how she got where she is (and it is truly a triumph of the American dream) then go to her Wikipedia page.

As I have been writing my book on corporate bravery one of the key aspects of a brave culture that eschews fear-based management is a support of individuality.  Not just for the people who work for the organization but also the organization's identity itself.

As it relates to Lynn's views on her own individuality and how it translates to women in the workforce as a whole:

“I’ve gotten used to [walking in heels like this]. When people talk about me as a Wall Street, stiletto-wearing chick … the stiletto part is right, but I really don’t consider myself Wall Street. I take pride in being an industrialist. I understand that people write about what I wear and what I look like because it’s an anomaly. But to only focus on those things is to really miss who I am. I’m trying to show women that they need to be women in a man’s world.”

And then in terms of the fund's strategy and the laser focused clarity on creating jobs in situations where smaller companies have lost their focus on their core product and their marketplace:

We feel strongly about buying companies that others would throw on the trash heap, as a way to create jobs, to give people the dignity of work. And what I’m hoping is that I’m going to help make manufacturing sexy and exciting again.

Steve Case's Second Act - Legislative Bravery

BusinessWeek recently profiled Steve Case's ascension to similar heights that he once reached during his AOL days over a decade ago.  What I found most interesting about this article is how Steve has performed this feat - by embracing the legislative process and helping shape legislation that benefits his business interests.

One of the key elements of fear-based decision making is the role of regulation in a particular industry. As I am writing about in my upcoming book one of the best ways to be brave in the face of regulation is to get out in front of it.  Embrace the legislative process and be a part of it so you can capitalize on the shifts in the market that regulation creates.  While It takes bravery beyond just being engaged in the legislative process (something I will cover in more detail in a later post) being engaged is the first step.

Steve Case has gotten engaged in spades.  Since his time at AOL & the combined AOL Time Warner he has been engaged in the following ways:

• In early 2011, he was selected by President Barack Obama to serve as Chairman of the Startup America Partnership

• Named to the President’s Council on Jobs and Competitiveness

• Case serves as a co-chair of the Democracy Project at the Bipartisan Policy Center

These are just his governmental roles and doesn't factor into his controlling interest in Revolution and its collection of companies.

According to the BusinessWeek article, "Case has become a genuinely productive figure in Washington—one of the few bipartisans who can take a meeting with the Obama White House one day and congressional Republicans the next, with actual legislation to his credit."

Not only has Steve Case become engaged in the legislative process but in many cases he is help leading the process and has become a good resource for bringing the two sides together into substantive conclusions.  This year's Congress has become known as the most grid-locked and 'do nothing' Congress that Steve has found a role in helping to bring parties together for progress towards goals.

“He’s really become a very serious and effective advocate,” says Gene Sperling, director of the National Economic Council. “He is not a flash in the pan. He is focused. He is substantive. And he stays at it. There are not that many people who are willing to make a real ongoing commitment of their personal capital to learning the ins and outs of our sometimes crazy world.”  In Case’s political work, there are shades of how he built AOL—not with blazing charisma, but through extreme persistence, taking every meeting and being content with the good instead of the perfect.

Not only is Steve not afraid of the political process but he has embraced.  He has spurned silicon valley as a home and has put down his roots in the Washington DC area where he can be closer to the action and be more effective:

The simplest reason for politicians’ embrace of Case may be that he does not hold them in contempt, the way much of Silicon Valley seems to do. In caricature, tech leaders are libertarians who like to “move fast and break things,” as Facebook’s credo goes, and who look down on people in Washington as their constipated opposites. “They have a total disdain,” says Mark Warner, the Democratic senator from Virginia. “It’s always good to have a healthy disdain for politics. But there’s almost this naive arrogance to it, in the sense that they don’t really want to know how hard it is to get from A to Z.

Case has had a lot to gain personally for all this effort, not just on the Venture Capital side for Revolution but also some of Revolutions's core businesses depend heavily on the flow of foreign workers that are at the heart for his most recent push towards a compromise on immigration reform.

A grateful VC industry is on the receiving end of Case’s efforts. The JOBS Act contained multiple sweetheart provisions for technology companies

At the heart of all this work is opportunity.  Not just to create a stronger legacy but to find new frontiers for his cash and better returns.  His access and influence in Washington allows him to think more strategically about where his investments should flow and capitalize on the likely outcomes of emerging legislation:

Legacy or no, Case sees a huge opportunity at the junction of his two passions, entrepreneurship and policy. He recognized, when few others did, that the Internet would become part of everyday American life, remaking everything from personal finance to advertising. Now Case argues that the last few industries on the brink of being revolutionized by the Internet—health care, education, transportation—happen to be ones in which the government plays a gigantic role in purchasing and rulemaking.

Brief Departure for Thoughts on 9/11

I know we generally talk about corporate bravery on this site but today is reserved for bravery of another kind.  Twelve years ago today many first responders in NY and DC risked their lives and many eventually lost them in a terrible attack on our country.  While you might think that I would reserve this post to salute those men and women who did risk their lives (and I do) the other heroes from that day are all of you for continuing to live your lives without fear of commercial flights, large public gatherings, or anywhere else that terrorists have sowed the seeds of fear.

While sadly, we continue to lose freedoms and sink into an ever more dreadful march towards fear, the United States wasn't founded with that culture but rather one of bravery.  Those early pioneers had a lot to fear but they persevered despite a long and uncertain sea voyage.  Our ancestors persevered despite the British desire to hold onto us as a colony, and again in the face of tyranny and destruction that was the Nazi party and eventually led us into world wars.  They persevered through famines and economic crashes and each time bounced back stronger than before.

So I salute every American today who continues to live their lives without fear of bombs and without feeling the need to add layers of security that only provide a false illusion of safety.

Corporate Bravery's Tribute to Breaking Bad

I ran across this great article about David Gilligan, the creator of Breaking Bad, my favorite show on television (just making my biases known), and the managerial lessons we can learn from television show creators in Fast Company magazine.

Some of the highlights include

• The relationship of the runner, the second in command, and the creator and how that relationship is critical to the success of the show.
• Management styles in general for show creators
• How the creative process can be successful

I will leave you with 1 good quote from the Q&A session that highlights the fact that a successful show must have writers without a fear of rejection / failure - but the article as a whole is a must-read:

A show runner needs to create a safe space. To be a writer in these rooms is to be rejected constantly. It’s brutal. So the ability to inspire people despite rejecting them is really important. A writers room on the one hand is a professional atmosphere, but it’s immensely fraught with all the things you think would happen if you put a bunch of creative, neurotic, striving, competitive, insecure people in a room together and told them to bare their hearts and face rejection or acceptance.

The Culture of Costco

I hate feeling like I am just on a bandwagon and I generally like to move in the opposite direction of the crowd but Costco is one company that isn't a fad, rather has consistently produced results year after year.  Yes, it may be a darling of wall street but there is a reason for its impressive performance and I would like to focus on the cultural aspects of this performance in this post.

Once again a BusinessWeek article is the focus of the content for this post and their recent article entitled "How Cheap is Craig Jelinek?" - focused on the CEO of Costco.  As you read through notice the following ways that the Costco culture is one of corporate bravery.

1. Employee culture - pay nearly 2 x industry average.  No massive downsizings during the recession has led to some of the most engaged employees in retail.  Result is employees have less employment anxiety.  Another example of this is the health benefits provided to their employees:

Costco workers with [health] coverage pay premiums that amount to less than 10 percent of the overall cost of their plans. It treats its employees well in the belief that a happier work environment will result in a more profitable company. “I just think people need to make a living wage with health benefits,” says Jelinek. “It also puts more money back into the economy and creates a healthier country. It’s really that simple.”  In February, Jelinek set Costco’s convictions in ink, writing a public letter at the behest of Nader, urging Congress to increase the federal minimum wage for the first time since 2009. “We know it’s a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty,” he wrote.

2. Costco doesn't have teams of public relations and corporate attorneys like many corporations do when they reflect their corporate fears of lawsuits, bad press, and the sometimes negative consequences of someone grinding an axe.

Costco has no public-relations staff. Jelinek conducts an interview with a journalist alone, an anomaly at major corporations, and afterward Costco Chief Financial Officer Richard Galanti calls to inquire whether the boss inadvertently said anything negative. Sinegal returns a reporter’s phone call on a Saturday morning, leaving his cell number.
In February, Tiffany (TIF) filed a multimillion-dollar trademark infringement suit against Costco alleging it improperly labeled merchandise as “Tiffany engagement rings.” Galanti calls it “an honest mistake” and says they should have been labeled “Tiffany-style.” The suit is pending.

labeling something an honest mistake would be a major no-no in a company driven by legal fear as it implies some level of culpability.

3. They are not overly driven by fear of their competition..... although the BW article include wariness towards Wal-Mart's overall size and Amazon's web capabilities but the focus of those comments were more around concerns about consumers' shifting habits.

“They are buying and selling more olive oil, more cranberry juice, more throw rugs than just about anybody,” says David Schick, an analyst at Stifel Nicolaus. And that allows Costco to get bulk discounts from its suppliers, often setting the industry’s lowest price. Even Amazon can’t beat Costco’s prices, which means that “showrooming,” or browsing in stores but buying online for the better price, isn’t much of a concern for Jelinek.

It is because they know who they are and how they best compete in the marketplace.  This extends to their vendor relationships as well.  Even though a product would be great for their customers - if the vendor places restrictions on the sale that do not match how they go to market they have a stern response:

Costco is sensitive to any perceived slights from its vendors. It canceled a relationship with Apple (AAPL) in 2010 because the company wouldn’t sell it anything other than the iPod, and wouldn’t allow it to sell any Apple products online. It has also at times curtailed its sale of products from Sony (SNE) andPanasonic (6752:JP) over such issues.

4. They are not driven by investor fears as demonstrated by this excerpt from the BW article regarding wage increases during the Great Recession and investor pressure to do otherwise.  They have a long-term perspective and are focused on doing the right thing for the employees even at a detriment in the short-term.

Costco went public in 1985, and over the years, Wall Street repeatedly asked it to reduce wages and health benefits. Sinegal instead boosted them every three years.
As the economic downturn worsened in the fall of 2009, Costco, like every other retailer, started seeing declines in same-store sales. Macy’s (M), Best Buy (BBY),Home Depot (HD), and Office Depot (ODP) were resorting to layoffs and wage cuts, but Sinegal approved a $1.50-an-hour wage increase for hourly employees, spread out over three years. “The first thing out of Jim’s mouth was, ‘This economy is bad. We should be figuring out how to give them more, not less,’ ” says CFO Galanti, who adds that Sinegal’s decision to parcel out the raise in three annual 50-cent increments, instead of more gradually, cost an extra $20 million. The founder’s stubborn resolve remains a point of pride. “Could Costco make more money if the average wage was two or three dollars lower?” asks Galanti. “The answer is yes. But we’re not going to do it.”

Why is culture so important?  Because all of these examples where decision making wasn't being done out of fear - rather out of conviction and knowing who they were as a corporation occurred during and after a CEO change from the original founder.  Organizations who do not have a full appreciation for who they are quickly change their behaviour once the previous leader has moved on and that has not occurred with Craig Jelinek (pictured below - right).

Tesla's Elon Musk

This week's profile in corporate bravery is Elon Musk of Tesla motors.  If you haven't heard of him by now you must be living under a rock.  He is an eccentric innovator - most recently making headlines for his hyperloop idea and also known for his space company and his intergalactic aspirations.  I know, it sounds a bit like Sheldon from the Big Bang Theory but instead he is a billionaire with a really good business strategy in the automotive space.

Tesla has been on a roll recently and the stock price and media coverage have followed.  Including the basis for this post - the recent BusinessWeek article on Tesla entitled "Why Everybody Loves Tesla".
I am not going to focus on why everybody loves them though and instead focus on all the 'brave' things they are doing as a business - led by Elon who dares to do things differently.  To underscore this philosophy the article includes this quote from Consumer Reports after giving their Model S a 99 out of 100 rating:

"It’s what Marty McFly might have brought back in place of his DeLorean in Back to the Future”

Tesla's business strategy has focused on all the things that prevent people from buying not only a new car but also an electric car including:

• Range of an electric charge and re-charging - by pushing the envelope on innovation of batteries and creating an entire network of refueling stations.

"Higher-end versions of the Model S can go up to 300 miles on a charge, which has helped separate Tesla from rival vehicles such as the Nissan Leaf, which run about 75 miles before needing more juice. Musk has hinted that Tesla has a 500-mile battery pack in the works. At the company’s solar-powered Supercharger stations, Tesla owners can replenish about 200 miles of range in 20 minutes for free. (Most electric cars take hours to recharge.) Or customers can opt for the battery swap, which will cost about what they’d pay for a tank of gas, and be back on the road in 90 seconds." 

• Integrating software and hardware for a seamless driver experience.

"Even the flaws of the Model S seem to resonate with geeks. Early versions of the outside handles malfunctioned—they sometimes wouldn’t extend out of the door—and the windshield wipers seemed to have a mind of their own. Tesla fixed those and other problems with a software upgrade delivered via the car’s high-speed wireless connection. An engineering leader at Ford says he’s envious of what Tesla has achieved by starting from scratch and interweaving software on the touchscreen with the vehicle’s internal systems. “The level of integration that the software has into the rest of the Model S is really impressive,” he says."

• Creating a direct to consumer strategy for car sales

"Unlike every other major car company, Tesla has also kept its retail business in-house. It’s trying the Apple model of placing its own stores in high-end malls and shopping centers instead of relying on dealer franchises. Salespeople, who don’t receive commissions, help buyers configure their cars on giant touch screens." 

• An innovative insurance program that guarantees the value of the vehicle over the long-term
• Maintenance program that includes pickup service and only minimal necessary maintenance

These are all ways that Tesla didn't listen to conventional wisdom; they weren't afraid of perceived advantages that the large, legacy car makers had and they weren't afraid of challenges they would encounter from various stakeholders that would have their very business models disrupted.  As the BusinessWeek article points out they will continue to see challenges but it isn't likely to stop them from continuing to push a business model that they believe is likely to be successful in the long-term.

There’s also the possibility that Tesla is overdoing it with the high-tech whiz-bang. The 17-inch touchscreen, for example, is equipped with a Web browser. Distracted driving laws vary by state, but obviously no one behind the wheel should type out Internet searches in a moving vehicle. There’s no stopping determined drivers from trying. Tesla’s in-car technology “is almost too good,” says Munley. “Detroit is leery about it, and would never go that way for fear of safety and lawsuits. We’re all waiting to see if there are accidents.” Meanwhile, car dealers around the country see Tesla’s direct-to-consumer sales as a violation of laws that separate car manufacturing from selling, and are engaged in a statehouse-by-statehouse lobbying effort to block the company from opening its own stores. 

Ursula Burns - Xerox CEO

Meet Ursula Burns, the current CEO at Xerox.  She was the first African American woman to head a Fortune 500 company and the first woman CEO to succeed a woman CEO.

While those accomplishments alone would be strong enough to qualify as a trailblazer, there are many other things about her ascension to Xerox that buttress that label.  I was introduced to her recently by the BusinessWeek issue on interviews.  During the interview she had a couple great quotes that hit at a couple of factors that influence the level of fear in an organization and influences the culture of corporate bravery among managers and leaders.

The first is individuality which she embraces and nurtures.  On that aspect she has this to say about how that aspect of corporate culture at Xerox helped her become the leader she is today,

Q: You’ve said Xerox (XRX) was a company where you could grow into yourself. What does that mean?A: They didn’t try to spend a lot of time trying to make me into something else—kind of fit into whatever would have been a normal hire. When I first entered the company, they just thought I was smart and said, “You go do some stuff.” And they kept giving me things to do. 

She continues in the interview with a great response to a question on failure,

Q: And you’ve said it takes a long time to recover from mistakes.A: We’re going to make mistakes. We just try to make mistakes where you can make them fast, so you’re not five years into the damn thing and realize, “Oh my God, that was a bad move. And we just threw billions of dollars after it.” Fail fast and make sure that you fail early. So the challenge is this whole balance.

While they may not embrace mistakes they understand that mistakes are a key part of the trial and error process that creates breakthrough products, services, and business models.  It appears to be a culture that doesn't punish mistakes and stifle creativity.

Blackrock's CEO on Fear in the Global Economy

Meet Larry Fink, CEO of Blackrock - one of the largest asset managers in the world.  While not exactly the bravest sounding name he drops a few quotes in the most recent issue of BusinessWeek that shows he knows bravery in the face of fear.

When asked about longer life expectancy and the impact of living an average extra ten years and its impact on public policy, public pensions, retirement saving, and working longer and how the public's perception of retirement in the face of the longer life expectancy he had this to say.

Q: Are fear and alarm the best way to fix this problem?

A: No. It’s talking about the blessing of longevity. I mean, I’m surprised at how much we spend and read about having better health, whether it’s more exercise, and whether it’s taking omega-3 pills, eating more healthy, having preventive health care.

Whereas the financial services community feeds off of personal fear, Fink runs the other direction with the question and challenges everyone to focus on the blessing of a longer life.  He follows it up with this Q and A:

What would you say is the biggest enemy of adequate retirement savings right now?
One of the key elements of human behavior is, humans have a greater fear of loss than enjoyment of success. All the academic studies will show you that the fear of loss of capital is far greater than the enjoyment of gains. You have seen most individual investors underinvest, because they’re so frightened of losing money.

He continues the theme by admonishing us to let go of fear and begin to embrace the possibility of success.  Blackrock isn't going to sell fear - they have a very long-term perspective as shown by his last comment.

You manage $4 trillion worth of assets, but you’re not Wall Street?
What Wall Street is, they’re market makers. Wall Street’s business model is making money on velocity of money. They’re a click industry. That’s what Wall Street is. They make a lot of money when there’s a lot of turnover. And they make a lot of money when that velocity is fast. The investment management business, we don’t make money on clicks. Actually, our returns degrade when we buy and sell a lot because we pay commissions to Wall Street. So our job is long periods of holding. 

TedX Talk on Fear by Karen Thompson

I ran across this TedX Talk by Karen Thompson recently and I wanted to share it with you.  Karen Thompson is the author of 2012 book The Age of Miracles, a young girl and her family awake one morning to discover that the rotation of the Earth has suddenly begun to slow, stretching the length of the 24-hour day and throwing the natural world into disarray.




Karen's talk focuses on a story of American sailors with a troubled boat that eventually became the basis for the story Moby Dick.  With a broken boat in a remote part of the Pacific Ocean they are faced with a choice between 3 options to survive.  The first is take the closest route to land and end-up somewhere near modern day Tahiti where they have heard stories of cannibals.  The second option is a more intermediate route to modern day Hawaii which in the current season will face certain storms and rough seas.  The third is the longest route towards South America where it is certain they will run out of food and face likely starvation.

Like any good story, her story of the men of the Essex can teach us some important lessons about the impact of fear in a corporate context - specifically its impact on decision making.  The basic premise of her talk boils down to three things:

1. Fear can be profound and imaginative and that some of the best minds in history were haunted by intense fears
2. We should think about fears as stories with characters and plots that make us think of the future
3. By thinking of fears in this way we can apply a filter of better reason to our fears and improve our decision making

While not necessarily wrong, Karen points out the benefits of fears but almost seems to glorify fears as a motivator above the negative realities of our fears.  She references a study of fears in entrepreneurs and glorifies how they study fears and put plans in place for the fears which they think are most likely to come true.  But how much time, effort, resources, and emotional energy go into this process?  These are resources that could have been used to move their business forward and in some cases could even be preventing them from being successful, much like the men of the Essex.

She mentions that sometimes fears do come true but they are statistical anomalies.  Take a look at the picture below that outlines the chances of dying in the following ways.  Notice the paradox that exists between the chances of dying in a horrific way that fuels our fears versus those that are the result of everyday habits.

Much like the men of the Essex, corporations must pay attention to the more subtle and realistic problems facing them and that starts with the components of culture that create a fear mentality so that when faced with a possibly life threatening problem (a manifestation of a fear) you are not distracted by all the other possibilities (that are oftentimes more remote in likelihood) and you stay focused on the task at hand for the best possible outcome.

The Cargill Approach to Fear

This Cargill article from Fortune magazine is an oldie but a goodie and focuses on a few elements of the Cargill culture that keeps them thinking about the long-term and away from fear-based decision making.

First about their organizational structure - they are still a family-controlled private company.  It is not led by a family member and they have nearly equal 1/3 representation on the board which keeps the family from running amok:

Cargill introduced a limited employee stock ownership plan in the '90s that allowed some family members to cash out. However, roughly 100 descendants of the founders still own around 90% of the stock, worth some $52 billion as of the last official tally. Generally, they've been content to plow profits back into the business and watch the value of their asset grow. Dividends are calculated on a rolling two-year cycle and paid at a rate that Page describes as de minimis. "The capital's not only private," he says, "it's patient and permanent."

I love the CEO's comment at the end of this quote about the capital being patient and permanent.  A common theme for those organizations that are brave in the face of fear.

So how does this patient capital have an impact on business strategy?

"As far as how our corporate strategy works," says Conway, "we don't say, 'We think the world's going to look like this, let's define our strategy for that world.' We say, 'We don't know what the world's going to look like. We need a strategy or a set of strategies that can be successful almost irrespective of what the world looks like.'"

The article goes on to describe how this has played out with a few examples including taking a leading role in converting Vietnam's agriculture economy and introducing new cash crops that can grow well in that environment.  This effort not only provided Vietnam with a new export option (a byproduct was taking them from a largely net importer to primarily net exporter) but solved a big issue for the world supply chain for cocoa.

How does the play out in the face of adversity?

As mighty as Cargill may be, it is not immune to setbacks. In fact, the company's fiscal 2012 is off to a dismal start. Revenues rose 34% in the quarter ended Aug. 31, but earnings were down 66%. That after earnings rose more than 60% in the first quarter of fiscal 2011.  Page blames a perfect storm of unforeseen events: spring flooding in the Midwest (Cargill spent $20 million to prevent the Missouri River from washing out its corn-milling plant in Blair, Neb.); the salmonella outbreak in its turkey plant, which led to a partial shutdown and layoffs ("instead of a business that was making money, we have one absorbing the costs of the recall"); a significant wrong bet on a single, unnamed commodity; a "risk-on, risk-off" market environment that otherwise neutralized Cargill's vaunted trading expertise; and, above all, the global recovery that wasn't. "We underestimated the degree to which the world was gonna back up," says Page.  Remarkably, though, Cargill didn't slow down. The company maintained what Page calls a "big acquisition agenda,"

Even with a culture that eschews fear it doesn't mean that their management team is immune from fear-based decision making or contributing other factors to a culture of fear:

Page may not be under pressure from the family shareholders, but that doesn't mean that he is unworried about the future. The real threat to Cargill's long-term prosperity, Page says, is that forces beyond the company's control will infringe on its freedom to operate across markets. Cargill is clearly concerned with the way the global conversation is bending on food security. "You don't want to end up with policies that are counterproductive to feeding everyone," says Page, "and we don't want to end up with a business model that doesn't have any freedom to operate."

Nancy Dubuc - A&E Networks

Our first business leader profile comes from the June 20th issue of BusinessWeek chronicling the amazing business success of A+E Networks.  It is a great read on a business that has had fantastic success the past few years but also profiles Nancy Dubuc, the CEO of A+E Networks, parent company of A&E, History Channel, and Lifetime.  The article gives us some great quotes about the place fear has in the corporate culture of A+E as well as the role fear has played in Nancy's success:

While on maternity leave in 2007, Dubuc got a call from her mentor, Abbe Raven, then-CEO of A+E Networks. Raven asked Dubuc to return to History to run the channel. Turning around a struggling cable brand takes a willingness to experiment and a capacity to survive public flops and inevitable criticism. “Nancy is willing to take chances,” Raven says. “You either have that or you don’t.”  Dubuc says her fearlessness is a result of the years she’d spent at A+E, where executives could take programming risks without worrying about losing their jobs if a new series tanked. It was timidity, she says, that was frowned upon. 

Additionally, there is a great quote about what makes A+E successful when compared to the industry and the role fear plays in that success:

When Vikings was in production, he says, Dubuc did what too few TV executives are willing to do—she left him alone. “Normally on a show, the networks send a lot of executives to try and control, spy on, and influence what’s being made,” Hirst says. “There was never a question about that with Nancy.” He adds, “The industry is driven by fear. People don’t want to fail. They have huge ambitions, but they’re afraid that the show won’t work. That’s why they start interfering. It’s their fear that starts screwing everything up. By not being afraid, by trusting people, you get the best work back. Nancy isn’t afraid of anything.”