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Confronting The Communications Paradox: The Role of Social Media for Leaders

It was the evening of June 25 at precisely 5:56 Eastern Time when I, once again, came face-to-face with the Communications Paradox. As I was preparing to introduce myself to a cohort of executive MBA students for whom I would be teaching strategic management, one of the students announce to the group that Michael Jackson was dead. Several others reached for their smart phones and notebook computers for confirmation. It wasn’t until later that I realized that I was witnessing the Communications Paradox.

Over the years I have observed that the single biggest challenge for any leader is effective communications. Regardless of the organization, the most common complaint expressed by stakeholders is insufficient communications. Even the most diligent leader seems unable to communicate quickly, frequently or completely enough to his or her constituents. But if a scandal occurs, word spreads at the speed of light. That is the Communications Paradox.

Five hours after my class began on June 25th I learned that Michael Jackson was pronounced dead at 2:26PM Pacific Time. Even though it occurred some 2,730 miles from our classroom, my students were discussing his death a mere 30 minutes after it occurred. This was well before the major networks and news outlets reported it. It was then that I realized I had once again encountered the Communications Paradox, driven by a convergence of technology and keen interest.

Just as the Internet and social media have changed the face of journalism forever, it is also changing the way companies relate to their customers. Two weeks ago I led a panel discussion that touched on the importance of social media in today’s business world. One of the executives on the panel described his active involvement with the various social media outlets for purposes of customer relations, and consumer and industry communications.

The obvious temptation is to presume a leader can improve the efficiency and effectiveness of communications by merely introducing social media tools into his or her tool bag. Before jumping to this conclusion it might be helpful to look back to the early days of Enterprise Resource Planning (ERP) solutions.

Not too many years ago, ERP was heralded as the business savior. Companies of all shapes and sizes were willing to invested millions implementing ERP solutions, and companies like SAP and Oracle were more than happy to oblige. All too often, however, these solutions failed to deliver the promised returns. As such, company executives and business pundits were quick to assign blame to the technology. While consultants and solution providers were culpable, the primary blame rests with the company leaders. Quite simply, they attempted to introduce new technology tools without introducing the business process, and management, changes necessary to leverage these new technologies.

Before fully embracing social media to shore up company communications, the leadership team should answer the following questions:

1. Have we democratized company communications, or are our communications typically top down? If the leadership culture is one that believes it is important that company communications are closely and centrally managed, social media tools may increase the quantity of communications, but not the quality or effectiveness of communications. The unprecedented swell in social media is largely due to its democratic nature, where all stakeholders have a voice.

2. How do we handle media inquiries today? If all media inquiries are referred to your “company communications” team, introducing social media tools likely will not enhance communications. In the wake of the recent, well-publicized, corporate malfeasance, stakeholders are demanding more and more transparency. Social media tools provide an excellent platform for transparency, but only if company leaders are willing to risk spontaneity of communications.

3. Do we have a shared vision among the entire leadership team? If not, the risks associated with spontaneous transparency can be significant. The only thing worst than sluggish communications is providing stakeholder with conflicting messages.

4. Do we have a company culture that encourages healthy debate? Part of the allure of New Media is its provocative nature. Stakeholders want to be heard, and want their opinions to be voiced. As long as everyone in the organizations understands they are on the same team, and working toward the same over-arching objectives, ongoing debate and dialogue is healthy.

In the final analysis, leaders who are prepared to leverage social media as a tool to help overcome the age-old problem of effective communications are better positioned to succeed.

©Mark P. Loschiavo

Entrepreneurial Rhythms: Building a Scalable Business

If you think it is common to build a scalable business, you may find the following statistics, from Verne Harnish’s book, Mastering the Rockefeller Habits, startling.   Of the roughly 23 million firms in the US, only 4 percent get above $1M in annual revenues.  Of those firms, only 1 in 10, or .4% of all companies, ever make it to $10 million, and only 17,000 firms exceed $50 million.  Finally, only 500 firms exceed $11 billion in annual revenues.

Harnish goes on to assert that there are three barriers that prevent scalability in firms:  Leadership, lack of systems and structures, and market dynamics.  Under the category of leadership he has this to say.  “To make more than just a lot of noise in your business, you’ve got to have rhythm.  And the faster you want to grow, the faster you have to pulse.  At the heart of executive team performance is a rhythm of tightly run daily, weekly, monthly, quarterly, and annual meetings—all of which happen as scheduled, without fail, with specific agendas.”

If all those meetings sound less than entrepreneurial, he follows the metaphor of the freedom expressed in Jazz.  “At first glance, all you see is the improvisation.  But if you study Jazz or talk about it with somebody who really knows the idiom, you soon realize that there is a rock-solid rhythm and a set of rules underlying all that passionate free-styling.  To come together and create something amazing, all players must understand jazz’s basic structure and agree to work within it.  They have to know the key and the time signature.  They have to establish how many bars are theirs for a solo (usually eight), and they need to know who to take the hand-off from….For growing companies, when meetings are the rhythm and agendas are the rule, pros and unknowns can come together to create something new and marvelous.”

Harnish is not talking about the endless, often pointless, meetings many of us have endured in the past.  If order to ensure rhythm these meetings need to be on time, agenda driven, and full of purpose.  I sit on the advisory board of one of the start-up ventures at the Baiada Center.  Each Friday evening, without fail, the advisory board receives an email from one of the founders of CityRyde, detailing the accomplishments from the week, and how each accomplishment links to a strategic objective for the company.  It has become so predictable that I find myself checking my Blackberry each Friday evening at about the same time for this update.  This weekly ritual has gone a long way toward helping the team develop a rhythm for the company.  I have seen first hand how that rhythm has helped CityRyde build and maintain momentum, even in the most uncertain and ambiguous times.

In the book, The Rhythm of Business:  The Key to Building a Successful Business, David Rottenberg and Jeffery C. Shuman have this to say:

“Whether in art, song, dance, literature, sports, love or recreation, all human activity follows a rhythm.  And not surprisingly, this rhythm also runs through business, rhythm is basic to how business functions.  Most simply, the rhythm of business is attempting to develop a product or service that fulfills a group of customers’ wants and needs, testing the product or service in the marketplace, learning from that test, and then refining the product or service to more accurately fulfill your customers’ wants and needs.”

Rottenberg and Shuman explain six basic requirements to developing the rhythm of business:

  1. You need, at least, some natural skills.
  2. You need to work hard and practice.
  3. You need a basic understanding of the mechanics of the business you are in.
  4. You need to gather information about your business.
  5. You need to constantly think about your business.
  6. You need to love the business with a passion.

The American Heritage Dictionary defines rhythm as, “The regular patterned flow, the ebb and rise, of sounds and movement in speech, music, writing, dance and other physical activities, and in natural phenomena.”

In the August-September, 1994 issue of Earth Star, Layne Redmond wrote an article entitled, When The Drummers Were Women.  In that article Redmond claims, “Rhythm is undeniably the structuring basis of life on this planet…The sun’s rays create the primary rhythms of rest and activity, of growth and decay, of life and death…Realizing that healthy living things are not only internally rhythmic but are also synchronized with their environment, the earliest communities of humans based their survival on keeping track of these rhythms.”

Larry Bird attributed his success in basketball to, always knowing where the ball was going to be, and Wayne Gretzky attributed his success in hockey to skating to where the puck is going to be.  Doesn’t that sound like rhythm?

The Rhythm of High Performance Teams
High performance teams thrive on collaboration.  Rhythm becomes essential where high levels of collaboration are needed.  I recently had the opportunity to witness the Chester County Youth Orchestra give a performance, which provided an excellent example of collaboration.  Although the orchestra was comprised mostly of K-12 students, the audience was treated to some very sophisticated pieces, typically reserved for more mature orchestras.

During a particularly challenging piece I was struck by the importance rhythm played in their ability to collaborate.  What I experienced was musicians knowing exactly when to come in and out of the piece.  One section would finish runs of other musicians, with the Bassist playing the first five notes of the run, finished by the Cellist playing the last five notes.  These musicians were demonstrating seamless hand-off.  If you were to close your eyes, it would sound like one instrument.  It reminded me of the competitive advantage that comes when business partners and participants in the value chain create a rhythm that allows for the seamless handoff of business activities, so that it looks to the customer that they are getting one stop shopping.

The Rhythm of Purpose
In an article entitled The Passion and the Rhythm of Business, Melody Campbell describes the importance of having a clearly defined and easily communicated purpose for your business.

“This is where the “rhythm” of business comes in. You must have a formula, a plan, that when applied to your business with the discipline of an athlete in training – organized, finely tuned, and flawlessly executed every day of your business life – will reward you with steady growth. I’m talking about the mechanics of how you bring your customers in; how you service them when they’ve done business with you once; how you keep them so loyal they’d rather `fight than switch.’”

Campbell goes on to articulate the need for clearly identified tasks that become your daily money making activities that keep you from getting off point with busy work.

“For example, you might have on your list the following:

  • Contact 5 new prospects each day
  • Call 5 previous customers each day
  • Create 1 new alliance relationship
  • Follow up on 2 current alliance relationships
  • Add 5 new link swaps to website today.

With a list like this – if you’re just not up to doing business as usual you can give yourself the day off if you do the list. It’s remarkable what transformation you will go through if you create a list like this. Your business will grow daily and you will pull yourself out of ‘the glooms’ more often then you might realize just by going through the motions.  Remember, when the passion of your small business seems gone, look to your purpose, and put the rhythm of your plan to work for you.  When the success is steady it will create the passion again.”

The Rhythm in Music
When listening to a basketball being dribbled, I am reminded that rhythm can be found just about anywhere.   As an integral part of nature, rhythm is found in raindrops falling, waves crashing, a horse’s gallop, a beating heart, or a person’s gait.  It is no wonder that rhythm is what makes music move and flow.  Music is made up of sounds and silence that form a pattern of sound.  Rhythm in music is dependent on the fact that humans recognize a beat occurring at a regular interval.  Rhythm in music is more than just a beat, however; it is the way that sounds with differing lengths and accents can combine to produce patterns in time, which contain a beat.  These sounds do not have to be particularly musical; striking almost anything can make rhythms, as long as there can be difference in accent.  Differences in accent can mean different sounds or just different amplitudes.

It is common to speak of a particular rhythm, referring to a pattern of note lengths, which occurs in a piece of music, and it is important to understand that the rhythm is defined by the pattern.  While the tempo could vary from performance to performance, the rhythm remains the same.

The Rhythm of Building a Scalable Business
Much like in music, in order to build a scalable venture you must maintain a rhythm that, when consistently applied, allows employees to stay on track.  This requires the consistent rhythm that comes from planning, directing, control and culture.  These four concepts provide the antidote for two of the three barriers described by Harnish:  leadership and lack of systems and structures.

Many businesses start through the efforts of a single individual.   When this occurs, the individual looks much like the solo singer/songwriter.  If the entrepreneur is skilled, he or she may have the necessary ingredients for a successful offering.  As a solo artist, tempo, pace and rhythm are at the discretion of the entrepreneur, providing them a great deal of freedom and flexibility.  Although rhythm is required, it need not be too structured or predictable.

Much like the solo artist, solo entrepreneurs are typically faced with limits to their ability to grow.  While a solo musician may offer great appeal to a particular fan base—I never tire from James Taylor’s One Man Band, or Joe Pass’ Virtuoso—his or her breadth of appeal may be limited.  In the case of James Taylor, some fans may want to hear his songs played with different instrumentation.  Although Joe Pass is arguably one of the greatest jazz guitarist of all times, some folks might like to hear the lyrics associated with the Jazz standards he plays so expertly.  Likewise, when a business tries to scale, it often needs to build a team, find suppliers, partners and other affiliates, in order to meet market needs.  Once the business moves beyond the sole proprietorship everything changes, which requires rhythm.

In a recent panel discussion, I spoke with Thom Elicker, visiting professor at Elizabethtown College, on the subject of rhythm.

Loschiavo:  What does it mean for an organization to have rhythm, and when and why is it important?

Elicker:  Organizations having rhythm means many things:

First, it means setting a beat everyone follows – having a structure, not rigid and inflexible, but one everyone knows and understands.  Like a budget – how we’re going get there.  In other words, planning.

Second, it means predictability – being consistent, not changing the beat mid-tune.  Having consistent quality products and services for customers, reliable pricing, consistent delivery patterns, and treating employees fairly.  For example, not changing the rules for how employees earn a bonus in the middle of the year.  In other words, directing.

Third, it means everyone is in sync following the beat – everybody understands the corporate goals and objectives.  For example, having clearly defined hiring practices, having clearly defined accounting controls.  In other words, control.  By the way, this is much easier to do when a company is small.  It gets more difficult as you add people.

Which brings me to culture.  Every company has a unique beat.  It is a certain way they do business.  Some are more laid back.  Some are more rigid.  The beat may actually change over time, as a company goes from being a start up to a publicly traded company, but it is the beat that helps to define the culture of the company.  People identify the beat with the company and sometimes if the change in beat occurs too quickly, the company may lose its rhythm, temporarily.  For example, when some of the Big 4 accounting firms merged in the 1990s, cultures were disrupted and had to be re-defined.     The same is true in music.  Remember the Bee Gees?  They started as a British Invasion type band, disappeared for a while, and then re-appeared as the stars of the Disco Era.

Loschiavo: How does an organization stay in rhythm?

Elicker:

  1. By having the mission statement regularly re-enforced – leaders walking the talk, corporate retreats, webcasts, newsletters, etc.
  2. By focusing on what made them successful in the first place – by surveying customer and employees to be sure they are still on track.
  3. By establishing some specific measures of success and monitoring against them.

Loschiavo: What’s a potential cause of a company getting out of rhythm?

Elicker:  Growth and more specifically, diversity.

Loschiavo: So is it good for a company to get off beat temporarily and redefine its rhythm?

Elicker:  Yes!  This frequently happens during periods of growth and adding people with different backgrounds – in other words, making the organization more diverse.  There are several advantages to being a more diverse organization:

  1. Increased adaptability – can supply a greater variety of solutions to problems in service, sourcing and resource allocation.  There is no one best answer to a question.
  2. Broader service range – being better able to provide services to customers on a global basis.  Be in a better position to understand the demographics of customers they serve –increasing market opportunity.
  3. Increase in productivity – different cultures may bring different skills sets – bring insights previous managers may have overlooked.

In fact, a study conducted by the Society for Human Resource Management found that diversity has led to improvements in employee morale, retention and recruitment.  But it is not without its challenges – Organizations need to learn how to manage differently.

  1. Communication could be a problem – culture and language barriers
  2. Resistance to change, caused by prejudice of some employees – could lead to turnover, harassment and other legal issues
  3. Costs – legal and revamping offices to accommodate people with disabilities

But, all in all, increased diversity in an organization – “changing the beat” – is typically very advantageous.

With a solid rhythm that comes from effective planning, directing and controlling, and with a well-defined culture, an organization can not only overcome differences in style, but can learn to leverage it to me more successful.

According to Bob Wilson, Vice President of Sales for Disc Makers, “In music you have to keep the beat.  That’s called rhythm.  In management it’s the same, it has to be consistently applied or you lose the beat or the rhythm that you’ve established. Employees will tend to go off and do their own thing without the consistent rhythm or consistent application of management; coaching, reviewing, monitoring, mentoring, and listening.”

“Every song has structure; key, time signature, tempo, melody or lyrics,” says Wilson.  “In management you have to build structure; expected hours, objectives, productivity goals, policies and the like.”

Taking the music metaphor further, Wilson speaks to the musical arrangement, “Each player in an ensemble needs to know their role and any parameters surrounding them.  The larger the ensemble, the tighter the arrangement needs to be.  The same applies in organizations. Each employee must know the parameters within which they are permitted to act. What is their authority, when do they escalate an issue to management, how do they interact with other functions?”

According to Bruce Kaminsky, founder and president of KYDD Products, rhythm provides gravity for a musical number.  “Although a piece may have a great deal of diversity in tempo, style or voice, rhythm is what allows the piece to remain cohesive.  The same holds true for business.”

Even the most independent-minded entrepreneurs recognize the need for rhythm.  While few would argue that Steve Jobs is anything short of a brilliant entrepreneur, he is often criticized for “not playing well with others”, and “marching to the beat of his own drummer.”  In a 60 Minutes interview on April 13, 2008, Jobs had this to said, “My model for business is The Beatles: They were four guys that kept each other’s negative tendencies in check; they balanced each other. And the total was greater than the sum of the parts. And that’s how I see business.  Great things in business are not done by one person, they are done by a team of people.”

If great things is business are done by a team of people, that team must have rhythm.  Rhythm comes from the culture you develop in the organization and by a purposeful attention to planning, directing and control.


©Mark P. Loschiavo

Facing Adversity: How to Survive – Perhaps Even Thrive – During This Recession

In the midst of a recession entrepreneurs may ask themselves what role they play in the recovery of the economy, or if they even have a place. Adversity provides tremendous opportunity for entrepreneurs and other business owners to innovate and to differentiate themselves from their competitors. It is during times of crisis and turmoil that true character is revealed and the best leaders emerge. Like two pieces of furniture on the showroom floor of the furniture store – one made of solid maple and the other made of wood veneer – with the perfect lighting and controlled environment of the showroom, both appear to have excellent value. It is only after the two pieces are removed from the safety of the showroom and subjected to the wear and tear of rambunctious children does the real value emerge.

Similarly, the competency and character of an entrepreneurial leader is revealed once they are removed from the safety of prosperous times. Many businesses can manage to can look good during good times. During tough times, however, the veneer gets worn off, dinged and scratched, revealing the true value.

It is important to remember during times of adversity that we have been there before – and have emerged victorious. There are numerous examples of creativity, risk, innovation and opportunism thriving in times of adversity.

For example, the 1970s brought with it Vietnam, Japanese imports, race riots, an Arab Israeli war and Watergate. During that same decade we experienced 11 percent inflation, interest rates as high as 14 percent, and unemployment levels that at times exceeded 9 percent. In the midst of all this adversity, advances in computing technology were paving the way for a revolution in the way information is handled and conveyed.

At the same time the invention of transistors and integrated circuit boards along with innovations in manufacturing, miniaturization and plastics technology launched the electronic and digital revolution. Some examples of the inventions of the 1970s include the space station, email, liquid crystal displays, microprocessors, magnetic resonance imaging (MRI), the ethernet, the personal computer, Gore-Tex and the mobile phone.

Times of adversity often bring us back to the basics, requiring us to evaluate what constitutes real value. History shows us that inventors, innovators and entrepreneurs often introduce the best value during the most difficult times. During a recession there are several questions – some of them obvious, some outside-the-box – that entrepreneurs and other business owners need to consider to help evaluate their relevancy and ability to weather the storm.

Am I offering something that my customers need?

During recessions “must-haves” almost always trump “nice-to-haves.” A good place to start is by making a list of things we all must have regardless of the economy. If I am not offering a must-have, I may need to drop prices or change up my offering to make it more compelling to get a percentage of the customer’s wallet. In some cases I may have to expand my geographical coverage to find more customers who see my products or services as a must-have.

Take the thinking about what is a ‘must-have’ beyond what you usually think of. For example, we usually think of utilities as telephone, water, electric, oil and gas. But the government’s response to the banking crisis demonstrates that our financial industry is also a utility. Like oil, gas, and electricity, access to money has become a basic need for our society to function.

Am I offering an affordable luxury during recessions?

Several years ago I was doing some work in one of the more depressed areas of Appalachia. In many ways it felt more like I was in a third-world country than the most affluent country in the world. In the midst of abject poverty, with homes that sported outdoor plumbing and surrounding property that looked more like salvage yards than lawns, I saw satellite dishes. In the context of their surroundings these satellite dishes, at first, seemed like a strange juxtaposition.

On further reflection it made perfect sense. These satellite dishes, and the TVs they were connected to, provided a level of freedom to their owners, and allowed them to enjoy the luxuries of the affluent society around them, even if only vicariously. During times of economic distress most consumers cut back on nice-to-haves. At the same time, they are willing to indulge in certain “luxuries.” These have been referred to as affordable luxuries.

Starbuck’s coffee has often been referred to as an affordable luxury. During a recession, however, it may no longer be considered affordable. Can you offer something that still feels like a luxury, but is more affordable than Starbuck’s coffee? Or for that matter, can you offer a product that will be considered an affordable luxury in light of the recession? If so, you might actually see an increase in demand.

Am I able to leverage an emerging convergence of change?

A simple example of a potential convergence opportunity is portable, potable water. The last decade has given rise to the walking water bottle. The use of water fountains has been replaced by millions of individual bottles of Poland Springs, Deer Park, Aquafina, Aqua Fiji and Evian, being carried around by consumers convinced of the need for hydration and concerned about the quality of water.

But now, some of these consumers are beginning to look for an alternative. Those who are more environmentally conscious must be feeling some guilt associated with the amount of petrochemicals used to make each bottle, or the landfill impact of their waste. Others may be concerned about spending roughly three times more money for 16 ounces of water than they are spending for 16 ounces of gasoline.

By combining the perceived need for hydration with concern for the environment, and the recent health concerns over the dangers of chemical leaching from plastic bottles, we can expect to see the sales of BPA free plastic water bottles and stainless steel water bottles continue to rise during these difficult economic times. Companies like Nalgene (BPA-free plastic) and SIGG (stainless steel) have an opportunity to capitalize on this convergence of change.

Another example can be found in our incubator at the Baiada Center. By leveraging a convergence of technologies, Drexel MBA alumni Chuck Sacco ‘06 and Doug Bellenger ‘06 started PhindMe to solve an emerging business problem. Two nice-to-have items of the 80s and early 90s have become utilities. Both the Internet and mobile phones have become necessities for most people, and especially for businesses.

The World Wide Web provides a vast ocean of information that most of us have come to depend on in almost every aspect of our personal and professional lives. Companies are becoming increasingly dependant on the Web to bring them business, but small businesses find it difficult to rise above the noise of the masses. PhindMe is offering a series of products to solve this problem. PhindMe mobile technology solutions are designed to ensure that a business’s mobile consumers can receive the same online branding, advertising and customer service experience they receive from their desktop computer.

Am I offering something that will help my customers “weather” the recession?

Recently two Drexel alumni visited the Baiada Center looking for advice regarding a company they are starting. Both partners work in the troubled finance industry, where they recognized a need. With all of the pending foreclosures thousands of people are looking for options to allow them to restructure their mortgages. There are plenty of financial advisors offering solutions.

Unfortunately, many of these solutions are shams, charging these troubled homeowners fees without solving their mortgage problems.  These two entrepreneurs have developed a model that can help many of these homeowners restructure their loans keep their homes, taking no payment unless they are successful in solving the homeowner’s problems. These entrepreneurs are offering value by helping customers weather the recession. If you are offering something that will help folks weather the recession make sure your marketing and sales message drive this point home, and then price accordingly.  If not, you may need to drop prices to get a percentage of the customer’s wallet.

Am I decidedly better at what I do than my competition?

The fundamental economics of price elasticity will continue to hold even in difficult times. The more an entrepreneur can differentiate his or her products or services, the more customers are willing to pay.  At the Baiada Center, entrepreneurs building their businesses are often strapped for cash. In addition to long hours with little sleep, many of them maintain a steady diet of Ramen Noodles.  Even though they are not willing to indulge in a more appetizing cuisine because of their need to conserve cash, many of them will pay a premium to solve their IT needs, because they are convince the premium solution is better than the lower priced alternative.  It is important to keep in mind that there are limits to this logic. Regardless of differentiation, there is a point where the price/value trade-off will drive the market to the lower-priced alternative.

What kind of information is a must-have during tough times?

The value of information changes with conditions. Take for example the Social Security Act of 1935, which was born out of the Great Depression and yet created the need to record the employment records of 26 million people. This was a “must have” that then-IBM President Tom Watson Sr. was positioned to offer the government.

There is a percentage of the population that loves to track the weather regardless of the conditions. These are the folks who watch The Weather Channel for entertainment. But most of us, are only interested in the weather when we are dependant on the outcome. The minute a snowstorm hits the Mid-Atlantic states, the value of weather information increases exponentially – so much so that TV networks often delay the shift from local to national news. Unless we think it is going to rain on our parade, the value of weather information is limited.

What are the different ways people access information?

The value of electronic access to information goes up when gas prices rise from $2 per gallon to $4 per gallon. During tough economic times the demand for access to electronic information dealing with acquisition or preservation of cash increases. For example, if I am offering access to information regarding mortgage options to avoid foreclosure, or information regarding ways to save money by switching to more efficient energy sources, I may have a solution of value in tough times. For example, the desire to access information via hand held devices is growing. As long as you can offer a solution that meets such a need at a price the customer can afford, your product or service will always be in demand.

Regardless of economic conditions it is important to remember that the laws of macroeconomics still apply. Over the long-term there is no substitute for a clear understanding of supply and demand with regard to the products or services you are offering. Rather, it is all about finding customers who have a demand for the products and services you offer, and providing more value than your competitors.

Times of adversity provide a wonderful opportunity for the most skilled entrepreneurial leaders to weather the storm, and to thrive when others are shutting down. As the Roman poet Horace said, “adversity reveals genius, prosperity conceals it.”

©Mark P. Loschiavo

From Blues to Prosperity: The Entrepreneur Effect

Adversity is a funny thing. Take for instance the pearl, which is the only gemstone produced by a living entity. The formation of a natural pearl begins when a foreign substance slips into the oyster between the mantle and the shell, which irritates the mantle. It’s kind of like the oyster getting a splinter. The oyster’s natural reaction is to cover up that irritant to protect itself. The mantle covers the irritant with layers of the same nacre substance that is used to create the shell. This eventually forms a pearl. And what we have is the creation of beauty from adversity, art from irritation. The pearl is a beautiful living reminder that from adversity can come something of great value.

There are untold examples of creativity, risk, innovation and opportunism thriving in times of adversity. To name just a few:

  • Italy under the House of Borgia was notorious for warfare, terror, murder and bloodshed but still produced Michelangelo, da Vinci and the Renaissance.
  • It was during a time when Spain was suffering from a severely distressed economy that Columbus set off to discover a quicker trading route to the East Indies, and discovered America.
  • During the Great Depression of the 1930s, IBM managed to grow while the rest of the U.S. economy floundered. IBM was among the first corporations to provide group life insurance, survivor benefits and paid vacations. While most businesses had shut down, IBM’s founder, Tom Watson, Sr., kept his workers busy producing new machines even while demand was slack. Thanks to the resulting large inventory of equipment, IBM was ready when the Social Security Act of 1935 brought the company a landmark government contract to maintain employment records for 26 million people. It was called “the biggest accounting operation of all time,” and it went so well that orders from other U.S. government departments quickly followed. In fact, IBM invested in an R&D lab in 1932, which became one of the finest in the world (IBM Archives).
  • The decade of the 70s brought with it Vietnam, Japanese imports, race riots, an Arab Israeli war and Watergate. During that same decade we experienced 11% inflation, interest rates as high as 14% and unemployment exceeded 9%. In the midst of all this adversity, advances in computing technology were paving the way for a revolution in the way information is handled and conveyed. At the same time the invention of transistors and integrated circuit boards along with innovations in manufacturing, miniaturization and plastics technology launched the electronic and digital revolution. Some examples of the inventions of the 1970s include: the Space Station, Email, Liquid Crystal Displays, the Microprocessor, Magnetic Resonance Imaging (MRI), the Ethernet, the Personal Computer, Gore-Tex and the Mobile Phone. If that is not enough, the 70s produced such a rich array of music that many of the bands and musicians from that decade are still in high demand thirty years later.
  • A little known start-up came on the scene in the midst of the deep recession of the 1980s. In fact, that little known startup, Microsoft, was about to celebrate its third anniversary when Black Monday hit in October of 1987, leaving us with the single largest drop in stock prices in our history.
  • Lest we forget the dot com bust, here are two examples of the kind of fatalities the industry experienced: Boo.com, an Internet retailer of fashion apparel, spent $188 million dollars in just 6 months. Boo.com eventually had to liquidate, and went bankrupt in May 2008. After spending $1.2 million for a 2000 Super Bowl commercial, Pets.com closed its doors in the same year, leaving 320 people unemployed. On the heals of the dot com bust the United States experienced the terrorist attacks of September 11, 2001, leaving the country and the economy paralyzed. In the midst of this adversity Google, eBay, Amazon.com, Priceline, Travelocity, Paypal, Yahoo and many others weathered the storm, only to emerge stronger.

Times of adversity often bring us back to the basics, requiring us to evaluate what constitutes real value. History shows us that inventors, innovators and entrepreneurs often introduce the best value during the most difficult times.  As the Roman poet, Horace so eloquently put it, “adversity reveals genius, prosperity conceals it.”

Music is one of the more compelling examples of value being the product of adversity. Some of the greatest songs come from the singer/songwriters response to tragedy or troubled times.Whether talking about the well-known African-American spiritual, Swing Low Sweet Chariot or Eric Clapton’s Tear in Heaven, these great songs were born of adversity.  In fact, there is an entire genre of music built around adversity. It’s called The Blues.

Joseph Machalis, 30-year faculty member of the Julliard School noted that the Blues is a native American musical and verse form—a blending of both traditions. The word ‘blue’ has been associated with feelings of sadness and depression since Elizabethan times. Washington Irving is credited with coining the term ‘the blues’ in 1807. In the 1800s the blues was associated with songs sung by African-Americans, expressing the extreme suffering they endured as slaves, and usually took the form of “field holler”. The field holler gave rise to spirituals and the blues in an attempt to express their profound despair.

Southern prisons also contributed significantly to the blues tradition through work songs, songs of death row, murder, prostitution, the warden, the hot sun and other hardships endured.

Although the blues can be traced back to the 1800s, some argue that the first blues song ever written down and published were in the early 1900s. Two of early 1900s pioneers were W.C. Handy, an African American cornet player and composer from Alabama, known as the “Father of Blues” and Hart Wand, a white violinist and publisher from Oklahoma. Handy composed and Hart published Memphis Blues, and St. Louis Blues in 1912 and 1914 respectively. Mamie Smith recorded the first vocal blues song, Crazy Blues in 1920.

Interestingly, the blues started to gain in popularity after the First World War when troops from all parts of the United States were exposed to it from Southern Whites. During the 1920s and 1930s the blues became a national craze, with blues singers like Bessie Smith and Billie Holiday.During that time it became a musical form more widely used by jazz musicians and blues singers.

During the thirties and forties the blues continued to spread northward with the migration of Southern blacks into Northern cities like Chicago and Detroit. Some of the more notable urban bluesmen of that time were Muddy Waters, John Lee Hooker, T-Bone Walker and B.B. King. It wasn’t until the early 1960s that white American and European musicians discovered the urban bluesmen, creating a proliferation of blues-based bands like the Rolling Stones, the Yardbirds, Cream, Canned Heat and Fleetwood Mac.

Since the sixties, several rock guitarists, such as Eric Clapton, Jimmy Page, Jimi Hendrix and Eddie Van Halen have used blues as a foundation for offshoot styles. The latest generation of blues players, including folks like Stevie Ray Vaughan, Robert Cray and Kenny Wayne Shepherd, has drawn a new generation of blues listeners.

Blues as a Parallel to Entrepreneurship

Starting with the lyrics, early blues frequently took the form of a loose narrative. The singer voiced his or her personal woes in a world of harsh reality.  Often an entrepreneur’s concept for a new product or idea takes the form of a loose narrative, where the entrepreneur is voicing his or her response to a problem or a need in a world of harsh reality. 

Scholars characterize the early development of blues music as a move away from group performance to a more individualized style. They argue that the development of the blues is associated with the newly acquired freedom of the enslaved people.  Entrepreneurship often results from an individual wanting to break away from the corporate constraints of large companies, and express their newly acquired freedom from the institution.  In many ways entrepreneurship is the ultimate expression of individualism.

There are few characteristics common to all blues music because the genre took its form from the unique characteristics and styles of individual performers.   It is equally challenging to characterize entrepreneurs or entrepreneurial companies because of the unique characteristics and styles of individual entrepreneurs.  For decades researchers have tried to pin down or provide definitive characteristics of successful entrepreneurs. While many characteristics have been identified, they are in no way definitive, complete or common to all.

Some common characteristics found in much of the blues include:

Call and response—initially expressed in shouts. Now more likely seen in guitar riffs. Think B.B. King and Eric Clapton in the Album Driving with the King.  Likewise, the process of new venture creation is one of call and response. Common phrases to describe this in the entrepreneurial world include:

  • Build and test quickly and inexpensively
  • De-risk assumptions through the use of surveys, focus groups, etc.
  • Talk about, and get feedback from, as many people as possible during the concept and development stage of building the new venture.

Typically there is not significant accompaniment or sophisticated harmonies.  Likewise, the watchwords for most successful entrepreneurs and prospective investors include:

  • Keep it simple
  • Stayed focused
  • Don’t try to be all things to all people.

Typically unbounded by formality or any particular musical structure.  Entrepreneurial ventures thrive on informality and fluidity of structure to enhance agility, speed to market and optimum utilization of scarce resources.

©Mark P. Loschiavo

Youth Experiences: Influence on entrepreneurial success

Whether we are talking about sports, scouting, music, dance or chess, what influence does competing and excelling at the highest levels early in life have on an individual’s success as an entrepreneur later in life?

· Are people who excel in at least one activity early in life more likely to be successful entrepreneurs?

· Given our current lifestyles, are we preparing our youth to compete successfully in this ever increasingly entrepreneurial world?

In order to draw correlations between early life experiences and successful entrepreneurial leadership we might want to first identify some key characteristics of successful entrepreneurial leaders. They are:

Locus of control: A term in psychology, which refers to a person’s belief about what causes the good or bad results in their life, either in general or in a specific area such as health or academics. It can either be internal (meaning the person believes that they control them self and their life) or external (meaning they believe that their environment, some higher power, or other people control their decisions and their life). Julian B. Rotter developed an understanding of the concept as an important aspect of personality in1954.

Discipline: Training that corrects, molds, or perfects the mental faculties or moral character, or orderly or prescribed conduct or pattern of behavior…Merriam Webster.

Need to achieve: David C. McClelland from Harvard University has studied the urge to achieve for over 20 years. His research led him to believe that the need to achieve is a distinct human motive that can be distinguished from others and can be identified in a group. For example, when groups were asked to participate in seemingly trivial games (ring toss), most people randomly toss the rings to get them to go over the ring, while those with a need to achieve will carefully measure where they were most likely get a sense of mastery.

Singularity of purpose: Purpose is the cognitive awareness in linking cause and effect for achieving a goal. In general it is the anticipated result, which guides decision making in choosing appropriate actions within a range of strategies based on varying degrees of ambiguity. Purpose serves to change the state of conditions in a given environment, usually to one with a perceived better set of conditions or parameters from the previous state. This change is the motivation that serves the locus of control and goal orientation…Wikipedia

Ambiguity tolerance: The ability to perceive ambiguity in information and
behavior in a neutral and open way. In psychology and in management, levels of tolerance of ambiguity are correlated with creativity, risk aversion, psychological resilience, lifestyle, orientation towards diversity (cross-cultural communication, intercultural competence), and leadership style. 

David Wilkinson’s Modes of Leadership as explained in The Ambiguity Advantage—2006, is largely based on ambiguity tolerance. Mode one leaders have the least tolerance to ambiguity with mode four leaders enjoying and preferring to work in ambiguous situations. In part this is due to what Wilkinson calls ’emotional resilience’.

The converse, ambiguity intolerance, which was introduced in The Authoritarian Personality in 1950, was defined as a “tendency to perceive or interpret information marked by vague, incomplete, fragmented, multiple, probable, unstructured, uncertain, inconsistent, contrary, contradictory, or unclear meanings as actual or potential sources of psychological discomfort or threat.”

Resilience: the positive capacity of people to cope with stress and catastrophe…Wikipedia

Persuasion: a form of social influence. It is the process of guiding people toward the adoption of an idea, attitude, or action by rational and symbolic (though not always logical) means…Wikipedia

Connectedness: Associated with or related to others, especially to influential or important people. According to Dr. Edward M. Hallowell in an essay of the same name, connectedness is a sense of being a part of something larger than oneself.  It is a sense of belonging, or a sense of accompaniment.  It is that feeling in your bones that you are not alone.  It is a sense that, no matter how scary things may become, there is a hand for you in the dark.  While ambition drives us to achieve, connectedness is my word for the force that urges us to ally, to affiliate, to enter into mutual relationships, to take strength and to grow through cooperative behavior.” 

In order to probe this thought further I recently sent out a survey to entrepreneurs, who have achieved varying levels of success. The survey was limited to youth sports, and did not address other youth activities. These were the findings of the 50 respondents:

· 89.6% participated in sports as youngsters

· 46.9% excelled in a sport, competed at a very high level (regional, statewide, national AAU or college)

When the 46.9% were asked how excelling at a high level impacted their success as an entrepreneur the reasons varied. The following are some excerpts of their answers to that question along with potential correlations(italics) :

“…is that you will always encounter obstacles and adversity and it simply a part of life. You need to learn how deal with the challenge and move forward.”—Resilience

“…taught me the importance of preparation, dealing with adversity, leadership and the notion different skill sets contributing to a common goal.”—Discipline, Resilience, Connectedness

“Raised awareness of competitiveness in interactions with others, awareness of linkage between effort and results.”—Discipline, Internal locus of control, Singularity of purpose

“After playing hurt most of the time to earn my tuition in a top notch engineering school, starting and running a business was fairly easy.”—Internal locus of control, Singularity of purpose

“Learning about getting up after getting knocked down and that you win some and lose some and you have to be tough and play hard all the time.”—Resilience

“…helped me to accept losses, train harder and embrace a win.”—Resilience, Internal locus of control

“…taught me the benefits of hard work, perseverance, built confidence / faith, among other things.”—Discipline, Internal locus of control, singularity of purpose, connectedness

“…learning how to focus, and through hard work you can achieve many things.”—Internal locus of control, Singularity of purpose

An interesting aside from this survey was that a number of respondents indicated that, while they did not excel in sports, their ability to excel in other activities had an impact on their approach to entrepreneurial ventures.

Next, I convened a panel of four successful entrepreneurs. Based on the survey responses I expanded the scope of the discussion beyond sports. The panel consisted of an Eagle Scout (earned at a very young age), a national youth chess champion, a United States Tennis Association Youth regional (later collegiate) tennis competitor and an American Athletic Union (later collegiate) wrestling competitor.

Panel Discussion Observations:

A question was raised from one of the panel members regarding cause and effect. That is, do youngsters excel in an activity because they innately possess some or all of the characteristics described above, or do they develop those characteristics through the process of excelling? This question of nature vs. nurture is an age old one, but the panel consensus was that regardless of innate ability, the process of excelling in an activity at the very least reinforces the positive characteristics for entrepreneurial success.

Of the characteristics mentioned above, discipline, resilience, internal locus of control, connectedness and need to achieve, in that order, were most prevalent. Additionally the idea of persuasion surfaced in an unlikely way. For example, when a Chess Master plans her strategies, she does so with the intent of making moves that will persuade her opponent to move his/her chess pieces into a trap.

As part of the discussion, I also posed the question of limits. Is there a point at which excelling in a single activity to the exclusion of all others hampers your chances for entrepreneurial success.

I recently had lunch with a childhood friend by the name of Frank Busch. Frank and I were AAU swimmers in our youth. He went on to become the head swimming coach at University of Arizona, where both his men and women’s teams won the 2008 NCAA championship. He was also selected to coach in both the Athens and Beijing Olympics. While we were together I took the opportunity to get his thoughts about the correlation between athletes competing at such a high level and future success in business and entrepreneurship. As an aside, his father was the quintessential entrepreneur.

I found a couple of his responses interesting. While he said that most of his athletes go on to be successful in their future endeavors he also indicated that many of these athletes have never had a job before or during their college careers. Their extracurricular time has been consumed by the sport. The other point he made is that many of these athletes are so goal oriented, with the ability to measure progress toward their goal every step of the way they often become very impatient in situations where there is ambiguity of goals or measurements.

The panel seemed to agree that excelling in any activity at the highest level may sacrifice balance, which may have long-term negative effects.

I closed the panel discussion by posing a question to the audience for them to ponder as they departed.

In his book The Trophy Kids Grow Up, Ron Alsop describes how the Millennial Generation is shaking up the workplace. In it he talks about a generation of kids who have been showered with praise for the most modest accomplishment, and an environment of “trophies for everyone”. He also talks about the intense level of parental involvement in their accomplishments. He goes on to say that it has caused them to have an unquenchable thirst for praise and an acute sense of entitlement.

1. What impact do you think this will have on this generation regarding resilience, singularity of purpose, ambiguity tolerance, discipline, etc?

2. What impact do you think this will have on entrepreneurial leadership?

He also goes on to say that because most millennial generation kids have remained close to their parents they tend to relate well to adults. And because they grew up in an era of standardized test scores and a desire to score well, they tend to be achievement oriented.

©Mark P. Loschiavo

Entrepreneurial Leadership: so what’s music got to do with it?

Many well known management gurus have used the metaphor of the orchestra in the past – Peter Drucker and Henry Mintzberg, to name a couple.

Prof. Paddy Miller, who is professor of managing people in organizations at IESE Business School describes a program where business leaders were exposed to music conducting. The following are just a few excerpts:

Regarding Communication

What they saw was a leader who knew every instrument intimately. They also saw a leader who knew every musician intimately. When combined, musician and instrument, the leader knew the limitations of the combination and got the most out of them. His encouragement, support, advice, admonishment was immediate. Performance, appraisal and feedback were interwoven to improve output on a second by second, minute-by-minute basis. It was clear, directed and aimed at improving the performance of a musician, a section or the whole orchestra. There was a total communication system in process, one that was two-way. It involved verbal and non-verbal signals and was specifically aimed at performance.”

Regarding Vision

Watching the conductors, we learned some interesting things about being a leader. While their actions portrayed an intense involvement with the entire orchestra all the time, few conductors speak about their visions – they feel them.

“It is hard to explain,” said Carrasco, “But I don’t tell musicians my vision. I want them to feel it. I project my vision through my body, my gestures, my eyes, my voice.”

Regarding Trust

“Conductors also rely on trust. Trust is a vital part of their ability to lead. The musicians trust the conductor to lead them to a successful completion of the piece. Without a leader there is no trust, with no trust performance falters. Trust here is a tacit requirement in the leader and his musicians. They do not speak about trust; they do not take it for granted. A conductor builds it up over time through close contact with individuals, sections and the orchestra as whole. Eventually they want to know that they are safe in the hands of the conductor and he in turns knows he can depend on his team.”

Regarding Power

“During these illuminating sessions, we often closed with members of the orchestra reflecting on the power that conductors brought to their jobs. The music and its message had power. If one listens to Vivaldi or Mozart, there is power and it is the job of the conductor to interpret that power, to bring new energy to something that has been played over and over for a hundred years or more.”

I have been playing guitar since the age of nine, and have been a singer/songwriter/musician for over 40 years. Over those 40 years music has taught me a great deal about entrepreneurial leadership. It 

has taught me:

  • The importance of starting with a solid foundation.
  • The need to work within an accepted framework, even when trying to define a new one.
  • The importance of knowing when to lead and when to let others lead.
  • The importance of timing and pace.
  • That when appropriate, improvisation can make the difference between a good and a great performance. 
  • That playing through the mistakes is always better than stopping the music and fretting over those mistakes.
  • The importance of knowing your audience. 
  • That a song is only as good as the vision of the songwriter, and that the vision, like the songs cries out to be shared. 

And Finally:

  • A song can only be made better if you surround yourself with the right people who share your passion and drive.

©Mark P. Loschiavo