The Art of Corporate Warfare

Complete Archive 

This is the decade+ archive of the popular blog/newsletter that led to my book "The Art of Corporate Warfare: How to change your approach and kick ass every day”.

The archive content is as useful today as it was when written, starting with the astonishing moral flexibility of the Enron era right up to the wild days of bitcoin, cryptocurrencies and the hyper-speed world of FinTech, where I currently spend much of my assignment time.

The chapters systematically illustrate how you can use time-tested battle techniques to win your own modern day business battles. Whether your battles are defensive or offensive, history can lend a knowing and brutally helpful hand if you know to look backward. The content herein provides that helping hand.

This library contains most of the chapters of the book and is searchable by using the Search tool to the right.

Tal Newhart
Chicago

Table of Contents

Chapter 1: The "Plan with Branches"
Chapter 2: Mistakes—And What Great Leaders Do About Them
Chapter 3: Avoiding Defeat Caused by Victory
Chapter 4: Six Traits of a Good Manager
Chapter 5: Winning or Losing with Near Certainty
Chapter 6: Concentration of Force
Chapter 7: The Risk of "Normal Innovation"—And What to do About It
Chapter 8: About Generals and CEOs
Chapter 9: Controlling Napoleon
Chapter 10: Avoiding Your Own Charge of the Light Brigade
Chapter 11: Lucius Quinctius Cincinnatus: The Perfect Leader?
Chapter 12: A CEO Talks about the Importance of Grokking
Chapter 13: A Reader's Strategy—Act Like a Snake
Chapter 14: Getting Ahead Through Fakery
Chapter 15: How to Avoid Your Own Waterloo
Chapter 16: What We Seem to be Forgetting & Why We're in Trouble
Chapter 17: The Key Trait of a True Corporate Warrior
Chapter 18: “The Feint”: Genghis Khan and Henry Kravis—Different Time, Same Tactic
Chapter 19: How a Famous CEO Stays so Calm
Chapter 20: Preventing Systemic Failure (Things to Look Out For)
Chapter 21: Upturning, in a Downturn
Chapter 22: Pressuring Generals (CEOs) to disclose their plans—Wrong!
Chapter 23: Bill Swanson's "25 Unwritten Rules of Management"
Chapter 24: Normal vs. Extraordinary Performance (vs. Vanity)
Chapter 25: Holiday Comments about Corporate Responsibility
Chapter 26: "Capitalist Gone Wild!!"
Chapter 27: A Useful Business Weapon Called FUD
Chapter 28: FUD Update
Chapter 29: More lessons from the Corporate Battlefield with Client X
Chapter 30: Some Basic Rules of Corporate Warfare
Chapter 31: How a Fortune 500 CEO Helps Change Happen in 7 Steps
Addendum: Some Interesting and Useful Interviews

• The Ethical Hacker Interview
• What You Should be Doing Minute to Minute
• What's Your Stirrup?
• Advice from a Mysterious Russian
• Ensuring Corporate Victory by Using OODA Loops

The Ethical Hacker Interview

ASSIGNMENT: Find an accomplished ethical hacker for a contract

LOCATION: Woodside, CA

CLIENT: A large technology company

Note: Parts of this post have been redacted/changed to obscure certain identifying details. John isn’t the candidate’s real name. The car wasn’t white. Technology explanations and clarifications are in square brackets.

SUMMARY: I was tasked with finding a skilled ‘white hat’ hacker (e.g. an ethical hacker with or without a CEH certificate) for a specific task, which I can’t disclose. The client was one of the most affluent, influential senior executives on the U.S. West Coast. The track down and reference checking took a month and compensated skills proofing (e.g. “find the data files that pertain to X project at this physical address [a distant, client owned complex]”) took another couple of weeks.  Three candidates were short-listed; this is the one that eventually got the gig, which was difficult and lucrative. This was the second day of the face-to-face interview and getting to know him had been fun. The first morning, after showing me how he detected a foreign company had installed a backdoor on his client’s server, he secretly turned on the notebook microphone in the rival COO’s office so we could hear a meeting going on (“This is trivial and don’t judge. It’s his own medicine!”). After the demonstration he described how the weirdest thing he ever hacked was an in situ anesthesia device. Acknowledging my alarmed expression over this he shrugged and grinning, said, “Hey, come on, it had an Internet connection! I couldn’t just ignore it!” A genuinely scary point. Funny guy though.

***

The white Lamborghini coasted to a stop. The young driver, John, looked over at me and said, “Well, that didn’t sound good!”

It was a vast understatement. A few moments before we had been screeching along Skyline Boulevard above Palo Alto, California. The day was beautiful. No traffic. The sound of the ridiculously expensive car was intoxicating.

Then the fun stopped with a loud POP, a weird screech followed by eerie silence. We were going fast enough that we were able to coast off Skyline and down a side road surrounded by massive redwoods. It was mostly dark and moist with pools of light on the narrow lane.

A minute later we were standing behind the low car looking down into the opened rear engine compartment. The engine was making a cracking sound as it cooled off.  It was smoking and smelled bad. We weren’t going anywhere.

John looked up at me with his boyish face, “What do you think?”

All I could do was nod and say, conclusively, “Expensive.”

He pulled out a phone. In two days I hadn’t seen this one. It was an old flippy, almost an antique (and therefore devoid of a GPS chip). In a resigned voice he said, “Yeah. I figured. I’ll call him.” He walked a short distance away into a shaft of light between the tall trees and called the car’s owner. As he walked back he looked as normal as any mid 20’s kid could look. Nikes, jeans, a t-shirt with a snowboard brand on it.  “He’s sending a flatbed,” he said, closing the phone.

“Is he pissed?” I asked.

“Nah. He just wanted to know who was driving. I told him it was you,” he answered laughing and sporting a prankish grin.

“Gosh, thanks,” I said not knowing whether to believe him.

We leaned against the inert car.

“So, where were we?” he asked.

“The most fun you’ve had with a hack.” He had been thinking this over when the Lamborghini’s monstrous V12 engine decided it had had quite enough.

“That’s hard to say because I try to make them all ‘fun’. Even the state-sponsored stuff which can be creepy. But, from a pure amusement perspective, I’d have to say my first paid gig which came from an acquaintance of a professor at school. It wasn’t hard because the target was fairly careless but the hunting, discovery and kill thrills were certainly there. I miss that rush. It was primal.”

“Who was it for?” I asked.

He looked over and laughed. “Really?”

I had to laugh too, but at myself for asking. “Ok, tell me what you can.”

He thought a few moments then said, “I was hired by the CEO who was fairly certain somebody just below the C-suite was passing on the goods to a competitor in Europe.”

“How did the CEO know?”

“The IT guys had discovered an unusually clever backdoor [a way into the servers that bypassed security] which they immediately patched. In retrospect they should have left it, and watched it, but by policy, they simply killed it. It was mentioned nominally later in a weekly memo to the corner offices.”

“This was the heads up to the CEO?”

“Well, that’s the thing. It was routine and he didn’t give it much thought. Then the next week as he was walking down the hall to a conference room when he stopped into somebody’s office to ask a question. Unfortunately, or fortunately, depending on your perspective, the guy was in the restroom. As the CEO waited he noticed the dude’s notebook screen was displaying the TOR browser screen. The CEO had heard about TOR and had the presence of mind to check the browser’s bookmarks for .onion sites and the only thing bookmarked was TOR mail.” John paused a moment then asked, “You ever use the dark web?”

I nodded.

“Under what circumstances?” he asked.

“I’ve taken a couple assignments to locate and participate in hidden deep and dark web sites where pissed off employees were selling or swapping various forms of inside information.”

“You ever use bitcoin?” John asked.

[Explanation: Bitcoin is a pseudo-anonymous digital currency often used to pay for goods and services on the deep web. If something is illegal to own, use your imagination here, you can probably buy it with bitcoin. Same with services. That said, plenty of legitimate companies are adopting it due to its natural security and low friction transfer properties.]

“I’ve been paid with them a couple times plus I ran an early mine. I’ve seen company secrets for sale priced in bitcoin. The dark web is a crazy place. It’s the Wild West in there. Huge and spooky,” I said.

“Exactly. So why would this guy be playing in there? Especially when he later insisted he simply stumbled across TOR.

I laughed. “Nobody simply ‘stumbles’ across TOR," I said. "Obviously he was up to something. The CEO probably made him right there with the BS.”

“Well, at least there was now a possible explanation for some things a competitor had done,” John said.

[Explanation: The TOR browser is used for anonymous web browsing and allows access to hidden parts of the web that most people don’t even know exists called the “deep web”. Used properly TOR provides near perfect anonymity while browsing by encrypting and bouncing your web page calls through servers all over the world. Along the same lines, TOR-based e-mail is almost impossible to trace back to its source if you stay in the TOR environment. Anti-regime political activists (e.g. Arab Spring) commonly use these tools as do criminals, disgruntled employees, etc.]

“Who owned the employee’s computer?” I asked.

“The company.”

“Why didn’t they just take it and have a look? If it’s clearly the company’s property there is no realistic expectation of privacy.”

“True but that would be too obvious. The CEO didn’t want the guy to know he was being looked at until the right moment. That’s when I came in because he couldn’t task anyone in his company since it might get back to the well-liked guy and he would just try and destroy the evidence.”

“So, what did you do?”

“I dropped some nice malware onto the computer and remotely had a look. The only thing suspicious was an encrypted volume that was hardly hidden and had an innocuous name. But you have to ask yourself, if the contents are innocuous why go to all the trouble to encrypt the file container? Why not just use a good password on the individual files. So I tried to brute force the container open but, of course, that’s tough and can take a while. So with the client’s permission I crashed the notebook hard enough so that after a couple days of trying to fix it himself the guy left it with the evening IT crew to fix, which they did. After they delivered it to the guy’s office afterhours the CEO’s trusted assistant picked it up and brought it into her office where I was waiting. And this is when it got seriously fun.”

“How so?”

“Because it turned out this guy was a lot smarter than the CEO gave him credit for. When I took out the Vaio’s battery there was a sticky note stuck to it. It said ‘If found call such and such number’. Sure enough, with some jiggling of the spaces, that was the pass phrase that unlocked the file container. Initially I thought it was pretty lame…or really smart. I called the client and we reviewed the two files I found. Important design IP but not something you would protect beyond physical control of the notebook plus a decent password. But I had a hunch. I started looking everywhere for something else. I KNEW there had to be something else on the encrypted drive but I couldn’t see it. It was driving me nuts.”

“Maybe it was on a thumb drive someplace else. I’ve recovered locked USB drives and they can be a bitch and that’s assuming you can even find them in the first place.”

He smiled and pointed to me. “Close! What I figured he had done, or was done for him since it's tricky, was make the real files invisible. You know, make another container, a hidden one, within the one I had just busted open.”

I nodded. “’Plausible deniability’. Nice!” I said, impressed.

“’Nice’? Are you kidding me? Back then I was a noob and thought it was freak’n awesome! Even if the guy was confronted by his boss all he had to do was give up the password to the in plain sight folder that everyone could see. Same thing in court under subpoena. You give up the passwords to files that are only ‘just a little’ embarrassing. It can be impossible to prove the real stuff even exists. It’s just noise on the disk.”

“What did you do to find the hidden volume? I thought that was impossible without the password?”

He laughed. “It pretty much is but I was on a roll and the guy was, in fact, an idiot. So on a hunch I did another brute force starting with the pass phrase he used to lock the first container. With the head start it was a trivial break and the files just suddenly appeared on the screen. I thought it was the coolest thing I had ever seen. I felt like a rock star. I learned later it was just his daughter’s cell phone number. He just substituted it. Dumb. I was out of the place by 4AM. I had a great breakfast with the assistant. Best twelve hours of my life!”

I thought about this a moment then said, “Talk about being a noob. There were a hundred ways to do it better. He should have just put the stuff on an encrypted thumb drive and stashed the thing in his wife’s lingerie draw. What was in the files?”

“Pretty much the company’s DNA. He was the COO in perpetual waiting for the top spot. So he had everything and he was pissed.”

“What happened to him?” I asked.

“After quietly signing a very long statement he was made available to other employers and, naturally, he went directly to work for the company he was piping the IP to.”

I smiled. “Right. Let me guess who he REALLY works for.”

John laughed, “Yep! You gotta love this valley. We’ve got more Bournes running around than Amazon!

I knew there was a lot more to the story but obviously it was a waste of time to ask. I leaned back against the car and looked up at the cerulean sky and the puffy clouds coming up from the coast. This had been fun.

A while later we headed down Woodside Road in the tow truck and had the driver drop us off at famous Buck’s of Woodside for lunch.

Interesting day. Perfect Day.

Ensuring Corporate Victory by Using OODA Loops

SUBJECT: Better decision making with OODA loops. Bitcoin advents. 
ASSIGNMENT: Find a knowledgeable (and trustworthy) cryptocurrency consultant 
CLIENT: A large venture capital firm

I’m sitting on a bench by Claw Fountain in White Plaza at Stanford University and entering this directly into a tablet while it’s fresh in my mind since I was asked to not record the interview. It’s the final interview for a cryptocurrency consultant position, focusing on Bitcoin. (This is the third cryptocurrency interviewing or recruiting assignment in the last 4 months alone.) It was an interesting discussion as we did the fountain walk and not just because it involved bitcoin. I’ve been involved with cryptocurrency for a few years now and, in fact, funded a small ‘mining’ operation for bitcoins back when simple graphics cards could economically solve the complex equations required to create the currency and run the underlying bitcoin ecosystem. In addition, I’ve been paid in bitcoin for services (an interesting story in itself…). There’s no longer any question about it, peer-to-peer cryptocurrencies like bitcoin have some very interesting, and useful, properties in today’s overstressed global economy, not to mention the banking world.

However, as interesting as largely unregulable cryptocurrencies are in an age of aggressive global quantitative easing by the central banks (unnerving), there was an aspect of our conversations that I found even more engaging. The candidate had been a fighter pilot and he used those skills as a basis for his decision-making skills which are remarkable in their speed and accuracy across all subjects and tasks. I asked him to reduce it to some usable details that I said I would share with my Corpwar readers, of which he has been a member for over 10 years.

He explained that in the Korean conflict the US flew the F-86 Sabre jet against the MiG-15. The MiG-15 was clearly a superior aircraft on paper (more thrust, speed, etc.). Yet the Americans had air superiority with a ~10:1 kill ratio over the MiG, meaning we shot down 10 of them for each one of ours shot down. Training played a role in this but it could not, alone, explain the extreme ratio. So, what was going on and how does this apply to conducting modern business?

It took a fighter pilot and mathematician to figure it out. It largely came down to basic aircraft canopy design. The Sabre jet had a bubble canopy providing the pilot a better view of the airspace environment. The MiG's canopy was much more enclosed, limiting the pilot’s peripheral view of the surrounding environment (note: this was largely before electronic threat detection but the principle is the same—today’s electronics extend the pilot’s ‘view’ of threats, expanding his or her ability to observe). There was another advantage in that the Sabre jet’s hydraulics responded very slightly quicker to the pilot’s control inputs than the MiG’s. So while the Sabre couldn’t turn as tight a radius, it could get into the turn quicker.

The two advantages were lethal to the enemy, or, relative to my readers, your corporate competition. In very broad strokes, here is the resulting rule and what it’s called: The party that can OBSERVE the situation, ORIENT to it, DECIDE what to do about it, and take appropriate ACTION will typically win. This is the basis of the ‘OODA loop’ or OODA cycle and it had a tremendous impact on military thinking.

It all gets down to speed. You need to get ‘inside’ a competitor’s decision cycle. The Sabre’s bubble canopy allowed the pilots to see, or observe, MiGs sooner and the American jet’s faster responding hydraulics allowed the pilot to implement Action quicker. Orienting and Deciding come with training and experience but you must see what’s going on and be able to implement your reaction. Thus, the Sabre's 10:1 advantage in the skies over Korea.

There’s much more to it than that, such as changing the environment quicker than your competition can react, or even comprehend, then promptly exploiting his confused and hasty decisions, but this outline is the usable, leverageable gist for the action oriented corporate warrior.

So, speed through the OODA loop. Think about it. We all use OODA loops whether we know it or not. The trick is to do it quicker than your competition.

If you get your team thinking formally in these terms (Observing, Orienting, Deciding and Acting), allowing them to get inside your competition’s corresponding OODA cycle, you will hammer them almost every time, especially if they have a cumbersome, meeting-heavy corporate culture.

Always be thinking: How can I get INSIDE my competition’s turning circle? This will confuse him since he is responding to old information; the way things were, not the way they are. During this phase you own them.

That’s how you win for your equity holders; that’s how you win for yourself.

Think about it…

Advice from a Mysterious Russian

ASSIGNMENT: FT 500 COO candidate (succession planning), Part 2 
LOCATION: Istanbul, Turkey 
CLIENT: Global 500 company

While waiting on the dock here in Istanbul something weird is in the air.

As an executive recruiter that has never said no to a tough, unlikely assignment I've found myself in many a strange situation. Done right, proper recruiting is an intoxicating blend of hunting and sales. Find The Best and sell them on your client. Fill the empty seat. The quant dogs of BCG can take their number rush; I'll take a tough search assignment any day. At least that’s what I was reminding myself of…

With evening quickly fading to night I jumped down into the big speedboat. No sooner had I grabbed onto one of the high seats than the driver cracked open the throttles and the hellacious engines roared up to full voice and we took off up the Bosporus. The 50’s candidate I interviewed throughout the afternoon looked over at me and smiled. I didn’t know who we were going to meet. It was spur of the moment. I have the generally useful trait of being up for almost anything.

I had arrived late last night into Istanbul and this afternoon met up with the COO succession candidate for a lunch that turned into a pleasant multi-stop food ramble through town. It was going well. He understood my client’s challenges and shared his own thinking about them. He was on board, very sharp, and connected. He was happy to let me record most of the conversation and the audio quality was good. I was looking forward to getting back to the hotel to edit it down and transmit it to the client.

Well, that was the plan anyway. But now we were slowing up to a dock by the candidate’s waterside villa. We tied up next to an old fishing boat that looked out of place against the beautiful houses overlooking the water. There was something odd about the wooden boat but I couldn’t put my finger on it. It seemed very clean for a fishing trawler.

I climbed up onto the dock and looked over my shoulder across the strait to downtown Istanbul. I could see the colorful safety of my tall hotel. That was Europe. Although still in Istanbul, we were now walking in Asia. It felt darker, and it wasn’t just the fading orange light.

As we approached the sliding glass doors behind a beautiful, faintly modern house, the candidate turned around and said, “I've told my friend you’re the guy whose newsletter I occasionally forward. You're both in the people business. He's semi-retired. Don't ask him a lot of questions."

This didn’t help my comfort level. I ask questions for a living.

As we walked into a formal, dark wood paneled room a short, heavyset man in an old fisherman sweater got up and shook the candidate’s hand, then mine. His hand was massive and could have easily crumbled mine like a graham cracker. He was introduced simply as Yuri by the candidate. I was introduced with both my first and last name. The man smiled and nodded, somehow knowingly. It was obviously his boat out back. They smelled the same.

“The ladies are upstairs in the kitchen with the fish I brought,” Yuri said in a gravelly voice that sounded like Henry Kissinger but with the stretched out syllables of Russian.

“Great. You two have a seat,” the candidate said as he disappeared around a corner.

Yuri and I sat down. On the table between us was a chilled screw cap bottle without the cap, three stubby wine glasses and a bowl of pickles. I could smell vodka. I knew what was coming. My head hurt already from the afternoon. We made small talk about fishing, subtly testing each other’s answer depth. Despite the sweater the place smelled great. Somebody knows how to cook fish, I thought to myself.

When the candidate came down we all sipped, then tossed back the chilled vodka. It was strangely smooth. There was no burn at all. Nice.

Yuri reached across to get the bottle. As he did the left sleeve of the worn sweater slid up. In the overhead light I caught a glimpse of the distinctive octagonal face of a massively expensive gold Audemars Piguet Royal Oak watch. His business, whatever it really is, must be good.

Another round went down. Number two. It was hitting me.

There was a strange dynamic in the room. The three of us formed an equal sided triangle, with the host at the end of the table, but clearly I was on the outside. I wanted to somehow take back some control but I knew it simply wasn't possible—I never had any to give up. The Russian controlled the room. It was like he controlled the gravity holding us all to the floor. He was like Jack Welch in his prime at GE. The Russian’s human capital was immense. You could feel it. People around him became his property, willing or not.

Yuri looked from me to the host and asked. “You told him about finding someone’s stirrup??”

“He did,” I said answering the question for him.

“I’ve read some of your rules. Some are useful,” the fisherman said to me.

“And which ones have you found ‘useful’?” I asked breaking the host’s no questions rule.

The Russian thought a moment, looking down at his vodka glass then back over to me. “The ones about controlling the movements of your enemy or competition. Mostly good stuff.” He paused, then repeated, smiling, “Mostly.” He reached down and picked one of the pickles out of the bowl and bit it in half. It crunched.

“What would you add?” I asked. “What’s a management rule that’s worked for you?” I glanced over to our host who seemed OK with the question. I realized it was the identity of the Russian I wasn’t supposed to poke around. That was OK with me. Eventually I would find out. I always do.

While Yuri was thinking the host reached over and refilled the glasses. The three of us tossed them back. That was it for me. I had to work later on the day’s recordings. Tough to do when a room won’t stay still around you.

The Russian spoke. “Well, you should certainly never let anyone know the reality of how hard you are working on something. It just needs to get done.”

“And why is that?” I asked.

“The moment somebody knows how hard you are working they can measure more precisely what you are capable of. That is not good. They know your limits and can predict your behavior. In my experience, it is better to make everything look effortless, even if you are withering, and then choose more wisely, later, if you misjudged.”

I said, “That’s the old corporate warfare rule of controlling your competition by controlling what they think they know about you. War and business, it’s largely the same.”

“Exactly,” the fisherman said. “My first mentor taught me how to move arrogant or unskilled enemies around like chess pieces by making them think something I was doing was either very tough, or very easy, or something in-between. It’s gratifying to watch your enemy do exactly what you intend them to do. Disinformation is a cheap yet very powerful weapon.”

“When weak, appear strong. When strong, appear weak,” I said.

Watching me closely he finished my thought saying, “When close, appear far. When far, appear close.” Still watching me he paused then added slowly, “Scientia est potentia.”

“’Knowledge is power’,” I answered nodding and smiling inside, translating the Latin.

A few seconds of silence followed as we watched each other, then a woman’s voice came from upstairs. The host made a gesture with his hand and a moment later the glass door behind me slid open. The boat driver stood outside waiting, obviously for me. Whatever this was, it was over. Our host stood up, with Yuri and me following.

The fisherman reached out to shake my hand. “Tell me Mr. Newhart,” he said shaking it. “Why is it a bad idea to be just as good as your competition?”

At last, new fruit to pluck. “Because, Yuri, ‘as good’ means average,” I said. “There’s nothing compelling about average; it’s just another word for mediocre. Nobody changes for mediocre. They change for better. That’s why I came all this way to talk to him,” I said nodding toward the candidate who was a great example of better.

I thanked our host and stepped halfway out the door but stopped when the fisherman spoke. “It was nice finally meeting you. Our paths will cross again.”

“I know,” I said before turning out the door into the moist night air. That’s when I realized I was being interviewed for something.

The next day I flew home to Chicago. It had been an interesting few days.

Think about it…

What's Your Stirrup?

ASSIGNMENT: FT 500 COO candidate (succession planning), Part 1
LOCATION: Istanbul, Turkey 
CLIENT: Global 500 company

After the walk down from the hotel in Istanbul the candidate and I took a seat on a bench overlooking the river-like Bosporus. Although we were sitting in Europe, we could see Asia not even two miles across the water. Ferryboats and other boat traffic were busily moving back and forth in front of us. To the right was the Sea of Marmara leading to the Aegean and up the Bosporus to the left was the Black Sea less than 20 miles away. Across the water from us, I could see tall minarets of mosques glowing in the fading orange light. The air was warm and moist. Another early evening in a beguiling place proving, once again, serious recruiting can still be enjoyable.

The secret interview up at the Ritz Carlton had gone well and turned into a long, multi-stop lunch as the candidate and I wandered through town to the water talking as we went. Editing down the recorded sections of the conversation for the client was going to be a complex chore back at the hotel, when my head cleared. And it definitely had clearing to do thanks to some very strange raki and ouzo based concoctions we had consumed as we wandered around while I got to know him.

“That’s my ride,” the candidate said pointing from the shore to a white speck racing across the straits directly toward us.

“So, what’s your secret?” I asked watching the approaching, cigarette-style boat. It was hard to judge its speed but I figured we had about two minutes. I could already hear its big, meaty engines.

The candidate turned on the bench to face me. “Secrets?” he said laughing. “I have no secrets. What makes you think I have secrets?”

“Your effectiveness,” I said simply. “What makes you so effective?”

He thought about it a moment. I noticed this habit earlier. He didn’t just flip out an answer like most candidates hoping to impress. When I tossed a question mark at him it was as if he would catch it and examine it carefully for a moment before answering. It was refreshing to watch.

He finally said, “I guess it would be my ability to recognize how well a person uses his or her stirrup.”

Now it was my turn to pause, trying to figure it out. “You mean as in a, horse?” I asked, baffled.

“Right. Every successful manager has a stirrup. The question is what is it, and how well do they use it.”

“I’m still not following you.”

“It’s simple. A big reason Genghis Kahn conquered so much of the world was because of his expert use of horses. The horses were, in effect, the terror weapon of their day. Even better than the earlier chariot which was expensive to build. But until the invention of the stirrup, the horse as a weapons platform had a serious flaw. The rider was so busy hanging on for dear life he couldn’t accurately aim his distance weapons which were heavy crossbow arrows. The stirrup changed that. Now the warrior could not only move fast but could accurately aim his weapon at the same time. Combined with Kahn’s tactics it was a key advantage and a game changer.”

We both looked over at the approaching speedboat, which now appeared to glow red in the setting sunlight.

I looked back at the candidate. “You’re describing concentration of force and that’s a great thing if you know where to focus it.”

“And a good manager does,” he said as we stood up. “That’s part of their job.”

“Of course,” I said as we walked toward a stubby little pier where the launch had pulled up. “But I’m still waiting for you to relate your success to stirrups.”

He laughed as he took a long, steady step down into the rocking boat. “Very simple. As we discussed at lunch, in business it’s hard to do something truly meaningful entirely alone. You need a great team. So when I’m thinking about hiring somebody I look to see if they have a stirrup. And if so, can I use it to help change the game to the sustainable benefit of the ownership. Keep me posted,” he said looking up and waving goodbye. With that, he leaned into the powerful boat’s acceleration as it roared off to his shoreside home across the straits.

I watched as the boat got smaller, then could hear the engines change note as it started a wide sweeping turn to the left and head back towards me. My phone buzzed signaling a text message.

“We’re coming back to pick you up. I’m having dinner with somebody you should meet.”

This will be interesting, I thought to myself waiting for the approaching boat.

What You Should be Doing Minute to Minute

ASSIGNMENT:  FT 500 COO candidate

LOCATION: Piazza San Marco, Venice, Italy

CLIENT: Global 500 company

We were sitting at a small round table on the side of the Piazza San Marco in Venice. The famous bell tower rose high above us. There were a lot of pigeons around. In a sudden, flapping flourish, several took off right over us.

The candidate, in his 50s, laughed as he ducked. We had been talking for about an hour. Time was running short and I was getting ready to turn off the small digital recorder on the table between us.

I turned back to the candidate. “Ok, one more question. This one is for my newsletter and if you don’t mind we’ll keep the recorder going. The rest of the interview I’ll e-mail to the client from the airport before I leave tonight.

“Sure,” he said holding up his espresso cup signaling the furtive waiter to bring another.

“Share with me your best tip. Something a true corporate warrior should know. Something that helped you get where you are, which is obviously a pretty good place despite your boss’s scandal.”

Before he could answer, a sharp comment in a language I didn’t understand came from the next table. It was obviously cursing which has a nearly universal tone. The candidate and I both looked over. An elegant, well dressed blond woman was sitting alone, staring at a fresh white blotch on her navy blue jacket sleeve. A pigeon had made a deposit. I leaned over and placed my espresso spoon and carafe of water in front of her. “First the spoon and then all the water,” I said smiling.

The candidate, with an understanding smile and enthusiasm that seemed to raise the day’s fading light said, “And remember, it’s good luck!”

Following the instructions she thanked us in what sounded Slavic, maybe Russian. But it didn’t matter. Her eloquent smile said everything worth saying.

I turned back to the candidate. “So, your best tip for high-value managers. For true corporate warrior types.”

“Ok,” he said looking from the pretty woman back to me. “That’s easy. You’ve come all this way to interview me because your client knows of me as someone who gets a lot done. People think it’s a trick and it’s not. It’s a simple mindset. At any slack moment, I ask myself what is the most important thing I can be doing right now. Back when I started in Belgium my mentor taught me there is never enough time to do everything you have to do, but there is always enough time to do the most important thing.”

“But how do you choose?” I asked as his espresso arrived.

“The easiest tells are things with long term consequences.”

As he finished the espresso we both looked at our watches. “We good?” he asked.

I nodded, put a colorful Euro note down and picked up the recorder as we both stood up, returning the warm smile from the woman at the next table. “We’re good,” I said shaking his hand.

With that he strolled off towards his wife and daughter waiting at nearby Harry’s Bar. As I watched him I asked myself what was the most important thing I should be doing right then. The answer was pretty simple: I picked up my light carry-on and headed toward the Grand Canal and the ferry ride to Marco Polo Airport for the evening flight to Istanbul and the next candidate.

More later…

How a Fortune 500 CEO Helps Change Happen in 7 Steps

Before the client pulled the limo’s door closed he looked up at me and said, "I’ll send the steps to your phone. Give me about 15 minutes." He then looked at the candidate standing beside me and said, "Welcome aboard! Work it out with him," he said nodding toward me. He added a quick "Thanks!" then smiled and waved to a couple of passersby that recognized him. With that he drew the car’s door closed as it pulled away from the Four Seasons toward Chicago’s Midway Airport.

The candidate and I stood on the windy sidewalk watching the car. It had been a long interview. I hadn’t been hired to find the candidates for the job. This time I was sent a short list of high profile managers to entice into possibly working for the fellow in the car. Most of the people on the list receive this newsletter so it was pretty straightforward. I did the video screening interviews then set up and facilitated the final interviews like this one. This was all done quickly, with no fanfare, and with the hermetic confidentiality my clients expect from me.

Leaning against the wind the tall candidate looked at me. "I guess that means I got the job." He paused and added, "Right?" he said with a hint of laughter.

I put out my hand and shook his. I'd been through this oddness before. He hadn't. I nodded. "Oh, yes," I said, adding, "Congratulations! You’re in for an interesting 48 months." I looked around him and signaled the doorman. A cab materialized almost out of thin air. As the candidate climbed in we shook hands again and I said, "We’ll get the letter over in the morning. You'll like the final terms."

A moment later he was headed toward O’Hare. I turned and went back into the hotel. Taking the elevator up to the Seasons Lounge, I ordered a drink and fell into one of the cushy chairs.

The conversation that afternoon had ranged from Little League to the Army’s concept of VUCA (Volatility, Uncertainty, Complexity and Ambiguity) to the difference between action and change. "Action is often meaningless," the client said in his well known, matter-of-fact manner. "Change is what counts." We explored the importance of getting inside your competition’s decision cycle, the value of "ground truth" and the importance of empowering all your teams with what he (and the Army) called an electronic, real-time RCP, or Relevant Common Picture "so that everybody makes decisions from the same information" (the candidate had implemented a similar system with such granularity he could predict what his competition was going to do often even before they knew themselves—awesome). Like I said, it had been an intensely engaging afternoon. There was a reason my head throbbed.

The phone in my jacket pocket vibrated. I took it out and downloaded the note. Here is what it said: (Note: Some of the text was in a different font and I could see I wasn’t the only person to get a version of this particular missive. The list is reproduced here with his permission and it can be forwarded by any Corpwar reader that wants to do so.)

Tal, I have found there are typically at least 7 stages to making a change in an organization. I always try to do all of them since over the years I’ve found skipping any of the stages reduces the chances of eventual success. This isn’t just for the big glory moves either. It works at all levels. All my senior managers understand, and use, some version of the list.

1.     Time. The change has to happen soon. Make sure you get across why it’s a good thing. If you have communicated the benefits properly you shouldn’t need your boot tips.

2.     Team. I get a team together, preferably where everybody knows and has worked with each other, to see the thing through, soup to nuts; from the beginning all the way through to the eventual consumer, whether internal or external. Pick the team wisely. Make sure there are some dissenters. You don’t want everybody thinking alike. You need the idea to be rigorously challenged internally. I use that Gen. Patton quote you sent out. ("If everyone is thinking alike, somebody isn't thinking." -General George Patton, Jr.)

3.     Vision of the future. Convey your vision to your teams. If you don’t have a vision, work with your trusted resources to develop one. If you still don’t have one, do your equity holders a favor and help find your replacement.

4.     Communication. Make sure everybody in the enterprise/group knows what the vision is.

5.     Empower. Make sure everybody can move their area toward the vision. This way you can converge on it on multiple tracks. There should be a lot of work in parallel. Think digital. Analog is yesterday.

6.     Interim goals. If the vision is too far off people may not be sufficiently motivated. Dial in sub-goals so they can occasionally taste their own momentum toward the ultimate prize. People prefer to reach for what they can actually touch; it’s ok to keep it beyond their grasp, just not too far or too often.

7.     Reinforce. When the change has been achieved keep it high profile until it is assimilated into the organization or group. Get it organic as soon as possible. It has to be part of the walls. Part of the mindset. The culture.

Get the paperwork to that guy ASAP. I like him. As you said last night, “He gets it.”

With that I dropped the phone into my pocket, paid the bill and left for home. Interesting day.

Some Basic Rules of Corporate Warfare

(Things to Include in a Corporate Warrior’s Toolkit)

Last week I was invited to dinner by two longtime readers of this newsletter that happened to be in town. Both are well known as being effective capitalists on a large scale. Both have, on occasion, been loudly criticized for being a bit on the savage side. Victors often are. That said, they have both done an outstanding long-term job of driving increasing equity holder value so, in my book, they are ok guys. I wrote about a meeting with one of them in How a Famous CEO Stays So Calm.

After agreeing on The Fundamental Rule ("Add value to the customer.") we got into a lengthy discussion about competitive behaviors and philosophies for competing to win in today's, and tomorrow's, marketplace. I started scribbling out notes and have put the tenets into the list below. It was an interesting and useful evening to say the least.

I encourage you to forward this to your staff since, eventually, the good of a competitive mindset, shared by all, reaches down and out to the tiniest roots in a world-class company and eventually finds its way out to the equity holders’ wallets.

This is a good basic list to pedal through while making any competitive decision. Keep it handy:

1.         Act according to a plan only after a thorough analysis of the possible outcomes.

2.         Minimize damage to the competition. Capturing him intact will typically maximize your gain (said from an M&A perspective but useful elsewhere).

3.         Maximize profit by minimizing the use of force, which is expensive. Force is more efficient when not actually used. The optics of known, but withheld force, are onerous.

4.         Weaken your competition before engagement (hire away his most valuable executives, disrupt his supplies, maybe spread around some FUD, etc.). This effectively strengthens you.

5.         Shape, or control, your competition. Make him do things he would not normally do (lure him into undesirable markets, force up his costs, make him trip). While often fun to do, these things should all be designed to increase your advantage and relate to a specific goal of some sort and not just to amuse you (Though that does have value. We work hard and life is short. Have fun. - Tal)

6.         Analyze every possible course of action for the advantages and disadvantages of every possible outcome. Endeavor to convert your own disadvantages into advantages, and your enemy's advantages into disadvantages.

7.         Use your enemy's own psychological and philosophical structures against him. Somewhat tough to do (and can backfire badly) but when successful this will rattle him and may have him gasping, “But hey, I thought we were the good guys!”

8.         When attacking/moving into a new market be extremely sensitive to any changes and adapt accordingly. "Be like water" (adapt to the terrain). Keep in mind you’re probably being watched so ask yourself “What do they see and what can they conclude from what they see?” Then ask, “How can I modify what they see to my advantage?”

9.         Attack with sufficient strength where you are not expected. Note: One of my hosts suggested using overwhelming force to debilitate the opposition. The other thought this would suggest you had misjudged the situation and thus wasted resources. I agree with the later. Less waste and destruction means more profit for you and yours.

10.      Try to achieve your goals via indirect methods your competition doesn't expect. Again, always be "unfathomable". If you are unfathomable your competition will have a very difficult time effectively planning and executing against you.

11.      Speed is everything. Always be asking yourself "How can I get this done quicker without more costs." Quicker wars (of all kinds, even with kids I’m still learning) are cheaper.

12.      Think it through. Never forget that battles are won or lost before they are fought.

The list is longer but these are the easy-to-deploy heavies. It's a quick list when you get used to the “mode of thinking”.

Think about it…

I had a useful sign made for my office wall: "Business Bullets are fast. Fire first." -T. Newhart

Avoiding Your Own Charge of the Light Brigade

To paraphrase an ancient Greek writer: "Ten good shoulders, wisely led, Will beat a hundred without a head." -Euripides

"The famous Charge of the Light Brigade is a useful study because it broke so many classic rules of basic management. Inflated egos didn’t help things either." -Tal Newhart

Let’s look at the famous “Charge of the Light Brigade.” It happened on October 25, 1854 during the Crimean War with the British fighting the Russians. The disaster happened for the same reason a lot of businesses fail: bad communication brought upon by a lethal collection of inflated egos.

In an act that appears to be of unfathomable stupidity the British Lieutenant-General the Earl of Cardigan ordered his light brigade (the “light” was because they were lightly armed, as opposed to the “heavy brigade”) to attack the Russian artillery positions. Success was impossible. The charge was through a narrow valley a mile and a quarter long. Russian guns were at the end of the valley and gunners were on both sides, forming a classic death box. In fact, some of Cardigan’s men did manage to get through to the guns, but were then surrounded by the Russian troops. When they turned to retreat they were easy targets. The whole thing took about 20 minutes and cost about a third of Cardigan’s force. And of course there is the Tennyson poem to remind everybody about it forever (sort of like our modern social media…).

But what really went wrong, and why, it is vaguely familiar if you regularly read the Wall Street Journal.

As is often the case, there was a sequence of careless—and completely avoidable—mistakes. And they all came down to poor ‘corpcraft’ (see my definition of corpcraft elsewhere). A successful attack was clearly hopeless. That was obvious—as is almost always the case in war (and business), success or failure is decided before the battle. And again, as in business, after the “first stupid mistake” was made, management suddenly couldn’t get anything right and the situation (and equity holder value) disintegrated with shocking speed.

In a nutshell this is the famous story of The Charge of the Light Brigade. It’s amazing that generally intelligent commanders, which these gentlemen were, could make such foolish mistakes. But, just as in the corporate world, that happens. The real problem is that a single minor mistake can set off what around here we call a “negative cascade”. (As opposed to a positive cascade which is what you and your equity holders want: good events leading to good events, etc.) A negative cascade is simple: think dominos. Big expensive ones.

But here’s the detail and it is easy to compare this to something you’ve probably observed or personally experienced:

Lord Raglan, the English commander (a.k.a. the Boss here), looked across a broad landscape, and from his high vantage point on a hill, could see the enemy (the competition) in the distance trying to remove some captured English cannons. Since captured cannons were a metric of victory or defeat in a battle this was a Bad Thing. Raglan sent down another in a sequence of orders to Lieutenant-General the Earl of Lucan—who was in a position 600 feet lower in elevation and didn’t have the same view—to recover the cannons “immediate” [sic]. The order was given to another officer’s aide-de-camp, Captain Edward Nolan, for delivery—Captain Nolan was chosen because he was an accomplished horseman and would take a speedy, more direct route down to Lucan. He did this, probably loving it, because he was a known showoff.

So Nolan delivered the order to Lucan to attack and regain the cannons. Reading the order Lord Lucan was justifiably baffled and reasonably asked for clarification because he couldn’t actually see any cannons. Nolan, eager to see some “real cavalry action”, arrogantly waved his arm in the general direction of the Russian front and snapped “There, my Lord, is your enemy. There are your guns.” Nolan repeated that the order was to attack immediately then trotted off to talk to another officer. Lord Lucan, flawed by pride, and always at odds with the arrogant Nolan (Nolan had authored books on cavalry tactics and made sure everybody knew it), failed to ask Nolan for further clarification. Note: Like Lord Raglan, Captain Nolan had seen the location of the cannons that were obscured from Lucan’s view because of the topography. But Nolan didn’t accurately point to where the cannons were—he merely swept his arm across the landscape in the general direction of the Russians. As you can see, the cascade now accelerates towards preventable disaster.

Lord Lucan rode over to the commander of the light brigade, the Earl of Cardigan (and his trusty horse Ronald). Lucan and Cardigan hated each other (Cardigan had been married to Lucan's youngest sister but was now separated from her) and, again, there was no useful discussion. Lucan simply ordered Cardigan to attack ‘down the valley’ with his light brigade. Cardigan pointed out the fact there were numerous enemy positions in the vicinity to which Lord Lucan simply replied Cardigan should take the ride at moderate speed so as not to exhaust the horses (good news for Ronald). Lucan would follow up with the heavy brigade. The cascade continues.

So off they rode into “The Valley of Death”. Twenty minutes later it was over. Nolan died dramatically in the charge, ostensibly trying to ride forward to warn Cardigan he was headed in the wrong direction (some historians disagree with this interpretation—nobody argues he was the first to die). Lucan, seeing what was happening to the light brigade in front, turned the heavy brigade around uttering the famous line: “They shall not have the heavy.”

The high level military history view says that the attack was a perfect misapplication of the sound strategy of applying superior force at a position of an enemy’s weakness (e.g. your competition, also see the Southwest Airlines comments elsewhere in this collection).

But that’s the easy way out. What happened was that the functional CEO (Lord Raglan) made a terrifically dumb mistake (the cannons were clearly lost to the Russians). That mistake, foolish in itself, compounded itself through a sequence of unquestioning levels of management (accelerating the negative cascade). In the final analysis it was Cardigan who took the most heat because he led the actual charge straight into the cannon battery. Cardigan, of course, blamed Lucan. And Lucan, of course, blamed the dead Nolan for the vague delivery of the orders. Nothing’s changed. This happens with poor management all the time. Look around. Hopefully you don’t see it, but you probably do.

It all sounds uncomfortably familiar doesn’t it? How many boards and executive committees behave the same way?

Let’s take a look at this via a few very broad strokes:

1.     Underestimation of a major obstacle. Raglan, like a lot of successful CEOs, probably thought “I’ve figured this out. Nothing’s changed. Go get the cannons.” Raglan had convinced himself he was the “master of the universe” and that he knew everything. Toss in a little of the “I can do anything” syndrome and it spells disaster. It’s the same in the market place. In his mind Raglan saw only the cannons being recaptured. He failed to think of the process. Does the name Vivendi ring a bell (sorry Jean-Marie)?

2.     Faced with a rapidly deteriorating situation Cardigan continued his charge. A Great CEO sometimes has to admit that he or she is wrong. Sun Tzu said excess pride in a general is a bad thing (poor corpcraft) because they worry too much about what others think of them. Even smart CEOs sometimes continue to throw massive resources at projects (often pet projects) that can’t work. Consider Ross Johnson of R.J. Reynolds and his so-called smokeless Premiere cigarettes. Like Cardigan, Ross continued the charge to prove “he could do it”. It cost Ross a couple billion RJR dollars and Cardigan a couple hundred men. Great generals and great CEOs can admit that sometimes “you really can’t get there from here”. They can say it even though there’s always somebody like Captain Nolan who will say “You see! I knew he couldn’t do it!” Great leaders admit they made a mistake and move on, limiting the destruction. Good managers don’t compound their errors. (See the chapter about mistakes.)

3.     Another mistake Raglan made was his assumption of domination in a fluid state. Raglan thought he dominated the landscape (e.g., marketplace). But there were what amounted to “marketplace eddies” where he could be overpowered. Great generals and CEOs know that battlefield or market domination is a highly dynamic thing. They know that constant adjustment and tuning isn’t optional, it’s required.

4.     Lord Lucan failed to get clarification from Captain Nolan and Nolan failed to pass on relevant information. A Great leader knows he or she has to listen to—pursue, understand and act upon—any credible source of information potentially relevant to the survival of the company. In many cases information “doesn’t know where to go” in an enterprise. That’s a serious flaw in a company since sometimes tiny pieces of information can lead to the destruction of even a huge company. The challenge is that extremely vital information frequently first presents itself in remote places along the outer edges of the organization. The datum or event may seem innocuous to the casual observer but can, if not acted upon decisively, cripple or even collapse a major enterprise. But that wasn’t the case with the light brigade. Captain Nolan had the critical piece of information—he had seen the location of the cannons! But, in the heat of the moment he didn’t pass it along. And Lucan didn’t ask him to explain further because he felt Nolan was his inferior and Lucan himself would look bad or somehow weak by asking. Great leaders give, and get, the information needed. Lucan knew he had incomplete information but chose to act anyway. No greatness there. Just poor corpcraft.

So off they rode into “a mile long jaw of death.”

The real tragedy here is how senseless it all was. The biggest box in the failure matrix was simply poor communication. The same thing frequently happens on Boards of Directors. Board level things often don’t happen like they should because the board doesn’t function as a proper, fluid team (and this has nothing to do with Sarbanes-Oxley, that’s a downstream consideration).

Remember, in business the cannons are always there, somewhere. But there’s no reason to ride into them.

Think about it…

____________________

My thanks to the British Government for their help in this account. –TN

A CEO Talks about the Importance of Grokking

I had lunch last week with an author of two once best-selling business books. I was interviewing him on behalf of a client for a consulting job. I was brought in because the client wanted a good arm’s length interview they could easily pass around the C-suite. The writer had once run a very large corporation, did so famously, and wrote well about it. The recorded interview itself was telling and useful relative to the client's decision about whether or not to consider him further for the assignment. But it was the informal discussion later when he brought up a useful notion he said I could share with other Corpwar readers.

This notion is his very deep seated belief of something called "grokking". This was what he always looked for in his inner team members. He said it was an even denser form of value, to him, than what I call a "corporate warrior" (a phrase he considers a bit pop and superficial). I had never heard the term “grok” before so I asked what it meant to him in a functional, as well as philosophical, sense.

He answered, "It means the guy or gal is really inside the skill set of something. It's not an external layer. Most people with good skills wear them like good clothes. But it's still external. A layer on the outside. A person that groks something knows it so thoroughly it has become part of them. It has become their retina through which they see everything."

"Doesn't that singular focus lead to a kind of social dysfunction?" I asked having seen exactly that in software engineers, actuaries, etc., that I have been responsible for hiring.

"Sometimes. Those guys we just put into a nice corner with good tools and keep the place dusted for them. Everybody that’s properly employed adds equity holder value in their own way; if they grok something of value to the organization, and therefore the equity holder, then that value add is pretty high. You need to support it and use it. My ongoing goal, perfection really, is having our most important critical paths composed of these kinds of people doing what they grok. It's a beautiful thing to watch projects flash up those human chains once they are assembled."

I asked him what he grokked. He smiled and said "Well, that's simple. People."

I left the meeting asking myself what I "grok" in my professional life, if indeed anything. I concluded it would be recruiting in its various flavors, such as doing useful interviews and selling exceptional candidates that don’t want to move jobs; that it will improve their life in various meaningful ways to take that leap. It’s a fairly diverse skill cloud that, when brought to a singular focus, is actually somewhat limited, which I found humbling.

It might be beneficial to ask yourself the same question: "Do I grok at anything, and if so what?" After looking at your core team members with the same question in mind, suggest they do the same. And so on. It’s a useful exercise for accelerating things.

Think about it...

The Risk of "Normal Innovation"

And what to do about it

The Gordian Knot, presented to Alexander the Great in 333 B.C., has become symbolic of an unsolvable puzzle. History suggests it may have been an actual knot, impossible to untie. In fact it wasn’t until recently when Polish physicist Piotr Pieranski wrote a knot program* called SOTOS that the knot was finally undone. It turned out not to be a knot at all (note: when Alexander was presented with the challenge no rope ends were visible) but rather a loop of rope (2 ends spliced together) that was probably wetted, somehow entangled, and then shrunk in the sun. With insufficient looseness it would have been impossible to unravel the rope.

However, Alexander the Great was innovative and had an interesting solution to “luein” (loosen/solve) the knot. After all, Zeus had said anybody that could undo the knot would rule all of Asia. Thusly motivated Alexander stared at the twisted mass for a while, then abruptly took out his sword and sliced the knot in half. Nobody had thought of that solution before. But that was ok. After all, the challenge was to “part the knot”. The how was left to the attempter. It wasn’t how he played the game—it was whether he won or lost.

Result: Problem solved by looking at it differently than others. And, of course, Alexander went on to rule Asia.

Alexander knew how to innovate.

Alexander the Great was known as a great innovator in matters of war and competition. Napoleon was using Alexander’s techniques a thousand years later and they still worked (well, except that last time…).

Alexander looked for different ways to do things. For example, Alexander was the first to use the “strike at the weak spot” strategy. It seems simple and obvious now but in 334 B.C. it had never been formalized and he used it to shatter more powerful, better equipped armies. Never satisfied, he then refined it by cleverly creating a weak spot in the enemy line, then attacking there.

How? Simple if you look beyond the obvious. Alexander knew the enemy (his competition) was always watching him. He realized he could cause the enemy to physically move around by rearranging his own men. Using this, Alexander would, by moving his men, carefully have the enemy arrange itself in a manner that would ensure its own defeat. This led to less costly victories for Alexander and in war cheaper, with good results, is always better. This is why smart generals/CEOs/managers are always asking themselves, “How can I control my competition?” This makes competition cheaper and thus better for our equity holders. It’s fun too.

However, in the example, you need to look carefully at what Alexander did in the battlefield. It has two parts. One was the pure innovation (strike at the weak spot), the second was a refinement (create the weak spot in the first place)—the second was a sustaining move on the previous innovation. Don’t confuse them.

One of the definitions of a well-managed company is one that carefully listens to its customers and provides what they want. Super performing companies do this better than their competition via a sort of hyper-alignment with their clients.

But this extreme client centricity relative to innovation does carry a risk. You are thinking inside the box (e.g. the client’s). And if you are doing a good job you are probably receiving rewards and that feels good in all sorts of ways. But you probably aren’t truly innovating. You must objectively examine your actions and see if you are really just sustaining, in some fashion, an existing product or service (even if it’s “new”). There’s a difference and the difference can doom even a great company.

How? Even if you are performing greatly you have to ask yourself what you will do if somebody comes along with a client usable solution that is so different that you never even thought of it. Your client never thought of it either. In fact, maybe nobody but the goofy guy in the fabled garage, or some small market “skunk works”, ever thought of it. But it works better than your solution. And your clients gravitate to that new solution because that’s what their equity holders expect them to do—wouldn’t you? (Have you ever noticed how often small cap skunk works often smell like money? It’s an invigorating odor, even if it can occasionally smell like people have forgotten how to bathe...).

What makes this especially grim is, on the surface, you’re being penalized for being a “good”, well-managed company. You listened and were guided by your clients. Maybe you even took a bit of a chance and got out in front of them—helped them see a marginally better way. Even improved them. Companies win awards for doing that.

However, in many cases what we’re doing with that innovation, without knowing it, is simply treading water. Looking at the knot the same old way. In fact some of your well-intentioned, engineering driven, innovation may simply be “over-satisfying” the client’s need and that’s not helpful to your equity holders. In fact it can be damaging because you are diverging from what your client actually needs and wants to pay for. Less can be more. Eventually customers learn this.

The point is although you are admirably aligned with your clients you are still at risk because your client will switch away from you if a better way comes along. They have to.

Find your industry’s Gordian Knot.
Then untie it.

The challenge is to also venture outside the often small and constricting, client-driven, innovation box. Really do it. A lot of us think we do it, but we don’t. Not really. Why? Frankly, it’s a strange place for a traditionally well-run company. Too many unknowns. Somebody will ask you, “But what’s the ROI going to be?” Huh? You can’t analyze what doesn’t exist. True innovation, the real fresh stuff that flips your industry on its ear, is a financial analysis black hole. I know many CFOs and they have it tough enough already. Black holes? “No thanks.”

But you have to do it. Some call it “disruptive technology.” That’s a bit pop for my tastes but the idea is there. And I agree with it. It is, after all, the polar of merely sustaining and that’s risky. It speaks to the notion that you can’t get stuck—sometimes you have to just throw away what you call normal.

Whatever you label it, figure out how you are going to pay for it and who is going to do it. Then give them some space and stand back. If it were me I’d tell them to come up with the industry’s Gordian Knot and when they came up with it I’d tell them, “Great, now go figure out how to untie it. Or find the guy or gal in the garage that may already know. Take a checkbook. Get going!”

Is the approach too weird? Too expensive? Then create an internal mechanism (preferably an accountable person or small group—and yes, it may be a peculiar job description) whose job it is to know about anything (ANYTHING!) that can cause your customers to do things differently. Why? Because if they start doing things differently they may not do them with you. And this has killed off many a “great” company.

I once had a plaque made for my office wall. It said: “A company exists to create customers.” As I’m older now I think I should add: “and keep them for a long, long time.” Focusing a little less on what we can actually see and measure is a good way to ensure the new addition.

Think about it…

____________________

*Lest you think Piotr had way too much time on his hands physicists study knots because they think that matter may be composed of string-like, possibly knotted, pieces of space time. Thus “String Theory.” Interesting stuff—especially if you have a bottle of aspirin around.

How a Famous CEO Stays so Calm

Hint: "The open folders will kill you."

Somewhere along the line I picked up the rule that says when you're having lunch with someone on their private jet you should pay special attention to what they have to say. Last week was such an occasion and I'd like to pass along part of the conversation. If you occasionally feel stressed out and overwhelmed you might find it useful.

As is our practice when we do an executive search we typically supply some video, or recorded audio, of the top candidates. Seeing, or hearing, the candidates, provides a better idea of who they really are. So it saves a lot of time, money and reduces hiring risk for the client. Normally we put all this material securely on the web so the hiring team can peruse it at their convenience. This saves even more time. It's a slick system and although low-tech by today’s standards, works very well.

However, recently a client, a Fortune-level CEO and a way-back reader of this occasional newsletter (we've mentioned him previously), called up and asked me to bring the interview content over to Chicago Executive Airport (a busy corporate airport north of Chicago) and we'd go over the candidates for a senior finance position and then have some lunch.

We met on his Gulfstream (nice ride). After reviewing the video and resumes, and making some decisions, we put the work aside as the flight steward set the table for lunch which was brought over by a famous North Shore restaurant. I replied a cautious “Sure," to the host’s comment: "I hope you like Atkins." For the curious the meal consisted of grilled tuna steak with a portabella, gorgonzola salad and a glass of One.6 Chardonnay (a "low carb" wine). For the record, I would have that meal again anytime, anywhere.

During lunch (which permanently altered my notion of "diet food") I noticed my host seemed totally relaxed and without distraction. This was notable to me because you almost never see it. Most people, from the McDonald's drive-thru window person, to Donald Trump (ok, maybe a bad example), have so much on their minds that you just know they aren't all there. And they know it themselves. But here was my host, a nationally important man responsible for over 50,000 employees, and ultimately responsible for countless projects and equity holders, and yet he had a relaxed "lightness" about him that suggested he had arrived someplace that I, and perhaps you too, want to be. So I asked him how he did it. Here is the salient part of the conversation almost verbatim:

He smiled at the initial question. "Ah, maybe it's just a trick. Maybe I'm as overwhelmed as the fella that brought the food. I just don't show it. Maybe it's a ruse."

Sipping the wine, I thought about this. "No. I don't think so. I'd be able to tell because that's my job and I'm good at it."

He smiled. "OK, then describe to me in a single word what you think you're observing, either by its presence or absence. Go ahead. You're creative, Tal. Give it a try."

I thought about this, then said, simply, "Carefree." I then looked around the luxurious $40 million jet and added, "Which strikes me as impossible!"

"Well, you're right. I absolutely am not carefree in the usual sense, but I am in a very important way."

Now we were getting somewhere. "And what way is that?"

"My mind is clear. And relaxed," he said, eating the crisp tuna. He then reached into his breast pocket, pulled out a dime store notepad, made a note on it with a nice fountain pen and replaced both in his pocket. The motion was fluid and seemed to take only a few seconds. I realized he'd done it a half dozen times since I arrived but this was the first time I really noticed. His motion was that practiced. That routine. Clearly he had done it thousands of times.

"So's mine," I announced confidently, referring to my mental state.

"But it's not," he said, waving his fork. "And, Tal, that's not a bad thing. It's just inefficient. Like most people you over and under react to situations, which means the situations control you. I’ve seen you do it. You need to remind yourself to respond appropriately."

I replied, "Like the old notion of reacting like water when you toss a pebble into it?"

"Exactly," he said smiling. "We're talking about the same thing. The water doesn't over or under react. It reacts appropriately. If you over or under react the input is controlling you. Phone calls. Meetings. E-mails and texts. I learned a long time ago to give everything exactly what it deserves. Nothing more. Nothing less. At the time I came to that understanding, it was a big step for me." As he said this the pad came out and a few seconds later glided back into his shirt pocket. Smoothly, like relaxed breathing. It was elegant.

In the background a Learjet roared down the runway and off toward the East. I confess to wondering if its expensive occupants were under or over reacting to something. I half expected my host to read my mind and whisper, "Over." I continued with my lunch. It was genuinely delicious.

There was an easy silence in the cabin. I finally asked, "I can understand the efficiency of a measured response. But that doesn't explain your notion of the clear and relaxed mind. You have to have more going on in your head than most anyone I know. How can you honestly say it's clear and relaxed?"

"Simple. No open folders," he said, pointing his fork towards his head. "The open folders can kill you."

"Excuse me? Open folders?"

"We all make commitments—far more than we are aware of, most of them to ourselves. The key is the way our subconscious mind handles them. Basically, all our outstanding commitments are kept track of. I think of these as open folders because literally that's what they are. Something unfinished and waiting for something. Waiting for action and closure."

"What's an example?"

"Anything you think of that you want to come back to. Think about the enormity of that. It's any task you need to do, anything you want to follow-up on. The moment you think of it, if you don't execute it right then, it becomes an open folder. Something that needs to happen in the future. The problem is, in a typical human being, the open folders sort of float around in your short term memory which is a finite space. In the majority of people it's very cluttered which is the opposite of having a clear mind."

"And the clutter creates stress?" I asked, reaching for the glass of peculiar, but tasty, wine.

"Of course. Because you've identified a responsibility you have, some task you need to do and your subconscious mind won't let you really relax until it's done. So you have to handle it. The problem is much of the time we "forget" it—but in reality, Tal, it's not gone. It's still up there. Still an open folder sponging up resources. After a while there's no more room so we get tense, lose focus, and become less effective. We founder."

Then it dawned on me. "Thus, the pad?"

"Thus the pad," he said, pulling it out and fanning it like a deck of playing cards. "This is where everything goes. And I mean absolutely everything. The key is you have to trust it. I know if I write it down it will resurface. [Note: This was later clarified. The little note pages, which are all dated, (idea, reference, action or desired outcome notations), are faxed to an admin support person for handling. The circle back/follow-up process is apparently quite rigid.] The point is I can then forget about it. Writing it down "closes the folder" freeing up bandwidth to think about something else."

"And what is that, typically?"

"Actually, a lot about family and other pleasant pastimes. But if it's business related, after envisioning a project's desired outcome, it's mostly next step related thinking. Much less big picture than you would think. I've known a long time you can't "do" a project. You do steps. Therefore, much of my focus is on what's the very next thing that has to happen to move a project along. And, since I’m a leader, that's typically making a suggestion to somebody."

"So your strategy is to keep very little on your mind."

"Broadly. And that's what you refer to as my appearing 'carefree'." With that he reached into a compartment in the leather arm rest of his seat. He pulled out a new red notepad. "Here," he said sliding it across the table. "Try it. You'll see."

I did try it. And he's right. By moving the things that can't be used or concluded right now into a trusted loop-back system I'm finding I have a lot less 'on my mind' which, in turn, makes my thinking a bit crisper and cleaner. And yes, knowing valuable thoughts aren't going to "escape" leads to a kind of mental relaxation you need to experience to understand. I doubt I'm the sort of person that will ever be truly "carefree" but it's proving an enjoyable and very useful experiment.

If you feel stressed and over committed you should definitely try this technique. I've substituted my smartphone for the little paper pad but it works the same.

Give either a try. You too may never look back.

Think about it…