A Latte with Deming: How I learned to stop blaming employees

There is a coffee shop in southern Stockholm where I have taken the habit of procuring my morning shot of coffee. There’s nothing special about the place, devoid of charm and located at the busy entrance of a metro station, but the coffee’s pretty good. I always order a double latte with an additional carrot-and-orange juice. One nice touch is that they put cardboard holders around hot paper cups, making them less uncomfortable to hold.

The coffee shop is managed by a middle-aged man, often working in the back room. The best thing about the place is probably not the coffee, but the young, female shop-assistant, who’s very service-minded and efficient.

This morning routine of mine hummed along nicely until one day a couple of weeks ago when, to my concern, I was met by two girls behind the counter. The new girl looked very confused. During the following weeks, the training period I assume, the new and old assistant worked side by side, but after that, the one I was used to was gone.

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Giving Back: Being a Positive Force in a Complex World

As an employee it’s quite easy to become cynical about the role your company takes in society. Most companies seem to focus on making money within the legal limits – not minding ethics, even less being a positive force in society. One example is the recent TeliaSonera leadership meltdown in Uzbekistan, where management defended from allegations of bribery by claiming to follow local legislation. That’s far from enough today for a major company. In a transparent world, you have to do what’s right, not just what’s legal.

More and more people think it’s important how their suppliers, and by extension their own company, behaves but very few have the power to influence that behaviour. This incongruence creates a feeling of unease, or even resentment. You want to be able to proudly present your company – not excuses.

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Peer Performance Conversations: Feedback Without the Baggage

I’ve had mostly poor experiences with performance reviews. They often left me feeling slightly dirty; like I wanted to take a shower and forget the whole thing ever happened. I am not alone, it seems. Some people call them a joke. Some say they’re tayloristic, elitist or even evil. Very few enjoy them. It’s just one of those things that you “have to do” in business. Or is it?

What I have experienced as an employee is the Swedish form of performance review, most often referred to as a “development dialogue”. They are similar to their Anglo-Saxon counterpart, the “performance appraisal”; typically a little bit more coaching and a little bit less assessing, but only by a margin. At heart, they’re the same. The supervisor assesses the employee and indirectly or openly link that to their yearly compensation adjustment.

At Adaptiv, we wanted to get away from the negative stuff. But how could we? Just skipping performance reviews (I’ll use that term to mean all forms) would be one way, but why throw the baby out with the bath water? To me, there is clearly some value in getting honest feedback on your performance from your colleagues at least once in a while.

Would it be possible to set things up so that you could get that without the dirt?

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Why Avoiding Customer Focus May Be Right Sometimes

Let’s start with an eternal question: What should a company seek to optimise? Its profits? Share price? Or something else?

For many, company profits is the obvious answer. “Without profits a company cannot exist”, they proclaim. This is obvious but misleading. It’s like saying “Without water a human cannot exist”. Its true but that doesn’t mean I should always optimise my water level. As long as its over a certain level, I’m fine.

For others, shareholder return is the focus. Investors and owners are certainly important, but are they most important? Think about it. We have all seen the negative effects of management trying to inflate share prices. How good is truly the quarterly focus for a company? And how motivating are stock price increases to employees?

Some management gurus claim that everything must start with a customer focus today. Customers should pull what they need from organisations. Organisations should be designed and adapt continuously to cater to their needs. This strikes a chord with me, but what if customers don’t really know what they need? Or what if my job is to know a lot and learn what they need?

There are other thoughts on this. Some system and complexity thinkers, claim you should not optimise for one group but strive to satisfy all stakeholders, including even the families of employees and society at large. This sounds great, and I agree, but there are two problems:

  1. In context, some groups are more important than others and there are dependencies between them.
  2. Saying you should satisfy everybody doesn’t really provide much focus at all. It doesn’t help us attack our initial question.

From the above, we can deduce that even very smart people disagree on how to answer this question. I guess it’s because there are many true answers and it depends on context. In this post, I’d like to explain how my own company, Adaptiv, has reasoned around this. We have chosen none of the options above.

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Am I a Socialist? – How a Small Consultancy Approached the Tricky Questions Surrounding Power and Money

Who should decide in a company? Who should make the most money? These are difficult questions with many possible answers. In this post I want to explain how my company, Adaptiv, is set up when it comes to power and money.

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One Day a Week Together

My company, Adaptiv, is what you might call a life style company. We, the four owners and partners, think of it more as a way of life than some big entrepreneurial ambition. In other words, we’re not trying to conquer the world. It seems to me that many companies seek world domination just because they think that’s what a business should be about. Well, it turns out that’s a pretty modern idea, dating back to the time when armies also started to conquer the world.

It doesn’t have to be like that. You see, there are numerous downsides and sacrifices you need to do in such an enterprise. For some, it might be worth it. For us, well, no. We’re committed to Adaptiv because we feel our lives would be a bit grayer any other way.

In this post and hopefully a few others I want to share some ideas that I think may be a bit original about Adaptiv. If you are starting your own company or if you are in a position to affect the basic thinking in your company, I hope these ideas can provide some inspiration.

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Applying the Innovator’s Dilemma to Leisure Travelling

In the book The Innovator’s Dilemma, Clayton M. Christensen examines why companies wither away and die. His research shows that in the face of disruptive change, very few companies are adaptive enough. It is not mainly a technological problem, as one might infer. Instead, it could mostly be considered a business problem. It is so called “good management” that fails. Listening closely to customers and looking out for the needs of your company will only take you closer to the impending disaster. I found these ideas fascinating so I thought I would have a go at applying them to a market I know fairly well, the leisure travel industry in Sweden.

First, some modern business history. There was a time, not long ago, when the leisure travel market in Sweden was more or less divided between three tour operators (Ving, Fritidsresor and Apollo). Together they accounted for the lion’s share of the market (75-85 %). In the public eye, and looking at official numbers, they still do, but in fact this is not true anymore. If you include all leisure travelling, counting privately booked trips through travel agencies on the internet, known as OTAs, the numbers look radically different. Over the last 10 years the big tour operators have been overtaken and now hold about 40 % of the market together. In other words, their market share has halved in a decade.

How is that possible? How did it happen? In just 10 years? What adds insult to injury is that this has occured on a market that has been growing. (We travel more than ever before.) Was it because of bad management? Probably not. These companies are still showing profit. The answer is, of course, because of a disruptive technology: The web.

How could the web be considered as a disruptive technology for leisure travels? Travelling is about people and services, not software, right? And travel agencies make money by bringing new cool resorts in exotic countries to the market while at the same time milking the well known resorts, not by IT, correct? Well yes, some of that, but that’s not the point. The point is that the web has levelled the information playing field.

Before the web, tour operators had all the information. They had connections and deals with airlines to charter planes at volume rates. Same thing with hotels, which they could reserve years in advance. They knew the culture and ways in many foreign countries and cities and had researched and tracked the most price-worthy places for decades. They were the experts on the conditions in the foreign country and travellers were glad to pay for their guidance.

This information imbalance has been almost eradicated during the last decade. Now most computer-literate people research places and find great family hotels all by themselves, thank you very much. Then why not go ahead and book the plane and hotel yourself as well, using simple online agencies? Heck, its even cheaper too! So most people do just that.

So even though the total market has grown and even though the big tour operators still shuffle millions of Swedes to foreign countries every year, another market has grown behind their backs: The informed, internet-based holiday. “We don’t need no annoying guides, we’ve got iPhones!”, people seem to say.

Of course, the market leaders are no fools. For example, Fritidsresor opened their first online booking back in 2001. Not that they really wanted to, mind you, but everybody else had it. And sure, it would be another sales channel. I think it is fair to say that the web sales channel was seen as an add-on, programmed by the weird guys in the basement. Management did not understand just how game-changing the web was. That’s understandable. Nowadays they do understand better, but they aren’t doing much about it, which brings us back to Christensen. That is the typical symptom of a disruptive technology, which is why I believe that the web is a disruptive technology in leisure travelling.

Let’s be clear. The problem is bigger than fixing a better online booking dialogue. Much bigger. The tour operators are web-based travel agencies now, not catalogue-based, but not everybody at the top has realised it. Sure, the tour operators are reachable online, but they seem unable or unwilling to exploit its full potential. Their reservation systems are dinosaurs, which basically turn travel searching and exploring into palaeontology. Travel offerings are still collected into seasons. They don’t have an app that could help their guests onsite. They allow crappy wifi at the hotels. The most advanced way of getting in touch with guides is through texting. Let’s be honest, being online is simply not in their DNA.

Furthermore, their marketing and sales departments are perfectly geared towards selling package travels using ads and campaigns, often with an air of quiet desperation. The price structure is complex, even deemed too complex for customers to understand. So it’s hidden from them. The delivery organisation is a lean, well-oiled machine serving an identical experience, week after week, to people looking for something that is adapted to them. These firms view the development of their web software more as an IT support function to sales than like a business process in its own right. In fact, you could regard it as the business process, since 60-70 % of sales today originate from it.

The market for package deals is shrinking. Nowadays, a bit simplified, one could say that they generally reach customers with poor internet skills or people who want as little adventure as possible on their journey. To generalise further, this means beginning travellers, families with kids and older travellers. This is not a big enough market for these companies. To make matters worse, it will continue to shrink as the older customers stop travelling with age.

So what should they do?

Imagine you are the CEO of one of the major tour operators. What would you do? You would probably come up with three obvious strategies:

  1. Stay on course. Keep the company as it is and hope the wind turns with the next generations of travellers.
  2. Rewire the company. Transform it into a modern company where online services are core.
  3. Create a separate department or project to start a truly online travel agency from scratch.

The 1st option is more or less religious in nature. You are basically praying for higher powers to make it right for you. It’s not a real option for a decisive CEO. The 2nd option is certainly possible, but it would mean very hard work over many years. You need to change everything, from leadership team, business model, and culture. It’s probably not even doable for a publicly traded company, where a year or two is as far ahead as anybody looks. The 3rd option certainly sounds the most promising. However, knowing your “Innovator’s Dilemma” you remember that these attempts almost always fail. Christensen lists numerous examples in his book.

There is a 4th strategy, however. It is not intuitive, but it is the one which has met with most success according to Christensen. When disruptive technology strikes, a market leader’s best choice is to take some of its best people and create a separate organisation, financially isolated from the mother company. It should have a separate product line, business model, culture, and leadership. If and when the disruptive technology upsets the market and if you’ve been successful, you may gradually move people over from the old (and marginalised) company to the new (and growing) company.

This would be my choice. I would set up a new company with some great business people, domain experts, a visionary CEO, and a couple of development/operation teams. We could probably leech off the large network of travel and lodging suppliers as well as local guides of the mother company. This company would have an online, mobile, social focus from the beginning. We would start with the assumption that everybody is or wants to be online before, during, and after their holiday trip. We would use web technology as a base instead of something glued on afterwards.

How our business model would look, I don’t know, but I bet we could utilise our main differentiator; having both great local presence as well as great online presence. To my knowledge, there is no such company today. Perhaps we could offer both innovative travel searching and personal pickup from home. Perhaps we would crowd source a lot of the web content, interact a lot with customers online and be transparent and guarantee your transport home when war or disaster hits paradise. Perhaps we would have downloadable apps that you could bring to the trip with all you need to know about your trip and destination. Perhaps even an augmented reality app, for that walk in that serpentine, arabic town and a human guide you could call on demand, lying pool side, when you are planning an outing next day. The adventure would be there, gently guided, for those who want it, on demand, but without much of the hassle and anxiety of leaving for a foreign, unknown location.

I don’t think any of these ideas are new. It’s just that a traditional tour operator never seems to have time to try them and an online agency is not interested in tour operating. Will the giant tour operators transform and survive? Or will the OTAs take over completely? According to this analysis, there could be room for a 3rd option, a fresh middle ground. Will someone go there? Only time will tell.