March 3, 2014

How will you measure your life? by Clayton M. Christensen

How will you measure your life? by Clayton M. Christensen
[Wonderful book - the flow helped me to read the book in one sitting!
Applying successful business strategies in every day life to have happiness and success in life]

There are no easy answers to life’s challenges. The quest to find happiness and meaning in life is not new. Humans have been pondering the reason for our existence for thousands of years. There are no quick fixes for the fundamental problems of life. But I can offer you tools that I will call theories in this book, which will help you make good choices, appropriate to the circumstances of your life.

[As author says, it is better to teach how to think, than what to think] When people ask me something, I now rarely answer directly. Instead, I run the question through a theory in my own mind, so I know what the theory says is likely to be the result of one course of action, compared to another. I will explain how it applied to their question. To be sure they understand it, I’ll describe to them how the process in the model worked its way through an industry or situation different from their own, to help them visualize how it works. They will then answer their question with more insight than I could possibly have.

A good theory does not change its mind; it does not apply only to some companies or people, and not to others. It is a general statement of what causes what and why.

People often think that the best way to predict the future is by collecting as much data as possible before making a decision. But this is like driving a car looking only at the rear view mirror - because data is only available about the past. Indeed, while experience and information can be good teachers, there are many times in life where we simply cannot afford to learn on the jobs. You don’t want to have to go through multiple marriages to learn how to be a good spouse, or wait until your last child has grown to master parenthood. This is why theory can be so valuable: it can explain what will happen, even before your experience it.

For example, consider the history of mankind’s attempts to fly. They were replicating what they believed allowed birds to soar: wings and feathers. The mistake was that although feathers and wings were correlated with flying, aviators did not understand the fundamental causal mechanism - what actually causes something to happen - that enabled certain creatures to fly. The early aviators might have seen some warning signs in their rudimentary analysis of flight had they examined what their beliefs or theories could not explain. Ostriches have wings and feathers, but can’t fly. Bats have wings but no feathers and they great fliers. And flying squirrels have neither wings nor feathers ... and they get by.

There are tons of books on how to be happy and they are like attempting to fly with wings and feathers, without knowing the theory behind it. This book uses research done at Harvard Business School (HBS) and in some of the world’s other leading universities. It has been rigorously tested in organizations of all sizes around the world.

Strategy at a basic level is what you want to achieve and how you will get there. In the business world, this is the result of multiple influences: what a company’s priorities are, how a company responds to opportunities and threats along the way and how a company allocates its precious resources. These things all continuously combine, to create and evolve a strategy. All factors - priorities, balancing plans with opportunities and allocating your resources - combine to create your strategy. The process is continuous: even as your strategy begins to take shape, you will learn new things and new problems and opportunities will always emerge. They will feed back in,; the cycle is continuous.

When we find ourselves stuck in unhappy careers and even unhappy lives, it is often the result of a fundamental misunderstanding of what really motivates us.

Michael Jensen and William Meckling published a paper that has been one of the most widely cited of the past three decades focused on a problem as agency problem or incentive theory. As per this theory, people work in accordance with how you pay them. The problem with this theory is that there are powerful anomalies that it cannot explain. Some of the hardest working people on the plant are employed in nonprofits and charitable organizations. Military attracts remarkable people too and they are not doing for the financial compensation. In fact, it is almost opposite - working in military is far from the best paid job you can take.

Second school of thought is based on two-factor theory or motivation theory. It acknowledges that you can pay people to want what you want - over and over again.  True motivation is getting people to do something because they want to do it. Frederick Herzberg who comes out with motivation theory, the common assumption the job satisfaction is one big continuous spectrum - starting with very happy on one end and reaching all the way down to absolutely miserable on the other. Two factor theory or motivation theory - that turns the incentive theory on its head. It acknowledges that you can pay people to want what they want - over and over again.

This theory distinguishes between two different types of factors: hygiene factors and motivation factors. On one side of the equation, there are the elements of work that, if not done right, will cause us to be dissatisfied. These are called hygiene factors - things like status, compensation, job security, work conditions, company policies and supervisory practices. Bad hygiene causes dissatisfaction.  You have to address and fix bad hygiene to ensure that you are not dissatisfied in your work. If you instantly improve the hygiene factors of your job, you are not going to suddenly love it. At best, you just won’t hate it anymore.

What are the things that will truly, deeply satisfy us, the factors that will cause us to love our job? Herzberg calls them as motivators - like challenging work, recognition, responsibility, and personal growth. The theory of motivation suggests you need to ask yourself a different set of questions than most of us are used to asking. Is this work meaningful to me? Is this job going to give me a chance to develop? Am I going to learn new things? Will I have an opportunity for recognition and achievement? Am i going to be given responsibility? These are the things that will truly motivate you. Once you get it right, the more measurable aspect of your job will face in importance.

Understanding what makes us tick is a critical step on the path to fulfillment. But that’s only half the bottle. You actually have to find a career that both motivates you and satisfies the hygiene factors. You have to balance the pursuit of aspirations and goals with taking advantage of unanticipated opportunities. Managing this part of the strategy process is often different between success and failure for companies. It’s true for our careers too.

When you put in place a plan focused on these anticipated opportunities, you are pursuing a deliberate strategy. The unanticipated problems and opportunities then essentially fight the deliberate strategy for the attention. The company has to decide whether to stick with the original plan, modify it or even replace it with it altogether with one of the alternatives. When the company’s leaders made a clear decision to pursue the new direction, the emergent strategy became the new deliberate strategy. The process of strategy then reiterates through these steps over and over again, constantly evolving. Strategy almost always emerges from a combination of deliberate and unanticipated opportunities. What is important is to get out there and try stuff until you learn where your talents, interests and priorities begin to pay off. When you find out what really works for you, then it’s time to flip from an emergent strategy to a deliberate one.

There is a tool that can help you test whether your deliberate strategy or a new emergent one will be a fruitful approach. It forces you to articulate what assumptions need to be proved true in order for the strategy to succeed. The academics who created this process, Ian MacMillan and Rita McGrath called it ‘discovery driven planning’. But it might be easier to think about it as ‘what has to prove true for this to work?

Any business plan is based on some assumptions. When the business plan gets the green light to proceed, that they learn which of those assumptions baked into the financial plan turned out to be right and which were flawed.  By the time, they have learned which assumptions were right and wrong, it is too late to do anything about it. The critical question should have asked before approving the business plan, ‘what are the most important assumptions that have to prove right for these projections to work and how will we track them?

In your career, you need to ask the same question - what are the assumptions that have to prove true in order for me to be able to succeed in this assignment? List them. Are they within your control? What assumptions have to prove for you to be happy in the choice you are contemplating? Are you basing your position on extrinsic or intrinsic motivators? What evidence do you have? How can swiftly and inexpensively test if they are valid. make sure you are being realistic about the path ahead of you.

Real Strategy - in companies and in our lives - is created through hundreds of everyday decisions about where we spend our resources. As you are living your life from day to day, how do you make sure you are heading in the right direction? Watch where your resources flow. If they are not supporting the strategy you have decided upon, then you are not implementing that strategy at all.

The relationships you have with family and close friends are going to be the most important sources of happiness in your life.

Professor Amar Bhide showed in his Origin and Evolution of New Business that 93% of all companies that ultimately become successful had to abandon their original strategy - because the original plan proved not to be viable.

Some of the most frequent offenders in failing to abide by this theory are big investors and successful existing business looking to invest in new growth businesses. The way in which this happens is through a predictable and simple three step process, as articulated by Matthew Olson and Derek van Bever in Stall Points.

The first step is that because the probability is so high that the initial plan isn’t viable, the investors needs to invest in the next wave of growth even while the original business is strong and growing - to give the new initiative the time to figure out a viable strategy. Despite this, the owner of the capital postpones the investment because today it seems unwarranted, given the strength of the core business and its incessant appetite for more capital investment and executive bandwidth. Deal with tomorrow tomorrow

In the next step, tomorrow arrives. The original core business has become mature and stops growing. Then the owner realizes that he should have invested server years earlier.

Third, owner of the capital demands that any business that he invests is must become very big, very fast. The stake- the pressure - become enormous. As these new business drive at full speed over the cliff, analysts construct unique stories for why each one failed.

People in their later years in life so often lament that they didn’t keep in better touch with friends and relative who once mattered profoundly to them. Life just seemed to get in the way. The consequence of letting that happen can be enormous. That can be loneliest place in the world. One of the most common versions of this mistake that high potential professional is believing that investments in life can be sequenced. For example, I can invest my time in my career and then I will focus in my family. by that time, game is over.

When parents engaged in face-to-face conversation with the child, the impact on cognitive development was enormous. These richer interaction they called language dancing. Language involves talking to the child about ‘what if’ and do you remember’ and ‘wouldn’t be nice? - questions that invite the child to think deeply about what is happening around them.

Many products fail because companies develop them from the wrong perspective. Companies focus too much on what they want to sell their customers, rather than what those customers really need. What is missing is the empathy: a deep understanding of what problems customers are trying to solve. The same is true in our relationships: we go into them thinking about what we want rather than what is important to the other person. Changing our perspective is a powerful way to deepen your relationships.

Helping your children learn how to do difficult things is one of the most important roles of a parent. It will be critical to equipping them for all the challenges that life will throw at them down the line. But how do you equip your kids with the right capabilities?

I warn them that their time at school might be the best time to reflect deeply on that question. Fast-paced careers, family responsibilities, and tangible rewards of success tend to swallow up time and perspective. They will just sail off from their time at school without a rudder and get buffeted in the very rough seas of life. In the long run, clarity about purpose will trump knowledge of activity-based costing, balanced scorecards, core competence, disruptive innovation, the four Ps, the five forces, and other key business theories we teach at Harvard. What is true for them is true for you too.  If you take the time to figure out your purpose in life, I promise that you will look back on it as the most important thing you will have ear learned.

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