Tag Archive for: Sidebar: Charles H. Green

Some of you read this blog because it’s about selling. Most of you read it because it’s about trust—perhaps despite it also being about selling. Let me address the latter group on why the former is so important.

Sales is the new marketing.

Nearly 50 years ago, Ted Levitt (Marketing Mypia, Harvard Business Review) crystallized the shift from producer-oriented to customer-oriented. It put marketing front and center, and broadened strategy industry definitions.

We’re now on the cusp of a shift at least as big.

Companies started as safe havens for doing business. You couldn’t trust anyone out there, so you vertically and horizontally integrated. If you made cars, you made most of the things that went into them. That way you controlled budgets, salaries, cost accounting, promotions, quality, and processes. The corporate form made possible massive scale economies over the last hundred years.

What’s changing now—look to The World is Flat, or Wikinomics , or How We Compete —is that companies no longer must own the means of production in order to produce. Increasingly goods and services can be outsourced. This trend dates back to 1910, but the internet, high speed telecomm and other IT services have vastly accelerated it.

Further, those who can integrate services outsourced by others have access to greater scale economies in those services than did the original companies.

Fast forward to a world where transactions that used to happen within companies now happen between them. Outsource a few functions; all transactions that were internal become external. Spin off a supply business; more internal transactions become external. The new model for business is to focus on your world-class strengths, and buy everything else from those who are world-class in their own areas.

That increases sales events by orders of magnitude. Add to that increases in stock ownership volatility, job-hopping, strategic alliances, decentralization and empowerment and you have vastly more people involved in the “sales” function more broadly defined.

Let’s define sales: it is the activity of personally influencing other people or businesses in a direction that is mutually beneficial.

In the old world, this “personal influencing” was done disproportionately on a vertical employment basis—bosses and subordinates. We worried about things like span of control, giving and receiving feedback, and the secret sauce that separated “leaders” from, I guess, followers. Call that the vertical model.

Today, the world’s looking more horizontal. Transactions, and relationships, are tilting to those between equals, with no reporting relationships, if not working for other organizations then working in matrix organizations within a company.

The world of business is less about monolithic vertical companies competing against each other. It’s becoming far more a model of inter-company commerce—transactions between businesses, and people.

That looks like “selling.”

Selling is the point where one organization meets another—and where economic value is acknowledged. It’s getting more and more common.

To make a vertical world work, you need power and control.

To make a horizontal world work, you need trust.

Trusted relationships between those who transact business have always been the best form of sales. Now sales is becoming the paradigm model for inter-company relationships.

That’s why selling is so important for all of us.

In 1994, Jerry Porras and Jim Collins wrote “Built to Last--” which it certainly has, ranking #935 on Amazon, lo these thirteen years later. (Collins’ later “Good to Great” ranks even higher). The aim was to diagnose “landmark,” “outstanding,” and “exceptional” companies (adjectives from the bookflaps).

Almost all great books get something very right. In this case, it was the characteristic of “visionary” that they identified. The “vision thing” is as important as ever.

But often, even great books don’t age well. Time reveals a flaw in the foundation, maybe not critical, but a source of confusion—something just not quite right, something that begins over time to annoy.

In this case—it’s the title itself.

The book picks twelve matching pairs of companies—e.g. Westinghouse vs GE, Merck vs. Pfizer, Ford vs. GM—and explores why we think one is better than another. “Better” is also defined in stock market performance terms, so we’ve got long-term value creation as a criterion, along with brand power, and a few others.

Some have critiqued the choices—ditto for "In Search of Excellence"—-for not being valid over time (both Ford and GM today are candidates for the dustbin of history, for example). But the choices stand up pretty well—if your game is to be lasting.

But—what precisely makes “lasting” the criterion for describing a company as landmark, outstanding, or exceptional?

What used to be valuable about continuity over time was:

• stock market performance for investors
• employment and economic stability for workers
• community involvement for host governmental units
• a dependable brand for consumers.

Let’s see how well these criteria have stood the test of thirteen years.

• The vast majority of owners these days are not shareholders looking to hitch their wagon long term to a particular organization. They are pension and other funds looking for performance, managed by hired guns ready to swap equities at the drop of a quarterly hat, or leave them entirely for the latest hot category, e.g. private equities—hardly bastions of vision.

More importantly—financial instruments have evolved enough that shareholders don’t need to buy a corporate package—they can create the virtually the same performance through a blended mix of instruments reflecting currency, geography, industry and risk profiles. This is not at all a bad thing: it greatly enhances the ability of investors to pick precisely what they want. Which is not, frankly, a lasting organization.

• Employees of a lasting organization are not likely to be well-served unless that organization is participating in most of the global trends affecting its business. Those include outsourcing, globalization and technological investments. Job security at the cost of growing irrelevance is the short-term opiate of the unions.

• Community involvement doesn’t necessarily require a sustained physical presence—the core values an organization carries with it ought to be recognizable quickly with a given locality or other community.

• Branding is a funny thing—it is usually the word we use to describe the retail B-to-C feeling we get when we know what a name stands for. But test yourself: who owns Jif Peanut Butter? Skippy? If a brand clearly conveys something over time, we don’t much care about the visionary nature of the company producing it. The consumers of YouTube don’t seem to be terribly concerned about whether it will last into next month—but it was visionary, and it did what consumers wanted, at least yesterday.

The truth is: focusing on “lasting” as an attribute of a company these days is likely to confuse rather than enlighten. The continued existence of a particular corporate organization is a pretty un-inspiring goal, when you think of it.

Ironically, the continued existence of a particularly corporate instantiation probably requires high turnover in shareholders, employees, geographies and even consumers. So who exactly cares if it’s lasting?

The point is not to last. The point is to do great things for all your constituents. Where continued existence helps, great. Otherwise, standing water stagnates. The visionary thing works; but these days, the vision had better be to change, morph, grow, evolve, turnover, shift.

Built to last is not a desirable adjective anymore, it’s likely a critique.

Non-compete agreements are the topic du jour.

Frank Byrt, in Financial Week, writes that “Companies are blocking more execs from jumping to competitors.”

Jay Shepherd continues the discussion with The Rising Noncompete Tide in his blog “Gruntled Employees.” He’s a Boston lawyer with a big specialty in non-competes within employment law. He’s done some original research that indicates a pretty major increase in non-compete litigation in the last several years.

More blogs jumped on the topic: the irrepressible Maureen Rogers at PinkSlip has a compelling first-hand take on the subject.

Here’s my take—I can’t back it up with research, so write in and tell me if you can support or deny it.

Non-compete agreements are the manifestation of sick management thinking. They are symptomatic of failed people management. They give the lie to many companies’ claims that they care about their employees. But worst of all—like throwing water on a grease fire—they produce more of the very thing they were designed to prevent.

They are a poster child for the concept that you empower what you fear.

If you fear employees will rip you off, and set up spying processes—you will get ripped off.

If you fear employees will steal from you, and institute lie detector tests—they will steal (see The Perversity of Measuring Trust)

If you fear your employees will talk to search firms, and tell the receptionist to screen calls—they will talk.

If you fear your employees will take your secrets to a competitor, and force them to sign non-competes—they will try to take secrets to a competitor, and if they can’t do that, they’ll bring on a whole lot of other nasty side effects.

You empower what you fear.

Fear may manifest itself as simple paranoia about losing money. Understandable, but it still drives bad behavior.

It may show up in the form of resentment, or vengeance, or of seeking recompense against someone’s perceived act of “disloyalty.”

I worked for two small firms: one did not have non-competes, and in 25 years never had an employee lawsuit of any kind. The other did use them, and on average was involved in two suits per year with its employees.

The first firm had its own problems, but it did one thing right—it treated people issues as management issues. The second firm treated them as legal issues.

People live up—or down—to expectations. You see it in kids. You see it when you approach a dog—if you fear the dog, it will growl and bark; if you approach in a friendly manner, you get the tail-wag response. In this regard, ich bin ein canine, and so are most other people.

What’s the alternative? Simple.

• If you really care about the employee who left, then be happy for him/her. If you’re not happy for them, then cut out the crap in your website where it says you believe in people development, because you don’t—you believe in the development of "human capital," an oxymoron. People know the difference. Capital doesn’t.
• If you’re happy for them but wish they hadn’t left, then find out why they left and fix it before the next one leaves. If you don’t want to fix it, then go buy a lottery ticket. The odds of effectiveness are about the same.
• Make alumni of the people who leave. Your college didn’t go all resentful on you when you graduated; they didn’t make you sign a non-compete about getting a master’s from another university. And when your college phones you to contribute to the fund years later, you still do! (And if you don’t, it’s because your college needs to read this blog). Think of people who leave as graduating advocates of your company—not as disloyal double agents.
• Let everyone know that you run the company on the basis of rules 1 through 3 above. And tear up the non-compete forms.

There are of course some valid exceptions, mainly in the hard sciences and tech businesses. But the rest? Marketing execs? Consultants? Bankers? Please.

You empower what you fear.

A basic lesson of trust is that if you trust people, they respond by being worthy of your trust.

Substitute trust for fear. It works.

Social networking on the web is hot. Many sites talk about trust. They tell us something about trust in cyberspace—and about trust in general.

Think four archetypes: Zagat’s, Amazon, eBay, and LinkedIn.

1. Zagat’s started off-line. It presents reviews by the "regular folks"—we trust it because the reviewers are presumably unbiased, in a way that commercial directories presumably aren’t. Zagat’s gains trust through clean motives of “people like me.”

2. Amazon has a recommender system—we trust it because we believe their massive databases dependably predict our likes.

3. eBay developed seller ratings. You can trust the person you buy from online because of their reputation among other previous buyers.

3. LinkedIn networks you to others by degrees of separation (a la the Kevin Bacon game) to others. You know Bill, I know you, ergo you can introduce me to Bill’s cousin’s friend. This works on the principle of personal relationships.

The social networks recombine these four types of DNA.

TrustedOpinion.com combines movies, music and restaurant reviews with an “x-degrees of separation” taxonomy. LinkedIn meets Zagat’s.

Crowdstorm.com measures the “buzz” around products, get “points,” and also allows you to rate “trusted” reviewers. LinkedIn meets eBay.

Digg and del.icio.us review content a la eBay meets Amazon—combining massive databases and reputations.

Each type has drawbacks.

1. The “people like me” approach gets hard to sustain at scale; when you get thousands of “people like me,” they aren’t—they’re the crowd.

2. The crowd system—Amazon’s approach of masses of people dependably predicting our likes—depends on large numbers. Can the data be compromised? Sure. See the “let’s make my book #1” schemes, a la American Idol call storming.

3. The eBay-type ratings system is more obviously subject to hacking. See Wired for a good article on hacking reputation sites.

4. The Linked-In model has the great virtue of being based on super-high bandwidth connection—real people we actually know. The trouble is, personal trust has a high decay rate. It’s one thing to ask you to introduce me to your friend; it’s quite another to do so in order to meet his friend.

It’s in this arena that the internet falls down, even laughably, when it tries to promote trust. Consider Opinity and Rapleaf.

From Opinity’s site:

Create a powerful and portable Opinity profile and be trusted! Using your Opinity profile, you can bring your already established reputation to any new site you want. Build your reputation quickly and gain trust.

And you gotta love Rapleaf:

Rapleaf is a portable ratings system for commerce. You can look people up before you buy or sell, and rate them afterwards.
Rate people and they will be encouraged to rate you back. Before long, your Rapleaf profile will reveal you for the honest person that you are. After all, it is more profitable to be ethical.

Do you trust a website to tell you how much to trust someone who has had his friends email in to say how trustworthy he is so that he can make more money by appearing to be trusted?

Lessons from all this:

1. The best trust isn’t very transferable
2. Deep digital trust is a tradeoff for breadth; trusting you to sell me a book doesn’t mean I’ll introduce you to my daughter
3. Saying “I’m trustworthy” means you aren’t
4. As in the meatosphere, all is not what it seems.

Following is a synopsis of an article—"Truth, Lies and Unicorns"—that I just published with Andrea Howe of BossaNova Consulting Group in RainToday.com. You can read the complete article here.

What is lying?

On a conversational level, we take “lying” to mean speaking an untruth; overtly saying something that is not the case. Webster’s first definition is “to make an untrue statement with intent to deceive.” “To lie” is an active verb, with a connotation of intent.

But Webster’s second definition is far broader: “to create a false or misleading impression.” That definition includes lies of omission; it even extends beyond speech.

By that definition, business advisors (or for that matter, people) who don’t lie are like unicorns: not inconceivable, but pretty infrequent. In the same sense, Diogenes never found an honest man.

The article goes on to describe five common ways we lie to clients. It then explores just why it is that we lie. Our contention is that we fool ourselves.

The article examines the costs and benefits of lying, separating the purely utilitarian consequences from any ethical treatment. The article argues that when humans analyze lying as a purely utilitarian practice—we tend to get the analysis wrong.

Specifically, we underestimate the utilitarian value of truth-telling, and of the cost of disapproval if caught.

Meanwhile, we overestimate the benefit of the false perception our lie gets us, the cost of disapproval for truth-telling, and the probability of getting away with it.

On purely arithmetic grounds, then, lying is often accompanied by self-deception. It’s speculation on my part, but I suppose it has to do with over-estimating present pain vs. future good—a saber-tooth tiger in one’s face gets a lot of attention. It’s all fear-based in any case.

The article goes on to discuss the very real economic costs of lying, and to suggest some practical ways of doing a better job of truth-telling.

If the article interests you, you might also want to read Sissela Bok’s excellent book Lying: Moral Choice in Public and Private Life. She makes a wonderful case that, while “always tell the whole truth” may be an overly strict rule, it is far closer to correct than what we usually do.

Finally, as long as I’m self-promoting in this post, let me dump it all at once. I got a very nice book review of my book "Trust-based Selling" from Mike Schultz. Full disclosure: Mike is also publisher of RainToday.com, of which I’m a contributing editor. Mike was taken by the use of lists in the book.

There, all done.