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Manage inputs, not outputs

By on 1st April 2023

I keep returning to Working backwards. Insights, Stories, and Secrets from Inside Amazon. A great insiders view of Amazon’s period of growth and mindset of customer obsession.

I want to focus here on what Amazon calls input and output metrics. Amazon focuses on controllable input metrics, the drivers, when managed well can lead to profitable growth.

The CEO, and companies in general, have very little ability to directly control output metrics. What is really important is to focus on “controllable input metrics,” the activities you directly control, which ultimately affect output metrics such as share price.

Amazon calls leading indicators, ‘controllable input metrics’ and lagging indicators ‘output metrics’. Input metrics are factors that you can control like SKUs in a category. Output metrics can’t be directly manipulated in a sustainable manner over the long term, like sales. It now becomes clear that focusing on inputs that don’t have an impact on outputs is waste. Choosing the right metrics, and tools to measure them takes time.

Output metrics show results. Input metrics show guidance. Trends will show up earlier in input metrics, if you only focus on output metrics like ‘revenue’ you won’t see the effects of, for example, customer deceleration for quite some time.

If you look at the input metrics for Amazon, they often describe things customers care about, such as low pricers, lots of available products, fast shipping, few customer service contacts, and a speedy website or app. A lot of the output metrics, such as revenue and free cash flow, are what you’d typically see in a company’s financial reports. Customers don’t care about those.

Controllable input metrics are quantitative (diving deep with data) and qualitative (anecdotes) way of measuring how well the organization is satisfying those customer interests so that the output metrics trend the way the company desires.

Input and output metrics is such a simple way of looking at systems and can be applied to both business and life in general.

Design for Good

By on 10th January 2023

2022 is the first iteration of Design for Good. There are 10 contributing organizations and each provides their designers 5 days to contribute to the project. Participants across member organizations self-organize into small teams to ideate, prototype, and test ideas. Based on the outcome of the first iteration the network of participating organizations will be expanded for the second iteration.

Design for Good brings together designers around the world with a shared goal of improving lives through human-centered design. They develop products & services with impacted communities, that are donated fully open-source.

The United Nations adopted 17 Sustainable Development Goals (SDGs) in 2015; summarizing humanity and the planet’s greatest challenges. The goals area: No poverty, zero hunger, good health and well-being, quality education, gender equality, clean water and sanitation, affordable and clean energy, decent work and economic growth, industry, innovation and infrastructure, Inequality, Sustainable Cities and Communities, Responsible Consumption and Production, Climate Action, Life Below Water, Life On Land, Peace, Justice, and Strong Institutions and Partnerships for the Goals. 

Targeting one United Nations Sustainable Development Goal goal each year.

In 2022, Design for Good focuses on Goal 6: clean water & sanitation. We have selected SDG 6 based on three criteria. Firstly urgency: it was one of the most highly prioritised goals during COP26. Secondly globality: it has immediate needs in most of the 200 nations. Thirdly diversity: the needs range from physical products to digital apps to service designs, which allow for participation by a broad range of participants.

Thriving in Consulting

By on 2nd September 2022

Working in consulting, or the broader knowledge economy, requires continuous soul searching: being clear on your ‘why’, awareness of the trade-offs, and working on yourself to maintain a healthy mindset enabling you to grow and move forward. Companies have playbooks for this, but the frameworks in the playbooks can be out of synch with ‘reality on the ground’. I found Beyond Collaboration Overload helpful to refocus on networking and collaboration, a useful reminder that these are the foundations of the consulting world, a world where the project is the product. A research based guide to ‘Play offense’, be in control, whilst controlling health and happiness.

Renewal strategies – essential collaboration:

Tapping broad networks early in the life of each new project whilst simultaneously investing in longer-time-horizon relationships for efficiency and innovation (which is much more counter-conventional than it may sound.)

Becoming an energizer to stimulate a flow of great ideas and great people toward you.

Engaging in targeted collaborative renewal activities to build greater physical and mental well being.

Energy trumps all:

We have consistently seen that people who create energy or enthusiasm in networks are far more likely to become and remain high performers as well as move more fluidly in and out of groups.

For me the biggest challenge has been managing distractions, both external and of my own making. The following paragraph really hit home:

But to become an essential collaborator, you must be able to overcome the factors that keep you focused on the distractions of the everyday–factors such as ego, reactivity, inertia, defensiveness, and fear–so that you can initiate innovative responses and mobilize people affectively, while also taking care of yourself.

Be more anti-fragile by building a noninsular network.

These structurally divers networks often bridge expertise domains, cultures, geographical regions, functional areas, and other pockets of mastery and opinion.

Another concept I found helpful is the idea of networking across time horizons: short, medium, and long term.

The point is that these long-term explorations are an essential part of the work of successful people in today’s hyperconnected organizations. These interactions are not things to do when you have time. The are as essential as the work itself.

Overall the book is helpful in making what we do intuitively, in my case not optimally, more visible with a structured framework to be more purposeful and effective.

Climate existentialism

By on 26th August 2022

The hardest book I have read: The Uninhabitable Earth, Life After Warming. Climate change is a ‘hyperobject’, ‘a conceptual fact so large and complex that, like the internet, it can never be properly comprehended.’ We are burning more carbon than ever before when we should be slowing down. What if climate change happens faster than current models predict? Anyone notice that lakes and rivers are disappearing across continents? We assume that they will be coming back, amongst other assumptions. I pulled a few markings from the book, there are many more.

How much damage has been done in the last 30 years:

In fact, more than half of the carbon exhaled into the atmosphere by the burning of fossil fuels has been emitted in just the past three decades.

The problem of plastic:

And global plastic production is expected to triple by 2050, when there will be more plastic in the ocean than fish.

Expecting linear growth to continue:

Generations being as long as they are and historical memory as short, the West’s several centuries of relative reliable and expanding prosperity have endowed economic growth with the reassuring aura of permanence: we expect it, on some continents, at least, and rage against our leaders and elites when it does not come.

Climate change changes everything:

Nature is both over, as in ‘past.’ and all around us, indeed overwhelming us and punishing us–this is the major lesson of climate change, which it teaches us almost daily. And if global warming continues on anything like its present track, it will come to shape everything we do on the planet, from agriculture to human migration to business and mental health, transforming not just our relationship to nature but to politics and to history, and proving a knowledge system as total as ‘modernity.’

Fake news and mistrust:

That climate change demands expertise, and faith in it, at precisely the moment when public confidence in expertise is collapsing, is another of its historical ironies.

The scope of change and sacrifice required:

The cost is large: a decarbonized economy, a perfectly renewable energy system, a reimagined system of agriculture, and perhaps even a meatless planet.

Our responsibility towards future generations:

The possibility that our grandchildren could be living forever among the ruins of a much wealthier and more peaceful world seems almost inconceivable from the vantage of the present day, so much do we still live within the propaganda of human progress and generational improvement.

How much time do we have:

… the world has at most three decades to completely decarbonize before truly devastating climate horrors begin. You can’t halfway your way to a solution to a crisis this large.

Humans will go extinct before finding other civilizations and saving itself:

The natural lifespan of a civilization may only be several thousand years long, and the lifespan of an industrial civilization conceivably only several hundred. In a universe that is many billions of years old, with star systems separated as much by time as by space, civilizations might emerge and develop and then burn themselves up simply too fast to ever find on another.

Category design (Part two)

By on 5th March 2022

Picked up Play Bigger again. The concept of category design makes a lot of sense and cross-links to many concepts out there already. In a nutshell: define and create a new category, and then dominate the category by positioning yourself as the category king. It is hard to unseat category kings due to the many biases we are subject to, but more specifically:

  • anchoring effect: early information affects overall view
  • choice supportive bias: positive qualities to options we have chosen
  • groupthink bias: people embrace the category king simply because so many others have

The idea of category design stuck because it helps focus when designing a new business. Create or define clearly ‘where to play’, and then figuring out ‘how to win’. A category design approach reminds me of blue ocean strategy thinking as opposed to entering a red ocean. So then meanings when design is applied to different levels in an organization:

  • Company design: business model innovation
  • Category design: strategy design (blue ocean strategy as category design vs competing in a red ocean)
  • Product design: product innovation

Category design applied to careers

Category thinking comes to life when applied to one’s career. From Play Bigger:

Well, Dave, you have two choices in business and in your career. You can position yourself, or you can be positioned. And I’ve positioned myself as CMO in this company, and you’ve been positioned as the lowest person on the totem pole.

And it is about taking advantage of the exponential value of different versus the incremental value of better.

Category Design of Life

  1. Category is the strategy: “The best way to start a category and make yourself its king is to find one of those problems, concisely define it, and make sure others see it as you see it.”
  2. Find your category: “When you seek different, your aren’t climbing someone else’s ladder–you’re building your own ladder and putting yourself at the top rung.”
  3. Develop a point of view: “Putting yourself through a POV exercise can be incredibly clarifying. How do you define who your are and what you want to mean to the world?”
  4. Condition the market: “At work it might be a report to key superiors, or a presentation to a colleagues, or in the way you present yourself on LinkedIn or Twitter.”
  5. Design an ecosystem: “Form bonds that go beyond the walls of your company. Just like categories make category kings, other people make you successful.”
  6. Fire up a lightning strike: “For a person, a lightning strike can be both a great motivator and a life-changing event. A lightning strike is a huge public goal, which might range from performing a musical piece at a recital to major presentation at work.”
  7. Establish yourself, then expand your category: “This is how you grow, open up new opportunities, and generate more demand for yourself.”

I’d say the challenge is to keep doing all of the above consistently–a key trait of entrepreneurship is consistency.