Marina Gorbis's Blog, page 1441

Leaders Can No Longer Afford to Downplay Procurement

If you were asked to identify the most strategic and valued unit in your corporation, the procurement department would probably not come to mind. The term procurement itself has a very administrative connotation: It’s associated with buying ‘stuff’ for the lowest prices possible.

Today’s corporations are directing more and more of their budgets toward a complex web of global specialist providers and suppliers to help deliver on their businesses’ core strategies. A recently released global study of nearly 2,000 publicly traded companies found that 69.9% of corporate revenue is directed toward externalized, supplier-driven costs. In the last three years alone, companies have increased their external spend as a percentage of revenue by nearly 4%.

As a result, the role of procurement is magnified. Or, at least, it should be magnified. Suppliers must now be viewed as an extension of the company. Like the internal workforce, they must be incentivized, coached, sanctioned, and rewarded to help achieve corporate objectives.

However, procurement doesn’t register on the C-suite’s radar in a manner proportionate to its growing importance within the organization, and most procurement departments are neither ready nor empowered to take on their new responsibilities. Here are some of the reasons for this:

An unproductive fixation on cutting costs

Businesses want to increase profits to grow shareholder value, so procurement incessantly portrays savings as profit improvements. At best, this is naive and, at worst, disingenuous. Improvements to shareholder value come from delivering the corporation’s objectives, not from decreasing spending. And too often, savings just represent corrections of past failures in managing supplier relationships. There are some corporations whose objective is to have the lowest possible cost base as the primary source of competitive advantage, but even here procurement still disappoints, as it seldom owns the budgets and therefore has a much smaller impact on profits than imagined.

Organizational isolation

Procurement teams are often disconnected from the functions they serve and the markets they engage. Too often, they are not fluent in the nuances of the business and therefore lack the expertise and authority to challenge or influence spending decisions. This often frustrates sales and the revenue-generating front lines, further isolating procurement.

Glacial processes

Procurement teams tend to rely on processes that are far too slow to support the business’s needs. Procurement’s response to almost any problem is to run a sourcing exercise and issue a tender, which could take six to eight weeks. That’s just not acceptable in today’s fast-moving and interconnected environment.

Acting without inquiry

Procurement fails to ask the most basic of questions: Why? In most organizations today, procurement people are not programmed, encouraged, or incentivized to do much other than review vendors and negotiate terms, even when there might be a better way of serving the business’s need. Many lack the training and skills to thoughtfully analyze a sourcing request and their aforementioned isolation makes it nearly impossible to truly understand business priorities. Instead, requests are taken at face value without second thought.

So, what can be done to improve procurement? How can we resolve a function that is increasingly marginalized, despite its growing importance to the firm?

The answers lie in four fundamental areas that need to be addressed and resolved by C-level leaders:

First, leaders should reassess and clearly define the role of procurement in the company philosophy. Is it a process-oriented, savings-obsessed function? Or does it focus on customer service and helping the business achieve its strategy?

Second, they should change the way procurement is measured, connecting its objectives to those of the budget holders it is there to serve. Leaders should consider what the business is trying to achieve and design metrics around areas such as innovation, stakeholder experience, risk mitigation, improving ways of working, and spending wisely rather than less.

Third, leaders should determine whether the current cast of procurement executives has the required skills and abilities. A very broad range is needed – from consultants, with skills like rapport building, influencing, and dealing with difficult stakeholders, to analysts, process mappers, researchers, negotiators, change managers, paralegals, contract managers, project managers, and so on. Deep expertise is critical in each area. If the requisite skills are absent, the company needs a plan for acquiring them through training, recruitment, or partnerships with third parties – or all three.

Finally, leaders must give procurement teams incentives to create a welcoming atmosphere for suppliers. If procurement is operating effectively, suppliers should be beating down the door to get their goods and services sold into the organization. They should be treated as a driving force for innovation and viewed as critical partners in the company’s success.

To Improve Collaboration, Try an Olive Branch on Steroids

With the exception of “dyed-in-the-wool” unforgiving types (you know, the people who seem to delight in ruining family holiday dinners), one of the things nearly all of us are defenseless against is a sincere, earnest, unsolicited apology.

Despite its power, there are not a small number of people in this world who have never received one — and an equally sizable number of people who have never felt they owed one to someone. And yet for the majority of people, it’s disarming and intriguing enough to lower their guard to hear what the apologizer has to say.

If you’re unsure of the value in delivering a sincere, earnest, unsolicited apology, you need go no further than the neurology of mirror neurons.  Mirror neurons appear to help us with learning and empathy.  But they can also have a negative impact, such as when criticism triggers defensiveness (i.e. a reciprocal criticism from the criticized) and bared teeth trigger reciprocally bared teeth. In the case of a sincere, earnest, unsolicited apology, receptiveness begets more openness. Still too soft? You need look no further than conflicts you have successfully resolved at home with your spouses, children or parents… unless of course you truly believe that your “my way or the highway” approach to life has served you well.

So, I can’t guarantee that it will work, but if there is someone you work with that is not cooperating and with whom you would like to improve cooperation, it might be worth your trying. The sincere, earnest, unsolicited apology consists of five steps:

Select the person with whom you would like to improve cooperation with and communicate to them (probably best to do in person at not by paper trail leaving email), “Might there be a time when we can talk for a few minutes in person or by phone, because I just realized that I owe you an apology?” Hopefully their curiosity will cause them to agree.
When you meet say to them, “Would you agree that we have come to different conclusions on a number of situations?” Hopefully they will agree with that statement — but if they hesitate, simply proceed directly to the next step:
“If that’s so, I owe you an apology because I have never taken the time or made the effort to understand how you came to came to the conclusions you have.” Then wait to see what they say.  In all likelihood they will say nothing because they’ll be too busy feeling a little disarmed and not knowing what to think.
 Wait a few moments and then say, “And furthermore I owe you another apology for something that I am not proud of.  And that is that I never even wanted to understand your point of view, because I was so focused on pushing through my agenda.  That was wrong and I am sorry.” Owning up to and taking responsibility for negative thoughts and feelings they have towards you is further disarming.
 Then say, “And if you are willing to give me another chance, I would like to fix that starting now.”

This may not always work, but it has a good chance of being accepted.  If it is, but seem dumbfounded or are looking for you to start the ball rolling, do so by saying, “So please tell me how you came to think about x, y and z the way you do.”

As they begin to explain how they have come to develop their point of view, employ conversation deepeners to help them open up ever more deeply.  Conversation deepeners including saying thinks like, “Say more about such and such” (where “such and such” is any statement they make that has an emotional charge or uses hyperbole)” or “Really,” (with a tone that communicates interest and understanding on your part, not skepticism) or even just “Hmmm.”

Keep listening until you really do understand how and why they think the way they do.  You can communicate that by saying such things as, “Wow, that really explains a lot” or “I can see why you think and believe what you do.”

After you have reached that point you will often have the opportunity to say, “You don’t have to, but would you want to hear about what I think and believe and how I came to my conclusion about those matters?” Hopefully they will mirror the receptiveness you’ve just shown. But if they say no, you might follow up with something like, “I will definitely respect that, however we are both expected by each of our [departments/groups/bosses] to work together and achieve a result that will satisfy them and help our respective [group/company].  So then, how do you suggest we proceed, if we can now agree that neither of us wants to do something that jeopardizes either of our positions in our respective companies?” By following these steps you are setting the other person and you up to formulate a solution to the problem each of you are trying to solve in your particular job in your company.

And that is not merely cooperation.  It’s taking a big step  toward collaboration and that is where you both begin to take action.

How Corporate Investors Can Improve Their Odds

When investing in new growth businesses, corporate leaders are commonly advised to behave more like venture capitalists. VCs, they’re told, take more of a long-term approach, have a greater degree of risk tolerance, and parcel out their funds in stages to mitigate risk.

All of this is right, as far as it goes. But having spent the past five years straddling between our consulting business (which advises large companies) and our venture investment arm (which provides seed investment to entrepreneurs), I now believe there is a more fundamental philosophical difference that corporate leaders need to adopt as well, if they’re serious about creating dynamic new growth businesses that stretch the boundaries of their current business models.

The philosophical divide is this: When VCs invest in an early-stage start-up, they recognize that odds are, the company will fail. When large companies invest in a nascent idea, they will only do so if they see convincing proof that they will generate an appropriate return on their investment. But that seemingly safer approach actually pretty much guarantees corporate investors poor returns on their new growth investments.

Why?

It’s not that VCs invest in businesses they think are bad. They just know the odds are stacked against any particular start-up. So when they invest, they look for a business with the potential to hit it big (to cover the inevitable losses), and they take steps to learn quickly whether that possibility is remote or realistic. The operative question for them is, not “How confident am I that this investment will yield a positive return?” but “How much can we afford to lose on a given investment?”

So, a VC might spread her $100 of investment capital across 10 companies in the following way:

Every company starts with $5. Six – which show their lack of promise early on — never receive any follow-on funds. One – possibly more promising — receives one more round of funding. Three companies end up taking 60% of all investment dollars.

By contrast, for corporate innovators each idea needs to carry its own weight. Ideas with positive discounted cash flows get investment. Those that don’t, don’t. Big bets don’t make it through the every-idea-has-to-be-a-winner screen because it’s very hard to create reliable, detailed financial projections for the types of uncertain ideas that have the promise of big returns. So, the corporate investor might spread his investment as follows:

This looks like a safe, prudent portfolio. But how do the investments actually pan out? Results might look like this:

Every idea the corporate investor backed produced something. Five produced positive returns, two broke even, and three lost a little, but not a catastrophic, amount of money.

Trying to make everything a winner led to two hidden traps. First, as in this example, it’s rare that every corporate bet pays off, even when betting conservatively. And yet no provision was made to cover the cost of the inevitable failures.  It’s probably true that corporate investors suffer fewer strike-outs than VCs. It’s hard to get good data on innovation success rates, but most corporate leaders will report that even close-to-the-core efforts fail to deliver on their promise at least a third of the time. And of course the more the company pushes the edges of today’s business, the lower those odds sink.

Second, what happens if there is an idea in the portfolio with breakthrough potential? Since the venture capitalist made her investment in smaller increments, she was eventually able to double down on the ideas with substantial potential. The every-idea-must-be-a-winner investor locked all of his resources into smaller projects, none of which was ever going to yield a substantial payback.

The lesson here is clear. If you’re investing in new growth businesses inside a company and want to adopt a VC mind-set, start by assuming any given investment is not going to pan out. Invest a little to test that assumption. Measure the progress of the teams running the projects not by how quickly they can produce commercial results but by how quickly they can provide vital information (evidence of unit profitability, customer interest in the idea, technological feasibility, regulatory clearance, and so on) to figure out if they will eventually produce sizable commercial results. Regard just as valuable evidence that a project won’t pan out as evidence that it will. Expand investment in the winners, and cut off the losers as quickly as possible.

That’s how you invest in growth.

Could You Come Up with $2,000 in 30 Days?

A substantial fraction of seemingly middle-class Americans are “financially fragile” in the sense that they’d be unable to come up with $2,000—the cost of a major car repair or legal or medical expense—within 30 days, says a team led by Annamaria Lusardi of George Washington University. Specifically, nearly half of Americans surveyed in 2009 reported that they “probably” would be unable to come up with that sum, and one-quarter of the total were “certain” they couldn’t. Those in the “probably” group would seek to raise funds by doing such things as tapping family and friends, increasing their work hours, or selling their possessions.

Midsize Companies Must Prioritize Ruthlessly

The world is littered with the hollowed-out shells of firms that tried to do too much and spent too big trying to grow too fast. Many of those firms were midsize companies; they didn’t have the resources of the big firms to sustain setbacks, nor were they scrappy like most small companies, making do with the resources they had.

I have interviewed more than 100 leaders of midsize companies in the last three years and been a CEO coach to several dozen others. Before that, from 1996 to 2006, I was the CEO of a firm that grew to the small end of midsize (Bentley Publishing Group). I have seen again and again the dysfunctions that derail growth of midsize companies – maladies that are not nearly as harmful to smaller and larger companies. One of these: letting time slip-side away.

While poor time management hurts large and small firms as well, it’s especially pernicious at midsize companies. The reason is that they must still move quickly to fend off smaller competitors but must tackle big projects to support growth, deliver enterprise-class service to large customers, and compete with large competitors. All this on a midsized company budget.  Every second counts.

Being neither big nor small forces midsize firms to prioritize ruthlessly. To survive downturns and stay focused during upturns, these firms must plan their high-priority initiatives meticulously. And as they do, they need to understand that time is never on their side.

Here’s the story of how one midsize company changed its sense of time.

Despite many successes and the best of intentions, Pennsylvania-based Goddard Systems Inc., national franchisor of The Goddard School preschool system, missed deadline after deadline in 2007 rewriting its franchisee training manual. Franchisors use this training manual as a fundamental tool for capturing best practices and disseminating them efficiently. Over 17 years, Goddard had grown to 200 locations and its old manual was out-of-date, calling for too much one-on-one training for new franchisees and employees. To sustain growth, Goddard had to rewrite the training manual.

But for Goddard’s top management, a new manual was not perceived as critical to keeping their 200 schools operating well.  Since they considered other projects to be far more important, the manual wasn’t getting done. When new leader (and now CEO), Joe Schumacher, joined the company in 2007, he recognized the fundamental problem: the Goddard team didn’t appreciate time.

Schumacher made rewriting the training manual a real priority, knowing that rapid expansion was just around the corner. If Goddard didn’t have the new manual, training and new-school performance would suffer. Schumacher assigned the training manual to one of his direct reports:  it got done.

In addition, Schumacher required his team to compile strong business cases for all their projects. The process helped everyone differentiate high-priority from low-priority initiatives, and it forced senior managers to identify the resources their projects would require.

Today, the firm has grown to nearly 400 locations, almost double the number from when Schumacher arrived. The management team is continually trained on project management techniques, which Goddard now recognizes as fundamental executive skills.

Time, not money, is the most important resource for midsized firms. In order to create a culture which treats time as a valuable commodity in short supply, leadership must believethis. All the project management in the world will go for naught if the CEO disrespects deadlines. Such behavior must become unacceptable at every level.  There are three steps executives at midsize companies can take to get everyone to respect time as a resource.

1. Ruthlessly cut projects until only a handful of critical ones remain. Often midsized companies have the resources to manage only one key initiative at a time. Here’s an awful truth that CEOs of midsized companies must acknowledge: Even if they’re the boss, there are limits to what they can do. Kill your pet projects. When a company tries to do too much with too few resources in too little time, projects will be late if they’re completed at all. Invariably they will be done poorly.

2. Expose the status of core projects, warts and all. The status of crucial projects must be made naked to the entire management team – especially when progress slips. In midsize companies, core projects by definition affect every department since the core of the business isn’t that big. Deadlines that are missed and tasks that run into trouble can’t be known to just a few, for two reasons. First, the people kept in the dark may not be able to execute their assigned tasks at later dates, and getting things back on track could require the senior management team’s collective ingenuity. Second, in many cases, the midsize company senior team holds most of the subject matter expertise.  Not only must the project leader — under the supervision of the CEO — inform every team member about the state of each task on a detailed plan, he must also provide his opinion on the project’s progress. That lets each team member know the boss is watching and no one can hide.

3. Promote your best time-managers. CEOs and senior leaders must explain the personal rewards for critical projects executed well and on-time. Well-planned and executed initiatives ought to fuel individual career growth, as well as company growth. Managers must remind their direct reports that promotion opportunities are much greater in fast-growing companies – but that promotions only go to those team members responsible for growth.  Advancement and learning are critical motivating factors in midsized firms, who often don’t have stock options (like a Fortune 500) or equity (like a start-up) to offer.  But the stick is just as important as the carrot.  The consequences of missing deadlines must also be career altering.  The leaders of the team should be uncomfortable with the pressure; that discomfort will motivate them to avoid failure.

CEOs: Own the Crisis or It Will Own You

The terrible press for GM keeps coming. The New York Times reported this week that GM lied to grieving families about the reasons for their loved ones’ deaths and even aggressively threatened families should they sue the company. This comes on top of recent revelations that GM officials knew about the faulty and deadly ignition switch issue in the Chevy Cobalt for years before recalling the cars. All this hits only months into Mary Barra’s tenure as CEO. While GM’s crisis is dramatic and specific, the crisis and the way Barra is handling it offer a broad array of lessons and a fair dose of controversy about what good leadership looks like and how some in the media judge male and female leaders differently.

Barra has wisely opted to “own” the crisis — even though she’s only been CEO a short while and had no apparent role in the scandal. Nevertheless, she has taken on the crisis with full attention and focus, constantly facing both the media and her own employees with candor and honesty in the process. She has won well-deserved praise for her swift action and willingness to be accountable. But in an opinion piece in USA Today this week, Michael Wolff argues that Barra’s willingness to take responsibility for a crisis that was not of her making shows poor leadership and a female proclivity to seek the spotlight.

Wolff starts by criticizing Barra’s leadership in the crisis. He writes, “Barra could have personally sidestepped this. She’s only been the CEO for two months — it didn’t happen on her watch. And, anyway, CEOs assign responsibility, they don’t assume it.” By taking on this crisis, he argues, Barra defines her legacy from minute one with crisis not of her own making. It’s not clear what he believes she should have done differently, but it doesn’t stop him from writing a poor argument.

In 2010, I coauthored a study with the Center for Talent Innovation that aimed to quantify the intangibles of leadership: the ways in which individuals demonstrate their leadership and inspire others through some universal principles including gravitas, communications, and appearance. We found that leaders must demonstrate three key attributes in order to be seen as a true leader, both to their teams and to the outside world. First, they must have “grace under fire” — the ability to stay calm and coolheaded in any crisis. Indeed, this calm emerged as fundamental to leader credibility. But also, our research found that leaders must stand for and by a clear set of values which define them. Finally, they must have integrity, constantly speaking truthfully. Fundamentally, it emerged that in this day and age, crises are inevitable but leaders are made by the way they handle them.

By taking responsibility, demonstrating her values, and speaking honestly and forthrightly, Barra has shown stronger, not weaker leadership. Had she not done this, or simply blamed others as Wolff argues she should have, she would have inevitably faced withering and justified criticism. A different but recent example illustrates the point.

Chris Christie, in facing the recent scandals around the closing of the George Washington Bridge, refused to acknowledge any role or culpability and blamed a wide range of people from his staff to Port Authority officials. Ultimately, he may indeed be cleared of any wrongdoing. A detailed review he commissioned from a major law firm indicates he may not have had any direct role in the bridge closings as he has argued all along. At this point, though, it almost doesn’t matter. Christie’s passionate refusal to take any responsibility for the actions of his team was a bad miscalculation and made him look weak, self-serving, and desperate. The public has not forgiven him. His approval ratings are at an all-time low, and his national aspirations are clearly unattainable. Had Barra followed Wolff’s guidance and the Christie model, she would have permanently damaged her reputation, credibility, and legacy.

Perhaps the most misguided argument from Wolff asserts that Barra is “part of a new fashion of women running major companies who are, suspiciously, media-willing and comfortable.” In Wolff’s view, Barra speaks honestly to the media only to make herself a star. He points to both Sheryl Sandberg and Marissa Mayer as examples of women who seem to value the spotlight over company success. The reality today is that CEO personal brand is inseparable from the company’s brand and reputation. Take Mark Zuckerberg, Bill Gates, Jamie Dimon — all leaders whose media personae are inseparable from the brands of their companies. The willingness of CEOs to build a strong and clear media presence is not female or self-serving — it’s essential. No one criticized Brady Dougan for his willingness to take responsibility for the illegal behavior of a few employees. In fact, he told employees, “While employee misconduct violated our policies, and was unknown to our executive management, we accept responsibility for and deeply regret these employees’ actions.” Dougan was right to do this, and so is Barra. Speaking with the media about it is part of her job — not some distinctively female desire to be a star.

It’s not uncommon to find that women leaders face some blatant bias and double standards in the media, but it’s worth the effort to call it out when it happens. In an era where so few women occupy top jobs, and many more are dissuaded from taking them for fear of intense scrutiny and bias, Wolff and other writers would do well to reflect more seriously on the true meaning, value, and actions of leadership before leveling criticism.

Why Bitcoin Entrepreneurs Are Begging for More Regulation

The IRS took a stand yesterday on Bitcoin, declaring that it would treat the digital currency as property, not currency, for tax purposes. “The Internal Revenue Service may have just taken some of the fun out of Bitcoin,” declared The New York Times. Yet, in the minds of many Bitcoin proponents, not only is the fun still ahead, but the guidance from the federal government is welcomed. In fact, they’d like more of it.

Over the last three weeks I’ve spoken with entrepreneurs, lawyers, VCs, consultants, and bankers about Bitcoin, and through those conversations a clear theme emerged: lack of regulatory certainty is a major factor holding the Bitcoin ecosystem back. Despite the libertarian ideology often associated with the cryptocurrency, those doing business in the space are both realistic about the need for regulation and eager to have more of it sooner rather than later.

Such eagerness toward regulation is not common among entrepreneurs, but in Bitcoin’s case there is a recognition that a new form of digital money will need to somehow fit into existing financial rules. Exactly how that will work is still being sorted out, with regulators at the Fed as well as federal and state agencies working behind the scenes to incorporate the cryptocurrency into their regulatory frameworks.

As Bitcoin entrepreneur and Circle founder Jeremy Allaire — whose company this morning announced another $17 million in venture capital financing — explained at a panel I moderated Monday at Harvard Business School, there is an appropriate role for regulators to play in ensuring consumer protection. When companies like Mt. Gox go under, customers lose their investment and the ecosystem suffers.

The hunger for regulation is also driven by a desire to see more banks get involved. Right now, finding a banking relationship can be quite difficult if you’re starting a company that deals with Bitcoin.

“Many of the major banks and financial institutions are looking at Bitcoin and trying to figure out their take on it,” said Jacob Farber, senior counsel at the law firm Perkins Coie. But concern over compliance with anti-money laundering and anti-terrorism laws have to date largely discouraged their participation.

Clarity is coming, and with it, likely, greater involvement from banks. In March of 2013, the department of the U.S. Treasury tasked with combating money laundering issued guidance on Bitcoin, defining it as a “decentralized” class of “virtual currency” that, though not equivalent to legal tender, “acts as a substitute for real money”. Despite this subtle distinction, the guidance extended existing money transmitter laws to include companies facilitating the exchange of Bitcoin.

Though the IRS chose to designate Bitcoin as property rather than currency, it accepted Treasury’s definition of a decentralized virtual currency, thereby beginning “to crystallize that framework of what Bitcoin is and how to think about it,” according to Farber.

Despite gradual recognition at the federal level, clarity from state regulators remains a roadblock for participation by U.S. banks. Here again, Bitcoin entrepreneurs would welcome guidance, and are particularly interested in New York’s consideration of the matter.

The IRS decision adds a layer of complexity to Bitcoin transactions, but for entrepreneurs in the space there is an upside. “Facilitating adherence to these guidelines provides an opportunity for innovation,” said Tiffany Wan, an innovation fellow at Deloitte’s GovLab. “Just as Bitcoin companies have popped up to provide wallet or payment processing services, the same could occur for tracking and maintaining records for tax purposes.”

Regulatory clarity will bring costs with it. Much of the business excitement around Bitcoin has centered on its possibility to offer transactions with dramatically lower fees than credit cards. Yet the cost of regulatory compliance by the companies running Bitcoin exchanges or managing Bitcoin wallets will have to be passed on to the consumer somehow, likely in the form of fees.

Moreover, a fundamental tension remains between regulators and Bitcoin’s champions. As Allaire said Monday, the vision for Bitcoin is as a global currency, something that will inherently have an uneasy relationship with regulators at every level. For now, regulatory acceptance is a necessary step toward more mainstream adoption. But the idealistic notion of a transnational digital currency remains very much alive.

What Makes Big Data Projects Succeed

In conversations with executives, many of the same misconceptions about big data projects — and what makes them successful — keep coming up.  To help clear the air and foster a better understanding of what makes big data initiatives succeed, here are some of the key things I’ve learned from companies that are realizing substantial business value with their big data initiatives.

Technology: The most popular misconception many organizations have is that big data projects are all about technologies that are specific to big data—Hadoop, Python, Pig, Hive, etc. It is certainly true that those tools are important and useful to big data projects. But unless your company is a start-up, you probably have some legacy technologies and skills that can come in handy as well. In a recent study I did on big data projects involving “data discovery” platforms from companies like Teradata Aster, I found that companies can program big data applications with existing languages like SQL. I also learned that companies with existing data warehouse environments tend to create value faster with big data projects than those without them. Your existing analytical tools—SAS, SPSS, R—will also still be useful with big data.

People: Just as you can hold onto some of your legacy technologies, you also don’t need to bring in entirely new people. The large companies I interviewed about big data projects said they were not hiring Ph.D. level data scientists on a large scale. Instead they were forming teams of people with quantitative, computational, or business expertise backgrounds. They felt the need to educate some of the project team members on big data technologies such as Hadoop and scripting languages. But they were not in desperate straits from a big data talent perspective.

Good change management:  Change management is key to the success of projects. While one might think that technical challenges would outweigh human ones in big data work, it’s not necessarily so. Many big data projects involve “prescriptive analytics”—algorithms or automated systems that tell workers at the front lines of organizations how to do their jobs. In talking with companies that are using big data for these purposes—UPS’s Project ORION for real-time routing of delivery vehicles, or Schneider National’s analysis of fuel tank sensor and GPS data to designate fuel stop locations to drivers—the project managers emphasized how important change management is. Both applications involve substantial changes in how drivers do their work, and the recommendations they make have to be accurate and trustworthy or they may be ignored.

A clear business objective: Popular wisdom suggests that big data projects are primarily about sifting through a big pile of data to find promising relationships. That is an essential task, but it will be an unproductive fishing expedition unless a company has a business problem in mind. For example, telecom companies including T-Mobile and Vodafone are using big data technologies to churn through customer and network data records. It would be an overwhelming project without a business objective in mind: preventing customer churn. With that goal in mind, Vodafone Australia was able to find and fix some network problems that were causing churn in just a few weeks.

Good project management:  Does it help to have executive sponsorship? Absolutely. Should the manager of the project communicate effectively with stakeholders? You betcha. These are hardly surprising, although the technical complexities of big data (and the technical focus of its practitioners) may make it somewhat more difficult to recruit sponsors and engage stakeholders.

Of course, in addition to good project management, and the other factors above, you need some good fortune. Big data projects involve new technology and new development approaches, and are inherently risky. And if you’re doing significant data exploration or discovery with big data, you will occasionally fail—which is not really a problem if you learn from the failures. Big data projects are still more like R&D than production applications. But those organizations that combine conventional project management wisdom with some of the big data wrinkles I’ve described will have a leg up on success.

Find the Right Mentor During a Career Transition

As you take the next steps in your career, do you have the right mentor? You may think a mentor is a person within your organization who has more experience than you do, who coaches you and looks out for you as you move up the ranks. You can rely on these mentors for advice because of their more senior perspective. While this definition is technically accurate, it only takes into account one type of mentor. This type of mentor is great support to have, but can an in-company mentor provide the same level of support when you want to look beyond your current organization? They may be able to start you off with advice or leads, but their area of influence is usually within a single organization.

Just at the moment that you really need professional advice from someone senior and more experienced, you are on your own. But don’t despair! There are mentors you can cultivate to help you during your transition.

Instead of leaning solely on those within your organization, broaden your search. Consider industry- and profession-focused mentors. These mentors have a reputation for broad knowledge of more than one company or industry and can be found in many different places: a professional association, a recruiting firm, a law firm that specializes in an industry, etc. One profession-focused mentor I know is a recruiter who freely shares his knowledge with human resources professionals in transition. He has a reputation for knowing everyone and happily meets with people who need a coach. Alternatively, an industry-focused mentor I know has been an executive in startup biotech firms. He is always ready to talk to people looking into biotech because he is always on the lookout for talent. Many consultants and vendors are also industry- or profession-focused mentors, as they have a perspective that crosses many organizations and know where openings are likely to occur.

Industry- and profession-focused mentors provide you with advice about how you should present yourself, which employers you should target, and how your resume could be improved. They can even suggest contacts or make connections. But you will need to ask for that advice, and once you’ve asked, you have to follow it. That means, don’t ask what they think of your resume unless you are prepared to change it. If they recommend you do some digging to prepare for an interview, do it. These mentors know they have a reputation for helping, and they don’t want to waste their time. If you don’t follow through on their suggestions, they will drop you and move on to someone else.

It’s also your responsibility to keep the connection going. Follow up, not just with a thank-you note or email, but by taking their suggestions, even if you don’t really think they will do you any good. Being referred by Mr. Biotech is great for your reputation, even if you never want to work for that big pharma company he referred you to. After your big pharma meeting, thank Mr. Biotech as well as the person you met with. Ask your mentor follow-up questions via email or in face-to-face meetings to keep the relationship open. Repeat this process with any suggestion your mentor has made. Stay in touch regularly with updates on your search.

How do you find industry- or profession-focused mentors? The easy way is to join a professional or industry association. Go to their meetings or local conventions. Is there a name that crops up over and over, either as a speaker or as a sponsor? Whom does the organization give awards to? Or, just ask around: “I’m very interested in this field. Is there someone you know who could give me an overview?” The same names will come up again and again.

Read the conference programs for the names of consultants and vendors who sell to members of the association, as well. Since they are most likely also at the conference, you can just walk over, explain that you are in transition, and ask them whom they recommend. Remember, you are looking for an experienced, senior person who is known for helping others. Keep asking, and you will come up with a mentor for this transition sooner than you think.

If you are lucky, you may meet a senior person while you are searching who takes a real interest in you and your career. They could be people that you are directly introduced to through your mentor or even someone you meet in passing at a conference or networking event. These people, who I call “surprise” mentors, often enjoy taking someone under their wing and helping them, in spite of how busy they are. Pay attention to those experienced people you meet with whom you have a special connection. Give them special attention and follow up. Take advantage of the opportunity before it disappears.

For example, a friend of mine went through an agonizingly long hiring process for a position in Washington D.C. During it, she hit it off with one particular interviewer. When she didn’t get the job, she had the presence of mind to write a nice note thanking this person for making her feel so comfortable during the interview process. To her amazement, she got a return email offering all kinds of help and connections. She continued the relationship and got an even better job thanks to her surprise mentor. In cases like these, all you need to do is be grateful and stay in touch with regular updates on your progress.

All mentors place a high personal value on helping others, whether for the good of the profession or industry, or simply because they like you. So, if you want to really pay back a mentor who helped you during your transition, think about “paying it forward” — become a mentor yourself. Volunteer for a professional association or for a conference. Offer to talk about your industry at a local college. Let your mentor know you are giving back.

Finally, when you find your new job, write a thank-you note to all the people who helped you, give them your contact information, and tell them you would be happy to help anyone in transition the way they helped you. They’ll see the fruits of their labor, and they may just stay on as your mentor, even as you’re settling into your new position.

This is the third post in a blog series on using mentorship to advance your career. Priscilla Claman is a contributor to the HBR Guide to Getting the Mentoring You Need.

Read the other posts here:

Post #1: Three Questions to Advance Your Career

Post #2: Engage a Mentor with a Short-Term Project

Why Do App Developers Still Live with Their Moms?

With the virtual disappearance of major white-collar employers like Eastman Kodak and Westinghouse — once fairly reliable career on-ramps — young talent is focusing on entrepreneurship as a path forward. Some kids are skipping college entirely and heading straight into business, pointing to the success of dropouts like Bill Gates, Steve Jobs, and Mark Zuckerberg. But unschooled entrepreneurship is unlikely to end happily for most.

A recent story in the New York Times highlighted a pair of high school students who had experienced considerable success as app developers. Their product, a program designed to combat procrastination, quickly became the best-selling productivity app on iTunes. They received acclaim and took meetings with heavyweights at industry conferences. The money was not exactly life-changing, though: after Apple’s cut, they split $30,000, some of which went to business expenses. Not bad, but hardly Zuckerbergian.

Unfortunately, app development came at the expense of schoolwork, resulting in a sharp decline in one developer’s grades as the pair headed into the college application season. As a fallback, he’s applying for a Thiel Fellowship, which pays 20 lucky winners $100,000 to skip college and start a business instead.

There are certainly some high-profile entrepreneurial success stories out there. Facebook’s recent purchase of WhatsApp for $19 billion instantly created fantastic wealth for many of its 55 employees. Kids might understandably dream of retiring rich before they reach drinking age. Yet like most apps, WhatsApp is hardly unique as a product: Line, Kik Messenger, Viber, WeChat, and others do much the same thing.

This is not uncommon. The Apple Store lists more than one million apps and claims that there are 275,000 registered app developers in the U.S. A fair number of apps are indistinguishable from one another, and the vast majority will not yield riches, or even a reasonable income. It is hard to dominate a product category where a pair of self-taught high school kids can create a bestseller; success in this situation is more a matter of luck than of merit.

The reward system for app developers follows a familiar “winner take all” pattern described by Cornell economist Robert Frank, where a few outstanding successes capture huge returns while those not lucky enough to reach the top see very little. In this way, the industry parallels drug dealing. Hear me out.

In a chapter of their best-selling book Freakonomics, “Why Do Drug Dealers Still Live with Their Moms?,” Steven Levitt and Stephen Dubner note that most street-level drug dealers earn modest wages at best — they may neglect their schoolwork, and some take straight jobs in addition to make ends meet. But a few drug dealers become fantastically wealthy, and the chance to play this lottery keeps many lower-level dealers in the game.

The Thiel Foundation president points out that “the safe career track is totally broken.” Lawyers can be laid off; janitors have PhDs. This is true. But encouraging kids to blow off schoolwork to write apps, or skip college to become entrepreneurs, is like advising them to take their college money and invest it in PowerBall. A few may win big; many or most will end up living with their moms.

There is a possible consolation prize: perhaps these kids can parlay their programming skill into jobs at Facebook or Google. Unfortunately, the odds there are only slightly better. Facebook had 2,400 employees in 2011; 3,500 in 2012; 4,900 in 2013; and 6,300 today. With about 1,400 net hires per year, getting a job at Facebook is only slightly more likely than getting drafted into the NFL. Twitter has 2,700 employees; Dropbox has 550; Snapchat has 21. The combined global workforces of Groupon, Facebook, LinkedIn, Zynga, Yelp, Pandora, and Zillow is smaller than the number that Circuit City fired in January 2009 when it was liquidated. (Hey, it could be worse: the computer and electronics hardware industry has shed 750,000 jobs since the turn of the 21st century.)

I’ve looked up every company that did an IPO in the U.S. since 2000. Even the best-known employers of knowledge workers often have fewer people than a local car dealer or Walmart store. For instance, real estate site Zillow has 812 employees, and travel site Kayak has only 205.

The message for aspiring entrepreneurs? Stay in school, and resist the lure of quick success. In introductory economics courses in college, kids learn about “opportunity costs” and the “time value of money.” Though $15,000 seems like a lot to a high school senior, it’s hardly a great choice for entrepreneurs or anyone else if it comes at the expense of an education that yields a far higher lifetime income, a more agile mind, and a more rewarding life.