Marina Gorbis's Blog, page 1552

Building a Minimum Viable Product? You're Probably Doing it Wrong

In creating a minimum viable product, entrepreneurs choose between experiments that can validate or invalidate their assumptions about a business model.

If your MVP is a worse product than your imagined final version, success validates your idea; failure, on the other hand, doesn't necessarily invalidate it. If your MVP offers a better experience, then failure invalidates your business model; success doesn't necessarily validate it.

Unfortunately, we usually pick the wrong kind of MVP: we tend to choose validating MVPs, even though most businesses fail because they persist too long in solving the wrong problem — what invalidating MVPs are designed to prevent.

The Two Kinds of MVP

Validating MVPs use a worse product than what the final version will be, so success proves your model but failure is inconclusive.

The classic Validating MVP is selling an idea. You approach people you think should be customers and try to sell them a product you haven't built yet. If they pay you today to deliver a solution a month from now — and you can build a profitable business from that revenue — you've validated your company. But failure of this test doesn't invalidate your business model.

For example, Drew Houston's March 2008 Digg video for Dropbox generated 70K signups for a product that hadn't been released yet — and went a long way in confirming product-market fit. But a failure of this test wouldn't necessarily mean that Dropbox wouldn't work — it could mean that the quality threshold was higher than expected, or that Digg users weren't ideal early adopters, or that some other news event had distracted users from watching or sharing the video. Regardless, failure of his validating MVP only invalidates one small way of acquiring customers — with a video on Digg — not the entire business model.

Invalidating MVPs, however, have a better product than the final business, so failure means the business model is doomed but success is inconclusive.

Many "concierge MVP" approaches fall into this category. You create a better product at an unsustainably high cost by personalizing it for every customer. If you cannot get people to pay a realistic long-term price for a better product, it's time to move on. Jennifer Hyman and Jennifer Fleiss began Rent the Runway with this approach: they provided an in-person dress rental service where college students could try on dresses in person before renting them — a much better experience than online rental. Had no one rented that night, they would have known that online rental was hopeless. But 34% (and then 75%) of women rented, so they went on to a validating MVP — where 5% of 1,000 women on their mailing list rented dresses from an emailed PDF.

While useful, invalidating MVPs are only possible when better products can be produced in small batches — making them difficult when product quality depends on scale of use or when low-quality alternatives abound in the market.

Which approach should you use first?

Ironically, the only successful MVPs we hear about are validating MVPs, since to succeed at invalidating a business model means no one will ever hear of your success. As a result, we're more likely to think of validating experiments. But most businesses fail because our assumptions about customer demand are wrong — because of market risk.

Accordingly, startups with significant market risk should run an invalidating MVP first, to test whether customers will buy a better product, rather than running escalating validating MVPs and wondering if people aren't buying because the concept is flawed or just because the product isn't yet good enough, or because you're targeting the wrong customers, or because the creative is wrong.

Test market risk first. If you create a "better product" and no one pays, then move on.

But creating a "better" experience early on is sometimes impossible, particularly when product performance results from scale — as in multi-sided platforms, where the value proposition depends entirely on network effects. In these cases, you're forced to run validating MVPs, as with Dropbox. It's critical, however, to define failure from the outset. Usually, this means failing to convince early adopters to buy your product once you've built a reasonably good (yet still inferior) version of the product, a process that often takes much more time than an equally effective invalidating MVP.

Most invalidating MVPs are relatively simple — and many will reveal our fundamentally flawed assumptions about customer demand, saving us a huge amount of time and frustration in pursuing multiple validating MVPs.

Learning from MVPs

Of course, MVPs have twin goals: learning what problems we should be solving, and driving risk out of our current (hypothetical) business model by testing fundamental assumptions.

I focus mostly on the second goal, but invalidating MVPs also tend to be more effective at the first, since those "better" initial products tend to resemble concierge MVPs that sacrifice unit cost and scalability for performance and flexibility. These tests substitute human labor for technology, and the human component means we can gather more information from potential customers about their problems and our potential solutions.

As a result, we should usually begin our companies with an invalidating MVP. Then, if it's inconclusive, we should switch gears and focus on MVPs that validate our business model.

Nadal Is Strong Enough to Cry. Are You?

Rafael Nadal, who just won the U.S. Open for the second time, is my hero.

His athleticism is extraordinary. His focus is awe-inspiring. His skill is, clearly, second to none. His will is unremitting. It's a joy to watch him in competition. Yet those are not the reasons he's my hero. In fact, it wasn't until after he was finished playing in this year's final that he rose to role model in my book.

So what was it?

It was that, right after winning, he fell to the ground, crying, then leapt for joy, then lay back on the tennis court, face down, sobbing. After a few moments, he got up and hugged Novak Djokovic, his opponent.

"Now that," I told Isabelle, my eleven-year-old daughter, who was watching with me, "is what it looks like when you put your whole self into something!"

Where is that energy in our companies today? Where are the people leaping for joy, pumping their fists in the air, or weeping, either with happiness or grief?

I sometimes walk through the halls of various companies, looking at people working numbly at their desks or cubicles or nodding off in meetings, wondering, "where are the people?"

I'm not advocating for a workplace of loose cannons. I am advocating for a workplace of human beings.

Before his emotional outburst, Nadal played for hours, channeling the energy coursing through his body with controlled responses and deliberate, calculated movements. In other words, he managed his emotions.

That's appropriate; it's how any of us achieve any challenging objective, and we've become very good at it.

But after the game, where does all that energy go? Nadal's post-game response was the natural eruption of energy pent up from the concentration of his game.

That's appropriate too. Yet how many of us unrelentingly repress our emotions, or eat and drink them back down?

Years ago, when emotional intelligence became the next big thing, I thought that, perhaps, it would give us permission to express ourselves more authentically in our workplaces. It might teach us how to hold the emotions of others, to sit quietly, empathically, with someone who was crying, without trying to fix what was wrong. Or to celebrate our successes without losing our compassion toward others, whether they be friends or opponents.

But that never happened. For the most part, emotional intelligence is simply new jargon for discussing our emotions intellectually or codifying them in competency models. Meanwhile our feelings remain imprisoned in our heads.

That's not the world I want to live in, and I don't think you really want to live there either. Sure, it might keep us comfortable. Certainly it might feel safe. But only in the short run. Long term, keeping our emotions nice and presentable hurts us, hurts our relationships, leads to burn out, and makes us sick.

So why don't we all live our lives with Nadal's open passion, with his exposed heart?

It's scary to be emotionally open. It makes us vulnerable. We may feel shame, and we're likely to feel weak.

When I watched Nadal lying face down on the court, his body heaving with sobs, I was reminded of a time when I did the same, in very different circumstances. Earlier this year, a colleague of mine was very angry about something I had done. In front of several other people, she proceeded to tell me everything I was doing that was making her angry.

My job, in that situation, was to listen to her without defensiveness. I had a very hard time doing that (I kept trying to butt in to explain myself), but the other people in the group helped me; when I tried to talk, they gently reminded me to just listen and, when I did, they told me how much they appreciated it.

As I took in her criticisms, my body began to vibrate and, after a while, visibly shake. I couldn't control it. I can't explain it other than I felt like my body was trying to contain all of the energy that was coming at me from her, as well as all the energy brewing inside me. After a while, it was simply too much for me to contain and I just burst into sobs.

I felt exposed and ashamed. Not so much by the way my colleague was attacking me as by my physical reaction. That felt painful.

But I also felt a massive release. I felt unburdened, like there was nothing left for me to hide. I felt completely and fully myself. And that was tremendously pleasurable.

I also felt like I could finally take in what my colleague was saying, without agreeing with everything she said but also without making her wrong or judging her. That felt important.

And what I thought might lead to my rejection led to connection. The people around me supported and comforted me.

My sobbing came from failure, Nadal's came from success. I have experienced both, and here's what's interesting: They feel the same. That's because, essentially, they are. It's all energy looking for a way out.

We are, fundamentally, emotional beings. In celebration or sadness, fear or anger or love, our emotions are very much a part of who we are.

It's high time we openly embrace them.

Every Leader Needs a Challenger in Chief

We are drawn to those who echo what it is we already believe. We get a dopamine rush when we are presented with confirming data similar to what we get when we eat chocolate or fall in love. On Facebook we defriend those with different political views to our own. On Twitter we follow people just like us.

Yet a vast body of research now points to the import of contemplating diverse, dissenting views. Not just in terms of making us more rounded individuals but in terms of making us smarter decision-makers.

Dissent, it turns out, has a significant value.

When group members are actively encouraged to openly express divergent opinions they not only share more information, they consider it more systematically and in a more balanced and less biased way. When people engage with those with different opinions and views from their own they become much more capable of properly interrogating critical assumptions and identifying creative alternatives. Studies comparing the problem-solving abilities of groups in which dissenting views are voiced with groups in which they are not find that dissent tends to be a better precondition for reaching the right solution than consensus.

Yet how many leaders actively seek out and encourage views alien and at odds to their own?

All too few.

President Lyndon Johnson notoriously discouraged dissent, with many historians now believing that this played a significant role in the decision to escalate U.S. military operations in Vietnam. Excessive group-think is now recognized to have underpinned President Kennedy's disastrous authorization of a CIA-backed landing at Cuba's Bay of Pigs. Former employees of the now defunct Lehman Brothers have talked about how voicing dissent there was considered a career-breaker. Yale economics professor Robert Shiller explained that when it came to warning about the bubbles he believed were developing in the stock and housing markets just before the financial crisis he did so only "quietly" because: "Deviating too far from consensus leaves one feeling potentially ostracized from the group with the risk that one may be terminated."

Is this the feeling the "clubby" environment in your boardroom is inadvertently engendering? Or are you actively signaling that you want to hear views different and diverse and in opposition to your own? We need to have the confidence to allow our own ideas and positions to be challenged.

Eric Schmidt, the Executive Chairman of Google, has talked about how he actively seeks out in meetings people with a dissenting opinion. Abraham Lincoln's renowned "team of rivals" was comprised of people whose intellect he respected and were confident enough to take issue with him when they disagreed with his point of view. Stuart Roden, Co Fund Manager of Lansdowne Partners' flagship fund, one of the world's largest hedge funds, tells me he sees one of his primary roles as being the person who challenges his staff to consider how they could be wrong, and then assess how this might impact on their decision-making.

Who in your organization serves as your Challenger in Chief? Interrogating the choices you are considering making? Making you consider the uncontemplated, the unimaginable and that which contradicts or refutes your position?

And also challenging you?

For we are not the robotic emotionless decision-makers of economics text books, bound to make the rationally best choices. Instead we're prone to a whole host of thinking errors and traps.

Did you know that when we're given information that is better than we expected — i.e. that our chance of being targeted for burglary is actually only 10% when we thought it was 20% — we revise our beliefs accordingly. Whereas if it's worse — i.e. if we're told that rather than having a 10% chance of developing cancer, we actually have a 30% chance — we tend to ignore this new information?

Are you aware of the extent to which our emotions or moods can skew our choices? You may already know that stress leads to excessive tunnel vision, but did you know that studies of both judges and doctors reveal that when stressed they typically revert to their unconscious racial stereotyping biases? Or that if we go 24 hours without sleep or spend a week sleeping only four or five hours a night, our thinking is as compromised as if we were drunk? Whilst studies in which people are presented with financial choices reveal that people make worse decisions when their blood sugar has dipped, but also when they're feeling hot under the collar. Male students presented with a financial decision after having been shown either a "neutral" image such as a rock or a "hot" image of a lingerie clad Victoria's Secret model, made significantly poorer choices after having looked at the "hot" image.

And how about our propensity to become overly attached to the past?

You remember how huge Nokia was. From the 1990s onwards, Nokia dominated the mobile phone industry. At its peak the company had a market value of $303 billion and by 2007 around four in 10 handsets bought worldwide were made by Nokia.

But when Apple introduced its game changing iPhone in 2007, Nokia was caught sleeping on the job. Despite having themselves developed an iPhone-style device — complete with a colour touchscreen, maps, online shopping, the lot — some seven years earlier. They never released the product. Instead they decided better to stick with what they knew worked — good, solid, reliable mobile phones. As a former employee working in the development team at the time said of that decision, "Management did the usual. They killed it!" When the iPhone was introduced, Nokia engineers sneered at the Apple devices' inability to pass their "drop test" in which a phone was dropped onto concrete from a five-foot height.

Nokia management believed that their successful past would continue to provide a reliable guide to the future, but as we now know it didn't. In the six years since the iPhone was introduced Nokia lost about 90% of its market value. And when Microsoft bought Nokia's phone business this month, the fire sale price it paid for it, only half what Google paid for Motorola last year, firmly reflected just how far it had fallen.

Your Challenger in Chief needs to be alerting you to such thinking errors and foibles. And you need to be listening to him or her.

Analyst Scrutiny Impedes Corporate Innovation

Companies covered by larger numbers of analysts generate fewer patents, and the patents they produce have lower impact than those from other firms, according to an analysis by Jie (Jack) He of the University of Georgia and Xuan Tian of Indiana University. The findings suggest that analysts exert so much pressure on managers to meet short-term financial goals that they impede companies' investment in long-term projects, the researchers say.

Nice or Tough: Which Approach Engages Employees Most?

It's probably no news to most people who work that poor leaders produce disgruntled, unengaged employees. Our research also shows convincingly that great leaders do the opposite — that is, that they produce highly committed, engaged, and productive employees.

And the difference is cavernous — in a study of 160,576 employees working for 30,661 leaders at hundreds of companies around the world, we found average commitment scores in the bottom quarter for those unfortunate enough to work for the worst leaders (those leaders who had been rated in the bottom 10th percentile by their bosses, colleagues, and direct reports on 360 assessments of their leadership abilities). By contrast, average commitment scores for those fortunate enough to work for the best leaders (those rated in the 90th percentile) soared to the top 20th percentile. More simply put, the people working for the really bad leaders were more unhappy than three quarters of the group; the ones working for the really excellent leaders were more committed than eight out of ten of their counterparts.

What exactly fosters this engagement? During our time in the training and development industry we've observed two common — and very different — approaches. On the one hand are leaders we call "drivers"; on the other, those we call "enhancers."

Drivers are very good at establishing high standards of excellence, getting people to stretch for goals that go beyond what they originally thought possible, keeping people focused on the highest priority goals and objectives, doing everything possible to achieve those goals, and continually improving.

Enhancers, by contrast, are very good at staying in touch with the issues and concerns of others, acting as role models, giving honest feedback in a helpful way, developing people, and maintaining trust.

Which approach works best? When we asked people in an informal survey which was most likely to increase engagement, the vast majority opted for the enhancer approach. In fact, most leaders we've coached have told us that they believe the way to increase employee commitment was to be the "nice guy or gal."

But the numbers tell a more complicated story. In our survey, we asked the employees not only about their level of engagement but also explicitly, on a scale of one to five, to what degree they felt their leaders fit our profiles for enhances and drivers. We judged those leaders "effective" as enhancers or drivers who scored in the 75th percentile (that is, higher than three out of four of their peers) on those questions.

Putting the two sets of data together, what we found was this: Only 8.9% of employees working for leaders they judged effective at driving but not at enhancing also rated themselves in the 10% in terms of engagement. That wasn't very surprising to many people who assume that most employees don't respond well to pushy or demanding leaders. But those working for those they judged as effective enhancers were even less engaged (well, slightly less). Only 6.7% of those scored in the top 10% in their levels of engagement.

Essentially, our analysis suggests, that neither approach is sufficient in itself. Rather, both are needed to make real headway in increasing employee engagement. In fact, fully 68% of the employees working for leaders they rated as both effective enhancers and drivers scored in the top 10% on overall satisfaction and engagement with the organization.

Clearly, we were asking the wrong question, when we set out to determine which approach was best. Leaders need to think in terms of "and" not "or." Leaders with highly engaged employees know how to demand a great deal from employees, but are also seen as considerate, trusting, collaborative, and great developers of people.

In our view, the lesson then is that those of you who consider yourself to be drivers should not be afraid to be the "nice guy." And all of you aspiring nice guys should not view that as incompatable with setting demanding goals. The two approaches are like the oars of a boat. Both need to be used with equal force to maximize the engagement of direct reports.

You've Been Fired: Now What?

You've just received word that you've been fired. Or perhaps the company has gone through a re-structuring and eliminated your job — and you've been told that none of the managers you've worked with over the years have a position for you on their team. This comes as a shock to your system, especially if you've enjoyed a record of success up to this point in your career. While there are some practical things to attend to — negotiating your severance, signing up references, and agreeing with the company on a storyline about the reason for your exit — your most important action item is managing your own attitude to the situation.

Your first step is realizing that you're not alone. Although they don't trumpet the fact for obvious reasons, most successful senior executives have hit speed bumps in the course of their careers. As search consultants will tell you, experiencing a setback doesn't have to be terminal — if you're able to move forward productively.

As you dust yourself off, think through those parts of the situation you need to own. In a highly emotional state, it's too easy for you to curse the darkness: "I had a bad boss." "The place was rife with organizational politics." "My colleagues were non-cooperative and had it in for me." There may be some truth to this, but you also need to ask yourself, "What do I need to accept about the experience to avoid making the same mistakes so I can succeed in the future?"

Even in the best of times, the vast majority of organizations do a poor job of giving people constructive feedback, and companies are even less inclined to provide useful feedback when showing someone the door. Still, think carefully about the messages you have received, however oblique, to see if you can identify issues you need to be alert to. For example, if you developed a reputation for having sharp elbows and were too frequently involved in unresolved conflict with people from other departments, you may well need to improve your skills in influence, collaboration, and conflict management. If you tend to be a perfectionist and were overwhelmed by the sheer volume of deadlines and tasks, you may need to work on delegation and building a team you can rely on.

Or perhaps the problem was not so much one of lack of skills as of fit. If you found yourself frustrated by the organization's constant demands for quick, one-off solutions unlikely to add value over the long term, you may be a "craftsman" who'll do better in a slower-paced company where management values well-designed and thoroughly integrated programs. Or if you found that constantly communicating and vetting your ideas in a large, bureaucratic organization was tedious, perhaps you should consider a smaller, more entrepreneurial company.

Once you've gleaned the two or three key lessons you should draw from your experience, move forward and don't wallow in self-doubt or what might have been. You don't want to ignore important messages about what will be required to succeed in your next job or that will help you target the best type of organization. However, your most valuable commodity is self-confidence. so don't let that be eroded. As painful as your departure may be, with the right attitude and reflection you'll take away some important lessons that can give direction and focus to the rest of a highly successful career.

How Corporate Venture Capital Helps Firms Explore New Territory

A good idea faces so many obstacles en route to market today that it's a wonder we have any innovative products at all. You know those baby sea turtles that get eaten by birds and crabs on their way from the nest to the water? It's like that.

Corporations have narrowed the focus of their R&D by pressing for clear, short-term wins; venture capitalists are too quick to get caught up in the latest, hottest thing; and even the vaunted crowdfunding option is pretty limited: It's great if you're an internet star, but try getting a crowd excited about an innovative idea in industrial machinery.

It doesn't have to be this way. Effective means of boosting innovation already exist, but not enough companies are making use of them. Two in particular are corporate venture funds, which invest in start-ups outside companies' walls, and internal idea contests. I'll describe both, but first let's look at what's wrong with some of the traditional sources of innovation.

Corporate R&D too often focuses on refining technologies that are already in use. You can see why: For decades in the U.S., billions were spent on big science, and the commercial returns were disappointing. But cutting back on research funding doesn't work either. In the 1990s, Eastman Kodak cut its R&D spending and focused on film, a technology that was clearly successful (you know where this is going); and in the 2000s, Nokia focused on maintaining its strong position in low-end phones (you know where this is going too — Kodak filed for bankruptcy, and Nokia, whose phone business is now being bought by Microsoft, suffered from having missed the smartphone wave). Even in companies that are diligent about looking to the future, R&D has a tendency to be slow, rigid, and expensive.

Independent venture capital is a vital force in funding start-ups, but VCs tend to have a narrow focus on certain industries and geographies. Their funding cycles are volatile, too — it's either feast or famine — and they expect returns within a few years.

Crowdfunding has undeniable power, but rather than solve the problems of venture capital, it exaggerates them. The glamorous projects inevitably get the bulk of the funding, while more experimental, more complex, and more pedestrian projects lose out. If VC is "unfair," crowdfunding is even more unfair.

Corporate venture capital can avoid some of these problems. A corporate venture-capital fund can often do a better job than corporate R&D of exploring new territory, and at the same time, it can move more quickly, flexibly, and cheaply than traditional R&D. In the 1990s and 2000s, for example, several corporate-venture initiatives helped pharmaceutical companies catch up with rapid advances in bioscience that were threatening to undermine the value of their well-established expertise. And corporate venture funds, if well managed, can avoid the fickleness problem that plagues independent venture capital and crowdfunding.

Many large companies have been wary of corporate venturing, because they've seen such funds deployed ineffectively. And it's true that if companies aren't careful, their internal venture capitalists can become entangled in the agendas of various corporate stakeholders or demotivated by inadequate or poorly designed financial incentives. That's why it's important that venture funds' goals be aligned with corporate objectives, approvals for funding be streamlined, and compensation levels match those offered by independent venture groups. Companies that fail to provide adequate incentives face a steady stream of defections; after too many board meetings in which the corporate investor parks his Fiesta next to the independent venture capitalist's Ferrari, the temptation to go elsewhere becomes too great.

Contests are at the opposite end of the size and cost scales from venture funding, but they can be an effective complement to a corporate innovation program. Companies should consider offering rewards for people who solve internal problems or create new products. It's important to have a specific goal at the outset, and the rewards should be meaningful, but they don't always have to involve cash. Recognition is a powerful reward too.

These two very different approaches aren't the only ways to improve innovation, of course, but they're particularly cost-effective as well as powerful in tapping the best aspects of both venture capital and the traditional corporate R&D approach. They demonstrate that with experimentation and ingenuity, even the most intractable problems are surmountable. They illustrate the range of programs that companies should be implementing to stimulate innovation and shepherd ideas toward marketable products.

Executing on Innovation
An HBR Insight Center





Innovation Isn't an Idea Problem
Five Ways to Innovate Faster
Ready to Innovate? Get a Lawyer.
Just How Valuable Is Google's "20% Time"?

Why Is Innovation So Often Synonymous With Disappointment?

Because a pure idea is a beautiful thing, and seeing it get mauled as it struggles to become something real can be highly disappointing. It's painful to see your "bridge to the moon" end up as a mere woodshed.

Welcome to HBR's new Insight Center: Beyond the Breakthrough: Executing on Innovation. This four-week series addresses the reality problem that always besets great ideas, and our thesis in curating it is that reality isn't a problem — or at least it doesn't have to be. We believe that reality too can be a beautiful thing, although, granted, it's more of an acquired taste.

We'll take a close look at the execution aspects of innovation. In other words, you've birthed the breakthrough idea — now what? How do you nurture it, raise it, put it on its own two feet? How do you make sure it has an impact on the world? We'll draw on a range of writers with a range of insights.

Ethan Mollick of Wharton will reveal the overlooked value of individual middle managers in executing on innovation. The best project managers, he writes, have a "magical" impact; companies need to do a better job of supporting and encouraging them. Scott Anthony will show how organizations can improve an idea's chances by ensuring full commitment to innovation. Josh Lerner of Harvard Business School urges companies to look beyond the usual R&D approach to consider becoming corporate venture capitalists themselves, a point he expands on in his article "Corporate Venturing" in the October 2013 issue of HBR.

Bart Barthelemy and Candace Dalmagne-Rouge of Wright Brothers Institute argue that execution is inextricably tied to identifying the right problem to solve, and they show how people as varied as illusionists and set designers can help an organization gain insights from beyond the corporate world. Gary Hamel will explore how companies build their innovation engines.

We'll also look at how organizations are using crowdfunding internally to bring their new ideas to life, as well as the qualities that help great entrepreneurs execute on their ideas.

Turning innovative ideas into new products and services isn't easy, and there is no one-size-fits-all strategy for doing so. But there are insights that can help you travel the rocky road of executing on innovation, and raise your odds of success. We look forward to sharing some of those with you and hearing your views on what it takes to turn innovative ideas into reality.

Executing on Innovation
An HBR Insight Center





Innovation Isn't an Idea Problem
Five Ways to Innovate Faster
Ready to Innovate? Get a Lawyer.
Just How Valuable Is Google's "20% Time"?

It Takes Purpose to Become a Billionaire

What do billionaires have in common? What is it that they do better than anyone else? Why do we admire them, or their companies' products and services, so much?

I've spent some time trying to identify common traits in the Forbes list of billionaires and other similar lists of the world's wealthiest. I'm particularly interested in finding patterns in the types of people whom I respect. It's less about all that dough they've accumulated than about better understanding how and why they made their fortunes.

It turns out there are many ways to make a billion dollars: real estate, investing, gaming and entertainment, retail, technology, and good old-fashioned inheritance. But the most interesting (and most respected) businesses and personalities are also the ones with the strongest and most authentic purposes behind them. My business partner, Mats Lederhausen, was one of the first advocates I knew of purpose-driven business and entrepreneurship. I credit Mats with helping me understand that purpose is neither something soft nor something overly lofty. Instead, purpose is the bigger why of a business. All of us understand the what of any successful business, but what about the why?

While billionaires and their companies are bucket companies by industry (i.e. the what of the company), I believe that there are three categories of purpose that are interesting to observe, and consider which one dominates your company's mission. Here they are:

1. Making the world more beautiful.

2. Making the world more fun.

3. Making the world more efficient and smart.

1. Making the world more beautiful. These are the people who make us look, eat, and live more beautifully. It is a broad definition of outer and inner beauty. The best are able to make us look and feel good. The beauty category of billionaires includes the larger-than-life fashion figures of Ralph Lauren, Bernard Arnault (of LVMH), and recently minted billionaire Tory Burch. It is actually quite amazing to see how many of the world's richest come from the fashion, retail, and design worlds. And then there are those who aren't explicitly in the design, style, or beauty business but nonetheless identify strongly with these themes. Apple, of course, is the poster child for this ethos, as it puts design first for everything from its software to the industrial engineering of products. For Apple, it is not just design that matters — what's paramount is using design to connect to the user.

Beyond beauty sensed with our sight and touch, there are the founders in this category who have focused on our inner beauty and health. Indeed, there are people like Hamdi Ulukaya (the Turkish founder of Chobani Greek Yogurt) or the founders of a variety of biotech and pharmaceutical firms who have achieved this through focusing on the purpose of healthier ways for us to eat and live.

2. Making the world more fun. One name that springs immediately to mind is Richard Branson. His mission and purpose center around fun and play. Disney is another icon that has redefined the entertainment experience. But perhaps my personal favorite of a billionaire founder who has spread his creative fun around the world is Cirque du Soleil founder Guy Laliberté. Making the world more fun is noble and creates greater happiness for us all. The billionaire founders who get this and who have succeeded in doing so help to put more smiles, more laughter and yes, more fun into a world that is too often dull and mundane. Fun is a good business model -- and it does not need to be a billion-dollar enterprise. It is perhaps because it is relatively easy to think of small ways to create fun that it is even more impressive when people such as these are able to scale fun on a massive level.

3. Making the world smarter, more efficient, and more relevant. There are more "knowledge workers" today than ever before. In this world, we have all become familiar with the technology and Internet moguls (e.g. Larry Ellison, Bill Gates, Sergey Brin, and Larry Page) who have helped to make us smarter, faster and more efficient in our daily lives. Doing work via shared Google Docs versus a word processor versus a typewriter — yes, we've come a long way. The connected social economy and its companies like Facebook and LinkedIn are all about how we can try to do more, faster. That is, these companies allow us to have more communication moments in ever-shorter time segments. And there are also information and media moguls, like Mike Bloomberg or the Thomson family behind Thomson Reuters, who dominate financial and legal information, respectively, and are viewed as being mission critical to professionals in those fields. As these firms enable more, faster, and smarter throughput of information, a challenge will be to maintain relevancy. As more and more information is thrown at us, we are now ironically often seeking less and less of it. And this is perhaps what the next great wave of tech and info billionaires will address — as curators whose purpose will be to find greater meaning, context, and relevancy in this mass information world.

So, while there are many ways to make money, there tend to be some common patterns of higher purpose. The three purposes illustrated here help explain why and how some of the world's wealthiest have have gotten so rich, and made our lives richer as well. These three purpose categories likely blur at times, and certainly co-exist in terms of the culture and value propositions of the truly great companies. But the take-home lesson is to ask yourself which of these purposes you are willing to strive to become the absolute best at. Companies and founders that make a singular and unwavering commitment to excel along any of these three purpose dimensions not only have the chance to make our lives better, but also to leave an imprint on our culture, on how we view and experience this world. That, and they might just end up as billionaires.

Weighing the Value of an Infantry Soldier's Life

In substituting heavily armored combat vehicles at a cost of $170,000 each for lighter, $50,000 vehicles during the 2000s, the U.S. Army reduced infantry deaths by 0.04-0.43 per month at an estimated cost per life saved that is below the $7.5 million commonly accepted "value of a statistical life," say Chris Rohlfs of Syracuse University and Ryan Sullivan of the U.S. Naval Postgraduate School. However, the Army's subsequent replacement of about 9,000 of those new vehicles with even more heavily armored vehicles, costing $600,000 each, did not appreciably reduce fatalities and was not cost-effective for less-active infantry units, according to the researchers' analysis of Army data.