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These must stay in-house—otherwise, you are handing over the future of your business. Understanding the power and importance of capabilities can make the difference between a good CEO and a mediocre one.
Resources are what he uses to do it, processes are how he does it, and priorities are why he does it.
But the nature of these activities—experiences in which they’re not deeply engaged and that don’t really challenge them to do hard things—denies our children the opportunity to
develop the processes they’ll need to succeed in the future.
The end result of these good intentions for our children is that too few reach adulthood having been given the opportunity to shoulder onerous responsibility and solve complicated problems for themselves and for others. Self-esteem—the sense that “I’m not afraid to confront this problem and I think I can solve it”—doesn’t come from abundant resources. Rather, self-esteem comes from achieving something important when it’s hard to do.
the adults you want them to be. Children need to do more than learn new skills. The theory of capabilities suggests they need to be challenged. They need to solve hard problems. They need to
develop values. When you find yourself providing more and more experiences that are not giving children an opportunity to be deeply engaged, you are not equipping them with the processes they need to succeed in the future.
Instead, it was because they had honed them along the way, by having experiences that taught them how to deal with setbacks or extreme stress in high-stakes situations. The
“right stuff” thinking lists skills that are correlated with success. It is, using the description of theory discussed earlier, looking to see whether job candidates have wings and feathers. McCall’s schools of experience model asks whether they have actually flown, and if so, in what circumstances. This model helps identify whether, in an earlier assignment, someone has actually wrestled with a problem similar to the one he will need to wrestle with now. In terms of the language of the capabilities from earlier, it is a search for process capabilities.
He had never started and built anything before—and as a consequence, he knew nothing of the problems that one encounters when starting up a new factory and scaling production of a new process. Furthermore, because of the scale of his operation, Candidate A had a large group of direct reports.
He managed through them, rather than working shoulder by shoulder with them.
In expressing a preference for the more polished candidate, we biased ourselves toward resources over the processes.
While Pandesic’s senior management team had stellar résumés, not one of them had experience launching a new venture. None of them knew how to adjust a strategy when the first one didn’t work. None had had to figure out how to make a brand-new product profitable before growing it big.
“What are all the experiences and problems that I have to learn about and master so that what comes out at the other end is somebody who is ready and capable of becoming a successful CEO?”
“Instead, it was always: is it going to give me the experiences I need to wrestle with?”
As a parent, you can find small opportunities for your child to take important courses early on.
find the right experiences to help them build the skills they’ll need to succeed. It’s one of the greatest gifts you can give them.
Culture is a way of working together toward common goals that have been followed so frequently and so successfully that people don’t even think about trying to do things another way. If a culture has formed, people will autonomously do what they need to do to be successful.
Culture in any organization is formed through repetition. That way of doing things becomes the group’s culture. Many companies see the value in assertively shaping their culture—so that the culture, rather than the managers, causes the right things to happen.
Most of us think that the important ethical decisions in our lives will be delivered with a blinking red neon sign: CAUTION: IMPORTANT DECISION AHEAD. Never mind how busy we are or what the consequences might be. Almost everyone is confident that in those moments of truth, he or she will do the right thing. After all, how many people do you know who believe they do not have integrity?
Marginal thinking made Blockbuster believe that the alternative to not pursuing the postal DVD market was to happily continue doing what it was doing before,
And when Blockbuster declared bankruptcy in 2010, the existing business that it had been so eager to preserve by using a marginal strategy was lost anyway. This is almost always how it plays out. Because failure is often at the end of a path of marginal thinking, we end up paying for the full cost of our decisions, not the marginal costs, whether we like it or not.
When he saw that the plan involved spending money to build new mills, he put the brakes on. “Why should we build a new mill? We have 30 percent excess capacity in our existing mills. If you want to sell an extra ton of steel, make it in our existing mills. The marginal cost of producing an additional ton in our existing mills is so low that the marginal profit is four times greater than if we build a completely new mini-mill.” The CFO made the marginal-thinking mistake.
Hence, the paradox: Why is it that the big, established companies that have so much capital find these initiatives to be so costly? And why do the small entrants with much less capital find them to be straightforward?
Every time an executive in an established company needs to make an investment decision, there are two alternatives on the menu. The first is the full cost of making something completely new. The second is to leverage
As Henry Ford once put it, “If you need a machine and don’t buy it, then you will ultimately find that you have paid for it and don’t have it.” Thinking on a marginal basis can be very, very dangerous.
But looking back on it, I realize that resisting the temptation of “in this one extenuating circumstance, just this once, it’s okay” has proved to be one of the most important decisions of my life. Why? Because life is just one unending stream of extenuating circumstances. Had I crossed the line that one time, I would have done it over and over and over in the years that followed.
Based on how those numbers play out, it may decide to forgo the investment if the marginal upside is not worth the marginal cost of undertaking the investment. But there’s a big mistake buried in that thinking.
In many companies, the purpose has come through an emergent strategy entrance, in which certain powerful managers and employees believe that the company is there solely to help them, as individuals, achieve their personal ends
whatever those might be. For those people, the company essentially exists to be used. Enterprises with such de facto purposes usually fade away—and very quickly the company, its products, and its leaders are forgotten.
Médecins Sans Frontiers, the World Wildlife Fund, and Amnesty International. But the world did not “deliver” a cogent and rewarding purpose to them. And, unfortunately, it won’t “deliver” one to you, either.
The type of person you want to become—what the purpose of your life is—is too important to leave to chance. It needs to be deliberately conceived, chosen, and managed. The opportunities and challenges in your life that allow you to become that person will, by their very nature, be emergent.
Understanding the three parts composing the purpose of my life—a likeness, a commitment, and a metric—is the most reliable
way I know of to define for yourself what your purpose is, and to live it in your life every day. Finally, please remember that this is a process, not an event. It took me years to fully understand my own purpose. But the journey has been worthwhile. With that as background, I will share how I have come to understand my purpose.
Finally, I am a professional man. I genuinely believe that management is among the most noble of professions if it’s practiced well. No other occupation offers more ways to help others learn and grow, take responsibility and be recognized for achievement, and contribute to the success of a team. I drew heavily upon this learning to mold my likeness.
Each of us may have a different process for committing to our likeness. But what is universal is that your intent must be to answer this question: who do I truly want to become?
I sketched—kindness, honesty, being a forgiving and selfless person—were the right ones.
econometrics a few times a year, but I apply my knowledge of the purpose of my life every day. This is the most valuable, useful piece of knowledge that I have ever gained.
In short, we need to aggregate to help us see the big picture. This is far from an accurate way to measure things, but this is the best that we can do.
