Magnus Penker

Today I will share a recent happening but before that some words about trust. Trust can be one-dimensional, two-dimensional or transformational meaning that ether you have trust or not in your business partners (one-dimensional) or you can have both trust and distrust at the same time (two-dimensional) and an evolving trust, the transformational trust theory, meaning that trust is build up in three steps:

1. Calculating whether do to business or not with a person or an organization
2. Developing knowledge about your business associate
3. Developing mutual identification

Recently I used odesk.com (the world’s leading network for freelancers, very competitive pricing) to find skilled people for a project. We applied game theory by asking +20 people giving them a chance to do a micro-delivery before selecting three of them going further with the larger project. The same project, the same task. This way we mitigated the risks, reduced the costs (even if three person did the same job) and finally increased the capacity being able to scale up with higher speed. At the first thoughts  it seemed crazy to ask three people to do the exactly same task. However, this way we

1. could in a secure way select the right people (without knowing them, taking references or even being sure who they were)
2. do it faster (quicker to find and start up than other free lancers) with less risk of delays or bad quality (=game theory applied on development)
3. deliver cheaper than if it was made locally in-house or by sub contractors or freelancers

Basically what we did was to add game theory to the existing trust theories – meaning:

1. Instead of only play with safe cards, take a chance of finding new possibilities on the global arena. Skilled and motivated people in other parts of the world, ready to take chance.
2. Make it in small portions with redundancies (three persons doing the same task) to mitigate the risks (= give the same small task to several people in the same time. Still cheaper since the fees are approx 10% of equivalent local services)
3. Evaluate, motivate, build trust and relationship
4. Build common a ground and eventually identity

By the way, ODesk freelancers actually get better paid that if you go through offshoring companies paying less salary (classical offshoring companies cut approx 70-80% of the fee, while ODesk take 10%). Moreover the freelancers constantly get ranked by their clients building the freelancers reputation and brand towards better assignments and finally increased compensations still profitable for all involved.

If you are looking for a new venture, challenging the Web industry aligning and joining the off and online world with the new business imperative of the globalization – then I want to get in contact with you. One of Sweden’s leading B2B agencies is in the initial phase setting up a new web venture aiming at

1. erasing the boarders between on and offline, wired and wireless
2. bring real and measurable value of digitalized communication initiatives
3. integrating learning, knowledge transfer, experience, information sourcing and networking
4. aligning values with messages

and are looking for a business minded entrepreneur to start up the venture with. Clients, knowledge, brand, systems, production capacity and a board is already in place, now they are looking for you to drive it. Interested? Please let me know.

Having a board might by some be motivated with the legal reasons, by others to control or be able to offer tabouret seats to important people. By many entrepreneurs also motivated by having people buying and reselling their products and services. However, there are many and important reasons having a board and non of them is about power, buying or reselling products and services.

Every time I get the honor to be asked for a board assignment I always ask why and what I can do for the shareholders. If the answer is helping them selling or open up my network for selling the answer is always no. I will explain why by first I will provide some theoretical foundation:

Agency Theory: This is about aliening the interest of the CEO (in a public company with an employed CEO, not founder or owner) with the shareholders. By making sure the CEO has the same interest he or she will act in the interest of the shareholders and not in other personal interest. The trouble is of cause in large corporations where the CEO has a second layer in order to control, whereas personal interest might influence. However, by appying modern corporate governance rules and regulations the second layer can easily be controlled. This theory does not reduce the board to a control function rather explaining the importance of aligning the interest of the CEO with the shareholders. However, the question is then raised; what role does the CEO play in the board and shall the CEO be in the board at all?

Stakeholders Theory (my interpretation of Freeman’s theories): It is a theory practiced in Japan, continental Europe and Germany where all large interest groups get a seat on the board, e.g. employee groups and large shareholders. The idea is that all stakeholders shall be considered, however regardless of small entrepreneurial companies or large public companies this only work for easy decisions rather then complicated and hard-to-make decisions where interest groups only will focuses their interest instead of  long term wins. An alternative is having a committee of board election presenting a board to the annual meeting for voting. This give a possibility form a strong and balanced board securing all interest as well as competencies, relations, reputation as well as network and integrity. This can be lead by the chairman or by an external part appointed by the major shareholders.

Stewardship Theory: It is based on the assumption that decisions shall be motivated by something greater than the personal interest, a theory based on utilitarianism (the greatest good for the greatest number of people). I a board this means always acting in the greater good for the society and world as a whole, typical what you migh expect from a non-executive director.The criticism to this approach is that there is a fuzzy interlinkage between end and means, and that everything is a goal and then nothing becomes a goal.

Shareholder value Theory. This theory is utilitarianism but for the one with the greatest number of shares, i.e. the greatest good for the greatest number of shares. However, it is not an easy task to decide what is best for the shareholders as this might rapidly change over time and in accordance with number of shares and financial power. Just think of a entrepreneurial company owned by the founders, used to decide by them self. One day they run into an opportunity, and grab that but need a capital injection. The project does not pay off early enough and the company desperately needs money, they get it but diluted to minority owners. Now the new majority owners decide what best for them at that are to sell out the profitable parts of the business then close it down. The era is ended, people lost their jobs and the entrepreneurs are out of business. How is right or how is wrong? If the entrepreneurs were allowed to act in their favor as majority owners, why should not the financiers have the same favor? The problem is the same as for the stewardess. Is everything allowed just because it is good for the greatest number of shares? This impact the way a board work and outline future options.

Other aspects of board work is that owners, founders and other stakeholders might want to strengthen the strategic work and view upon the board work in order to develop the business long term as well as short term. Short term discussions normally means balancing power, interest, point of views, as well as providing second thoughts and options. Long terms are more of strategic skills, knowledge and thinking. Other reasons might be expert knowledge in a certain area or a general expert in the company laws. It is also common to dress up the board with famous names or inviting business people with extensive networks.

My advice five to all of you that are running small and mid size privately held companies, especially entrepreneurial companies, when rethinking your board strategy:

1. Find a balance between executive directors (working in the company) and non-executive directors (from outside) to balance interest and power as well as helping you with long term planning as well as short term prioritizations. Blend experienced board professionals with experts in certain areas and if possible with different gender and backgrounds. Typically 1/3 executive directors and 2/3 non-executive directors. Make sure each board member knows what and how to supposed and contribute.
2. Appoint a strong external chairperson with integrity and ownership in the business. Make sure the dialogue between the Chairperson and the CEO works fine and is both demanding and developing.
3. Make sure that the CEO, if not the founder, is shareholder (preferably step by step, but with well defined criteria’s from day one) aligning the interest.
4. Define the owners instructions in written, containing risk level, expectation of return, exit potential strategies, social and environmental ambitions and goals, personal ambitions, governance and control function. Make sure to defined and enroll the board´s rules of procedure as well as the CEO Instructions.
5. Elect a committee of board election. Lead by someone one trust and integrity, preferable the chairperson or the majority owner.

It is a lot of focus on Talent Management at the moment, and if you ask me it is possible the most important source of success in a globalized world full of possibilities and treats. Today the world is highly competitive, less borders and super-fast mechanisms for transmissions of best practice, knowledge and competences. Innovation and sourcing of skills, knowledge, capabilities and financial funding are the corner stones in today’s world.

As up today Talent Management has been pretty much driving the process of attracting, retaining, develop and transitioning (next move including exit and alumni) human capital. However, by linkage Talent Management to reputation management and Raison d’être the four-phase-model of Talent Management can be the most powerful weapon existing in today’s business eco system:

1. Attract: Build the Employer Brand and link it to Raison d’être, trust, shared values and transparence as well as balance in effort and benefits. Make sure you never break the brand promise anywhere in the chain of brands (firm, employer, products)
2. Retain: Secure that all employees are treated fair, understand the rules, feel a balance in what they give up and get (the equity theory), as well as consistent communication and messages to all people in the organization. Make sure there are a clear link the performance management and reward strategies as well as acting in accordance with the over-all brand promises and communicated values.
3. Develop: Constantly coach for result, skills, capabilities, knowledge and personal development. Plan the next step, short term and long term. Support and coach for stating personal missions and visions and how they are aliened and supported by the firms riason d’tere.
4. Transition: Suppport and plan for your peoples work-life; short/long term goals, internally/externally. The relations internally as well as externally are what is building up your total brand equity, or in other words the potential future cash flow.

The Talent Market (Recruitment Market + Internal Market) is two out of six markets and shall be as much interlinked into all business decisions as the other markets (Customer Market, Influence Market, Referral market, Supplier Market)

There are several new and fresh consultancy companies growing up around this new mega trend, as well as a bunch of old recruitment and staffing companies trying to transform themselves with mixed success. One of the most progressive and newly started consultancy agency I have found on the Scandinavian market is Area Of Excellence, definitely worth a visit (www.aoex.se)

There is nothing more dangerous believing you are successful, nothing in the past success guarantees any future success. It is your perception and capability that impact future success. Even things happening that are feelt to be out of you control you can still adopt to it, overcome it and finally learn how to live under uncertainty.

In Jim Collins new book, How The Mighty Fall: And Why Some Companies Never Give, you can read more about the five steps to check mate:

Stage 1: Hubris Born of Success

Stage 2: Undisciplined Pursuit of More

Stage 3: Denial of Risk and Peril

Stage 4: Grasping for Salvation

Stage 5: Capitulation to Irrelevance or Death

By applying scenario planning and risk management, defining and adopting your core capability to match a core need on the market within a unique competing space, driving for innovation, never giving up, always challenge yourself and never get fat and happy you have a rather good chance of getting a long successful track record.

The most trendy right seems to be innovation. Companies such as Apple, Facebook, and Google has created a wave of management literature, lectures and theories that will help others to think as creatively.

Innovation has long been recognized as key to getting businesses to achieve success. Innovation creates new markets and opportunities for improvement. In a study by the McKinsey Global 84 percent of business leader’s states that innovation is extremely important for the company’s growth strategy. Innovation as a keyword in the book titles at amazon.com gives over 40,000 hits. It says a lot about the trend that prevails. Even in Sweden, the trend has taken root. Apple founder Steve Jobs says that innovation happens when you hire a sufficient number of smart and innovative people. Something that many Swedish companies have focused on and the result is a growing demand for entrepreneurial and creative innovators…

Maybe we see a new paradigm shift as company previously saw technology as the major driving force for innovation has now been given a more outside-in perspective. A market driven perspective. One can see that innovation is seen as a strategic way to change the market structures, creating barriers for competitors and change the maturity of a product. Innovation can, by making improvements, create new competitive advantages over competitors. To offer something better than it already on the market is a way to temporarily increase the market share. A revolutionary innovation captures market share from other companies more permanence, such as when Apple introduced the iPhone. An innovation may also create barriers for competitors, by being too difficult to imitate or copy. In the end it’s about differentiate itself from its competitors. And if all this is true, it requires companies to be more open and based on customers insights when they develop new ideas, hiring people and develop them self’s.

Also read my and Maria Sporre’s trend-watch about the subject on http://www.dfkompetens.se/trendspaning/veckans-entreprenorskap/2010-12-10_innovation/index.xml

Art for art’s sake has become an obsolete expression and entrepreneurship is the solution to the cultural worker’s needs. Our politician aims to bring out the entrepreneurial spirit of our artist, e.g. as the Swedish government has now developed an action plan for cultural and creative industries. The aim is to generate opportunities for entrepreneurs in these fields and is a national initiative of 73 million that by 2012 that will support entrepreneurs and business leaders in the cultural and creative businesses to start and run companies. The next step is to establish a council for the creative industries, indicating that illustrate important issues. Read more about it in my and Maria Sporres new trend watch http://www.dfkompetens.se/trendspaning/veckans-entreprenorskap/2010-11-17_kultur/index.xml

The other day I spoke to Hans Rosling, professor in global health and advisor to the world’s leaders. He gave me he gave me a very tangible advice on how to establish a business in Africa as I was writing a trendwatch about Africa together with my college and friend Maria Sporre: ”Find a missionary’s son who you can work with, listen carefully and stay place to understand the culture.” If you are intressted in the full trendwatxh please visit http://www.dfkompetens.se/trendspaning/veckans-entreprenorskap/2010-10-27_afrika/index.xml

When it comes to innovation, Apple CEO Steve Jobs is legendary. His company slogan ”Think Different” is more than a marketing tool. It’s a way of life–a powerful, positive, game-changing approach to innovation that anyone can apply to any field of endeavor. In his acclaimed bestseller The Presentation Secrets of Steve Jobs author Carmine Gallo laid out a simple step-by-step program of powerful tools and proven techniques inspired by Steve Jobs’s legendary presentations.

Now, he shares the Apple CEO’s most famous, most original, and most effective strategies for sparking true creativity–and real innovation–in any workplace in the new book The Innovation Secrets of Steve Jobs Insanely Different Principles for Breakthrough Success. The seven basic principles of innovation according to Carmine Gallo, inspired by the master himself are:

1. Do What You Love.Think differently about your career.
2. Put a Dent in the Universe.Think differently about your vision.
3. Kick Start Your Brain.Think differently about how you think.
4. Sell Dreams, Not Products.Think differently about your customers.
5. Say No to 1,000 Things.Think differently about design.
6. Create Insanely Great Experiences.Think differently about your brand experience.
7. Master the Message.Think differently about your story.

I all companies I have worked in or with, including the one with the best entrepreneurs, there are a few pit falls that seems to be inherited in entrepreneurship regardless of culture, trade or geography. Before pointing those out outlining my suggestions let´s set the scene: The DNA of entrepreneurship is about believing, it is about doing the impossible, literal going where no man went before– with determination, focus and a pathological believe that you will success. So, based on the DNA code of entrepreneurship there are of cause pitfalls, or design mistakes of entrepreneurs hindering and complicating fast growth and success, all of them possible to treat if discovered and addressed. The pit falls I like to bring in the light with suggestions of how to treat them are

1. Writing e-mails night times instead of lighting a fire at daytime. Wait to the next day and make it 100%.
2. The crocodile syndrome: Big mouth, small ears. Instead ask other for their opinion, then summarize and take it to the next level adding your entrepreneurial skills.
3. Declaring victory before the war is over. Do not say that you have sold, is you not have the written contract in your hand. Do not say you have established on a new market just because you met an interesting person on a flight, wait until the operation is up and running.
4. Looking for bad guys in the wrong places, not all people want to take your ideas and customers. Focus on doing the job better than all other, not on protecting everything popping up in your head.