Eric Ries is an entrepreneur, the bestselling author of The Startup Way and The Lean Startup, and the creator of the Lean Startup methodology, a global movement in business practiced by individuals and companies around the world. Ranked one of the world’s most influential management thinkers by Thinkers 50, Morten Hansen is a management professor at University of California, Berkeley and the bestselling author of Collaboration and Great at Work. The two recently sat down to discuss the benefits of narrowing your focus and how to produce true value at work.
This conversation has been excerpted from the “Open Minds” video series on American Express OPEN Forum®. View the complete video and series for more on management.
For more on management, view the complete video and series on American Express OPEN Forum.
Eric: In your new book, you talk a lot about what allows individual employees to perform at an exceptional level.
Morten: Yes, I set out to get at the question, “Why are some managers and employees performing far better than others?” Of course, talent plays a role, education plays a role, how hard they work plays a role. But I studied 5,000 people to find out what really makes a difference, and one key factor is that those who really excel are incredibly good at applying intense focus. They choose a few activities, they say no to others, and then they obsess over those activities. I call it the “Do less, then obsess” principle.
The more mediocre performers allow themselves to be spread too thin. Intuitively, [you’d think that] you accomplish more if you do more things, but the problem is that if you do more things at the mediocre level, you’re not good at anything, and therefore, you don’t get the payoff from true excellence. That principle explains the difference between the really great and the merely good.
Eric: Talk a little about the “Do less” part of it, because I think a lot of people understand that perfectionism and attention to your craft are important skills in a business context, but the idea that you would pair that with the willingness to do fewer things, to say no to things—that seems counterintuitive.
Morten: Let me tell you a story about a small business owner in New York named Susan Bishop.
She founded and was running her own executive search business. When you’re a small business, you don’t have the resources of a large competitor, so she was going to do whatever was humanly possible to please her clients.
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She got a reputation for being very good, so more clients came to her. She started helping with executive search in the media business, then people in financial services came to her, then people from consumer goods came to her… Her market reach was widening and widening, but now she was stressing to perform in each of these verticals. She was spreading herself too thin, and her quality and profit levels were not what they should have been.
That, I think, is a very natural tendency—you want to grow by adding stuff. And then she had an epiphany: “Maybe a better way is to focus on the one thing that we can do exceptionally well, and we concentrate our efforts there because that’s where we’re going to have the biggest impact.”
She set a couple of rules, and applied them to her business: [work with] only media businesses, only senior searches, stay away from difficult clients, etc. In the beginning, she had to cross the valley of death, because as a small business, saying no to customers is hard.
But then she started getting traction, and really obsessing over the quality of the work she did. Then she got beyond that valley of death, and profits soared. It’s a great example of being rigorous about the few things that you want to work on, and then applying intense effort to become exceptionally good at that.
It’s kind of counterintuitive, because you’re not hedging. Many times we hedge because we are afraid of going all in on the things we think are the most impactful. I’m sure you see that in the startup world.
Eric: Absolutely. We have a concept in the Lean Startup movement called “minimum viable product,” or MVP. And the idea is, we want to do the least amount of work necessary to start learning from customers, and we descope as much as we can to get that simple initial thing in the market. Many famous companies began with a very humble initial product, and only added features and became more complicated later.
When people hear about MVP, they think, “Oh, we’ll just throw some stuff together and not care about the quality.” But it’s actually counterintuitive in just the way you’re saying—by descoping, by saying, “We’re just going to serve this one customer,” or “We’re only going to use these few materials,” we can actually produce a much higher-quality result for fewer people.
I’ll give you an example: I was working with a consumer packaged goods company that is used to mass-manufacturing millions of units of all of their products, and they were showing me a really cool early prototype of a product. I was really excited about it, [but] they said, “Sorry, we can’t put it in the market yet. We haven’t figured out the technology required to mass-manufacture this product.” I said, “Okay, but you’ve just shown it to me. How did you manufacture this one?” They said, “Well, every day we’re able to hand-assemble 25 [of them].” I said, “You’re telling me that instead of being mass-manufactured, this is a handcrafted, artisanal product? You can charge ten times as much for that!”
They looked at me like I was crazy, [like] what would be the point of selling such a small number of things? I said “Listen, why don’t we prove we can sell 25 units before we worry about 25 million units? Let’s show that there is a price premium for this superior product, and as we get customer validation, we can [figure out] what’s worth scaling up in the first place.”
Doing that minimum viable product, they discovered that some of the manufacturing challenges had to do with features of the product that customers didn’t [even] care about. So the process of testing and experimenting made the technical problem of achieving scale easier—they never had to solve that problem, because they were learning from customers.
Morten: Yeah, it’s a great example of [how] if you have a narrow scope, you really do that well, and you take out the features that are not so important, [you can find success]. It doesn’t require all those resources.
But in big, established companies, it sort of goes the other way. “You want to make a big bet? Okay, here’s lots of money.” And what happens when you give a team lots of money? They go and create a product or service with lots of extra features that may not be needed.
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So I really like the idea of minimal viable product, and I think it applies not only to products or services inside a company, but it also to the initiatives or work that you need to do. What is the minimal amount of work, what are the activities that you are engaged in that really move the needle? So many people are working on the wrong things.
One of the things I discovered in my research is how you need to innovate your own work. I did an academic study in a large company, and I traveled to their Colorado site to meet with this project manager. He was very busy, and he was waving me off—“I’m very busy, can’t talk to you today. Come back tomorrow.” I said, “What are you working on?” [He said,] “I have to finish this quarterly report to headquarters, which is due tonight,” and he told me what the report was about.
What he did not know, which I knew since I was coming from headquarters, was that nobody read that report anymore. It was an outdated report. He finished the report, and he met his objective for his job, but he produced zero value because nobody read the report.
Eric: That’s heartbreaking.
Morten: People pursue objectives and KPIs, but they may not produce any value, like in the case of this person. If you can figure out the real value [of what you do], then you can [do] very impactful work. And the best performers in my study did exactly that.
You probably see that in the startup world too, right?
Eric: Oh, absolutely. No matter where I go, no matter what size company, I ask employees, “What is the evidence that somebody other than your boss cares about what you do every day?” And most people can’t answer that question. “How do you know that this matters to customers, that this matters to somebody outside the building?” Most people don’t know. They assume, they hope, they think that maybe it does, or they get paid to not think about it. In most corporate settings, the amount of energy that gets wasted working on things that don’t matter to anybody is absolutely staggering.
And so when people say that companies can’t afford to make change, that they don’t have time to work on new things, I say, “Well, what if we got rid of all the wasted work that nobody cares about?”
Morten: All the things you don’t need to do.
Eric: Exactly, just make that go away.
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But that raises the question of, “Okay even if I agree that my organization needs to change, how do I get from here to there?” What has your research shown about that?
Morten: The top performers ask, “What can I do that produces value?” Value is defined as benefits to customers, benefits to the company overall. People are [often] working on the wrong metrics, so their work is not producing any value.
I spoke to a CEO, and he said, “Let me tell you the difference between value and busy work. [We] got a guy out of the shipment department, and according to him, 99% of the shipments go out on time. But then [we] did a survey of customers and asked, ‘How often are you getting the shipment when you need it?’ That was in the 65% range. One-third of them came too late, even though the shipping guy said 99% [go out on time].”
So he’s busy running around focused on the wrong thing. And if you think of value, you start thinking differently. I came across this high school principal out in Detroit. After the automobile meltdown, the population was on food stamps, parents were out of work… It was a very difficult environment to be a student, and they were doing terribly. They were in the bottom 5% of schools in the state of Michigan.
So [the principal] asked his teachers, “Why are we sending kids home with homework that they aren’t doing?” And the teachers were saying, “It’s what we’ve always done. Homework is a 300-year-old model.” Then he proposed a different way of doing it: “If we’re going to produce value for students, we can’t send homework home that they’re not doing. Let’s flip the classroom.” They created these small videos of, say, a math lesson. The kids watched them at home, and when they got to school, they sat down and did their homework, with tutoring and help of the teachers. So [they] reversed the model.
This is kind of The Startup Way inside of a school—he said, “We’re going to test the model on two classes. One is getting the new treatment, and one gets the traditional.” The new model outperformed the old, and they tried it in three new classes. Same result. Two years later, they became the first school in the country to flip the entire high school, all 700 students.
And results were soaring after that. It’s an extraordinary outcome of a manager who dared to ask the question, “Are we producing value? No? [Then] how can we do it differently?”
Eric: I love that story, because when you think of a startup—working innovatively with a scarcity mindset—you don’t think of a high school principal in Detroit. And yet the principle works just as well there as anywhere else.
For more on management, view the complete video and series on American Express OPEN Forum.