I usually start my Sunday newspaper reading with The New York Times book review section. If I find a book I’m interested in I will first check with my public library system to see if they have the book or have ordered it. My fallback is, of course, Amazon. This Sunday the book that interested me was REINVENTING CAPITALISM IN THE AGE OF BIG DATA By Viktor Mayer-Schönberger and Thomas Ramge.
The section of the book review by David Leonhardt, an Op-Ed columnist for The Times, was actually not about big data per se, but a theory of the historical basis for the firm.
This new book starts its story with the ancient idea of human coordination. “If there is a single crucial thread that has persisted through human history,” the authors write, “it is the importance of coordination.” Coordination allows communities to accomplish tasks that individuals working alone cannot. People can build on one another’s strengths and make up for one another’s weaknesses. Coordination made possible the library of Alexandria, the Great Wall of China, the Suez Canal and the moon landing. Coordination, in turn, depends on communication — the exchange of information that allows people to work together.
One of the lessons I learned from working for others and running my own companies was that lack of or poor communications tended to be at the root of the majority of problems inside the company. So I always preached to my colleagues and now my mentees the need to communicate early and often. This is especially true in startups as the staff is constantly trying to read the company’s tea leaves to see if the venture will make it or is showing signs that it might fail. You don’t want your staff wasting time in the company kitchen trying to read tea leaves, especially since virtually 100% of the staff of a startup drinks coffee or maybe Coke or Pepsi – whatever can kickstart their engines.
What follows from the preceding quoted portion of the book review is important to founders:
In modern times, the most effective way to coordinate behavior, other than through government, has been through a company, also known as a firm. Firms tend to follow a top-down approach to coordination. A canonical example is Henry Ford’s automobile firm. There, workers were divided into specialized groups. Information flowed up from these groups through a tightly controlled management structure that culminated with an imperial chief executive. Decisions came down from the top.
Today’s firms are far from the top down hierarchical models of the last century, with information flowing mainly top down through the king-like CEO. But what has replaced the hierarchical model of management, still with us in the government and especially the military and the quasi-military police and fire departments?
Collaboration, or coordination as the two authors prefer to term it, is the key function of a venture. The role of the CEO has changed dramatically. Rather than issuing edicts from on high as in the original hierarchical models of the monarchy, the military, and industrial businesses, the CEO has three major responsibilities:
- Set the vision for the venture. Google’s original mission statement was to organize the world’s information and make it universally accessible and useful.
- Communicate the vision. The CEO must clearly communicate the firm’s vision not only to employees, but to all stakeholders, including the Board of Directors, suppliers, and partners.
- Supply the necessary resources. In startups it falls to the CEO and perhaps their co-founders to provide the necessary resources for the venture to pursue its vision. The key resource is, of course, people. But often a startup does not have the capital or the revenue stream to pay its staff, thus the common need to raise capital.
But all of this is necessary, but not sufficient. In order to successfully pursue its vision a venture must translate that vision into objectives: measurable goals. To reach those goals requires collaboration or as the authors seem to prefer to call it, coordination.
Thus the today’s CEOs are somewhat like orchestra conductors, they do not play any instrument but must communicate the tempo, pace, dynamics , ensure correct entries by various members of the ensemble and shape the phrasing where appropriate.
In today’s firm CEOs, managers, directors and ultimately the staff rely on data, primarily data about the venture’s customers. That data is used to measure the progress of the firm towards its objectives and make any necessary mid-course corrections.
So founders, if your venture isn’t meeting its goals and objectives look first to yourself. Are you clearly communicating the company’s vision to everyone? Are you providing the the necessary resources? The old saw is true: it’s the job of the senior management to see that the right things are done, it’s the job of the team to do things right. But neither will happen without good, that is timely and relevant, data that is used to direct everyone’s efforts, to collaborate both efficiently and effectively.
If this all sounds like so much management theory heres a post to help you translate what seems like theory into practice: Identifying What to Watch: 14 Key Performance Indicators That Matter and the new book by John Doerr, famed venture capitalist: Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs,
As Peter Drucker, management guru, once said, If you can’t measure it, you can’t manage it.
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