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Referenced by an e-commerce entrepreneur

Virtual Reality

Every now and then someone comes up with a wise answer for cliché or naïve interview questions.

Döpfner: When and why did you get the idea to launch Facebook?

Zuckerberg: You know, it’s this funny idea in society that there is a moment where you have an idea and then you kind of create something from that. I don’t actually think that that’s the way a lot of things work in the world.

Full Interview (Zuckerberg on Virtual Reality and Facebook’s “origins”).


Referenced by a Shopping Mall Developer and Operator

Americana at Brand 01

The packed Americana at Brand Shopping Mall, Glendale, CA, U.S.

I have recently been forwarded a comment from Rick Caruso, founder of Caruso Affiliated, a private real estate company based in California which owns 2 of the most productive shopping malls in the world. Here’s the excerpt I wanted to share with you:

“My goal as a real estate developer is a pretty simple one: create spaces that are so pleasant and so central to a community that people want to go there to spend time together.
It may sound trivial, but that extra foot of sidewalk makes a huge difference. Without it, our guests would have been constrained between the storefronts and the parked cars. Instead of leisurely stroll down the sidewalk, they would have felt claustrophobic. That’s a small item that can be easily overlooked in a project of this scale.”

“But, we remembered to parse every little detail. Another example – during our corporate training and on-boarding process, we emphasize the need for every staff member to pick up any litter they see as they walk the grounds of our properties. The same is expected of an entry-level valet attendant or a senior executive (and even the CEO).”

Why, you might ask. The mall evolves the neighborhood with its mix of entertainment and shopping attractions, turning itself into the epicenter of the surrounding community. Many will say that that extra foot of sidewalk is (too) costly and simply unnecessary. Shorter-term, it simply signals higher CAPEX and maintenance costs.

While costs are salient, tangible and undesirable, in the context of a shopping mall behemoth and of overall customer experience, wider sidewalks are invisible. Once interwoven into hundreds of other design and executional details, more space translates into more frequent, qualified traffic, i.e. the most important leading indicator to more revenues. Shopping malls are in the business of “selling sales” to retailers. Their main job is to bring qualified public to spend time in the mall. Smart, long-term oriented shopping mall owners trade obvious short-term profits for the opportunity to build their stronghold, or even better, the community’s second living room. Highly productive malls (measured in sales per sq.ft.) have negligible vacancies, command higher occupancy costs and lease-spreads. They also demand special, harder to find land lots, cost much more to build and to operate. Returns-wise they might seem similar, but the longer your investment horizon, the more important they become as top line performance is usually the key driver of future profits. You wouldn’t be looking for a great year, or three-year sprints, but for a great marathon, i.e. great risk-adjusted returns in the long run. After all, who wouldn’t come back to have a good time?

Top line generation can be more relevant – and a leading indicator to healthy and sustainable future returns – than short-term bottom line in most businesses. Interestingly, it’s quite rare to find top-line driven leaders that embrace lean operating standards. And sure, many businesses demand more of a bottom-line approach, especially the low-margin, high-turnover ones.

That said, the company’s shopping malls are the neighborhood’s big stage, where people go to have a good time with their family and friends. With such care, people feel embraced and end-up up-spending. One could argue that Caruso has the advantage of being a privately held company (with a defined controlling shareholder involved running the business). And maybe he does. But in truth, sometimes public companies have a shorter-term, pure bottom-line, quarterly orientation simply because the people that run it never thought there was another way to go – and were entrapped by their incentives. Something for us to think about.

Interesting Reading: Michael Raynor, co-author of The Innovator Solution’s with Professor Clayton Christensen, wrote an interesting book called The Three Rules – How Exceptional Companies Think in which he highlights a few top-line driven companies’ stories. His three rules are:

  1. Better before cheaper: don’t compete on price, compete on value;
  2. Revenue before cost:  don’t drive profits by cutting cost, instead find ways to earn higher prices or higher volume;
  3. There are no other rules: view all your other choices through the lens of the first two rules.

If you are more prone to 15-minute talks, don’t miss the opportunity to getting acquainted to some of his examples in the video below.

The Tricky Side of Automation

Referenced by a board member of an Industrial company

Mechanical Clockwork

“Once you automate, you’re incapable of further improvement.” – Sean McAlinden, Chief economist at the Center of Automotive Research

It’s a paradox: automation can make companies extremely productive. But once you spend a lot of money and time designing and implementing a system, you somehow become enslaved by it. Processes become crystallized and in a few weeks the company starts to serve them instead of the other way around.

The key, of course, is to think in advance and focus on automating what really matters, while leaving room for smart human interference and further improvements. Still, there are some caveats:

  1. Automation providers want to sell you pre-packaged solutions and induce you to believe that more automation is better;
  2. More automation, state-of-the-art does look and feel better;
  3. In complex adaptive systems, it’s impossible to really understand how the new process as a whole will work until everything goes live. Extensive planning and test environments are not THAT reliable;
  4. The more you “customize” your vendors’ pre-packaged solutions, the more enslaved the company tends to become;
  5. Once part of the process becomes automated, it’s extremely hard to come up with a better overall systemic solution: local improvements sometimes prevent global gains.

Sure, there is a classical trade-off between the transactional robustness of a system and the flexibility of less definitive – usually cheaper, of lesser perceived quality  solutions that gives you degrees of freedom to adapt and improve. Since technologies and processes are changing so fast, it makes little sense to commit too much to system straightjackets.

Referenced by a group of business leaders visiting Northern Italy


In a meeting with a Mayor from a very old and charming city in the North of Italy, one of the visiting business leaders made an interesting comment about the city’s Tourism initiatives:

“If your city is not sufficiently strong as a stand-alone attraction, you might consider collaborating with cities within a 100 mile radius in France, Switzerland or Italy in order to build a “circuit” around commonalities and complements.  The coordination costs might be high in the beginning, but the attractiveness of the bundle in the long-term might increase significantly.” 

A broader way of thinking about this subject is that sometimes the way we frame our resources at hand is simply too narrow and self-absorbed – and short-term thinking may compound the problem. We tend to constrain ourselves to looking inside our companies and within your budgets while teaming up with outside partners (and even competitors) might make us all better off. When working with intangible products such as tourism and relying on modest marketing budgets, a flexible mindset can lead one to conceive augmented, attractive product offerings. In this case, of course, one of the key real world issues would be to coordinate the interests of all municipalities involved in the project first in planning and then in executing. A daunting task indeed.

The classic 1980 HBR article where Ted Levitt mentions product augmentation for the first time is: Marketing Success Through Differentiation of Anything. He was one of the firsts to invite us to jump over the boundaries between product and service offerings – and, more importantly, to bridge marketing and business strategy.

For those interested in more, the book “Tourism Marketing: A Collaborative Approach”  is dead on. It can be read with a narrow mindset as a “tourism marketing book” or as food for thought from a different angle for anyone interested in either product development/management, services marketing and inter-company collaboration. Collaboration has been a hot topic of late, but it has been approached more frequently from either a social media or product innovation standpoint (and a couple of decades ago, more from the supply/value-chain angle), so it’s quite refreshing to think about it from a different perspective.

Referenced by a board member of several consumer businesses who attended the NACD Global Board Leadership Summit.

Raj Sisodia delivered an interesting keynote presentation at the NACD Global Board Leaders Summit about “Conscious Capitalism”.  Sisodia co-authored with Whole Foods’ Co-Founder John Mackey the book, Conscious Capitalism: Liberating the Heroic Spirit of Business.

The business world is definitely in need of a richer, integrative and more ethical narrative than its dominant greedy and exploitative one – where profit and business leaders are seen at best as a ‘necessary evil’. We are highly empathetic with the consciouscapitalism.org movement and subscribe to most of its main ideas. Still, it’s the least heroic part of the “liberating the heroic spirit of business” storyline that caught our interest. What makes Whole Foods an amazing and exemplary story – the cornerstone of the whole book,  is the way they somewhat “compromised” the fulfillment of its mission in order to achieve “purposeful” impact.

What are Conscious Capitalism’s (as expressed in the book and Sisodia’s presentation) key tenets?

  1. Business can and should be done with a higher purpose, not just maximizing profits. Purpose is definitely a board issue. It matters how companies make their money;
  2. Conscious businesses are explicitly managed for the benefit of all their stakeholders. In the future, companies will not be able to survive by only focusing on driving shareholder wealth;
  3. Directors should focus on the corporation – not just the shareholders. We (board members) do not work for the shareholders, but for the corporation;
  4. Conscious leaders are driven primarily by service to the firm’s purpose and people, rather than by power or money;
  5. These leaders create a conscious culture, which enables and empowers employees.

What do we see differently?

  1. Stakeholder integration/harmony is a very nice ideal, and yet very tough to operationalize. It’s impossible to please all stakeholders: you actually need to choose who you will serve first and be wise and diplomatic to accommodate their sometimes incompatible needs and demands throughout time. All stakeholders are not made equal. Some boards do a “forced ranking of stakeholders” to make things clear. Although not exactly a holistic, all-inclusive approach, this pretty simple exercise brings very important stuff to the surface.
  2. For your ‘purposeful business’ to ramp-up and reach critical mass, to have real impact, you need to be very wise and pragmatic in the trade-offs you make between your idealized goal and what your fellow key stakeholders are ready to cope with. 

One of the most interesting takeaways from the book is the fact that Whole Foods has had to deal with a lot of trade-offs and contradictions between purpose/ideology and real world execution in order to transform itself from a small shop into a $12 billion behemoth. Even though the company is called “Whole” Foods, it started in 1980 with less than 5% of its sales from organic food. Even today “whole” products represent little more of 30% of its sales. Whole Foods sells red meat even though it explicitly condemns it from the health & wellness standpoint. How come? Because their service offering demands it (customers rank high as stakeholders in Whole Food’s list)  and their competitive frame of reference requires it (they are targeting a much larger market than “whole/healthy foods consumers”). Their customers were not ready to fully embrace or even frame 100% of their lifestyle as “whole” or “healthy”. What should John Mackey have done? Should he have stayed in Austin running a couple stores and stick 100% with the purist health and wellness concept or should he have compromised with regard to some key aspects the original concept and ipsis litteris view of their mission? 

This is not a critique to Whole Foods. In fact, it’s a compliment. Execution-wise, in a world where it’s currently quite common to propose your business story from an heroic standpoint/ideal narrative, sometimes your explicit, deliberate, well-crafted “purpose” and “values” become an operational straight-jacket. But they are also crucial guidelines – and the little things that we and our team do to endorse or compromise them slowly becomes our “culture”. Whole Foods made concessions and adapted itself in order to keep playing – in the neighborhood of its original “purpose”. In hindsight and ex-post it all looks and sounds grandiose and intentional. Back in the early days, in foresight (where it’s usually where we are when running real businesses), the trade-offs between purpose and execution were most likely pretty tough. That’s the beauty of it: Whole Foods looks de facto heroic in “failing” to be 100% coherent and consistent with its deliberate purpose.

John Mackey’s colleagues from his long gone commune-days might think that he became one of the bad guys – 100% profit-oriented of the extract and exploit kind. But in order to have deep social IMPACT and achieve his evolved educational (teach people better eating/drinking habits and redesigning and developing a big part of the healthy food supply-chain) purposes, he needed to adapt and compromise (execution-wise, purpose-wise and time-wise). Maybe that’s what real conscious capitalist “heroes” do to cope and survive, keeping themselves afloat and therefore still eligible to fulfill and achieve great but different purposes and objectives that they sought out to pursue in the first place. 

The NACD presentation:

Highlight: from 31:23 to 35:25 Sisodia focuses on board issues. 

Find the books’s first chapter here.

The Lost Art Of Engineering

Referenced by a group of business leaders visiting Maserati’s plant in the Turin suburb of Grugliasco, Italy

maseratti plant

From Officine Maserati Grugliasco Giovanni Agnelli’s plant director:

“Quality is not just about  efficiency and non-conformity control. Quality needs first to be conceived, created and earned.”

The “One-Firm” Firms

Referenced by a law-firm owner and an investor

One Ring

If work at the senior level at any firm is increasingly about managing knowledge and talent, there might be something interesting to learn from a few of the most successful professional services firms’ corporate cultures, ethos and practices. Although Silicon Valley’s iconic companies became the most usual references of engaging, meaningful, collaborative work/management propositions, the great professional services firms’ management philosophy and practices (especially in their early years) offer some pretty good insights.

What do companies like Goldman Sachs, McKinsey and Latham and Watkins have in common – besides being possibly the most profitable and/or admired firms in their industries? “A commitment to a model of professional business management which stresses teamwork, collaboration and institutional loyalty” says David Maister, who coined the concept of “one-firm firm” in 1985.

“In contrast to many of their (often successful) competitors who emphasize individual entrepreneurialism, autonomous profit centers, internal competition and/or highly decentralized, independent activities, one-firm firms place great emphasis on firm-wide coordination of decision making, group identity, cooperative teamwork, and institutional commitment.”

“In large part, the institutional commitment within one-firm firms is generated not only through loyalty to the firm, but also by the development of a sense of a “mission”, which is most frequently seen as client service. All professional service firms list in their mission statement what I call the “3 S’s”: the goals of (client) Service, (financial) Success, and (professional) Satisfaction. What is noticeable about one-firm firms is that, in their internal communications, there is a clear priority to those 3 S’s. At McKinsey, a new consultant learns within a very short period of time that the firm believes that the client comes first, the firm second, and the individual last.”

“The high-commitment, hard-working, mission-oriented, team-intensive characteristics of one-firm firms are reminiscent of another type of organization: the Marine Corps. Indeed, one-firm firms have an elite, Marine Corps attitude about themselves. An atmosphere of a special, private club prevails, where members feel that ‘we do things differently around here, and most of us couldn’t consider working anywhere else.’ While all professional firms will assert that they have the best professionals in town, one-firm firms claim they have the best firm in town, a subtle but important difference.”

His must read articles:

  1. The One-Firm Firm – David Maister’s 1985 MIT – Sloan Management Review classic
  2. The One-Firm Firm Revisited – David Maister’s review of the original article in 2006

Charles (Charlie) Ellis also did phenomenal work on the subject, especially with regard to the investment profession. See The Characteristics of Successful Investment Firms – Charles Ellis’ classic speech at the “Managing the Investment Professional Conference” held in Chicago, in September 1983. We will write soon a review of his great book on professional services: “What it takes: Seven Secrets from the World’s Greatest Professional Services Firms”.

Referenced by an investor and entrepreneur

Berlim Wall


Norwegian anthropologist Fredrik Barth states that “Boundaries and frontiers are not necessarily defined and built because of differences that naturally demand or signal the need for segregation. Sometimes it’s the other way around: it is mostly after frontiers have been established and constructed that the differences between what is set apart is actively sought and searched for. Frontiers become ever more salient and require fortification, validation and justification.”

The above assumption is valid not only for ethnic groups and countries, but also for companies and investment thinking. From a business organization standpoint, we are still prisoners of: 1) the “functional-box” based organizational structure that stresses and measures functional silos accountability, while most of the opportunities and problems arise at the intersections (requiring cross-borders, inter-functional cooperation); 2) the illusion that most of the resources at hand are tangible and lie inside our company; 3) our incredible lack of education on soft skills and humanist disciplines – maybe we are simply too equipped with scientific, engineering, war vocabularies and mental models to read into and cope with social interactions. Most of what we do is highly dependent on group dynamics. And yet most groups seem to be, well, a tiny little bit dysfunctional…

Referenced by an apparel retailer


“Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” – Patagonia’s Mission Statement

Yvon Choinard, CEO and founder of outdoor sports retailer Patagonia is a very special breed of entrepreneur: authentically long-term oriented – not focused on growing fast, hitting the jackpot and running (well, in a way, he tried that before and almost went bankrupt).  His very interesting personal story told in a straight-from-the-gut, low key, humorous tone made me want to share this speech with you.

“If you want to understand the entrepreneurs you should study juvenile delinquents. They’re both saying: – ‘This sucks. I’m gonna do it my own way’.”

Instead of deliberating ex-ante that “green and sustainable” were the new cool, Patagonia’s strategy slowly emerged thanks to his focus on understanding “why” he was building a business in the first place.

“Until the recession hit in 1990 I was doing it the way you are supposed to do. Grow like crazy. I was becoming part of the problem. It was completely unsustainable.”

“There’s an appropriate size for each endeavor. There are no 3 Michelin-starred restaurants with 50 tables… Given our values we can’t have a large company.”

If you are still curious, I recommend his two books:

  1. The responsible company: what we’ve learned in Patagonia’s first 40 years
  2. Let my people go surfing: the education of a reluctant business man 

Patagonia’s Anti-marketing Marketing

For a company that spends short of 0.5% of its revenues on marketing, Patagonia is very effective on making its ad dollars work. Take a look at this amazing Black Friday ad copy “Don’t Buy This Jacket” (there’s no better marketing than anti-marketing to enhance their sustainability story). Authentic brands which really knows “what” they stand for usually need much less money to build a loyal community around to promote themselves. Having an entrepreneur at helm committed to executing the little details in full harmony with the brand’s core story definitely helps.

Referenced by an investor who has just read Colonel Chris Hadfield’s book An Astronaut’s Guide to Life on Earth: What Going to Space Taught Me About Ingenuity, Determination, and Being Prepared for Anything. 


“The ratio of prep time to time on orbit is many months to a single day in space.”

As Canadian Colonel Chris Hadfield states in his book and TED presentation below, astronauts spend their lifetime preparing themselves to travel to space “eventually” – actually, some of them never get to go. The book has pretty good advice to everyone: from teenagers to business leaders. But it is definitely a must read for investors.

Essentially, the book can be summarized as: Never stop getting ready

“To me, it’s simple: if you’ve got the time, use it to get ready. (…) I picture the most demanding challenge; I visualize what I would need to know; how to do to meet it; then I practice until I reach a level of competence where I’m comfortable that I’ll be able to perform. It’s what I’ve always done, ever since I decided I wanted to be an astronaut in 1969, and that conscious, methodical approach to preparation is the main reason I got to Houston. I never stopped getting ready.” 

One thing that is usually taken for granted from the investing standpoint is the amount of tacit knowledge you need to build-up for decades in order to be able to discern signal from noise when and where it matters. Since you can only grasp what you are already prepared to see, the most relevant “investment” of your life is probably in acquiring and deliberately perfecting the mental models, frameworks and heuristics that might help you see what the market is missing – in a sharp, insightful and relevant way.

Astronauts, intelligence agencies and a few good investors put a lot of emphasis in a process called “Pre-Mortem“, which is basically a group meeting where your team assume you are at some point in the future and that the project actually went wrong. The group mindset is to understand the “Whys”? What assumptions or factors were wrong, not anticipated or weighted accordingly? Why didn’t the investment thesis play out as expected? When the group is cognitively diverse and fully engaged, it can be powerful. Differently from investors and intelligence analysts, astronauts take these exercises way more seriously. It’s like the pig and the chicken “breakfast” story: investors and analysts (chicken) contribute with the eggs and therefore are “engaged” in the breakfast experience. Astronauts (pigs) bring the bacon – they are “fully committed”. If they don’t think through very well the first, second, third order consequences of potential systems and people/group failures, they can actually die.

These couple of posts from a value investing blog are quite sharp on what astronauts might have to provoke and inspire investors.

  1. What Does An Astronaut Has To Teach Investors? – Part I
  2. What Does An Astronaut Has To Teach Investors? – Part II: An Ode to Preparation