Productivity vs. Efficiency

Productivity vs. Efficiency

I am constantly surprised by the confusion in the business world between Productivity and Efficiency. So let us take those concepts and explore them.

Productivity[1]: it is simply how much output we produce with a given input. It is regarded as a stimulus response model that an input causes an output. For purposes of simplicity we can say that it is output/input. It is a relationship between resources that come into an organization during a given period of time and outputs generated with those resources. Productivity answers a very simple question: by putting 1 USD of investment in, how many dollars came out?

There could be several ways to measure it. For example: # of customers served per employee, $ sales revenue per sq-ft of store area, etc. One of the most common measures is the ROI (Return on Investment): this measures for every USD of investment how many dollars were returned. The goal is to do more with less, and getting the job done with a smaller budget. Consider the impact on a country level. GDP x capita measures how much output every inhabitant produces on a macroeconomic level. This has absolutely nothing to do with efficiency, or with a company’s situation.

There are many measures that impact productivity: labor productivity, capital/equipment productivity, raw material productivity. Let us take another example. The process Outputs would be the number of bottles produced and sold, whereas Inputs are Labor, Equipment, Raw materials. Let us say that:

Week1: 1000 bottles produced and sold at 20 USD each gives an output of = USD 20,000.

Week2: 1000 bottles produced and sold at 15 USD each gives an output of = USD 15,000.

Output has decreased by 25%; Input has remained the same. Productivity has decreased by 25%.

Efficiency[2]: efficiency is performing in the best possible manner with the least resources, time and efforts. It is about doing things in the right manner, focusing on the processes it is defined as the extent to which time is well used for the intended task. It is a measurable concept, and can be measured in units of: time, effort and cost. It is very easy actually to visualize efficiency. How many sit-ups can you do per minute? How many pages can you read an hour? But most importantly it should be used for work reasons. For example, how many tickets or issues is your team resolving per month? How about individual performances?

Managers should never lose sight of efficiency metrics. But most importantly, never confuse productivity with efficiency. While efficiency focused on producing in a fast manner, productivity focuses on the generation of the value itself. What is efficiency without value added? The input transformed into output, and the relationship between the two, will give you the productivity. But if that input can be produced in an efficient manner, your productivity will actually increase as well. To boost productivity, increase output but also work more efficiently to reduce input.

[1] http://www.investopedia.com/terms/p/productivity.asp

[2] https://en.wikipedia.org/wiki/Efficiency

Globalization

Globalization

Globalization[1] is the process by which the markets of different countries become increasingly integrated thanks to the exchange of good, services, technology and capital. Exchanges between people in countries far apart are now fast and simple, thanks to the development of new ways of communication, both virtual and real. A very good example is the film industry: before, films were released in the US and Europe and then cascaded down to undeveloped countries. Today, films are released worldwide simultaneously to avoid illegal copies to eat up a slice of the market share. Globalization depends on economic factors and on social aspects, such as the relationship with other cultures and the dissemination of information. Globalization has changed the way we work. Today, people in countries cooperate to produce and distribute the same goods of services.

What is the effect of globalization? Globalization does not eliminate the inequalities and the distribution of wealth, but it does encourage investments in the less developed areas of the world, and allows poorest countries to find markets in richer ones. Globalization is not a new thing: during the last three Industrial Revolutions, the developments of transport and communications facilitated the launch and integration between the countries. Today, you buy a T-Shirt designed in France but produced in China. Since the 1960s underdeveloped countries have been manufacturing consumer goods for domestic markets but primarily for foreign ones.  

Globalization has had positive effects on the eradication of poverty. Extreme poverty, defined as a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information, has been reduced by half in the last 15 years!!! By the year 2030, people living in extreme poverty will drop to less than 400 million. Since the end of WW2, Free Trade agreements and technological advancements mean good and services move around the world more easily than ever. The Mobile Phone, sponsored by our genius Steve Jobs, are the most transformative technology when it comes to the developing world. Phones give people access to banking, and payment systems, better access to education and information. In some places, mobile phones help farmers get information and get the best price for stuff they are producing. International Trade has also created new opportunities for people to sell their products and labor in a global market place.

In a globalized world, the low end jobs are being outsourced to countries where labor is cheap and  regulations are weak (workers rights). In developed nations, consumers get good products at a cheaper price and stockholder get value for their money, but the workers that had those jobs lose them towards jobs overseas. Globalization has fans and detractors. Those who are positive towards it mean that it helps economy to grow by offering more opportunities to workers, which in time puts upward pressure on wages. Those who are negative think that it is not sustainable and has adverse effects on global climate.

According to Swedish economist Hans Rosling[2]: the way globalization is occurring could be much better, but the worst thing is not being part of it. In a fantastic documentary, Hans Rosling shows the advances in life expectancy, income, etc., in the last 200 years. Check it out:

https://www.youtube.com/watch?v=jbkSRLYSojo 

The first 3 Industrial Revolutions made countries in Europe move away from the rest. The countries in the West developed more rapidly, while other countries were hindered in their development. Two World Wars had catastrophic effects but also contributed to technological development. Notice however how from the 1970s strong growth in South East Asia (Rise of China), and Latin-America (Brasil), meant accelerated development for developing nations.

Rosling addresses the fact that developing nations have been rapidly catching up with developed nations the last 40 years at a fast and steady pace. He addresses the differences in inequality between nations, but also within Nations!!! He remarks regional inequalities showing the case of China, where Shanghai produces as much as Italy, but Guizhou produces the same as Pakistan, not to mention differences in social classes. We have seen 200 years of remarkable progress, where that huge gap between Western countries and the rest of the world is shortening. Hans Rosling is optimistic and sees a bright future with aid, trade, green technology and peace where it is fully possible that anyone can make it to the wealthier corner.

In developed nations, where people have the luxury of functioning healthcare and education systems, Revolution 4.0, or the Knowledge Based Economy, will offer possibilities for people from lower and middle classes to fight inequality by becoming knowledge experts in their field and turning that into a products or services. Whereas Europe took the lead in the last 3 industrial revolutions, free access to education and resources will shorten the gap even more. Hans Rosling is right in naming that Nations will eventually converge in a long term perspective. He is also right in being optimistic about the future. After all, we are reaching an era of balance and prosperity for the people of Earth.   

HR for Tech

HR for Tech

The role of HR has varied a lot over the last decades. As explained in my release in Amazon "Change Hard: Why Corporations Rise and Fade": "Human Resource Management (HRM) is the process of managing an organizations' human resources. It is about developing policies, practices and systems designed to influence employee motivation, behavior and performance. In addition to tracking payroll hours and processing benefit forms, HRM has a lot to do with attracting and maintaining a high performing workforce". But what does HR do, besides participating in the Recruiting process? In practice, HR does not really do an employee follow-up. They usually consult with the employees' Supervisors or Managers, who are of course biased and more interested in providing political support to their most loyal employees than to actually value, recognize or promote the best players. Quite the opposite, the best employees will represent a threat to them, and they will do their best to get rid of them. HR should most definitely take more responsibility for employee follow-up, and protect the organization's most valuable players, who will drive change and also add more value in a long term perspective. Instead of taking strange tests and profiles, they should sit down with them and hear the employees' version of the story. Worst case scenario, they can be reallocated to another department.

But who should HR make a bet for? Experience, experience, experience (three times), is a word that is repeated to death at work in any branch. "You are too green" (immature), is the favorite phrase from the older people to the younger generations. But how important experience really is? Let us take examples from sports. Older players, more mature, might be best for organizing the team. A strong experienced defense, or mid-field, will have a better overview of the game than an 18-year old. But what about superstars, does it matter how much experience they have, how many matches they have played? How old was Messi when he started playing for the Argentinian National team? And what about Cristiano Ronaldo? Should they have waited many years, until they where old, to have their first appearances? What about those outsider midfields that run up and down the field, up and down, since they have the motivation, stamina and energy of youth? Has there ever been a team of "oldies" that ever made it somewhere? If the players do not have experience, should there not be other players more mature, more experienced, or a coach, that is in charge of channeling and organizing that energy to productive uses in the field? And if the team loses, who has the most responsibility, is it one player, a group of players, or the coach?

Again it does not seem to be like that in the Business World. Experience really refers to politics, "the way to handle yourself". We can call it Street Smarts. It is more about Networks and Contacts than anything else. In that sense, experience really counts... But how important is it really in the Tech field, as we approach the Knowledge Based Economy? Mark Zuckerberg, CEO & Co-Founder of Facebook (32 years old): "I started the company (Facebook) when I was 19, so I can't believe that experience is really that important, otherwise I would have a hard time reconciling myself. We invest in people that are really talented even if they HAVEN'T DONE that thing before. That applies to people who are fresh out of University, as well as the CFO who took the company public but had never taken a company public before! Focus on really talented people. Even if you are 19 you have done side projects and interesting stuff. It is important not to believe that the person needs to specifically have done the job that they are going to do in order to be able to do it well. We have given the people in the company a lot of opportunity, so there are a lot of people that have grown with the company over this period of time".

Great leaders UNDERSTAND the benefit that comes with working with Smart people. Marissa Mayer (41, CEO Yahoo!) considers that: "It is wonderful to work in an environment full of Smart people. It challenges you to THINK and WORK in a different level. If you play with the best players, that will make you better and you will ultimately be able to grow and learn a lot. The same thing happens on an intellectual level as well. I was very lucky to work at Google, where there are tons of Smart people to learn from. Smart people bring their perspectives and interesting intellectual arguments that they make, and give you a whole new way of thinking about things. If you give them EMPOWERMENT, you don't need to have a lot of MANAGEMENT or bureaucracy in the organization". Marissa Mayer might not be one of the smartest people in the World, but she was Smart enough to understand who to surround herself with to make it to the TOP!

And last, by not least, why not cite the greatest one, Steve Jobs: "the greatest people are self-managing, they don't need to be managed. Once they know WHAT to do, they will figure out how to do it. What they need is a common VISION, and that's what leadership is. Leadership is having a vision, being able to articulate that so that people AROUND you can UNDERSTAND it, and given a consensus on a common vision, we wanted people that were insanely great at what they did. Not necessarily those seasoned (experienced) professionals, but those who had at the tips of their fingers or in their passion of where technology was and what we can do with that technology, and who wanted to bring that to lot of people. The most important job of someone like MYSELF is RECRUITING". 'Nuff said!!!

Great Tech Entrepreneurs: A Conclusion

Great Tech Entrepreneurs:

A Conclusion

Steve Jobs (Apple), Bill Gates (Microsoft), Mark Zuckerberg (Facebook), Elon Musk (Tesla Motors, SpaceX, Solar City), Larry Page & Sergey Brin (Google), Steward Butterfield (Slack), Nolan Bushnell (Atari), Evan Williams (Twitter), Jeff Bezos (Amazon), Marc Cuban (Broadcast.com) what do these fantastic personalities in the tech field have in common? Is it genetical? The education, the experience? How can we know what motivates them, what is their driver? Do they even have similar stories? Some things do come to mind though:

- The US has produced the largest amount of millionaires in the last few decades.

- They are all Caucasians[1].

- They all have competitive personalities, they believe in their projects and never quit (or know when to call it quits, something very important as well).

- They belonged to middle-class or well-accomodated families. Nobody started from the bottom-bottom.

- They were all visionaries, and risk takers.

Again, the issue of inequality arises: non-caucasians have a harder time. In Silicon Valley, only 2% of the workforce is African-American[2]. Even having a good education system and equal opportunities does not seem enough. What would be the reason though, is it more difficult for minority groups to open doors, or do they lose hope by not finding representatives, people like them, amongst successful people? That appears as a challenging question, but once more I can conclude that for good or for bad, culture matters. The same could be said about women, there are not that many in the Forbes billionaire list[3] and represent a minority. The business world is mainly dominated by white men.

Consider the changes the world economy is going through. Whereas before Networks and Contacts were important, today their weight is slowly becoming less. The Knowledge Based Economy is opening doors for those who master a specific and unique knowledge, and learn how to capitalize it. Jeff Bezos (Amazon) turned a simple concept like selling books online into a billion dollar business. Larry Page & Sergey Brin (Google) optimized search engines and conquered a market dominated by giants like Yahoo!. Mark Zuckerberg (Facebook) turned a University project into the largest platform to connect with people. Evan Williams (Twitter) differentiated by creating a Media Channel. And Marc Cuban (Broadcast.com) surfed his way to the top by broadcasting online. They seem like simple concepts, easy to replicate, but they are not. Once again, all of them understood the importance of building a Brand and a Business AROUND the main concept. So ideas matter, but not that much. Many of them didn't even have the idea themselves, but they did have to acknowledge or recognize the "idea maker".  

Consider the impact of Entrepreneurship and Wealth Creation in the region as a whole. Having the largest amount of millionaires quite clearly is a huge advantage: they create jobs, they pay their taxes, they drive growth... However, incentives to keep the millionaires in the country must be made as well. It is actually often that the rich move to other countries, be it for lower taxes, easier labor laws, or simply to avoid inspection from the Government. As I mentioned in a previous post, it could be difficult to succeed as an entrepreneur with the Government on your tail.

Successful entrepreneurs are not only economically driven, but that doesn't mean that money doesn't matter. Intelligent entrepreneurs always keep an eye on the Cash Flow. Quantifying the value of a company can be a challenge as well, especially when it comes to the Technology Field which is Knowledge based. Eventually it is best to take similar companies as a benchmark. Google improved what the other Search Engines at the time (Yahoo!, Altavista, etc) where offering, surpassed them and became a billion dollar business. Entrepreneurs are not politically engaged, and look for solutions. Adding value is crucial, as I have explained in my chapter "The 4 Keys to Value Creation"[4]. A successful entrepreneur looks for simple solutions to complex problems. And then of course tries to make a profit out of it. If you don't believe me, check out the following video where our beloved Doc from Back to the Future uses garbage as fuel in the year 2015 (wasn't that LAST year?). Who will come up with the solution to replace fossil fuels? I would make my bet on Elon Musk. And no, where we are going we don't need any roads:

https://www.youtube.com/watch?v=VO4ebmJHFF0

[1] https://en.wikipedia.org/wiki/Caucasian_race

[2] http://www.usatoday.com/story/tech/nation-now/2016/02/08/african-american-diversity-tech-leaders-silicon-valley/76616284/

[3] http://www.forbes.com/sites/chasewithorn/2015/03/02/forbes-billionaires-full-list-of-the-500-richest-people-in-the-world-2015/#43c333eb16e3

[4] http://thenobeleconomist.blogspot.no/2016/08/4-keys-to-value-creation.html

Great Tech Entrepreneurs: Mark Cuban

Great Tech Entrepreneurs:

Mark Cuban

Mark Cuban[1] (born July 31, 1958) is an entrepreneur and investor. He is the owner of the National Basketball Association's Dallas Mavericks, Landmark Theatres, and Magnolia Pictures, and is the chairman of the HDTV cable networkAXS TV. He is also one of the main "shark" investors on the ABC reality television series, Shark Tank. He graduated from the Kelley School of Business in 1981 with a B.Sc. in Business Administration. At college he had a variety of jobs including bartender, disco dancing instructor, and a party promoter. He also had various business ventures, including a bar, disco lessons, and a chain letter.

In 1982, Cuban moved to Dallas, Texas, where he first found work as a bartender, and then as a salesperson for Your Business Software, one of the earliest PC software retailers in Dallas. He was fired less than a year later, after meeting with a client to procure new business instead of opening the store. Cuban started a company, MicroSolutions, with support from his previous customers from Your Business Software. MicroSolutions was initially a system integrator and software reseller. In 1990, Cuban sold MicroSolutions to CompuServe for $6 million USD. Mark retired for a few years, where he traveled the world and partied as much as he could.

In 1995, he was back in business. A man called Chris Jaeb took his business plan for Audionet.com to Mark Cuban, to made it his own. Cuban brought Jaeb out and together with his partner Todd Wagner and turned the concept into Broadcast.com[2] in 1998. By 1999, Broadcast.com had grown to 330 employees and $13.5 million in revenue for the second quarter. In 1999, Broadcast.com helped launch the first live-streamed Victoria's Secret Fashion Show, which became the most viewed event on the web at the time. That year, during the dot.com boom, Broadcast.com was acquired by Yahoo! for $5.7 billion in Yahoo! stock. For Yahoo!, it was bad business. They had paid overprice and it was difficult to integrate to the core business, not to mention Yahoo! lost focus on it's Search business giving room for Google to blossom.

In January 2000, Mark Cuban buys majority participation in the Dallas Mavericks, a team that had one of the worst performances in the league. He would reorganize everything to print the team a winning mentality. In 2001, he launched a high definition TV Network called HDNet[3], which reached 350.000 homes in it's first year. In 2003 and together with Todd Wagner, he invested into the movie industry, giving him the leverage to release in theaters, DVD and TV simultaneously. In 2011, the Mavericks finally won the Basketball Championship. He then rebranded HDNet, calling it AXS.tv. He achieved major popularity by participating as Investor in the TV Shark Tank[4], where self made millionaires invest their own money in Start-Ups. 

[1] https://en.wikipedia.org/wiki/Mark_Cuban

[2] https://en.wikipedia.org/wiki/Broadcast.com

[3] https://en.wikipedia.org/wiki/HDNet_Movies

[4] https://en.wikipedia.org/wiki/Shark_Tank

Great Tech Entrepreneurs: Jeff Bezos

Great Tech Entrepreneurs:

Jeff Bezos

Jeff Bezos[1] (born January 12, 1964) is an American technology entrepreneur, investor, and philanthropist. He is the founder of Amazon[2] which became the world's largest online shopping retailer. An Internet merchant of books and a wide variety of products and services, most recently video streaming and audio streaming, Amazon became the world's largest internet sales website on the World Wide Web. His mother divorced his biological father and married Miguel Bezos, a Cuban immigrant and petroleum engineer, who adopted Jeff. He graduated from Princeton University Suma Cum Laude, with degrees in electrical engineering and computer science. He took a job at DE Shaw, a hedge fund, but he was interested in computer programming. He noticed that the Internet was the NeXT big thing. He noticed there was not a comprehensive catalog for books, and he quit his Wall Street job to create one of the world's first Online bookstores. He had a unique profile, since he had both a finance and business guy. His first investor was none other than his father, who invested not on the company but on his son.

Bezos and his wife established themselves in Washington State, and hired two programmers to code. In 1995, Amazon was launched. The goal was to establish the Amazon Brand and grow the overall business in the E-Commerce segment. As always, earning took time as the capital was reinvested in the business to expand at a fast pace. On May 1997, Amazon went public. The business expanded into a full E-Commerce business including grocery, healthcare, cell phone plans, etc. The dot.com bubble slumped the price of the stock, but in 2002 Bezos bold strategies paid off and Amazon started to bring in a profit.

In 2007, Amazon released the Kindle[3], a device that enabled users to browse, buy, download and read e-books, newspapers, magazines and other digital media via wireless networking to the Kindle Store, a total success. In 2009, Amazon buys Zappos[4] an online shoe and clothing shop in an amazing 1.2 billion USD transaction. However, in January 2010 Apple launched the iPad, a serious competition for the Kindle. Forced to change their business model, Amazon saw an opportunity by empowering authors to self-publish. In 2012, Amazon stepped into the video-streaming industry going head to heads against Netflix. Jeff Bezos is today the 2nd richest person in the world, with a Net worth of 20 billion USD. Amazon is the fastest company ever to reach 100 billion USD in sales. Can you imagine how a what started as a simple book store turned into one of the most lucrative companies of all times? Jeff Bezos and Amazon clearly show us the importance of building a business and a brand AROUND the initial concept, which was simply selling books online.

[1] https://en.wikipedia.org/wiki/Jeff_Bezos

[2] https://en.wikipedia.org/wiki/Amazon.com

[3] https://en.wikipedia.org/wiki/Amazon_Kindle

[4] https://en.wikipedia.org/wiki/Zappos

Great Tech Entrepreneurs: Evan Williams

Great Tech Entrepreneurs:

Evan Williams

Evan Williams[1] (born March 31,1972) is an American computer programmer and Internet entrepreneur founder of Twitter[2], an online news and social networking service. He was raised on the family farm in Nebraska, USA. He loved webdesign and programming, and after a year and a half at the University of Nebraska he dropped out and participated in many start ups and technology jobs. In San Francisco, he meets Meg Hourihan, they become a couple and found Pyra Labs[3], a webprogram designed to manage projects, keep track of to do lists and assemble contacts. They also developed and in-house tool which became Blogger[4], a blog-publishing service that allows multi-user blogs with time-stamped entries. It was an easy way of publishing online, write an article, write something short about their lives and publish it.

After the dot.com bust Blogger went through financial difficulties, they went through lay-offs resignations and Evan found himself as the only person left in the company. Suddenly, Blogger was acquired by Google and Evan hopped on board to continue developing the project. However, after 2 years he resigned and went back to being an Entrepreneur. He developed a new concept called Odeo[5], to take podcasting to mass markets, but encountered competition from Apple.

On the other hand, Jack Dorsey had an idea to help people connect. He meets Evan Williams and the idea starts being incubated. Noah Glass, co-founder of Odea, comes up with the name: Twitter. Biz Stone, also involved in Odeo, was the fourth partner. The online news and social networking service involves user posts and reads short 140-character messages called "tweets".  Registered users can post and read tweets, but those who are unregistered can only read them. Users access Twitter through the website interface, SMS or mobile device app. The project takes off in 2007.  

Twitter got global attention as a communication platform for open exchange of information. As always, monetization was an issue. An Ad program to promote the Tweets was the solution. In November 2013, it went public raising a billionaire sum. Twitter has become a world changing media channel, having global reach and positioning itself as one of the top Social Media enterprises.

[1] https://en.wikipedia.org/wiki/Evan_Williams_(Internet_entrepreneur)

[2] https://en.wikipedia.org/wiki/Twitter

[3] https://en.wikipedia.org/wiki/Pyra_Labs

[4] https://en.wikipedia.org/wiki/Blogger_(service)

[5] https://en.wikipedia.org/wiki/Odeo