I’ll always remember a discussion with an advisor from the late Bear Sterns. He mused that the “efficient” investor tries to optimize trading costs from 14.99 to 9.99 per trade and averages 5-7% of return a year. While the “effective” investor has the right investment strategy that requires advisors and may have trading costs that are much higher but overall produces many times the returns.

My favorite business example is in working capital. “Efficient” companies try to reduce accounts receivables through better collections, credit terms and more aggressive “customer care”. An effective strategy would be to look at R&D, order problems, shipping issues that cause the customer to withhold payments and ultimately improve cash flow for the firm. Few get this: effectiveness fixes root cause issues that impact your ultimate outcome across the entire business. Efficiency is always suboptimal and impacts one aspect of the business. Efficiency asks how you can make your products at lower costs (HOW). Effectiveness asks what products your market needs (WHAT).

Someone with the personal outcome of creating a nest egg has similar choices. The personal dilemma is between spending less (efficiency) or finding a job that pays more (effectiveness), which in turn requires more effort in training, relationships and track record of results.

Effectiveness always requires more investment than efficiency. In fact, efficiency is always about cutting and reducing choices. Costs, resources, distractions, tasks and so on. Effectiveness is additive. We are investing in learning, expanding, transitioning. Efficiency taps our XQ while Effectiveness taps our IQ and EQ more (More on IQ EQ XQ - see here).

Next time we are all facing a choice let us select an effective one and make an investment to get where we are going. Even at a cost.

What came from the interviews though is a series of spectacular insights. One of which is that in these times executives should focus on different skills than just business expertise and personal development. My friends told me that the ability to execute and build relationships will surpass all IQ and business acumen.

I decided to put the theory to the test. I reached out to my LinkedIn network and conducted the following poll:

In these times what executive skills should we focus on?

The response was overwhelming to say the least. In a week I received 170 completed polls, 40 detailed comments and over 50 emails detailing and arguing various points.

Here is the bottom line:

Ability to Execute is the Most Important Skill.

40% of those polled believed that Execution is the most critical while 31% put Relationship Building first.
Interestingly only 10% put Business Expertise on top.

Again, like the adage says: IT IS NOT WHAT YOU KNOW…

Interestingly the ranking was almost identical from both men and women:

We will be dedicating a new site to publish the details of our polls and interviews soon. Stay tuned.

In the new world of tough competition for positions, careers and recognition it is important to remind ourselves that it takes 3 to be successful and compete.

We can look at this as the following formula:

SUCCESS = IQ * EQ * XQ

IQ - Intelligence, Credibility

Most of us have been taught that through learning and personal development we will succeed. It is certainly part of the equation but the as John Maxwell’s classic reminds us - Talent is Never Enough.

EQ - Relationships, Intimacy

Relationship building may be the most misunderstood area of the equation. Many assume EQ is the area for salespeople and managers. Others believe that having 10,000 online “friends” or consumers does the trick. The most important for us is to create long term relationships of give and take that will help you advance your agenda. Whether it is sales, politics, social or otherwise. Keith Ferrazzi emerged as the most prominent advocate of this skill.

XQ - Execution, Consistency

The most under-appreciated factor in success is to actually deliver the goods, so to speak. Being smart and knowing the right people only matters if you produce results. We are always astonished how many people forget this. Leading advocates of this skill are Bossidy , Kaplan and David Allen .

In fact, our research shows that most executives overweigh their focus in one of these areas so much so that certain archetypes are emerging

The Expert Archetype: “IQ eq xq” - I am the expert in my field, I have the best insight. I already know the right solution.
Typical roles that overemphasize this skill: consultant, advisor, attorney, researcher, professor.

The Connector Archetype: “iq EQ xq” - I build connections with everyone. I can leverage it to advance their and my agenda.
Typical roles that overemphasize this skill: sales, marketer, politician, PR, fundraiser.

The Manager Archetype: “iq eq XQ” - I deliver results through teams. I meet objectives, deadlines and budgets.
Typical roles that overemphasize this skill: project manager, plant manager, supervisors, crisis managers.

Great, very insightful (IQ), but what can I do about this (XQ)?

ACTION STEPS:

1.) DEVELOP ALL 3 SKILLS: All successful leaders create a balance of these 3 skill areas and augment their own shortcomings by partnering with others that are strong in areas where they are weak. It is interesting to see what other executives think about relative importance of these skills in today’s economy. Check out our global executive poll:

2.) EXCEL IN ONE OR TWO - Our research shows that in order to be considered an effective leader - in a given corporate or social environment - it is critical to meet the ‘minimum’ expectations in ALL 3 areas and demonstrate excellence in at least 1 area. According to Marcus Buckingham the best approach is to ‘Build on your strengths’ and focus on the area where you are already good at.

3.) BALANCE THEM, DAILY - We believe it is important to strike a daily balance to make sure all of us work on tasks that strengthen all 3 areas and create a personal development program to improve each discipline. What-if our daily GTD lists have reminders to do that… (we will talk about that our next blog)

Following the electronics industry model:

• a $3.50 latte from a decade ago should cost today $0.70
• your child’s education “product” should sink from $200,000 to $40,000
• your car of $30,000 should now be $6,000
• heart surgery prices in 10 years should drop from $250,000 to $50,000

Of course it does not happen for other industries.

No other industry apart from High Tech outperforms the pressure of inflation. At least not due to productivity and efficiencies. Only due to falling demand. See Real Estate, Investment Assets, etc.

Consumer food product companies have a similar mantra by holding food prices steady in the stores. To achieve that they have to keep improving efficiencies by 4-5% each year just to eliminate the impact of material and labor price inflation.

Then there are industries that do the opposite. Even in today’s economy health care related costs, education and some professional services prices are still growing at 5-8% far outpacing inflation and GDP growth (or lack thereof).

The Monster is not Deflation but Lack of Innovation and Productivity

There is all this talk about the deflation and how falling prices will kill the economy. Maybe so. However I think the real debate should be about productivity, innovation, efficiency and hyper competitiveness.

Annual Productivity Growth 2000-2005 (OECD 2008):

• Technology: 17%
• All Manufacturing: 5%
• Metal products: 3%
• Textile/apparel: 5%
• Heavy Equipment; 3%

In the US - industry productivity has been lackluster outside technology. That’s what the tech sector has that no other industry seem to have. In the coming year of falling prices maybe other industries get to practice a little high tech life.

Harvard studies point out that:

The expanding field of happiness research has shown that we tend to overestimate the long-term impact of negative events. Negative events do affect us, but generally not as much as we expect-or for as long. (Dan Gilbert, research psychologist, Harvard)

Families with higher income and fewer children tend to be happier according to Gallup data.

Technorati Tags: Gallup, Mood, Recession

He categorizes all business models into the following groups: Brokerage, Advertising, Infomediary, Merchant, Manufacturer (Direct), Affiliate, Community, Subscription, Utility A similar study from MIT classifies it differently and also points out that the selection of the model fundamentally determines the success of the venture as much as the product or service:

Alex Osterwalder is one of the consultants focused on business model creation vs product idea creation. For many great companies business model was much more important than product idea (Dell, Toyota). These companies realized that well executed business models are much harder to imitate than products.

Technorati Tags: business ideas, business models, Enterprise 2.0

Technorati Tags: business ideas, business models, entrepreneurs, Innovation, Venture Capital

The value proposition of the story is attractive: Most people have great ideas but how do you actually follow up and deliver on your dreams and do it half the time… The online community has been very active on this ever since it came out in a book form. The book is great read despite the usual skepticism that creeps in when you are reminded of things. More than once. Persistently. We all know the basics:

• Set goals you are passionate about
• Take action every day towards them
• Always do what you say you'll do

Maybe Simple.ology can motivate us to do more of what we know we should do.

Technorati Tags: GTD, Simpleology, success, wealth

Technorati Tags: Acquisitions, Boom cycles, business growth, investments, business cycles, Strategic Planning

• Companies should focus on fewer goals (2-3 at most)
• Break down goals to chunks that team members can relate to and get excited about
• Everyone should have a role at least in developing the action plans (decentralize strategy)
• Everyone should do what they said they would do
• Measure results and hold each other accountable
• Spend 20% on planning and 80% on actions
• Make sure incentives and disincentives are aligned with actual results

When the majority of the population faces strategic planning once a year in the form of New Year Resolutions and no elementary training in any form of planning or execution discipline it is not surprising that only half of the people surveyed can translate organizational goals to personal goals. Wouldn't it be great if high school or college curricula included execution as a critical element. There are pioneers out there from David Allen Co, Franklin Covey's K-12 Execution Training and volunteers like Marc Orchant that one day may create a better trained society in results and follow-through.

Technorati Tags: Execution Gap, GTD, leadership, Right Stuff Employee, Strategic Planning, success

Technorati Tags: Golf, Elsie McLean, success

This week the Heart Institute in Montreal started turning away patients according to their press release. It was already bad enough having to wait months for surgeries and years for some specialists. Now please keep away from the emergency rooms?

MONTREAL, April 5 /CNW Telbec/ - Due to a very high volume of patients, the Montreal Heart Institute (MHI) is asking people to avoid its emergency department as much as possible for the next 24 hours. The MHI would like to reassure the public that it will continue to provide emergency care.

Despite rising health care costs in the US at least we have immediate access. Which is what heart patients want in an emergency situation. Waiting 24 hours? Some may not have 24 hours left…

Technorati Tags: Canada, Demographics, Health Care

Some good old rules are getting broken…

• Despite 12% drop in the dollar in the last 2 years and 46% drop in the last 5 against the Euro the US growth is behind that of Germany and even the EuroZone. They were supposed to be shrinking under the pressure of the cheap US exports… It turns out we are increasingly competing globally with companies that source products from the same place we do: China. And the Chinese currency is pegged to the dollar. The cheaper US exports get, the cheaper Chinese exports get…

• If we take two graduating buddies (Class of 2002) from the same midwest College split up and one lives in Germany the other one in Chicago the real cost of currency becomes real for them. If the two make the same money for the last 5 years what they made when they graduated… the German fellow would have over twice as much in dollars as his Chicago buddy by 2007 assuming they save at the same rate…
• The Chicago house one of them bought that appreciated 50% in those 5 years would have been flat counted in Euros. The same house in Frankfurt appreciating 50% would have doubled in price if measured in dollars..

Maybe all in all it is a good thing considering someone has to buy up all the savings and assets we accumulate over the years as I wrote in my prior article… We expected Chinese investors but we may have to take some Euros as well…

Technorati Tags: Boom cycles, business growth, Competitive advantage, investments, value creation, weak dollar, wealth, Winning

There are popular visionaries like Karl Fisch, a Colorado teacher of the Shift Happens fame and there are the commercial dreamers of the Future is Wild project that produce yet another insight 100-million year in the future.

(My Karl Fisch favorite is that “by 2049 a $1000 computer will exceed the computational capabilities of the human race“.)

An interesting and more pragmatic approach is what the University of Washington professors do when each faculty publishes their predictions for just around the corner, say the year 2088.

Some highlights from the UW Professors:

- Technology will make prisons obsolete
- Lifespan will increase to several hundred years with preventive medicine starting in the womb
- Human implant for Internet communication interface
- Nanoscale storage devices
- Professional sports will have its own higher education farm system (college alternative)
- No more phonelines
- Walk-in clinics will conduct regular full-body scans and monitor disease development to prevent all chronic disease
- Biological agents will prevent tooth decay. No more dental drills
- Alternative medicine will still be eclipsed with drugs and biological agents

Technorati Tags: futurism, future, year 2088

In his article on the Top 5 Things That Should Be Taught In Every School there are great reminders of the basics:

• Personal Finance
• Effective Communication
• Social Skills
• Sales
• Time Management

Looking back on an average day in the office those are really the key skills I use….

In my case the ultimate teachers became Tom Dorsey in Finance, Mahan Khalsa in Sales and David Allen and Tony Robbins in Time Management, Barbara Minto on Communication and Keith Farazzi on Social Skills.

And I barely remember the calculus, geography, physics and philosophy I took. Let alone early European literature.

Technorati Tags: Brian Kim, Learning, social networking, success, time management, value creation

I put his time assessment in the chart to make the point. Now he wants to structure his next action list so that the priority is determined by the Magic Quadrant. Way to go, Rick.

Technorati Tags: GTD, leadership, success, time management

Build a world class team with a mix of A/B/C players, that is a high diversity high performance team.

A client friend of mine asked a similar question during the performance season. He had some great thinkers and some outstanding doers in his team. Sometime both. He started plotting them on the magic quadrant, a matrix that compares ability to execute and the ability to formulate and articulate a vision or a plan.

The (simplified) result is below. What is interesting is what he did with all of that. He ended up with 4 categories of people:

• Leaders - who can define a vision / outcome and have the energy, commitment to follow-through till the results are there
• Innovators - who come up with awesome ideas, plans, goals but never actually deliver the results
• Performers - who will climb any mountain, break down any wall to reach an objective but have a hard time plotting strategy
• Apprentice - who need a lot of direction in both planning and execution of the tasks

He had A/B/C players in all these categories but decided to team up his Innovators and Performers on projects so they have a great plan and they execute on them. He also made sure his well-rounded leaders were put in charge of mentoring the Followers.

The jury is still out on the experiment but the team loves the clarity around the roles much better than being given a “B” again. Now they can all be “A” players in their own game without having to become something they are not.

Technorati Tags: business models, Competitive advantage, Innovation, leadership, success

One of the most puzzling and unsettling in those deeper conversations is the nature of corporate success. Many of my newfound friends were puzzled how their peers and (typically) bosses seem to move ahead with ease and grace while they were busy delivering on all their commitments and getting lost in the bigger picture.

Over time I came to a conclusion that is hardly scientific but statistically fairly accurate. The difference between super-achievers and the rest has a lot to do with the questions they ask and act upon and not just the skills they bring or the results they deliver.

Let me explain.

I noticed that my most successful customers had a rich vocabulary of transformational questions: Why do we do what we do, why should we serve these customers, why shouldn’t we try something else, what would be a better direction, what else can we try, what succeeds elsewhere, etc. Then listening intently to the achievement-challenged populace the questions tend to take a different tack: How can we work on this, how can it be done, who should do it, when should we do it, who’s job is it, etc…

Over time I logged the questions leaders ask vs the questions followers ask and came to a set of simple but fairly universal conclusion based on my little “questions determine destiny” theory.

• We all play both leading and following roles in different circumstances.
• Leaders are those who spend the majority of their cycles thinking WHY and WHAT questions and then follow through their answers with action.
• Followers spend the majority of their time asking HOW, WHO, WHEN questions and act on those tactical levels.
• Anyone can change their direction by focusing on WHY, WHAT and delegating the HOW, WHO responsibilities.
• Asking the right questions is not enough. Acting on the right questions makes people leaders.
• And of course it is just common sense.

I now use the above chart to mark my contacts based on the interactions we have and sometimes share my statistics if the topic comes up.

Technorati Tags: leadership, Right Stuff Employee, success

Siegel, notorious for calling market tops and bottoms far in advance dedicated his speech less to the market but to wealth management. His insights were useful regardless what level your investments are.

A couple of highlights from Siegel:

• Over the next 25-30 years there will be a tectonic shift in the ratio of working vs retired people in the US. The ratio will move from 5:1 to 2.5:1 in only 20 years. This will cause a massive shift in liquidity of assets. The relative diminishing income earning part of society will have less and less current income (in relative terms) to buy the assets of the increasing retiring baby boomer group.

• Retiring baby boomers “cannot eat” their wealth - i.e. you have to sell your appreciated assets (real estate, securities, etc) in order to get current income for consumption. Unless there are sufficient buyers of these appreciated assets there can be a very significant correction (30-50%) of the value of these assets to find supply/demand equilibrium if only US buyers can buy these assets.

• To dispose appreciated assets (real estate, businesses, investments) at highest value the buyers need to come from outside the US economy - primarily from large non-aging societies - India and China. A large majority of these assets will be acquired by Asian and Eastern European consumers and investors.

• As a result there will be a shift in economic contribution with India, China controlling more of productive assets and over time eclipsing the size of the US economy. Today 7% of the capital is in the developing world, by 2050 67% of capital will be controlled by the current developing countries.
• Unless these transfer of assets are enabled the baby boomers cannot dispose of their assets and will have to retire at a much higher age (if at all) probably pushing their mid-to late 70s.

So as a society either we work into old age or we yield our global capital leadership to the less demographically challenged emerging economies.

He also pointed out that currently stocks are better investments than debt or real estate - but the audience was already reallocating their portfolios to distant relatives in Beijing…

There is little for policy to influence these trends. As Siegel put it: “Demographics is the future that has happened”.

Technorati Tags: investments, Jeremy Siegel, value creation, wealth, Wharton

After 4 years of hiatus (and withdrawal) from the venture and startup world I decided to reengage with the local entrepreneurs and venture crowd in the Philadelphia area. It is very interesting to compare the Valley venture activities to the one here in Philly. It reminds me of my experience with Canadian investors in Toronto and Montreal from my “Canadian entrepreneur” days.
We had an entrepreneur breakfast where startups had the 2-minute elevator pitch and the mingle afterwards.
The investors seem more close-knit and tight with the companies but there were definite differences in the companies pitching as well. We had many biotech / healthcare companies beyond the technology startups and some traditional businesses.

Some of the obvious differences from my fundraising days:

• Some companies had revenues (one was in the $15-20M revenue range)
• Few had established channels,
• Most had some anchor customers.

Also management teams typically had decades of experience. In fact we did not have a single Wharton MBA pitching their company. Considering that Wharton is the number 1 school in the country I actually expected that.

All in all a great intro to what is to come from the monthly investor series. NewBuzzTV was an interesting local addition to the entertainment / video / web convergence.

Technorati Tags: entrepreneurs, mid-atlantic capital, venture capital