What’s Going On At FIFA?

What's Going On At Fifa 2

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Seven senior FIFA officials were arrested on Wednesday at a high end Swiss Hotel as part of a larger two decades long investigation by the FBI into corruption at FIFA. The alleged wrongdoings include racketeering, wire fraud and bribery to the tune of more than $150 million.

The arrests occurred just prior to FIFA’s presidential election, in which current president Sepp Blatter was expected to be re-elected. Blatter should have known about the problems at FIFA, and only through his complacency could any wrongdoing continue to run rampant.

The Economist, Richard Branson and other high profile figures have been quick to call for a cleansing and reinvention of football’s world governing body. If Blatter was a corporate CEO then he would surely be fired for his negligence or complicity in the corruption; why should the consequences be any different just because he is the head of the world’s governing body for football?

The reason that FIFA may fail to reform (and Blatter may fail to resign) is that FIFA is a very powerful organisation.

Football is an international game and universally loved by millions of people from a diverse range of cultures and backgrounds. For many people football is more akin to a religion than a sport, and the institution at the center of the football cult is FIFA. It controls television and marketing rights to the World Cup which are worth billions of dollars, and the concentration of so much power in one organisation has led to what the concentration of too much power typically leads to, endemic bribery and corruption.

It is also unclear whether sponsors will withdraw their backing.

Sponsors pay for marketing, and the World Cup has millions of fans worldwide. The problem of course is that sponsorship dollars, coming from the likes of Adidas, Coca-Cola, Visa and Hyundai, help to support and enrich a corrupt organisation.

Being associated with scandal puts the reputation of sponsors at risk, and so the more people who talk about what’s happening the more likely they will be to reassess their involvement with FIFA.

Australia Is An Innovation Laggard (Nigel Lake, Part 10 of 10)

Australia, The Innovation Laggards

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This is the tenth instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: There has been a lot of support given to entrepreneurs in the UK in the last few years which seems very promising. Do you think that Australia is perhaps falling behind in that area?

Nigel LakeNigel Lake: Australia is 11 hours ahead of GMT, and about 10 years behind at least.

It is not a question of “is Australia falling behind?” Australia is massively behind.

I moved [to Australia] in 2003 and was amazed by the almost complete lack of online anything. Wind the clock forward and the online businesses of the big companies are still terrible. So there has been an amazing lack of innovation.

[Pottinger is] quite plugged into the entrepreneurial universe here through the universities, through some of the people who have invested in those companies, and through the incubators and so forth. We have put a fair amount of time into trying to support the evolution of that whole ecosystem because we think it’s amazingly important.

[Australia has] a political environment where there is a significant disaffection with science in general. There is a real love of things which are steeped in the past. There is a great unwillingness on the part of business here to embrace things which are new.

The poster child for success is Atlassian, the tech company, which sold its product in 10 or 15 countries to dozens of large companies before an Australian company would buy any of its products.

They are based in Sydney and had a fantastic platform for making your own wiki. They had a similar platform for managing agile software development programs, which is now used in many large companies around the world. Australian companies were at the end of the queue, despite the fact that the company is actually based in Australia.

Tom: So it sounds like there may be a cultural issue that Australia needs to overcome. I know that after finishing university a lot of the smartest people either leave Australia or take plum jobs in the established order of things. There appears to be a missing segment of the economy which exists in the UK and the U.S. And that is, young people trying to change things and create new businesses.

Nigel Lake: You just need to look at the university world. In most countries around the world, university students are pretty radical and protest about everything all the time. I have never heard an Australian student protest about anything apart from whether the temperature of their cappuccino is quite right.

There is an endemic acceptance of the status quo as being nice and comfortable and really quite reasonable, which to a significant degree it is. But you don’t have a change the world mentality, and people who want to change the world, as you said, they just get on a plane and they go somewhere else where they feel more welcome.

The only way you can change Australia is by changing its leaders. And that is about political leadership and business leadership. It’s an absolutely massive endeavour to attempt to do that. The challenge is that the political leadership comes out of the party system, which is breaking down in Australia as it is in the UK, but it is hard to see where that inspirational change the world leader will come from in Australia.

Ongoing Innovation in Digital Media (Nigel Lake, Part 9 of 10)

Innovation in Digital Media

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This is the ninth instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: One of my friends used to work at a large management consultancy in Sydney and was involved with providing advice to The Australian on the implementation of its subscription model.

In my view the subscription model is a crazy model because on the Internet the things which are scarce are attention and the ability to connect with people. Content is very cheap and increasingly free.

How can it be a good strategy for large newspapers, which are in the business of content creation and distribution, to be restricting access to that content? Meanwhile Google, LinkedIn and others are producing huge amounts of content and giving it away for free. What are your thoughts on that?

Nigel LakeNigel Lake: I couldn’t agree more.

What many of these organisations have done is say, “look, we are a newspaper”, and the world is going digital so we need to place the newspaper online.

So they take the physical newspaper and then they put it into an Internet version which is still the exact same thing as the physical newspaper. All lined up around the masthead of whatever the title is, and it has sections which are the sections that they used to have before.

After about 20 years they realised that if you’re online you can actually have video in a newspaper, which is a very modern phenomenon. Papers like the New York Times still don’t have much in the way of video content which is kind of bizarre because it works really well on a 4G network.

They have just not in any way reinvented themselves for the digital world.

The challenge is that to do that properly and to be able to figure out what you should actually do, you need to understand the media industry and what it is that people actually want to go and read. Secondly, you have to understand what makes a profit and what makes a return on capital. And thirdly, you need to understand what is really going on in the evolution of technology and where will it take us.

This goes back to why we set up Pottinger in the first place. If you have a strategic consulting set of skills but you don’t have financial or transaction skills then you only have part of the equation. And if you’re an investment banker who likes doing deals then you only have part of the equation. So we brought together the whole strategic thinking mindset with very robust financial analysis and over time we have added the big data analytics piece so that we have a much more holistic view of what you need to do.

In the world of media the technology part is incredibly important.

The lack of understanding about what is really going on in technology in some of these large media companies around the world is mind blowing. It’s almost impossible to put into words how little they know.

Tom: I couldn’t agree more.

Nigel Lake: Just on newspapers, the one that is very interesting to watch is The Guardian.

The thing that The Guardian has done which is very interesting, beyond the fact that they don’t have quite as many amazing typos as they used to, is that they are the world’s first global newspaper.

They have the full editorial staff in the UK, they have a pretty decent editorial staff in the U.S., and they now have quite a strong editorial staff in Australia having picked up some of the better journos who got kicked out of other things. They have a model which is free in terms of ability to access the content, and they have still retained a level of focus on the quality of the writing.

This is the other part of the media journey that newspapers have been down, which is they’ve said, we have got to get online, everything is so cheap online, we’ll just make the content as cheaply as possible. And the underlying business is really profitable because people come there and click on all the ads. But the thing is people don’t go to a newspaper website to read the ads. And so, if the content is not what people want they will just go somewhere else. Particularly if they have to pay for it, then they will definitely go somewhere else.

The Guardian has followed a different model which is about saying we’ll try to keep the quality of the journalism up, we’ll provide a much broader view of the world, and it’s not a subscription model at this point in time. Well, it’s a subscription model for things like the crosswords which is kind of interesting.

For me that feels like intuitively a model which is much more likely to be successful. Now I have never worked with The Guardian and I’d love to get under the hood of their profitability and metrics on usage and so forth. But they are an example of a paper which is going the other way, and I’d be interested to see whether it is working for them.

Where Should the CEO Focus His or Her Attention (Nigel Lake, Part 8 of 10)

CEO Focus

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This is the eighth instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: In my mind one of the problems with innovation is that it can require a kind of schizophrenic approach. Focusing on the present business model and current needs can be all consuming, and thinking about the future can similarly be all consuming. Do you think that it may be helpful for companies to divide those roles? Or, do companies just need a business leader who has the foresight to see the future as it’s unfolding?

Nigel LakeNigel Lake: I think that’s a very interesting observation.

The advice that everyone gives entrepreneurs is that make sure that you don’t spend all of your time working in the business, you actually have to work on the business. And the same very much applies to large companies.

The CEO should not be spending much of his or her time running the business day to day. They absolutely should be looking much further out into the future and making sure the business is well positioned by taking the long term and difficult decisions now that will ensure that the business does well over the longer term. That isn’t always the case, but that for me is very clearly what the CEO role is all about.

In terms of how do you deal with this, in many organisations you end up with most of the management infrastructure focused on running the business, and that’s fine, and you have a preferably very small team of people who are focused on the longer term strategy of the business.

An interesting example is Tata Consulting, the big Indian IT services business, one of the world’s largest IT businesses. They have a workforce of hundreds of thousands of people around the world, and what they do is all about reliable delivery of technology which is very driven by process and reliability.

In that kind of entity how on earth are you going to embrace radical innovation and change? And so, what they have is a whole separate ecosystem internally called the Co-Innovation Network, which has quite a significant headcount in it and which is entirely focused on radical innovation and new technologies. And so, they have part of their business which is not constrained by today and is entirely engaged with what is happening that will change the world in all sorts of ways. That part of the business reports in directly to the Global Chief Technology Officer, who is one of the key guys in the group.

Tom: I guess, at the end of the day, change needs to come from the top.

Nigel Lake: You can’t make change happen from anywhere other than the top. If the top isn’t interested you’re wasting your time.

How to Anticipate The Future (Nigel Lake, Part 7 of 10)

Anticipating The Future

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This is the seventh instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: If you were the CEO of a bank, say National Australia Bank, and you see [innovation in the payments industry] coming, but you don’t have the capital to invest, and you don’t have the technology people. How do you respond to that?

Nigel LakeNigel Lake: You have to get in a darkened room where you feel very safe, and you have to say “what does the world look like when these people have taken over one of the most profitable parts of my business? What are we going to do? How are we going to compete?”

The payments part [of the banking industry] is somewhat invisible from the outside but it is a very high margin business. And so you have to say, “if we lose all of that, what are we going to do? How do we organise ourselves? How do we continue to be relevant in a very different world?” And you need to make all your decisions working back from that.

That’s an archetypal example of why thinking about the long term first is incredibly helpful because trying to work out what you might do incrementally starting from today is quite hard when you’re saying look it’s all too difficult. But if you say, okay, well, whatever is going to happen is going to happen let’s think about the world after that, then you can start making decisions where everything you do along the way lines up with making sure that you’re well positioned over the longer term. And you can then get out and start to tell some of that story publicly.

Tom: So in a certain sense it’s having the foresight to see what’s coming, accepting that, and then working accordingly.

Nigel Lake: Absolutely.

I spoke at a strategy conference a month or two ago, and I got there just a bit before I was due to speak and the last session was still going. It was a guy from the management consulting world talking about how companies couldn’t really deal with a strategy that looked out two or three years any more. It was all too hard; the world was moving too rapidly; they could only really deal with things for the next three months. And I just thought to myself, wow, how can I find companies like that which are only thinking three months at a time? I just need a client on the other side and we’ll go take their business because they have no idea where they are going.

People like to reassure themselves that understanding the future is just too difficult, so you had better focus on the near term. But there are all sorts of areas where actually the future is very very predictable over vastly long time horizons.

Anything to do with demographics you can predict quite reliably decades and decades ahead. If you want to know what the population of some country is going to be in the year 2050 we have already a pretty good idea now because most of the people have already been born who will be alive in 2050 in that country. Things like that are predictable.

The TVs that will be on sale in the year 2020, we know what they are now and what the specifications are now because you can’t invent new technology and bring it to market in four and a half years.

The things that will go on sale in 2020 have already been in the product development pipeline for some time and they are part of a longer term evolution of products. So in the world of technology you can predict five or ten years in the future as to what things will be like. Many of them are on relatively predictable Moore’s law price curves.

What is energy going to cost in ten or twenty years time? Well, we have fifty or sixty years history of the evolution of solar PV prices, and they will continue to decline on more or less the same basis for a period of time. Before long they will come to drive the cost of power, and so predicting the cost of power in the future becomes rather easier than it has been in the past where it was all dependent on oil and commodities cycles.

There is lots of data you can use to understand the future but businesses are not necessarily brilliant at doing that.

The Challenges of Pursuing Organisational Change (Nigel Lake, Part 6 of 10)

Challenges of Organisational Change

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This is the sixth instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Nigel LakeNigel Lake: Major incumbents have historically struggled to reinvent themselves.

The people that made and sold horses and carts didn’t do very well when cars came along, and the people who make cars are not going to do terribly well when electric vehicles come along.

Tom: That’s interesting. Do you think that the problem is that they’re framing what they do in the wrong way, for example they say “I’m a horse and cart company”? Or do you think it’s a lack of capabilities, and companies want to evolve but they are unable to evolve?

Nigel Lake: I think it’s a mixture of things.

I think absolutely it is how they frame what they do. They think they are a horse and cart company, not a person transport company.

If you have a large organisation, the challenge is that you have to switch from investing nearly all of your capital expenditure on things that you’ve done in the past, to invest much more of it on things you don’t yet do. The people who currently run the major bit of the business are suddenly going to be deprived of expenditure and it’s going to go to someone else who’s running something which doesn’t really exist yet. And making that change at an organisational level is incredibly difficult.

We’ve done a variety of pieces of work in the last couple of years with companies where it is abundantly clear that their main prize lies outside their core business. Their core business is great and fantastic, but that’s 1% of their future and 99% of their future is in things they’re not doing.

The other part of it is what my colleague Cassandra Kelly calls the supremacy gene, which is that big companies become very inbred and strongly enamoured with their own wonderfulness, and they can’t see that they have significant inherent weaknesses.

Look at the banking sector and what the likes of Google and Apple and others will do to the payments industry. They will just quietly take over and own payments. And the banks will spend a long time thinking it’s never going to happen, and they won’t stop to think that if you’re Google you can throw 5 or 10 billion dollars at having some fun in payments. There isn’t a bank in the world that can spend 10 billion dollars on payments. None of them have 10 billion dollars of spare capital that they can just burn.

We see this with the Australian banks which are obviously very small in broad terms, but by market value they’re large so that all four of them are in the world’s top 25 banks. I think [the Commonwealth Bank of Australia] understands that you really need to innovate or you will die. As for the other three, sometimes I think that having a fourth weekbix for breakfast is an innovation that they would find hard to stomach.

They really are very very slow moving, but they have tremendously profitable businesses and they will continue to do really well for quite a decent period of time.

The Need for Continual Innovation (Nigel Lake, Part 5 of 10)

Continual Innovation

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This is the fifth instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Nigel LakeNigel Lake: If you watch what happened with the iPhone. Jobs had very particular views about the size and shape of phones. The iPhone had evolved quite significantly over time but it was still basically a very similarly shaped device.

When Jobs died the whole organisation sort of thought, we’ve just to keep on making the phone the same way because that’s what Steve Jobs would have done. But that wasn’t really who he was because he was someone who was continually reinventing all these things.

Apple got into a really pretty dark place with the iPhone 5, which just looked so kind of yesterday, and then impressively re-discovered its mojo and ability to say, look that was yesterday and we have to reinvent ourselves. They then created the iPhone 6, which is a tremendously good product and has sold incredibly well.

Tom: So they weren’t responsive to the needs of customers and what people were telling them.

Nigel Lake: That’s right.

People in senior roles got sort of hung up on “there was this guy, and he told us to do everything, and that’s what he would have told us to do” without realising that the world had moved on.

[Steve Jobs] was someone who could do something one day very very passionately, and then have the kind of whatever it takes to say, “that was then and this is now and the world has changed, and maybe we should think differently”.

When he died it left quite a shadow over the organisation but it has somehow reinvented itself. If you think about what happened the first time around when Jobs was booted out, it was a complete disaster. This time around they have managed to continue, reinvent themselves, reinvent the phone product, and bring the watch to market to what seem like quite strong reviews so far.

Tom: I guess it’s yet to be seen how things will play out. One question mark over Apple is that Tim Cook is an operations guy whereas the whole company’s magic is based around innovation, being nimble and being willing to change.

Nigel Lake: It’s going to be an amazing story to watch for the next five years or more to see what happens to that business.

It’s a fascinating thing, because on the one hand it’s hard to think of organisations which have really dominated some particular segment that have survived radical innovation in their segment. And yet on the other hand, you look at the world’s largest companies from a few decades ago and there haven’t necessarily been huge changes in those names. But that’s partly because things like oil and gas are still very big industries.

It’s starting to change quite rapidly now.

The Importance of Having A Strategic End Goal (Nigel Lake, Part 4 of 10)

Strategic End Goal

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This is the fourth instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: Do you think that public companies are disadvantaged in being able to take a longer term view because they’re driven by the quarterly earnings cycle?

Nigel LakeNigel Lake: I’ve spent most of my career in and around public companies advising them on various things. I don’t think that the earnings cycle itself is a problem at all. I think the problem is in how leaders have responded to that earnings cycle.

When analysts and other commentators come begging for some short term faddish response, too many CEOs and management teams have tried to deliver up something which looks a bit like the latest fad with no sense of where they are actually trying to end up as a business.

An example of this is lots of companies which talk about strategy and strategic direction, but the whole notion of a strategy or a direction is completely meaningless unless you actually know where you are trying to end up.

Think about the analogy of getting on a boat or a yacht, and you sail out into the harbour and ask the captain where you are going. The captain will give you the name of the port you’re trying to end up at. She’s not going to tell you that you’re sailing North-North-East because that doesn’t really matter very much right now.

Many companies have got what they would call a strategy, which is some sort of vague sense of direction but with no enunciation whatsoever as to where they are trying to end up in five or ten years time.

Tom: I suppose in some sense it’s very difficult. From the interviews I’ve read, it seems like Steve Jobs didn’t always know exactly what the next thing would be. He had a strong emphasis on fast cycle times, paring the initial products back as much as possible to be as simple as possible, and then seeing what worked and what didn’t work and being very responsive to customers. And yet, he was probably quite a good strategist?

Nigel Lake: It’s fascinating, I think the whole Apple/Jobs story is an absolutely fascinating story, and there is a very interesting tension between exactly what you say.

There is at the same time this deeper guiding purpose or obsession [that Apple has] which is to deliver a product which completely revolutionises an entire industry, globally, by creating a product that is essentially perfect.

It’s not that it’s better than what someone else has got; it’s just the perfect thing.

The major things that Apple has done: the reinvention of the Sony Walkman effectively as a portable music player, the iPhone and then tablets are all things which have – and now query the watch, I have not yet formed views on the watch, but I’m not going to criticise it given the company’s amazing track record – they have completely revolutionised complete industries by delivering products that are essentially perfect.

That is an amazingly high ambition, and it’s difficult to think of other companies that have really set about to do something that dramatically transformational on a world scale.

12 Tips for Nailing the Guesstimate Question

Twelve Tips for Nailing the Guestimate Question

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Below we outline twelve (12) tips for nailing the guesstimate question:

1. Practice

Practice doing some guesstimate questions before the interview so that you are prepared. It is a good idea to bring a pen and graph paper to the interview so that you can keep track of your calculations.

2. Know some basic facts

Below are some facts that you should know. In addition, you should also know the key demographics for the country where you are interviewing.

Guestimate Question Basic Facts

3. Use round numbers

You are responsible for doing the calculations so pick numbers that are easy to work with. For example, estimate the population of America as 300 million not 316.1 million.

4. Clarify units of measurement

You should clarify the units of measurement that the interviewer wants from you. For example, market size can be measured by revenue or sales volume.

5. Take a moment

It is important to maintain your composure so before starting to answer the guesstimate question take a moment to write down the key details of the question, and consider your approach.

6. Have a clear approach

It is important to have a clear approach to help you answer the question. More on this in a later post.

7. Ask questions

Your interviewer may be able to provide you with direction. If the question is “How many ping-pong balls will fit inside a 747?” the first question you might ask is “What is the volume of a ping-pong ball?”

8. State your assumptions

The interviewer may not know the answer or may not want to give you direction so you’ll have to make assumptions.

It is a good idea to clearly state your assumptions. For example, “let’s assume that the diameter of a ping-pong ball is 4cm. The formula for the volume of a sphere is 4/3.pi-r^3. So the volume of a ping-pong ball would be about 11-pi centimetres cubed”.

9. Think out loud

The interviewer is trying to assess your thought process in getting to the answer, not the answer itself. If you don’t think out loud, you make it difficult for the interviewer to give you points.

10. Explain your logic

As you make your way through the problem it is helpful to explain the logic behind each of your assumptions.

Instead of saying “a 747 is about 100 metres long” you could say “I know that an average car is about 5 metres long and based on my experience I would say that 20 cars lined up end to end would be about the same length as a 747. So I will assume that a 747 is 100 metres long”.

11. Answer the question

After doing all of the calculations remember to answer the question that has been asked.

12. Be prepared for follow-up questions

After you answer the guesstimate question, the interviewer might ask “If you had to find the real answer to the question, how would you do it?” This is a test of your creativity and resourcefulness.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Finding The Courage to Overcome Vested Interests (Nigel Lake, Part 3 of 10)

Courage to Overcome Vested Interests

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This is the third instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: The problem for decision making is partly about short term thinking, but it seems like the problem might also partly be a result of the principle-agent problem. For example, Steve Jobs was a founder who could make tough calls and bet the company based on his vision of the future; whereas if you are a CEO taking a bonus then you might be very incentivised to ride the current business model and underinvest in new innovations.

Nigel LakeNigel Lake: That’s absolutely spot on.

So, one of the other broad areas that I deal with in my book is the whole concept that we might all believe that the free market is a wonderful thing, but of course there are all sorts of structures in place in the world in which we live which set up all sorts of vested interests in various different ways which then inhibit sensible decision making.

And I absolutely agree with the point that you make about CEOs being in a world where they are probably only going to last three years.

They’re trying to maximise their pay over that period of time because most CEOs of listed companies never get another job. And as a result, the people in those sorts of roles get lured into the belief that taking a short term approach will work really well for them.

Now the irony of course is that that doesn’t necessarily prove to be the case, and that the most successful CEOs are often those that have thought rather long term and have not been the people that have chased the quarterly reporting figures.

But that requires a very different sort of individual, who has the courage to say, look we actually need to go and do this big picture thing which will completely transform our company over the next five years. We’re going to go from a business where none of our value is, in Apple’s case, phones to where a huge part of the value is in the design of phones. And Apple doesn’t even make mobile phones, Foxconn does that.

Looking Beyond Short Term Financial Metrics (Nigel Lake, Part 2 of 10)

Looking Beyond Short Term Financial Metrics

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This is the second instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: Do you think that short term financial metrics are part of the problem in developing long term strategy?

Nigel LakeNigel Lake: Absolutely, I think they are a very fundamental part of why very large organisations don’t make good decisions on an amazingly frequent basis.

A simple analogy is that if you’re driving down a motorway you actually need to look further ahead, and if you stare just in front of yourself you will crash and probably die.

Very large organisations do this.

Nokia is a very good example of a company [that was dominated by this kind of myopia].

One of my colleagues at Pottinger held an iPhone in his hand in about 2003, which was four years before Apple had the iPhone, except that the iPhone said Nokia on the bottom of it.

But everyone at Nokia knew that people liked candy bar phones and that that would never change, and so they never launched the iPhone.

Tom: Oh really? So Nokia had the technology to develop and produce an iPhone several years before Apple released it?

Nigel Lake: A phone which for all intents and purposes was very much an iPhone like device.

Now the even deeper point is that people who worked in technology knew that something like the iPhone would come about roughly when it came about in at least the early 90’s.

The iPhone was essentially a proper computer which was small enough to be a phone, and to get there was a journey of miniaturisation of processes, improving battery technology to be able to store the power to run the phone for long enough that people would think it was useful, and the improvement of the screen technology.

All of those things have been on Moore’s law progressions for an amazingly long period of time, and those things all crossed over to be a computer like phone some time in the middle of the first decade of the naughties.

People knew that was going to happen ages ahead but large organisations did nothing about it. HP is an example. I know there were people working at HP in the early 90’s in the UK who said “these things are coming”, but no one was interested.

It’s ten years away, why would you bother? And for Nokia it was five years away, and it’s like, why would you bother? And then Apple comes along, and Nokia goes from being the biggest phone company in the world to not being a phone company.

Tom: That’s very interesting. One of the ideas that I’ve been thinking about recently is that financial metrics are basically designed to evaluate how much you are getting out of a company, your cash flow take from the company. But the goal of a company is actually to give value to customers and to the community. And so, there appears to be a disparity between what companies do and what the metrics are measuring. What are your thoughts on that?

Nigel Lake: That is absolutely right, and I’ve spent quite a lot of time thinking about precisely that set of issues.

Where my own thoughts have gone is that if you take a very short term approach then there is a massive conflict between what’s in the interests of shareholders and what’s in the interests of customers. The shareholders just want to sell as much product for the highest possible price, never mind the quality or impact on any other stakeholder in the entire ecosystem, and then pocket the profits and run.

If you take a longer term view then the financial metrics will tell a different story, which is that if you abuse your suppliers and you abuse your customers then they will go away and you won’t have a business left. The high profits in year one may turn into no market capitalisation by year five.

A lot of people have worked through this saying, okay short term financial metrics don’t work, let’s look at different forms of triple bottom line reporting or measures of broader impact.

One of my friends runs a US business called HIP Investor (for Human Impact + Profit) which is a sustainable investment type business where they have created a set of metrics which measure the sustainability and non-financial impact of an organisation. They apply those metrics to all the companies in an index, re-weight the index along this new sustainable basis, and an investment in their portfolio (which is a re-weighted index portfolio) outperforms the index and has lower risk.

So you can go down that path, but where I’ve gone down is a different route to the same answer, which says that if you take a longer term view you will make different decisions about how you should treat all the stakeholders in the ecosystem. And you will then start to realise that thinking more broadly about how you create value is very much in the interests of your company.

One of my current areas of focus is this broader area of sustainability. I think that there are amazing opportunities in that. The Royal Mail in the UK is one example of an organisation that really drove this kind of mindset over a fair period of time, and from what I understand achieved quite significant results in making the whole thing more efficient, and having better environmental outcomes as a result.

Thinking About the Long Term First (Nigel Lake, Part 1 of 10)

Thinking About The Long Term First

(Source: Flickr)

This is the first instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: Nigel, I had intended to ask you questions about Pottinger and your recruitment process but I was reading up on what you’ve been doing and I’d be interested to instead talk to you about your book, “The Long Term Starts Tomorrow”.

Nigel LakeNigel Lake: Those two things are somewhat related, but I’m very happy to do that. Just fire away with anything you wanted to ask. Let’s get into it.

Tom: A lot of tech companies were invented by college students in dorm rooms and the Internet poses a continuing threat to the business models of many established companies. From what I understand your book is really about innovation and the ability to make short term decisions that are going to stand the test of time. Is that an accurate characterisation?

Nigel Lake: Yeah, it’s an interesting thing, it kind of goes deeper than that, and I’ll give you a bit of context and then you’ll understand why I’ve written it the way I’ve written it.

There is lots of evidence that the way that people make decisions in the business world doesn’t work especially well, and a simple example is all these crazy young kids who created trillions of dollars of value, and the old guys surrounded by lots of advisors didn’t.

If you peel it back, what are the things that are going wrong fundamentally with decision making?

One of the deep problems is that the whole architecture that we live in for decision making focuses people’s minds on the short term.

You see that in a qualitative sense in terms of the reporting cycle and in terms of what analysts want to see and what CEOs then go and do. But you also see it in a very quantitative sense in the world of discounted cash flow models and the whole economic architecture which I describe as a kind of cult of economic rationalism.

People have picked up that way of doing things which came out of the 1950’s and early 1960’s, and in fact some of it goes back to the 19th century.

No one has really done anything different since.

Nobody has stopped to think about the fact that the pure mathematics of those models drives you to focus on the first five to ten years and encourages you to ignore everything after that.

Many of the great successes and great failures over that period came about because people precisely ignored what would happen a little bit further down the road.

At Pottinger we do a whole bunch of work around infrastructure, for example, and one of the fundamental problems most major economies have is that they need to rebuild crumbling infrastructure and build new infrastructure.

They struggle to justify the costs and returns that they are going to get, and part of the reason is that people are trying to build 100 or 200 year assets on the basis that it should pay for itself in 30 or 40 years.

It’s just not going to work.

Conversation with Nigel Lake, CEO of Pottinger

PottingerI recently had the good fortune to speak with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia.

Nigel is a truly original thinker who combines a good sense of humour with sharp strategic insights and clarity of thought.

I had originally intended to ask Nigel some questions about Pottinger and its recruitment process, but I thought better of it. I was interested to learn more about his book “The Long Term Starts Tomorrow” and we ended up having a very interesting conversation.

Our discussion touched on various fascinating topics including:

  1. The importance of thinking about the long term first
  2. Looking beyond short term financial metrics
  3. Finding the courage to overcome vested interests
  4. The importance of having a strategic end goal (rather than just a general sense of direction)
  5. The need for continual innovation
  6. The challenges of pursuing organisational change
  7. How to anticipate the future
  8. Where should the CEO focus his or her attention
  9. Ongoing innovations in digital media, and
  10. Australia’s unenviable position as an innovation laggard

Please bookmark this initial post, subscribe by email or follow the conversation on Twitter via the hashtag #nigellake.

I will post one instalment from my conversation with Nigel Lake every weekday for the next two weeks.

Have you ever failed at anything?

Overcoming Failure

(Source: Flickr)

Another question that may come up in the consulting interview is “have you ever failed at anything?”

This question is designed to assess your ability to learn from experience, and overcome obstacles.

In preparing a response to this kind of question, develop a story about a time that you were not able to achieve a goal, how you adapted your approach, ultimately achieved success, and what you learnt from the experience.

Do not tell stories about academic failure, illegal activity, or failed relationships.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Why Consulting?

Why Consulting

(Source: Flickr)

In the consulting interview, your interviewer is likely to ask you the following straightforward question, “why consulting?”

Relevance of the question

The question is relevant for two reasons:

  1. Your interviewer is likely to ask it in the interview; and
  2. You will be much more likely to succeed (in the interview and afterwards) if you can clearly and passionately articulate in your own mind the reasons why you want to work in the consulting industry.

How to answer the question

The way you respond to the question is more important than what you say. The most important thing is to be sincere and passionate about getting into the industry.

Think about why you want to get into the industry and write down each reason as a bullet point. Review your points before stepping into the interview.

Reasons to enter the consulting industry

Here are thirteen (13) reasons that you might give in answer to the question “why consulting?”:

  1. Early responsibility: Opportunity to get early responsibility tackling real world business problems;
  2. Skills: Opportunity to develop marketable skills in a prestigious environment;
  3. Learning: Continuous learning through project experience and formal training;
  4. Work experience: Working with intelligent and energetic people;
  5. Mentors: Exposure to senior consultants and the chance to learn how they think, act, and analyze problems;
  6. Networking: Access to senior clients and an extensive alumni network;
  7. Variety of work: Opportunity to undertake a diverse range projects across a broad range of industries;
  8. Remuneration: Consulting is prestigious and the money is good;
  9. Teamwork: Working as part of an elite fast paced team;
  10. Impact: Creating solutions that lead to improved organisational performance;
  11. Travel: Opportunity to travel with work;
  12. B-school: Increasing the chance of being accepted into a top business school;
  13. Exit opportunities: The skills, networks and branding of a few years at a management consulting firm will open new doors and the experience will always look good on your résumé.

[For more information on consulting interview, download “The HUB’s Guide to the Consulting Interview“.]

Price and Value

Price and value, there is a difference.

Price is what you pay for something; the number of dollars that you need to part with in order to obtain it. Value is what you receive; the positive feelings or practical utility that the object or the experience imparts.

I recently had my birthday, and I was delighted to receive a wonderful birthday present from my family in Sydney.

I logged onto Facebook in London, and found that my family had posted the following picture.

Price vs Value

The price of a piece of cardboard and some crayons: $1.

The value of receiving a “Happy Birthday Tom!” poster from all the family: priceless.

Time and Money

Time and Money

(Source: Flickr)

If you had all the time in the world but not much money, then your capacity to create new ideas and connect with people would be great, but your capacity to consume would be limited.

On the other hand, if you didn’t have much time but had a lot of money, then your capacity to create new ideas and connect with people would be limited, but your ability to consume would be considerable.

Time and money, where should we be placing value?

This is not just a question for individuals but also for organisations.

Universities appear to value time over money (at least this was traditionally the case), and so tend to be geared towards sharing ideas and enabling people to connect with one another.

Many corporations today take the opposite approach and value money over time, and so tend to be geared towards maximising short term earnings. Employees are required to be in the office regardless of whether this improves productivity, initiatives that provide value to consumers but don’t generate revenue get discontinued, and the mantra “time is money” might on occasion be heard echoing through the hallways.

Companies will of course need to keep an eye on cash flows, but important strategic decisions should not be held hostage by the quarterly earnings report.

A resilient company will be one that has freedom to maneuver and sufficient time to anticipate new opportunities and respond to impending threats in a thoughtful and considered way.

Consulting Interview Question Types

Consulting Interview Question Types

(Source: Flickr)

There are six types of questions that you may encounter in the consulting interview:

  1. Behavioural interview questions;
  2. Guesstimate questions (aka market sizing);
  3. Math questions;
  4. Brainteasers;
  5. Factor questions; and
  6. Business case questions (these form the cornerstone of the consulting interview).

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Case Interview Prep

Case Interview Prep

(Source: Flickr)

Case questions form the cornerstone of the consulting interview, and reading this blog or reviewing the case prep resources listed below will not be sufficient preparation.

If you want to perform successfully, then you will need to do a lot of practice.

Many experts recommend at least 30 mock case interviews with friends, classmates, contacts in the industry and anyone else who is willing to help.

You may be an Olympian with a GPA of 4.0, but this won’t help you in the consulting interviews.

While the amount of practice you need will obviously vary depending on how quickly you can get comfortable with the variety of questions that you are likely to be asked, there is no getting around the need for some dedicated case practice.

Here are a number of case interview resources that you may find helpful:

  1. Case in Point by Marc P. Cosentino (Recommended)
  2. Case Interview Workshop by Victor Cheng (Recommended)
  3. Look Over My Shoulder by Victor Cheng (Recommended, but expensive)
  4. Case Interview Secrets by Victor Cheng
  5. Crack the Case by David Ohrvall
  6. How to Get Into the Top Consulting Firms by Tim Darling
  7. Mastering the Case Interview by Alexander Chernev
  8. The Harvard Business School Guide to Careers in Management Consulting by Maggie Lu
  9. Vault Guide to the Case Interview
  10. Ace Your Case! Consulting Interviews by WetFeet

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

How to strengthen a non-business background

Strengthen a non-business background

(Source: Flickr)

It will help your consulting application if you have prior business experience, however if you come from a non-business background all hope is not lost.

You can strengthen your consulting application by showing how your experience demonstrates team work, leadership, and an ability to achieve positive outcomes.

Use ‘action-outcome’ language in your résumé. That is, use action verbs to describe what you did and strong adjectives to describe the outcome.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Play The Game

Play The Game

(Source: Flickr)

I recently had a conversation with a friend who is studying a PhD here in Oxford.

She is originally from China, and her intelligence is only exceeded by her work ethic and desire to make her PhD supervisor happy.

She confessed to me with a look a mild despair on her face, “I am making slow progress. I send emails but people don’t respond. I think they are ignoring me.”

Intrigued, I wanted to find out more, and asked a few questions to see what might be the matter.

“Have you called the person?” “No.”

“Have you been to see them in person?” “I spoke to him once, but I almost felt like crying.”

“And what did he say?” “He asked me to provide a detailed plan before I can run the experiment?”

“And have you created the plan?” “No. That’s the strange thing. I haven’t.”

Hmm, I seemed to be getting closer to the heart of the problem.

How could it be that a competent, motivated and well meaning individual (an Oxford student no less) could be stopped dead in her tracks by a seemingly surmountable obstacle?

Some would say that it’s simply a matter of emotional intelligence and having the maturity to deal with people.

That’s certainly part of it, but I think the problem is slightly more interesting and complex than that. In fact, this is not the first time I have experienced this situation. I have actually confronted it myself.

If you come from a culture or a family that has taught you not to assert yourself (which I believe is influencing my friend’s situation), then being assertive in the workplace is likely to be near on impossible, even if you are otherwise quite emotionally intelligent and pretty mature.

If you have a personal belief or way of acting that has been reinforced over time, so much so that you no longer see it as a matter of choice, then how can you possibly overcome it?

How can you overcome something that has become a part of you?

Luckily, as it happens, I believe there is a simple solution.

Role playing.

People seem to have no trouble taking on new and different personas when they believe they are playing a game.  And being at work is just another game. There are rules to follow, goals to achieve, and prizes to be won for good performance.

You may not be assertive by nature. But that needn’t stand in your way. You just need to play the game.

Design is about Function

Apple Watch

(Source: Techradar)

Design is about function.

Every product has a job to do, as Professor Clay Christensen enjoys telling his marketing students at Harvard Business School.

If a product is designed properly, then the job will get done well.

Apple’s new debut wearable technology, the Apple Watch, has a sleek yet distinctively square shaped design.

This seems like a strange design choice because they could have made the watch a circle, which would have been even sleeker.

And while this may be true, one of the core jobs that the Apple Watch needs to perform is to display lists, text and data.

A circle shaped watch just wouldn’t be able to get the job done quite as well.

Elon Musk Debuts the Tesla Powerwall

A revolution in energy technology? Elon Musk launches the Tesla Powerwall

Elon Musk, CEO and product architect at Tesla Motors, has just announced the launch of the Tesla Powerwall. Musk was a co-founder of Paypal with Peter Thiel (who I talked about yesterday), and has since gone on to found Tesla Motors, SpaceX and SolarCity.

The new product is a home battery that represents a potential revolution in energy technology. It is designed to store around 10 kilowatts of energy, and could be used (in combination with solar panels) to take homes off the grid.

Solar power is likely to be part of the solution that frees us from our dependency on burning fossil fuels.  The big catch with solar power though is that the sun doesn’t shine at night. The Tesla Powerwall is a wall mounted battery, and so if used in combination with solar panels, it could allow people to satisfy their energy needs without relying on grid energy.  This is significant because grid energy is often produced by burning fossil fuels which produces CO2 emissions and contributes to global warming.

It will be interesting to follow the evolution of this technology in the months and years to come.  We could very well be witnessing the initial steps in a global energy revolution.

Peter Thiel at Oxford’s Said Business School

I had the good fortune yesterday to attend a conversation between Teppo Felin, Professor of Strategy at Oxford’s Said Business School, and Peter Thiel, co-founder of PayPal and recent author of the bestselling book Zero to One: Notes on Startups or How to Build the Future.

Apart from being a co-founder of PayPal, Thiel is also known for being the first outside investor in Facebook, taking a 10% stake in 2004 for $500,000. He now sits on the company’s board of directors.

As if that weren’t enough, Thiel is also:

  • Co-founder and chairman of Palantir, an American software and services company;
  • President of Clarium Capital, a global macro hedge fund;
  • Managing partner of Founders Fund, a venture capital fund with $2 billion in assets under management;
  • Co-founder and investment committee chair of Mithril Capital Management, a global investment firm; and
  • Co-founder and chairman of Valar Ventures, a globally oriented venture fund.

Needless to say, I didn’t want to miss this conversation with one of the world’s tech startup demi-gods.

Below I highlight ten (10) of the key lessons shared by Peter during the discussion.

  1. When it comes to teaching entrepreneurship and innovation there is a certain paradox.  How do you offer a formula for how to do new things? Science always starts with experiments and every moment in the history of technology happens only once. For example, the next Gates won’t create an operating system and the next Zuckerberg won’t start a social network.
  2. A lot of great entrepreneurs have certain diametrically opposed personal qualities. They will be, for example, people who are very stubborn but yet still quite open minded.
  3. Imitation is how culture is built, but it is also how things go wrong. People who are hyper-socialised (for example, business school students) are more likely to follow the big social trends and more likely to be talked out of their truly interesting and original ideas before they are even fully formed.  Innovation requires a certain willingness to buck the trend.
  4. In a company, you want to unite people around a common mission which differentiates the company from the rest of the world. For example, Elon Musk’s company SpaceX is the only company aiming to go to Mars.  At the same time, within the company, you want the roles to be as differentiated as possible. Conflicts tend to arise when people’s roles are too similar.
  5. There is not enough time to A/B test every idea you might have.  We live in a world which is far too skewed towards A/B testing, and not enough towards mission driven and vision driven companies.
  6. If you define the culture of a company the way an HR person would, then that’s probably evidence that you have no culture at all. You shouldn’t think of a culture as “having foosball tables and lava lamps” or anything generic like that. You should define culture around the common mission of the company.
  7. Assuming it were possible to reduce innovation to a formula, Thiel says the three part formula for a successful startup would be to have (1) a great team, (2) some great technology (because Thiel is a tech investor), and (3) a good business strategy.
  8. A startup should have a great team, and the team should in fact be a team. You need very talented people who can work well together. Preferably people who have known each other for a decent period of time, and who have complementary skills. When it comes to finding a startup co-founder, Thiel notes (tongue firmly in cheek) that “you don’t want to get married to the first person you meet at the slot machines in Las Vegas”.
  9. Business strategy is about having a story which explains how the startup will move towards building a monopoly. You can have a great team, and great technology, and no business at all. If your business creates X dollars of value and you capture Y% of X, most people forget that X and Y are independent variables. In most cases Y equals zero percent (0%).
  10. Investment capital is often deployed in extremely inefficient ways. Thiel notes that there is a very big difference between investing your own money, and investing other people’s money.  When you invest your own money, you are just trying to generate good returns. But when you invest other people’s money, you have two objectives. Number one is to get good returns, and number two is to look like you’re going to get good returns.  And the disconnect between those two can be much larger than people would typically think.