Make a List

...think through the intersection between what was important and what was actionable.  

Making a list is baby-steps management.  Pick up any book on self help, on organizing yourself, or on the nuts and bolts of running an office or organization, and it will proffer this advice: "make a list."  Carnegie's benefit was not from the list itself.  It came from actually constructing the list.  The idea that people have goals and automatically chase after them like some kind of homing missile is plain wrong.  The human mind s finite, its cognitive resources limited.  Attention, like a flashlight beam, illuminates one subject only to darken another.  Given Fredrick Taylor's assignment, some people might have listed the bills they had to pay or the people they needed to see.  One can only guess at Carnegie's list.

Taken seriously, Taylor's injunction was not simply to make a list of important issues.  It was not simply to make a list of things to do.  And it wasn't to make a list of what might be important.  Taylor's assignment was to think through the intersection between what was important and what was actionable.  Carnegie paid because Taylor's list-making exercise forced him to reflect upon his more fundamental purposes and, in turn, to devise ways of advancing them.

ACTION POINT: Reflect upon the important and actionable issues that will advance your business. 

Andrew Carnegie meets Fredrick Taylor

 "if you can tell me something about management that is worth hearing, I will send you a check for ten thousand dollars."

It was 1890, and there was a cocktail party in Pittsburgh.  All of the movers and shakers were there including Andrew Carnegie.  He held court in a corner of the room smoking a cigar.  He was introduced to Fredrick Taylor, the man who was becoming famous as an expert on organizing work.

"Young man," said Carnegie,  "if you can tell me something about management that is worth hearing, I will send you a check for ten thousand dollars."  Now, ten thousand dollars was a great deal of money in 1890.  Conversation stopped as people nearby turned to hear what Taylor would say.

"Mr. Carnegie," Taylor said, "I would advise you to make a list of the ten most important things you can do.  And then, start doing number one."  And, the story goes a week later Taylor received a check for ten thousand dollars.  

ACTION POINT:  Make a list of the the 10 most important things you can do and start with number one.

The Process of Learning

After hundreds of iterations, the original hypothesis has long since vanished, replaced by a myriad of new hypotheses, each covering some aspect of the growing, evolving business.

In 1987, Schultz bought out the Starbucks' retail operations and adopted the Starbucks name.  The new firm combined the old Starbucks business of selling dark-roasted arabica coffee beans with the new one of operating espresso bars. 

By 2001, Starbucks had become an American icon, with 4,700 worldwide outlets and $2.6 billion in revenue.   The bulk of its revenues came from selling coffee drinks--the company called them handcrafted beverages.  The rest came from the sale of coffee beans, some other food items in its coffee bars, and licensing agreements with food-service firms.  Only a few years before "coffee" had been seventy-five cents and came in a plastic foam cup.  Now the urban landscape is peppered with Starbucks outlets, and the sight of young professionals sipping pin-sized three-dollar takeout lattes has become commonplace.

Howard Schultz envisioned an Italian espresso bar in Seattle.  he tested this hypothesis and found it wanting.  But the test produced additional information, so he modified his hypothesis and retested.  After hundreds of iterations, the original hypothesis has long since vanished, replaced by a myriad of new hypotheses, each covering some aspect of the growing, evolving business.

ACTION POINT: This process of learning--hypothesis, data, anomaly, new hypothesis, data, and so on--is called scientific induction and is a critical element of every successful business.

Privileged Information

As knowledge accumulated, he altered policies. 

One of the most important resources a business can have is valuable privileged information--that is, knowing something that others do not.  There is nothing arcane or illicit about such information--it is generated every day in every operating business.  All alert businesspeople can know more about their own customers, their own products, and their own production technology than anyone else in the world.  Thus, once Schultz initiated business operations, he began to accumulate privileged information.

As knowledge accumulated, he altered policies.  He took the Italian off the menu, then eliminated the operate music.  He knew the baristas were central, but he did away with their vests and bow ties.  He departed from the Milanese model and put in chairs for the sit-down trade.  Over more time, Schultz discovered that Americans wanted takeout coffee so he introduced paper cups.  Americans wanted nonfat milk in the lattes, so, after a great deal of soul searching, he allowed nonfat milk.  In the technical jargon of international business he gradually "localized" the Italian espresso bar to American tastes.

ACTION POINT: As you accumulate knowledge about your customers tastes, alter your policy where needed to localize the customers experience. 

Living Experiement

Schultz and his team were alert to customer response.

Schultz's proprietary information was only a glimmer in his mind, a mood, a feeling.  Others, exposed to exactly the same information and experiences, did not have this insight or feeling.  The privacy of his insight was both blessing and curse.  Were it easily shared with other, Schultz himself would have been irrelevant.  But because it could not be fully shared, it was difficult to convince others to back the project. 

Schultz left Starbucks to start his own shop (Il Giornale).  The new shop was a direct copy of an Italian espresso bar.  In it, he "didn't want anything to dilute the integrity of the espresso ad the Italian coffee experience."  Italian decor, shots served in small porcelain cups and Opera music in the background were all part of the shop.  

Had Schultz stuck to this initial concept, Il Giornale would have remained a single small espresso bar.  But, like a good scientist who carefully studies the results of experiments, Schultz and his team were alert to customer response.  Il Giornale, once started, became a living experiment.

ACTION POINT:  Take chances and test your hunches, then study the results.