Thursday, 25 July 2013

Successful Entrepreneurship Is Not About Winning A Popularity Contest With Venture Capitalists

By Ruslan Kogan
Entrepreneurs are inventors and athletes in one. They are inventors because they need to see the marketplace like nobody before them has seen it, understand all the market dynamics, and invent a product or service that enhances people’s lives. They are also athletes, because once they have come up with the invention they need to work incredibly hard to turn it into reality, no matter what obstacles the business environment throws at them.
Ever since the “The Social Network” came out I’ve seen “Entrepreneurs” pop up everywhere with one simple goal – to find a venture capitalist to back them. I even get people emailing me and adding me on LinkedIn LNKD +2.43% with the self-proclaimed title “Entrepreneur”!
It’s great that the movie has promoted entrepreneurship, but many people need to realise that things are much tougher in real life than in movies. I didn’t watch Spiderman and decide to try become a superhero.
Too many “Entrepreneurs” believe the end game is to find a VC to back them. They throw hundreds of business ideas around at any given time without giving true conviction to any one idea.
I had an “Entrepreneur” approach me at a bar once and asked if he could pitch an idea to me. I didn’t like the idea, so he reeled off ten others he was “working on,” and asked me which one he should enter into the “pitching competition” he was participating in at an “Entrepreneur’s Convention.” You can guess what my response was.
Being an inventor, an entrepreneur needs to have conviction in his or her own idea, and know that it would work as a real business. That the conviction is so powerful means entrepreneurs would logically not be out there seeking the approval of others, whether it’s friends, family, or even VCs. Before starting Kogan, I had to ignore the advice of my mother (“Why are you quitting this great paying job to become a TV salesman?”), supposed business experts (“No-one will ever buy TVs online without seeing it first!”), and friends (“This is not going to work! People won’t buy anything other than books or CDs online”.)
Entrepreneurship isn’t a storytelling competition, it’s about inventing something, believing in it, and having the passion and conviction to prove that your invention works no matter what anyone else thinks.
I know what you’re thinking. What good is an idea if you don’t have the funding to execute your plan? Good question.
I had $0 in the bank and no investment in 2006 when was getting off the ground in my parents’ garage. I quit my full time job to start the business, and taught a few IT classes part time at Monash University to help pay the bills. If you follow textbooks, I would have needed at least $10M to start a consumer electronics brand. I would have needed showrooms all around the country, retail supply agreements with credit terms, and significant amounts of stock. Obviously $10M would have been nice, but it wasn’t an option. I knew the idea I had for a fully vertically integrated consumer electronics brand that sold exclusively through an online channel was a winner, and I was very passionate about making it happen. I just needed to overcome the barrier of not having any capital to start the business.
I started selling stock that was yet to arrive in the country at heavily discounted prices (a presale). Shoppers would make extra savings, but would have to wait a little longer. It was a clear win/win scenario: customers save more money, I can start the business with no capital. As soon as I made the website and listed the products as “Will be delivered in 45 days” at market shattering prices, everything was selling like hotcakes. By reversing the cashflow cycle, I was able to create and grow the business, and was getting money from customers before I had to pay it to the factories. My customers were getting amazing deals, and I was in a position to prove the concept I had invented. Since then, we’ve taken this concept to a new level and patented a technology we created called LivePrice (you can check it out here.)
The second major challenge was getting factories to want to cooperate with me. When I first approached the ones I’d chosen to work with, they declined to work with me because my orders were too small. I wanted to order a single container, whereas they typically dealt with massive brands around the world who would order 100+ containers at a time. The textbook step here would have been to try find an investor to give me lots of capital so that I could place a large initial order.
But I wasn’t interested in spending time and energy convincing someone that I had a good idea worth investing in. I thought of a better plan.
For those who have dealt with Asian factories, they know that even the billion dollar operations can be very coarse in their presentation; all of their marketing and documentation poorly laid out, and often poorly written.
I always look for ways to create win/win scenarios in business. In an attempt to convince the factory to accept my small order, I redid all of their marketing materials for them. Indeed, I fixed all of their grammatical mistakes, not to mention their misuse of English, aligned all the images, standardised all the fonts, made diagrams for the user manuals, and annotated them. I sent all the work done back to the factory and told them that even though they couldn’t make a profit off of my order due to its small size, I could add value in other ways.
They responded within a few hours, thanked me for everything I did, and accepted my order (they even gave me an even better price than we had previously negotiated!). This factory contacted me a few weeks later and said they had just won a massive customer in the U.S. because that customer said they were by far the most professional factory they had contacted.

Where there’s a will, there’s a way. If you are truly passionate about your invention, you won’t let anything get in the way. You don’t need to convince any venture capitalists that your idea will work – you just need to think outside the box and find ways to get the business started without huge initial funding. If you look at some of the greatest companies out there, they all started in garages with no cash.
The other problem with relying on investors is that one of their main considerations is cashflow. Every investor wants to invest in a business with minimal risk that the business will come back to them in a few months asking for more money for the next phase of growth. As such, cash is king. There’s nothing more important than engineering your business to reverse the cashflow cycle. We’ve done this at and it allows us to grow infinitely without ever having the need for any external funding.
So stop trying to come up with 30 business ideas. You only need one. You need that one idea that you are passionate about, and can put your hand on your heart and say that you will do whatever it takes to make it happen. It’s your baby. It’s your invention. You don’t need any approval from any external investor. You need approval just from one person in the world – yourself! Then, let the athlete part of Entrepreneurship kick in, and as Nike would say: JUST DO IT!

Wednesday, 29 May 2013

What Makes a Leader?

It was Daniel Goleman who first brought the term “emotional intelligence” to a wide audience with his 1995 book of that name, and it was Goleman who first applied the concept to business with his 1998 HBR article, reprinted here. In his research at nearly 200 large, global companies, Goleman found that while the qualities traditionally associated with leadership—such as intelligence, toughness, determination, and vision—are required for success, they are insufficient. Truly effective leaders are also distinguished by a high degree of emotional intelligence, which includes self-awareness, self-regulation, motivation, empathy, and social skill.
These qualities may sound “soft” and unbusinesslike, but Goleman found direct ties between emotional intelligence and measurable business results. While emotional intelligence’s relevance to business has continued to spark debate over the past six years, Goleman’s article remains the definitive reference on the subject, with a description of each component of emotional intelligence and a detailed discussion of how to recognize it in potential leaders, how and why it connects to performance, and how it can be learned.
Every businessperson knows a story about a highly intelligent, highly skilled executive who was promoted into a leadership position only to fail at the job. And they also know a story about someone with solid—but not extraordinary—intellectual abilities and technical skills who was promoted into a similar position and then soared.
Such anecdotes support the widespread belief that identifying individuals with the “right stuff” to be leaders is more art than science. After all, the personal styles of superb leaders vary: Some leaders are subdued and analytical; others shout their manifestos from the mountaintops. And just as important, different situations call for different types of leadership. Most mergers need a sensitive negotiator at the helm, whereas many turnarounds require a more forceful authority.
I have found, however, that the most effective leaders are alike in one crucial way: They all have a high degree of what has come to be known as emotional intelligence. It’s not that IQ and technical skills are irrelevant. They do matter, but mainly as “threshold capabilities”; that is, they are the entry-level requirements for executive positions. But my research, along with other recent studies, clearly shows that emotional intelligence is the sine qua non of leadership. Without it, a person can have the best training in the world, an incisive, analytical mind, and an endless supply of smart ideas, but he still won’t make a great leader.
In the course of the past year, my colleagues and I have focused on how emotional intelligence operates at work. We have examined the relationship between emotional intelligence and effective performance, especially in leaders. And we have observed how emotional intelligence shows itself on the job. How can you tell if someone has high emotional intelligence, for example, and how can you recognize it in yourself? In the following pages, we’ll explore these questions, taking each of the components of emotional intelligence—self-awareness, self-regulation, motivation, empathy, and social skill—in turn.

Evaluating Emotional Intelligence
Most large companies today have employed trained psychologists to develop what are known as “competency models” to aid them in identifying, training, and promoting likely stars in the leadership firmament. The psychologists have also developed such models for lower-level positions. And in recent years, I have analyzed competency models from 188 companies, most of which were large and global and included the likes of Lucent Technologies, British Airways, and Credit Suisse.
In carrying out this work, my objective was to determine which personal capabilities drove outstanding performance within these organizations, and to what degree they did so. I grouped capabilities into three categories: purely technical skills like accounting and business planning; cognitive abilities like analytical reasoning; and competencies demonstrating emotional intelligence, such as the ability to work with others and effectiveness in leading change.
To create some of the competency models, psychologists asked senior managers at the companies to identify the capabilities that typified the organization’s most outstanding leaders. To create other models, the psychologists used objective criteria, such as a division’s profitability, to differentiate the star performers at senior levels within their organizations from the average ones. Those individuals were then extensively interviewed and tested, and their capabilities were compared. This process resulted in the creation of lists of ingredients for highly effective leaders. The lists ranged in length from seven to 15 items and included such ingredients as initiative and strategic vision.
When I analyzed all this data, I found dramatic results. To be sure, intellect was a driver of outstanding performance. Cognitive skills such as big-picture thinking and long-term vision were particularly important. But when I calculated the ratio of technical skills, IQ, and emotional intelligence as ingredients of excellent performance, emotional intelligence proved to be twice as important as the others for jobs at all levels.

Killed by Groupthink

Maria Trautmann On October - 25 - 2010
Groupthink is when a group of people are deeply involved in a cohesive in-group and their striving for unanimity overrides their motivation to discuss alternative options. The term was coined by psychologist Irving Janis in the 70s. When the cohesiveness is high, close-knit groups try to minimize conflict to reach consensus and may take inferior decisions that kill imagination. Groups are highly selective when examining information and fail to seek expert opinion. Members of the group avoid promoting viewpoints outside the group’s comfort zone for fear of upsetting the group’s balance. In pursuit of group cohesiveness, individual creativity, uniqueness, and independent thinking may be lost.
There are eight symptoms of groupthink to look out for:
  • illusion of invulnerability – excessive optimism
  • belief in inherent morality of the group – causing members to ignore the consequences of their actions
  • collective rationalization – not challenging the group’s assumptions
  • out-group stereotypes – those who are opposed to the group are perceived as weak, biased, spiteful, or stupid
  • self-censorship – censoring ideas that deviate from the group consensus
  • illusion of unanimity – silence is viewed as agreement
  • direct pressure on dissenters – towards any member who questions the group
  • self appointed mindguards – members who shield the group from dissenting information
Most commonly cited examples of groupthink are:
  • Bay of pigs invasion of Cuba by the Kennedy administration
  • Roosevelt’s complacency before Pearl Harbor
  • Truman’s invasion of North Korea
  • Johnson’s escalation of the Vietnam war
  • Watergate
  • Regan’s Iran-Contra arms deals
  • Truman’s decision to bomb Hiroshima
  • Challenger NASA space shuttle disaster
  • More recent examples: Enron, Northern Rock, Lehman Bros, RBS and HBOS
So how can we avoid groupthink:
  • Use external experts
  • Set-up multiple working groups
  • Appoint a “devil’s advocate”
  • Senior management to avoid expressing opinions
  • Discus ideas with trusted people outside of the group
  • Examine all effective alternatives


Real creativity

Where does it come from? What is it?
Well, if you're disheartened by my previous post about licensing your idea, here's the punchline: Real business creativity comes from boundaries.
Inventing something cool that can't be implemented isn't creative. It's mostly a waste.
I think that inventing the unimplementable is a fine hobby, but it's also a bit of a crutch. Yes, of course we need big visions and big ideas, but not at the expense of the stuff you can actually pull off.
So, let's get specific:
If you've decided you want to create a breakthrough in your area of expertise (say Ajax coding), then either be prepared to launch and run it when you're done, or have a clear licensing strategy in mind, one where you're not the first person in history to pull it off.
If you've decided to invent a great idea for a book, better be ready to write it too, and either find a publisher or publish it yourself. There's no market for book ideas.
If you want to do creative ads, it helps to have clients willing to run them.
These constraints are the best part of being creative, as far as I'm concerned. I couldn't imagine writing Superman comics. The rules are too vague. There are too many choices. In non-profits and organizations and even in politics, the rules are pretty obvious (sometimes they're too obvious). So the real creativity comes in navigating those rules in a way that creates a breakthrough.
One of my favorite triumphs of all time happened on my first day of work at my first real job, 1984, Cambridge, MA. No voice mail in those days. I was employee #30. I walked in and there was a plastic carousel, about 18 inches in diameter, with 40 slots in it. Like thin slices of pizza, but 4 inches deep. Each slot had a sticker with a name typed on it. Not in any order, particularly.
Every day, when you went into work, you had to spin the carousel around and around until you saw your name, and then grab whatever pink slips had your phone messages on them.
Now, there are 100 better ways to do this system. Faster and easier. But 99 of them required getting a new carousel or device.
Instead, I grabbed a paper clip and put it on my slot. I could find my slot in a heartbeat now.
Within a day, the carousel was covered with flags and widgets and more. Problem solved.
See the rules. Keep most of them. Break one or two. But break them, don't bend them. (thanks to Curt for various inspirations).


9 Attitudes of Highly Creative People

Creativity-1Yesterday I looked at 5 methods for being creative. Today I’d like to look at some attitudes to build into your approach if you want to be a more creative person:

1. Curiosity

I’ve written previously on the topic of curiosity because I’m convinced that it is an essential skill to build as a blogger. Learning to ask ‘why’, ‘what if’ and ‘I wonder…’ are great questions to build into your life if you want to be a more creative person.

2. Seeing Problems as Interesting and Acceptable

ChallengeOne of the problems of the Western mindset is that we often see problems or obstacles in life as unacceptable parts of life. We avoid pain or suppress it when it comes and in doing so don’t often see and feel symptoms that are there to tell us something important. Creative people see problems as a natural and normal part of life – in fact they often have a fascination with problems and are drawn to them.

3. Confronting Challenge

Many of the most creative ideas through out history have come from people facing a challenge or crisis and rather than running from it asking ‘how can I overcome this’?

4. Constructive Discontent

Creative people often have an acute awareness of what’s wrong with the world around them – however they are constructive about this awareness and won’t allow themselves to get bogged down in grumbling about it – they take their discontent and let it be a motivation to doing something constructive.

5. Optimism

OptimismCreative people generally have a deeply held belief that most (if not all) problems can be solved. No challenge is too big to be overcome and no problem cannot be solved (this doesn’t mean they’re always happy or never depressed – but they don’t generally get stumped by a challenge).

6. Suspending Judgment

The ability to hold off on judging or critiquing an idea is important in the process of creativity. Often great ideas start as crazy ones – if critique is applied too early the idea will be killed and never developed into something useful and useable. (note – this doesn’t mean there is never a time for critique or judgement in the creative process – it’s actually key – but there is a time and place for it).

7. Seeing Hurdles as leading to improvements and solutions

HurdlesThis relates to some of the above – but by ‘hurdles’ I mean problems and mistakes in the creative process itself. Sometimes it’s on the journey of developing an idea that the real magic happens and it’s often out of the little problems or mistakes that the idea is actually improved.

8. Perseverance

Creative people who actually see their ideas come to fruition have the ability to stick with their ideas and see them through – even when the going gets tough. This is what sets apart the great from the good in this whole sphere. Stick-ability is key.

9. Flexible Imagination

FlexibleI love watching a truly creative person at work when they’re ‘on fire’. They have this amazing ability to see a problem or challenge and it’s many potential solutions simultaneously and they have an intuitive knack at being able to bring previously disconnected ideas together in flashes of brilliance that seem so simple – yet which are so impossible to dream up for the average person.

Is Creativity tied to Personality Type or Can it be Learned?

As I read through this list of traits of creative people – the question that I find myself asking is whether creativity is tied to personality type or whether it can be learned.
My own uneducated answer to this question is – ‘yes’.
Some people are just creative – they don’t train themselves to think like they do and they often don’t even know that they are any different from the rest of us – it’s just who they are.
However I believe that we can all enhance our ability to be creative over time.
Tomorrow I’m going to round off this mini-series of posts on creativity by suggesting a few practical things that those of us wanting to enhance our creativity might build into our lives.

7 Rules for Maximizing Your Creative Output

January 5th, 2007 by Steve Pavlina
After my last article on experiencing creativity, there was a question in the resulting forum discussion about how to enter this highly creative flow state, the state where you lose all sense of time, your ego vanishes, and you become one with the task in front of you.  Is this peak creative state a rare chance event, or can it be achieved consistently?
For me the creative flow state is a common occurrence.  I usually enter this state several times a week, staying with it for hours at a time.  I’m able to routinely enjoy the flow state as long as I ensure the right conditions, which I’ll share with you in a moment.
My first memories of habitually entering this flow state date back to the early 80s when I was learning BASIC programming.  After school I’d rush through my homework in order to spend hours in front of my Atari 800 writing, testing, and tweaking programs just to see what the machine could do.  Sometime around 8pm I’d notice my hunger, realize that the family had already eaten dinner, and ask my mom, “Why didn’t you call me when dinner was ready?  I’m starving!”  She’d invariably claim to have called me 3-4 times, usually with me verbally acknowledging, “I’ll be there in a minute.”  Either I had no recollection of this happening, or it was like trying to recall a fuzzy dream memory.  Did she really call me, or did I imagine it?  I was so engrossed in my creative hobby that I became oblivious to what was going on around me.  If I did acknowledge my mom, it must have been an unconscious reaction.
For the past 25 years, I’ve relied heavily on these tune-out-the world creative periods for a variety of tasks encompassing many disciplines:  computer programming, game design, arts and crafts, web development, articles, speeches, Photoshop work, sound effects recording, school papers, and lots more.  Today these periods are essential for my blogging work.
For most of my life I took these creative spurts for granted.  As a teenager I attributed it to being left-handed.  But I later realized I’d developed a process for initiating and sustaining these creative periods.  I can’t guarantee these rules will be as effective for you as it is for me, but I suspect that with a little practice you’ll find them quite effective.
Here are my 7 rules for optimizing the highly creative flow state:
1. Define a clear purpose.
To enter the flow state, you need a goal.  Decide what you want to create and why.  Vague intentions don’t trigger the flow state.
If I sit down with the thought of cranking out a new article or doing some generic website work, I rarely enter the flow state.  I need a more focused intention like, “I’m going to write an article about my rules for creativity.”  Children do this automatically.  A simple, straightforward purpose like, “Let’s build a castle with these blocks” is all you need.
If you’re working on a large multi-session project like a book, state your purpose for this single creative session.  What do you want to accomplish right now?  Create an outline?  Design a character?  Write a scene?
Don’t overqualify your purpose.  You need enough clarity to give yourself a direction but not so much as to put yourself in a box.  You purpose should be an arrow, not a container.  Adding too many constraints can stunt your creativity by limiting your options.
2. Identify a compelling motive.
In addition to a goal for your creative session, you need a reason to be creative.  Why does this task matter to you personally?  What difference will it make if you can be creative?  Why do you care?
If I don’t care about a task or project, I can’t summon the flow state.  In school I could trigger the flow state easily when doing assignments I liked, but if I thought an assignment was pointless or stupid, I’d only go through the motions without crafting anything particularly original.
It’s much easier to be creative doing what you want to do vs. doing what you have to do.  One thing that often happens when people quit their jobs and go to work for themselves is that their creative output soars.  Even among those strange job-holding folk, being able to select your next project from a few options is often used as a reward, especially in technical fields.
The more compelling the motive, the more likely you are to summon high levels of creativity.  Imagine that your inner creative resources are lazy, and they need a damned good reason to roll out of bed and go to work for you.
My best creative output occurs when I’m working on something that will simultaneously benefit myself and others.  Being at the extremes of either selfishness or selflessness isn’t effective.  I write my best articles when I’m passionate about the topic and expect my writing will genuinely help people.  The anticipated impact needn’t be huge — writing a humorous piece to make people laugh is a perfectly effective motive.
3. Architect a worthy challenge.
To awaken your full creative potential, the difficulty of your creative endeavor must fall within a certain challenge spectrum.  On a scale of 1-10, where 1 is trivially easy and 10 is impossible, I’d say the optimal creative range is 5-9 with a 7-8 being ideal.
If a task is too easy, you don’t need to be particularly creative, so your creative self will simply say, “You can manage this one without me.  Come back when you have something worthy of my attention.”
If you consider a task too hard or too complicated, your beliefs will get in the way of your creativity, and you’ll end up with a self-fulfilling prophecy of failure.  Even if you manage to hit the creative zone, it will be unsustainable because you won’t recognize the validity of the ideas that come through.  When you feel a task is nearly impossible, it’s usually because the solution, if it exists, is way outside your comfort zone.  These are the kinds of problems where your creative self will come up with solutions like “quit your job” or “end your marriage.”  The solutions may be perfectly valid, perhaps even brilliantly correct under the circumstances, but you’ll be very resistant to accepting them.
What if you want to do creative work that doesn’t fall within the optimal challenge spectrum?  Fortunately there are many ways you can modify a task to adjust the challenge level.  If a task is too easy, you can add more constraints, just as you’d add weight plates to a barbell.  If a task is too hard, you can break it down into smaller chunks, like tackling a page or a chapter instead of a whole book.
Sometimes when I work on an easy task, I’ll boost the difficulty to push myself into the optimal creative range.  If I’m writing an article that seems too easy for me, I can increase the challenge by injecting humor, writing in an unusual style, or adding some other twist.  A while back I wrote a popular article on the Meaning of Life, which was a personal account of what I consider to be the most difficult period of my life (getting arrested for grand theft and being expelled from school).  Writing the article didn’t require much creativity because recalling those experiences was a straightforward, linear task.  To introduce more creativity into the piece, I decided to use Depeche Mode song and album titles for all the subheadings.  The challenge was to make them fit the text without seeming too odd.  This extra constraint made composing that 6400-word article a lot more fun.  Whenever you read an article of mine where the style seems a bit unusual, it’s a safe bet I’m boosting the challenge to be more creative.
You might assume a very easy task is a good thing, but being in the sweet spot of challenge is better.  Tackling something that’s too easy is like strength training with weights that are too light.  It’s mind-numbingly boring and won’t produce results.  Being properly challenged is more fun, helps you grow, and yields a meaningful sense of accomplishment.
4. Provide a conducive environment. 
You’ll find that certain environmental conditions make it easy for you to enter the flow state, while other conditions make it nearly impossible.  The optimal environment varies from person to person, so you’ll need to experiment to find what works best for you.
Some people seem to work best in stimulating, active environments.  Author Malcolm Gladwell (The Tipping Point, Blink) claims to have written at least one of his books entirely in public places like coffee shops.
I work best in a private, quiet environment.  I do virtually all my creative work alone in my home office with the door closed.  I’ve previously written an article on Creating a Productive Workspace, so I won’t reproduce that advice here.  But the basic idea is that different workspace layouts can have a noticeable effect on your creative output.  I’ve found certain feng shui principles helpful, such as positioning my desk to be in the “commanding position” with my back to the wall and where I can see the door.
When I’m doing challenging creative work, I usually don’t listen to background music at all, although sometimes I’ll play non-vocal new age or classical music.  However, I’ll listen to trance music (with or without vocals) when plowing through routine tasks.  I suggest experimenting with different types of music to see what effect it has on your ability to reach and maintain the flow state.
5. Allocate a committed block of time.
Imagine your mind is like a computer.  The more you can take advantage of the computer’s resources, the more creativity you harness.  To free up the most resources for your creative task, you first need to unload all nonessential processes.  This means closing programs like Ego 1.0, Physical Sensations 1.3, and Distracting Thoughts 2.0.  If you want to maximize your creativity, you need to hog as much of the CPU as you can get.
It normally takes me about 15 minutes to begin to enter the flow state, and I’m solidly entranced after about 45-60 minutes.  By the end of the first hour, I’m just getting into the task.  My real creative output happens in hours 2, 3, 4, and beyond.
It isn’t until after the first hour that the creative task is fully loaded into my mental RAM, and my CPU is finally dedicating its full capacity to the task at hand.  This is the state of deep concentration.  In this state distracting thoughts that would otherwise knock me out of state no longer arise.  I’m completely locked on, and I’ll keep plowing through my creative work until stopped by a force like fatigue or hunger.
When I begin an article, I don’t know how many words it will be or how long it will take to finish.  Sometimes I’m done after 90 minutes; other times I’m still going after 5 hours.  When I’ve written articles to target lengths (like 1000 words) or to target times (like 2 hours), I usually churn out the kind of vapid drivel you’ll find in fluffy print magazines.  With a tight deadline I can still finish something, but it won’t be anywhere near what I create with an open-ended schedule.
I recommend a minimum continuous block of 3 hours for a serious creative task, preferably closer to 6 hours.  That may sound like a lot, but once you’re cranking away in that glorious flow state, you’ll barely even notice the passage of time.  It’s better to allocate too much time than too little.  It’s a real downer to finally hit the flow state and have to stop after 30 minutes because you must attend to another commitment.  Feel free to schedule your routine tasks into 30-60 minute blocks, but give yourself as much time as possible for highly creative work.
6. Prevent interruptions and distractions.
If you can’t keep yourself from being disturbed by urgent phone calls, emails, or drop-in visitors, you won’t consistently achieve and maintain the flow state.  You must do whatever it takes to prevent unnecessary interruptions during your creative periods.  Make arrangements to ensure you won’t be disturbed except in an absolute emergency.
Once I’m in the flow state, I can handle a minor interruption like a bathroom break or grabbing a snack without falling out of state.  My mind will still be churning on the original task, and I can easily pick up where I left off.  But if I do something that requires a context change such as making a phone call or checking my email, I’ll begin losing my flow state.
When I begin a creative task, I tell Erin I’m “going to my cave,” so she knows not to interrupt me.  I clear my desk of unnecessary items, ignore the phone, disable my instant messenger, and close all programs except those required for the task at hand.  I do what I can to prevent interruptions, but even when they occur I usually just ignore them.
If you work for someone who expects you to produce creative work but makes it impossible for you to tune out interruptions, fire your boss.  If you can’t maximize your creative output, you’ve lost your greatest leverage for producing value.  That will cripple your earnings potential, since your income is a function of your ability to produce value.
Respect the value of your creative periods, and don’t permit yourself to be interrupted.
7. Master your tools.
Creating a tangible piece of creative work requires tools such as a computer, guitar, or pencil.  Even though it may take years, you must achieve basic competency with the tools of your trade before you can consistently enter the flow state.
Put in the time to take those piano lessons, attend those programming classes, or devour those Photoshop tutorials.  Of course there are degrees of mastery, but the more you develop subconscious competence with your tools, the easier it is to enter and maintain the flow state.  When you’re in the flow state, you won’t be worrying about where your fingers need to be, what buttons you need to click, or what words you need to type.  Your subconscious will handle those details for you while you remain focused on the high level composition.
The reason I can maintain the flow state when writing articles is that I’ve taken the time to develop my writing skills and to master the software I use to turn my ideas into published works.  I don’t pretend to be a literary genius, but I’m competent at turning my thoughts into words, sentences, and paragraphs without much difficulty.  On my first high school essay, I did the best I could and received a C+.  I didn’t understand the basic concepts of composition like unity and coherence.  But I had a fantastic English teacher in my freshman and sophomore years.  He was challenging and even a bit sadistic, but I put in the effort to learn grammar and composition and earn an A in his classes.  By the time I graduated high school, I could write articles, essays, and reports with relative ease.
On the other hand, when I’m not competent enough with my tools, I can’t enter the flow state.  Despite using Adobe Photoshop for many years, I never invested the time to master its complex interface because I only used it intermittently.  Consequently, I seldom achieve the flow state when using Photoshop because I spend too much time consciously thinking about the low-level action steps.  This stunts my creativity because I remain stuck in my left brain instead of shifting into my right brain.
After your creative flow state churns out your first draft, you’re always free to go back and edit it later.  Get the creative, right-brain part done first.  Then go back and do a logical, left-brain pass to make refinements and correct any problems.  For my articles that includes spell checking, tightening up the wording, making cuts, etc.
Entering and maintaining the highly creative flow state is a skill, not a blessing, an accident, or a fluke.  By habitualizing the rules above and adapting them to your situation, you can experience the flow state as a regular, perhaps even daily, occurrence.  And once you learn to harness the power of flow, your creative output will soar.


Tours of Duty: The New Employer-Employee Compact

by Reid Hoffman, Ben Casnocha, and Chris Yeh

For most of the 20th century, the compact between employers and employees in the developed world was all about stability. Jobs at big corporations were secure: As long as the company did OK financially and the employee did his or her job, that job wouldn’t go away. And in the white-collar world, careers progressed along an escalator of sorts, offering predictable advancement to employees who followed the rules. Corporations, for their part, enjoyed employee loyalty and low turnover.
Then came globalization and the Information Age. Stability gave way to rapid, unpredictable change. Adaptability and entrepreneurship became key to achieving and sustaining success. These changes demolished the traditional employer-employee compact and its accompanying career escalator in the U.S. private sector; they are in varying degrees of disarray elsewhere.
We are not the first to point this out or to propose solutions. But none of the new approaches offered so far have really taken hold. Instead of developing a better compact, many—probably most—companies have tried to become more adaptable by minimizing the existing one. Need to cut costs? Lay off employees. Need new skills? Hire different employees. Under this laissez-faire arrangement, employees are encouraged to think of themselves as “free agents,” looking to other companies for opportunities for growth and changing jobs whenever better ones beckon. The result is a winner-take-all economy that may strike top management as fair but generates widespread disillusionment among the rest of the workforce.
Even companies that have succeeded using minimalist compacts experience negative fallout, because the compacts encourage turnover and hamper employee productivity. More important, although the lack of job security indirectly creates incentives for employees to become more adaptable and entrepreneurial, the lack of mutual benefit encourages the most adaptable and entrepreneurial to take their talents elsewhere. The company reaps some cost savings but gains little in the way of innovation and adaptability.
The time has come, we believe, for a new employer-employee compact. You can’t have an agile company if you give employees lifetime contracts—and the best people don’t want one employer for life anyway. But you can build a better compact than “every man for himself.” In fact, some companies are doing so.
We three come from an environment where the employer-employee relationship has already taken new forms—the high-tech start-up community of Silicon Valley. In this world, adaptability and risk taking are acknowledged as crucial to success, and individual entrepreneurs can have a big impact if the networks they’ve built are strong enough.
Two of us (Reid and Ben) recently wrote a book, The Start-up of You, that applied the habits of successful tech entrepreneurs to the work of building a fulfilling career in any field. Obviously, not every industry works like a start-up business. But most firms today operate in a similar environment of rapid change and disruptive innovation.
Tiny start-ups out-execute corporate giants all the time, despite seemingly huge disadvantages in resources and competitive position. Start-ups succeed in large part because their founders, executives, and early employees are highly adaptable, entrepreneurial types who are motivated to out-hustle, out-network, and out-risk their competitors—and who thus generate outsize rewards.

Tours of Duty: The New Employer-Employee Compact

by Reid Hoffman, Ben Casnocha, and Chris Yeh
Recruiting, training, and relying on such a workforce can be scary. After all, if you encourage your employees to be entrepreneurial, they might leave you for the competition—or worse, they might become the competition. This is an everyday reality in Silicon Valley. But smart managers here have realized that they can encourage entrepreneurial mind-sets and increase retention by rethinking how they relate to talent within their organizations. What’s more, many have come to understand that they can benefit from employees who do leave for other opportunities.
This is the beginning, we think, of the new kind of compact that’s needed today. Although it is most evident in the tech world, we’ve seen elements of it elsewhere—at consulting firms, for example. The chief principle underlying it is reciprocity: Both parties understand and acknowledge that they’ve entered into a voluntary relationship that benefits both sides.
Mutual investment was implicit in the old lifetime employment compact, to be sure. Because both sides expected the relationship to be permanent, both sides were willing to invest in it. Companies provided training, advancement, and an unspoken guarantee of employment, while employees provided loyalty and a moderation of wage demands. The new compact acknowledges the probable impermanence of the relationship yet seeks to build trust and investment anyway. Instead of entering into strict bonds of loyalty, both sides seek the mutual benefits of alliance.
As allies, employer and employee try to add value to each other. The employer says, “If you make us more valuable, we’ll make you more valuable.” The employee says, “If you help me grow and flourish, I’ll help the company grow and flourish.” Employees invest in the company’s adaptability; the company invests in employees’ employability. As former Bain CEO Tom Tierney used to tell recruits and consultants, “We are going to make you more marketable.”
The reciprocal compact may be unsentimental, but it depends on trust nonetheless. Because the parties are seeking an alliance rather than just exchanging money for time, it can build a stronger relationship between them even as it acknowledges that relationship’s finite life in the organization. This allows both sides to take more risks, investing time and resources to find global maxima rather than simply seeking local peaks.
Netflix’s compact with its employees is an example of what these new arrangements can look like. In a famous presentation on his company’s culture, CEO Reed Hastings declared, “We’re a team, not a family.” He gave managers this advice: “Which of my people, if they told me they were leaving in two months for a similar job at a peer company, would I fight hard to keep at Netflix? The other people should get a generous severance now, so we can open a slot to try to find a star for that role.” The new compact isn’t about being nice. It’s based on an understanding that a company is its talent, that low performers will be cut, and that the way to attract talent is to offer appealing opportunities.
We’ve found three simple, straightforward ways in which organizations have made the new compact tangible and workable. They are (1) hiring employees for defined “tours of duty,” (2) encouraging, even subsidizing, the building of employee networks outside the organization, and (3) creating active alumni networks that facilitate career-long relationships between employers and former employees. Let’s look at each in turn.
Establishing a “Tour of Duty” If you think all your people will give you lifetime loyalty, think again: Sooner or later, most employees will pivot into a new opportunity. Recognizing this fact, companies can strike incremental alliances. When Reid founded LinkedIn, he set the initial employee compact as a four-year tour of duty, with a discussion at two years. If an employee moved the needle on the business during the four years, the company would help advance his career. Ideally this would entail another tour of duty at the
The tour-of-duty approach works: The company gets an engaged employee who’s striving to produce tangible achievements for the firm and who can be an important advocate and resource at the end of his tour or tours. The employee may not get lifetime employment, but he takes a significant step toward lifetime employability. A tour of duty also establishes a realistic zone of trust. Lifelong employment and loyalty are simply not part of today’s world; pretending that they are decreases trust by forcing both sides to lie.
Why two to four years? That time period seems to have nearly universal appeal. In the software business, it syncs with a typical product development cycle, allowing an employee to see a major project through. Consumer goods companies such as P&G rotate their brand managers so that each spends two to four years in a particular role. Investment banks and management consultancies have two- to four-year analyst programs. The cycle applies even outside the business world—think of U.S. presidential elections and the Olympics.
Properly implemented, the tour-of-duty approach can boost both recruiting and retention. The key is that it gives employer and employee a clear basis for working together. Both sides agree in advance on the purpose of the relationship, the expected benefits for each, and a planned end.
The problem with most employee retention programs is that they have a fuzzy goal (retain “good” employees) and a fuzzy time frame (indefinitely). Both types of fuzziness destroy trust: The company is asking an employee to commit to it but makes no commitment in return. In contrast, a tour of duty serves as a personalized retention plan that gives a valued employee concrete, compelling reasons to finish her tour and that establishes a clear time frame for discussing the future of the relationship.
The Wharton School polls its students about their satisfaction with their pre–business school jobs. It has found that students who came to it from “terminal jobs”—two-year analyst programs, for example—are more positive about their work experience than their peers are. Terminal jobs are generic versions of tours of duty; personalized tours would probably produce even more positive feelings.
In 2003 Matt Cohler was a management consultant who wanted to become a venture capitalist, although he lacked start-up experience. He began working for Reid at LinkedIn, where the two mapped out a two-year tour of duty. After that time was up, he and Reid agreed to extend the tour while they figured out what Matt could do next. Six months later Matt had the opportunity to join Facebook as one of its first five employees. Although Reid didn’t want to lose Matt, he advised him to take the position, which would bring diversity to his start-up experience and move him closer to his goal. After three years at Facebook Matt became the youngest general partner at Benchmark, a prominent venture capital firm.
Action item: Construct personalized, mutually beneficial tours. Work with key employees to establish explicit terms of their tours of duty, developing firm but time-limited mutual commitments with focused goals and clear expectations. Ask, “In this alliance, how will both parties benefit and progress?”
When possible, a tour of duty should offer an employee the possibility of a breakout entrepreneurial opportunity. This might involve building and launching a new product, re-engineering an existing business process, or introducing an organizational innovation.

This approach can’t be executed by a central HR function; you’re making a compact, not drawing up a contract. We’re not suggesting that you negotiate a guaranteed arrangement that spells out all the specifics—a rigid approach is the opposite of an entrepreneurial mind-set. You’re building a trust relationship that’s based on the employee’s actual job, so the conversations must be handled by direct managers.
Engaging Beyond the Company’s Boundaries Henry Ford once complained, “Why is it that every time I ask for a pair of hands, they come with a mind attached?” But these days, of course, minds dramatically amplify the value of hands—and they become even more powerful when they’re able to engage with minds outside the company.
No matter how many smart employees you have, there are always more smart people outside your company than within it. This is true of all organizations, from one-person start-ups to the Googles of the world.
You can engage with smart minds outside your company through the network intelligence of your employees. The wider an employee’s network, the more he or she will be able to contribute to innovation. Martin Ruef, of Duke University, has found that entrepreneurs with diverse friends scored three times as high as others on measures of innovation. To maximize diversity and thus innovation, you need networks both inside and outside your company.
Therefore, employers should encourage employees to build and maintain professional networks that involve the outside world. Essentially, you want to tell your workers, “We will provide you with time to build your network and will pay for you to attend events where you can extend it. In exchange, we ask that you leverage that network to help the company.” This is a great example of mutual trust and investment: You’re trusting your employees by giving them the resources to build their networks, and they’re investing in your business by deploying some of their relationship capital in your company’s behalf.
Those networks should encompass the entire environment in which your business operates, including customers and competitors alike and serving as platforms for information on new technology and other trends. For example, at the venture capital firm Greylock, where Reid is a partner, tapping the investment professionals’ external networks is an important part of product review meetings. Someone might ask, “What new technologies are you hearing about? Which ones should we investigate?” The insights gained translate into better decision making and more value for Greylock’s portfolio companies. The partners at another top venture capital firm, Andreessen Horowitz, have their own creative spin: At the beginning of every meeting, they award a cash prize for the best industry rumor someone has heard. You don’t have to be in venture capital to adapt such techniques for your company.
The power of external engagement helped define the history of Silicon Valley high tech, as chronicled in AnnaLee Saxenian’s 1994 book on technology clusters, Regional Advantage. In 1970 some of the world’s largest technology firms were located in Boston’s Route 128 corridor. Today none of the 10 largest tech firms are; Boston’s primacy has been snatched away by Silicon Valley. What made that possible? External networks.
Massachusetts companies typically preferred secrecy to openness and rigorously enforced noncompete clauses to prevent employees from jumping to rival firms or starting their own. Silicon Valley has long had a more open culture (and lacks enforceable noncompete clauses), and this has permitted the development of much denser and more highly interconnected networks—which make it easier for people to innovate. The area even gave rise to a term, “coopetition,” that reflects the fact that working with competitors can be mutually beneficial. Consider Netflix again: It runs its streaming video service on Amazon’s cloud platform, even though Amazon’s Instant Video is a direct competitor.
Action item: Encourage network development. In The Start-up of You we wrote, “Your career success depends on both your individual capabilities and your network’s ability to magnify them. Think of it as IWe. An individual’s power is raised exponentially with the help of a team (a network).”
Just as an individual’s power rises with the strength of her network (IWe), a company’s power rises with the strength of its employees’ networks. Value each person’s network and her ability to tap it for intelligence; make it an explicit, acknowledged asset. An employee who keeps her LinkedIn profile current or builds a big personal following on Twitter is doing right by your company, not being disloyal to it. And make a candidate’s network strength and diversity a priority when hiring. Bringing in employees with strong networks is good; hiring people whose networks complement rather than overlap those of existing employees is even better.
One of the techniques we recommend for individuals is to maintain an “interesting-person fund” to take people in their networks out to coffee. The corporate equivalent is a “networking fund” for employees. To make sure your company reaps the full benefits, establish two requirements for tapping the fund. First, employees have to leave your corporate campus; you want them to get “outside the building” to build a more diverse external network. Second, they must report back about what they learn so that the gains are shared. Most companies allow employees to expense business lunches, but few allow them to expense networking lunches. Yet if you’re a top executive, you probably have such lunches all the time, and your company benefits as a result. Make it not just acceptable but expected for your people to do the same.
HubSpot, a Massachusetts-based marketing software company that, in its words, believes in “invest[ing] in [the] individual mastery and market value” of every HubSpotter, keeps it even simpler than that. Interested in a book? Mention it on the internal company wiki, and the book will show up on your Kindle. Want to take somebody smart to lunch? Company policy is: “Expense it. No approval needed.”
The network intelligence flowing into your company needs to be a top management concern, with specific programs to strengthen and extend it. For highly networked and entrepreneurial employees, this is one of the primary criteria for judging your attractiveness as an employer.
Building Alumni Networks The first thing you should do when a valuable employee tells you he is leaving is try to change his mind. The second is congratulate him on the new job and welcome him to your company’s alumni network.
Just because a job ends, your relationship with your employee doesn’t have to. Corporate alumni networks are a prime way to maintain long-term relationships with your best people. As Cindy Lewiton Jackson noted while she was the global director of career development and alumni relations at Bain, “The goal is not to retain employees. The goal is to build lifelong affiliation.”
Some industries and firms have long understood this. McKinsey & Company has operated an alumni network since the 1960s; the group now has upwards of 24,000 members (including more than 230 CEOs of companies with at least $1 billion in annual revenue). Booz Allen Hamilton’s network has 38,000 people.

One obvious benefit of alumni networks is the opportunity to rehire former employees. The Corporate Executive Board reports that rolling out the CEB Alumni Network doubled its rehire rate in just two years. But the value goes far beyond that. Your alumni are among your most effective means of external engagement. They can share competitive information, effective business practices, emerging industry trends, and more. They understand how your organization works and are generally inclined to help you if they can. Bain’s Tom Tierney has observed, “Our number one source of high-quality new business is our alumni.”
It may be that management consultancies have pioneered corporate alumni networks because the organizational practices of those firms (two-year analyst programs, “up or out” advancement, encouragement of consultants to take positions with clients) align so well with the concept—but the practice is spreading. LinkedIn now hosts thousands of corporate alumni groups, including those of 98% of the Fortune 500 companies. Such groups are often informal, not official; they spring up because alumni want to stay in touch with and help one another. In a study from the University of Twente, in the Netherlands, only 15% of the companies surveyed had official alumni networks, but 67% had independently organized, informal groups.
You might fear that running an alumni network is an admission of failure—a sign that your company can’t retain its best people. But your alumni are likely to form a network anyway; the only real question is whether your company will have a voice in it. Alumni are fallow resources waiting for you to tap them. So why don’t you?
Action item: Utilize your exit interviews. The traditional exit interview represents a lost opportunity. Instead of collecting perfunctory feedback that they’ll probably just ignore, your managers should gather information that can help you maintain long-term relationships with departing employees (and induct them into your alumni network!). Keep a database of information on all former employees: personal e-mail and phone, LinkedIn profile, Twitter handle, blog URL, areas of expertise, and so on.
The exit interview is also a trust-building opportunity. Many employees have sat through grimly polite or even resentful parting talks. You can make your company stand out by emphasizing the ongoing nature of the relationship. This is also, of course, an opportunity to learn about ways the company and you can do better. Departing employees are more likely than current ones to be honest, and the flaws in your business and organizational practices may be on their minds. Listen closely to what they say.
If the employee who’s leaving is one of your stars, you should provide an even higher level of service (assuming he handles his departure professionally and doesn’t take the rest of the organization with him). Such folks are likely to go on to great things and to be the hubs of their networks, which could prove very valuable to you. As with the tour of duty, aim for a two-way flow of value; you need to provide benefits if you expect to receive them. The benefits you offer may depend on the business you’re in. For example, management consultancies often give free insights to alumni who have joined industry clients. If you’re a consumer company, offer alumni discounts in addition to the customary employee discounts. The cost is minimal, and the trust and goodwill gained can be substantial. Some might consider it extravagant to “reward” employees who have left, but that view misses the point. Most employees don’t leave because they’re disloyal; they leave because you can’t match the opportunity offered by another company.
If you don’t have the resources to set up a formal alumni network, you can support the informal networks that arise on LinkedIn or Facebook. Your assistance can cover the gamut, from giving financial rewards to alumni who help your firm to handing out company swag or paying for pizza during a meetup. Even distributing an alumni newsletter can contribute to an ongoing cordial relationship at practically no cost.
The Virtuous Circle An employee who is networking energetically, keeping her LinkedIn profile up to date, and thinking about other opportunities is not a liability. In fact, such entrepreneurial, outward-oriented, forward-looking people are probably just what your company needs more of.
How do you square the need for such people with the reality that many of them won’t stick around forever? First, by accepting that reality. A CEB study of 20,000 workers identified by their employers as “high potentials” found that one in four of them planned to be working elsewhere within the year (see “How to Keep Your Top Talent,” HBR May 2010). Once you get past this scary truth, you’ll find it easier to achieve honest, productive relationships that support your employees’ ambitions. This will make your employees more effective on the job and may actually keep them around longer.
The key to the new employer-employee compact we envision is that although it’s not based on loyalty, it’s not purely transactional, either. It’s an alliance between an organization and an individual that’s aimed at helping both succeed.
In the war for talent, such a pact can be the secret weapon that helps you fill your ranks with the creative, adaptive superstars everyone wants. These are the entrepreneurial employees who drive business success—and business success makes you even more attractive to entrepreneurial employees. This virtuous circle has created a competitive advantage in talent for Silicon Valley companies. It can work for your company, too.