I’m about half-way through “The Design of Business” by Roger Martin which explores how knowledge advances from one stage to another-from mystery (something we can’t explain) to heuristic (a rule of thumb that guides us toward solution) to algorithm (a predictable formula for producing an answer) to code (when the formula becomes so predictable it can be fully automated). As knowledge advances across the stages, productivity grows and costs drop-creating massive value for companies. p18-19

He talks about two of the models companies operate under, exploitation and exploration.  To paraphrase companies that operate under the exploitation philosophy will analyze a set of resources and their strategy will be to squeeze every drop of revenue and subsequent profit out of those resources, think of these companies as super efficient.   Companies that adhere to the strategy of exploration will purposefully step of the path of their current success to analyze the market, the customer and seek to discover new products.  Exploitation is a strategy that reaps tremendous benefit – and then seemingly overnight the cash cow runs dry.   Exploration bears almost no fruit in the short-term and can command equal resources without benefit – then seemingly overnight it turns into a rock star.

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• How Do Innovators Think? (blogs.harvardbusiness.org)
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I was fortunate to attend the Cincinnati area AMA lunch today, where Kip Knight, Vice President – Marketing of eBay spoke about “using the power of all of us to build your business” where he outlined his thoughts on the trending of business and marketing of companies moving into an open sourcing and collaboration model and away from the command and control model so many companies are familiar with.

Kip covered ground quickly, and interspersed his big ideas with humor to keep it light. As a result I left with a couple pages of notes. While Kip didn’t plant to many new ideas in my head, he proved a great review of blogs and articles I’ve read in the past few months. It’s also great to see yet another industry leader such as eBay to embrace these ideas.

You can view my full notes here (pdf download), but I thought I’d share a couple things he mentioned which I found very helpful and interesting.

First, Kip talked about a couple methods/programs they use to monitor the pulse of the eBay community.

* Voices – They fly in 20 users (sellers/buyers) each month and senior management with other key employees sit and talk with these users. Learning what they like about the site, what they don’t like, features they’d find helpful, etc. Once these users visit they become part of the Voices community and can be called in the future to answer questions and provide opinions on new ideas.
* Visits – This method takes 3 ebay employees to visit site users in their homes and watch them sell/buy on eBay. One employee asks questions, another takes notes, and the last video tapes.
* Views – Once a quarter, they conducts topical focus groups around the country on topics that are important to the company and it’s user base. i.e. Topic for Q2 2008 is safety

Secondly, he mentioned a couple stats I found very intriguing, the first of which is that 40% of the things sold on eBay are sold/listed via their API. 40%! That’s huge!

He also mentioned Wikipedia and how it’s huge user base allows for it to have a minimal staff of 5 full time employees, yet it is very agile in maintaining it’s product (obscenities last online for 1.7 minutes). It blows my mind that they are that quick in removing information that doesn’t conform to their community rules.

His talk sparked quite a few questions and ideas that require a bit more development, but I’ll follow up with additional posts later as those thoughts tie in for me, especially how they work with Abunga.

He also endorsed a book that I’m currently reading which is “Ultimate Question: For Unlocking the Door to Good Profits and True Growth” by Frederick F. Reichheld. The book focuses on the use of what is called the Net Promoter Score, boiling down to the question – would you recommend us to a friend? Pretty simple question, but very pertinent.

Have a great Easter.

The weather down here in Knoxville has been gorgeous, sunny and in the high 60s. Yesterday I took advantage of this weather and went mountain biking for the first time this year. It was a great ride, good traction, a slight breeze and they’d done some trail improvement from the fall so the loop was much faster. On one downhill switchback I went sliding off the trail into the the leafs and subsequently that led me into a tree which stopped my slide. Now sliding into that tree hurt, not only my hand (which connected solidly with the trunk) but my pride as well, I’ve been riding for a few years, I don’t think I should be sliding off the trail into trees. I got unclipped and untangled and hopped back up on the trail. Then it happened again, different curve, different tree, same pain. This time it happened I thought about it a bit more. As I rode away I realized that I was forgetting a crucial element, I wasn’t steering. As soon as I saw I was going off track I would neglect to point myself in the right direction and I would focus only on stopping. The next time I came around a switchback I made the decision to turn the direction I wanted to go, regardless of the consequence. Surprise, surprise I stayed on the trail, now it wasn’t the most controlled turn I’ve made, but it got me around the corner.

Now how often in our business or interactions do we forget to steer? We are so focused on maintaining speed, we get caught up in our daily actions and forget to steer. Creating new products or improvements of existing improvements are crucial, but sometimes the trail changes direction. We can steer better by learning from our customers, to talking with them about the product/service. If not our customers directly, then our salespeople who are the next closest. On my ride If I would have looked ahead I probably could have seen that the turn was coming and prepared for it (and not hit a tree).

Strategy is important too, we must look forward unless we want to join the likes of companies that have been industry leaders at some point, and they become so myopic and focused on what they do, they neglect to look forward until they are at the turn in the trail, and all their momentum, their investment, is propelling them off the trail into a tree.

Going off the trail into a tree hurts, the same is for business. If we’ve been in our market for a long time, like I’ve been biking for a while, we expect the similar performance. We forget that our idea’s that got us started had risk, and that the cycle of change is always happening.

To avoid trees and to make it through switchbacks I think we have to steer and look ahead. What do you think? Is one more important than the other? Or is their an “x” not considered here that trumps all others?