How Will You Measure Your Life? PDF

How Will You Measure Your Life? Clayton M. Christensen, James Allworth, and Karen Dillon Contents Cover Title Page Dedication Prologue 1 Just Because You Have Feathers … Section I Finding Happiness in Your Career 2 What Makes Us Tick...

How Will You Measure Your Life? Clayton M. Christensen, James Allworth, and Karen Dillon Contents Cover Title Page Dedication Prologue 1 Just Because You Have Feathers … Section I Finding Happiness in Your Career 2 What Makes Us Tick 3 The Balance of Calculation and Serendipity 4 Your Strategy Is Not What You Say It Is Section II Finding Happiness in Your Relationships 5 The Ticking Clock 6 What Job Did You Hire That Milkshake For? 7 Sailing Your Kids on Theseus’s Ship 8 The Schools of Experience 9 The Invisible Hand Inside Your Family Section III Staying Out of Jail 10 Just This Once … Epilogue Acknowledgments About the Authors Also by Clayton M. Christensen Credits Copyright About the Publisher Dedication To our families PROLOGUE ON THE LAST day of the course that I teach at Harvard Business School, I typically start by telling my students what I observed among my own business school classmates after we graduated. Just like every other school, our reunions every five years provided a series of fascinating snapshots. The school is superb at luring back its alumni for these events, which are key fund-raisers; the red carpet gets rolled out with an array of high-profile speakers and events. My own fifth-year reunion was no exception and we had a big turnout. Looking around, everyone seemed so polished and prosperous—we couldn’t help but feel that we really were part of something special. We clearly had much to celebrate. My classmates seemed to be doing extremely well; they had great jobs, some were working in exotic locations, and most had managed to marry spouses much better-looking than they were. Their lives seemed destined to be fantastic on every level. But by our tenth reunion, things that we had never expected became increasingly common. A number of my classmates whom I had been looking forward to seeing didn’t come back, and I had no idea why. Gradually, by calling them or asking other friends, I put the pieces together. Among my classmates were executives at renowned consulting and finance firms like McKinsey & Co. and Goldman Sachs; others were on their way to top spots in Fortune 500 companies; some were already successful entrepreneurs, and a few were earning enormous, life-changing amounts of money. Despite such professional accomplishments, however, many of them were clearly unhappy. Behind the facade of professional success, there were many who did not enjoy what they were doing for a living. There were, also, numerous stories of divorces or unhappy marriages. I remember one classmate who hadn’t talked to his children in years, who was now living on the opposite coast from them. Another was on her third marriage since we’d graduated. My classmates were not only some of the brightest people I’ve known, but some of the most decent people, too. At graduation they had plans and visions for what they would accomplish, not just in their careers, but in their personal lives as well. Yet something had gone wrong for some of them along the way: their personal relationships had begun to deteriorate, even as their professional prospects blossomed. I sensed that they felt embarrassed to explain to their friends the contrast in the trajectories of their personal and professional lives. At the time, I assumed it was a blip; a kind of midlife crisis. But at our twenty-five- and thirty-year reunions, the problems were worse. One of our classmates—Jeffrey Skilling—had landed in jail for his role in the Enron scandal. The Jeffrey Skilling I knew of from our years at HBS was a good man. He was smart, he worked hard, he loved his family. He had been one of the youngest partners in McKinsey & Co.’s history and later went on to earn more than $100 million in a single year as Enron’s CEO. But simultaneously, his private life was not as successful: his first marriage ended in divorce. I certainly didn’t recognize the finance shark depicted in the media as he became increasingly prominent. And yet when his entire career unraveled with his conviction on multiple federal felony charges relating to Enron’s financial collapse, it not only shocked me that he had gone wrong, but how spectacularly he had done so. Something had clearly sent him off in the wrong direction. Personal dissatisfaction, family failures, professional struggles, even criminal behavior—these problems weren’t limited to my classmates at HBS. I saw the same thing happen to my classmates in the years after we completed our studies as Rhodes Scholars at Oxford University. To be given that opportunity, my classmates had to have demonstrated extraordinary academic excellence; superior performance in extracurricular activities such as sports, politics, or writing; and significant contributions to their communities. These were well- rounded, accomplished people who clearly had much to offer the world. But as the years went by, some of my thirty-two Rhodes classmates also experienced similar disappointments. One played a prominent role in a major insider trading scandal, as recounted in the book Den of Thieves. Another ended up in jail because of a sexual relationship with a teenager who had worked on his political campaign. He was married with three children at the time. One who I thought was destined for greatness in his professional and family spheres has struggled in both—including more than one divorce. I know for sure that none of these people graduated with a deliberate strategy to get divorced or lose touch with their children—much less to end up in jail. Yet this is the exact strategy that too many ended up implementing. I don’t want to mislead you. Alongside these disappointments, there are many of my classmates who have led exemplary personal lives; they have truly been an inspiration to me. But our lives are not over, and the lives of our children are just now unfolding. Understanding what causes the problems that trapped some of my classmates is important not just for those who have come off the path that they had planned to follow but for those whose lives are still on the right path—as well as those whose journeys are just beginning. We all are vulnerable to the forces and decisions that have derailed too many. I am among those who have been fortunate so far—in many ways due to my wonderful wife, Christine, who has helped us see into the future with remarkable prescience. It would be folly for me to write this book, however, to proclaim that everyone who replicates the decisions we have made will be happy and successful, too. Instead, in writing this book, I have followed the approach that has characterized my management research. I have engaged my students in the quest as well. In my MBA course, Building and Sustaining a Successful Enterprise, we study theories regarding the various dimensions of the job of general managers. These theories are statements of what causes things to happen—and why. When the students understand these theories, we put them “on”—like a set of lenses—to examine a case about a company. We discuss what each of the theories can tell us about why and how the problems and opportunities emerged in the company. We then use the theories to predict what problems and opportunities are likely to occur in the future for that company, and we use the theories to predict what actions the managers will need to take to address them. By doing this, the students learn that a robust theory is able to explain what has and what will occur across the hierarchy of business: in industries; in the corporations within those industries; in the business units within those corporations; and in the teams that are within the business units. In the past several years, on the last day of my class after I’ve summarized what so frequently happens in the lives of our graduates, we have taken the discussion a step further, plumbing to the most fundamental element of organizations: individuals. For this discussion, rather than use businesses as the case studies, we use ourselves. I participate in these discussions with more history than my students do, but I follow the same rules. We are there to explore not what we hope will happen to us but rather what the theories predict will happen to us, as a result of different decisions and actions. Because I’ve been present in these discussions over many years, I’ve learned more about these issues than any one group of my students ever has. To even the score with them, however, I have shared stories about how these theories have played out in my life. To help structure this discussion, I write the theories we have studied along the top of the chalkboard. Then I write three simple questions beside those theories:  How can I be sure that I will be successful and happy in my career? My relationships with my spouse, my children, and my extended family and close friends become an enduring source of happiness? I live a life of integrity—and stay out of jail? These questions might sound simple, but they are questions that so many of my classmates never asked, or had asked but lost track of what they learned. Year after year I have been stunned at how the theories of the course illuminate issues in our personal lives as they do in the companies we’ve studied. In this book, I will try to summarize some of the best of the insights my students and I have discussed on that last day in class. IN THE SPRING of 2010, I was asked to speak not just to the students in my own class but to the entire graduating student body. But that’s not the only way things were a little different that day. Standing at the podium with little hair as the result of chemotherapy, I explained that I had been diagnosed with follicular lymphoma, a cancer similar to that which had killed my father. I expressed my gratitude that I could use this time with them to summarize what my students and I had learned from focusing these theories on ourselves. I spoke about the things in our lives that are most important—not just when you are confronting a life-threatening illness, as I was, but every day, for every one of us. Sharing my thoughts that day with the students about to make their own way in the world was a remarkable experience. James Allworth, who was in my class that semester and in the audience that day, and Karen Dillon, who heard about my remarks in her position as editor of the Harvard Business Review, were both extremely moved by the topic. I later asked them to help me convey to a broader audience the feeling people had that day in Burden Hall on the Harvard Business School campus. We are from three different generations and have completely different beliefs informing our lives. James is a recent business school graduate, who assures me that he is an atheist. I’m a father and grandfather with a deeply held faith, far into my third professional career. Karen, the mother of two daughters, is two decades into a career as an editor. She says her beliefs and career fall someplace between us.  But the three of us are united in the goal of helping you understand the theories we share in this book because we believe they can sharpen the acuity with which you can examine and improve your life. We’ve written in the first person, my voice, because it’s how I talk to my students—and my own children —about this thinking. But James and Karen have truly been coauthors in deed. I don’t promise this book will offer you any easy answers: working through these questions requires hard work. It has taken me decades. But it has also been one of the most worthwhile endeavors of my life. I hope the theories in this book can help you as you continue on your journey, so that in the end, you can definitively answer for yourself the question “How will you measure your life?” CHAPTER ONE Just Because You Have Feathers … There are probably dozens of well-intended people who have advice for how you should live your life, make your career choices, or make yourself happy. Similarly, walk into the self-help section of any bookstore and you’ll be overwhelmed with scores of choices about how you can improve your life. You know, intuitively, that all these books can’t be right. But how can you tell them apart? How do you know what is good advice—and what is bad? The Difference Between What to Think and How to Think There are no easy answers to life’s challenges. The quest to find happiness and meaning in life is not new. Humans have been pondering the reason for our existence for thousands of years. What is new, however, is how some modern thinkers address the problem. A bevy of so-called experts simply offer the answers. It’s not a surprise that these answers are very appealing to some. They take hard problems—ones that people can go through an entire life without ever resolving—and offer a quick fix. That is not what I intend with this book. There are no quick fixes for the fundamental problems of life. But I can offer you tools that I’ll call theories in this book, which will help you make good choices, appropriate to the circumstances of your life. I learned about the power of this approach in 1997, before I published my first book, The Innovator’s Dilemma I got a call from Andy Grove, then the chairman of Intel. He had heard of one of my early academic papers about disruptive innovation, and asked me to come to Santa Clara to explain my research and tell him and his top team what it implied for Intel. A young professor, I excitedly flew to Silicon Valley and showed up at the appointed time, only to have Andy say, “Look, stuff has happened. We have only ten minutes for you. Tell us what your research means for Intel, so we can get on with things.” I responded, “Andy, I can’t, because I know very little about Intel. The only thing I can do is to explain the theory first; then we can look at the company through the lens that the theory offers.” I then showed him a diagram of my theory of disruption. I explained that disruption happens when a competitor enters a market with a low-priced product or service that most established industry players view as inferior. But the new competitor uses technology and its business model to continually improve its offering until it is good enough to satisfy what customers need. Ten minutes into my explanation, Andy interrupted impatiently: “Look, I’ve got your model. Just tell us what it means for Intel.” I said, “Andy, I still can’t. I need to describe how this process worked its way through a very different industry, so you can visualize how it works.” I told the story of the steel-mill industry, in which Nucor and other steel mini-mills disrupted the integrated steel-mill giants. The mini-mills began by attacking at the lowest end of the market—steel reinforcing bar, or rebar—and then step by step moved up toward the high end, to make sheet steel—eventually driving all but one of the traditional steel mills into bankruptcy. When I finished the mini-mill story, Andy said, “I get it. What it means for Intel is …” and then went on to articulate what would become the company’s strategy for going to the bottom of the market to launch the lower-priced Celeron processor. I’ve thought about that exchange a million times since. If I had tried to tell Andy Grove what he should think about the microprocessor business, he would have eviscerated my argument. He’s forgotten more than I will ever know about his business. But instead of telling him what to think, I taught him how to think. He then reached a bold decision about what to do, on his own. I Don’t Have an Opinion, the Theory Has an Opinion That meeting with Andy changed the way I answer questions. When people ask me something, I now rarely answer directly. Instead, I run the question through a theory in my own mind, so I know what the theory says is likely to be the result of one course of action, compared to another. I’ll then explain how it applies to their question. To be sure they understand it, I’ll describe to them how the process in the model worked its way through an industry or situation different from their own, to help them visualize how it works. People, typically, then say, “Okay, I get it.” They’ll then answer their question with more insight than I could possibly have. A good theory doesn’t change its mind: it doesn’t apply only to some companies or people, and not to others. It is a general statement of what causes what, and why. To illustrate, about a year after meeting with Andy Grove, I received a call from William Cohen, then–secretary of defense in the Clinton administration. He told me he’d read The Innovator’s Dilemma. “Could you come to Washington and talk to me and my staff about your research?” he asked. To me, this was a once-in-a-lifetime opportunity. When Secretary Cohen had said “my staff,” somehow I had imagined second lieutenants and college interns. But when I walked into the secretary’s conference room, the Joint Chiefs of Staff were in the front row, followed by the secretaries of the Army, Navy, and Air Force, and then each of the secretaries’ under-, deputy, and assistant secretaries. I was stunned. He said that this was the first time he had convened all of his direct reports in one room. Secretary Cohen simply asked me to present my research. So using the exact same PowerPoint slides I had used with Andy Grove, I started explaining the theory of disruption. As soon as I had explained how the mini-mills had undermined the traditional steel industry by starting with rebar at the bottom, General Hugh Shelton, then the chairman of the Joint Chiefs of Staff, stopped me. “You have no idea why we are interested in this, do you?” he queried. Then he gestured to the mini-mill chart. “You see the sheet steel products at the top of the market?” he asked. “That was the Soviets, and they’re not the enemy anymore.” Then he pointed to the bottom of the market—rebar—and said, “The rebar of our world is local policing actions and terrorism.” Just as the mini-mills had attacked the massive integrated mills at the bottom of the market and then moved up, he worried aloud, “Everything about the way we do our jobs is focused on the high end of the problem—what the USSR used to be.” Once I understood why I was there, we were able to discuss what the result of fighting terrorism from within the existing departments would be, versus setting up a completely new organization. The Joint Chiefs later decided to go down the route of forming a new entity, the Joint Forces Command, in Norfolk, Virginia. For more than a decade, this command served as a “transformation laboratory” for the United States military to develop and deploy strategies to combat terrorism around the world. On the surface, competition in the computer chip market and the proliferation of global terrorism could not seem like more different problems to tackle. But they are fundamentally the same problem, just in different contexts. Good theory can help us categorize, explain, and, most important, predict. People often think that the best way to predict the future is by collecting as much data as possible before making a decision. But this is like driving a car looking only at the rearview mirror—because data is only available about the past. Indeed, while experiences and information can be good teachers, there are many times in life where we simply cannot afford to learn on the job. You don’t want to have to go through multiple marriages to learn how to be a good spouse. Or wait until your last child has grown to master parenthood. This is why theory can be so valuable: it can explain what will happen, even before you experience it. Consider, for example, the history of mankind’s attempts to fly. Early researchers observed strong correlations between being able to fly and having feathers and wings. Stories of men attempting to fly by strapping on wings date back hundreds of years. They were replicating what they believed allowed birds to soar: wings and feathers. Possessing these attributes had a high correlation—a connection between two things—with the ability to fly, but when humans attempted to follow what they believed were “best practices” of the most successful fliers by strapping on wings, then jumping off cathedrals and flapping hard … they failed. The mistake was that although feathers and wings were correlated with flying, the would-be aviators did not understand the fundamental causal mechanism—what actually causes something to happen—that enabled certain creatures to fly. The real breakthrough in human flight didn’t come from crafting better wings or using more feathers. It was brought about by Dutch-Swiss mathematician Daniel Bernoulli and his book Hydrodynamica, a study of fluid mechanics. In 1738, he outlined what was to become known as Bernoulli’s principle, a theory that, when applied to flight, explained the concept of lift. We had gone from correlation (wings and feathers) to causality (lift). Modern flight can be traced directly back to the development and adoption of this theory. But even the breakthrough understanding of the cause of flight still wasn’t enough to make flight perfectly reliable. When an airplane crashed, researchers then had to ask, “What was it about the circumstances of that particular attempt to fly that led to failure? Wind? Fog? The angle of the aircraft?” Researchers could then define what rules pilots needed to follow in order to succeed in each different circumstance. That’s a hallmark of good theory: it dispenses its advice in “if-then” statements. The Power of Theory in Our Lives How do fundamental theories relate to finding happiness in life? The appeal of easy answers—of strapping on wings and feathers—is incredibly alluring. Whether these answers come from writers who are hawking guaranteed steps for making millions, or the four things you have to do to be happy in marriage, we want to believe they will work. But so much of what’s become popular thinking isn’t grounded in anything more than a series of anecdotes. Solving the challenges in your life requires a deep understanding of what causes what to happen. The theories that I will discuss with you will help you do exactly that. This book uses research done at the Harvard Business School and in some of the world’s other leading universities. It has been rigorously tested in organizations of all sizes around the world. Just as these theories have explained behavior in a wide range of circumstances, so, too, do they apply across a wide range of questions. With most complex problems it’s rarely as simple as identifying the one and only theory that helps solve the problem. There can be multiple theories that provide insight. For example, though Bernoulli’s thinking was a significant breakthrough, it took other work—such as understanding gravity and resistance —to fully explain flight. Each chapter of this book highlights a theory as it might apply to a particular challenge. But just as was true in understanding flight, problems in our lives don’t always map neatly to theories on a one-to-one basis. The way I’ve paired the challenges and theories in the subsequent chapters is based on how my students and I have discussed them in class. I invite you, as you journey through the book, to go back to theories in earlier chapters, just as my students do, and explore the problems through the perspective of multiple theories, too. These theories are powerful tools. I have applied many of them in my own life; others I wish I’d had available to me when I was younger, struggling with a problem. You’ll see that without theory, we’re at sea without a sextant. If we can’t see beyond what’s close by, we’re relying on chance—on the currents of life—to guide us. Good theory helps people steer to good decisions—not just in business, but in life, too. You might be tempted to try to make decisions in your life based on what you know has happened in the past or what has happened to other people. You should learn all that you can from the past; from scholars who have studied it, and from people who have gone through problems of the sort that you are likely to face. But this doesn’t solve the fundamental challenge of what information and what advice you should accept, and which you should ignore as you embark into the future. Instead, using robust theory to predict what will happen has a much greater chance of success. The theories in this book are based on a deep understanding of human endeavor—what causes what to happen, and why. They’ve been rigorously examined and used in organizations all over the globe, and can help all of us with decisions that we make every day in our lives, too. SECTION I Finding Happiness in Your Career The only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it. —Steve Jobs  WHEN YOU WERE ten years old and someone asked you what you wanted to be when you grew up, anything seemed possible. Astronaut. Archaeologist. Fireman. Baseball player. The first female president of the United States. Your answers then were guided simply by what you thought would make you really happy. There were no limits. There are a determined few who never lose sight of aspiring to do something that’s truly meaningful to them. But for many of us, as the years go by, we allow our dreams to be peeled away. We pick our jobs for the wrong reasons and then we settle for them. We begin to accept that it’s not realistic to do something we truly love for a living. Too many of us who start down the path of compromise will never make it back. Considering the fact that you’ll likely spend more of your waking hours at your job than in any other part of your life, it’s a compromise that will always eat away at you. But you need not resign yourself to this fate. I had been out of college and in the working world for years before I figured out that I could make it back to school to teach and develop a generation of wonderful young people. For a long time, I had no idea that this might be possible. Now there’s nothing I would rather be doing. Every day I think of how fortunate I am. I want you to be able to experience that feeling—to wake up every morning thinking how lucky you are to be doing what you’re doing. Together, in the next chapters, we’re going to build a strategy for you to do exactly that. A strategy? At a basic level, a strategy is what you want to achieve and how you will get there. In the business world, this is the result of multiple influences: what a company’s priorities are, how a company responds to opportunities and threats along the way, and how a company allocates its precious resources. These things all continuously combine, to create and evolve a strategy. You don’t need to think about this for more than a minute, however, before you realize that this same strategy-making process is at work in every one of us as well. We have intentions for our careers. Against those intentions, opportunities and threats emerge that we haven’t anticipated. And how we allocate our resources—our time, talent, and energies—is how we determine the actual strategy of our lives. Occasionally, the actual strategy maps quite closely with what we intended. But often what we actually end up doing is very different from what we set out to do. The art of managing this, however, is not to simply stomp out anything that was not a part of the original plan. Among those threats and opportunities that we didn’t anticipate, there are almost always better options than were contained in our original plans. The strategist in us needs to figure out what these better things are, and then manage our resources in order to nourish them. The following chapters are all designed to help you leverage these concepts in answering the question “How can I find happiness in my career?” The starting point for our journey is a discussion of priorities. These are, in effect, your core decision-making criteria: what’s most important to you in your career? The problem is that what we think matters most in our jobs often does not align with what will really make us happy. Even worse, we don’t notice that gap until it’s too late. To help you avoid this mistake, I want to discuss the best research we have on what truly motivates people. Following this, I will outline how best to balance our plans to find something that we truly love doing with the opportunities and challenges that we never expected to arise in our lives. While some people will argue that you should always have the next five years of your life planned out, others have followed a strategy of just seeing what has come along and will tell you that it’s worked well for them. There’s a time and a place for both approaches. Drawing on our research, I will explain what the best circumstances are to be deliberate, to have that plan; and when it’s best to be emergent—to be open to the unexpected. The final element is execution. The only way a strategy can get implemented is if we dedicate resources to it. Good intentions are not enough—you’re not implementing the strategy that you intend if you don’t spend your time, your money, and your talent in a way that is consistent with your intentions. In your life, there are going to be constant demands for your time and attention. How are you going to decide which of those demands gets resources? The trap many people fall into is to allocate their time to whoever screams loudest, and their talent to whatever offers them the fastest reward. That’s a dangerous way to build a strategy. All of these factors—priorities, balancing plans with opportunities, and allocating your resources—combine to create your strategy. The process is continuous: even as your strategy begins to take shape, you’ll learn new things, and new problems and opportunities will always emerge. They’ll feed back in; the cycle is continuous. If you can understand and manage this strategy process, you’ll have the best shot at getting it right—of having a career that you will truly love. Even if you don’t end up getting to be an astronaut. CHAPTER TWO What Makes Us Tick It’s impossible to have a meaningful conversation about happiness without understanding what makes each of us tick. When we find ourselves stuck in unhappy careers—and even unhappy lives—it is often the result of a fundamental misunderstanding of what really motivates us. The Importance of Getting Motivation Right When I was running CPS Technologies, a company that I founded with several MIT professors early in my career, I had an epiphany of sorts about what motivates us. One summer Saturday, we had a company picnic for our employees’ families in a park near our laboratories. There was nothing fancy about it, but it was a welcome opportunity to get a three-dimensional perspective of our colleagues’ lives. I walked to the periphery of the group after everyone had arrived, just to figure out who belonged to whom. Out of the corner of my eye, I saw Diana, one of our scientists, and her husband, playing with their two children. Diana had a key position in the lab: she was an analytical chemist. Her job was to help the other scientists use our company’s specialized equipment so that they could know what elements were present in the compounds they created or with which they were working. By definition, waiting until the results came back from the tests Diana ran occasionally frustrated some of the twenty or so scientists on the team—each of whom needed his or her test run as the highest priority. But it frustrated Diana even more. She wanted to help everyone, but as a start-up we couldn’t buy unlimited equipment. So there were a limited number of machines and only ten hours in Diana’s workday. As a result, her days were often filled with turf battles. But that’s not what I saw at that moment. Instead, I was impressed by the love Diana and her husband clearly shared with their two children. Seeing her there, I began to gain a perspective of Diana in the full context of her life. She wasn’t just a scientist. She was a mother and a wife, whose mood, whose happiness, and whose sense of self-worth had a huge impact on her family. I began to think about what it must be like in her house in the morning, as she said good-bye to her family on her way to work. Then I saw Diana in my mind’s eye as she came home to her family ten hours later, on a day that had gone badly. She felt underappreciated, frustrated, and demeaned; she learned little that was new. In that moment I felt like I saw how her day at work negatively affected the way she interacted in the evening with her husband and their young children. This vision in my mind then fast-forwarded to the end of another day. On the one hand, she was so engaged by the experiment she was doing that she wanted to stay at work; but on the other, she was so looking forward to spending time with her husband and children that she clearly wanted to be at home. On that day, I saw her driving home with greater self-esteem—feeling that she had learned a lot, having been recognized in a positive way for achieving valuable things, and played a significant role in the success of some important initiatives for several scientists and for the company. I felt like I could see her go into her home at the end of that day with a replenished reservoir of esteem that profoundly affected her interaction with her husband and those two lovely children. And I also knew how she’d feel going into work the next day— motivated and energized. It was a profound lesson. Do Incentives Make the World Go Round? Six years later, as a new professor, I was standing at the front of a Harvard classroom teaching Technology and Operations Management, a required first- year course for all of our MBA students. In the discussion that day about the case study on a big materials company, a student recommended a way to resolve a conflict with one of their most critical customers. She suggested the company assign a key engineer, Bruce Stevens, to this project—in addition to his other responsibilities. I questioned her: “Asking Bruce to do this makes sense in isolation. But getting Bruce to actually make this his highest priority, on top of an overflowing plate of other responsibilities—isn’t that going to be hard?” “Just give him an incentive,” was her reply. “Wow—that sure is a simple answer. What kind of incentive do you have in mind?” I asked. “Just give him a bonus if he gets it done on time,” she responded. “The problem,” I said, “is that he has other responsibilities on other projects as well. If he focuses on this as his top priority, he’s going to fall behind on those other projects. So then what are you going to do—give him another financial incentive to motivate him to work harder on all the other projects?” I pointed to a statement in the case about Bruce. He was clearly a driven man, who routinely worked seventy-hour weeks. When the student said that’s exactly what she would do, I pushed her harder. “All the other employees will see that you are giving Bruce a bonus. Aren’t they going to demand that you treat them similarly? And where does this all lead? Do you feel like paying them specifically for every assignment—moving to a piecemeal system?” I pointed out that in the case the typical engineers in this company were working very hard every day without incentives. “They seem to love their work, don’t they?” I asked. Another student then added, “I don’t think you can pay Bruce an incentive— it’s against the policy of the company. Pay-for-performance bonuses are typically only given to general managers in business units, not to engineers, because it is at the managerial level where revenues and costs come together. Below that, employees have responsibility only for a piece of the puzzle, so incentives can throw things out of balance.” “Oh,” I said. “Let me understand what you’re saying. In this company, a lot of the senior executives used to be engineers. During that period of their lives, they seemed to be motivated by the work itself. They didn’t need incentives— right? So then what happened? When they became executives, did they morph into other beings—types of people that needed financial incentives to work hard? Is that what you are telling me?” As the discussion in the class continued that day, I sensed a broadening rift between my world and that of some of my students. In their world, it seemed that incentives made the world go round. And in mine—well, I had worked with Diana and her colleagues. How could we see something so fundamental in such different ways? A Better Theory of Motivation The answer lies in a deep chasm about how the concepts of incentives and motivation relate to each other. There are two broad camps on this question. Back in 1976, two economists, Michael Jensen and William Meckling, published a paper that has been committed to memory by those in the first camp. The paper, which has been one of the most widely cited of the past three decades, focused on a problem known as agency theory, or incentive theory: why don’t managers always behave in a way that is in the best interest of shareholders? The root cause, as Jensen and Meckling saw it, is that people work in accordance with how you pay them. The takeaway was that you have to align the interests of executives with the interests of shareholders. That way, if the stock goes up, executives are compensated better, and it makes both shareholders and executives happy. Although Jensen and Meckling didn’t specifically argue for huge pay packages, their thinking about what causes executives to focus on some things and not others is financial incentives. Indeed, the drive toward top performance has been widely used as an argument for skyrocketing compensation under the guise of “aligning incentives.” It is not just my students who have become believers in this theory. Many managers have adopted Jensen and Meckling’s underlying thinking—believing that when you need to convince others that they should do one thing and not another, you just need to pay them to do what you want them to do, when you want them to do it. It’s easy, it’s measurable; in essence, you are able to simply delegate management to a formula. Even parents can default to thinking that external rewards are the most effective way to motivate the behavior they want from their children—for example, offering their children a financial reward as an incentive for every A on a report card. One of the best ways to probe whether you can trust the advice that a theory is offering you is to look for anomalies—something that the theory cannot explain. Remember our story about birds, feathers, and flight? The early aviators might have seen some warning signs in their rudimentary analysis of flight had they examined what their beliefs or theories could not explain. Ostriches have wings and feathers but can’t fly. Bats have wings but no feathers, and they are great fliers. And flying squirrels have neither wings nor feathers … and they get by. The problem with principal-agent, or incentives, theory is that there are powerful anomalies that it cannot explain. For example, some of the hardest- working people on the planet are employed in nonprofits and charitable organizations. Some work in the most difficult conditions imaginable—disaster recovery zones, countries gripped by famine and flood. They earn a fraction of what they would if they were in the private sector. Yet it’s rare to hear of managers of nonprofits complaining about getting their staff motivated. You might dismiss these workers as idealists. But the military attracts remarkable people, too. They commit their lives to serving their country. But they are not doing it for financial compensation. In fact, it’s almost the opposite —working in the military is far from the best-paid job you can take. Yet in many countries, including the United States, the military is considered a highly effective organization. And a lot of people who work in the military get a deep sense of satisfaction from their work.  How, then, do we explain what is motivating them if it’s not money? Well, there is a second school of thought—often called two-factor theory, or motivation theory—or motivation theory—that turns the incentive theory on its head. It acknowledges that you can pay people to want what you want—over and over again. But incentives are not the same as motivation. True motivation is getting people to do something because they want to do it. This type of motivation continues, in good times and in bad. Frederick Herzberg, probably one of the most incisive writers on the topic of motivation theory, published a breakthrough article in the Harvard Business Review, focusing on exactly this. He was writing for a business audience, but what he discovered about motivation applies equally to us all. Herzberg notes the common assumption that job satisfaction is one big continuous spectrum—starting with very happy on one end and reaching all the way down to absolutely miserable on the other—is not actually the way the mind works. Instead, satisfaction and dissatisfaction are separate, independent measures. This means, for example, that it’s possible to love your job and hate it at the same time. Let me explain. This theory distinguishes between two different types of factors: hygiene factors and motivation factors. On one side of the equation, there are the elements of work that, if not done right, will cause us to be dissatisfied. These are called hygiene factors. Hygiene factors are things like status, compensation, job security, work conditions, company policies, and supervisory practices. It matters, for example, that you don’t have a manager who manipulates you for his own purposes—or who doesn’t hold you accountable for things over which you don’t have responsibility. Bad hygiene causes dissatisfaction. You have to address and fix bad hygiene to ensure that you are not dissatisfied in your work. Interestingly, Herzberg asserts that compensation is a hygiene factor, not a motivator. As Owen Robbins, a successful CFO and the board member who chaired our compensation committee at CPS Technologies, once counseled me, “Compensation is a death trap. The most you can hope for (as CEO) is to be able to post a list of every employee’s name and salary on the bulletin board, and hear every employee say, ‘I sure wish I were paid more, but darn it, this list is fair.’ Clayton, you might feel like it is easy to manage this company by giving incentives or rewards to people. But if anyone believes that he is working harder but is being paid less than another person, it would be like transplanting cancer into this company.” Compensation is a hygiene factor. You need to get it right. But all you can aspire to is that employees will not be mad at each other and the company because of compensation.  This is an important insight from Herzberg’s research: if you instantly improve the hygiene factors of your job, you’re not going to suddenly love it. At best, you just won’t hate it anymore. The opposite of job dissatisfaction isn’t job satisfaction, but rather an absence of job dissatisfaction. They’re not the same thing at all. It is important to address hygiene factors such as a safe and comfortable working environment, relationship with managers and colleagues, enough money to look after your family—if you don’t have these things, you’ll experience dissatisfaction with your work. But these alone won’t do anything to make you love your job—they will just stop you from hating it. The Balance of Motivators and Hygiene Factors So, what are the things that will truly, deeply satisfy us, the factors that will cause us to love our jobs? These are what Herzberg’s research calls motivators. Motivation factors include challenging work, recognition, responsibility, and personal growth. Feelings that you are making a meaningful contribution to work arise from intrinsic conditions of the work itself. Motivation is much less about external prodding or stimulation, and much more about what’s inside of you, and inside of your work. Hopefully, you’ve had experiences in your life that have satisfied Herzberg’s motivators. If you have, you’ll recognize the difference between that and an experience that merely provides hygiene factors. It might have been a job that emphasized doing work that was truly meaningful to you, that was interesting and challenging, that allowed you to grow professionally, or that provided opportunities to increase your responsibility. Those are the factors that will motivate you—to cause you to love what you’re doing. It’s what I hope my students hold out for, because I know it can make the difference between dreading or being excited to go to work every day. The lens of Herzberg’s theory gave me real insight into the choices that some of my classmates made in their careers after we graduated. While many of them did find themselves in careers that were highly motivating, my sense was that an unsettling number did not. How is it that people who seem to have the world at their feet end up making deliberate choices that leave them feeling unfulfilled? Herzberg’s work sheds some light on this. Many of my peers had chosen careers using hygiene factors as the primary criteria; income was often the most important of these. On the surface, they had lots of good reasons to do exactly that. Many people view their education as an investment. You give up good years of your working life, years you would otherwise be making a salary. Compounding that is often the need to take out big loans to finance your time at school, sometimes while supporting young families—as I did. You know exactly how much debt you’ll have the minute you graduate. Yet it was not lost on me that many of my classmates had initially come to school for very different reasons. They’d written their entrance essays on their hopes for using their education to tackle some of the world’s most vexing social problems or their dreams of becoming entrepreneurs and creating their own businesses. Periodically, as we were all considering our postgraduation plans, we’d try to keep ourselves honest, challenging each other: “What about doing something important, or something you really love? Isn’t that why you came here?” “Don’t worry,” came back the answer. “This is just for a couple of years. I’ll pay off my loans, get myself in a good financial position, then I’ll go chase my real dreams.” It was not an unreasonable argument. The pressures we all face—providing for our families, meeting our own expectations and those of our parents and friends, and, for some of us, keeping up with our neighbors—are tough. In the case of my classmates (and many graduating classes since), this manifested itself in taking jobs as bankers, fund managers, consultants, and plenty of other well- regarded positions. For some people, it was a choice of passion—they genuinely loved what they did and those jobs worked out well for them. But for others, it was a choice based on getting a good financial return on their expensive degree. By taking these jobs, they managed to pay back their student loans. Then they got their mortgages under control and their families in comfortable financial positions. But somehow that early pledge to return to their real passion after a couple of years kept getting deferred. “Just one more year …” or “I’m not sure what else I would do now.” All the while, their incomes continued to swell. It wasn’t too long, however, before some of them privately admitted that they had actually begun to resent the jobs they’d taken—for what they now realized were the wrong reasons. Worse still, they found themselves stuck. They’d managed to expand their lifestyle to fit the salaries they were bringing in, and it was really difficult to wind that back. They’d made choices early on because of the hygiene factors, not true motivators, and they couldn’t find their way out of that trap. The point isn’t that money is the root cause of professional unhappiness. It’s not. The problems start occurring when it becomes the priority over all else, when hygiene factors are satisfied but the quest remains only to make more money. Even those engaged in careers that seem to specifically focus on money, like salespeople and traders, are subject to these rules of motivation—it’s just that in these professions, money acts as a highly accurate yardstick of success. Traders, for example, feel success and are motivated by being able to predict what is going to happen in the world and then making bets based on those predictions. Being right is almost directly correlated with making money; it is the confirmation that they are doing their jobs well, the measure they use to compete on. Similarly, salespeople feel success by being able to convince customers that the product or service they’re selling will help those customers in their lives. Again, money directly correlates with success—a sale. It’s an indicator for how well they’re doing their jobs. It’s not that some of us are fundamentally different beasts—we might find different things meaningful or enjoyable—but the theory still works the same way for everyone. If you get motivators at work, Herzberg’s theory suggests, you’re going to love your job— even if you’re not making piles of money. You’re going to be motivated. Motivation Matters in Places You Might Not Expect When you really understand what motivates people, it becomes illuminating in all kinds of situations—not just in people’s careers. My two oldest children taught me an important dimension of Herzberg’s theory on motivation. When we bought our first house, I saw a place in the backyard that would be perfect for building a kids’ playhouse. Matthew and Ann were the perfect ages for this kind of activity, and we threw our hearts into this project. We spent weeks selecting the lumber, picking the shingles for the house, working our way up through the platform, the sides, the roof. I’d get the nails most of the way in and let them deliver the finishing blows. It took longer that way, of course, figuring out whose turn it was for every stroke of the hammer and cut of the saw. It was fun, however, to see their feelings of pride. When their friends came to play, the first thing my children would do was take them into the backyard and show them the progress. And when I came home, their first question was when could we get back to work. But after it was finished, I rarely saw the children in it. The truth was that having the house wasn’t what really motivated them. It was the building of it, and how they felt about their own contribution, that they found satisfying. I had thought the destination was what was important, but it turned out it was the journey. It is hard to overestimate the power of these motivators—the feelings of accomplishment and of learning, of being a key player on a team that is achieving something meaningful. I shudder to think that I almost bought a kit from which I could have quickly assembled the playhouse myself. If You Find a Job You Love … The theory of motivation—along with its description of the roles that incentives and hygiene factors will play—has given me better understanding of how people become successful and happy in their careers. I used to think that if you cared for other people, you need to study sociology or something like it. But when I compared what I imagined was happening in Diana’s home after the different days in our labs, I concluded, if you want to help other people, be a manager. If done well, management is among the most noble of professions. You are in a position where you have eight or ten hours every day from every person who works for you. You have the opportunity to frame each person’s work so that, at the end of every day, your employees will go home feeling like Diana felt on her good day: living a life filled with motivators. I realized that if the theory of motivation applies to me, then I need to be sure that those who work for me have the motivators, too. The second realization I had is that the pursuit of money can, at best, mitigate the frustrations in your career—yet the siren song of riches has confused and confounded some of the best in our society. In order to really find happiness, you need to continue looking for opportunities that you believe are meaningful, in which you will be able to learn new things, to succeed, and be given more and more responsibility to shoulder. There’s an old saying: find a job that you love and you’ll never work a day in your life. People who truly love what they do and who think their work is meaningful have a distinct advantage when they arrive at work every day. They throw their best effort into their jobs, and it makes them very good at what they do. This, in turn, can mean they get paid well; careers that are filled with motivators are often correlated with financial rewards. But sometimes the reverse is true, too—financial rewards can be present without the motivators. In my assessment, it is frightfully easy for us to lose our sense of the difference between what brings money and what causes happiness. You must be careful not to confuse correlation with causality in assessing the happiness we can find in different jobs. Thankfully, however, these motivators are stable across professions and over time—giving us a sense of “true north” against which we can recalibrate the trajectories of our careers. We should always remember that beyond a certain point, hygiene factors such as money, status, compensation, and job security are much more a by-product of being happy with a job rather than the cause of it. Realizing this frees us to focus on the things that really matter. For many of us, one of the easiest mistakes to make is to focus on trying to over- satisfy the tangible trappings of professional success in the mistaken belief that those things will make us happy. Better salaries. A more prestigious title. A nicer office. They are, after all, what our friends and family see as signs that we have “made it” professionally. But as soon as you find yourself focusing on the tangible aspects of your job, you are at risk of becoming like some of my classmates, chasing a mirage. The next pay raise, you think, will be the one that finally makes you happy. It’s a hopeless quest. The theory of motivation suggests you need to ask yourself a different set of questions than most of us are used to asking. Is this work meaningful to me? Is this job going to give me a chance to develop? Am I going to learn new things? Will I have an opportunity for recognition and achievement? Am I going to be given responsibility? These are the things that will truly motivate you. Once you get this right, the more measurable aspects of your job will fade in importance. CHAPTER THREE The Balance of Calculation and Serendipity Understanding what makes us tick is a critical step on the path to fulfillment. But that’s only half the battle. You actually have to find a career that both motivates you and satisfies the hygiene factors. If it were that easy, however, wouldn’t each of us already have done that? Rarely is it so simple. You have to balance the pursuit of aspirations and goals with taking advantage of unanticipated opportunities. Managing this part of the strategy process is often the difference between success and failure for companies; it’s true for our careers, too. Honda Takes America … by Accident Back in the 1960s, Honda’s management decided to try to gain a toehold in the U.S. motorcycle market, which had historically been dominated by a small number of powerhouse motorcycle brands such as Harley-Davidson and some European imports, like Triumph. They strategized that by making motorcycles comparable to those made by these competitors, and selling them at significantly lower prices (at the time, Japanese labor was very inexpensive), they ought to be able to steal away 10 percent of the motorcycle import market from the Europeans. Doing so almost killed Honda. In the first few years, it sold very few bikes— compared to a Harley, a Honda seemed like a poor man’s motorcycle. Worse, Honda discovered that its bikes leaked oil when subjected to the long drives at high speeds that were typical in America. This was a real problem; Honda’s dealers in America did not have the capability to repair such complicated problems and Honda had to spend what precious few resources it had in America to air-freight these faulty motorcycles back to Japan to fix them. In spite of the problems, Honda persisted with its original strategy—even as it was draining the U.S. division of virtually all its cash. In addition to the large bikes it sold, Honda had initially shipped a few of its smaller motorcycles to Los Angeles; but no one really expected American customers to buy them. Known as the Super Cub, these bikes were used in Japan primarily for urban deliveries to shops along narrow roads that were crowded with people, cars, and bicycles. They were very different from the big motorcycles American enthusiasts valued. As Honda’s resources in Los Angeles got tighter and tighter, it began to allow its employees to use the Super Cubs to run errands around the city. One Saturday, a member of Honda’s team took his Super Cub into the hills west of Los Angeles to ride up and down through the dirt. He really enjoyed it. In the twists and turns of those hills, he could work out the frustrations that had driven him to the hills in the first place—the failing big-bike strategy. The next weekend, he invited his colleagues to join him. Seeing the Honda guys having so much fun, other people in the hills that day asked where they, too, could buy one of those “dirt bikes.” Though they were told that they were not available in America, one by one, they convinced the Honda team to order them from Japan. Soon after, a buyer for Sears spotted a Honda employee riding around on a little Super Cub and asked whether Sears might sell it through its catalog. Honda’s team was cold to the idea, because it would divert them away from their strategy to sell the larger bikes—a strategy that was still not working. Little by little, however, they realized that selling the smaller bikes was keeping Honda’s venture in America alive. No one had imagined that was how Honda’s entry in the U.S. market would play out. They had only planned to compete with the likes of Harley. But it was clear that a better opportunity had emerged. Ultimately, Honda’s management team recognized what had happened, and concluded that Honda should embrace small bikes as their official strategy. Priced at a quarter of the cost of a big Harley, the Super Cubs were sold not to classic-motorcycle customers, but to an entirely new group of users that came to be called “off-road bikers.” The rest, as they say, is history. The chance idea of one employee releasing his frustration in the hills that day created a new pastime for millions of Americans who didn’t fit the profile of a traditional touring-bike owner. It led to Honda’s wildly successful strategy of selling the smaller motorcycles through power equipment and sporting-goods stores, instead of traditional motorbike dealers. Honda’s experience in building a new motorcycle business in America highlights the process by which every strategy is formulated and subsequently evolves. As Professor Henry Mintzberg taught, options for your strategy spring from two very different sources. The first source is anticipated opportunities— the opportunities that you can see and choose to pursue. In Honda’s case, it was the big-bike market in the United States. When you put in place a plan focused on these anticipated opportunities, you are pursuing a deliberate strategy. The second source of options is unanticipated—usually a cocktail of problems and opportunities that emerges while you are trying to implement the deliberate plan or strategy that you have decided upon. At Honda, what was unanticipated were the problems with the big bikes, the costs associated with fixing them, and the opportunity to sell the little Super Cub motorbikes. The unanticipated problems and opportunities then essentially fight the deliberate strategy for the attention, capital, and hearts of the management and employees. The company has to decide whether to stick with the original plan, modify it, or even replace it altogether with one of the alternatives that arises. The decision sometimes is an explicit decision; often, however, a modified strategy coalesces from myriad day-to-day decisions to pursue unanticipated opportunities and resolve unanticipated problems. When strategy forms in this way, it is known as emergent strategy. The managers of Honda’s beachhead in Los Angeles, for example, did not make an explicit decision to completely change strategy, to focus on the low-cost Super Cubs, in an all-day strategy meeting. Rather, they slowly realized that if they stopped selling the big bikes, it would stem the cash-bleed needed to cover the cost of the leaky-oil repairs. And, one by one, as employees ordered more Super Cub bikes from Japan, the path for profitable growth became clear. When the company’s leaders made a clear decision to pursue the new direction, the emergent strategy became the new deliberate strategy. But it doesn’t stop there. The process of strategy then reiterates through these steps over and over again, constantly evolving. In other words, strategy is not a discrete analytical event—something decided, say, in a meeting of top managers based on the best numbers and analysis available at the time. Rather, it is a continuous, diverse, and unruly process. Managing it is very hard—the deliberate strategy and the new emerging opportunities fight for resources. On the one hand, if you have a strategy that really is working, you need to deliberately focus to keep everyone working together in the right direction. At the same time, however, that focus can easily cause you to dismiss as a distraction what could actually turn out to be the next big thing. It may be challenging and unruly, but this is the process by which almost all companies have developed a winning strategy. Walmart is another great example. Many people think of Sam Walton, Walmart’s legendary founder, as a visionary. They assume he started his company with a plan to change the world of retailing. But that’s not what really happened. Walton originally intended to build his second store in Memphis, thinking that a larger city could support a larger store. But he ended up opting for the much smaller town of Bentonville, Arkansas, instead—for two reasons. Legend has it, his wife said in no uncertain terms that she would not move to Memphis. He also recognized that having his second store near his first would allow him to share shipments and deliveries more easily, and take advantage of other logistical efficiencies. That, ultimately, taught Walton the brilliant strategy of opening his large stores only in small towns—thereby preempting competition from other discount retailers. This wasn’t how he imagined his business in the beginning. His strategy emerged. Balancing Emergent and Deliberate I’m always struck by how many of my students and the other young people I’ve worked with think they’re supposed to have their careers planned out, step by step, for the next five years. High-achievers, and aspiring high-achievers, too often put pressure on themselves to do exactly this. Starting as early as high school, they think that to be successful they need to have a concrete vision of exactly what it is they want to do with their lives. Underlying this belief is the implicit assumption that they should risk deviating from their vision only if things go horribly wrong. But having such a focused plan really only makes sense in certain circumstances. In our lives and in our careers, whether we are aware of it or not, we are constantly navigating a path by deciding between our deliberate strategies and the unanticipated alternatives that emerge. Each approach is vying for our minds and our hearts, making its best case to become our actual strategy. Neither is inherently better or worse; rather, which you should choose depends on where you are on the journey. Understanding this—that strategy is made up of these two disparate elements, and that your circumstances dictate which approach is best—will better enable you to sort through the choices that your career will constantly present. If you have found an outlet in your career that provides both the requisite hygiene factors and motivators, then a deliberate approach makes sense. Your aspirations should be clear, and you know from your present experience that they are worth striving for. Rather than worrying about adjusting to unexpected opportunities, your frame of mind should be focused on how best to achieve the goals you have deliberately set. But if you haven’t reached the point of finding a career that does this for you, then, like a new company finding its way, you need to be emergent. This is another way of saying that if you are in these circumstances, experiment in life. As you learn from each experience, adjust. Then iterate quickly. Keep going through this process until your strategy begins to click. As you go through your career, you will begin to find the areas of work you love and in which you will shine; you will, hopefully, find a field where you can maximize the motivators and satisfy the hygiene factors. But it’s rarely a case of sitting in an ivory tower and thinking through the problem until the answer pops into your head. Strategy almost always emerges from a combination of deliberate and unanticipated opportunities. What’s important is to get out there and try stuff until you learn where your talents, interests, and priorities begin to pay off. When you find out what really works for you, then it’s time to flip from an emergent strategy to a deliberate one. When the Wall Street Journal Didn’t Respond I might not have had the right language to describe it at the time, but navigating between deliberate and emergent opportunities is essentially how I ended up being a professor, a job that I love. It took me years to get it right. In fact, I’ve had three careers: first as a consultant, then as an entrepreneur and manager, and now as an academic—none of which I planned. When I was a freshman in college, I decided that I wanted to become the editor of the Wall Street Journal, a newspaper I deeply admired. This was my deliberate strategy. One of my professors told me that I was a good writer—but rather than majoring in journalism, I’d have a better chance of distinguishing myself in a field of thousands of job applicants if I knew the field of economics and business. So I studied economics as an undergraduate student at BYU and also at Oxford. Then I pursued my MBA at Harvard. At the end of my first year in the MBA program, I applied for a summer position at the Wall Street Journal. I never got a reply. I was crushed, but an internship at a consulting firm emerged. It wasn’t the Wall Street Journal, but I knew that I could learn a lot by helping clients solve really interesting problems, and I hoped that would make me even more attractive to the Journal. Another consulting firm then offered to pay the full cost of my second MBA year if I would take a postgraduation job with them. We were so broke that I decided to accept it—thinking that I could keep learning about business, and then break loose to start my career with the Journal. This was my emergent strategy. Unfortunately for my deliberate plan to be the Journal’s editor, I loved the consulting work I was doing. But after five years there, just as Christine and I were deciding it was time to start my real career as a journalist, a friend of mine knocked on my door and asked me to start a company with him. The prospect of starting my own business, facing the challenges myself I’d spent the last few years solving with my clients, really excited me. I just jumped at the chance. Besides, if I could tell the editors of the Journal that I had actually founded and run a company, I might be an even better pick for the path to editorship. We took our company public in mid-1987, shortly before Black Monday. On one hand, we were lucky: we managed to raise capital before the stock market crashed. But from a different point of view, our timing was terrible. Our shares dropped from $10 to $2 in a single day. Our market capitalization became so low that no big institutions would put money into our company. We had planned on being able to raise another round of investment to fund our plan for growth. But without that funding, we became vulnerable. One of our initial investors sold his shares to another venture capitalist, and this sale gave the second venture capitalist enough shares to be in charge of our future. He wanted his own CEO in the top job—and I was fired. I didn’t know it at the time, but this triggered stage three of my emergent strategy. Several months before I got fired, I had talked with a couple of senior professors at Harvard Business School about another possibility that had been in the back of my mind: whether being a professor was something that I’d be good at. Both had said that I might. So I stood at a fork in the road. Was this the time when I should finally pursue my original deliberate strategy of becoming editor of the Wall Street Journal? Or should I try academia? I talked to an additional couple of professors about this, and on the Sunday evening of the very week I had lost my job, one of them called and asked if I would come in the next day. He announced that although the academic year had already started, they had gone out on a limb for me and made the highly unusual decision to admit me to their PhD program then and there. Less than a week after I had been fired, at age thirty-seven, I was a student once more. Emergent strategy again preempted my deliberate path. Sometime after I finished my doctorate and started my job as a professor, I faced head-on the need to get tenure. At that point, I thought through the fact that although academia had come into my life through an emergent door, in my heart and mind I needed to make this new path my deliberate strategy. To succeed in this arena, I realized I needed to truly focus on it. So that’s what I did. Now, at age fifty-nine and after a twenty-year career in academia, I still wonder occasionally whether it is finally time to try to become editor of the Wall Street Journal. Academia became my deliberate strategy—and will stay that way as long as I continue to enjoy what I’m doing. But I have not twisted shut the flow of emergent problems or opportunities. Just as I never imagined thirty years ago I’d end up here, who knows what might be just around the corner? What Has to Prove True for This to Work? Of course, it’s easy to say be open to opportunities as they emerge. It’s much harder to know which strategy you should actually pursue. Is the current deliberate strategy the best course to continue on, or is it time to adopt a different strategy that is emerging? What happens if ten opportunities present at once? Or if one of them requires a substantial investment on your part just to find out whether it’s something that you’re going to enjoy? Ideally, you don’t want to have to go through medical school to figure out you don’t want to be a doctor. So what can you do to figure out what has the best chance of working out for you? There’s a tool that can help you test whether your deliberate strategy or a new emergent one will be a fruitful approach. It forces you to articulate what assumptions need to be proved true in order for the strategy to succeed. The academics who created this process, Ian MacMillan and Rita McGrath, called it “discovery-driven planning,” but it might be easier to think about it as “What has to prove true for this to work?” As simple as it sounds, companies seldom think about whether to pursue new opportunities by asking this question. Instead, they often unintentionally stack the deck for failure from the beginning. They make decisions to go ahead with an investment based on what initial projections suggest will happen, but then they never actually test whether those initial projections are accurate. So, they can find themselves far down the line, adjusting projections and assumptions to fit what is actually happening, rather than making and testing thoughtful choices before they get too far in. Here’s how the flawed process usually works. An employee or a group of employees come up with an innovative idea for a new product or service; they’re enthusiastic about their idea, and they want their colleagues to be, too. But to convince senior management of the idea’s potential, they need to come up with a business plan. They are acutely aware that for management to approve the project, the numbers had better look good—but the team often won’t really know how customers will respond to the idea, what the true costs will turn out to be, and so on. So they guess—they make assumptions. Frequently, planners are sent back to the drawing board to change their guesses. But this is rarely because they have learned new information; instead, innovators and middle managers typically know how good the numbers have to look in order for their proposal to get funded, so they often need to cycle back and “improve” their guesses in order for the proposal to get the go-ahead. If they do a good enough job convincing management that they’re right, they get the green light to proceed with their project. It’s only then, once the team begins, that they learn which of those assumptions baked into the financial plan turned out to be right and which were flawed. See the problem? By the time they have learned which assumptions were right and which were wrong, it’s too late to do anything about it. In almost every case of a project failing, mistakes were made in one or more of the critical assumptions upon which the projections and decisions were based. But the company didn’t realize that until it was too far down the line in acting on those ideas and plans. Money, time, and energy had already been assigned to the project; the company is 100 percent committed; and the team is now on the line to make it work. Nobody wants to go back to management and say, “You know those assumptions we made? Turns out they weren’t so accurate after all …” Projects end up getting approved on the basis of incorrect guesses, as opposed to which project is actually most likely to work out. For example, Disney had launched thriving theme parks in Southern California, Florida, and Tokyo. But their fourth site, outside of Paris, was a disaster for a long time. They lost roughly a billion dollars in the first two years. How could the company get it so wrong on the heels of three enormous successes? It turns out the initial planning for the Paris site relied on assumptions about the total number of likely visitors and how long they would each stay. The projections were based on population density in concentric circles around the planned park, weather patterns, income levels, and other factors; the plan projected 11 million visitors per year. In the other theme parks, the average Disney guest stayed for three days. So the model multiplied 11 million people by three days, projecting 33 million “guest days” every year. Disney built hotels and infrastructure to support that number. Well, it turned out that Disney did have around 11 million visitors in that first year. But, on average, they stayed only one day versus the three days they stayed in the other parks. What happened? In the other parks, Disney had built forty-five rides. This kept people happily occupied for three days. But Disneyland Paris opened its doors with only fifteen rides. You could do everything in just one day.  Some person way down in the organization made an unconscious assumption about Disneyland Paris being the same size as all the other parks. That assumption then got embedded in the numbers. The folks at the top didn’t even know to ask, “What are the most important assumptions that have to prove right for these projections to work—and how will we track them?” If they had, they might have realized very early in the planning that no one knew whether people would still stay at the park for three days if there were only fifteen rides. Instead, Disney had to scramble to recover from the terrible start. There is a much better way to figure out what is going to work and what isn’t. It involves reordering the typical steps involved in planning a new project. When a promising new idea emerges, financial projections should, of course, be made. But instead of pretending these are accurate, acknowledge that at this point, they are really rough. Since everybody knows that numbers have to look good for management to green-light any project, you don’t go through the charade of implicitly encouraging teams to manipulate the numbers to look as strong as possible. Instead, ask the project teams to compile a list of all the assumptions that have been made in those initial projections. Then ask them: “Which of these assumptions need to prove true in order for us to realistically expect that these numbers will materialize?” The assumptions on this list should be rank-ordered by importance and uncertainty. At the top of the list should be the assumptions that are most important and least certain, while the bottom of the list should be those that are least important and most certain. Only after you understand the relative importance of all the underlying assumptions should you green-light the team—but not in the way that most companies tend to do. Instead, find ways to quickly, and with as little expense as possible, test the validity of the most important assumptions. Once the company understands whether the initial important assumptions are likely to prove true, it can make a much better decision about whether to invest in this project or not. The logic of taking this approach is compelling—of course everyone wants to achieve gorgeous numbers, so why go through the pretense of asking managers to keep working on them until they look good? Instead, this approach of “What assumptions must prove true?” offers a simple way to keep strategy from going far off-course. It causes teams to focus on what truly matters to get the numbers to materialize. If we ask the right questions, the answers generally are easy to get. Before You Take That Job This type of planning can help you consider job opportunities, too. We all want to be successful and happy in our careers. But it’s all too easy to get too far down a path before you’ve realized that choices aren’t working out as you hoped. This tool can help you avoid doing just that. Before you take a job, carefully list what things others are going to need to do or to deliver in order for you to successfully achieve what you hope to do. Ask yourself: “What are the assumptions that have to prove true in order for me to be able to succeed in this assignment?” List them. Are they within your control? Equally important, ask yourself what assumptions have to prove true for you to be happy in the choice you are contemplating. Are you basing your position on extrinsic or intrinsic motivators? Why do you think this is going to be something you enjoy doing? What evidence do you have? Every time you consider a career move, keep thinking about the most important assumptions that have to prove true, and how you can swiftly and inexpensively test if they are valid. Make sure you are being realistic about the path ahead of you. The Importance of Testing Assumptions I wish I’d had the wherewithal at the time to use this tool to help a student avoid a disappointing first job. When she was being recruited, the folks at the venture capital firm where she ended up working told her that they intended to invest 20 percent of their resources in developing-country growth initiatives. That was what my student had hoped to hear. She had worked for several years with a humanitarian organization in Asia before coming to our school, and after graduation she was looking for even bigger opportunities to create new growth companies in emerging countries. It seemed like a perfect fit, and she accepted their employment offer. But it turned out, in spite of their promises, the firm didn’t have the resolve or the resources to deliver. With each new assignment, my student would hope for a developing-country investment, but one never materialized. She had returned from Asia determined to continue working with developing nations, but her assignments continually focused on the United States. In the end she became embittered toward her employer, feeling that the firm and its leaders had deceptively co-opted her time and talents in the prime of her life. She eventually left and had to start all over again.  How could she have used the lens of “What has to prove true?” in assessing this job? A good place to start would have been to look at the characteristics of other firms that have successfully entered the developing world. For example, firms that have a deep commitment to developing countries typically have capital tied to investment there. They have partners dedicated to the practice. Their investors are attracted to the company in part because of its work in the developing world. Perhaps she could have opted for an internship before committing to a full-time job. If my student had listed out and found ways to test those assumptions, she would likely have recognized that though the firm might have intended to invest in emerging economies, it was quite unlikely that it would really do so. Similarly, it turned out I was just very lucky when making my own professional choices after my undergraduate studies. I never stopped to scrutinize my own assumptions. This would have been a great tool to help me think through what had to prove true for any opportunity in front of me—be it consulting, entrepreneurship, or academia—to be one that I could both be successful at and also enjoy. In hindsight, I was able to navigate my own journey through a combination of the push and pull of deliberate strategy and being open to unanticipated opportunities. I hope you can, too. I will never declare my career path polished and perfected—there could be exciting unanticipated opportunities out there for me, even at age fifty-nine. Who knows? Maybe the Wall Street Journal will still call one day to offer me that job … Hopefully, you’re going to go off into the world with an understanding of what makes us tick. But speaking from my own experience, it can be tough to find the right career to do that for you. What we can learn from how companies develop strategy is that although it is hard to get it right at first, success doesn’t rely on this. Instead, it hinges on continuing to experiment until you do find an approach that works. Only a lucky few companies start off with the strategy that ultimately leads to success. Once you understand the concept of emergent and deliberate strategy, you’ll know that if you’ve yet to find something that really works in your career, expecting to have a clear vision of where your life will take you is just wasting time. Even worse, it may actually close your mind to unexpected opportunities. While you are still figuring out your career, you should keep the aperture of your life wide open. Depending on your particular circumstances, you should be prepared to experiment with different opportunities, ready to pivot, and continue to adjust your strategy until you find what it is that both satisfies the hygiene factors and gives you all the motivators. Only then does a deliberate strategy make sense. When you get it right, you’ll know. As difficult as it may seem, you’ve got to be honest with yourself about this whole process. Change can often be difficult, and it will probably seem easier to just stick with what you are already doing. That thinking can be dangerous. You’re only kicking the can down the road, and you risk waking up one day, years later, looking into the mirror, asking yourself: “What am I doing with my life?” CHAPTER FOUR Your Strategy Is Not What You Say It Is You can talk all you want about having a strategy for your life, understanding motivation, and balancing aspirations with unanticipated opportunities. But ultimately, this means nothing if you do not align those with where you actually expend your time, money, and energy. In other words, how you allocate your resources is where the rubber meets the road. Real strategy—in companies and in our lives—is created through hundreds of everyday decisions about where we spend our resources. As you’re living your life from day to day, how do you make sure you’re heading in the right direction? Watch where your resources flow. If they’re not supporting the strategy you’ve decided upon, then you’re not implementing that strategy at all. Getting the Measure of Success Wrong More than a decade ago, Seattle-based SonoSite was founded to make handheld ultrasound equipment—little machines that had the potential to truly change health care. Prior to these machines, the only thing that most family doctors and nurses could do when performing an exam was to listen and feel for problems beneath the skin. As a result, many problems would elude detection until they were more advanced. For twenty years or so, although technology had existed that enabled specialists to look into a patient’s body through cart-based ultrasound, CT scan, or MRI machines, this equipment was big and expensive. SonoSite’s handheld ultrasound machines, however, made it affordable and easy for primary care doctors and nurse practitioners to see inside their patients’ bodies. SonoSite had two families of handheld products. Its principal product, dubbed the Titan, was about as big as a laptop computer. The other, branded the iLook, was less than half the size of the Titan—and one-third the price. Both machines had enormous potential. The iLook was not as sophisticated as the Titan, nor as profitable, but it was much more portable. The company’s president and CEO, Kevin Goodwin, knew there was a promising market for it—the iLook had managed to generate a thousand sales leads in the first six weeks after its introduction. It became clear that if SonoSite didn’t sell it, someone else was likely to develop the same compact, inexpensive technology and disrupt the sales of the more expensive machines—and SonoSite itself. Eager to see firsthand how customers were responding to the new, smaller product, Goodwin asked to attend a sales call with one of the company’s top salespeople. What happened taught Goodwin a critical lesson. The salesman sat down with the customer and proceeded to sell the Titan— the laptop ultrasound. He didn’t even pull the iLook handheld out of his bag. After fifteen minutes, Goodwin decided to intervene. “Tell them about the iLook,” Goodwin prompted the salesman. But he was completely ignored. The salesman continued to extol the virtues of the Titan. Goodwin waited a few minutes, then leaned over again. “Take the handheld ultrasound machine out of your bag!” he insisted. Again, the salesman completely ignored him. Goodwin asked one of his best salespeople three times to sell the iLook—in front of the customer. Each time, he was completely dismissed. What was going on? The CEO of the company couldn’t persuade his employee to do as he asked? The salesman wasn’t deliberately trying to defy Goodwin. In fact, he was doing exactly what the company wanted him to do—sell the product that provided the highest return. Goodwin knew that the handheld innovation had enormous long-term potential for the company—perhaps even more than the successful laptop-size model. The problem was, the salespeople were all on commission, and success for them was defined by the total value of their sales and gross margin dollars. It was much easier for Goodwin’s best salesman to sell one of the laptop-size ultrasound machines than it was to sell five of the little products. In other words, Goodwin thought that he was giving clear instructions into the salesman’s ear. But the compensation system was shouting the opposite instructions into his other ear. The Paradox of Resource Allocation At SonoSite, as in nearly every company, this conflict was not an inadvertent oversight. Rather, it is a pervasive paradox—a problem that I’ve termed in my research as the innovator’s dilemma. The company’s income statement highlighted all the costs that the company was incurring. It also showed all the revenues that SonoSite needed to generate day in and day out, in order to cover those costs—which, by the way, it had to do if it wanted to improve the quality and cost of health care for millions of people. The salespeople would need to sell five iLook handheld devices to generate the profits that a single Titan laptop would provide. And their own commissions were higher when they sold the more expensive laptop device. The sorts of problems that Kevin Goodwin and his salespeople were wrestling with are some of the most challenging of all—those where the things that make sense don’t make sense. Sometimes these problems emerge between departments within a company. At SonoSite, for example, what made sense from the CEO’s perspective did not make sense from the salesman’s perspective. What made sense to engineers—pushing the frontier of performance in the next products beyond the best of their current products, making them more sophisticated and capable, regardless of expense—was counter to the logic of the company’s strategy, which was to make the iLook even smaller and more affordable. Often even more perplexing, however, is when these problems arise within the mind of the same person: when the right decision for the long term makes no sense for the short term; when the wrong customer to call on is actually the right customer to call on; and when the most important product to sell makes little sense to sell at all. The decision that the SonoSite case describes introduces the last component in the strategy process: resource allocation. In the prior chapter, we introduced the idea that we decide between deliberate plans and emergent alternatives. In this chapter, we dive much more deeply into this—because in the strategy process, resource allocation is where the rubber meets the road. The resource allocation process determines which deliberate and emergent initiatives get funded and implemented, and which are denied resources. Everything related to strategy inside a company is only intent until it gets to the resource allocation stage. A company’s vision, plans, and opportunities—and all of its threats and problems—all want priority, vying against one another to become the actual strategy the company implements. When Individuals Cause the Problems Sometimes, a company such as SonoSite causes well-intended staff to go off in the wrong direction when the measures of success for employees are counter to those that will make the company successful. A company can also be at fault when it prioritizes the short term over the long. But sometimes individuals themselves are at the root of the problem. Apple Inc. shows how the differences between individuals’ priorities and a company’s priorities can prove fatal. Through most of the 1990s, after founder Steve Jobs had been forced out, Apple’s ability to deliver the fantastic products it had become renowned for simply stopped. Without Jobs’s discipline at the company, daylight began to emerge between Apple’s intended strategy and its actual one—and Apple began to flounder. For example, Apple’s attempt to create a next-generation operating system to compete with Microsoft during the midnineties—codenamed Copland—slipped numerous times. Though it was a purported priority for the company, Apple just couldn’t seem to deliver it. Management kept telling everyone—press, employees, and shareholders—how important it was. But on the front lines, the senior management’s sense of what the market wanted made little sense to the troops. Engineers seemed more interested in dreaming up new ideas than finishing what had already been promised for Copland. Without Jobs, individuals were able to get away with spending their time on ideas they were excited about, regardless of whether they matched the company’s goals. Eventually, Ellen Hancock, Apple’s chief technology officer at the time, scrapped Copland altogether, recommending the company buy something else instead. When Jobs returned as CEO in 1997, he immediately set to work fixing the underlying resource allocation problem. Rather than allowing everyone to focus on their own sense of priorities, Jobs brought Apple back to its roots: to make the best products in the world, change the way people think about using technology in their lives, and provide a fantastic user experience. Anything not aligned with that got scrapped; people who did not agree were yelled at, abased, or fired. Soon, people began to understand that if they didn’t allocate their resources in a way that was consistent with Apple’s priorities, they would land in hot water. More than anything else, the deep internal understanding of what Jobs prioritized is why Apple has been able to deliver on what it says it’s going to do, and is a big part of why the company has been able to regain its status among the world’s most successful. The Dangers of Getting the Time Frame Wrong But individuals are far from the only cause of this problem. In fact, if you study the root causes of business disasters, over and over you’ll find a predisposition toward endeavors that offer immediate gratification over endeavors that result in long-term success. Many companies’ decision-making systems are designed to steer investments to initiatives that offer the most tangible and immediate returns, so companies often favor these and shortchange investments in initiatives that are crucial to their long-term strategies. To illustrate how pervasive the innovator’s dilemma is between short-and long-term options, let’s examine another oft-emulated company, Unilever, one of the world’s largest providers of products in foods, personal care, and laundry and cleaning. In order to grow, Unilever has invested billions of dollars to create breakthrough innovations that will produce significant new growth business for the corporation. In baseball terms, however, instead of exciting new “home run” products, its innovators often produce instead bunts and singles—year after year. Why? After studying their efforts for over a decade, I concluded that the reason is that Unilever (and many corporations like them) inadvertently teach their best employees to hit only bunts and singles. Its senior executives every year identify next-generation leaders (high-potential leaders, or “HPLs”) from their worldwide operations. To train this cadre so that as senior executives they will be able to move around the globe from one assignment to the next with aplomb, they cycle the HPLs through assignments of eighteen months to two years in every functional group—finance, operations, sales, HR, marketing, and so on— in a sampling of products and markets. As they finish each assignment, the quality of the work they have completed typically determines the prominence of the next assignment they receive. HPLs who log a series of successful assignments “earn” the best subsequent assignments, and are more likely to become the company’s next senior executives. Think about this from the perspective of the young employees, all of whom were thrilled to be picked for this development program. What projects are they most likely to covet, in each of their assignments? In theory, they should champion products and processes that will be key to Unilever’s future success five and ten years ahead. But the results of those efforts, only available many years later, will garnish the record of whoever is in that specific assignment at that time—not the person whose insight initiated it. If, instead, the HPLs focus on delivering results they know can be seen and measured within twenty-four months—even if that method isn’t the best approach—they know that the people running the program will be able to assess their contribution to a completed project. As long as they have something to show for their efforts, they know they’ll have a shot at an even better next assignment. The system rewards tomorrow’s senior executives for being decidedly focused on the short term— inadvertently undermining the company’s goals. Misaligned incentives are pervasive. For example, America is unable to change its Social Security, Medicare, and other entitlement programs—despite the fact that everyone agrees that these programs are driving the country over a precipitous cliff toward bankruptcy. Why? Members of the House of Representatives stand for reelection every two years. These representatives, rightly or wrongly, are convinced that if America is to be saved, they personally need to be reelected in order to lead that effort. It is broadly known how to solve these problems. But no members of the House will pull thes