The New Business Dictionary
Behind every successful company lies a distinctive language, coded phrases and terms that reveal how they think and operate. What can these linguistic patterns tell us about success? By deciphering this vocabulary, we can better understand the different paths to building something remarkable.
Magic, Brilliance, Determination, and Secular Change
It's hard to say exactly why some companies and the people behind them are successful. Is it an unrelenting desire to improve themselves and those around them? Are they ambitious and brilliant? Borderline magical? Or is it just good timing and secular market shifts with a bit of luck tossed in? How can so many companies be so different in culture and still be successful? How can so many people have different ideas on what makes a business great? What is going on here?
There is a company in Canada called Shopify. Maybe you've heard of it? 😀 You've probably bought something from a Shopify store. It's one of the most successful companies in the world, and is now up to 12% of ecommerce in the US. [5]
Shopify started as a way to sell snowboards online...and now it's helping people around the world become entrepreneurs, in many cases changing their lives for the better. What's the secret to its success? And is the way it works replicable? Or is it a one off lightning strike? It's hard to argue with Shopify's track record of results, and yet many other thriving businesses do things drastically differently.
To analyze how some successful companies operate, we need to understand their lingo. This new Business Dictionary post is an attempt to do just that.
However, it's important to take a look at what some people, often successful people, think about business, career choices, and decision making overall, just to take in the information. To get the opinions. To see what they are up to. But in the end, you have to decide for yourself whether these definitions are useful...or accurate...or not. There are many ways to build successful organizations: everyone will have an opinion!
The New Business Dictionary
These are just a few of the terms and phrases I've come across in the last while. I'll add more over the next few months, there are many of them! But let's start with these.
"Don't Die"
The first order of business is to make sure the business doesn't die. Just..."don't die." That's the first step. A company that fails can't accomplish anything, so the main goal is to ensure continued existence, which means balancing short-term and long-term needs. However, companies have to play a "positional game" so that short-term financial goals, i.e. don't die, don't screw up long-term goals, i.e. the "North Star." Sometimes companies try to extract too much from their existing business, ensuring that the long-term goals fail.
Finite Winnable Games and the Infinite Game
Companies should understand the difference between finite and infinite games and use this information to guide their strategies. The infinite game is the pursuit of the organization's mission, which is in many ways unwinnable (if the goal is simply to succeed over a long period of time). Something more than a game. To succeed over that span, the organization must win at countless finite, but winnable, games. While winning the finite games, organizations must protect their "North Star" mission, the reason they exist, which is related to their infinite game.
Path Dependence
This is the idea that what the company is currently doing–its solutions, its methods, its products, its finances–are heavily influenced by past decisions based on conditions that may no longer be relevant, and is related to the concept of "local maxima". Path dependency is when a company is put on a road that is difficult to get off of, like being stuck in a rut, due to actions (or inaction) they have taken (or not taken) in the past. What they have today, their people, their processes, their products, are all based on those past decisions: what got them "here" may not be what they need to get them "there".
Local Maxima
At some point, a company may hit a wall in terms of improvement. They may be doing A/B testing and not seeing gains no matter what they do.
Lean startups often rapidly reach a local-maximum product which does not deliver product/market fit. They give up on their original idea and pivot–missing out on a massive opportunity. Pivoting will allow the startup to explore a different space, but they’re just as likely to produce a local-maximum product there and repeat the process. [4]
The Danger of "Good" Decisions
Decisions often look "good," but a company can get stuck in local maxims by making 100% good decisions. They do not make bad decisions, but they do not make great decisions either. Each iteration of the company is based on a merely OK decision, building on the last good old reliable choice, which puts them on a possibly entrenched path that may miss better long-term alternatives.
Porting Businesses
In programming, "porting" typically means taking a program intended for another operating system or environment and making a few changes to make it run in a different, possibly new, operating system or environment. Overall, the effort is less than writing a completely new program.
However, many large businesses are built on secular change, and simply trying to port an existing business to a new paradigm, such as the Internet, may not succeed. Replicating an existing business on a new strata may not achieve the ultimate goals of the venture, and it may have been better to rewrite the business from the ground up, as opposed to trying to "port" it over, jamming a round peg into a square hole.
Business Optimization Function
Companies need to continually re-evaluate their strategy based on current information and ensure that they are focused on their first principles and North Star. They need to build this adaptive capability and ensure that they are constantly iterating on it to keep the business moving in the right direction. But that does not mean just continuing the same path. They need to re-run this function often.
Time Compression
Time compression is the practice of moving quickly in terms of change management and decision making to ensure that the business adapts and changes in a shorter time frame than would normally be expected. This is typically done by senior, likely C-level management, and relies on quick, decisive decisions and actions, which may include stopping a project in its tracks if it is going in the wrong direction. The point is to avoid wasting time on efforts that do not move the organization toward its North Star.
Time compression is also related to working to accelerate one's career in that we have a limited amount of time to work to achieve our work-life goals, and if we are not constantly trying to move faster, we may get stuck taking too long and end up looking back on a career that could have been more.
Conclusion
Language matters. The way founders, senior executives, people in a position to pontificate on how business should be run communicate, the words and phrases they use, their "coded" linguistics, are indicators of how a company works, how these people think, how their minds work, what they will do in good times and in bad times.
One thing is for sure, we will continue to find successful companies that have drastically different ways of doing things, and specifically ways of talking about how they do things, and the question is, what parts of them should we adopt into our businesses; what would work for us...and what wouldn't.
Further Reading and Listening
[1]: https://www.lennysnewsletter.com/p/tobi-lutkes-leadership-playbook
[2]: https://www.simonandschuster.com/books/Finite-and-Infinite-Games/James-Carse/9781476731711
[3]: https://www.nytimes.com/1987/04/12/books/machines-are-out-gardens-are-in.html