2. Based on what’s important to you, you pick broad Strategies to get those.
If you want to serve others, one strategy would be becoming a medical doctor. A sub-strategy for that is getting into a great undergraduate pre-med program that reliably leads to get into a great medical school.
Or you might become a social worker.
Or you might join an organization like Rotary.
Or you might just try to be as helpful as possible.
Likewise, someone who is philosophically driven to beauty might try to build themselves very ornamental surroundings – fancy paintings and furniture and gilted and glittering everything – or they might opt for modern minimalism, clean lines, nothing unnecessary.
There’s an infinite set of possible strategies to get what you want.
3. Based on the strategies you select, those imply Tactics.
The high school student who wants to be a doctor start self-studying organic chemistry, knowing it’s a bottleneck class.
The person who is drawn to power philosophically, and who wants to be wealthy strategically, might decide tactically to start looking for a first rental property to buy as soon as they get into the working world.
All of this is very straightforward. You start with a rough and vague idea of what’s important to you (Philosophy/Religio), you decide on Strategies to get there; those become Tactics, individual actions you take.
This is all rather straightforward and uncontroversial. You can certainly study and clarify your Philosophy better; you can pick better or worse Strategies; you can pick better or worse tactics, and execute better or worse on them. But it’s all straightforward stuff, no?
***
OPERATIONS, II: OPS ENTERS THE PICTURE
This is where Operations comes in.
My definition of Operations: the coordination of tactics over time.
I believe it’s very expensive to clarify one’s philosophy, find and test good strategies, and find working tactics to implement those strategies successfully.
Frankly, most people don’t do too much “pure innovation” in their lives.
But I think our readership here is the type of people who can innovate, who likes to innovate, and so on and so forth.
The danger is that you do all the really, really hard and expensive work of “figuring out good solutions”… but then fail to operationalize them.
It’d be like putting in all the work of inventing the iPhone, but then not manufacturing and selling many of them.
This, then, would be the high school student who decides to go to med school to become a doctor, realizes organic chemistry would help them, identifies good online courses to learn it, gets started on the courses…
… and then inexplicably fails to follow through, forgetting entirely the path they figured out.
The missing link is operations.
It could be as simple as clearing a three-hour block every Sunday afternoon to always study organic chemistry until it’s fully learned.
That would do it.
That ensures the tactic (studying an organic chemistry course) consistently happens over time.
Getting things right once is rather expensive. It’s relatively inexpensive to then ensure that the right thing consistently happens. This is Operations.
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THEODORE VAIL AT AT&T
The Effective Executive by Peter Drucker is one of my favorite books; I re-read it once or twice every year. It’s full of correct ideas.
Originally written in 1967, Drucker talks about how Theodore Vail built AT&T into one of the most successful and innovative telecom companies of all-time:
“The least-known of the great American business builders, Theodore Vail, was perhaps the most effective decision-maker in U.S. business history. As president of the Bell Telephone System from just before 1910 till the mid-twenties, Vail built the organization into the largest private business in the world and into one of the most prosperous growth companies.”
Again, I’ll remind you this is from 1967, very much prior to deregulation –
“That the telephone system is privately owned is taken for granted in the United States. But [the coverage of AT&T] is the only developed area in the world in which telecommunications are not owned by government. The Bell System is also the only public utility that has shown itself capable of risk-taking leadership and rapid growth, even though it has a monopoly in a vital area and has achieved saturation of its original market. The explanation is not luck, or "American conservatism." The explanation lies in four strategic decisions Vail made in the course of almost twenty years.”
Drucker lists Vail’s four strategies:
1. An emphasis on constant service, back when this was an unusual way of thinking,
2. Working with regulators to create a framework of prices and coverage that served both public goals and made business sense,
3. Establishing Bell Labs as one of the top industrial labs in the world, in order to generate the “creative destruction” type of innovation despite monopoly status,
4. And ensuring AT&T was well-capitalized to keep expanding and growing via a brand new type and class of finance.
All of them are interesting – you ought to read The Effective Executive, which is a terrific book – but the fourth is the most interesting operationally.
The “heart of the matter,” as described last chapter, is that utilities got taken over by government when they lacked the capital to modernize –
“Industries are more commonly taken over by government because they fail to attract the capital they need than because of socialism. Failure to attract the needed capital was a main reason why the European railroads were taken over by government between 1860 and 1920. Inability to attract the needed capital to modernize certainly played a big part in the nationalization of the coal mines and of the electric power industry in Great Britain. …. The electric power companies, unable to raise their rates to offset currency depreciation, could no longer attract capital for modernization and expansion.”
Vail’s answer –
“[Vail] saw that the Bell Telephone System needed tremendous sums of capital in a dependable, steady supply which could not be obtained from the then existing capital markets. The other public utilities, especially the electric power companies, tried to make investment in their securities attractive to the one and only mass participant visible in the twenties: the speculator. … Vail realized that this was not a sound capital foundation. The AT&T common stock, which he designed to solve his problem in the early twenties, had nothing in common with the speculative shares except legal form. It was to be a security for the general public, the "Aunt Sally's" of the emerging middle class, who could put something aside for investment, but had not enough capital to take much risk. Vail's AT&T common, with its almost-guaranteed dividend, was close enough to a fixed interest-bearing obligation for widows and orphans to buy it. At the same time, it was a common share so that it held out the promise of capital appreciation and of protection in inflation.”
This is really remarkable; it’s hard to emphasize just how remarkable it was.
Before Vail’s innovations at AT&T, there was traditional financing from banks and a couple other forms of debt – primarily bonds – but the debt market in bonds and bank financing would seemingly randomly wax and wane based on the economy, whereas AT&T could go bust if it needed capital at a bad time.
Vail saw that, and saw an emerging middle class type investor who did not want to take a lot of risk. He designed the AT&T common stock to be as safe as a savings account, while also offering upside –
“When Vail designed this financial instrument, the "Aunt Sally" type of investor did not, in effect, exist. The middle class that had enough money to buy any kind of common share had only recently emerged. It was still following older habits of investment in savings banks, insurance policies, and mortgages. Those who ventured further went into the speculative stock market of the twenties—where
they had no business to be at all. Vail did not, of course, invent the "Aunt Sally's." But he made them into investors and mobilized their savings for their benefit as well as for that of the Bell System. This alone has enabled the Bell System to raise the hundreds of billions of dollars it has had to invest over the last half-century. All this time AT&T common has remained the foundation of investment planning for the middle classes in the United States and Canada. Vail again provided this idea with its own means of execution. Rather than depend on Wall Street, the Bell System has all these years been its own banker and underwriter.”
***
VAIL’S OPERATIONALIZATION
In the case of AT&T from the early 1900’s into the late 1960’s at the time of the writing – a damn fine run – Theodore Vail had solved the problem of capital operationally.
We can see the full circuit once again:
Philosophy: Vail believed that a private, non-government system could be better than a government system… but it needed to focus on service, work cooperatively with the government’s goals, and constantly innovate.
Strategies: Vail (1) made the commitment to service come first over profits (very unusual in the era), (2) worked with regulators instead of being antagonistic to them and fighting delaying actions against them, (3) build Bell Labs for AT&T innovate and “compete with itself,” and (4) strategically needed to get independence from debt financing or highly speculative stock prices.
Tactics: He implemented a number of tactics to serve those strategies… the most noteworthy one, in our case, was designing AT&T common stock with a reliable dividend as a safe security that offered a mix of nearly guaranteed returns with upside.
Operations: Vail didn’t just “do a financing round” once… he set up AT&T so it could issue new common stock whenever needed to raise capital – eventually raising hundreds of billions.
That last point is the critical one – AT&T wasn’t constantly scrambling to fix its financing; instead, Vail built a reliable vehicle for raising money whenever it was needed, that kept serving AT&T’s capital needs until deregulation 62 years after his death.
Yeah, when you build Ops that successfully help your company navigate the world until even 60 years after your death… that’s pretty impressive.
Vail didn’t try to solve AT&T’s capital needs once; he took an Operational approach to solve AT&T’s capital needs forever.
***
FACEBOOK’S CODE IN THE WASHROOMS
I had the privilege of touring Facebook a couple years ago.
The most striking thing to me wasn’t the cool campus space, the free food, or the remarkable mix of how coders would be working an intense pace but with a calm and relaxed focus…
… no, the most striking thing to me was the bathroom.
On the inside of every toilet stall, when you close the door, you’ll see a piece of paper covering some recent Facebook news.
It’s like a newsletter, sort of. One single page.
On that page is two things:
-- One business case of someone who had succeeded from Facebook Ads.
-- One best practice for coding or new technical technique to implement.
I was blown away when I saw this.
It’s a serious challenge, once a company gets as large as Facebook, to keep disseminating details about little best practices, and success stories of people paying the company.
A company can put out a newsletter – and most companies do – but what percentage of their employees read it?
Instead, Facebook makes it easy to learn a single business lesson and a single technical lesson every time you to the men’s room or lady’s room.
Again, we see the chain…
Philosophy: Constant innovation technically and constantly focusing on the business case of the company.
Strategy: Regularly disseminate information on both topics. But, the strategic challenge is – how do we get people to actually read it?
Tactic: Place these loose newsletter on the inside of bathroom stalls.
Operations: Constantly do this – not just once – and change them up roughly weekly, so people can always get a new lesson.
They’re easy to read, pleasant, and insightful. I bet Facebook gets better dissemination of new coding best practices and business cases than 99% of companies anywhere near their size.
***
SOME GUIDELINES FOR OPERATIONALIZATION
1. You probably want to start with working tactics, not “Platonic Ideals” of operations.
There’s exceptions to this rule – I know a few people who can conceive of an operational system that just works right out of the gate – but if you don’t naturally think in Ops and Systems, I see this as a potentially treacherous path.
Too many people design theoretical systems before they have working tactics, which… don’t actually work.
On an individual level, and a small-company level, you probably want to find tactics that work really well, then operationalize them.
2. Document and legible-ize what you do.
My friend Taylor Pearson is a terrific operationalist – I learned a lot of what I know from him.
His approach to Ops is to open a Google Doc every time he’s doing a task that should be repeatable, alongside the work.
Then, as he works, he writes down exactly what he’s doing in the Google Doc.
It’s rough and messy at first, and it means completing the task takes 20% longer than if he just did it without documenting, but he winds up with the start of legible processes that can be improved directly or delegated.
3. Budget time and make space for operationalization.
I learned this from Kai Zau – Kai hates doing the same type of project twice without dramatically improving between them.
For years, I was too busy and had too much going on to actually step back and improve things.
Kai budgets time into every project, and keeps his schedule loose enough, that before he initiates another round of a project, he makes dramatic improvements into how he does it.
He actually schedules the time to make improvements before and after projects, rather than just “jumping into the next thing.”
It’s a marvel to see. It’s hard, especially if you’re too busy, to make this type of time and space… but even a couple hours a week (and don’t be lame and say you don’t have two hours)… even a couple hours a week goes a long ways.
4. Regularly review and work on an Ops/Systems level instead of a task/tactical level.
As I’ve become more effective, my ratio of planning-to-working has tilted in favor of more and more planning.
Likewise, time I spend doing “Pure Ops” to working on a tactical/technician level also changes over time.
These days, probably 10% of my time is spent in pure planning, and probably a third of my time is “pure ops” – this might sound luxurious, until you realize that it actually keeps net-saving time.
It took me only about 3 hours (180 minutes) to save 20 minutes per week editing TSR, while also slightly improving quality. That paid for itself in nine weeks; it means a savings of 1040 minutes per year (17 hours) and made me more effective permanently.
Which brings us to the next point –
5. Prioritize time reduction over quality improvement to start.
For obvious reasons.
The temptation to add brand new operational abilities is high… it’s fun and exciting.
But sooner or later, time becomes the fundamental limit on everything you want to do.
I stayed with Taylor in Saigon for a couple weeks a few years ago. It surprised me what he did to eat healthy – he cooked a huge amount of chicken, salad, and sweet potatoes one day per week.
He designed his way of doing it, and then he spends a couple hours once per week in order to reduce his time on food prep for the rest of the week.
I don’t know how long it took him to figure that method out, buy tupperware containers, test recipes and food choi
ces that’ll last and work well for a week, but it can’t have been that long… and it’s a 5+ hour savings every single week.
Reducing the time you spend on core business duties, personal habits and maintenance, basic things like grooming and food, and anything else you do – starting with the time reduction aspects means freeing up time to keep making improvements.
If you do a few rounds of that, it gets addictive – and you never want to go back to working frantically and tactically.
***
OPS AND TEMPORAL CONTROL
We’ve been exploring Temporal Control in this series – Operations cuts just about as close as you can get to controlling time and space.
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