Wednesday, August 7, 2013

What Makes For Success? (Hint: It's Not the Bathrooms)

If I’ve seen it once I’ve seen it a dozen times—the article about the genius stroke Steve Jobs had in locating the bathrooms at Pixar.  He “insisted there be only two bathrooms in the entire Pixar studios, and that these would be in the central space. And of course this is very inconvenient. No one wants to have to walk 15 minutes to go to the bathroom. And yet Steve insisted that this is the one place everyone has to go every day.”

The moral of the story is that Jobs “wanted there to be mixing. He knew that the human friction makes the sparks, and that when you're talking about a creative endeavor that requires people from different cultures to come together, you have to force them to mix. . . And so his design was to force people to come together even if it was just going to be in the bathroom."

Now I ask you, does this really make sense?  

Do you really believe, had there been four or six or eight bathrooms spread throughout Pixar, that somehow Toy Story would have suffered?  

Do you really believe that a healthy company needs to force its employees to attend mixers near the toilet bowls?  (For that matter, do you really think, except for maybe the Pentagon and a NASA facility here or there, anyone actually has to walk 15 minutes in any office to find a bathroom?  That would certainly limit my Diet Cokes.)

By this theory, incidentally, the smokers in a company should all be wildly creative because they gather together in a little smelly place about a dozen times a day.

I would propose to you that this story is a function of 1) Steve Jobs’ halo effect, and 2) the fact that when a company is successful we back-attribute everything they did to that success.

Likewise, the Google gift of letting each engineer take 20 percent of his/her time to work on something company-related that interests them: Hands in the air if you think the stock price would move one iota if that “perk” were taken away?  Or the gourmet cooking that binds the troops to the company, just like Pixar’s bathrooms bound the troops to one another?  It’s more halo effect, and more placing culture far ahead of some of the other attributes that contribute to company success.

This I believe: Pixar was successful because it had great technology, great story-telling, a dozen geniuses and great leadership—with a fantastic, disruptive business model in a booming entertainment market.  With that line-up, the only impact bathrooms could possibly have played on Pixar’s success was if Jobs had forgotten to design a few in.

Google is successful because it has a killer search/advertising business model with a near-monopoly in a global market.  The food came later.  So did the car and the glasses.  And, if you work 60 hours a week for the company and want to contribute another 12 to do your own thing (for them), they’ll love you all the more for it.  Me, maybe I'll go for a run.

Culture is important—energy, how people treat customers and one another, etc.-- but it often gets the lion’s share of the credit for success (read: Zappos’ unrelenting crappos, with my apologies for the language).  We tend to write about culture once a company is successful and assume whatever they were doing contributed.  Said another way, companies with a great business model in a growing market can (and do) survive awful culture, but none can survive the opposite.

In fact, I’ve never actually seen a linear regression for “company success,” but I suspect it would look something like this:

30% Market: Large, attractive, and growing, with disorganized or vulnerable competitors.

30% Killer Business Model: Which isn’t “hits” or “views” or “visits" or whacks” or anything except the ability to generate rapid revenue and profit growth based on a clear technology-service-cost advantage.

Market and Business Model: that’s 60% of success, I think, and I may be on the low side.  

Then, of course, there’s:

25% Senior Managers, Quality People and Strong Culture: The stuff we love to read and write about.  The stuff that gets all the credit.  (Note, though, that strong senior management can have a multiplier effect on the business, since they are primarily responsible for choosing the market(s) and fixing the wayward business model.)

15% Luck: Good competition that doesn’t enter, bad competition that does enter, and a few large (or maybe a few thousand) customers who buy your product for no discernible reason on God's green earth.

If I’m right, then, we ought to be spending about 60% of our time reading (and worrying) about market analysis and business models instead of bathrooms and food.  At the very least, we ought to make an effort to clear the clutter from the language of success.

A leader who can generate energy, inspire, attract quality people, charm investors, instill confidence in the future and actually run a business is worth his weight in gold.  But if you cannot find one of those, at least find the lucky chump with the killer business model in a large, growing and disorganized market.  Then, you can let him place the bathrooms wherever he likes.