Monday, December 15, 2008

Community and the Incalculable ROI

Return on Investment (ROI) is a funny thing, easy to calculate but not always easy to interpret. In many cases, what you can quantify pales in comparison to what you cannot.  Nonetheless, these inestimable flows are real and valuable.

I call this the incalculable ROI.

The Wall Street Journal recently profiled Executive MBAs (EMBAs). Scott Thomas, a 31-year-old who was halfway through the EMBA at a Cleveland school, dropped out to enroll in Ohio State University’s EMBA program. This doubled his tuition costs to $72,500 for the 18-month degree.

The WSJ concluded that this was a good move for Mr. Thomas because the Ohio State program yields a 170% return on investment, third behind only Texas A&M and the University of Florida.

However, it's likely that Mr. Thomas had something different in mind.  One of his reasons for transferring to the Ohio State program was that “the alumni network is unbelievably large, and they’re unbelievably loyal.”  In other words, by moving to a program with robust community, Mr. Thomas might well connect with a future investor in some future start-up. Or his next boss. Or a partner who goes on to help him launch a world-beating product.

The ROI calculated by the WSJ is surely important for near-term cash flow, but it pales beside the incalculable ROI of an expanded, lifelong professional network.

Thursday, December 4, 2008

Leadership in the White Space

Before I talk about white space I need to talk about dark matter.

Sometime in the 1930s scientists began observing phenomenon, like clusters of galaxies, whose movements didn’t make sense based on what could be seen. There had to be more mass “out there” holding things together. In fact, there had to be a lot more mass. That was the first inkling of something called dark matter.

As time went on, more and more data suggested that not just some, but most of the cosmos was invisible. And scientists got very clever at observing, say, the way light from distant galaxies bends, figuring out the total mass it would take to create the bend, and then subtracting out the known mass. The result: dark matter.

It’s like Sherlock Holmes said, “Eliminate all other factors, and the one which remains must be the truth.” Even if it’s invisible. Even if nobody quite knows what it is.

Today, we think dark matter may be the most voluminous and important stuff in the universe.

I believe there’s a comparable concept in business, organizations and leadership which is sometimes called “white space.”

It’s invisible, largely inscrutable, and may be the most important force in an organization. And there is no doubt that it bends light and energy to its will.

The other day on XM Radio I was listening to Bob Edwards interview one of XM’s Classical Music hosts. The two were discussing the enormous impact of Leonard Bernstein. Edwards asked a really good question, as he often does: If every member of the New York Philharmonic is a virtuoso musician able to read, interpret and play virtually any piece of music ever written for their instrument, what exactly does the conductor do?

The XM Classical host answered, and I’m paraphrasing slightly, “There’s a lot that goes on between the notes.”

That could be the title of a classical murder-mystery novel, no? Between the Notes: Mozart, murder, oboes, sex, and mis-tuned timpani. Yowza. The hard-boiled detective would look at the voluptuous flutist and say, “You may be able to hit the high E-sharp, but you have to know there’s a lot that goes on between the notes.”

Anyway, I thought the XM host touched on something real. There’s a kind of glue, a kind of energy that binds all of the talent in an organization together. Even when—or especially when—all the talent can hit every note on the button every time. With vibrato, even.

This reminded me of a CEO interview I read maybe ten years ago. This particular CEO, who led a brilliant management team, was asked what he did all day. He replied, “I just manage in the white space.”

In my first MBA year we were required to take something called Human Resources Management. I distinctly remember, on day one of the course, the professor said something like, “I know you all think this is a waste of your time. You think you should be learning how to read balance sheets and segment markets and value equity. And that’s part of what you should be learning. But I want you to know something: This is the most important course you’ll take. You just won’t recognize that for a while.”

He might have said—and we would have been equally skeptical—“Anyone can learn to do a cash flow. We’re going to spend the semester learning something very different, about operating in the white space. Some of you will never figure it out. But those of you who get it right, there’s some chance you’ll be successful.”

Learning to read a balance sheet is, in a way, like learning to play an E-sharp. It’s a real, teachable skill, one of the visible galaxies. It’s the stuff out there we can see and understand. But the stuff we can’t see, that binds all the cash flows and notes and keeps the galaxies from flying off into pieces—that stuff needs lots of our attention, too.

Getting an orchestra of prima donnas to play together brilliantly is about leadership in the white space. Making a tough decision on an investment, building support along the way and, generating enthusiasm for the final decision--that’s leadership in the white space.

A short time ago we didn’t know dark matter existed. Now it appears to be the stuff that holds everything together. It’s where all the cosmic heavy lifting gets done.

In organizations, the white space does the same thing. It’s where all the notes get wired together. It’s where all the energy is manufactured. It is, in most cases, the fundamental contributor to success.

As for that murder-mystery novel I was proposing, the one with the sex and oboes, the one entitled Between the Notes?  Question the percussionist.

Any good detective will tell you to never trust a guy who hits things for a living.