Leadership, Why, how, what? How To Innovate Like Steve Jobs?

Why, how, what?

Inside-out leadership the difference between winners and losers

SCIENCE OF BUILDING LEADERS BY ROSHAN THIRAN

“People don’t buy what you do, they buy why you do it. And what you do serves as the proof of what you believe.” – Simon Sinek

Simon Sinek: How great leaders inspire action   19 min ted.com

A COUPLE of years ago, I was perplexed by an issue: Why are some people and organisations more innovative, more influential, and more profitable than others, even though they may be less funded, less equipped, and possibly far inferior? Why do some command greater loyalty from customers and employees alike?

Everywhere, small start-ups’ were outwitting big giants, and little “people” like Nelson Mandela, Mahatma Gandhi and Sam Walton were out-muscling far more advanced and illustrious opponents.

Why is Apple considered more innovative than Samsung, even though Samsung wins more innovation awards?

Mozilla is a small foundation with less than 60 employees but their Firefox products is far superior to mighty Microsoft’s Internet Explorer; Microsoft has more resources, talent and funding.

Last week, I interviewed Wikipedia founder Jimmy Wales on the Leaderonomics Show. Wikipedia has one employee yet eliminated heavy-weights Encyclopaedia Britannia and Microsoft’s Encarta to become the world’s largest encyclopaedia.

This question kept bugging me until I met Simon Sinek via a TED Talk, who similarly grappled with this issue.
He studied the lives of Martin Luther King, and the Wright brothers, who did not have as much funding or expertise as Samuel Langley in the aviation wars, yet won against the odds.

Sinek found that successful people think and act completely opposite from the others who ended up “losing”. He used three words – why, how and what – in a concept he named “the golden circle”.

The outermost circle, labelled “what” represents, for example, a company’s product. The next circle, “how”, would be the technology behind this product, and the innermost circle represents “why” the company makes the product.

With successful individuals, everything started with “why” followed by “how” and finally “what”. Sinek discovered that the “losers” communicate in the exact opposite manner.

He adds: “Any organisation can explain what it does; some can explain how they do it; but very few can clearly articulate why.”

Success can easily be replicated if we all start practicing “inside-out” instead of “outside-in” leadership.

The why-how-what model is actually grounded in biology. Our brain is split into the neo-cortex and the limbic brain. The neo-cortex (how and what) is responsible for all our rational, analytical thought and language.

Our limbic brain (why) is responsible for feelings, trust and all human behaviour and decision making with no capacity for language.

When we communicate from the inside-out, we are speaking directly to the parts of the human brain that control behaviour.

The neo-cortex will then follow, rationalising that behaviour. When we communicate from the outside-in, people may understand vast amounts of complicated information, but may not trigger behaviour.

This is why you can give someone all the benefits of your product but they still don’t buy your products, while in some cases (as with Apple’s iPhone 4 with receptor problems), people would still flock to the product.

Why

Steve Jobs once said: “Innovation has nothing to do with how many research and development (R&D) dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about how you’re led.” Jobs understood clearly how to lead and it meant starting with the “why”.

The crux of Sinek’s idea lies within this centre “why” circle. The “why” represents an entrepreneur’s beliefs and passion. Why does your organisation exist? This is probably the most important strategic question your business needs to answer yet most people answer this question with “making money”.

Making money is necessary for survival but cannot be your sole purpose; we all need good health to live but that doesn’t make good health the purpose of living.

Your “why” should be enduring, and involve a social contribution and be worthy – bringing a sense of purpose.

Here are some examples – Google (let’s organise the world’s information), Mozilla (let’s kill Microsoft), Apple (let’s reinvent the status quo), Wikipedia (let’s all contribute knowledge and create a true depository of global information), AirAsia (enabling everyone to fly) and Leaderonomics (let’s transform the nation).

Neurologist Aron Buchman claims people who understand their “why” in life, actually live longer and have lower risk of Alzheimer’s. He adds: “People with high purpose in life have a lower risk of dying and developing disability. We found that people with high purpose in life at the beginning of the study had a two-and-half times lower risk of developing dementia.”

Knowing your “why” gives you direction. You tend to have more opportunities than you could possibly pursue. Knowing why you exist helps you decide what you will do and what you will intentionally choose not to do.

How

After your “why” is formulated, you can then figure out “how” it is going to accomplish the “why”. Take Walmart, the world’s largest retailer.

It started with a simple “why” – everyday low prices. Sam Walton wanted to create a store where customers didn’t need to cut coupons, compare prices or engage in non-value added activities to obtain the lowest price.

Then, he went about the “how”. Walton built an entire infrastructure to support his “why”, including the world’s best supply chain, an EDI system that ensured cost efficiency, hiring of “lower cost” retired folks, establishing stores in remote locations where rental was lower, completely cutting out advertising and keeping his corporate team as lean as possible.

Most organisations benchmark Walmart and try to “copy” their “how”. However, the “how” at Walmart has its foundation on its “why”, thus making copying immaterial.

AirAsia’s “why” was to ensure “everybody can fly”. Their “how” was to build an entire infrastructure to support this “why”.

To enable everyone to fly, they needed to manage costs and price tickets from zero (for those with no money) to full price (for those who can afford to pay). If their “why” was to be the “best low-cost airline”, all their tickets would be priced low.

Essentially, the “how” are ways the “why” gets accomplished – your value system, processes and structures, infrastructure, the talent in your organisation and the eco-system you create to support your “why”.

Wikipedia’s “why” enabled them to build an entire web eco-system (how) with a global volunteer and policing organisation.

What

Amazon.com is a business that defies logic – an online retailer that has become the biggest bookstore in the world. Jeff Bezos, its CEO and founder, knew his “what” – to open an online book store. But unlike others, he didn’t start with “what”.

He spent countless hours in traditional brick-and-mortar bookstores trying to figure out “why”. As Bezos visited bookstores, he realised there was an “experience” people went through buying books. People read parts of the books, compared books, browsed the best-seller lists and got frustrated when a book they wanted was out of stock.

Bezos quickly understood his “why” – to become “earth’s biggest bookstore.” He later refined his “why” to “We seek to offer earth’s biggest selection and to be earth’s most customer centric company.”

His “how” was to ensure the “experience” in a traditional bookstore was replicated while the frustrations (ie. lack of book titles) was addressed.

This infrastructure that he built costs millions but guaranteed Amazon provided a truly unique customer experience (his “why”).

Finally, after this entire infrastructure was built, he focused on the “what” – the actual products and services that Amazon offered – books, music and videos. The “what” may have started out as a bookstore, but once he understood his “why”, it progressed into much more.

Likewise, Apple started out as a computer company, but their “why” was to make a dent in the universe. Apple believed that “everything we do, we do differently”.

They believed in challenging the status quo. That was their “why”. And “how” they challenged the status quo was by hiring talented people and making beautiful products with great designs.

And finally, “what” Apple does is make computers, MP3 players, phones or anything that supports their “why”. We often communicate starting from the “what”. Companies communicate “what” they’re selling. But the truth is, people don’t buy what you do. They buy why you do it.

Final thoughts

There is a difference between giving direction and giving directions. Direction is the end destination (your “why”) to which you are headed, while directions (your “how” and “what”) is the plan to get you there. Leaders often give directions when they should be setting direction.

Martin Luther King inspired many to make a difference on racism. Interestingly, his speech began with “I have a dream” and not “I have a plan”.

We think a great business begins with a solid business plan. But numerous businesses built on solid business plans don’t last either. Instead, start with “why” and you may just end up inspiring millions.

>Roshan Thiran is CEO of Leaderonomics, a social enterprise passionate about transforming the nation through leadership development. To sign up your kids for leadership camps this school holidays, email
yasir.osman@leaderonomics.com, or login to
www.leaderonomics.com.

How To Innovate Like Steve Jobs ?

By KYM MCNICHOLAS

Image via CrunchBase

What does Steve Jobs do, that none of us seem to be able to emulate? 
Carmine Gallo has been following Steve Jobs for more than a decade.

He watches all of Steve Jobs’ presentations. He’s talked to analysts, former employees and other experts to find out what makes Jobs not only the best communicator in the world, but also the best innovator.

He has a new book on the market called, “The Innovation Secrets of  Steve Jobs.”

The book is #1 on Amazon’s Kindle in three categories:  creativity; leadership; and office skills. 

There’s a chapter in the book called, “Kick-Start Your Brain.” In it, Gallo explains that what scientists have found is that great innovators practice what’s called “association”. They look outside their industry for ideas they can apply within their organization. Steve Jobs has been doing that his whole life.

Here are two examples:

1) Gallo says Jobs’ inspiration for not having a designated cashier in the Apple Store,  came from the Four Seasons hotel chain, which has a concierge;

2) When Jobs and Steve Wozniak were creating the Apple 2 computer,  which became one of best selling personal computers of its time, Jobs wanted a computer people would have in their homes.  But instead of looking at his competitors, he walked through the kitchen appliance isle at Macy’s for inspiration.

In that same chapter, scientists explain to Gallo that another key to kick-starting your brain and get those creative juices flowing is to try new and novel experiences that push you outside your comfort zone and push your interests.

Take a look at the video below. In it, Gallo shares one BIG key to Jobs’ success:  “Sell Dreams, Not Products.”

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Monkeying with interest rates: US, Japan and EU monetary policy

Monkeying with interest rates

THINK ASIAN BY ANDREW SHENG

EVERY Chinese child knows the old story about monkeys who were offered a choice of two bananas in the morning and three in the afternoon, versus three in the morning and two in the afternoon.

Most monkeys chose the latter, but the traditional answer was that there should be no difference because both choices end up with five bananas. Who is right?

Actually, the monkeys are right. Three bananas in the morning are better than two in the morning, because there is a time preference of consumption now versus consumption later.

The two choices are not the same because there is a value attached to time, which is the interest rate.

The interest rate is the price to compensate for delayed consumption, because in the afternoon the monkey risks not getting the third banana, so it prefers to consume one more in the morning.

The two choices are identical when the interest rate is zero, because there is no reward for consuming now or later.

This is exactly the dilemma the world faces under quantitative easing, which is another word for printing money.

There are two reasons why advanced countries may want interest rates to be near zero.

The first is that after a crisis, zero interest rates mean that the central banks do not fear higher inflation.

The second is that zero interest rates subsidise the borrower, especially since the advanced economies are all highly in debt.

But zero interest rates have huge distortive effects on resource allocation.

If the advanced countries are growing at 2%-3% per annum, the real interest rate should be around 2%-3% per annum, because the savers should be compensated for the growth in the economy, otherwise their capital is being eroded in value.

With interest rates at zero, markets also have difficulty pricing risks.

The gross interest rate or dividend should always price in an element of risk that the borrower may default or inflation may rise.

By printing too much money and keeping interest rates very low, central bankers in advanced economies are hoping to reflate their economies.

Japan has tried this for decades without any success.

Actually, my diagnosis of the Japanese debt deflation is that there are two mutually reinforcing reasons of demographics of an aging population and lower income from low interest rates.

As the population ages, the economy must slow. Lowering interest rates causes the aging population to save more, rather than consume, because their income from their savings is declining.

This creates a vicious circle. In the short run, the low interest rates create a bond bubble (since the price of the bond is the inverse of the bond yield).

When the government runs higher and higher fiscal deficits, it can only do so by lower and lower interest rates.

This is exactly what has happened in Japan, when the domestic fiscal debt has reached 200% of gross domestic product (GDP) and if interest rates rise to global levels, the government would have an impossible fiscal crisis and the bond market would implode.

Europe and the US are running large fiscal deficits with fiscal debt averaging 100% of GDP and rising.
Central bankers are a conservative breed – they seldom talk bluntly.

However, the president of the Federal Reserve Bank of Kansas, who hosts an annual exclusive Jackson Hole Economic Symposium in August for central bankers, recently gave a brave speech called “Hard Choices”.

You know you are considered a respected central banker when you are invited to the Annual Jackson Hole conference. Needless to say, I have never been invited there.

The first hard choice is regulatory. President Hoenig considered that the “too big to fail” problem will not go away easily.

He said, “The Basel Committee just announced an agreement to establish for our largest global banks a Tier 1 capital-to-asset ratio of 3%. This is a 33-to-1 leverage ratio.

Bear Stearns entered this crisis and failed with a 34-to-1 leverage ratio. It leaves a small cushion for error and is a level of risk that I judge unacceptable.” Thank you for telling the truth, President Hoenig.

The second hard choice is monetary. Paul Krugman warned that “deflation is a serious risk and that the US could become another Japan, which must be avoided at all costs”.

President Hoenig dissects that hard choice: “But as much as I want short-term improvement, I am mindful of possible longer-term consequences of zero interest rates and further easing actions. Rather than improve economic outcomes, I worry that the FOMC is inadvertently adding to “uncertainty” by taking such actions.”

He correctly diagnosed that “the financial collapse followed years of too-low interest rates, too-high leverage, and too-lax financial supervision as prescribed by deregulation from both Democratic and Republican administrations.

In judging how we approach this recovery, it seems to me that we need to be careful not to repeat those policy patterns that followed the recessions of 1990-91 and 2001.

If we again leave rates too low, too long out of our uneasiness over the strength of the recovery and our intense desire to avoid recession at all costs, we are risking a repeat of past errors and the consequences they bring.”

He advocates “dropping the ‘extended period’ language from the FOMC’s statement and removing its guarantee of low rates. This tells the market that it must again accept risks and lend if it wishes to earn a return.”

In other words, he favours easing off “quantitative easing” by getting the market back to normal.
“A zero policy rate during a crisis is understandable, but a zero rate after a year of recovery gives legitimacy to questions about the sustainability of the recovery and adds to uncertainty.”

I congratulate President Hoenig for his frank and realistic assessment of the current dilemma of excessive low interest rates.

Unfortunately, I am not sure that his central banking guests may want to follow his advice. A great pity if they don’t.


>Tan Sri Andrew Sheng is adjunct professor at Universiti Malaya, Kuala Lumpur, and Tsinghua University, Beijing. He has served in key positions at Bank Negara, the Hong Kong Monetary Authority and the Hong Kong Securities and Futures Commission, and is currently a member of Malaysia’s National Economic Advisory Council. He is the author of the book “From Asian to Global Financial Crisis”.

US, Japan and EU monetary policy: Monkeying with interest rates

September 22nd, 2010

Author: Andrew Sheng, University of Malaya and Tsinghua University

Every Chinese child knows the old story about monkeys who were offered a choice of two bananas in the morning and three in the afternoon, versus three in the morning and two in the afternoon. Most monkeys chose the latter, but the traditional answer was that there should be no difference because both choices end up with five bananas. Who is right?

Actually, the monkeys are right. Three bananas in the morning are better than two in the morning because there is a preference for consumption now versus consumption later. There is a value attached to time, which is represented by the interest rate. The two choices are identical when the interest rate is zero, because there is no reward for consuming now or later.

This is exactly the dilemma the world faces under quantitative easing, which is another word for printing money.

There are two reasons why advanced countries may want interest rates to be near zero. The first is that after a crisis, zero interest rates imply that central banks do not fear higher inflation. The second is that zero interest rates subsidise the borrower, which is especially pertinent nowadays when advanced economies are all highly in debt.

But zero interest rates have huge distortive effects on resource allocation. If advanced countries are growing at 2-3 per cent per annum, the real interest rate should be around 2-3 per cent because savers should be compensated for the growth in the economy, otherwise their capital is being eroded in value.

With interest rates at zero, markets also have difficulty pricing risks. The gross interest rate or dividend should always price in an element of risk that the borrower may default or inflation may rise.

So why support a zero interest rate policy?

By printing too much money and keeping interest rates very low, central bankers in advanced economies are hoping to reflate their economies. Japan has tried this for decades without any success.

Keeping with the Japanese example, the demographics of an aging population and lower income from low interest rates are two mutually reinforcing reasons for Japanese debt deflation. As the population ages, the economy must slow. Lowering interest rates causes the aging population to save more, rather than consume, because their income from their savings is declining. This creates a vicious circle. In the short run, low interest rates create a bond bubble (since the price of a bond is the inverse of the bond yield). When the government runs higher and higher fiscal deficits, it can only do so by lower and lower interest rates.

This is exactly what is happening in Japan. If interest rates rise to global levels, the government would have an impossible fiscal crisis and the bond market would implode. Europe and the US are also in danger of the same outcome – the US and some European countries are running large fiscal deficits averaging 100 per cent of GDP and rising.

Central bankers and policy makers need to talk bluntly about this worrying problem. Luckily, Thomas Hoenig, president of the Federal Reserve Bank of Kansas, who hosts an annual exclusive Jackson Hole Economic Symposium in August for central bankers, recently gave a brave speech called ‘Hard Choices.’

The first hard choice he discussed is regulatory. President Hoenig considered that the ‘too big to fail’ problem will not go away easily. ‘The Basel Committee just announced an agreement to establish for our largest global banks a Tier 1 capital-to-asset ratio of three per cent. This is a 33-to-1 leverage ratio. Bear Stearns entered this crisis and failed with a 34-to-1 leverage ratio. It leaves a small cushion for error and is a level of risk that I judge unacceptable.’

In addition to improved regulatory practices, the second hard choice is monetary. President Hoenig succinctly dissected this policy dilema. ‘[A]s much as I want short-term improvement, I am mindful of possible
longer-term consequences of zero interest rates and further easing actions. Rather than improve economic outcomes, I worry that the FOMC is inadvertently adding to “uncertainty” by taking such actions.’

He correctly diagnosed that ‘the financial collapse followed years of too-low interest rates, too-high leverage, and too-lax financial supervision as prescribed by deregulation from both Democratic and Republican administrations. In judging how we approach this recovery, it seems to me that we need to be careful not to repeat those policy patterns that followed the recessions of 1990-91 and 2001. If we again leave rates too low, too long out of our uneasiness over the strength of the recovery and our intense desire to avoid recession at all costs, we are risking a repeat of past errors and the consequences they bring.’

He advocates ‘dropping the “extended period” language from the FOMC’s statement and removing its guarantee of low rates. This tells the market that it must again accept risks and lend if it wishes to earn a return.’ In other words, he favours easing off quantitative easing by getting the market back to normal. ‘A zero policy rate during a crisis is understandable, but a zero rate after a year of recovery gives legitimacy to questions about the sustainability of the recovery and adds to uncertainty.’

I congratulate President Hoenig for his frank and realistic assessment of the current dilemma of excessive low interest rates. Unfortunately, I am not sure that his central banking guests may want to follow his advice. It would be a great pity if they didn’t.

Andrew Sheng is Adjunct Professor at the University of Malaya and Tsinghua University, Beijing.

A painless, facilitative budget

A QUESTION OF BUSINESS BY P.GUNASEGARAM

Najib has packaged a smattering of goodies while paving the path for growth with a sprinkling of incentives and expenditure.

IT’S a budget which is rather difficult to juggle with coming at a time when the world economic scenario is again uncertain as growth already shows definite signs of slowing in the second half.

The stimulus packages can’t be cut back quickly or the economy might slow even more. However, there is still the prudent need to ensure that the overall budget deficit – the excess of development and operational expenditure over total revenue – does not become too unmanageable.

That is reflected in only a marginal decline in the budget deficit to 5.4% of gross domestic product (GDP – goods and services produced within the country) for 2011 from 5.6% this year. The real cuts have to be postponed.

In the meantime, such spending is not sustainable especially in the face of what may be a slowing in government revenue as a result of a smaller growth in the economy. That means in 2011, the private sector has to firmly take over the reins of growth.

For that to happen, it is vital for confidence to be maintained and for the Government to do all it can to facilitate both private investment as well as consumption.

In a sense then, the budget announced yesterday by Prime Minister and Finance Minister Datuk Seri Najib Tun Razak is facilitative – it lays the groundwork for sustained economic activity in the face of renewed adversity on the external front by encouraging private investment and consumption.

Thus, it is that Najib put emphasis on a slew of projects announced earlier, most of which are to be undertaken largely by the private sector with some impetus provided by government agencies. On that will depend much of the push for economic growth.

There is realisation too that Malaysians do have a lot of money in the banks with savings of over RM200bil. The cut on a range of imported consumption goods no doubt indicates a desire to tap this savings pool to fuel demand in addition to making Malaysia a shopping haven for tourists as well.

An interesting aside was the politically charged issue of toll rates and their increase. Najib stands to increase his and the Barisan Nasional’s popularity by announcing that there will be no toll increase for the next five years.

Reportedly the government investment company Khazanah Nasional, and the Employees Provident Fund are launching a general offer for PLUS, the north-south highway operator, for over RM20bil. As part of the deal and the subsequent restructuring of equity and debt, the public will get some toll relief.

The call for the establishment of a minimum wage has been deftly deferred by the establishment of the National Wages Council with representation from all stakeholders. The council will come up with a recommendation on minimum wages as well as other measures related to wages.

The attempt to give some to the small man was reflected in the move to increase wages of security guards in government services so that they will earn more than RM1,000 a month in wages and fixed allowances.

While earlier measures by Bank Negara to curb property speculation was reflected in higher down-payments, the Government has encouraged first time buyers by coming up with a scheme whereby the 10% down-payment will be guaranteed by Cagamas, the national mortgage corporation.

Finally, it must have come as some relief to those who enjoy the occasional tipple or two (sometimes more) to know that alcohol has been left well alone. On that note, here’s to the budget!

> Managing editor P. Gunasegaram is convinced it is false to argue that less expensive alcohol and tourism go hand-in-hand – look at Singapore! But he isn’t complaining.

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