These trees have enormous, trunks and live for thousands of years.  One Boabab tree has a trunk with a diameter of more than 25 meters, and was dated to have been living at the time of Noah’s flood (source).

These trees teach about how businesses, countries and families can survive hard economic times.  The Boabab tree can drop it’s leaves for up to 9 months of the year to survive drought.  So, one of the secrets to the longevity of this tree is that it can dramatically reduce it’s consumption of resources when those resources become scarce.  When economic conditions get tough, do our families, businesses and countries have the wisdom to do the same thing?

Did you know that for each dollar Obama wants to spend in 2010, more than 30 cents are borrowed?

When times get tough and income shrinks, the companies, families and countries that have the discipline to proportionally reduce expenditures in a timely manner have a much greater chance of survival.  In short, strong companies, families and countries know that they can’t spend more than they make for long, or they are dramatically increasing the chances of economic failure.

“Approximately once a decade, a radical new technology emerges that fundamentally changes the business landscape.  In every case, regardless of prior competitive dynamics, businesses that understand and appropriately adopt the technology win, while those that fail to do so lose.  In the 1970s, this was mainframe computing.  IN the 1980s, it was the PC. In the 1990s, it was the Internet.  And today it is the online social graph.” (Clara Shih in The Facebook Era)

The social graph is the world wide web of people.  It is the map of everyone on the Internet and how they are interconnected.  The social graph is for people what the Internet is for interconnected webpages.  Social networks like Facebook, LinkedIn and MySpace are helping to construct this social graph.

Each of these radical technology evolutions has been punctuated by a cycle of innovation, commercialization, emergence of new applications, and then large-scale impact on business.  The online social graph is following this cycle, and is facilitating a “new, more nimble, and more efficient class of businesses that outcompetes those using technology from the previous era.” (Clara Shih)

I started working with the Internet and online communities almost 13 years ago in 1996.  I created Adoption.com, which became the world’s largest adoption service of which I’m aware (measured by the number of people using its services each month).

As my first consulting project I created the initial vision and directed the creation of the first website for Law.com, which I have been told sold for about $20 million within approximately 2 years of launch (unfortunately, I didn’t get any equity in the project).  I also built the Families.com online community and sold it in 2007.

During the last two years I have been doing consulting work for next-generation digital media properties, such as a large iPhone application and the 4th largest Facebook application, with 54 million registered members.

I have also built niche social networks (such as GenealogyWise.com) to leverage the social graph within niche industries.  These niche social networks provide tools that enable members to connect and share content with others who share similar interests.  GenealogyWise is just a few months old, but it already has 13,000+ members, 3,000+ sub-groups on genealogy-related topics, 700+ blog entries, 350+ videos, etc.

How could a social network help your business to seize your opportunity within the social graph?  If you are an accountant or attorney who practices a specific type of law, you could build a social network for people interested in your areas of practice.  If you own an emergency preparedness company or a manufacturing company, you could build a niche social network of your potential clients.   If you are part of a membership organization or are planning an event, a niche social network can help you recruit and develop stronger relationships with members and attendees.  If you are a politician, the social graph is an essential element of your campaign. President Obama’s social media strategy was given a large portion of the credit for his election victories.  If you are interested in sewing or if your child has a health condition, you can build a social network of people who have similar interests.

Then, once you have developed a successful social network, you can generate revenue in a variety of ways, such as selling advertising, directory listings,virtual goods, classified ads, e-commerce and subscription sales.

I have expertise in creating niche social networks, developing social media strategies for businesses, and helping organizations to better monetize their digital media properties. If your business could benefit from qualified, seasoned consulting to better seize the opportunities within the social graph, I would love to help.

Today FamilyLink became the #99 most popular US web property, according to Quantcast:
http://www.quantcast.com/p-86YkM5oSeBMSE#summary

Congratulations FamilyLink for your phenominal growth.  Thank you for letting me part of this amazing ride.

This picture shows the four of us in Matt and Michelle’s Sand Rail. This vehicle took the dunes with power and speed and had enough momentum to do whatever the driver wanted to do on the dunes.  (We wore helmets and had 5-point restraint systems in addition to roll bars.)

Later in the day, Matt and I took quads out and Matt taught me the concept of dune “bowling”.  Some of the large sand dunes were shaped as crescents or partial “bowls”.  In sand dune bowling, the quad rider builds up momentum then climbs straight up one side of the sand dune.  As the rider nears the top, and before momentum is lost, the rider turns to one side, and rides along the inside ridge of the sand dune bowl.  However, bowling only works if the rider keeps momentum.  If momentum is lost, the rider must quickly turn the quad down the sand dune to regain momentum. If momentum is not regained, the rider and the quad may tumble down a steep sand dune.

The momentum required for sand dune bowling has made me think of the importance of momentum in business and life, and I have been particularly thinking about the correlation between momentum and hope.  When our lives and our businesses are moving forward and progressing, we have momentum.  As a result of this momentum, we have hope for a better future than our present circumstances.

If we are feeling hopeless, it is often because we don’t have enough momentum in our life, or because our momentum is going the wrong direction.  Conversely, if we want to add more hope into our lives, we can often accomplish this by adding more momentum.

We can add momentum in our relationships by being more selfless, attending marriage education or counseling, spending more time with the people we love, expressing our love, etc.  We can add momentum in our career by improving education, enhancing job skills, reading industry books and blogs, improving the quality of our work, etc. We can add momentum in the physical area of our life by exercising, eating better, etc.   Businesses can add momentum through improving marketing effectiveness, innovation, user experience, viral advertising, etc. We can add momentum in the spiritual area of our life through scripture study, prayer, personal worthiness, etc.  We can even help add  momentum to the lives of others through mentoring, volunteering, helping the needy, making charitable contributions, etc.

We can’t just coast or maintain without regressing in our lives and businesses.  “If you’re coasting, you’re either losing momentum or else you’re headed downhill (source: Joan Welsh).”  

Even though most of us set well-intentioned New Year’s resolutions, studies show that most of us do not succeed in completing those resolutions.  If we really want to achieve our resolutions, we need to effectively convert a desire to change into a system or pattern in our lives.  Anthony Robbins said, “The most important thing you can do to achieve your goals is to make sure that as soon as you set them, you immediately begin to create momentum. The most important rules that I ever adopted to help me in achieving my goals were those I learned from a very successful man who taught me to first write down the goal, and then to never leave the site of setting a goal without first taking some form of positive action toward its attainment.”

As our goals become patterns in our lives and businesses, they add momentum, and the momentum increases our hope.

R.C. Willey is famous for not being open on Sundays.  When Warren Buffett, the world’s greatest investor, purchased R.C. Willey, this home furnishing chain only had stores in Utah.  After the purchase Bill Child, the CEO who remained with the company, wanted R.C. Willey to open a store in Idaho.  Up to that point, the only R.C. Willey stores were located in Utah.  Warren Buffett refused, believing that the closed-on-Sundays policy would make expansion outside Utah unsuccessful.  Bill Child believed in the Idaho expansion so fervently that he offered to front all the cost for the land and the new store personally.  If the store was not successful, it could be shut down and R.C. Willey would not lose any money.  If the store was successful, R.C. Willey could purchase the store from Bill Child at a price not much higher than what Bill had invested.  Warren accepted, the store in Idaho was built, and it was so successful during the “soft” launch that by the grand opening, Warren Buffet jokingly took credit for the Idaho expansion idea.  R.C. Willey has since expanded to Nevada with similar success.

One of the recurring themes of this book that stood out most were the defining moments in the history of R.C. Willey, and Bill Child’s leadership and decision-making during those moments.  R.C. Willey had many situations where the future of the company hinged on a single decision.  Many people look back at success that could have been and say “what-if.”  Bill Child lead the company through many defining moments that could have made or broken R.C. Willey, and traded “what-ifs” for a world-class success.  Here are a few examples:

(1) R.C. Willey was started by a man named R.C. Willey, who was Bill Child’s father-in-law.  Bill Child had gone to college intending to be a teacher.  Shortly after Bill finished college, he received an teaching job offer, and intended to pursue that career.  Before Bill he accepted, R.C. Willey believed he had ulcers and asked Bill Child to watch the store for a few weeks while R.C. took a vacation with his wife.  R.C. returned early from his trip, discovered he had cancer, and passed away soon thereafter.  Bill discovered quickly that the accountant had not been paying the bills and that the store had a huge amount of debt.  Bill and R.C.’s widow met with the company’s banker who recommended the company fold because of the huge debt load and the passing of R.C..  Bill Child refused to quit, gave notice he would not accept the teaching job, and spent the rest of his career building the R.C. Willey business.  If R.C. had made the easy decision to teach and walk away from the huge debt, his business career would have been over before it started.

(2) When Bill Child took over R.C. Willey, the store sold only home appliances.  Bill decided to expand the product line to include home furnishings, and feels if they had not made this decision they would have stayed a single store, and would have been forced to close when “big box” stores entered the market.

(3) In the early days of Bill Child’s success with a single store, a large percentage of his sales came from military personnel who worked on a nearby base.  Bill anticipated government cutbacks on military spending.  Instead of cutting costs and contracting to weather the storm, R.C. decided to expand to a second store in the Salt Lake City metro area.  When the military cutbacks happened, R.C. Willey had diversified and was even stronger than before.

(4) Bill Child invested in television advertising when other home furnishing companies did not see the value in this type of advertising.  Because of this decision, he was able to cut a “remnant” advertising deal to purchase a large amount of unsold advertising space before “remnant” advertising deals became popular.  As a result R.C. Willey received a phenomenal amount of advertising that the company never could have purchased, and experienced growth they could not have otherwise achieved.

(5) When the credit markets made it hard for R.C. Willey customers to receiving financing from traditional sources, Bill Child decided the company would offer financing directly to the customers.  The company’s financing arm became one of the key elements of R.C. Willey success.

When faced with adversity, many business leaders retract.  Bill Child knew how and when to keep moving forward instead of stepping back when times got tough.  In the end, R.C. Willey was rewarded with a $170 million acquisition by Warren Buffett, the brightest investor of our day.

In closing, here are few Bill Child quotes I enjoyed:

“Be motivated by excellence, not money.  You need to be better than all of your competitors.  If you are, the profits will come.”

” Offer customers true value on quality products.  A low price on a cheap piece of furniture is not value.”

Another client is almost completely dependent on Facebook. This client has seen phenomenal success in building a Facebook application.  However, when Facebook changed their design a couple months back, the prominence of third-party Facebook applications was diminished, and most of the leading Facebook apps have seen a huge dip in traffic.  Because of this recent Facebook strategy, Facebook apps that were too dependent on the Facebook platform must now diversify away from Facebook by building their own websites, and using social media websites such as as Facebook as marketing channels for their own websites, over which they have control.

Being too dependent on a third party who owns or controls a critical element of our businesses, is a recipe for disaster.  It’s like building a skyscraper on leased land.  Sooner or later that lease will come due, and the land owner will have all of the leverage in negotiating the new lease.  Businesses need to be the masters of their own destinies and own or control their key assets.  They need to not put themselves in a position that gives too much leverage to an essential partner.  Businesses in this position need to work quickly to diversify and regain that needed control.

What has been your experience with these type of business relationships that create too much dependence on a third party?

I have no idea if this story is true, but it illustrates clearly a common problem that businesses experience as they start to grow.  I have observed this type of paralysis which results from indecision, and often the results of not making a decision are worse than either of the viable decisions that could have been made.  

In other words, sometimes a business just has to quickly make the best decision possible with the available information and move forward, even if that business is not positive the decision is the best option.  Often companies don’t have enough information to make a perfect decision, or enough time to wait to make a decision.  Competitors can quickly leave behind the dinosaur companies who are unable to rapidly make the necessary decisions.

Sometimes decisive CEOs are criticized for not listening enough to their managers.   Strong leaders need to walk a fine line where they ask for and encourage passionate feedback from their managers.  However, managers then need to respect the responsibility of the CEO to quickly make a decision.  

Those decisions will not always be perfect.  However, the ability to quickly move the company forward is an essential attribute of a successful CEO and managers need to support their CEOs in these decisions after the CEO has heard their feedback.  Not doing or agreeing with what a manager has advocated is not the same thing as “not listening”.  CEOs are going to be wrong sometimes when the are analyzed with the hindsight of perfect knowledge.  However, it is often even more wrong to not make a decision.

· GoTo/Overture (became Yahoo Search Marketing) – paid inclusion search engine that was renamed Yahoo! Search Marketing after it was purchased by Yahoo to compete with Google AdSense.

· CitySearch – local city guides, acquired by IAC/InterActiveCorp.

· Commission Junction – affiliate marketing leader purchased by ValueClick.

· Insider Pages – Yellow Pages written by friends; a local search engine built around the concept that the best way to find a local business is through a personal recommendation. The Insider Pages community has written over 500,000 user-generated reviews of local businesses across the USA. The company was acquired by CitySearch/IAC in 2007.

· The DotTV Corporation – licensed the rights to the .tv domain, and sends the island nation of Tuvalu enough money from this license that it was able to join the United Nations. The company was acquired by VeriSign in 2001.

· eSolar – makes electricity generation from large scale solar thermal plants cost-competitive with fossil fuels. With mirrors that are 100 to 300 times smaller than conventional designs, eSolar’s product affords substantial advantages, including a 50 percent cost reduction. eSolar just received $10 million from Google and developed the solar power for the Google campus.

· Aptera Motors – is building lightweight, low cost composite electric and plug-in hybrid vehicles that are safe and reliable. By employing patent pending low cost composite manufacturing methods and cutting edge computational fluid dynamics, the company’s first car, the Aptera typ-1 will be available for under $30,000.

· Snap – is dedicated to getting users to results they really want faster. Snap.com delivers superior relevance and visual, rich and interactive search results to broadband users, and offers risk-free, flexible Cost-Per-Action advertising to advertisers. The company’s Snap Shots service is an open platform for delivering contextually relevant content such as stock quotes, streaming audio or video, product information and more, directly to users as they browse the web. (I have implemented Snap technology on this blog.)

· Tickets.com –a leading provider of tickets for sports and entertainment events worldwide.

· Compete – web analytics website that allows visitors to view and compare traffic to websites around the world (a site I use constantly).

· eToys.com – internet toy retailer, purchased by KB Toys.

· Picasa – a digital photo organizer for the PC that was widely reviewed as the best product on that platform. The company was acquired by Google in 2004.

· WeddingChannel.com – a central resource for couples about to get married. The site attracts millions of unique visitors each month and contains the bridal registries of a wide variety of retailers. WeddingChannel.com merged with The Knot in 2006.

· PayMyBills.com – online bill payment service acquired by PayTrust.

· Intranets.com – provided on-demand collaboration services — an “instant intranet” — for small businesses or departments and groups inside large organizations. By the time it was acquired by WebEx Communications in 2005, it had amassed over 300,000 paying subscribers and 10,000 corporate sites.

· NetZero – one of the first companies to offer free, ad-supported dial-up Internet services. It expanded its services with low-cost access in 2001. In that same year, it merged with Juno Online Services to form United Online. United Online is publicly traded on the Nasdaq stock exchange (Nasdaq: UNTD).

· HomesDirect – quickly became the largest online auction site for foreclosed properties with more than 10,000 homes sold per month. It was acquired by eBay in 2001.

· AirWave Wireless – a leading provider of specialized tools to centrally manage large, multi-vendor wireless LAN, mesh, and WiMAX networks.

· Free-PC – an opportunity to deliver free PCs to consumers, with the costs fully borne by advertising revenue. After providing free computers and Internet access to 20,000 customers in just a few short months, the company was acquired by eMachines.

· Energy Innovations – delivers cost-effective, grid-competitive solar electric power. It is currently developing the Sunflower, the first high-concentration PV system designed for commercial rooftop and adjacent ground-mounted applications.

· X-1 Technologies – changes the way corporate information is accessed and acted upon by end users. The company pioneered fast-as-you-type searching, intuitive interface, file and email previewing, the ability to save searches, and the ability to act on the found email or files. X1 is now available in both desktop and enterprise editions.

· New.net – provides more logical web address ending suffixes such as .travel and .shop. By partnering with Internet service providers to enable these new addresses to be recognized, the company sought to expand the market for web addresses and make it easier for users to find sites of interest. The company was acquired by Vendare Media (now Connexus) in 2004.

· Partsearch – a leading provider of Outsourced Parts Management (OPM) solutions.

· Infinia – improves the quality of life by changing how the world generates and uses energy. Having developed and delivered innovative Stirling engines and generators since 1985, the company’s technology is at the core of residential combined heat and power appliances currently being commercialized worldwide.

· Cooking.com – the leading online superstore for all things related to cooking.

· Desktop Factory – developed a breakthrough desktop 3D printer with capabilities similar to traditional rapid prototyping systems costing tens of thousands of dollars more. Combining high performance and low cost in a desktop size, this printer will allow three-dimensional printing to become pervasive in business, schools and homes.

· Perfect Market – an automated search engine marketing company that helps online publishers monetize content. The company maximizes the profitability of publishers’ pages by adjusting the amount spent with each traffic partner as calculated by Perfect Market’s proprietary algorithms through a closed loop feedback system. The high degree of automation provided by their patent-pending SEMgine™ technology is the key to profitably monetizing content that would otherwise remain invisible to Web searchers.

· InternetBrands – is a leading operator of media and e-commerce sites for “large ticket” consumer purchases, such as cars, real estate, mortgages, and travel. InternetBrands operates a portfolio of websites with 34 million visitors and 458 million page views in March 2008. In April, Internet Brands purchased five new websites, including FitDay.com. Some of the other InternetBrands websites include:

o CarsDirect

o Autos.com

o VacationHomes

o ApartmentRentals

o Loan

o CruiseReviews

o BikeForums

o Vamoose

o DVDtalk

o FamilyCorner

o FlyerTalk

o HorseTopia

o HuntingNet

o World66

o WikiTravel

o vBulletin (powers the Adoption.com Forums.)

o And many others.

IdeaLab was the simultaneous home to about 50 dot-coms at the height of the Internet bubble. After the burst of the bubble, Bill and IdeaLab went through some dark times. They had taken private placement funds at a $9 billion valuation, but then dropped in value to an estimated $500 million. Both sides eventually came to terms and dropped the suit.

After the dotcom crash Gross and IdeaLab shifted their focus to “big, impactful, change-the-world companies”. They felt it was going to take at least five years to get any company profitable, so they needed to focus on much bigger opportunities to make the effort worth while. Gross says, “We slowed our pace dramatically. We still had 20 ideas a month, but we just rejected 20 a month for six months, before we started one.”

Now, IdeaLab focuses on about 16 companies in a much more diverse portfolio. Bill is starting fewer new ventures, showing more restraint in which companies he starts, holding his companies longer, and trying to stay further out of the way of his management teams while they do their jobs.

IdeaLab has been a dream for a serial entrepreneur such as Bill Gross. He has all of the entrepreneurial tools he needs to create great businesses, and the business incubator allows him to spin of many ideas simultaneously. However, even with his phenomenal resources and talent, some of his businesses have failed. He has learned from these mistakes, and has modified the IdeaLab strategy.

Bill Gross said: “We found after starting fifty Internet companies after five years, the ones which succeeded were the ones with protect-able, intellectual property. It was not time to market, it was not how fast or lightweight the company was. It was how deep a reach, how proprietary, and what differentiation and barriers to entry those companies had so that others wouldn’t copy our idea. It led us to say–that building stuff was not bad. It wasn’t that assembly lines were a bad thing; it’s just that building things without protect-able differentiation is bad. We thought we should start companies in all our areas of expertise, as long as it meets the criteria of making an important difference to the world, that it meets the criteria of having fundamental demand, as well as meeting the criteria of company structure–protect-able, differentiable barriers to competitive entry. All our energy companies have that all in spades. In all aspects, they are large opportunities, with big potential impact, and also have patent protection and trade secrets that make it hard to copy the idea. We’ll continue to start Internet companies, too, but put them through the same test — big impact on the market, big potential, and intellectual property. “

What can I learn from Bill Gross as I create my new ventures? I am particularly impressed with his focus on social entrepreneurship, as many of his ventures make the world better, such as the clean energy companies. Life is to short to spend it just building businesses that make money. There are plenty of ideas and opportunities. I need to focus on those ideas that make a large social contribution in addition to making a profit.

I am impressed that Bill Gross and the IdeaLab team discipline themselves to toss out so many good ideas so that they can pursue the great ideas. I need to focus on fewer ideas that have the potential to be really big. I need to select ventures that have substantial demand, and have protect-able barriers of entry.

(Source: I gleaned information to write this blog entry from various sources, such as Wikipedia, the IdeaLab website, and news articles.)

One of the most surprising results of this research was the finding that virtually all of the companies which experienced this “Good to Great” transformation had a different kind of leader at the helm during the key transformation years. In Good to Great, they refer to this type of transformational leader as a “Level 5 leader”.

LEVEL 1 LEADERS are highly capable individuals who make productive contributions through talent, knowledge, skills and work habits.

LEVEL 2 LEADERS are contributing team members who add their individual abilities to the group objectives and work well with others as part of a group.

LEVEL 3 LEADERS are competent managers who effectively organize people and resources to achieve pre-determined objectives.

LEVEL 4 LEADERS are effective leaders who catalyze commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards.

Level 4 leaders sound like the type of leaders that elevate the performance of everyone around them and can effectively get priorities done. What more can we ask for than this? The research from Good to Great indicated that ALL of the leaders of the Good to Great companies had something more than their Level 4 counterparts at the less-successful companies. The attributes of this elite group of leaders is described as “Level 5 leadership”.

LEVEL 5 LEADERS build enduring greatness in their companies through a paradoxical blend of personal humility and professional will. Level 5 leaders demonstrate a duality of being “modest and willful, humble and fearless.”

Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious–but their ambition is first and foremost for the institution, not themselves.

Level 5 leaders often were described in interviews as: “quite, humble, modest, reserved, shy, gracious, mild-mannered, self-effacing, understated, did not believe his own clippings, etc. They seek to give the praise to others when things go right, and give the blame to them when things go wrong.

Level 5 leaders look out the window to apportion credit to factors outside themselves when things go well (and if they cannot find a specific person or event to give credit to, they credit good luck). At the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly.

Conversely, Level 4 leaders often have enormous egos that contribute to the demise or continued mediocrity of their companies.

For example, the CEO of Bethlehem Steel (a less-successful company), blamed all of their company problems on steel imports from foreign companies. Conversely the CEO of Nucor (a Good to Great competitor who thrived during the same era), saw the challenges faced by steel imports as a blessing, because their overseas competitors would have to ship heavy steel across the ocean, giving Nucor a large advantage.

However, Level 5 leadership is not just about humility and modesty. It is also just as much about “ferocious resolve, an almost stoic determination to do whatever needs to be done to make the company great… Level 5 leaders are fanatically driven, infected with an incurable need to produce results.”

Level 5 leaders help their successors to have even greater success than they had, and are not threatened by the success of these successors, because their goal is the long-term success of the company. Level 4 leaders often set their successors up for failure.

A damaging trend was identified by Good to Great, in which boards of directors tend to select larger-than-life, dazzling CEOs instead of the more reserved Level 5 leaders, passing by the individuals with the greatest chance to help create an enduring great company. These larger-than-life leaders are actually negatively correlated with going from good to great. Nearly all Good to Great CEOs were hired from within their companies.

So, what can I do to become more like a Level 5 leader? According to Jim Collins, some Level 5 leaders develop this skill through life challenges they have faced. Others were blessed with mentors or parents who helped teach them these principles. In my goal to be more like a Level 5 leader, I need to be better about giving credit to others when things go well, yet accepting the blame myself when things don’t go well. I need to be modest, and never boastful. I also need to be willing to pay the price to help the companies achieve the best long-term results.

Find Good to Great: Why Some Companies Make the Leap… and Others Don’t at Amazon.com.

(Source: The source for much of the content of this post came from Good to Great, by Jim Collins.)

In examining the history of visionary companies we were struck by how often they made some of their best moves not by detailed strategic planning, but rather by experimentation, trial and error, opportunism, and–quite literally accident.

This week I read an interview in Founders at Work with Paul Buchheit of Google. Paul was the creator of Gmail and developed the first Adsense concept. He also suggested the now-famous Google axiom “Don’t be evil.” The part of the interview that stood out most to me was that before Paul began the Gmail project, he didn’t receive a detailed spec with features, as you would expect from a company such as Google and a project of the magnitude of Gmail. Instead, Paul was given the non-specific charter to work on some type of email or personalization project. They just said, “We think this is an interesting area.” Paul went on to create the Gmail email program that has helped to revolutionize email.

Google didn’t try to micromanage Paul Buchheit. They hired a very talented employee, pointed him in a general direction, and then allowed him to do something even more amazing than what they were expecting. Google has done this repeatedly. Each of the Google developers is allowed to spend 20% of their time on a project of their choosing. In this way Google tries many new projects, and then runs with the ones that work.

The authors of Built to Last call this concept “branching and pruning”:

The idea is simple: If you add enough branches to a tree (variation) and intelligently prune the deadwood (selection), then you’ll likely evolve into a collection of healthy branches well positioned to prosper in an ever-changing environment.

Note how essential the pruning step is in this process. If we just try a lot of things and don’t prune, we will have a lot of projects falling somewhere in the mediocre to good range. To have a tree filled with great branches, or a company filled with great projects, we have to discipline ourselves to continuously prune away the less healthy branches or business concepts as we continue to add new branches or ideas.

William McNight was the visionary CEO of 3M, one of history’s most innovative companies. 3M utilized this “branching and pruning” concept extensively to develop products such as Post-It notes and Scotch tape. 3M allowed their team members to sprout tiny “twigs” in response to problems or ideas. Most of these twigs did not develop into anything. However, each twig that showed promise would be allowed to grow into a branch or even a tree.

3M developed a system which created a culture of continuous innovation. The following elements were implemented by 3M to create this systematic innovation:

• 15% Rule – allowing people to spend 15% of their time on projects of their own choosing and initiative. 3M executive Geoffrey Nicholson said “a lot of the things [that led to the Post-it] were accidental.” However, if 3M employees had not been doodling with weird adhesives during their 15% time, 3M would not have invented the Post-it note.
• 25% Rule – 25% of annual sales need to come from products introduced in previous 5 years.
• Golden Step Award – for team members responsible for new 3M business ventures.
• Genesis Grants – internal venture capital to develop ideas.
• Technology Sharing Awards – for team members who developed technology and successfully shared it with other divisions.
• Own Business – 3Mers who championed a new product could get the opportunity to run it as her own project or division.
• New Product Forums – sharing the latest innovations across the company.
• Dual Ladder - allows technical and professional team members to move up without sacrificing their research or professional interests.
• Problem-Solving Missions – small teams sent to customer sites to solve specific problems.
• High Impact Programs – each division selects one to three priority products to get to market in a short time frame.
• Profit Sharing – to stimulate individual investment.

McNight’s philosophy was captured in the following phrases which became part of the 3M culture:

• Listen to anyone with an original idea, no matter how absurd it might sound at first.
• Encourage; don’t nitpick. Let people run with an idea.
• Hire good people, and leave them alone.
• If you put fences around people, you get sheep. Give people the room they need.
• Encourage experimental doodling.
• Give it a try–and quick!

McNight understood that not all experimentation would prove favorable:

Mistakes will be made [by giving people the freedom and encouragement to act autonomously], but… the mistakes he or she makes are not as serious in the long run as the mistakes management will make if it is dictatorial and undertakes to tell those under its authority exactly how they must do their job. Management that is destructively critical when mistakes are made kills initiative and it’s essential that we have many people with initiative if we are to continue to grow.

Johnson & Johnson is another example of effectively implementing this concept of trying a lot of things, keeping the things that work, and quickly getting rid of the things that don’t. R.W. Johnson Jr. said, “Failure is our most important product.” He understood that companies must accept failure as an essential part of this innovation process.

In conclusion, the process of “trying a lot of things, keeping what works and getting rid of what doesn’t work”, if understood and harnessed, can be a powerful process to stimulate progress. For this to work I need to experiment with a lot of ideas, nurture the good ideas, quickly get rid of the ideas that don’t work, and accept failure as an essential element of the innovation process.

Find Built to Last: Successful Habits of Visionary Companies at Amazon.com

(source for much of this article: Built to Last)