On Leadership

By @ProfBruce

Professor Bruce M. Firestone, B.Eng. (Civil), M.Eng.-Sci., PhD.

Entrepreneurship Ambassador, Telfer SOM, University of Ottawa

Executive Director, Exploriem.orgFounder, Ottawa SenatorsBroker, Century 21 Explorer RealtyColumnist, Ottawa Business JournalAuthor, Entrepreneurs Handbook II, Quantum EntityBlogger, EQJournal.org, @ProfBruce

March 2012

Leadership is about getting people to do things they know are not in their best interests

Scott Adams, Dilbert creator

Right?

WRONG

“A leader is a person who chooses from among many alternatives, some of which s/he has generated and some of which either came from inside or perhaps from outside their organization, the right path for his or her tribe* getting buy-in from the whole organization as well as its entire stakeholder group and making sure that all its resources are deployed optimally to achieve their common objectives which serve not only to sustain and augment the interests of its individual tribal members and the organization itself but also a broader, ethical purpose for humankind.”

(* I am using ‘tribe’ here in the same sense as Dave Logan et al in their 2008 book, Tribal Leadership: http://www.eqjournal.org/?p=1155.)

Good leadership most valuable company on planet

Steve Jobs Build insanely great products and

services 40% of his time on Apple Biz Models What caused incredible run up in

Apple’s capitalization? Mac? iPod? iTouch? iPhone? iPad?

iPhone! Perhaps greatest tech product

EVER 288% p.a. (est.) IRR Try to get that from your Bank!

Motorola gets $100, once from sale of Razr

Apple gets CMRR Holy Grail of Tech!

Jobs visit to AT&T Sale of devices Share of monthly subscriber revenues App store sales/revenues iTunes sales/revenues iOS ad server

= Committed Monthly Recurring Revenues

Why would AT&T agree?

Strong Apple brand Trust in product Two year exclusivity Keep device out of hands of Verizon STEVE JOBS’ REALITY

DISTORTION FIELD

Kevin Rose, Founder, Digg.com Kevin Rose made $60 million in 18 months How did he do that?

DIGG.COM’S DIFFERENTIATED VALUE? New newspaper model adapted to Internet Not an online version of New York Times Digital community made up of homogenous

demographic—80% male, mainly young techies Readers are contributors Readers dig up interesting stories/post brief

synopses to site whereupon other readers vote them up or down

Site harnesses competitive instincts of readers Works because of homogeneous demographic

—contributors post stories of interest to group Site is dynamic—leading stories change by the

minute Digg.com’s cost for headline writers = ZERO Digg.com’s cost for journalists = ZERO Digg.com’s cost for editors = ZERO Digg.com’s cost for distribution = ZERO (at

least, marginal cost practically zero)

Digg’s sustainable competitive advantage is its business model and its readership

You might be able to knock off its business model but it is extremely difficult to knock off its millions of dedicated readers which form a community

The key is that the readership and community are relatively homogeneous and have similar interests

“If you spend our last $10,000 launching this site instead of a deposit on a home for us, I’m going to leave you,” Kevin’s girlfriend

Kevin and his partner populated their site by CALLING 3,000 of their friends

They didn’t push on a string–email campaign might have gotten them 30 users

I wonder how she feels now?

What are some attributes of successful leaders?

vain visionary creative proud angry impatient driven rebellious lonely

good psychologists manipulative emotional risk taker inspirational charming forceful changeable/ADD moody sensitive funny

Look at list Someone you’d like to spend a lot of time

with? Probably not! Leaders are exhausting people Look again We try to socialize these characteristics out

of our kids

Star Trek’s Captain Kirk split into two persons by Transporter beam

Goody 2-shoes Kirk and conniving womanizer Kirk.

Dr. McCoy (‘Bones’) asks: ‘Why don’t we just kill evil Kirk?’

Logical Vulcan first officer Spock declines Why?

Good Kirk is indecisive, wishy-washy, new age water-fountain kinda guy

Not person you’d put in charge of a starship

But ‘Good Kirk’ has to control ‘Evil Kirk’

Otherwise you get nasty tyrant/dictator/bully

Unavoidable internal inconsistencies

Difference between smart person and intelligent one?

Intelligent people can cope with ambiguity (Neal Stephenson, The Diamond Age)

Good leaders are trained for ‘emergency’ situations but are often bad managers

Entrepreneurial enterprises these days (large or small) are in constant state of controlled panic

Bad leaders? Michael Zafirovski, last Nortel CEO Spoke at Telfer Worst speech by CEO of major company 55 minutes on six sigma/getting

administrative financial ratios right Vision? 0 Great new NT products/services? 0 Updating NT’s biz model? 0

Good speech, Mike, if you are a COO WWSJD? None of his 55 minutes would be about six

sigma! That’s why you have a COO All would be about insanely great new

Apple products/services/biz models What should Mike have done?

Take page out of Lou Gerstner’s book Saved IBM in 1990s Took IBM into services, software,

outsourcing IBM became trusted advisor to clients—

even to the point of spec’ing non IBM equipment

Sit on same side of table as client Macy’s vs Gimbels/Miracle on

34th Street/Kris Kringle

Who knows more about maintaining/repairing legacy equipment than NT?

Their bankruptcy opens the door to Len Anderson and Renaissance Repair

Leadership matters! Almost no matter what you pay

Jobs/Gerstner/Rose/Zuckerberg, it isn’t enough

Anything you pay Zafirovski is too much

Anti-Leadership

Many people say they are pursuing success

But actually many people fear success Biggest obstacle to success is staring you

in face every time you look in mirror Fear of Success? Here’s how it works:

“I won’t try hard.” “That’ll show ‘em.” “If I don’t try hard and I fail, well I can always say that

I failed because I didn’t try hard.” “But if I had tried hard I would have succeeded.” “I won’t take any risks.” “My ego is protected because I have a safe fall back

position—i.e., I didn’t really want to do it anyway.” “No one can make fun of me even if I am a failure

because I didn’t want it anyway.” Notice how perfect reasoning is, how circular it is?

Leaders Need to be Creative Peter Patafie: up by bootstraps guy Hired to sell moving/packing supplies– 100%

contingent (all commission) Peter has confidence in himself At age 45, suddenly laid off Why? Making too much money (more than President) Wife and three kids to support Only had High School What to do?

Started own business selling moving and packing supplies

Started with less than $5,000 Had great reputation, Knows how to sell Gets product on credit from suppliers Brings creativity/differentiated value to

new biz

First great insight: his clients’ salespeople spend lot of time redelivering packing and moving supplies to their clients

Worries about his clients’ clients What if instead of delivering moving boxes to

client warehouse and then having their salespeople redeliver them to their customers who are moving, deliver boxes and moving supplies directly to customers?

Client salespeople can then spend more time selling (moves) and less time delivering boxes

Peter ends up with a 97% market share (> Microsoft’s OS)

Within six years, business that does $13 million per annum with 30% margin

Never expected to make that kind of money

Twice each year gets together with employees and shares the cash

Peter’s priorities:

Priority # 1: TAKE CARE OF YOUR BUSINESSPriority # 2: SO IT CAN TAKE OF YOUR FAMILYPriority # 3: SO YOUR FAMILY CAN TAKE CARE OF

YOUPriority #4: SO YOU DON’T BECOME A BURDEN ON

YOUR FELLOW HUMAN BEING OR SOCIETYPriority #5: SO YOU CAN HELP YOUR FELLOW HUMAN

BEINGPriority #6: SO THEY CAN HELP YOUR BUSINESS

This is the ethics rationale underpinning Adam Smith’s Invisible Hand and all entrepreneurship itself

Student asks Mr. Patafie: “Surely, you mean TAKE CARE OF THE

FAMILY is your number one priority?” “No!” he says What is the number one cause of divorce: a)

Alienation of Affection, b) Financial Difficulties? Answer is b) So take care of your business so it can take

care of your family and they can take care of you!

Opening scene of now-completed TV series LOST Writers get it about right when, > Oceanic Flight 815 crashes on

mysterious island, pecking order instantly forms around Jack Sheppard, doctor, John Locke, adventurer and Kate Austen, jail bird

These 3 characters between them have characteristics you’d expect in leaders:

Great training, intellect and education of Jack Physical courage and prowess of John Wiliness and toughness of Kate

Leaders Need to be Bold Joe Kowalski from Philly falls in love with

Algonquin Park Decides to be outfitter– taking visitors on

canoe trips First summer disaster– turns out no one wants

guide Learns force 3-4 rapids on Ottawa River that

no one traverses

Joe and pal Robbie Rosenberger scout territory

Joe sees BIG OPPORTUNITY Less than 90 minutes away market of 1.3

million outdoorsy people with disposable income

Next Spring, he and Robbie ask farmer to allow them to get in river from his property

Launch Wilderness Tours with two rafts– Robbie in one and Joe in other

100s then 1,000s show up Problem–rapids are terrific, ride is short Joe embraces programming: swimming rapids/one

channel for adventurous paddlers/another for families/bungee jumping/kayaking school/ mountain biking/rock climbing/volleyball/ badminton/ horseshoes/paddle tennis/basketball/soccer/ball hockey/lawn chess/softball/hot tubbing/outdoor movies

Joe buys land Joe builds a town Adds time share/fractional ownership

community too– Whitewater Village

4,000+ acres owned by WT Both sides of River (Québec and Ontario) No development permitted (other than WT) Problem– how to keep good staff in seasonal

biz?

Buy Mount Pakenham– winter time staff reallocation

Another problem– smallest vertical anywhere in region

Solution—turn Mount Pakenham into largest ski school anywhere– safety becomes competitive advantage

Schools show up whatever weather More programming? Add snow board park Add tubing for

non-skiers/boarders

Entrepreneurs would rather ask for forgiveness than beg for permission

Start with nothing/bootstrap your way to success/make a profit/cash is King or Queen

See and seize opportunities where others fail to see

Be innovative and creative Turn problems into opportunities– your

biggest weaknesses becomes your greatest strengths

Jim Balsillie, Phoenix Coyotes, Hamilton Bid, Advent of iPhone– bad CEO decisions can kill your enterprise

If you want to join private club, litigating your way in probably not best way

NHL a private club with 30 voting members plus Commissioner

Similar to political campaign to become Mayor– just fewer voters

Member clubs held in trust by owners for fans NHL believes should not be moved until all

options exhausted

NHL leadership—two lawyers (Gary Bettman and Bill Daly)

NHL leadership– no fear of litigation Jim soundly defeated in Phoenix courtroom Expansion route probably would have

worked Financial incentive for owners since they

share in expansion proceeds but not relocations

“I haven’t seen one (iPhone),” Jim Balsillie, Co-CEO, Research in Motion, 7 July 2007

“Try typing a web key on a touchscreen on an Apple iPhone, that’s a real challenge. You cannot see what you type,” Jim Balsillie, Co-CEO, Research in Motion, 7 November 2007

Litigation is soul-destroying, time-sucking black hole

Play to your strengths not your opponent’s Be strategic Why would you ever release a tablet called

Playbook that has smaller screen than your competitor?

With almost no apps? That doesn’t even send/receive email on its

own/your forte? That doesn’t even make phone calls?

Leaders are formed in the crucible of life They have a persuasive Mental Map of the

Way the World Works How do they get that? They have RL experience They make mistakes They gain more experience They never repeat same

mistake twice

They stand up to bullies They have a sense of fairness and fair play They can put a team together And keep it together Putting round pegs in round holes…

They have a sense of adventure They do dumb stuff They don’t listen to authority They follow the beat of their own drum They climb mountains in NZ in snow

storms where only way to survive is to go up

They see opportunity before others do

They see opportunity before others do Terrace gets $18 per s.f. for its office

space/five years later it’s $6 What to do? What does Toronto have that Ottawa

doesn’t have? A zoo/Princess of Wales Theatre/

Wonderland/NHL Team Conversation w/ Cyril Leeder and Randy

Sexton Bring Back the Senators

Cyril asks how much will it cost? $35 million (est. based on NBA) Actual NHL ask? $50 million USD Randy says let’s go for it Cyril asks how will we pay for it? Bootstrap capital, that’s how

Buy 600 acres at $12,500 per acre Put a NHL team and NHL-calibre building in

the middle of it Drive up the value of the land to $112,500 per

acre Keep 100 acres for Scotiabank Place and

parking lot Sell extra 500 acres for a profit of $100k per

acre or $50 million! NHL franchise cost = ZERO!

Also get 32 Original Corporate Sponsors at $15k each

And 500 Corporate Sponsors at $500 each Sell 15,000 PRNs at $25 each Raise $1,105,000 to help with bid As Al Davis once said: “Just win, baby.”

If u want a short, pleasant annual meeting w/ yr Bank, make a profit every year, no excuses

Don’t take ‘No’ for an answer, late Professor of Economics O. J. Firestone, U Ottawa to his son Sept.1990

“You will never, ever get a NHL Team in Ottawa,” anon. BOG member the night before the NHL awards the Senators to Ottawa, Dec. 6, 1990

“Make sure that the last face the BOG sees before they make their decision is yours,” Norm Seagram, former member of TOOC to Bruce Firestone

Last two faces the BOG see: Phil Esposito (Tampa) and Bruce Firestone

“The NHL is pleased and proud to announce… franchises have been awarded to Tampa and Ottawa,” five hours later

After winning the franchise, you:

a) Party all night?

b) Do a few media interviews, leave for Miami, fly to Montreal, drive to Ottawa, prepare to sell $22 million in cash worth of season tickets in ten days in late December 1990 for a team that won’t play (and win) its first game until October 8, 1992?

“John, what was the vote?” “It was unanimous.” Surprise phone call three weeks later

People like to buy from people they like and trust

Suppliers trust you to pay them/you trust them to deliver on time

Clients trust you to deliver and you trust them to pay you

Sold NHL on Ottawa and … on BMF

Conclusion

When something isn’t working, do something new Learn from your competitors Commitment is important: “YOU’LL NEVER, EVER GET A

FRANCHISE IN … OTTAWA” You can bootstrap big projects Even Fortune 50 companies do that (Disney and the Anaheim

Ducks 4 example) Sponsorship can apply to many industries and is a form of

Bootstrap Capital Keep your core competencies in house– outsource the rest If you are profitable, you will get financing not the other way round Entrepreneurs make their own rules

Conclusion

Entrepreneurship takes guts Sweat equity is important Creativity and innovation are key Sometimes you need to trade to get ‘table stakes’ Avoid competing directly with behemoths Try to add some differentiated value to your PB4L Be trustworthy Surround yourself with a competent, trusted team–

REALTOR/MORTGAGE BROKER/LAWYER/MENTOR/ETC.

The harder u work, the luckier u get Let 100 opportunities go by but when the right one comes

along, strike! EXECUTE! MAKE A PROFIT!

Last words

Trust is the foundation of a successful career Once you establish trust, you become part of a (business) ecosystem that

will sustain you, your business and your family for a long time Every business is an experiment… until proven otherwise Good decisions come when all three are in agreement:

YOUR GUT / YOUR HEART / YOUR HEAD An (unconventional) mentor can help give you confidence but at the end of

the day, every enterprise is an act of faith Enterprises that set goals, track their metrics and are held accountable by

their mentors and themselves are growing 7x faster* GO FOR IT!

THANK YOU,Dr. Bruce M. FirestoneB. Eng. (Civil), M. Eng.-Sci., PhD. Twitter: http://twitter.com/ProfBruce

* Internet startups that track their metrics grow 7x faster than those that don’t, Startup Genome Report 01, Max Marmer, Bjoern Lasse Herrmann, Ron Berman, 2011.