TechCrunch reviews the Kauffman Foundation’s ideas about making entrepreneurs and scaling startups. Very interesting:

“One of the findings of Kauffman research is that of the appx. 600,000
businesses that are started every year, less than a fraction of 1%
become high-growth “scale” businesses. These new firms, especially the
“scale” firms, have added all of the net incremental jobs to U.S.
economy since 1980 (about 40 million), and probably account for about
1/3 of GDP growth since then. So the key to boosting economic growth
is to increase the number of successful high-growth startups. After
all, the growth rate of our economy is nothing more than the
aggregation of the growth of our firms.

That is why Kauffman (which has a $2 billion endowment) is investing
heavily in an ambitious new program called Kauffman Labs. This aims
to dramatically increase the ability of small businesses to become big
businesses. The Labs program is built around a novel idea: that highly
motivated individuals with “scalable ideas” can be recruited to be
entrepreneurs and to be made successful, by surrounding them with a
network of other experienced entrepreneurs; sources of money; and
mentors. The goal is to educate entrepreneurs and surround them with a
powerful network.”

As I mentioned in my last post on scaling microfinance institutions, we’re coming to pretty much the same conclusions at the Grameen Foundation’s Technology for Microfinance division. To really make a significant impact on poverty, we need social businesses that can scale, and scale quickly.

(More on Kauffman Labs)

Coincidentally apropos to my last post on Lean Startups, today Jim writes:

Majority Rule or Boss Decides: both are ineffective on a team. Dissenters will actively or passively resist, it can’t be helped. Things have to be unanimous.

On average teams unanimity is a recipe for disaster. But with a shared vision, Booted teams can use Decider and Resolution protocols in small groups to make high-quality decisions quickly, and correct for new information when necessary. This has been my experience at with the Core so far at Grameen Foundation.

A Lean Startup is a startup company that combines Steve Blank’s Customer Development with Agile software development and other techniques that allow the company to iterate quickly to make products or services that customers want and will buy.

Lean Startup OODA loop - learn, build, measureEric Ries is an entrepreneur and student of Steve Blank, and has written a lot about Lean Startups. Here’s a great presentation about the nuts and bolts of creating a Lean Startup. In particular, one of the main – if not the main focus – of Lean Startups is speed. But a particular kind of speed – speed in learning, building, and measuring. Learning what customers want, building products that meet their needs, and measuring the results… over and over until you have a winning product and a winning way to deliver that product to customers.

On slide 24, Eric details a bunch of techniques and tools you can use to iterate faster – this is a great list. At Mifos we do a lot of those things. But I’ve also done a lot of things at other companies, and didn’t end up with truly great results. Why not?

I think at those other companies I was missing two key insights.

One is Blank’s Customer Development, which is a systematic way of breaking down the barriers between the sales, marketing, and product development functions and getting out in the field to learn with customers, enabling the company to find out what customers really want. (To be fair, Ries does list Customer Development, but it’s hidden in the sea of list items.)

The other key insight is increasing iteration speed. I’ve worked on some fast teams. But Eric’s toolbox doesn’t go to the heart of the difference between average teams and great teams. To make an order of magnitude change in speed and quality of the OODA loop, teams need shared vision and good decision making skills.

If team members have the same vision of what they want to achieve, they can trust individuals or subteams to make the right decisions. This saves time because less people have to be involved in each decision, making each decision go faster. On top of that, if the team has a systematic way of making wise decisions swiftly, this will allow them to consistently move at a fast pace.

So how do you get in a state of shared vision and stay there? How do you make wise decisions quickly? Jim and Michele McCarthy take this on in their book Software For Your Head and their Core Protocols methodology. As I detailed in my previous post about Boot Camp, my team at Grameen Foundation recently adopted the Core Protocols with good results. Before the training, our decision-making speed was adequate enough to keep us alive, barely. Afterwards… things are much faster, and speeding up! I’m actually struggling to keep up. I can’t wait to see the results of several months of this pace of work!

And I’m interested to see how combining the Core Protocols with the other Lean Startup techniques works.

At Mifos, we interested in growing microfinance institutions quickly. Why?

The problem is large:

Size of problem - pie chart showing number of poor people versus total world population

More than a third of the world’s population live in poverty: 2.7 billion people live in poverty out of a total world population of 6.7 billion. That’s 40% of the world living in poverty.

(source: Wikipedia entry on Poverty)

But MFIs don’t serve most poor people:

Microfinance market - bar chart of MFIs by number of clients and number of MFIs and percent of poor population served

(source: MIX Market data, chart by Grameen Foundation consultants Bryan Barnett, David Socha, and Mary Hausladen)

This is a very interesting chart. What does it show?

  • Most MFIs are small (15,000 clients or smaller).
  • Small MFIs serve a tiny fraction of the poor.
  • Large MFIs serve the most poor people.
  • There are very, very few large MFIs (1M clients or larger).

There are only about 3,000 MFIs in the world today. I don’t have a chart to show it, but the MIX Market data also shows that there is not much movement from one category to another – that is, most MFIs that are small, stay small. If this trend continues, microfinance won’t reach many poor people during my lifetime, and since microfinance is a key tool for ending poverty, we won’t make progress ending poverty.

However – there are some MFIs that can grow or “scale” quickly. One of our customers, Grameen Koota is growing exponentially, doubling about every 12 months, and will pass 500,000 clients this year.

Which points to an interesting strategy – find the MFIs that have the potential to grow quickly, and give them what they need to do it:

Moving mid-sized MFIs to large size - bar chart

Since MFIs can grow exponentially, it is possible to move mid-sized MFIs to large size. If we can create 27 new 5M-client MFIs per year, we can bring microfinance to all the poor people in the world by 2040. (World population is expected to be 10 billion by 2040; this means there would be 4 billion poor if the current proportion of poor to non-poor stays the same; 135M people/year * 30 years = 4.05 billion people.)

This is what we are doing. For more information, see the Technology for Microfinance Consortium.

Jim says:

“A want is a baby have. People need only join together in stating their goals, visualizing them, planning for them, and securing help from one another to achieve them. This is the heart and soul of teamwork.”

I saw this on a small scale recently – my team worked on an important bug in our software product for more than a year, not making any progress. We wanted to fix it, but we had other priorities too. Which meant that, practically speaking, it wasn’t going to get done, because it wasn’t our single priority.

We didn’t want to admit that to ourselves, though, and so we (and our customers) put up with this nagging pain for too long. Late last year, though, we finally decided we had had enough.

To fix it, a lot had to change. We had to admit to ourselves that we had a serious problem. And we had to expose this problem to our leaders to justify spending the time on it. We had to commit to having no other priorities until we fixed it. And we had to get external help. Fortunately, everyone was pragmatic and supportive! We did a whole release (Mifos 1.4) that was focused on fixing this bug. And of course – we fixed it! And in fairly short order, too. Kudos to SunGard India and Todd Farmer of MySQL for their help.Dr. Martin Luther King Jr. in his office, with a picture of Mohandas K. Gandhi on the wall

I think to myself: what stopped us from doing that a year earlier? I think it comes down to not believing we could do it. Once we believed we could, working together we changed many things to make our want into a have.

I work for a not-for-profit company that is working to end poverty. But I still meet people working in this field who don’t believe we humans can actually end poverty! And I must say, if we don’t believe we can end poverty, we never will.

There are people who did believe we could make a kinder, more just world: Martin Luther King Jr. and Mohandas K. Gandhi believed all people deserved civil rights, and before them Thomas Clarkson and the Quakers believed that people should not be slaves. These beliefs were outlandish at the time. But each of these people believed their movements could be great. And they each sought help – and received it. And prevailed.

Start by wanting to be great.

Some programmers are ten times more productive than average programmers. Similarly, some teams are vastly more productive than other teams. We’ve all been on low productivity teams in our life. In fact, judging by the popularity of certain satirizations of mediocrity these low-productivity teams are more the rule than the exception.Earthrise from the Moon, taken by Apollo 11 astronauts

But there are exceptional teams. These teams tackle projects others consider impossible, have success after success, and actually seem to have fun doing their work while leaving others in the dust. But what actually makes them different from other teams? How can we create teams like this? How do we keep them together, alive, and vibrant?

These are important questions to us all. If we could be more effective at solving our problems like poverty, global warming, and war, the world would be a much happier place!

It’s important on other levels too – do you want to get more satisfaction from your family, your job, or your school? Since we humans work in groups, knowing how to create great teams is part of getting the life you want.

What’s a great team like?

Can you say these things about your workplace?

  1. My projects effortlessly complete on schedule and in budget every time.
  2. Every team I’ve ever been on has shared vision.
  3. In meetings, we only ever do what will get results.
  4. No one here blames “management”, or anyone else, if they don’t get what they want.
  5. Everybody here shares their best ideas right away.
  6. Ideas are immediately unanimously approved, improved, or rejected by the team.
  7. Action on approved ideas begins immediately.
  8. Conflict is always resolved swiftly and productively.

(adapted from the list here)

And while we’re at it, let’s not just get a merely “better” team. Let’s go for great – a team that is 10x better than the average team. What does a team like that look like? Where can we go for best practices we can follow?

The Core Protocols

These are a set of best practices for intrapersonal and interpersonal relationships, designed by participants in Jim and Michele McCarthy’s teamwork laboratory called BootCamp. Two of the world’s foremost experts on teams, Jim and Michele have been running a series of simulations over the past 15 years for the purpose of asking the question, “what makes teams great?”

The Core Protocols are like recipes for good interactions – best practices that we can follow to help us get the most out of ourselves and our teams. They are hard to explain – how could following these commitments, recipes or “protocols” make my team great? Won’t they just lead to stilted, over-structured, and limited communication?

Despite being written down so clearly, practicing the Core is hard to explain in words. Like many things, there is a difference between reading about something and actually doing it. So there is a lot that I can’t convey here. But I can point to what it feels like.

Shadow Sun

In BootCamp, you immerse yourself in an environment where you use the Core Protocols all day, every day. The new skills you learn help you notice the barriers to greatness that exist in your mind, and practicing the Core with others helps you strip those barriers away. Together with your team you use your skills and your greatness to ship a product. The growth is exhilarating, awkward, and painful all at once. You feel what being part of a high-performance team is like. Because – you actually are part of a high-performance team.

Jim and Michele say:

The intense BootCamp experience includes all of the failures and triumphs that occur with normal team formation; the creation of a team-shared vision; and the design, implementation, and delivery of a product. The days in each BootCamp are packed with accelerated team dynamics; what usually takes a year or more is created in a few long days and nights of exceptionally deep engagement.

My team at Grameen Foundation wants to be one of those 10x teams, so we decided to hold a BootCamp recently, with the help of Jim and Michele McCarthy. It was an amazing and transformative experience. I highly recommend it. And the “booting” is continuing as I write this, because we’re taking that experience into our work as a team. It’s an experiment. I’ll say more about it on the pages of this blog.

Sidewalk cafe - civic spaceThe gist of Ran’s quote that I referred to in the last post was really about Google Buzz, privacy and civic space, and only referred to physical workspaces as a metaphor… but even online, there are different kinds of privacy and public space. Bloggers enjoy the civic space of conversation in the blogosphere and willingly give up some privacy to be a part of that conversation.

I think the reason they are – and I am – willing to do that is that we imagine we have some control of what we reveal. At my work, I still often go to a private conference room to have a one-on-one chat or take a phone call that I want to be private. And I have 1-1 chats via IRC and Skype. And me and my team members move between the public and private frequently.

Bloggers do this with some fluidity on line, and this is what people give up as they become more and more famous, the ability to have flexibility in mixing their public and private spaces. In the age of vast databases, data mining, NSA wiretapping, and social networks like Facebook and Buzz, the question of what is private, what is civic space, and what is oppression and invasion is often not under our control.
painting of a prison cell

The problem with Google Buzz is not that it’s public or private – it’s that we can’t easily choose who to associate with, or easily choose what is public and private. I think this what Ran was getting at when he said, “I feel myself being dragged out to sea in a rip current of increasing complexity.”

That’s what I think Ran’s reader missed – people don’t always want privacy over open space. Privacy and social status aren’t the same. You can have privacy in a corner office or a jail cell, or give it up by sitting at a sidewalk cafe, being homeless, or being famous. It’s choice that matters.

Ran writes, “How much privacy a person has, is often an indication of what position they hold in a hierarchy. Who gets the corner office? Who gets a desk in the middle of an open area?” Yes, that is a cliché in corporate USA and Europe. However, Extreme Programming teams almost always sit together, and I think, in general, most great teams do too.

I think this is part of the shift from an industrial economy, to an economy of ideas. In an industrial economy, the emphasis is on repeatable, standardized processes. By definition, there is a small group of people setting the standards and designing the processes. The best standards win – think of Henry Ford’s production line, Taylorism, and school.

For some time our economy and society has been shifting to an economy based on ideas. Here, firms, teams, and people win by having better ideas, not standard ideas. New and creative ideas are valued. And the best way to develop creative ideas is with other people, not by sitting in a room by yourself. Even some CEOs recognize this – Intel’s former CEO Andy Grove used a cubicle partly because his co-workers could overhear his conversations and give him help.

There is a movement afoot. I often say I wish my work was like my son Martin’s school, PSCS – it feels vibrant, warm, and fun, and often when I go there I don’t want to leave. So one of the first things I did when I started working at Grameen Foundation was create a team room, and got my team members sitting together. Our productivity jumped because we could get help from each other quickly – and at least for me, the warmth of the place went up a lot.

In the programming world, there is controversy about this. Microsoft rarely uses team rooms, putting most programmers into private offices where they can’t collaborate in-person with each other. So does Joel Spolsky. And Don DeMarco recommends it in the great book Peopleware – the same book where he recounts the story of the legendary Black Team.

But there have been great teams that do it the other way, like Chrysler’s famous C3 team ¹ that spawned Extreme Programming (XP). ThoughtWorks does it this way, as does my friends Paul Ingalls’ and Troy Frever’s XP team at Smilebox. When I visit ThoughtWorks or Smilebox, I don’t want to leave.

Anarchists often say that big business is the same as fascism and oppression, and make up that there is nothing to learn from corporations and business. That is true for many or even most large corporations. Business are changing the world – many for worse, but more and more there are ones that change it for the better – and the way they do it is by implementing their ideas. In the world we live in, if you want to change the world, shipping is what counts.

And it’s easier to ship if you’re sitting in the same room with your team.


Note 1: The Chrysler C3 team actually did not fully complete their software for Chrysler, and the project was eventually was shut down. However, in addition to shipping software, they also shipped the Extreme Programming methodology, which had significant influence on the software industry. Mistakes and failures are not always what they seem to be. I’ll say more about that in a future post.

My idea for this blog is to participate in the discussion about creating a kinder, more gentle world. I’m passionate about creating enlightened society – one where people are effective at making each other happy, don’t coerce each other, and don’t hurt each other. I’m interested in creating happiness one-to-one, on teams, and on a large scaleat the scale of nations and worldwide.