The Power of Continuous Improvement

54 Comments

baby_stepsMathematicians will tell you that the only way to learn math is to do math. Lots of it. The same is true in music and sports. While with math you quickly find out whether you’re right or wrong at a very atomic level with each problem you try to solve, with music a student listens to a song many times before she tries to emulate it — and then gets feedback on a note-by-note basis. And the same goes for sports — the stroke, the kick, the catch, the swing, the run and so on. Practice makes perfect, right?

Yet in business you often find people who have been doing something for a long time and just aren’t very good at it. Why? Lack of feedback. After all, imagine trying to solve math problems and waiting an entire year to get the answers, or hitting 1,000 serves and getting a summary of your performance at your “annual review” rather than after each serve or at the end of a game. Practice only makes perfect when there is frequent, high-quality feedback so that the right adjustments can be made, be it in math, sports, music — or business.

The Corporation and Feedback Systems

In certain disciplines, like engineering and sales, there is somewhat objective and frequent feedback. Your program compiles without an error and does what it was meant to do. Or you close the deal and make your quota. If, however, you’re in one of the many disciplines in which immediate and objective feedback is not available, practice may not lead to perfection so much as enforce bad habits.

Let’s say you’re a mid-level executive — a GM or product manager of some sort. More than likely, you’re measured by how well you interact with and present to your manager and senior executives. Consequently, you optimize to managing the bureaucracy (your boss in particular) rather than delivering the right product or service to customers. And so does your boss, and her boss, and so on and so on. Here the only thing that you’re practicing and perfecting are your brown-nosing skills. How can you expect to learn in an organization with that type of feedback and incentive system? How can such an organization, by extension, possibly produce excellence?

Product Development and Continuous Improvement

The organizations that produce excellence are those that continuously improve. The more granular and frequent the improvements, the better. For illustrative purposes, let’s compare two hypothetical companies that are going after the same opportunity with a similar product concept.

Company 1:  Large Web Company

It’s August 2009 and the annual plan has just been completed, a few months late. Regardless, the road map is set through August 2010, so it’s time to get to work. But new features continue to roll in from various executives, and since none of the older features are being dropped, the schedule is continuously moved out. Finally, after a death march, you launch your product — in October 2010. The press doesn’t like it. Millions of expected customers don’t show up. Somebody screwed up. Time to go back to the drawing board and start over again.

Company 2:  Web Startup

It’s August 2009 and you and a few friends are fired up to change the world. You decide that you’re going to launch your product in 90 days. You’re resource-constrained, so you add nothing to the requirements list and launch on time. The press doesn’t like it. Millions of expected customers don’t show up. Investors aren’t interested in what you have to offer. Every week you ship a new feature or two and learn what works and what doesn’t work. After several months of failure, some feature you cranked out late on a Sunday night leads to an uptick in traffic. Over the coming weeks and months you pull that thread. It’s now October 2010 and millions of people are using your product. You raise a hefty Series A and the press declares your company an overnight success.

This comparison in how organizations react to “failure” reveals the key reason why innovation comes from startups more often than large organizations (and why startups are often a very good training ground for product development and business talent). Large organizations generally aim to “get it right” from the get-go — an unreasonable requirement that leads to fear, posturing and endless delays. Startups, on the other hand, are just trying to get it right before they run out of money.

Human Resource Development and Continuous Improvement

Consider as well the feedback cycles in these two organizations. In the large organization, you likely get feedback when you do periodic releases — perhaps every six or 12 months — with the really important feedback saved for your annual review. In the startup, you get feedback after 90 days and then every single week. And there exists both carrot and stick in terms of providing honest and meaningful feedback — the carrot is equity and the rewards of creative ownership while the stick is running out of money.

Overnight successes make for great stories, but that’s largely because they’re so rare (and more often the stuff of fiction). Success, the kind that leads to great products and businesses, is built on the foundation of a huge amount of hard work over many years. Baby steps are the sure path to excellence in everything from product development to managing your own career — continuous adjustments based on frequent feedback lead to cumulative gains.

Mike Speiser is a Managing Director at Sutter Hill Ventures. His thoughts on technology, economics and entrepreneurship will appear at this time every week.

54 Comments

Rip Stauffer

This is dead on. Many of the important things can be measured, and should be, at regular intervals. You wouldn’t only look at your checkbook balance once a month or once a quarter.

BeenAround

Mike,

You raise a very important subject that is discussed in high tech cafeterias in the Valley all of the time. Managers have no incentive to reveal that the project that they are managing is behind schedule. In fact the system rewards them for delaying the project and blaming outside groups or individual engineers on projects. I know of countless examples where the managers bonuses (cash/stock options) were tied to intermediate goals for the project that were not measured by upper level management but by the project managers themselves. The fox is guarding the hen house. The upper level management does not understand the engineering issues most of the time. Engineers have no incentive to reveal to management that there is a problem because the engineers will be shot (the proverbial messenger). When there is a real technical problem on a project the natural inclination of poor managers is to take a short cut to give the appearance that all is well on their watch, when in fact there is a serious problem that has been covered up. Intel, pre-1996, was a honest organization, at least in the microprocessor divisions. The engineering management decision making process was driven by technical input. Politics and personal gain were not a component of the decision making process. Too many times in the current Valley are whistle blowers silenced or fired. Engineering has become a political mine field. New ideas are stifled because they threaten the status quo or some manager is sitting fat and happy and does not want to take a risk. VC’s have become part of the risk averse culture, seeking out people they know to run companies instead of next 30 year old Andy Grove. I know of too many instances where companies that have essentially failed and burned through $10-15 million get the series B round because of who they know in the investment community. The VC’s double down on relationships and don’t look at the facts. On the other hand new ideas from unknown engineers don’t see the light of day because they can’t raise funding. It would be easy to be dismissive of this post at this point as whining. But it is the reality in the Valley. People have mortgages. Eichlers are not $14k like they were in 1962. It was easy to take a risk back then. Not now. Fabs did not cost billions… The VC’s need to put the risk back in investing and avoid the herd mentality. Be innovative. Find 50 really good new ideas that can change a niche instead of making big bets on recycled executives who are social animals and are really good at hiding the real status of a project. America is about small businesses adding value not giant companies. Help rebuild America.

Scott Fitchet

I’ve had the opportunity to work at or closely observe about 30 tech companies. The ones that processed user feedback the fastest and with the biggest smile were the most successful and most fun to work at or follow. It’s quite easy, it just has to start at the top.

NWGuy

Mike,

Thanks for the article, it has a lot of good insights. It truly is amazing how overnight success takes so much time and effort. Those small incremental steps are critical to getting through the long process.

I’d like to suggest another aspect, especially since one of the comments is about Apple. What do you think is the timing of the product announcements for the two companies in your article? My guess is that the large company made an announcement by Q1 at the latest, and the smaller company likely used WOM for publicity. Apple seems to announce the products/features at launch more than during the development cycle, which can lead to more realistic expectations.

If you announce real early your prognostications have to be near perfect, and if you’re that good reading the future why are you working at a large company?

Thanks again!

Mike Speiser

Very good point and discussion topic. I’m with you — it’s best to do as much of the learning before you ask for the spotlight. The spotlight puts too much (of the wrong type of) pressure on an organization. For web and software products, why even do a press release or launch at all? Why not quietly launch to a small group and iterate until you get it right. Then you can do the ceremonial launch when you already know you have a winner?

Rajesh Menon

Mike,

Excellent article.

I have worked for a big company who had spawned an internet IT division sometime back.

I was the Project Manager and used to interact with the Marketing team to get the features and customer trends. We used to blindly believe whatever they (the marketing team) would say they need. Thus we were isolated from the real customer.

I personally think that it is not just the marketing people but the entire organization which should be listening to the customers voice. It gives more meaning to a programmers existence when he/she sees the customer using the feature that he had proudly written for them. Just knowing that the code served the purpose brings an immense amount of gratitude towards the customer.

Another startup where I worked, we had a product manager and a project manager. I was the so called Project Director who would oversee the orchestration. Here instead of the Project Manager, the Product Manager used to listen to the Marketing people. And translate it to the Project Manager who in turn relays the specs to eager programmers.

I feel that it is not just 1 or some people’s job to listen to the customer. Everyone in the organization should. Because your very meaning of existence comes from the Customer.

Some people may think that this may lead to little out of focus time for a programmer, but I feel instead that this will add to his/her productivity as he is spending time on the customer which is the bottomline.

Just thought that I will add my 2 cents worth.

Best Wishes

Rajesh Menon

Mike Speiser

Great comment, thanks Rajesh. Totally with you that everyone needs to use this approach. In fact, engineers as a group get this already more than any other function. We need an agile approach for marketing or something…

Kane Mar

Hi Mike!

Really great article. As you’ve pointed out regular feedback, and the ability to inspect our failures and adapt quickly is important for great products and businesses. May of these ideas have been around for a while in the software development community primarily in the form of Agile software development and Lean software development. The Scrum community, in particular, talk a great deal about Inspection and Adaption. [Aside: Scrum is a specific branch of Agile software development].

Further information about Scrum can be found at the Scrum Alliance website: http://ScrumAlliance.org
and a great reference for Lean software is Mary and Tom Poppendiecks book “Lean Software Development.”

Best regards,
Kane Mar
http://KaneMar.com

Mike Speiser

Thanks for the comment and link Kane. My example was a subtle reference to agile, which every startup I’ve met these days uses. So I expect startups to gain on big companies in aggregate over the coming learns. In the battle between exponential growth and linear or quadratic growth the outcome is pretty obvious.

Martin

Continuous improvement is a great process that is sadly underused. Although I advocate it and use it in business, unfortunately I tend to ignore it in other aspects of my life. I wonder if I am the only one?

Eran Galperin

Good article. The sports / music analogy is more apples to oranges – since in those fields the rules are much clearer and generally agreed on. In business there are many more variables and there is no consensus on what is the “right way” to play the game. Many successful business-men will impart almost contradicting advice stemming from their distinct experiences.

I liked your comparison between web companies. I think the biggest problems the large web company has are not necessarily wanting to get it right the first time (everybody does), rather it is a slow decision process and having too many chefs cooking the pot. Design / plan by committee is just a recipe for compromise and lower quality. They are also slow to react to feedback for the same reasons.

There are however exceptions to this rule, and some large web companies can and do deliver significant and innovative web products.

Mike Speiser

Thanks for the comment Eran. And apples and oranges are both types of fruit — so perhaps it will work? At least we’re not talking apple and steaks or chicken or the like ;–)

Ankur Jain

Excellent article Mike! Your analysis is spot-on! I work in a startup and I know what you mean by 90 days and then every week!!

Two questions for you:

* When everyone knows that innovation comes out of startups, then why big companies don’t adopt the practices of a startup? Who is stopping them?
* Every big company was a startup once upon a time. Then, how did they forget the culture in the initial days of their startups?

Mike Speiser

Great questions.

On the first question — I don’t know. Perhaps some social scientist has a good answer. It just doesn’t make sense to me. But this behavior allows startups to exist and thrive, so I guess we shouldn’t complain…

On the second question — I’ve noticed that a disproportionate number of great technology companies are led by their [product-focused] founder (NVIDIA, Microsoft until Gates left, Apple, SAP until Plattner left, Oracle, Salesforce.com, the Google guys, Facebook and so on and so on). A great [and somewhat benevolent] entrepreneurial dictator seems to be the key to keeping that startup mojo. Not any founder, but the original CEO founder who is driven by building great products. It’s quite difficult to keep that mojo after that founder leaves though, isn’t it?

AD

Great article, just loved it :)

Have experienced both scenarios working for a company and doing my own start up. The difference is while you are in start up mode, you are on a tighter timeline. You got to get things done before you run out of cash. That forces you to iterate faster, launch sooner, launch often. And when your users feedbacks start coming in, its a very humbling experience as you get to know that half the assumptions you made were actually wrong. You learn more in lesser time, so you get better faster too. That ofcourse is true if you are actually trying to listen and learn

The analogy with Maths is actually very correct

Mike Speiser

Thanks AD. Love the point on being humble. The one common attribute I noticed in great product people is humility — being smart enough to understand the limitations of your knowledge.

Avinash

Google (Chrome/mail, etc) and SAAS deliver a good job of incremental updates. MSFT on other hand makes products in 4 year cycle ?

Mike Speiser

Totally. Google is one of the few big companies that get continuous improvement. Google Labs was a brilliant device to allow a big brand the opportunity to ship imperfect products. But it seems that even the mighty Google is getting more conservative these days, no?

George John

Cool observation, and definitely something I felt when joining salesforce.com in 2003 where we did quarterly releases, versus my previous company that tended to plan out a year or more.

Also interestingly it’s the same in AI as it is with human/organizational learning.

In AI and Machine Learning there’s a branch of research on Reinforcement Learning, or learning from delayed rewards. It deals with how an intelligent agent can learn to modify its behavior to maximize total reward, in an environment where rewards are potentially quite delayed from the action(s) that ultimately caused the reward.

Reinforcement learning in complex regimes (where experimentation is expensive) becomes intractable without factoring the problem into subproblems, and designing “pseudo-rewards” that you hope will cause the right behavior in the end.

In your organizational learning example, the mid-manger’s pseudorewards (pleasing the boss) are all screwed up, and that sends the whole product and company in the wrong direction.

As computers get faster and industries evolve, some endeavors that historically have been solved via long-range plans with pseudorewards and organizational structures can now be solved via direct rewards and math.

For example, take online advertising — there’s a huge array of potential marketing actions that a company can invest in. Ultimately the goal of marketing is to drive sales, but it’s perceived as too hard to mathematically solve for the right long-term sales-maximizing marketing policy, so pseudorewards for things like good brand campaigns are designed.

But also interestingly, online marketing is actually a regime where fast experimentation is very cheap, so it’s actually possible to test interactions among brand and direct response campaigns in a way that solves for true reward versus pseudoreward.

How much does it help to “tee up” a direct response ad by showing a drip campaign of brand ads for weeks or months prior? What’s the optimal frequency and recency or mixture of brand and direct response ads? How do multiple publishers and ad networks interact? Who deserves credit for driving a conversion?

My bet is that success in online advertising will fall along these lines — the fast experimenters vs the slow planners.

Mike Speiser

Awesome comment, thanks George.

I’ve been thinking a great deal about machine learning. I wonder if the putting *everything* effectively in memory — the cost of DRAM is dropping like crazy and the emergence of SSDs means that spinning media will be a thing of the past for high IOPS environments — allows for far more rapid learning?

Sure, some firms have already done so, but at a massive cost or for relatively small capacities. With the cost of putting petabyte level data stores in memory or on SSD dropping at 50% every 9-12 months, won’t most machine learning become a real-time process?

Dan M.

Mike, another inisghtful article. I have enjoyed your many missives over the past few months. IT is funny you mention “The Goal”. You recommended that book to me when we were in college. I read it then and it is still on my shelf. I think I will pull it down and give it another read. dm

Mike Speiser

Thanks Dan! The Goal is great, but I like Zen and the Art of Motorcycle Maintenance even more. Worth a read. Thanks for the comment.

Haim Toeg

This is interesting reading and an important subject, however it touches only on the very surface of continuous improvement and neglects any standards and methodologies to create a continuous improvement system. Anything from ISO9000 to Six Sigma, Lean or CMM in their various reincarnations.

Meryl K Evans

Agreed on CMM, Six Sigma and all that. But these are way more than some small businesses’ need. To include all of this would take a series.

Haim Toeg

I don’t disagree and not necessarily every small business should implement a full fledged CMM, Six Sigma, et al. However, at the very least being familiar with the body of knowledge and understanding the principles and practices supporting them will make any continuous improvement program better and will help avoid reinventing the wheel.

Mike Speiser

Thanks Haim and Meryl.

I agree that this only touches on the surface and appreciate your specific comments Haim. As Meryl noted I’m somewhat limited on how much I can fit in <1000 words. However, I'm also limited by the depth of my knowledge on this topic. There are so many different methods and angles that I personally couldn't write anything close to a complete synopsis of them all.

In addition to the process approaches you note, I would also point out that agile programming is at its heart about continuous improvement. And just about every startup these days uses agile (my implicit point in the comparison of the two companies).

On the philosophy side, I would encourage people to read Zen and the Art of Motorcycle Maintenance and The Goal. I read both over a decade ago and this conversation has inspired me to go back and re-read them.

Alon Atsmon

Great article!

Hard and continuous work is highly underrated nowadays as it doesn’t make a good (short) news story. As a CEO of several SUs’ I can sya, this is one of the main lessons young companies and PM’s should learn.

Having looked at the authors resume, it seems this article is a results of many years of hard work- Keep on the good job your doing Mike..

Mike Speiser

Thank you Alon.

The two things I have found in common amongst the people I respect most is humility and focus. You cannot learn if you’re not open to finding out where you are wrong. If you change functions and/or industries you may carry over some of your learnings, but there is some amount of starting over.

On a personal level, hopefully a focus on these two things in addition to hard work will help me do something meaningful in the coming decades…

Alon Atsmon

Thanks Mike,

The fact that you have so dligently replied to most of the comments here says ait all..

Anyway we can follow you on twitter?

Alon Atsmon

Meryl Evans

I worked in process management for about 10 years of my corporate career. Plenty of people didn’t like it while others begrudgingly accepted it. If we keep doing things the way it has always been done, we’d never grow or innovate.

Sometimes you discover a faster and more efficient way of doing things. Everyone — including freelancers — can always be on the lookout to create and improve their working processes. Thanks for showing how important it is and doing it well.

Mike Speiser

Thanks for the comment Meryl. I agree with your insight that we can all get better at just about everything we do.

As I was writing this I was thinking about how various signals help me tune my writing. Number and quality of comments, Tweets, Delicious bookmarks, number of emails I get from friends… These indirect signals help me get better and better (hopefully).

krishna

Pretty relevant post in any company. I think startups do have feedback, but to retain people the need for frequent review is very important.

Mike Speiser

Thanks, and I agree that great companies are learning machines. Even Apple, despite the assumption among many that Jobs knows everything before he ships a product. For example, the iPhone App Store was a product of learning…

Wilf

I like your math analogy. That’s why we have instant feedback on our online maths revision site. If only I could convince my kids on the value of continuous practice :)

Mike Speiser

Thanks Wilf. Will check out your site.

I believe that the vast majority of people have the capacity to be very, very good at mathematics. But to do so you must start early, because once a child falls behind it gets harder and harder on a relative (to peers and expectations) basis. Compounding learning is as powerful (or daunting) in mathematics as compounding interest is in investing.

On your kids… why not buy a few workbooks from Amazon and get up every morning with the kids for a little dad / mom 1:1 time? Just 30-60 minutes each day before or after school will do it… That’s my plan ;–)

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