Today your software solution most likely delivers the same value to your customer whether it is the first, 101^st or 1,000,001^st transaction. But software made smarter with predictive analytics delivers greater value to your customer with each transaction because it learns and adapts. Predictive analytics make your software solution “sticky” because your solution grows in value to your customer over time. The more the customer uses the product, the better your solution will be.

You’re probably used to hearing about web analytics rather than predictive analytics, but predictive analytics have been around for a long time. Specialty applications in banking, credit and marketing have applied predictive analytics to manage risk and analyze opportunity. Historically few software vendors outside these markets have taken up this powerful approach. But this is changing fast. Thought leaders like Tom Davenport in “Competing on Analytics” and James Taylor in “Smart (Enough) Systems” have made the case that predictive analytics are a must for operational systems.

Platform vendors like IBM (with its acquisition of SPSS), SAS, Teradata and others get it. And predictive analytics have become an essential feature in high-end CRM and Marketing applications. Recent surveys show analytics, especially predictive analytics, top of mind for CIO’s. As Forrester Research said, “IBM’s acquisition of SPSS marks an industry tipping point. In the advanced analytics segment, the deal is having the same impact that IBM’s Cognos buy had on the BI market.”

The good news for startups and small software companies is that building in predictive analytics is easy. It is often said that predictive analytics turn uncertainty about the future into a usable probability. So what could you do with this knowledge to add value to your customer? The key is to build your solution with predictive analytics in and in mind.

Here are 3 steps to customer centric software that build predictive analytics in and in mind:

1. Business Step: Identify where in your solution knowing the probability of something that hasn’t happened would improve the solution.
2. Analytics Step: Look at those circumstances (from test data, trials and judgment) and define what information the solution will need to calculate these probabilities.
3. Data Step: Make sure the solution will capture these data with the right level of granularity so that the system can calculate the probabilities.

Let’s walk through these steps with a fictional software startup, primarily cloud based but also offering an on-premise solution. They’ve landed their first customers, and are starting to standardize and package their offering. Now it’s time to scale their product and sell to many customers, not just a few early adopters. Like most companies they have competitors, competitors who are taking advantage of the same technologies to rapidly iterate their product. The team at our startup wants their product to have a competitive edge and they know that integrating predictive analytics will increase the value of their solution to their customers over time.

Step 1: Our startup taps the expertise of a business analytics consultant – someone who can look at their solution and find the places where predictive analytics will make a difference to their customers. This important business view of analytics will tell them what kinds of predictive analytics make sense, how best to deploy them, and how this will improve the solution from a customer’s perspective.

Step 2: Our startup now knows what kind of analytics will add value. They contract with an experienced predictive analytics specialist, someone who has experience building the specific kinds of analytics they need. These analytics might predict a customer’s propensity to buy, the likelihood of fraud in a transaction, the riskiness of a customer, customer churn or the best cross sell for a customer. The predictive analytics specialist will define what kinds of data they will need to capture, and at what level of detail. This will define the right data structure and information architecture needed, how much historical data, etc.

Step 3: Our startup hires an analytic modeler (aka statistician, econometrician, or data miner).  As their software solution collects data, the modeler starts to build the predictive analytic models. The resulting models, or algorithms, will make predictions when called by the software. For their local version these are deployed as code, for their hosted version they use a third party option to deploy XML-based definitions (using Predictive Model Markup Language or PMML) to the cloud. There are lots of options here, but these are the ones our startup decides will work for them.

Our startup now has a competitive edge that gets better over time. Their software solution uses predictions to give their customers a better experience, at higher value.

Your software solution made smarter with predictive analytics means greater and increasing value to your customers and a competitive edge for you.

Every time a customer or potential customer interacts with your company, a decision is made. What home page is displayed?  What results are returned for that search term? What offer should be made in this direct marketing campaign? What’s the next best action for this customer? Should this customer’s request be approved? What’s the best way to handle this problem? How do I retain this customer? Should I retain this customer? All of these decisions add up to the customer experience, and to customer profitability. But how are these decisions made in your company?

Let’s take the example of the direct marketing campaign. How many decisions are involved in sending a letter to 10,000 customers? Just a few design decisions, or 10,000 decisions – one per customer? When I receive an expensive clothes catalogue in the mail with little or nothing relevant in it to me, the clothing company just made a few design decisions then sent the same expensive catalogue to everyone, disappointing many.  But companies have the opportunity to make each decision for each customer.  Instead of treating every customer the same, they can treat each customer uniquely.

By beginning with the decision in mind, companies can streamline the application of analytics to personalize and target customer interactions that treat each customer or potential customer uniquely and consistently across channels. This is more than just scripting responses, because the best response changes in each situation for that specific customer. In one example, a leading Telco is using analytics to make an individualized decision about the plan/upgrade offer to make to each customer.  In another example, a retailer is using analytics from their own cross-channel data to tailor promotions integrated with their loyalty program for consistently compelling offers across channels.

Personalized and targeted customer interactions rely on making the best decision for each customer at that time for that interaction, and learning from the outcomes of those decisions so they improve over time.  By treating customers uniquely, companies are increasing loyalty and revenue and improving customer service. More importantly companies are aligning around the decisions that impact their customers. In a recent CustomerThink post, Lynn Hunsaker sums up customer-centricity as “a way of thinking and doing that puts the customer at the center of all you do; it’s the way you operate in your organization, enterprise-wide.” To put the customer at the center of all you do, know, understand and improve on all the decisions that define your customer’s experience.

Braden Kelley observes in his new book Stoking Your Innovation Bonfire: A Roadmap to a Sustainable Culture of Ingenuity and Purpose that “successful organizations are typically built around one or more key customer insights that allow them to solve their customers’ problems better than their competition.” But as the company grows, focus shifts and drifts, and soon that insight into the customer is lost. Companies “unintentionally erect barriers to innovation as they become ever more efficient and profitable.”

Stoking Your Innovation Bonfire takes on these innovation barriers in three parts: Part 1 is about vision, how to unblock it and set realistic innovation goals. Part II zeros in the on what for me is central to successful innovation: customer focus. “Broadcasting the Voice of the Customer” is one of the many takeaways from the book that companies can immediately act on and quickly reap high value. Part III tackles the organization, recognizing the importance of purpose and passion in building innovation into an organization. There is also a super useful customer journey visual framework in the Appendix, an excellent tool that companies can put right to work in bringing the voice of customer back into the core of their organization.

The combination of both roadmap and easy to implement tool kit, extensive use of case studies and Braden’s passion and purpose in helping companies innovate successfully clearly coming through makes Stoking Your Innovation Bonfire a recommended read for executives, managers and the broader innovation community. You can download a free sample chapter here.

I had a recent experience that got me thinking about what drives customer service and what causes failures of customer service. I took our Subaru in for its 45,000 mile service to the dealer where we bought the car and a pre-paid service plan.  When I checked in at the service desk, I mentioned there was a brake light out.  The service rep replied that changing the brake light wasn’t included in the pre-paid service. I asked the obvious question, “How much will it be?” At this point, the service rep turns to his colleague sitting in the next check-in desk and asked him the same question.  This service rep recounted all the steps involved in changing the light bulb and ended with “so it will be $60.”

I didn’t believe it could cost $60 to change a light bulb, even at the dealer’s service department. When I went to the waiting area I got on my smart phone. Within 5’ I had two quotes, including a $10 quote from another Subaru dealer in the area. This was not about the $60, it was about trust: We had been a good customer (bought the car here, bought their service pack), so why did I have to be on my guard over the cost to change a light bulb?

I went to the service manager’s office and asked him what it would cost to change a brake light in my Subaru make and model. He replied, “About $40-$45.”  I asked him why his service reps wanted to charge me $60, and I told him about my other quotes.  In the end they changed the bulb for free – but they lost our business.

Here are a couple customer service take-aways :

1. If the service department had a process, if the service rep had simply looked in a book and read me out a price, I would have paid it.  In fact, when I called the other local Subaru dealer to get a quote that’s exactly what they did, “just hold a second, and I’ll look that up. It is $10.” It was the capriciousness of the price quote and the sense that they were trying to take advantage of me that eroded my trust.
2. Whatever your business model, your brand is what customers remember. Clearly Subaru dealers operate differently and somewhat independently. But when I walk away with a bad experience it is Subaru’s brand that gets damaged. Take Zappos with its great return policy and its relationship with UPS. When I walk into my local UPS Store to return my shoes, they are clearly not happy about all the Zappos boxes they are processing. I come away thinking less of the Zappos return process because of the begrudging customer service at the UPS Store. Or take the smooth Apple store purchase of an iPhone 3GS and then the unpleasant experience of dealing with AT&T Wireless for international travel plans. AT&T came with the iPhone, so what they do is a reflection on the Apple brand. Bottom line: your business web impacts your brand, so take care that your employees and your partners reflect your brand values in their interactions with your customers.
3. Subaru’s website list core values for their cars: “The core values of our all-wheel-drive product are safety, reliability, confidence, control, value and versatility.” If Subaru had a set of core values for its BRAND, beyond its cars, I expect my experience would have been very different.

Eric Jacques wrote a great post on “Building Trust and Delivering Customer Service” where he says, “People don’t trust companies; they trust other people. A great way of building that trust is through your customer service.”  Subaru lost my trust through a failure of customer service. Trust is hard to build and quick to lose.

As someone who started her career working on oil rigs, the ongoing disaster in the Gulf of Mexico really hit home. I know first-hand the intense and often times dangerous activities on a drilling platform, and the enormous coordination effort involved in every drilling program. As I have followed this accident I have been struck again by the potential for Enterprise 2.0 software not just to improve how companies work, but to save lives and ecosystems.

A disaster of this proportion almost always has a series of cascading failures. One was the failure of the Blow-Out Preventer (BOP). The BOP, sitting on the seabed, is the last line of defense in the case of a blowout in a floating rig setup. We have learned that the blowout preventer was modified “in unexpected ways”. But these modifications were not rippled through the dependent processes, systems and tools, or across the different organizations involved. In those crucial hours following the blowout and fire, critical time was lost due to this fact. “When they [BP] investigated why their attempts failed to activate the bore ram [part of the BOP], they learned that the device had been modified. An entire day’s worth of precious time had been spent engaging rams that closed the wrong way.”  A collaboration platform would have shared the modifications to the blow out preventer and ensured that the impact of these modifications would have been understood and acted upon.

The BOP had several issues in the weeks and days leading up to the blowout. There were many red flags during the drilling operation as well. Many decisions were taken by the (many) different companies involved that could be rationalized in isolation. The cumulative effect across such a complex operation was not, however, really understood by anyone. The last few days and hours prior to the disaster are especially telling.  I realize that hindsight is 20-20, but what-if a social network had been part of the culture and tool set of BP (the Operator), Transocean (the drilling company), the mud company, the cement company, the wireline company and so on. A social network would have surfaced the increasingly vocal worries of the crew beyond the confines of the rig, so that more light could have been shed on key decisions leading up to the blowout, perhaps preventing the tragedy.

A drilling operation is a tremendous undertaking – a carefully choreographed integration of moving parts requiring sophisticated operating techniques and advanced technologies. Yet the challenges and failures of collaboration and communication in this global, multi-cultural industry are universal. I joined Schlumberger to see the world and did wireline work on rigs all over the world. Since then I have worked for large Fortune 500 companies, consulting firms and startups. Across all these very different enterprises, and in many different countries and cultures, I have seen these same problems of collaboration and communication occur again and again.

As companies have become more virtual and more diverse, as they have replaced vertical integration with widespread business webs, the execution gap has grown: the difference between what they mean to do and what they actually do grows ever wider. Companies need a social business platform that connects their workforce and their partners, that enables collaboration and that counteracts failures in decision making caused by narrow and isolated points of view.

This disaster would not have happened if the disparate groups in the the many different organizations involved in a drilling operation had been able to collaborate more effectively. A framework of enterprise 2.0 tools that created a social business network would have made a difference.

I had high expectations when I received my free advance copy of Delivering Happiness, A Path to Profits, Passion and Purpose by Tony Hsieh, CEO of Zappos. I admire Tony Hseih and Zappos tremendously.  Zappos gets so much right because Tony Hseih understands the profound importance of motivation and alignment in building a company. I was very curious how this all came about as I knew really nothing of Tony beyond his role as CEO of Zappos.

Tony started one business after the other from an early age, from selling worms to photo buttons to magic tricks, learning many lessons along the way. Like many of this new generation of entrepreneurs, like Lyle Fong and Gurbaksh Chahal, Tony accepted his parents’ high expectations but rejected their narrow definition of success, pursing what he was passionate about, not just accepting that he should become an engineer, a doctor or a lawyer.

Tony’s story about his first job out of Harvard with Oracle is a wake-up call for the typical big-company recruiting process.  Tony is very understated about his accomplishments in his book, but this was a guy who had racked up a lot of achievements for a new college grad. Yet when he joins Oracle,  “They didn’t really know who I was, and I didn’t really know who they were. I actually had no idea what I would be doing or what to expect.”  An experience far too many new employees can relate to.

At this point in Tony’s journey, he starts to understand that Purpose matters. Purpose is illustrated by a story told by Erik Berggren of SuccessFactors about two workers, each pushing a rock up a hill. The first worker is grimly going about the task; the second is whistling and is clearly energized. When asked what they are doing, the first worker replies, “I am pushing a rock up a hill.” The second replies, “I am building a castle.”  Despite the fact that “motivated employees who care about their company goals aren’t 10% or 20% more productive, they can do 10x more. It’s not just the hours they work, they are also more effective” few companies articulate a purpose to their employees. Most employees see rocks instead of castles.

Tony’s first huge success was LinkExchange, sold to Microsoft for $265M in 1998. Tony and his co-founders started the company in 1996 because they were bored pushing rocks in their day jobs. The company quickly took off – they had caught the internet wave just right. They caught the wave because they were in the game, pursuing their passion.

Tony was an early investor and advisor to Zappos, and joined as CEO just before the dot com crash. The first years were spent in survival mode and in the search for a profitable business model. Even with Tony’s huge payout from the LinkExchange exit, the VCs wouldn’t invest in Zappos at this stage.

It is clear from the book that Tony is someone who stays true to himself, and he wanted to do work he was passionate about. But the LinkExchange experience taught him the hard lesson that building a business where he would like to work takes something more.  “We loved the idea of owning and running our own business, but the reality ended up being a lot less fun than the fantasy.” He called the LinkExchange culture “death by a thousand paper cuts.” He asked himself, “How did we go from an ‘all-for-one, one-for-all’ team environment to one that was now all about politics, positioning and rumors?”

Mindful of this experience, Tony wanted to build a business that continued to share his purpose and passion beyond the early stages. Of LinkExchange Tony wrote, “During the first year, we’d hired our friends and people who wanted to be part of building something fun and exciting. Without realizing it, we had together created a company culture that we all enjoyed being part of.  Then, as we grew beyond twenty-five people, we made the mistake of hiring people who were joining the company for other reasons.”

LinkExchange grew to a mix of people with different motivations and different agendas. For Tony, working at LinkExchange went from building a castle back to just hauling rocks. Like NetApp, Linkshare found that when a company grows to the point where all the employees can no longer fit around a table or in the lunch room, without a shared passion and purpose, agendas diverge and motivations narrow. A company culture happens – for better or for worse.

When Zappos moved from San Francisco to Las Vegas, Tony didn’t want the worst to happen, so he set about capturing the culture that made Zappos’ special.  “We thought that if we got the culture right, then building our brand to be about the very best customer service would happen naturally on its own.”  Tony insightfully calls this chapter of the book “Platform for Growth” because “our Brand, our Culture and our Pipeline are the only competitive advantages that we will have in the long run.” If you only have time to read one chapter of the book, I recommend Platform for Growth.

Delivering Happiness doesn’t end with the great financial success of the Amazon acquisition of Zappos as you might expect. Tony’s $100M/year in value creation since 1996 is extremely impressive but Tony’s story doesn’t stop there. Tony’s mission is to help others “defy conventional wisdom and create their own paths to success.” Tony has figured out that profits and a great working environment aren’t mutually exclusive. In fact Tony has replaced the traditional four P’s of Product, Price, Place and Promotion with the three P’s of Profits, Passion and Purpose.

Profits, passion and purpose are reflected in the core values that Zappos captured in their Culture Book. These are the simple rules that Jane Young describes so eloquently in Complexity & Humanity 2.o. Simple rules support complex, adaptive behavior. Core values matter because you can’t foresee every circumstance, or script every decision for every employee of your company. Core values are a touchstone, empowering your growing team to make the right decisions that keep everyone moving in the right direction.  Core values are built from the ground up, and are constantly modeled by the leadership team.

Zappos isn’t a poster child for startup business execution. Few startups have the runway that Zappos had thanks to Tony continuing to invest to keep the company afloat . But Zappos got key things right, like their early focus on the customer and the hard earned lesson of never outsource your core competency. Tony’s focus on capturing and now cultivating the unique Zappos culture keeps his team building a castle.

Tony’s story, written in his own words, is honest and genuine and there are many take-aways from the book for education, for business and for life; that we can be mindful of the narrow definitions of success that were handed down to us, and be an agent to change that.

Let’s start with our kids – over scheduled and buried in homework, with no time and space to find and pursue their passion.  Tony is clearly very bright and probably underestimates how much leeway this afforded him. He did a great job of managing external expectations of success while pursuing his own goals. But most kids don’t have this leeway. It’s up to us as adults to be their advocates, to push back on a system run amok.

And let’s revisit our assumptions of what motivates people.  To quote Daniel Pink, author of Drive: The Surprising Truth About What Motivates Us, “too many organizations are making their decisions, their policies about talent and people, based on assumptions that are outdated, unexamined, and rooted more in folklore than in science.”

CEO’s that put happiness “at the core of their business models” understand what Tony describes as “the parallels between what the research has found makes people happy (pleasure, passion, purpose) and what the research has found makes for great long-term companies (profits, passion, purpose).”

I’m in. http://www.deliveringhappinessbook.com/jointhemovement/

Companies are looking for new ways to collaborate with their customers to co-create products and services.  But customers are already telling companies a lot about what new products and services they want. Too many companies just aren’t paying attention.

I had an errand to run over the weekend for a new bathroom rug. I hate running errands, but figured this would be quick. I wanted something fun so I headed to Cost Plus. There was an assortment of bath rugs about the right size and in a few different colors, but with no backing.  I am sure there are people who buy bath rugs and then find the appropriate non- skid backing, but I am not one of them. I want a bath rug with a non-skid backing. Seems like a simple wish. There was no one around to ask or to care that I was not finding what I wanted.  I looked at the long check-out line and gave up.

I had a similar experience at Target a 5’ drive away. There was a big assortment of bath rugs, but the fun rugs had the slippery backs, and the rugs with non-skid backs were in the usual boring bathroom colors. I opted for the boring color with the non-skid back, since I was running out of patience, but the size/color combination I wanted was out of stock. And just like at the first store, there was no one around to ask or to care.

I am now two stores and too many minutes into what should have been a simple errand. Maybe this is why I hate running errands. Even what seems like a simple errand isn’t. I am making the ultimate expression of customer loyalty – I am in their store wanting to buy something – but there is no process or system that cares whether I find what I am looking for.

Here I am walking around these stores with practically a neon sign on my forehead saying “I am your target demographic”, and yet I am completely ignored.  Is it really too expensive to collect information from customers in your store?

Tony Hsieh, CEO of Zappos, writes in “Delivering Happiness” about the telephone being “one of the best branding devices out there.” Tony goes on to say, “You have the customer’s undivided attention for five to ten minutes, and if you get the interaction right, what we’ve found is that the customer remembers the experience for a very long time and tells his or her friends about it.”  I would think a customer in your store would be an even more powerful branding device.

Companies have a huge opportunity to drive innovation and customer loyalty through the emergent intelligence of their people and their data.  But emergent intelligence requires companies first and foremost to be listening. This means companies need to interact with me in a meaningful way during my shopping experience and capture that data in a useful way.

I’ve written about how big online retailers like Netflix and Zappos can improve the customer experience through Emergent Intelligence. These companies have a lot of information about their customers and their products that they could use in more useful ways, by listening and paying attention to what their customers are telling them through their calls to customer service and through  the kinds of returns they are making.

Big box retailers could do the same if they would blur the line between the online and box shopping experience, letting customers have easy access to the same kinds of useful information in store as online. Best Buy, a company that also excels in social media, has made online product reviews and recommendations available in store as well, merging the online and offline experience and taking advantage of customer-generated content. Of course a retailer could rely on me using my smartphone to get this information, but when I do so I am also checking prices and locations for all of their competitors.  Most companies are giving up this store “real estate” without a compelling in-store alternative.

And box retailers can do more. I’m in the store! I’d love to see retailers trying new ways to engage and interact with their customers. I’d love to see a button on the shelf that says “I would have bought this” for out of stock items, or even a simple “out of stock” slip that I could hand to the checkout.  I’d also like a store to try out the idea of placing easy to use, fun and interactive displays all around the store that let me tell the store what I am not finding, and that use game mechanics to incent and reward me for doing so.

Even better, I’d love for a store employee to have a meaningful conversation with me about what I am looking for, and to capture that information. Imagine how a company value that “our stores are our best marketing device” would change employee recruitment and training as well as the shopping experience.

Meaningful listening and data capture would let companies seamlessly collaborate with their most loyal customers to co-create new products and services. And what’s more, customers would take away a positive and memorable shopping experience.

It is good news for my hometown Palo Alto that Jive Software is moving its HQ here. And it is good news for business too. Jive is clearly getting traction and that is good news for business because Jive sells the kind of software that companies need to enable collaboration and to avoid the problems I outlined in “Let’s talk chickens and e2.0.” The chicken story taught us that companies win or lose based on the performance of their teams, not individuals; and increasingly, on the performance of teams of teams, distributed teams of teams, and networks of teams, customer communities and partners.

Social Business Software, to quote from Jive’s home page, fuels engagement with customers, employees and partners. I’ve written before about the power of social business software to transform businesses:

• By creating a community of shared values like in Walmart’s Elevenmoms initiative.
• By driving employee engagement and alignment demonstrated by Best Buy in “How Best Buy’s Execution Culture Creates Social Media Success.”
• By enabling the intelligence of people to better inform decision making in “What’s wrong with today’s enterprise software? [Emergent Intelligence]” and in “Netflix: Make more customer magic with your people and your data.”

In a recent survey by IBM’s Institute for Business Value reported in Business Week, 1,500 CEOs identified creativity as the most important leadership competency for the successful enterprise of the future. These CEO’s understand the equation “Human Capital x Social Capital = Productivity and Innovation.”

Collaboration is far more valuable to productivity and innovation than our current enterprise systems and processes allow for. As Valdis Krebs of Orgnet wrote, to actually get your work done, you tap into the organization sideways, leveraging your informal contacts across the company. Things get done through informal networks, what Nenshad Bardoliwalla calls human integrators of the white space, the space between systems, business processes and job descriptions.

Social Business Software is the foundation for the next generation enterprise, where emergent intelligence from employees, customers, partners and data create and sustain a successful execution culture and create a great place to work.

Social business software is clearly on the move. Welcome to Palo Alto Jive HQ.

[Crossposted on Silicon Angle on 5/27/2010]

In a previous post, I talked about how startups can out-execute the big guys by applying a lot of hard work moving in the same direction.  Doug Park of DYPAdvisors asked in his comment “That leads to the question of how are they going to get there. How is the company going to execute? “

To answer Doug’s question, let’s look at the execution lessons of NetApp, captured in founder Dave Hitz’s great read  “How to Castrate a Bull; Unexpected Lessons on Risk, Growth and Success in Business”. NetApp is a data storage and management company that is a classic Silicon Valley tale. Founded in 1992, NetApp raised angel money, a couple venture rounds, and had a successful IPO in 1995. It rode the internet boom to over $1B in annual revenue in 2001, took a hit when the bubble burst, recovered, and today is an industry leader with over $3B in revenue.

NetApp’s founding team included a visionary CEO. He came up with the idea of a networked storage appliance; he raised $1.5M from 24 angels; he raised the venture rounds. But somewhere between the founding team of three and employee number 25, the CEO’s skill set went from being a huge asset to being a huge liability. He was gone shortly after the second VC round. What happened?

Dave writes “Good CEOs have magic pixie dust that they can sprinkle on problems to make them go away.” According to Dave, NetApp’s founding CEO didn’t have that magic pixie dust.  The founding CEO “was most effective as a leader when he wasn’t around too much and when the whole company could fit around a table. We had disagreements but we could work though them as a group.”

All startups begin this way, sitting around the metaphorical table, making things happen. With hard work and luck, a company quickly grows beyond this stage. Most don’t think about the consequences of becoming a larger group. They continue to operate with the same old mechanism: get together, make a decision, get it done. But with a bigger group, the “getting together” process creates competition for the CEO’s time and mindshare, and rival plans. At NetApp, the words “the new plan is…” began to strike fear in the heart of the co-founders and the employees. The CEO “was always changing the plan based on the most recent information from his most recent visitor.” A leadership style that worked fine with eight employees became “dysfunctional at 25 and a disaster at 50.“

Dan Warmenhoven, who replaced the founding CEO,  had the magic pixie dust. Writes a 2005 BusinessWeek article “Warmenhoven may be one of the most respected tech CEOs you’ve never heard of. He has earned the trust of Wall Street, not only for NetApp’s 34-fold share appreciation since its 1995 IPO, but for his tell-it-like-it-is credibility. He’s also a hit with employees, given his good-natured personality and inclusive management style.”

Dan was brought in as CEO after the second VC round.  The company was less than two years old, but a culture of fear and mistrust had already taken hold. Dan set out to change that. He set a Plan of Record. He made his decision making process clear. He started a discussion about company values. “It was a breath of fresh air. People could go back to work, safe in the knowledge that the plan would not change out from under them just because they were busy working instead of politicking.”

Values were harder. Dan’s first attempt to create a set of company values, shortly after joining, was met with mistrust. The initial reaction was summed up by one employee who said “How will these values be used against us?”  Dan was patient and, after a year at the helm, approached his staff again about creating a list of company values – explaining why it was important to him and sharing his aspirations for NetApp. “He sort of eased us into assembling a list of values,” explains Dave. What’s more, added Dave, “company values only work if the leaders say, ‘These are things that I really do believe. If I violate them, please call me on it.’”

Dan Warmenhoven’s magic pixie dust is creating an execution culture.  “Dan defines culture as values plus behavior. Values should remain constant, but behavior will change as a company grows.”  Dan’s magic pixie dust married behaviors like a Plan of Record and a focus on the way decisions were made with a set of company values that created trust and alignment in a growing organization.  Under Dan’s leadership, NetApp went through a period of hypergrowth, survived the dotcom bust, and is today what Dave calls a grown-up company. The culture has evolved as the company has grown. But the values Dan created with his staff are still there. “Culture should change. It needs to be different depending on the size of the company, its growth rate, the challenges it faces – but always you want the culture and the behaviors to reflect the core values. “

You too can have that magic pixie dust. But don’t wait until your company starts melting down, when you have to unstitch a toxic environment. Work with your team from day one to define who you are as a company, to create your company values.  Be mindful of what behaviors make sense at the different stages your company will travel through.  Create a successful execution culture and you will have laid the foundation for a successful company.

Game mechanics work, even in the most unlikely places.  I’ve written about using game mechanics in software to incent participation and encourage and align positive behaviors. I was reminded of this fact at my son’s school Science Fair last week. The school wisely gave us a “Science Fair” Passport as we walked in.  The passport listed all the science projects next to the student’s name and symbol, with a blank space for us to collect a matching stamp from each. Instead of randomly wandering around the different project displays, I was amazingly motivated to get all those stamps on my passport, double checking before moving from room to room to be sure I had collected all the stamps in that room.

Contrast this experience with the “Art to Wear” fair I went to a few days later. Much like the science fair, there were many rooms with many exhibitors, talented artists showing their wares. We were given a list of the exhibitors at the entrance but that didn’t motivate me the same way. I worked my way through the various rooms and the crowds, but it was tiring, and I am sure I missed seeing many of the exhibitors.

I am not a gamer. I don’t play board games, facebook games or console games, unless I am talked into it by my kids. So why did the Science Fair Passport work? Perhaps a simple incentive like stamps on a paper provides some low-overhead organizing principle – one less thing to think about. But I did not feel I had to go in order, I was just motivated to collect them all. I should note too that there was no prize, nothing to “win” – it was just to collect the stamps. But it made it easier and more fun for me to perform the desired behavior – visit all the science fair posters.