Any business that can continuously come up with innovative solutions to significant problems will invariably win. In the good old days, the way to solve problems was to get the smartest people in an organisation into a room and allow them to combine their intellectual firepower in brain storming solutions.
But the problems confronting organisations and society today are more complex and more challenging than many problems in the past and the tools for solving problems and challenges have advanced.
Modern day innovative organisations no longer rely on conventional brainstorming methods to solve problems. With advances in communication technology and the ability to reach large pools of people, many innovative organisations now get immense benefits from tapping into the wisdom of the crowd to solve their most pressing problems.
Organisations that have got it right
1. Top Coder Inc tackles clients’ most complex and intricate software development challenges by creating software development competitions for its community of 210 000 independent geeks. If your business faces a challenge in writing an algorithm, architecting a system, writing code, sorting out bugs or any other software development obstacle, you can go to Top Coder Inc and they will, for a fee, create a challenge for their community.
The community tackles the challenge and submits solutions in the hope of winning a substantial prize. To date, Top Coder has given away more than $7 million dollars in prizes to geeks in its community and created innovative software solutions for an elite client list. With revenue of close to $20 million and growth of almost 1 000% over the past three years, the competition based business model exemplified by Top Coder Inc may be a sign of the future.
2. Best Buy, the US electronics retailer, has a $1 billion gift card business. One of the challenges for the small team that managed the gift card business was predicting gift card sales for any single month. Typically they were off by 5% making their budgets and forecasts inaccurate.
To resolve this problem, Jeff Serverts, a Best Buy VP sent an email to hundreds of Best Buy employees, inviting them to submit guesstimates of gift card sales for the following month. To help them make a decision, he provided them with data of gift card sales for the previous 12 months. He also offered a $50 gift card as a reward for the individual with the most accurate guesstimate.
Once the sales data for that month had been collected, the gift card management team was off by the normal 5% in its estimate whereas the average of the 192 employee responses that Serverts received was less than half a percentage off. The crowd was over 10 times more accurate than the experts. This logic was later applied to generating estimates for holiday sales on all merchandise (with 98% accuracy) and now Best Buy uses a system through which it gathers data from thousands of employees to solve its most challenging forecasting problems.
3. Global Ideas Bank is a repository of ideas for solving some of the world’s most challenging social problems. People from across the globe submit ideas pertaining to social innovations (4 000 ideas have been submitted thus far) and then others visit the site and vote for the ideas displayed (160 000 visitors have voted for ideas on the site).
This creates a mechanism for the best ideas to rise to the surface and then for the people who have come up with the good ideas to get input from others and the recognition and confidence required to take the idea forward. It is a mass vetting system for ideas related to solving social problems.
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With the right systems in place you can get everything done…by doing less. This is how.
Solving Business Problems
This same philosophy can be used for solving problems in multiple business contexts. Here are some guidelines for implementing a “wisdom of the crowd” problem solving solution.
- Be clear about the problem. Even if there are many complex issues involved, make it as simple as possible.
- Search far and wide for people to contribute. The more diverse and the larger your problem solving base, the better the solution is likely to be.
- Make it simple and easy to respond. Provide a very easy means for people to provide you with the input you need.
- Recognise people’s efforts. To everyone who contributes send out a thank you note and if possible share the main elements of the crowd-sourced solution.
- Offer rewards. Rewards increase participation and accuracy. If people know that there is potentially something in it for them, they are likely to apply more effort to providing a solution.
- Experiment. Using this as a problem solving tool does not always work perfectly first time around. You need to be willing to experiment with various aspects of the process to make it work effectively.
Further reading: The Wisdom of Crowds by
James Surowiecki. 2005. By Anchor Publishers.
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What’s The Worst That Can Happen With A Disgruntled Silent Shareholder?
Whether a shareholder brings capital to the business, experience or connections, you need to ensure everyone has the same vision and values.
While we often hear that it can be bad to have a silent shareholder that does not want to play ball, it is not often that we make enquiries about how the governance of a company can be hindered by a disgruntled shareholder.
Most of us assume that as long as they own more than 50% of their own company, they are entirely in control of all aspects of the company and how it is governed. This is not true: Even if you are a majority shareholder, holding less than 75% of all the shares in your company can still result in headaches if a minority shareholder, holding at least 25% of the company, becomes disgruntled and neither participates in the decisions of the company, nor consents to the decisions being made.
What is set out below highlights, among others, why it is so important to give shares in a company to prospective shareholders over a period of time, rather than from the outset. This allows for shareholders to prove their worth without you potentially placing your company in a position where it could be held at ransom for many years.
The illusion of holding more than 50% of the shareholding in a company
- Many people assume that by holding more than 50% of the shares in a company they are free to do with the business as they please. This generally only holds true for basic decisions of the shareholders, such as the removal and appointment of directors. The most important decisions of a company are based on special resolutions. A special resolution requires that shareholders, either individually or collectively, holding at least 75% of all the shares in a company, vote in favour of a specific decision.
- Examples of decisions that require a special resolution include:
- Amending a company’s Memorandum of Incorporation
- Approving the issuing of shares or granting of other similar rights
- Authorising the basis for determining directors’ salaries
- Disposing of company assets
- Mergers and acquisitions.
So, what does this mean for you and your company?
- If you are a start-up looking to raise funds, apart from some exceptions, you will not be able to issue further shares to new shareholders or anyone other than existing shareholders if there is a shareholder that is effectively dead weight.
- Should you manage to vote a new director to the board, you will not be able to determine the basis on which they are compensated (their salary) without a special resolution.
- If you intend to merge with another company, you will not be able to pursue this without a special resolution.
- If you plan to raise money by disposing of or selling most of the assets of your company you will, once again, be prevented from doing so.
Accordingly, it is always best when starting a venture to vest your shares over a period of time. This means that, for example, shareholders are only entitled to have their shares allocated to them after a certain period of time to avoid a situation where you have a dead-weight equity shareholder hindering the governing of your company, and requiring possible litigation to remove them.
There’s More To Team Management Than Leadership
When you’re running a business you need to ensure that your employees are on your side, helping you to make profits. Giving them job security, taking them seriously and treating them with respect, will go a long way in enhancing loyalty and productivity.
The staff that work for you determine:
- How happy your customers are with your business
- The quality of the things that you sell
- The costs that you incur to sell your products and services
- Your risks – the things that can go wrong and how much it costs you
All of these things determine your profitability and how competitive your business becomes. How do you ensure that everyone is on the same side and helping you to make profits?
At work everyone believes that they are getting something (such as money) and are giving something in return (such as time and effort). They are weighing up in their mind “how much am I giving, how much am I getting in return and is this fair?” If they believe that they are:
- Giving too much or
- Getting too little
- Then this is unfair, and they won’t work well (poor productivity – how much they produce).
The manager needs to:
- Know what people are thinking about what they are giving and getting and
- Manage the giving or getting side
- So that people become more productive
In a smaller business you sometimes cannot afford to pay more or provide the sort of benefits (pensions, medical aid, bursaries etc.) that larger firms can and so the staff may be unhappy, not be productive and be on the look-out for something better.
How do you increase happiness without money?
- Job security – knowing that you will still have a job next year – and that you will get paid on time.
- Contributing to the success of the business. If you train staff to have the knowledge and skills to do a better job and you then encourage and support them to do this then they are happier, and you increase profits. If you then share some of these profits with the staff that helped you to make them then everyone wins!
- To be taken seriously and treated with respect. If you do this then staff are happier, and they will also treat your customers with respect.
- To be part of the team. You can often do this by having a regular briefing on what your plans are and discussing ideas. Because staff are doing the actual work they will often have good ideas and then will be motivated to implement them – it was their idea after all!
Staff leaving you all the time is a can destroy significant value. If you implement the strategy above, you will have happier staff that are more productive and a more profitable business.
Jeff Bezos Reveals 3 Strategies for Amazon’s Success
One of the richest men in the world shared his leadership tips for running a company.
“It remains Day 1.” That’s how Jeff Bezos, founder and CEO of Amazon, signed off in his 2018 letter to shareholders. He’s been propagating the “day 1” mantra for decades, and it’s meant as a reminder that Amazon should never stop acting like a start-up – even though the company now boasts more than 560,000 employees and more than 100 million members of Amazon Prime, the company’s paid service for free shipping on select items.
Here are some of the most useful nuggets of wisdom Bezos shared in his letter and during a recent onstage interview:
1. Standards are contagious
Bezos says he believes high standards are teachable rather than intrinsic. “Bring a new person onto a high standards team, and they’ll quickly adapt,” he writes. “The opposite is also true.”
If a company or team operates with low standards, a new employee will often – perhaps even unwittingly – adjust their work ethic accordingly.
He also says that high standards in one area don’t automatically translate to high standards in another – it’s important for people to discover their “blind spots.”
Try making a list of your duties, then ask trusted colleagues to tell you which responsibilities are your greatest strengths. If certain things from the list don’t come up during the conversation, it might be useful to think about how you can up your personal standards in those areas.
2. Set clear, realistic expectations
If you’re looking to raise your standards in a particular area, the first course of action is to outline what quality looks like in that area. The second is to set realistic expectations for yourself – or for your team – regarding how much work it will take to achieve that level of quality.
Exhibit A: You won’t find a single PowerPoint presentation at an Amazon company meeting. Instead, teams write six-page narrative memos to prepare everyone else for the meeting.
Bezos says the quality of the memos vary greatly because writers don’t always recognise the scope of the work required to reach high standards.
“They mistakenly believe a high-standards, six-page memo can be written in one or two days or even a few hours, when really it might take a week or more!” Bezos writes.
3. Stay involved with the people you’re serving
Whether you’re selling a product or service, it’s a good idea to make sure you never lose touch when it comes to the people you’re serving – no matter how high up the ladder you climb.
Bezos says he still reads emails from his public inbox (email@example.com) as a way to keep his finger on the pulse of what’s happening with Amazon customers.
He says he believes focusing on what customers are saying is much more important for success than focusing on what competitors are doing, and he often compares customer feedback to company data to see where they misalign.
“When the anecdotes and the data disagree,” Bezos said at a recent leadership forum at the George W. Bush Presidential Center, “the anecdotes are usually right.”
This article was originally posted here on Entrepreneur.com.
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