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Strategy

Problem-Solve by Tapping the Virtual Think Tank

Creatively solving problems is a source of competitive advantage – sometimes enhanced by the effective use of crowd input.

Greg Fisher

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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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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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Greg Fisher, PhD, is an Assistant Professor in the Management & Entrepreneurship Department at the Kelley School of Business, Indiana University. He teaches courses on Strategy, Entrepreneurship, and Turnaround Management. He has a PhD in Strategy and Entrepreneurship from the Foster School of Business at the University of Washington in Seattle and an MBA from the Gordon Institute of Business Science (GIBS). He is also a visiting lecturer at GIBS.

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Strategy

You Are Your Own Client

Before you can build a start-up that takes over your industry, you need to treat yourself as your own best client.

Allon Raiz

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In business, when you have a client, the relationship is formalised into a structured one where there are defined expectations and regular meetings. For example, if you are a consultancy and have a one-year contract to deliver services to a client, the relationship will be formalised, structured and possibly include monthly status meetings. Some may be report-back meetings while others may be briefing meetings.

Your client will receive a monthly invoice and there may be quarterly reviews of the work you have done. Your general mindset is one of service to the client because they are important and worthy of the effort. Crudely speaking, most service-provider arrangements work in a similar way because the structured model works.

In contrast, as entrepreneurs, our relationship with our own business is often far more chaotic or ‘organic’ than formal. My contention is that it is also much less effective. When I work with SMEs, one of the first things I do is encourage the entrepreneur to treat his or her own business as a client by formalising meetings, ensuring that there is a feedback loop and having a service-provider mindset. By making these philosophical and structural changes, you will create a far more efficient and well-run business.

There are four aspects to any business which, in my view, should be formalised.

1. Partners

It still astounds me how informal the meetings are between partners in SMEs, especially when they operate from the same office. There are no set times, no agendas and no outputs required. The fact that you might sit in the same office or chat regularly is the problem because it’s interpreted as proper communication while it’s actually a very undisciplined and unstructured process. Casual chats do not ensure that all the requisite items or issues are being properly discussed and dealt with.

Related: How Investors Choose Who To Invest In

2. Staff

The often-given excuse for not holding weekly, biweekly or monthly meetings with team members at the same date and time is that the business is fluid and the entrepreneur needs to be responsive to their clients’ urgent needs whenever these might occur. And so non-rhythmic meetings are occasionally inserted into the gaps in between the chaos.

The discipline that I try to imbed in the SMEs I work with is to hold rhythmic meetings at a certain time and day every week, month or quarter. Should there be a need to cancel this meeting for whatever reason, it should be rescheduled. The simple discipline of rescheduling and not cancelling allows for a compromise between the practical reality of an entrepreneur’s life and the discipline required to build a sustainable business.

3. Agendas

Agendas are often seen by entrepreneurs as an icon of the structure of the corporate world. They smack of rigidity, stuffiness and boredom so they are often discarded and replaced with warm and fuzzy chats. In reality, in order for it to be an effective use of time, every meeting requires a structure, outline or agenda.

This can be a comprehensive agenda similar to that used by corporates or as simple as each person in the meeting talking about their three top-of-mind issues. What is important is that there is structure and outputs, otherwise the meeting’s output is merely that it’s nice to know. The output from a meeting with a formalised agenda is that it’s nice to do.

Related: Why Reading Is The Most Important Tool In Your Arsenal

4. Product review

When last did you, as an entrepreneur, formally ask yourself if your products are still relevant and effective in the market? One of the greatest oversights made by SMEs is not regularly reviewing the appropriateness of their existing products or services. In a high-growth, chaotic environment that is attuned to constantly producing new products, existing products soon become the ugly stepchild, only getting attention when the client cancels the contract because your competitor has a faster, shinier and cheaper iteration of your product. An incredibly important discipline in any business is the regular and formalised review of products and services.

We resist structure as entrepreneurs and the price of that resistance is ineffective and inefficient businesses. By simply treating ourselves as we would our clients, we are able to imbed a level of structure to our businesses that will create a far more effective and enduring business.

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Strategy

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.

Kyle Torrington

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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.

Related: 7 Factors To Determine Who Are Your Employees (And Who Aren’t)

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.

Related: Reality Check: You Probably Don’t Own That Work You Outsourced

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.

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Strategy

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.

Henry Sebata

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The staff that work for you determine:

  1. How happy your customers are with your business
  2. The quality of the things that you sell
  3. The costs that you incur to sell your products and services
  4. 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).

Related: Why Innovative Employee Benefits Are Your Competitive Advantage

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?

Everyone wants:

  1. Job security – knowing that you will still have a job next year – and that you will get paid on time.
  2. 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!
  3. 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.
  4. 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.

Read next: Understanding Your Responsibility As An Employer

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