Jan 042007

Book (Not So) Short: Raise Your Hand If You’re Sure

Book (Not So) Short:  Raise Your Hand If You’re Sure

I couldn’t get the catchy jingle from the 80’s commercial for Sure deodorant (you remember, the one with the Statue of Liberty at the end of it – thanks, YouTube) out of my head while I was reading the relatively new book, Confidence: How Winning Streaks and Losing Streaks Begin and End.  Written by HBS professor Rosabeth Moss Kantor, Confidence is one of the few business books I’ve read that’s both long and worth reading in full.

The book has scores of examples of both winning and losing streaks, from sports, business, politics, and other walks of life, and it does a great job of breaking down the core elements that go into creating a winning streak or turnaround (Accountability, Collaboration, Innovation).  Kantor also puts a very fine point on the “doom loop” of losing streaks and just how hard it is to turn them around.  The book also has a good crisp definition of why winning streaks end — arrogange, anyone? — and has consistent, but not preachy recipes for avoiding pitfalls and driving success.  All in all, very inspirational, even if many of the roots of success lie in well-documented leadership qualities like those expressed in Jim Collins’ Built to Last and Good to Great.  The book is good enough that Kantor can even be forgiven for lauding Verizon, probably the most consistently awful customer service company I’ve ever dealt with.

But even more of the roots of success and disappointment around streaks are psychological, and these examples really rang true for me as I reflected back on our acquisition of the troubled NetCreations in 2004.  That company was in the midst of a serious slump, a losing streak dating back to 2000, at the peak of the original Internet boom.  Year over year, the company had lost revenues, profits, customers, and key personnel.  Its parent company saw poor results and set it into the doom loop of starving it for resources and alternating between ignoring it and micromanaging it, and when we acquired the business, we found great assets and some fantastic people (many of whom I’m proud to say are still with us today), but a dispirited, blame-oriented, passive culture that was poised to continue wallowing in decline.

I can hardly claim that we’ve turned the business around in full, or that I personally made happen whatever turnaround there has been, but I do think we did a few things right as far as Kantor and Confidence would see it.  Her formula for a turnaround (Espouse the new message, Exemplify it with leadership actions, Establish programs to systematically drive it home throughout the organization) is right in line with our philosophy here at Return Path.

First, we accelerated the separation and autonomy of a fledgeling NetCreations spin-off unit, now our Authentic Response market research group, and let a culture of collaboration and innovation flourish under an exceptionally talented leader, Jeff Mattes.

But that was the easy part (for me anyway), because that part of the business was actually working well, and we just let it do its thing, with more support from HQ.  The turnaround of the core list rental and lead generation business of NetCreations, the original Postmaster Direct, was much tougher and is still a work in progress.  In the last six months, we’ve finally turned the corner, but it hasn’t been easy.  Even though we knew lots of what had to be done early on, actually doing it is much harder than b-school platitudes or even the best-written books make it seem.

The one thing that Kantor probably gives short shrift to, although she does mention it in passing a couple times, is that frequently turnarounds require massive major amounts of purging of personnel (not just management) to take hold.  As one of my former colleagues from Mercer Management Consulting used to say, “sometimes the only way to effect Change Management is to change management.”  Sometimes even very talented people are just bogged down with baggage — the “ghost of quarters past” — and nothing you do or say can break that psychological barrier.

Boy, have we learned that lesson here at Return Path the hard way.  I’m extremely grateful to our team at Return Path, from the old RP people who’ve seen it all happen, to the old NetCreations people who are thriving in the new environment, to the new blood we’ve brought in to help effect the turnaround, for playing such important roles in our own Confidence-building exercises here.  And I’m super Confident that 2007 will be the year that we officially turn the old NetCreations/Postmaster losing streak into a big, multi-year winning streak.

Anyway, I realize this may redefine the “short” in book short, but Confidence is without question a good general management and leadership read.

  • http://profile.typekey.com/siehmonster/ David Sieh

    This is a fascinating topic!

    I’d like to share some of my thoughts and observations from the arena of trading/investing in stocks in regard to losing/winning streaks.

    Most individual investors don’t make it over the long haul because of psychological issues. For example, how many investors can emotionally tolerate a long series of losing trades (not to mention financially tolerate it if they’re not trading a system that clearly specifies stop losses!)? Moreover, how many individual investors would throw in the towel if their portfolio suffered a 25% or more drawdown? Yet, there are a number of “systems” that, in the long run, are winning systems that can be expected to have 25% (or more) drawdowns and long sequences of losses.

    So, how does one build “confidence” to trade? I think one of the lessons is that it helps to know yourself and your system(s). In the arena of trading/investing how do you do this?

    One method is to thoroughly understand the system(s) that you’re trading. With a record of historical trades (hopefully through a number of different market conditions), one can run monte carlo simulations to get a sense of the expected behavior of it. In the simulation, thousands of sequences of trades are generated, then, the thousands of sequences can be summarized. For example, metrics such as the following can be generated: what’s the average drawdown, what’s the average number of sequential losing trades, what’s the average gain (or loss?) per trade, etc.

    Then comes the important “know yourself” part: given these expected behaviors, is this a system that you have the emotional self-discipline to trade? Can I really sleep at night (and continue to trade the system) if the system is experiencing the expected 10, 15, or 20 sequential losing trades? Can I sleep at night if the system is experiencing the expected 25% drawdown? etc….

    This is certainly an oversimplified example. But, for me, one of the important points on the subject of “confidence” is knowing yourself. And, a big part of that, at least in trading and investing, is having a very well defined system (or systems) and really understanding the expected behavior of the system(s). And, I think that these concepts are very applicable to operating a business as well.

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    • Matt Blumberg

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