What is the equation for success?

Let´s go to work fun.

After 9 months as CEO at Iterate I want to share some of my thoughts and actions on how we tackle globalization, Lean Startup movements, platform revolutions, millennials and everything else that predicts the 4th industrial revolution.

The equation:

Potential + (autonomy, clarity and intent) + slack = value creation + fun

Well at least this is the equation that we are trying to solve. And our hypothesis is that this is the equation to our future success.

Let me explain..

The last 10 years, the industry has been good, but the trend (in Norway at least) is that salaries increase faster than hourly rates. We are looking into a future of squeezed margins and we have to deal with that one way or another. Lower margins can normally be compensated with higher volume. That is a reasonable logic when you talk about products on a shelf, but not necessarily true when you are dealing with people. We do not believe that we will create a better work environment if we triple in number of employees.

The industry is changing. Luckily we se less of big pre-planned project tenders and more requests for getting the right person on the right task. At some point this might make the consultancies redundant as we don’t need big companies to carry constructed contract risk anymore.

The reality of the market, and our vision of simply having the best workplace in the world, just will not coincide. Lower margins means less fun enabling money. The obvious economical factor and our curiosity about the creative potential of our employees have made us wonder…

Looks like we have a transformation on our hands. Luckily, we have all the skills necessary to start this journey. Transformation is exactly what we do for our customers, so let’s do it for ourselves this time.

Potential.

We have always focused on hiring the right people and worked systematically on developing them to become even better. Choosing the right customers with challenging  assignments using new technology has been a good combination for us. Therefore, I believe we have great potential in our employees.

Autonomy, clarity and intent.

The literature is full of evidence that autonomy is a key to productivity for knowledge workers. From my own experience this is true. When you deal with highly educated, ambitious and motivated employees you have no choice but to trust them to make their own decisions. If you don´t, they just leave.

The hard part as a leader is to give clarity to what we are trying to achieve as a company. If autonomous persons and teams autonomously drift in different directions, we will not succeed. As a former project manager I know the importance of expectation management. The second you step out of that meeting where you all seemed so aligned, the expectation start to diverge. To maintain clarity and alignment I have to constantly remind the organization of what we are trying to achieve without coming off as fussy.

Pro tip: Give employees responsibility, guidance and then back off!

Slack

No, not the team collaboration tool. We’re using it, but I mean real slack as in lowering the utilization of employees. This is where it gets really hard, because this means investing money or accept lower economic results. I can do that because the board of directors introduced slack from the very top. As CEO my mandate from the board is to hit a 5% profit margin. Compared to an industry standard of 10%-15%, or even higher for the really “profit margin driven” ones, that´s a lot of slack. I have several millions (NOK) worth of slack at my disposal. Wait a moment – doesn’t this make me an investor?

So, what do you normally do as an investor?

You find a company that is apparently underestimated and you put your money into it.

Easy, right?

My version of putting money into an apparently underestimated company is to give my own employees time to play with ideas that someday might end up as the next big thing. Allow for time to procrastinate, so that they can be more creative. And most important, allow failure, so that we all can learn from them and make better decisions later on.

We are “trained killers consultants”. We have been drilled on what to do. We consult, we invoice, we upsell. If we have spare time, we find a customer that is willing to pay for that time. This is optimization for the consulting business model, and we are pretty good at it.

My job is to say no!

Trust me, It´s really hard to say no to customers when you do have spare capacity, but it´s necessary to do so to get where we want to be. Breaking out of this “trained killer consultant” mindset is hard, but we are getting there.

Oh, and before I forget. Introducing slack like we do, probably will not work that well if you have an incentive model based on profit margin. Let everybody own the company instead. That way you are in the same boat.

Value creation

So, where do we want to be? The reason we became engineers, designers and business developers is because we really want to accomplish something. The timing is now. We have created value for our customers for 10 years already, so we know we can. Our own shots at creating value in new and existing markets with value adding services, platforms or whatever it takes.

We call it Iterate Ventures!

Fun

It´s not about doing company outings and goof around all the time, but the best reward I get as a leader is to see people genuinely  love their work. Too many people work to earn money so they can afford time off to spend on what they are passionate about. Why don’t we try to create win-win situations instead? If we can let people work on what they are passionate about, they have fun at work. If we can put a good business model on top, we might just strike some gold eventually.

It´s all about creating a culture where we take care of each other, where we can be creators and maximise for utilization of potential, not capacity.

A great example of how this culture really manifests itself is this years “Iterockalypse” festival:

Me: We should arrange the annual Iterate party with customers, employees and friends.

Employees: OK

Me: Do you need me for anything?

Employees: No, not really.

Result:

So, what’s the worst thing that can happen?

– We just get a lot better at consulting.


By Rune Larsen – CEO Iterate AS. Written with valuable feedback from Anders Haugeto, Kim Leskovsky, Charles Michelson, Fredrik Pettersen, Jonas Feiring and Torve Indahl.

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