Chapter 1 Big Business Goals – How Successful Engineers Become Great Business Leaders

CHAPTER 1

Big Business Goals

How can you maximize your odds of great leadership success in business?

Why Big Business Goals Matter

In the iconic movie Pulp Fiction, viewers are introduced to a character called Mr. Wolf. He shows up on the scene to clean up the sordid mess created by the two main characters of the movie. The mess includes a dead body, an upset wife, and a blood-covered car. In the entire scene, Mr. Wolf doesn’t lift a finger but is very effective by simply telling others exactly what to do. He solves big problems with the least amount of energy. This, of course, is why I like his character so much.

To be an engineer is to solve problems and achieve goals. This is the raison d’être. This is why you do what you do. In secret, the actual fantasy of many engineers is to be Mr. or Ms. Wolf. When the Bat-sign lights up in the sky, you move in, solve the problem, briefly bask in the adoration of the crowd, and make a dramatic exit to deal with the next crisis. This heroic image solidifies our thinking that becoming better at problem solving will help us to become better leaders as well. After all, the reward for solving complex problems is the opportunity to solve even more complex problems. Yet what has got you here won’t get you there. The differences between a successful engineer and a great business leader are better skills and behaviors to solve different problems and achieve different goals.

It’s therefore a good moment to introduce an interesting question: How can you use your engineering backgrounds to solve bigger and bigger problems and rapidly become outstanding leaders? This may be the greatest hurdle you will face in your entire career. The corollary to this question is, of course: Why is it that some engineers become outstanding business leaders and achieve big business goals, while others, talented as they may be, never rise to the top? To answer this question, you may need a better understanding of the role of skill, luck, and talent.

Why Skill, Luck, and Talent Drive Achievement

About 5 years ago, a group of senior executives enthusiastically told me that the massive success of their business was driven by an excellent strategy and a culture of getting things done. They were right about the nature of their results. Rumor had it that a money-printing press was in full operation in the bowels of their factories. They were wrong, however, about the reason for their splendid results. Within 2 years, the business came to a grinding and unexpected halt. After a painful restructuring, the business has recently been sold, the workforce has been reduced, and profitability still seems a distant dream.

This tragic story is an illustration of the illusion of control. It happens when you assign too much credit for your success to your own skills and talent, while underestimating the significant role of luck.

The formula for achievement is both profound and simple:

achievement = skill + talent + luck

A skill is applied knowledge or ability that leads to a predictable and consistent way to achieve a predefined result. Usually, it requires a combination of experience and training. A skill is therefore learnable.

Talent, on the other hand, is driven by the natural inclination toward a skill and generally determines the ceiling of a skill. For example, someone who loves working with numbers will achieve more in mathematics than someone who doesn’t, even if their experience, intelligence, and training in the field of mathematics are the same.

Luck is the happy circumstance in which our skills and talents may bloom. For example, the gains of a roulette player completely depend on luck. His skills and talents are limited to choosing a number or a color, moving a pile of chips, waiting for the feedback and then repeating the process. It’s as simple as that. On the other hand, the achievement of a chess master is determined mostly by skill and talent. Yet even during a chess match, luck can still play a significant role: A spicy Thai meal from the evening before may upset his stomach, and as a result deep thinking may be compromised by ungainly bowel movements at essential moments during the match.

To achieve success, you therefore have to operate at the intersection of skill, talent, and luck (see Figure 1.1).

Figure 1.1 Intersection of skill, luck, and talent for extraordinary achievement

If you are skilled and talented yet unlucky, you will forever be a best-kept secret. With skills and luck but lacking talent, you may make it to tier two, yet tier one will stay out of reach. With only talent and luck, you won’t be able to maintain momentum and run the risk of becoming a one-day wonder. Only with skill, talent, and luck will you be able to achieve outstanding results.

The two variables you are able to control as a leader to achieve extraordinary results are the development of skill and the application of talent. Development requires awareness of the skill, a decision to develop it, and, finally, the hard part: consistent actions to improve the skill. The difficult part of talent application, however, is often simply becoming aware of your talents. You may be brilliant at free-diving, a form of underwater diving that relies on the ability to hold your breath until resurfacing: No use of a breathing apparatus such as an oxygen tank is allowed. If you have never tried free-diving, you may be completely unaware of having this talent. That’s why it’s called a hidden talent. The truth is there’s much more you haven’t tried than what you have tried. Thus, the majority of knowledge about your talents are actually hidden. That’s also why the most important parts of your extensive library are the books you haven’t read.

Why We Overestimate Skill and Talent

There are two reasons you habitually overestimate your skill and talent and underestimate the role of luck. The first is the Dunning–Kruger effect—a cognitive bias in which unskilled individuals suffer from illusory superiority, mistakenly rating their abilities much higher than average. This bias is attributed to a metacognitive inability of the unskilled to recognize their mistakes. It means that if you are completely ignorant and unskilled in a certain area, you may overestimate how well you will perform in this area. During a TV cooking program, the master chef made the task of cutting carrots look easy. Only when I heard that it requires a full year of advanced master chef training to learn how to properly cut vegetables did I realize there is much more to cutting vegetables than meets the eye. This is the Dunning–Kruger effect in action. Most people have no problem recognizing this effect in others. Think of surveys where more than 50 percent of vehicle operators consistently believe they are within the top 10 percent of safe drivers. You think you’re skilled, but in reality you’re simply lucky. As a general rule, if you encounter the Dunning–Kruger effect in others, keep in mind the words of Mark Twain: “Never argue with ignorant people. They will bring you down to their level and beat you with experience.”

The second reason is cargo cult thinking. The term cargo cult was first coined after World War II. During the conflict, several remote-island-based airfields were established for military purposes, baffling the indigenous, primitive populations. Often limited or no contact was established between the islanders and the more modern military forces. When the military finally left the islands, the original inhabitants tried to recreate the airfields using bamboo, stone, and other available material, waiting for the planes to return. Hence the name cargo cult thinking: If you build it, they will come.

Cargo cult thinking is not limited to the minds of our primitive brothers and sisters. It has a prominent place in modern business thinking as well. We often believe that if we simply emulate the visible effects of achievement, the real achievement will follow automatically. Especially when the initial results look promising, we tend to think we are skilled, while in reality, we are lucky. For instance, Elizabeth Holmes, the notorious CEO of Theranos, started wearing a black turtleneck to mimic Steve Jobs in order to practice a reality distortion of her own. Though initially very successful, as the recent scandals around Theranos have shown, what she actually did was mix cause and effect: The rooster that crows in the morning doesn’t cause the sun to rise. Likewise, cajoling the rooster to crow earlier will not make a longer day.

The absence of skill and talent and underestimating the role of luck are dangerous follies and the main reasons smart people sometimes do stupid things. The fact that there are lottery winners is no excuse for buying lottery tickets. Instead, you need to move to a place where skill and talent massively trump reliance on luck. Fertile land beats better seeds all the time. In order to find fertile land, you need to turn to the power laws.

How to Use Power Laws

Nature is unbalanced, and therefore output isn’t necessarily determined by the size of input. For example, in the English language, fewer than 3,000 words are used more than 80 percent of the time. This law is known as the 80/20 rule, Pareto rule, or vital few. Only small chunks matter, especially when it comes to achievement. Our focus is to find fertile lands, where talents and skill can be maximized and the influence of luck can be minimized. The reason to minimize the role of luck is that you want your achievements to be sustainable. The fertile lands are marked by power laws. A power law describes how small differences can yield exponential results. For our discussion, we need to focus on the power laws of prime location, prime time, and prime knowledge.

A great example of the power law of prime location happened on January 12, 2007, when the world-class violin player Joshua Bell played for an audience of over 1,000 people. Interestingly enough, he played while dressed as a common street artist in the subway of Washington D.C. Mostly ignored by the apathetic and rushed subway crowd, it took him almost 45 minutes to earn a meager 30 dollars. A few weeks later, Bell played again, but now in Carnegie Hall, which was packed to its limits with ecstatic listeners who loved his work. In both cases, his talents and skill were identical, yet the results were vastly different. What changed was the influence of luck. The crowd at Carnegie Hall was self-selecting, yet the chance that the subway crowd would recognize and value Bell’s work was limited at best. By choosing a different venue, the reliance on luck to achieve success became much smaller.

Executive Question

Where is the prime area or location where your talents and skills will have maximum effect to improve your business?

The power law of prime time can be illustrated by understanding airplane pilot skills. The most important moments when flying an airplane are landing, taking off, and emergencies. An airplane pilot who crosses the Atlantic Ocean will spend less than 10 percent of his or her time doing these three activities. The remaining time will be spent on routine activities like watching the autopilot. A pilot who wants to step up the game and become better will need to focus on improving skills in landing, taking off, and emergencies. On January 15, 2009, US Airways pilot Chesley Sullenberger managed to make a successful emergency landing with his Airbus A-320 on the Hudson River. Pulling off this feat requires incredible skill, and, fortunately, Sullenberger had recently trained for peak performance during such a scenario, thus reducing the reliance on luck.

Executive Question

What are your prime chunks of time as a business leader, and how can you maximize their effect?

Finally, the power law of prime knowledge is especially applicable to knowledge workers. Bill Gates once remarked that a great lathe operator commands several times the wage of an average lathe operator, but a great writer of software code is worth 10,000 times the price of an average software writer. This means the impact of knowledge is often subject to power laws as well: By focusing on expanding the right skills, a great software writer doesn’t need much luck to command a high salary.

Executive Question

Which additional knowledge would have an exponential impact on your achievement as a business leader?

Why Small Differences Create Extraordinary Achievements

Joshua Bell and, of course, Bill Gates are on top of their games. Their applications of the power laws result in a huge disparity in results and compensation between the absolute top performers and the muddling middle. First prize: a Ferrari. Second price: a set of steak knives. The power laws therefore open ways to real achievement. This phenomenon is called the razor’s edge, and it means that small differences, consistently applied, will have a huge impact on your results. Part of these differences are driven by luck. If Bill Gates had caught the flu the day he and the owners of an obscure software company called Seattle Computer Products were hammering out a deal, IBM would not have adopted MS-DOS as the operating standard for all its hardware and the company Microsoft as you know it now would probably not have existed.

Another part of these small differences is driven by talent and skill. The excellent software code writer who is paid 10 times more than the average code writer obviously doesn’t have 10 times more skill and talent, but is only slightly better in the areas that truly matter.

Here lies the heart of extraordinary achievement. If you want to double your results, you don’t have to double your skills, but you need to apply the power laws to become slightly better at what truly matters.

How the Link between Risk and Reward Drives Achievement

Next to the power laws, there’s another law that will help you become great business leaders and achieve massive success. This is the law of risk and reward. This law tells us the reward you get is equal to the risk you are willing to take. Take, for example, long-term stock market investment strategies. The big secret of the investment world is that your exposure to risk determines your maximum reward. Penny stocks, for instance, provide the highest possible returns but will expose you to dramatic losses as well, as penny stocks can lose all their value overnight. If you invest in less risky assets such as government bonds, your rewards will be significantly lower. Therefore, a typical successful investment strategy is based on a portfolio consisting of relatively secure bonds and relatively risky equities.

The same can be said of your business success. The more you expose yourself to risk, the higher the results can be. The problem, however, is that a massive downfall is more likely as well. For example, if you would apply the power law of knowledge to narrowly specialize and decide to become the best reservoir engineer in the world, you may find yourself in a comfortable winner-takes-all position. This position poses two problems. First of all, it takes a long time to become the best. Because of technological and societal developments, your deep expertise may also be irrelevant for future success. For example, your ability to solve complicated differential equations may have been much more valuable before the arrival of the computer. The second problem of narrow specialization is that the biggest rewards are usually not harvested by the originators of knowledge but by the people who apply this knowledge to improve the condition of a large number of people. This explains why Bill Gates is a billionaire many times over, while the top programmers at Microsoft do well but will never approach this level of financial success.

This means that if business leaders want to be successful, they need to expose themselves to more risky activities to gain the maximum rewards, while at the same time minimizing the downside of this risk exposure.

How Focus on Goals Maximizes Results

So far we have seen that the power laws of location, time, and knowledge may help to minimize the impact of luck and maximize the impact of skill and talent. Furthermore, we have discussed that the size of a reward equals the risk you are willing to take. Can the two be combined to present an actionable guideline to answer an important question: How to maximize achievement as a business leader with an engineering background?

One approach is descriptive. First, analyze the actions and careers of the most successful companies, organizations, and leaders. After that, distill the key skills and personality traits. Finally, present these skills and traits in an actionable menu to be used by anyone who wants to emulate success. The problem with this approach is twofold.

First, you may suffer from the narrative fallacy. By presenting a direct line between two points, you forget the role of luck and chance in the entire process. If Alexander Fleming had diligently cleaned all samples in his lab, he never would have made the chance discovery of antibiotics in one of his dirty petri dishes. This is why Jim Collins’ book Built to Last, in which he used a narrative to describe the common traits of the most successful companies, didn’t stand the test of time. After 15 years, a large number of his excellent companies have joined the ranks of mediocrity, or even failed completely.

Second, you may ignore the Einstein observation. One day, when Einstein was teaching physics at Oxford, he gave an exam to his senior class of physics students. After the exam, a baffled assistant asked why he had given the same exam to the same students 1 year ago. Einstein remarked dryly that the questions may have been the same but the answers had changed. The skills and talents leading to current success may no longer be applicable for a successful future.

I therefore prefer a more comprehensive and pragmatic approach to maximize achievement: Make business goals the core of your leadership focus.

How to Select the Right Goals

Life is about goals; all else is just commentary. If it weren’t for goals, mankind’s major achievements would have been the result of stumbling upon success by random, undirected activities. That doesn’t mean it’s impossible to combine success and random activities. After all, a million chimpanzees with a million typewriters may come up with Shakespeare’s Hamlet after a million years. Many achievements are based on chance discoveries and lucky breaks. Yet the efforts were almost always driven by goal-oriented individuals. Ray McIntire invented Styrofoam purely by accident around the time of World War II while trying to achieve another goal: finding a flexible electrical insulator.

Goal achieving is about solving problems. You can apply problem-solving skills to return to a previous state or to move to a new and better state. The bigger your goals, the bigger the obstacles and the bigger the problems you will have to solve. An objective that doesn’t require you to face obstacles is not a goal but an activity. Where is the fun in that?

If goal achieving becomes the core of your activities as a business leader, it’s essential to pick the right goals and engage with the right activities. This means that your goal must be worthy of your attention. It needs to solve a pressing problem. Engineers usually have different problems than do senior business leaders. The engineer may have to deal with a new bridge, a nuclear reactor design, or implementation of a just-in-time delivery process. The business leader, on the other hand, must focus on business development. This means that goals need to improve the condition of the customer. While a better mousetrap may work, an innovative company expansion strategy with advanced robotics for widespread critter control is much better for business leadership success.

Practical Application

Here are six questions for a business leader to find out whether a new business goal should be considered:

  • What exactly is the goal?
  • Does the goal achieve a significant result?
  • What are the options to achieve the goal?
  • Are the options feasible to achieve the goal?
  • Are the options effective to achieve the goal?
  • Do the advantages of the options outweigh their disadvantages?

Furthermore, your business development goal must be connected to your existing talents and preferably linked to skills that you already possess or that can be developed easily. If a young Thomas Edison had decided to become an investment banker, the world would probably have gained a mediocre financial brain but would still be lit by candles.

To ensure sustainable achievement, your business development goal must cover an area where the role of luck is minimized. It’s impossible to predict the future, yet several warning signs will tell you that luck may play too big a role:

  • An existing field with winner-takes-all characteristics. It may not be a good use of your talents to try to beat the company Amazon at its own game. Instead, it’s better to pick an underserved niche without existing dominant players.
  • The need for long-term skill building. The training of a brain surgeon may take 10 years or more. The good news is there are few people who are willing to sacrifice this amount of time to gain the deep knowledge required to be successful. Thus, there are a limited number of brain surgeons commanding high salaries. The bad news is that many things can happen in 10 years’ time. A brain surgeon robot may make the regular brain surgeon obsolete overnight.
  • A singular, nontransferable skill niche. Business leadership skills can be broadly applied. Typewriter repair skills? Not so much.

Your business development goal must be susceptible to power laws in order to get extraordinary results in the quickest way possible. Small differences need to have extraordinary effects. This is why operating in a niche often has the biggest benefits. For example, in-depth advanced robotics knowledge may very well create a big chasm between you and your nearest competitor.

The risks associated with your business development goals must be as small as possible, while the rewards must be big. If a risk is big, it’s important to find ways to mitigate the downside of risk before even trying to achieve your goals.

Practical Application

There are three ways to mitigate the downside of risk:

  • Transfer risk to someone else, which is the core idea behind insurance.
  • Reduce risk by setting big goals and, at the same time, committing to small investments of time, energy, and money at every step on your way to achieve the big goals.
  • Eliminate risk. For example, while developing deep sea drilling, the risk of losing human life can be completely eliminated by using robots.

Which of these three strategies would be most applicable to reduce the risk profile of your biggest business goal?

Finally, your most important goals as a business leader must be focused on business growth. This change in focus separates the engineer from the business leader. Growth is the natural state of any organization or organism. If it stops growing, it withers and dies. Or, viewing this from another angle, if your business adds massive value to your customers, it would be unfortunate to stifle your own growth and deny this value to existing and new customers. The drive to achieve growth goals is therefore a key distinction for every successful business leader.

Summary and What’s Next

Business success is a function of skill, talent, and luck. You can fully control your skill building and actively work on recognizing your talents. The power laws give you the opportunity to maximize the impact of your skills and talents, and minimize the role of luck. Small differences have an enormous impact on the final results. At the same time, you need to minimize your exposure to the downside of risk. The practical application of these insights is that goal achieving in the area of business growth should be the central focus of business leaders

Connecting to your skills and talents, minimizing the role of luck, adhering to the power laws, minimizing the downside of risk, and focusing on business growth will help you achieve the right goals. This is how your chances of business success can be maximized and how the best leaders get even better.

Now that we have discussed the importance of selecting business goals worthy of your time, we can now address the question: How can leaders with engineering backgrounds actually become outstanding goal achievers? Doing so requires answering three questions:

  1. What does success of big growth goals look like? Succeeding with big goals requires clarity. Clarity is therefore the first building block of becoming an unstoppable achiever. Getting clarity as a business leader will be the focus of Part II of this book.
  2. How can you achieve big growth goals in the easiest, fastest, and most elegant way possible? There are thousands of ways to achieve a goal. As a business leader with an engineering background, you will therefore need to choose the few that truly build on your unique skills and talents. Choosing them requires focus: the second building block of becoming an unstoppable goal achiever. Focus is therefore the subject of Part III of the book.
  3. How can you consistently take action to make progress on big growth goals? Once clarity and focus have been achieved, it’s time to make your goals happen, which requires the ability to execute. Execution is therefore the third building block of becoming an outstanding goal achiever. Building execution power is the subject of Part IV of the book.

Finally, Part V of this book brings these elements together in an actionable blueprint for business leaders with an engineering background to make big growth goals happen.