MONDAY*

Issue #22 | May–June 2018

CAPITALIZING ON THE UNEXPECTED SUCCESS

EXECUTIVE
BRIEFING

Peter Drucker viewed the “unexpected success” as a particularly rich source of innovation. “In no other area are innovative opportunities less risky and their pursuit less arduous,” he wrote. “Yet the unexpected success is almost totally neglected.” Why? Managements might have fixed ideas about their business and find a shift inconceivable. Or they might have their eye so resolutely on one result that they neglect to notice another. Or they may be unable to make a decision on what to do with the success and simply allow it to wither. What follows are three stories—one from the corporate arena, one from the social sector and one from government—in which organizations avoided the usual pitfalls and wholeheartedly embraced an unexpected success.

CAPITALIZING ON THE UNEXPECTED SUCCESS

When the writer Gustave Flaubert published his novel Madame Bovary in 1856, he noticed, much to his dismay, that people tended to respond best to the farcical parts. “Success,” he complained in his journal, “is always off the mark.”

What was true for Flaubert back then remains true much of the time for people today. We achieve something profitable or noteworthy, but not on the terms we expected. Sometimes, we’ve become so wedded to those terms that we fail to see any success at all.

For his part, Peter Drucker viewed the “unexpected success” as a particularly rich source of innovation. “In no other area are innovative opportunities less risky and their pursuit less arduous,” he wrote. “Yet the unexpected success is almost totally neglected.”

As Drucker explained it, an unexpected success faces many obstacles to being properly exploited. Managements might have fixed ideas about their business and find a shift inconceivable. Or they might have their eye so resolutely on one result that they neglect to notice another. Or they may be unable to make a decision on what to do with the success and simply allow it to wither.

With the rise of startup culture, the unexpected success has become a far more common source of innovation among businesses. Tech companies often change direction with incredible speed in response to new opportunities—the term “pivot” is already a cliché—and anything that’s bringing in revenue is quickly seized upon.  A behemoth like Amazon Web Services came about because the cloud services that the company was providing in-house were, some realized, of obvious use to customers on the outside.

Nonetheless, many businesses still have trouble taking advantage of an unexpected success. And in the public and nonprofit sectors, it’s even rarer to capitalize on such a thing. Nonprofits care about advancing a mission, and an unexpected success can feel off-mission. Government entities are often measured against set-in-stone-goals, which don’t allow for much flexibility and improvisation.

What follows are three stories—one from the corporate arena, one from the social sector and one from government—in which organizations avoided the usual pitfalls and wholeheartedly embraced an unexpected success, giving it, to use Drucker’s words, a level of “seriousness and support on the part of management equal to the size of the opportunity.”

FRAME WORK

The Drucker Institute’s Phalana Tiller talks with the University of North Carolina’s Buck Goldstein about how not to squander the unexpected success.

THE NIMBLE JOBS STRATEGY

Managed by Q, a New York-based company that offers through its digital platform a range of services to offices—from cleaning and maintenance to IT support and security—has earned a reputation as a wonderful employer in an industry that, by and large, doesn’t treat people very well.

Having adopted what it is known as “The Good Jobs Strategy” (a business model created by an MIT management professor named Zeynep Ton), Q offers robust training, pay above minimum wage, strong health and retirement benefits, and even equity stakes in the company for front-line employees.

The approach has paid off. Founded in 2014, Q now serves thousands of office buildings across five cities. It has raised $76 million in venture capital, and its core business recently turned profitable. Q’s secret: By treating its workers so well, employee turnover is exceptionally low. In turn, customer satisfaction and retention are extraordinarily high.

“We have a reputation for hiring really good people,” says Dan Teran, Q’s co-founder and CEO.

In fact, clients have been so satisfied with the personnel that Q dispatches to clean and take care of their offices that something unanticipated happened: They began luring them away.

And why not? Unlike in most offices, where cleaners work nearly invisibly, earning little more than an occasional “hi” or “thank you” from people at their desks, those on Q’s team are all heavily vetted and trained on how to interact effectively with customers. Not only do they clean diligently, but they leave regular messages and updates for the client, flagging things like the need for new supplies.

Window of Opportunity

Dan Teran (middle), co-founder and CEO of Managed by Q, has taken advantage of an unexpected success: a number of clients luring away his office cleaners to become their office managers.

What’s more, the typical point of contact for Q is the customer’s office manager, who usually gets to know the cleaning crew quite well. And since office managers tend to stay less than two years in their jobs, creating sudden vacancies, Q cleaners were natural candidates to replace them.

In all of this, Q spotted an unexpected success—and ran with it.

When clients starting recruiting the Q’s cleaners, it was the “earliest signal that this could be an interesting avenue for us,” Teran says. “We realized maybe this is a business we should be in.”

Last year, Q created a staffing service to find and place office managers. (The company also runs an online marketplace to connect clients to all sorts of third-party vendors, including staffing firms, but there was clear demand in this case for Q to handle recruitment and screening directly.)

direct-from-drucker2x

So far, Q has placed more than 150 people into office manager positions. Some are people it has found through an application process. But others have continued to come from the ranks of its own cleaners. That “they were able to progress in their career,” Teran says, has “been one of the most gratifying things for me to watch evolve.”

If launching this new line of business seems obvious in hindsight, Teran stresses that it wasn’t in real time. “We’re a startup, we’re not out of the woods yet, and focus is critical,” he says. “There’s the risk of creating distraction from the core business, which is very much in scaling mode.”

Yet Teran takes it as a given that the company will regularly find its assumptions to be off in some way. That may mean an unexpected failure. Or it may mean an unexpected success. What’s crucial is being nimble enough to respond appropriately.

“I like to joke that we’re in a prison of our own making, but the key is in our pocket,” he says. “When you figure that out, it’s super empowering.”

VOX BOX

GIVING TUESDAY (UNLESS IT’S ALREADY WEDNESDAY IN INDIA)

Every year around the holidays, Americans have come to expect a certain rhythm: Thanksgiving falls on Thursday. Black Friday—the official start of the shopping season—follows the next day. The new week then begins with Cyber Monday, marked by a surge of online deals for consumers.

The day after that? As many know, that’s Giving Tuesday, when philanthropic contributions are encouraged. In 2017, some 2.5 million people donated more than $300 million online to their favorite nonprofits in the United States alone.

But what’s remarkable is that it isn’t just in the United States where Giving Tuesday has gained traction. In all, people in 150 countries participated last year, with those in dozens of nations having established official, independently led #GivingTuesday movements.

None of that was foreseen when the 92nd Street Y in New York launched Giving Tuesday in 2012.

“We assumed that, since it was predicated on Thanksgiving and Black Friday and Cyber Monday, it would be an American phenomenon,” says Asha Curran, who leads the 92Y’s Belfer Center for Innovation and Social Impact. “Almost immediately, though, it started crossing boundaries.”

It began with a couple of other places around the globe—Canada and the United Kingdom—and then quickly spread. By year five, Giving Tuesday was operating in 20 countries. Last year, it was 42.

“People will say, how can it function in a place like Puerto Rico?” notes Curran. “The leaders in Puerto Rico would say, ‘How could we function without it?’”

WATER 
COOLER 
CHATTER

Yet the growth of an unexpected success doesn’t happen automatically. Once 92Y executives realized that there was organic interest in their idea across the world, they had a number of vital decisions to make. Among the trickiest was this: Should the 92Y allow Giving Tuesday to become completely autonomous, letting folks in other countries do with it as they wanted? Or should the organization try to keep its hands on the reins? The choice wasn’t binary, but it required decisions about structure and balance.

While partners could help to provide new databases and systems for global collaboration, overseeing a worldwide Giving Tuesday network from 92Y headquarters would require an investment in time and travel. “It wasn’t entirely straightforward,” says Henry Timms, 92Y’s executive director. “This was not in our wheelhouse.”

The Y eventually chose to employ an an intentionally loose structure, so that civic-minded people could pick up the idea and adapt it to the needs of their own regions. In Brazil, where the rich provide the bulk of philanthropy, the hope is to foster a similar mindset among the middle class. In crisis-affected countries such as Venezuela, Giving Tuesday has become a way to connect concerned citizens.

“We never want to become top-down with Giving Tuesday,” says Curran. “At the same time, we exist to be responsible stewards of a movement that has done a lot of good.”

The upshot: #GivingTuesday now has 60 people around the world—none of them directly on the 92Y’s payroll—who are running the program in their respective countries.

Meanwhile, the 92Y ensures that the essential purpose and character of Giving Tuesday remains intact—preventing efforts to hijack it for narrow political or commercial purposes—while enabling new interpretations of the program to flourish. “The skill is how you think about releasing the right amount of control,” says Timms. “Our job isn’t to create content but context.  And in that space, others create their own visions.”

Adds Curran: “It’s a distributed network, not a decentralized network. The country leaders are not just connected to us but with each other, and if something works they share it and encourage others to replicate it. So it becomes almost like a global innovation lab.”

None of which would be happening if Timms and Curran and their colleagues hadn’t seen past the expected, and Giving Tuesday had been confined to its home shores.

NORWAY’S FIELD OF DREAMS

Fifty years ago, the oil industry was all but done hunting along Norway’s continental shelf. Oil companies had been vainly sinking drills into the area for some time, and most people had come to consider landing a major find there as fantastical.

Then, in 1969, Phillips Petroleum faced a choice of spending a hefty sum on yet another exploratory well or paying a similarly huge penalty for backing out. It decided to take one more shot, in the hopes of salvaging something.

What it discovered came to be known as the Ekofisk field, one of the largest offshore oil fields in one of the richest basins on earth.

This was, unquestionably, an unexpected success. But, while the Norwegians were pleased by it, they were also wary—and therein lies a powerful lesson: The bigger the upside surprise, the more carefully it then has to be nurtured.

The Norwegians had spent the 1960s watching Holland strike gas and suffer what was later dubbed “Dutch disease,” a type of economic malaise characterized by, among other problems, a soaring currency and devastated export sector, all brought on by a sudden spike in resource-extraction revenue. If oil was to be a blessing, it had to be managed with a mind to avoiding massive economic fluctuations.

Norwegian officials traveled to several oil-rich countries to learn more about how they had managed their booms. Most of what they heard was cautionary.

Among those in charge of the effort was Farouk Al-Kasim, who had worked as a geologist and oil executive in Basra, Iraq, before immigrating in 1968 to Norway, where he became a consultant to the Ministry of Industry. Back home, he had been witness to the way that oil resources were being ineffectively harnessed for the public good. Enlightened self-interest was scant.

“I was preoccupied all the time I was in Iraq with why the only international oil consortium and the government had been fighting each other and destroying each other’s efforts,” he says. 

GUSHER

In the late 1960s, energy companies had all but written off Norway’s continental shelf as a place for a major oil find, only to discover one of the biggest petroleum basins on earth.

Now in Norway, it fell to Al-Kasim and a colleague to draw up a plan for how government was to manage the giant pools of wealth that were waiting for the nation under the sea.

They authored a white paper in 1971 for the creation of a directorate to regulate the petroleum industry and a national oil company, Statoil, so that Norway could develop its own competence in the business and not rely fully on foreign companies. This, they hoped, would generate a healthy balance among the industry’s key players and help Norway get as much as possible out of its natural resources.

“The state wasn’t going to leave everything to private enterprise,” says Al-Kasim. “Otherwise the citizens wouldn’t get the full benefit. But you did need the private enterprise so that companies would be efficient in a way that satisfied the state and the citizen.”

The plan was adopted, and, when the government established the Norwegian Petroleum Directorate, Al-Kasim became director of resource management, remaining in the post for nearly two decades.

Part two of the story began once Norway started to contemplate how to manage its oil revenues over the longer term. During the 1970s and ’80s, the government had used oil money for investments in infrastructure and for plugging deficits, but it was projected that revenues would keep growing, and the country’s parliament wrestled with how to put the money into some sort of national fund.

I was very afraid of building a bureaucratic entity or another mediocre investment company.

Knut Kjær
Founder and former CEO of Norway’s national oil fund

The debate was intense because of widespread concern that a national security fund established in 1960s had been mismanaged. A new oil fund could easily turn into a piggy bank that politicians would want to empty and no one would want to fill back up.

Finally, in 1990, despite skepticism over the idea, the parliament approved the establishment of an oil fund, managed by the central bank, to be launched in 1997. To prevent Dutch disease, all of its investments were to be made abroad.

The fund’s founder and chief executive for its first decade was Norwegian economist Knut Kjær, who took pains to make it both limber and transparent.

“I was very afraid of building a bureaucratic entity or another mediocre investment company,” he says. “I wanted something that could stand up against Wall Street, something that had the same high-level competence but also the same eagerness to protect assets.” Kjær hired his people carefully and, to keep the public informed, traveled the country giving presentations. He also held press conferences every quarter.

Kjær’s efforts were successful beyond anyone’s expectations, and his successors kept things going. Today, the oil fund, officially called the Norwegian Pension Fund Global (although it has no pension obligations), is the world’s largest sovereign wealth fund, valued at more than $1 trillion. That amounts to about $200,000 for each Norwegian.

It must still invest all of its money abroad, and the government may take no more than 4% of the fund’s annual returns. While many inevitable squabbles continue over the fund—how to manage it, how to spend it—the problems it faces are ones that most polities would be fortunate to have.

Unexpected success often requires that you take advantage of it quickly and enthusiastically, doubling down on it as soon as possible. But the case of Norway is a reminder that long-term thinking, cooperation and restraint can be just as important. “Norway,” says Kjær, “has a long history of far-sighted politicians understanding how to work together in a political system.”

In today’s world, that may be the most unexpected success of all. *

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Monday Mandate*

What will you do on Monday that’s different?

UNEARTH THE UNEXPECTED

Gather your team and explore the question, “Where are we having success right now that we might not be focusing on—and, therefore, missing out on a golden opportunity?”

DOCUMENT WHAT’S WORKING WELL

In addition to a traditional operating report, which tends to focus on problems, make sure that your organization is routinely capturing and analyzing areas where performance is better than expected, budgeted or planned for.

BUILD ON THE BEST AND BRIGHTEST

Systematically find the people and units in the organization that are doing things better than the rest, single them out and have them teach the others by constantly asking them, “What are you doing that explains your success?”