Talk at IIM Lucknow to the 1st year batch, August 9, 2014
It is always a pleasure to be back at campus. It is the fourth year running that I have come for the Dream Series lecture, and it is something I really look forward to. It is not just an opportunity to meet all of you and connect back with the campus, but also a good opportunity for me to reflect on what I have learnt that would be helpful to share with you.
Today I would like to share with you some of the most important management concepts and frameworks I have learnt over the past 20 years. These concepts and frameworks can be applied in life and business to improve the quality of decision making and actions. I have used them in numerous situations and found them to be tremendously beneficial. I thought it will be helpful for you to learn these frameworks as you are in early stages of your life at IIM Lucknow. The next 2 years of your MBA are going to be very intensive where you need to make a lot of choices and build the foundation of your career. I think these frameworks can help you make better choices.
I will share 9 frameworks. The first 5 are more about “What” and the latter 4 are more about “How”.
- Sweet Spot
One of the biggest questions for all of us is how we can better realize our full potential. We do that when we find our “Sweet Spot” where our passions, strengths and opportunities come together. Finding the “Sweet Spot” is not easy. It is unlikely you will find it with an Excel analysis!! It is more likely to be a patient journey of experimentation and discovery. But, it is important that you seek it and persevere in the journey. When you operate from your “Sweet Spot” you find tremendous energy, your activities become easy, you delivery high quality and you feel happy.
This concept is relevant for businesses as well. One of the simplest but most powerful frameworks for any business situation is Opportunity vs. Ability to compete, which is really an application of the “Sweet Spot” concept.
- Risk-Return Tradeoff
As you make decisions, one of the most important considerations is to understand the Risk-Return profile. There is no free lunch. If you want higher returns you will typically need to take higher levels of risk. This concept is one of the most fundamental concepts of finance, but is relevant in personal life as well. It is important that we understand our risk propensity. For the same Risk-Return curve, the point to play might be different for different individuals. A good example of this is a question I face every year from students – should I do a start-up right after MBA or work for a couple of years before becoming an entrepreneur? Clearly, there can be no one right answer to this!!Generally I find that in India, many of us are too risk averse perhaps because of our parental conditioning. To play at the optimal point in the Risk-Return curve, it is important to define and understand risk better. If you keep risk at an amorphous level it will paralyze you. When you define risk clearly you can differentiate between what is real and imaginary. That will allow you to make bigger bets and play at higher levels of the Risk-Return curve. - 80-20 Rule
The Pareto Principle or the concept that vital few tasks drive majority of the results is a well-known concept. However, not many are able to apply it practically in daily lives. The reason for this is that while the 80-20 is evident in hindsight, it is more difficult to see it with foresight. To improve the 80-20 ability it is important to make time to think. It is easier said than done. Most are so caught up in the flow of events that we don’t make enough time to think through our options and approach. In addition, it is imperative that we make time for reflection. Writing a dairy can be very helpful. This reflection can improve the intuition required to make the right 80-20 decisions.
- The One Thing
There is a Russian proverb that “If you try to catch two rabbits, you will not catch either one”. The One Thing is an extension of the 80-20 Rule. At these early stages of our career, we are often obsessed about multi-tasking. However, multi-tasking dissipates energy. You will maximize chances of success if you focus on one thing at a time. We have finite will-power. We need to focus it on where we need it most. It is not necessarily the most brilliant and hardworking who succeed. I have seen many who were seemingly average but who stuck to a particular career do very well.
The concept of One Thing can be applied in any situation. The question to ask in any situation is “what’s the One Thing I can do such that by doing it everything else will be easier or unnecessary”. This concept has been brilliantly illustrated by Eli Goldratt in his book “The Goal”, where he brings out how a chain is no stronger than its weakest link. I recommend all of you to read this book. - Urgent-Important Matrix
Talking of books, another of my favorites is “The Seven Habits of Highly Effective People” by Stephen Covey. In this book, Covey introduces the “Urgent-Important Matrix”, which is an invaluable tool for time management.
Our natural instinct is to do the urgent tasks first. Instead we need to shift focus to the important tasks first. If we focus only on the Important-Urgent quadrant, it keeps getting bigger and bigger until it dominates us. The Important-Not Urgent quadrant is the heart of effective personal management and key to long-term success. It takes discipline to work on the Important-Not Urgent tasks. That is why the 80-20 Rule is so important. It is only if we have a few, well-chosen priorities in this quadrant that we can focus and make progress on them.
- Trust Equation
Trust is the foundation of relationships and key to success both in personal and professional lives. It is like a super powerful lubricant that makes interactions and working together easy and effective. Trust can take time to build. However, once you build trust the relationship moves to a totally different level of effectiveness.Trust Equation is a great framework to understand how to build Trust. Trustworthiness is driven by your Credibility (expertise, knowledge), Reliability (consistency of actions) and Intimacy (personal connect). However, the most important driver is Self-Orientation in the denominator. All the great work because of the earlier three factors can be undone by a perception of self-centeredness.
Trust Equation is a good reflection of the human balance of head and heart. Credibility and Reliability reflect the head, and Intimacy and Self-Orientation the heart.
- Virtuous-Vicious Cycle
No situation is as good or as bad as it seems. Most times we are in either a virtuous cycle (positive feedback loop) or a vicious cycle (negative feedback loop). This reflects that emotions play a big role in our decisions. We see this in markets, industries and companies.
Equally, we see this in team and individual situations.Question is how to break out of a cycle and move from a vicious cycle to a virtuous cycle. It is difficult to have perspective when you are in the midst of a cycle. Those who are around you may see it sooner. Seeking advice and help from others might help you make changes required to break out of a negative cycle.
- Pain Barrier
In most tasks you will have to cross a Pain Barrier to make progress. You feel a period of great pain where you feel like giving up. However, if you battle through the Pain Barrier, the pain diminishes and you can go on more smoothly. Every athlete is very aware of the pain barrier. This is very true for entrepreneurs as well. Most entrepreneurs go through a period where it seems to make sense to give up. Those who persevere are often able to go on and make a success of their ventures.
Pain Barrier is present in most team and project situations. You often start on a high but then very quickly hit a low. As you battle through the low phase you can then move on to a steady growth phase. Understanding the existence of Pain Barrier should give us the strength to work our way through any Learning Curve situation. - S Curve
Sigmoid Curve (or the S Curve) is an extension of the Learning Curve where after the growth phase you see a period of maturation and then eventual decline. The S Curve has profound implications for both companies and individuals. To ensure sustained growth, you have to move from one S Curve to another. The only option for shifting from one curve to another is when you are on your way up. This is because you can never predict the top and when you are in the decline phase you lose energy. It may be that the first curve is longer than was thought, in which case you can keep cruising along until you are indeed nearer to the peak. But preparing for the second curve too early is far better than waiting until it is too late and the decline has set in.However, making a shift when you are in a growth phase and things are going well is not easy. You have to break through your Comfort Zone. Moreover, when you transition between S Curves you will go through a period when the rewards are lower (as you have to battle through the Learning Phase of the next S Curve).
Successful individuals and organizations are self-reflective and constantly monitor their own position on the S Curve. Riding the first curve while cultivating the second is always the best option. Clinging to the first and trying to prolong it is a pointless waste of energy. When all is well and you are at the top of your game, then you know it is time to plan your next move.
I hope you the found the 9 frameworks I have shared to be helpful. In the end, I want to mention another very important factor. That is LUCK.
As I have gone through life, I have realized that success is not a predictable formula. Sometimes your best efforts go waste and sometimes you get success that you never anticipated. That is the nature of life; it is not linear and deterministic. It is uncertain with many unpredictable ups and downs. That is why it is very important to have a broad and relaxed perspective towards life. Not get arrogant with success and too depressed with failures.
Gita talks about KARMA. It says, “Karmanye Vadhikaraste, Ma phaleshou kada chana – you should do your duty but not worry about the results”. There is deep truth in this. If we realize it, both our individual lives and the world around us will be a much better place!!
All the best!!
