Five Easy Pieces—The reverse management phenomenon

Failing at the basics

Executive summary

The Urban Dictionary defines reverse management as "when management tasks are completed by personnel that are typically under a manager who was responsible for the tasks but failed to do them in a timely manner." Different than bottom-up management, reverse management happens when a manager delegates their own work to their reports, and instead turns their focus to completing the operational tasks that are the responsibility of their reports, effectively trading places and inverting the organisational pyramid structure. Having experienced this peculiar phenomenon a number of times, I’m using this Piece to reason about its causes, and elaborate on its effects.

Failing at the basics

The role of management

Management is put in place by company owners to manage its resources productively; the most important resource of all being the people in the company. A manager's focus should be on results and people: to produce results while retaining people. Reaching and combining these goals requires a management system that not only sets direction, defines and delegates tasks, but also looks after the individual interest of every report in their career. Though management is an art and not a science, the basic responsibility is establishing system of communication between manager and reports.

In place of a system

A manager that fails to establish this system is likely be overwhelmed by the amount of tasks, plans and budgets, and requests for reports they are met with and required to handle. The quick and easy, but destructive, solution is to off-load these responsibilities onto directs who are normally only operationally responsible for their own areas. As a result their attention is divided between execution and management, neither of which is likely to be done optimally.

The prerogative to meddle

Being freed of their own responsibilities, the manager now has time to dive deep into various functional areas and nitpick on things that are done less than optimally; i.e. micromanage. It goes without saying that there is always room for improvement, and doubly so once an employee’s capacity is stretched by work not normally part of their responsibilities. As a result, there’s no shortage of things for the reverse-managing manager to “improve” while at the same time failing at their own job. (Coincidentally, this is also why every micromanager has failed their job, because they have taken time from their responsibilities to do things that they should not be doing.)

Steve had to complete the reports just hours before they were due for the meeting that was planned months in advance because his manager had spent the last few months procrasturbating. Thanks to Steve's Reverse Management the meeting was able to proceed and the company didn't look like a sack of dicks at the meeting. - Urban Dictionary

Life in the inverted pyramid

While this inversion can feel like a benefit to the manager, freeing up time and giving them the illusion of control by taking a hands-on approach to operational work, the effects that are not seen are numerous. The integrity of the team's work suffers because of misalignment; the direction that is supposed to be given by the lead is missing. Lack of ownership demoralizes when reports neither own the managerial tasks handed down to them, nor the operational work that are their real responsibility. Everything is subject to change at the whim of the inverted manager.

Lackluster results and no people

It is confusing to find oneself in this situation and to try to make sense of it, because one is under a manager that doesn’t do their job of managing at all, while at the same time micromanaging everything. Going back to the two goals of the manager, to produce results while developing the people in their team, we see that they have failed at both. There is no trust between manager and reports, morale is low, and people who can will leave ASAP. And all of this because of a manager who failed to do what is prescribed in every text of management basics: set up a system for communicating about work, in order to build trust and set direction.

Five Easy Pieces — Curation as a Service

A service to culture

Executive summary 

In 2017 and 2018, publishers tried and mostly failed in turning video into a new medium for delivering content and selling advertising on. The same problems that prompted that pivot still exist: digital is crowded, and platforms are continuously changing terms for publishers, each year making it harder to reach audiences. As publishers now turn their focus to subscriptions, many of them will develop a new-found fondness for print. Because in the same way that the unlimited nature of digital brings benefits, so does print’s distinctly limited nature. At its core, the constraints of print together with the saturation of our digital environment nudges publishers in the direction of quality and incentivizes them to build their name as a mark of its editors’ ability in selecting stories, with the publication as delivery vehicle for the most important information over a unit of time. Call it curation as a service.

Curation as a service

The dilemma of digital reading

Since you’re reading this, you likely have the same problem as I do: despite a glut of free content available digitally, it’s close to impossible to find something worth reading. Across the range of subjects that I’m interested in, from things that help me professionally to things that entertain me, there’s hardly any reliable source of timely, quality information to visit because it seems that everyone is chasing scale in order to grow ad revenue. And in going for scale, content is watered down to attract the many over the few. The result is that most outlets today are bland in terms of both their identity and their product, and hardly worth the bother. If only there was a service that freed us from having to wade through an ocean of content by delivering topical reading on a timely schedule.

Differentiation

While we have spent the past two decades marveling at digital’s low barriers to entry, that line of thinking is today obsolete. Digital media properties in 2019 are most accurately described as highly competitive content farms that succeed (or not) by producing mountains of undifferentiated content based on what they believe will bring the highest number of page views—previously from Facebook, today through SEO, and monetized through advertising. In this state of sameness, print is a strategic medium because its associated costs of delivery that makes it the non-default choice for publishing both invites and forces differentiation. For the publisher, what is the factor that would make them publish in print instead of digital? For the reader, why would they pay for a copy and bother to take time to sit down and read it?

Quality 

When print was the only choice in publishing, it was the home of all types of publications, from high-brow to tabloid. In a digital-first world it only makes sense to publish thoughts in print of a quality that is high enough for readers to want to pay for. As a high-priced, non-default choice of reading and publishing, print must be either higher in quality or more focused than the free alternatives. In most cases, it will be both. The shift to subscriptions and print is a shift from pleasing the advertiser with a wide reach and effective adverts, to satisfying the reader’s want for a reliable source of practically useful information, or entertainment, in the form of writing.

Figure courtesy of Venkatesh Rao

Subscriptions

What turns a publication from a product into a service is it being delivered consistently over time--meaning, bought by subscription. In late 2018, the subscription made a strong comeback with the New York Times being notably successful in growing its subscriber base. Of highest importance in a subscriber business is continuously offering subscribers value; value that is higher or at least different than what is available from other publishers. Hence the close relation between print and subscription business models. But the most difficult thing with subscriptions is not gaining a reader but keeping them, and the value of doing so is immense becauseincreasing customer retention rates by 5% increases profits by 25% to 95%. As a result, a shift to subscriptions means increasing pressure for publishers to increase quality, to increase their point of difference, and one of the most effective ways of doing so is going into a new medium: print.

A service to culture

Which magazines a person buys can say a lot about that person: their interests, their values, their spending habits. People who read the same niche publications become part of a particular group of people who are in the know; a subculture of highly interested and knowledgeable people that may in turn become actors in shaping that culture. The publication then becomes a fount of that particular culture, where new ideas and trends emerge from. It becomes a membership card sent to you once per week, month, or quarter. Over time, it builds community, and the publications you read become a personal identifier. As digital is becoming increasingly pointless, we may see print return as both a valuable service, and as an integral part of culture, and in some cases may replace digital as the real social media.

Five Easy Pieces — Blumhouse, not Netflix, is the film production innovator to watch

A process for taking a chance on stories

Executive summary

Since entering the business of production, Netflix has spent and plans to spend many more billions on new films and series for its platform, and some say it’s changing the way films are made. But there is another, much less known, production house that, to me, is far more interesting to watch. Counter-intuitively, Blumhouse Productions comparatively minimal budgets and its production process lets it make bets on stories in a way that Hollywood hasn’t been able to in decades. Its process gives directors creative freedom to tell the best story possible—because for Blumhouse, it is the story that counts, not big-ticket actors. In fact, its low budgets is such a strong competitive advantage that it in practice has barely any competition within its niche.

A process for taking a chance on stories

Blumhouse Productions

Established by Jason Blum in 2000, Blumhouse Productions is a film and television production company best known for its unique way of producing low budget films that get mainstream release and generate massive box office returns. Mainly focused on the horror genre, its recent productions include Get OutInsidiousThe PurgeSplitHappy Death DayUpgradeParanormal ActivitySinister and The Gift. Two Blumhouse films, Whiplash in 2014 and Get Out in 2017, have earned nominations for the Academy Award for Best Picture. Its first real success was the Paranormal Activity series, of which the first part grossed $193M on a $15K budget, and since then it has regularly produced films that give returns matched only by the Star Wars franchise.

Integrity of the story

Among Blumhouse’s key insights are: story is key; directors want freedom; only low budgets can provide that freedom . Film is really just a vehicle for storytelling, and it is the integrity and uniqueness of the story, rather than production values and star actors, that ultimately decides if a movie succeeds. By experience, Jason Blum knew that when studios and producers meddle in a production, the story is inevitably weakened and so is its box office performance. For directors to get the control necessary to preserve the integrity of their vision, producers must give it to them. Producers are typically fearful of giving up control because of they are afraid that creative but not so business-minded directors will create a film that flops.

The deal: creative freedom

Imagine yourself as the producer putting up money for a film to be made. How can you as a producer find the trust required to hand over control of the film to your director? First, you limit risks by keeping the budget low so that you can afford a miss. Then, align incentives by designing a deal where the director foregoes their fee and instead owns part of the box office returns. Then, find a director with something to prove—because then you know they’ll do their best work possible. Blumhouse has typically worked with directors who have fallen form grace, like M. Night Shyamalan who went from star in the early 2000s, to has-been, and back to star with Split (2016).

Budget and distribution

Evolving over time, Blumhouse’s current budget for new productions is $5M, and $10M for sequels. Directors and actors get scale (a percentage of profits) if they come in below budgets. How a film is distributed is decided by Blumhouse together with the director, and with Universal Pictures, with whom the company signed a 10-year first-look deal in 2014, through internal screenings and then audience previews. The most promising productions see a mainstream release in U.S. theaters backed by a $30M marketing budget. Less confidence-inspiring films go directly to Netflix with few or no theatrical showings.

Returns

Blumhouse’s process started taking shape after the release of the first Paranormal Activity, which was turned into a six-film franchise earning a total of $900M. Since then, it has created the Insidious and The Purge franchises, each of which has made more than $300M over 3 films. M. Night Shyamalan’s standalone hit The Visit made close to $100M on a $5M budget. In 2017, its biggest hits to date were released, with Split earning $280M on a $9M budget, and Get Out $253M on a $4.5M budget. In comparison, Star Wars: The Last Jedi made $620M, but it cost around $300M to make. Blumhouse has not only found a repeatable process for producing box office hits with the highest return in the industry, but also created a position for itself where it has no competition — because the large studios simply cannot adopt a model that is the opposite of what their organizations are built for: big budgets and films packed with star actors.

Five Easy Pieces — Steve Jobs was wrong about middle management

Growing companies desperately need good managers

Executive summary

In the startup communities of Silicon Valley and Shenzhen, management is a four-letter word. Bearing the brunt of disdain is middle management, supposedly deadweight offering nothing by way of value and instead being a time and energy suck for the staff that actually produces. Yet the reality is that for a startup attempting to grow beyond its seed phase requires competent managers to grow new teams and departments. Startups that don’t hire, and then trust the managers of their teams, run the risk of losing a sense of meaning, as well as condemning their business to fail to adjust to a dynamic market and the needs of its users.

Growing companies desperately need good managers

The trope

Iconic business leaders including Elon Musk and Steve Jobs have argued the view of middle management as removed from the end product, a role that adds nothing of value while restricting the actions and behaviors of the teams engaged in production. "Companies, as they grow to become multi-billion-dollar entities, somehow lose their vision,” goes an old Steve Jobs quote. “They insert lots of layers of middle management between the people running the company and the people doing the work. They no longer have an inherent feel or a passion about the products. The creative people, who are the ones who care passionately, have to persuade five layers of management to do what they know is the right thing to do."

No top without a middle

The cause of lost vision and inflexibility in an organisation might just as well be due to a lack of middle management, rather than too much of it. Formulating vision is the job of top management; implementing it the role of middle management. Without the middle, top management has to engage in execution and end up in a position without the distance, nor time, required to formulating a coherent vision for the company. A company without middle managers will not have a clear, compelling vision and is not just likely to fail as a business but also to fail at inspiring its organization.

Implementation

Part of the influence of middle management comes from their ability to create structure and process. MIT’s Paul Osterman, who has spent decades analysing the role of managers in large organisations, identified several responsibilities of middle managers. Their roles are varied, spanning from the formation of teams and the smooth day to day running, to serving as ambassadors. They allow for the execution of the organisation’s overall message and, perhaps most vitally, they serve as the connecting part between the top leadership and the company’s staff. A Wharton study from a few years ago found that middle managers are the most influential group in the organisation when it comes to innovation. That matters, because a recent study from Cambridge University found that ideas originating from middle managers were much more likely to be supported than those that originate from the top. Without the steadying hand of a capable middle management layer, attempting to implement strategy is like pushing on a string.

Impact and direction

Middle managers are in the unique position where they are close to production, but not producing themselves, so retain the distance required to make decisions. In a research paper “People and Process: Suits and Innovators: Individuals and Firm Performance.”, Ethan Mollick highlights that management plays a vital role in setting the direction of company activities. Through examining the middle management role of the producer in the computer games industry, Mollick asserts: “It’s amazing that the effect of these middle managers on a project is not only larger than the creative people, but larger than the rest of the organization.” In fact, tech companies find middle management so important that they created their very own type: the product manager.

Creating meaning

The middle manager is their reports’ connection to the heart of the company. Without this connection, employees are directionless in their work, and without direction there is no sense of meaning to work. A good manager gives projects a context by explaining how they matter to the company’s broader vision. Moreover, they work bidirectionally and help their team to communicate feedback upwards to influence their own working environment, develop their careers, and as a result feel like their feedback is taken into consideration by the company. A good manager ultimately improves team performance and reduces attrition, as we all know we leave managers, not companies.


Edit: A comment on this article posted on Hacker News:

Steve didn't believe most of the stuff he said. I used to work for him, and he got monthly reports from his PR firm. One section each month was filled with pages of quotes for him to say to be perceived as a visionary. He used them regularly, and most of his most well known quotes came from those pages. They were completely unrelated to the way we were doing things. And, obviously, we had plenty of middle managers.

Five Easy Pieces — Why Digital Native Vertical Brands are boring

Economics shaping aesthetics

Executive summary

Everlane. Warby Parker. Bonobos. Glossier. Digital-first consumer brands that are all hugely successful and growing rapidly thanks to business savviness and venture capital funding that has helped them grow rapidly. When compared to their independent contemporaries like Eckhaus Latta and Vaquera, another commonality becomes apparent—these brands all look and feel the same, to the point where some have started referring to them as “blands” rather than brands. On their own, their sans serif graphic design paired with plenty of white space is attractive but when all brands look like this, it becomes bland. While economics and design are seen as fully separate disciplines, it turns out that it is a formulaic business strategy of these digital native vertical brands (DNVBs) that shape the way they look, feel, and sound.

Economics shaping aesthetics

Stories and formulas

New brands would typically be founded based on an idea or a sensibility about how the product can be designed in a different way, or a total experience – brand experience – can be delivered to the consumer in a better. They grow out of their founders’ personal experiences and local environment, and that in turn gives them character that makes them stand out. In short, what a brand is, is really a story of its origin that becomes a context for consumer to understand its products, and in turn gives them a differentiated value. DNVBs, on the other hand, are growth vehicles where an existing and proven model of growth is applied to a new category of products. The idea here is not so much how to deliver a better product but how to deliver more growth, faster. The process of building these brands is now so established that there are consulting companies focused specifically on creating new DNVB identities, and many of the best-known ones come out of the same design studio. As such, many of these companies lack an authentic or at least interesting story.

Simplicity

Every company has to make a choice to either go wide or go deep. DNVBs which pursue a strategy of vertical integration, gain one advantage at the cost of another. They start off selling directly to consumers instead of relying on established network to push out their product. As a result, they shift their resources to handling direct marketing and advertising, logistics and sometimes manufacturing. Owning several steps in the chain that supplies the product means that they need to pare down their product offering to one or a handful of options, else managing that catalog would not be possible. As a result, while normal companies would be fully focused on product and let partners handle manufacturing, distribution and logistics, product comprises just around one fifth of what a DNVB does.

Scaling

From the outset, a new DNVB is enters a numbers game with a known timeline. They know that high growth is the key to attracting future funding, and a requirement for what they have already received. Indeed, when they pitch to VCs, their pitchbooks focus on projected exponential growth trends as much as their product differentiation. In following this model, the focus naturally has to shift to logistics and technology. Even if the company is selling mattresses or glasses, the focus of the company is likely to be technology first and product second. In many cases, the most interesting story about these brands is their infrastructure, their ability to scale, to find funding, and so on. As such, the brands become, to the general viewer, boring.

Finding the customer

A brand-led company mainly relies on the attractiveness of its brand to drive sales; it does brand marketing that only indirectly drives sales and makes the customer come to them. In contrast, DNVBs actively look for customers, pushing out their messages through the advertising networks of Facebook and Google. Much of their success comes from its ability to target and acquire new customers; whereas traditional brands outsource advertising, direct to consumer brands build their own inhouse advertising teams. As such, focus is on ad operations, on discounts and offers—all things that are paid for not only in hard cash but in deteriorating brand equity, because a company that just wants to sell you stuff loses its sense of wonder.

Can compelling branding and strong growth co-exist?

For new brands, there are a few paths to success, with VC funding on one end and bootstrapping on the other. Both ways can lead to growth, albeit at different rates and over different time periods. When companies accept VC funding, this money comes with strings attached. Growth, and everything that supports it such as logistics, simplicity and digital advertising, is the highest priority. Under this framework, the emotional component of brands is unlikely to survive. It is possible for DNVBs to achieve growth while maintaining their unique personalities and brand identities, however it would likely require the company remaining independent and growing more slowly.

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