Kathleen Eisenhardt: Effective People Think Simply

Speaker 0:00 [upbeat music]

Speaker 0:18 All of us have way too much complexity in our lives, too many devices, our kids going a million different places. At work, we have all kinds of things we're supposed to be doing, and, and realizing, is there a way to be simple? And then noticing that some of, I think, the most effective people actually are simple. And so that kind of led us to, to start exploring what, what's, what's the value of simple rules and simplicity. We started studying companies and their product development processes, and we, we realized that, that there were companies that had these very complicated

Speaker 0:48 com- uh, product development processes, and what would happen was they would do the wrong product really efficiently. And conversely, we would see these other companies where there were no rules at all, and they were having a great time getting nothing done. And we saw that, then again, this, there was this sort of intermediate, a few simple rules. Who, who's in charge of what? What kind of a product do we do? But just maybe four or five rules that, that sort of constrained what people did but yet gave them some flexibility to, um, to innovate. [upbeat music] There's

Speaker 1:23 really three steps of coming up with simple rules. One of them is what, what's the objective? What are we really trying to achieve here? Is it, is it revenue? Is it growth? Um, is it, is it notoriety? Um, so what, what's, what's the underlying objective, business objective we're trying to achieve? And so profitability and growth, for example, would be two different things. So what are we trying to achieve? And that's usually fairly straightforward for businesspeople to come up with. What's harder to figure out is what's the bottleneck process? What's the repeated thing that we do often that

Speaker 1:53 really keeps us from achieving that objective? Um, so an interesting example is actually Google back in the day. Um, there were some problems at Google early on where they weren't getting enough, um, product improvement in their, in their search engine and some of their other products, so their product development

Speaker 2:09 wasn't as good as they wanted it to be. S- uh, thought a bit about, you know, do we reorganize product development? Uh, you know, what do we do? Well, then as they thought about it more, the real bottleneck that was keeping them from, from being successful was the quality of their computer scientists. And

Speaker 2:24 so they realized the real bottleneck was the hiring process, and what we need to do is get top-flight computer scientists because top-flight computer scientists are substantially better than the average computer scientist. And then they developed some simple rules that were things you might not expect, uh, s- things like look for people who are eccentric because they're more creative, so people who ride a unicycle, climb the Himalayas, do something strange. And look for people, always, always prefer referrals from other Googlers because the idea there was Googlers know what good Googlers look like, and they wanna work with them. And then the third one was stop the, stop the hiring process if you see anything phony or fake on the resume because we want high-integrity people. So the, uh, the point here is that the objective was not what they first thought it was gon- uh, excuse me, the bottleneck was not what they first thought it was be- gonna be. It ultimately became something around computer science hire- hires. And then finally, developing the rules, um, that's the third step, is what are the rules? And that's

Speaker 3:24 usually a combination of looking back at your own data. So for example, I worked with a company in biotech where partnerships were very important, and they looked back at their data trying to figure out when were we successful, when weren't we? So try to understand from your own data. Another strategy is to bring outn- outside experts. You come up with rules by thinking about what your objective is, trying to figure out what that bottleneck is, which is probably the hardest thing to do, and then developing rules partly from your own experience, partly with, with working with outsiders

Speaker 3:54 to come up with them. [upbeat music] You can make faster decisions when you're simple because you only have to think of a few factors. The second reason is that there are certain situations that sim- simplicity actually is not only faster, but it's actually better than using complicated formulas and lots of data, um, because if you use too much, if you use a lot of data and a lot of formulas, what you tend to do is overfit the past, which is a poor predictor of future. So

Speaker 4:25 f- so it's actually ... Uh, because what you're trying to do is predict the future, and y- and, and, and, and given, let's say, given you have a set of data and there are multiple ways you could fit that data, the simplest fitting of that data is the most likely to be predictive of the future. And then it's better because people actually do it. So for example, if I give you, um, you know, three rules to remember for partnerships or three rules to remember for investing or, or dieting, you know, you

Speaker 4:56 are more likely to remember it and do it even if you're stressed out, you're busy, you are, got a zillion things to do. You can say, "Oh, wait a minute. I'm supposed to think about hiring people, and I remember these three rules, and that's all I have to remember." So it's particularly effective when you're just stressed out with too much to do. [upbeat music] It works best when you involve the people in, in your organization, so not just you at the top deciding what the rules are, but i- but getting, getting the talent below you thinking about it and, and participating

Speaker 5:27 in the process of coming up with the rules, looking at the data, testing them out. [upbeat music] The stopping rules are ha- are, are the hardest to learn. Uh, when do I, when do I, you know, back off? You know, we're, we're doing a s- we're trying to sell to a client, and when, when is it time to say no? We're developing a product. When is it time to stop? We have an investment. When do we sell it? Those, those, those stopping rules are the hardest for people to learn, and, and, and, and I think maybe ironically, um, they're also related to higher performance. So getting ... W- probably one of the biggest mistake businesspeople make is they stay in something too long, and a stopping rule helps you get out of that. People are really good at starting, and they're really bad at stopping. And so a rule that says, "I'm done with this partner. I'm done with this sales call. I'm done with this product. I'm done this person. I'm not hiring them," whatever the process is that you have a rule that says, "I stop." [upbeat music] When

Speaker 6:32 it's time to change is when they don't seem to be working anymore or the situation has somehow changed. Um, one of the examples I think that's pretty obvious so people would know well is the Moneyball, the Oakland A's Moneyball, which was focused on, among other things, getting players with high on-base percentage. Well, once everybody else in the major leagues figures that out, they're doing it too. They're paying more than you are, and the Boston Red Sox are winning the pennant, and you're not. Uh, and so when your st- when your rules are starting to be copied, uh, by competitors, when, or when the situation's changed as it did for the A's, you have to change up the rules. [upbeat music]