Hasta La Ideas

Image from the Mayan ruin site Palenque: Templo de la Calavera ( Temple of the skull ), by Peter Andersen

Every couple of years a crackpot comes along and prophesizes the end of the world. Fortunately for us, the outcome of the Mayan calendar looks a lot more favorable than reviews for Roland Emmerich’s film, 2012. So far, no end of the world cult has gotten it right and as a populace, we remain unsurprised. At the same time, on a very different calendar, an entirely different set of crackpots make promises on a much shorter timeline. This group tends to achieve their predictions, at least in the short term, but their shortsightedness might be just as dangerous as the Mayan’s prophecy from so long ago.

Unfortunately, the second group has far more sway on the global economy. Each quarter CEOs give “guidance” to stock market analysts, which is basically a prediction of the earnings that they expect to achieve in the next quarter. Using an enormous bag of accounting tricks and choosing when to buy or sell assets, they often get their earnings per share estimates correct. When they exceed those estimates, they are rewarded by seeing their share price jump or punished when they miss it. For investors, that “pop” is a nice thing to see in their personal account, but the suits that own their stock aren’t necessarily their customers.

Peter Drucker observed in 1973 that the only valid purpose of a firm is to create a customer, and the recently eulogized Steve Jobs fully understood that insight. Because Apple made an effort to focus on user experience rather than shareholder wealth, the people who invested in Apple shared in the same customer driven joy when it made its way to their pockets in earnings. Jobs, however, retook control of the reins of Apple in 1997 and the full extent of his influence is still being felt today. Jobs was CEO for around 60 quarters, while a design engagement usually takes less than a year. Apple succeeded in part because he understood that business is an ongoing design engagement, not an exercise in hitting quarterly earnings.

Steven Jennings wrote a thoughtful review of Roger Martin’s new book Fixing the Game in Forbes called The Dumbest Idea in the World: Maximizing Shareholder VALUE. Maximizing shareholder value isn’t necessarily the dumbest idea in the world if we view companies as players in a short-term betting game. For product designers, employees and customers, however, product development and corporate survival is not a short-term game of beating expectations, but instead represents creating actual value in the real world.

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