Team Genius

The New Science of High-Performing Organizations

Rich Karlgaard, Michael S. Malone

• Publisher: Harper Business
• Year: 2015
• ISBN:
  9780062302564
• Topic: Negocios y empresa
• Subtopic: Liderazgo

A groundbreaking book that sheds new light on the vital importance of teams as the fundamental unit of organization and competition in the global economy.

Teams—we depend on them for both our professional success and our personal happiness. But isn't it odd how little scrutiny we give them? The teams that make up our lives are created mostly by luck, happenstance, or circumstance—but rarely by design. In trivial matters—say, a bowling team, the leadership of a neighborhood group, or a holiday party committee—success by serendipity is already risky enough. But when it comes to actions by fast-moving start-ups, major corporations, nonprofit institutions, and governments, leaving things to chance can be downright dangerous.

Offering vivid reports of the latest scientific research, compelling case studies, and great storytelling, Team Genius shows managers and executives that the planning, design, and management of great teams no longer have to be a black art. It explores solutions to essential questions that could spell the difference between success and obsolescence. Do you know how to reorganize your subpar teams to turn them into top performers? Can you identify which of the top-performing teams in your company are reaching the end of their life span? Do you have the courage to shut them down? Do you know how to create a replacement team that will be just as effective—without losing time or damaging morale? And, most important, are your teams the right size for the job?

Throughout, Rich Karlgaard and Michael S. Malone share insights and real-life examples gleaned from their careers as journalists, analysts, investors, and globetrotting entrepreneurs, meeting successful teams and team leaders to reveal some "new truths"

• The right team size is usually one fewer person than what managers think they need.
• The greatest question facing good teams is not how to succeed, but how to die.
• Good "chemistry" often makes for the least effective teams.
• Cognitive diversity yields the highest performance gains—but only if you understand what it is.
• How to find the "bliss point" in team intimacy—and become three times more productive.
• How to identify destructive team members before they do harm.
• Why small teams are 40 percent more likely to create a successful breakthrough than a solo genius is.
• Why groups of 7 (± 2), 150, and 1, 500 are magic sizes for teams.

Eye-opening, grounded, and essential, Team Genius is the next big idea to revolutionize business.

Change Kills—If You Don’t Have the Right Teams

Talking about the rapid pace of technology-driven change has become commonplace. These days, even schoolchildren are taught about the power of Moore’s law, that measure of semiconductor memory chip development that has now become the metronome of the modern world. But our acceptance of the reality of this change doesn’t necessarily mean that we understand it, or that we have developed effective strategies to cope with it. In fact, the reality of this ever-accelerating change is stranger and more challenging that we can imagine.

Gordon Moore, a cofounder of Fairchild Semiconductor (and later of Intel Corporation), first devised his law in 1965 in an article for Electronics magazine. The point Moore wanted to make was that memory chips, invented just a few years before, were improving at a dizzying speed. He tried to plot their price and performance points on regular graph paper, but they took off too fast, so he switched to logarithmic graph paper (that is, to show exponential growth), and he got a nice straight and shallow line. It showed that the performance of these chips was doubling every couple of years (eighteen months at the time, twenty-four months now).

It was an impressive graph, but no one then, not even Moore, realized that this graph would continue to hold for fifty years and set the blistering pace of change for the modern world. We all now live in the world of Moore’s law, and we likely will for at least another quarter century. It’s interesting to note how shallow that curve is for the first forty years, until about 2005. Yet along that comparatively flat curve can be found the births of the minicomputer, the microprocessor, the digital calculator, computer gaming, the personal computer, the Internet, robotics, wireless telephony, the smartphone, and electronic commerce. After 2005, as we race toward twenty-five billion transistors per chip, the curve goes almost straight up, heading toward infinity. Are we really prepared for this? If the entire digital age occurred in the foothills, what happens now that we are entering the Himalayas?

We have grown so accustomed to living in the world of Moore’s law that we forget we’re dealing with one of the most explosive forces in history. We’ve become so adept at predicting, incorporating, and assimilating each new upward click of the curve that we assume we have this monster under control. We don’t.

There is a second great exponential law that has emerged out of the digital world to redefine modern life: Metcalfe’s law. It says that the value of a network is proportional to the square (or a similar multiple) of the number of users. In other words, each new addition adds value to the Web out of the usual proportion to its presence. And with the emerging Internet of Things, those “users” may soon include 100 billion new smart devices as well—sensors, cameras, robots, drones, and the like. As far back as 2005, Google’s CEO, Eric Schmidt, estimated the Internet’s data size to be 5 million terabytes (that’s eighteen zeros).¹ Today, the Internet is 60,000 times larger, at 300 exabytes. John Chambers, CEO of Cisco, says the “Internet of Everything” is worth $14.4 trillion, growing more than 20 percent per year.

But, as with Moore’s law, the exponential implications of Metcalfe’s law are less noticed. Fifteen years ago, about a billion people regularly jumped onto the Web. Even then, that number already made the Internet the largest market in human history. But that was just the beginning. As of 2010, another billion people had joined the global marketplace. By 2012, 2.5 billion people around the world had joined the global, Internet-based marketplace.² Today that number likely exceeds 3 billion. And that number has yet to include those scores of billions of sensors and smart devices that will also soon be joining the Internet. Thus, according to Metcalfe’s law, the number of possible digital connections among people and sensors will grow into the trillions times trillions—a practical infinity.

But just sticking to humans, we find that the third billion is very different from the first two. Most of this cohort lives in the developing world and probably in a teeming metropolis that barely existed twenty years ago. These users may never see an annual income of more than a few hundred dollars per year, and may have never driven in an automobile, much less flown on an airplane. Nonetheless, even if they are just selling items on eBay from a cellphone rented by the minute in a corner of some Third World city, they are adding value to the global economy. Just as important, they are helping create yet one more new submarket in addition to the millions springing up throughout the world. Even in developed countries, the Internet’s contribution to global GNP is now 21 percent, double what it was just five years ago.³ It is growing at an even faster pace in the developing world.

Let’s keep going—because waiting out there is a fourth billion, about which we know almost nothing. They live in some of the poorest and most isolated places in the world, with little contact with even the products of the developed world—many have never used money or been in a car, and have seen an airplane only from afar. But they will join the global economy when the planet is completely covered with wireless connectivity. They will do so through minutes rented on a smartphone offered from a cardboard hut on a corner in some teeming Third World supermetropolis, or from one of the free phones handed out by the millions by the big telecom companies looking for new customers.

Soon these third and fourth billions will be part of the Internet-based global economy. Companies, desperate for their business and the benefits of Metcalfe’s law, will use creative new means to seek them out and bring them onto the Web—even as the nature of that Web will be continuously transforming, thanks to Moore’s law.

TWO LAWS BUT NO GUARANTEES

So where does that leave us? Mass scale and, with it, global reach, will be incredibly valuable in the twenty-first century. But will they be enough to capture the huge opportunities offered by the third and fourth billions? Our conclusion: no. That’s because scale and reach are rapidly being commoditized. You can be a small company, and your opportunities to make products and services with large-scale efficiency are better than ever—and will become better yet in the future. A crucial understanding of Moore’s law is that it creates excess capacity—and not just in the world of electronics. For instance, extremely precise horizontal drilling far beneath the earth’s surface makes it possible to tap new oil sources trapped in shale rock. This level of precision is made possible by advanced electronics, itself made possible by Moore’s law. As the oil billionaire T. Boone Pickens told Forbes, “You can drill two miles down, take a right turn, drill another two miles, and pick the lock to someone’s front door. That’s how precise it is.”⁴ Moore’s law, then, describes a tendency to create excess capacity not just of electronic chips but of oil, factories, shipping—everything.

As for global reach, you might wish you had a billion-dollar advertising budget to reach the global marketplace. But no budgets will be large enough in the future, because of our other friend, Metcalfe’s law, which describes the exponential creation of a near infinite number of connections and ways to reach customers. Fast-moving small companies can find more niches and customers than ever. The same is true of technology power. The cloud is rapidly commoditizing the availability of top-class technology. You don’t have to buy equipment from IBM; you can rent it by the second from Amazon, Alibaba, Google, Microsoft, and others.

Our point is to show you that although access to scale, global reach, and powerful technology is a requirement for success, it is not sufficient to create sustained success. It is being commoditized. It is losing its former status as a barrier to entry. It is becoming, as poker players like to say, mere table stakes in the game of economic competition. Instead, it is maneuverability that will be the new barrier to entry, the new essential for sustained rising value. Such maneuverability will come from the combination of global reach, great technology, and highly optimized teams—team genius, as we call it.

Here is the uncomfortable truth: Humans run to a much slower evolutionary clock than our inventions. To use an engineering term, we are the “gating factor” that keeps a process from running faster. It is people, not scale or technology, who determine how well an organization adapts to change.

So, whether we know it or not, the difference in our rapidly accelerating world between a perpetually successful enterprise and a struggling, dysfunctional also-ran comes down to the people in those enterprises—and even more, to how those people relate to each other as they form and re-form into teams.

Thus, even as the companies that expand their reach around the world grow bigger and more ambitious in their vision, they will, paradoxically, also have to become smaller and more focused in their execution. And, contrary to what many business prognosticators have assumed for the last half century, the more gigantic the enterprise and the more virtual and wired it becomes, the more likely that it will be dependent on dozens, hundreds, even thousands, of small, closely knit internal teams.

That’s why, at the nexus of two almost unprecedented forces in human history—the unrelenting, exponential advance of technological performance (speed), and the explosion of new connections in the global marketplace (reach)—one of the oldest human cultural phenomena, the team, finds itself as vital as ever before.

MASTERING MANEUVERABILITY

Both of the authors of this book knew Bill Walsh, the great San Francisco 49ers football coach of the 1980s. Walsh won three Super Bowls and left his successor with a team that won two more. Walsh died in 2007, but his playbook and team innovations redefined professional football for two generations.

We once asked Coach Walsh why he drafted Jerry Rice, a little-known wide receiver out of tiny Mississippi Valley State University. Rice went on to become the National Football League’s all-time scorer. But in 1985, Walsh was alone among scouts and coaches in perceiving Rice’s true potential as a future Hall of Famer.

“Rice was considered to be too slow for NFL greatness,” explained Walsh. “His time in the forty-yard dash was only 4.7. Most great NFL receivers run 4.4 or faster. But when you studied the film from Rice’s college games, you saw two things different about Rice. One, he could turn on a dime. He could run sideways faster than anyone I’d seen. His maneuverability left defenders wondering what happened. Two, Rice always finished his pass route within one foot of where he needed to be. Like he had a GPS in his head. [Quarterbacks] Joe Montana and Steve Young could count on him.”

Rice’s abilities give us an insight into success in the modern economy beyond scale, reach, and speed. In today’s economy, it is essential to be maneuverable.

Maneuverability is more than rapid evolution. Sometimes even that is too slow. Rather, maneuverability is the capacity to turn, even reverse direction, quickly, to deal competently with whatever new change—technology, market opportunity, or competition—has just burst onto the scene, and to do so without losing internal cohesion and breaking up. This is a challenge facing almost all institutions, from small retailers to the governments of great nations around the world.

The exponential forces at work in today’s culture and economy reward winners quickly and punish losers mercilessly. Over here you’ll find a resurgent Apple, but over there is sad, old Eastman Kodak. Germany on the one hand, Greece on the other. South Korea and North Korea, Silicon Valley and Detroit. As this book goes to press, prosperity and futility are being sorted out more swiftly, and dispersed more unevenly, than at any other period in our lifetimes. Whether the global economy improves or worsens, this new unevenness is here to stay.

History, of course, is filled with stories of maneuverable teams somehow surviving in incredibly dangerous situations—and even triumphing—against almost impossible odds. Xenophon’s march, Magellan’s and Cook’s voyages, Marco Polo’s journey to the East, Cortés and Pizarro, Stanley’s search for Livingstone, the Bolsheviks, Shackleton’s expedition, Apollo 13. There are a multitude of such stories, and no doubt thousands more that were never recorded, such as the inhabitation of the South Pacific islands, the first exploration of North America across the Bering land bridge, and, most important of all, the survival of those few families of early humans who managed to avoid near extinction on the northern coast of Africa and gave birth to modern humankind.

What does this mean for those of us who lead businesses and organizations? Where will we find maneuverability? One answer, and one that seems counterintuitive at first glance, is structure. The size and composition of the most successful teams match archetypes that are as old as humankind, which suggests (as we’ll see in later chapters) that there is a kind of organic strength and stability to these structures that cannot be matched by other, synthetic groupings—much less by very large organizations.

Stability enables these teams to move with a common purpose, sometimes even when a situation demands that a team move in a different direction than the one for which it was created. The Silicon Valley legends Bill Hewlett and David Packard pursued bowling pin resetters, automatic flush urinals, and other failed ideas before they lit upon Hewlett’s old grad school project, the audio oscillator. Jim Clark, Marc Andreessen, and the other founders of Netscape were originally planning to go into the computer game business. Google was founded with no clue whatsoever about advertising. Amazon launched by selling books to consumers, not cloud services to businesses. Who knew Apple would become a giant in music? Organizations lacking maneuverability find such moves—almost second nature to proper teams—almost impossible to execute.

That’s not to say that older and larger organizations cannot maneuver effectively and even make stunning reversals in direction. But it is exceedingly rare. And it almost never happens unless a small, cohesive team is found at the center or top of that organization and is endowed with two other crucial factors: the power to execute its decisions across the entire organization, and the trust of its players in the periphery around that team. Indeed, even the largest organizations can maneuver widely and with stunning speed in the face of rapid change if they are built out of genius teams in support of an empowered leadership.

APPLE’S COMEBACK

One of the greatest examples in business history of a large organization’s maneuverability took place right before our eyes: Apple Inc. In September 2002, Apple’s future was thought to be so bleak, you could buy shares in Apple Computer at a price that valued its operating enterprise at less than zero. What you were buying, if you had been so bold, was Apple’s cash reserves of $5 billion. Beyond that, you were buying a prayer that Apple could do something with that cash.

Remember, this was five years after the return of Steve Jobs. Contrary to myth, Jobs did not immediately turn around Apple’s dismal fortunes. Yet just one decade later, Apple would drop the “Computer” from its name but win the world. It would become the richest company on earth in September 2012, valued at $656 billion.

Meanwhile, during that decade of Apple’s extraordinary ascent, other great American companies, stalwarts of reliable business success, fared poorly. Among them were Pacific Gas & Electric, Enron, WorldCom, Tyco, Adelphia Communications, US Airways, Trump Entertainment Resorts, Northwest Airlines, Lehman Brothers, Washington Mutual, Chrysler, and General Motors. Thus, even while Apple prospered, a greater number of American companies went bankrupt or out of business altogether than in any decade in the country’s history, including during the Great Depression.

How did Apple do it? Why did it succeed while its bigger and (initially) more successful neighbors faltered?

The simple answer is that during this period Apple managed to introduce a series of four monumental products and services—the iPod, iTunes, the Apple Store, and the iPhone and iPad—that created not only new industries but also entirely new multibillion-dollar market categories.

To understand how Apple ...

Table of contents

• Dedication
• Contents
• Introduction: The Power of Teams
• 1: Change Kills—If You Don’t Have the Right Teams
• 2: The Magic Numbers Behind Teams
• 3: The New Science of Teams
• 4: The Power of Difference
• 5: Managing Teams to Genius
• 6: The Power of Pairs
• 7: Successful Pairing: The Building Blocks of Teams
• 8: Trios: The Plutonium of Teams
• 9: Four and More: The Wild Bunch
• 10: Scaling Up without Blowing Up
• 11: The Birth and Life of Teams
• 12: The Retirement and Death of Teams
• Acknowledgments
• Notes
• Index
• About the Authors
• Additional Praise for Team Genius
• Also by Rich Karlgaard and Michael S. Malone
• Credits
• Copyright
• About the Publisher