Take risks early - lessons from Commando Training

This is one of a series of articles on lessons from Commando training.  Here is the full list.

Commando training offers lessons that reach far beyond soldiering skills. One of the widely applicable lessons of Commando tactics is the evaluation of risk and return - and the timing of risk-taking.

After a few weeks of learning the basics of field survival, navigation, communications and weapon skills, Royal Marines learn to disappear.

The "tactical" phase of Commando training enables Royal Marines to see without being seen, and to move undetected from place to place. These are vital military skills, and tactical movement gives big advantages on the battlefield and in low intensity conflicts where discretion is required.

One of the most important applications of tactical movement is reconnaissance. It's often said that "time spent in reconnaissance is never wasted" - but this isn't true!

I was introduced to tactical movement on a patrolling exercise called "Long Night". It was well named: we spent every night for a week conducting reconnaissance patrols around Norfolk, and every day planning the next night's outings. We would typically creep around 5 miles per night, silently but at a snail's pace.

Towards the end of the week, we were all very short of sleep, and we asked our instructor, who was an SBS Sergeant, what he thought. His answer has stayed with me ever since:

"If you're going to take risks, take them early"

That night, my 4 man team ran several miles towards our reconnaissance target (by an indirect route to avoid potential ambushes), ghost-walked a few hundred meters, leopard crawled for several minutes, and finally kitten-crawled the last few silent meters into position overlooking our target, where we took detailed notes. Then we reversed the process (though not the route) and were back at our base in time for a good long sleep.

The lesson we learned that night was really about matching risk with expected return over time. In any endeavour, the least bad time to fail is early, when you have invested minimum resources and time, and as you progress towards your goal you should moderate your risk-taking to reflect the value of what you stand to lose.

This trade-off informs both the "fail early, fail fast" approach used by R&D departments to winnow their research and focus on the most promising projects, and also the investment strategies of pension funds, which steadily reduce the risk of their client's portfolios as the pension nears maturity, for example by switching from equities to bonds.

For all of us, it's worth remembering that it's the timing of your risk taking that can be critical - a risk taken early usually puts less value at risk. Get it right and you'll probably sleep better at night too!


This is one of a series of articles on lessons from Commando training.  Here is the full list.

Headache? Get it checked out.

If you have a persistent headache, I recommend you get it checked. One month ago I visited my GP with what another GP had diagnosed as sinusitis. It had persisted longer than I expected. My GP asked me a couple of questions, then asked me to walk a few paces. Finally he asked me to sit down while he called Charing Cross Hospital and requested a CT scan and an ambulance.

Shortly after the CT scan I was given an MRI scan, and here are some of the scan views, showing the fist-sized tumour they found in the right side of my forehead:

If the tumour had remained undetected for another 10 days, the surgeons reckoned I would have died. They didn't wait: after a further scan to include some reference markers, they cut a 36 cm incision over the top of my head, exposed the skull and removed a large panel of bone over my right eye. They removed the tumour and sent it for tests. It turned out to be a benign meningioma - the best news I could have had.

I'm still amazed that I'm alive. My recovery is going exceptionally well, and I'm deeply grateful to the GP who diagnosed me (who would expect to see this kind of symptom only once every 5-10 years) and to the team of experts at Charing Cross who somehow removed the tumour without damaging my brain.

My wife, mother and sisters especially endured a tense time when the prognosis was very much less encouraging. And I'm very grateful to my family and friends who have been great sources of support. I've been very moved by the generosity of friends from far and wide who have got in touch with all sorts of offers of help. It's been a great opportunity to witness the breadth and depth of people's kindness.

I've had a very lucky reprieve. If you have any doubts about a persistent headache, get checked out. If you are unfortunate enough to have a tumour, I hope that you enjoy the same good fortune as me.

Wise advice from a fool

I was lucky enough to see the new production of King Lear in the newly refurbished theatre at Stratford on Saturday.  It's an excellent production and I recommend it if you have the opportunity to go.  One of the few wise characters in the play is the fool, and he delivers this lesson to King Lear:

Speak less than thou knowest,
Lend less than thou owest,
Ride more than thou goest,
Learn more than thou trowest,
Set less than thou throwest,
Leave thy drink and thy whore
And keep in-a-door,
And thou shalt have more
Than two tens to a score.

Good advice!

Supplier Induced Demand - should you lead or follow your customers?

Many people take the view that a big part of the secret of success lies in knowing the needs of your customers better than anyone else.  As a result they place great store in analysing feedback and transaction data and in studying industry trends.  Of course this is based on the assumption that your customers are relentless optimisers, pursuing rational economic logic to identify their best outcome.

During the last month I've had the opportunity to talk to people from a wide range of professions and one theme has emerged repeatedly to challenge this consumer demand-led approach - Supplier Induced Demand.

Supplier Induced Demand arises when suppliers have an advantage over consumers in their knowledge of their product or service and are therefore able - knowingly or subconsciously - to encourage their customers to buy regardless of the needs of the customer.  This effect is most apparent in markets in which the products and services are complex (such as medicine, financial services), or where the consumer is distracted by other factors such as fear or shortage of time.

I'm struck how widely across sectors the effects of supplier induced demand manifest.  It's clear that in complex markets such medicine and financial services, regulators try hard to counter the effects by encouraging transparency and the disclosure of vested interests, as well as the alignment of incentives.

So if you (like me) are designing business propositions to address consumer markets, it's worth considering whether your intended market is characterised by supplier induced demand.  If it is, you need to know how and you can seek to induce your own demand.  If it is not, you need to master the art of determining what the demand of your customers is - and your best tools will be data analytics, competitor analysis and customer feedback.

A medical example

Supplier Induced Demand was most clearly articulated to me by an eminent epidemiologist, who explained how different healthcare commissioning models can result in predictable biases in the provision of certain operations and medications.  For example, he cited the fact that current NHS policies tend to encourage inputs rather than outputs - number of surgical procedures completed within 18 weeks rather than number of patients reporting reduction or elimination of pain.  In a more extreme example of market failure following from supplier induced demand, and the associated concentration of power in the hands of the commissioning doctors, he reported that a liver transplant in the US currently costs $2 million, while the same operation in the UK costs only $70,000.  For an illustration of comparable effect in the cost of drugs in healthcare, see the recent Economist article illustrating how Big Pharma holds the French and US healthcare systems in hock.

A retail example

But during the last month I've also had the opportunity to talk to several retail experts, and it's clear that even relatively straightforward products can be pushed on unsuspecting consumers (and some would argue that they should be).  For example, the decision to stock a new line in an established retail outlet represents a supplier bet that the demand will follow the increased supply - build it and they will come on a small scale.  This incremental approach to retail stocking, of course, works best when the retailer has a deep knowledge of the consumer market and can deliver informed, market-leading insights.  I've been struck how strong the instinct for this is in three retailers in particular that I have spoken to recently.  These are not followers - they are the makers of fashion!  An effective retailer can quickly create demand where none previously existed.

A contrasting consumer marketing example

Two weeks ago I spoke to a successful entrepreneur who is developing a business to collate aspirational purchase data - wish lists of items that people would like to own.  This is an example of consumer induced demand.  The entrepreneur wants to collate this demand data and then sell it (sensitively to the privacy of the individuals) to retailers who may be able to meet the demand.  As we talked, I wondered whether the aggregation of this information would provide a sufficiently concentrated opportunity for retailers.  Organisations like Groupon attempt to induce demand by offering discounted volume sales to retailers, but making the market from the other direction - from consumer to retailer - requires very agile retailers who are prepared to chase very niche and typically low-volume opportunities.  In defence of his idea, the entrepreneur cited the sale of Mint for $400 million.

Conclusion

As a supplier the balance between inducing and responding to demand will reflect your confidence in your market knowledge, your willingness to gamble on over-stocking and your freedom within your regulatory environment.  It's possible by be successful both as a leader and as a follower - after all while the early bird gets the worm its the second mouse that gets the cheese.  The trick appears to be to pick the products in which one has a particular advantage in terms of supply or demand knowledge, and lead confidently with these, while monitoring other lines and joining the fray when demand levels are established.

If you have a view on the whether you should lead or follow your customers, please share them here.

21 tips for life

I recently met with a family friend who very kindly offered me some advice.  We spoke for an hour and he has since introduced me to several very interesting people and new opportunities.  He is 77 and has lived an impressively varied life, most recently becoming a film extra.  As we parted he passed me an A4 sheet with a list of aphorisms which he had collected together to offer at the 21st birthday of a friend of his.

Here they are:

1. This above all - to thine own self be true. (Hamlet Act I Sc 3)
2. Half the battle in life is to decide what is important and what is not.  Have a sense of priorities.
3. Reflect a lot and then take action absolutely secure. (Pope John Paul II)
4. Ambition should be to make the most of oneself, not only for one's own sake but for one's family, friends and the world in general.
5. Never be too proud to listen to advice, remember, you need not take it.
6. Try not to indulge in self pity; others will have even bigger crosses to bear.
7. Always carry a little slate with you and wipe it regularly clean of all grudges. (Sir Winston Churchill)
8. Regardless of how much or little money you may have, it is a subject best talked about only selectively.
9. Be a good listener; it will help you develop an enquiring mind.
10. I think one has to be ready to start all over again any number of times. (Abbot Herbert Byrne)
11. Try to be an independent thinker.  It is necessary if you are to keep your personal integrity.
12. Make the best rather than the worst of people; it is both right and rewarding to do so.
13. Live as if you are to die tomorrow, learn as if you are to live for ever. (Erasmus of Rotterdam)
14. Imagination and patience solve many problems.
15. Always try to turn adversity to advantage; it usually can be, sometimes dramatically.
16. Why use a five dollar word, when a ten cent one will do. (Ernest Hemmingway)
17. There is a right and a wrong way of doing most things in life be they personal or practical.
18. Life is made up of opportunities few of which recur.  Remain alert.
19. What you do not wish done to yourself, do not do to others. (Confucius)
20. A sense of humour enhances life as also does a smile.  They cost nothing.
21. Use your mind as well as your emotions in all important decisions, especially in matters of the heart.
22. One extra - In short, there are three things that last: faith, hope and love, and the greatest of these is love. (St Paul I Corinthians Ch 13)

What advice would you give - or wish you had received?

Endings and Beginnings

Nearly 10 years after we first thought up the concept, Matt Cooper and I sold Bmycharity earlier this year.  By the time of the sale, we had helped raise over £30 million for hundreds of UK charities,  and in the capable hands of its new owners, Help for Heroes, Bmycharity continues to provide commission-free online fundraising services to more and more charities and change the way people fundraise for the better.

It was an exciting journey from back of the envelope to exit by trade sale, and now that the journey has come to an end I have had the opportunity to take stock and reflect.  I've been enjoying talking to a very wide range of people over the last few months of 2010 and, together with a wonderful family holiday in Australia for the whole of November, this has given me the opportunity to prepare for the next steps in my career.

Now I am focusing on 3 sectors - online financial services, healthcare and renewable energy.  Each of these sectors shows great potential and I've been talking to some of the people who have been shaping each of them.  I look forward to new beginnings in 2011 - and I hope you have a wonderful new year too!

Surfing and watching dolphins in Byron Bay

I'm taking some time out in Byron Bay - back next month :)