by Tim O'Reilly
09/01/1995
As many of you know, the company's executive managers met for an offsite retreat at the end of August, to consider how best to reflect the company's core values in business strategies for the next few years.
While I was out of town, the exec group did a lot of planning for the meeting, and set up an agenda, based on an approach set out in the book Beyond Entrepreneurship: Turning Your Business into an Enduring Great Company, by James Collins and William Lazier. Collins and Lazier talk a lot about how you need to understand your core values, see how they are reflected in the overall purpose of your business, and then define a "mission" -- a concrete set of achievable goals that carry out that purpose. From there you get to strategies--the methods you will use to achieve those goals.
The first day of the two-day event was to focus on values; the second on purpose, mission and strategies for each major functional group within the company.
Much as O'Reilly is a consensus kind of organization, I know that a lot of its core values start with me. So, faced with this ambitious agenda, I felt rather on the spot. As a result, I did a lot of thinking in the weeks before the meeting about why I've made the choices I have and what has motivated me.
Here's what I came up with, adapted from some mail I sent to the group a few days before the meeting:
The goal of the company is to support the fundamental goal of each human being who makes it up: to live "good" lives.
"What is the good?" of course is the fundamental question of philosophy, and should be the subject of much of our discussion, made concrete for our circumstances. But I can say this much here: my goal for the company is for it to support the desire of each of its members for livelihood, happiness, and self-fulfillment. And because I believe that the best way to achieve those goals is to be of real service to others, serving ourselves becomes a means of serving our customers and our world.
In terms of applying these values to our business strategy, it seemed to us that there were two big questions for us to address, with lots of little questions under each of them.
How do all our product business areas: technical books, online books/magazines/services, travel books, software, market research, etc. fit together? Are they purely independent businesses sparked by the interests of the people in them or are there common threads and synergies that we ought to be exploiting? (I should add that structurally, we want to exploit the benefits of separateness and smallness, while strategically, we exploit every last nickel's worth of synergy.)
It's easy to see how creativity and self-fulfillment can fit with product development businesses and the growing edge of each of our businesses. How do the fundamental company goals play through our various supporting businesses? Are they "product" businesses in their own right or just supporting players? If the latter, how do we make sure that these "benefits" of O'Reilly percolate through the organization to everyone, not just top managers or "creative" jobs?
These two big questions map into individual questions for each area of our business.
How do we exploit new online technologies as part of our tech pub program, so that it isn't left behind by the very areas that it played a part in spawning for O'Reilly? How can we get back some of the "intentionality" we had as a closely knit writing/editing group vs. the current editor/outside author model? (I already am clear about the answer to this, but want to make it explicit: I want to go back in the direction of having more staff writers.) When is something sufficiently "far out" that it needs its own business unit? How do we decide?
How do O'Reilly's efforts fit with those of Songline and GNN? How are our online products rooted in our books, and to what extent do they break new ground? How much money should we invest in this area before having clear business models to rely on? How many new types of products/business models should we try at once? How do we integrate our online marketing efforts with online sales/customer service and with actual online products?
Is software something strategic to our overall business, or just an offshoot going off in its own direction? (The more I think about it, the more I think we have a unique opportunity and perspective to develop the tools that will enable online publishing, and we should see software as a core part of our business, for which, in a way, our books/online businesses are R&D/market research/ core customers. Lots to talk about there--but if we think this way, a lot falls into place.) Another way to ask this question: "Are we correctly targetting the future convergence of publishing, online information and software tools?" If the above is true, what should we be doing differently? What other product areas should we be exploring? How do we bring the website development team in house? What else do we need to develop a real software engineering group?
To what extent can international chart its own course, and to what extent should it be consistent with the US program? Among the various international companies? How much of the international revenue can we plow back into development of international, and how much must continue to support our overall business? (There are really two businesses here: a channel for our US product, and independent local language publishing businesses.)
What new products/businesses does this toe in the water make possible? How do they fit with what else we're doing?
How much of its revenue/profits can a given business unit put into new ideas? What are the "off books" costs of getting into a new business area?
How does O'Reilly relate to its "affiliated businesses" such as Travelers' Tales and Songline Studios? What mechanisms should we put in place for:
How can we keep the independent actions of the various groups from tipping the boat, through imbalanced hiring or spending policies? (E.g. how do we make sure that everyone has fair space allocation?) What kinds of things need to become "company policy" rather than managerial discretion? Should our distribution function consider itself an independent business (e.g. taking on other clients) or just a service unit for O'Reilly businesses? (Probably a 1996/1997 issue, but still real.) How much better can we get on the operations/fulfillment side with a new system? What will change when we have it?
Even apart from the mechanics of reporting and budgeting, which I think we can take on faith as on the right path forward...how do we ensure consistent spending policies? For example: How much is a business director's discretion, and how much is company policy in areas like space, equipment, travel, etc? If a business unit is doing better than its targetted profit, how much discretion does it have to use the funds to start new areas or reward people vs. contributing the increase to the overall bottom line? How do we set standards/get control of cash as well as profit? Can we continue to prosper solely as a self-funded company, even if we want to? (I know that's hard to answer...so far we've managed...the real question is perhaps: how will we be able to tell far enough in advance that we can't do something we want purely out of our own cash flow?)
As with distribution: is this solely an O'Reilly support group or will it eventually take on other products? How does sales and marketing integrate with fulfillment as a direct business? Are these two really just two facets of the same business (if they are an independent business at all?) How much sales and marketing belongs in product groups rather than in an overall service group?
How do we improve communication between distant offices? What kind of financial/transaction information systems do we need if we keep growing at current rates? What kinds of standards do we need to set for equipment, level of support, and so on? How much support belongs in the individual group vs. a central sys admin group? (This may be more tactical, but probably has some serious strategic overtones.)
How do we create real opportunities for growth and creativity for people in entry level support jobs? Are we doing enough to educate and encourage everyone so that opportunities are really equally spread throughout the company? How do we articulate and actualize company values that really add up to action on every level? Is our compensation fair? What metrics do we use to decide what's fair?
What are we going to do about ensuring people's long term financial security, if they work for the company for their whole lives? What yardstick do we use in even thinking about those questions? (Thinking of the company as something whose primary goal is to serve its employees, it strikes me that this is an absolutely essential area to spend more time thinking about.) Should we be thinking about training, sabbaticals, and other ways to encourage personal development?
With a list of questions like that, you can imagine that we didn't get very far into detailed answers. What we did do was to get everyone "in sync" about values, and hit some high points in terms of the mission for each group, with the idea that we'd take the process out into each of the business groups, which could hold their own meetings to address these issues, and get down to details.
We had a really nice discussion about core values, in which everyone talked about the things that they felt represented real touchstones for the company--values that we perhaps don't always live up to, but certainly aspire to, and which run through our discussions and our decision making.
Here's the list of words and phrases that we came up with.
Honesty
Caring
Freedom
Fairness
Livelihood
Fun
Well being
Balance/Nothing too much
Clarity
Open-endedness
Creativity
Personal growth
Customers are part of our community; we move with our customers.
Trusting people to do the right thing
Finding a balance between individual needs and group needs
Leadership emerging (do the project, then get the people)
Serendipity
Balanced life
Your voice matters; each person matters
Freedom to fail
It was nice to see that the list was very similar to one that Annie had assembled as a result of her conversations with managers here when interviewing for her job.
A couple of asides on the list--which after all is just a list of words here, but at the meeting was the result of a lot of lively conversation--
We talked about how honesty was a touchstone of our products--their straight across, no nonsense approach--as well as of how we want to treat each other and our customers. We recast this as "truth matters."
We talked about how many of the other values--caring, freedom, fairness, personal growth, balanced life--added up to a statement that "people matter." And in a funny way, that's also been at the heart of our product vision: you might say that we wrote computer manuals as if the people using the computers mattered more than the computers themselves.
When talking about livelihood, and the difficulty of balancing ideals with the needs imposed by the real world, we recognized that that outside world matters too, and imposes structure and discipline on what we do.
Some of the most contentious discussion was around whether or not "fun" was a real company value. Gina proposed that it was--that an essential part of how we thought about our work was that it should be fun--while others disagreed vehemently, feeling that their groups feel (chronically) overworked and understaffed, and "fun" seems like a painfully unattainable goal.
In short, there was a lot of disagreement about even what it meant to say that fun should be one of our values. We all agreed that joy and pleasure and enthusiasm for what we do at work matter to all of us--but does that add up to fun? How does the "fun" of work itself relate to working harder at having fun? How much should we be doing to lighten up at work? We realized that there was a lot more to think about here than we might have realized, and agreed to ponder it all some more.
(By the way, the retreat itself was definitely fun! We held it at a place called Pocket Ranch, a retreat center only about an hour from the Sebastopol office, but buried way back in the hills at the end of a long dirt road. In the gaps between our meetings, we hiked, swam and played volleyball. But the best part was just hanging out with some great people in a more relaxed setting than we normally give ourselves at the office. It was particularly nice to see people in a different context. One of my favorite moments involved Steve Block--who by all rights should be a stuffy financial type. He was lying in the sun with flies buzzing around him, and remarked to no one in particular, "I wish I had a tail!" Dick responded "Boy, did you come to the right place!")
From values, we turned our discussion to the purpose of our business, its "mission" and finally (at the most superficial level) to the strategies that might be required to carry out that mission. As you might expect, we weren't very precise in our distinctions between each of the levels, and just used them as a starting point.
Starting with me speaking for the company as a whole, the leader of each business unit spoke for their group, with the other members supplying feedback and ideas.
As suggested in the mail I quoted at the opening of this article, what has really emerged for me from my thinking has been a re-emphasis on the human side of the company. Our purpose isn't to do any particular line of business, but to "make work work" as an integral part of a fuller life.
I always used to say that O'Reilly was a "lifestyle company" (a term business writers use to describe companies that aren't chiefly after fortune, but after a nice life) that accidentally got big, but I came up with another term that I like better: O'Reilly is a "livelihood company", whose real business is to help its employees create good, happy lives, using their talents effectively to make a living while serving real world needs.
This led me to an unexpected formulation of the overall company mission: "To create new businesses that create livelihood for as many people as possible, businesses that are interesting, ethical and "do-able", and in which people are productive, engaged, and employed in a creative, humane way."
A second aspect of this mission is to figure out the business structures that will allow this mission to be carried out beyond the lifespan (and certainly the attention span) of any one individual, so that O'Reilly is still a viable business consistent with these values and goals 200 years from now.
Audacious? Perhaps. But this is the kind of big thinking that leads to lots of practical considerations in the decisions we're making here and now.
Actions and strategies: to continue to explore options for funding new businesses; to set up a broader framework for entrepreneurship within the company; to spend more time on human resource issues related to "making work work."
If O'Reilly as a whole is somewhat agnostic with regard to the subject of its businesses, the individual business units have much more specific missions. Technical publishing, our oldest and largest business unit, went first.
Purpose: To give people power over their tools.
Mission(s):
To create information products for networked computer users that are affordable, convenient, useful and truthful.
To continue to be a pillar of the company's prosperity, widening the base from which other businesses can be launched; to inspire other groups to do the same.
To produce "evergreen" products that sell for as long as the topic has importance and to produce books that reach "just the right" audience, not necessarily the largest one.
To create new models for online products, that optimize the technology and create new opportunities for O'Reilly people.
Purpose: To create software that makes the Internet/the Web an interesting and accessible place -- as close to freeware as we can make it: affordable, accessible, good quality.
Mission: To create 10 innovative products in 2 years, with at least $10 million in sales, while remaining true to O'Reilly's core values.
Action and Strategies: The future lies in more than one product; need to discover innovative developers and bring them on staff.
Purpose: To bring O'Reilly's products and values to other parts of the world.
Missions: To make international sales 50 percent of overall sales within the next five years.
To establish "the right number" of international offices (probably five) in the "right number" of years (probably four); each office develops organically from the people--a "new barn" atmosphere, where unique activities originate--and grows as the local body of customers grows.
To foster development of new business initiatives such as the market research product line.
Purpose: To develop the forms that will become the future of online publishing.
Mission: To establish at least two successful online products in the next year; to turn Songline from a forced bloom into a self-sustaining business.
Purpose: To create a marketing support and sales operation that provides equally outstanding service to all its clients.
To help make new businesses and ideas real in the "outside world."
Missions: Establish new structure that for retaining integrity of marketing across product lines without stretching people too thin.
Action and Strategy: Establish marketing liaisons within each product group.
Purpose: To create continuity between O'Reilly values and the daily realities of equipment, IS personnel and users.
Mission: To develop the ability to make proactive decisions about IS structure, to make purchases with flexibility and upcoming change in mind.
To ensure that machines help people, not other machines
Purpose: To ensure that financial resources are there for new and growing businesses.
Missions: To produce reliable, believable numbers; to develop long-term financial structures for the company
Purpose: To ensure that the core values are clear and that they're clearly communicated and manifest throughout the company.
Missions: "Cooking on a tightrope": to establish core HR functions by June of 1996; longer term missions when the basic house is in order.
Purpose: To ensure that the physical resources are there for new and growing businesses.
To serve our customers: "The customer you've got is gold"
"To be the touchstone to the customer and back to the rest of the company"
Missions: To be able to deliver within 24 hours; to facilitate growth overseas.
Clearly, we opened a lot of boxes, and didn't necessarily get to the bottom of any of them. However, the process was both a lot of fun, and helped us "remember" and bring to the surface many of the things that have intrigued and inspired us over the years here.
We want to continue the process. For starters, we thought we'd schedule some all-Sebastopol and all-Cambridge meetings to discuss the retreat; from there, we thought we'd schedule separate meetings in each of the groups to address how to understand, refine, apply, and build on the values in each of our business areas.
After reading a draft of this article, Gina commented:
"I think it would be good to open this up more explicitly to everyone, at the end. This isn't Moses and the 10 commandments coming from on high. This is what we all came up with at this meeting, but all this talk only becomes real if and when people in the company flesh it out.
"Individuals and groups may agree, disagree, turn it sideways, come up with some things we didn't even think of, etc - but these values and mission statements are real only when everyone in the company has had a chance to think about them and further shape them. This will hopefully happen as the values and goals come up as issues in daily work life at O'Reilly, and also when individual groups go off and talk about their mission statements and values. This is live stuff, not cast in stone."
I couldn't agree more.
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