Waive got a lot of real world experience. Waive got a vision of where we want this thing to be at some point in time. But exactly how to get there, and what technologies to use, and how we should employ them, that's much bigger than any two people should be responsible for.

Jim Lavabo, CEO of Rite-solutions, speaking of himself and company President Joe 1 Marino In July 2006, Susan Duncan attended a workshop at Rite-solutions to learn more bout an innovative tool that the company had developed to foster innovation, and to encourage collaboration among employees. She had read about the tool, a stock market game called mutual Fun,I in an in-depth article in the New York Times. If an employee had an idea that might help the company, either by saving money, developing a product or service, or developing new technology, the employee could create a stock that would be listed on Mutual Fun.

Other employees could invest virtual money in the idea, provide comments, or volunteer for short projects that would move the idea forward. The stock market tool provided an interesting vehicle for harnessing the creativity of employees. Rite-solutions had created Mutual Fun for its own use, but found it to be so powerful that the company wanted to license it as a product to others. The New York Times article generated a tremendous amount of interest in Mutual Fun, and the Rite-solutions put on a series of day-long workshops for companies interested in learning more about it.

Duncan was an executive with a consumer products company, with a large portfolio of products such as soaps and detergents. Her company was struggling to come up with new products. Duncan attended one of the Redefinitions seminars, and learned about the stock market game. However, she quickly realized that the game was Just part of a culture of collaboration and creativity at Rite-solutions. She wondered whether Mutual Fun would help enhance innovation at her company, and whether she could apply other lessons from Rite-solutions within her company. 1 All quotations are from interviews with the author, unless otherwise specified.

David Hoyt prepared this case under the supervision of Professor Hexagram Raw as the basis for class discussion rather than to illustrate either effective or ineffective middling of an administrative situation. Copyright 2006 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, e-mail the Case Writing Office at: [email protected] Stanford. Dude or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015.

No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any meaner an electronic, mechanical, phonology, recording, or toneless an walkout ten permission AT ten tanoak Graduate School of Business. This document is authorized for use only in Strategic Impresario y Plan De Negation 2013 by Mart? N Alterations at University of Palermo from April 2013 to October 2013. Rite-solutions: Mavericks Unleashing the Quiet Genius of Employees: HER-27 RITE-SOLUTIONS Rite-solutions was founded in Rhode Island in 2000 by Jim Lavabo and Joe Marino.

Lavabo and Marino had been long-time executives of a software company which had gone public, and had become a large company. They noticed a change after going public, which Lavabo described as going from make it happens to make us money. They had talked about starting their own business, and after their company was bought by a larger company, they soon left their positions as executive vice presidents to strike out on their own. The two had made a lot of money from their stock options, and had enjoyed long, successful careers.

Lavabo and Marino were well suited as partners in the new venture. Lavabo was a creative, visionary thinker. Marino had an excellent attention to detail, and was a strong operations manager. Equally important, they each recognized their own limitations, valued the others strengths, were good friends, and had an exceptional working relationship. They did not want to start a conventional company. Marino explained, after leaving a company with thousands of employees, we started the company with the idea that there's got to be a better way to do business in the 21st century?

All of the communities are loving, embracing, nurturing. Then you get into the business world, and everything you've ever experienced Is town out ten wallow. So, ten wangle Telling Tanat we want people to have when they come in here is a continuity of ©this is Just one more community,I not 180 degrees out from every other community [they've] ever belonged to. So, it is a This document is authorized for use only in Strategic Impresario y Plan De Negation 2013 by Mart?

The primary office was in Middletown, Rhode Island. Other offices were in Packet, Connecticut and San Diego, California. Though no managers were given revenue growth goals, the company had grown at an impressive rate, and was financially successful. They had an extraordinarily dedicated and loyal workforce, virtually no employee turn-over, and no debt. Rite-solutions Industry and Competitive Environment Rite-solutions was a software company with clients in both the government and commercial sectors.

Its initial clients were primarily casinos, for which it provided software for games, management, and back-office functions. It also had some government contracts, and many of its employees had experience working with the military, particularly with the Navy. By mid-2006, the company offered a wide range of products and services, including Navy training curricula and simulations, AD situational awareness simulations, casino games and back-office software, and a consumer game platform developed for Hasher (discussed further below).

However, Lavabo and Marino did not think of their company in terms of the products they provided so much as the knowledge they possessed which could be used to meet potential customer needs. Lavabo commented, most companies say ©this is what we do. I We say, ©what can we do with what we know? Ii Thus, Rite-solutions was open to ideas for new products that leveraged and extended their knowledge base. The company's industry competitors varied dramatically with the market, but both the military and commercial segments contained very large and very small companies.

Many of the small companies were either niche players, or were struggling. In the military sector, the large competitors, companies like General Dynamics, Lockheed Martin, and Northrop Grumman, saw themselves as system integrators. In the commercial sector, Rite-solutions competed with other providers of casino software, such as KIT, Harris Entertainment, Catch, Scientific Games, and Bialy's. The large competitors were generally resistant to innovation, as they wanted to maintain their legacy products. New entrants were always a threat, but there were barriers to entry In ten government Ana callas sectors.

In ten government sector, developing training programs for the military or Department of Homeland Security required a deep understanding of the subject matter (which was often classified), as well as substantial technical competence. In the casino business, a supplier had to be highly respected for the integrity and security of its product, as well as 2417 support¶an unknown entrant faced the challenge of proving its dependability. Rite-solutions Culture The culture that Lavabo and Marino created could be seen from the moment someone logged onto the company Web site (wry. Redefinitions. Mom). On each page of the site was a drawing of an owl, with Ohio? I scrolling across its face. Clicking on the owl brought up a page with a picture and short biography of a Rite- Solutions employee, including hobbies and other items of personal and professional interest. For many of the pages, clicking the owl several times would bring up profiles of different employees, each of whom had expertise in the area described on the Web page. Thus, Web visitors could communicate directly with a large number of employees, a signal that indicated the company trusted employees to represent it well.

The hiring process focused both on technical competence and cultural fit. The company described its employees as none of F. E. W (Friends Enjoying Work),I a slogan that was on each employees business card. It described the hiring process as a try- UT,I to find citizens in our community and partners in our culture. Ii Attributes that people looked for in new employees included an upbeat, optimistic attitude, a collaborative nature, and someone I would want to share an office with. I As of mid-2006, most new employees had been referred by existing employees.

Prior to joining the company, new employees were sent an e-mail with all the information they would need to know, including links to Intranet pages where they could find necessary information. On the first day of work, the new employee was given a welcoming party, complete with cake and wrapped gifts (company mug, T-shirt, etc. . The objective, as described by Lavabo, was to make the new employee feel that they're home. I want them to feel like they belong here. As opposed to: they are employed here, or they have a Job here. I really want them to feel like they are home. The new employee created a Ohio page, as described above, which became part of a accompanied database. When employees needed to contact people that they did not know, they could refer to that person's Who page, see a picture, and learn about any common interests. Employees described this as helping them to feel more comfortable calling people that they didn't know. The Ohio idea had originally come from an employee playing a game called mutual Fun,I (to be discussed shortly). On the third Thursday of each month, the company had a presentation of interest to the employees, followed by a social period.

Communications were extremely easygoing, enhance Day ten openness t at n Lave Ana Marino demonstrated, Ana ten personal friendships that they cultivated with the employees, many of whom had known one another for many years. Open communication and trust were also demonstrated in the employee newsletter, which gave extremely detailed information about company entrants and other sensitive information¶far beyond that which was shared with employees at other companies. The culture of openness and trust extended to relationships with customers.

For instance, each project had a team room on the company Intranet in which all plans, schedules, status reports, and other documents were stored. The client had access to the team room for its project, and 2 http://www. Redefinitions. Com/home. HTML Tory-Touts tab) duly 31 , 2006). Could look at any document, as well as submit its own. If a client wanted to evaluate the status of a project, that information was available. If a client wanted to check the priority of software fixes, that information was also available¶and the client could modify the priorities as appropriate.

Thus, clients were always informed of details of their projects, and if they needed to discuss them, the discussion was a high-value- added meeting rather than a recitation of facts. The Puzzle Ensuring a Meaningful Relationship with Employees Lavabo and Marino had observed that the employee- employer relationship in most companies was transactional. The employee was hired to do a Job. The questions that the employee faced were: Can I do the Job, and am I owing to behave according to the company's rules? If the employee couldn't do the job, or refused to behave, the relationship was terminated.

However, this was far short of the meaningful relationship that Lavabo and Marino sought with their employees. A meaningful relationship existed when employees cared about the company and trusted it, when they thought about the company's future, and contributed to that future. But, employees would only participate in that way if they believed that they were important, that they belonged, that the company cared about them and trusted them. Employees also had to believe that the company wanted and listened to their input. Finally, the company had to recognize and reward the employees.

Only when those pieces were in place could the employee and company have a truly meaningful relationship, providing benefits to both parties far in excess of those shared when the relationship was merely transactional. Lavabo and Marino developed these concepts into a puzzle (Exhibit 1). If a piece was missing in the transactional stage, the remedy was simple¶the employee quit or was fired. However, if the employee could do the Job, and followed the rules, and the company did not accomplish any of the objectives represented by the puzzle pieces required for a meaningful relationship, the consequences were more damaging.

The employee could play a puzzle place called Screw YOU. I Nine two Teenagers Delved Tanat tens was the most damaging situation¶an employee who met the basic employment requirements, but who brought negativity. Such an employee could poison an otherwise outstanding organization. The final line of the puzzle related to staying involved with the company after retiring. In industrial companies, workers typically did not want to stay involved in the company after retirement. An auto worker for instance, would probably not want to come back to the factory after retirement.

As companies evolved, and employees contributed on an intellectual level, they did not necessarily want to totally withdraw when they retired. They might want to travel, spend more time on hobbies, but they also might want to spend some time making a significant personal contribution in their professional field, or to a company that they cared about. This required a way of staying involved in a meaningful way. Lavabo characterized knowledge capture,I the practice of documenting the knowledge of tiring employees, as IL want to know what you know, and put it someplace electronically so I won't have to know you anymore. He wanted to create a vehicle for knowledge tethering, which he described as: IL don't want to suck your brain out. I want to know how you think. I want to know what you think. I want to know what interests you. I Organization Structure Organization structure was an essential element of the Rite- Solution culture. The cultures page of the company Web site included a glossary of terms (Exhibit 2). In the section labeled into in Our Vocabulary,I organization was defined as IA pyramid. Pyramid was defined as IA tomb for dead people,I and an organizational box was defined as IA storage bin for dead people stuck in a pyramid. 3 Lavabo described what he called tithe pyramid game: You have to know how to play the pyramid game in a big company. There are fewer boxes above you than level with you. Which meaner you've got to be better than someone in [your peer group] to get to [the next higher] line. That's why the pyramids are such an awful, awful structured When we sold the company, we made a dozen people wealthy. But we left 1,800 behind who got to keep their Job when we sold the company. Why? Because they weren't as good at playing pyramid as we were. Now, there were guys a heck of a lot smarter than me back in the old pyramid.

They Just didn't have the moves, didn't have the theater, didn't have the passion? It is interesting to watch people Just try to do their best. And their best can be good enough in a good community. You don't have to be a politician to be a good citizen¶and it is the politicians that win the game of pyramid. Another drawback of the pyramid model, according to Lavabo and Marino, was the perception that people at each level were smarter than those below them. Where this perception existed, it placed severe pressure on people at ten top to constantly De ruling, Ana It Annihilate Input Trot people elsewhere in the organization.

Lavabo and Marino freely admitted that good ideas were likely to come from anywhere in the organization. Rather than think of the organization as a pyramid, they thought of it as an adaptive community of knowledge,I supported by four guideposts: stability, innovation, empowerment, and vision and coaching (see detailed description in Exhibit 3). Two senior people were assigned to each guidepost (increasing as the company grew), chosen so that they ACH brought complementary capabilities (or inn and yang). Lavabo and Marino were the vision and coaching guidepost.

The empowerment guidepost consisted of the SCOFF, whose strength was information, and a technology/automation expert. Guidepost partners made an agreement specifying what each expected of the other. The empowerment guidepost focused on the infrastructure that was needed to support the efforts of employees. The stability guidepost focused on the nuts and bolts of operations and maintaining the business¶e. G. , order receipts, getting paid, and the other necessities of keeping the business in operation. There was a yin and yang between guideposts as well as within them.

Lavabo described the interaction between the innovation stability guidepost by describing measures of success: 3 http://www. Redefinitions. Com/home. HTML Cultures tab) Lully 31 , 2006). If you're in the innovation block, you're not going to be measured on how innovative you are, because I already know you're innovative. Limit going to measure you on how stable your innovations have been for the company. For the stability people, Limit going to measure you on how innovative you've been in putting new products in the customers hands.

So, now it forces these guys to work together, because weir dependent on you for the innovative ideas that weir going to leverage into my customer base. While the company used a community/guidepost model rather than a pyramid to describe the organization, this did not mean that there was no hierarchy. Lavabo was CEO, Marino was the company's president. There were vice presidents and directors, group managers and project managers. The hierarchy was driven by the need for accountability and effective customer service.

In addition, performance appraisals and salary reviews required a degree of hierarchy. But the overriding Renville was that people could play multiple roles in the organization, unconstrained by ibexes. I People were free to seek the advice of the best person available without the boundaries of a chain of command. I Company Ownership Another important aspect of the company culture was the fact that it was employee owned, Walt no need Tort outside Investors. Lave Ana Marino Delved Tanat an ownership interest was important to a meaningful long-term relationship with employees.

Employee ownership was in the form of stock options, but employees were not eligible for options until they had been with the company for one year. Since the objective was a long-term relationship rather than a quick pay-off, this enabled both the employee and company to take stock of the situation and make sure that there was a good fit. If there wasn't a good fit, it wasn't in the interests of either the employee or the company to continue the relationship. This typically centered around the collaborative nature of the company, and the central concept of trust. Lavabo explained: We have a forcing function at the one-year mark. If they aren't the right fit, we] help them find another Job, where they would probably be very comfortable, because it is the norm, and this is not the norm. They Just aren't perfect for us. It doesn't mean they aren't smart. They Just don't get [the concept of] trust. Lavabo elaborated on the importance of basing relationships on the assumption of trust, rather than having trust come only after being earned by long experience: If you don't start out from a position of trust, Just about the time [a person is] about to gain your trust, they do something you don't understand, so you distrust them.

My God, that's too many calories for me. Why not trust everybody, and once in a while you'll get screwed. As opposed to ©don't trust anybody,I and you'll never trust anybody. Ownership fostered the employees sense of belonging and accountability, but in order for it to have economic meaning, there had to be a way for ownership to be motorized. This presented a potential problem. Lavabo and Marino did not plan to take the company public, nor to sell it to a larger company¶either of which would have serious consequences for the company culture. Lavabo noted wryly that one advantage of not having a pyramid organization structure was that it made a takeover unlikely¶an acquiring company would have no idea how to assimilate the organization. ) Terry Feely, director of new ventures, had mounded a successful laser company in 1980, which he had sold. After doing some consulting, he heard about Rite-solutions, met Lavabo and Marino, and Joined the company. An important part of his Job was to find ways to noontime company ownership.

While employees talked of working for the company because of the culture, and how well they were treated, Feely believed that it was an¶eve to think that employees didn't also want to make a substantial amount of money from their company ownership. He observed: There's a tremendous loyalty to Jim and Joe, and that's a wonderful thing. I also think there's an expectation that they will get taken are of. That's an expectation because that culture is here. We stay here because weir treated well.

But treated well when you're getting ready to retire looks different tan Dealing treated well when you'll 20 years 010 . Since live Eden to D n Ana ready to retire, Limit committed, and Joe and Jim are supporting me, on creating liquidity. The company planned to create liquidity by developing products and/or services that could create lasting value. Feely cited the example of Keep, which had sold to eBay for $1. 4 billion. He believed that some of the ideas and intellectual property that Rite- Solutions was working on had the potential for very high returns.

However, Lavabo and Marino recognized that if the concepts they had used in creating and developing Rite-solutions was truly to be a business model for the 21st century, it could not be limited to small, privately held companies. It would have to also be applicable to larger, publicly held companies. MUTUAL FUN Mutual Fun was created as a way of fostering trust, collaboration, and the ideas of employees throughout the company. While it was often referred to as a game,I in reality, it was a powerful tool for innovation and employee involvement.

It also served as a unifying structure to enhance the company culture, and to bring forth the benefits that the culture provided. It was launched in January 2005. Mutual Fun was an internal stock exchange, consisting of three markets: Savings Bonds, which were ideas that could save the company money or increase efficiency; bow Jones,I which consisted of ideas that utilized existing technology to create new products or services; and spaded,I which contained ideas of new technologies that the company should explore for potential future use. Like technologies that formed the basis for companies on the

NASDAQ, some technologies worked well, and others not so well. The study of a new technology could lead to a decision to return to a proven technology rather than an emerging alternative. The knowledge spasms of investigating emerging technologies was worth the investment to the company and its knowledge base. (Exhibit 4 shows representative stocks on each exchange. ) Putting an Idea Onto the Market To put an idea onto the stock market, an employee (the inventors) went to the Mutual Fun Web site and clicked on a button to create an expect-Us. (Exhibit 5 is a flow chart of the stock market process. Exhibit 6 shows mom of the Mutual Fun Web screens. ) The Expect-Us was a simple, one-page, form that described the idea. (Exhibit 7 provides an example of a completed Expect-Us for an idea that was later incorporated within Rite-solutions, and then sold as a product. ) In order to guide the inventor, the Expect-Us form had some simple screening questions: 1. 2. 3. 4. 5. 6. Is this idea in our path? Does it leverage what we know? Does it allow us to learn new things? Wicked we use this?

Do we know anybody else that would use it? Will this make us a better company? These questions were intended to coach the inventor into areas that might be of use o ten company, as opposed to money-making Ideas Tanat were totally outset company's competence (such as opening a dry-cleaning store). Even if the idea seemed far-fetched, however, the inventor could still pursue it. The Expect-Us also had space for a description of the idea, and then asked: What's the key to success for this? What's the potential savings or growth?

What's the return on innovation (knowledge gained, product developed, etc. )? What are the success beacons (how do you know when you're done)? After completing an initial draft of the Expect-Us, the inventor had to find a prophet,I another person in the company who would act as a enter and evangelist for the idea. There were about 40 people in the company who Lavabo and Marino had approved to be prophets. An inventor would select a prophet who s/he thought might provide good guidance, and who would be interested in the idea.

If a potential prophet was interested, s/he would agree to help. This fulfilled one of the important rules of Mutual Fun¶the two-man rule,I which ensured that at least two people were interested in the idea before it proceeded. The prophet could be anywhere in the company, and did not have to have any other relationship with the inventor. Sometimes the prophet would change as the idea progressed¶a technical person might be the prophet at the start, handing it off to a business person once the technical issues were understood and a business case was required.

More than one prophet could help with any idea. Once the prophet signed on, and helped the inventor finish the Expect-Us, the idea was listed on the appropriate Mutual Fun stock market through a process termed an initial public offering (PIP), as in the real stock market. In this case, however, the stock price was always initially set at $10. By July 2006, there were about 50 stocks in the market. Exhibit 8 provides statistics on Mutual Fun activity. Each employee, including new employees, started with $10,000 in virtual money (also referred to as impressions or opinion money) that s/he could invest. When an employee logged into p. 10 his/her Mutual Fun Web site, he/she could see his/her portfolio, and any unallocated funds. To buy or sell a stock, the employee simply highlighted the stock, filled in the dollar amount, and clicked buy or sell. I Employees could review all Expect-Us documents, and could participate in threaded discussions about any stock.

They could also volunteer to complete short tasks that would move the idea forward. These tasks, called budge-lit items (as they served to budge the idea along), were defined and listed on the stocks Web site by the prophet. Thus, when employees clicked on a specific stock, they could review: the Expect-Us, any discussions that had taken place, the list of Budge-alt items, and those Budge-alt items that had been completed.