Tuesday, June 30, 2009

New Zealand Air's Creative Advertisement

Well, this certainly represents an interesting way to advertise the lack of fees on an airline... the crew in body paint!

Building Effective Boards

Beverly Behan outlines some key principles regarding the construction of effective boards of directors. I think it's especially important to note that so much of the governance reform literature focuses on the composition of the board, whereas much of the impact can be found in improving board process. After all, one can alter composition to insure, for instance, a high share of outsiders on the board, but that doesn't mean that the board will truly be independent of top management. Many people who appear to be outsiders, in fact, may have close social ties with the CEO. Composition, then, is a blunt instrument of governance reform. For boards to operate effectively, they need to rethink their process. That improvement effort should focus on key process issues such as information flow, opportunity for surfacing divergent views, and the like.

Monday, June 29, 2009

Made to Stick

I just finished reading Chip and Dan Heath's best-selling book, Made to Stick, while on vacation in Maine. What a terrific book! The Heath brothers explain how we can create, spot, and communicate ideas that people both memorable and compelling. I love the blend of research insights, practical advice, and convincing examples. The Heath brothers boil "stickiness" down to six key principles: simplicity, unexpectedness, concreteness, credibility, emotions, and stories. For those who are interested in increasing the impact of their ideas, this book is a must-read.

Discover Bryant University

Later this summer, my institution, Bryant University, will be hosting two great events for high school students interested in learning more about our school. We hold these events each summer. This year's "Discover Bryant" programs will be held on August 14th and August 28th. The programs represent a casual and fun way to learn more about the school. The event includes a campus tour, mock interview session, and a barbeque lunch with members of the faculty and staff. I hope to attend both picnics and to meet many prospective students and their families at that time. Come learn more about how Bryant prepares young people for personal and professional success through applied learning. We don't just teach theories espoused by those in the ivory tower; we create opportunities for students to apply what they are learning through a variety of projects and real world experiences. We hope that talented young people will come take a look.

Thursday, June 25, 2009

Ethnography for Innovation

Business Week provides another example of the power of ethnographic methods in the innovation process. This article features a new product development project at OfficeMax. Here's an excerpt:

"In order to get beyond the survey data, OfficeMax asked GravityTank, a Chicago innovation consultancy, to study women who buy office supplies. "If you wanted to understand the behaviors of a long lost tribe in the Amazon, you wouldn't send them a census survey. You'd observe them," says Ryan Vero, OfficeMax executive vice-president and chief merchandising officer, who initiated the research. Ditto, he says, with consumers. "Ethnographies are a critical component of our innovation process."

Vero wanted to know more about the potential customers' underlying needs and values. How could OfficeMax offer something more valuable than an eco-friendly paper line or longer-lasting pens? What products would address their problems? What messaging would resonate? Did OfficeMax need to change the design or staffing of its stores to better address female customers? Gravity Tank's task was to paint a more complete portrait of women's lives and understand how office supplies fit into them.

The research team recruited a group of 10 women, all from the Midwest, who together represented a cross-segment of OfficeMax's customer base, which includes both small offices and big companies.

Over the course of two weeks, the Gravity Tank field teams, including a researcher and videographer/photographer, spent one or two days with each subject, arriving at the woman's home in the morning and shadowing her as she traveled to work and back. "We try to watch for workarounds. Things people don't necessarily perceive as a problem, because they've developed a way around it," says Shailesh Patel, a Gravity Tank partner who led the OfficeMax project.

For instance, the research teams repeatedly saw women trying to reuse file folders, often writing a new project name on a Post-It and sticking that on the tab. But because the adhesive was relatively weak, the Post-Its would often fall off."

Wednesday, June 24, 2009

Visiting Zappos

My colleague, David Ager, and I spent yesterday afternoon visiting Zappos, the fast-growing on-line shoe retailer. Zappos has been recognized repeatedly for its extraordinary customer service as well as its very distinctive organizational culture. We simply had to see what Zappos was all about... and we learned a great deal during our visit.

I had heard so much about Zappos' ten core values, which are at the heart of its unique culture and commitment to exceptional customer service. What struck me most, though, was how every employee we met could rattle off the core values. Not only that, but they seemed incredibly committed to bringing these values alive each and every day. These people absolutely loved the company and their jobs.

We also heard legendary stories of how Zappos "delivers WOW through service." One person, for instance, described multiple occasions when employees have spent HOURS on the phone with a customer to help them find just the right shoes that they wanted. In another example, a woman bought shoes for her husband, but he died right after the order was placed. The Zappos' employee not only helped her return the shoes and get her money back, but also sent a beautiful bouquet of flowers to the funeral.

The work environment proved quite unique. Each group decorates its own workspace, and each group had a unique greeting for us as we toured the offices. People freely answered so many of our questions, and they wanted to share their knowledge with us. Zappos talks a great deal about the importance of passion, and we certainly saw a great deal of evidence of passion for the company and its mission.

Perhaps most interestingly, we learned that many much larger companies are trying to learn about Zappos, and trying to understand how they deliver such an exceptional customer experience.

For more on Zappos and its core values, you might wish to view this video:

Monday, June 22, 2009

Lessons in Leadership

If you have not seen it, the Wall Street Journal has developed a rich set of video resources on leadership. They call the site, "Lessons in Leadership" - it includes many videos from CEO interviews that they have done. Many videos offer good, practical advice for managers. Here's the link.

Business Plan Flaws

London Business School Professor John Mullins has a terrific article in today's Wall Street Journal about the typical flaws in entrepreneurs' business plans.

Friday, June 19, 2009

M&A Advice

Shaun Rein provides some sound advice regarding how to approach mergers and acquisitions in his column over at Forbes.com.

I would add a few additional pieces of advice. First, be aware of how sensitive valuations are to a few assumptions. Slight changes in growth rates, discount rates, and the like can have a profound impact. Therefore, it's especially important to identify who is driving those assumptions. If the advocates for the deal control the assumptions, they control the valuation... and thereby can push through bad deals. Too many times, the bankers have a powerful influence on those assumptions, which is problematic because they have a financial interest in seeing the deal completed.

Second, the people who are going to implement the deal (i.e. the integrators) need to be involved in the decision process. That not only helps scope out a deal effectively, but it also builds buy-in and commitment that will be helpful in making the integration process succeed.

Third, don't leave due diligence to the financial experts. You need to also perform due diligence from an operational perspective. You want to not only know about the target firm's financial condition, but also the condition of their fundamental business functions.

Finally, don't let deal fever, momentum, and sunk costs take over an acquisition decision process. It's easy to get swept up in the moment and find yourself going down a path where you find it very hard to turn back.

Thursday, June 18, 2009

Writing Good Emails

Stacey Hanke provides some wonderful advice on how to write effective emails. I would simply add one additional recommendation: individuals must learn to write consistently in the active voice!

Gaming the US News Rankings

Is it any surprise that some colleges have learned to game the US News ranking system? I doubt very much that Clemson is the only school to engage in such activity. The incentives to game the system are quite substantial. I'm not excusing such behavior, of course, but simply pointing out that we should not be surprised.

Tuesday, June 16, 2009

Economies of Scale in Autos?

For a long time, the conventional wisdom in the auto industry has been that bigger is better. In other words, consolidation occurred as firms sought to achieve economies of scale. We saw huge mergers such as Daimler & Chrysler, as well as acquisitions such as Ford's purchase of Volvo and GM's acquisition of Saab.

Now, we see a reverse in this trend. As GM reorganizes, it is selling off many business units. However, these units are not being purchased by large automakers. Just today, we hear that Koenigsegg Automotive AB, a quite small Swedish super luxury carmaker, has acquired Saab. Magna, a Canadian auto parts supplier, acquired GM's European subsidiary, Opel, last week. With these deals, we see firms operating at what used to be considered suboptimal levels of production. In fact, Fiat bid for Opel in part because their CEO, Sergio Marchionne, believes that his firm needs to get to roughly 6 million cars produced in order to fully capitalize on economies of scale. Below that number, he does not believe that he will have fully exploited scale economies.

Who is correct? Are these smaller firms making sensible moves by choosing to compete at levels of production far below 6 million autos, or is Marchionne correct that one has to achieve that level of production to be cost competitive in the mass market? I tend to believe that some powerful scale economies do exist in autos, but that consolidation over the past two decades went too far. Companies failed to account sufficiently for the possibility of diseconomies of scale, and they didn't fully understand the challenges of cross-border merger integration.

CEO as Storyteller

Sangeeth Varghese has a good post over at Forbes.com about the importance of storytelling for leaders. Here's an excerpt:

"Many top executives, trained at conventional business schools, eschew storytelling and stick to a tight-jacketed professional approach. They lay out their vision, goals and results using data points, graphs, Excel sheets and PowerPoint slides. They transform the boardroom into a bored room. Not that numbers and charts are unnecessary, of course--what would happen if salespeople never mentioned numbers? But storytelling can be the most powerful way for a chief executive to sketch a vision and align people behind it. Explanatory talk and statistics appeal to the intellect, but people aren't inspired by reason alone. Compelling stories convey loads of information while also appealing to our emotions, ensuring that we not only listen, but get engaged and inspired."

Several years ago, Gordon Shaw, Robert Brown, and Philip Bromiley wrote an interesting Harvard Business Review piece about strategic planning at 3M. In that article, they explained how stories can be used to convey a strategy quite effectively. For those who are interested, here's the link to obtain that article.

Monday, June 15, 2009

Diversity's Missing Ingredient

Pat Lencioni has a great new article discussing why diversity does not automatically lead to better decisions. He rightfully points out that taking advantage of diversity requires the proper management of conflict. Simply having people with diverse backgrounds in an organization does not automatically lead to higher performance. Those diverse ideas must be brought together in a vigorous dialogue and debate. Unfortunately, sometimes people with diverse backgrounds engage in conflict that becomes personal and highly counterproductive, in part because they don't understand each other well.

Friday, June 12, 2009

Heading Issues Off at the Pass

Thank you to CIO Insight for putting together this nice slideshow about my work.

Safeway's Efforts To Cut Health Care Costs

Steven Burd, CEO of Safeway, has an interesting op-ed in today's Wall Street Journal explaining how his company has tackled the high cost of healthcare. Specifically, Burd's firm has set worker premiums based on each employee's behavior. In other words, if you smoke, or are obese, you can expect to pay more for your health care at Safeway. He's creating incentives for people to change their lifestyle so as to become healthier, thereby driving down the cost of care, particularly for chronic conditions. It's an approach worth further examination.

Thursday, June 11, 2009

Software Makers Choosing Between Apple, Palm, and RIM

Business Week has an article about how some software makers, given limited resources, must grapple with the difficult choice regarding whether to develop software for the iPhone, Blackberry, Palm's new smartphone - the Pre, or other devices. The situation provides a powerful example of positive and negative feedback loops. If one player achieves a dominant lead in the smartphone business, then developers will flock to build software for that platform, as they will be able to more quickly achieve a return on their investment. Laggards will be in trouble, as few developers will want to expend precious resources to create software that has limited market potential. Of course, the question becomes: How does one achieve a lead in the smartphone market? In part, one has to woo developers, so as to have enough interesting software available to persuade consumers to buy your phone. If one attracts developers, then that increases the installed base of your smartphone, which in turn attracts more developers. That's the virtuous cycle of positive feedback in action. Of course, if one does not attract sufficient developers, that shrinks the installed base of phones, which means less developers work on your platform in the future - that's the negative feedback loop in action. What determines the intensity of these feedback loops. The size of the fixed costs of software development will be a key factor. To the extent that the fixed costs of development rise, then the pressure on laggards will intensify dramatically. Software developers will not want to develop products for niche phone-makers, because they won't be able to amortize their high fixed costs effectively. Recall that this phenomenon affected Apple in the late 1980s and early 1990s, when its very small market share relative to Windows caused many software developers to choose to create products for Windows rather than Apple. The key factor was that the fixed costs of software development could not be recouped quickly given the small installed base of Apple machines relative to Windows.

Wednesday, June 10, 2009

Succession at P&G

Business Week has an article about the succession process unfolding at Proctor and Gamble. The company announced this week that Robert McDonald will take over from A.G. Lafley as CEO. The authors point out that Lafley has become a management icon during his very successful tenure at the company. Moreover, they stress that the track record of those CEOs who follow icons is rather mixed.

This issue raises an important question about which I've often wondered. Many leadership scholars argue that the mark of a truly great CEO is that the company's performance persists long after he or she retires. It is said that such CEOs built sustainable organizations. However, one could make the counterargument... a drop-off in performance after a CEO retires could be taken as a sign that the leader was indeed substantially responsible for the exceptional performance during his or her tenure. In other words, maybe a drop-off after retirement means that the CEO added a great deal of value, above and beyond what another leader can bring to the table.

Questions to Ask Your Boss

Rachel Zupek of Career Builder provides a terrific list of nine important questions to ask your boss.

The Limits of Telecommuting

Jonathan Weber writes on MSNBC.com about the pitfalls of extensive telecommuting within your organization. He makes some good points about the value of face-to-face interaction.

Tuesday, June 09, 2009

Supermarket Differentiation

Business Week has an article about supermarkets trying to differentiate themselves given the low margins in the business and intense competition for the roughly 10% of consumers who do switch supermarkets each year. Here's an excerpt:

"Today's newly frugal consumers are cranking up the pressure on retailers to innovate. Margins in the $547.1 billion market averaged just 1.84% nationally in 2008, according to the Food Marketing Institute. Though an average grocery store has 46,852 items, the sector's big chains also stock pretty much the same brand-name goods. So with little room to further cut prices or wow consumers with unique products, food retailers are seeking out new trends and technology that might differentiate them from competitors."

The article goes on to examine some of the innovations that have been introduced by various supermarkets around the country. However, the author fails to highlight one key problem facing the supermarket industry. Most of the attempts to differentiate can easily be imitated. After all, many innovations and improvements have taken place in the industry over the past several decades, yet margins remain paper thin. Why? In part, supermarkets cannot fatten their margins because it's difficult to sustain differentiation; most innovations are easily copied in this industry. Of course, a few supermarkets have differentiated in the premium segment of the market (Whole Foods, for instance), but most mainstream supermarkets remain in an intensely competitive space.

In any industry, the challenge is to build a sustainable and defensible competitive advantage through strategies that are inimitable. Unfortunately, some industries lend themselves to such differentiation attempts more easily than others (for instance, some industries involve innovation that can be defended through intellectual property laws).

Monday, June 08, 2009

Why Don't Students Like School?

Cognitive scientist Daniel Willingham has written a tremendous book titled, "Why Don't Students Like School?" I read a review of the book in the Wall Street Journal and promptly ordered it. I couldn't put the book down. Willingham has written a serious book, filled with findings from rigorous academic research, yet he has communicated his points in clear and concise language that all can understand.

The book focuses on nine cognitive principles "that are so fundamental to the mind's operation that they do not change as circumstances change." Willingham outlines these principles in detail, and he then lays out the implications for teachers in the classroom (whether it be elementary schools or universities).

The book has many important insights. He explains, for instance, that "factual knowledge must precede skill." What does this mean? First and foremost, it implies that one cannot teach students to be critical thinkers without first teaching them a body of factual knowledge. Many college professors that I know talk about how it's not important to "drill facts"... that their job is to teach critical thinking skills. However, Willingham provides rich evidence that contradicts this viewpoint, that explains the importance of background knowledge for everything from reading comprehension to complex problem-solving.

Willingham also challenges another precious bit of conventional wisdom held by many in the field of education. Many people believe that teachers should vary their approach with students based on each individual's cognitive style. Willingham explains that scant evidence exists to support this widely held viewpoint. That chapter was eye-opening for me.

The book has many more important insights, useful to both teachers and parents. I highly recommend the book.

Friday, June 05, 2009

Mulally at Ford

Here's a good video from CNN about Alan Mulally's efforts to turn around Ford Motor Company. The video highlights two key aspects of his tenure at Ford: how he positioned Ford to survive a severe downturn such as the current one, and how he chose to streamline the company's brand portfolio and focus on the core Ford brand. Both decisions appear to smart ones, though clearly, Ford has a long way to go to return to profitability.

Politicians Running GM

Yesterday brought the first signs that members of Congress, from both parties, will find it hard to resist meddling in the affairs of General Motors. First, we hear that Massachusetts Congressman Barney Frank intervened to stave off the closing of a GM distribution center in his home state. That distribution center was slated to be shut down according to GM's restructuring plan. At the same time, Congress held hearings on GM and Chrysler's plans to shut down many dealers throughout the country. Naturally, we heard members of Congress pushing the heads of GM and Chrysler to reconsider the closings of dealers in their districts. It's week 1 of the GM bankruptcy, and already, we see some disturbing signs.

Thursday, June 04, 2009

The Incredible Shrinking Harvard

Richard Bradley writes a fascinating piece about the current challenges at my alma mater. There's no question that Drew Faust was hired when the university faced a a bountiful set of opportunities... much different from the problems and threats it faces today. She may very well have been ideal for the situation Harvard faced two years ago. Bradley raises the interesting question though of whether Faust has the skills and capabilities to deal with today's circumstances.

Wednesday, June 03, 2009

An MBA Oath?

On her blog, Decision to Lead, Frances Frei explains that some business school students have attempted to create an MBA oath, modeled after the type of oaths taken by law and medical school graduates. For more information regarding the oath, go to http://mbaoath.org/

Cutting Salaries Instead of Jobs

Business Week has an interesting article on the pros and cons of the "cut salaries rather than enact layoffs" approach to reducing costs being taken by many firms in this recession.

Tuesday, June 02, 2009

Jon Stewart: Carmageddon '09 - Lemon Aid

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Air France Crash

The Associated Press has posted an article about the Air France crash with the title, "Multiple factors eyed in case of missing jet." Experts tell the writer that lightning or turbulence alone are unlikely to have caused the crash. Here is a brief excerpt:

Although aviation experts stressed it was much too early to speculate about the causes of the disappearance, they noted that the incident was most likely caused by various factors that combined to cause a catastrophic chain of events. "It sounds like something that evolved into a problem, not something that happened instantly," said Bill Voss, president and CEO of Flight Safety Foundation, in Alexandria, Virginia. "It would appear that their systems were degrading but we don't know why they were degrading." Most aviation accidents are the result of the combination of several adverse circumstances which by themselves would not ordinarily be dangerous.

The lesson here applies to all large-scale failures, not simply aviation accidents. Most large-scale failures result from a series of small errors and failures, rather than a single root cause. These small problems often cascade to create a catastrophe. Accident investigators in many fields, not simply aviation, have shown that a chain of events and errors typically leads to a particular disaster. The key lesson: Be wary of trying to identify a single root cause; search instead for all the links in the chain of events that led to catastrophe.

Monday, June 01, 2009

Questions about the GM Bankruptcy

A few questions to ponder on this historic day in which General Motors announces that they are filing for bankruptcy:

1. Why should we believe that a company whose core capabilities revolve around making trucks and SUVs can suddenly become a highly competitive and successful manufacturer of small, environmentally friendly cars?

2. How long will it take to wind down the "old GM" and will this process require an additional infusion of government funds?

3. Has the company done enough in its talks with the UAW to make the firm competitive against firms such as Honda and Toyota?

4. Will GM's suppliers survive this process, or will some enter bankruptcy themselves? Will the government find itself bailing some of them out as well?

5. Can the firm attract the management talent required to engineer the turnaround, particularly given the limitations on executive compensation that are likely to be put in place due to government ownership?

6. How much will Washington meddle in business decisions for political reasons?

7. Will Washington find itself favoring GM over Ford or engaging in protectionist policies to advance the interests of government-owned General Motors?

8. Does GM have a viable, profitable strategy for the Volt?

9. With the sale of assets such as Opel and Saab, GM will become more U.S.-centric while the auto industry continues to globalize; is this an effective strategy?

10. Finally, how much more money will the government have to invest in GM in the years ahead? Will we end up throwing good money after bad?