Friday, December 23, 2011

Leaders, Go the Back of the Line!

Several days ago, someone reminded me about a book that I read awhile back - “It’s Your Ship: Management Techniques from the Best Damn Ship in the Navy” by Commander Michael Abrashoff.  In the book, the commander describes how he turned around a poor performing ship and helped it become one of the best vessels in the U.S. Navy.   My colleague reminded me of one particular story Abrashoff tells about his first week on the ship.   The commander went to the weekly cookout on the ship, and he noticed that all the officers jumped to the front of the line (cutting in front of the enlisting personnel waiting patiently for their food).  Abrashoff took his tray and went to the back of the line.   His officers got their food and sat down to eat on the upper level, while the sailors sat down on the lower level.  When they noticed the commander at the back of the line, one individual went down to speak with Abrashoff: "Captain, you don't understand. You go to the head of the line."  Abrashoff responded, "That's okay. If we run out of food, I'll be the one to go without."  Abrashoff waited patiently for his food and sat down with the sailors on the lower level.  He did not scream at his officers or reprimand them for his actions.  However, he noticed that the officers did not cut the line the following week, and they chose to sat with the enlisted men. 

Every leader at all levels should read that story and consider whether they lead from the front or the back of the line.  I would submit that far too many leaders choose to cut the line.   Moreover, many leaders who witnessed the cutting in line would choose the verbal reprimand route.  They would fail to recognize that actions often speak louder than words.   

Thursday, December 22, 2011

Corporate Governance and a CEO Search at Avon

Avon recently announced that CEO Andrea Jung would be stepping down, but remaining at the firm as Executive Chairman.  The firm announced that a search for a new CEO would commence immediately.  Today the Wall Street Journal reports that two former Avon CEOs (including Jung's mentor and predecessor) have criticized the decision to have Jung remain as Executive Chairman for at least two years.  According to the Wall Street Journal,

Former Avon CEO James Preston, once one of Ms. Jung's closest mentors, took the unusual step of writing a letter to the board two days after the shake-up. He criticized Ms. Jung's leadership, stressed that departing CEOs should step aside and called on the board to replace her with someone with deep experience in the direct-selling world. "I have long held the belief that once a CEO leaves that position, he or she should make a 'clean break' and not question or second-guess the actions of his successor," wrote Mr. Preston, who ran Avon from 1989 to 1998, in the letter, dated Dec. 15, that was reviewed by The Wall Street Journal. "I have held true to that belief, even though in recent years I have become increasingly concerned—and saddened—by the declining fortunes of the company."

I found the Avon decision puzzling as well.   I wonder whether the decision will make it very difficult for Avon to find a top quality CEO.  What executive would want to take the job, knowing that the former CEO would be looking over their shoulder for the next two years?  It's particularly problematic, given that Avon has struggled lately.  Big changes will have to be made.  Will Jung prevent some of that change from occurring as fast as it should?  

The Board now has a major problem.  The fact that Preston's letter has become public puts pressure on the directors to clarify and justify their rationale for keeping Jung as executive chairman for two years.  They cannot ignore this issue.  They'll have to address it, or they jeopardize their ability to find a high quality CEO.  Moreover, a lack of response will raise more questions about the efficacy of corporate governance at the firm.  That could hurt the share price, as investors may be leery of investing in the company if they perceive governance to be weak. 

Wednesday, December 21, 2011

Preventing Analysis Paralysis

The Corporate Executive Board has posted a useful article on Business Week's website regarding how managers can avoid analysis paralysis.   Among their recommendations, they advise the following:

Unclutter dashboards for managers: Even the most relevant and informative survey data won’t get very far in your organization if managers cannot readily access them. Our research shows that managers who transform data into usable information for their teams can increase business performance by 24 percent. So, focus managers on what matters by providing them with personalized views of the data they need to be effective. Streamlined online dashboards provide managers with instant access to aggregate survey results from their team and organization overall. Ideally, they highlight areas of strong performance and opportunities for improvement for each manager, and equip them with the resources to improve.

I agree completely.   Many organizations face metric overload these days.  Senior leaders need to think carefully about the priorities of the organization and communicate those to all the troops.  Then, the dashboards used to run the business must reflect those priorities.   How does one rationalize the metrics and reports being generated? It starts with tying the dashboards closely to senior leadership's priorities.  One can go further though.   I can recall an exercise we undertook when I worked in corporate finance at a major aerospace firm in the early 1990s.  We went out and talked the people who received the reports we generated.   We asked them whether they used our reports, and if so, how.  We also asked them when was the last time that they had examined each report.  It sounds so simple, yet many people who put together dashboards and reports don't actually know how their data are being used.  By connecting the dashboard creator and user more closely, one can identify which metrics are most useful.    

Monday, December 19, 2011

You Gotta Believe - Leaders are Made vs. Born

Each Sunday, the Boston Globe's Uncommon Knowledge section features interesting research findings from the social sciences.  Yesterday, the newspaper described a study by Crystal L. Hoyt, Jeni L. Burnette and Audrey N. Innella.  The researchers examined the impact of individual beliefs regarding leadership on actual behavior.  They compared people who tend to believe leaders are "born" with those who tend to believe leaders are "made."   The scholars conducted two studies.  In the first study, they primed individuals to think about a leadership role model.  Then, they found that the people who believed that leaders are made tended to show more confidence and less anxiety as they performed a leadership task (delivering a speech).  In the second study, they asked some individuals to read an article arguing that leaders are made.  They found that those who read the article tended to show more confidence, exhibit less anxiety, and perform better in the delivery of a speech (as measured by independent judges). 

Knowing Your Customer - By Channel!

Knowledge @ Wharton has published an article about a new report produced by Wharton’s Jay H. Baker Retailing Center and The Verde Group, a market research firm.   The report emphasizes that companies need to think carefully about the multi-channel shopper.  Retailers clearly have been spending time (appropriately) trying to provide some commonality for the customer regardless of how they shop (online, in store, catalog, etc.).  However, the report reminds retailers that the shopper in each channel has different wants and needs.  Therefore, one has to tailor the experience to suit that customer at that point in time.  The same individual may actually want a different experience in store vs. online - and some of those differences may be quite subtle, yet critical.   Here is a key excerpt from the article:

"Courtney (Paula Courtney, president of The Verde Group) notes that while the emphasis for many retail businesses has been on creating a seamless experience across multiple channels, the reality is that retailers need to spend more time addressing the specific needs of various channel users. “While it’s important to have consistent policies across channels, policies are different from experiences. This [research] suggests that an overriding emphasis on ‘consistent’ channel experiences is misplaced. Different channels attract different types of customers who demand experiences that are specific to their needs and preferences.”

Friday, December 16, 2011

Lego Tries to Appeal to Girls

Business Week has a story this week about how Lego is trying to appeal more effectively to girls. I don't know if it will work, given the firm's historical image and positioning. However, I am very impressed with the research methodology that they employed before designing a new line of products specifically targeted at girls. Lego invested significant resources in anthropological research, sending researchers into homes to watch how girls play. They learned a great deal about how girls build, value beauty and color, and engage in role play. Here is one fascinating excerpt: Lego confirmed that girls favor role-play, but they also love to build—just not the same way as boys. Whereas boys tend to be “linear”—building rapidly, even against the clock, to finish a kit so it looks just like what’s on the box—girls prefer “stops along the way,” and to begin storytelling and rearranging. Lego has bagged the pieces in Lego Friends boxes so that girls can begin playing various scenarios without finishing the whole model. Lego Friends also introduces six new Lego colors—including Easter-egg-like shades of azure and lavender. (Bright pink was already in the Lego palette.)

Thursday, December 15, 2011

Hasbro Faces Challenging Times in Board Game Business

The Wall Street Journal reports that Hasbro continues to face challenges in its board game business.   Naturally, mobile and social gaming, as well as other forms of entertainment, have threatened the board game industry for some time.  However, the Wall Street Journal reports that, "Sales of Hasbro's games and puzzles dropped 9% over the last three quarters, far more than overall sales of board games, which declined 3% in the same period, according to researcher NPD Group. Hasbro's game sales slid 3% last year, even as industry-wide game sales edged up 1%."   Some observers claim that Hasbro has neglected its board game business as it has tried to become a broader entertainment company.   The company, naturally, rejects such criticisms. 

I decided to take a quick look on the Amazon site.   What the are the most popular board games on Amazon right now?  The top three games are produced by GameWright, MindWare, and PlaSmart.  Each firm appears to be independent (i.e. not owned by a major toy company).  I found this fact quite interesting.  It appears, then, that the board game business may not have substantial barriers to entry, nor economies of scale that provide incumbent players such as Hasbro a formidable advantage.   In fact, these independent firms often use a form of crowdsourcing to generate new games.  That is, in addition to creating games in-house, they solicit game ideas from inventors around the world, and then select the best ideas.   They often build on and expand those ideas to create their games. 

Interestingly, the Wall Street Journal suggests that Hasbro has spent a considerable amount of time trying to modernize its classic board games, rather than emphasizing the development of many new titles.  These independent firms, of course, focus on bringing totally new ideas to market.  Some of Hasbro's modernization attempts have not gone so well, and in fact, have invited some humorous response.  Check out Stephen Colbert's take on a new version of Monopoly that Hasbro introduced recently (start watching at the 5 minute mark):

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Wednesday, December 14, 2011

Starbucks appoints 29 year old board member

Starbucks has announced that Clara Shih, the twenty-nine year old founder of Hearsay Social,has been appointed to the coffee company's board of directors. Shih's firm, Hearsay Social, provides tools for large companies to manage social media across many local branches and units. I find this appointment very refreshing. Company leaders often fall out of touch with key social and technological trends. Connecting regularly with young people insures that board members and executives will stay attuned to key generational differences and consumer trends. The key to making this move a success, though, will be working diligently to encourage other board members to consider her views seriously.

Tuesday, December 13, 2011

Amazon's Public Relations Problem

Amazon caused quite a stir this week with a new promotion.   They introduced a new "Price Check" smartphone app for consumers.  Individuals could visit a brick and mortar store, check the item's price on Amazon, and then receive a 5% discount (maximum $5 savings) if they purchase that particular item from Amazon.  Now, smartphone apps that enable consumers to check prices elsewhere have existed for quite some time.   Yet, this promotion by Amazon went one step further. It not only enabled price checking, but actually gave a discount to the consumer if they chose Amazon over the brick-and-mortar retailer in which they were shopping at the moment.   That extra step caused a backlash.  Small business owners and advocacy groups expressed outrage at the promotion almost immediately.  Politicians became upset as well.  Maine Senator Olympia Snowe issued a press release in response to the promotion:

"Amazon's promotion - paying consumers to visit small businesses and leave empty-handed - is an attack on Main Street businesses that employ workers in our communities. Small businesses are fighting everyday to compete with giant retailers, such as Amazon, and incentivizing consumers to spy on local shops is a bridge too far...   We should remember that our local restaurants, bookshops, and hardware stores are the economic engines in our communities.  I urge Amazon to cancel its planned promotion, and look for ways to partner with Main Street, not promote anti-competitive behavior that could shutter the doors of America's small businesses." 

What do we make of this situation?  At the end of the day, price checking via smartphones will not be stopped.   It has already begun to transform the way people shop, particularly for pricey electronics.  The prevalence of such price checking will only increase in the future.  Small businesses will not be able to put an end to that phenomenon.  On the other hand, Amazon may have underestimated the extent to which the discount would create a public relations mess.  While the firm states that they were focused mainly on competing with large retail chains, they ended up becoming portrayed as the enemy of small business.  I'm sure that they don't want to be seen in this fashion.  Moreover, the timing doesn't serve them well at all, given that they already face a growing controversy over the sales tax issue.   Given the anti-big business mood of many people at the moment, I'm surprised that Amazon didn't think through the way that this move might feed that sentiment.  Every large firm needs to consider how they might get caught up in that national mood these days.

In the video below, we hear the other side of the story.    Evan Newmark, a Wall Street Journal writer and former Goldman Sachs executive, defends Amazon and criticizes Senator Snowe.

Friday, December 09, 2011

How Early Career Experiences Shape Future Career Prospects and Decision-Making

Antoinette Schoar and Luo Zuo have published a new paper titled, "Shaped by Booms and Busts: How the Economy Impacts CEO Careers and Management Style."    They studied how early career experiences shape future career prospects and decision-making.  Here is what they found:

"Economic conditions at the beginning of a manager’s career have lasting effects on the career path and the ultimate outcome as a CEO. CEOs who start in recessions take less time to become CEOs, but end up as CEOs in smaller firms, receive lower compensation, and are more likely to rise through the ranks within a given firm rather than moving across firms and industries. Moreover, managers who start in recessions have more conservative management styles once they become CEOs."

I found the last point particularly interesting, namely that a person tends to become a bit more risk averse after experiencing a major recession early in his or her career.  Now that could be a good thing.  Perhaps we will see less "irrational exuberance" in future years from those currently starting out their careers.    

Thursday, December 08, 2011

Anxious Negotiators Lose Big Time!

Wharton Professor Maurice Schweitzer and graduate student Alison Wood Brooks have published an interesting paper titled, "Can Nervous Nelly Negotiate? How Anxiety Causes Negotiators to Make Low First Offers, Exit Early, and Earn Less Profit."  The scholars examine the effects of anxiety on business negotiations.   Not surprisingly, they find that anxiety can be very harmful in a negotiation. The study goes one step further though.  It shows precisely how anxiety harms negotiators.   Specifically, the researchers found that more anxious negotiators made lower initial offers, and they responded to others' offers more quickly.   Those behaviors contributed to the fact that anxious negotiators ultimately achieved worse outcomes. 

Why do anxious negotiators behave in this manner?  Schweitzer and Brooks explain that anxiety seems to induce conflict avoidance.  Anxiety often brings with it a desire to minimize the likelihood of confrontation with the other party.   However, the desire to avoid confrontation often drives a negotiator to compromise prematurely or advocate for their own interests less forcefully.   The lesson is clear:  If you are feeling anxious, step back for a moment and collect yourself before beginning a negotiation.  Your anxiety may not just make you feel sick to your stomach; it may lighten your wallet too! 

Wednesday, December 07, 2011

Decision Quicksand

The Wall Street Journal reported recently on a new study by Professors Aner Sela and Jonah Berger about what they describe as decision quicksand. These scholars compared the approach individuals took on three types of decisions: hard, important choices; hard, unimportant choices; and easy choices. The scholars found that individuals spent the most time on the difficult, but unimportant decisions! Moreover, happiness declined as the length of the decision-making process increased. it reminds me of what a former dean once said to me: "Academics find a way to argue the most over the decisions that matter the least!" Well, it appears that trivial choices trip up many people, not just hopeless professors.

Tuesday, December 06, 2011

MITX E-Learning Award

I am excited to report that last night the Everest Leadership and Team Simulation V 2.0 (released in July) received the 2011 Massachusetts Innovation and Technology Exchange Award for best eLearning solution. We were absolutely thrilled to earn this honor. According to the MITX website, “The MITX Interactive Awards is the largest and most prestigious awards competition in the country for interactive and web innovations and celebrates the best creative and technological accomplishments emerging from New England.” The awards ceremony took place last night at the Sheraton Hotel in Boston.

As you may know, Professor Amy Edmondson (of HBS) and I developed this simulation and released the original version three years ago. We made a series of enhancements for the V 2.0 release this summer. The product was developed by a terrific team from Harvard Business Publishing and Forio Simulations of California.

Under Armour and Target Markets

I just finished reading an article about Under Armour's remarkable success. The article ended, though, by pointing out that the firm has done much better with men than women. It cites the fact that many women choose Lululemon over Under Armour athletic wear.

When I read this type of article, I wonder whether we sometimes forget the concept of target markets. If we try to sell to every demographic under the sun, we have no focus at all. We might not be the best at serving any particular segment unless we are clear about our target. Of course, Under Armour may find a way to succeed with a particular segment of women. They may have great success eventually with a female demographic. However, their focus on a young male demographic to date is not a weakness, but a sign of a smart focused strategy. Similarly, Lululemon's focus on women has been a great strategy.

The article mentions that Under Armour also is very US-centric. Perhaps expanding their geographic scope before expanding their demographic may make good sense. At some point, you must allocate resources judiciously as you expand.

Monday, December 05, 2011

Another Major Downside to Large CEO Severance Packages

According to the Wall Street Journal, Tulane Professor of Finance Peggy Huang has conducted a terrific new study regarding CEO severance packages.  As you know, many journalists, investors, and analysts have expressed dismay at some of the large severance packages provided to dismissed CEOs in recent years.  Huang set out to examine the impact of such packages in more detail.   She explored whether such packages may have led to excessive risk-taking (since the cost of failure was substantially reduced by the generous severance).  More specifically, she examined whether companies whose CEOs had such packages underperformed the stock market during the CEO's tenure. 

Her findings suggest that Boards of Directors should proceed with caution when offering such packages, particularly cash-heavy packages.  Huang examined roughly 2,000 CEO severance agreements from S&P 500 companies between 1993 and 2007.  She discovered that these firms underperformed the market by 1.6% on average over a three-year period, when compared with firms that did not have CEO severance packages.  If the CEO had a cash-only severance package, the firms underperformed the market by 4% on average.  Looking at the CEO's actions in more detail, she found some evidence suggesting enhanced risk-taking by the CEOs with severance packages. 

Professor Huang offered a comment to the Wall Street Journal about her findings:  "With a severance contract, a company is basically saying that even if a CEO fails, there will be no penalty."

Friday, December 02, 2011

How Twitter Generates Revenue

Business Insider CEO and Editor-in-Chief Henry Blodget conducted this very informative interview the Twitter's Chief Revenue Officer Adam Bain.  Check it out to learn more about how advertising and sponsored tweets work on the Twitter platform.

Thursday, December 01, 2011

Social Makeover at Electronic Arts

Fortune reporter Alex Conrad wrote a good article this week on the challenges facing Electronic Arts.  EA once stood at the pinnacle of the video game business.  Eight years ago, I wrote a case study about the firm.  At the time, EA had a stable of high-performing video game franchises, with healthy profits each year.   Today, EA faces many challenges.  It lost in excess of $1 billion in 2009, and it lost more than $300 million in the second quarter of this year.  Social gaming firms such as Zynga have burst onto the scene and disrupted the console-based video game industry. 

Interestingly, the signs of trouble stretch back to a time well before Zynga arrived on the scene.  EA became increasingly reliant over the years on building franchises, with a series of sequels building off of a popular game.  Moreover, those franchises often relied on others' intellectual property (whether it was a movie character or John Madden and the NFL players/teams).  Acquisitions played a key role too.   Fewer and fewer blockbuster hits emerged organically within EA's studios based solely on its own intellectual property.  As EA became more reliant on others, and less successful at creating home-grown hits, the threats to its competitive advantage increased.  Then, just as EA became vulnerable due to these trends, social gaming came along to disrupt the business substantially.

Now, EA must decide how to counter the social gaming threat.  The article suggests that one way it will do so is by adapting some of its popular titles for the social world.  However, one wonders if that is the optimal strategy.  Perhaps they will leverage those strong brands to make popular social games.  On the other hand, one must acknowledge the significant differences between console-based games and social games such as Farmville.  Will a firm trying to adapt titles from the console business end up creating a suboptimal social gaming experience?  Will the mindset of creating high quality, graphics intensive console games (which require substantial R&D expenditures) get in the way of producing successful social games (which have simple graphics, much less technological sophistication, and which require much less development investment)?   Companies focusing completely on social games, without the history of console game development, may actually have an advantage here.   EA itself seems aware of these challenges.  That may be why they have acquired several social gaming companies.  How they manage those acquisitions will prove critical to their future success.

Wednesday, November 30, 2011

Nordstrom Innovation Lab

Eric Ries has written a terrific new book called The Lean StartupOn his blog, he wrote recently about how his lean start-up principles can be applied in large corporations.  He profiled Nordstrom, with these two terrific videos about the Nordstrom Innovation Lab.  I recommend taking a look at his book and at these two videos.

Tuesday, November 29, 2011

American Airlines Files Chapter 11

Perhaps we should not be surprised that American Airlines' parent company has filed for bankruptcy protection.  American remained the last of the legacy U.S. carriers not to have filed Chapter 11.  All others had done so at one point or another.  As a result, the other legacy carriers had been able to use Chapter 11 to restructure their balance sheet and modify their labor contracts significantly.  American remained at a disadvantage because it had not been able to reduce labor costs and debt obligations as substantially as its rivals.  To some extent, Chapter 11 offers the opportunity to level the playing field.  It may seem strange to suggest that a firm may be compelled to file Chapter 11 in part because all its rivals have filed previously.   Yet, that dynamic does exist in this industry.  One should not come to the conclusion, however, that such a domino effect always exists.  Clearly, Ford has managed to be very competitive, despite the fact that it was the only one of the Big Three not to engage in a government-aided bankruptcy restructuring. 

Monday, November 28, 2011

The 10,000 Hours Misconception: Practice vs. Talent

Professors David Z. Hambrick and Elizabeth J. Meinz wrote a good article in the New York Times this weekend about the "10,000 hours" concept popularized by Malcolm Gladwell.   Actually, the idea of experts achieving world class status through 10,000 hours of practice comes from the excellent work of Florida State University Professor K. Anders Ericsson and his colleagues.  They have studied how world class violinists, chess players, athletes, and the like engage in deliberate practice to enhance their skills.  Ericsson has found that top people in these fields tend to engage in at least 10,000 hours of deliberate practice during their formative years.

Some people have interpreted this work to mean that talent doesn't matter much, that somehow one can become world class simply through hard work.   Here is how Hambrick and Meinz counter that conventional wisdom:

Research has shown that intellectual ability matters for success in many fields — and not just up to a point.  Exhibit A is a landmark study of intellectually precocious youths directed by the Vanderbilt University researchers David Lubinski and Camilla Benbow. They and their colleagues tracked the educational and occupational accomplishments of more than 2,000 people who as part of a youth talent search scored in the top 1 percent on the SAT by the age of 13. (Scores on the SAT correlate so highly with I.Q. that the psychologist Howard Gardner described it as a “thinly disguised” intelligence test.) The remarkable finding of their study is that, compared with the participants who were “only” in the 99.1 percentile for intellectual ability at age 12, those who were in the 99.9 percentile — the profoundly gifted — were between three and five times more likely to go on to earn a doctorate, secure a patent, publish an article in a scientific journal or publish a literary work. A high level of intellectual ability gives you an enormous real-world advantage. 

Hambrick and Meinz go on to explain that the high achievers that they studied tend to have a very high level of working memory capacity.   That attribute tends to matter, above and beyond how much one practices.  For example, when they studied pianists who had practiced the same amount of hours, they found that those with higher working memory capacity tended to perform better.   The scholars don't dispute that deliberate practice matters.  They simply remind us that talent still matters... a great deal. 

Wednesday, November 23, 2011

Employee engagement: The importance of public recognition

Many firms expend a great deal of resources on merit review systems these days. Providing employees 360 degree feedback for evaluative and developmental purposes has become standard in large companies. Coaches and mentors provide feedback too. Managers meet one-on-one to provide "constructive feedback" as well. Incentive compensation exists, in some form or another, in most firms. Nevertheless, many company executives fret these days about the low levels of employee engagement in their organizations.

Many reasons exist for the lack of engagement, but let's start with a simple cause. Despite all the "feedback" provided to employees these days, they often feel that they receive little public recognition for their good work. Yes, employees enjoy a bonus or a raise. However, they also value those occasions when a manager or executive praises their efforts and accomplishments publicly. Yet, that public recognition comes very rarely in some firms. Tomorrow's holiday reminds us that a simple "thank you" and "job well done" expressed in front of one's peers can be very motivating.

Tuesday, November 22, 2011

Ron Johnson and the JC Penney Turnaround

Ron Johnson, new CEO of JC Penney, has an interesting blog post on the HBR site. He draws on his time as head of Apple stores to offer some thoughts on how to be successful in retail. Johnson explains that some skeptics discounted his success at Apple by saying essentially: "The products sold themselves. Let's see what he can do without iPads to sell!". Johnson counters that customers could have chosen to buy the same products on Amazon, while avoiding the sales tax... Yet they often paid a premium to buy at the store. He explains that they came to the store for the experience, Johnson argues that the associates' focus on solving problems for customers, rather than just trying to sell stuff, proves key to creating a good experience.

I agree that brick and mortar retailers must draw customers by creating a special experience. However, some products are more conducive to this type of strategy. For others, the notion of an experience seems to matter less (do we need a physical experience to rent movies?).

The other issue here is the distinctiveness of the retailers' products. Apple stores sell their own products. Yes, they are available elsewhere, but the stores don't stock other firms' items. The products are clearly distinctive. No discounting occurs anywhere on Apple products. JC Penney sells clothes that are often discounted elsewhere. To succeed, it will have to create a more distinctive product mix. It will also have to change that mix in a nimble way to keep up with current fashions. In so doing, it can minimize costly markdowns that plague many department stores. The challenge will be significant. However, Johnson has a tremendous track record at Target and Apple of finding the right combination of products and experience to prosper.

Monday, November 21, 2011

Where's the Cash at HP?

The Wall Street Journal reports that some investors have concerns about the balance sheet at HP.   Many other tech companies have stockpiled cash, while minimizing debt, during the past few years.  For instance,  cash net of debt equals $45 billion for Microsoft, $28 billion at Cisco, and $17 billion at Oracle.  Apple has more than $80 billion in cash and securities on its balance sheet and no debt at all.  Meanwhile, HP has spent a considerable amount of cash on acquisitions in the past year.  Moreover, according to the Wall Street Journal, " H-P has leaned more heavily on borrowing than some other tech companies. Its long-term debt has swelled to $19 billion through the first three quarters of 2011 from $7.7 billion in 2008."

I find this investor concern interesting, given how much politicians and journalists have taken to criticizing many firms such as Cisco and Apple for "stockpiling cash" instead of investing it.   This Wall Street Journal article reminds us of why investors generally like firms to disburse excess cash, but perhaps hold a different view when it comes to tech companies.  In the tech industry, conditions change quickly and dramatically at times.  That potential turbulence and volatility means that keeping leverage low and cash balances strong can make a good deal of sense.   Acquisitions also have played a major strategic role for firms such as Cisco over the years.  Keeping a strong cash position with low debt puts these firms in a position to move with speed and flexibility when an acquisition opportunity emerges.  

On the other hand, perhaps the weaker balance sheet at HP will play an important positive role in the short term.  The discipline of debt can restrain management from making flawed acquisitions or pursuing value-destroying diversification strategies.  Perhaps the balance sheet will constrain HP in a positive way, and keep new CEO Meg Whitman focused on shoring up the core businesses in the near term.

Friday, November 18, 2011

Retailers, Thanksgiving, and Black Friday

Many retailers have decided to open at midnight this year on Thanksgiving, rather than waiting for the early morning hours of Black Friday.   Some controversy has erupted over this decision.  News reports indicate that Anthony Hardwick, a part-time Target employee in Omaha, became very upset when he learned that some employees would have to come to work at 11pm on Thanksgiving night to prepare for a midnight opening.  He launched an online petition, gathering over 37,000 signatures in protest of the midnight opening. Here in Massachusetts, firms have had to delay their opening to 1am or later because of the "blue laws" prohibiting certain businesses from requiring employees to work on the Thanksgiving holiday. 

For me, the controversy around whether employees should work on the holiday obscures a more strategic issue facing these firms.  The critical question is:  Will opening at midnight actually enhance revenue and profitability?  Retailers may find that the earlier opening simply shifts sales from other points in time on the holiday weekend, rather than adding true incremental revenue.   Moreover, even if the firms experience incremental sales, they may find that the additional expenses associated with opening at midnight overwhelm the additional revenue.   To be successful, these firms must do more than cope with the public relations backlash that they are experiencing.  They must generate true incremental revenue, and those sales increases must be sufficient to offset the additional costs that they will incur. 

Thursday, November 17, 2011

Common Public Speaking Mistakes

Kathy Caprino has written a good column for Forbes regarding public speaking.  In this article, she highlights five common errors that people make when speaking to an audience.  I found one of her points particularly compelling.  Here is the excerpt:

Show Respect for the Listener

Again, I’ve seen scores of speakers alienate an audience by expressing disdain or criticism for some common behavior or thinking. For example, if you’re speaking to social media novices about what they need to do to get up to speed in the social media arena, you must understand that many folks are afraid and insecure about taking the plunge, and you need to be gentle with them, not judgmental, critical or flip. In the end, If you hate or disrespect your listeners for their lack of savvy in your area of expertise, they’ll hate you back. And if you leave your audience feeling that they are losers, failures or unworthy of your respect, then you’ll achieve the opposite of your desired effect – you’ll bruise their sense of self-worth and create a huge rift between you and your audience.You’ll lose them forever.

I agree wholeheartedly with Caprino's point. Too many speakers forget what it feels like to be a novice in a particular domain. They fail to put themselves in the shoes of someone who knows little about a particular subject, or might even be a bit stressed about trying something new or different.  Putting yourself in their shoes proves critical if you wish to be a successful public speaker.

Wednesday, November 16, 2011

Why women like teams more than men

The Wall Street Journal reported this weekend on a new study by Peter Kuhn and Marie Claire Villeval regarding teamwork. They created a simple task and asked men and women whether they preferred to work alone or on a team. Women preferred teams much more than men. The researchers discovered one reason why that disparity might exist. They found that men overestimated their abilities much more so than women. Not exactly shocking, eh? Still, the study does a nice job of documenting this phenomenon.

Tuesday, November 15, 2011

The Simple Decision Test

I heard a common complaint from a mid-level executive today: "Its really hard to get closure on any decisions around here." I wondered whether the chief executive understood the level of frustration. Was the CEO the problem, or were decisions getting bogged down in the bureaucracy, even before getting to the top? In many cases, decisions get derailed by silo rivalry, dysfunctional team dynamics, and leaders who are conflict averse. As a result, people can't seem to achieve closure on key decisions.

What should a chief executive do to determine if this closure problem is slowing down his or her firm's ability to compete effectively in the marketplace? I believe they should occasionally slice through the organization's layers and ask a simple question of mid-level managers? "Are you waiting excessively for certain decisions to be made by senior executives?" If the answer is yes, then the CEO must trace the flow of a few sidetracked decisions to diagnose the problem. If many mid-level managers express the same frustration, then the CEO knows that the firm has a broader cultural problem; it's not just a few poor leaders here and there.

Saturday, November 12, 2011

The "Married Men" Wage Premium

For years, economists have explored the reasons why married men tend to earn more than single men, holding all else equal.  Now we have a fascinating new study that looks at this phenomenon in the context of major league baseball.  Exploring this issue in sports proves fruitful, because we can actually measure individual productivity more accurately using an array of statistics.  Scholars Francesca Cornaglia and Naomi Feldman recently found  that married baseball players also earn more than single players.  However, they found that the married players were NOT more productive than their single counterparts. What could explain the premium then?  Cornaglia and Feldman discovered two interesting nuggets in their research.  First, the married players tended to exhibit a bit more stable and consistent performance.  That consistency might be quite valuable.  Second, they found that having more married players on the team tended to be associated with higher attendance (and therefore, higher team revenue).  The results proved statistically significant.  What could be occurring?  The authors speculate that the married players and their wives might be engaging in a variety of activities that bolster the team's image, and therefore, increase the popularity of the club.  For more on this study, you might wish to listen to this interview with the authors on BBC radio.

Friday, November 11, 2011

What a Job Interviewer Really Wants to Know (or Should Want to Know!)

From Seth Godin's interesting and thought-provoking blog:

What good interview questions are actually trying to discover :
  • How long are you willing to keep pushing on a good project until you give up?
  • How hard is it to get you to change your mind when you're wrong?
  • How much do you learn from failing?
  • How long does it take you to learn something new?
  • How hard is it for you to let someone else take the lead?
  • How much do you care?

Thursday, November 10, 2011

Saturday Night Live's Weekend Update on the European Debt Crisis

The Milkshake Test

The Heath brothers, authors of the best-selling book Made to Stick, have now published a new book: The Myth of the Garage and Other Minor Surprises.  Slate published an excerpt this week, in which they describe a simple test devised by Clay Christensen to evaluate potentially over-hyped new technologies.Christensen calls it the "milkshake test."   Here is a portion of the Heath brothers' article:

Christensen asks us to imagine a group of marketers at a fast-food restaurant who want to sell more shakes. As they comb the customer data for insight, they discover something interesting: Most milkshakes are sold to early-morning commuters who buy a single milkshake and nothing else. Why milkshakes? These commuters, according to Christensen, are “hiring” milkshakes to do a job for them: to supply a breakfast that is filling and nonmessy and cupholder-compatible. So when you evaluate the next big thing, ask the Christensen question: What job is it designed to do? Most successful innovations perform a clear duty. When we craved on-the-go access to our music collections, we hired the iPod. When we needed quick and effective searches, we hired Google. And looking ahead, it’s easy to see the job that Square will perform: giving people an easy, inexpensive way to collect money in the offline world.

The Heath brothers admit that the test is NOT a perfect predictor of which new technologies will thrive and which will turn out to be busts.  It is helpful though.  The "milkshake test" reminds us to focus on what function the product serves for the customer.  Moreover, it reminds us that the same product can do different jobs in different situations.  For instance, a Starbucks coffee at 6:00am does a very different "job" for the consumer than a coffee at 4pm in the afternoon. 

Tuesday, November 08, 2011

New Leaders and the Whole Vision Thing

Barbara DeBuono, CEO of Orbis, sat down recently with Adam Bryant of the New York Times for his Corner Office interview series.   Orbis is a global health organization that helps to treat and prevent blindness.  DeBuono offered some terrific leadership advice:

Let’s start with leadership.  Be very careful that you don’t cut yourself off from everyone, either by hanging out in your office by yourself or hanging out in your office or your suite with three or four key people.  I’ve seen that happen a lot — where people are in their bunker with three or four people, and they block everything else out.  You lose all touch with your external customers and your internal customers, and nobody has a sense of your vision; nobody has a sense of who you are.  I think that’s a huge mistake.  

The other thing is to be articulate early on about what you want to do and who you are, but don’t be afraid to actually say, “It’s not all baked.”  I think a lot of people go into a job as a leader or C.E.O. and say: “I have to have the whole vision thing. I have to have the whole mission thing down, with all the strategic objectives, all the programs to support that, all the pillars — and if I don’t, they won’t take me seriously.” I would say, “Don’t be afraid that you haven’t figured all of that stuff out, because really you should be spending your first six months to a year just learning the organization.” 

How can you articulate a fully baked vision and mission and strategic objectives when you have to learn the business you’re in?  Just learn the business, learn the people in your business, learn what they hope and feel, learn what they think the business is.  Do they understand the business that you’re in?  I’ve always been struck by how often people don’t. 

DeBuono offers two critical pieces of advice there.  First, I can't tell you how many new leaders fall into the trap of spending far too much of their time talking to just a few other senior folks in the organization. They isolate themselves from the troops, because they feel that they have to have a bunch of stuff figured out first before interacting with the front-line employees. That's a mistake. Being visible early on is key. However, DeBuono also suggests that being visible doesn't require having a fully-baked vision ready to be rolled out on Day 1. New leaders can use that early face time to learn, to soak in as much knowledge as they can about the organization. Moreover, that face time offers powerful symbolic value. It shows a level of transparency and engagement that will be respected and valued by the front-line employees. 

Friday, November 04, 2011

Strategy by Rule of Thumb

UNC's Christopher Bingham and Stanford's Kathy Eisenhardt have produced some fascinating new research on entrepreneurial firms make decisions in turbulent environments (building on a long stream of excellent research Kathy has done in this area).  These scholars found that the more successful firms frequently rely on heuristics – simple rules of thumb (example: for international expansion, enter English-speaking countries first).   These heuristics become more cognitively sophisticated as managers gain experience and the firm grows.  Moreover, managers learn how to eliminate some rules of thumb over time, as they recognize the limitations or flaws of certain heuristics.   Bingham and Eisenhardt argue that such simple rules of thumb help guide organizational action more effectively than complex processes and procedures. 

Interestingly, this work seems to stand in stark contrast to the psychological research on cognitive biases.  That stream of research suggests that many heuristics can be problematic.  They can lead to highly flawed decisions.   Bingham explains the dichotomy between his work and most of the studies conducted by cognitive psychologists (excerpt from UNC business school's research insights magazine):

He argues that psychologists reached this conclusion by testing people in lab settings and asked binary choice questions that have a definitive correct answer, such as: Which German city has the higher population, Munich or Dusseldorf? Psychologists say that people often base their answer on the city that is most familiar to them, creating a heuristic of answering what first comes to mind, which might not lead to the correct answer.  “Yet in real life, strategists rarely face such clear-cut situations,” Bingham said. Lab studies often stack the deck against heuristics by putting people in unrealistic situations. But by viewing heuristics in the context of the unpredictable environments in which firms compete, Bingham argued that heuristics can be rational and even optimal strategy.

Thursday, November 03, 2011

Public Speaking in the Social Media Age

Fast Company's Drew Neisser has a good column on public speaking in the social media age.  I thought two of his points are worth emphasizing here, though I recommend reading the whole column.  

First, he argues: "Don’t Panic if They Aren’t Looking at You."   They might be on a portable device, such as an iPad or iPhone.  However, it doesn't mean they are reading email necessarily.  They might be taking notes, or tweeting about your presentation in real-time.  Both of those behaviors could be very productive and useful for you.  If they tweet your message, you could be reaching a much broader audience.  Telling them to put away their devices is NOT the answer, according to Neisser.

Second, he explains: "If You Don’t Speak Twitterese, It’s Time to Learn It."  In other words, you need to share your Twitter handle up-front. In that way, people can share their thoughts about your presentation, and you will be able to see those statements. Moreover, you need to provide some concise phrases and sound bites that will be amenable to tweeting. Think of capturing your message in a few phrases of 140 characters or less.

Wednesday, November 02, 2011

Thinking Inside The Box

Consider this scenario: The CEO decides to hold a special long term strategic planning session. He or she reserves a conference room at an off-site location - perhaps a nice resort. The executive team gets together in a room with a nice oak table, white walls, and leather chairs. The only thing at each seat is a notepad and perhaps a few slides outlining key financial targets. Now the group is commanded to "think outside the box" and create a bold and innovative strategy for the future. Yet, what's really happened is the leader is asking everyone to think inside a rather sterile box! Where is the fuel for innovative thinking? Why not have materials, photos, and videos all over the room to spark dialogue? Why not have rivals' new products on display? Where are the latest prototypes from the firm's R&D labs? To think outside the box, CEOs have to set the stage. They can't just being people to a luxurious, but quite sterile, box!

Tuesday, November 01, 2011

What's Wrong with a Focus Group?

The Wall Street Journal ran an interview this weekend with Ira Neimar, former CEO of Bergdorf Goodman (the luxury retailer).  Neimar offered several of his core principles for running a successful retailer.  Here's one:

"There is no question, in any business, that it is imperative to know as much as possible about your present and potential customer."   The backstory: Mr. Neimark is a proponent of earning one's MBWA degree (Management By Walking Around), interacting with actual customers to find out what's working and what's not. He likens using a focus group to the old New England expression: "It is like kissing a girl through the screen door."

Bottom Line:   Focus groups have significant limitations.  When it comes to learning from focus groups, remember that p often say one thing and do another. Asking individuals questions in focus groups and surveys may yield answers that are not consistent with the way those consumers actually behave in their homes or at retail stores. Moreover, responses may become distorted because market researchers ask leading questions, or simply hear what they want to hear.

Monday, October 31, 2011

Motivation: The Power of Peer Comparison

Ian Larkin of Harvard Business School has conducted a very interesting field study to examine how comparison to one's peers motivates employees.  Larkin conducted a field study at a large enterprise software firm.  The company paid its sales people based on commission, naturally.   However, employees also could receive a nonmonetary recognition each year if they performed better than 90% of their peers.  They could be granted membership into the "President's Club."  The award did not come with extra monetary compensation.  Instead, employees received a gold star on their name card, company-wide recognition, an e-mail from the CEO, and a weekend trip to a tropical destination with the other club members.    Here is what Larkin found:

The software firm uses a "commission accelerator" program over the course of each financial quarter, meaning that a salesperson expecting a high-volume sale at the beginning of a quarter would receive a higher commission on any additional sales in the same quarter. A salesperson expecting a large sale early in the first quarter of the year would rationally want to delay any other potential sales until later in that quarter, so as to take advantage of the accelerating commission schedule.  However, making the sale right away, before the end of the year, could help the salesperson achieve special recognition as a member of the club. Thus, the salesperson faces a choice: delay the sale and garner eventual commission boosts, or make the sale right away and improve the chance of attaining club membership. In the paper, Larkin uses actual choices of hundreds of salespeople facing this decision to statistically estimate the average salesperson's "willingness to pay" for club induction—the point at which a salesperson is indifferent to waiting for greater commissions and closing the deal now and getting inducted into the club. The willingness-to-pay statistic at the software firm is calculated to be nearly $30,000, or approximately 5 percent of take-home pay.  "My research shows that salespeople who are right on the margin of club induction are actually willing to pay to get over the margin and into the club," Larkin says.

What's the implication of this study?  Well, as we have known for some time, social comparison is a very powerful motivator.  People don't simply worry about what they earn. They care about what they earn relative to their peers.  Designing reward schemes with this in mind can result in a more highly motivated workplace.  Disregarding these findings can lead to disenchanted employees.   I recall Michael Lewis writing about this phenomenon in Liar's Poker.  Bankers would receive huge bonuses, but still be very upset, because they learned that others had received higher bonuses.  We might just chalk that up to "banker greed" - but of course, this study and others show that social comparison is a powerful factor across many organizations. 

Thursday, October 27, 2011

Markkula's Three Principles at Apple

In Walter Isaacson's terrific new Steve Jobs biography, we find a description of the simple principles Mike Markkula outlined at Apple's inception. As my students know all too well, I love the concept that strategy is all about making trade-offs. As Michael Porter has said, "The essence of strategy is choosing what NOT to do." Take a look at principle #2 at Apple. From the firm's inception, its leaders understood the criticality of making trade-offs to create competitive advantage and build barriers to imitation. Here is an excerpt from the Isaacson's biography:

Markkula wrote his principles in a one-page paper titled “The Apple Marketing Philosophy” that stressed three points. The first was empathy, an intimate connection with the feelings of the customer: “We will truly understand their needs better than any other company.” The second was focus: “In order to do a good job of those things that we decide to do, we must eliminate all of the unimportant opportunities.” The third and equally important principle, awkwardly named, was impute. It emphasized that people form an opinion about a company or product based on the signals that it conveys. “People DO judge a book by its cover,” he wrote. “We may have the best product, the highest quality, the most useful software etc.; if we present them in a slipshod manner, they will be perceived as slipshod; if we present them in a creative, professional manner, we will impute the desired qualities.

What an amazingly simple, but powerful statement of core principles. Every entrepreneur should take note!

Wednesday, October 26, 2011

TJX: Myths about off-price retailing

USA Today has an in-depth feature on TJX today. TJX is the off-price retailer that operates the Marshalls, TJ Maxx, and Home Goods retail chains. The firm's CEO tackles some myths about her firm's strategy in this article. Meyrowitz explains that the firm does not sell mostly prior season merchandise purchased from liquidators. Here is an excerpt:

"In a rare interview, TJX CEO Carol Meyrowitz explained how conventional wisdom is wrong when it comes to T.J. Maxx and Marshalls. Meyrowitz, 57, has been with TJX for almost 30 years, rising from a buyer in 1983 to CEO in 2007. During that time, the chain has turned into a retail powerhouse, with more than 1,700 stores — nearly as many as Target. She says 85% of what the stores sell is from the same season and same year it was designed for, and 85% is purchased directly from manufacturers. Much is identical to what the brands sell in department stores, she insists. Less than 5% is irregular."

What's interesting is the brands appear to have perpetuated the myth about off-price retailing. Many branded manufacturers do not want to acknowledge publicly that they are selling the same goods at full price in department stores at the same time that these goods are for sale at Marshall's. It seems to me Meyrowitz runs a risk with this interview. Exposing these myths may attract more shoppers to her stores, but it may not thrill her suppliers. They like the myth. If the truth becomes well-known, and TJX attracts more upscale shoppers, it may decrease willingness to pay and margins for the branded manufacturers' products.

Tuesday, October 25, 2011

Clutch Performer or Choker?

Kellogg Insight, a website dedicated to featuring new research by Kellogg school faculty, recently described the work of Julio González-Díaz, Olivier Gossner and Brian W. Rogers.  They conducted a study to examine the question:

"In sports, some athletes are known as “clutch players” who consistently perform well under pressure; in the business world, an individual may gain a reputation for maintaining composure and good judgment in the most trying circumstances, ultimately contributing to their organization’s success.  Does this ability to “rise to the occasion” differ measurably across individuals?"  

Fans of baseball may be aware that sabermetrics experts (such as Bill James) have studied this question for years.  Most of them have argued that there is no such thing as "clutch" players in baseball.  These statistical experts have argued that most players perceived by fans as "clutch performers" don't necessarily perform better in crucial situations.  More recently, some studies have shown that "clutch performers" may exist. 

In this research, the authors focused on tennis.  They looked at point-level data over a twelve year period.  They wanted to know if some players had "high critical ability" - i.e. did they consistently perform well on the most important points?   Here is what they found:

"First, players differed “significantly and substantially” in their critical abilities, and these capabilities were important in explaining point outcomes—that is, players with greater critical ability were more likely to win important points than their opponents. Moreover, critical ability was correlated moderately with serving and returning capabilities. Critical ability was also linked with players’ ratings on the Association of Tennis Professionals (ATP) points system over the 12-year period studied. Critical ability’s correlation with ATP rating was about as strong as the link between returning ability—a crucial skill—and ATP rating. The relationship between critical ability and career success remained even when the researchers accounted for players’ experience levels. For the average professional tennis player, the study found that the impact of improving critical ability on ATP rating is 41 percent that of improving their serve, arguably the most important factor in the sport."

What is the implication for leaders in the business world?   Naturally, if we could identify "high critical ability," that would be of immense value.  Unfortunately, management does not lend itself to the kind of quantitative analysis performed by these scholars with regard to tennis players.   Moreover, we know from many baseball studies that our eyes can deceive us.  Many players regarded as clutch by fans do not actually perform better statistically in important situations over a lengthy period of time (i.e. a player might perform better in the clutch one year, but not the next in many instances).  These celebrated players often simply have had some highly memorable moments where they came through in the clutch... and thereby have been labeled as extraordinary in high stakes situations.  For leaders, the lesson is beware of drawing sweeping conclusions based on one or two isolated moments of greatness in the clutch.  However, don't dismiss the notion of high critical ability entirely. Apparently, at least in tennis, clutch performers do exist. 

Monday, October 24, 2011

Learning from Improv

Russ Meyer has a great article on the Fast Company website.  Meyer offers some solid recommendations for how companies should go about trying to design better customer experiences.  For instance, imagine that you are trying to provide a better after-sale service experience for your customer, or you are trying to redesign the check-out process in your retail store.  Meyer draws on the lessons of Improv comedy to offer his advice to you in these types of efforts.   For starters, he argues:

"In improv, this means don’t disregard premise, no matter how outrageous... In experience design, you can’t start by denying what could be: 'We can’t change the check-in process because...,' for instance. For a great new customer experience to come to life, it will have to break some of the conventions of the current experience. Make sure you’re open, especially at the beginning of a process, to accept what may be an outrageous premise or idea."

Meyer also argues that "thoughtful watching" should be the approach one takes toward discovering a better customer experience.  In Improv, people concentrate intensely on what others are saying, and they listen actively.  Meyer explains, "Sitting back, watching, listening and concentrating on how people are presently experiencing the brand (while leaving yourself open to the outrageous) can identify moments where the experience could be improved."   Similarly, I've argued that systematic observations of customers and front-line employees yield powerful insights regarding your firm's problems and deficiencies, as well as how to improve in the future. 

Friday, October 21, 2011

Ben & Jerry's: Schweddy Balls Not Always on a Shelf Near You

Ben and Jerry's has launched a new flavor called Schweddy Balls, a play on the famous Saturday Night Live skit below.  The ice cream, which contains fudge-covered rum balls, has sparked a protest from a conservative group called One Million Moms.  Moreover, many supermarket chains apparently have refused to stock the product.  Nevertheless, the company reports that it has become one of its best-selling limited edition flavors.

The question is:  Did Ben and Jerry's anticipate the controversy, and if so, did they go ahead anyway?  I suspect they did know that some retail partners would not stock the product, and that some negative publicity would emerge.  In the end, though, you have to ask yourself how you would define the company's target market.  I don't know many moms and dads who buy Ben and Jerry's for their small children.  It's expensive, after all, even if it is terrific ice cream.  If you have a family, you are likely to buy half gallons or gallons of less expensive ice cream.  Perhaps you splurge on occasion for Ben and Jerry's, most likely when you stop at one of their shops.

Who is the target market for Ben and Jerry's?  I believe it's adults with fairly high disposable income who seek a delightful indulgence, some of whom do not have young children at home.  It also includes people who identify with the firm's social mission.  Many people in that target market are not likely to be offended by this flavor.  In fact, the brand will be quite appealing to them, as they have fond memories of this particular SNL skit.

Thursday, October 20, 2011

Katrina Markoff and Vosges Haut-Chocolat

Katrina Markoff made Fortune's list of 40 under 40 this year (just announced this week).  Markoff is the founder of Vosges Haut-Chocolat.  Markoff creates exotic truffles using fine ingrediennts which she personally from around the world.   She developed her skills at Le Cordon Bleu in Paris, where she began to create her unique chocolates, which involve infusions of rare spices and flowers combined with premium chocolate.
Katrina Markoff
Her growth exploded when she began selling her chocolates at Neiman Marcus.  She also has grown her catalog business substantially and operates eight boutique retail locations of her own. 

According to Fortune, Markoff now has agreed to develop a lower-priced line of chocolates for Target and Wal-Mart. Naturally, she follows a long list of designers who have gone this route, creating popular lines at affordable prices ("affordable luxury" if you will).   The move always comes with some risk though.  How does one manage the brand so as not to dilute it?  Beyond that, though, "designers" such as Markoff have to think about how they manage their retailer relationships.  How does one continue to please Neiman Marcus and maintain that strong relationship, while selling lower-priced items at Target and Wal-Mart?  To thrive, designers have to create products of clearly different quality and positioning for the different retailers.  They must really understand the differences in the consumer at each retailer to do that effectively.   Some cannibalization always will occur, but a designer can avoid that if they continue to innovate and first bring exciting new products to their high-end luxury retailers.  Without that "reward", they risk damaging the relationships with those retailers who first helped them build their brand.  They also have to think carefully about WHICH mass merchandisers with which to partner.  Some would question whether it makes sense, for instance, to sell to both Wal-Mart and Target, given Vosques' positioning. 

Wednesday, October 19, 2011

Why Education Without Creativity Is Not Enough

Anya Kamenetz has a terrific article about American education and its effect on competitiveness over at Fast Company.  Kamenetz argues (rightfully, I believe) that a focus on simply cranking out more and better STEM graduates (science, technology, engineering, and mathematics) is not the way to compete more effectively with China and India.  She offers the perspective of one leading executive in the Indian outsourcing industry - Phaneesh Murthy, CEO of iGate Patni.  Here is an excerpt from Kamenetz's article:

If we could just tighten standards and lean harder on the STEM disciplines--science, technology, engineering, mathematics--we'd better our rigorous rivals in India and China, and get our economy firing on all cylinders. As with much conventional wisdom, this is conventional in the worst sense of that word.  If you want the truth, talk to the competition. Phaneesh Murthy is CEO of iGate Patni, a top-10 Indian outsourcing company. Murthy oversees 26,000 employees--not the ones snapping SIM chips into cell phones or nagging you about your unpaid AmEx bill, but the ones writing iPhone apps, processing mortgage applications, and redesigning supply chains--in jobs that would be handled in the U.S. by highly paid, college-educated workers. In other words, you. Yet Murthy, a regular bogeyman of outsourcing, believes American education is by far the best in the world. "The U.S. education system is much more geared to innovation and practical application," says Murthy. "It's really good from high school onward." To compete long term, we need more brainstorming, not memorization; more individuality, not standardization.

Deepwater Horizon Oil Spill

The Ivey Business School Case Collection has now published by new case study on the Deepwater Horizon oil spill.   This case has three primary learning objectives. First, it provides students an opportunity to examine how and why catastrophic failures occur. Second, the case highlights several factors that drive enhanced risk-taking in organizational decision-making. Finally, the case enables students to learn about the characteristics of an effective versus ineffective safety culture.   The case soon will be available through the Harvard Business Publishing website as well. 

Tuesday, October 18, 2011

Does your team trust you?

Mike Figliuolo, author of  One Piece of Paper: The Simple Approach to Powerful, Personal Leadership,  has a great blog post over at The Leader Lab.  Figliuolo is a graduate of West Point and currently serves on the faculty at Duke.  He examines the "real reason your team doesn't trust you."  Figliuolo argues that trust in a leader erodes when the team doesn't know what to expect from you.  He says, "Trust is about an ability to rely upon or expect a predictable outcome.  When you act in ways your team doesn’t expect, it erodes trust and makes them wonder what you’re going to do next." 

Figliuolo goes on to argue that every leader should articulate their own personal leadership philosophy.  They should share that philosophy with their team members.  Finally, they should try to behave in a manner that is consistent with that philosophy on a day-to-day basis.  Consistency of action, in line with your personal leadership philosophy, proves critical to building and maintaining trust. 

Monday, October 17, 2011

Hire for Excellence... in any field

Fast Company has a terrific interview with Oren Jacob, former Chief Technical Officer at Pixar.  Jacob describes some of the key attributes of the Pixar culture and processes.   Among the many great tidbits, Jacob explains a crucial facet of the Pixar hiring process.  He calls it "hire for excellence." Here's the explanation:

When Pixar is evaluating potential hires they look for three traits: humor, the ability to tell a story, and an example of excellence. These aren’t unique qualities to assess in applicants, but how excellence is defined is not that common. It doesn’t matter what you are excellent at, just that you have reached a level of excellence. It’s important that you know what excellence feels like and what it takes to achieve it. It could be gardening, jujitsu, or cooking. The main thing is you’ve had a taste of excellence and will know how to get there again.

I really like the concept of hiring for excellence.   Developing mastery in a particular field or endeavor demonstrates self-discipline, work ethic, and perseverance.   It also means that individuals have probably engaged in the kind of deliberate practice that is required to excel.  Familiarity with that process of learning and development will suit them well when they have to develop new skills and capabilities.   Finding people who have achieved excellence in a range of endeavors also creates a workforce with incredibly diverse perspectives and experiences that they can bring to bear on any problem.