Friday, December 27, 2013

Two Kinds of Questions: Which Do You Ask?

Stanford's Bill Barnett has a terrific blog post about the two types of questions that people tend to ask.   The "showing off" question aims to demonstrate how much we know about a subject.  It might be a "gotcha" aiming to expose the weakness or mistake in a presenter's argument.  The second type of question aims to learn, not to show off.  This question comes from a willingness to be a bit vulnerable, to acknowledge ignorance or a lack of a complete understanding about a subject.  This "learning" question aims not to demonstrate our existing knowledge to others, but instead to deepen our understanding about a particular topic.  Barnett points out that we often fail to ask these "learning" questions because we don't want to look stupid.  We are afraid to acknowledge in front of our peers, subordinates, or superiors that we do not understand a topic completely.   Unfortunately, we limit ourselves when we hold back in such a fashion.  

What type of questions do you ask as a leader?   Moreover, what type of questions do you encourage your team members to ask?  Here are a few clues that someone might be asking a "showing off" question rather than a learning one.  First, do you hear a long preamble before the actual question (or is there actually no question in there at all!)?  Second, does the person's agenda shine through when they ask the question?  Third, what's the person's body language like?   Are they in attack mode in their posture, as well as their words?   Finally, is it a leading question?  Are they clearly fishing for a particular answer?  

Thursday, December 26, 2013

Engaging Your Workers

Business Week interviewed Jim Harter of Gallup about the firm's extensive analysis of worker engagement (or should we say, disengagement) across the United States.  Gallup data show that only 30% of American workers are engaged at their workplaces.  If you think that this problem exists only in the United States, think again.  Harter explained that the global engagement numbers are even lower!  Harter offered some comments based on their analysis of the data:

We see workplaces that have doubled the rate of average engagement, and the variance has a lot to do with the quality of management. Having a manager who really understands the individuals they’re managing and gets them into positions where they can use their talents effectively is really important. And then we’ve also found that individuals knowing what they do best and knowing their talents and being aware of them so that they can then leverage them along with their co-workers is really important.  Another thing that kind of stood out to me in these organizations we studied that grew is they didn’t use the economy and changes in the economy as an excuse. When the economy dropped, they just leaned into it a bit more. 

As for those companies that have moved to open floor plans, well they might want to rethink that design.  Harter reports that people tended to be more engaged if they had "a space that they could call their own."   They enjoy collaborating with others, but they value their own space.   As for telecommuting, it does not harm engagement in general.   In fact, telecommuters tended to report slightly higher engagement on average.  However, the most engaged workers in the Gallup data are actually those who telecommute less than 20% of the time.  

Thursday, December 19, 2013

Peter Thiel: Should He Be Encouraging People to Avoid College?

The Wall Street Journal interviews Peter Thiel today.  Thiel, founder of Paypal, has stirred controversy due to a key initiative of his nonprofit foundation.  Thiel's 20 Under 20 Fellowship offers substantial financial support to young people who will forgo college to work on a startup that can have a significant social impact.  Thiel believes that this "learning by doing" can be more valuable than college for some bright young people.  According to the paper, "So far, 64 Thiel Fellows have started 67 for-profit ventures, raised $55.4 million in angel and venture funding, published two books, created 30 apps and 135 full-time jobs, and brought clean water and solar power to 6,000 Kenyans who needed it."  

Thiel has attracted many critics, including Harvard's Larry Summers and Stanford's Vivek Wadhwa.  What do I think about Thiel's initiative and his views about higher education.  To begin, I agree with Thiel's concerns about the amount of debt many families take on so that a young person can attend college.  Moreover, I do agree that many universities do not provide enough "learning by doing" opportunities.  

However, Thiel should be much more careful about discouraging young people from attending college.  Why?  First, Thiel attended Stanford.  He admits that he would do it again if he had the choice today.   It's easy to talk about pursuing other avenues to success, when you have the comfort of the Stanford brand on your resume, as well as the incredible network that comes with being an alumnus of that prestigious school. Moreover, Thiel relies on graduates of top schools to do the legwork for his venture capital and private equity investments.  He isn't hiring college dropouts to manage his money!  There is more than a bit of hypocrisy here, as we compare actions and words. 

Thiel also does not acknowledge that the rate of failure for many startups is quite high, and that students without a college degree then don't have the diploma to fall back on when they fail.  Sure, they could always attend college later, but that can be difficult.  It's not always easy to attend college later in life when you begin to have family obligations and the like. 

The bottom line: Higher education is very expensive, and families are taking on too much debt in some cases. Still, the average college graduate earns far more than the average high school graduate.  A select few can build a startup and become Mark Zuckerberg or Steve Jobs, people who built amazing companies without a college degree.  Are the odds in your favor though if you pursue their path?  I'm afraid not. 

Monday, December 16, 2013

Beyoncé and the Power of Surprise

Last week Beyoncé stunned the music world with the surprise release of a new album.   Yes, she released 14 new songs and 17 music videos, with no long marketing and public relations buildup over the course of many prior months.  The album's release set social media on fire.  Mashable reported that the album generated 1.2 million tweets in the first 12 hours after the release.  The Twitter volume peaked at more than 5,000 tweets per minute. Did the surprise release make sense?  Would she have been better off doing the usual public relations ramp-up employed by most recording artists?  

Beyoncé's strategy reminded me of a great HBR blog post from May 2013.  Advertising executive Scott Redick penned a post titled, "Surprise is Still the Most Powerful Marketing Tool."  He made several arguments for why surprises can be so effective.   Here's an excerpt:

Surprise is like crack for your brain. Scientists at Emory and Baylor used MRIs to measure changes in human brain activity in response to a sequence of pleasurable stimuli, using fruit juice and water. The patterns of juice and water squirts were either predictable or completely unpredictable. Contrary to the researchers’ expectations, the reward pathways in the brain responded most strongly to the unpredictable sequence of squirts. “The region lights up like a Christmas tree on the MRI,” said Dr. Read Montague, an associate professor of neuroscience at Baylor. “That suggests people are designed to crave the unexpected.” Birchbox, a subscription service that sends customers a box of mystery beauty products each month, and Phish, the rock band that never performs the same show twice, proves that entire business models can be built around this insight.

Redick also argues that surprise can amplify emotions, and that unexpected events often stimulate changes in behavior.  Moreover, he points out that surprise can be fairly inexpensive at times. 

Is surprise always the right strategy?  Clearly not.  In this case, Beyoncé has a huge following.  Thus, she has the luxury of relying on surprise.  She knows that people will notice her album's release, and that it will generate a great deal of online buzz.  For new or unknown artists, surprise used in this manner will not likely lead to such positive results.  For well-known brands in other industries, though, the lesson is clear:  Perhaps the usual formula of publicity prior to a product launch does not always prove to be the optimal strategy. 

Friday, December 13, 2013

Big Monster Toys: When Vertical Integration Provides Speed

Readers of the blog know that, from time to time, I've discussed the costs and benefits of vertical integration.   In many cases, vertical integration can be problematic.  It can increase fixed costs, reduce flexibility in the supply chain, dull incentives, create dysfunctional political bargaining, etc.  However, vertical integration does make sense in some cases (see Apple owning retail stores).    

Can vertical integration make coordination more effective and actually increase speed?  At times, it can. Witness Zara's fast fashion strategy, enabled by vertical integration.  This week, I ran across another company that achieves speed through vertical integration.  In the American Way magazine on my flight yesterday, I read about Big Monster Toys.  The company invents toys, which are sold by major toy companies such as Hasbro and Mattel.    They created "Polly Pockets" and "Uno Attack!".   They also created Hot Wheels' Criss Cross Crash.  How do they achieve remarkable success in the toy design business?  Here's an excerpt from the article:

The train’s-eye view provides the best vantage point of the work floor and the key to BMT’s success: vertical integration. Every function required to make and promote a prototype is performed in-house, from plastic molding to painting, sound engineering to sewing, computer-aided design to animation. “We control everything,” Rosenwinkel says. “We don’t go outside to hire anyone; we don’t have to get on waiting lists to get work done. We are very nimble. We can immediately say, ‘We like this idea. Let’s pull a team together and work on this.’ ”

Many design forms operate this way.  They have all the tools and functions required to build prototypes in house.  That enables them to prototype rapidly, and to smoothly coordinate the activity of designers and builders.   Moving all those functions in-house means that they can adjust and adapt rapidly.  

Thursday, December 12, 2013

Stifling Innovation: The Why vs. How Mindsets

Fast Company's Eric Jaffe reports on some terrific new research by University of San Diego Professor Jennifer Mueller.   The creativity scholar has examined how a person's mindset affects the way that they perceive and evaluate a new idea.  Her work helps explain why large companies often dismiss or reject innovative proposals.   

In one study, Mueller and her colleagues asked subjects to examine four ideas:  two that independent evaluators judged to be creative, and two that were judged to not be creative.  To begin, the researchers tried to establish a certain mindset in the subjects.  Half of the subjects were encouraged to adopt a "why" mindset, while the other half adopted a "how" mindset. A "why" mindset tends examine issues from a broader, conceptual perspective (why might this work?  why might this be a good idea?  why might we want to pursue this approach).  A "how" mindset tends to approach ideas much more narrowly (how could this work? how would we implement this idea?).  

After trying to put people in one or the other mindset, the researchers asked the subjects to evaluate the four ideas.  The scholars found no difference in the evaluation of the non-creative ideas by the subjects in two mindsets.  However, key differences emerged when it came to the ideas judged to be highly creative by independent evaluators.  The people in the "why" mindset found these ideas to be quite creative, much more so than those who had adopted the "how" mindset at the beginning. 

Ask yourself:  Which mindset do you adopt when evaluating bold ideas presented to you?  What mindset is typical of senior executives in your corporation?  Could the mindset that evaluators adopt explain why your firm fails to embrace innovation at times?

Wednesday, December 11, 2013

New Case Study about Trader Joe's

I am excited to announce that David Ager and I have published a new Harvard Business School case study about Trader Joe's.  David is a senior fellow in Executive Education at HBS and a classmate of mine from graduate school.   We are excited to publish this new case that examines the strategy, organization, and culture at Trader Joe's.   

CEOs: Building Empires and Selling Shares at the Same Time?

Many CEOs like doing deals.  Mergers and acquisitions happen for many reasons.   Typically, CEOs argue that synergies exist between the acquiring firm and the target that is being purchased.  However, we sometimes wonder whether CEOs are just as interested in empire building as they are in creating long term shareholder value.   A splashy merger means that their faces end up on the cover of leading periodicals, and in many cases, their compensation packages rise as they come to run larger enterprises.   Do these deals actually create value?  In many cases, they do not.   

Interestingly, Tulane Professor Cynthia Devers and her colleagues have discovered something interesting about the behavior of CEOs involved in acquisitions.  They examined more than 2,000 companies over a 12 year period. They found that acquiring company CEOs are 28% more likely to exercise stock options and 24% more likely to sell shares within three months following acquisition announcements than they are during other periods in which no acquisitions are taking place.  

Hmm... why would these CEOs be selling shares if they were so confident of the synergies that can be achieved as a result of these deals?  Are CEOs telling Wall Street that the whole is worth more than the sum of the parts, while at the same time, they are selling shares because they know that it will be hard to generate enough synergies to justify the takeover premium that has been paid? 
The study of more than 2,000 companies over a period of 12 years finds that CEOs are 28 percent more likely to exercise stock options and 24 percent more likely to sell company stock within three months following acquisition announcements than they are at times in which no acquisitions are announced. - See more at:

The study of more than 2,000 companies over a period of 12 years finds that CEOs are 28 percent more likely to exercise stock options and 24 percent more likely to sell company stock within three months following acquisition announcements than they are at times in which no acquisitions are announced. - See more at:
The study of more than 2,000 companies over a period of 12 years finds that CEOs are 28 percent more likely to exercise stock options and 24 percent more likely to sell company stock within three months following acquisition announcements than they are at times in which no acquisitions are announced.
“Although executives exercise options and sell shares for all sorts of reasons, it does seem odd that they’re especially likely to do so in the aftermath of acquisitions that they presumably engineer for the future good of the company,” says Devers, an associate professor of management at the Freeman School, who carried out the research with Gerry McNamara of Michigan State University, Michele E. Yoder of the University of Wisconsin, Madison and Jerayr Haleblian of the University of California, Riverside.
In the words of the study, “Our findings show that in the quarters following acquisition announcements, CEOs reduced their equity-based holdings by cashing out stock options and selling firm stock…presumably to reduce the exposure of their equity-based holdings to potential firm stock price decreases. Thus, their behavior is inconsistent with the idea that CEOs are confident that their acquisitions will generate substantial long-term shareholder value.”
- See more at:

The study of more than 2,000 companies over a period of 12 years finds that CEOs are 28 percent more likely to exercise stock options and 24 percent more likely to sell company stock within three months following acquisition announcements than they are at times in which no acquisitions are announced.
“Although executives exercise options and sell shares for all sorts of reasons, it does seem odd that they’re especially likely to do so in the aftermath of acquisitions that they presumably engineer for the future good of the company,” says Devers, an associate professor of management at the Freeman School, who carried out the research with Gerry McNamara of Michigan State University, Michele E. Yoder of the University of Wisconsin, Madison and Jerayr Haleblian of the University of California, Riverside.
In the words of the study, “Our findings show that in the quarters following acquisition announcements, CEOs reduced their equity-based holdings by cashing out stock options and selling firm stock…presumably to reduce the exposure of their equity-based holdings to potential firm stock price decreases. Thus, their behavior is inconsistent with the idea that CEOs are confident that their acquisitions will generate substantial long-term shareholder value.”
- See more at:
The study of more than 2,000 companies over a period of 12 years finds that CEOs are 28 percent more likely to exercise stock options and 24 percent more likely to sell company stock within three months following acquisition announcements than they are at times in which no acquisitions are announced.
“Although executives exercise options and sell shares for all sorts of reasons, it does seem odd that they’re especially likely to do so in the aftermath of acquisitions that they presumably engineer for the future good of the company,” says Devers, an associate professor of management at the Freeman School, who carried out the research with Gerry McNamara of Michigan State University, Michele E. Yoder of the University of Wisconsin, Madison and Jerayr Haleblian of the University of California, Riverside.
In the words of the study, “Our findings show that in the quarters following acquisition announcements, CEOs reduced their equity-based holdings by cashing out stock options and selling firm stock…presumably to reduce the exposure of their equity-based holdings to potential firm stock price decreases. Thus, their behavior is inconsistent with the idea that CEOs are confident that their acquisitions will generate substantial long-term shareholder value.”
- See more at:

Tuesday, December 10, 2013

Does Creating a Subculture Encourage Innovation or Create Problems?

Alexa Clay has an interesting article at Fast Company titled, "5 Tips for Growing Changemaking Communities in Your Company."   She makes the argument that successful intrapreneurs and change agents build coalitions, develop allies, and foster a community of like-minded folks who can help them enact change.   Here's one of her five tips:

Foster a subculture:  Often social intrapreneurs are adept at creating mini subcultures within their host organizations. But at times, it might feel like the culture you’re trying to create is not reconcilable with the culture of your organization. Ask yourself what is the delta behind the culture that is and the culture that you are trying to create. And the delta should be fairly small. Most people don’t like massive change.

Clay makes a great point here.   Creating a strong sense of team identity for a group of change agents can be a powerful tool for enhancing intrinsic motivation and driving performance.  People love to be part of something unique, and they like feeling as though they are part of something that is going to make a significant impact.   As you build a subculture and foster team identity, you can create a strong in-group vs. out-group dynamic though.   That schism between your group and others can be problematic.   You have to careful not to drive too large a wedge between your subgroup and the broader organization.  If you do, it can be difficult to then build support within or access resources from other parts of the firm to make your change successful.  

Monday, December 09, 2013

Managing Generation Y

Brian Halligan, CEO of HubSpot, has an interesting take on managing Generation Yers in a recent New York Times Corner Office column:

We’re trying to build a culture specifically to attract and retain Gen Y’ers. I just think cultures are stuck in the 1990s and don’t match the way Gen Y’ers work. So we set it up for them in a way that they really like. They want to work wherever they can work. They want a ton of freedom. They want to change jobs every six months, so we’re very aggressive about pushing people around to different jobs. They care less about money and more about learning. We want there to be a certain percentage of the company that moves every three months between departments and does new jobs. One of the things I track is what percentage of the company changed jobs in the last three months. If that’s flattening out, I get worried because I know these Gen Y’ers will leave if they’re not moving around. 

In general, I think Halligan has hit the nail on the head.  However, I would offer one word of caution. The desire to move people around frequently must be considered in the context of the business.  In some companies, we can put people on projects of very limited duration, and within several months, measure the results of that person's work on a particular project.  In those situations, frequent rotations can make a good deal of sense.  However, in other situations, the projects or the nature of the work require a longer period of time to truly evaluate a person's effectiveness.  In those situations, rotations must be managed carefully. You don't want to reward someone for launching initiatives without ever seeing if they can implement effectively.   

Friday, December 06, 2013

The Controversy Sweet Spot in Marketing & Public Relations

Wharton Professor Jonah Berger has conducted some fascinating research on the role of controversy in marketing and public relations.  Berger and his co-author, Zoey Chen, discovered that increasing the level of controversy can increase the volume of online conversation about a company or brand.  However, the relationship is not linear.  A moderate level of controversy increases conversation.  Increasing the controversy even further, though, starts to dampen the level of online conversation.  

In one study, they examined 200 articles posted on a particular online site, and they asked independent evaluators to rank them in terms of level of controversy.  Then they counted the number of online comments posted by readers.  They found that higher levels of controversy increased the number of online comments up to a moderate level of controversy (4.6 on a 7.0 scale).  Beyond 4.6, however, they found that high controversy articles tended to elicit a lower number of online comments.   In a series of experimental studies, Berger and Chen confirm this same curvilinear relationship. 

Berger notes that high controversy diminishes online conversation because people sometimes feel uncomfortable chiming in on a highly explosive topic.  Berger says, "“At the core, the key [question] is … how will talking about an issue affect how people see me?”  

Berger argues that the findings do not suggest that firms should avoid controversy.  However, they should consider the "sweet spot" for their firm.   That sweet spot will differ among firms.  In some cases, controversy quickly creates a great deal of discomfort.  Thus, the controversy doesn't create the online buzz that they seek.  People instead get quiet, for fear of how others will perceive them.  For other companies, it takes quite a bit to reach that level of discomfort where online conversation, buzz, and word-of-mouth actually becomes suppressed.  

Thursday, December 05, 2013

Overconfident CFOs

Strategy and Business reports today on a new study by Itzhak Ben-David, John R. Graham and Campbell R. Harvey.   They examined the accuracy of predictions by chief financial officers (CFOs).  They examined over 13,000 surveys of chief financial officers in 2011.  What did they find?  "Instead of hitting the right range 80 percent of the time, the CFOs were correct in only about 36 percent of the cases when predicting the market’s point total a year out, the authors found. Even during the least volatile periods in the sample, CFOs had only a 59 percent success rate."  

Psychologists, of course, have long known that human beings are subject to an overconfidence bias.  Interestingly, this study shows that the overconfidence extends to projections about company performance as well.  According to Strategy and Business, "CFOs who erred on market forecasts also tended to provide unrealistic estimates of returns on investment for their firm’s projects. These hubristic CFOs failed to anticipate volatility and risks, even when they could look to benchmarks like their firm’s return on invested capital as a basis for their predictions."  

What I do take away from this study?   In many companies, the senior management team looks to the CFO to be the "voice of reason" or the "force for restraint" in the face of ambitious executives who want to invest, grow, and expand.  This study shows that many CFOs may not be effective forces of reason and restraint. Instead, their overconfidence may add fuel to the fire when it comes to flawed strategies.  Far from being the cynic or the ultra-conservative person watching the pennies closely, some CFOs may dramatically underestimate the risks associated with certain investments.  Moreover, they may support rosy projections for the future. 

IBM Embraces Crowdfunding Internally

We have all become familiar with popular crowdfunding platforms such as Kickstarter over the past year.  Now IBM provides us with an interesting example of how a company can put the concept to work inside the corporation.  For years, IBM has tried to nurture innovation through various special structures and processes, recognizing that traditional resource allocation processes in large, complex organizations often stifle breakthrough ideas.  For instance, David Garvin and Lynne Levesque wrote a famous Harvard Business School case study about IBM's Emerging Business Opportunities program developed by Bruce Harreld and others about a decade ago. 

Now, IBM has brought crowdfunding inside the firm to nurture innovation.  At this point, they are focusing particularly on ideas that can improve the way work gets done internally.  It will be interesting to see if they apply the concept to product innovation as well.  Here's an except from an article in Fortune about the new program:

As with Kickstarter, IBM employees can get involved by submitting an idea, by critiquing it and suggesting improvements, or by investing in it. Submitters set a funding target to cover the cost of basic coding, architecture, and testing. They can also enlist teams of IBMers who volunteer their expertise to help develop projects that interest them. Employee backers support proposals they like by voting in $100 chunks (up to a maximum of $2,000 per employee) that come out of a $300,000 fund supplied by the CIO Lab.  "Once the total amount of support reaches $25,000, we fund the project and move forward with it," says LeGoues. 

IBM reports that more than one thousand employees have participated, and twenty proposals have been funded to date.  I'm encouraged that a large firm such as IBM would embrace this novel concept and apply it to their work.  Large firms often struggle with innovation for a wide variety of reasons, as we all know.  Leaders at such complex firms must find special ways to surface new ideas, vet them, and fund the best ones.  Perhaps crowdfunding in this way may become a key tool for supporting intrapreneurship in large organizations.  

Tuesday, December 03, 2013

60 Minutes Apparently Airs Infomercials Now

What was that on Sunday night on the CBS 60 Minutes program?  Charlie Rose interviewed Amazon founder Jeff Bezos in a roughly 15 minute segment on the popular news show.  In the now infamous interview, Bezos unveiled his vision for how drones might someday deliver Amazon products to people's homes.  Rose swooned.   But wait... did anyone at 60 Minutes even bother to think about the timing of the interview?  It ran on the DAY BEFORE CYBER MONDAY!  It amounted to a huge 15 minute infomercial for Amazon on the day before the biggest online shopping day of the year.  Where is the journalistic integrity here?  Did anyone at CBS even question the timing?  Of course, Rose didn't ask much about a tiny little word that somehow conveniently never receives much attention when journalists swoon over Bezos (shhh... let's not talk about profit, or the lack thereof).   I don't blame Bezos or Amazon here.  They had an opportunity to participate in a feature on a highly popular news show.  They took advantage of the opportunity for some great public relations.   The fault here lies entirely with Rose and the 60 Minutes producers.  When do the small independent merchants in every small town in America get there 15 minute infomercials on CBS? 

Tuesday, November 26, 2013

Father Guido Sarducci's Five Minute University

Thank you to my colleague, Professor David Ketcham, for pointing me to this hilarious video featuring the famous comedic character, Father Guido Sarducci.   The video is very funny, in part because it contains a kernel of truth about college education in America.  

Monday, November 25, 2013

The Myths of Creativity

David Burkus has published a new book titled The Myths of Creativity.  I highly recommend it.  In the book, Burkus explains how creativity truly works, drawing on the latest research as well as plenty of compelling examples.  Here are a few myths that he exposes:

  • The Eureka myth:  the truth is that most great creative ideas do not emerge in a flash of instant brilliance. 
  • The Lone Creator myth:  the truth is that many great ideas are works of collaboration, not the product of a lone genius. 
  • The Brainstorming myth:  the truth is that brainstorming itself is not a bad thing, but the notion that it will produce a fully formed idea that translates directly into a successful innovation... that's a mistaken belief. 
  • The Constraints myth:  the truth is that creative potential is not necessarily diminished by constraints.  Constraints, indeed, can be helpful in the innovation process.
To learn more about the book, check out this feature on CBS This Morning about Burkus' work.

Friday, November 22, 2013

Should You Trust the Expert?

On the Washington Post website, Darden Business School Professors Yael Grushka-Cockayne and Kenneth C. Lichtendahl Jr., ask the provocative question: Is it better to trust the best expert, or the average of a group of experts?  They examine this question in the context of economists forecasting economic growth for the Wall Street Journal.  They remind us about the concept of "the wisdom of crowds" described so eloquently by James Surowiecki of The New Yorker.  Then, they describe research by two Duke professors, Rick Larrick and Jack Soll:

Rick Larrick and Jack Soll, business professors at Duke University, have shown that when given a chance to do so, people often prefer to rely on experts. In laboratory experiments, they found that where experts disagreed, people would deem the “most able” among them and trust that individual’s judgment more.  Despite this perception, the average forecast often outperforms the best individual’s forecast. Such outperformance happens when forecasts bracket the true result. 

In their column for the Washington Post, the two Darden Professors examine past data from the Federal Reserve Bank of Philadelphia, an institution that surveys economists and relies on averaging of the individual forecasts.  They found that, "The crowd beat the expert in 63 percent of the 40 quarters. Not surprisingly, any two forecasters in the survey often bracketed the truth, bracketing on average 28 percent of the time."   

No surprises here... we have known about the wisdom of crowds for some time.  What is fascinating is that people tend to want to rely on the individual expert.  They prefer the expert over the crowd... absolutely the wrong strategy.  

Thursday, November 21, 2013

Our Environment Shapes Our Behavior... even though we don't always recognize it!

Several years ago, Michael Mauboussion wrote a good book titled, "Think Twice: Harnessing the Power of Counter-intuition."  At one point, he describes an experiment by Adrian North, David Hargreaves, and Jennifer McKendrik regarding the sale of wine in supermarkets.   Researchers examined whether consumers would choose a French or German wine, when the products were placed next to each other on the shelves.   In some weeks, French music played in the aisle.  In other weeks, German music played.  Consumers said that the music did remind them of the associated country, but they said that the music had no impact on their buying decision.  However, they were completely wrong!  Consumers bought French wine 77% of the time when French music played.  However, when German music played, they bought German wine 73% of the time.  

What's the lesson here?  Our environment really does shape our behavior, and we often underestimate how much the situation/environment influences us.   It's very easy for us to believe that we would have behaved differently than others or made a different decision than the flawed choice they made in a particular circumstance.   Yet, what would have happened to us given those same situational factors they faced?  When I teach a case on the Columbia space shuttle accident, many students and executives often indicate that they would have behaved differently than the engineers there.  They claim that they would have spoken up more forcefully about the dangers of the foam strike and the need for more investigation.  Would they really have behaved differently? It's easy for us to say that we would act differently, but are we recognizing and admitting how much environment, culture, and situation shapes our actions? 

Wednesday, November 20, 2013

Power Corrupts: When Leaders Dominate the Conversation

Francesca Gino, Leigh Plunkett Tost, and Richard P. Larrick have conducted a fascinating study on power and leadership.  For one of their experiments, the scholars used the Everest Leadership and Team Simulation that Amy Edmondson and I developed.   The simulation enables students and executives to learn by doing. They experience challenging team decision-making in a virtual climb of the world's tallest mountain.   Participants work in five-person teams in this virtual climb, and they face increasingly challenging decisions as they ascend the mountain.  One person serves as the leader.  Four others adopt pre-assigned roles, such as a team physician and team photographer.  

The scholars decided to modify the simulation, by asking some leaders to consider a time when they had control/power over others.   They asked those leaders to write about that situation, prior to conducting the simulation.   Other leaders did not engage in this "priming" exercise.  What did they find?   The "high-power" leaders (those primed to think about a situation in which they exercised power/control over others) tended to dominate the group conversation.  Their comments accounted for 33% of the air time during group deliberations in the simulation.   The other leaders only spoke 19% of the time!   Did the difference in leader behavior affect group performance?  It did!  The groups with "high-power" leaders achieved 59% of their goals (slightly below average in my experience running the simulation).   The teams without a dominating leader achieved 76% of their goals, a very solid performance.  Why?  The teams with a dominating leader missed key clues and did not share and integrate information effectively.  Gino explains, "Even subtle ways of making people feel powerful have powerful effects on behavior." 

Imagine, then, the effect that truly powerful executives have on group deliberations.  If this simple "priming" had such a significant effect, what is the impact of a dominating, charismatic, powerful chief executive in "real world" settings?

Tuesday, November 19, 2013

What Did the Dissenter Say? Great Question!

This week, the New York Times Corner Office column (by Adam Bryant) features an interview with Bob Pittman, CEO of Clear Channel Communications.  You may also know Pittman as the person who oversaw the creation and launch of MTV back in the 1980s.  In the column, Pittman talks about the value of dissent, a topic about which I have written extensively over the years.  Here is what he says:

Often in meetings, I will ask people when we’re discussing an idea, “What did the dissenter say?” The first time you do that, somebody might say, “Well, everybody’s on board.” Then I’ll say, “Well, you guys aren’t listening very well, because there’s always another point of view somewhere and you need to go back and find out what the dissenting point of view is.” I don’t want to hear someone say after we do something, “Oh, we should have done this.”  I want us to listen to these dissenters because they may intend to tell you why we can’t do something, but if you listen hard, what they’re really telling you is what you must do to get something done. It gets you out of your framework of the conventions of what you can and can’t do. 

I love the question:  What did the dissenter say?   Often, people come to the leader with a recommendation.  They are both the advocates for a particular plan, as well as the primary information gatherers and analysts of the situation.   They clearly have strong vested interest. (bias!)   Asking about the dissenters insures that you are not simply hearing advocacy.   Moreover, it enables the leader to dig into the advocates' decision-making process a bit.  Did they reach out to hear opposing opinions at all? Did they consider alternatives?  Did they probe and test their assumptions?  If they stumble on this question, then you know that their decision-making process has key weaknesses.  At this point, as a leader, you can conclude that you are not in a good position to make a tough call.    Your team is not providing you with the right information, analysis, and advice.  

Thursday, November 14, 2013

Being a Smart Protege

In this terrific Wall Street Journal column,, and Kathy E. Kram offer eight tips for "being a smart protege."  We know that many young people are being encouraged to find a series of professional and personal mentors.   That advice begs the question:  How does one become a good protege?  What does it take to be successful in a mentoring relationship?  Chandler, Hall, and Kram offer some good recommendations.   In particular, I like their thoughts on how to "make it mutual."  Here's an excerpt:

Mentoring networks involve shared learning between two people. Too many people enter the relationships thinking of themselves as plebeian protégés who get support. Savvys, on the other hand, realize they have something to offer their mentors, too, and help them out whenever they can—which gives the other person a deeper vested interest in them.

Mentoring should be a two-way street.  Are you in an industry facing rapid technological change, or being disrupted by new internet-based technologies?  If so, senior executives may need to hear from young voices.  They may need to understand how millenials think, act, and consume products and services.   In some cases, firms will have established reverse mentoring programs, so that the veteran employees can learn from the millenials.  Suppose, though, that your firm has NOT embraced such a cutting edge program.  As a protege, you can still work on making a mentoring relationship mutual, by offering insights about societal and technological trends, and by letting the senior person "hear the voice of a millenial" on key issues.  In short, as a protege, you can become a "mini-focus group" for the senior executive. You can offer them insight into how millenials consume (or don't consume) the firm's products.  By offering that perspective, you can make a mentoring relationship mutual and provide real value to that mentor and the firm as a whole.  

Here's the key though:  Don't bring your opinions to the table.  Bring your data.  Bring insight into how millenials think and act, rather than offering your view on what the firm should do.   It can easily be considered brash and arrogant to start telling senior executives how to change the firm's strategy.  However, offering them insight into consumer behavior (just the facts) can help guide them to a rethinking of an outdated strategy, while avoiding a defensive response. 

Wednesday, November 13, 2013

How do we value things?

NYU Professor Adam Alter wrote an article for The New Yorker recently, in which he examined why we often do not value things properly.  He tells the story of how an elderly man tried to sell eight spray-painted canvasses in Central Park on a recent weekend.  The canvases were painted by a highly accomplished British artiest, who had sold two of pieces for more than $3 million several years ago.  Yet, on this Saturday, the elderly man selling these pieces on Banksy's behalf could not command very high prices.   In fact, the art was worth more than $225,000, yet he collected only $420.   Wow.  What an amazing disparity!  Why?  Alter argues that, 

"Beer and art share an awkwardly named property: they’re “inherently inevaluable.” Some concepts are easy to evaluate without a reference standard. You don’t need a yardstick, for example, when deciding whether you’re well-rested or exhausted, or hot or cold, because those states are “inherently evaluable”—they’re easy to measure in absolute terms because we have sensitive biological mechanisms that respond when our bodies demand rest, or when the temperature rises far above or falls far below seventy-two degrees. Everyone agrees that three days is too long a period without sleep, but art works satisfy far too abstract a need to attract a universal valuation."

In these situations where products are "inherently inevaluable," we look to certain cues to try to ascertain the value of an item.  Unfortunately, we pay attention to all the wrong cues.  Is the product sold at a fancy hotel or a cramped restaurant with outdated furniture and decor?   Is the product sold by someone in a fancy suit or a shabby t-shirt and jeans?   As Alter says, " We’re swayed by all the wrong cues, and our valuation estimates are correspondingly incoherent."   Think for a second about the types of products that you buy that may not be easy to value.  What cues command your attention?  Now, think about the products your firm sells.  What cues do you present the customer?  Are they helping to increase or decrease the perceived value of that product?

Beyond Big Data

Here's a terrific short video from the University of Chicago's Booth School of Business.  The video explores the latest trends in consumer research.

Tuesday, November 12, 2013

Disney, Marvel, and Netflix

The Wall Street Journal reported last week about a new agreement between Disney and Netflix.  According to the newspaper, 

Walt Disney and Netflix unveiled a deal for multiple original live-action series based on four of Marvel's most popular characters to be shown exclusively on Netflix's streaming-video service.Under the agreement, Marvel will develop four serialized programs—"Daredevil," "Jessica Jones," "Iron Fist" and "Luke Cage"—leading to a miniseries programming event for Netflix. Netflix has committed to a minimum of four, 13-episode series and a culminating Marvel's "The Defenders" miniseries. 

What's the logic here?   I think Disney has not only found a new outlet for its content, but it has found a creative way to experiment with new vehicles for some of its Marvel characters.  If one of the characters becomes highly popular on Netflix, it can then choose to build feature film vehicles for these characters.  Netflix then becomes a way to experiment, as well as a way to build audience in anticipation of a feature film release.  Netflix also may offer a better fit from a distribution perspective than some of Disney's own networks (such as Disney Channel or ABC Family).  For Netflix, it offers more exclusive content to attract loyal subscribers.  It seems like a win-win for both parties.  

Monday, November 11, 2013

Veterans Day 2013

On this Veterans Day 2013, thank you to the men and women who have served our nation and defended our freedoms.   We are very grateful for your service and your sacrifice.

Saturday, November 09, 2013

Mental Fatigue and Ethical Behavior

The Wall Street Journal reports today on a study by Maryam Kouchaki and Isaac Smith published in Psychological Science.  In a series of experimental studies, their research shows that people have a great tendency to engage in unethical behavior in the afternoon than in the morning.  Why?  According to the newspaper, "The researchers found evidence that, as the day wears on, mental fatigue sets in from hours of decision making and self-regulation, raising the odds of transgression."  It makes me wonder... have any studies examined whether people are more likely to engage in unethical behavior while multitasking?  Does distraction work in the same way that fatigue does, raising the odds of transgressions? 

Friday, November 08, 2013

Could Disney Sell ABC?

The Wall Street Journal reports today that Walt Disney CEO Bob Iger indicated that the company would not be divesting its local television stations.  He said that, as long as the firm owned the broadcast network, it would also stay in the business of operating some local affiliates.  However, when pressed as to whether Disney might consider divesting both ABC and the local affiliates, Iger seemed more noncommittal.   

In my strategic management courses, I push my students to consider the merits of Disney's vertical integration strategy with regard to the purchase of ABC in the 1990s.   Interestingly, many entertainment firms pursued vertical integration strategies at that time (think AOL-Time Warner and Viacom-CBS), but many of those companies have reversed those strategies in recent years.   I often remind students that herd behavior happens in industries... in the 1990s, vertical integration became the conventional wisdom.  At a second glance, there are many arguments against the purchase of a broadcast network by a content provider such as Disney.   Here are two stock charts.  The first shows the Disney stock performance from the day Michael Eisner became CEO until the day prior to the announcement of the ABC deal.  The second shows the stock performance from the day of the deal until Eisner's resignation.   As you can see, the stock outperformed the S&P 500 index by a wide margin prior to the deal, but underperformed after the acquisition.  Clearly, other factors caused the subpar performance post-deal, but still, the chart suggests that this vertical integration play may not have been as positive as envisioned at first.  


Thursday, November 07, 2013

Walking the Walk on Corporate Integrity

Scholars Paola Sapienza, Luigi Guiso and Luigi Zingales have conducted interesting new research on the topic of corporate values and integrity.    Kellogg Research Insights reported on the research. In that article, Sapienza notes, "We didn’t find any correlation between the cultural values that a company advertises and what its employees perceive from the inside once they're working there."  In other words, it really didn't matter whether a company crowed about its values and integrity on its website or on other publicly available documents.  The bottom line:  employees watch what managers do, not just what the company says on paper.   Employees make an independent determination as to whether the company and its senior leaders have integrity.  They watch to see who walks the walk, as opposed to worrying simply giving credit to those who talk the talk about integrity.

Ok, the research results don't surprise most of us (that doesn't stop scholars from claiming that their findings are surprising... it helps get you published, after all!).   Still, the findings should remind us to take another look at how we "walk the walk" at our firms.  As leaders, what do we do that might contradict public proclamations about values and integrity?  Have we given our employees any reason to doubt the authenticity of our claims about honesty, integrity, and respect for one another?  

Tuesday, November 05, 2013

Sitting All Day is Killing Us

Last night, Martin Keen spoke here at Bryant University.   Keen is the co-founder of Keen Footwear.   Several years ago, he sold his stake in that company and founded Focal Upright Furniture.  The company offers "all the advantages of a standing desk with the ingenious option to relax on the Lotus leaning seat."   The design for his upright desks has earned numerous awards.  Google and Apple have both purchased some of his products.   

Keen spoke about how sitting at our desks all day is harmful to our health. He showed how the typical human's spine looks very different today than it did 100 years ago, when we were much less sedentary.  It was a fascinating discussion worth thinking about as we design our office spaces and consider how we accomplish our work.  For more on "sitting disease" see Nilofer Merchant's TED talk below.  

Monday, November 04, 2013

Amazon, TV Pilots, and the Wisdom of Crowds

On Saturday, the Wall Street Journal reported on Amazon's attempt to develop original television programming (similar to Netflix's entry into this market).   Here's an excerpt from the article that describes how Amazon's efforts differ from the way the large television networks launch new shows:

A group of 14 "pilot" episodes had been posted on the company's website a month earlier, where they were viewed by more than one million people. After monitoring viewing patterns and comments on the site, Amazon produced about 20 pages of data detailing, among other things, how much a pilot was viewed, how many users gave it a 5-star rating and how many shared it with friends.Those findings helped the executives pick the first five pilots—winnowed down from an original pool of thousands of show ideas—that would be turned into series. The first will debut this month: "Alpha House," a political comedy about four politicians who live together, written by Doonesbury comic strip creator Garry Trudeau.

Amazon is taking advantage of the wisdom of crowds.   Traditional networks use focus groups to test out ideas for new shows.  Aren't thousands of reviews better than the responses from a small number of people in focus groups?  After all, focus groups can be very problematic, and not simply because of the small sample size.  Well... it depends.  The wisdom of crowds works when the responses from a larger, diverse audience are INDEPENDENT of one another.  In other words, the wisdom of crowds works when each individual response does not influence the response of others.  Does independence hold when it comes to online reviews, or does herd behavior take place?

Tim Harford of the Financial Times asked this question in a recent column.  He cites an interesting study that I blogged about earlier this fall.  According to the Wall Street Journal, researchers Muchnik, Aral, and Taylor found that, "positive online ratings can be strongly influenced by favorable ratings that have come before."  They discovered that initial positive ratings did create herd behavior.  Ratings that followed were more likely to be positive as a result of the influence of the initial evaluations.  According to Harford, "Positive comments tended to attract birds of a feather – a comment sent into the online world with a single positive vote attached was 30 per cent more likely to end up with at least 10 more positive votes than negatives."  Interestingly, initial negative ratings did not lead to similar herd behavior.  People who liked a product often chimed in to "counterbalance" an early, unusually negative review. 

Friday, November 01, 2013

Intuit Founder Scott Cook: Experimentation vs. Powerpoint

In a Fast Company interview, Intuit founder Scott Cook talks about a key lesson he learned about decision-making processes.   He regrets that too many decisions are made through a series of meetings, where people present their ideas to folks at higher levels in the organizational hierarchy.  Multiple reviews take place, as senior people scrutinize the proposals generated from below.  Powerpoint dominates these meetings.  Yet, despite all this review and critique, many poor decisions get made.  Cook advocates for a shift from decision-making by persuasion and Powerpoint to decision-making by experimentation.  Here's an excerpt:

There's a pattern here. Both companies make much better decisions because they don't rely on hierarchy, PowerPoint, persuasion. They're making decisions based on real experiments. So I said, wait a minute. Whenever reasonable, let's move from decisions by persuasion to decisions by experiment.  Three things happen. One, you make better decisions because it's actually real consumers or real production methods that aren't based on theory or a PowerPoint. It's based on real results. That's one.  Two, you enable your most junior people to test their best ideas, and when in you're doing PowerPoint presentations, whose ideas are most likely to get lost?  The third is, you get surprises more often, and surprises are a key source of innovation. You only get a surprise when you are trying something and the result is different than you expected, so the sooner you run the experiment, the sooner you are likely to find a surprise, and the surprise is the market speaking to you, telling you something you didn't know.

Cook does a very nice job here of explaining three key virtues of a shift toward experimentation.  I often advise executives that experiments can be a very effective tool for resolving key differences of opinion.  I encourage leaders to stimulate constructive debate.  We make better decisions if we encourage dissenting views.  However, sometimes we then find ourselves in a difficult spot.  An impasse emerges, and it's not clear how to resolve the differences of opinion that have emerged.  In those instances, how can we manage the conflict constructively?  One way to do so is through experimentation.  Rather than continuing to hold meetings and debate the issue, we can shift toward experimentation. Ask yourself: What are some of the key assumptions and hypotheses at the core of the arguments being made?  What could we do to test some of the key assumptions and hypotheses that have been put forward here?  Experiments, then, can become a way to manage conflict constructively and advance a decision-making process that is stuck in a stalemate.  

Thursday, October 31, 2013

World Series Champions!


Network Effects in Reverse: Facebook's Problem with Teens

Facebook spooked investors yesterday when it announced earnings.  Actually, profit levels themselves were not the problem.  Facebook reported robust financial results.  However, management informed investors that the number of teens visiting the site declined in this recent quarter.  What's happening?   I believe that teens are migrating to other social media sites, one of which Facebook now owns (Instagram).   I hear many parents of middle school and high school students noting that their kids are not asking first to join Facebook.  Instead, they are first asking to join Instagram or some other social media sites.   

Here's the potential bigger problem coming down the road for Facebook.  When you are growing as a social media site, you have network effects in your favor.  The more users on the site, the more value per each user - it's a virtuous cycle.    However, when the number of users begins to decline, you have the potential for a downward spiral to begin.  As someone's friends leave Facebook (or don't join in the first place), he or she derives less value from the platform.  Then that person defects perhaps.  Their friends now derive even less value from the site, and they may defect.  We've seen this story before, of course... just ask the folks at MySpace.  Now, I'm not predicting such a dramatic fall for Facebook, but I am suggesting that investors have a right to be worried about the drop in teen usage.  It will be an interesting metric to watch going forward.

Wednesday, October 30, 2013

Making Career Choices: Professor G. Richard Shell

Here's a great video for those embarking on a transition in their career (graduating from college, changing jobs, switching careers, etc.).   The video features Wharton Professor G. Richard Shell discussing his new book, Springboard: Launching Your Personal Search for Success

Tuesday, October 29, 2013

It's Time for Sears to Sell Lands' End

Sears has been on a slow slide to extinction for some years, even decades.  Now we hear that Sears is considering the sale of its Lands' End business unit.  Well, it's about time.   Whenever we look at a corporate strategy, we have to ask the following question about each business unit:  Is it truly better off as part of this corporation, as opposed to being on its own or part of some other organizational arrangement?   In this case, you have to ask:  Does Lands' End benefit from being part of Sears?  Is it perhaps disadvantaged because it is part of a struggling retailer?  This article in Business Week makes a good case for why Sears should divest Lands' End.  Several good arguments can be made.  First, Lands' End could benefit from being a smaller, focused company with all attention focused on growing its online business (it already has a strong catalog business and a decent presence online).   Second, it would not be battling for capital within a larger corporation that has liquidity issues and clear capital constraints.   Third, the company may be able to attract more talent as a focused entity, as opposed to being part of a struggling giant such as Sears.  Does a young talented fashion merchandiser want to work for Sears?  Might they work for a Lands' End brand that is owned by a private equity firm instead?    Finally, Lands' End may actually be harmed because, as the article suggests, "Being close to Diehard batteries or Kenmore dryers doesn’t do much for an apparel line looking to burnish its fashion cred."  

Saturday, October 26, 2013

Does Going Public Harm Innovation?

A new study by Wharton management professor David Hsu and Insead Professor Vikas A. Aggarwal,  suggests that IPOs may be a damaging event for some startups.   Their work suggests that going public actually decreases the amount of innovation at firms.   According to Knowledge@Wharton,

The researchers find that the level of innovation is highest among privately held start-ups and lowest in businesses that go public, while acquired companies fall somewhere in between. Hsu and Aggarwal discovered that pivotal to this ordering of innovation outcomes is the level of public scrutiny the company gets rather than the degree to which key players are leaving the company.

The scholars find that investors and Wall Street analysts focus a great deal of attention on short term performance.  As a result, many startups sacrifice the types of long run investments required to drive innovation, so as to maximize short run performance.   Moreover, being a public company makes it more difficult to experiment.  The markets tend to not be kind to failed experiments.  Of course, experimentation is a key innovation tool for startups.  For more on this research, click here

Thursday, October 24, 2013

Gladwell's New Book

Malcolm Gladwell has written an entertaining and insightful new book titled David and Goliath.  The book examines how the disadvantaged may not be as disadvantaged as we think in some cases.   I found the book very interesting, though I acknowledge the merits of some heated criticism that the book has received.  Scholars take issue with the way Gladwell chooses selectively from the academic literature to support his points, without always examining the entire range of studies on a topic.   Still, he raises some great points.  His chapter on why smaller class sizes don't necessarily raise academic performance is a tour de force.  I'm sure he won't be getting invited to as many cocktail parties in Manhattan after some people read that chapter! 

I would like to focus in for a moment on how a key theme from the book connects with some foundational scholarship in the field of business strategy.   Harvard Professors David Yoffie, Jan Rivkin, and Michael Porter have argued for years that successful entrants often take advantage of the rigidities associated with the historical commitments that incumbent players have made.  Yoffie specifically points out that some great entrants practice "judo strategy" - using the incumbent's apparent strengths against them.   In many ways, that is the story of David and Goliath, and a key theme throughout the book by Gladwell.   In short, Gladwell's notions about the disadvantaged apply in the business world as well. 

Jon Stewart on Government Healthcare IT Glitches

Wednesday, October 23, 2013

Red Sox: how much does chemistry help teams?

Does team chemistry lead to winning, or does winning lead to good chemistry?  I've heard that question debated frequently as my beloved Red Sox unexpectedly head to the World Series tonight.  I think the question is misleading though.  What puzzle are people trying to solve when posing this question?  They are observing unexpected success.  They see a team that is clearly more than the sum of its parts.  That's the riddle here.  Chemistry is a simplistic answer, though, for why the whole is worth more than the sum of the parts.  

Team synergy results from a combination of factors, not simply from the fact that players get along with one another (who can forget the 25 players, 25 cabs era of 20 years ago with the Clemens Red Sox?!?).  Synergy derives from good team design.  That means selecting complementary parts, not simply assembling all-stars based on statistical models (sorry, Theo).  It also means thinking about who your team leaders will be, and how they will lead through both words and actions.  Finally, it means not overreacting to a small sample of poor performance.  The Sox didn't let one bad year cause them to forget the longer term pattern of strong performance for players such as Lester and Buchholz.  

Synergy also involves creating the right environment in which people are motivated to excel.  John Farrell has created an environment of collective accountability.  He's also been transparent, communicating his decisions and rationale to players clearly and firmly.  

What about the beards?  Well, they are fun.  They are a wonderful bonding experience.  In the end, though, the team design and environment matter most. 

Monday, October 21, 2013

Have You Written a Failure Resume?

IDEO's David and Tom Kelley have featured an interesting concept called the failure resume in their new book, Creative Confidence.  The idea comes from Stanford professor and creativity expert Tina Seelig.  The Kelley brothers describe one famous example of a failure resume - the "anti-portfolio" of the highly successful venture capital firm, Bessemer Venture Partners.   Here's an excerpt, reprinted by Fast Company:

Nonetheless, one of our favorite examples of a company owning their failures comes from financial services. Bessemer Venture Partners is a well-respected, 100-year-old venture capital firm that has gotten in on the ground floor of some stellar-growth companies. Their website predictably features their “Top Exits.” What’s refreshing and not so predictable is that one click away from these mega-successes is a catalog of miscues and failed foresight Bessemer calls their “Anti-Portfolio.” As Bessemer explains, their “long and storied history has afforded our firm an unparalleled number of opportunities to completely screw up.” One of their partners passed over a chance to invest in the Series A round of PayPal, which sold a few years later for $1.5 billion. The firm also passed--seven times--on the chance to invest in FedEx, currently worth over $30 billion.

Why would people want to keep a failure resume?   The Kelleys, as well as Professor Seelig, argue that we need to "own" our mistakes if we are to improve and move forward effectively.   Acknowledging mistakes is a crucial first step in the learning process.  Moreover, I would argue that being able to compare those failures the successes on our actual resume is a crucial way that we can identify the drivers of high vs. low performance.   The failure resume also humbles us a bit, and it reminds us of the role that good fortune played in some of our successes, and bad fortune in some of of our failures.  

Thursday, October 17, 2013

A New Kind of Leadership Development

One of my clients has just completed a new three-day leadership development program for senior folks in the organization.  The managers came from different divisions and didn't work together often.  What was different about this program?  It involved no lectures or case studies about other firms led by professors, and it involved no presentations from top executives.  What did they do?  The program began with a four-hour simulation focused on teamwork and decision making.  The entire second day involved group work trying to come up with solutions to challenges described in a special case study about their company written especially for this program.  The challenges addressed building new business models.  At the end of that day, the groups presented to the CEO and her team.   The program ended with a session in which the teams came together to collaborate and build upon each other's work.  What was the reaction?  One participant noted that he or she learned a ton even though they never felt like they were being taught.   Isn't that amazing?  That's true learning by doing.  More leadership programs need to involve this type of "real work" that brings people together in ways that they don't normally collaborate.  We need to create forums for collaboration, and we need to truly foster learning from one another.

Tuesday, October 15, 2013

The Myths of Creativity

Here's the trailer for the new book by David Burkus.  The book is titled The Myths of Creativity.   New books by Burkus and the Kelley brothers will advance our thinking about creativity a great deal. 

Creative Confidence

Here's the trailer for the new book from IDEO's Tom and David Kelley... I look forward to reading it very much!

What You Should Do Before 8:00am Each Day

Jennifer Cohen has a very useful article at today.   She writes about the five things that highly successful people tend to do before eight o'clock in the morning.   In particular, I think #5 is worth considering for a moment: 

Make Your Day Top Heavy. We all have that one item on our to do list that we dread. It looms over you all day (or week) until you finally suck it up and do it after much procrastination. Here’s an easy tip to save yourself the stress – do that least desirable task on your list first. Instead of anticipating the unpleasantness of it from first coffee through your lunch break, get it out of the way. The morning is the time when you are (generally) more well rested and your energy level is up. Therefore, you are more well equipped to handle more difficult projects. And look at it this way, your day will get progressively easier, not the other way around. By the time your work day is ending, you’re winding down with easier to dos and heading into your free time more relaxed. Success!

Is this suggestion worth following?  In some cases, I think it makes a good deal of sense.  However, I would note that, in some cases, we need a few "small wins" before we tackle something very unpleasant and/or challenging.  We build confidence and momentum by securing some easy victories before we try to climb to the mountaintop.  As is the case with so many things in life, it simply depends.  Making your day top heavy every day does not seem like the right way to go.  However, this strategy may fit perfectly in certain situations. 

Friday, October 11, 2013

An Additional Thought on Providing Negative Feedback

Here's a brief follow-up to my recent post about how to offer negative feedback... Adam Bryant recently interviewed Jonathan Klein, CEO of Getty Images, for his excellent Corner Office column in the New York Times.  Klein explains how he learned to pause before offering negative feedback.  Here's an except from the interview:

I’ve learned a lot from my executive coach. Anytime someone came to me to show me their work, I would critique it. I would almost behave like a schoolteacher — my mother was a teacher — and bring out the metaphorical red pen. And what I didn’t appreciate at the time is that before you mess around the edges, you’ve got to say to yourself, “Am I going to make this significantly better, or am I going to make it only 5 or 10 percent better?” Because in fiddling over the small stuff, you take away all the empowerment. Basically it no longer becomes that person’s work. And after a while, those people get into the habit of giving you incomplete work, and then you have to do it for them.
I also used to always debate and argue whatever point was under discussion. And my coach said: “You’ve got to stop. You’ve got to pause, and think, ‘Are you debating the point to get a better outcome or because you just like getting the last word and you like winning?’ If you’re debating to get a better outcome, absolutely do it. If you’re debating because of the latter, cut it out.” 

I would add one other question that you should ask yourself in these situations.  When someone comes to me, am I truly listening to them?  Or, am I already preparing my rebuttal before they have completed their thought?  In many cases, we prepare our critique before the idea has been communicated fully.  Active listening not only shows respect to the other party, but it helps us understand their rationale more effectively.  

Thursday, October 10, 2013

Darden Restaurants Pressured to Break Up

Activist investor Barington Capital is pushing for the breakup of Darden Restaurants, according to today's Wall Street Journal.   Darden operates the following restaurant chains: Red Lobster, Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V's, and Yard House.  The newspaper reports that, "The investor group argues that Darden should create one company with its Olive Garden and Red Lobster restaurants, and another with its higher-growth chains, which include Capital Grille."   

One could argue for a breakup of the firm, but this particular rationale does not make sense.   Why should Darden own multiple restaurant chains?  Presumably, they believe that significant economies of scope (i.e. synergies) exist among the chains.   If you believe that the company should be broken up, then you must believe that these synergies are relatively small.  

The article suggests, though, that the activist investor wants to split the high growth businesses from the low growth ones.  Why will this increase shareholder value?   Do they think that the P/E ratio of the firm is too low because it's being dragged down by the lower growth businesses in the portfolio.  If so, that's faulty logic.   The investors can see that some chains are higher growth than others, and they understand how to value the parts.   You can't create a pop in valuation just by putting the high growth chains in a different firm and looking for a high P/E ratio.  Why?  Well, investors will offset that high P/E with a very low one in the firm that remains holding the low growth businesses.  You have not magically created value just by segregating units with different expectations of future growth.   The only reason why it could make sense would be if you believed that the higher growth businesses somehow are fundamentally different, and that they share synergies with each other, but not with the lower growth units.  I don't see how that is the case, but that would have to be the rationale to pursue this particular breakup strategy. 

Wednesday, October 09, 2013

Giving Negative Feedback

Geoffrey Tumlin has a very useful article at Fast Company on the art of giving negative feedback.  Here are several of his key tips:
  •  Offer an example!  Don't just tell someone that they have a generic problem (you have poor presentation skills).  Give them a concrete example (talk about the meeting last week where they did not pace their presentation well and ran out of time before conveying crucial information). 
  • Focus on a problem that the other party can fix.  As Tumlin says, "If you tell Jim that he’s a bad presenter (a criticism), how does he fix that? But if you tell him he had too many slides during yesterday’s client pitch (feedback), you’ve pointed out something that he can fix.
  • Be concise.  In many instances, we don't extract ourselves from the conversation.  Out of our discomfort, we keep the dialogue going, even after we have conveyed our key point.  Tumlin explains, "Length doesn’t correlate to success when it comes to delivering negative feedback; long conversations confuse as often as they clarify. Your goal is to communicate the negative feedback, not to produce a dazzling epiphany, a heartfelt apology, or a ton of emotive dialogue. Once you’ve communicated your message, get out of the conversation, and allow time and space for the feedback to work." 
 I would add one other tip to this terrific set of recommendations.  If possible, offer examples of how others overcame a similar problem.  For instance, if a student is struggling with their job search, I may notice that they are stumbling on a particular aspect of that search (e.g. interview skills).  If I can offer them an example (disguised perhaps) of another student who overcome this particular challenge, that can be helpful.  It conveys a path to improvement, and it gives them confidence that they too can fix this problem.  

Fairness and Leading Change

Eliane Bacha and Sandra Walker have published a new article in the Journal of Business Ethics.   The paper examines the relationship between perceptions of fairness and transformational leadership.  The scholars studied 100 European companies.   They found a relationship between certain types of fairness and the ability to inspire change.  In this article in The Guardian, Polly Courtice, director of the Cambridge Programme for Sustainable Leadership (CPSL), explains why perceptions of fairness matter:  "Fairness reflects an assumption about fundamental equality… about not putting your rank in front of other people's interests."   Co-author of the article Sandra Walker notes, "What they [employees] care about is whether they are active in decision-making and how they are treated by their boss." 

Fairness does not mean that everyone gets treated identically, of course.   There is a significant difference between outcome fairness and procedural fairness.  Leaders can't always make it such that all outcomes are equal or fair.  However, they can make the process of decision-making more fair.  They can invite input, demonstrate strong consideration of others' views, give others an opportunity to influence the final decision, and lead a transparent decision process.  If they create procedural fairness, then they can build commitment and buy-in even if all parties do not agree with the final decision.

Saturday, October 05, 2013

Capitol Steps

On our Bryant University Honors Program trip to Washington, DC this week, we went to a Capitol Steps show.  For those not familiar with the Capitol Steps, they put on a terrific political satire comedy show.  It seemed very appropriate to hear from the Capitol Steps this week with all that is occurring in Washington.  Here's a brief look at one of their hilarious routines:

Should Companies Rethink the Practice of Offering Product Bundles?

You've all seen plenty of promotions that offer two or more products for one bundled price.  Think of a combo meal at McDonald's, an offer for an airline ticket and hotel reservation, or a special for a blazer and pair of slacks.  Does offering these bundles make sense?   New research by Aaron Brough and Alexander Chernev suggests that companies should proceed with caution.    Chernev explains that, " When we show people a burger and ask them how many calories it has, they might say 500. For a side salad, they might say 100. But if you pair the same burger with the side salad, people will often think that the whole meal has fewer calories—say 400—than the burger alone. That seems counterintuitive, as if the salad somehow has ‘negative’ calories.”  The scholars document a similar effect on consumer willingness to pay.  They conducted experiments in which they paired expensive items with an inexpensive item in a bundle (example: a home gym and a fitness DVD).  They found that bundling decreased customers’ willingness to pay substantially.  In fact, consumers sometimes end up valuing the bundle less than the expensive item on its own!