Thursday, December 07, 2017

Fewer Experts, More Innovation?

Riitta Katila, Sruthi Thatchenkery, Michael Christensen, and Stefanos Zenios have conducted some fascinating new research about the role of experts during the innovation process.  They studied over 200 surgical instrument ventures.  The scholars examined the role that physicians played during the growth and development of these new ventures.  Here's what they concluded:

To be sure, entrepreneurs in highly specialized and technical industries need the knowledge that only users (doctors, lawyers, engineers, and the like) can provide. Doctors understand what other doctors will value in a new product; lawyers know what other lawyers need. But you can have too much of a good thing — including input from such experts. In fact, my colleagues and I have found that innovation thrives when expert users make up about 40% of an invention team. Any less and the company will lose sight of what its customers need; any more and the group will tend to converge on old ideas.

The researchers found that having a doctor serve as CEO of the new venture served as a key impediment to innovation.  Why is the presence of many experts a liability for these ventures?  Remember that experts provide important knowledge about the use of products, the problems with existing products, and the opportunities for improvement.  However, experts also are very entrenched in the existing ways of working.  They often cling to conventional wisdom and find it difficult to shake loose from certain long-held assumptions and beliefs.   Katila explains the particular liabilities that emerge when a doctor serves as CEO:

Why do firms led by doctors tend to lag behind in innovation? In part, we think it’s because expert users have spent lots of time getting comfortable with existing tools and methods. As a result, they’re invested in their field’s status quo and may have trouble seeing the value in a novel idea. We found that although expert users excelled at refining existing products, they couldn’t always recognize a potential breakthrough innovation when they saw one. As one physician CEO we interviewed for our study confessed, “If you show me a prototype, I can say, ‘Well, you could do this better.’ … I know very well how to help a company optimize its product … but I don’t know how to invent something that was never invented before.”

Wednesday, December 06, 2017

All-New Version of the Everest Leadership and Team Simulation!

I'm pleased to announce the release today of an all-new version of the Everest Leadership and Team Simulation.  This version (V3) provides an updated user experience, as well as all-new scenarios on the mountain.  Instructors can continue to use the original scenarios, or they can choose new situations and problems that students must address and solve.  For those not familiar with this simulation, it provides a highly engaging and interactive experience for students and executive education participants.  The simulation aims to teach important concepts about team dynamics, decision-making, and group learning.  I'm grateful to have collaborated once again with co-author Amy Edmondson and the incredible teams at Forio and Harvard Business Publishing.  I hope instructors will learn more about this new version and let us know if they have any questions!  The link above provides a description of the simulation as well as a preview of the experience.  

Apple's Jony Ive on Team Trust & Listening

Fast Company published some excerpts this week from Rick Tetzeli's interview of Apple design chief Jony Ive.   I especially loved Ive's comments on building trust within his design team, and how that helped them overcome the common problem of self-censorship.  Here's the excerpt:

In 30 years time, we’ll look back at, with such fondness, the way we worked, not necessarily what we did. I think the advantage is we have so much trust as a team that we don’t censor our ideas because we are nervous and scared that they will sound absurd . . . Very often it seems to be you listen to the biggest, loudest voice. A lot of this process is about listening, I think. What we’ve found is very often the very best ideas come from the quietest voice. And if you’re not listening, you’re going to miss that.

And also when you have trust, it’s not a competition. We don’t have to deal with the bizarre game of all of the problems involved with a thrusty sort of ego. Our interest isn’t some leaf table with points. What we’re interested in as a team is, we’re genuinely, genuinely trying to figure out how we can make the very best product possible. And of course, there are many occasions where we don’t get there. But that’s our sincere hope.

Tuesday, December 05, 2017

Creating a Culture of Accountability

How can I hold people accountable without creating a culture of finger pointing, blame avoidance, and excuse making?   Leadership coach and consultant Peter Bregman argues that leaders must achieve clarity on five dimensions if they wish to build a culture of accountability in their organizations. 
  1. Expectations - make sure your people know the objectives and outcomes that you expect them to achieve by a particular date. 
  2. Capabilities - make sure the people have the skills and capabilities to achieve those goals, and if they don't, put in place a plan to develop their capabilities accordingly. 
  3. Measurement - inform people of the metrics that will be used to evaluate performance 
  4. Feedback - put in place a mechanism for providing feedback on a regular basis 
  5. Consequences - insure that everyone understands the consequences of failing to fulfill key obligations 

Monday, December 04, 2017

Think Like a Traveler

IDEO's Tom and Dave Kelley wrote a wonderful book together a few years ago titled, "Creative Confidence."   In the book, they offer tons of ideas on how to spark creativity in your organization, based mostly on their work developing design thinking as a process and set of tools for creating breakthrough innovations.  One of my favorite passages has to do with encouraging people to "think like a traveler."  Here is an excerpt:

Ever travel to a foreign city?  We've all heard that, "Travel broadens the mind."  But beneath this cliche lies a deep truth.  Things stand out becuase they're different, so we notice every detail, from street signs to mailboxes to how you pay at a restaurant.  We learn a lot when we travel not becuase we are any smarter on the road, but because we pay such close attention.  On a trip, we become our own version of Sherlock Holmes, intensely observing the environment around us.  We are continuously trying to figure out a world that is foreign and new. Too often, we go through day-to-day life on cruise control, oblivious to huge swaths of our surroundings.  To notice friction points - and therefore opportunities to do things better - it helps to see the world with fresh eyes.

Psychologists distinguish between two ways of perceiving the world around us and processing information - top down vs. bottom up processing.  In top down processing, we draw on our past experiences and "fill in the blanks" when we encounter a particular place or situation.   We don't have to notice every detail, because a few signs prove sufficient to let us know what we are seeing.  We walk into a library, and we know quickly based on a few visual cues that we are in a library.  We don't need to attend to all the details.   In bottom up processing, we start by perceiving all the little details, and we put the pieces of the puzzle together gradually.   In day-to-day life, as the Kelleys explain, we are on cruise control, using top down processing to capture the essence of a situation quickly and fill in the blanks to paint the picture in our mind.   When we travel, we engage in bottom up processing, because we can't rely on past experience to help us.   As such, we notice lots of little things.  Noticing the little opportunities for improvement and innovation can be crucial in the creative process.  Thus, thinking like a traveler is essential to creativity.  

Friday, December 01, 2017

Learning from the Young People in Your Organization

The youngest can teach the most experienced in an organization at times.  They have a fresh perspective, and they are often more up to date about new societal and technological trends.  Moreover, they may not fear challenging the conventional wisdom, as compared to some more experienced employees.   Organizations have formalized this notion, describing it as reverse mentorhship.  My earliest memory of such a practice comes from Welch's time as CEO of GE.  (video below). 

I had an interesting discussion today, though, with a group of executives about the notion of reverse mentorship.  One executive mentioned that it can be frustrating at times when young employees put forth new ideas on a frequent basis.  It's easy to push back and reject what feels like "pestering" or "badgering" by that individual.   As he said to me, you just want to say, "Look, I have more experienced than me.  Trust me.  There's a reason why we do it this way."  However, this executive noted that he has learned to restrain himself.   He tries hard to stay open to these new perspectives, and to withhold any frustration.   Why?  This young person has developed a solid track record.  The individual is getting the job done, with a strong likelihood of becoming a future leader in the organization.  That track record and potential has earned the executive's trust.  It translates into a willingness to listen, even if some of the ideas are off track.  If the person wasn't getting the job done, that would be another matter.   What a fascinating discussion about monitoring and controlling your own response to young people's ideas in your organization, as well as thinking about when you might be willing to tolerate a little more "badgering" and "pestering" by an inquisitive young mind.  

Thursday, November 30, 2017

Becoming a Terrific Facilitator: All About Preparation!

I recently read a blog post by Hannah Feldberg-Dubin of the Design Gym.   She describes the capabilities required to be a highly effective facilitator.   Several of her key points pertain to preparation for an important meeting or workshop.   Let's focus on that important preparation phase f or a moment.  Drawing from her article, here are a few lessons that you might apply the next time you have to lead a team meeting: 

1.  Physical space & materials:  What type of physical space do you require?  What materials should you have available for the participants?  Remember that environment shapes behavior.   How you design the environment will have a significant impact on the way people interact during your meeting or workshop.  If you want collaboration, think about how to promote that.  If you want to stimulate creativity, consider the types of materials that might be fuel for innovative thought.  

2.  Purpose & desired outcomes:  What is the intent of this meeting or workshop?   What are the desired outcomes?  Make sure that everyone understands the intent and the desired end state.  

3.  Shared norms and ground rules:  How will the group members interact with one another?  What rules of engagement do you want to establish and enforce during the meeting?  I suggest creating a poster for the wall that defines these norms and ground rules.  

4.  Pre-work:  Often, we skip the pre-work because we are not sure that members will actually complete it.  However, we can get much more accomplished if people come to a meeting or workshop already having done some reading, conducted some analysis, or reviewed certain data.  Keep the pre-work manageable, but consider assigning some work to be done before you gather together.  

5.  Instructions:  If you have certain activities planned, be sure you are prepared to offer clear and concise instructions.  Run the instructions by a colleague before the meeting, and ask for feedback.  Make sure that these instructions make sense to your colleague, and that he or she interprets them as you intended.  

6.  Technology:  What technology will enable an effective conversation?  Don't overdo the slides.  Focus on creating a good dialogue, and use technology to stimulate that healthy give-and-take.   Don't put excessive technological demands on the participants, particularly if they are not particularly tech-savvy.  Test the technology beforehand.  Nothing derails a meeting more than having to fiddle with a computer that isn't working properly, or waiting for A/V help to arrive.  

7.  Food!  Ok, nothing derails a good workshop like bad food and drink, or a lack of food and drink.  Maintaining energy in the room is key to good facilitation, and a bit of fuel can be very helpful.   

Wednesday, November 29, 2017

Confronting Unethical Behavior in the Workplace


I recently read a thought-provoking piece by Darden Professor Mary Gentile about what she calls values-based conflicts in the workplace.  Gentile argues that we often hear a series of rationalizations if and when we try to raise concerns about the ethics of certain behavior in organizations. Gentile argues that it is worthwhile to step back and try to understand the nature of the objections and rationalizations. In so doing, one can formulate a more effective response and can speak up more effectively. Here are the questions we should consider according to Gentile: 
  • What are the main arguments you are trying to counter? What are the reasons and rationalizations you need to address?
  • What’s at stake for the key parties, including those who disagree with you? What’s at stake for you?
  • What levers can you use to influence those who disagree with you?
  • What is your most powerful and persuasive response to the reasons and rationalizations you need to address? To whom should the argument be made? When and in what context?
I think these four questions are incredibly helpful.   Moroever, I'm particularly interested in the second question.  I think that question pertains to any conflict in the workplace, even if it has nothing to do with ethics.  Suppose you want to question a plan of action proposed by another manager.  Asking yourself what they have at stake in this situation, how invested they are in this plan, can be important, as it may help you understand the extent to which they will be defensive.  Moreover, it will help you understand what might trigger interpersonal friction and conflict in this situation.  If you want to engage others in a productive debate (i.e. constructive conflict), it's crucial to understand how high the stakes are for the other party, to understand where their passion and emotional investment resides.  

Tuesday, November 28, 2017

HBO: Opportunity vs. Threat Framing in the Response to Cord-Cutting Behavior

Bloomberg BusinesWeek's Megan Murphy recently interviewed HBO's CEO, Richard Plepler.   The discussion offers some terrific insights regarding how an incumbent player can grow and innovate, overcoming concerns about how new opportunities might cannibalize existing products and services.  Plepler talks about purusing "multilateral growth" at HBO in an age of cord-cutting customers.  First, he explains that HBO made a decision to offer a standalone streaming service (i.e. purchasing HBO without having to buy a cable package) in 2013, when few homes were "broadband-only."  Today, nearly 20 million homes are in that category.   HBO didn't view cord-cutting as simply a threat though.  They framed it as an opportunity.   Plepler explains that HBO chose to pursue "multilateral" growth - expanding into the standalone streaming space, while also trying to grow its traditional cable business.   To management at HBO, one did not have to come at the expense of the other.   Plepler explains: 

We are going to grow multilaterally—digitally and among our traditional partners. We looked at the market and realized we were totally underpenetrating both...We knew it wasn’t going to be cannibalistic. There are some people who prefer a traditional bundle—maybe it’s a skinnier bundle and doesn’t have 180 channels in it. But for HBO, skinnier bundles have been a good thing, because if you take the average price of a cable or a satellite or a telco subscription down from $100 to, say, $65 or $70, that means HBO—which has always been a la carte—is a much more digestible purchase. Skinny bundles allowed the cable, satellite, and telcos to package us more effectively.

Opportunistically for us, we’ve been able to parallel-process and to grow digital. One has not been at the expense of the other. As I like to say, nobody is doing us a favor when they sell HBO, whether it’s digitally or whether it’s in the traditional ecosystem. They’re selling HBO because it’s a great product and it helps make their bundles stickier—and because they know their consumers want it.

That quote is packed with some fascinating insights.  Perhaps most interestingly, HBO did not buy into the conventional wisdom that skinny bundles would serve as a disruptive threat to its business.  Instead, it asked the question:  How might we take advantage of this trend to actually grow our business?   What they found was that the offering of skinny bundles by cable companies provided more disposable income and purchasing power for the consumer, enabling them to add HBO while staying within their budget.   

HBO didn't begin by assuming that these trends regarding cord-cutting and skinny bundles were simply threats.  They reframed these issues as opportunities, and asked the "how might we" questions that enabled them to discover new growth opportunities.  More companies need to think in terms of "opportunity framing" when their business environment shifts.  

What are the benefits of "opportunity framing" in these situations?  Research suggests that we can act very rigidly when we frame situations as a threat.  We often simply "try harder" - doing more of the same rather than thinking differently.  We act much more flexibly and adaptively when framing situations as opportunities.  We encourage more experimentation and learning, and we find new ways of working.   Clark Gilbert's research suggests that initially viewing a situation as a threat can help an organization to mobilize resources and get management's attention.  However, successful adaptation requires reframing the situation as an opportunity, much as HBO has done in this case.  

Wednesday, November 22, 2017

The Benefits of Gratitude

We should all be thankful for the many blessings that we have received. We should express our gratitude to others more often. As leaders, saying thank you more often will help us engage our employees and enhance their satisfaction and productivity. Who could quibble with these assertions. They represent common sense to most of us. Does research back up our attitudes regarding the benefits of gratitude? An impactful series of experimental studies by Robert Emmons and Michael McCullough demonstrated some of the key benefits associated with counting our blessings on a regular basis. 

The two scholars conducted several studies regarding gratitude. In each experiment, they directed some subjects to list their blessings on a regular basis. Meanwhile, they directed others to list the hassles that they had experienced. A control condition existed as well. What did they find? Counting your blessings had substantial emotional and interpersonal benefits. For instance, in one study, they found that people who counted their blessings on a weekly basis "felt better about their lives as a whole, and were more optimistic regarding their expectations for the upcoming week" relative to those who listed the hassles that had affected them during that week. The researchers also found that the people in the "blessings' condition felt better physically and exercised more often during that week. 

In a second study, they asked people to count their blessings on a daily, rather than weekly, basis. They found that people in the blessings condition experienced higher levels of positive affect. Moreover, these individuals were more likely to have helped others as compared to those in the "hassles" condition.  In a third study, the scholars found that, "The gratitude intervention also appears to have improved people’s amount of sleep and the quality of that sleep. Furthermore, the effects on well-being (positive affect and life satisfaction) were apparent to the participants’ spouse or significant other." 

In sum, counting our blessings can have real benefits for us and for those around us. We should express our gratitude on this Thanksgiving, but more importantly, we should pledge to be more grateful on a weekly, and even daily, basis moving forward.  Happy Thanksgiving everyone! 

Tuesday, November 21, 2017

Framing the Problem: The Decline of Campbell Soup & Other Packaged Food Companies

The Wall Street Journal reports today that Campbell Soup reported a disappointing quarter of financial performance yesterday, causing the company's shares to fall by 8%. The firm has now experienced 12 straight quarters of declining revenues. The newspaper explains the decreases in sales as follows:

Campbell and other packaged-food companies are facing difficulties in attracting consumers who increasingly want foods that they see as healthier, more natural and more environmentally sustainable. Companies also face a changing food-retail environment, with the rise of meal-kit providers, the growth of deep-discount chains in the U.S. and the food-selling ambitions of Amazon.com Inc. and its Whole Foods Market.

The article goes on talk about some of the company's recent moves intended to address these competitive threats:

Campbell executives have said they intend to use acquisitions and investments in new products to help lift the company’s fortunes and expand from its mainstay soups. In July, the company said it would buy organic-soup maker Pacific Foods for $700 million, as part of its natural-food push. It now expects to complete that acquisition by the end of the year. It has also invested in some food-related startups.

There's a lesson here about how you frame a problem. To me, the challenge facing Campbell Soup is much broader and deeper than simply the rise of organics or the margin pressures from Amazon and Wal-Mart. Campbell Soup faces a problem with respect to how people shop the grocery store these days. Increasingly, people are spending more time on the perimeter of the store and less time in the center. They are buying fresh fruit and produce, fresh meats and fish, and frozen foods and dairy items. They aren't buying as many packaged foods. Campbell Soup is in the center of the store. Adding a line of organics won't solve that problem. The issue is broader than organic soup displacing conventional soup. The broader challenge is that people are purchasing fewer packaged food items, period. There's a lesson here for all firms. Always make sure you think carefully about how you frame the competitive problem you face. How you frame a problem will, of course, shape the nature of the options you generate for future strategic action.

Thursday, November 16, 2017

Four Principles of Values-Based Leadership

Several weeks ago, I had the privilege (for the second time) of hearing former Baxter CEO and current Kellogg Professor Harry Kraemer discuss values-based leadership.  Kraemer offers four principles for leaders to consider, as they try to lead with purpose, conviction, and integrity.  This short video introduces you to the four principles.  For a more in-depth discussion by Kraemer, you can click here.

Wednesday, November 15, 2017

Competitive Rivalry Increases Risk-Taking Behavior

Intuitively, many of us probably believe that heated competition with a rival increases our propensity to take risks.   That type of behavior occurs in sports, at school, and in the business world as well.   Several scholars chose to examine whether the data support this conventional wisdom.  Here is what they found, as summarized in this NYU Stern Research Highlight:

In this first-of-its-kind study, the authors (NYU Stern PhD student Christopher To , NYU Professor Gavin Kilduff, University of Arizona Professor Lisa Ordóñez, and Wharton Professor Maurice Schweitzer) examined archival data from more than 2,000 regular season NFL games, totaling almost 500,000 unique plays, and found that teams, when competing against a rival team, were 37% more likely to forgo kicking an extra point to instead attempt a two-point conversion and 17% more likely to “go for it” on fourth-down by running a play instead of punting or attempting a field goal. A related behavioral study with more than 140 University of Arizona students confirmed their results and showed perceived rivals took 17% more risks than non-rivals, which was partly explained by a 11% greater increase in their heart rate.

As a New England Patriots fan, I immediately think of Bill Belichick's ill-fated decision to go for it on Fourth and 2 yards to go from the Patriots' own 28 yard line against the Colts in 2009.  In fact, the legendary coach has made some of his riskiest decisions against heated rivals in big games.  Belichick didn't have much confidence that his defense could stop Peyton Manning on that night in 2009.  Manning and the Colts, of course, were huge rivals of the Patriots in those years.   The coach made a very risky decision, hoping to keep the ball and run out the clock rather than give Manning another opportunity on offense.  It didn't work. The Patriots did not make a first down, and Manning promptly marched the Colts into the endzone for the victory.    Sometimes, rivalry might indeed cause us to make ill-fated risky choices.  You make a bold decision, and if it doesn't work, you take a great deal of heat.  That's what happened to Belichick on that night.  I'm not sure it was a bad decision actually, but it certainly was highly risky. 

On the other hand, sometimes heated rivalries can cause us to take innovative risks.   Not all risk-taking is bad. Sometimes, it involves creative choices spurred by competitive rivalry.   Consider another very famous Belichick decision.  In 2003, the Patriots trailed the Denver Broncos (another key rival) by 1 point with just over 3 minutes left in the game.  The Patriots faced a fourth down and ten yards to go from their own 1 yard line.  A punt from there would be difficult to execute, and it would probably give the Broncos the ball with tremendous field position.  Instead, Belichick made the very bold decision to take a safety intentionally, causing the Patriots to fall further behind (26-23 at that point).  However, the Patriots could now kick off from the 20 yard line, and a good kick sent the Broncos all the way back to their own 15 yard line.  The Patriots defense stopped them in three downs, received the ball back with decent field position, and then Brady worked his usual magic.  A short time later, he threw a touchdown pass to David Givens to win the game.   In this case, competitive rivalry may have led to innovation, to a beneficial form of risk-taking behavior.  

In sum, the study confirms that competitive rivalry increases our propensity to take risk. However, the scholars make an important point.  Such behavior may not always be detrimental to the organization.  Sometimes, rivalry sparks innovation.  

Tuesday, November 14, 2017

Law of Unintended Consequences

Organizations and people within them respond to incentives.  They just don't always respond the way that we would like them to do so.   We might have a policy designed with the best of intentions, but it may have serious uintended consequences.   Take, for example, this article from yesterday's Wall Street Journal.  It reports on a new study published in the JAMA: Cardiology.  Melanie Evans reports: 

The Affordable Care Act required Medicare to penalize hospitals with high numbers of heart failure patients who returned for treatment shortly after discharge. New research shows that penalty was associated with fewer readmissions, but also higher rates of death among that patient group.

The researchers said the study results, being published in JAMA Cardiology, can’t show cause and effect, but “support the possibility that the [penalty] has had the unintended consequence of increased mortality in patients hospitalized with heart failure.”

The article goes on to report some disagreement among researchers about the impact of this policy.  Nevertheless, it notes concerns by some physicians about the possibility of unintended consequences and the desire by many to see further research on this matter.

More broadly, this article reminded me that managers need to consider the law of unintended consequences as they establish policies, metrics, and procedures.  For instance, managers may have great intentions when they create a new incentive compensation scheme.  However, the reward system may cause behaviors that they did not foresee or intend to stimulate.  In fact, they may see some adverse effects because of the ways in which their scheme distorted behavior.   One can blame individuals for unethical behavior that emerges as people try to achieve ambitious targets and garner bonuses, for example.  Or, one could ask:  Did we create policies that unintentionally encouraged people to act in unethical ways?  I'm not excusing bad behavior, but I am encouraging to think carefully about the systemic reasons for unethical action within firms.  

Friday, November 10, 2017

Kobe Steel, Middle Managers, and Unethical Behavior

The Wall Street Journal reports today about the results of an interim investigation into the product quality scandal at Japan's Kobe Steel. According to the newspaper, "Kobe Steel Ltd. released a report Friday that blamed lax management and overworked employees for a product-quality scandal, saying the company has to restore trust to survive." The report reminded me of research by Linda Treviño of Penn State University.  She and her colleagues have conducted research on unethical behavior that emerges from middle manager's attempts to cope with unrealistic targets set by top executives at firms.  She has found that middle managers sometimes react to highly ambitious and difficult-to-achieve goals by finding ways to deceive top executives as to the actual performance of the organization.  She describes the results from a study of a large telecommunications company: 

"What we found in this particular case — but I think it happens a lot — is that there were obstacles in the way of achieving these goals set by top management," said Treviño. "For a variety of reasons, the goals were unrealistic and unachievable. The workers didn't have enough training. They didn't feel competent. They didn't know the products well enough. There weren't enough customers and there wasn't even enough time to get all the work done."

Facing these obstacles, middle management enacted a series of moves designed to deceive top management into believing that teams were actually meeting their goals, according to Treviño, who worked with Niki A. den Nieuwenboer, assistant professor of organizational behavior and business ethics, University of Kansas; and Joa᷃o Viera da Cunha, associate professor, IESEG School of Management.

The researchers also discovered that middle managers took concerted actions to coerce individuals to comply with the deceit campaign.  They pressured people to go along with the efforts to fool top executives into believing that the organization was reaching its targets.  The most interesting finding, though, pertains to what the researchers did NOT find in their study.  They did not see managers trying to argue for a revision of unrealistic goals.  They were afraid to challenge top management.  Treviño explains: 

"Interestingly, what we didn't see is managers speaking up, we didn't see them pushing back against the unrealistic goals," said Treviño. "We know a lot about what we refer to as 'voice' in an organization and people are fearful and they tend to keep quiet for the most part."

Tuesday, November 07, 2017

The Dangers of Benchmarking

Freek Vermeulen of the London Business School recently penned an insightful blog post titled "Don't Be Fooled By Success."   He explains three key downsides associated with benchmarking the top firms in your industry.   First, he explains that managers often confuse cause and effect.  The "best practices" that they observe might not be the driver of high performance, but instead the result of success.  Second, managers forget that good fortune and the right timing might have had a lot to do with another company's success in the marketplace.  Finally, some efforts to adopt others' best practices might lead to a short term gain at the expense of long run performance.  

I would add a few other thoughts with regard to benchmarking.  First, you should seek to understand what others do well and how you might learn from them.  However, imitation alone will not lead to sustainable competitive advantage.  You have to do things differently, or do different things, if you wish to stand out in the marketplace.  Second, benchmarking can lead to strategy convergence within an industry, which ultimately shrinks the total profit pool.   Why?  Each company can spend too much time "catching up" in areas with they are behind their rivals and insufficient time and attention on how to expand their lead in key domains.  Third, managers forget that competitive advantage does not come from "best practices" but rather "tailored practices."  Managers must adapt processes, techniques, and systems to fit their organizational culture, structure, capabilities, and target market.   Finally, competitive advantage comes from organizational fit/alignment.  You won't necessarily achieve comparable success by copying parts of another firm's system of activities and capabilities.  The whole is greater than the sum of the parts at great firms.   In her book, The Strategist, Cynthia Montgomery makes this point quite clearly with a terrific quote from IKEA's former president:

“Many competitors could try to copy one or two of these things. The difficulty is when you try to create the totality of what we have. You might be able to copy our low prices, but you need our volumes and global presence. You have to be able to copy our Scandinavian design, which is not easy without a Scandinavian heritage. You have to be able to copy our distribution concept with the flat pack. And you have to be able to copy our interior competence – the way we set our stores and catalogues.” - Anders Dahlvig, Former President of IKEA

Monday, November 06, 2017

Should You Take a Vote at the Start of Meetings?

David Marquet has written an interesting article for Forbes this week regarding decision-making processes. He begins with a statement of the problem that many organizations must address: "It's not that the courage to speak up is too low, it's that the barriers to speaking up are too high."  However, I have some concerns about the solution that he proposes. He argues the following:

Vote first, vote often. Voting first results in maximum diversity of opinion. It’s difficult to disagree with the group, and maybe more difficult to disagree with the leader. The purpose of voting first is to uncover those who feel strongly one way or the other about something. If you want to poll again after discussion you can.

Why might voting at the outset of meetings not make sense?  Consider what happens when an initial vote takes place, even if you allow people to indicate that they are not sure how they feel about an issue.  Some people will take a hard stance on an issue even before hearing from other parties who may have quite different views.   We might find people shifting into advocacy mode before the problem has even been well-defined by the group.   The vote may confine people's thinking to the options presented, rather than encouraging the generation of new alternatives.  Opportunities to reframe the issue may become more elusive, since we have voted already on the problem as defined by the leader at the outset of meeting.  What happens next?  Will the vote exacerbate the confirmation bias?  Will people examine data selectively, and in so doing actually find themselves polarizing further as the discussion takes place?  Moreover, one has to be concerned if the meeting begins with a lopsided vote.  Would the majority begin to pressure the "holdout(s)" to abandon their opposition and "get on board" with the team?   

In my mind, a meeting has to start with some exploration of the issues at hand, before we move into advocacy regarding particular solutions.  We want to encourage people to share information, particularly data that others may not be aware of prior to the meeting.  Leaders should stimulate a discussion about different ways to frame the problem, and the team should have a vibrant dialogue about alternaive solutions.  We want people to try to understand others' thinking first, before shifting into advocacy mode.   Voting early may actually diminish these important behaviors that lead to more effective decisions.  

Thursday, November 02, 2017

Six Benefits of Being Curious

Are you naturally curious?  Do you love to learn new things?  Do you ask questions, seeking to understand what you do not know?  It turns out that curiosity can be very beneficial.  Emily Campbell has written an article for UC-Berkeley's Greater Good magazine about the six key benefits of curiosity.   

  1. Curiosity helps us recognize dangers in our external environment.  
  2. Curiosity helps us achieve "positive emotions, lower levels of anxiety, more satisfaction with life, and greater psychological well-being."  
  3. Curiosity helps us become successful learners at school and at work.  
  4. Curiosity enables us to understand others' circumstances, interests, and points of view.  That level of empathy can be beneficial in numerous ways. 
  5. Curiosity causes others to perceive us as "warmer and more attractive."  As such, curiosity helps us build connections with those we meet and with whom we collaborate. 
  6. Curiosity may enhance our physical well-being.  Studies show that curiosity by doctors may lead to improved health outcomes, as they gain a better understanding of patients' concerns and conditions. 
This discussion of curiosity reminds me of one of my favorite quotes.  “In the beginner’s mind there are many possibilities, but in the expert’s there are few.”  – Shunryu Suzuki, Japanese Zen priest.  The quote suggests that we need to be wary becoming closed-minded as experts in a particular field, and we must approach complex and challenging situations with the curiosity of beginners.   

Wednesday, November 01, 2017

Preparing for a Better Brainstorm: Tell an Embarrassing Story?

Kellogg's Leigh Thompson writes about some fascinating new research on the Harvard Business Review blog this month. She describes an experiment in which she and her colleagues tested the impact of having group members tell an embarrassing story about themselves before beginning a brainstorming session. In the study, Elizabeth Ruth Wilson, Brian Lucas, and Leigh Thompson assigned 93 people to three-person groups. They asked 1/2 of the groups to begin by having members tell an embarrassing story about themselves. The other groups shared a story about sometihng they were very proud of accomplishing. The scholars measured the outcomes of the ensuing brainstorming sessions on two dimensions. First, they evaluated fluency, i.e. how many ideas the team identified. Second, they examinedof the flexibility of the team, i.e. how diverse were the ideas that the group generated. What happened? Thompson summarizes their observations of the two types of groups:

My colleagues and I carefully watched these conversations unfold. The people told to embarrass themselves were initially taken off-guard and even apprehensive. But inevitably someone would jump in (“OK, I’ll go first….”) and, within minutes, the trios were laughing uproariously. The people told to boast had, by contrast, no trouble starting their conversations and appeared more composed. However, there was little laughter and only a few polite head nods on the teams. 

What happened in the brainstorming session itself? The scholars asked the teams to identify as many uses of a cardboard box as they could in ten minutes. The groups that began with embarrassing storytelling performed better than the "pride" groups in terms of both fluency and flexibility. How much better? They identified 26% more ideas during their brainstorming sessions, and the ideas ranged across 15% more categories than the "pride" groups.

Why did the two groups perform so differently? The scholars argue that the telling of embarrassing stories, while awkward at first, helped the team members become more comfortable with one another. They let their inhibitions fall away. On the other hand, the sharing of "pride" stories may have "caused people to worry more about hierarchy and social comparisons." The climate became less safe and less conducive to taking risks.

Tuesday, October 31, 2017

Why We Need to Reflect

In my last blog post, I discussed several reasons why organizations don't learn effectively from experience. New research from Giada Di Stefano, Francesca Gino, Gary Pisano & Bradley Staats demonstrates that reflection proves critical to personal and organizational improvement. These scholars have published a working paper titled, "Learning By Thinking: How Reflection Improves Performance."    They argue that we can't simply rely on learning by doing.  We have to reflect upon that experience to learn effectively.  They conducted a series of studies to examine the role of reflection in the learning and improvement process.   They conclude the following:

In our daily battle against the clock, taking time to step back and engage in a deliberate effort to learn from one’s prior experience would seem to be a luxurious pursuit. Though some 9 Data show that between 1973 and 2000, “the average American worker added an additional 199 hours to his or her annual schedule—or nearly five additional weeks of work per year (assuming a 40-hour workweek)” (Schor, 2003: 7). In the meanwhile, between 1969 and 2000, “the overall index of labor productivity per hour increased about 80 percent, 27 organizations increasingly rely on deliberate learning tools, as in the case of after-action reviews and post-mortems (Catmull, 2014), there has been little effort to encourage individuals to take the time to think about the past, rather than to do more and more. Articulating and codifying prior experience does entail the high opportunity cost of one’s time, yet we argue and show that thinking after completing tasks is no idle pursuit: It can powerfully enhance the learning process, and it does so more than the accumulation of additional experience on the same task. Performance outcomes, we find, can be augmented if one deliberately focuses on learning from experience accumulated in the past. Results from our studies consistently show a significant increase in the ability to successfully complete a task when individuals are given the chance to couple some initial experience with a deliberate effort to articulate and codify the key lessons learned from such experience. 

Monday, October 30, 2017

Why Don't We Reflect & Learn?

Most leaders acknowledge the value of learning from past experience.  Some organizaitons have established highly regarded best practices for deriving lessons learned from past projects.  For instance, the U.S. Army pioneered the After-Action Review process, and it has documented the substantial benefits derived from the systematic use of this lessons learned methodology.  Still, most leaders don't spend nearly enough time faciltating these types of activities or empowering their people to engage in this type of work.  Why?  What seems to be preventing these powerful learning experiences from occurring in organizations?  The usual answer is time.  We hear responses such as the following:   "We would love to conduct postmorterms, but who has the time to perform that work?"  "We are always rushing off to implement the next set of plans."  "No one rewards you for taking time out to review and learn from past experiences."  

In my view, time represents a significant challenge, but these types of explanations often mask a deeper problem in the organization.  What are the true impediments to engaging in after-action reviews?

1.  Blame culture.  People fear that the process will degenerate into a finger-pointing exercise, rather than a true learning experience.  In these types of organizations, people fear talking about mistakes and how to learn from them, because they don't want to be accused of being part of the problem.  

2.  Lack of systemic thinking.  In many organizations, explanations of past failure tend to be individualistic, i.e. who was the rotten apple that needed to be thrown out of the bunch?  Learning organizations embrace systemic explanations for past success and failure, i.e. was the barrel rotten, and therefore, did it spoil some of the apples?  Systemic explanations for failures do not preclude managers from holding people accountable for negligent or irresponsible acts.   However, they help managers understand multiple factors that may contribute to success and failure. 

3.  Attribution error.   Psychologists have shown that people often attribute others' failures to character flaws, lack of expertise, or other internal deficiencies.  However, we explain our own failures quite differently.  We blame external events or factors beyond our control.  Such distortions in our attributions may explain why we do not engage in lessons learned exercises as frequently as we should. 

4.  Low leader self-awareness.  In some enterprises, leaders have tried to facilitate such after-action reviews, and the efforts have not been fruitful.  Thus, they choose not to spend time performing them again.  However, these leaders often are not aware that their presence and influece during the after-action review discouraged candid dialogue.  Thus, the group did not generate powerful lessons learned, as people refrained from discussing the tough issues.  Leaders sometimes lack the awareness to recognize how their behavior and presence may have distorted the dialogue during an after-action review process.  

Friday, October 27, 2017

What Type of Projects Receive Support on Kickstarter?

What type of projects receive support on crowdfunding platforms such as Kickstarter?  Anirban Mukherjee, Cathy Yang, Ping Xiao, and Amitava Chattopadhyay conducted extensive research on this topic.   They examined over 50,000 projects on the Kickstarter platform over several years.  The scholars wanted to know how claims about the innovation would affect funding. Would projects that claimed to be highly novel receive more funding than those that claimed to be quite useful and practical?  Interestingly, they discovered that projects claiming novelty raised funds just as effectively as those that claimed usefulness.  However, claiming BOTH tended to be less effective.  Why would projects that claimed to be both novel and practical not receive as much support on the crowdfunding platform?  The scholars offered three possible reasons:

1.  Credibility:  People might view a project as too good to be true if it claimed to be highly novel and very practical/useful.  

2.  Risk aversion:  Perhaps funders wanted to invest in projects that they deemed feasible and likely to become implemented effectively.   They might have deemed the projects that claimed to be both novel and useful as highly risky. 

3.  Polarization:  Truly breakthrough innovations often can be polarizing.  Some people are fans, while others are haters.  Consider how people often reacted initially to breakthrough products such as the iPod.  Something claiming to both novel and practical might have a polarizing impact.  

Wednesday, October 25, 2017

Telltale Signs That You Might be Fired

In many cases, workers are shocked when they are dismissed from their jobs.  They don't see it coming.  In today's Wall Street Journal, Sue Shellenbarger writes about the signs that might suggest your job is at risk.  Here's her list of warning signs:
  • Your boss stops dropping by your desk with suggestions.
  • You’re left out of important meetings you used to attend.
  • Once-friendly colleagues start to avoid you.
  • You never get any feedback.
  • You never ask for any feedback.
  • You start comparing yourself to mediocre peers rather than stars.
  • You’re not sure what your boss cares about.
  • You don’t care what your boss cares about.
In general, the article focuses on the problem of low self-awareness.  In too many instances, people do not recognize their own under-performance, or understand their weaknesses in the eyes of their boss.   Shellenbarger cites a particularly compelling academic study published in 2014 by Oliver Sheldon, David Dunning, and Daniel Ames.  These scholars found that people's overly optimistic views of their own performance tend to persist even in the face of critical/negative feedback.   In fact, low performers tend to dispute the legitimacy of that feedback or the person who provided it.  Finally, their studies show that high performers tended to be more interested and willing to pursue self-improvement strategies with regard to issues such as emotional intelligence.   Consequently, it would appear that the stronger performers only get better, while the low performers miss key opportunities to develop their capabilities.  

Tuesday, October 24, 2017

Amazon: No Need to Disclose (yet)

Shira Ovide has a terrific article for Bloomberg BusinessWeek titled, "Amazon Takes Secrecy to a Comic Extreme."   She writes,

Companies, of course, would prefer to reveal as little as possible. And then there's Amazon.com Inc., which takes financial disclosure stinginess to the next level. So far, investors have been fine with it. They see one of the world's most ambitious companies and a stock price that has quadrupled since 2012, and happily toss aside their Amazon spreadsheets filled with question marks. But Amazon's thriftiness with financial disclosure could backfire. Secrecy is acceptable when companies are doing well. It becomes suspicious when things go south.

Ovide writes that Amazon provides quarterly earnings projections that are "comically broad."   Ovide explains that the company "loves to show charts without labels" and provide investors and analysts with "reams of fluff."  Bezos, I believe, would rebut Ovide's observations by explaining that Amazon does not manage for quarterly earnings or to meet short-term investor expectations.  He is managing for the long term, and he's putting the customer first.  That's his story, and he's sticking to it.  In fact, he's stuck to it for 22 years, profits be damned.  

Ovide does make an important point though.   This attitude about disclosure works beautifully until a company stumbles.  If and when that happens to Amazon, the willingness to accept very limited disclosure will change.  In fact, it may change quite suddenly if Amazon falters.   For now, though, Amazon gains a key competitive advantage through its limited disclosure policy.   Competitors don't know the types of details that they would love to have access to as they formulate their strategies.  Once again, Bezos has found a way to gain the upper hand.  Some of his key rivals have to play by a different set of rules.  Not only must they turn a sizable profit to please investors, but they must disclose much more information.  

Wednesday, October 18, 2017

Scanning Your Environment

When organizations fall behind the competition, we often hear people describe how the enterprise had become increasingly insular in recent years. Managers focused on enhancing operational efficiency, and they fixated on internal processes and procedures. As a result, they did not recognize key trends and changes in the marketplace. They did not spend enough time learning about new types of competitors. How can we become better at scanning our external environment? Here are four key steps that can enhance your efforts:

1. Make time for environmental scanning on your agenda. Carve out space on your calendar each week to learn about new technologies, products, or competitors. Dedicate some time each year to attend a conference, speaker, or workshop that falls outside of your normal routine. If you don't make time for scanning, it's easy to allow other duties to crowd out this key activity. 

2. Identify some young people in your organization with whom you can connect on a regular basis. Talk to them about social and technological trends. Compare and contrast how they use their smartphone, computer, television, automobile, and other devices differently than you do. Inquire as to how their consumption patterns might differ from yours (currently or when you were their age). 

3. Make it a habit to read the major SEC filings of your competitors. Don't just read the articles that appear in the Wall Street Journal. Dig into the details found in those financial reports. Read what analysts are saying about the competition as well. Consider listening to a few earnings calls from your rivals. It's amazing how many managers have never actually dug into these types of documents. They rely on journalists to tell them about major events taking place in their industry without studying the competition more closely. 

4. Take a look at what your suppliers are doing. Many environmental scanning efforts focus on customers. That's important, naturally. However, you can also glean a great deal of information from your partners and vendors in the supply chain. How is their business changing? Are they selling to different people? Have their portfolios of products and services changed? Have any of them started to vertically integrate? Suppliers must adapt as they see changes downstream in the value chain. Watching for those adaptations can tip you off to key trends in your market.

Walk My Mind - Listen to my "Walkcast"

Walk My Mind describes itself as an organization that "provides a platform that fosters walking, learning, listening and community."  The company's website features "walkcasts" with educators and authors.   The goal is to promote two healthy habits coming together (walking and learning).    You can listen to my "walkcast" here.  I discuss leadership, decision-making, and problem finding.  Enjoy!  

Monday, October 16, 2017

Blind Spots that Derail Careers

Fast Company's Stephanie Vozza writes this week about the need for accurate self-assessment.  She argues that being blind about our weaknesses can derail our careers.  She cites a new book by Kellogg School of Management Professor Carter Cast.   In his book, Cast describes five blind spots that impede our careers:

  1. A me-first attitude that leads to poor listening skills
  2. Micromanaging others, hindering your ability to build and lead a team
  3. Being too comfortable with routines and resisting change
  4. Having narrow perspectives on business that undermine your ability to be strategic
  5. Not following through on promises due to poor organization or task management skill

Friday, October 13, 2017

How to Stop Being a Micromanager

We have all worked for a micromanager at one point or another in our careers.   The experience can prove very frustrating.  We cherish our autonomy and believe in our abilities.  We become frustrated when a micromanaging boss meddles in our work.  Moreover, we become disenchanted when that meddling slows us down, creating numerous delays while our competition passes us by.   Of course, we all have probably micromanaged one of our employees or team members at some point or another.  Those in glass houses... 

How can someone stop being a micromanager?   Naturally, a simple recipe does not exist.  Here are a few baby steps in the right direction though:

1.  Make a list of the types of decisions in which you have been involved heavily over the past month or so.   Now divide the list into two categories: the ones in which you absolutely must be involved, and the ones where you  might test letting go a bit.  Give it a few weeks or a month, and see how things go.  Let your subordinates know that you are going to try to let go on those particular decisions.  Review and assess periodically to see if the change has been productive.  

2.  Identify the people you trust the most in the organization.  Consider providing them more autonomy.  Talk with them about the opportunities that they wish to pursue, and the situations where they feel confident moving with less direction and oversight. 

3.  Examine your calendar.  How can you free up some time to think more strategically about the direction of the organization?  What meetings or commitments are soaking up your valuable time, while strategic issues receive less attention than they deserve?  Consider shifting responsibility to subordinates so that you can find time to address high-stakes, high-risk issues that warrant your undivided attention.  Extract yourself from a few meetings and follow up to see how things went without your presence. 

4.  Review the forms and memos that arrive on your desk for signature and approval.  How many layers of approval exist on those issues?   Do you need to be one of those layers?  Consider changing the rules and procedures to provide others more autonomy.  For example, might you change the spending limit above which people must obtain your approval?   Do you need to sign off on as many personnel requisitions as you do?   Does someone really need your approval to reserve that particular space or hold a special event in your offices?  

5.  Assess your email inbox.  Do you need to be involved in all those email threads?  How might you reduce your email traffic by 10%?   Consider the situations from which you could extract yourself.  Think about how much more productive you can become if you eliminate 10% of your emails.  

Thursday, October 12, 2017

Scarcity of CEO Talent? Are Board Members Right?

Joann Lublin of the Wall Street Journal reports today on directors' beliefs about the CEO talent pool. She writes:

The pool of executives qualified to take over the top job at the biggest U.S. companies is incredibly shallow, especially in the technology industry, a recent survey of directors finds. On average, directors of Fortune 250 companies estimate that fewer than four people inside and outside their company have the management expertise and industry-specific knowledge to step into the CEO role and run it as well as its current leader, according to a Stanford University survey of 113 such directors. Board members also say an average of six executives could perform at the same level as the head of their largest rival. 

I found these results interesting. It certainly explains why CEOs receive very high compensation packages. The question, however, is whether directors are right. Apparently, the conventional wisdom is that the talent pool is very shallow. Do directors have concrete evidence to support this belief? What if they are wrong? What would that mean for corporate leadership, governance, and compensation? I haven't seen any concrete, valid research that supports the conventional wisdom here. I'm not saying they are absolutely wrong; I would just like to see proof.

Wednesday, October 11, 2017

Telling the Hard Truth at Work

Wall Street Journal, October 11, 2017
Sue Shellenbarger of the Wall Street Journal interviewed me during her research for today's column titled, "The Best Ways to Tell the Hard Truth at Work."   She addresses the topics of how to encourage candor across the enterprise, provide honest feedback to others, and tell the hard truth in a constructive fashion.  

Tuesday, October 10, 2017

Feedback's Impact on Innovation: A Key Tradeoff

Harvard Business School Professor Daniel Gross has a very intriguing new product development research article forthcoming in the Rand Journal of Economics.   Gross studied the impact of feedback on innovation efforts.  Specifically, he collected data from over 4,000 commercial logo design contests from an online platform.  Gross tried to understand the impact of feedback on the quality of subsequent submissions.  However, he also studied whether feedback might discourage some applicants from submitting additional designs in future rounds of the competition.  

What did Gross discover?    First, not surprisingly, feedback does improve the quality of subsequent work.   However, feedback also discourages future participation.  People who receive low ratings in the initial round are less likely to continue in the contest.   "A majority of players (69.5%) whose first rating is the lowest possible rating will subsequently stop investing in the contest."  That's not necessarily a bad thing.  Weeding out low performers can be efficient.  However, Gross finds that the detrimental impact on participation is NOT exclusive to individuals who receive negative feedback initially.  He also finds that, "Feedback can simultaneously reduce incentives for high-performers to participate, relative to incentives in a state of ignorance, by revealing or enabling high quality competitors."   Yikes!  We can actually discourage good people from continuing by being critical of their early work.  We should not be surprised by this finding.  Let's face it.  We all have a hard time receiving critical feedback at times.  

Thus, a tradeoff exists.   Quality improves, but participation suffers, when we provide critical feedback.  There's good news here though.  What's the net effect?  Gross argues that, "Feedback significantly increases high-quality output, with gains in quality far outweighing the costs to participation."  Moreover, he argues that, "Making feedback private yields modest incremental benefits by shrouding information on competitors' performance, which in turn reduces attrition."   In sum, we will have to live with some attrition when we provide critical feedback, but the net effect is positive in the innovation process.  

Saturday, October 07, 2017

Building a Culture of Trust

Neuroscience researcher Paul J. Zak has been studying trust for many years.   A recent Inc. column by Marissa Levin summarized some of his key research findings.  Zak has discovered that people at high-trust organizations experience less stress, higher productivity, more engagement, and more job and personal satisfaction.  How does one build a culture of trust in your organization?  Zak advocates eight strategies:

  • Recognize excellence
  • Provide challenging (but not impossible) work for people
  • Give workers the autonomy to choose how to do their work
  • Give employees voice, particularly in how they design their jobs. 
  • Communicate clearly, concisely, and frequently. 
  • Build relationships among employees. 
  • Facilitate whole-person growth and development. 
  • Show vulnerability as a leader, thus making others feel psychologically safe. 

Wednesday, October 04, 2017

Boards of Directors Assessing Corporate Culture: It's About Time!

The Board of Directors bears responsibility for oversight and control of the management of an enterprise. Their duty to monitor management actions and performance includes assessing the risks that the organization faces. Unfortunately, many boards have been caught by surprise by recent scandals and crises at firms such as Wells Fargo, General Motors, Volkswagen, Uber, Toshiba, and Theranos. Key risks remained hidden for lengthy periods of time. When the boards finally became aware of these issues, the damage had largely already been done... to company reputation, share price, etc. In many of these cases, investigators and analysts have blamed the corporate culture. The organizational cultures encouraged inappropriate behavior and discouraged people from sharing bad news. The boards in many of these situations did not understand the dysfunctional elements of the corporate cultures. 

The Wall Street Journal reports today that some boards have decided to become more involved in understanding and evaluating organizational culture. Joann Lublin reports:

Corporate culture counts. But bad culture can damage a company’s reputation, results and recruitment. That’s why boards are starting to scrutinize the cultures of companies they serve. Directors at Whirlpool Corp. , for example, make sure its workers feel comfortable divulging bad news by tracking internal surveys. Companies such as Citigroup Inc. and CACI International Inc. have formed board culture committees. 

Culture describes the way values and actions create a unique business environment. One recent study found that a positive corporate culture improves company profits. Yet “few boards currently have an explicit focus or formalized approach to cultural oversight,’’ said Helene Gayle, a director ofCoca-Cola Co. and Colgate-Palmolive Co. A blue-ribbon panel co-led by Ms. Gayle wants boards to monitor corporate culture as vigilantly as they do risks. The 34-member commission, organized by the National Association of Corporate Directors, released an extensive report on Wednesday that suggests how boards could bolster their oversight of company culture. 

Can board oversight and intervention help? Absolutely. As Lublin reports, Whirlpool went through a scandal in 2010, and the company instituted changes at the behest of the board. They focused on encouraging workers to share bad news. The result? According to the Wall Street Journal, "Worker survey scores about their willingness to speak up rose 10 percentage points between 2010 and 2015." 

I would add one important recommendation to this push on the part of several boards. Before engaging in culture audits and other monitoring mechanisms, these boards also need to look in the mirror. They must evaluate the board's culture. Are people able to speak freely in board meetings? Do directors have the appropriate incentives? Does risk management get sufficient attention on the agenda at meetings? The boards cannot be effective at evaluating and enhancing the organization's culture if they do not practice what they preach.

Monday, October 02, 2017

Marathon Complete!

I completed one of my sabbatical goals yesterday - running the Twin Cities Marathon.  I'm so grateful to my family for all their support, and to many friends, family, colleagues, and former students who contributed to my charitable campaign.  Thanks to the generosity of many people, I have raised $5,989 for Homes for our Troops.  This amazing organization builds specially adapted homes for severely disabled military veterans.  I'm so proud to have contributed to their incredible work.  If anyone would still like to donate (just $11 more to pass $6,000!), you can do so by clicking here.   Now, back to my academic goals for this sabbatical - gotta write this book!  

Friday, September 29, 2017

Norwegian Airlines: Are They Built to Last?

Travelers in my area have been enjoying incredibly low fare trips to Europe on Norwegian Airlines. Right now, you can book a one-way flight for next week from Providence, Rhode Island to Shannon, Ireland for $169. With these low fares, Norwegian has been growing rapidly here in the northeast. The question is: Can they succeed in this highly competitive space? Have they replicated the Southwest and Ryanair low-cost operating models and applied it successfully to intercontinental travel? The Wall Street Journal's Heard on the Street column has some doubts:

The airline operates a very different growth model to tried and tested low-cost carriers such as Southwest Airlines Co. in the U.S. and Ryanair in Europe. These combine a disruptive approach to operations with a conservative one to finances. Crucially, strong balance sheets and fat margins have given them the muscle to expand through downturns, when rivals are in retreat and customers hungry for bargains.

With its slim margins and leveraged balance sheet, taking advantage of a downturn will be much harder for Norwegian. Frequent fliers may hope its ambitious project to disrupt the North Atlantic oligopoly thrives. History suggests they shouldn’t get their hopes up.

The Wall Street Journal has expressed skepticism about the airline in the past as well.  In July, the Heard on the Street column noted that Norwegian's costs have been rising over the past four years. Columnist Stephen Wilmot wrote, "You can’t build a low-cost airline without low costs."

The combination of slim or negative profit margins and high debt does indeed pose a serious challenge.  A cyclical downturn will occur at some time in the not-so-distant future.  At that point, the company may struggle to service its debt.   Even if they can make their interest payments, the high debt load relative to rivals may put Norwegian at a serious strategic disadvantage.  Traditional low cost carriers have maintained low debt loads as a competitive weapon, using the flexibility that a conservative capital structure provides to bludgeon higher-cost rivals.   Will competitors take advantage of Norwegian's debt load and launch a price war at a very inopportune time, during a cyclical downturn perhaps?  

Thursday, September 28, 2017

Disney Revamps Its Stores... Again

Disney has once again tried to overhaul its retail strategy. The New York Times reports today that Disney has opened a new prototype store in California. Reporter Brooks Barnes explains the changes in the store format:

Quietly, like a mouse on tiptoe, Disney overhauled its retail store at the Northridge Fashion Center mall in late July. Out went the twisty Pixie Path aisles, the ornate displays, the green walls and the color-changing fiberglass trees. In came a movie-theater-size screen, a simplified floor plan, white walls and more items for fashion-conscious adults... The redesign makes Disney’s stores a bit more like Disney’s theme parks. For instance, daily parades at Disneyland in California and Walt Disney World in Florida will be streamed live to those colossal video screens. During the parades, store personnel will put out mats for shoppers to sit on and roll out souvenir carts stocked with cotton candy and light-up Mickey Mouse ears.

Of course, Disney tried to overhaul its retail stores seven years ago.   Now they are trying again to reshape their retail strategy in the face of intense competition from online retailers, as well as major players such as Target and Wal-Mart.  As with the prior revamp, I think Disney has to ask itself two fundamental questions:

1.  Do the stores represent a sufficient experience that justifies customers making a special trip to the store, as opposed to buying elsewhere?  Does that experience enhance customer's willingness to pay for its products?  If they can't answer yes to those two questions, then they should reconsider this vertical integration strategy.  

2.  Should Disney have 300+ stores across the country, mostly in shopping malls?  Or, should Disney consider slimming down the store count considerably, and opting for a "flagship store" strategy in major cities around the world?  

Wednesday, September 27, 2017

Is Regret a Bad Thing?

Do you have some decisions or actions that you regret? Perhaps it's an action taken yesterday that you wish could be taken back. Or, perhaps you regret something you wished that you had done in the past. Is regret clearly a bad thing? Research by Colleen Saffrey, Amy Summerville, and Neal Roese suggests that people may actually have a favorable view of regret, and that it might serve a useful purpose for us. They write,

"People value their regret experience. They value it in both an absolute sense (the favorable aspects outweigh the unfavorable aspects) and in a relative sense (as compared to other commonly experienced negative emotions). This is a surprising finding given the assumption of the aversiveness of regret..."

Why might regret be a positive thing? The scholars argue that regret can be a mechanism for self-improvement. Experiencing regret might be part of the self-reflection process that leads to learning. As a result, we may come to avoid past behaviors that were not good for us or for others. Similarly, we might come to realize why certain actions should be taken, though we may have failed to take those actions in the past.  

Consider for a moment the occasions during which you may have regretted an action or decision at work.  Are you using those moments of regret to reflect, learn, and change?  

Tuesday, September 26, 2017

Pressure for Directors to Sit on Fewer Boards

The Wall Street Journal's Sarah Krouse and Joann S. Lublin report today that several major institutional investors have been pressuring companies to reduce the number of directors that simultaneously sit on a number of other boards of directors.  The writers report that, "The number of directors on five or more corporate boards has declined in recent years."   Why the pressure?  Investors argue that these directors cannot possibly provide adequate attention to their monitoring and oversight duties at a company if they sit on many other boards at the same time.  That makes good sense to me.   In fact, a study by research firm Equilar "suggests that leaders with multiple outside corporate board seats and their employers make more money, but their shareholders see lower returns than those with one or zero outside directorships."   Still, more than 60 directors of firms on the S&P 500 serve on five or more boards of directors at this time.   That should change.  Shareholders and other constituents deserve directors who are not only highly capable, but also who have the proper amount of time to devote to understanding a firm and its industry and engaging in effective oversight and control.  

Monday, September 25, 2017

How Specific Should a Worker's Contract Be?

A set of studies by Eileen Chou, Nir Halevy, Adam Galinsky, and the late J. Keith Murnighan have examined how specific labor contracts should be. They conducted experiments on an online labor market. They wanted to know whether specifying work duties and responsibilities increased or decreased employee motivation. Here is what they found, according to Stanford Leadership Insights:

Across nine different experiments, the researchers found that workers whose contracts contained more general language spent more time on their tasks, generated more original ideas, and were more likely to cooperate with others. They were also more likely to return for future work with the same employer, underscoring the durable and long-lasting nature of the effect. But why? The researchers found that the more general contracts increased people’s sense of autonomy over their work. Those findings dovetail with previous psychological research showing that increased autonomy boosts motivation, which leads to a ripple effect of other desirable outcomes.

Indeed, this research proves consistent with the work decades ago of Richard Hackman and Greg Oldham.  Those scholars argued that one could enhance intrinsic motivation by, among other things, designing jobs that provided workers with a substantial dose of autonomy.  Of course, one has to have some guidelines and policies.   You can't provide no direction at all.   In my view, you have to be more specific with regard to WHAT needs to be done, but less specific with regard to HOW it should be done.  In short, you have to establish goals and objectives, but you should empower your employees to discover the best ways to achieve those goals (provided they uphold ethical and legal rules and responsibilities).  

IDEO's Tim Brown: How to Solve Problems Like a Designer

Thursday, September 21, 2017

Selling the Problem vs. Selling the Solution

Entrepreneur and investor Dave Bailey has written an outstanding column for Medium.   Bailey addresses the importance of focusing as an entrepreneur on the problem you are trying to solve.   He argues that startups often become enamored with their solution or their technology in particular, but they don't explain adequately the customer need that they are addressing.  What pain point are you alleviating?  What problem are you solving for the user?   How will take away a roadblock, inefficiency, or frustration that users are experiencing?   Bailey explains:

As Steve Jobs said: you have to start with the customer experience and work backwards to the technology. Jobs understood that when you try to reverse-engineer the need statement from the product, it’s too easy to lose touch with reality.

After 6 months of intense product development — this happened to me. My product was my baby and I wanted to talk about with everybody.  When I didn’t lead with the need, it was often greeted with confused looks. I was giving people the ‘answer’ without telling them the question — like a weird game of ‘Jeopardy’.

Even when I did start with the need, I only afforded it a sentence or two. I’d describe the need to perfectly frame my product. In other words, I did the exact opposite to Steve Jobs. At when the confused looks continued, I got defensive. ‘Trust me, it’s a problem — ok?

Bailey recommends writing a customer need narrative.  He argues that it's more than one sentence.  It's a clear and compelling paragraph that "outlines a thesis on how to make peoples’ lives better."  Certainly, many entrepreneurs fall in love with their idea.  They get excited about the technological innovation.   Unfortunately, many forget that the product is simply a means to an end.  Keep the end in sight, with the end being a better experience for the user.   Sell your problem first, not your idea.  

Wednesday, September 20, 2017

Herb Kelleher on Market Share

Entrepreneur Joel Gascoigne tweeted a quote from Southwest Airlines co-founder Herb Kelleher yesterday. The quote describes Kelleher's views on the pursuit of market share vs. profitability. I think he's hit the nail right on the head.



Tuesday, September 19, 2017

The Dark Side of Board of Director Mentoring Relationships

Joann Lublin wrote a Wall Street Journal article this week titled, "Boards Try Buddy System to Get Newcomers Up to Speed."   Lublin describes how some boards have assigned mentors to new directors, so that experienced board members can help newcomers assimilate to the culture of the group.   Lublin offers the example of Carol Martz mentoring new director Amy Chang at Cisco Systems.  She explains, 

More boards are pairing new members like Ms. Chang with seasoned mentors like Ms. Bartz as they scramble to improve their oversight of management in the face of intensified investor scrutiny. Board buddies can help newcomers figure out the boardroom’s cultural norms, power brokers—and even the right place to sit.  Mentors make sure “you don’t come in as a bull in a china shop,” observes Steven R. Walker, managing director of the board services group at the National Association of Corporate Directors.

I certainly understand the importance of helping new directors learn the ropes when joining a board.  These mentoring relationships certainly appear to have a good intent.  However, I do have some worries about such systems.  What if the mentors provide the wrong message?  What if they encourage newcomers to refrain from challenging the status quo, expressing dissent, or asking the tough questions.  In the article, Martz acutally encourages Chang not to apologize for asking a challenging question.  However, some directors might provide very different advice.  They might promote norms that include conflict avoidance and deference to management.   Long-time directors might protect the harmony of the group, and in doing, send a signal that speaking up is not welcome.  Rocking the boat might not be the right strategy during your first board meeting. However, discouraging people from ever rocking the boat might also be a very dysfunctional dimension of some of these mentoring conversations.