Monday, August 07, 2017

High Status Firms: Hiring Advantage but Retention Challenge

Scholars Matthew Bidwell, Ethan Mollick, Roxana Barbulescu, and Shinjae Won have written a new paper titled, “I Used to Work at Goldman Sachs! How Firms Benefit From Organizational Status in the Market for Human Capital.” The scholars discover, unsurprisingly, that high status firms have a powerful hiring advantage. Knowledge@Wharton summarizes the key finding: 

If a firm is high status, it possesses a hiring advantage (“preferential labor market access” in the paper’s language), but the advantage is not what one might think. It isn’t better pay or more interesting or challenging work: It’s the belief that having worked for such an employer can help you get a better job later on.  “You essentially can pay people in reputation,” says Mollick. “They will take less salary early on because the reputation will result in a higher salary later.” 

How substantial was the impact of status in the employment choices made by MBA graduates in the study? According to the authors, the impact was especially critical in investment banking (shocker!), "where respondents’ odds of accepting a job offer nearly doubled with a one-unit increase in their perception of the firm’s reputation."

Interestingly, though, the hiring advantage that high-status firms possess turns into a retention disadvantage later on in people's careers.   These workers may value status over pay when they are looking for a job right out of school, but eventually, they want firms to show them the money!   The scholars found that, "Workers’ pay rises faster with seniority in high-status firms than lower-status firms."    What's going on?  Now these workers have the high-status firm on their resume.  They view themselves as highly attractive candidates on the job market.  Indeed, they probably do have many outside opportunities that are quite lucrative. Thus, they demand high wages if the firm wishes to retain them.  Of course, many of these high-status firms that recruit at top business schools understand that retention will be difficult.  They don't even mind as people leave in many cases.  They cultivate their alumni network, much as a university would.  Why?  After all, these former employees who leave a banking or consulting firm become potential clients for the firm when they move to a different company.  

Saturday, August 05, 2017

Failure Has Become Fashionable

Everyone is talking about becoming more tolerant of failure these days.  You read it everywhere.  Failures are really learning opportunities.   You learn more from failure than success.  You have to be willing to fail if you wish to innovate.  Experimentation entails some failures; without them, you won't create anything truly bold.  You have to make it ok to fail.  

Is it really true? Should failure be acceptable in your organization?  HBS Professor Amy Edmondson has noted that there is a spectrum of reasons for failure.  Some failures are truly preventable.  They result from people knowingly deviating from procedures or not paying close enough attention to specifications.  These types of failures are blameworthy events.  They are not acceptable.  At the other end of the spectrum are intelligent failures.  These failures result from the experimentation process.   In these situations, people are trying to learn through hypothesis testing or exploratory experiments.   These types of failures, according to Edmondson, are praiseworthy events.  

Are all experiments praiseworthy?  Of course not.  Some experiments are well-designed and carefully  implemented.  Others are hastily arranged and not well-designed.  You want to encourage people to make smart bets.  They should be engaging in enlightened, disciplined trial and error in the iterative process.  They shouldn't just be haphazardly trying new things.  Failures that emerge from a well-designed experiment are praiseworthy events.  We should not send the message, though, that all testing is good testing.  We should encourage people to put some thought into how they execute tests, experiments, and prototypes.  Are they designed in such a way to elicit highly useful user feedback?  Was data collected in an unbiased way, or were people simply trying to confirm what they already believed?  Did people pick the right sample, and were appropriate controls chosen if a hypothesis was  being tested?  These types of questions need to be asked when people fail during the iterative process.   We want to tolerate certain types of failure because we want to maximize learning. However, poorly designed tests and experiments do not lead to effective learning.  

Friday, August 04, 2017

Supporting Homes for our Troops

Thank you so much to all my readers who have contributed to my campaign to support Homes for our Troops.  I'm running the Twin Cities Marathon on October 1st to support this amazing organization that builds specially adapted homes for severely disabled veterans.  I'm very grateful for your contributions to date.  If anyone would still like to contribute or learn more about my effort, you can visit my campaign page here.  Thanks!  

Is It a Curse to Be Labeled a Star?

Jennifer and Gianpiero Petriglieri have written a terrific Harvard Business Review article titled, "The Talent Curse."   In this essay, they argue that being labeled as a "high potential" or "future leader" can be detrimental to many talented employees.   The label changes their behavior and mindset, and as a result, their stress level increases, performance suffers, and attitude toward the organization sours.  They explain:

In an age when companies wage wars for talent, it is hard to acknowledge that for some people, being recognized as talented turns out to be a curse. But it does. Aspiring leaders work hard to live up to others’ expectations, and so the qualities that made them special to begin with—those that helped them excel and feel engaged—tend to get buried. They behave more like everyone else, which saps their energy and ambition. They may start simply going through the motions at work—or, like Thomas, look for an escape hatch. This curse strikes the talented even in companies that invest heavily in their development—places where executives are sincerely dedicated to helping people thrive.

What are the signs that being labeled as a star may actually be a curse for you?  They cite three symptoms of trouble. First, are you determined to prove that you are worthy of your label as a star, rather than focused on simply using your talents effectively to achieve personal and organizational goals?  Do you stress short term performance at the expense of continuing to learn and grow?  Second, have you become very focused on your image?  Do you want to be your authentic self, but find yourself trying to be someone else?  Third, are you going through the motions now, with aspirations of eventually doing meaningful work down the road?  Have you convinced yourself that it's okay that you aren't passionate about your work at this point, because you will have a chance to find passion and purpose in the future?  

In sum, you have to ask the question: Has the star, high potential, or future leader label fundamentally changed my behavior?  If so, you have to take a hard look at your mindset, attitude, and behavior.  

Friday, July 28, 2017

The Irrational Desire to Complete a Set of Tasks, Purchases, etc.

Kate Barasz, Leslie John, Elizabeth Keenan, and Michael Norton have completed a new study demonstrating that people have an irrational desire/need to complete sets of tasks, purchases, assignments, etc. Barasz says, "People really don't like to leave things incomplete." HBS Working Knowledge describes the implications of their research: 
  
Do you want customers to refer more of their friends to your company’s website? Ask them to refer friends in arbitrary “batches” of five at a time. Looking to increase charitable giving to your nonprofit organization? Ask potential donors to contribute a set of six gifts. Are you and your fiancĂ© struggling to write thank-you cards for all those wedding shower gifts? Try batching the unwritten cards into sets of eight. Rather than feeling overwhelmed by the prospect of writing one note at a time, you’ll feel oddly motivated to finish a whole set at a time.

In one study, the scholars conducted a field experiment with the Canadian Red Cross.  They tested three types of donation request with more than 7,000 donors during the Christmas season in 2016.  One group of donors received a request for cash donations.   A second group received a request to donate so as to fund the giving of particular items to people in different spots around the globe.  A location marker on a visual of the globe indicated where their money was funding a particular item. The third group of donors received a request to donate funds for a "Global Survival Kit" of six items. As they donated each item, a line stretched further around the globe, going around the entire earth if all six items were funded. The prospective donors did not have to donate all six items.  They could choose to donate a single item if they wished.  Barasz notes, “Who wants to donate six blankets, when you can donate one blanket and feel just as good? But, if you frame it as a set, then there is a reason to want to complete the set and to donate all six of the items.”

What did they find? 21% of the people in the third group chose to donate all six items. That was more than 4 times as many people donating as compared to the second group, and 7 times as many people donating as compared to the first group.  In short, framing the decision as a set to be completed has a substantial impact on donor behavior.  Presumably, the same type of framing may have a significant impact on customer or employee behavior.   It may not seem rational to be compelled to complete a set, but that's the way many individuals feel.  

Thursday, July 27, 2017

Bud Light's Decline: What's the Brand Promise?


The Wall Street Journal reports today that Budweiser and Bud Light continue to experience market share declines in the United States.   The chart shown here documents the eroding share over the past six years for the Bud Light brand.  The main Budweiser brand also has experienced share decreases over this time.  The article attributes the declines to the growing appeal of craft beers and imports.   The article makes me wonder about Budweiser and Bud Light's brand promise.  What is it, and has it been updated effectively for the current market environment. What is Bud selling these days, and has it positioned itself appropriately amidst the heightened competition from craft brews and imports?


Consider the concept of a brand promise.  What is a brand promise?   Hinge Marketing describes it as "the tangible benefit that makes a product or service desirable." Workfront defines it as " a value or experience a company’s customers can expect to receive every single time they interact with that company." Workfront argues that a highly effective brand promise has five attributes: simple, memorable, credible, different, and inspiring.  

Does Bud Light have a brand promise that meets these five criteria? Has it updated that brand promise for the current competitive situation and to meet today's customer needs and desires?  It's not clear to me that they have figured out how they should position themselves in this current environment.  

What's an example of a brand promise that does meet these five criteria?  How about Ritz Carlton?  Their brand promise is quite compelling:  "Ladies and gentlemen serving ladies and gentlemen."  


Wednesday, July 26, 2017

LEGO Boost: Continuing to Renew & Extend the Core

Great firms don't simply diversify into new businesses when their core business appears to be maturing.  Diversification attempts sometimes have two deleterious effects.  First, companies find themselves extending into areas in which they do not have distinctive capabilities that can lead to competitive advantage.  Second, the attention focused on the new businesses can accelerate deterioration of the core, as management becomes distracted and resources stretched thin.   Top performing firms search for ways to deepen their competitive position, to reinvigorate their core business.  Great firms don't simply accept the apparent decline of their core business.  

LEGO went through some substantial challenges in the early 2000s. Jargon Vig Knudstorp became CEO in 2004, and he engineered a remarkable turnaround.   He focused on what made the firm successful for decades - the LEGO bricks and the play associated with those iconic bricks.   Over time, LEGO has reinvigorated the brand and the famous LEGO bricks.  Moreover, the firm has deepened its competitive position with new product offerings and brand building efforts such as the LEGO movie.  

Now the Wall Street Journal reports on the introduction of a new line of products called LEGO Boost.  The products seek to capitalize on the movement to teach kids how to code.   Geoffrey Fowler reports:

Learning programming is awesome when you’re making Lego robots fart. “Usually Legos cannot fart, so we made these Legos fart a lot,” says Eleanor, 9 years old, who helped me code dance moves, jokes and simulated bodily functions into Lego Boost, a new take on the iconic bricks. “Also burp. Don’t forget the burping,” she adds.  Making Lego bricks come to life is a big deal for children aged 7 to 12—as well as for parents who want to teach them the basics of programming.

This new product line appears to build nicely off of the success of the company's Mindstorms products.  Mindstorms is used to teach older kids about robotics.  The Boost product line aims to introduce coding to younger children (ages 7-12).   The product line is consistent with the brand positioning, and it leverages what the company is already good at doing.  LEGO Boost appears to be another way in which LEGO continues to reinvigorate the core business and deepen its competitive position, rather than trying to do new things for which LEGO does not have a distinctive capability.  

Tuesday, July 25, 2017

The Dangers of Sleep Deprivation

We've all heard the stories of the startup team working late into the night, day after day, as they try to build their business, or the bankers sleeping in the office while they try to close a big deal.  Research suggests that sleep deprivation can have some significant costs though, and not just in terms of personal health. Michael Christian and Aleksander Ellis wrote a paper titled, "Examining the Effects of Sleep Deprivation on Workplace Deviance: A Self-Regulatory Perspective."  By deviance, they mean "a wide spectrum of behaviors that violate organizational norms and threaten the success of a company, ranging from rudeness and withheld effort to theft and violence."

The authors conducted a series of studies on sleep deprivation.  In some cases, they conducted field research, and in other instances, they performed experimental studies in the laboratory.  They found that sleep deprivation does indeed increase deviant behavior in organizations.   For instance, in one experimental study, they split their research subjects into two groups.  one group was able to get a normal night's sleep, while the other did not sleep for 24 hours.  Then the students had to mentor fellow business school students and answer inquiries from business school applicants.  The sleep-deprived students were more likely to provide "inappropriate, negative, or hurtful responses" to questions from fellow students or applicants.  Similarly, in a field study, they found that nurses were more likely to engage in deviant behavior if they were sleep deprived.  


Saturday, July 22, 2017

Networking Inside & Outside the Firm to Drive Innovation

Linus Dahlander, Siobhan O’Mahony, and David Gann have conducted a fascinating new study regarding researchers at IBM.   They studied more than 600 technical experts at IBM, people responsible for many of the firm's patents.  They paid attention to how these experts networked with others both inside and outside the firm.  In an HBR digital article, the scholars summarize their findings:  

We measured the breadth of each person’s external social network by the different types of external sources they interacted with. Then we assessed how the breadth of each person’s external network was associated with subsequent innovation outcomes at IBM, like the quantity and quality of the patents the individual produced.

Surprisingly, we found that our respondents’ most common sources of inspiration for new ideas were their colleagues inside, rather than outside, the firm. In contrast with current theories of open innovation, people with broader external networks were no more innovative than people with narrow external networks. Many of the experts relied mostly on internal networks and were still innovative. To better understand this puzzle, we examined how people allocated their time among their information sources inside and outside IBM.

We discovered that experts with a broad external network were more innovative only when they devoted enough time and attention to those sources... This is an important finding, as many managers are keen on the idea that networking and forming external ties can boost the flow of ideas that spurs innovation. What we found is, for that to happen, employees need to devote significant time and attention to creating and sustaining their external relationships. In some cases, people who focused on learning from colleagues inside the organization were just as innovative.

About 30% of the respondents who had a broad external network did not allocate enough time to learn from those relationships. These people would have been better off deepening relationships with their colleagues inside the firm. For spending time inside the company is also important to understanding the firm’s innovation needs and knowing how to develop and execute on innovative ideas.

In sum, the best innovators engage in a balance of external and internal networking.  They scour the outside world for ideas, but they do so given a solid understanding of what's happening within their firm.  Moreover, they engage with people in sufficient depth so as to truly learn from them, rather than simply gaining a superficial understanding of the trends and developments in the outside world.  You can't simply have coffee with a hundred people in search of the next big idea. You have to immerse yourself in certain contexts, whether they be internal or external.   Learning takes time, as does relationship building.   

Thursday, July 20, 2017

Avoiding Confirmation Bias

Earlier this year, Tom Stafford wrote a column for the BBC's website about how to combat confirmation bias.  In other words, how do we avoid the problem of searching for and relying on data that confirm what we already believe (while dismissing or avoiding data that contradict our pre-existing beliefs)?  

Stafford recalls a famous set of experiments by Charles Lord,  Lee Ross, and Mark Lepper.  In one classic study from several decades ago, they looked at how people's attitudes toward the death penalty changed after being exposed to two contrasting studies - one demonstrating a powerful deterrent effect for the death penalty and another showing the exact opposite finding.   Lord, Ross, and Lepper found that people's attitudes polarized after looking at the two studies.  Why?  They assimilated the data in a biased way, relying heavily on the information that supported their pre-existing beliefs.  

Stafford describes a second experiment that these scholars conducted.  In this subsequent research, they compared two strategies for trying to combat confirmation bias.  They analyzed the impact of two different sets of instructions for people.   They were given these instructions before looking at the data.  Stafford summarizes what these scholars discovered: 

For their follow-up study, Lord and colleagues re-ran the biased assimilation experiment, but testing two types of instructions for assimilating evidence about the effectiveness of the death penalty as a deterrent for murder. The motivational instructions told participants to be "as objective and unbiased as possible", to consider themselves "as a judge or juror asked to weigh all of the evidence in a fair and impartial manner". The alternative, cognition-focused, instructions were silent on the desired outcome of the participants’ consideration, instead focusing only on the strategy to employ: "Ask yourself at each step whether you would have made the same high or low evaluations had exactly the same study produced results on the other side of the issue." So, for example, if presented with a piece of research that suggested the death penalty lowered murder rates, the participants were asked to analyse the study's methodology and imagine the results pointed the opposite way.

They called this the "consider the opposite" strategy, and the results were striking. Instructed to be fair and impartial, participants showed the exact same biases when weighing the evidence as in the original experiment. Pro-death penalty participants thought the evidence supported the death penalty. Anti-death penalty participants thought it supported abolition. Wanting to make unbiased decisions wasn't enough. The "consider the opposite" participants, on the other hand, completely overcame the biased assimilation effect – they weren't driven to rate the studies which agreed with their preconceptions as better than the ones that disagreed, and didn't become more extreme in their views regardless of which evidence they read.

Tuesday, July 18, 2017

What's the "Optimal" Failure Rate at Netflix?

When Orange is the New Black, House of Cards, and Crown became mega-hits for Netflix, many people credited the analytics capabilities of the company. Mining the customer data had enabled the firm to project the type of original programming that would be highly successful. By this logic, Netflix would achieve a lower failure rate on new shows than the major television networks. After all, broadcasters such as CBS and NBC cancel a substantial share of their new shows each year, some after only a few episodes. 

On the recent Netflix earnings call, many investors were pleased to hear about strong subscriber growth at the firm. However, some investors came away concerned about the amount of spending taking place as the firm acquires or develops new content. Moreover, some observers and analysts have expressed concern about the recent cancellations of some new Netflix original shows. Tom Huddleston Jr. reported on the company's reaction to this criticism in a recent Fortune article:

Meanwhile, also on the Monday earnings call, Netflix's chief content officer Ted Sarandos defended the company's recent cancellations of a handful of expensive, but underperforming, original series. "The more shows we have, the more likely in absolute numbers that you’ll see cancellations, of course," Sarandos said. The executive compared Netflix's recent spate of cancellations—including big-budget series like The Get Down and Sense8—to traditional TV networks that cancel nearly one-third of their new shows after their first seasons. Netflix, he said, has renewed 93% of its original series. With respect to the shows that Netflix opted not to renew, Sarandos argued: "If you’re not failing, maybe you’re not trying hard enough."

This quote from Sarandos raises a fascinating question.  What is the "optimal" failure rate at Netflix?  Surely, we would like the failure rate to be lower than the broadcast networks.  We would like to see the company reaping the benefits of its analytics capabilities.  At the same time, no one should want Netflix's failure rate on original programming to be zero.  We want the firm to take some chances in hopes of landing some surprising breakthrough hits.  Hopefully, the firm isn't simply guessing or drawing on the intuition of the "creatives" in the business.  We would like to see them engaging in "enlightened" experimentation, using big data to guide them while still taking some risks.   If they balance data mining and risk-taking in an effective way, the failure rate won't be zero, but it will be much lower than their broadcast and cable competitors.  

Monday, July 17, 2017

Proxy Fight at P&G: Can Activist Investors Drive Effective Change?

The Wall Street Journal reports today that activist investor Nelson Peltz has launched a proxy fight with Proctor & Gamble.  No company this large has ever faced a proxy fight.  The investor seeks a board seat in hopes of driving change. Peltz has been frustrated with the lackluster revenue and earnings growth at the consumer products giant over the past several years. According to the article, "Mr. Peltz’s Trian Management Fund argues that P&G failed to capitalize on a five-year savings plan that shrank the company by tens of thousands of employees, more than a dozen factories and hundreds of brands. Trian casts doubt on whether a second, five-year, $10-billion savings plan announced by P&G last year will produce results." 

Many observers and analysts have wondered whether activist investors would push for a breakup of P&G. After all, the company does operate a number of businesses including grooming (e.g., Gillette), fabric and home care (e.g., Tide, Cascade), oral and personal care (e.g., Crest, Prilosec), baby and feminine care (e.g., Pampers and Tampax), and household items (e.g., Bounty, Charmin). However, the company already has divested several units that appeared to be somewhat unrelated to their core brands; P&G divested its pet food, battery, coffee, and potato chip businesses in recent years. Peltz has signaled that he's not pushing for further divestitures at this time. 

What's the problem at P&G?  In my mind, the company can't cut its way to enhanced long run performance.  Perhaps costs are bloated, and some efficiencies must be attained.  However, the core problem remains innovation and growth.  In the heyday of A.G. Lafley's first tenure as CEO, P&G excelled because it generated product innovations that drove robust revenue growth (consider the remarkable success of Febreze and Swiffer).   These innovations have not come at the same pace in recent years.  Moreover, customers have traded down from the premium-priced products offered by P&G to more affordable brands.  Consider the success of upstarts in the razor business, as well as the increasing success of private labels in a number of P&G categories.  

What then of the proxy fight led by Peltz?  It seems to me that activist investors can be helpful at times in forcing difficult reorganizations, cost-cutting initiatives, and divestitures that management may be unwilling to undertake.  However, activist investors are not well-equipped to help companies jumpstart innovation and revenue growth.  How will this proxy fight solve the underlying growth problem at P&G?   It won't.   The company has much more challenging work to do than simply fending off an activist investor's attempt to snag a board seat.  



Sunday, July 16, 2017

Knowledge Increasingly Generated by Teams Rather than Solo Artists

Do great breakthroughs in knowledge occur as a result of a brilliant mind working alone, perhaps through some brilliant flash of insight? Or, is knowledge creation fundamentally a collaborative endeavor? Has the process of knowledge creation changed in recent years? Has it become more collaborative? Northwestern scholars Stefan Wuchty, Benjamin Jones, and Brian Uzzi studied these questions and have written a paper titled, "The Increasing Dominance of Teams in Production of Knowledge." 

The authors examined nearly 20 million articles from the Institute for Scientific Information Web of Science database. These articles include work from a range of fields including science, engineering, social sciences, the arts, and the humanities. They also studied more than 2 million patents issued during the time that these articles were published. 

The scholars report that, "For science and engineering, social sciences, and patents, there has been a substantial shift towards collective research. In the sciences, team size has grown steadily each year and nearly doubled from 1.9 to 3.5 authors per paper over 45 years." The authors found that solo authors tend to be more prevalent in the arts and the humanities, though collaboration has increased there as well. Moreover, the authors discovered "a broad tendency for teams to produce more highly cited work than individual authors" - a finding true across all fields. In fact, that trend toward higher citations of collaborative work has picked up in recent years. 

In sum, collaboration has become more important and more prevalent over time in the knowledge generation process. This statement represents more than just a well-worn cliche; the empirical data support this claim in clear and convincing fashion.

Friday, July 14, 2017

Sir Ken Robinson: How To Escape Education's Death Valley

Creativity expert Sir Ken Robinson has provided some excellent thinking on the state of education.  I love listening to him describe how we stifle creativity in our children at times, and how we can shift our thinking as educators.  Here's one of his terrific TED talks:

Thursday, July 13, 2017

Top Sales People Really Don't Make the Best Managers

The conventional wisdom is straightforward - the top individual performers don't always make the best managers.  That old adage holds true especially in the field of sales.  Many people believe that the best sales people don't make the best managers.   Is it true?  New research examines this assumption, drawing upon one of the most extensive databases ever collected to research this topic.  

Alan Benson, Danielle Li, and Kelly Shue examined data on salespeople at more than 200 firms. These scholars analyzed how individual performers did prior to promotion.  Then, after these individuals were promoted to managers, they examined how the performance of their new subordinates was impacted.   The richness of the data enabled the scholars to compare salesperson performance under this new boss vs. other previous supervisors.   What did they find?  Chicago Booth Review reports:  

The best salespeople did not make the best managers: demonstrated sales skill, as evidenced by managers whose sales doubled before their promotion, corresponded to a 10 percent drop each in the sales performance of new subordinates.  The typical newly minted manager is in charge of five people. Therefore, the doubling of a manager’s sales predicts a total team sales drop equivalent to half the sales of one worker.

Thus, the conventional wisdom is true.  Moreover, the negative impact of promoting the wrong people is substantial.  Companies need to understand the skills and qualities required to become good sales managers, and based on that analysis, they must change their promotion criteria.  Meanwhile, they must find other ways to reward top individual performers, rather than using promotion as a key incentive.   

Wednesday, July 12, 2017

Grooming Future Leaders

Retired Brigadier General Bernard Banks, now teaching at Kellogg, offers some interesting insights on developing future leaders.  Banks explains that companies need to begin grooming future leaders when individuals are not yet managing others.  He advocates providing individuals temporary opportunities to lead others as an initial developmental opportunity, before people are promoted to managerial positions.  Banks explains: 

According to Banks, a better path is to begin grooming future managers when they are still in nonmanagement roles, so that they can develop prior to moving up the ladder. For example, a company might place people on teams where they have no formal authority, but are nonetheless expected to work collaboratively with others. Or a company might temporarily provide leadership assignments. When a manager leaves for vacation or is occupied with another assignment for a finite period of time, a nonmanager—rather than a colleague already in a managerial role—might be asked to fill in.  This early investment can feel like a risk at the time, admits Banks, but he has seen it pay off in future leaders. “When they make that transition, they have a reasonable expectation of succeeding in that new role.”

Banks also argues that individuals need to take ownership of their development plan.   Companies should not simply be telling workers what they need to do next to develop as leaders.  The process should involve a healthy dose of self-direction.  Individuals need to identify opportunities for development, rather than always waiting to be told what to do.  

Monday, July 10, 2017

Chief Justice John Roberts' Commencement Address

I heard about Chief Justice John Roberts' commencement address at Cardigan Mountain School in New Hampshire the other day.   I had an opportunity to watch the speech on YouTube, and I thought he shared a vitally important message.  Moreover, it was unique, avoiding many of the usual pieces of advice offered by graduation speakers.   Take a look for yourself:

Thursday, June 29, 2017

Five Essential Questions

My colleague Peter Nigro (finance professor here at Bryant University) gave me a little book to read this week:  "What, What?" by James Ryan, Dean of the Harvard Graduate School of Education.  What a fantastic read!  I laughed, cried, and learned a great deal.   Ryan offers five essential questions that we should all ask ourselves (not just once, but throughout our daily lives).   Here are the five questions:

1.  Wait, what?   In other words, ask people for clarification.  Ask them to elaborate. Seek to understand them more clearly before jumping to conclusions.

2.  I wonder... Two types of "I wonder" questions actually: I wonder why and I wonder if.  I wonder why demonstrates intellectual curiosity.  You are trying to understand what's really going on.  Then, you can ask, "I wonder if..."  In other words, what might be possible?  How might we improve things?  You open up your mind to new opportunities for growth, development, and change.

3.  Couldn't we at least...?   Sometimes we disagree vehemently with others.  This question seeks to find some common ground.  It looks for some small first steps that can bring people together.  It propels us to take some action, rather than waiting for the perfect grandiose solution.  It invites us to find small wins.

4.  How can I help?  With this question, we reach out to others, but we don't simply offer our solutions to what we perceive to be their problems.  We let them drive the conversation.  What do they need from us?  How can we contribute most effectively?

5.  What truly matters to me?  This question pertains both to specific meetings, projects, and decisions as well as to your life overall.  For particular tasks, asking this question enables you to get to the heart of the issue.  Where should we really focus our attention?  What are the key issues, and what are the things that distract us?  At a broader level, this question enables us to consider our values and our priorities in life.

The video below provides a brief introduction to these ideas.  I highly recommend reading the entire book.  It's a quick read (just over 100 pages).  I promise that it will be thought-provoking.

Tuesday, June 27, 2017

How Do We Deal (Dysfunctionally) with a Heavy Workload?

Diwas S. KC, Maryam Kouchaki, Bradley R. Staats, and Francesca Gino have written an HBS Working Paper titled "Task Selection and Workload: A Focus on Completing Easy Tasks Hurts Long-Term Performance." These scholars found that individuals choose to work on easier tasks when they experience heavy workloads. Why? People enjoy a positive feeling when they are able to complete a series of tasks in fairly short order. Thus, individuals choose to satisfy themselves by choosing to work on easier tasks when they have a ton of work to do. In the short run, that's a very productive strategy. They cross quite a few items off of their to-do list. However, the researchers find that this task selection strategy may have negative long term performance consequences. 

The study took place in the emergency department of a hospital. They studied over 90,000 patient visits to the emergency room over a two-year period. They found that doctors choose to work on easier patient cases when the ER is very busy. Naturally, they see more patients as a result of this bias toward selecting easier cases. In other words, short term productivity increases. However, the doctors may not capitalize on as many powerful learning opportunities if they always choose the easier cases. The doctors may not be as effective at tackling complicated cases if they work with those patients much less frequently. Indeed, the scholars found a negative long term effect on productivity if doctors exhibit this bias toward selecting easier cases when the workloads are high. 

What's the implication for all of us? Be careful before you simply choose the short-term satisfaction of crossing many easy items off of your to-do list. Think carefully about the long term benefits of tackling tougher tasks. It's a balancing act, of course. You probably should go after some of the low-hanging fruit. You just have to be careful that you don't spend an inordinate amount of your time there, and thus miss key opportunities for learning and improvement that come with more challenging work.

Monday, June 26, 2017

Unilever: Algorithms Replace Humans in Hiring Process

Kelsey Gee wrote about Unilever's "radical hiring experiment" in this morning's Wall Street Journal. Gee explained that, "To diversify its candidate pool for early-career roles that are a fast track to management, Unilever has ditched resumes and traditional campus recruiting. Its new process relies on algorithms to sort applicants and targets young potential hires where they spend much of their time: their smartphones."  

Algorithms have analyzed 275,400 job applications to date and chosen 1/2 of those candidates to advance to the next round of evaluation.  At that point, applicants "play a set of 12 short online games designed to assess skills like concentration under pressure and short-term memory."  Roughly 33% of those candidates move on to the next round of evaluation:  a video interview analyzed through artificial intelligence tools.  Finally, the top 300 candidates or so traveled to Unilever for in-person interviews.   The company claims that they saw top notch applicants in this final round, and they hired many of the candidates. 

What are the benefits and risks of this approach?  For Unilever, it enabled them to branch out beyond the usual small number of college campuses from which they recruited.   More and more companies are realizing that they are missing out on top notch talent by relying only on a few "prestigious" schools for recruiting.  This approach also tries to mitigate some of the bias effects from in-person interviewing.  Much has been written lately about the biases and other problems with usual job interviews.  What's the downside?  Perhaps certain types of candidates don't do well with techniques such as video interviews.   What about those online games?  Are you measuring the right types of skills?  What about "soft" skills that are harder to measure?   Companies will have to monitor such efforts to be sure that they aren't filtering out certain types of talented individuals because of the methods chosen.   

Saturday, June 24, 2017

Please Consider Supporting My Run For the Troops

During my sabbatical year from Bryant, I'm training to run the Minneapolis Marathon on October 1st. I'm running to support Homes for our Troops (HFOT). This organization builds and donates specially adapted custom homes nationwide for severely injured Post-9/11 veterans, to enable them to rebuild their lives. I'm honored to be running to support these men and women who have sacrificed so much to defend our nation and protect our freedom. 

Most of these veterans have sustained injuries including multiple limb amputations, partial or full paralysis, and/or severe traumatic brain injury (TBI). These homes restore some of the freedom and independence our veterans sacrificed while defending our country, and enable them to focus on their family, recovery, and rebuilding their lives. 

Homes for our Troops is a privately funded 501(c)(3) nonprofit organization rated four out of four stars by Charity Navigator. Since its inception in 2004, nearly 90 cents of every dollar donated to Homes for Our Troops has gone directly to their program services for veterans. Charity Navigator has given the charity a perfect 100 score for accountability and transparency. Your money will be going directly to help veterans rebuild their homes and their lives. 

Please join me in my efforts to support this wonderful organization! You can donate here. Thank you very much!

Why Your Cellphone Bill is Decreasing

In an article by Ryan Knutson, the Wall Street Journal reports this morning that, "The cost of U.S. cellular service is rapidly plunging, reversing years of increases that have squeezed consumers’ budgets and generated huge profits for wireless companies." We are in the midst of a massive price war among the key players: AT&T, Verizon, Sprint, and T-Mobile. Knutson reports that prices have declined sharply in recent months: "The consumer-price index for wireless phone service, an indicator of current offers from cellphone service providers, dropped 12.5% in May from a year ago, according to the Labor Department. The index earlier fell 13% in April, the largest decline in the history of the category..." 

Why is the price of cellphone service dropping sharply? Why are we experiencing a price war among the major players? First and foremost, we have an industry with incredibly high fixed costs and relatively low variable costs. The cost of the infrastructure and the technology is astronomical. The marginal cost for you to speak one additional minute or send one additional text is virtually zero. Thus, the service providers have an incentive to cut price in an effort to cover their high fixed costs. The same dynamic exists in the airline industry. The airlines have an incentive to cut price so as to fill every available seat, since the marginal costs of an additional passenger are very low. Moreover, the growth in the market has slowed. Since most Americans now have a cellphone, the service providers have very few new customers to grab. Instead, they find themselves fighting over each other's customers and trying to steal them from one another. These dynamics have sparked the price war. As customers, we benefit.

Friday, June 23, 2017

Three Lessons from the Uber Mess

Yesterday, we learned that venture capital investors forced the resignation of Uber CEO Travis Kalanick.  The company has undergone a tumultuous year, including a massive sexual harassment scandal as well as accusations about stolen files from Google.  What can we learn from the challenges that the company has faced?  There are many lessons; here are three big ones:

1.  We have to be very, very cautious about situations in which investors place seemingly blind faith in a charismatic, successful CEO who is succeeding by challenging conventional wisdom and "breaking all the rules."  Where was the Board when clear warning signs had emerged about improper behavior quite some time ago?

2.  Startups cannot simply ignore human resources rules, policies, and procedures.  They matter.  You have to have guidelines for employee conduct.  There's a point where you stifle people with too much bureaucracy.  However, Uber seems to have gone too far in the other direction.

3.  Culture eats strategy for breakfast, lunch, and dinner.  Uber might have an amazing strategy that has catapulted it to remarkable success in a short period of time.  However, a rotten culture has taken down its CEO and many other top executives, caused lost market share to Lyft, and could be the downfall of the firm.  You have get culture right.   Values matter more than strategy.

Thursday, June 22, 2017

Sabbatical Life

Creating Great Ideas: Combining Open Innovators and Extroverted Peers on a Team

Sharique Hasan and Rembrand Koning have conducted research on idea generation in teams, using a unique field experiment design.  These scholars conducted their field experiment within the opening week of an entrepreneurship academy in India during the summer of 2014.  The scholars begin by noting that prior research suggests that, "Individuals with higher openness are more creative because they seek out diverse information and experiences, but also recombine these more effectively into novel ideas."  However, they explore how creativity may be enhanced when we combine these open innovators with extroverted peers.  Why does the combination of individuals enhance creativity within a team?  They argue that extroverted peers provide new, unique, interesting, and diverse information to the open innovators,   In short, those conversations with extroverted peers provide fuel for the open innovators.  Here's a summary of their conclusions:

Contrary to prior research, we find that being open to experience alone does not lead individuals to generate better ideas (e.g. McCrae, 1987; Feist, 1998). Our findings suggest that this individual capability depends on the types of peers with whom a focal innovator converses. When open innovators are exposed to extroverted peers, they are more likely to develop higher quality ideas–ones that are evaluated higher, are more detailed, and have more distinct word usage compared to other ideas. Conversely, more open innovators whose peers are not extroverted appear to produce mostly average ideas. In terms of magnitude, while this effect alone will not make the lowest-quality ideas the best ones, it can shift ideas at the margins of “good” to “very good” or “very good” to “great.” This is equivalent of moving an idea from being at the 80th percentile of quality to being in the top decile. Overall, our findings highlight the importance for considering the specific nature of social inputs in to the production of good ideas. Moreover, this insight—about the value of a dyadic interaction for information acquisition and ideation—can fruitfully be used to design teams that have a preponderance of those individuals who can help develop high-quality ideas within teams.

Tuesday, June 20, 2017

You Don't Always Want To Focus


Dr. Srini Pillay, an author and executive coach who teaches part-time at Harvard Medical School, has written an intriguing HBR post about the value of "focus" in our work. Pillay argues that focus can enable us to perform outstanding work, but certain negative consequences may emerge if we are "too focused." Pillay argues, "The brain operates optimally when it toggles between focus and unfocus, allowing you to develop resilience, enhance creativity, and make better decisions too." 

What's an example of the value of "unfocus" in our work? Pillay points to a study by Denis Dumas and Kevin Dunbar in which the scholars found that one can solve creative problems more effectively by pretending to be someone else.  Assuming a different identity, or pretending to stand in someone else's shoes, can help people achieve better results at creative problem-solving tasks.  Specifically, Dumas and Dunbar invoked two stereotypes for their research subjects:  the "rigid librarian" and the "eccentric poet."   They asked subjects to either imagine themselves as the librarian or the poet, and of course, they had a control group in their study as well.  The students who imagined themselves as eccentric poets exhibited more divergent thinking than either the librarian group or the control group.  They conclude that, "divergent thinking... is a highly malleable rather than a fixed trait."  

Friday, June 16, 2017

Design Thinking: Observation Tips

When conducting field research as part of the design thinking process, we should keep in mind some of the key do's and don'ts of observational research.  Here are some key tips:

Source:  M. Roberto, Know What You Don't Know (2009). 

Monday, June 12, 2017

Will Immelt's Retirement Lead to the Break-up of GE?

Stunning news from General Electric headquarters this morning;  Jeffrey Immelt will step down as CEO, and John Flannery will succeed him.  Many people wonder what's next for GE given the leadership change.   Immelt has transformed GE in many ways, but some big strategic questions remain.  While he divested a number of businesses during his tenure, the company remains a conglomerate with some seemingly unrelated businesses.   As the stock has languished in recent years, many analysts and observers have asked:  Should GE break up? Is the whole not worth the sum of the parts?   After all, one has to wonder how powerful the scope economies (synergies) are when combining a healthcare company and a jet engine manufacturer under one corporate parent.   Flannery's background and initial comments suggest that a broad strategic review will take place, and nothing is off the table.  

Conglomerate strategies may have made sense many decades ago, but focused firms and related diversifiers have outperformed unrelated diversification strategies in recent years.  In GE's case, it often has been viewed as an exception to the rule when it comes to unrelated diversification.   While many such conglomerates have faltered and broken up in recent decades, GE prospered.  Recent performance has not been as good though.  GE does not seem to have powerful economies of scope (typical synergies), but in the past, it has exhibited strong governance economies. In other words, it used common management systems and methods (the GE way) across the range of businesses, adding value as a result.  Moreover, it had a strong talent management system that moved people across the business and enabled highly effective management of a diverse array of businesses.  Are those governance economies still as strong as they used to be?  Is that enough to justify keeping some unrelated business units together.   John Flannery will have to answer those questions.  

One final note:  John Flannery is a fair bit older than Jack Welch and Jeff Immelt were when they became CEO.  He is 55 years old.  Welch and Immelt were each ten years younger when they became CEO in 1981 and 2001 respectively.   One might conclude, therefore, that the Board does not expect Flannery to serve for as long as his predecessors.  Could that mean Flannery will have more urgency to conduct a strategic review and make substantial changes in the near future?   I think so.  

Wednesday, June 07, 2017

Innovating Around the Box

Knowledge@Wharton reports on a new book by Wharton Professor David Robertson. (The Power of Little Ideas).   In the author interview, Robertson describes his focus on innovation associated with complementary products and services.  In short, he's not focused on simple incremental innovations to existing products.  However, he's also not focused on breakthrough innovations or products in entire new categories.  Instead, Robertson looks at how companies can drive profitable growth through the development of complementary products and services.  In pursuing such innovation, companies can not only drive growth, but deepen their competitive advantage.  Many companies see slowing growth in their core market and look for the next big thing.  Many of these firms should focus on complementary growth first, but they miss those opportunities.  LEGO is a good example of a firm that looked for the next big thing, and nearly went bankrupt.  They recovered by thinking about how to grow "around the brick" and "around the box" as he explains:  

My previous book was about Lego, and that was a story about a company that figured out that you didn’t want to innovate inside the box — that wasn’t going to get them anywhere — and you didn’t want to innovate outside the box because that almost put them out of business, but rather, around the box. Complementary innovations around a core product — the brick for Lego — was what really led them to their recent success.

I got my house painted a couple of summers ago, and the contractor I hired put together a proposal. He helped me choose colors and helped me decide what kind of paint, what things needed painting the most, and how I’d manage on a limited budget. He put together a proposal, and he picked Sherwin Williams paint.

I looked at my favorite consumer ratings magazine, and Sherwin-Williams paint is good, but it’s twice as expensive as another paint that’s equally good. So I talked to him, and I said, “Can’t we use this other paint?” And he said, “Well, yes, we could, but it’s going to raise your price.” I said, “I don’t understand, the other paint is half the price.” And he said, “Yeah, but paint is only about 15% of the total cost of your project. I have to think about all the supplies; I’ve got to line up the labor; there’s the overhead of running a company, etc..”

He said, “What Sherwin-Williams does is help me though the entire process of working with you, from helping you choose your colors — there’s a Sherwin-Williams color consultant — to figuring out how much paint is needed for the primer, and for the paint itself, brushes, tarps, all the other supplies. Then, during the project, it is keeping me supplied — I can return extra primer if I don’t need it. If I run out of something, that Sherwin-Williams rep will be over at the site, delivering what I need. Then, at the end, he helps me put together that next proposal. Because there’s always a next proposal, as any homeowner knows.

I looked, and it turns out within a five or 10-minute drive of my house, there are more Sherwin-Williams stores than there are Starbucks, and that’s because they realized who their customer is. It’s not me. I’m the end consumer, of course, and I’m the one that has Sherwin-Williams paint on the house. But it’s that small business, the painting contractor, [that they focus on]. Sherwin-Williams, like Lego, realized it’s not so much about the product — their product is a can of paint — it’s about their innovations around the product that make that product more valuable.

Tuesday, June 06, 2017

Leaders as the Rim vs. the Hub

In Adam Bryant's New York Times Corner Office column, he interviewed Edison International CEO Pedro Pizarro recently.   Pizarro offers this very insightful description of how he thinks about the role of a leader in an organization: 

I see a lot of leaders who want to be the hub, with their people as the spokes, bringing them information. My visual for leadership is that if the team is a wheel, I’m actually the rim. I’m not the center. My job is to keep the spokes together, keep the team together and really help that team perform because they, collectively, are going to have a lot more insights than I will. It also means that when you have to go through mud, the rim goes in first. But that’s the way it should be. 

How awesome is that?!  I love the notion of the rim holding the team together.  In addition, he describes the rim as going through the mud first.   Imagine those situations where the leader can take the flak for his or her team, or perhaps serve as a buffer between the team and outside forces that may get in the way of the work being done.  A leader does not simply direct his or her team.  An effective leader also shields his or her team at times and takes responsibility when things go wrong... rather than throwing the team under the bus.  

Making People Feel That They Count

Andrea Illy, CEO of Illy Coffee, talks in this short video about how important it is for people to feel that they "count" in an organization.

Monday, June 05, 2017

Do Reusable Grocery Bags Lead to Unhealthy Eating?

Scholars Uma Karmarkar and Bryan Bollinger have conducted fascinating new research regarding reusable grocery bags.  Through both empirical data from the field and experimental studies, Karmarkar and Bollinger discovered how shopping with reusable grocery bags influenced consumer behavior.  Not surprisingly, they found that people tend to buy more organic foods when they shop with reusable bags.  However, they discovered that these same consumers indulge more as well. While they might buy more organics, they also buy more ice cream, cookies, and the like.  

Could reusable bags really affect people's behavior in this manner?  Think about what might be going through our brains as we shop.   It's almost as if we decide that we deserve a reward for helping the environment.  We've done something good for the planet, so why not splurge and have a bowl of ice cream when I get home.  Of course, that bowl of ice cream might not be very good for our health.  Yet, we are not necessarily thinking about that damaging effect in the moment. Instead, we are looking to indulge as a reward for "good" behavior.   

To me, the research reinforces the age-old law of unintended consequences.  We might not ever imagine such a negative impact of shopping with reusable bags when we begin shopping with them.  Yet, this unintended consequence emerges.  Humans foil even the most well-intentioned schemes and systems.  We behave in ways that are sometimes hard to predict in advance.  We always have to remember the law of unintended consequences when we try to reshape human behavior.  

Friday, June 02, 2017

Panera Bread, Technology, and Wait Times: The Value of Prototyping

Popularity can be a blessing and a curse for fast casual and fast food restaurants.   Naturally, these chains want as many customers as possible to frequent their locations.  However, customers will become disenchanted very quickly if the wait times become lengthy.   The easy way to solve these issues is to open more locations.   You can't continue to do that forever though.  You have to be able to drive same-store sales, and you must address wait times in order to maintain the customer satisfaction necessary to achieve that revenue growth.  

Panera Bread faced this issue in recent years.  They tackled the problem head-on with a number of initiatives, including the use of technology.  The Wall Street Journal discusses their strategy in an article today titled, "How Panera Solved Its Mosh Pit Problem."   Mobile ordering became a key part of Panera's strategy.   They have done an amazing job with the Panera app, and the mobile ordering system put in place along with that app.  As a frequent customer, I find the mobile ordering system simple, easy-to-use, and very convenient.  I often will order on my phone when I leave my office or home, and I can simply walk in and pick up the order from a shelf near the entrance as soon as I arrive at Panera. Payment is already taken care of via the app.  

How did Panera develop such an effective system?   They prototyped, and they iterated many times.  They used a prototype store in Braintree, Massachusetts as their testing ground.  Even the top two executives spent a great deal of time watching how workers and customers interacted in this location.   They didn't settle quickly on one solution, devised in a boardroom somewhere. They listened to feedback, and they adapted based on that feedback.   What a great innovation story! The article describes the approach, led by CEO Ronald Shaich and President Blaine Hurst:


The chain opened a prototype Panera in Braintree, Mass., to test all elements of “Panera 2.0”: self-order kiosks, delivery, digital ordering and a new practice of bringing food to customers’ tables.  Messrs. Shaich and Hurst spent about 100 hours a week in that Braintree cafe observing what would work.  Easing the ordering bottleneck by taking orders online, instead of at the counter, wasn’t enough: The kitchen had to be able to handle the volume. Allowing customers to place orders themselves led to more customization, but also more staff mistakes. The company revamped the way employees process orders in an effort to minimize errors by simplifying the kitchen display systems.  “It was literally hundreds of these little things that we did,” said Mr. Hurst, who became company president last year after holding several other executive positions with Panera.

Thursday, June 01, 2017

Elmer's Glue: The Slime Craze

In 1947, Borden introduced Elmer's Glue packaged in a glass bottle. Over the years, it became a key item for elementary school classrooms throughout the country. Seventy years later, Elmer's Glue (owned by Newell Rubbermaid now)  has experienced an interesting phenomenon, fueled by social media.   Product sales have skyrocketed over the past year, as young people throughout the country enjoy the "slime" craze.  They've all learned how to make slime using Borax and Elmer's Glue.   In March, Money magazine reported on the remarkable profit-making venture launched by Theresa Nguyen, a 13-year old from Texas.  She earns $3,000 per month selling her slime creations.  Her Instagram account has 665,000 followers.   Her most recent post already has 149,000 views.  Unbelievable! 

Newell has ramped up production of its glue to meet skyrocketing demand.  Meanwhile, the company has also set up an extensive website with its own videos, recipes, and the like.  It all sounds like a terrific story.  Why should Newell be careful though?   Kids are fickle.  Fads come and go.  Will the slime craze be sustainable, or will kids move on next month or next year?   Newell will have to be careful as it ramps up production.  The company will want to be cautious about making large investments to extend capacity.  Moreover, it will have to careful as it manages inventory.   It should strive to meet rising demand while the craze is ongoing... after all, you have to take advantage of the fad while it's ongoing.  However, you don't want to get caught with huge amounts of excess inventory if the fad suddenly stalls out.  In addition, you have to think carefully about how to extend the surge in demand. How can you take steps to insure that it's not just a passing fad? How can you come up with new recipes or ideas that build upon what kids are already doing?   How do you create activities that art teachers and others can use that enable sales to continue to grow?  Finally, and perhaps most importantly, you don't want to damage the authenticity of this craze.  You don't want kids and parents to begin to perceive Elmer's as pushing sales in an inauthentic way.    You want kids such as Theresa to spread the word more so than the corporate social media managers.   Authenticity should be a key priority as the company takes steps to market its product.   

Wednesday, May 31, 2017

How Should You Handle The Impossible Job Interview Question?

University of Texas Professor Art Markman has written a good column for Fast Company about job interviews.  He offers some good advice for how to handle the challenging interview question that has you stumped.  His advice boils down to three key ideas:

1.  Don't try to BS your way through an answer if you are clueless about the subject matter.  You will do far more harm than good with this approach.  You will be much better off acknowledging what you don't know, while demonstrating an eagerness to learn quickly on the job. 

2.  Make the interview a conversation.  Ask questions for clarification if you are stumped.  Probe to learn more about the interviewer's intent with the question that he or she has posed.  Sometimes initiating that conversation will make things much clearer for you, while also building rapport with the interviewer.  In many cases, a reframing of the question will spark a thought for you that will help you provide a thoughtful response.  

3.  Remember that the interviewer may have asked a very tough question with a clear purpose in mind... namely, he or she may want to evaluate your ability to handle adversity and to navigate a difficult conversation.  Keep your cool in these situations and remember that you don't have to knock every question out of the park to get the job.  Focus on the big picture... explaining why your skills and capabilities will benefit the organization.   

I would add one other key piece of advice.  If the question is technical in nature, be ready for the topic to come up in a second or third round interview.  Be sure that you have done your research and are prepared to answer the question in a subsequent interview.  That type of good follow-up will be viewed very positively by most organizations.  

Tuesday, May 30, 2017

Why Walking Promotes Good Thinking

Jessica Stillman recently recapped the research linking walking with the generation of great ideas in a column for Inc.com.  She draws upon a terrific article by Ferris Jabr in The New Yorker.  Stillman explains that exercise enhances blood flow and stimulates the brain.  She also argues that the rhythm of our steps has a positive impact.  Finally, she explains that walking requires little conscious effort, leaving time and capacity for our minds to wander.  Insights emerge during that time when we can allow our minds to observe, reflect, and make connections among various ideas.  For more information about the positive impact of walking, take a look at this TED talk by Stanford psychologist Marily Oppezzo:

Friday, May 26, 2017

Why Being #1 Should NOT Be Your Goal

This morning Kathy Chu wrote a Wall Street Journal article titled, "China's Lenovo to Reboot  After Losing PC Crown to HP."   Chu writes:

China’s Lenovo Group is shaking up its operations as it seeks to reclaim the title of global leader in personal computers and shore up its smartphone business.   For the first time in four years, Lenovo—a company that gained acclaim a decade ago for turning around storied U.S. personal-computer maker International Business Machines Corp.—slipped from the top spot this year to No. 2 in the personal-computer market, behind rival HP Inc.  Lenovo has also fallen to No. 8 in the number of smartphones shipped globally, from No. 3 when it acquired another U.S. brand, Motorola, in late 2014.

When I read this article, I asked myself:  Why do firms obsess with being #1 in their market?  Or, perhaps more specifically, why do they obsess with being #1 in market share in their industry?  Yes, Lenovo held the top spot in the personal computer industry for the past four years.  What precisely did that mean for them?  Well, I checked their Annual Report.  Last year, the company reported a net loss.  During the previous year, they generated a slim profit (1.79% profit margin).    Before that, the margins ranged from 1.6% to 2.1% from 2012-2014.  In short, Lenovo has made very little money over the past five years.  Perhaps, you might argue, they generated a decent return on assets despite the low margins.  With strong asset turnover as a low cost producer, they might produce a good return on assets.  Not so much... in 2015, their ROA equaled 3%.   We should not be surprised by these results.  It's not necessarily an indictment of management.  The personal computer industry is one of the lowest profit industries on earth.  If you perform a five forces analysis, you conclude rather quickly that all the elements of the industry structure point to low returns.  It's a very unattractive industry.  

The lesson: Don't obsess over market share.  Don't worry so much about being #1 in volume.  Think instead about the structure of your industry.  If you are in an unattractive industry, you might not want to be #1 in market share. Instead, you may want to find profitable niches and segments within that industry.  By focusing there, you might not lead the industry by volume, but you may produce stronger returns for investors.  

Thursday, May 25, 2017

How To Think About Goals Over Time

Researchers have conducted some interesting new work on goal-setting and achievement.   Insights by Stanford Business summarizes the findings of research conducted by Szu-chi Huang, Liyin Jin,, and Ying Zhang:

New research by Szu-chi Huang, assistant professor of marketing at Stanford Graduate School of Business, finds that while people benefit from concentrating on small “sub-goals” in the early stages of a pursuit, they should focus instead on the larger objective in the late stages. That notion could be important to any business that entices consumers and employees to set goals, whether as part of an incentive program or service offered.

“When you are just starting a pursuit, feeling reassured that it’s actually doable is important, and achieving a sub-goal increases that sense of attainability,” Huang says. But later, people are no longer concerned about attainment and need to feel that their actions continue to be worthwhile in order to maintain motivation.  “At that point, to avoid coasting and becoming distracted, they need to focus on that final goal to see value in their actions,” Huang says. 


The research appears very consistent with the work on small wins.  You need to have those sub-goals, because small wins are important during any transformation process or challenging task.  However, you need to have the broader vision as well.   This work adds nicely to our understanding of how small wins work by describing the important shift that has to happen over time from small sub-goals to broader objective.

Thursday, May 18, 2017

Advice for Graduates (2017)

At this time of year, I've always shared an old blog post with some advice for those young people graduating from college.  This year, I thought that I would share a new post.  Here goes... 

I want to tell you a story about Retired U.S. Navy Captain D. Michael Abrashoff.   Twenty years ago, in June 1997, Captain Abrashoff became the Commander of the USS Benfold, a guided missile destroyer.  Unfortunately, the USS Benfold was a seriously dysfunctional ship.  Morale was quite low, and many sailors could not wait to leave the Navy.   Captain Abrashoff has described how he led a remarkable turnaround on the USS Benfold.  I love the stories that he tells in his book, It's Your Ship: Management Techniques from the Best Damn Ship in the Navy.  

My favorite story centers on the Sunday afternoon cookouts on the aft flight deck of the USS Benfold.    One day Captain Abrashoff noticed the enlisted men waiting in line patiently for their food at one of these cookouts.  Then he watched as the officers cut in line, rather than waiting their turn.  The officers then ate together, separate from the enlisted men.  What did the Commander do?  He went to the back of the line.  One officer approached him, "Captain, you don't understand.  You go to the head of the line."  Abrashoff responded, "That's okay.  If we run out of food, I will be the one to go without."  When the Commander finally received his food, he went to sit with the enlisted men, rather than his officers.   Note that Abrashoff did not chastise his officers or reprimand them for their behavior.  He simply chose to enjoy a quiet lunch with the sailors whose morale had been so low when he took over.   On the following Sunday, the officers waited patiently at the back of the line, and they did not go off and eat by themselves.  How about that?! 

What's the morale of this story for young people beginning their careers after commencement this month?   Be the type of person who understands that leaders don't cut to the front of the line.  Lead by example, not simply by harsh words and reprimands.   Take the time to sit with those doing the real work.  You might learn a new thing or two... no, you WILL learn a thing or two.  Finally, remember that all eyes will be on you when you become a leader.  Your words and actions will have great symbolic importance.  Mind the signals that you send.  Small actions will say a great deal to others about who you are and what you value.  

Wednesday, May 17, 2017

More CEOs Fired for Ethical Lapses

The Wall Street Journal reported this week on new research from Strategy&, the consulting practice of PWC, about CEO dismissals. The researchers found that more CEOs are being fired these days due to ethical transgressions. According to the newspaper, "CEO ousters due to ethical lapses—either their own improper conduct, or their employees’—are climbing. Such forced exits rose to 5.3% of CEO departures in the 2012-to-2016 period, up from 3.9% during the previous five years." 

 The article goes on to quote Per-Ola Karlsson, a Strategy& partner, about the reasons for this uptick in such firings. Karlsson argues that the trend is not the result of an increase in unethical behavior. Instead, Karlsson cites the rise of social media, the loss of trust in institutions as a result of the scandals from the 2007-2009 period, and the enhanced attention from regulators as reasons for the increase in dismissals. The bottom line - for whatever the reason, CEOs are being held accountable for ethical lapses.  That's a good thing.  It shows that they can't escape from responsibility for flawed decisions that due harm to consumers and other stakeholders.   The data suggest that CEOs should have all the more reason to be highly vigilant about uncovering hidden risks in their organizations, welcoming those who wish to share bad news, and demonstrating transparency when problems do surface.  

Tuesday, May 16, 2017

Should You Sit Next to a High Performer at Work?

New research by Michael Housman and Dylan Minor examines the impact of sitting next to a high performer at work.  They discover important "spillover" effects.  In fact, these spillover effects can occur in both a positive and negative direction.  Here's an excerpt from Kellogg Insight about their research:

Researchers looked at the 25-foot radius around high-performers at a large technology firm and found that these workers boosted performance in coworkers by 15 percent. That “positive spillover” translated into an estimated $1 million in additional annual profits, according to new research from Dylan Minor, an assistant professor of managerial economics and decision sciences at the Kellogg School.

Of course, the flipside is that bad eggs impact their neighbors, too. Negative spillover from so-called toxic workers is even more pronounced—sometimes having twice the magnitude of impact on profits as positive spillover. Yet, while this toxic spillover happens very quickly, it also dissipates almost immediately once that worker is either fired or relegated to the far physical reaches of the company.

Friday, May 12, 2017

The Power of a Nudge: Persuading People to Take the Job

Knowledge@Wharton profiles some interesting new research regarding how to persuade people to commit to a new endeavor such as a job. Clayton Featherstone and Judd Kessler have written a paper titled, “Can Social Information Affect What Job You Choose and Keep?"   They studied Teach for America, and they conducted an experiment to see if they could convince more young people to sign up for the program.   Featherstone explains the research:    

Teach for America tries to place teachers in schools. If you’re admitted to the program, you get an email that says something like, “Congratulations, you’ve been admitted to Teach for America. You’ve been assigned to wherever. We hope you’ll join us.” That email is how they communicate that you should join Teach for America. The sentence we added to the email was, “Last year, 84% of people in your position chose to join Teach for America. We hope you will as well.” We found that one sentence was actually pretty powerful in inducing extra people to join. That sentence is a canonical example of social information. Basically, when I’m thinking about doing something, I might be interested in what others in my situation have chosen to do in the same way.

Now you might wonder if these people were convinced to join, but later dropped out as teachers in the program.  In fact, the scholars found that these people stayed on in their positions.  The small inducement via social information had long term positive consequences.  You can begin to see the implications for other situations, not simply letters to candidates who have been offered a job.   Of course, the power of social information has to be used with care.  You would not want to persuade someone to do something which is not ultimately good for them or the organization.  One wonders too whether the effect is pronounced here due to the age of the people in the study.  We are all shaped and affected by social information, but might the effect be larger for younger people?  

Monday, May 08, 2017

Learning Strategies: Is Talking to Yourself Crazy or What?

Ulrich Boser has written an interesting piece for Harvard Business Review regarding learning strategies.  Boser argues that our ability to learn new skills and assimilate large amounts of new information has become very important in today's economy.  We have to be lifelong learners to adapt and grow as our companies and our jobs change.  Boser reviews the work of University of Illinois psychologist Brian Ross, who has conducted some fascinating research on how we learn.   Boser tells the story of how Ross decided to take a computer science course.  Ross chose to employ a learning strategy called self-explaining to try to master the class.  Boser explains the strategy:

The approach revolves around asking oneself explanatory questions like, ”What does this mean? Why does it matter?” It really helps to ask them out loud. One study shows that people who explain ideas to themselves learn almost three times more than those who don’t.  To help him outperform his younger colleagues, Ross asked himself lots of questions. He would constantly query himself as he read through the assigned texts. After each paragraph, after each sentence, he would ask himself: “What did I just read? How does that fit together? Have I come across this idea before?”  By the end of the course, Ross had found that, despite his relative inexperience and unfamiliarity with computers, he could answer many questions that the other students couldn’t and understood programming in ways that they didn’t. “I sometimes had the advantage,” he told me. “I was focused on the bigger picture.”

Far too many of us continue to believe that reading and re-reading a text provides the best mechanism for digesting new material and accumulating new knowledge.  We whip out our highlighter and brighten the pages of those books, thinking that these colorful additions to the text will help us remember key nuggets.  It doesn't work.  Recent advances in learning research show that other strategies are far more effective than reading and highlighting.  These studies show that we must force ourselves to recall what we read.  We have to quiz ourselves.  We have to summarize and synthesize what we have heard and read.  We have to do something with the information that we are trying to digest.   In short, we need to be much more active in our learning strategies, rather than passively reviewing material.   These strategies work well for students, but they also work well for adults on the job, as we try to develop and enhance our skills and as we take on new roles.  

Wednesday, May 03, 2017

Edward Lampert & The Demise of Sears

Earlier this year, Sears acknowledged publicly for the first time that bankruptcy might be a possibility.  The two charts shown here document the financial deterioration over the past decade.  Many people have placed substantial blame at the feet of CEO Edward Lampert.  In Forbes last year, Adam Hartung wrote about the unwillingess of Lampert to welcome and listen to dissenting views.  

Source:  Company 10K Filings

Mr. Lampert had no time for staff who did not see things his way. Mr. Lampert wanted his management team to agree with him - to confirm his Beliefs, Interpretations, Assumptions and Strategies -- to believe his BIAS. By seeking managers who would confirm his views, and execute rather than disagree, Mr. Lampert had no one offering alternative data, interpretations, strategies or tactics. And, as Mr. Lampert's plans kept faltering it led to a revolving door of managers. Leaders came and went in a year or two, blamed for failures that originated at the Chairman's doorstep. By forcing agreement, rather than disagreement and dialogue, Sears lacked options or alternatives, and the company had no chance of turning around.



Source: www.bigcharts.com
Of course, others have argued that Sears' culture had become insular long before Lampert took over.   Fortune writer Geoffrey Colvin wrote about an incident in the early 1990s, when Edward Brennan served as the firm's CEO:


At this same time, shareholder activist Robert A.G. Monks launched a campaign to get elected to the Sears board and to reform its rules; he even ran a full-page ad in the Wall Street Journal headed “The Directors of Sears, Roebuck and Co.: NON-PERFORMING ASSETS.” When he was finally granted an audience with Sears CEO Ed Brennan in his 90th-floor office in the Sears Tower (now the Willis Tower), the functionary escorting Monks in the elevator reportedly said, “This is the first time bad news has made it above the 78th floor.” Star consultant Ram Charan asks CEOs if they’re hearing lots of bad news. Why? Every company has lots of bad news, he tells them, and if you’re not hearing it, something’s wrong.