Monday, June 17, 2024

Customer Experience Hits Rock Bottom

Forrester Research recently released its annual Customer Experience Index (CX Index™) rankings. The results are dismal.   The chart below shows that the index has reached a new low.  

The scores probably do not surprise shoppers who have had some poor experiences lately.  On the other hand, you might be puzzled a bit given that many company leaders talk obsessively about customer obsession.   They appear to be talking the talk, but not walking the walk.  

Why might it be so difficult to elevate customer experience?  Here are a few hypotheses:

1.  Senior executives are extremely detached from the experiences of their everyday customers.  In fact, many of these executives live very different lifestyles than their average customers.  In short, they are out of touch.

2.  High employee turnover makes it difficult to maintain consistent customer service. 

3.  Company resource allocation processes are distorted.  It's often rather simple to quantify the return on investment from initiatives intended to reduce labor costs.  It's much more difficult to quantify the ROI when it comes to projects aimed at improving the customer experience.  Thus, programs aimed at cutting expenses get funded more easily.   

4.  Metrics drive behaviors in ways that harm customer experience. For example, one of my daughters once worked at a large national coffee shop chain.  One key metric focused on the time required to serve customers in the drive-thru lane.  The manager's focus on that metric caused employees to de-emphasize service to customers who came into the shop.   Frustration ensued for customers walking up to the counter. 

5.  Young people working in many retail locations have weak interpersonal skills, in large part due to the rise of the smartphone and social media platforms. During their childhoods, as Jonathan Haidt has eloquently argued, we have seen the smartphone cause a substantial decline in vitally important in-person interaction.  They never developed key skills that come from free play, in person, with other children.  

Wednesday, June 12, 2024

What Happens When Your Team Adds an AI Teammate?

Source: Getty Images

Bruce Kogut, Fabrizio Dell’Acqua, and Patryk Perkowski have conducted a study to examine how team performance changes when we replace a human member with an AI agent.  In their research project, more than 100 two-person teams played 12 rounds of a video game. For the first six rounds, only humans played the game. For the next six rounds, the researchers replaced one human on each team with an AI agent. Interestingly, they found that performance in the game initially declined when an AI agent replaced a human team member, though performance ultimately bounced back after several rounds of game play. This effect occurred even though the AI agents were actually superior to humans when playing the game individually.  Kogut explained why team performance declined at first:

Despite the AI’s superior individual performance and the fact that bonuses were paid to the entire team if it performed well, 84% of respondents preferred to play with their human teammates. From surveys conducted at the midpoint and end of the experiment, we learned that AI causes team sociability to fall, and that lessens members’ motivation, effort, and trust.

Perhaps most surprisingly, the scholars found that all-human teams adjacent to a team with an AI agent also experienced a decline in performance.  The scholars described this phenomenon as a spillover effect.  What's going on there?  Kogut explained that the AI agent disrupted the environment, perhaps affecting the routines and processes within the all-human teams.  He likened to the impact that losing an employee, or hiring an inexperienced one, can sometimes have on adjacent teams in an organization because of the disruption of usual work routines.  

Monday, June 10, 2024

Companies Learning from Their Histories

Fortune's Phil Wahba has written an excellent article titled "From Tide Pods to Coach bags, how Fortune 500 companies use museums of their hits and misses to drive success."  He documents how business leaders have developed company museums and assigned individuals to serve as corporate historians.  Many firms derive great benefit from these efforts to preserve and highlight important facets of their histories.  What are some of the key uses of these company museums?

1.  The museums keep track of substantial failures, enabling the the firms to heed the lessons of those setbacks in the future.  Moreover, sometimes companies can resurrect failed projects, find new uses for old technology, and simply find that the time is now right for something that may have been ahead of its time.  Documenting and highlighting failures, and not just successes, also sends an important message regarding the culture.  Employees come to understand that intelligent failures are acceptable, and even encouraged, because they represent the type of experimentation that can lead to breakthrough innovation. 

2.  The museums enable product developers to tap into past designs for inspiration, as the Wahba article illustrates by pointing out that designers at Coach enjoy looking back at the bags that were fashion hits in previous decades.  

3.  Executives can dig into the artifacts and records to examine how leaders addressed similar challenges in the past.  Wahba writes that Coca-Cola executives dug into records from the 1918 pandemic when the COVID-19 virus swept across the globe in 2020.  They sought to understand how the company responded then, and what lessons might be applicable in the 21st century.  

4.  Perhaps most importantly, these museums enable companies to highlight the values that they hope will endure at the company.  What aspects of the company culture do they want to highlight for current employees?  How can they demonstrate the company's commitment to making life better for customers, and not just producing profits?  The museums have a role in telling the story of the founders and giving employees a sense of the impact that the organization has made on people's lives.  

In short, history matters.  Companies have much to learn from their past, and investing in telling the story of past success and failure can be incredibly valuable.   It's so important to examine the good and the bad, because people learn very effectively when they can compare and contrast success and failure.  

Thursday, May 30, 2024

Why Do We Miss Deadlines and Overrun Budgets?

Source: USA Today

We all have experienced projects that miss key deadlines and exceed budgets.  It's not a fun experience.  In retrospect, it seems obvious that we were overly optimistic in our estimates.  Yet, at the start, we thought we had been reasonable, even conservative, in our projections.  Why do we make these crucial errors?  One study offers an interesting explanation.  Bradley Staats, Katherine Milkman, and Craig Fox once published a paper titled "The Team Scaling Fallacy: Underestimating the Declining Efficiency of Larger Teams" (Organizational Behavior and Human Processes, 2012). 

Staats, Milkman, and Fox found that people tend to overestimate the benefits and underestimate the costs of increasing team size on a project.  Adding more people can enhance expertise and skills available on the project.  However, the challenges of coordination and collaboration grow as well.  By not acknowledging those costs sufficiently, many people generate overly optimistic estimates regarding budget and schedule on important projects.  

The study confirms the intuition of leaders such as Jeff Bezos at Amazon, Steve Jobs at Apple, and Brad Smith at Intuit.  Each of those leaders advocated keeping critical work teams small and nimble.   For example, the "two-pizza rule" maintained that you should be able to feed the entire team with two large pizzas (meaning the team should probably not exceed 6-7 members).  

Friday, May 24, 2024

Why We Might Keep Hunting for More Data Despite The Costs

Michalis Mamakos and Galen Bodenhausen have published an interesting new paper in the journal Cognition titled “Motivational Drivers of Costly Information Search.” These two scholars examined whether our search for additional information may hinge on how we frame a problem. They hypothesize that our tendency to gather more data and conduct additional analysis may depend on whether we frame the issue in terms of gains vs. losses. Kellogg Insight's Emily Stone summarizes the key concept:

The idea is that people have one of two different types of motivations for reaching a goal. Broadly speaking, those with a promotion focus are eager to achieve a goal because it offers a chance for self-advancement—a gain—while those with a prevention focus are vigilant about the need to fulfill their obligations, and thus they’re more occupied with what they might lose if they make a bad decision. Prior research has shown that people with a promotion focus are more likely to take risks in their decisions, while prevention-oriented people are more deliberate.

While prior studies have compared this promotion vs. prevention focus, this study went further by examining whether people in a prevention mindset will seek to gather more information even when aware of the costs of acquiring more data. Moreover, they examined whether those in a prevention mindset might be willing to gather more information even if it disconfirmed existing beliefs. Indeed, the scholars found that, "prevention-framed messages can motivate the search for decision-relevant information, even when this search is costly and could lead to disagreeable data."

Of course, this search for an additional information can be a double-edged sword. On the other hand, the additional comprehensiveness may lead to higher decision quality. On the other hand, perhaps being worried about downside risks and potential losses may lead people to engage in highly costly search and time-consuming analysis that ultimately leads to untimely decisions. Companies may see opportunities pass them by, or competitors gain the upper hand, because leaders engage in costly and time-consuming search for that elusive "perfect" information to make a tough decision.

Weighing the costs and benefits of additional information search is critical. In particular, we must consider that the marginal benefits of additional data may decline over time, while the marginal costs of searching for more data may escalate over time.

Wednesday, May 22, 2024

Being on Time: An Underrated Skill


In far too many university settings, being on time has become undervalued.  Professors don't establish strong norms for arriving to class on time.  They don't establish and enforce clear guidelines for attendance.  They don't enforce deadlines for key assignments.  In a recent Wall Street Journal article, we read about a school district's policy that limits teachers' ability to penalize late work (not an isolated incident... now common in many districts). An administrator defends the policy: "A piece of work that is penalized because of the timing of the work no longer represents what the student knows about that content."   That statement is pure nonsense. Unfortunately, many educators have embraced this nonsense.  

Showing up and being on time is a critical life skill.   Being chronically late at work will lead to poor performance reviews and perhaps even dismissal for an employee.  The same goes for absenteeism or failure to meet deadlines.  The most talented employee will not succeed if they cannot be present, show up on time, and meet critical due dates.  

Why does punctuality matter?   Certainly, others will evaluate your dependability and trustworthiness based on your ability to be on time.  However, keep in mind that it's also a matter of serving others effectively.  You are wasting others' time if you are late for a meeting, and you cannot serve your customers well if you are not present when they need assistance.  Bottom line: it's inconsiderate to make others wait for you on a consistent basis.  

There are many reasons why people struggle to be on time.  I will focus on two problems that students seem to experience regularly.   First, they succumb to the planning fallacy.  This cognitive bias means that human beings often underestimate how long it will take to complete a task.   Why do we succumb to this fallacy?  Well, we often picture the most optimistic scenario when estimating time to complete a task.  Moreover, we often remember fondly and proudly those times when we finished a task ahead of schedule, and we give ourselves credit.  However, we blame external factors for those past occasions when we failed to complete a task on time. 

Second, students often struggle to compartmentalize.  Something happens that disrupts their routine or causes some delay.  Sometimes, that is a very serious issue that warrants immediate attention.  It is a justifiable reason for being late.  All too often, however, the disruption could be compartmentalized.  One could say, "Ok, I have this problem, but right now, I have to get to class on time.  I will address that situation in two hours."  Yet, many students struggle to prioritize, and they cannot set aside one problem to address the work that needs to be done.   Employees struggle with the same challenges.  

What strategies help you improve your punctuality?  What can we do as teachers and as organizational leaders to help people value punctuality and consistently meet expectations in this regard?   To me, these questions deserve more attention.   It starts in school.  As faculty, we need to make sure that we cultivate this critical life skill, rather than enabling unproductive behavior.  

Friday, May 17, 2024

The Unfounded Premium for Being Performatively Atypical

All too often, companies pursue me-too strategies.  They blindly imitate industry leaders, and they pay far too little attention to how they might differentiate themselves from the competition.  In some cases, however, company leaders make a point of trying to stand out. Perhaps a very loud statement. Often, these eccentric and iconoclastic business leaders attract a great deal of attention from journalists and investors alike.  These leaders make the case that they are doing business in an entirely different way than more conventional firms in their industries.  They "perform" for the world in ways that attract free publicity and persuade others that they are visionary and groundbreaking. Is it real though? Is all that theater a sign of true differentiation, or is it just smoke and mirrors? Think about the hype generated by Adam Neumann at WeWork. Was that strategy really anything new or revolutionary? Far too many people bought the hype for far too long. 

Now Amir Goldberg, Paul Gouvard, and Sameer Srivastava have conducted a fascinating new study examining this leadership theater that takes place in some companies.  They used machine learning methods to examine the transcripts for more than 60,000 quarterly earnings calls over an eight-year period.  They noticed that some companies used language that clearly tried to articulate how much different they were than their competitors.   You would think that making a case for distinctiveness would be a good thing.  Well, stock analysts apparently thought so.  These companies experienced what the researchers called a "performative atypicality premium."  In other words, equity analysts tended to believe earnings for these "distinctive" firms would be higher than other more "conventional" companies in their industries.  Did actual performance meet analyst expectations?  No.   The premiums were not justified by later performance.  In fact, these companies missed earnings estimates in later quarters.  Analysts believed the hype, and they turned out to be mistaken.  

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What's the lesson here?  Well, being distinctive is important.  However, we need to look for fundamental sources of differentiation, not eccentric leadership styles or vague talk about vision.  We have to ask ourselves repeatedly:  What is really different here? Moreover, we have ask whether there's a true moat around that castle. In other words, even if there is something distinctive about the strategy, the issue of imitability is critical.  Will that source of differentiation and competitive advantage endure, or can others easily emulate it?