Thursday, June 21, 2018

Immediate Regret: Why Did I Take This Job?

Joann S. Lublin recently wrote a Wall Street Journal column titled, "What to Do When That Shiny New Job Isn't the Right Fit." Actually, the article mostly focuses on why and how people end up in that difficult predicament. Lublin recounts the story of one tech executive who discovered soon after landing a new job that it would not be the opportunity that he anticipated. Here's an excerpt from Lublin's column:

Technology industry veteran Puneet Goel says he wishes he had done greater due diligence a few years ago before taking charge of product management at a midsize tech company He never reached out to his immediate predecessor who no longer worked there. He says the firm’s CEO and founder asked Mr. Goel to draw up a road map for a more competitive version of its software—and promised him autonomy to devise product strategy. But once Mr. Goel joined, the company chief promised potential customers product capabilities that didn’t exist and weren’t part of his new road map.

“He wanted to do what I thought was my job,’’ Mr. Goel explains. “I just couldn’t be successful in that way.’’ According to Mr. Goel, the CEO defended his approach by telling him, “‘This is the way I have always done it and this is how we are going to do things here.’’’ Concluding “there are no good options here,’’ Mr. Goel resigned after seven months. He’s now a product manager for Google. an Alphabet Inc. unit.

Many reasons exist for this type of regret after landing a new job.  The example above identifies a common problem for new hires - the lack of expected and promised autonomy.  Leaders often do not want to let go, and though they might promise a new hire a degree of autonomy during the recruiting process, they simply cannot avoid the desire to micromanage.   Naturally, some good due diligence will help in this case, but you have to be a bit skeptical of the promises made to you.  You have to learn about the decision-making style of those for whom you will work.   Don't be foolish and believe people when they tell you that they are suddenly going to change their spots.  A candidate might hear, "I've managed this function tightly in the past, but I'm ready to provide the new manager much more autonomy."  Be careful!  It's highly unlikely that someone with decades of micromanagement in his or her past will suddenly shift leadership style.  

Wednesday, June 20, 2018

Are You Signaling a Desire to Cooperate?

Emma Levine, Alixandra Barasch, David Rand, Jonathan Berman, and Deborah Small have published an interesting new paper titled, "Signaling emotion and reason in cooperation," in the Journal of Experimental Psychology.  They conducted a series of experiments to examine how people decide whether to cooperate with another individual.   The experiments used two-player prisoner dilemma games to examine what might cause someone to be more or less cooperative with another party.   Their findings identify an interesting distinction between emotional and rational cues.  Here's an excerpt from NYU Stern's concise summary of the article

The experiments revealed that people infer that emotional actors are more likely to be prosocial, or altruistic, than rational actors. That is, people assume that individuals who make their decisions emotionally are more likely to cooperate, and then respond accordingly by cooperating more with them. “We find that people associate one’s reliance on emotion with prosocial motivations and feelings such as empathy and compassion, rather than selfish emotions, such as greed,” says Professor Barasch.

In addition, reaction to these signals depends on how people themselves make decisions. While people who rely on emotion themselves are quite responsive to signals of emotion and reason, people who rely on reason do not respond as strongly to these cues, instead making their decision to cooperate through calculated self-interest. “We show that people see emotion as a signal of cooperation, and will cooperate more with individuals who make their decisions emotionally. However, signals like this are less important to people who make their own decisions using reason – they cooperate less overall, and are not responsive to these social cues.”

The study has important implications as we work on new teams or with new partners on a project or initiative.   We not only need to be aware of the cues that we are emitting, but we must understand how others make decisions.  Are they more rational or emotional? What does that mean for our ability to engage in cooperative behavior?   Naturally, we also need to be careful not to put ourselves in a precarious position, where others might try to take advantage of our altruism.   Finally, we need to think carefully about our own behaviors that might suggest a powerful desire to pursue self-interests.  Those cues might harm our ability to elicit cooperation from the very people we need to work with to achieve our personal goals as well as the broader organizational objectives.  

Tuesday, June 19, 2018

Busting Myths about Successful Tech Entrepreneurs

The typical successful startup founder in Silicon Valley is in his or her twenties, right? Millennials have the creativity and fresh thinking required to disrupt entrenched incumbents in industry after industry, right? A comprehensive new study debunks this popular myth.  Kellogg Insight describes new research by strategy professor Benjamin Jones and his co-authors.   Here's a quick summary of their findings:

In a new study, Jones, along with Javier Miranda of the U.S. Census Bureau and MIT's Pierre Azoulay and J. Daniel Kim, use an expansive dataset to tackle that question. The researchers find that, contrary to popular thinking, the best entrepreneurs tend to be middle-aged. Among the very fastest-growing new tech companies, the average founder was 45 at the time of founding. Furthermore, a given 50-year-old entrepreneur is nearly twice as likely to have a runaway success as a 30-year-old.

Here are a couple more intriguing statistics from their research:

  • The average age of the founder of one of the fastest-growing tech companies in their massive sample was 45 years old.
  • The average age of the founder of firms that achieved successful exits either through IPO or acquisition was 46.7 years old.  
Why is it important to debunk the popular myth about millennials and successful tech startups?  First, we have to consider the biases that might shape investor decisions.  Might some be inclined to think that the best ideas come from founders in their 20's and perhaps find themselves biased against older entrepreneurs?  Second, we have to consider how the myth might discourage older individuals from taking the risk to launch a startup.  I applaud the authors for such an extensive study that shines a light on the actual experience of successful tech startups and their founders.  

Friday, June 15, 2018

Building Trust: Admitting When You Screwed Up

Wharton's Adam Grant recently interviewed Daniel Coyle, author of The Culture Code: The Secrets of Highly Successful Groups.   They focused at the start of the talk on the issue of building trust.  Grant explains what he learned from reading Coyle's book:

A huge theme in [The Culture Code] is trust. I’ve always thought about trust as the willingness to be vulnerable and take a risk together, but you convinced me that I had it backward. I always thought, “Once we trust each other, then I can go out on a limb, because I don’t have to worry about you harming me or taking advantage of me or letting me down.” You said, “Actually, you take risks together first, and that’s how you build trust.” 

After Grant shares this lesson, Coyle goes on to explain this process of building trust by first becoming vulnerable and acknowledging mistakes.  Coyle tells Grant:

One of the places I saw it first was with Ed Catmull, the president and cofounder of Pixar. We’re walking around Pixar’s new Brooklyn Studio, and it’s a $20 million building, the coolest building I’ve ever been in. I say to Ed, “This building is really cool!” He goes, “Actually, this building was a huge mistake—the hallways are too narrow, the atrium is too small, the cafeteria is in the wrong place. But the real mistake we made was that we didn’t realize we were making a mistake.” [There was] this moment of total candor and openness, and he does this all the time.

Then I would go to the [Navy] SEALs, and the commanders there are doing the same thing. They’re saying, “The most important words a leader can say are, ‘I screwed that up.’” It’s not that we’re going to slowly build trust and then have the willingness to be vulnerable—it’s actually this exchange of vulnerability between two people that creates that closeness.

Take risks and become vulnerable together first, and in so doing, build trust with colleagues and team members.  That's the core lesson here.  As a leader, how can you put this lesson into practice with your team?  What will the benefits be?  Trust clearly leads to higher team performance, more engaged employees, and better talent retention.   Building trust takes time and effort, but the payoff is substantial.  

Wednesday, June 13, 2018

Layoffs at Tesla: What Does It Mean?

Yesterday, Elon Musk announced substantial layoffs at Tesla (9% of its workforce).  Successful, high-growth companies typically do not let go of that many employees.   What's wrong at Tesla?  Clearly, the company has struggled with production of the Model 3.   Many analysts have said that Tesla will need to raise significant amounts of capital in the near future.  Musk has denied that such a move is necesssary.  His recent announcement regarding the scaling back of capital expenditure spending plans, and now the layoffs, suggest an ambitious effort to conserve cash.   Tesla's challenge is not the lack of profitability (it has not been profitable for 15 years).  Instead, it's problem is cash.  Many investors clearly have not been worried too much about the lack of profitability.  However, they would become very concerned if the company started running out of cash and then faced challenges raising new capital at attractive terms. 

"Still, sizable layoffs and moves to conserve cash typically are not the acts of growth companies that are having just a little trouble achieving their goals.And there is a danger for Tesla if it starts to behave like a normal company: Investors may start to value it as one, and its highflying stock may tumble.

Eaves' point is that investors have ignored the lack of profitability for years.   They have expressed profound belief in the growth story, and they have been willing to fund huge capital expenditures in pursuit of that growth.  If investors suddenly started valuing the company differently, then the stock price would face significant pressure. 

Tesla's competitors must watching this situation with much curiosity.  After all, the incumbent car companies have faced their own dilemma for years.  Consider a company such as BMW.  Investors have valued the strong profitability it has generated over the years.  It cannot simply persuade investors to absorb hugeTesla-like losses for years in pursuit of an electric vehicle future.  Somehow, BMW has to invest in the future while still maintaining enough profitability to placate investors.  In some ways, Tesla has had a huge advantage over firms such as BMW, because investors have given Musk essentially a license to lose money for years in pursuit of an EV future.   Is that changing now, and will it change the competitive dynamic in the industry?   We will learn a lot more in the coming months, as we see whether Tesla can ramp up Model 3 production successfully without raising more capital.  

Tuesday, June 12, 2018

Sudden-Death Aversion: It's About More Than Football

Your favorite National Football League team is trailing 31-24 with 30 seconds remaining in the game.  The star quarterback throws a 35 yard touchdown to the tight end, and the crowd goes wild.  The score sits at 31-30.   The coach has a decision to make.  Your team can either kick the extra point to tie the game, or go for the two-point conversion and the victory.   If they tie the game, it goes to overtime.  What does almost every coach do in this situation?  They kick the extra point.  It's the safe strategy in the moment; after all, kicking the extra point has a higher chance of success than going for the two-point conversion. However, have you ever asked yourself: Does kicking the extra point give you the best chance of winning the game eventually? 
Source: Wikipedia

Scholars Jesse Walker , Jane Risen , Thomas Gilovich , and Richard Thaler have examined this decision-making situation.  They describe the typical coach's behavior as exhibiting "sudden death aversion."  Here's the crux of their argument:  

We argue that sudden-death aversion reflects a common bias that can lead to non-optimal decision making in a great many contexts, some far removed from the gridiron. When decision makers face a choice between a “fast” option that offers a greater chance of ultimate victory but also a non-trivial chance of immediate defeat, and a “slow” option with both a lower chance of winning and a lesser chance of immediate defeat, they often opt for the slow option because of their aversion to sudden death. In so doing, they lower their chances of ultimate success.

The researchers found that 89% of NFL coaches took the safe strategy of kicking the extra point to tie the game over a ten-year period.  However, those teams often did not end up winning the game in overtime.  In fact, the percentage that won the game eventually was lower than the average success rate of two-point conversions in the NFL.   These data suggest that sudden-death aversion ends up leading to a sub-optimal outcome. 

The scholars turned to the NBA to conduct further research.  Do teams go for the two-point shot to tie the game, or the three-point shot for the victory?   Coaches tend to prefer to tie the game, but again, that appears to be the sub-optimal outcome.  

The scholars have studied this phenomenon in other settings as well, and they discover a similar "sudden-death aversion" that shapes decision making.  Do business leaders face the same problem?  Surely, they do.  The researchers argue that managers experience "sudden-setback aversion" and thus take what appears to be the safer option in the here and now to avoid a loss in the moment, even if that risk-averse strategy is suboptimal in the long run.  

Friday, June 08, 2018

Learning from Your Customers

Our family loves games produced by a Massachusetts-based company named Gamewright.  The copmany's hit products include Sleeping Queens,  There's a Moose in Your House, and Rat-a-Tat-Cat.   Our latest favorite is Qwixx, a simple dice game that all ages can enjoy.  When we first purchased the game, though, we were frustrated with the fact that we were using up the colored scoring sheets rather quickly.  You could order additional sheets.  However, to save money, we simply laminated the scoring sheets, used dry-erase markers, and wiped them clean after each game.  As it turns out, other customers did the same.   Amazon customer reviewers apparently noted the same thing online.  Recently, we purchased Qwixx Deluxe, a new and more complex version of the game.  Immediately, I noticed a change to the scoring sheets.  Gamewright now makes them out of a dry-erase board that can wiped clean after each game.  

What's the lesson of this story?  Designers can learn a great deal from workarounds - i.e. adaptations invented by customers to address a pain point or unmet need (think tennis balls on the bottom of an elderly person's walker).   I don't know for sure, but it seems that Gamewright learned from the customer workaround (laminated score sheets), and they adapted their product based on observing that adaptation.  Well done!  

What workarounds do your customers employ?  What pain points or unmet needs do these adaptations address?  How can you modify your product or service to alleviate these pain points?