Friday, December 06, 2019

Making Time for Big Picture Thinking

Adrian Granzella Larssen has written a terrific Fast Company article titled, "How to get out of the weeds and make time for big-picture thinking."  Larssen introduces executive coach Melody Whiting's perspective on why we often overload our schedules.  Whiting argues that a busy schedule reinforces our self-perceptions.  Here's an excerpt:
Source: Wikipedia

Everyone’s busy, and that’s not exactly by accident. Wilding’s take is something that might be uncomfortable to hear: “It makes us feel useful and wanted, and especially for people who are leaders or traditionally high achievers, that’s how they source their self-worth—via accomplishments and what they get done.”

Larssen has some good suggestions for how to rethink the way we manage our time, so that we can have more time for strategic thinking and reflection.   I highly recommend the article.  Among other things, Larssen reminds us of the value of the Eisenhower Matrix, a simple diagnostic tool that the former president and military leader recommended for setting the right priorities.  


Monday, December 02, 2019

Why Entrepreneurs Don't Learn From Their Mistakes

Source: Flickr
Edinburgh University Business School Francis Greene has written a terrific, research-based article for the Wall Street Journal titled, "Why Entrepreneurs Don't Learn From Their Mistakes."   Greene challenges the fail fast philosophy espoused by many in the the start-up community, by arguing that the credo only works if we actually learn effectively from our mistakes.  However, Greene's research shows that entrepreneurs don't actually learn very well over time.   Greene explains:

While second-chance stories are comforting, my research shows that entrepreneurs don’t learn from their mistakes. In fact, it’s the opposite: Fail once and you’re most likely to fail again. Believing in the myth only sets entrepreneurs up for more failure—and leads to disappointment and frustration.

There are many reasons why this is so, but the most important is basic psychology: Learning is a complex process that usually doesn’t proceed as simply and obviously as we hope. We struggle to take away lessons about what went wrong and then apply those insights to new situations. Or we simplify our experiences and leave out key details that would help us get a complete picture of why things went wrong.

I should note that Greene's research focuses on whether entrepreneurs who experienced a failed startup are more likely to be successful at their next start-up than first-time founders.   The "fail fast" philosophy, of course, does not simply talk about learning from complete failures.  It describes an iterative, experimental, prototype-based approach to building a startup.   You hopefully don't fail completely, thus going out of business.   You encounter small experiments that fail, and you hopefully learn from their to improve your business model. 

Still, Greene's research resonates with me and is consistent with plenty of other research showing that humans are constrained in their ability to learn from failure.  We like to believe that failure is a wonderful professor, but we often don't derive the right lessons and make the correct changes in the aftermath of an unsuccessful event.   I highly recommend reading the article for more detail on why we struggle so badly to learn from our mistakes.  

Friday, November 22, 2019

Curious Leaders: Relentlessly Question How Things Work

Source: needpix.com
Adam Bryant has written a great article for Strategy+Business titled, "How to Think Like a CEO."   In it, he talks about a particular habit of mind of highly effective leaders.  He calls it applied curiosity.   Here's an excerpt:

Ultimately, I settled on a habit of mind that I call applied curiosity. Yes, curiosity is table stakes for anyone hoping to succeed. But it comes in many shades. Some people’s curiosity leads them to excel at crossword puzzles or to be champions on Jeopardy! Applied curiosity is a more specific variety.

People who have it engage in relentless questioning to understand how things work. And then they start wondering how those things could be made to work better. They approach everything with an inquiring mind-set — whether it’s making sense of shifting consumer habits or the global macroeconomic trends that are shaping their industry... 

What separates top CEOs from the rest is how much they question, probe, and then process what they are experiencing in order to look for insights and patterns. And in this wicked-problem world, the questioning mind-set has to be forward-looking as much as it is retrospective, sifting through what has already happened to look for lessons. If one old definition of wisdom is that it’s a sense that “I’ve seen this movie before and I know how it plays out,” then wisdom for leaders today increasingly means unlearning what they already know in order to explore what-if scenarios for an uncertain future.

I love the concept.  I've written before about how leaders often can become too beholden to the conventional wisdom, and even close-minded over time.  They become afflicted by confirmation bias, seeking data that confirms what they already believe, rather than being willing to consider how existing perspectives or mental models may be incomplete, or even wrong.  The best leaders acknowledge that the past is not necessarily a good predictor of the future, that what worked in the past may not work going forward.  They also understand that others may have vital information and insight that they do not possess, and they are open to listening to those perspectives.  Applied curiosity... we could use a lot more of it at the top of many organizations.  

Friday, November 15, 2019

The Xerox Bid for HP

This week, Fortune's Jonathan Vanian reports on Xerox's takeover bid for HP.   Vanian writes:

HP Inc.'s printing division was once the envy of Silicon Valley for its billions of dollars in annual revenue and supersized profits. But in the increasingly digital world, consumers and companies are printing less, causing HP's printing business to fade. Last week, HP Inc. confirmed getting an acquisition offer from copy machine giant Xerox worth over $30 billion, a premium to HP's market valuation. The massive deal would combine two venerable but troubled names in tech, in the hopes that they would be stronger together. The takeover bid highlights the difficult position HP Inc. is in. If it rebuffs the deal, or any rival offer, it risks continued decline, while combining with another troubled company is also dangerous.

I have a few thoughts on this takeover bid.  First, I'm not sure how the Xerox takeover addresses the fundamental weaknesses in the HP business.  The printing business, as Vanian reports, has been profitable, but declining for some time.  There is no obvious upturn in site for that business.  Vanian reports that the personal computer business has been a bright spot, in that HP's PC sales have risen substantially in recent years.  The firm has reached #2 in global market share, and it has received very favorable product reviews for its laptops recently.   Having said all that, Vanian does not note the one most obvious concern about the PC business, namely that the industry is incredibly challenging.   If we conduct a simple five forces industry analysis, we can see why margins are slim in the PC business.  The competitive forces are not attractive/positive (i.e. consider buyer and supplier power, for instance). Thus, despite HP's recent success, it faces an uphill slog in that market.   It may achieve strong sales and market share, but strong profits will be hard to come by. 

Second, the history of mergers between two weakened companies is not a positive one.  Generally speaking, putting two weak companies together does not make a strong organization.  In fact, the challenges of merging two organizations and cultures can actually distract management from many of the key strategic challenges that it faces.  Companies can become inwardly focused during a merger integration process, and rivals can take advantage of the distraction at the newly merged entity.  

Finally, as NYU Professor Melissa Schilling noted in a recent tweet about the merger, "Both companies are huge and unlikely to gain further economies of scale (HP: 21.4% share in printers; Xerox: 23% share in copiers)."  In fact, one could argue that they will face potential diseconomies of scale and scope due to the increased complexity of the organization.  

Tuesday, October 15, 2019

New Case Study: Planet Fitness

I've published my latest case study, Planet Fitness: No Judgements, No Lunks, through the William Davidson Institute at the University of Michigan.  The case is available now by clicking here, and it will be available through Harvard Business Publishing very soon.   The Planet Fitness case study addresses issues of competitive strategy including the topics of industry analysis, competitive positioning, and the sustainability of competitive advantage as well as franchising vs. vertical integration.  

Tuesday, October 08, 2019

Running for Homes for Our Troops


On October 13th, my wife Kristin and I are running the Newport Half Marathon 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. We are honored to be running to support these men and women who have sacrificed so much to defend our nation and protect our freedom. Two years ago, I ran the Twin Cities Marathon and raised over $7,000 for this terrific organization. We hope to build on that total with this race effort.

Most of these veterans assisted by HFOT 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.

We understand that you may receive many of these types of requests, and that you may not be able to fulfill all of them. However, if you can help, we would appreciate it very much.

Thanks for considering this special request!   Click here to navigate to our donation page! 

Friday, September 20, 2019

Does Birth Order Affect a Leader's Propensity to Take Risks?

Source: Psychology Today
In our own families, we probably have all talked anecdotally about the differences in behavior and personality among our children and perhaps attributed some of those differences to birth order.  Researchers, of course, have been studying birth order effects for some time.   This year, Robert Campbell, Seung-Hwan Jeong, and Scott Graffin have published a study on CEO birth order.  They examined whether birth order affected a CEO's propensity to take risk.   Campbell and his co-authors write: 

We theorize that CEO birth order is positively associated with strategic risk taking; that is, earlier-born CEOs will take less risk than later-born CEOs. As evolutionary theory proposes that birth order effects are driven by sibling rivalry, we also argue that this relationship is moderated by three factors related to sibling rivalry: age gap between a CEO and the closest born sibling, CEO age, and the presence of a sibling CEO. Our results provide support for our theorizing and suggest that birth order may have important implications for organizations.

I found this result quite interesting and somewhat intuitive.  However, I then ran across a different study that reviewed many studies of different types that looked at birth order's impact on adult risk taking generally (not exclusive to CEOs or business).  Tom├ís Lejarraga, Renato Frey, Daniel D. Schnitzlein, and Ralph Hertwig published this analysis in the Proceedings of the National Academy of Sciences in March 2019.   Here is what they conclude: 

Does birth order shape people’s propensity to take risks? For decades, personality psychologists have believed that birth order influences personality, but recent evidence has accumulated to indicate that this is not the case. The effect of birth order on risk taking is less clear. We searched for evidence in survey, experimental, and real-world data, analyzing self-reports, incentivized risky decisions, and consequential life choices. The findings point unanimously in the same direction: We found no birth-order effects on risk taking in adulthood.

What do I make of these conflicting results?   Honestly, I'm not quite sure.   Are CEOs somehow different than typical adults?  (Surely they are!) Does sibling rivalry play a major role in CEO's lives, perhaps more so than in other's lives?  That's plausible.  More study needs to be done on this matter, as we clearly don't have a full picture.  

I do think it's interesting to try to understand what might shape an executive's propensity to take risk though. For instance, Matthew Cain and Stephen B. McKeon looked at chief executives who had pilot licenses. Flying small planes is viewed as thrill-seeking behavior. Professors Cain and McKeon found that chief executives with pilot licenses were more prone to engage in acquisitions, with the theory that takeovers are risky, yet exciting ventures.   Should Boards think about a person's propensity for taking risks when hiring a chief executive?  Certainly.   They have to recognize when a person might be incredibly risk averse or risk-seeking, and how their attitudes may or may not fit the needs and circumstances of the organization at that time.  They also need to understand the type of questions that they should be asking about risky choices, and the type of monitoring and control in which they should engage.