Friday, January 25, 2008

The Financial Meltdown: From Blame Game to Collaborative Problem-Solving

The WSJ's Davos Blog has some interesting comments from Charles Dallara, managing director of the Institute of International Finance. Dallara argues that people around the world need to stop pointing fingers at the US for the current crisis, and instead, begin thinking about how central banks and governments can work collaboratively to improve economic conditions. He points out that the financial system is a global one, with many interconnections. All problems can't be solved at the national level.

I think Dallara makes a good point about the need to shift from the blame game to some collaborative problem-solving. Yes, the US regulatory system may need some fixing, but I'm sure that no nation has a perfect system. It's time to work together to iron out some of these issues that led to the current situation.

I find the finger-pointing so interesting because employees in companies do this all the time. Too often, managers spend far too much time assigning blame when a problem occurs, or trying to dodge blame, rather than confronting the issues openly and fixing them collaboratively.

Wednesday, January 23, 2008

Developing the Leadership Capabilities of Your Children

Michael McKinney of The Leading Blog points parents to a great article by Tim Elmore of about the attributes that we should be nurturing in our children. I especially liked the points about humility, gratitude, and being teachable - i.e. being willing to seek advice and wisdom from others, and being a good listener in those situations. We can all work on being more teachable - children as well as adults. As a faculty member, I think this list is useful to think about in terms of how we can nurture the development of our students personally as well as professionally.

Tuesday, January 22, 2008

Challenging the Tipping Point

Great article in Fast Company about Columbia sociologist Duncan Watts and his research that challenges a key assertion in Malcolm Gladwell's book - The Tipping Point. Watts studies social networks. He has done a number of studies, using computer simulations, to examine Gladwell's assertion that a small group of influential and connected people tend to trigger social trends. He concludes from his work that these influencers don't have nearly as much influence as Gladwell believes. It's a fascinating debate about how social trends emerge, and not surprisingly, many marketers are deeply skeptical about Watts' research findings.

Friday, January 11, 2008

Evaluating Companies...Lessons from the Jim Rice Debate

This week, Jim Rice, a famous Boston Red Sox slugger of the 70s and 80s, was denied entry into the Hall of Fame once again. To explain this, many sportswriters point out that he "only" hit 386 career home runs. Yet, he played when hitting thirty home runs in a season actually meant something. Many others have played during a more recent era in which balls have flown over the fences at an unprecedented rate. Rice was one of the game’s most feared hitters for a decade. How should we measure his performance? For starters, we should not focus on raw numbers alone, because today’s offensive numbers are grossly inflated relative to the 1970s (thank you, steroids and HGH). Instead, we ought to see how a player fared relative to others who competed during the same era.

Let’s see how Rice stacks up . One good measure of preeminence in a particular era is the Most Valuable Player award voting. Right away, we see a stark contrast between Rice and many other great ballplayers. Jim Rice earned one MVP award, but he also finished in the top five in the MVP voting on six separate occasions - a remarkable feat. To put this in perspective, Rice finished in the top five more often than many Hall of Famers including Reggie Jackson, Willie McCovey, Willie Stargell, Dave Winfield, George Brett, Tony Perez, and Boston's own Carl Yastremski!

Why do I bring up the example of Jim Rice? For one, I'm a Red Sox fan who believes that it is wrong for him to have been repeatedly denied entry into the Hall of Fame :-) However, I also bring up Rice's case because, too often, journalists, students, and practicing managers make the mistake of looking at company's financial results in isolation, rather than thinking about how they are doing relative to their competitors. They make the same mistake that sportswriters have made with regard to Rice.

With the economy slipping perhaps into recession, many firms are experiencing a deterioration in their financial results. The key question, however, is this: Are some firms able to weather the storm more effectively than others? The headlines shouldn't be: XYZ retailer experiences downturn in comparable store sales growth. Why is that newsworthy these days? Almost all retailers are experiencing softness in their numbers. What we really want to know, particularly as investors, is this: Is XYZ retailer experiencing more or less of a downturn in performance relative to its rivals? Too often, articles fail to explore this very important comparative data.

Entrepreneurship Myths

On Guy Kawasaki's blog, Professor Scott Shane of Case Western has a phenomenal post on the ten biggest myths about entrepreneurship. It's a must-read.

Monday, January 07, 2008

Schultz Returns as CEO of Starbucks

Breaking news this afternoon that Howard Schultz has returned to the role of CEO at Starbucks. The news comes on the heels of a front page article in the Wall Street Journal today, which focuses on how McDonald's is expanding its direct competition with Starbucks in terms of coffee sales. That article proved very interesting, because it is clear that the strategies and product offerings of Starbucks, Dunkin' Donuts, and now even McDonald's have been converging over time. Strategy convergence generally isn't a good thing in industries; it tends to enhance direct and intense rivalry among firms and diminish overall industry profitability.

Kudos to Schultz for finally recognizing that Starbucks needed to re-think its strategy. They had drifted from their core strengths in recent years, and ultimately, it began to affect financial performance. In the letter Schultz posted on the Starbucks website, he notes that the company will scale back the growth of domestic locations and even close some underperforming stores. Moreover, Schultz states that Starbucks will seek to reconnect emotionally with their customers, enhance differentiation relative to rivals, and launch new products.

Here are some issues that should definitely be on the table as Starbucks considers its strategy moving forward:
  • Should the company continue to serve breakfast sandwiches? Does this really fit with the Starbucks experience? Do the sandwiches take away from the atmosphere in the store, and from the focus on coffee?
  • Should the company continue to build drive-thrus? Do these fit with Schultz' initial vision of Starbucks as a "third place" where people gather and enjoy coffee together?
  • Should the company take some products off of the menu? Is the product proliferation diluting both product quality and the quality/speed of the service by the baristas?
  • Should the company consider offering free wireless, as competitors such as Panera Bread do, so that customers may come and spend more time in the stores?

Naturally, the list goes well beyond these questions. Schultz' return provides a tremendous opportunity for Starbucks to confront key strategy issues such as these and rekindle the magic that drew in so many customers over the past twenty years.

Wednesday, January 02, 2008

Training Generation Y

Fortune magazine had an article last month about how UPS transformed its training practices to address the unique ways that Generation Y tends to gather information, communicate, and learn. The story is fascinating for me as a professor because it shows the power of active learning.

Let me explain. Lectures invite passive learning; the student sits and listens quietly as the professor drones on and on... The student isn't involved in the creation of knowledge; they are an empty vessel hoping to be filled up with knowledge. Active learning involves participation by the student in the educational process. It involves discussion, hands-on projects, simulations, experiential exercises, etc. Ideas and knowledge emerge from the process of trying to apply concepts to real problems.

UPS recognized that Generation Y tends to react in a particularly negative way to passive learning techniques. Thus, they shifted to an approach that emphasizes hands-on training - very much an active learning orientation. Here is one great example from the article:

The final kinetic-learning module - or for non-academicians, hands-on learning tool - is the crowd-favorite slip-and-fall simulator. UPS incurs significant costs every year from slips and falls, and it is first-year drivers who succumb the most. Lucky for first-years then that Thurmon Lockhart, director of the Locomotion Research Laboratory at Virginia Tech, has devoted his entire life to the issue. In his studies Lockhart has found that the only way to help people avoid falling is to "perturb" them - i.e., to put them through the motions of falling - which causes their bodies to adjust during subsequent encounters with falling hazards.
To that end, Lockhart's lab houses a falling machine - a nine-foot-high metal frame with a body harness attached to it. A subject puts on the harness and gets comfortable walking back and forth, and then someone sneaks up behind her and spills soapy water, causing the subject to slip, scream, and flail around before getting caught by the harness. It sounds funny - until you wipe out.
For the record, having experienced this first-hand, I was perturbed, and my gait remains adjusted. "This type of research has been going on since the 1920s," Lockhart says, "but UPS is going to be the first to apply it. And when their guys get out of the program, they'll almost be ergonomists. The training is that good." Now there's a shiny new brown version of the simulator at the training center.

The article reports that UPS has experienced much success with these new training methods. My belief is that active learning always trumps passive learning, though perhaps that is even more true with Generation Y. The lesson of this UPS story applies in a range of settings... from the classroom at business schools, to corporate training programs such as the driver training at UPS, and even to corporate leadership development programs populated by senior executives. Let the lectures cease!