The Impact of Conflicting Goals

With the new year upon us, many people will be setting goals for themselves and their organizations.  Of course, we would hope that these goals would be aligned, i.e. that they would reinforce and complement one another.  Sometimes, however, we find ourselves trying to juggle conflicting goals.  Stanford's Jennifer Aaker has conducted research, along with Duke's Jordan Etkin and Rotterdam's Ioannis Evangelidis, on the impact of competing objectives.   What did they find?

1. Not surprisingly, people tend to experience more stress when they have competing goals that they are trying to juggle. 
2. People tend to feel more pressed for time when they experience conflicting goals, even when the goals do not compete for their time. 
3. When people have conflicting goals, they tend to become much less patient.  In other words, they are less willing to wait in line, or on the phone.  They are also less willing to wait for a package to be delivered.  
4. Because they have less patience, people are willing to pay more to save time.  The researchers found that, "Goal-conflicted subjects who felt short on time were willing to pay 30 percent more for expedited shipping of a DVD from Amazon. Such results confirm the hypothesis that feeling pressed for time shortens patience and increases willingness to pay."  

 What's the lesson for all of us as we set goals for 2015?   First, if we are leading an organization, we should be mindful of the pressures we create for others if we establish too many goals that are competing with one another.  We can never align objectives completely, but we can try to minimize conflicts.  Second, we can become more aware of how competing objectives may distort our behavior.  Before we expend resources, we might think about how stress and anxiety may be causing us to spend a bit less responsibly.    Finally, we might think about streamlining our list of goals and objectives for 2015.  If we set too many goals, we may not accomplish anything.  We have to be able to set priorities.  In so doing, we will also reduce the likelihood of stress from competing objectives. 

The Thank You Note After the Job Interview

Maureen Dempsey has written an interesting article about job interviews for Fast Company.  She aims to debunk five key myths about the factors that drive success in the job application process.  While I don't agree with all her points, I think she makes a very strong argument about thank you notes after an interview.  Here's an excerpt:

Rather than simply thanking hiring managers for their time—something that doesn’t add value to the decision-making process—Hawley says to make sure your note contains meaningful information that proves you were paying attention and are still interested in the position.  "Think about the conversation, and write something both personal and business-related," she suggests. "Tell them how much you appreciated discussing a certain business topic, then thank them for sharing their insights about something personal."

 

I would agree wholeheartedly on this point.  Be specific in the thank you note. Show that you listened to the interviewer, that you learned something new about the company.   What should you not do? Try to make an expanded case for why you should get the job.  You don't want to be writing a long novel.  However, you can express your continued interest in the job.   If specific concerns arose during the interview process about your qualifications, you could politely offer to provide evidence to address those questions.   In a recent interview situation, my colleagues and I were incredibly impressed with a candidate who very politely offered some additional evidence that was quite compelling.  However, the person was concise and to the point, and most of all, expressed gratitude for the opportunity to compete for the position.  

"Prove it!" - Two Words that Kill Innovation

Roger Martin, former Dean of the University of Toronto's business school, has a terrific new HBR blog post about innovation.  In this piece, Martin argues that two little words kill innovation in many companies:  "Prove it."  Here's an excerpt:

The great irony is that the managers who give this instruction — prove it before I agree to do it — think that they are simply being rigorous managers. They are sure that any innovation problem has nothing to do with them. Rather, it’s the people they’re managing who aren’t executing properly on their innovation program.  They are oblivious to the fact that they are setting a standard that’s impossible to meet. They will complain about their organizations failing to come up with ‘compelling innovations.’ They will hire innovation consultants to bring ‘new thinking’ to the organization — but later declare that the consultants haven’t brought any “winning concepts.”

Why do these two words kill innovation, specifically the truly creative, disruptive innovations that firms seek to bring to market?  In many cases, the early days of such innovation represent what some scholars and practitioners call the "fuzzy front end."  In those days, innovators find it very difficult to quantify the costs and benefits of a new innovation.   They cannot accurate estimate the size of the market or the revenues that a firm might capture.  However, a large organization's mindset often focuses on rigorous quantitative analysis of investment opportunities.  Proof means producing a very detailed spreadsheet with a return on investment calculation.   Small, incremental innovations sometimes can be approved through this type of process.   A manager can produce the kind of proof required, because the technology is established, the market opportunity well-known, and the historical data is available.   Breakthrough innovations stumble though, as managers cannot build upon existing datasets to produce the proof that is required.   

Time to Celebrate Accomplishments: The Year-End Leadership Message

The holiday season and the end of the year have arrived.  Leaders should take this opportunity to reflect back on the work that their organizations have done over the past twelve months.  What were the significant accomplishments?  What key goals were achieved?  What lessons did the organization learn, perhaps even from some failures that took place?   What will be the key priorities in the year ahead?   Each leader should take the time to answer these questions in a thoughtful letter to the members of their organization, or perhaps in a brief recorded video.   Such a message helps celebrate the accomplishments, and it offers the opportunity to share the credit for the success of the past year.  Moreover, leaders can recognize key individuals or teams publicly.   People want to be recognized for their efforts, and simply paying bonuses for good work does not buy employee engagement.  Public praise and recognition goes a long way.   The message also offers an opportunity to show that the leaders of the organization are reflecting on lessons learned, and it provides the forum to encourage all employees to learn from their successes and failures of the past year.  Finally, leaders have a chance to build alignment, to get everyone on the same page regarding the goals and objectives for the year ahead.   How should the leader close such a message?  Yes, you want to thank everyone for their hard work and wish them a happy holiday season.  However, leaders also should take the time to ask for feedback and input.  They should encourage employees to send them questions or comments in response to this year-end message.   Leaders need to make this communication a two-way street, not a one-way broadcast.  That final step will further enhance employee engagement, and it might yield some terrific ideas on how to improve the organization. 

Innovating Through Pyramid Search

You would like to innovate, and you have heard that bold innovations often come from outside of one's particular domain of expertise.  We derive breakthrough ideas by tapping into expertise from analogous fields.  I've blogged about that topic previously on this site.  However, you may find yourself asking:  Where do I begin?  How do I find an expert in an analogous field?  Which analogous field should be explored? 

Marion Poetz and Reinhard Prügl write this week in Harvard Business Review about a concept called pyramid search.   Here's how they explain the process:

 

The basic idea is that you identify people who might have some knowledge of or interest in a given topic area, and you ask them who else might know even more than they do — or who else might know of others with greater knowledge. Then you contact those people and repeat the process until you’ve gotten to the top of that particular topic area, or pyramid, and found individuals with the highest levels of expertise and passion.  Once you’re at a peak of a pyramid, you’re more likely to get a referral to someone in a distant but analogous topic area (when we say “distant,” we’re not referring to geography but to contextual differences between subjects). That’s because the highly curious, knowledgeable, well-connected people at the top of pyramids tend to reach out to people outside their domains.

How To Disagree With Your Boss

Kathy Bloomgarden, CEO of Ruder Finn - a public relations and communications agency, has written a short column for Fortune about how to disagree with your boss.   I've written extensively about how leaders need to encourage dissenting views.   Often, I'm asked how subordinates can express dissent constructively and effectively.   I n this article, Bloomgarden offers a few tips.  First, she argues that one should stick to the facts.  Avoid making your case based on intuition or emotion.  Provide a sound analysis of the situation with data to support your argument.  Second, identify the costs and benefits of your proposal, as well as the costs and benefits of your boss' proposed course of action.  Try to look at both scenarios in an evenhanded way.  Finally, she says that you should "own what you're suggesting."   In other words, be specific about your willingness to take responsibility for the alternative solution, but be transparent and realistic about what you promise.  Set expectations clearly, but realistically. 

I would add a few other recommendations.  First, you have to know your audience.  How does your boss make decisions?  What types of arguments are most persuasive?   How does he or she like to see data presented?   Second, study the history of the issue.  Understand what has been tried in the past, and if it failed, examine why it did not work.  Third, seek allies and build coalitions. Don't go it alone.  Try to persuade others first, before you turn to your boss.  There's strength in numbers.  Fourth, identify and work through key gatekeepers.  Who has the boss' ear and trust?  How can you work through that person to persuade and influence the boss?  Finally, focus first on divergent thinking before trying to persuade people that their idea is not well-suited to address this particular problem. In other words, ask questions before proposing your solution.  Try to encourage the boss to think a bit differently about the situation.  Encourage them to explore other options.  That inquiry-based approach may be more effective than listing the deficiencies with their proposed course of action. 

More Interpersonal Conflict in Virtual Teams

Stanford Professor Lindred Greer has conducted research on conflict in virtual teams.  She has found that virtual teams are more likely to see task-based disagreements become interpersonal in nature.  According to Greer, 

“They can’t see the context or the nuance or even the facial expressions of the person who is engaging in this task conflict.  When people lack information — when they are uncertain about why someone disagreed with them — they are much more likely to take it personally.  This means they are going to be more emotional and their response is going to be more aggressive and more likely to escalate the conflict than what would happen with face to face teams.” 

 Greer has some tips on how to improve the functioning of virtual teams. She advocates a face-to-face kickoff of a team project whenever possible.  She argues that it can help people understand where others are coming from, and it can help prevent a knee-jerk reaction to attribute negative motives to those with whom we disagree.  Here's a video with more information from Greer on this topic:

Ed Catmull: Let Your Ideas Suck

Fast Company has a great feature describing Pixar President Ed Catmull's views on innovation and creativity.  I had the chance to interview Catmull several months ago, and he has a terrific perspective on how to develop a highly creative work environment.   Here's an excerpt from the Fast Company article:

Let Your Ideas Suck

Pixar movies have multi-layered, compelling stories and are beautifully put together, but they don’t start that way. Catmull shared the process that the beloved movies go though, starting with a story that bears no resemblance to the final product. He said, "All that anyone sees is the final product and there’s almost a romantic illusion about how you got there. When we first put up something—these stories suck." For example, he shared that the first version of the movie Up included a king in a castle in the clouds. They threw everything out from that first idea except a bird and the word "up," from there it went through several other iterations with a little more of the final story emerging each time. They had to make a lot of mistakes and have a lot of failures along the way to get the final product, he said.

Speaking of Pixar, they have released the trailer for their upcoming movie, Inside Out.  It sounds like it could be another hit (14 Pixar movies in a row have achieved #1 status at the box office). 

Disney*Pixar's Inside Out - Official Trailer by FanReviews

How Growth Ambitions Lead to Complexity... and Perhaps Lower Revenues and Profits

The Wall Street Journal reported last week on McDonald's slumping sales.  The article was titled, "McDonald’s Menu Problem: It’s Supersized."  According to the Wall Street Journal, "McDonald’s doesn’t disclose historical data on its menu’s size, but Datassential, which tracks menu trends, says there were 85 items seven years ago, and McDonald’s says there are 121 today."   What are the negative consequences of this menu creep?  The article notes, "QSR Magazine, a trade publication that studies the drive-through performance of fast-food restaurants, reported last year that McDonald’s had clocked its slowest average speed of service in the study’s 15-year history: 189.49 seconds, more than twice the chain’s goal."   

The McDonald's story is not unique.  A firm has growth ambitions, and perhaps it is even worried about slowing growth.  What does it do?  Expand its product offerings.   However, the increase in product variety and selection adds considerable complexity to the business.  As a result, operational efficiency declines, and the company's fortunes actually worsen.  In some cases, it leads to excessive manufacturing and supply chain costs;  in other situations, it decreases customer service.   Consider what happened to Lego more than a decade ago.  A desire to increase growth led to an explosion in the number of different pieces that it produced and sold.  The added complexity became a huge burden for the company's operations.  It had significant negative consequences.  Many firms face this challenge.  Before they decide that new product offerings will be the answer to growth challenges, they have to think about the impact that additional complexity will have.  Are they prepared for that?  Can they cope with the strain that new products may create on operational processes? 

Pick the Best Players - No, not exactly!

You have an important project at work.  You need to assemble a team to complete the critical task.  Who do you select?  Pick the best people, of course.  Well, perhaps not.   As  Tara Nicholle Nelson   writes in Fast Company, 

"A-players Don’t Always Make Great Team Players. Motivated by credit, praise, promotions, and raises, Superstar employees are often amazing individual contributors. But they are not always amazing to work with.  When multiple A-listers are on one team, unless the culture aggressively fosters collaboration and cooperation, they can become competitive with each other, hoard resources, and spend way too much time focusing on what each other is doing, versus focusing on beating your company’s actual competitors in the marketplace."

I have always argued that team creation should involve picking the right players, not simply the best players.  Picking the right players means thinking about how they will complement one another.  Can they fit into certain roles on the team?  Do they have personalities that will enable them to collaborate effectively?  Are they all willing to put the organization's goals above their own personal or departmental interests? 

Target Pep Talk!

Now this guy is one heck of an engaged employee!  Check out his pep talk at the Westminster, Maryland Target store as he prepares his team for the onslaught of Black Friday shoppers.

Five Collaboration Skills from The Design Gym

The Design Gym is an organization that conducts workshops about the design thinking process. Recently, they posted a great piece on their blog regarding the "five core collaboration skills." Here's a recap:

1. Yes, AND

A key principle of improv comedy.  You accept what others say, and they you build upon their ideas.  You don't criticize in the early phases of the creative process.   You defer judgment. 

2. Open vs. Close

Opening a collaborative process correctly makes it much easier to achieve closure effectively.  Opening well means achieving clear alignment on the goals upfront, and then giving people voice in the process so that they feel that their input has been heard and considered. 

3. Keep it Visual

A picture is worth a thousand words.  Don't just discuss ideas.  Sketch them. Draw storyboards.  Create diagrams and tables to help communicate concepts.

4. Needs over Solutions

Don't jump the gun and offer solutions before you understand the true needs of the user.  Focus on the struggles and the "pain points" of the user, and be open to multiple ways to address those needs.

5. Testing over Talking

Experiment. Experiment. Experiment.  Don't debate forever about the merits or the pitfalls of a particular idea.  Instead, conduct a simple test.  Let the data speak.   Rapid iterations in the experimentation process work much more effectively than lengthy deliberations. 

Networking Leads to Job Growth?

Michael Mandel, president of South Mountain Economics and former chief economist at BusinessWeek, has conducted an interesting new study about job growth.   Using data from LinkedIn, he found that, "the most connected metro regions had more than double the job growth of the least-connected metro areas.” Does that mean networking leads to more economic activity and more jobs?  Not necessarily.   Correlation does not equal causation.  Perhaps, a high growth economy in a region causes professionals to connect with one another more often. The chart to the left summarizes Mandel's findings. 

SNL Black Friday Skit

What Can Carpenters Learn From Skaters?

Marion Poetz, Nikolaus Franke, and Martin Schreier have conducted a fascinating new study about innovation.  They interviewed roofers, carpenters, and inline skaters with the goal of trying to understand how to get workers to use safety gear that they might be reluctant to employ.  They recruited a panel of experts to judge the ideas that emerged from these discussions.  The scholars found that, "Each group was significantly better at thinking of novel solutions for the other fields than for its own."  The conclusion from their research:  If organizations want to drive innovation, they should encourage the "mining of distant, analogous fields."  

 

Why a CEO Perhaps Should Not Pick His or Her Successor

An interesting article on the Stanford Graduate School of Business website examines three key reasons why a CEO perhaps should not have a prominent role in selecting his or her replacement.  First, selecting a CEO is fundamentally different than hiring other top managers.  The outgoing chief executive often has no experience selecting a CEO, while many board members may have that type of experience.  Second, CEOs worry about their legacies.  As a result, an outgoing boss may pick someone who will preserve his or her legacy, rather than someone who will make bold, but necessary, changes.  Finally, people have a tendency to hire others similar to them in a variety of ways.  CEOs may do the same when selecting replacements.   I would add one additional reason.  The outgoing CEO may not recognize the future needs of the organization.  They may be looking backward at what has been necessary to make the company successful in the recent past (during their tenure).  The outgoing CEO may not recognize that new challenges and opportunities await, and those issues require a very different set of skills and expertise. 

JetBlue: Stuck in the Middle?

My former student, Harris Roberts, asked an interesting question on Twitter yesterday:  Is JetBlue stuck in the middle?  In other words, are they stuck in a competitive position somewhere between an effective low cost strategy and a successful differentiation position?  The question arises because of the news that came out yesterday about the firm.  JetBlue announced that it would be charging baggage fees for the first time.  For certain types of low fare tickets, passengers will have to pay baggage fees.  In addition, the company will be reducing leg room and adding seats on certain jets that it will fly.  The announcements come after much investor pressure and a change in the CEO office.  Investors have clamored for JetBlue to improve its profitability, as it has lagged competitors in recent  years.  The moves, of course, represent a significant departure from JetBlue's past strategy.  If you have watched JetBlue's marketing in recent years, you know that more leg room and no baggage fees have been key elements of their message.  

Why do the moves suggest that JetBlue may be stuck in the middle strategically?  For years, JetBlue has tried to be the "Target" of the airline industry.  In other words, they have tried to differentiate themselves from the pure low cost players in the industry (Spirit, Southwest), while trying to operate more efficiently than the legacy carriers.  Target has tried to do the same for years, operating at a lower cost structure than traditional department stores or older discounters, while differentiating from Wal-Mart.  Such a strategy has been very successful for Target for decades, though the last few years have been challenging.  JetBlue's lagging profitability may suggest that it has not been able to achieve the efficiency of the low cost players.  At the same time, its efforts to differentiate (better service, TVs on the seats, more leg room) have not been sufficient to generate a price premium that offsets the higher costs associated with these amenities.  The moves to cut leg room and add baggage fees are not so much a sign that they are moving to become stuck in the middle... to me, they may indicate that JetBlue had already become stuck in the middle.   Now they are trying to find their way out of that challenging competitive position.   It's difficult, though, to make moves that contradict a longstanding marketing message.  It will be interesting to see how customers react. 

Managing Up

David Bradford and Allan Cohen have written a new book, Influencing Up.  They are the authors of the previous best-selling leadership book, Influence Without Authority.   Stanford Business School has posted an interview with Bradford about the duo's latest work.  Bradford has a key insight about how we perceive ourselves relative to our bosses:

What does it take for a direct report to gain power in the employee-boss relationship?

First, not falling into the trap of accentuating the power gap. Research, much of it done here at Stanford, shows that when there is a significant gap between the most powerful and the least powerful, dysfunctional things happen for both parties. In the book, we say that "high power makes you deaf and low power gives you laryngitis." When you have high power, you tend to overestimate your abilities and can be closed to influence, which can be very dangerous in a fast-changing world. On the other hand, if you perceive you have very little power, you tend to shut down instead of offering alternate points of view, which is really what is needed. Now, sometimes power is objective: some people have a lot of money and others have very little; someone is CEO and another is a clerk. But we often exaggerate the power gaps, and when we do that we hurt ourselves and our bosses.

I think Bradford has made a good point.  Sometimes, employees do exaggerate the power gaps.   They do not realize the other sources of power that they may have. Clearly, the boss has the formal authority.  However, the subordinate may have deep expertise on a particular specialized subject.  The subordinate also may have cultivated a network of collaborators and allies in other parts of the organization.  That network may be a source of power.  The subordinate may have key facts on their side.  The question becomes:  How do you present that data most effectively?   In short, managing up does indeed require a thorough assessment of one's power in a particular situation.  Avoiding the knee-jerk conclusion that a massive power gap exists is good advice.   

Startup Funeral

Kevin Galligan is one of the organizers of an event called Startup Funeral that takes place in Manhattan.  A group of young professionals get together to hear the stories of startup failures.  The point is for entrepreneurs to share the lessons from an in-depth postmortem analysis of a startup failure.  At the same time, the event is supposed to be fun.... a party, according to Galligan.  Another organizer, Valerie Lisyansky, tells Fortune magazine: “It’s equally as important to be successful as it is to understand your failure, understand what happened, and educate community.”   Publicly sharing postmortems has become more commonplace in the startup community.   People want others to hear the lessons that they have learned the hard way.  

Is this type of event taking the entire "celebrate failure" movement a bit too far?   I don't think so, though I would note that the article refers to the fact that many entrepreneurs back out after initially committing to present at such events.  I think the key to a successful sharing of lessons learned from a startup postmortem is a safe environment.   I'm not sure an open invitation public party is the most safe environment.   You want to have a place where people are comfortable putting themselves out there and taking an interpersonal risk. I also think it's important to hear the perspective of multiple people involved in a startup, not simply the founder(s).   Multiple perspectives can shed light on causes of the failure that are not apparent to the founder(s), or that the founder(s) aren't ready to acknowledge. 

Reed Hastings: Make as Few Decisions as Possible

Netflix CEO Reed Hastings sat down for a terrific interview with Bill Snyder of Stanford's Graduate School of Business.   I found several terrific nuggets in the piece.  In the first quote, Hastings makes the point that he's given people a great deal of autonomy at Netflix.  However, with that autonomy comes responsibility.   He has high expectations.  In the second quote, he points out that the CEO does not have be the ultimate product expert.   In fact, there may be a downside to that type of situation.  I like the concept of a "distributed set of great thinkers."  Great leaders, I believe, know how to marshal the collective intellect of an organization. 

“I take pride in making as few decisions as possible, as opposed to making as many as possible,” Hastings says. One example: Netflix’s decision to produce the popular House of Cards was a huge one, but the meeting that gave the project a green light lasted just 30 minutes. Others had already laid down the groundwork and details, making it easy for Hastings to sign off. “It’s creating a sense [in your employees] that ‘If I want to make a difference, I can make a difference.’” Freedom is only one part of the Netflix culture; the other is responsibility. Netflix, says Hastings, has created a culture of high performance. “Adequate performance gets a generous severance package,” he says, adding that “we turn over a lot of people.”

 Without mentioning Apple or the late CEO Steve Jobs by name, Hastings says certain companies’ conception of the top job was very different than his view. “Some companies operate by the principle of the product genius at the top,’’ Hastings says. “There’s this whole motif that to be a great CEO you have to be a great product person. That’s intoxicating and fun, but you build in incredible amounts of dependence on yourselves. You’re much stronger building a distributed set of great thinkers,” he says.

Understanding Your Rivals' Time Horizon

Great firms engage in rigorous competitor analysis.  They try to understand their rivals' goals, strategies, capabilities, and weaknesses.    Beyond that, I believe that good competitor analysis entails an understanding of your competitor's time horizon.  Are they managing the business quarter to quarter, so as to meet Wall Street expectations?  Or, does your rival have a long term orientation?  Are they willing to make significant investments today with payoffs expected well down the road? 

Why does the time horizon of competitors matter?  Suppose that your small firm is contemplating entering a new product market segment.   You are trying to anticipate the incumbents' response to your entry.  Will they retaliate aggressively when you try to take share?  If they are very short-term oriented, they may not want to hurt their margins substantially so as to attack a small new entrant.  On other hand, if they are very long term oriented, they might bite the bullet today to try to retain market share and deter future entrants.  

Similarly, suppose that technological change is taking place in your industry, and firms are examining an unproven new technology with uncertain payoffs.   A rival with a long term orientation may be willing to make a big, bold bet, knowing that the payoff may not come for a number of years.  A rival who is focused on next quarter may hold off on such risky investments. 

Onboarding Employees the Whirlpool Way: "Real Whirled"

Companies are experimenting with many new ways to onboard young employees.   Whirlpool has one of the more novel systems.   They have run a program called "Real Whirled" for 15 years.  A group of new young employees live together for 10 weeks in a two-story condo in Michigan.  According to this article in Fast Company, "For those 10 weeks you're spending most of your waking hours using their products in the kitchen and laundry room and comparing them with competitors, hosting dinners for executives, going to product testing labs—essentially becoming one with the appliances you will eventually sell on the sales floor."  Nearly 400 people have gone through this program at Whirlpool.   Not everyone thrives in this environment.  However, Fast Company reports that, "Since 2009, Whirlpool has retained 80% of everyone who has participated. There is also an extensive alumni network, filled with people in all parts of the company..."  

GM Turns "Chevy Guy" Gaffe Into Positive Promotion

During the presentation of the World Series MVP trophy, a Chevy manager (Rikk Wilde) became very nervous.  He had a hard time getting the right words out, and eventually he described the Chevy truck as, "class-winning and leading, you know, technology and stuff."   Soon, #chevyguy and #technologyandstuff began to trend on Twitter.  GM didn't reprimand the employee.  Instead, Wilde's bosses understood why he had become so nervous.  Moreover, GM decided to capitalize on the social media buzz created by the gaffe.  They even incorporated the gaffe into their online promotions.  Jamie Barbour, a social media manager at GM, began the company's efforts by tweeting at 1:29am: "Truck yeah the 2015 #ChevyColorado has awesome #TechnologyAndStuff!"  Then the company used #TechnologyAndStuff with three online video ads the next day.   They even bought prime time spots during late night comedy shows to run one of those ads.   I love these types of stories.  Companies should be willing to laugh at themselves sometimes, and they should turn these types of gaffes into marketing opportunities whenever possible. 

Do Corporate Skunk Works Need to Die?

Successful entrepreneur, Stanford faculty member, and lean startup guru Steve Blank has written an intriguing blog post titled, "Why Corporate Skunk Works Need to Die."  Blank argues, "But as successful as skunks works were to the companies that executed them well, innovation and execution couldn’t co-exist in the same corporate structure. Skunk works were emblematic of corporate structures that focused on execution and devalued innovation."  He argues that companies today must master the art of continuous innovation.  Innovation and execution must be enacted together in organizations.   He explains, "To start it requires board support and CEO and executive staff agreement. And recognition that cultural, process and procedure changes are needed to embrace learning and experimentation alongside the existing culture of execution."  I would agree with Blank that companies must stimulate learning and experimentation.  I do wonder whether that can be done by those who have their heads down focused on daily execution.  It's easier said than done, in my experience.  Blank promises future blog posts with more details on how innovation and execution can co-exist side-by-side in large organizations. I'll be looking forward to those writings. 

Who is More Biased? The Crowd or the Expert?

 Shane Greenstein and Feng Zhu have published a new working paper titled, "Do Experts or Collective Intelligence Write With More Bias:  Evidence from Encyclopedia Brittanica and Wikipedia."  Their results surprised me.  I would have expected more bias from experts.  I thought the work of the crowd would mitigate biases by any particular contributors.  However, they found that Wikipedia entries exhibited more political bias than encyclopedia entries.  Here's what they said in their paper:  "Using a matched sample of pairs of articles from Britannica and Wikipedia, we show that, overall, Wikipedia articles are more slanted towards Democrat than Britannica articles, as well as more biased."  Perhaps not surprisingly, they did find that the Wikipedia articles tend to become less biased as they receive more and more revisions.  However, the overall analysis does show more bias with Wikipedia.  The scholars conclude, "It is surprising because the average Wikipedia article receives over 1,900 revisions and that is still not enough for eliminating bias."  

The Stay Interview: Retaining Top Talent

The Wall Street Journal has a great how-to guide regarding employee retention.  I especially liked the tactic of a "stay interview."  Here's a description:

– Conduct “stay” interviews. In addition to performing exit interviews to learn why employees are leaving, consider asking longer-tenured employees why they stay. Ask questions such as: Why did you come to work here? Why have you stayed? What would make you leave? And what are your nonnegotiable issues? What about your managers? What would you change or improve? Then use that information to strengthen your employee-retention st

Entrepreneurs: Are They Truly Different Than Others?

Conventional wisdom about entrepreneurs tends to focus on their mental make-up.  They are risk-seekers.  They are creative.  They are daring.  They are ambitious.   They are not afraid to make mistakes or to fail.   Perhaps we should take a step back and question this conventional wisdom..   Laura Huang and Peter Cappelli of Wharton have a terrific article in the Wall Street Journal today that challenges these prevailing view about entrepreneurs.  They write, "There’s only one problem with the conventional wisdom: There is no direct evidence to support it and some solid research to suggest it isn’t true."  I suggest reading their article for more details about their review of the academic literature. 

Why has this conventional wisdom dominated our thinking about entrepreneurs for so long?  Why do we believe that entrepreneurs have a different make-up than the rest of us?   Huang and Cappelli explain that the fundamental attribution error plays a key role:

"Why are we so inclined to believe that entrepreneurs are different and better people than the average? The answer is something known in social psychology as the fundamental attribution error: We tend to assume that behaviors are caused by someone’s disposition, even when circumstances are the real factor, such as assuming that the driver of the speeding car must be an irresponsible person rather than thinking he might be going to an emergency."

Bryant's Collegiate Entrepreneurs Organization Wins Best Chapter in the Nation!

I serve as the adviser to Bryant University's chapter of the Collegiate Entrepreneurs Organization.  Our student group competed against 400 other chapters throughout the nation at this year's CEO conference in Orlando, FL.  On Saturday, the group earned the Best Chapter in the Nation Award!  This recognition marks the fifth time in the past decade that the Bryant group as earned the best chapter award.  The prize demonstrates the vibrant culture of entrepreneurship that thrives at our university.   Very proud!

Congratulations to Renee Lawlor, President of our chapter, and her entire executive board.  Congrats also to Harris Roberts, past president and now alumnus of Bryant, who helped create the foundation for this big win during his two years leading the group.  Thank you, Harris, for traveling with the group to Orlando.

Mayor Tom Menino: Leadership is about more than making speeches

Tom Menino, long-time mayor of the city of Boston, died yesterday at age 71.  He served as Boston's mayor for two decades.   He enjoyed widespread popularity and respect.   Menino accomplished a great deal during his time as the city's leader.   I think we can take an important lesson away from Menino's incredible success.   Was Tom Menino a terrific speaker?  Not at all.  People made fun of how inarticulate he could be at times.  They referred to him as "Mumbles Menino."    However, Menino had tremendous leadership skills.   Too often, we became enamored with political candidates who deliver a wonderful speech.   That does not make them a leader.   They have to be able to execute.   Menino could do just that.   He understand how to get things done, and he knew how to stay incredibly connected with his constituents.  

Source:  Boston's official website

What is Critical Thinking?

The Wall Street Journal published a terrific article by Melissa Korn this week.   The article focuses on the fact that many executives say that they want to hire people with "critical thinking" skills. However, the definition of that term seems elusive.  In fact, some people don't have a clear definition of the term. Others disagree over the meaning of critical thinking skills.   Perhaps, the article suggests, you simply know them when you see them.   The article does offer a few intriguing definitions of the term:

• “The ability to cross-examine evidence and logical argument. To sift through all the noise.”
  -Richard Arum, New York University sociology professor
• “Thinking about your thinking, while you’re thinking, in order to improve your thinking.”
  -Linda Elder, educational psychologist; president, Foundation for Critical Thinking
• “Do they make use of information that’s available in their journey to arrive at a conclusion or decision? How do they make use of that?”
  -Michael Desmarais, global head of recruiting, Goldman Sachs Group

Breaking Up Isn't Always the Optimal Solution: The Curious Case of Dan Loeb and Amgen

Corporate breakups seem to happening every other day.   I blogged last week about some of the reasons for the recent surge in breakup activity.   In general, I think many of these breakups make sense, as firms tend to prosper when they are more focused.  Moreover, many of these firms are experiencing significant diseconomies of scale and scope.   However, I think we may be taking it too far in some cases.

Let's take the case of hedge fund investor Dan Loeb pushing Amgen to break into two independent firms.   Loeb proposes that Amgen split into one business focused on its mature products and another focused on its high growth products.   Typically, when investors propose such splits, they want the mature business to generate lots of cash and return much of it to shareholders.  They want the growth business to reinvest profits to stimulate even more growth.   

Here's the problem with proposals such as the Amgen deal though.   In the old BCG model of corporate strategy, firms were supposed to milk the cash cow and use those proceeds to fund promising growth businesses.   That model has since been completely debunked.  Cross-subsidization amongst unrelated business units makes no sense if external markets are reasonably efficient.  Chas cows should return excess cash to shareholders, and growth businesses should find their own sources of funds from private equity, venture capital, or public equity and bond markets.  Note the word "unrelated" though.  The BCG model is faulty if we are talking about using it to justify an unrelated diversification strategy.  However, a firm such as Amgen is clearly not an unrelated diversifier.  It has a set of highly related businesses.  Strong synergies exist among its lines of business.  In fact, some would say that it's a focused firm, not even a related diversifier.  Thus, Amgen is not in any way inappropriately using funds from a cash cow to fund a growth business. They are managing multiple products that each have stronger competitive advantage because they co-exist together in the same firm.  I don't see how you create real value by splitting a firm such as Amgen in two.  In fact, you may destroy value by doing so, because synergies are lost.  You create real value if you split an unrelated diversifier in two. 

Attracting and Retaining Better Workers: Higher Wages Alone Won't Do the Trick

We have heard a great deal of commentary about the low wages paid to front-line employees in some industries, particularly the retail and restaurant sectors.   While politicians debate the merits of raising the minimum wage, some people point to the companies paying higher wages as a model.  They argue that these companies attract and retain more productive workers because they pay higher-than-usual wages.   For instance, people point to firms such as Costco, Trader Joe's, and Whole Foods as examples.   I think that we have to be very careful about these arguments though.  These firms attract and retain highly productive, engaged employees for reasons well beyond the wages that they pay.  Yes, they pay their employees more than some of their rivals.  However, these firms also have built an entire organizational system that supports an engaged, productive, and collaborative workforce.  They have developed a culture that attracts talented people.  They have embraced certain values and principles.  They have articulated a sense of purpose that people find compelling.  They have developed managers and supervisors who know how to engage employees.   I could go on.  The point is simple: they have built an entire system that attracts and retains these workers, and helps them produce great value for the firm.   Paying someone a few bucks more without doing these other things won't have any significant effect on engagement, customer satisfaction, employee retention, or profits. 

How PWC Engages Millennials

Bob Moritz, the U.S. Chairman of PWC, has written an article for Harvard Business Review regarding his firm's efforts to attract, engage, and retain millennials.  Moritz and his firm collaborated with researchers from USC and LBS to understand key generational differences.  From that work, PWC began to develop initiatives to foster higher levels of engagement and retention among millennials.  They have tracked the effectiveness of various efforts.  Moritz cites four major areas of emphasis:

1. Give them voice. Millennials want to have input regarding the future direction of the organization.  Therefore, PWC gave them voice in several powerful ways.  They asked millennials to offer ideas regarding the most effective methods for talent development in the firm.  In addition, they asked people for suggestions regarding the next $100 million opportunity for PWC.  More than 70% of the employees offered suggestions.  
2. Provide flexible career paths.   Millennials do not want to stay in the same role for a lengthy period of time.  They want to shift positions and roles, try new things, and embrace different opportunities.  Moreover, they want greater flexibility in their careers.  PWC has created several programs that enable talented employees to take time off or to work part-time for the firm while pursuing other opportunities (such as graduate school). 
3. Recognize them often and in multiple ways.  Millennials want to be recognized, and that does not mean only monetary awards.  PWC implemented more frequent recognition, and they began to offer a host of non-monetary rewards.   For instance, PWC created a sabbatical program as a reward for millennials who perform well and stay at the firm for a certain period of time.
4. Give them a chance to give back.  Millennials want to make a broader impact, and they want to work for a firm that has that same aspiration.  PWC found that employees who participate in a corporate responsibility initiative tend to stay at the firm for a longer period of time.  For example, participants in one program to enhance students' financial literacy tended to exhibit much less turnover than those who did not participate (only 8% of participants had left PWC a year later, while 16% of non-participants had left the firm). 

Jimmy Kimmel, the Uber Driver

Uber has to love this free publicity.   Jimmy Kimmel became an Uber driver for one afternoon.  Check it out!

HBO's Big Decision and the Disruption of the Cable Business

HBO made a major announcement yesterday.  They informed investors that they would be offering a stand-alone digital subscription to customers outside of the usual cable distribution model.  Time Warner (parent company of HBO) indicated that the firm would be targeting customers (typically millennials) who have chosen to "cut the cord" - i.e., to go without a cable television subscription. 

Today's Wall Street Journal article about the move has quotes from several experts. Some indicate that the move is revolutionary, while others downplay its potential to disrupt the cable business.  One expert (USC's Jeff Cole) regards the announcement as a "seismic event."  On the other hand, Tom Larsen, an executive at Mediacom Communications, states, "I don't view it as overly disruptive."  Some cable companies regard the move as not disruptive so long as HBO does not undercut the price which the cable firms charge customers for HBO.

Where do I come down on this move?  In and of itself, I don't think it's hugely disruptive.  However, the strategic decision by HBO may have a large ripple effect.  We have already heard that CBS will follow suit and offer a streaming subscription service.  The next big shoe to drop could be Disney.  If that firm offered its networks (children's programming, ESPN networks) directly to consumers, that would be a major jolt to the cable business.  If consumers can package together subscriptions to Netflix, Disney/ESPN, and HBO, would they still purchase an expensive cable package? Many consumers would not.   Yes, the cable companies also make money selling broadband service.  However, that cannot make up for the loss of significant numbers of cable subscriptions.  The price that HBO charges for its standalone service may not be the key factor.  Why?  People are not thinking about HBO in isolation.  The key is whether other firms follow, and consumers can begin to patch together a whole set of desirable entertainment options for less than the total price of their cable package. 

The entertainment industry has been known for herd behavior in the past.   Consider the moves by many large players to vertically integrate in the 1990s (CBS/Viacom, AOL/Time Warner, Disney/ABC).  They watch each other closely.   Herd behavior can sometimes occur in an industry because managers are risk averse.  In this case, perhaps managers at other entertainment companies will view a move to sell directly to consumers as less risky if a few leaders, such as HBO and Disney, make the move first.  Bob Iger, the industry... and the consumer is watching... 

Playing Catch Up Can Be Very Problematic

You have worked for months on the planning of a new initiative or project.  You have been meticulous.  You have identified the key phases in the implementation process, built a budget and schedule, and marked milestones that need to be achieved at each stage.  You have assembled a terrific team with talented individuals who possess complementary skill sets.  Unfortunately, as you begin to execute the plan, unexpected obstacles arise.  You begin to fall behind schedule, and the results do not match expectations.  As you approach the first major milestone meeting, you realize that you also have exceeded your budget to date.  

What do many managers do?  They try to get back on plan.  They work harder.  They implore their team members to work harder.   They throw more resources at the project.  They try to catch up.  That strategy can be very problematic though. Doing more of what got you into trouble in the first place does not constitute an effective strategy.   Yet, that is the initial tactic often chosen when execution does not match our plan.  Even worse, playing catch up can burn our people out and expend precious organizational resources.   To be effective, we have to be willing to modify that original plan, or perhaps move to Plan B.  However, managers often become overly committed to their original plans.  They don't want to be accused of having put together a "bad plan" for the project.  Instead, though, they may find themselves conducting a very "bad implementation" in part because they are trying to save face. 

Bryant Collegiate Entrepreneurs Organization (CEO) Video

I'm very proud to serve as the CEO club adviser here on campus.   In this video, the club makes its case for National CEO chapter of the year in advance of the national conference in Orlando, Florida later this month.

Amazon Opens Brick-and-Mortar Store

The Wall Street Journal reports today that Amazon will open its first brick-and-mortar store in Manhattan.  Here's the description of the first site:

Amazon’s space at 7 West 34th St., across from the Empire State Building in Midtown, would function as a mini warehouse, with limited inventory for same-day delivery within New York, product returns and exchanges, and pickups of online orders. The Manhattan location is meant primarily to be a place for customers to pick up orders they’ve made online, but will also serve as a distribution center for couriers and likely one day will feature Amazon devices like Kindle e-readers, Fire smartphones and Fire TV set-top boxes, according to people familiar with the company’s thinking.

What do we make of this move?  As an experiment, it may serve a very useful purpose.  Innovative companies test ideas and conduct well-designed experiments frequently.  They recognize that such experiments may fail, in the sense that they do not achieve desired business results.  However, they view them as successful if tons of learning emerges from these tests.  Could this site in Manhattan drive a great deal of learning and innovation at Amazon?  Definitely.   However, the logic of a major brick-and-mortar expansion at Amazon escapes me.  Leasing incredibly expensive space in the middle of Manhattan to serve as a place for customers to pick up online orders does not seem to make economic sense.   If the store is meant to be a flagship, focused on providing a fun and engaging retail experience for showcasing the firm's digital products, then one might be able to make a case for it.  Of course, a "flagship" strategy would entail a very limited number of brick-and-mortar locations. Does Amazon need such flagship locations to build the brand and sell more digital devices?  It does not seem so; they already have a strong brand and have achieved great success with the Kindle.   Is the brick-and-mortar location all about same-day delivery?  Well, one could achieve that without leasing high-priced retail space on 34th Street in Manhattan.  It will be interesting to see how this experiment evolves, and to understand precisely what Amazon's aims are with this brick-and-mortar strategy.   

Tim Cook: Intuition's Role in Decision-Making Processes

The Dangers of Multitasking

Travis Bradberry, author of the bestselling book Emotional Intelligence 2.0, has a great post over at the Forbes website about multitasking.  Bradberry reviews the research on multitasking and concludes that it can very detrimental.   He notes that Stanford's Clifford Nass, Eyal Ophir, and Anthony Wagner conducted research showing that, "Multitasking is less productive than doing a single thing at a time."  Moreover, the notion that some people are simply great at multitasking appears to be false.  Bradberry explains, "They found that heavy multitaskers—those who multitask a lot and feel that it boosts their performance—were actually worse at multitasking than those who like to do a single thing at a time."  The article also cites recent research showing differences in the brain for those people who engage in a great deal of multitasking.   Bradberry suggests that those changes in the brain may even reduce an individual's emotional intelligence.   That last point is purely speculation, but the overall point is clear:  multitasking may be having an adverse effect on employee performance in many organizations. 

Breaking Up Isn't So Hard to Do

HP announced yesterday that it would be splitting into two companies.  One will focus on personal computers and printers, while the other will focus on computer hardware, software, and services.  Interestingly, this breakup represents the second split for HP in its history.  In 1999, HP spun off its measurement instruments business as Agilent Technologies.  Could the deal increase shareholder value?  Perhaps, as it has become increasingly difficult to argue that the synergies between the two sides of HP are significant enough to outweigh the costs associated with managing and integrating such a large, bureaucratic, and highly complex organization.  Of course, the deal also opens up the possibility that one or both of the new entities could be takeover targets.  Here in Massachusetts, we have been reading rumors about EMC exploring talks with HP about a merger.  The breakup at HP probably makes such a deal more likely.   Of course, it's not entirely clear why or how a merger would be beneficial.  While some synergies might exist, again the key question is whether the benefits outweigh the costs associated with integrating such large, complex organizations. 

Beyond this particular deal, the Wall Street Journal reports that, "Corporations around the world have sold or spun off $1.6 trillion worth of subsidiaries and business lines so far this year, just behind 2007’s record-setting pace, according to data provider Dealogic."   We have seen some high-profile moves by diversified firms to become more focused.    GE sold its appliance business.   Gannett announced  a split into two entities, one focused on newspaper publishing and the other on television broadcasting.  Other firms, such as Pepsi, face pressure from activist investors to break up.  What's behind these moves?  The Wall Street Journal cites research showing that U.S. conglomerates tend to under-perform more focused firms:  "Shares of North American conglomerates underperformed their more focused rivals by 11.4% on average from 2000 to 2010, according to a study from Anil Shivdasani, a finance professor at the University of North Carolina Kenan-Flagler Business School... Professor Shivdasani said Monday the data remained similar through the end of last year."

This research has been well known for many years though. Why the pickup in breakups lately?  I think several reasons may exist.  First, economic growth has been very low in this "recovery."  As a result, many firms have businesses in mature markets that are struggling to find ways to grow revenue.   Without sales growth to help drive share prices upward, they are looking for other ways to create value for investors.  Second, a new class of activist investors has become very vocal and has challenged the diversification strategies of many of these large firms.   Third, more investors have begun to question the economies of scale and scope rationale behind these large firms.  They are wondering if, in fact, these organizations are experiencing significant diseconomies of scale and scope. Finally, investors have become quite concerned that CEOs are cross-subsidizing extensively, milking cash cows to fund other initiatives.  Such practices used to be quite commonplace and accepted, but increasingly, they are being challenged.  These investors would rather see the CEOs return cash to shareholders from mature units, and let the newer, higher growth entities seek capital directly from the markets. 

Maximize vs. Satisfice: How Do You Decide?

What type of decision-maker are you? Do you examine all the options exhaustively, hoping to find the absolutely best alternative?  Do you carefully compare the pros and cons of a wide range of options before making a decision?  Or, do you search until you find an option that is satisfactory, and then choose that one even if it is not perfect or completely optimal?    Nobel winner Herbert Simon described these two patterns of decision-making decades ago.  He called them "maximizing" vs. "satisficing" behaviors.  

In today's Wall Street Journal, Elizabeth Bernstein examines these two strategies.  She describes the research of Swarthmore Professor Barry Schwartz.  Here's an excerpt:

In a study published in 2006 in the journal Psychological Science, Dr. Schwartz and colleagues followed 548 job-seeking college seniors at 11 schools from October through their graduation in June.  Across the board, they found that the maximizers landed better jobs. Their starting salaries were, on average, 20% higher than those of the satisficers, but they felt worse about their jobs.

Bernstein describes how maximizers often find themselves less content than satisficers.  Why might that be?  The exhaustive search and comparison of many alternatives often opens the door for feelings of regret once a decision has been made.  Did I make the right call?  Should I have chosen another option?  Did I consider the right variables and attributes?   Satisficers may not experience those feelings to the same extent.  Does this mean that we should not examine options carefully? I don't think so, but it does mean that we have to watch out for feelings of discontent in the immediate aftermath of a tough decision.  Moreover, we have to be cognizant of the fact that we might be on a team with people how tend to have the opposite decision-making pattern.  

Leaders, Power, and Perspective-Taking

Adam Galinksy, Joe Magee, Diana Rus, Naomi Rothman, and Andrew Todd have published a new paper titled “Acceleration With Steering: The Synergistic Benefits of Combining Power and Perspective-Taking.”   Leaders need a certain amount of power to get things done.  However, the research shows that leaders can be more effective if they have both power AND what they call perspective-taking.  In other words, can leaders put themselves in others' shoes so that they can see how those individuals view particular issues and situations?  

Of course, as many leaders accumulate power, sometimes it's difficult for them see the world as others do.  You "forget" what it was like when you were in their position.  You become isolated from the day-to-day work.   You interact most frequently with other senior executives, who often see the world much as you do.  Some leaders simply hire folks who think just like they do. 

Generate Multiple Frames to Make Better Decisions

How you frame a situation helps to determine the types of options you consider and the ultimate decision that you make.   By frame, I mean the way that you characterize a situation.  We face a complex and messy reality.  We simplify those situations by adopting mental models and frameworks.  Those frames can be powerful in helping us make sense of that messy reality.  However, how you frame a situation can constrict the range of alternative solutions that you generate and analyze.  To broaden the range of alternatives generated, managers should seek to frame situations in multiple ways.  For example, suppose that a firm has experienced high employee turnover.   A leader may frame the situation as an incentive problem.  However, that framing would focus his or her team on potential solutions such as changes in compensation.   A better approach would be for the leader to offer multiple frames of the situation.  He or she might ask: We might say that we have a turnover problem, or perhaps we might cast the issue as a talent management problem.  In other words, we don't simply have a talent retention issue... perhaps we have a recruitment challenge, a development problem, etc.   Framing the problem in a broader way might lead to a very different type of discussion.  If you are in a situation where you feel that the range of options being considered is particularly narrow, consider reframing the problem. 

Think Your Idea is Great? Go for a Walk!

University of Texas Professor Art Markman has a great article on idea generation over at Fast Company's website this week.   Markman describes the "high" that people often feel at the end of an idea generation session.   He argues that we should be careful about that positive emotional rush that we feel in that moment.  Markman explains:

Unfortunately, some amount of the strong positive feeling you are having in that moment is a result of the idea generation process itself. Completing a goal makes you feel good, and coming up with a potential solution to a hard problem makes you feel good. In addition, positive social interactions make you feel good, and group idea generation fits that bill. Finally, research demonstrates that fast thinking makes you feel good. When the ideas are flying around the room, there is a lot of fast thinking going on.So, the entire setting of idea generation creates lots of positive feeling. Then, everyone looks around the room for the source of that feeling. And they settle on the idea you just created as a team. In that moment, that idea is not just good, it is the best idea ever. 

 How do you avoid a rush to judgment?  How can you protect yourself against falling head over heels for your idea a bit too quickly?  Markman argues that it's a good idea to step back for a bit.  Go for a walk, he says.  Take some time to go do something else, and then return to your idea.  See how it looks after you have slept on it.  Don't let yourself get caught up in the emotions of the idea generation process itself.  That seems like terrific advice to me!

Trustworthy Leaders

What do trustworthy leaders do? How do they build trust?  Stanford's Roderick Kramer has been studying this topic for many years.  Here are a few of his key findings, described in more depth in this article from the Stanford Business School research website:

1. They project confidence, competence, and benevolence.  In other words, they have the experience and the capabilities required to do the job.  Moreover, they are trying to do what's best for the firm as a whole rather than pursuing their own self-interest at the expense of others.


2.  They define roles and responsibilities clearly.   Kramer says, "“When people know what they’re supposed to do, and they know what other people are supposed to do, then they trust that system of roles to work.”

3.  They share the credit and take the blame.   Taking responsibility proves to be very important.  Trustworthy leaders do not throw others under the bus.  They also talk in terms of "we" when discussing major accomplishments, rather than "I did this" or "I achieved that."

4.  They tell it straight, particularly when a crisis occurs. They do not try to cover things up.  Instead, they acknowledge mistakes, and they commit to preventing problems from happening again.  

The Downside of Strategy Agility

Words and concepts such as "strategic agility" or "adaptive strategy" have become all the rage in recent years.  People argue that strategies must be dynamic given the turbulent world in which firms must compete.  A recent article on Kellogg Insights offers a word of caution for those focused on adaptation and dynamism in their competitive strategy.  The article focuses on the research of Kellogg Professor Tom Hubbard, Paul Leinwand - a senior partner with Strategy&, and Cesare Mainardi - CEO of Strategy&. 

Mainardi explains, "“Everybody’s talking about dynamic strategy, agility, and chasing opportunity.  That’s all well and good. But if you aren’t operating from a base of who you are, you will likely not realize what the real risks you’re facing are because you aren’t focused on your core strengths, and therefore you will be less clear-minded about how best to respond.”

Hubbard argues that many company growth strategies follow the "let a thousand flowers bloom" philosophy.  In other words, plant a bunch of seeds, and hope that few of them flourish.  Hubbard explains that this type of growth initiative can lead to a highly incoherent strategy.  Firms need to understand who they are, as well as what their distinctive, scalable capabilities are.

Finally, Hubbard emphasizes that profits alone do not justify the existence of a business within a corporate portfolio.  You have to ask the question:  Does it fit given the capabilities that you have?  Can you sell the business at a higher value than the present value of future profits that you can generate from that unit?  

I could not agree more with this article's main message.   Too many firms, starved for growth, simply plant a wide variety of seeds without focusing on coherence.  They focus on the size of the market opportunity rather than thinking about fit.  They see profits, and they use those to justify having a new venture in the portfolio, rather than thinking about whether that unit could generate higher returns as part of some other firm's portfolio.   

Grade Inflation

Economist Justin Wolfers tweeted out this chart yesterday regarding grade inflation at Ivy League colleges.  What a wonderful world in which everyone is exceptional!

Résumé Mistakes

What are some the classic mistakes that job hunters make on résumés?  Laszlo Bock, SVP of People Operations at Google, has posted a good article on LinkedIn with the top five common mistakes that he has seen.  It's a good list.  Here are Bock's top five, with some commentary from me:

1. Typos

I would expand his point to include grammatical errors, particularly on the cover letters that accompany résumés.  Poor writing plagues many cover letters.   Examples of writing deficiencies include:  overly complex sentences, improper use of commas and conjunctions, far too much use of the passive voice, and poor paragraph construction.  The list could go on! 

2.  Length

As Bock says, you should be aiming to land a first round interview, not to tell your life story.  You can expand the story during the interviews.  Focus on getting your foot in the door.

3.  Formatting

Bock recommends saving the document as a PDF since other formats can become troublesome as they are passed electronically across various platforms and devices.  Good advice!  He also argues that it should be a clean, easy-to-read document.  I would emphasize the need for plenty of white space.    You do not to jam every inch of the page with words.

4.  Confidential Information

Bock uses the example of a consultant who clearly reveals the names of clients.   Many consulting firms have confidentiality policies.  If an applicant breaks their current or past employer's confidentiality policy, that's a major problem.  

5.  Lying

Lying on résumés appears to occur quite often.  We have just seen a senior executive at Wal-Mart who lost his job due to a lie about his educational background.  We've seen CEOs lose their jobs over these types of lies.  I think the harder-to-detect lies are even more common, specifically exaggerating job responsibilities and accomplishments.  I also think that résumés sometimes fail to give proper credit to those who helped an individual achieve certain goals at a prior employer.  Was it a team effort?  Does the résumé reflect the fact that a team achieved the goal, not just that individual?  Not giving others proper credit seems to be a major issue in the job application process. 

When is grit beneficial, and when is it not?

Angela Duckworth has been of the leading researchers on the topic of "grit" - something she defines as "perseverance and passion for long-term goals.”  She has found that grit can be a powerful predictor of academic achievement.   In short, she argues that academic achievement is not just a matter of raw intellect; grit matters a great deal. 

Now Magdalena Grohman, a faculty member at the University of Texas at Dallas, has questioned whether grit may be as powerful a predictor of creative achievement.   According to Grohman, "These are 'no results' that we are actually excited about. Creative achievement and grit, intellectual creativity and grit, everyday creativity and grit: no effects whatsoever."   She found that "openness to new experiences" did help creativity, but grit apparently did not.  Similarly, Yale's Zorana Pringle conducted a study in which she asked students to evaluate their peers in terms of the generation of creative and original ideas.  Grit scores did not correlate with high peer evaluations on creativity.  Grohman speculates that grit may be very useful in structured environments and tasks, but perhaps is less useful to individuals when they are embarking on ill-structured, creative endeavors.  More research certainly will be done in this area to explore this rather interesting set of new findings.

Experts Buy Private Label

Bart J. Bronnenberg, Jean-Pierre Dubé, Matthew Gentzkow, and Jesse M. Shapiro recently published a working paper titled, "Do Pharmacists Buy Bayer?  Informed Shoppers and the Brand Premium?"  Here's an excerpt from the abstract of their paper:

In a detailed case study of headache remedies we find that more informed consumers are less likely to pay extra to buy national brands, with pharmacists choosing them over store brands only 9 percent of the time, compared to 26 percent of the time for the average consumer. In a similar case study of pantry staples such as salt and sugar, we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar non-chefs.

Private label products certainly have taken a much larger share in many categories over the past decade.  Nevertheless, the scholars still found this "brand premium" effect, particularly for non-experts.  As private label products continue to rise in quality and availability though, we should expect more people to act like the informed consumers in this study.  Consider, for instance, the success of firms such as Trader Joe's and Aldi, both able to persuade consumers that private label products can deliver solid quality.  

Brainwriting: How to Run a Better Idea Generation Session

Check out Northwestern Professor Leigh Thompson on the brainwriting technique:


Kellogg - Animation - Final for Site

Five Classic Competitive Strategy Mistakes

Based on my experience, here are five business strategy mistakes that organizations often make:

1.  Focusing on market share extensively, while not thinking enough about how to drive product category growth - as a result, they miss chances to grow the pie for all

 2.  Paying too little attention to a maturing core business while focusing effort on growth into new markets, resulting in further erosion of the core

3.  Overestimating economies of scale and scope - and forgetting that diseconomies of scale and scope can become substantial

4.  Benchmarking rivals and then imitating one particular activity or capability, while not realizing that the rival's competitive advantage comes from how that activity fits tightly into a broader, integrated system of activities

5.  Resorting prematurely to price as a competitive weapon - not being creative enough to think about other ways to attract customers, deepen their relationship with existing customers, and grow an entire category

Does Apple Spend Enough on R&D?

Matt Kramer published an article in USA Today this week titled, "7 Companies Outspend Apple on Innovation."  Kramer noted that Apple ranked behind seven other prominent technology companies in terms of R&D spending.  Moreover, Apple ranked 95th  among the S&P 500 in terms of R&D as a percentage of sales.  He found that quite surprising.  Kramer ends the article by saying, "But with the iPad getting stale, and competition in the smartphone arena kicking up, investors might wonder if Apple might need to pick up its R&D game."  The article caught my eye because a great deal of academic research shows that R&D spending is not strongly correlated with successful new product development.  It's not just how much you spend; it's how you spend it!   Kramer's article is thought-provoking, but it would have made for a much stronger piece if he included the research findings about the connection between R&D spending and firm performance.  

Fast Company article: Embracing Failure

Rachel Gillett has written an article for Fast Company titled, "What The Hype Behind Embracing Failure Is Really All About."  She has included several of my comments. The article examines the popularity of the concept of "tolerating failure" - is it overdone? Is it a fad?  What's the true meaning of the concept of embracing failure?  Here is the link to the article. 

Are Smaller Boards More Effective?

The Wall Street Journal reported last week on a new study conducted by GMI Ratings for the newspaper.  The study examined boards of directions, and it took a look at the link between board size and performance.  Here is a summary of the findings:

Among companies with a market capitalization of at least $10 billion, typically those with the smallest boards produced substantially better shareholder returns over a three-year period between the spring of 2011 and 2014 when compared with companies with the biggest boards, the GMI analysis of nearly 400 companies showed.  Companies with small boards outperformed their peers by 8.5 percentage points, while those with large boards underperformed peers by 10.85 percentage points. The smallest board averaged 9.5 members, compared with 14 for the biggest. The average size was 11.2 directors for all companies studied, GMI said.

What are the advantages of smaller boards? Why might they perform more effectively? Here are a few potential reasons cited in the Wall Street Journal article:

• Decisions can be made more quickly with a smaller team. It can be more nimble.
• Each person is more likely to be fully committed, prepared, and engaged. There's less likelihood of free riders on a small board.
• People are more likely to be candid in a more intimate atmosphere than on a large board.
• A small board can dig into an issue in much more depth. On a large board, you may have a tendency to deal superficially with issues rather than really "getting your hands dirty."

I would add one other reason. We already know that teams tend to focus their discussion on information commonly held by all participants, and they don't spend enough time on information held privately by one or a few members. That challenge becomes even more pronounced as a team becomes larger. Therefore, a smaller board benefits from a higher likelihood that information and expertise from all members will be shared and discussed.

Stihl: Making Tradeoffs

Great firms make tradeoffs; they choose what not to do.   One key tradeoff that firms make is about the channels through which they decide to sell their products.  Premium brands often make an explicit choice to restrict distribution of their products, so as to maintain service quality and preserve the reputation of their brand.  As an example, consider Stihl.  They are quite blunt about their strategic choice to only sell their products through licensed dealers and not through big box retailers such as Home Depot, Lowe's, or Wal-Mart.  Here's an except from their Canadian website:

We can give you over 1,000 reasons - our legion of independent STIHL Dealers nationwide. We count on them every day and so can you. To give you product demonstrations, straight talk and genuine advice about STIHL products. To offer fast and expert on-site service. And to stand behind every product we carry, always fully assembled. You see, we won't sell you a STIHL in a box, not even a big one.

In addition, here's an advertisement that they ran several years ago.