Wednesday, November 26, 2014
Tuesday, November 25, 2014
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."
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.
Friday, November 21, 2014
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.
Thursday, November 20, 2014
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.
Wednesday, November 19, 2014
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.
Tuesday, November 18, 2014
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.
Friday, November 14, 2014
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.
Thursday, November 13, 2014
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..."
Wednesday, November 12, 2014
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.
Tuesday, November 11, 2014
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.
Monday, November 10, 2014
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."
Thursday, November 06, 2014
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
Monday, November 03, 2014
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."
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.