The Irrational Desire to Complete a Set of Tasks, Purchases, etc.

Kate Barasz, Leslie John, Elizabeth Keenan, and Michael Norton have completed a new study demonstrating that people have an irrational desire/need to complete sets of tasks, purchases, assignments, etc. Barasz says, "People really don't like to leave things incomplete." HBS Working Knowledge describes the implications of their research: 

  

Do you want customers to refer more of their friends to your company’s website? Ask them to refer friends in arbitrary “batches” of five at a time. Looking to increase charitable giving to your nonprofit organization? Ask potential donors to contribute a set of six gifts. Are you and your fiancé struggling to write thank-you cards for all those wedding shower gifts? Try batching the unwritten cards into sets of eight. Rather than feeling overwhelmed by the prospect of writing one note at a time, you’ll feel oddly motivated to finish a whole set at a time.

In one study, the scholars conducted a field experiment with the Canadian Red Cross.  They tested three types of donation request with more than 7,000 donors during the Christmas season in 2016.  One group of donors received a request for cash donations.   A second group received a request to donate so as to fund the giving of particular items to people in different spots around the globe.  A location marker on a visual of the globe indicated where their money was funding a particular item. The third group of donors received a request to donate funds for a "Global Survival Kit" of six items. As they donated each item, a line stretched further around the globe, going around the entire earth if all six items were funded. The prospective donors did not have to donate all six items.  They could choose to donate a single item if they wished.  Barasz notes, “Who wants to donate six blankets, when you can donate one blanket and feel just as good? But, if you frame it as a set, then there is a reason to want to complete the set and to donate all six of the items.”

What did they find? 21% of the people in the third group chose to donate all six items. That was more than 4 times as many people donating as compared to the second group, and 7 times as many people donating as compared to the first group.  In short, framing the decision as a set to be completed has a substantial impact on donor behavior.  Presumably, the same type of framing may have a significant impact on customer or employee behavior.   It may not seem rational to be compelled to complete a set, but that's the way many individuals feel.  

Bud Light's Decline: What's the Brand Promise?

The Wall Street Journal reports today that Budweiser and Bud Light continue to experience market share declines in the United States.   The chart shown here documents the eroding share over the past six years for the Bud Light brand.  The main Budweiser brand also has experienced share decreases over this time.  The article attributes the declines to the growing appeal of craft beers and imports.   The article makes me wonder about Budweiser and Bud Light's brand promise.  What is it, and has it been updated effectively for the current market environment. What is Bud selling these days, and has it positioned itself appropriately amidst the heightened competition from craft brews and imports?

Consider the concept of a brand promise.  What is a brand promise?   Hinge Marketing describes it as "the tangible benefit that makes a product or service desirable." Workfront defines it as " a value or experience a company’s customers can expect to receive every single time they interact with that company." Workfront argues that a highly effective brand promise has five attributes: simple, memorable, credible, different, and inspiring.  

Does Bud Light have a brand promise that meets these five criteria? Has it updated that brand promise for the current competitive situation and to meet today's customer needs and desires?  It's not clear to me that they have figured out how they should position themselves in this current environment.  

What's an example of a brand promise that does meet these five criteria?  How about Ritz Carlton?  Their brand promise is quite compelling:  "Ladies and gentlemen serving ladies and gentlemen."  

LEGO Boost: Continuing to Renew & Extend the Core

Great firms don't simply diversify into new businesses when their core business appears to be maturing.  Diversification attempts sometimes have two deleterious effects.  First, companies find themselves extending into areas in which they do not have distinctive capabilities that can lead to competitive advantage.  Second, the attention focused on the new businesses can accelerate deterioration of the core, as management becomes distracted and resources stretched thin.   Top performing firms search for ways to deepen their competitive position, to reinvigorate their core business.  Great firms don't simply accept the apparent decline of their core business.  

LEGO went through some substantial challenges in the early 2000s. Jargon Vig Knudstorp became CEO in 2004, and he engineered a remarkable turnaround.   He focused on what made the firm successful for decades - the LEGO bricks and the play associated with those iconic bricks.   Over time, LEGO has reinvigorated the brand and the famous LEGO bricks.  Moreover, the firm has deepened its competitive position with new product offerings and brand building efforts such as the LEGO movie.  

Now the Wall Street Journal reports on the introduction of a new line of products called LEGO Boost.  The products seek to capitalize on the movement to teach kids how to code.   Geoffrey Fowler reports:

Learning programming is awesome when you’re making Lego robots fart. “Usually Legos cannot fart, so we made these Legos fart a lot,” says Eleanor, 9 years old, who helped me code dance moves, jokes and simulated bodily functions into Lego Boost, a new take on the iconic bricks. “Also burp. Don’t forget the burping,” she adds.  Making Lego bricks come to life is a big deal for children aged 7 to 12—as well as for parents who want to teach them the basics of programming.

This new product line appears to build nicely off of the success of the company's Mindstorms products.  Mindstorms is used to teach older kids about robotics.  The Boost product line aims to introduce coding to younger children (ages 7-12).   The product line is consistent with the brand positioning, and it leverages what the company is already good at doing.  LEGO Boost appears to be another way in which LEGO continues to reinvigorate the core business and deepen its competitive position, rather than trying to do new things for which LEGO does not have a distinctive capability.  

The Dangers of Sleep Deprivation

We've all heard the stories of the startup team working late into the night, day after day, as they try to build their business, or the bankers sleeping in the office while they try to close a big deal.  Research suggests that sleep deprivation can have some significant costs though, and not just in terms of personal health. Michael Christian and Aleksander Ellis wrote a paper titled, "Examining the Effects of Sleep Deprivation on Workplace Deviance: A Self-Regulatory Perspective."  By deviance, they mean "a wide spectrum of behaviors that violate organizational norms and threaten the success of a company, ranging from rudeness and withheld effort to theft and violence."

The authors conducted a series of studies on sleep deprivation.  In some cases, they conducted field research, and in other instances, they performed experimental studies in the laboratory.  They found that sleep deprivation does indeed increase deviant behavior in organizations.   For instance, in one experimental study, they split their research subjects into two groups.  one group was able to get a normal night's sleep, while the other did not sleep for 24 hours.  Then the students had to mentor fellow business school students and answer inquiries from business school applicants.  The sleep-deprived students were more likely to provide "inappropriate, negative, or hurtful responses" to questions from fellow students or applicants.  Similarly, in a field study, they found that nurses were more likely to engage in deviant behavior if they were sleep deprived.  

Networking Inside & Outside the Firm to Drive Innovation

Linus Dahlander, Siobhan O’Mahony, and David Gann have conducted a fascinating new study regarding researchers at IBM.   They studied more than 600 technical experts at IBM, people responsible for many of the firm's patents.  They paid attention to how these experts networked with others both inside and outside the firm.  In an HBR digital article, the scholars summarize their findings:  

We measured the breadth of each person’s external social network by the different types of external sources they interacted with. Then we assessed how the breadth of each person’s external network was associated with subsequent innovation outcomes at IBM, like the quantity and quality of the patents the individual produced.

Surprisingly, we found that our respondents’ most common sources of inspiration for new ideas were their colleagues inside, rather than outside, the firm. In contrast with current theories of open innovation, people with broader external networks were no more innovative than people with narrow external networks. Many of the experts relied mostly on internal networks and were still innovative. To better understand this puzzle, we examined how people allocated their time among their information sources inside and outside IBM.

We discovered that experts with a broad external network were more innovative only when they devoted enough time and attention to those sources... This is an important finding, as many managers are keen on the idea that networking and forming external ties can boost the flow of ideas that spurs innovation. What we found is, for that to happen, employees need to devote significant time and attention to creating and sustaining their external relationships. In some cases, people who focused on learning from colleagues inside the organization were just as innovative.

About 30% of the respondents who had a broad external network did not allocate enough time to learn from those relationships. These people would have been better off deepening relationships with their colleagues inside the firm. For spending time inside the company is also important to understanding the firm’s innovation needs and knowing how to develop and execute on innovative ideas.

In sum, the best innovators engage in a balance of external and internal networking.  They scour the outside world for ideas, but they do so given a solid understanding of what's happening within their firm.  Moreover, they engage with people in sufficient depth so as to truly learn from them, rather than simply gaining a superficial understanding of the trends and developments in the outside world.  You can't simply have coffee with a hundred people in search of the next big idea. You have to immerse yourself in certain contexts, whether they be internal or external.   Learning takes time, as does relationship building.   

Avoiding Confirmation Bias

Earlier this year, Tom Stafford wrote a column for the BBC's website about how to combat confirmation bias.  In other words, how do we avoid the problem of searching for and relying on data that confirm what we already believe (while dismissing or avoiding data that contradict our pre-existing beliefs)?  

Stafford recalls a famous set of experiments by Charles Lord,  Lee Ross, and Mark Lepper.  In one classic study from several decades ago, they looked at how people's attitudes toward the death penalty changed after being exposed to two contrasting studies - one demonstrating a powerful deterrent effect for the death penalty and another showing the exact opposite finding.   Lord, Ross, and Lepper found that people's attitudes polarized after looking at the two studies.  Why?  They assimilated the data in a biased way, relying heavily on the information that supported their pre-existing beliefs.  

Stafford describes a second experiment that these scholars conducted.  In this subsequent research, they compared two strategies for trying to combat confirmation bias.  They analyzed the impact of two different sets of instructions for people.   They were given these instructions before looking at the data.  Stafford summarizes what these scholars discovered: 

For their follow-up study, Lord and colleagues re-ran the biased assimilation experiment, but testing two types of instructions for assimilating evidence about the effectiveness of the death penalty as a deterrent for murder. The motivational instructions told participants to be "as objective and unbiased as possible", to consider themselves "as a judge or juror asked to weigh all of the evidence in a fair and impartial manner". The alternative, cognition-focused, instructions were silent on the desired outcome of the participants’ consideration, instead focusing only on the strategy to employ: "Ask yourself at each step whether you would have made the same high or low evaluations had exactly the same study produced results on the other side of the issue." So, for example, if presented with a piece of research that suggested the death penalty lowered murder rates, the participants were asked to analyse the study's methodology and imagine the results pointed the opposite way.

They called this the "consider the opposite" strategy, and the results were striking. Instructed to be fair and impartial, participants showed the exact same biases when weighing the evidence as in the original experiment. Pro-death penalty participants thought the evidence supported the death penalty. Anti-death penalty participants thought it supported abolition. Wanting to make unbiased decisions wasn't enough. The "consider the opposite" participants, on the other hand, completely overcame the biased assimilation effect – they weren't driven to rate the studies which agreed with their preconceptions as better than the ones that disagreed, and didn't become more extreme in their views regardless of which evidence they read.

What's the "Optimal" Failure Rate at Netflix?

When Orange is the New Black, House of Cards, and Crown became mega-hits for Netflix, many people credited the analytics capabilities of the company. Mining the customer data had enabled the firm to project the type of original programming that would be highly successful. By this logic, Netflix would achieve a lower failure rate on new shows than the major television networks. After all, broadcasters such as CBS and NBC cancel a substantial share of their new shows each year, some after only a few episodes. 

On the recent Netflix earnings call, many investors were pleased to hear about strong subscriber growth at the firm. However, some investors came away concerned about the amount of spending taking place as the firm acquires or develops new content. Moreover, some observers and analysts have expressed concern about the recent cancellations of some new Netflix original shows. Tom Huddleston Jr. reported on the company's reaction to this criticism in a recent Fortune article:

Meanwhile, also on the Monday earnings call, Netflix's chief content officer Ted Sarandos defended the company's recent cancellations of a handful of expensive, but underperforming, original series. "The more shows we have, the more likely in absolute numbers that you’ll see cancellations, of course," Sarandos said. The executive compared Netflix's recent spate of cancellations—including big-budget series like The Get Down and Sense8—to traditional TV networks that cancel nearly one-third of their new shows after their first seasons. Netflix, he said, has renewed 93% of its original series. With respect to the shows that Netflix opted not to renew, Sarandos argued: "If you’re not failing, maybe you’re not trying hard enough."

This quote from Sarandos raises a fascinating question.  What is the "optimal" failure rate at Netflix?  Surely, we would like the failure rate to be lower than the broadcast networks.  We would like to see the company reaping the benefits of its analytics capabilities.  At the same time, no one should want Netflix's failure rate on original programming to be zero.  We want the firm to take some chances in hopes of landing some surprising breakthrough hits.  Hopefully, the firm isn't simply guessing or drawing on the intuition of the "creatives" in the business.  We would like to see them engaging in "enlightened" experimentation, using big data to guide them while still taking some risks.   If they balance data mining and risk-taking in an effective way, the failure rate won't be zero, but it will be much lower than their broadcast and cable competitors.  

Proxy Fight at P&G: Can Activist Investors Drive Effective Change?

The Wall Street Journal reports today that activist investor Nelson Peltz has launched a proxy fight with Proctor & Gamble.  No company this large has ever faced a proxy fight.  The investor seeks a board seat in hopes of driving change. Peltz has been frustrated with the lackluster revenue and earnings growth at the consumer products giant over the past several years. According to the article, "Mr. Peltz’s Trian Management Fund argues that P&G failed to capitalize on a five-year savings plan that shrank the company by tens of thousands of employees, more than a dozen factories and hundreds of brands. Trian casts doubt on whether a second, five-year, $10-billion savings plan announced by P&G last year will produce results." 

Many observers and analysts have wondered whether activist investors would push for a breakup of P&G. After all, the company does operate a number of businesses including grooming (e.g., Gillette), fabric and home care (e.g., Tide, Cascade), oral and personal care (e.g., Crest, Prilosec), baby and feminine care (e.g., Pampers and Tampax), and household items (e.g., Bounty, Charmin). However, the company already has divested several units that appeared to be somewhat unrelated to their core brands; P&G divested its pet food, battery, coffee, and potato chip businesses in recent years. Peltz has signaled that he's not pushing for further divestitures at this time. 

What's the problem at P&G?  In my mind, the company can't cut its way to enhanced long run performance.  Perhaps costs are bloated, and some efficiencies must be attained.  However, the core problem remains innovation and growth.  In the heyday of A.G. Lafley's first tenure as CEO, P&G excelled because it generated product innovations that drove robust revenue growth (consider the remarkable success of Febreze and Swiffer).   These innovations have not come at the same pace in recent years.  Moreover, customers have traded down from the premium-priced products offered by P&G to more affordable brands.  Consider the success of upstarts in the razor business, as well as the increasing success of private labels in a number of P&G categories.  

What then of the proxy fight led by Peltz?  It seems to me that activist investors can be helpful at times in forcing difficult reorganizations, cost-cutting initiatives, and divestitures that management may be unwilling to undertake.  However, activist investors are not well-equipped to help companies jumpstart innovation and revenue growth.  How will this proxy fight solve the underlying growth problem at P&G?   It won't.   The company has much more challenging work to do than simply fending off an activist investor's attempt to snag a board seat.  

Knowledge Increasingly Generated by Teams Rather than Solo Artists

Do great breakthroughs in knowledge occur as a result of a brilliant mind working alone, perhaps through some brilliant flash of insight? Or, is knowledge creation fundamentally a collaborative endeavor? Has the process of knowledge creation changed in recent years? Has it become more collaborative? Northwestern scholars Stefan Wuchty, Benjamin Jones, and Brian Uzzi studied these questions and have written a paper titled, "The Increasing Dominance of Teams in Production of Knowledge." 

The authors examined nearly 20 million articles from the Institute for Scientific Information Web of Science database. These articles include work from a range of fields including science, engineering, social sciences, the arts, and the humanities. They also studied more than 2 million patents issued during the time that these articles were published. 

The scholars report that, "For science and engineering, social sciences, and patents, there has been a substantial shift towards collective research. In the sciences, team size has grown steadily each year and nearly doubled from 1.9 to 3.5 authors per paper over 45 years." The authors found that solo authors tend to be more prevalent in the arts and the humanities, though collaboration has increased there as well. Moreover, the authors discovered "a broad tendency for teams to produce more highly cited work than individual authors" - a finding true across all fields. In fact, that trend toward higher citations of collaborative work has picked up in recent years. 

In sum, collaboration has become more important and more prevalent over time in the knowledge generation process. This statement represents more than just a well-worn cliche; the empirical data support this claim in clear and convincing fashion.

Sir Ken Robinson: How To Escape Education's Death Valley

Creativity expert Sir Ken Robinson has provided some excellent thinking on the state of education.  I love listening to him describe how we stifle creativity in our children at times, and how we can shift our thinking as educators.  Here's one of his terrific TED talks:

Top Sales People Really Don't Make the Best Managers

The conventional wisdom is straightforward - the top individual performers don't always make the best managers.  That old adage holds true especially in the field of sales.  Many people believe that the best sales people don't make the best managers.   Is it true?  New research examines this assumption, drawing upon one of the most extensive databases ever collected to research this topic.  

Alan Benson, Danielle Li, and Kelly Shue examined data on salespeople at more than 200 firms. These scholars analyzed how individual performers did prior to promotion.  Then, after these individuals were promoted to managers, they examined how the performance of their new subordinates was impacted.   The richness of the data enabled the scholars to compare salesperson performance under this new boss vs. other previous supervisors.   What did they find?  Chicago Booth Review reports:  

The best salespeople did not make the best managers: demonstrated sales skill, as evidenced by managers whose sales doubled before their promotion, corresponded to a 10 percent drop each in the sales performance of new subordinates.  The typical newly minted manager is in charge of five people. Therefore, the doubling of a manager’s sales predicts a total team sales drop equivalent to half the sales of one worker.

Thus, the conventional wisdom is true.  Moreover, the negative impact of promoting the wrong people is substantial.  Companies need to understand the skills and qualities required to become good sales managers, and based on that analysis, they must change their promotion criteria.  Meanwhile, they must find other ways to reward top individual performers, rather than using promotion as a key incentive.   

Grooming Future Leaders

Retired Brigadier General Bernard Banks, now teaching at Kellogg, offers some interesting insights on developing future leaders.  Banks explains that companies need to begin grooming future leaders when individuals are not yet managing others.  He advocates providing individuals temporary opportunities to lead others as an initial developmental opportunity, before people are promoted to managerial positions.  Banks explains: 

According to Banks, a better path is to begin grooming future managers when they are still in nonmanagement roles, so that they can develop prior to moving up the ladder. For example, a company might place people on teams where they have no formal authority, but are nonetheless expected to work collaboratively with others. Or a company might temporarily provide leadership assignments. When a manager leaves for vacation or is occupied with another assignment for a finite period of time, a nonmanager—rather than a colleague already in a managerial role—might be asked to fill in.  This early investment can feel like a risk at the time, admits Banks, but he has seen it pay off in future leaders. “When they make that transition, they have a reasonable expectation of succeeding in that new role.”

Banks also argues that individuals need to take ownership of their development plan.   Companies should not simply be telling workers what they need to do next to develop as leaders.  The process should involve a healthy dose of self-direction.  Individuals need to identify opportunities for development, rather than always waiting to be told what to do.  

Chief Justice John Roberts' Commencement Address

I heard about Chief Justice John Roberts' commencement address at Cardigan Mountain School in New Hampshire the other day.   I had an opportunity to watch the speech on YouTube, and I thought he shared a vitally important message.  Moreover, it was unique, avoiding many of the usual pieces of advice offered by graduation speakers.   Take a look for yourself: