Friday, December 06, 2019

Making Time for Big Picture Thinking

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

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

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

Monday, December 02, 2019

Why Entrepreneurs Don't Learn From Their Mistakes

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

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

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

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

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

Friday, November 22, 2019

Curious Leaders: Relentlessly Question How Things Work

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

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

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

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

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

Friday, November 15, 2019

The Xerox Bid for HP

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

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

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

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

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

Tuesday, October 15, 2019

New Case Study: Planet Fitness

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

Tuesday, October 08, 2019

Running for Homes for Our Troops

On October 13th, my wife Kristin and I are running the Newport Half Marathon to support Homes for our Troops (HFOT). This organization builds and donates specially adapted custom homes nationwide for severely injured Post-9/11 veterans, to enable them to rebuild their lives. We are honored to be running to support these men and women who have sacrificed so much to defend our nation and protect our freedom. Two years ago, I ran the Twin Cities Marathon and raised over $7,000 for this terrific organization. We hope to build on that total with this race effort.

Most of these veterans assisted by HFOT have sustained injuries including multiple limb amputations, partial or full paralysis, and/or severe traumatic brain injury (TBI). These homes restore some of the freedom and independence our veterans sacrificed while defending our country, and enable them to focus on their family, recovery, and rebuilding their lives.

Homes for our Troops is a privately funded 501(c)(3) nonprofit organization rated four out of four stars by Charity Navigator. Since its inception in 2004, nearly 90 cents of every dollar donated to Homes for Our Troops has gone directly to their program services for veterans.

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

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

Friday, September 20, 2019

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

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

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

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

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

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

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

Sunday, September 08, 2019

How CFOs Can Help Foster Innovation & Creativity In Their Enterprises

Source:  Pixabay
Deloitte recently featured my work in their CFO Insights newsletter. The article is titled, "Unlocking creativity: How CFOs can help cultivate a creative mindset."   CFO Insights draws upon my book, Unlocking Creativity, to examine what Chief Financial Officers can do to help break down the barriers to innovation and creativity in organizations.  Why should CFOs focus on the task of breaking down these barriers?   Deloitte argues:

The case for creativity seems more apparent than ever. One reason may be the current growth shortfalls at some companies. A recent analysis of Fortune 500 companies found that more than one-third (38 percent) experienced a decline of revenue between 2014 and 2016. Another driver may be the looming prospect of an economic downturn, which may force CFOs to look for original ways to boost efficiencies at their already-lean organizations. In Deloitte’s North American CFO Signals™ survey for the second quarter of 2019, nearly all 159 respondents said they anticipated an economic slowdown by the end of 2020. However, a prospective downturn may also be an opportune time to invest in innovation, calculating tradeoffs that need to be made to emerge from any decline—which 80 percent of CFOs expect to be mild, according to the Q2 2019 CFO Signals survey—with a competitive edge over their creativity-challenged peers.

Check out this edition of Deloitte's CFO Insights to learn more about this topic.  In addition, take a look at the tips provided in the article for how to improve competitive benchmarking practices in your organization.  

Friday, August 30, 2019

Forever 21's Possible Bankruptcy: Why Copying Zara is Difficult

Source: USA Today
CNBC reported yesterday that apparel retailer Forever 21 is preparing for a bankruptcy filing.  News reports emphasize the challenges that brick and mortar retailers are facing these days.  Moreover, they note that Forever 21 made a huge bet on building very large stores in recent years.  Both arguments are valid.  Others note that perhaps "fast fashion" is going out of style.   On that last point, I beg to differ.  I don't think the problem is the concept of fast fashion.  I do think that emulating the Zara business model is far more difficult than many competitors recognized.

Zara pioneered the fast fashion strategy many years ago, and it has excelled for many years. Zara has a unique strategy and business model though. For starters, they are vertically integrated, unlike almost any other apparel retailer with whom they compete.  Their unique supply chain strategy is key to their fast fashion positioning, and instrumental to their ability to avoid the deep discounting that has harmed so many apparel retailers. 

Years ago, James Surowiecki wrote a terrific column for The New Yorker about Zara.  He titled the article, "The Most Devastating Retailer in the World."  Toward the end of the article, he explains why it's so difficult to imitate Zara's strategy.  His argument echoes the familiar strategy lessons offered by Michael Porter and Jan Rivkin of Harvard Business School, who have argued for years that imitating a complex, integrated and self-reinforcing system of activities is often very difficult.  Often, competitors don't recognize the need to copy the whole; instead, they identify parts of the model that they try to imitate.  Moreover, rivals often do not understand the "secret sauce" by observing from afar... they only see the observable elements of the model, and they don't see how it all fits together, as well as how the organizational culture and values support the model.   Copying the intangibles often proves incredibly challenging.  How do you even understand the intangible elements of a successful business model?

Here's Surowiecki on the challenge of trying to copy Zara:

"So why doesn't everyone just copy Zara?  They would if they could... Zara is an integrated system, not just a collection of parts.  You can't simply copy elements of the system and expect the same results... After all, it's a lot harder to knock off a two-billion-dollar business model than to knock off two-hundred -dollar pair of pants."  

Of course, Zara too has had to adapt to a changing world that makes life difficult on retailers heavily reliant on brick-and-mortar stores.  Sometimes, modifying or adapting a highly successful, integrated system of activities to a changing environment can be just as difficult as emulating a top competitor.  We shall see how Zara fares moving forward as e-commerce becomes a much more important part of their business.  

Thursday, August 29, 2019

Optimistic CEO, Pessimistic CFO: Optimal Pairing?

Insead Professor Guoli Chen and University of Miami Professor Wei Shi have conducted some fascinating new research on mergers and acquisitions.  They examined the nature of the relationship between the CEO and CFO, and how that affects merger performance.   They studied 2,356 companies between 2002 and 2013.  They discovered, not surprisingly, that the optimal pairing includes an optimistic CEO and a pessimistic CFO.  Here's their description of the research

We culled transcripts of conference calls between 2002 and 2013 involving both the CEOs and CFOs, and measured the executives’ optimism and pessimism by analysing their use of positive and negative words. Positive words included “achieve”, “assure” and “successful”; negative ones covered “flaw”, “penalise” and “unavoidable”. CEO optimism was calculated as the difference between a CEO’s use of positive words and negative words, and CFO pessimism was calculated as the difference between a CFO’s use of negative words and positive words.

Our data showed that CEOs generally used more positive words and were more optimistic than CFOs. CFOs used more negative words and were more pessimistic than CEOs. We then used the ratio of CEO optimism to CFO pessimism to derive what we call the CEO-CFO relative optimism. This value is then matched with the firm’s number of M&As and operating performance, assessed in our study as return on assets (ROA) a year later.

We found that the more optimistic a firm’s CEO-CFO pair was (high-optimism CEO with low-pessimism CFO), the more M&As it undertook. High CEO-CFO optimism also correlated with lower ROA a year after M&As. Conversely, low CEO-CFO relative optimism was associated with fewer M&As but higher ROA.

Does this mean that a pessimistic CFO is always a positive for organizations?  Not necessarily.  I often speak to audiences of finance executives about playing the role of the devil's advocate on the top management team.  CFOs often embrace this role, seeking to poke holes in proposals and find the potential flaws and risks in any course of action.  Such critical thinking can be quite helpful at times.  However, CFOs can take such behavior too far, and then devil's advocacy no longer proves constructive.   The CFO can become "Dr. No" - always finding reasons not to try new things, and always arguing why a new idea won't work.   CFOs need to maintain a healthy balance when they look at the downside of new ideas.  They should be critical, but they should also ask:  How might we make this proposal work?  What other options could help us achieve the same goal?  How could we move forward in a less risky manner?   They can't simply say no to everything.  They have to help find other ways to move forward if the proposed course of action seems inadvisable.  For more on how to play the devil's advocate constructively, you can read my article here I also have a chapter dedicated to this topic in Unlocking Creativity.  

Tuesday, August 27, 2019

Are You Willing to "Fire Yourself" to Gain Fresh Perspective?

Source: Logitech
Adam Bryant of Merryck and Co. recently published a terrific interview with Bracken Darrell, CEO of Logitech. I especially liked this exchange. We all should think about this reflection exercise. Darrell "fired himself" and started anew in the very same role, but with fresh perspective. Here's an excerpt: 

How do you set the tone for constant change given that people crave a certain amount of sameness?

I’m very explicit about it. I’ve shared a story from last year, after I’d been on the job for five years. One Sunday night, I asked myself, “Am I the right person for the next five years?” I had made tons of change, and the stock was up about 500 percent.

I knew that, on paper, I probably was the right person for the next five years, and that it’s risky to change if you don’t have to. On the other hand, I had been involved in every single personnel and strategic decision. My disadvantage was that I knew too much, and that I was too embedded in everything we were doing.

So I decided that I was going to fire myself, and that I would sleep on the decision. I didn’t share it with anybody, including my wife or kids. I just thought to myself that I might be done. I woke up the next morning, and felt that I knew exactly what I needed to do: I have to rehire myself but have no sacred cows. It was super exciting and fun, and I started changing things that I had put in place. Fortunately, I didn’t have to change things radically, but I felt new again.

Then I realized that the real opportunity is to compress that timeframe from five years to a year and then to a month and then into every day. And if you can get yourself to the point where you can really come in unbiased every day, then you’re there. That’s my ultimate goal, which I think is impossible, but that’s the goal.

3 Ways to Spark Creative Ideas

Check out my recent guest post for the Institute for Management Studies blog.  The short piece is titled:  "Getting Unstruck: Three Ways to Spark Creative Ideas."   The Institute for Management Studies provides leadership development for member organizations throughout the country.  

Saturday, August 24, 2019

Never Eat Lunch Alone

I recently came across a terrific essay by Assurant CEO Alan Colberg on LinkedIn, published two weeks ago. In the article, Colberg reflects on what he learned during three major events at which he appeared along with other top executives in a series of panel discussions and speeches. One key lesson he derived from these sessions: ask good questions that challenge the status quo and the conventional wisdom in your company and/or industry. He writes:

One of the most profound, yet simple suggestions discussed across each event was about the importance of asking the right questions. Imperative to future success is not solely dependent on having the best products or services. Indeed, it starts with asking the right questions and viewing those through a “consumer” lens – again, being attuned to the changing needs of customers and delivering on that exceptional customer experience. Someone at the CNBC Evolve event asked, “why isn’t buying enterprise software as easy as buying a book on Amazon?.” This is an important question every organization -- whether a global B2B company, a small technology start-up –- must ask if it’s serious about changing and improving the consumer experience.

Even better, I loved his advice for his employees.  He has adopted the mantra - "never eat lunch alone" - at Assurant.   He explains:  

Finally, attending these events reminded me yet again of how important it is for all of us to take some time to think externally and engage with people. I often advise my employees to “never have lunch alone.” We learn so much from one another through dialogue and interaction. I would encourage everyone at all levels to get out from behind your desk and think externally. Consider actions like reaching out to a colleague or friend elsewhere at your own company or at another organization – or visiting a website or store of one of your client partners – you never know how what you learn now will change the course of your future.

I love this mantra.  We often feel that pressure to eat at our desk, because we face a looming deadline or a lengthy to-do list.  However, we miss a huge opportunity when we isolate ourselves at our desks.  We forego an opportunity to connect with colleagues or perhaps customers.  So many terrific collaborations can emerge from conversations that begin casually and informally over lunch.  We can learn from others, and we can expose ourselves to different points of view.  We can learn about the work being done in other silos of the organization, and we can begin to break down the barriers among those silos.  "Never eat lunch alone."  I think that I'll embrace this mantra moving forward in my own work.  I hope you do as well. 

Wednesday, August 21, 2019

Lyft CFO Brian Roberts: Creating a Dialogue, Testing for Understanding

The Wall Street Journal recently published an interview with Lyft CFO Brian Roberts, an MBA classmate of mine from Harvard Business School. Roberts describes his attempts to create an open dialogue with members of his organization. Tatyana Shumsky of the Wall Street Journal writes,

Mr. Roberts regularly holds CFO chats—free-form, large-group conversations open to anyone and everyone in the ride-sharing company—to facilitate communication and give employees greater clarity on company strategy. He also holds frequent office hours, doled out in 10-minute increments, so that any of the more than 150 people on the finance team can get a one-on-one meeting with the CFO to chew over any work topic.

During the interview, Roberts mentions an important a-ha moment during on of these dialogues:

When I did my first chat since the IPO, I think it was probably several hundred people in the room. And there was videoconference, so it was a much larger group. Obviously the stock has been volatile, and I expected a lot of questions about the stock. But a lot of questions were around the strategy. Why are we doing this? Why are we doing that?

It was a lightbulb moment for me, because I realized if we have internal employees who are living, breathing Lyft 24 hours a day, seven days a week and the strategy is not clear to them, it means it’s not clear probably to the external world as well. And so from that, it gave me a very good lens for the next time I’m in front of investors to make sure that we’re really crisp in terms of why we’re doing certain things and what’s the purpose of strategies.

I've witnessed far too many organizations in which top executives think that they have communicated the strategy clearly, but in fact, employees remain confused or unsure.  I've always advocated a "check the pulse of the organization" approach whereby senior leaders go out into the organization, often in an informal fashion, to see if their message has "gotten through" to employees in the way that they intended.  Do people understand the goals?  Do they understand why we are doing what we are doing?  Do they understand how they can contribute to the fulfillment of our organizational objectives?  Roberts has developed an effective mechanism to get direct feedback.   More executives should follow his lead. 

Tuesday, August 20, 2019

When Substitutes, Not Direct Rivals, Pose the Most Serious Competitive Threat

Source: Pixnio
Years ago, many strategy faculty members used to teach an old Harvard case study about the breakfast cereal industry.   The U.S. industry operated as an oligopoly.  A few firms dominated the market (General Mills, Kellogg, Post).  The firms competed in terms of new brands, flavors, and the like, yet they tended to avoid competing heavily on price.   The market leaders tended to have a stranglehold on the supermarket shelf, making it difficult for new players to enter the market.   In short, the industry tended to be quite attractive for the incumbent players.  

Things have changed.  Cold cereal sales have declined by 6% over the past five years.  As the Wall Street Journal reports today, 

Cereal makers, under increasing competitive pressure, are struggling to improve sales of puffed rice, wheat flakes and oat clusters that were once a standard part of Americans’ morning routines.  Fast-food chains are beckoning customers with new breakfast products and bacon-laden promotions. More people say they are eating less sugar and more protein, or forgoing breakfast altogether. Snack bars for on-the-go consumers are ubiquitous.  “There’s a lot more competition for breakfast than there ever has been,” General Mills Inc. Chief Executive Jeff Harmening said in a recent interview.

What's the lesson from this story of the changing fortunes of the breakfast cereal industry?   In many cases, the most serious competitive threat for a company does not come from its direct rivals.  Instead, it comes from substitutes - i.e. alternative products and services that fulfill a similar human need.  In other words, snack bars, yogurt, and fast-food restaurants have displaced cereal in the daily morning routine of many Americans.  General Mills didn't get beat by Kellogg or vice versa.  They are getting threatened by these substitutes.  The same dynamic plays out in many industries.  Often, this type of substitution threat proves much more difficult to detect in the early going, and then much more challenging to address moving forward.  Executives have to think carefully and broadly about substitutes as they plot their firms' strategies.  For instance, what's a substitute for auto insurance?  Well, it might be Uber, Lyft, and other options that have reduced the number of people owning and driving personal automobiles.    

Monday, August 19, 2019

Many Workers Don't Feel The Same Way About Innovation as Executive Leaders Do

Source:  PxHere
SurveyMonkey recently conducted a survey on behalf of Fast Company regarding employee attitudes about innovation.  They questioned over 3,000 workers in this study.  The results demonstrate a wide disparity between executive beliefs and lower level employee attitudes and beliefs.  

According to Jay Woodruff of Fast Company, "71 percent of C-level respondents believe they have opportunities to personally contribute new or innovative ideas at work."  Unfortunately, Woodruff reports that, "only 22 percent of lower level individual contributors feel the same way."

Meanwhile, the study also shows a marked difference in beliefs regarding the extent to which the culture supports creative thinking. Woodruff writes, "While 48 percent of C-level respondents believe their workplaces encourage innovative thinking, only 30 percent of individual contributors agree."
What's happening here?  Nothing new, I would argue.  Unfortunately, prior studies have documented similar results.  As I have explained in earlier writings, executives say that they want creative thinking, but their behavior often makes it seem as though they simply desire compliance and control.  Their words simply don't match their actions.  No wonder then that workers are cynical about initiatives designed to encourage innovation.  

Leaders need to ask themselves:  Are my actions expressing a desire for compliance or a desire for creativity?   What systems and processes encourage or discourage one or the other?  What do our incentive systems reward or punish? Of course, they can't just engage in self-reflection.  Leaders have to ask others, because top executives may be seeing their organization through rose-colored glasses.  

Wednesday, August 14, 2019

Three Techniques for Smart Prototyping

Source:  Flickr
Here is my latest article about the prototyping stage of the design thinking process.   I've published it as a guest post on the Experience Point blog.  The title of the short piece is "Three Techniques for Smart Prototyping."  In the article, I explain some of the typical mistakes that we make when trying to prototype new ideas, and I offer several strategies for enhancing our approach.  I hope you find the article useful and informative. 

Monday, August 12, 2019

Why Employees of Acquired Firms Leave in Droves (And Can We Predict Turnover In Advance?)

Source: Flickr
The Wharton School's J. Daniel Kim has written a good paper titled, "Predictable Exodus: Startup Acquisitions and Employee Departures." Kim finds that 33% percent of workers brought into a company through an acquisition of a startup leave within 12 months, compared to 12 percent of other employees with similar backgrounds. Why do they leave? Could we actually predict whether such high turnover will occur BEFORE we make a deal and acquire a startup? Kim has developed a rather ingenious strategy for examining that question. He explains how he constructed a measure he calls "startup affinity." 

I track employee departures prior to the acquisition along with their destinations. While these individuals leave before the acquisition, their decisions to join a young firm or an established company provide useful information for predicting their peers’ post-acquisition retention outcomes. When aggregated up, these mobility choices reflect the firm’s tendency to attract workers who prefer to transition to startups rather than established firms. Following this reasoning, I define firms to have a strong affinity for startups if their former employees – who leave prior to the acquisition – systematically tend to move to other young companies.

Kim then goes on to examine the relationship between startup affinity and worker turnover after an acquisition:

I find that the pre-acquisition departure patterns strongly predict the acquired employees’ decision to stay with the buyer. In short, target companies with a strong affinity for startups exhibit much higher rates of turnover following an acquisition. Furthermore, these effects are magnified when the acquiring firm has a lower startup affinity than the target firm, lending empirical support to the role of organizational mismatch. Therefore, ex-ante differences in the target and buyer’s organizational type largely explain why many acquisition deals fail to retain the new workers while others succeed in capturing talent. 

What does this mean for larger firms employing an acquisition strategy to target technology and talented employees at startups in their industry or a related market?   Companies have to do some strong self-diagnosis before embarking on an acquisition spree.  They have to understand their current workforce and culture, and in so doing they can assess whether they are a good match for the target firm's employee population.   Remember, those workers don't get to choose to be employed by the acquiring firm.  They have chosen to work at that startup.  They can then vote with their feet after the deal.  If there's a strong mismatch between the employee population and the acquiring firm, you can expect a significant dose of turnover.  Perhaps that's not concerning to some executives, but in many cases, a big chunk of the value of the deal is tied to the intellectual capital embodied in the workforce.  If those folks leave, what is left?  Often, the remaining physical assets (technology, etc.) aren't worth nearly enough to justify the takeover price if the workers leave in droves.  

Friday, August 09, 2019

Clarifying Information Priorities to Make Better Decisions

Source:  flickr
Former Army Colonel Robert Hughes, now a professor at the Kellogg School, has some great advice for leaders facing tough decisions. In a feature for Kellogg Insight, he argues that you have to identify and clarify your information priorities. According to Hughes, "This means determining the most important information they will need in order to decide—as early as possible—whether the plan is moving forward as intended, or whether it might need to be adjusted." He goes on to explain, "“The leader’s role is to define what success looks like for each operation. Then you think about what essential information is needed throughout the plan to achieve success.”

Establishing your information priorities is only a first step though. Hughes argues that you have to link those information priorities to decision points that you anticipate will occur moving forward. In other words, you have to anticipate key choices you will have to make and roughly when you might need to make them, and identify the data you will need to make those decisions effectively. 

Finally, Hughes argues that you have to communicate your information priorities clearly and concisely to your team. You have to encourage people to share key data, including problems or unexpected issues that arise. Moreover, you have to be willing to adjust your plans and priorities when things don't work out as planned.

Hughes' advice is terrific. I love the notion of anticipating the information you may need to make good decisions as you execute a plan of action. In addition, I think it's critically important to anticipate key decisions that you might have to make, and preparing yourself to make those choices as much as possible. Mountaineer David Breashears once told me that he played out many scenarios in his mind before beginning to climb a mountain. Moreover, he thought carefully about the types of tough decisions he might face, including whether to turn around himself or to direct a team member to return to base camp. Breashears argued that thinking carefully about the "exit decision" before you launch is critically important to helping make that challenging decision. He also argued that you have to discuss those issues with your team before you begin your journey. His advice is very consistent with Hughes' approach to planning and execution. Both men have offered good lessons applicable to business leaders.

Thursday, August 08, 2019

"I Don't Think My Company Tells Me The Truth"

I recently read a great interview, conducted by Wharton's Mack Institute for Innovation Management, with accomplished entrepreneur and angel investor David Kidder (author of the new book, New To Big).   Kidder talks about how to create an environment conducive to growth and innovation.   He explains the keys to "productive failure" as part of that culture.  Here is an excerpt:

I think there are a couple qualities to productive failure. One is that it was done inexpensively. You got to a truth on a cost basis that was much, much less than say the planning model, which makes predictions and then tries to make them true. The cost base of the learning is really important. Secondly is that the person who’s delivering that productive failure is actually telling the commercial truth. Often when I do my keynotes, the CEO of the company will come to me and say, “I don’t think my company tells me the truth.” And my response to this is, “Because it doesn’t, because your cost of failure is too high.” You have these amazing people who want this company to be successful, but the organization is largely intellectually dishonest... As a result of this, you have these zombie ideas, these zombie companies, these zombie programs that literally won’t die because there are people who are trying to make their ideas work. Here’s a rule of investing: You never invest in an entrepreneur who loves their idea, ever, because they have no elasticity or permission to change it. You want to invest in entrepreneurs who are obsessed with the customer problem, with total permission to solve it, even if it means letting go of truths about yourself or your product that are no longer true. I think that, coming full circle, you need to have the mindset and mechanics and the permission inside the leader and the organization so that people are in a position to actually lower the cost of failure and, as well, they can tell you the truth.

I love the notion that you don't want people who are in love with their ideas.  You want people in love with a perplexing problem, people who are willing to learn and to shed ideas that are not working.   I also think it's very important for CEOs to acknowledge that people aren't telling them the truth in all cases, and then to discover WHY that might be the case.  What have those leaders done that has discouraged people from telling the truth? 

Wednesday, July 31, 2019

Perceiving Yourself as an Underdog Really Can Enhance Performance

Source: Wikimedia
We've all heard professional athletes "feed off" of the desire to prove others wrong.  They cast themselves as underdogs who have been written off by the experts and the pundits, and then they profess to be highly motivated to challenge the doubters.   +Here in New England, we have seen Tom Brady constantly talk about how we had to fight to become the starter at the University of Michigan, and how he was just a 6th round draft pick and 4th string quarterback when he entered the National Football League. Is the underdog effect real? Does it actually help or hurt to perceive oneself as an underdog? Samir Nurmohamed of the Wharton School has published a new study in the Academy of Management Journal about how our self-perceptions affect our performance. The paper is titled, "The Underdog Effect: When Low Expectations Increase Performance." 

Nurmohamed conducts a series of studies to examine the underdog effect.   Interestingly, perceiving oneself as the underdog doesn't always help us.  Nurmohamed finds that underdog expectations can have a beneficial impact on performance.   However, the research shows that it depends on the perceived credibility of those observing and judging one's abilities.   If the outsiders' credibility is high, then underdog expectations have a negative impact on performance.  However, when outsiders' credibility is perceived as low, then underdog expectations have a positive effect on one's performance.  

Monday, July 29, 2019

Reducing Confirmation Bias

Can students be trained in a way that helps reduce confirmation bias on an unrelated task/decision in the near future?  Anne-Laure Sellier, Irene Scopelliti, and Carey K. Morewedge set out to addressz tha the question an interesting study.  They have published their results in an article titled, "Debiasing Training Improves Decision Making in the Field."

They offered students an opportunity to participate in a serious game-based training exercise.  They informed the students that this exercise could improve their "managerial decision-making ability." The exercise took 80-100 minutes. The scholars report that, "The one-shot debiasing intervention consisted of playing a serious video game, “Missing: The Pursuit of Terry Hughes.” Playing this game once has been shown to significantly reduce the propensity of players to exhibit confirmation bias..."  

At least six days later, and in some cases well over a month later, students worked to solve the "Carter Racing" business case during one of their regular class sessions.  The case is based loosely on the Challenger space shuttle launch decision, and it had nothing to do with the game-based training that they had experienced earlier.  If you avoid confirmation bias, you have a better chance of making a sound decision in the Carter Racing case.   

The results were quite striking. The scholars report, "Trained students were 29% less likely to choose an inferior hypothesis-confirming case solution than were untrained students. A reduction in confirmatory hypothesis testing appeared to explain their improved decision making in the case." Why did this significant impact occur? They do not know for sure, but they speculate that perhaps, "Games may be uniquely engaging training interventions."   Since we could all benefit from avoiding confirmation bias, I found the intervention interesting and useful as we begin to think about how to develop the decision-making abilities of leaders.   

Friday, July 26, 2019

Your Decision-Making Abilities are Terrific! Uh-oh... such praise can be problematic.

Source: Flickr
I've written extensively about the sunk cost problem.  We have a hard time letting bygones be bygones in business and in life.  Worse than that, we throw good money and effort after bad.  Psychologists call this phenomenon the escalation of commitment.   We would like to believe that we are not vulnerable to this decision-making trap, but most of us will encounter it no matter our intelligence, experience, or expertise. Recently, I happened upon a 2008 study by Niro Sivanathan and colleagues. The article was titled, "The promise and peril of self-affirmation in de-escalation of commitment."  It has some interesting new lessons regarding the sunk cost trap.  

The authors conducted a series of interesting experiments.  In one study, they gave some participants information that affirmed their abilities, but these skills were not relevant to the decision at hand.  For other participants, they gave them information that affirmed their decision-making abilities.  They told them, "Your decision-making orientation suggests that you possess the ability to decode and analyze complex data with ease. More often than not, you are able to use the analyzed data to make a sound and profitable decision.”   Naturally, they also had a control condition in their experiment.  What did they find?  The authors write, "Following a poor managerial decision, individuals who received feedback affirming an important ability that was directly related to this decision (decision-making abilities in Study 3, Hypothesis 3B) showed increased escalation of commitment to their decision."  

What's the lesson here?  I think we can now realize why people who have been highly successful in the past can find themselves in the sunk cost trap.  They have made a series of wonderful decisions in the past, and they probably were praised mightily for their decision-making abilities.  However, that may make it quite difficult to admit errors moving forward.  Therefore, they may find themselves unwilling to walk away from bad decisions, and indeed throwing good money after bad in a failing situation.  

Thursday, July 25, 2019

Cultural Enhancers, Not Yes Men or Women

Source: Pixabay
Adam Bryant, Managing Director at Merryck & Co., conducted a terrific interview recently with Dawn Zier, former CEO of Nutrisystem, a company at which she led a very successful turnaround.   Zier described what she looks for as she builds a management team.  She doesn't want yes men or women, and she doesn't want people who simply fit into the existing culture.  She wants people who bring new ideas, and who enhance the culture.  I love the concept of cultural enhancers, as opposed to the notion of finding people who fit the existing culture.  Here's an excerpt from the interview.  

One thing I always tell my team is that I don’t want “yes” people around me. That’s not helpful to the organization. What I value is a diverse set of opinions. I’ll go around the room and hear different opinions, but pretty quickly you have to come together and decide on what the path is going to be. At that point, we should all be rowing in the same direction.

But I actually don’t like to use the phrase “cultural fit” anymore. I like saying “cultural enhancers,” because you always want to continue to build and enhance the culture. So I spend a lot of time in interviews really trying to assess that. Moving from cultural fit to cultural enhancer is important because each person brings something unique to the table.

Wednesday, July 24, 2019

Why Don't People Buy Into Your Vision?

Source:  pxhere
Andrew Carton and Brian Lucas recently published an Adminstrative Science Quarterly paper titled, “How Can Leaders Overcome the Blurry Vision Bias? Identifying an antidote to the Paradox of Vision Communication.”   They explore how leaders often craft vision statements poorly, resulting in a lack of understanding and buy-in on the part of their followers.   Carton recently summarized the key point of their research in an interview with Knowledge@Wharton.  He describes what they call the "blurry vision bias" that afflicts many leaders:    

The blurry vision bias is the tendency for most people — including leaders — to think abstractly rather than concretely about the distant future. Leaders might invoke vagaries such as “we aim to impact the world” rather than vivid images like “bring smiles to customers’ faces.” Therefore, most visions are, ironically, not very visionary. 

Why does this bias exist? First off, we don’t have direct experience with the future for a pretty self-evident reason: It hasn’t happened yet! So, we tend to speculate about it in very broad, general terms. Although it is useful to think about the future in general terms because it allows for flexibility, the problem is that when we communicate this generality and vagueness to other people, it often has some unfortunate consequences: It is not very motivating because it is not emotionally appealing, and it stifles coordination because different employees have a different understanding of what we aspire to achieve in the future.

I've definitely witnessed blurry visions in many organizations, and they definitely result in strategy execution problems.  One thing that I often remind leaders is that they have to test for understanding and alignment in multiple ways at multiple levels of the organization.   They must try to do so informally.  They have to go out into the organization and see how people have interpreted and understood what they have tried to communicate.  To do so, leaders can't ask leading questions or pose inquiries that are not likely to elicit honest responses.  In other words, they can't ask: "Does our vision statement make sense to you?  Do you agree with our vision statement?"  Instead, leaders need to ask open-ended questions that simply ask people to reflect on what they have come to perceive and understand about the direction of the organization.   In so doing, leaders can discover if a lack of alignment, buy-in, and shared understanding exists.  

GetAbstract Editor's Pick of the Week

GetAbstract publishes succinct summaries of nonfiction books, with key takeaways highlighted. Each week, they select five nonfiction book as editor picks of the week. I'm honored that Unlocking Creativity was selected this past week.

Tuesday, July 23, 2019

Are Your Employees Afraid of You?

Source: Pixabay
Megan Reitz and John Higgins have written a good Harvard Business Review article titled, "Managers, You’re More Intimidating Than You Think."    They write, 

Most of us believe that we’re approachable to our employees. In a survey we conducted with 4,000 professionals, two-thirds reported they are never or rarely scary to those junior to them.  We’re even more sure that we’re approachable to those who are our hierarchical equals or superiors. Asked whether their peers and their bosses would find them scary, 75% of respondents said it was extremely unlikely in the case of their peers and 80% in the case of their boss.

Yet we know from our other research streams of the last five years that many people think twice before speaking up in organizations because they find colleagues intimidating. This doesn’t add up. Other research shows that managers in particular need to accept that people see them as much scarier than they realize — and it’s hurting their businesses.

My research and experience working with executives at many companies confirms the conclusions presented here by Reitz and Higgins.  The self-perception of leaders often does not match the perceptions of those who work for them.   Most leaders do not have any sense of the fear that they have instilled in their people.  At times, of course, it's not anything major that the leaders have done.  It's simply the fact that employees in many organizations have a natural reticence to speak up.  It seems to come with the territory in most large firms.   Leaders need to lower the barriers, and it starts with recognizing how intimating they may appear to others.  

Thursday, July 18, 2019

The Power of Telling Hard Truths

Source: Flickr
As I prepare for teaching some new material during the fall semester, I came across this terrific article by Jena McGregor last year in the Washington Post.  It's titled, "A lesson from GE: The power of telling hard truths - and the peril of avoiding them."   She described the cultural deficiencies that conributed to the downfall of GE. She explains that these cultural flaws did not just manifest themselves in the past few years; they stretch back two decades. McGregor describes a "history of selectively positive projections, a culture of overconfidence, and a disinterest in hearing or delivering bad news."  She argues that the company had a strong "can-do" attitude; unfortunately, that created certain problems.  McGregor writes, 

"In professional workplaces where a can-do attitude is valued above all else, and fears about job security remain common, getting unvarnished feedback and speaking candidly can be especially hard... Add to that its history as a business icon - GE was known as much for its vaunted management practices as it was for its actual products - and leadership experts say it's easy for a sense of overconfidence to creep in."

She goes on to quote Peter Crist, Chairman of Crist Kolder Associates (an executive search firm) and Chairman of the Board of Wintrust Financial Corporation.  Crist explained,  "It's the mindset of invulnerability that iconic companies create - that we are a special entity.  There was a time when GE players had a certain arrogance to them." 

McGregor closes the article with some good recommendations from Ethan Burris, professor of management at the University of Texas - Austin.  She writes,

"Burris suggests they (leaders) have to model the behavior, being realistic about goals and forecasts and candid when things go wrong.  They should host town halls where employees can speak up without criticism, structuring them so bad news can flow to the top.  For instance, he recommends getting mid-level managers to first interview lower level employees about what's not working to make sure tough subjects are aired." 

This week, as I taught a case study about the Columbia space shuttle accident to a group of Japanese executives here in Tokyo, several of them told me that they have begun to start meetings in a different manner than usual. They ask first for bad news before people can begin to share success stories from the past week or month.   It reminded me of a startup back in Boston where the leaders used to tell managers that they had to share two problems or pieces of bad news for every celebratory brag that they shared in a meeting.  

Wednesday, July 17, 2019

Voice is Not Enough

Source: pixabay
If leaders want to build employee buy-in and commitment, they need to do much more than provide opportunities for people to express their opinions. Voice is not enough to achieve buy-in and build trust.  People need to believe that they are actually being heard, that their views are being genuinely considered, and that they have had a legitimate opportunity to influence plans and decisions.  In short, employees need to know that leaders are actually listening.   Employees want to see changes occur as a result of their ideas and suggestions.   If nothing ever changes, employees stop offering their ideas.  Engagement suffers, and intrinsic motivation declines.  

What are some signs that leaders are actually listening?   

  • The leader asks questions, trying to understand an employee's ideas more thoroughly.  
  • The leader plays back what he or she has heard, seeking to confirm an accurate understanding of employee views.
  • The leader asks others for input and feedback on an employee's suggestions.   
  • The leader thanks those who have the courage to express dissenting views.
  • The leader comments directly about what he or she has learned from direct communication with employees, and he or she seeks to learn more through further dialogue.  
  • The leader follows up promptly when an employee makes a suggestion, rather than letting recommendations simply hang out there in limbo for weeks or months.

Monday, July 15, 2019

'Tis Better to Give Than To Receive

We've always heard the wise old adage, "It is better to give than to receive." Scholars Ed O’Brien and Samantha Kassirer (from University of Chicago and Northwestern respectively) set out to test this piece of advice empirically.   The researchers designed a simple experiment.    They provided their research subjects (college students) $5 per day for five straigth days.  They told 50% of the students to spend the money on themselves.  They directed the others to give the money to others each day.  The scholars asked the students to respond to a questionnaire each night, evaluating their happiness.  As you can see in the chart below, the "givers" maintained a high level of happiness throughout the week.  Meanwhile, the "receivers" began the week almost equally as happy as the "givers" in this study.  However, the receivers experienced a substantial decline in happiness as the week progressed.  

Source:  Chicago Booth Review
How do the scholars explain the results displayed above?   Alice Walton summarizes one of their explanations in her article for Chicago Booth Review:

The phenomenon may have to do with someone’s vantage point, the researchers suggest. When we receive money or goods repeatedly, it’s easy to compare the results and become acclimated to them. In fact, research over several decades has explored “hedonic adaptation,” a theory of happiness that suggests people quickly become accustomed to good things and return to their original happiness level.   But giving seems to work differently, suggest O’Brien and Kassirer. When people give, the endpoint isn’t always apparent, therefore comparison—and acclimation—aren’t as likely. As they write, “The happiness we get from giving appears to sustain itself.”

Friday, July 12, 2019

Rationalizing Bad Decisions: How Moral Disengagement Plays a Key Role

Source: Pixabay
Darden Ideas to Action, a site that features cutting edge research insights from the Darden School at UVA, published a fascinating piece earlier this year titled, "TALKING OURSELVES INTO IT: HOW WE RATIONALIZE BAD CHOICES."  The article describes research by James Detert and Sean Martin, along with several colleagues from other schools.  Jim and I went to graduate school together, and he is a terrific scholar of organizational behavior.   You can read the underlying research here.  

These scholars have documented a rationalization process that they call "moral disengagement" that unfolds when we are trying to justify to ourselves and others our poor decisions.  Detert and Martin have created a typology of moral disengagement strategies, and they offer some examples of the types of pharses associated with each strategy.  Here are the eight types.  The list proves a useful tool for self-reflection.  You can ask yourself:  Am I thinking or saying something similar to these phrases?  If you answer yes, it might be time to step back and reconsider your course of action or your decisions.  

Here are eight common moral disengagement strategies and what they sound like:

Moral justification (“This is actually the morally right thing to do; we’re actually helping them by doing this.”)

Euphemistic labeling (“I’m just ‘borrowing’ this.” “It’s ‘collateral damage.’”)

Advantageous comparison (“Doing A, is not as bad as doing B.” “It’s not like I’m doing B.”)

Displacement of responsibility (“My boss told me to do it.” “I’m just following orders.”)

Diffusion of responsibility (“Everyone’s doing it.” “It’s a group decision.” “This is just a small part of a bigger system.”)

Distortion of consequences (“This is a victimless crime.” “No harm done.” “It’s no big deal.”)

Attribution of blame (“They brought it on themselves.” “Buyer beware.”)

Dehumanization (“They’re a bunch of dogs.” “They’re like robots.”)

8 Books on Creativity Every Entrepreneur Should Read

Thank you to TSOHOST for featuring Unlocking Creativity on your list of "8 Books on Creativity Every Entrepreneur Should Read."  I'm very honored to be in such great company. 

Tuesday, July 09, 2019

Problems with Priorities

As I observe many different leaders struggle with strategy execution, I notice that priority-setting tends to be at the root of the problem.   How do leaders struggle with establishing and communicating priorities?  Here are four patterns of dysfunction that I have observed:

1.  Leaders change their priorities quite often.  Members of the organization think to themselves, "This too shall pass" as they observe the latest "flavor of the month" or "management fad" being championed from the top.   Alternatively, employees simply find themselves confused as to what they should be doing. 

2.  Members of the organization do not agree with the priorities established by the leader.  In some cases, leaders do not recognize the disenchantment.  In other cases, they convince themselves that the employees simply "don't get it" and don't have the strategic vision necessary to chart the organization's path as well as those at the top.   This type of "leader knows best" thinking can be dangerous though.  Moreover, employee engagement falls, and therefore, productivity decreases when employees do not believe that the leader's priorities match their values.  

3.  Leaders do not communicate their priorities clearly.   Too often, the leadership team assumes that employees throughout the organization understand the goals and objectives, when in fact, people are somewhat confused or unclear about the strategic direction and priorities.  

4.  Leaders set too many priorities.  At this point, employees perceive everything as urgent and important.  In some sense, if everything is crucial, then nothing is really crucial.  People do not know how to allocate their time and effort properly in these situations.