Wednesday, February 19, 2020

Be Passionately Dispassionate: A Key to Unleashing Creativity & Innovation

Eric "Astro" Teller, co-founder of Google's Moonshot factory, has published a wonderful blog post reflecting back on his experience over the past ten years.   Teller offers some important lessons that he has learned about how to unleash what he calls "radical creativity" in an organization.   My favorite tip is to "cultivate the ability to be passionately dispassionate."   Here's an excerpt:

Cultivate the ability to be passionately dispassionate. While we can’t predict the future, we’re trying to invent it efficiently, to maximize the impact of our effort and resources. So it’s absolutely necessary to be intellectually honest and kill things that are pretty good (even if we love them!) so we can move on to even better opportunities. It’s something we keep trying to get better and faster at, though it’s deeply unnatural. It’s never easy to kill projects. Over the years we’ve had to disband dozens of teams and walk away from hundreds of gorgeous ideas, including a carbon-neutral fuel made from seawater.

Entrepreneurs who are charging passionately toward their vision often need to be coached to pop their heads up regularly and switch their mindset to dispassionately assess their situation. Sometimes people say to us, “You have to keep going at this because no one else will.” But that misses the point. Yes, we want to invest in far-out technologies with huge promise when they’re still so risky no one else will. At some point, though, once we’re satisfied that the technology has been somewhat de-risked, we need to test its commercial viability. If the market is as excited about it as we are, other companies will put money into it too, and we’ll keep going. But if they won’t, then maybe we’ve been kidding ourselves, and we should walk away and redirect our time, resources, and talent to more promising solutions.

Wednesday, February 12, 2020

Don't Be a Copycat! Benchmark in a Better Way

Learn more about several approaches to benchmarking that can help you learn effectively and build a distinctive strategy, rather than engaging in copycat behavior.

Monday, February 10, 2020

Storytelling to Communicate Data Insights

Source: Pixabay
Companies are investing a great deal of time and money into data analysis to drive better decision making. Yet, data analysts sometimes find themselves frustrated by their inability to persuade others with regard to a particular conclusion. The bottom line is that we can say that we are fact-based or evidence-based decision makers, but we don't always respond to arguments rooted in data alone. Stories tend to be much more compelling than numbers, statistics, and bullet points. Nancy Duarte makes this point in a short post for Sloan Management Review. She writes:

If it’s your role to communicate data insights and persuade people to change their behavior, you’ll have more influence and promote better decision-making if you emphasize the people behind the numbers. In a story, we root for the hero as he or she maneuvers through roadblocks. To use data to steer your organization in the right direction, you need to tap into the human tale your data can tell.

Duarte argues that four storytelling techniques can be quite effective: 
  1. Identify the Hero - Whose actions produce the data being analyzed? Who has the power to improve the situation?
  2. Empathize with the Heroes - Speak with them directly. Try to stand in their shoes and understand their point of view.
  3. Identify the Adversary - What is the source of conflict in this story? Who or what is standing in the way of our hero?
  4. Share Context - Provide the bigger picture.  Put the current data in the context of a lengthier timeline of events.  

Friday, February 07, 2020

The Effect of Board Tenure on Firm Performance

Sterling Huang of Singapore Management University and Gilles Hilary of Georgetown University have published an interesting paper titled, "Zombie Board: Board Tenure and Firm Performance." They found a curvilinear relationship between average board tenure and organizational performance. Not surprisingly, financial results increase as board members gain some experience and learn about the firm and its industry. However, when average board tenure exceeds ten years, firm performance begins to decline. The authors argue that there are diminishing marginal returns associated with learning and experience. At the ten-year mark, the deleterious effects of board entrenchment become more pronounced and began to have a serious negative effect on performance, overwhelming any small amounts of learning that are continuing to take place. 

Lengthy board tenure not only diminishes firm performance, but has an effect on key decisions made by the board. The authors note that, "A level of tenure close to the optimal reduces excess compensation and increases the pay-performance sensitivity." Huang and Hilary also find that CEO entrenchment exacerbates the negative impact of lengthy board tenure. In short, the mix of board and CEO entrenchment can be very bad for organizations. They conclude by stating, "Our results are consistent with the interpretation that directors’ on-the-job learning improves firm value up to a threshold, at which point entrenchment dominates and firm performance suffers."

Wednesday, February 05, 2020

Entrepreneurs and Salespeople: Are You Overestimating How Much Others Value Your Product?

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Minah Jung, Alice Moon, and Leif Nelson have published a new paper titled, "Overestimating the valuations and preferences of others," in the Journal of Experimental Psychology.   The scholars examine how individuals evaluate the preferences of others.  Specifically, they find that people tend to systematically overestimate how much others will value something.   Here's an excerpt from their paper: 

In social judgments, we are frequently called upon to make predictions about the evaluations of others, such as how much a friend will enjoy a recommended novel, how long a coworker will be willing to wait for useful feedback, or how much a potential buyer will be willing to offer for a used set of golf clubs. The overestimation bias has important implications on real-world economic and social decisions. Furthermore, the paradox we document suggests that someone who perfectly understands others’ enjoyment for a good may nevertheless be imperfect at setting prices, simply because they fail to recognize how people trade off enjoyment against other valuation metrics, such as willlingness-to-pay and willingness-to-wait. This suggests that social and consumer judgments may suffer not only from general overestimation but also from an additional imperfect understanding of how people weigh trade-offs. Many preferences are developed from a complex weighting of positives and negatives, the balance of which produces a summary evaluation for each individual. When judging the preferences of others, however, that complexity may be ignored and the weight of some attributes will seemingly tip the scales in the direction of a simpler, more intense preference.

This research has important implications for entrepreneurs who are trying to determine whether their idea will gain traction in the market.   Are they systematically overvaluing their idea, or overestimating how much people will be willing to pay for the product or service?   We all know that entrepreneurs can fall in love with their own idea, but this research gives us a deeper understanding of precisely why we can't estimate willingness-to-pay properly and accurately.   The same bias, of course, affects salespeople in a wide variety of professions.  Do they really understand the potential buyers' preferences?  Can they accurately assess value from the buyers' perspective?   

Tuesday, February 04, 2020

The Perception Gap: Leader vs. Team Members

Kat Boogaard has written an interesting post for the Atlassian blog titled, "Attention leaders: there’s something your team isn’t telling you."  She explains the findings from some of the firm's research on leaders and their teams.   In particular, she focuses on the perception gap between the leader and his or her team members.  Here's an excerpt that summarizes the research findings:

When we asked managers to rate their agreement with statements about their team’s health, they consistently agreed at a higher rate than their individual contributors. For instance:
  • 37 percent of managers said their team had quick and easy access to information, but only 20 percent of their individual contributors agreed.
  • 45 percent of managers said they receive honest feedback, but just 26 percent of individual contributors felt they like could give that honest feedback.
This inflated view is even worse in the C-suite. C-level executives are two times as likely to say that their team is high performing or has high well-being, while their individual contributors view those aspects as well below average.

How can leaders close this perception gap?  Boogaard has some good recommendations. For instance, she advocates getting out of your office to put your finger on the pulse of the organization, rather than waiting for people to come to you with problems or concerns.   Similarly, she focuses on the importance of promoting psychological safety within your team.   I would add one other important tip for closing this perception gap.  Find a truth teller on your team.   Find a sounding board, or consigliere if you are a fan of the Godfather movies.  Talk to them one-on-one, and use those private conversations to get a sense of whether team members are seeing things the way that you are.  Kathy Eisenhardt's research shows that effective leaders in high-growth firms operating in turbulent environments often have these confidantes who help them in numerous ways as they make tough decisions.  However, the key is to find a truth teller, not a yes-man or yes-woman.  Make sure it's someone who will give it to you straight.  

Monday, February 03, 2020

Evaluating Creative Ideas: Ask Why, not How

Stanford Professor Justin Berg has conducted some fascinating new research regarding people's self-evaluation of creative ideas. How do they assess the ideas that they generate, and can they spot the best ideas at a very nascent stage of the problem-solving process? Berg finds that individuals are not great at spotting the very best idea. In fact, the idea that they rank second-best at first often tends to be superior to the concept that seemed optimal at initial glance. What's happening? Berg explains his theory of how evaluation goes off track in this Stanford Leadership Insights article:

“People value concreteness too much and abstractness too little in their initial ideas,” Berg says. A concrete idea, he went on, is necessarily more developed, and so it will more readily present its creative virtues. Abstract ideas, meanwhile, can be difficult to see as promising. “The best initial ideas likely won’t seem very creative at the beginning—there may not be enough substance to see their potential originality and usefulness. Their abstractness is a barrier that prevents people from spotting their potential.”

Berg tested this theory by putting people in more abstract states of mind as they assessed their initial ideas. He had them ask “Why is this a good idea?” as opposed to “How is this a good idea?” and then provide answers. This approach was based on prior research showing that focusing on why (versus how) encourages abstract thinking. This simple shift to a more abstract mindset helped people identify their most promising idea at the outset.

This theory definitely resonates with me.   Research has shown the value of "why" questions and abstract thinking.   I think "how" questions often shift people into an "implemental" mindset too quickly, as I wrote about with Derek Pankratz in this article for Deloitte Review.  When we start thinking about how to execute an idea too soon, we can actually select a flawed course of action.  We become vulnerable to certain biases and faulty reasoning.  Perhaps we are also less creative too, as Berg's research suggests.   We move from the abstract to the concrete prematurely in those situations.  We need to think about what we want to do and why we want to do it, before we get too bogged down into the execution-related issues.  Of course, we can't ignore the how while we are making the decision, but the balance of our thinking can't shift too much to the how at those early stages of the creative problem-solving process.

Friday, January 31, 2020

Why Your Innovation Lab Might Be Failing

Source: Wikimedia
Vip Vyas and  Diego Nannicini of Distinctive Performance have written an interesting blog post titled, "Is Your Innovation Process a Corporate Illusion?" for INSEAD's Knowledge website.  The authors examine why some companies have shut down their innovation labs, after achieving less-than-desirable results.  Vyas and Nannicini offer several different explanations for the underperformance of these labs, but I find one explanation particularly compelling.  They argue that the leaders at the lab often lack credibility with the managers in the core business.   Here's an excerpt: 

In their efforts to promote a culture of creativity, companies may establish unintended physical and psychological distances between their main business operations and the innovation lab’s activities.

Setting up the lab as a free-thinking island, or tasking it with forwarding critical initiatives, is a key strategic decision. Without a clear pathway for connecting to the core business units, the innovation lab can find itself generating orphan products that fall into no man’s land. Even worse, the lab becomes nothing more than an expensive showcase, running public tours and hosting product demo kiosks.

The takeaway: An innovation lab needs solid executive sponsorship and advocates from mid-level management to effectively integrate solutions into the existing organisation.

To accomplish this feat, one has to insure that the leaders of the both the lab and the core understand one another.   After all, they often speak different languages, use different metrics, and have very different risk tolerance levels.  They also use quite different methodologies for making decisions.  Fostering understanding and appreciation of each other's methods, processes, and mindsets is essential for effective cooperation.   Otherwise, innovative ideas will wither on the vine. 

Friday, January 24, 2020

Early Career Failures: Do They Make You Stronger?

Source: Osan Air Base
We all have heard the old adage: What doesn't kill you will make you stronger. Researchers at Kellogg School of Management have tested whether that is indeed true when it comes to early career failures. They did so by examining a very unique dataset. Dashun Wang, Benjamin Jones, and Yang Wang have examined research grants provided by the National Institutes of Health (NIH).  The paper, published recently in Nature Communications, is titled, "Early Career Setback and Future Career Impact."  The scholars compared scientists awarded grants early in their career to those who narrowly missed out on achieving a grant.  Here is what they found, as summarized by Kellogg Insight:

To figure out just how much of a difference these early successes or setbacks made to a scientific career, the researchers traced the careers of 623 near-miss and 561 narrow-win scientists.  Notably, it turned out that the two groups published at similar rates over the next 10 years—not what you’d expect, given that narrow winners got an early leg up from their NIH grant funding. Even more surprising, scientists in the near-miss group were actually more likely to have “hit” papers (that is, papers that cracked the top-five percent of citations in a particular field and year). In the five years after they applied for NIH funding, 16.1 percent of papers produced by scientists in the near-miss group were hits, compared to 13.3 percent for the narrow-win group.

The researchers went on to rule out some of the possible explanations for this finding.  For instance, they demonstrated that the finding is not attributable to attrition by the "near-miss" scientists... i.e., it is not explained by quitting on the part of some of the researchers who did not receive grants early in their career.  They conclude that the career paths of these "near-miss" scientists suggests that they indeed did become stronger through adversity.  Somehow, the early career failure inspired them to persevere, led to key learnings, and/or helped them understand their own strengths and weaknesses.   As a result, they overcame the failure and went on to achieve considerable success.  What an uplifting finding for all of us... the old adage is not just a cliche...there is real truth there apparently! 

Tuesday, January 21, 2020

How Do I Assess This Firm's Culture Before Taking a Job?

Source: SHRM
Joann S. Lublin wrote a Wall Street Journal column last week about assessing the organizational culture of a firm at which you are considering taking a job.  She offered five tips for how to identify warning signs that a culture might not be the right fit for you.   I thought her first strategy was particularly useful.   Lublin argues, "Identify Who and What Count."  Here's an excerpt:

To grasp unwritten norms, discern what is acceptable behavior—especially for rainmakers, said Gail Meneley, co-founder of Shields Meneley Partners, a career-transition firm. She recommended inquiring whether sales stars operate under looser standards, such as completing deals without required internal approval.

“You may feel uncomfortable working for a business where there are different rules for different people,’’ she cautioned.

Small but significant gestures can offer hints about what behaviors matter. In 2017, Brad Neuenhaus became chief business officer of MindEdge Learning Inc., a provider of online education. He did so partly based on a company lunch he had attended as a customer. He recalled being impressed when a MindEdge leader exhibited respect for employees by clearing their plates.

“I wanted to be part of their organization,” Mr. Neuenhaus said. “Culture starts at the top.’

You might think that such small gestures don't matter, but in fact, they often can signal a great deal about the interpersonal and cultural dynamic at a company.  I had a boss who once said that he used to pay close attention to how someone treated a waiter or waitress at a restaurant during an interview process.  These things do matter.   At the end of the day, your antenna should be up at all times as you assess cultural fit. 

Monday, January 20, 2020

Simplify to Amplify: The Spindrift Story

Source: Flickr
I recently listened to a particularly intriguing episode of Guy Raz's How I Built This podcast.  Raz interviewed serial entrepreneur Bill Creelman, founder and CEO of Spindrift - the sparkling water company.  I found one particular part of the Spindrift growth story quite compelling.  Creelman explains that the company had started to take off, and then he made the courageous and intelligent decision to exit one of the firm's two product lines.  

In the beginning, Spindrift sold both a sparkling water product made with real squeezed fruit, as well as a soda product (albeit one with less sugar than mainstream soda brands).   The interesting part of the story is that the soda product line was quite profitable, and it was generating millions in revenue for the company.   Yet, Creelman decided that that the brand positioning needed focus and clarity.  He called it a "simplify to amplify" strategy.   Creelman explains, 

"That was a really important moment for us... we had a very low sugar soda, but even that, among our team, that was confusing. We had people who would say, you know, I don't drink soda. And we would say, well this isn't a soda... So, we made the hard decision to shut down about a $5 million business, super profitable, and just focus our resources on the sparkling water... The risk was for us that if we didn't stand for one single thing that we were going to go down the path of so many other businesses where you sort of try to do everything pretty well and nothing really, really great."

As I've written before on this blog, far too many companies try to be all things to all people.  They would never exit a profitable business, even if it meant a clearer competitive positioning that would be more sustainable in the long run.   Creelman made a smart move, sacrificing in the near term for the sake of a smarter strategy for competing in a confusing and highly competitive marketplace.  

Friday, January 17, 2020

Failing to Change When Faced With Negative News

Source:  Flickr
I recently read about a new study by Bradley R. Staats and his co-authors titled “Maintaining Beliefs in the Face of Negative News: The Moderating Role of Experience” in Management Science.  They set out to study how decision-makers react when faced with negative news.  The scholars chose to look at how expertise affects our likelihood to adjust our behavior in light of new negative information.  They assembled an interesting database about cardiac stent use in Pennsylvania from 2003-08 involving nearly 400 cardiologists. During this time, the Federal Drug Administration (FDA) recommended that doctors reduce their use of drug-eluting stents, but it did not ban the use of these devices.  The scholars set out to see how much the FDA's announcement affected behavior.  In particular, they wanted to see how experts reacted, as opposed to doctors with less experience.  Would overconfidence lead some experts to discount the new negative information?  Here's what they found: 

"For each standard deviation increase in experience, cardiologists were 6.3% more likely to use the drug-eluting stents before the FDA warning. Afterward, their use of the stents fell, but they were still more likely — 2.8% for each standard deviation increase in experience – than average to use the drug-eluting stents."

An article on the University of North Carolina's Kenan-Flagler Business School website summarizes the results and implications of this study:

It’s a kind of paradox. Are more experienced individuals – because of their presumably greater expertise – more likely to change their behavior when confronted by new information? Or are they more likely to resist new decisions because they’re confident about relying on their experience?  That’s the fundamental question tackled by Brad Staats, professor of operations and faculty director of the Center for the Business of Health at UNC Kenan-Flagler.  “Ideally, when you receive new information, you quickly adjust your decision-making – and you would expect the most experienced people would do so most accurately,” says Staats, “but our research indicates that might not be the case when they get negative news.”

Wednesday, January 15, 2020

Preparing for a Meeting: You Do Better When You Anticipate Conflict

source: pexels
This week, I read an interesting interview with several scholars from the Kellogg School of Management. In the interview, Professor Cynthia Wang describes an interesting study that she conducted with Denise Loyd, Katherine Phillips, and Robert Lount, Jr. They published their findings in an Organization Science paper titled, "Social Category Diversity Promotes Premeeting Elaboration: The Role of Relationship Focus."   Wang reports that people tend to prepare better for meetings when they anticipate interacting with others with whom they expect to have conflicting views.  This preparation and introspection leads to better decisions.  Here's Wang commenting on the research:

Sometimes conflict can actually be productive. When you go into a group meeting with somebody who is very different from you, the assumption that there’s going to be a conflict actually leads to better outcomes because you prepare better. For example, in one study, Katherine Phillips and I gave people tasks and said, “Hey, you’re going to be working with a stranger from the opposite political persuasion.” We then saw that knowing this leads you to start preparing a little bit more for the discussion, because you assume that there is going to be conflict. This drives better decisions in the end, because you’re more prepared and more introspective. On the other hand, if we come from the same group, we don’t challenge each other as much.

Monday, January 13, 2020

The Charade of Consultation

Years ago, my friend Mike Watkins, author of the best-selling book The First 90 Days, coined the term "charade of consultation."  He used it to describe instances when leaders would hold meetings, ask for input and advice, and yet do not genuinely provide an opportunity for those participants to influence the final decision.  He described these situations as a charade because the decisions were pre-ordained, a fait accompli.  Leaders were simply using the meetings to pretend that they were giving employees voice in the decision-making process.  Somehow, they thought that soliciting input would build buy-in, without recognizing that employees would see right through the charade.  

What are the negative consequences of engaging in a charade of consultation?

1.  Leaders diminish the extent to which their employees trust them.  That loss of trust adversely affects commitment, engagement, and morale.  

2.  Implementation efforts falter, because employees have not bought into the decision that was made.  They perceived the decision process as unfair, and therefore, they fail to commit the selected plan of action.  

3.  Employees opt out of future opportunities to participate in decision-making processes.  They think to themselves, "What's the point?  They aren't really listening to us anyway."   

4.  Leaders find themselves only hearing from people that agree with their proposals and plans.   Dissenters have opted out, and thus, leaders find themselves operating in an echo chamber. 

Does this mean that leaders always have to do what employees think is best, over their own better judgement? Of course not.  The opposite of the charade is not workplace democracy.  It's a thoughtful, robust, open process of dialogue and debate.  After hearing diverse viewpoints, the leader can then make a more informed and prudent decision.  

Thursday, January 09, 2020

Is Avoiding Losses Actually a More Significant Motivating Force Than Realizing Gains?

For decades, psychologists and behavioral economists have proclaimed the importance of loss aversion, one of the most prominent cognitive biases identified by researchers. However, a recent thought-provoking article in Scientific American by David Gal challenges the conventional wisdom. Gal writes about the research he has conducted with David Rucker and published in the Journal of Consumer Psychology

Source:  Blue Diamond Gallery
Gal argues that, "Loss aversion is essentially a fallacy." The statement surprised and intrigued me. Could it really be true that such a prominent theory was incorrect, and that a great deal of evidence existed to contradict it? Gal explains in more detail:

That is, there is no general cognitive bias that leads people to avoid losses more vigorously than to pursue gains. Contrary to claims based on loss aversion, price increases (ie, losses for consumers) do not impact consumer behavior more than price decreases (ie, gains for consumers). Messages that frame an appeal in terms of a loss (eg, “you will lose out by not buying our product”) are no more persuasive than messages that frame an appeal in terms of a gain (eg, “you will gain by buying our product”).

People do not rate the pain of losing $10 to be more intense than the pleasure of gaining $10. People do not report their favorite sports team losing a game will be more impactful than their favorite sports team winning a game. And people are not particularly likely to sell a stock they believe has even odds of going up or down in price (in fact, in one study I performed, over 80 percent of participants said they would hold on to it).

To be sure it is true that big financial losses can be more impactful than big financial gains, but this is not a cognitive bias that requires a loss aversion explanation, but perfectly rational behavior. If losing $10,000 means giving up the roof over your head whereas gaining $10,000 means going on an extra vacation, it is perfectly rational to be more concerned with the loss than the gain. Likewise, there are other situations where losses are more consequential than gains, but these require specific explanations not blanket statements about a loss aversion bias.

Perhaps most interestingly, Gal goes on to offer an explanation for why loss aversion has become such a prominent principle generally accepted by many scholars as truth.  He explains that another key cognitive bias, confirmation bias, has been a major factor. Scholars have tended to look for evidence that confirms and bolsters the theory of loss aversion, while dismissing or discounting contradictory or discordant findings. Other social forces too have helped to maintain and preserve the conventional wisdom. Gal concludes, "Wrong ideas can persist for a long time despite contrary evidence, and therefore, that there is a need to critically assess accepted beliefs and to be wary of institutional consensus in science and otherwise."

Tuesday, January 07, 2020

Working Backwards to Innovate at Amazon

Recently, Lisa Eadicicco wrote an article for Business Insider titled, "This is the test Amazon uses to decide which ideas are worth turning into new products."  She describes the "working backwards" methodology that Amazon routinely uses during its new product development process.  Here's an excerpt: 

And while Amazon's product portfolio may be larger and more diverse than ever, there's a simple process the company uses to figure out which ideas are worthy of becoming real products: writing a press release.  This is what has come to be known as the "working backwards document" within Amazon, a mock press release that describes the product and the problem it's trying to solve.

"Everything starts as a working backwards document," Miriam Daniel, Amazon's vice president of Alexa and Echo devices, recently said to Business Insider following the company's fall product launch event. "The reason we write a press release is, when we read it, we want to be able to say as a consumer, 'Wow, I want that.' We write with that end in mind."

All of the devices Amazon unveiled during its event at the end of September started as a working backwards document, says Daniel. The goal of the working backwards document is to help the product team focus on what the main use case for a particular product would be.

Often, at Amazon, they not only draft the press release as part of this working backwards process.  They also write the frequently asked questions document that will be provided to customers if the product/service is built.   These documents help Amazon's managers envision how customers will react to the new product, and in particular, whether it will fulfill a customer need or alleviate a key pain point for users.   

I wrote about the working backwards approach in my book, Unlocking Creativity.   It's a powerful technique that can help individuals step back and gain some distance from a challenging problem.  They can look at the problem in a new way by jumping forward in time and trying to predict how others will react to our solution at that point in the future.  For more on how and why this type of approach is worthwhile, check out the video below: