Do We Actually Want Some Dissatisfied Employees?

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MIT researcher George Westerman has written a provocative post on the MIT Sloan Management Review website. The title of his short article is, "The New Digital Mandate: Cultivate Dissatisfaction."  Westerman writes:  

The problem is that employee satisfaction can be a double-edged sword. While satisfied employees are good for current activities, that very satisfaction can inhibit innovation. Transformative innovation is difficult. It is far easier to stick with what we know works and tweak the current process than it is to start over. People who are satisfied with the current way of doing business are not likely to transform it.

People who transform their organizations must be aggravated enough with the current situation that they’re willing to bear the effort and risk to change it. Leaders who want their organizations to continuously transform must not only look for dissatisfaction on which to capitalize, but also be willing to cultivate dissatisfaction in their employees.

Westerman argues that there is a right and a wrong way to be "dissatisfied" in an organization.   A useful form of dissatisfaction involves a willingness to question the conventional wisdom and the commonly accepted ways of doing things.   It means protecting the organization against complacency.   The wrong type of dissatisfaction involves pointing fingers and blaming others for problems that arise, while not offering constructive alternatives.   

I agree wholeheartedly. A certain amount of healthy and constructive restlessness can be a powerful positive force in an organization. Andy Grove, long-time CEO of Intel, once argued that organizations need to have a few "helpful Cassandras" who can bring some healthy paranoia to the table.  Grove once wrote, "I believe in the value of paranoia. Business success contains the seeds of its own destruction."  Of course, what you do not want are naysayers who simply look for all the reasons a new idea won't work.  You don't want people who are stopping innovative ideas in their tracks.  You would like people who are looking broadly for potential threats to a firm's competitive advantage and are protecting against complacency.  

The Dangers of Benchmarking

Freek Vermeulen of the London Business School recently penned an insightful blog post titled "Don't Be Fooled By Success."   He explains three key downsides associated with benchmarking the top firms in your industry.   First, he explains that managers often confuse cause and effect.  The "best practices" that they observe might not be the driver of high performance, but instead the result of success.  Second, managers forget that good fortune and the right timing might have had a lot to do with another company's success in the marketplace.  Finally, some efforts to adopt others' best practices might lead to a short term gain at the expense of long run performance.  

I would add a few other thoughts with regard to benchmarking.  First, you should seek to understand what others do well and how you might learn from them.  However, imitation alone will not lead to sustainable competitive advantage.  You have to do things differently, or do different things, if you wish to stand out in the marketplace.  Second, benchmarking can lead to strategy convergence within an industry, which ultimately shrinks the total profit pool.   Why?  Each company can spend too much time "catching up" in areas with they are behind their rivals and insufficient time and attention on how to expand their lead in key domains.  Third, managers forget that competitive advantage does not come from "best practices" but rather "tailored practices."  Managers must adapt processes, techniques, and systems to fit their organizational culture, structure, capabilities, and target market.   Finally, competitive advantage comes from organizational fit/alignment.  You won't necessarily achieve comparable success by copying parts of another firm's system of activities and capabilities.  The whole is greater than the sum of the parts at great firms.   In her book, The Strategist, Cynthia Montgomery makes this point quite clearly with a terrific quote from IKEA's former president:

“Many competitors could try to copy one or two of these things. The difficulty is when you try to create the totality of what we have. You might be able to copy our low prices, but you need our volumes and global presence. You have to be able to copy our Scandinavian design, which is not easy without a Scandinavian heritage. You have to be able to copy our distribution concept with the flat pack. And you have to be able to copy our interior competence – the way we set our stores and catalogues.” - Anders Dahlvig, Former President of IKEA

Amazon: No Need to Disclose (yet)

Shira Ovide has a terrific article for Bloomberg BusinessWeek titled, "Amazon Takes Secrecy to a Comic Extreme."   She writes,

Companies, of course, would prefer to reveal as little as possible. And then there's Amazon.com Inc., which takes financial disclosure stinginess to the next level. So far, investors have been fine with it. They see one of the world's most ambitious companies and a stock price that has quadrupled since 2012, and happily toss aside their Amazon spreadsheets filled with question marks. But Amazon's thriftiness with financial disclosure could backfire. Secrecy is acceptable when companies are doing well. It becomes suspicious when things go south.

Ovide writes that Amazon provides quarterly earnings projections that are "comically broad."   Ovide explains that the company "loves to show charts without labels" and provide investors and analysts with "reams of fluff."  Bezos, I believe, would rebut Ovide's observations by explaining that Amazon does not manage for quarterly earnings or to meet short-term investor expectations.  He is managing for the long term, and he's putting the customer first.  That's his story, and he's sticking to it.  In fact, he's stuck to it for 22 years, profits be damned.  

Ovide does make an important point though.   This attitude about disclosure works beautifully until a company stumbles.  If and when that happens to Amazon, the willingness to accept very limited disclosure will change.  In fact, it may change quite suddenly if Amazon falters.   For now, though, Amazon gains a key competitive advantage through its limited disclosure policy.   Competitors don't know the types of details that they would love to have access to as they formulate their strategies.  Once again, Bezos has found a way to gain the upper hand.  Some of his key rivals have to play by a different set of rules.  Not only must they turn a sizable profit to please investors, but they must disclose much more information.  

Would Anyone Miss Your Company?

Columbia Business School Professor Rita McGrath sent out a terrific tweet several days ago.  She offered a thought about Macy's, the department store struggling to adapt to the new business environment in which find themselves.  Macy's faces multiple threats these days, including e-commerce, as well as more nimble specialty retailers that pursue "fast fashion" strategies.  I have posted McGrath's tweet here.  What an awesome concept!   Who would miss Macy's if they disappeared tomorrow?  What customers find them indispensable? What customers are highly devoted to Macy's and why?  What do people get at Macy's that they cannot get anywhere else?  Every firm should be asking this question.  It truly challenges management to consider what makes their organization truly distinctive.  

Netflix: Geography, Age, Gender Not Good Predictors

David Morris wrote an article this week for Fortune titled, "Netflix: Geography, Age, and Gender are 'Garbage' for Predicting Taste." Morris writes, 

"'Geography, age, and gender? We put that in the garbage heap,' VP of product Todd Yellin said. Instead, viewers are grouped into “clusters” almost exclusively by common taste, and their Netflix homepages highlight the relatively small slice of content that matches their taste profile. Those profiles could be the same for someone in New Orleans as someone in New Delhi (though they would likely have access to very different libraries)."

Why is this statement so fascinating?  To me, it speaks directly to Netflix's competitive advantage.  If geography, age, and gender were, in fact, accurate predictors of viewers' preferences, then Netflix would have a far less formidable advantage over rivals.  Why?  Well, those variables are easy to identify and measure.  Others can get access to that data quite easily and build predictive algorithms using that information.  However, if more accurate predictive algorithms involve data that are not as publicly available, then Netflix has a key advantage.  In other words, if the predictive power rests with variables that come from proprietary data that Netflix has collected about us, then the sustainability of Netflix's advantage over competitors rises substantially.  The same holds true for any company trying to take advantage of "big data" to develop predictive algorithms.   The key is to unearth variables that matter, but hopefully, variables that are not easily identified and measured by others.  

The Advantages & Disadvantages Incumbents Have Relative to Startups

In this brief video, Stanford Professor Jesper Sorensen explores the advantages and disadvantages that incumbents have as they compete against startups.  It's a good recap for any entrepreneur.