Can Data Analytics Make Your Product Boring?

We live in an age in which companies are investing heavily in data analytics and algorithms.  Clearly, these analyses are often very helpful in making better decisions.  However, I'd like to pose a critical question as leaders ponder the impact of analytics in their organizations.  Can analytics make your product or service boring?  Could it lead to strategy convergence in your industry?  In other words, might an intense focus on analytics by all competitors lead to less much product differentiation?

Consider the case of the National Basketball Association (NBA).   In the 1986 NBA season, teams averaged 3.3 three-point attempts per game.  League MVP and champion Larry Bird attempted 194 attempts for the entire season.   That number led the entire league.  Last year, teams averaged 35.1 three-point attempts per game.  26 players attempted more than 500 three-point shots during the season.   In 1986, games involved a wide array of shooting.  Teams had powerful low-post players such as Hakeem Olajuwon and Kevin McHale.  They had players who could slash to the basket and others who had perfected the mid-range jumper.  Today, the game involves an overwhelming number of three-point shots and very little low-post play.  In the 1980s, some teams played a bruising, slower, physical game.  Others played a run-and-gun, fast-break game.  Today, nearly all teams rely heavily on long-distance shooting. 

Fans can disagree over whether today's game is better than the 1980s version of NBA basketball. However, it is difficult to argue that today's game is more differentiated than the 1980s version.  Most assuredly, teams all play a much more similar style of play today.  Strategy convergence has taken place at an incredible rate.   What's driven this change?  Analytics.  The data clearly say that teams should take a high number of three-point shots.  It simply makes a great deal of sense if you want to win. 

What's the lesson for business leaders?  Analytics may drive what seem like clearly better decisions.  Yet, it might just lead to strategy convergence, which may be harmful in the long run.  Your product may become much more similar to those of your competitors.  Distinctiveness falls, and in the long run, that may actually harm profitability for all rivals.  

Amazon CEO Andy Jassy on Shaping Your Career Journey

Amazon CEO Andy Jassy recently penned a blog post about career planning and development. Mostly, the post offers a series of clichés such as "find your passion" and "don't be afraid to fail." However, one point bears emphasis and reflection. Jassy argues as follows:

"I don't think that you have to know what your final destination is in your job early in your life. Maybe not even in your 40s, 50s, and 60s. I think that you have a chance to keep writing your own story and reinventing your own story.  Before I got to Amazon, I had tried sportscasting and sports production, I coached a soccer team, I worked in a retail golf store, I did product management, I tried investment banking, I tried sales, I tried a lot of things.  I really do believe it's perhaps as important to figure out what you don't want to do as what you want to do, because it actually helps you get more centered on what really makes you happy. So don't be afraid to try a lot of different things and don't let people tell you that whatever you've done—even if you've done it for a while—is what you must do. You have the opportunity to write your own story."

Most of my young students feel a great deal of pressure about their career choice and job search as they complete college.  They often think they have to have it all figured out.  If only they thought hard enough, talked to enough people, found the right mentors... they would land the perfect job and know precisely what career they should choose.  Then, all they have to do is begin to set some concrete goals for the next 3, 5, 10 years... and they are off to a great start.  

The reality is much different, of course.  Most will switch jobs frequently, particularly in the early part of their careers.  Some will switch to completely different professions, or different functional areas within the business world.  The shifts will occur for various reasons, including the emergence of incredible opportunities, changes in family situation, etc.  Some, though, will make substantial shifts because they are not satisfied with their early choices, don't find them fulfilling, or discover that they are simply not well-suited for those roles.  Here, Jassy's advice becomes so important.  We should not think that we have to have it all figured out.  We should be willing to experiment, particularly early in our career.  We will only know what we enjoy, and what we are skilled at, if we experience it for ourselves.  Talking to others is helpful, but not sufficient, for coming to these conclusions effectively.  

The willingness to experiment should not end early in your career, according to Jassy.  Here I agree wholeheartedly as well.  New technologies will emerge, creating new threats and opportunities that will shape people's careers.  The willingness to learn will be crucial, and so will the willingness to adapt.  Those who began their careers 35 years ago in retail could hardly have imagined the landscape today.  Yet, opportunities still exist for those willing to put aside their early career goals and rethink what is best for them today.  All of this change may be unsettling, but the first step is to accept that the career path will not be linear for most of us, even later in our lives.  

Southwest Pursues a Me-Too Strategy

Source: Wikipedia

This week, Southwest Airlines announced a major strategy shift. Alison Sider of the Wall Street Journal reported that, "Southwest Airlines plans to start charging for checked bags, a seismic shift that will boost revenue but potentially give its fiercely loyal passengers a reason to shop around. 'Bags fly free' was a policy so sacrosanct that Southwest trademarked the phrase and devoted a section of a book celebrating its 50th anniversary to it."  She also reported that, "Southwest is adding a bare-bones fare similar to its rivals’ basic economy tickets, with restrictions galore, including no advance seat assignment."  This latest change comes after other major changes including the move away from open seating, announced in July, as well as the decision to sell tickets on platforms such as Expedia.   Southwest has made these changes after pressure from an activist investor, Elliott Investment Management.  The firm pressed Southwest to add five new board members in October.  

The stock market reacted positively to the news of the strategy changes at Southwest. Sider reported that, "Shares in Southwest surged more than 8% Tuesday, on a day when several airlines tempered their financial outlooks for the first three months of the year."  I understand that the changes likely will result in new revenue and improved profitability in the short term.   For that reasons, investors are cheering.  However, I would offer a cautionary word on this strategic shift.  Abandoning many of the classic elements of Southwest's strategy means that the firm has lost of much of its distinctiveness.  What sets it apart now from other airlines?  In the past, we could articulate a whole host of distinctive features of the Southwest model.  Now, it looks more and more like any other airline.  In the long run, becoming less distinctive will make it more difficult to achieve superior profitability.   Competitive advantage typically does not derive from me-too strategies.  

Two research papers are relevant to this question about Southwest's strategy.  First, in 2013, Jost Daft and Sascha Albers published a paper titled "A conceptual framework for measuring airline business model convergence."  They studied the European airline industry and measured the extent to which the strategies of competitors converged over time.  They found a remarkable amount of convergence, with one glaring exception.  They wrote:

“A comparison of the business models of the 26 [European] airlines in 2004 and 2012 revealed a decrease of distance of nearly 19 percent. This considerable and statistically tested reduction of differentiation is [an] indicator of the convergence of airline business models…Ryanair, which is known to be fundamentally focused on its initial cost-saving business model design, is the only airline that was able to even increase the average distance to all other airlines.”

What's interesting about the one outlier in their study? Ryanair.  The Irish airline, run by brash CEO Michael O'Leary, has been one of the most profitable airlines in Europe for the past two decades.  Controversial? Yes. Profitable? Definitely.  

A second paper that warrants attention here was published by Stewart Thornill and Roderick White. The paper, published in Strategic Management Journal in 2007, was titled "Strategic Purity: A Multi-Industry Evaluation of Pure vs. Hybrid Business Strategies."  They examined data regarding the question of whether a pure strategy does better than a hybrid one, referring to Michael Porter's concept of pure "low cost" vs. "differentiation" strategies.  In other words, is being "stuck in the middle" a big risk, or can many firms pull of this hybrid approach?   Here is what they found: 

"Does strategic purity pay? Most theorists believe strategic purity—the extent to which a business pursues one type of generic strategy over another—contributes to better performance. By defining the strategy space consistent with the theory, and employing improved design and methods, our study of 2,351 businesses finds a significant relationship between strategic purity and performance. Purity does appear to pay."

In short, the distinctive, low-cost position at Southwest produced competitive advantage and superior profits for many years.  They lost their cost advantage over the years, and now they are eroding their distinctiveness.  Are they at risk of trying to be all things to all people?  Other than price, what will attract customers to Southwest moving forward? Will it be superior customer service?  According to JD Power's 2024 airline industry results, "Southwest Airlines ranks highest in customer satisfaction in the economy/basic economy segment for a third consecutive year."  Can that result be sufficient to set Southwest apart in the cut-throat airline industry?  Will these changes affect that service ranking?  These are the key questions that management must confront moving forward.  The company has many positive attributes and a tremendous history on which to build.  It will be quite interesting to see how it navigates these choppy waters in the years ahead. 

increase; green up pointing trianglSplans to start charging for checked bags, a seismic shift that will boost revenue but potentially give its fiercely loyal passengers a reason to shop around

Interviewing Candidates Who Have Prepared Using Generative AI Technologies

Navio Kwok writes in the MIT Sloan Management Review that job candidates increasingly are utilizing generative artificial intelligence to prepare for interviews.  They are providing job descriptions and company data, as well as information about themselves, and then asking for help simulating the interview, anticipating questions, and generating strong responses to those queries.  Kwok sounds an alarm though:

However, there is growing concern among hiring professionals that candidates using generative AI are gaming the interview process. Research suggests that GenAI use has a material influence on hiring decisions: In one recent study, candidates who used such tools to prepare received higher overall interview performance ratings compared with those who were unassisted by GenAI.

This finding only exacerbates concerns about the job interview process. Several years ago, I drafted a post about Yale Professor Jason Dana's research on the flawed approach and poor results of many job interviews. Dana's work demonstrated that hiring managers often draw erroneous conclusions from interviews. He makes the case that people often hear what they wish to hear.  Reflecting on his research, he wrote, "The key psychological insight here is that people have no trouble turning any information into a coherent narrative....People can't help seeing signals, even in noise."

Kwok recognizes that we cannot stop candidates from using generative artificial intelligence to prepare for interviews.  However, we can take some steps to insure that we are not being duped by these candidates.  First, Kwok advises that in-person interviews are important, so that candidates cannot use AI in real time to generate responses.  Second, Kwok argues that the right types of follow-up questions are critical to assessing a candidate's qualifications and capabilities.   For instance, Kwok recommends asking the candidate to explain their thought process in detail, as well as their rationale, when explaining key decisions they have made in the past.  Kwok also recommends asking the candidate to explain what options were considered, but rejected.  Finally, Kwok suggests that hiring managers pose probing questions about the challenges and obstacles that the candidate faced, and how they addressed those unanticipated issues.  He also recommends asking the candidate to explain what he or she might do differently next time. 

Moving beyond these thoughtful suggestions, I would recommend requiring candidates to take on a challenging task, rather than simply answering questions.  Give them a problem and ask them to present on that issue.  Or, ask them to do some work that is similar to what they will encounter on the job, evaluate that work, and then ask them about how they approached the task.  Require people to DO, rather than SAY what they have done.  That is the best remedy for the challenges Kwok and Dana describe regarding the interview process. 

Managing Cognitive Load During Long Meetings

What is cognitive overload and why is it important to consider as managers? The Mayo Clinic describes this challenge as follows: "When there is too much information to process, you may feel cognitive overload. This happens when you reach a point of paralysis of information — not being able to process and then act on what is heard."

When I'm teaching, I always try to be very aware of the cognitive load that I'm imposing on students.  I want them to be engaged in challenging and rigorous analysis, solving tough problems, and debating with their peers.  The cognitive load can be very high at times. I'm cold-calling intermittently.  They have to be on their toes.  However, I try to shift gears pretty frequently during class, knowing that the best teaching often has a change in pace, content, or pedagogy every 10-12 minutes.  When I change things up, I might occasionally engage students in a brief task that offers them a bit of a cognitive break.  For example, I might show a quick video about the company or leader we are discussing, or I may ask them to ask them to get up and go to the whiteboard to brainstorm some options for the company moving forward.  The students are still engaging in critical thinking, but this shift gives them a bit of a cognitive break.  They are engaging in something a bit less stressful, and/or they are moving around a bit in the room.  Then, in a few minutes, they are ready to dive into a different, quite complex issue.  

This same approach to managing cognitive load can be useful in meetings, particularly those that are lengthy in duration.  Having people sit in their chairs for hours discussing a series of complex financial performance metrics can be difficult.  People will eventually become less attentive and productive. They may find their cognitive performance deteriorating due to fatigue and stress.  Therefore, managers need to think about giving them a cognitive break during these meetings.  That does not just mean having a coffee break here or there.  You can intermittently introduce lighter topics or a brief activity that gets them out of their chairs and up to the whiteboards.  Movement, change of pace, and topic selection all help to manage cognitive load in a way that leads to more effective meetings. 

Gender Divide on AI Adoption

Are men more likely than women to adopt generative artificial intelligence tools in their work?  Indeed, that is what scholars Nicholas Otis, Solène Delecourt, Katelynn Cranney, and Rembrand Koning have discovered. They recently published a working paper titled "Global Evidence on Gender Gaps and Generative AI."  Here is an excerpt from their paper:

The findings above document that gender gaps in generative AI are nearly universal. We find women use generative AI less than men in data from 18 studies covering 143,008 people from across the world as well as data on who uses top generative AI websites and apps. Moreover, equalizing access does not appear to fully close the gap, even when presented with the chance to use generative AI, women are less likely to use this new technology than men. Akin to efforts to equalize female labor market participation and pay (England, Levine, and Mishel, 2020), it appears that social, cultural, and institutional frictions have led to a gendered gap in generative AI adoption.

Why does this gender gap exist?  HBS Working Knowledge recently interviewed Rembrand Koning about the research.  The article, by Michael Blanding, reports that, "the research suggests women are concerned about the ethics of using the tools and may fear they will be judged harshly in the workplace for relying on them."  

Why is the gender gap finding so consequential?  Two important ramifications must be considered.  First, will the differential usage lead to the exacerbation of gender biases?  In their paper, the scholars write:

This disparity has the potential to be significant. As generative AI systems are still in their formative stages, the under-representation of women may result in early biases in the user data these tools learn from, resulting in self-reinforcing gender disparities (Cao, Koning, and Nanda, 2023). Such biases in user data—similar to those that have previously led to racial disparities in generative AI performance—could result in generative AI systems that reinforce gendered stereotypes and in tools that are less effective at the tasks more often performed by women (Koenecke et al., 2020; Guilbeault et al., 2024).

Secondly, the lower adoption rates by women may affect their career opportunities and future compensation, according to these scholars.  Thus, further work will be needed to understand what's driving the gender gap, and how it may be affecting employees and their careers.  

Thinking Carefully about Boomerang Employees

How often do employees return to your company after departing for a promising opportunity elsewhere?  Why did they leave, and what caused them to return?  Anthony C. Klotz, Andrea Derler, Carlina Kim and Manda Winlaw have conducted some useful research on the topic of boomerang employees.  They found that returning to an organization where an individual once worked is quite common. Based on their analysis of extensive employee work records, "28% of “new hires” were actually boomerang hires who had resigned within the last 36 months."  Clearly, employees depart and often discover that the grass indeed was not greener elsewhere.  

What does this boomerang phenomenon mean for employees and employers?  For employees, the research implies that individuals must do more homework before jumping ship.  They need to go beyond what recruiters might be telling them and try to ascertain precisely what their role and responsibilities will be.  Moreover, they need to try to determine how the culture and values as articulated might differ from the actual practice within the organization.  Chris Argyris used to describe this schism as the difference between espoused values and values-in-use.  Employees also need to focus on how they leave their existing organization.  Ian Morris, co-founder of Likewise and former CEO of real estate software company Market Leader, once advised my students that they should always "leave well" when departing an organization.  You never know if and when your path may cross with that of a former co-worker or manager.  Preserving relationships during and after the departure may be very important for one's career.  It surely will help if you become a boomerang employee.

For companies, the boomerang phenomenon means two things. For the companies losing talent, managers  should maintain open lines of communication with talented former employees.  The research shows that many boomerangs occur shortly after the one year mark at the new company. Thus, managers should reach out around that time to see how things are going for the former employee at their new organization.  For the companies gaining talent, they need to think about how they can check in regularly with new employees to see if they are finding the position consistent with their expectations.  Identifying discrepancies between expectations and reality as early as possible can help to avoid misunderstandings, clarify roles and responsibilities, and make adjustments to better match workers' professional goals with organizational needs and demands.   Don't wait for the one-year merit review to have an in-depth conversation with a new employee because they may already have one foot out the door at that point.