Monday, January 31, 2011

The Dark Side of Creativity - A Rebuttal

My former colleague and co-author Lynne Levesque has written a thoughtful guest post about the Gino and Ariely research on the "dark side of creativity" (about which I blogged a few days ago). Lynne and I wrote an article for the MIT Sloan Management Review on "making change stick" several years ago. She has a great deal of expertise in the area of creativity, and she raises some good points about this new research on the possible relationship between creativity and dishonest behavior. Here is her guest post:

Since creativity is a competence in high demand these days, especially among leaders, it needs to be appropriately understood. Such understanding is also critical since I believe that we all have the potential to be creative – at least at some level -- and that recognizing and appropriately valuing this vital quality is essential for personal and organizational excellence, dare I say even survival. Accordingly, I have several comments about this paper on the “Dark Side of Creativity:”

First: It should be recognized that the authors limit themselves to only part of what creativity is really all about. The most current definition of creativity is that it is “the ability to produce novel and useful work– not just ideas. As such creativity involves much more than the two processes studied by the authors -- divergent thinking and cognitive flexibility. True creativity also involves convergent and deliberate thinking, planning, strategizing, and implementing.

Secondly, the authors do not indicate that creativity causes dishonest behavior, only that “high levels of divergent thinking and cognitive flexibility are likely to be associated with dishonest behavior” and even then only under certain circumstances. I might add that, without limits, divergent thinking is also associated with and may even cause chaos and craziness!

Thirdly, the tests that the authors use to judge creativity are self-rated measures of “divergent thinking.” Is it possible that those participants in the research who exhibited dishonest behavior in the exercises also manipulated their answers on the “creativity” tests?

Finally, I agree with the authors that creativity can be used to justify unethical behaviors and to push boundaries. These dangers put even more emphasis on leaders to understand creativity and their crucial role in defining constraints, in terms of clearly articulated goals and organizational values. Enron didn’t fail because of the creativity of its employees and leaders. It failed because leaders got carried away with their own success and greed and neglected to set and enforce ethical boundaries and necessary controls.

Thus topics for further research, as the authors suggest, should include the role of leaders and organizations in ensuring that promotion of creativity and innovation is closely coupled with education and enforcement of standards of ethical behavior. Hopefully this further research agenda will also include accounting for all the good that creative thinking has contributed to the world. How do those who are recognized for their creative contributions manage to walk on the Bright Side of Creativity?

Lynne C. Levesque, Ed.D, author of Breakthrough Creativity: Achieving Top Performance Using the Eight Creative Talents (Davies-Black, 2001)

Friday, January 28, 2011

Remembering Challenger and Its Lessons

25 years ago today, the tragic explosion of the Challenger Space Shuttle took the lives of seven brave astronauts including New England high school teacher Christa McAuliffe. The ABC News video below looks back at the tragedy. On this day, we remember the courage of those astronauts and mourn their loss. Hopefully, we also remember the key lessons from that catastrophic failure.

For those who have not read it, sociologist Diane Vaughan wrote the seminal book on the Challenger accident back in 1996. That book provides a detailed systemic explanation, looking specifically at the culture of the organization. Vaughan argued that a process that she called the "normalization of deviance" had taken place over the years and led to the tragedy. By that, she means that O-Ring erosion had gradually become an accepted risk and even taken for granted at NASA. By 1986, O-Ring erosion essentially did not constitute an anomaly that triggered widespread concerns in the organization. As she says, when the normalization of deviance occurs, "the unexpected gradually becomes the expected, and then becomes the accepted." That process takes place over years, and it means that we gradually go down this slippery slope at times whereby we normalize greater and greater risks over time. All organizations prove vulnerable to the normalization of deviance and should be aware of this phenomenon.

Thursday, January 27, 2011

The "Moving the Needle" Fallacy

In a discussion yesterday with senior leaders at a large consumer goods company, we discussed an important challenge facing managers who are trying to build new ventures or launch innovative new products in large organizations. Many managers face what I call the "moving the needle" fallacy. In many firms, senior executives will only endorse new ventures or products if they believe that they will "move the needle" in terms of top line revenue for the firm. In other words, they want the business to be big, not just a tiny increment to overall sales. They don't think small ventures are worth the time and effort.

What's the fallacy here? In my view, this requirement actually drives people to broaden the potential market for their innovative new product or service to the point where it becomes far too generic and similar to rivals' offerings. They essentially are pushing their managers to be less focused. Instead of tailoring a product to a very specific target market, managers end up trying to be all things to all people in search of a large enough target market to move the needle in terms of total firm revenue. In sum, to attract a broader range of customers, they offer a product that is far less distinctive. We get the opposite result from good strategy!

Wednesday, January 26, 2011

Academically Adrift

A new book, titled Academically Adrift, has raised some troubling questions about how much students actually learn at college. The study, by Professors Richard Arum and Josipa Roksa, examines the progress made by a nationally representative sample of more than 2,000 students who entered 24 four-year colleges in the fall of 2005. The study finds that 36% of students showed no gains in reasoning and writing skills over four years of college, based on a test called the Collegiate Learning Assessment. Some people already have raised concerns about the book's approach. However, many people acknowledge that the book makes some strong points, particularly with regard to writing skills. I look forward to reading the book and learning more about the research methodology and details of the findings. Every college educator should read this book and take the findings seriously.

Tuesday, January 25, 2011

Dark Side of Creative Individuals?

Francesca Gino and Dan Ariely have conducted a startling new study that provides evidence suggesting that creative individuals may be more likely to engage in dishonest behavior. Here is an excerpt from their working paper abstract:

In four studies, we show that participants with creative personalities who scored high on a test measuring divergent thinking tended to cheat more (Study 1); that dispositional creativity is a better predictor of unethical behavior than intelligence (Study 2); and that participants who were primed to think creatively were more likely to behave dishonestly because of their creativity motivation (Study 3) and greater ability to justify their dishonest behavior (Study 4). Finally, a field study constructively replicates these effects and demonstrates that individuals who work in more creative positions are also more morally flexible (Study 5). The results provide evidence for an association between creativity and dishonesty, thus highlighting a dark side of creativity.

Wegmans' Employee Retention

As many of you know, Wegman's Markets - a privately Rochester, NY based supermarket - has been ranked in the top 10 of Fortune's best places to work this year. The company attracts and retains employees through a number of unique initiatives. Perhaps most impressively, their extensive employee education program helps to attract and retain people. This program began in 1984. Since that time, Wegmans has offered $77 million worth of scholarships to more than 24,000 employees. These scholarships attract talented, hard-working staff members, beginning with teenagers who work part-time and are interested in earning tuition assistance for college. The group of young people most interested in this form of compensation, of course, are precisely the type that you would like to have on your staff. That's what makes this program so great - it creates a powerful self-selection process with regard to applicants.

Since supermarkets by nature have many part-timers, including many young people, this program does a particularly good job of finding and retaining talented high school and college-aged employees. Some go off to college and return afterward, though the company scholarships do not dictate that they return. Does it work? According to some statistics that I have seen, Wegmans has substantially lower turnover than the usual grocery chain. Moreover, they have a substantial group of employees who have lengthy tenures at the firm.

Friday, January 21, 2011

Bad Process vs. Good People

I read this great quote in yesterday's Wall Street Journal. General Jim Mattis said, "When capable people with good intentions meet bad processes, bad processes win 9 times out of 10." How true! So many talented people become frustrated by bad processes in organizations. The question is: How do organizational leaders respond when capable people identify what is clearly a flawed process? Do they become defensive? Do they demonstrate an unwillingness to take a fresh look? Do they refuse to change simply because the process does have some valid reasons for being?

Have you heard of Hot Mama?

Have you heard of Hot Mama? No, we aren't talking about some new reality television show, nor are we describing a new segment on the Howard Stern radio program. Hot Mama is a fast-growing Minneapolis-based retailer which targets young mothers who want to dress fashionably. The retailer's 17 stores generated over $15 million in sales last year according to this Fast Company magazine article.

What's novel about this concept? The store doesn't just offer attractive apparel. It provides a complete experience that is tailored to the young mom. Specifically, the store provides an entertaining experience for the children, so that the mom can actually shop for clothes without constantly being distracted, or without having to rush. Hot Mama provides toys, coloring books, video games, and movies to entertain kids. The layout of the store makes it easy for moms to shop, while not losing sight of their little ones. The store associates, known as stylists, also have been trained to specifically help moms find clothes that work well with their particular body type. Moreover, the store associates help to watch over the children as the moms try on clothes.

Does the concept work? According to the article, each mom spends one hour per visit to the store. That metric is astounding to me. In most retailers, moms with young children struggle to rush through the store quickly. At Hot Mama, they've found a way to provide an environment whereby the mother can take her time, and as we all suspect, the more time in the store, the more likely that customers will spend. It will be interesting to watch to see whether the concept can be scaled up successfully, as well as how other apparel retailers respond.

Thursday, January 20, 2011

Breaking up Conglomerates is NOT Simply Financial Alchemy!

The most recent "Deal Professor" column on the New York Times' website chronicles the rise and fall of conglomerates, and it describes break-ups of these giants as "financial alchemy." Steven Davidoff, a UConn law professor and former corporate attorney, writes this interesting blog. While I enjoy reading the column, I strongly disagree with the premise of this recent article. The article suggests that the demise of conglomerates may be a fad, much in the way that tracking stocks were a fad during the internet boom. While I agree that trading stocks were a passing fad and perhaps did resemble financial alchemy, I don't think the same holds true for break-ups.

Is there another explanation for the rise and fall of conglomerates, one that would make the case for the efficiency of breaking up these unrelated diversifiers? Of course! Most corporate strategy scholars would argue that conglomerates made more sense in decades past when product, labor, and capital markets were less efficient than they are now. Thus, the corporate parent in one of these conglomerates perhaps could move money and people around more effectively than would otherwise happen if the divisions were completely separate. However, over time, external markets became more and more efficient. Thus, it became hard to justify the notion that the corporate parent could allocate resources more efficiently than the external markets. Moreover, the complexity of these conglomerates, and insufficient transparency, made it very difficult for investors to properly value them. Thus, we have seen the decline of unrelated diversifiers over time. Yet, in emerging markets, conglomerates still exist, and many do quite well. Scholars have argued that it may be because markets are not efficient in those countries, resembling conditions from decades past here in the United States.

Wednesday, January 19, 2011

The Indispensable Leader

The Steve Jobs' leave if absence raises some interesting questions about leadership. When an employee joins an organization at the entry level, he or she often wants to make themselves indispensable to the firm. After all, the more crucial your role, the more job security... Or so goes the conventional wisdom. At this point, you are an individual performer, not a manager. As you rise in the organization, it still feels as though you are evaluated based on how indispensable you are. People often worry about delegating too much, because they fear that others will realize "they aren't really needed" around here. However, at some point, great firms hold leaders accountable for building a leadership bench and an organization that can thrive without them. The challenge, though, is how you make this transition in your career from those early days as an individual performer who hopes to be indispensable to the leader who strives for sustainability. It's a tricky transition, with no recipe for how to get it done well.

Tuesday, January 18, 2011

It's Not Simply What You Say, but How You Say It

Adam Bryant had a terrific article in the New York Times this weekend, in which he interviewed Robin Domeniconi, Senior Vice President and Chief Brand Officer of the Elle Group. Domeniconi describes her philosophy of leadership, and I particularly enjoyed her discussion of how she promotes candor and constructive conflict within her management team. She stresses that people can engage in vigorous debate, but how they articulate their disagreements matters a great deal. I concur completely. Language matters. Here is an excerpt:

One lesson I learned is from a phrase I picked up called M.R.I. It means the “most respectful interpretation” of what someone’s saying to you. I don’t need everyone to be best friends, but I need to have a team with M.R.I. You can say anything to anyone, as long as you say it the right way. Maybe you need to preface it with: “I’m just curious, and I want to understand what you’re saying better. Right now, my point of view is quite different. So can you help me understand why you don’t want to do this, or why you wanted to do this?”

Let me point out one key idea here. Domeniconi does not simply argue for being polite. She's telling us that people need to adopt an "inquiry" orientation when working collaboratively with others. They need to seek deeper understanding of others' points of view, and they need to maintain a healthy curiosity. They cannot simply advocate for their own views. They have to be trying to learn more about others' reasoning. In so doing, they can find better solutions together than simply engaging in a win-lose, zero-sum battle that can lead to very dysfunctional interpersonal conflict.

Friday, January 14, 2011

Herd Behavior in the Hedge Fund Industry?

The Wall Street Journal has a thought-provoking article today about herd behavior in the investment choices made by hedge funds. Are these firms actually mimicking each other a great deal? It seems odd, given that the typical notion we have of successful hedge fund managers is that of the independent-minded genius willing to make moves that run counter to the conventional wisdom. After all, by betting against the majority, an opportunity arises to make out-sized gains.

Many explanations can be put forward for the increase in herd behavior, and the article articulates some of those quite well. One notion focuses on the sharing of information that regularly takes place among hedge fund managers. For instance, some of these investors get together for "idea dinners" in which they share philosophies and judgments about particular firms. On the one hand, such sharing of information seems natural given that many of these investors have social ties - they went to the same schools, came from the same larger banking and asset management firms, etc. On the other hand, why do they share so freely? Are they giving away competitive advantage when they share their investment conclusions with others?

My sense is that herd behavior does not derive from the sharing of major secrets at idea dinners per se. Why would investors give away competitive advantage in this way? However, as more and more young MBAs flood the field, we may be seeing people with very similar analytical toolkits, educational backgrounds, prior work experiences, and the like. These folks may have training, but not deep expertise and the pattern recognition ability that comes with lengthy experience in a field. As a result, they may be applying the same models and the same way of thinking. That may be different from the early days of the industry, when you had a few very experienced investors using unconventional and idiosyncratic methods to determine their investment strategies.

Thursday, January 13, 2011

Pension Incentives

Joel Klein had a terrific op-Ed in the Wall Street Journal a few days ago about teacher pensions. In that essay, the former head of the NYC schools argues that hefty pensions distort incentives. First, the way we compensate teachers tends to be very back-loaded. We pay them low amounts of salary in the early years, and promise them pensions decades from now. That discourages some talented folks from entering the profession. These people might prefer more money now rather than later. Secondly, the pensions create a lock-in effect, a disincentive for teachers to leave the job in the later years. They might hang on to preserve or enhance pension benefits. Together, these two incentive effects from the way we compensate teachers may be lowering overall teacher quality considerably.

Wednesday, January 12, 2011

Twitter Becomes an E-Newspaper

Have you heard of Check out this interview with founder Edouard Lambelet.

Uniqlo: Fashion vs. Basics

Business Week has a good article about how Uniqlo, the successful chain run by Japanese retail conglomerate Fast Retailing, stumbled last year. The company tried to go toe-to-toe with firms such as Zara, which has been invading the Asian market. Zara, of course, specializes in "fast fashion" - being a very rapid follower on hot fashion trends. Zara has a constantly changing product mix, and it is adept at producing and buying small batches of new fashionable items. Uniqlo's strength traditionally focused on producing large quantities of high quality basics at a reasonable price. As it shifted toward fashion, it stumbled. The Uniqlo value chain simply was not designed for fast fashion, while Zara's was intentionally designed for that type of strategy (and perhaps less cost effective at the basics business). Now, Uniqlo has announced that it is reversing course, focusing back on basics.

Of course, the firm has one additional challenge. It remains highly concentrated in Japan, where the economy continues to be quite stagnant. It has announced plans for aggressive growth in the US, but it has yet to move beyond its flagship store in the Soho section of Manhattan. The firm will need global expansion if it wishes to grow in the future. Building a global brand won't be easy, as the competitive space is crowded. However, remaining so concentrated in Japan will spell trouble for them for sure.

Tuesday, January 11, 2011

Unlimited Data Plans from Verizon

News reports indicate that Verizon may offer unlimited data plans as part of their service contracts for their version of the iPhone. Of course, AT&T moved away from unlimited data recently, shifting instead to tiered plans based on data usage. At the time, AT&T made this move because heavy users tended to be putting a strain on their network. Many now speculate that Verizon is quite confident that their network can handle heavy usage, and therefore, has decided to battle AT&T by offering these unlimited plans.

What's going on here? To me, this story begins and ends with a simple discussion of the cost structure of providing smartphone service. When we think about price rivalry among competitors, we should always try to understand the nature of the firms' cost structures. How high is the fixed to variable cost ratio? If fixed costs are very high, and variable costs are very low, then we tend to see vigorous price competition. Why? Well, firms are trying to cover their fixed costs. Put another away, if the marginal costs are very low, then any price above those marginal costs tends to add to the bottom line (adds to contribution margin, as accountants say). In the case of Verizon, if they believe the investments in their network are sufficient, then the marginal cost of having a consumer use more data on their smartphone amounts to almost nothing. Meanwhile, the fixed costs of developing that network are high. So, they have every incentive to try to spread those fixed costs among as many consumers as possible. In short, price will fall toward marginal cost in a highly competitive market.

Monday, January 10, 2011

Self-Esteem: Better than Sex?

The Wall Street Journal reported on a new study by Brad J. Bushman, Scott J. Moeller, and Jennifer Crocker. Their work will soon be published in the Journal of Personality. According to the WSJ, these scholars asked 130 college students to consider experiences that boosted their self-esteem. For instance, they might receive praise from a professor, boosting their self-esteem. They also asked subjects to rate other pleasurable experiences such as sex, eating, etc. Here is the newspaper's summary of the key conclusions from the study:

"Overall, the students valued the self-esteem increase more than good food or sex. The ratio of "wanting" to "liking" was used to gauge the addictive qualities of each pleasure: Addicts can want a fix more than they like it. While students said that they liked all of these things more than they wanted them, the gap was narrowest in the case of self-esteem—which hints at the intoxicating effects of ego, the authors said."

Wow! We always about how this generation of young people have grown up constantly being showered with praise, with many teachers and parents thinking that self-esteem boosts were ultra-critical to their development. I just didn't know quite how critical these compliments and pats on the back were to my college students. Better than sex, really?

Friday, January 07, 2011

Reverse Mentorship

Many of you may have heard of the idea of reverse mentorship. In this process, a senior level executive finds a young person in the organization to serve as a mentor to him or her. The relationship focuses on certain skills and ideas that the young employee can share with the more senior person. For instance, the young person may have much more knowledge and expertise with regard to new technologies or social media. The senior executive can use this reverse mentorship opportunity to learn from the young person, to insure that he or she keeps abreast of key trends and developments important to the organization.

I don't know where the concept began, though I recall hearing Jack Welch describe how he discovered this concept in his own organization back in the mid-1990s. According to Welch, a business unit president in London pioneered the concept, when he realized that he did not know enough about the internet and e-commerce. Therefore, the executive found the brightest young person under the age of 30 to teach him as much as possible about e-commerce. Welch loved the idea, and he directed each senior executive at GE to find a young mentor to help them get up to speed on e-commerce if they were deficient in their knowledge and expertise in that area.

Gary Hamel also has argued that CEOs should go out of their way to stay connected with the youngest and brightest in their organizations. Hamel believes that young people will help senior executives see threats and opportunities in a whole new light, and that they can help senior leaders get up to speed with important new social and technological developments.

Some people also have argued that reverse mentorship opportunities enhance a firm's ability to retain talented young people. These young employees will value this relationship and the opportunity to have a direct connection and significant influence with senior leaders. As a result, they may be more satisfied with their jobs and more likely to stay with the firm.

Has your firm developed reverse mentorship opportunities? Would they be helpful to your organization?

Thursday, January 06, 2011

Disney's High-Tech Command Center

Last week, the New York Times ran a fascinating article about Disney's High-Tech Operational Command Center at Walt Disney World in Orlando, Florida. According to the article, Disney "has spent the last year outfitting an underground, nerve center to address that most low-tech of problems, the wait. Located under Cinderella's Castle, the new center uses video cameras, computer programs, digital park maps and other whiz-bang tools to spot gridlock before it forms and deploy countermeasures in real time."

When they see lines building, Disney can send characters to entertain guests while they wait, or add additional boats to a ride so as to accommodate more people. The command center aims to enhance customer satisfaction by making those waits either shorter or more entertaining. According to the article, Disney's command center has helped the average visitor enjoy one more ride, on average, during a trip to the park. That seems pretty significant.

What's the broader lesson from the story? Perhaps other companies can use similar technological systems to spot wait times and other bottlenecks that could be frustrating consumers, and then use that awareness to take proactive action to mitigate the problem. Some firms do, I'm quite sure. Many do not though. I've always wondered, for instance, why physicians could not do a better job of monitoring wait times and adjusting accordingly in their waiting rooms. After all, if a physician is running one hour behind at 10:30am, perhaps they could find ways to alert patients who are scheduled to come later the day (via text, email, or phone). After all, the patient would be much happier simply arriving a bit later, as opposed to sitting in the waiting room. Many other companies have customers who face frustrations because of various delays. Using technology to identify these problems and dynamically adjust seems like very good business to me.

Wednesday, January 05, 2011

Planet Fitness Commercial: You are NOT our customer

Planet Fitness' new commercial offers a funny take regarding the customers they are definitely not trying to serve. By telling us that they are not targeting the bodybuilder segment, they are trying to tell customers that they are the gym for average folks who just want to get more fit. It's a nice technique, and one that many firms often do not employ. Many firms are afraid to scare away any customer. In a way, this commercial reminds me of the "hostile brand positioning" technique described by Youngme Moon in her new book: Different, Escaping the Competitive Herd. In that book, Moon describes how some brands establish a distinctive positioning by purposefully making themselves hostile to certain types of consumers.

Tuesday, January 04, 2011

Creativity: Wiping the Slate Clean

Recently, many people have been stressing the importance of enhancing creativity in organizations. Presumably, with more creativity comes more innovative products, services, and processes. However, many leaders and firms forget that the important first step in the creative process involves "wiping the slate clean." Think of it this way: If you have done something wrong, you must first face up to your sins before you can move forward effectively. That is the concept behind confession in the Catholic Church, for instance. You want to get rid of the baggage that is holding you back and move ahead free of those past mistakes, addictions, grudges, etc.

With creativity, a similar process must take place. You have to get rid of old baggage first, before you can truly engage in bold new thinking about a challenging issue. By that, I mean you to engage in a process by which you question existing mental models, assumptions, and conventional wisdom. How does one do that? You have to put all the "givens" of today and yesterday on the table, and then be ready to discard many of them. Even if you think certain assumptions still hold true, you might have to ask yourself: What if this assumption no longer holds? That exercise can help you see the world differently.

To begin, you have to surface and identify all the implicit cognitive frameworks, models, and presumptions that constitute the current ways of thinking and working in your organization, industry, etc. Often, the implicit cognitive elements prove to be more formidable barriers to creativity than the explicit aspects of your organization such as the formal mission statement, strategic goals, etc. Getting at the implicit "ways we think and do things around here" can take awhile. Many of us take for granted certain things and aren't aware of these implicit cognitive elements of our firm's culture and strategy. After surfacing these building blocks, you have to question each of them, and ask: "What if these no longer hold true?" Then, finally, you must ask yourself what alternative mental models and assumptions might replace them. Those three steps can then help you "wipe the slate clean" before you try to "create" new ideas, products, services, and the like.

Monday, January 03, 2011

DVRs and Commercials

Recent news reports described research findings by Nielsen regarding consumer habits with regard to DVRs. Nielsen found that approximately 50% of people age 18-49 watch commercials even when they have recorded a show on DVR. Nielsen also found that homes with DVRs watched more primetime programming than those without DVRs. The Nielsen report concludes, “Contrary to fears that DVRs would wipe out the value of commercials because of viewers fast-forwarding through ads, DVRs actually contribute significantly to commercial viewing."

Well, the news reports that I read seemed to stress a "glass half full" interpretation of these findings, as described above. The conclusion seemed to be, "We thought that DVRs would be the end of TV ads, and they aren't completely. Isn't that great?" Another interpretation, of course, could be that 50% of folks aged 18-49 aren't watching those ads, and that is a HUGE number in my view. The report also found that many people are watching shows on DVR on the same day that the show originally aired. To me, that suggests that some people may be watching shows on slight delay purposefully to avoid the ads. Finally, we all know that some people let commercials run while using their DVR because they are stepping out of the room for a moment anyway, or otherwise multi-tasking. So, are they really watching those ads?

Bottom line: I wouldn't read this report with rose-colored glasses.