Tuesday, December 19, 2023

Getting Comfortable with Discomfort

Physicist Peter Carruthers, once the leader of the theoretical division at Los Alamos Laboratory, had a wonderful viewpoint about the discomfort that comes with taking on an interesting challenge:  

“There’s a special tension to people who are constantly in the position of making new knowledge. You’re always out of equilibrium. When I was young, I was deeply troubled by this. Finally, I realized that if I understood too clearly what I was doing, where I was going, then I probably wasn’t working on anything very interesting.”

As I reflect on the past few semesters of teaching, I'm reminded of the profound insight captured in this quote.  Moreover, I'm mindful that many students are deeply troubled by the discomfort that comes with learning something new and difficult.  Or, they shy away from particular activities that they find uncomfortable, such as making a public presentation or speaking up in class.  In education today, I think we are often allowing students to nestle in their comfort zone.  As a result, they are missing tremendous fairly low-risk opportunities to stretch and grow their skills in the safety of a classroom.  

What happens when they enter the workforce?  Will they seek opportunities that "fit" their skills, or will they look for challenges that will grow their skills?  For those who seek comfort and fit, they may excel early in their career, but will they plateau at some point?  Will they grow bored eventually with repeating tasks at which they have become quite adept?  Meanwhile, what about those who stretch themselves?  We need to prepare them for the failures that will undoubtedly occur.  We need to encourage them to be self-reflective, to learn quickly from their mistakes, and to adapt based on the feedback of others.  If we teach them to be resilient learners, they will thrive in the long run. 

Leaders need to think about how to best develop talented young people in their organization.  They need to insure that these future stars don't limit their potential by simply seeking comfortable opportunities in the early part of their career.  I told my students the other day that they should not shy away from the mess in their future organizations; they should sometimes run to the mess.  In those situations, there's the opportunity to fix broken things, and to learn a ton from that process.  Leaders, of course, need to support those who take on these challenges.  They will need to be encouraged, and they need some help not being frustrated by the failures along the way.  

Saturday, December 16, 2023

The Erosion of Brand Loyalty

In my discussions about competitive strategy with many clients, the topic of brand loyalty always arises.  Many companies have experienced a decline in brand loyalty, as this report indicates.  Some of this decline has occurred because of the recent bout of high inflation, as consumers have traded down to lower-priced products including private label goods in many categories.  However, some of this decline in brand loyalty began long before the recent inflationary experience.  The erosion has many causes.

However, I think it is important to think about consumers and brands in terms of both loyalty and desire for variety.  I use this simple 2x2 matrix to illustrate my point.  You may have a brand for which there is a great deal of loyalty or not.  However, you also have to think about the demand for variety in your particular product/service category.  

For some product categories, customers demand a great deal of variety.  They do not want to consume the same good/brand each time they shop.  In some cases, we have low loyalty because customers are constantly trying new things.  They love to explore and discover.  Wine definitely fits in this category. Many people are always trying new wines, and they exhibit very little loyalty.  Craft beer fits here too for many people.  In other categories, there is some loyalty, but the high demand for variety means that the brand sits firmly within the regular repertoire of the consumer.  A product such as M&M's fits in this category.  People love the brand, but they don't always want that type of chocolate.  For Trader Joe's, the brand has a cult-like following, but few people do all their shopping at Trader Joe's. They buy their groceries at several different stores, but Trader Joe's is always in their repertoire.   For companies, they need to think about where their products fit in this matrix.  Do they have a product that is not sufficiently differentiated?  Is it a commodity product, and is that the reason competition always seems to revolve around price?  Or, is the challenge that consumers want variety and love to try and to discover new things?  The response to that competitive challenge can and should be very different than the problem of a lack of differentiation.  

Monday, December 11, 2023

Are You a Perfectionist? Is That Always a Bad Thing?

Source: https://www.verywellmind.com/signs-you-may-be-a-perfectionist-3145233

In Fast Company this week, University of Texas Professor Art Markman describes some of the pitfalls of being a perfectionist. He writes, "It’s wonderful to have high standards. But, at some point, those high standards cross the line from a benefit to a hindrance." Throughout the article, he describes some symptoms that might suggest you have crossed that line. He concludes the article as follows:

"Success in life is less about mistake elimination than about mistake recovery. Do enough work on projects to know that you have covered the major bases. Focus on detecting problems that come up after the work you do. Fix problems as they arise. And if you discover that a problem reflects an error on your part, apologize for the error, take steps to repair the problem, and make a note of it so that you don’t make that mistake again."

London School of Economics Professor Thomas Curran has studied perfectionism for years.  In article for the LSE website, Peter Carrol describes Curran's comments about the downsides of crossing the line from high standards to perfectionism:

"Each form of perfectionism comes with 'negative baggage' Dr Curran says, but this is particularly acute with those that suffer from socially prescribed perfectionism. 'Socially prescribed perfectionists don’t feel valued in social situations and have a chronic need for other people’s approval, while being extremely down on their implicit value,' he says.

While some may view perfectionism as a 'necessary evil' that helps people become become highly successful, Dr Curran argues that this is a myth, and that in fact perfectionism can be detrimental to performance and health. 'There is a lot of evidence to say you are not going to get any real performance benefit from perfectionism, and that it’s actually really damaging for lots of people,' he adds."

I think Markman and Curran offer some important insights about the downsides of perfectionism.  I believe, however, that we have to distinguish between easily preventable errors and other types of mistakes that might occur.  Submitting a memo that has multiple spelling and grammatical errors is inexcusable.  Proofing the memo carefully is essential.    Moreover, the stakes will differ across a variety of situations.  Our level of perfectionism should vary by situation. If the downsides of failure are quite low, then we don't want obsess over every detail to the point of creating undue anxiety or stress of ourselves and our team.  On the other hand, if the stakes are quite high, we might want to change our standards.  Finally, we all have to get better at setting priorities.  What really matters in a piece of work that we are doing?  The substance probably matters much more than the wordsmithing, or the formatting of the slide deck.  I believe that we sometimes obsess over things such as formatting because we are trying to distract ourselves from the tougher issues or choices that need to be confronted in a particular situation.  

Tuesday, December 05, 2023

Does Merging Two Struggling Firms Create Value?


Fortune's Chris Morris has reported that Neiman Marcus has rebuffed an acquisition offer from Saks, a competitor in the luxury retail market.  Apparently, merger talks continue, with Neiman Marcus hoping that Saks will increase its $3 billion offer.

This potential merger raises an interesting question for me:  Will merging two struggling firms create value?  Both brick-and-mortar retailers are struggling to compete as e-commerce rivals soar, and specialty retailers such as Zara and Lululemon outperform them.  Morris explains some of the challenges at each firm: 

The potential matchup comes at a time when luxury retail is in a down cycle, as consumers focus on bargain hunting and economic headwinds continue to keep them on edge. Neiman, in 2002, filed for bankruptcy, but has emerged in a better position, with less debt. Saks has reportedly been late with several payments to vendors, some of whom temporarily halted shipments. Hudson Bay Company, which owns Saks, sold real estate holdings recently, raising $340 million to help pay bills.

Saks believes that some synergies will be created as a result of the deal.  According to the article, management believes that combined entity will have more negotiating leverage with powerful luxury brands, particularly those that have become part of very large luxury conglomerates such as LVMH in recent years.  Moreover, management believes that the elimination of certain duplicative functions will reduce costs.  

These synergies may be real, and cost savings may result.  However, a fundamental question is:  Will merging the firms help them turn their revenue problem around?  Can they develop a stronger competitive advantage that enables them to grow in the face of strong headwinds in the brick-and-mortar retail industry?  It seems unlikely that a merger solves the growth problem at these firms.  In addition, one has to wonder about the burden of merger integration hoisted upon two organizations that are already struggling in many ways.  Will the merger integration effort make them more inwardly focused, when they should be paying ever-closer attention to changing consumers?  How much distraction will an integration effort create?  

Two wrongs don't make a right, and two weak firms don't necessarily make one stronger one after a merger.  If this deal does occur, it may lead to value creation, but formidable challenges lie before them if they are to create and sustain value and competitive advantage for the long haul. 

Friday, December 01, 2023

Should We Micromanage Sometimes?

Source: https://day.io/blog/

Adam Bryant recently posted a terrific interview on LinkedIn with David Wilkie, CEO of World50.  Wilkie ended his comments with the following story:

The other thing is that people often struggle with the sheer volume of work they face. I like to ask the CEOs I meet, what is your management hack? One gave me a great piece of advice. “Micromanage,” he said. “I know. Everyone tells you don’t micromanage, but you should micromanage 20 percent. In every business, 80 percent of your business needs to be good, but 20 percent of it needs to be very, very good, and that’s the differentiator for you in the marketplace. Your job as CEO is to know what 20 percent that is and over-index on that.” So I tell leaders, “Figure out what your 20 percent is and focus on that.”

The sentiment here definitely surprised me at first, but then it stimulated my thinking on the subject.  I believe this leader has made a fascinating point.  Leaders sometimes have to take a deep dive on certain matters and get their hands dirty a bit. They need to dig into a project or an issue, and they need to understand it a great deal of depth.  Which areas require this type of extra attention?  It makes a great deal of sense to focus on those key areas of differentiation for the company. What are the make-or-break elements of the firm's value proposition?  Where are the key points where a customer experience can go from good to great, or from good to terrible?  What truly distinguishes the firm from its competition?  In these areas, perhaps a bit of micromanagement from time to time can actually do a great deal of good.   Of course, the key is how the leader behaves when they dive into these matters.  Do they just tell people what to do? Or, do they ask good questions, coach people through the situation, and empower others to help craft a solution collaboratively?