The Unfounded Premium for Being Performatively Atypical

All too often, companies pursue me-too strategies.  They blindly imitate industry leaders, and they pay far too little attention to how they might differentiate themselves from the competition.  In some cases, however, company leaders make a point of trying to stand out. Perhaps a very loud statement. Often, these eccentric and iconoclastic business leaders attract a great deal of attention from journalists and investors alike.  These leaders make the case that they are doing business in an entirely different way than more conventional firms in their industries.  They "perform" for the world in ways that attract free publicity and persuade others that they are visionary and groundbreaking. Is it real though? Is all that theater a sign of true differentiation, or is it just smoke and mirrors? Think about the hype generated by Adam Neumann at WeWork. Was that strategy really anything new or revolutionary? Far too many people bought the hype for far too long. 

Now Amir Goldberg, Paul Gouvard, and Sameer Srivastava have conducted a fascinating new study examining this leadership theater that takes place in some companies.  They used machine learning methods to examine the transcripts for more than 60,000 quarterly earnings calls over an eight-year period.  They noticed that some companies used language that clearly tried to articulate how much different they were than their competitors.   You would think that making a case for distinctiveness would be a good thing.  Well, stock analysts apparently thought so.  These companies experienced what the researchers called a "performative atypicality premium."  In other words, equity analysts tended to believe earnings for these "distinctive" firms would be higher than other more "conventional" companies in their industries.  Did actual performance meet analyst expectations?  No.   The premiums were not justified by later performance.  In fact, these companies missed earnings estimates in later quarters.  Analysts believed the hype, and they turned out to be mistaken.  

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What's the lesson here?  Well, being distinctive is important.  However, we need to look for fundamental sources of differentiation, not eccentric leadership styles or vague talk about vision.  We have to ask ourselves repeatedly:  What is really different here? Moreover, we have ask whether there's a true moat around that castle. In other words, even if there is something distinctive about the strategy, the issue of imitability is critical.  Will that source of differentiation and competitive advantage endure, or can others easily emulate it?

Why Don't People Buy Into Your Vision?

Source:  pxhere

Andrew Carton and Brian Lucas recently published an Adminstrative Science Quarterly paper titled, “How Can Leaders Overcome the Blurry Vision Bias? Identifying an antidote to the Paradox of Vision Communication.”   They explore how leaders often craft vision statements poorly, resulting in a lack of understanding and buy-in on the part of their followers.   Carton recently summarized the key point of their research in an interview with Knowledge@Wharton.  He describes what they call the "blurry vision bias" that afflicts many leaders:    

The blurry vision bias is the tendency for most people — including leaders — to think abstractly rather than concretely about the distant future. Leaders might invoke vagaries such as “we aim to impact the world” rather than vivid images like “bring smiles to customers’ faces.” Therefore, most visions are, ironically, not very visionary. 

Why does this bias exist? First off, we don’t have direct experience with the future for a pretty self-evident reason: It hasn’t happened yet! So, we tend to speculate about it in very broad, general terms. Although it is useful to think about the future in general terms because it allows for flexibility, the problem is that when we communicate this generality and vagueness to other people, it often has some unfortunate consequences: It is not very motivating because it is not emotionally appealing, and it stifles coordination because different employees have a different understanding of what we aspire to achieve in the future.

I've definitely witnessed blurry visions in many organizations, and they definitely result in strategy execution problems.  One thing that I often remind leaders is that they have to test for understanding and alignment in multiple ways at multiple levels of the organization.   They must try to do so informally.  They have to go out into the organization and see how people have interpreted and understood what they have tried to communicate.  To do so, leaders can't ask leading questions or pose inquiries that are not likely to elicit honest responses.  In other words, they can't ask: "Does our vision statement make sense to you?  Do you agree with our vision statement?"  Instead, leaders need to ask open-ended questions that simply ask people to reflect on what they have come to perceive and understand about the direction of the organization.   In so doing, leaders can discover if a lack of alignment, buy-in, and shared understanding exists.  

Lessons from the Theranos Debacle

Several years ago, journalists far and wide heralded college dropout Elizabeth Holmes for her bold vision, innovative strategy, and charismatic leadership at her well-funded startup, Theranos. Holmes proclaimed that she had invented an entirely new blood testing regimen for patients.  Journalists drew parallels to Steve Jobs, even noting that she dressed in a similar fashion. Holmes did not only fool journalists though.  She allegedly managed to deceive an array of investors and board members with extensive experience in industry and government.   Of course, the governnent now charges that the entire organization turned out to be a massive fraud. Last week, Elizabeth Holmes and her firm's former president, Ramesh Balwani (also her boyfriend at one point), were indicted for engaging in an elaborate scheme to defraud investors, patients, and doctors.   

What can we learn from this debacle?  Dr. Greg Licholai, a Yale faculty member and biotech entrepreneur offers the following advice regarding how to prevent another Theranos from occurring:  

So what can we do? First, investors should maintain a “trust but verify” attitude toward companies. We want to enable innovation by providing appropriate resources to creative people—but simultaneously scrutinize their claims, especially when it comes to technology that affects patient safety. Second, companies should foster open cultures and allow for feedback and safe environments for whistleblowers when necessary. Third, industry must continue to embrace transparency and recognize that in the long run, those companies that listen to their constituents achieve sustainable success.

These lessons are highly valuable.  I think there's a broader point though.  We have to be careful about becoming too enamored with a bold and highly appealing vision.  We fall in love with dreams.  We have to ask: Is this vision technically feasible and economically viable?  Sometimes, we find the vision and the desired end state so desirable, and the leader proclaiming that vision so appealing, that we begin to put too much faith in their ability to do the highly improbable.  We stop asking tough questions.  We want to believe that the vision will become reality, and that fervent belief erases some of the natural skepticism that would be healthy in scrutinizing the organization.   Does this make you think of any other visionary leaders these days pursuing what are perceived to be very socially beneficial outcomes?  Hmm... 

Connecting People's Work to the Mission and Vision of the Organization

We hear quite often these days that leaders need to instill a sense of purpose in their organizations. People have to believe that they are doing meaningful work.  They have to understand why the organization exists and what beyond profit is the goal of the firm.  In an interview for Knowledge at Wharton, Professor Andrew Carton talks about an important part of this process. He talks about how important it is to connect the broad vision of the firm to the actions of individuals on the front lines.  That connecting process is crucial.  People have to see how their work connects to the bigger picture.  How are they specifically contributing to the mission even if they are not interacting with the customer every day or doing what they perceive to be the glamorous work in the firm?  

What I found is that it’s absolutely critical that leaders do depict a compelling picture of where ultimately we want to go. But just as important — and also more time consuming and requiring even more investment — is that they communicate about how each employee in the organization can get a sense of how their work connects to the organization’s mission or vision. That process of connection-building took more steps and was more time intensive and more complex than the process of just selling somebody about the importance and beauty of this ultimate goal that we’re trying to achieve together. In some sense, that was the easy part. The hard part is helping people see a connection between their work and the organization’s mission.

Consistency & Simplicity: Keys to an Effective Message

In a recent New York Times Corner Office column, Adam Bryant interviewed John Lilly, a partner at Silicon Valley venture capital firm Greylock Partners.  Lilly offered this leadership lesson that he learned early in his professional career.  I find it particularly useful as a new year begins.  Many leaders will be trying to offer explanation of their vision for the coming year.  It's worth heeding Lilly's advice.  

I didn’t understand the role of simplicity and messaging early on. One of the things that happened at one of my start­ups was that I would get bored saying the same thing every day. So I decided to change it up a little bit. But then everybody had a different idea of what I thought because I was mixing it up. So my big lesson was the importance of a simple message, and saying it the same way over and over. If you’re going to change it, change it in a big way, and make sure everyone knows it’s a change. Otherwise keep it static.

Communicating Your Organization's Vision to Your Team

Kelly and Ben Decker have published a terrific Harvard Business Review blog post about communicating your organization's vision to your team.  They argue that middle managers should follow four basic steps when translating the overall company vision for their direct reports. 

1.  Know your audience:  What do these particular people care about most?   What are their primary goals and objectives?  What is their passion?

2.  Tailor the message:  Hone the communication of the vision to this particular audience.  Having learned about their passions, needs, and wants, you can shape the message in a way that is most appealing to them.

3.  Be specific:  Ok, if that is the vision, what do we do next?  How specifically do we act in ways that advance the vision?  Be specific and concrete.

4.  What's in it for them?   Sure, they care about the organization as a whole.  In the end, though, they are also self-interested.  How will these actions enable them to meet their personal goals?  Why will they benefit from the pursuit of this organizational vision? 

Where Does Vision Come From?

Dale Buss has written a good article for Chief Executive magazine about nurturing a leader's visionary skills.   Buss argues that compelling visions for an organization don't simply come to someone like a bolt of lightning from the sky.  Leaders can cultivate their ability to chart the right vision for the future.  Mainly, he argues that leaders need to maintain close contact with customers, rather allowing others to tell them what customers want and need.  They have to avoid becoming isolated at the top.  Buss also argues, "Be your own customer. Put yourself in the role of the customer and walk through every touch point, to see what they see. Are there gaps in the relationship? Can some touch points be shortened or made easier?"  

Buss notes that substantial new threats and opportunities often emerge at the periphery of an organization.  Andy Grove of Intel once observed the very same phenomenon.  I wrote about Grove's ideas in this regard in one of the early chapters of my book, Know What You Don't Know.  Buss explains how to see those issues emerging at the periphery, rather than the core, of the organization:

Spot weak signals at the periphery. Attempt to gain early detection of developments that could potentially interrupt or disrupt your business so you can take them into account as early as possible. Introducing “randomness” into your life can be one way to do this. Iconic and visionary architect Buckminster Fuller, for instance, used to pick up a magazine at random from a kiosk when he traveled and force himself to read the entire publication during his trip so that he kept in touch with parts of the world he otherwise knew nothing about, the authors said.

I've heard the Buckminster Fuller practice many times, and it's always struck me as a very effective technique.  It does not take much effort, but it can deliver strong dividends at the unlikeliest of moments.  It also enhances your general knowledge - useful as you network and engage with a variety of external and internal constituencies to the organization.  

Being Clear vs. Being Right

Fast Company's Jessen O'Brien recently interviewed Ping Fu, the cofounder and CEO of 3-D software company Geomagic.   Ping Fu just wrote a new book titled Bend, Not Break: A Life in Two Worlds. Fu's story is quite remarkable.  She grew up during the Cultural Revolution in China.  She suffered brutal treatment at the hands of Mao's regime.  Fu survived those tortuous years and came to the United States to become Inc. magazine's Entrepreneur of the Year in 2005.  In this interview, she offers some leadership advice that I found to be quite thought-provoking:

I found in my career that it is better to be clear than to be right. A lot of times, I find leaders want to be right and they think being right is what gains respect. I find being clear is what gains respect--if you’re clearly wrong, people can correct you, and if you’re clearly right, people can follow you.

Here's why I think she makes a great point.  If someone isn't making a clear point, here is what you should be asking yourself:  Do they really have a sound strategy, vision, plan?  Lack of clarity may be a simple problem of  articulation and communication.  However, in many cases, a lack of clarity speaks to much deeper problems.  An inability to articulate a plan or strategy clearly means that someone actually has a muddled vision.  They haven't thought it through with the type of precision required to perform at a very high level.  In many cases, it means that they are trying to do too many things at once, or they are pursuing inconsistent objectives.     

New Leaders and the Whole Vision Thing

Barbara DeBuono, CEO of Orbis, sat down recently with Adam Bryant of the New York Times for his Corner Office interview series.   Orbis is a global health organization that helps to treat and prevent blindness.  DeBuono offered some terrific leadership advice:

Let’s start with leadership.  Be very careful that you don’t cut yourself off from everyone, either by hanging out in your office by yourself or hanging out in your office or your suite with three or four key people.  I’ve seen that happen a lot — where people are in their bunker with three or four people, and they block everything else out.  You lose all touch with your external customers and your internal customers, and nobody has a sense of your vision; nobody has a sense of who you are.  I think that’s a huge mistake.  

The other thing is to be articulate early on about what you want to do and who you are, but don’t be afraid to actually say, “It’s not all baked.”  I think a lot of people go into a job as a leader or C.E.O. and say: “I have to have the whole vision thing. I have to have the whole mission thing down, with all the strategic objectives, all the programs to support that, all the pillars — and if I don’t, they won’t take me seriously.” I would say, “Don’t be afraid that you haven’t figured all of that stuff out, because really you should be spending your first six months to a year just learning the organization.” 

How can you articulate a fully baked vision and mission and strategic objectives when you have to learn the business you’re in?  Just learn the business, learn the people in your business, learn what they hope and feel, learn what they think the business is.  Do they understand the business that you’re in?  I’ve always been struck by how often people don’t. 

DeBuono offers two critical pieces of advice there.  First, I can't tell you how many new leaders fall into the trap of spending far too much of their time talking to just a few other senior folks in the organization. They isolate themselves from the troops, because they feel that they have to have a bunch of stuff figured out first before interacting with the front-line employees. That's a mistake. Being visible early on is key. However, DeBuono also suggests that being visible doesn't require having a fully-baked vision ready to be rolled out on Day 1. New leaders can use that early face time to learn, to soak in as much knowledge as they can about the organization. Moreover, that face time offers powerful symbolic value. It shows a level of transparency and engagement that will be respected and valued by the front-line employees.