Dove Real Beauty Sketches

This Dove "Real Beauty" online ad has created quite a stir.  You can read about the response to this campaign here.  Dove certainly seems to have struck a chord with its customers.  The fact that some people have criticized the ad doesn't seem to concerning, as most Dove customers seem to be responding positively.  The attention that it has received seems to endorse the view: there is no such thing as bad publicity.   Nevertheless, there's a big question remaining:  Will this attention turn into additional revenue for Dove?  Can the engagement with customers translate into sales in the supermarket?  

Predicting Bankruptcy

Maureen F. McNichols of Stanford Business School and several co-authors have conducted a fascinating study regarding corporate bankruptcies.  They have examined the usefulness of financial statement analysis as a tool for predicting bankruptcy.  They analyzed data from 1962-2002 for thousands of publicly traded companies.  They found that, over time, financial statement analysis (traditional ratio analysis and the like) became less useful as a means of predicting corporate bankruptcies.   Note that the analysis was still quite useful, just not as effective at predicting bankruptcy as it was back in the early to mid-1960s.  Why might that be the case?  The scholars offer several suggestions.  First, companies restate earnings more frequently today than they did in the 1960s.  That would suggest a higher frequency of earnings manipulation of earnings today.  Second, many tech companies spend a significant portion of sales on research and development.  Those investments do not make it onto the balance sheet in the way that capital investments in property, plant, and equipment do.   As a result, ratios become less useful in predicting bankruptcy.  Finally, more firms have negative income today than in the early 1960s.  When firms lose money in a particular year, it becomes much harder to predict what will happen to them in the following years.   Yet, losses in a particular year don't necessarily mean a bankruptcy is in the future. 

Whose Needs Are You Serving? WEEI vs. The Sports Hub

Regular readers of the blog know that I have commented several times on the fascinating competition that has unfolded in sports talk radio in Boston.   For many years, WEEI had a dominant position in the Boston market.  Entrants came and went, unable to topple the station or even to survive in the market.  Then, the Sports Hub (98.5) came along and knocked off the powerful incumbent.  It took a substantial ratings lead in many key time slots.   In the past, I've commented on how 98.5 did things a bit differently, while also focusing on a few important customer segments, so as to be successful.  

I've noticed one other lesson from this interesting competition.  In the mornings, the Toucher and Rich show on 98.5 has overtaken the once-popular Dennis and Callahan show on WEEI.   They became successful for many reasons.  However, one key thing that they have done is bring on guests in a different manner.  On the WEEI show, most of their prominent guests come on the show between 8am and 10am.  On the Toucher and Rich show, many key guests actually come on the show prior to 8am.   Why is this important?  Well, I've noticed that I miss many of the WEEI guests as I'm at work by 8:00am or shortly thereafter.  Why does WEEI have its guests on after many audience members are already at work?  I think, in part, it's because the guests prefer the later interviews.   They don't want to get up that early, or they aren't yet prepared to be interviewed on radio at that early hour.  WEEI is serving the needs of its guests, but at the expense of its audience members!   The audience wants those early interviews.   The Sports Hub has delivered on that previously unmet customer need.

What's the lesson for other businesses?   Think about whose needs you are actually fulfilling.  Yes, you have multiple constituents.  However, at the end of the day, the customer's needs must come first.  You never want to leave their needs and desires unmet because you are focused on other priorities. 

Leadership Development Technique: Board Interaction

Adam Bryant recently interviewed Ilene Gordon, CEO of Ingredion, for his New York Times "Corner Office" column (an excellent weekly feature).   Gordon explained one technique she has used to further the development of young emerging leaders in her organization:

I use one dinner a year with my board to bring in young, high-potential managers. We have everybody give an “elevator speech.” You have three minutes to tell the board and other people in the room where you came from, the challenges you’re facing and how you’re trying to create value for the company. Everybody might want to take 15 minutes, but you have to be succinct.  This is part of what we’re looking for in people who have potential; it’s all about communication. What are the challenges you have, and you have three minutes to explain them, because there are 40 of you and we’re going to be here all night otherwise. And if you take somebody else’s time, that’s not respectful. It’s all about being succinct and articulate. 

Why do I like this technique?  First, it provides the board an opportunity to interact with people who may become senior leaders in the organization in the future.  They can begin to develop a relationship with these individuals.  Second, it challenges these young leaders' communication capabilities.  Can they be succinct, interesting, and engaging?   Can they create a powerful conversation based on their three minutes of remarks?  Third, it fosters the establishment potentially of some key mentoring relationships.   Not only may the young leaders gather advice and counsel from board members, but the board members may learn a great deal by hearing from young people who come from a different generation and may be more similar to the firm's actual core consumers.   Fourth, the invitation to present, in and of itself, offers a wonderful reward and recognition for these high performers.   Yes, they would love to be paid well.  However, these folks also care about their future career path.  Having this opportunity certainly will be welcomed and may help retain top young talent.  Finally, the board hears from voices other than senior managers about what is going on at the company. That can be important.  Senior managers naturally filter information as they present updates to the board.  Senior executives present information through their lens and perspective.  Having a different voice and perspective talk to the board can be helpful. 

Creating Personal Accountability Systems

How do we motivate ourselves to achieve our important, but not necessarily highly urgent, goals and objectives?   Writer Laura Vanderkam has a neat article at Fortune.com about how to use personal accountability systems to keep us on track when it might otherwise be easy to procrastinate.   Vanderkam explains:

"So what do successful people do? They create external motivations for things they want to do but that life has a way of crowding out. They create accountability systems that boost important but not urgent items to the top of their priority lists -- ideally in a way that makes failure really uncomfortable. Effective people know that we succeed when success seems like the easiest choice."  

Vanderkam actually tried this technique herself while working on her novel.  She tapped someone as her "writing buddy."   She set out to write 2,000 words per week, and Vanderkam checked in with her writing  buddy each Friday to see how things were going.  Soon enough, she was writing more than 2,000 words per week, and then she actually finished her rough draft.   The buddy system worked. 

Why does this type of personal accountability system work?   Vanderkam argues that we don't like to appear lazy before others. Therefore, we are motivated to reach the goals that we have set out, and that we know our partner(s) will hold us accountable for achieving.

Promotion vs. Prevention Focus: How Do You See Your Goals?

Social psychologist and best-selling author Heidi Grant Halvorson has published a new book titled, "Focus: Use Different Ways of Seeing The World for Success and Influence.  Halvorson explains the difference between promotion-focused individuals and prevention-focused individuals.   People with a promotion focus  tend to perceive goals as opportunities to gain something.   People with a prevention focus tend to think about goals in terms of what they might lose if they don't achieve their objectives.   Promotion-focused individuals have high aspirations and are willing to take risks to achieve grand objectives.  Prevention-focused individuals tend to try to avoid mistakes and losses.  They are more risk averse.   They are more focused on their duties and obligations; they strive to be the steady, stabilizing hand as opposed to the adventurer charting new territory.  

Halvorson does not advocate one focus over another.  Instead, she emphasizes the need for people to understand the perspective of those with whom they are working and collaborating.   Recognizing that you may have a different focus than your partner or team member can be the first step toward more effective collaboration.  Actually understanding and appreciating their different perspective helps even more!   For more on this topic, check out this brief article in the Wall Street Journal about Halvorson's work. 

Cooperation & Competition in the Venture Capital Market

Yael Hochberg, Michael J. Mazzeo and Ryan McDevitt have conducted some interesting new research on competition and cooperation in the venture capital market.   They found that competition has a different impact in the VC market as compared to most other industries.   Mazzeo explains in a write-up on the Kellogg Insight website:

"In other industries what you see is that the first competitor that is similar to you to enter the market hurts you a lot, and the second competitor hurts you a little less, and the third even less.  But that flips around in the venture capital industry, where the first competitor that is similar to you to enter the market doesn't hurt you very much, but the second competitor hurts you a little more and the third hurts you even more.  This makes sense because there is a beneficial element to the first competitor in the market if you are working together and sharing resources. But that benefit begins to go away with the second competitor, and it's even less with the third."

Cooperation is key in the VC market because some firms may be very adept at providng the expertise required to help a particular start-up grow, but may want to spread the risk by bringing in a partner to provide some of the needed capital.  In certain cases, a start-up may need different types of expertise, access to networks, etc.  One VC firm may provide some of that assistance, while another VC firm may provide other forms of support and guidance.   Once firms work together on one deal, they may learn that they can work together effectively, and that each has important capabilities to contribute.  That makes them likely to want work together again.   Thus, cooperation becomes crucial to success in the VC market. 

On the other hand, VC firms still compete to find the best deals, get the most favorable terms, identify the next hidden gem so that they can get in early, etc.   What that means is that a feeding frenzy can eventually take place, where too much money is chasing too few deals... as a result, diminishing returns eventually can kick in, and returns on investment can fall.   Cooperation doesn't mean that rivalry won't harm returns.  That still happens, as it would in any industry. 

Prayers for the Victims in Boston

Source: BAA

Service Challenges at McDonald's: Did Success Breed Problems?

The Wall Street Journal reports that McDonald's has launched an initiative to improve customer service.  Apparently, the company has recognized some significant problems in recent quarters.  Here is an excerpt from the article:

In a webcast McDonald's executives held with franchise owners last month, the company said 1 in 5 customer complaints are related to friendliness issues "and it's increasing," according to a slide from the presentation reviewed by The Wall Street Journal. The webcast identified the top complaint as "rude or unprofessional employees."  One slide said that complaints about speed of service "have increased significantly over the past six months." Another mentioned that customers find service "chaotic."  "Service is broken," said a slide from part of the webcast delivered by Steve Levigne, vice president of business research for McDonald's USA.

What could be causing the problems at McDonald's?  I have several theories.  First, the company has experienced many consecutive years of same-store sales growth.  The firm prospered during the struggling economy, as folks looked for value.   Moreover, McDonald's foray into coffee drinks turned into a blockbuster success.   One wonders if the growth simply began to tax many of its smaller restaurants.  Did crowds overwhelm the firm's processes and systems?  Second, McDonald's did expand its menu to offer more drinks as well as healthier food options.  Did the new options add so much complexity that they slowed down service considerably, or made it difficult for employees to provide food in an efficient manner?  In short, I wonder if success brought these problems upon McDonald's.  Perhaps there is a lesson there for every rapidly growing quick-service or fast-food restaurant chain.   Growth may be wonderful, but service deteriorates, you may have a major problem on your hands. 

Starbucks, Price Decreases, & Game Theory

Business Week has an interesting article about the recent decision by Starbucks to cut prices on its coffee sold in grocery stores by $1 per bag.  According to the article, "Last quarter the company collected about $380 million from sales outside its cafés at an operating margin of 25.5 percent. At that level, the coffee empire is making a profit of about $2.55 per bag. Take away $1 per, and Starbucks would have to sell 65 percent more bags to book the same amount of profit." 

Wow... could Starbucks really generate that many more sales to make up for the lost margin?  Unlikely.   The article tries to offer another explanation, citing Columbia Professor Rita McGrath.   Here's an excerpt:

It’s not clear Starbucks will sway that many customers quickly. But the company could be betting on widening income inequality—what academics call “the hourglass economy.” The theory is: Major retail growth has been—and will continue to be—at the low and the high ends of the socioeconomic scale. Starbucks already has plenty of $6 barista-brewed drinks to capture the top of that market, but a bag of $10 coffee is very much in the middle, according to Rita McGrath, a professor at Columbia Business School.

I respect McGrath's work a great deal.  She's a terrific strategy scholar.   However, I don't understand this point.  How is cutting the price of a bag from $10 to $9 enabling Starbucks to tackle the "low end of the market"?   That's some view of the low end!  The article continues by citing the fact that lower-end rivals such as Maxwell House, Folgers, and Dunkin' Donuts have cut prices this year as costs of coffee beans have fallen significantly.  Here's another excerpt:

And here’s where a little game theory comes into play...By committing to lower prices (and not using coupons or sales), Starbucks is sending a signal, McGrath says. It’s serious about the low end of the market; Dunkin’ Donuts, Folgers, and other competitors can either trim their margins further or give up volume. Either way, they lose. So does Starbucks, at least in the near term. But with savvy hedging and customers lining up for expensive lattes—including increasing crowds in China—it can stand the pain for a while. And it is betting it is more efficient than its competitors. As McGrath says: “If you can run economically enough to make money at the lower price, you’re simply taking money out of your competitors’ pockets.”

Again, I'm not sure that I understand or agree completely.    If Starbucks was clearly the low-cost competitor, I might understand this explanation.  It would be using its scale economies and cost efficiencies to attack its higher cost rivals.  However, do we really believe Starbucks is the low-cost player in this market?  That seems unlikely.   Perhaps another explanation is that, after Dunkin' and others cut prices this year, the gap between Starbucks and its lower-priced rivals became too large.  Starbucks' differentiated, high quality product could justify higher prices, but not that much higher.  The gap in price had simply exceeded the difference in perceived value (or willingness-to-pay) between Starbucks and other coffee rivals in the grocery aisle.  If it didn't address that issue, it would have ceded a great deal of volume to competitors.  Differentiated players always have to be careful that their price premium doesn't grow too high, exceeding the excess value that customers perceive in their product vs. rivals' products. 

If Starbucks, on the other hand, is truly just going for share at the low-end of the market, then I don't understand the logic of the strategy.  Why would a differentiated player cut its margins and try to compete directly with low-cost players?   Why compromise its premium positioning?  I don't think Starbucks is doing that... I don't see them getting into a price war in the grocery aisle just to inflict pain on their rivals.  The coffee industry is an attractive one, particularly at the higher end of the market.  Why would a market leader spoil that market by triggering an unnecessary price war?  That would be bad strategy. 

A New Kind of Disney Princess

The Wall Street Journal reports today on Disney's development of a new type of princess for young girls.  Sofia the First is one of the new additions to Disney's family of characters.  She's "confident, resourceful and focused on being a good person. She should not be valued most of all for her beauty. Her royal family should include exactly zero evil stepmothers."    Nancy Kanter, a senior executive at Disney, explains: "We knew we didn't want it to be a young woman looking for a man."    The Sophia the First series debuted on Disney Junior on January 11th.   It has become the year's top-rated show among pre-school children.  Disney aimed to create a princess that would appeal to young girls, but that would provide an image and identity more acceptable to parents than some of the company's traditional princesses.   It appears that they have succeeded.

To me, this case provides another interesting development at Disney, besides the unique way that they are trying to reposition a key type of character.   Here we have a case of a key new animated character debuting on Disney's cable networks, rather than in an animated feature film.   The firm has begun to leverage the character in the theme parks and through its consumer products and retail divisions.  Historically, Disney launched key characters through animated feature films, and then leveraged them to other areas.  With Johnny Depp's Pirates of the Caribbean movies, we saw Disney take a theme park ride and build a popular series of feature films.  Now we have a character debuting on cable and then moving to the theme parks.  Could an animated feature film be next for Sophia the First?   Disney's ability to find different ways to originate content may be a key driver of growth for the future.  Relying only on feature films to launch a new franchise can be expensive and risky.  Having other ways of originating and leveraging characters could be key to the company's future... as important as some of the recent acquisitions have been in terms of adding to the stable of characters in the Disney family. 

New Thoughts about Brand Extensions

For years, scholars and consultants have argued that companies should stick to brand extensions that fit closely with the core brand image and identity.   The logic goes as follows:  It's ok for Coke to make Diet Coke, but it does not make sense for the firm to offer Coke-branded laundry detergent. 

Researchers Tom Meyvis, Kelly Goldsmith and Ravi Dhar noticed something interesting though.  A few firms did extend their brands successfully in a way that seemed to fit much less closely with the core brand's image and positioning.   If these firms had succeeded, then perhaps the notion of fit needed more clarification.  

The scholars conducted an experiment, and in that study, they found that visual cues make a difference with consumers.  Seeing the physical product, as opposed to just hearing about it, can cause customers to genuinely consider a brand extension that appears to be low fit.  According to Kelly Goldsmith, “When you give people pictures, preferences shift because [people] are focused on quality—they are more interested in quality than fit.  Whereas when you show the brand concept without pictures … the reaction is more focused on fit than quality. Allowing product comparisons leads to the same results.”

Goldsmith explains the practical implications of the study: “If you get your brand-extension concept out of the lab and into the store, all of those [benefits from visual cues and brand comparison] are taken care of.  If you are a brand like Nike or Häagen-Dazs, or one of these very large national brands associated with quality, and you want to make money by extending that very successful brand even further—to new [but] lower-fitting categories—what our research shows is that you really need to show people what that product looks like and show it to them in the context of other brands in that category."

I find the research very interesting.  I still believe firms need to be very attentive to fit when it comes to brand extensions.  However, the notion of offering visual cues, sampling, and physical displays does seem to make sense.  Those tactics certainly do help a consumer understand and appreciate a new product offering that may not seem to fit with a brand's prior identity. 

Innovation in Laundry Detergents

The Wall Street Journal reports today about how innovation is actually hurting laundry detergent sales.  Well, that's not quite what is happening.  Let's explore. P&G launched "pods" last year.  The product offered just the right amount of detergent for a load of laundry.  The product has been popular with customers.  However,  it appears that industry revenues are falling.  Has innovation been a bad thing?  I don't think so.  While revenues may be declining, margins for P&G are rising.  Their margins for pods are better than for jugs of laundry detergent.  Customers clearly like the pods.  Moreover, P&G seems to be gaining an upper hand on rivals, who are busy trying to copy them.

The bigger issue here is the obsession with revenues.  In the end, industry executives should be focused on profits rather than the top line.  Moreover, if customers prefer pods, then executives should be focused on delivering what customers want, rather than blaming P&G for "hurting" industry revenues.

One final thing... If P&G were escalating price rivalry in the industry, that could be problematic.  They would be damaging industry structure, making it less attractive.  However, that is not what they are doing.  They are actually bringing a differentiated product to a market which had experienced a great deal of price competition.  That's enhancing industry attractiveness.  Other firms should be seeking similar ways to innovate so that they are not just competing on price.

Engaging Your High Performers

Forbes reported this week on a startling new study by Leadership IQ, a company that does a great deal of work on the assessment of employee engagement.   The firm examined data from 207 companies on employee performance as well as employee engagement.   According to Forbes,

"In 42% of the companies, the employees who do the worst job are the ones who feel the most “engaged.” At the same time, the middle and high performers in those firms feel disconnected from their jobs and not very motivated to come to work every day."

\The article, by Susan Adams, does a very nice job of explaining many of the reasons for this result.  Adams, drawing on a conversation with Mark Murphy (Leadership IQ CEO), argues that the lack of a true meritocracy causes disengagement among high performers.   Company leaders aren't having the difficult conversations with low performers, and they are not properly recognizing the best employees.  I cannot argue with that finding; it seems quite reasonable.

I would argue, however, that one other cause may exist for this alarming finding.  Many companies simply are not investing effectively in leadership development for their top performers.  Notice that I did NOT say that they are not investing ENOUGH.   Many companies are spending a great deal of money on leadership development programs and processes.  However, many organizations are not spending that money WISELY.   We see a litany of problems in many companies:  Too many one-off events exist.  Too many programs lack cohesion.   Too many leadership development events lack clear criteria for determining who should be involved or invited.   Far too little follow-up exists after programs are delivered.  Until firms start designing more effective leadership development activities, and begin spending their resources more effectively, we won't see engagement rise significantly for the highest performers. 

Big Data Will Not Solve All Our Problems, May Mislead Us

Microsoft Research's Kate Crawford has a terrific blog for HBR about big data.  In the post, she discusses the hype regarding big data, and she talks about the hidden biases that we must be aware of when analyzing large data sets:

Data and data sets are not objective; they are creations of human design. We give numbers their voice, draw inferences from them, and define their meaning through our interpretations. Hidden biases in both the collection and analysis stages present considerable risks, and are as important to the big-data equation as the numbers themselves. 

Crawford has some terrific examples of biases in data sets.  For instance, she talks about how the Twitter data after Hurricane Sandy offers a distorted view of the storm.  Why?  As the storm progressed, people in the hardest hit areas ran out of battery power on their cellphones.  Thus, they stopped tweeting.  Folks in Manhattan, where the storm was significant, but not as devastating, engaged in much more Twitter activity.  Moreover, people in the lowest income groups are not as well represented on Twitter, because many do not own smartphones.  As she writes, "We can think of this as a "signal problem": Data are assumed to accurately reflect the social world, but there are significant gaps, with little or no signal coming from particular communities."

The lesson is clear.  Begin your big data project by asking:  How was the data collected?  What populations are overrepresented?  What populations are underrepresented?  Beyond that, you should ask:  Who collected and assembled the data set?  Do they have an agenda?  Are they biased in any way?  Often, the biggest bias in big data has nothing to do with access to technology or underrepresented populations.  Instead, the most significant bias lies inside the mind of the person assembling the data.  Their agenda clouds the process of data collection. 

Do You Have a Mistake Diary?

The Wall Street Journal reports on an interesting new leadership phenomenon.  According to this article by
Rachel Silverman, "Some self-aware managers are trying out “mistake diaries” or “failure reports” to help minimize the chances that a problem happens twice – and to help foster an environment where it’s OK to try and fail."  

Silverman describes the efforts of Meebo co-founder Elaine Wherry, who has kept a mistake diary for a number of years.   Silverman writes that, "Using a series of sketchbooks, she started taking notes and making drawings to record her mistakes – such as time-management problems and hyper-perfectionism — as a personal way to remember them."   Wherry has even shared her "most common blunders" with her staff, since she noticed many young new employees making many of the mistakes that she had made earlier in her career.  (Take a look at a video created by Elaine Wherry by clicking here). 

Everyone should note the importance of reflection as a tool for improving as a leader.   We can't just focus on what's next, on the newest pressing problem.  We have to find a way to carve out some time for reflection if we are to improve and develop.   Of course, finding that time can be difficult in hectic schedules that many leaders keep.  So, before thinking about crafting a mistake diary, you have to take a hard look at your schedule.  Blocking out some time for reflection is hard, but necessary, if we are to identify and learn from our mistakes. 

Amazon Buys Goodreads

We learn today that Amazon has acquired Goodreads, a social network for people who love to read.  Goodreads has roughly 16 million members.  More than 30,000 book clubs use the site.  Many people see the move as a perfect fit for Amazon.   The company gets the opportunity to learn about people's likes and dislikes regarding books, and they have an opportunity to promote to this active book-loving community.  Moreover, they can use analytics to mine this tremendous amount of data about books that the social network will provide.  Early reports indicate that they intend to integrate Goodreads more closely with their Kindle reader devices as well. 

For me, this move clearly extends the powerful network effect that Amazon already benefits from in the book business.  The network effect means that the value for each Amazon user goes up as more people use the site.  That effect increases now with the addition of this powerful and broad social network.   Book lovers will derive even more value from Amazon, as the online marketplace enhances its ability to provide informative reviews and highly personalized recommendations to each customer. 

What's the downside?  Goodreads has cultivated an independent status up to this point.  Some Goodreads users will undoubtedly worry about the link with Amazon and the loss of that independent status.  Amazon will have to manage this tension, much as firms do any time they vertically integrate.  

Chevron Cuts Executive Compensation

The Wall Street Journal reports today that Chevron's Board of Directors has cut compensation for senior executives at the firm, despite stellar financial results.  What's the reason?   Apparently, Chevron has had a spotty safety record over the past year or so.  Therefore, despite strong financial performance, the bonuses for top executives have been scaled back.

Now, the total compensation numbers are still very high.  So, I don't think anyone is crying about the compensation changes.  However, the move does send an important message.  Unlike many other firms, Chevron's board is saying that financial performance at all costs will not be rewarded.   A strong safety culture has many facets, so incentives alone will not improve safety.  However, incentives are a key component.  You have to reward the right kinds of behaviors if you want a strong safety culture.  You also have to send the right symbolic messages.  Chevron seems to have taken a step in the right direction. 

Rethinking the Action Learning Project

Many executives push hard for leadership development programs to deliver a strong return on investment.  They want the programs to be "practical" and "applied" in nature.  As a result, many companies have embedded action learning initiatives in their leadership development programs.  They sound like a great idea.  Bring a group of highly talented managers together for a leadership development program led by faculty members, consultants, and/or company executives.  Then, put the participants in teams and have them work on real projects back at work for the next few months.  Those projects provide an opportunity to put their learning into action, to apply the principles and techniques that they discussed during the program.   After several months, the teams present to senior executive sponsors of these projects, and hopefully, some of their recommendations become reality.  Hooray - we have demonstrated ROI!

Ok, that's the ideal...what's the reality?  The reality is that many of these action learning initiatives do not deliver the intended results.  Why?  It begins with the fact that you have overburdened some of your best talent.  You bring them off-line for a week, perhaps several weeks, for a leadership program.  They are now already feeling behind about work.  Then, you ask them to take on this new project on top of everything else they are doing.  Moreover, you ask them to collaborate on a team with members who may not even be co-located with them.   Executive sponsorship often doesn't materialize as promised either.  Senior leaders commit to serve as champions for the projects, but then they offer little guidance, support, or resources.   I have seen this scenario play out on numerous occasions.   Yes, applying what you have learned on a project can be a powerful development opportunity with tangible results for the business.  However, these types of projects require far more preparation, support, and resources than we usually find in companies.   For that reason, I would argue that many companies should re-think their action learning initiatives.  

3D Printing and Rapid Prototyping

This very good USA Today article describes the impact that 3D printing is having on innovation processes.  This new technology has enabled firms to build incredible prototypes, so that they can bring innovations to market faster and more effectively.   I think the technology has great promise, and firms can use it effectively to test out new ideas.

Having said that, I think firms can fall in love with the concept of 3D printing prematurely.   It is expensive to purchase and use this new technology.   On most occasions, firms would benefit from beginning with a very inexpensive, crude prototype.  They need not spend much money at all.  They simply want to begin the discussion about a new idea, and offer folks a chance to touch and feel a product. 

Source: Fast Company

As an example, consider this article in Fast Company about the creation of the Nike FuelBand.  The article describes the first prototypes shown to Nike CEO Mark Parker.  One prototype is shown here.  It's a simple prototype made from a Velcro strap.   It made a huge impression on Parker, and from there, Nike developed a hit new product. 

Mission Questions

Warren Berger has an outstanding column over at Fast Company about what he calls "mission questions."   Berger, the author of the forthcoming book A More Beautiful Question, argues that leaders should be asking five crucial questions pertaining to a company's mission.   Here are the five questions:

1.  Why are we here in the first place?

2. What does the world need most that we are uniquely able to provide?

3.  What are we willing to sacrifice?

4.  What matters more than money?

5.  Are we all on this mission together?

I think these questions are very useful.   I would simply add two comments.  First, companies need to be cautious about adopting an insular approach when responding to these questions.   The questions focus on "we" a great deal - as in the company's leaders and other employees.  Of course, the key player here is the customer.  What do they want, need, and desire?   Why should they choose us?   We might have a cool product idea, and we might care about it a great deal... but does it really solve a problem for a customer?  Does it relieve their pain?   Too much product focus and not enough customer focus can be a problem in some organizations.  

Second, the questions get people to think very broadly about the company's purpose. However, a great strategy has a strong degree of focus.  Answering these questions can sometimes get people thinking so expansively that they aren't carefully delineating the boundaries of the firm's strategy. Who are we trying to serve, and who are we not trying to serve?   What are we going to produce, and what are not going to produce?  

Backward Integration at Starbucks

Source: Wall Street Journal

The Wall Street Journal reports that Starbucks has acquired a 600 acre coffee farm in Costa Rica.  You might ask: Why is Starbucks backward integrating?  They probably do not think they can operate the supply chain more efficiently through vertical integration.   They certainly aren't going to obtain a significant amount of coffee beans through one 600 acre farm.  What are they doing?

They are learning, experimenting, and innovating.  It's a terrific reason to engage in partial/limited backward integration.   Starbucks CEO Howard Schultz explained, "We are talking about doing innovative things we would not be able to do without this farm."   Craig Russell, a Starbucks senior vice president, explained that the company would try to identify ways to address a fungus problem that is affecting coffee farm yields in Central America: "It's a dynamic situation and we will absolutely use this farm for testing different methodologies and ways to use new types of coffee trees we've developed that have become more disease- and rust-resistant."   Finally and most importantly, Starbucks intends to share what they learn about the fungus with other farmers, so that coffee bean production improves overall for the industry.   

This example demonstrates that a small bit of vertical integration (backward) can be very effective as a means of innovation and experimentation.  Many companies simply view vertical integration from the perspective of its immediate effect on the bottom line.   Ironically, many of those efforts actually decrease profits much to the chagrin of senior executives.   Of course, many of those efforts are not small experiments.  They are bold moves down without a good pilot to test the concept.  In this case, a small bit of experimentation could yield large improvements in profits over time.  

Ron Johnson: The Heat is On

The pressure continues to escalate on J.C. Penney CEO Ron Johnson.   In this week's New Yorker, James Surowiecki writes about the struggling retailer (thank you, James, for the shout-out).   Meanwhile, on CNBC, former J.C. Penney CEO Allen Questrom speaks out about the situation.

Attracting Creative Talent

Charles Day, CEO of The Lookinglass, has written a good article for Fast Company about attracting top creative talent.  He offers eight suggestions.  I want to highlight several of them here.

First, he notes that mission-driven businesses are more likely to attract top creative talent.  People want to make a difference.   Second, people want to work for an organization that does not support underperformers forever.  Nothing is more deflating than watching managers retain people who are not contributing.   Third, you have to be transparent.   Day writes:

"Transparency is essential to attracting and retaining great talent. We define transparency as this: telling what you can and explaining what you can’t. Sharing openly encourages your people to give you the benefit of the doubt. Critical to building loyalty."

I think it's critically important to note the point about explaining what you cannot share.  At times, certain issues cannot be disclosed, or at least must wait to be shared.   That does not mean managers should remain completely silent. They need to explain (repeatedly) that more information will be shared moving forward, and you have to describe why certain information cannot be shared.   Employees will fill a vacuum of information with gossip, rumor, and lots of time-wasting water-cooler talk.  Don't let that vacuum exist.  Fill it with a steady stream of communication. 

Netflix & House of Cards

Last month Netflix launched a new original series called House of Cards.  The show, starring Kevin Spacey, tells the story of a Democratic Congressman named Frank Underwood.  It has received a number of favorable reviews.  What I find most interesting about the show, though, is not the plot or the acting.  It's the way in which Netflix introduced the show.  It released all 13 episodes of the show's first "season" simultaneously.   What a fascinating move!  Why?   We know that many Netflix customers engage in "binge viewing" of television series.  They will sit down and watch an entire season of a show over a weekend - all 20 plus episodes.  So, if that's the way that many customers enjoy watching TV series, why not give them an original series in the same format?  It seems fitting.

What's interesting, of course, is that none of the major television broadcast networks have chosen to launch a series in this manner.  Why not?  Why should they be beholden to the ancient once-per-week format for TV series?  If we know consumers like to watch episodes in bunches, why not roll out a series in that manner?  Broadcast networks have watched cable television and the internet erode their ratings for years.  They need to think creatively about their business model.   A move such as this one might be a good step forward. 

Speaking Up Effectively

In my work, I have focused a great deal on how leaders often create conditions in which it becomes very difficult for individuals to express dissenting opinions.   What about the dissenter?  Can individuals become better at expressing dissent?  Can they enhance the odds that leaders will listen and consider their views?  Can they increase the odds that others in the group will not marginalize them?  I believe that dissenters can become better at speaking up.

Here are a few strategies:

1.  Know thy audience.  Who are you trying to influence or persuade?  How do they think?   Are they analytical by nature, or they do make decisions more intuitively? 

2.  Understand the history of the issue.   What events have taken place leading up to this situation?  Who has been involved?  Who might become defensive if I challenge the conventional wisdom here?

3.  Build a coalition.   Who could be my allies on this issue?  How can I cultivate their support before I express my dissenting view?

4.  Develop some options.  If I disagree with this plan of action, I should offer some alternatives.  What options might I propose?  How could I invite others to propose alternatives? 

5.  Ask questions.  Do not declare your opposition outright if that might be too threatening.  Ask questions. Seek to understand, to press for clarification, to surface and test key assumptions, to encourage people to think differently about the issue. 

Just Assume Your Business Model is Obsolete

Geoff Colvin, the terrific columnist at Fortune, wrote the following this week:

"Innovation" is the hottest word in business, but most of the discussion centers on products and services. The more profound challenge for most companies now is imagining a new business model, a new answer to the fundamental question, How do we make money?  You will face this challenge. For convenience, just assume the following: Your business model doesn't work anymore. That blunt claim won't be far wrong. Even if the model has worked for decades, even if it's working okay right now, odds are that it soon won't be.

I love the advice.  In fact, I would argue that every company should take his recommendation, and simply assume their business model is obsolete.  In other words, chief executives should gather the senior management team and ask them to begin a discussion with that basic assumption.  What would a new business model look like?   Don't wait for revenues to sag or margins to decrease.  Don't wait for new rivals to emerge, or substitutes to disrupt your industry.  Engage in the exercise even if conditions seem quite good for your company at the moment.   Simply going through this process may lead to some valuable insights.  Then make this thought experiment a part of your repertoire... engage in it from time to time with the senior team.   Don't make an annual exercise.  Routinizing it would probably kill its efficacy.  However, when the timing seems right, and the team needs to reflect on some traditional orthodoxies that might be holding the firm back... challenge the team to assume the firm's business model has become obsolete.  

What Questions Do You Have For Me?

Source: glassdoor.com

You go on an interview, and you answer all the questions posed by the interviewer.  You think that you have performed quite well.  Then the interviewer poses the usual query:  What questions do you have for me?  You don't want to appear befuddled.  You need to have some good questions to pose.  What should you ask? 

Drake Baer has some good questions over at Fast Company. 

He suggests the following inquiries:

1. If I started tomorrow, what's the first project you'd want me to tackle?
2. What are the must-have personality traits for this position? 
3. What would you like to see more from in this position? 
4. Do you like it here? 
5. Why would I not be a fit for this job?

I think that these questions may prove quite useful.  However, I have a slightly different piece of advice to offer as well.  I always advise my students to conduct some field research prior to their interviews.  For a student interviewing at Bose last year, I suggested spending some time in the Bose outlet store in Wrentham, MA.  For a student interviewing this winter at Boston Beer Company, I suggested spending time examining how the company was merchandising and marketing its products at bars, restaurants, and liquor stores.  He really loved that suggestion - what fun research!  In each case, I recommended developing some questions based upon those field visits.   The students both impressed their interviewers with this knowledge of what was happening in the field (as opposed to just what they read on the website or in the 10K).   The questions proved far from generic; they could engage in a really substantive way with the interviewer.  They both got the job that they wanted! 

The Dark Side of Employee Awards?

Timothy Gubler, Ian Larkin, Lamar Pierce have conducted a provocative new study regarding employee awards.  They collected data about an attendance award program at a private commercial laundry services company in the Midwestern United States.  One of the company's five plants chose to implement an award for good attendance.   Managers wanted to reduce absences and tardiness.   The other four plants did not institute this program.   The program was rather simple.   All employees without an unexcused absence or tardy in the prior month received recognition before their peers, and they became eligible for a drawing for a $75 gift card.  The program lasted for a bit less than a year.  Senior executives at the company eliminated the program because they felt it rewarded behavior that should be expected of everyone.

The scholars studied this program, and they found that the award produced two important unintended consequences.  Here is an excerpt from the paper's abstract:

First, employees game the program, improving timeliness only when eligible for the award, and strategically calling in sick to retain eligibility. Second, employees with perfect pre-program attendance or high productivity suffered a 6% to 8% productivity decrease after program introduction, suggesting they were demotivated by awards for good behavior they already exhibited. Overall, our results suggest the award program decreased plant productivity by 1.4%, and that positive effects from awards are accompanied by more complex employee responses that limit program effectiveness.

I don't think we should be surprised by these results.  When creating any type of incentive or recognition program, we should remember the law of unintended consequences.   Still the paper documents the phenomenon in a powerful way.   I find it particularly interesting that this award program clearly created a perception of injustice.  People felt that people did not merit recognition for simply showing up when they should anyway.  Perceptions of inequity should be top of mind when creating reward programs. These feelings are likely to trigger discontent and unintended consequences.  

Ron Johnson's Three Mistakes at JC Penney

The turnaround at JC Penney has definitely not transpired as CEO Ron Johnson expected.   Sales have plummeted, the firm has reported huge losses, and the company's cash position has deteriorated.  Johnson came on board just a short time ago to much fanfare.  He enjoyed a successful career at Target, and then he had launched Apple's retail stores with Steve Jobs.   He came to JC Penney with high hopes of engineering a major turnaround.   He announced a major new pricing strategy and plans for changes in the layout/design of the stores.  Customers didn't flock to his stores; they fled.   The stock has taken a beating lately.

What went wrong?  I think Johnson made three major mistakes:

1.  He changed the pricing strategy BEFORE changing the merchandising strategy.   He wanted to move toward an everyday low pricing strategy, and away from constant discounting.  However, he needed to change the merchandising and store design strategies FIRST before he could try to do away with promotions and discounting.  Johnson needed to create a different shopping experience, and then having done that, he could have perhaps persuaded customers to shop without waiting for discounts and sales.

2.  He did not manage expectations well.    He was hired with great fanfare.  He talked  boldly of a new strategy for the retailer.  Perhaps he should have remembered the old adage:  under-promise and over-deliver.  

3.  He didn't recognize the difficultly involved when trying to change ingrained habits.    His customers were very accustomed to shopping in a certain way.   Asking them to shop in an entirely different manner, almost overnight, would be too much of a shock.   At the same time, he didn't have the new merchandising strategy in place that might attract different customers to his stores.   Habits die hard.   The firm learned a hard lesson there.

Email and Your Personal Brand

Fast Company's Jonathan Rick has written a terrific column titled "What Your Email Says About Your Brand."  Here's Rick's main argument:

It’s something you take for granted, something seemingly trivial, even mundane. When executed thoughtfully, however, it makes a splash. It says, “This guy is sharp--I want to work with him!”  What is this opportunity, obvious but overlooked? It’s the bookends of your emails: your address and signature block--often, the first and last thing your recipients will see. For better or worse, your email bookends are powerful purveyors of your brand. What are yours conveying about you?

Rick goes on to offer some solid advice about what to do, and what not to do, when it comes to email.  Along the way, he offers several great examples for us to emulate... or not.  Among his nuggets of advice, he cautions against email addresses that will make it difficult for others to take you seriously.  A funny nickname may sound great with your pals, but it will make you sound highly unprofessional if you are trying to land a job or win over a client for your small business.   

Brad Pitt's Chanel Ad

You never want your high-priced advertising campaigns to end up parodied in this manner on Saturday Night Live!  Knowledge at Wharton has a good article about how these types of marketing campaigns can backfire for companies. 

Career Advice from Chris Stevens of Keurig

Source: Notre Dame

Last week Chris Stevens, one of the Keurig co-founders, gave a speech at the Bryant University Collegiate Entrepreneurs Organization conference.   He offered a tremendous mix of practical advice and emotion-packed inspiration.   Chris has a fascinating background.  He played basketball at Notre Dame, worked at Proctor & Gamble and Anheuser Busch before joining with several others to make Keurig a resounding success.  He currently serves as an adjunct faculty member at Notre Dame's Mendoza College of Business.  He also still serves as VP of Corporate Relations at Keurig.  Beyond his business accomplishments, Chris has done tremendous philanthropic work over the years.   He's also faced more than his share of personal adversity, including the death of his wife and two brothers in 2004. 

Chris offered some terrific practical advice for students searching for jobs.  He recommended that each student build a portfolio that they could take on job interviews.  That portfolio should include examples of the type of work that the student has done.  What projects have they completed at school or during an internship?  What presentations have they made?   Beyond simply putting the portfolio together, he recommended customizing it for the particular company at which a student was interviewing.  He told students to put the company name and logo on the front of the portfolio, and even the name of the executive with whom he or she would be interviewing.  Then they should offer to leave the portfolio with the interviewer.   It makes great sense.   Students (and all job applicants) need to be prepared to SHOW people what they have done, not just tell them about it. 

Marissa Mayer and the End of Telecommuting at Yahoo

The Wall Street Journal "At Work" blog has a terrific post about Marissa Mayer's memo to all Yahoo employees essentially ending telecommuting at the firm.   Some people reacted very negatively to her announcement.  How could she ban working from home given the proliferation of technologies that enable virtual collaboration?  What type of message did this move send to working parents trying very hard to juggle professional and personal commitments responsibly?  Would this announcement scare away some terrific talented people? 


The blog post points out, however, that there are significant downsides to extensive telecommuting at a firm.   The bottom line:  Face-to-face interaction does promote more effective collaboration and information sharing in many instances.   People do lose the ability to read nonverbal gestures if they are not physically present at meetings.   Moreover, many ideas get shared when people bump into one another in the hallways or at the cafeteria.   As Saul Kaplan of the Business Innovation Factory argues, innovation occurs through the "random collision of unusual suspects" in many cases.  We can't design or plan those interactions.  However, the right type of working environment at a firm can promote that type of interaction.   If many people work from home, they don't have those opportunities to engage with others in unplanned ways.  


The challenge, though, is that many people may interpret Mayer's move as a belief that telecommuters are simply not working hard enough outside the office. That interpretation may cause a drop in morale at the firm.  In addition, some very talented people may simply not be willing to engage in a lengthy commute each day.   Finally, not all jobs are alike.  While some tasks require intense collaboration and may benefit from having people in the office together, other jobs may not require frequent interaction with colleagues.   Does a blanket policy make sense when work comes in many different forms, and jobs differ significantly in terms of interdependence?  

Mattel, Moms, and Hot Wheels Cars

Mattel has chosen to tackle a very interesting problem with regard to its Hot Wheels line of toy cars, according to Business Week.  Sales have been sluggish in recent years.  The company believes that the lack of sales growth may be due to a "moms" problem.  Specifically, Mattel believes that moms don't really appreciate why young boys like to play with cars, nor do they understand how boys play with them.  According to Mattel Vice President Matt Peterson, "She doesn’t get why cars, engines, and all the shapes and crashing and smashing are so cool."  On the other hand, Peterson argues that mothers do understand how to play with a Buzz Lightyear toy, because the type of play is somewhat similar to how they might have interacted with dolls as a young girl. 

The company chose to gather together a group of bloggers - specifically moms who wrote influential blogs read by fellow women with small children.   Peterson conducted a lengthy discussion with the moms, to examine why they chose not to purchase cars for their sons... as well as to talk about why boys do like to play with cars. 

I have two reactions to this story.  First, I'm not sure if Peterson's hypothesis is correct.  Is his diagnosis of the sluggish sales of Hot Wheels correct?  Does he really have a "moms" problem?   Presumably, he has more data than provided in the article.  Hopefully, he has explored alternative hypotheses as well.  Second, a focus group might be helpful here, but Mattel will have to go well beyond a discussion such as this one to understand how to recharge sales for this product line. 

I would argue that they should consider two types of additional research.  Mattel needs to find some other categories of toy, analogous to cars, that have achieved strong success with moms.  Is there another category that might, at first, have been hard to understand for the typical mother, but in fact did achieve strong sales.  Why did that product take off?  What made moms purchase that product?  Furthermore, Mattel needs to engage in some anthropological research.  My wife plays cars a lot with my five-year old son.  Mattel needs to understand how some moms do play cars with their sons.  Does their play pattern differ from the way dads play cars with their kids?   How might understanding that play pattern help drive more sales to mothers?   Watching kids and moms at play will be helpful in answering these questions. 

Should You Examine All Your Options At Once?

Stanford Professor Baba Shiv and Columbia Professor Sheena Iyengar have conducted some interesting new research about consumer decision-making processes.  They created a series of experiments to examine whether consumers were more satisfied when they examined all their options at the same time, versus looking at the options sequentially.

Their experiments involved the purchase of products including wine, chocolate, and nail polish.   The research findings showed that, "Sequential choosers were less satisfied with their chocolates than were participants in the simultaneous group. And, when offered the opportunity to switch to a different chocolate — a randomly selected one, they were told — more of the sequential choosers opted to do so, even though they knew virtually nothing about it."

What explains the higher satisfaction on the part of those examining all their options at once? The researchers argue that hope and regret play a significant role.  People in the sequential situation worry about possible future options (subsequent and unknown) that they may forgo by making a choice now.   People don't seem to have that worry when they examine a wide array of alternatives simultaneously. 

Heineken - The Candidate - A Different Kind of Interview!

OfficeMax and Office Depot Merger

The Wall Street Journal reports that OfficeMax and Office Depot are in advanced discussions regarding a potential merger.   The article, by Anupreeta Das, Ryan Dezember, and Ann Zimmerman cites many of the benefits of the deal.  For instance, the authors note that experts estimate roughly $500 million in synergies may emerge from the deal.  The article also cites Staples founder Tom Stemberg, who says, ""This should have happened a long time ago.  It's healthy for the industry. It takes out excess capacity.''  (note: I worked at Staples in the mid-1990s, when Stemberg served as CEO). 

I would agree that the merger will yield some significant cost synergies, provided merger integration is  managed well (a major caveat).  Moreover, the industry does have excess brick-and-mortar capacity.   Online players such as Amazon have taken a significant bite out of the traditional office supply industry in recent years.  The companies have closed some stores in response to the shift toward e-commerce, but more rationalization of the store base needs to occur.   The article points out that many experts think the three major office supply retailers have not downsized their brick-and-mortar footprints fast enough. 

I do have some concerns though.   I would ask the following question: Why will a merger drive out more excess store capacity than otherwise should have been eliminated by the companies individually?   The answer: Perhaps the merger's promises of cost synergies will create the public accountability that will drive necessary rationalization.   In other words, maybe you need the merger to push management to do what they otherwise have been slow to do. 

I also have a second question to pose:  How about the issue of taking on the e-commerce challengers?  Does the merger make these companies more formidable competitors relative to the Amazons of the world?  Perhaps, but I'm not so sure.  Again, the question for management is clear:  Why will a merged entity do the things to be successful against online competitors that the two firms have not otherwise been able to do to this point?  

Finally, I would offer one other concern.   In many industries, mergers that drive out excess capacity can help prop up prices.  When excess capacity exists, price wars often occur as firms try to fill that capacity and cover fixed costs.  However, in this industry, removing excess capacity may not yield major price gains.  Why?  The competitors setting the price level are not the brick-and-mortar players;  Amazon and other e-commerce players are pushing down prices.  That pressure won't change due to this merger.

Carnival Cruise Ship: Public Relations Mess

We have all watched the amazing story unfold on that Carnival cruise ship over the past few days.  Overflowing toilets, irate customers, and an explosion of criticism via social media... Carnival executives have their hands full with this incident.  Many people have been offering suggestions regarding the near term public relations strategy that Carnival should employ.   I would like to offer one point that is a bit more long term in nature.  Carnival has to conduct a highly transparent after-action review.  I would recommend bringing in reputable outside experts to help conduct a review of safety and operational procedures.  Moreover, Carnival needs a clear communication plan associated with that after-action review process.  How will the various stakeholders be kept informed of the process and the findings?   How will potential customers learn about the corrective actions that result from this lessons learned exercise?   Having a transparent and legitimate/credible after-action review process will go a long way toward rebuilding the company's reputation.   Yes, they can do some things in the short term to manage the public relations crisis.  However, salvaging the brand in the long run requires a clear demonstration that the firm has done everything possible to insure that this type of incident does not happen again. 

Maker's Mark: Is Diluting the Boubon a Good Idea?

I have to admit that I was very surprised when I heard this week's news about Maker's Mark bourbon.  The company announced that they cannot keep up with customer demand, and therefore, they are cutting the proof from 90 to 84 to boost availability.   As Roger Dooley points out in his column at Forbes, the move risks damage to the brand.  Even worse, Dooley cites a statement by the company's chairman emeritus, Bill Samuels, Jr (son of the company founder).    Here is an excerpt from a news report by the Louisville Courier-Journal:

In an interview Monday, Chairman Emeritus Bill Samuels Jr. said he failed to foresee a worldwide surge in demand for premium bourbon when he was still in charge of the brand about six years ago. As a result, Maker’s Mark is being diluted to 42 percent alcohol by volume, from 45 percent, so more of the whiskey can be bottled to meet demand. That’s a cut from 90 proof to 84 proof.“I was the forecaster in chief around here. ... I must have been asleep at the wheel,” Samuels said.  Samuels and his son, Maker’s Mark Chief Operating Officer Rob Samuels, insist consumers won’t notice the change when the slightly weaker bourbon hits shelves in the next few weeks. Even Maker’s Mark’s professional taste testers couldn’t tell the difference, Rob Samuels said.

Wow... as Dooley rightfully points out, why makes things worse by claiming that your loyal customers won't know the difference!   Perhaps it is true, but should you really say that?   The bigger question is whether Maker's Mark has put short term revenue and market share goals ahead of what is good for the brand in the long run.  Does this move really fit with a company whose historic slogan was:  "It tastes expensive... and is." 

How does a firm handle scarcity?    Should it try to capitalize on the excitement and frenzy that scarcity can create, or should it move to rapidly expand supply?   One other interesting note:  Beam Spirits now owns Maker's Mark.  Would the company have made the same move if it was privately held?  Does being part of a publicly traded company put too much pressure on management to make up for this supply shortage? 

Abraham Lincoln: Leadership Lessons

Today we celebrate President Abraham Lincoln's birthday.    In honor of the great 19th century leader, I thought that I would take a look at one important leadership lesson pertaining to him.    Doris Kearns Goodwin spoke to Harvard Business Review several years ago about her research on Lincoln.  She talked specifically about how he made the decision regarding the Emancipation Proclamation:

For example, for months Lincoln let his cabinet debate about if and when slavery should be abolished. Finally, though, he made up his mind to issue his historic Emancipation Proclamation to free the slaves. He brought the cabinet together and told them he no longer needed their thoughts on the main issue—but that he would listen to their suggestions about how best to implement his decision and its timing. So even though some members still did not support Lincoln’s decision, they felt they’d been heard. And they had been. When one cabinet member suggested that Lincoln wait for a victory on the field to issue the proclamation, Lincoln took his advice.

I take two key lessons away from this example.  First, Lincoln appears to have led a decision-making process that most advisers felt was fair, i.e. he not only gave them voice, but made them feel that their views had been considered genuinely and thoughtfully.   Second, Lincoln still gave them room to have input after he had made the final decision.  However, he didn't give them an opportunity to undo the decision or revisit the choice.  Instead, he brought them back into a dialogue about how to best implement his decision.  It turns out that they had a good suggestion regarding the relationship between his political move and a battlefield victory in the late stages of the Civil War.   Many leaders could use the time of announcing a decision to pivot the conversation with their team, away from WHETHER to do something to the issue of HOW to do it.  In that way, you can give them voice once again, and you can make others truly own the implementation process.  

How Things Go Viral

Over the past few years, I've become a fan of Wharton Professor Jonah Berger's research.   He now has a book out titled, Contagious:  Why Things Catch On.   Fast Company has profiled his book, and they offer a summary of the basic steps he has outlined for making something go viral.  Berger refers to it as the STEPPS method: 

• Social Currency: We share things that make us look good (even if that means pictures of our cat).
• Triggers: Easily memorable information means it's top of mind and tip of the tongue.
• Emotion: When we care, we share.
• Public: Built to show, built to grow.
• Practical Value: News people can use.
• Stories: People are inherent storytellers, and all great brands also learn to tell stories. Information travels under the guise of idle chatter.

I'm really looking forward to reading the book.  I'll put together another blog post once I'm done with the book.

Collegiate Athletic Success as Advertising: Is it Effective?

Harvard Business School Professor Doug Chung has written a new working paper titled, "The Dynamic Advertising Effect of Collegiate Athletics."  He explores the impact that athletic success impacts the quantity and quality of a university's applicant pool.  Here's an excerpt from the abstract to his paper:

I estimate the impact of athletic success on applicant quality and quantity. Overall, athletic success has a significant long-term goodwill effect on future applications and quality. However, students with lower than average SAT scores tend to have a stronger preference for athletic success, while students with higher SAT scores have a greater preference for academic quality. Furthermore, the decay rate of athletics goodwill is significant only for students with lower SAT scores, suggesting that the goodwill created by intercollegiate athletics resides more extensively with low-ability students than with their high-ability counterparts. But, surprisingly, athletic success impacts applications even among academically stronger students.

The findings surely will provoke some interesting debate.   Note that Chung finds that going from good to truly great in NCAA football, for instance, can cause applications to rise by nearly 20%.   It takes a significant move in other areas of a university to achieve a similar impact.  For instance, Chung estimates that a college would have to reduce tuition by nearly 4% to get the same rise in applications, or it would have to recruit higher-paid, higher-quality faculty.  What's interesting about this analysis is that some will say that the cost of athletic success outweighs the positive effect on applications.   That's potentially true.  However, Chung shows that there is a cost to other ways of driving applications higher as well... so it's not immediately clear what methods are most cost effective to increase application quantity and quality.  Of course, we have to remember that athletic success can be very difficult to achieve, and it can be fleeting at times.  Schools may spend a great deal of money and never get to the "great" level required to get this type of increase in applications. 

Planet Fitness: Making Money in a Tough Industry

I ran across this excellent article by Judith Ohikuare in Inc. magazine.  The article is titled, "The Secret to Planet Fitness's Success."  Here's a quote from the company's CEO in the article:

It's very, very difficult to make money in the fitness industry. In order to thrive, you really have to have a niche and sell it. You've either got to be at the high end or at the low end; otherwise, you're not in at all. We're at the very low end: Members have access to a great club for 10 bucks a month, and I don't see that changing. We keep it as simple as possible, so that there are as few areas to disappoint as possible. When we started out, we included perks that everyone else had, such as day care and yoga classes, but none of that made sense for us.

Having read that quote, now check out the commercial below, a creative follow-up to the famous "I lift things up and put them down" ad which I featured on the blog awhile back. (Thank you to student Meredith Soper for pointing me to this commercial).   What you see is a company that is clearly trying to identify its niche... and clearly specifying what it is not (and who it does not seek to target).  In a very tough industry, leaders must pay particular attention to the clarity of their target market and the boundaries of their strategy.  Making clear choices becomes all the more important when you have fewer potential profits because of an unattractive industry structure (such as in the fitness center industry).  

Business Plans: useful or not?

Over the past few years, we have heard a great deal of conversation about the inadequacy of traditional business plans.   The lean start-up movement has argued that we should focus on developing a basic business model, testing out our ideas, and then refining them through a process of enlightened trial and error.  We should not over-emphasize a lengthy, drawn-out planning process.   The lean start-up movement emphasizes the notion rapid prototyping.   This approach has many merits.

Source: getaliff.blogspot.com

On the other hand, I think we can go too far in diminishing the importance of a business plan.   Dwight Eisenhower once said, "Plans are useless, but planning is indispensable."  In other words, the process of thinking through an issue and developing a strategy can be very useful. 

The mistake that many people make though is becoming too wedded to that original business plan.   A process of research and analysis can be productive, but it must lead quickly to a rapid prototyping phase.  We have to take action, and learn from that action.  However, we can't just leap without any spade work. 

For the Wall Street Journal, London Business School Professor John Mullins has written a great column exposing some of the many problems with traditional business plans.  For those interested in learning more about this topic, I strongly suggest reading his essay. 

Oreo: The Power of a Nimble Social Media Strategy

By  now, many of you have heard of Oreo's social media grand slam during the Super Bowl.  While all of us sat through that lengthy delay due to the power outage, Oreo's social media team unleashed the tweet heard round the world.   The tweet read:  "Power out, No problem."   The tweet included the photo shown here.

15,000 people retweeted that simple message.   More than 20,000 people "liked" it on Facebook.   Oreo's Instagram followers mushroomed from 2,000 to 36,000.   

Forbes reports on the most interesting part of the story - namely, how they managed to engineer such a rapid and highly creative response.  Apparently, Oreo's brand team had set up a "command center" at advertising agency 360i’s offices in New York City.    All of Oreo's advertising agency partners set up shop together at those offices, with Lisa Mann, an executive from Oreo's parent company on the  phone.   Mann explained how they moved so quickly:  “Because everyone was together, they had everyone in place to jump on a real-time marketing opportunity, which was, how would Oreo see the blackout? And Oreo saw the blackout as an opportunity to dunk in the dark.”

What a terrific story!   I love the fact that preparation yielded such a great result.  They knew that the Super Bowl represented a unique opportunity.  While so much attention is focused on the television ads, social media represents a huge opportunity at low cost.  With the blackout, everyone took to Twitter.  The volume of tweets exploded.  That posed a challenge for many firms though. How do you stand out when the Twitter world suddenly became so crowded.   Being prepared and ready to move so quickly turned out to be a tremendous advantage.   

Notice that Oreo did not try to be controversial or outlandish.  They stayed true to the brand.  So many social media and television advertising efforts associated with the Super Bowl yield poor results, because they emphasize being funny or controversial at the expense of communicating an authentic and consistent message about the brand.  Think about some of the ads you saw this weekend.   How many times did you think to yourself:  While that ad was funny, I'm not sure I know what it has to do with that product or brand.  

Peripheral Knowledge & Breakthrough Innovation

My former graduate school classmate, Martine Haas (now a professor at Wharton), has written a new paper exploring how peripheral knowledge might impact breakthrough innovation.  Haas describes peripheral knowledge as information and ideas that may not seem pertinent to a particular task, that are outside of that technical domain.   Haas argues that that peripheral knowledge drives innovation through two mechanisms:  transplantation and perspective shifting. Haas defines transplantation as "the direct transfer of artifacts, technologies or practices from peripheral domains into core domains, with or without some modification."    Perspective shifting means that " expertise or experience in a peripheral domain leads work group members to see a problem in a core domain differently, thus revealing new solutions." 

Haas and her co-author, Wendy Ham, go on to argue that having more one person exploring a peripheral knowledge domain can be helpful, but of course, that takes scarce attention away from the specific task at hand.  In short, it's a balancing act:  How much time should we spend focusing narrowly on the task at hand versus moving outside of that area to explore potentially, but perhaps not very useful, topics? 

One last challenge:  Which peripheral domain will be most useful?  Well that's a tough one.  It's difficult to know in advance.  However, I do think groups can be purposeful about peripheral knowledge accumulation.  At leading design firms, they think carefully about related domains that are worthy of exploration.  They examine industries or products that might be in some way analogous to their current project, and then they explore those areas.   Stepping back at the start of a project to think about potentially useful peripheral knowledge could be a key step in an innovation team's work.