Algorithm Aversion: How Can We Overcome It?

Algorithms can help us make better decisions in a variety of situations.  However, human beings tend to have an aversion to using algorithms.  They trust their gut more than the computer, even though the algorithms may lead to better decisions. Knowledge@Wharton reports on a stream of fascinating research by Cade Massey, Joseph Simmons, and Berkeley J. Dietvorst.  They found that you can persuade people to use algorithms if you give them a choice as to whether to use the algorithm or not.  In other words, don't force them to use it; make them feel a sense of control.  That will help convince them to choose the algorithm.  However, many people stop using the algorithm after some period of time, because they become frustrated with the mistakes that the computer makes.  Of course, the computer might make fewer mistakes than a human using intuition, but people don't recognize that possibility. Instead, they fixate on the mistakes and lose faith in the algorithm. Simmons points out, "People want algorithms to be perfect and expect them to be perfect, even though what we really want is for them to simply be a little better than the humans."

The scholars also found that you could persuade people to use the algorithms if you gave them an ability to adjust the computer's recommendation slightly.   Of course, the algorithm's predictions and recommendations become less accurate when humans intervene in this manner.  However, the researchers found that you only have to give people an ability to adjust the algorithm slightly to enhance adoption.   Providing them an ability to adjust more substantially does not increase adoption more than offering a slight adjustment possibility.  Thus, you might be willing to tolerate a bit of degradation in the algorithm's accuracy simply because giving people some sense of control increases adoption of the computer-assisted decision-making system.  For more on this research, see the video below in which Massey and Simmons are interviewed about the research.  

Should I Tell That Joke at Work?

The Wall Street Journal has a nice summary of recent research on humor in the workplace written by scholars Alison Wood Brooks and T. Bradford Bitterly.   The scholars point out some of the positive effects of humor in the workplace.  For instance, they cite one study by Nale Lehmann-Willenbrock.  Here is the summary of those findings:

Research led by Nale Lehmann-Willenbrock at VU University Amsterdam studied how patterns of humor in conversation—such as a joke followed by another joke or a joke followed by laughter—predicted other types of communication, as well as team performance, more broadly. The researchers found that teams that tell more jokes and laugh together also made more supportive and constructive statements to each other, things like “that’s a great idea” or “we could solve this problem by doing X.” That, in turn, led them to perform better on a number of measures, such as hitting goals and improving efficiency. The researchers surmised that humor could improve team interaction by triggering positive forms of communication.

Of course, one always worries about the inappropriate use of humor in the workplace. Will you offend someone?  Could you cross the line and face disciplinary action for something you say?  Could it even get you fired?   The problem, according to researchers, is that we are not very good predictors of what others will find to be funny.  In fact, we aren't good predictors even when we know the person quite well.  Here's one study that examined this situation:

In a recent study led by Michael Yeomans at Harvard University, pairs of museum-goers were asked to predict what their companion would find funny. Many of the pairs included married couples, or people who had known each other for years. Even with the close connection between people, Dr. Yeomans found that they weren’t very good at predicting what their partner would find funny. A statistical prediction model turned out to be much better at rating how funny their companion would rate a joke.

Why People Quit

Why do people quit their jobs?  Fast Company reported this week on a new analysis conducted by Glassdoor.   The firm studied approximately 5,000 workers who switched jobs over the past decade.   They found that three most important reasons for quitting are:

• Company culture
• Employee salary
• Getting stuck in the same job for long periods of time

The firm discovered that, "On average, we find that a 10% higher base pay is associated with a 1.5% higher chance that a worker will stay at the company for their next role."  In addition, the probability of quitting rises by 1% for every 10 extra months someone stays in the same role at a company. 

What didn't matter as much with regard to quitting?  Interestingly, "they found that while work-life balance, liking their senior leadership, and benefits may matter for overall employee satisfaction, they don’t impact turnover."

Marketing Your Products as Designed by Users: Benefit or Hindrance?

The Boston Globe reported this weekend on the fascinating new research of Vienna University Professor Martin Schreier.   He studied the marketing of crowdsourced products.  Schreier found that marketing an item as user-designed tended to increase sales more than marketing a product as created by a firm's own designers.  Why this positive effect?  Schreier discovered that, "People believe their peers understand their needs better, and therefore, come up with better solutions."   Moroever, Schreier found that people tend to react more positively if informed that the user-designers had something in common with them.   For instance, female consumers tended to prefer user-designers who were women similar to them.  

Is there a potential downside to marketing a product as "user-designed"?  Schreier found that the effect does not appear to be positive for luxury items or high tech goods.  Why?  For technologically sophisticated products, the consumer trusts experts with high levels of knowledge and expertise more so than fellow users.  As for luxury items, the explanation is quite different.  In those cases, consumers "want to set themselves apart."  Thus, they tend not to prefer something sourced from the crowd.  

Shorter Lines at Starbucks and Dunkin' Donuts

Several weeks ago, The Street reported the following news regarding Starbucks: " Starbucks also seems to be having trouble dealing with the rapid rise and popularity of its mobile order and pay technology.  On a conference call with analysts, executives said there has been significant uptick in the usage of mobile order and pay. The jump created operational challenges, especially at its highest volume stores at peak traffic hours. The congestion at the beverage hand-off counter resulted in some customers who entered stores or considered visiting a location, but decided not to complete a transaction, the company said."  

Meanwhile, this week The Street reported that Dunkin' Donuts would be trimming its menu to improve wait times:  "We have thousands of combinations of drinks and sandwiches on our menu, in some cases more than McDonald's (MCD) and other competitors -- we have perhaps gotten too complex," acknowledged Dunkin' Brands Chairman and CEO Nigel Travis in an interview with TheStreet. Travis believes simplifying the menu will help speed up lines both in stores and via drive-thrus."  

The issues facing both Starbucks and Dunkin' are not unique.  As retail chains mature, they face formidable challenges regarding same-store sales increases.  How can they continue to increase comps year after year, even as their industry and their chain matures?   Many restaurants resort to "menu innovation" as a means of jumpstarting growth.   However, menu innovation inevitably means menu expansion at many restaurant chains.   Therefore, operations become substantially more complex.  Operating efficiencies diminish, and wait times increase.  Customer service begins to suffer.  The best chains prune their menus from time to time, so as to regain efficiencies and reduce wait times.  Of course, some customers will miss certain items that they have grown to love.  Chains need to be prepared for such complaints and train their staff members as to how to handle this pushback appropriately.   The chains that are most successful are ready and able to discuss the changes with customers, and they provide a consistent and effective response to customer questions across all locations.  

How Successful Leaders Make Decisions

Lydia Dishman has written a column for Fast Company titled, "How Leaders at Google, Buzzfeed, and More Make Decisions."   She has a number of interesting tidbits from various leaders.   A few key themes emerged:

The Value of Seeking Small Wins:

In a recent report for Fast Company, Harry McCracken asked staffers of Facebook how their leader has pulled off some of the company’s recent major achievements.  "I don’t hear a lot of anecdotes about him swooping in and personally making genius-level decisions that suddenly changed everything. Instead, they praise his inquisitiveness, persistence, ability to deploy resources, and devotion to improving Facebook and himself. He has a knack for carving up grand plans into small, doable victories."  

Ask Good Questions

Mark Parker, CEO of Nike: "You can’t always predict the winners. I end up asking a lot of questions, so the team thinks things through. I don’t say, ‘Do this, do that.’ I’m not a micromanager. I don’t believe in that. My father, when I was growing up, would say to me when I had to make a decision, ‘Well, what do you think?’ And I’d say, ‘Well, I think this.’ And he’d say, ‘That seems like a good idea.’ And over time, I started picking for myself. I didn’t need to go to him. At Nike, we have incredibly strong people. They know what to do."

Step Out of Your Functional Shoes:

Ursula Burns, CEO of Xerox:  We don’t want to compartmentalize people’s expertise based on their internal organization alone. We try to give individuals parity–-equality-–in the discussion. In our leadership team, I expect all of them to check at the door their function as the primary thought process by which they give me input. I expect them to think more about the customer, competitors, employees, and shareholders. So, I give everyone parity to speak about an issue.

Test Your Hypotheses: 

Dao Nguyen, Publisher of Buzzfeed:  Publishing volume is actually really important. It's not that we want to crank stuff out there for no reason at all. The more you publish, the more opportunities you have to look at things that are happening, read comments, have a new hypothesis, test a hypothesis. And if you can do that relatively quickly, then you remember what you were testing.

Do Boards Pick the Right Person as CEO?

What happens when the Board of Directors appoints an internal candidate to the position of CEO?  Do they tend to pick the right person, or do they overlook/reject an alternative candidate that would have been a better CEO?  Stanford scholars David Larcker, Stephen Miles, and Brian Tayan examined this issue recently.  They examined 121 transitions at the 100 largest companies over a ten-year period.  They found that roughly 1/3 of executives who were not selected for internal promotion to CEO were, in fact, hired at other companies.  However, the internally promoted CEOs experienced higher shareholder returns than those executives who were not chosen and left to lead other firms.   

Don't Try to Imagine the Future! Ask Others Before You Decide

You have to make a decision. Suppose you are trying to decide on whether London or Dublin is a better place to visit with small children. You read the travel guides and try to imagine what it will be like in each city. You envision what your daily experiences will be like. Will you make a decision that your family finds acceptable and enjoyable? Alternatively, you could ask others who have traveled to London and Dublin. What were their experiences like? Which did they prefer for their small children? You might hesitate to use the latter strategy of consulting others. After all, your family is rather unique. What if those other families are very different from yours? 

It turns out that consulting others makes much more sense than trying to envision the future, at least in most cases. Harvard psychologist Daniel Gilbert has studied this type of decision. Gilbert describes the strategy of consulting others as "surrogation" - i.e. you are using others' experiences as a surrogate for your own. Harvard Magazine described one experiment that Gilbert and his colleagues conducted and summarized their findings:

In one experiment to test surrogation, the psychologists asked a sample of women to predict how much they would enjoy a “speed date” with a particular man. Some women saw his personal profile and photograph; others learned nothing about him other than how much another woman (a stranger) had enjoyed her speed date with him. The second group predicted their enjoyment far more accurately than the first. Both groups had expected the reverse, and oddly enough, despite the outcome, both groups preferred to have the profile/photograph for their next date.

This suggests that ideas trump reality. But in predicting your likings, even someone else’s direct experience trumps mental hypotheses—which is why surrogation works. But to be helpful, the surrogate’s experience must be recent. “People are very poor at remembering how happy they were,” Gilbert says. “So it’s not very useful to ask, ‘How much did you like something you experienced last year?’ People get most questions about happiness wrong. But there is one question they get right: how happy are you right now?”

Why Would Abercrombie & Fitch Pay Someone NOT to Wear Its Apparel?

When we think about social influence, we typically think about how and why people tend to feel pressures to conform to the behavior of their peers, colleagues, or teammates. We act a certain way, or make certain decisions, because others have made similar choices or taken similar actions. However, at times, social influence works in the opposite way. We do not want to be like certain people. Therefore, if they act a certain way, we most certainly do not want to behave in a similar fashion. 

Jonah Berger, author of Invisible Influence: The Hidden Forces That Shape Behavior, relates a story about this type of repellent effect of social influence in an episode of the Hidden Brain podcast.   Berger tells a story from the reality show, Jersey Shore, believe it or not!  He explains that Abercrombie & Fitch once paid Mike "The Situation" Sorrentino NOT to wear its apparel.   Similarly, a Gucci competitor sent Nicole "Snooki" Polizzi one of Gucci's handbags.  Why would that Gucci rival do that?  They knew that many luxury handbag customers would be turned off by the fact that Snooki was carrying around a Gucci handbag.  That would hurt the Gucci brand image, and perhaps help the rival's position in the market.   

Berger explained ,"It turns out influence is very much like a magnet...but it just as well repels us.  And the idea here is, well, if Mike 'The Situation' is wearing Abercrombie & Fitch, maybe other people aren't going to want to wear it anymore. Or if Snooki is hanging on to a Gucci handbag, maybe that will help their competitors because no one will want to wear Gucci anymore. So we need to understand how social influence attracts, but also how it repels."

Berger once conducted a study with Stanford's Chip Heath to demonstrate the power of this repellent effect.  Berger and Heath distributed Livestrong wristbands to residents of a particular dorm on the Stanford campus.  One week later, they distributed the wristbands to a nearby residence hall known on the campus as the "geeky" dorm.   The researchers tracked continued usage of the wristbands.  They found a 32% drop in wristband usage by the first group.  They had witnessed the "geeks" wearing the Livestrong wristbands, and a sizeable number of them had abandoned wearing them as a result!  

Put Your Shared Norms on the Wall!

I had lunch with the CEO of a major academic medical center today.  He mentioned a key aspect of the culture of his top management team.  In the conference room they use for weekly meetings, they have a list of shared norms and ground rules up on the wall.  He explained how these norms are very useful to help the team engage in productive dialogue and debate.   Moreover, this leader expressed how important it was that the team members held him and each other accountable for adhering to these rules of engagement.  If someone didn't behave in accordance with these norms, they could be gently, or perhaps not so gently, reminded about their unacceptable behavior.  They could be told that they had violated a particular rule.  This leader concluded by arguing that building the right culture means you have to be specific about the behaviors you expect.   In addition, people have to hold each accountable for adhering to these behavioral norms.  Peer-to-peer accountability is key.  

Are Your New Hires Fitting In?

Joann Lublin reported yesterday in the Wall Street Journal about new research regarding cultural fit of new employees. Lublin described the research of Sameer B. Srivastava, Amir Goldberg, and their colleagues. The scholars examined 10.2 million emails among 601 full-time staffers at a technology company written between 2009 and 2014. They hypothesized that language is a key element of culture at an organization. Adopting a similar communication style as your colleagues represents one key element of cultural fit. What did they find? According to Lublin,

"The review of 10.2 million internal messages found that new hires who stuck around and thrived used language styles similar to those of their co-workers. Newcomers with high cultural fit had a greater chance of advancing to managerial positions, the study found. Quitters experienced decreased cultural fit roughly midway through their tenure. But individuals with low cultural fit had a four-times-higher risk of getting fired after three years."

In short, newcomers who thrived at the organization either communicated in a similar fashion as existing employees (implying that the hiring process had screened effectively for cultural fit), or the successful newcomers adapted their communication style so as to fit in at the organization. Those that left or did not succeed at the organization failed to adapt to the way people communicated at the tech company.

Why Persuading People with Facts Doesn't Work At Times

The British Psychological Society's Research Digest reports on a new study by Gregory Trevors and his colleagues.   They examined why we fail at times to persuade people with factual evidence.  Why don't fact-based arguments change minds?  In the past, researchers have posited that a "backfire" effect can occur when you confront someone with information that challenges their pre-existing views.  Why?  They have argued that people begin to recall all the information supporting their existing position.  An "arms race" occurs in their minds, as they retrieve all the data that rebut the new factual evidence being presented to them.  Trevors takes the research on this backfire effect one step further.   That work hypothesizes that, "When people read information that undermines their identity, this triggers feelings of anger and dismay that make it difficult for them to take the new facts on board."  

Trevors and his colleagues conducted an experiment with regard to genetically modified foods.  120 students participated in the study.  The scholars first tested "how important food purity was to the participants' sense of identity."  Then the researchers provided the students with scientific data contradicting their views in opposition to genetically modified foods. Here is what they found:

"After the researchers gave participants scientific information worded to directly challenge anti-GMO beliefs, those with higher scores in dietary purity rated themselves as experiencing more negative emotions while reading the text, and in a later follow-up task, they more often criticised GMOs. Crucially, at the end of the study these participants were actually more likely to be anti-GMO than a control group who were given scientific information that didn’t challenge beliefs: in other words, the attempt to change minds with factual information had backfired."

What's the lesson here?  You have to understand WHY people hold certain beliefs.  If those views are deeply tied to their identity, then fact-based arguments alone will not prevail.  In fact, they might backfire.  What can you do differently?  Here is the advice offered in the Research Digest article:

If persuasion is most at risk of backfire when identity is threatened, we may wish to frame arguments so they don’t strongly activate that identity concept, but rather others. And if, as this research suggests, the identity threat causes problems through agitating emotion, we may want to put off this disruption until later: Rather than telling someone (to paraphrase the example in the study) “you are wrong to think that GMOs are only made in labs because…”, arguments could firstly describe cross-pollination and other natural processes, giving time for this raw information to be assimilated, before drawing attention to how this is incompatible with the person’s raw belief – a stealth bomber rather than a whizz-bang, so to speak.

Unreasonable Goals, Unethical Behavior

In a recent Harvard Business Review post, Liane Davey explores the connection between unreasonable objectives and unethical behavior.  Sometimes, you face a difficult situation as a team leader.  You have been given an unreasonable goal to achieve.   Davey examines how team leaders can prevent their employees from engaging in inappropriate conduct as a means to achieving highly aggressive goals.  

First, Davey argues that you need to "define the off-limits options" when discussing how to achieve your objectives.  Davey recommends asking, "What would we not be willing to do to hit our target?”  Second, Davey argues that you need to probe carefully to understand how people are trying to achieve their targets.  Don't just focus on results.  Focus on the behaviors and the processes that are being employed to try to achieve those results.  Third, don't single out publicly those people who are struggling to achieve highly aggressive goals.   Such shaming may cause them to resort to unethical methods to achieve better results.  Finally, keep your eye out for outliers... people doing extraordinarily well in the face of aggressive targets.  If one person or unit is exceeding all others by 30%, you might want to ask, "How could they be doing so much better than all the others?"  Don't accuse them of inappropriate behavior without any evidence, of course.  Probe to understand what their best practices might be, for purposes of sharing those with other team members.  However, be on the lookout for any evidence that they may be crossing the line in pursuit of top notch results.  

In sum, these types of vigilant behaviors will help avoid some very unpleasant surprises.   Don't just complain about unreasonable objectives, or demand that your team go above and beyond to achieve those results. Keep a close eye on how people go about their work so as to avoid putting you and your organization at great risk.   

The Customer vs. The Task

You approach the counter at a fast casual restaurant, coffee shop, or bakery.  You would like to place your order.   The workers appear busy performing various tasks.  They need to do this work in order to serve you effectively.  They must wash dishes, clean counters, sweep the floor, obtain supplies from a cabinet, refill the coffee maker, etc.   You understand that these tasks must be completed.  However, you become frustrated very quickly because no one has taken your order.  In fact, no one has even acknowledged your presence at the counter.  They have not said good morning and/or welcomed you to the establishment.  They keep their back turned and their head down.  They walk past you several times without so much as a word to you.  We have all experienced this frustrating moment... workers placing task before customer.   Perhaps we have even walked away at times, when the wait seemed to be interminable.  

World class customer service requires a different approach.  Companies have to train employees to put customer before task.  They does NOT necessarily mean dropping everything to take the person's order immediately (though that should be done if the task is not a high priority at the moment).  After all, you can't fulfill a coffee order if there is no coffee brewing at the moment.  However, an effective associate acknowledges the customer's presence.  They greet them professionally and courteously.   They ask them politely to wait one moment while they complete the particular task that needs to be done immediately.   They explain what the task is, and why it is important.   Managers need to help employees understand how to approach these situations.   Moreover, they need to make sure they are not sending employees the wrong message, by establishing controls and incentives that might cause associates to put task before customer.   Far too many employees feel pressured to put the task first because they haven't received the right message from their bosses.  

Stress Testing Your Partners & Team Members

Stanford Professor Lindred Greer studies startup teams extensively.   Not surprisingly, she advises students and others to be very careful in selecting partners and team members with whom to work.  She cites the old adage that she has heard many times from entrepreneurs and investors:  "Hire slow, fire fast."  In an interview on the Stanford website, Greer offers a recommendation for how to evaluate a potential partner or team member:

With my students, one of the big things I ask before they commit is, “Have you had a fight yet? Do you know what this person is like when things get stressful and ugly?” And if you haven’t seen that yet, then you need to find ways to gently explore how this person will react if you disagree with them or stress goes up... Push back on something much harder than you usually do, and see their reaction. That can reveal a lot. I’ve had students come back to me saying, “Oh, my gosh. I’m so happy I did that. That was terrifying.”

I find the advice useful, though I could see where it might be difficult to find just the right way to conduct this stress test without alienating a potential collaborator.  Many companies, though, clearly are trying to find ways to do some forms of stress testing as part of their selection process.  Increasingly, they ask job candidates to perform make presentations, conduct and share some work that they have done, and take certain tests.  They are putting some level of pressure on candidates, and they are seeing what they can accomplish and how they handle themselves.  

Do Technical Experts Make Better Leaders? Part 2

Someone read yesterday's blog post about technical experts as leaders, and they asked me if I had done a similar analysis for NFL coaches.   In yesterday's blog post, I showed that most NBA championships have been won either by non-players or players who never made an All-Star team.   That finding stood in contrast to a scholarly study that showed former All-Stars achieving a higher winning percentage than non-stars or non-players.  The scholars used those findings to argue that technical experts thrive as leaders, contrary to conventional wisdom.  My results regarding championships didn't fully support their conclusion. 

What about the NFL?  What do the data show there? I reviewed the list of Super Bowl winning coaches from 1966-2016.   32 coaches have won the 51 Super Bowls (several coaches have earned multiple championships, including Bill Belichick and Chuck Noll, who both won 4 times).  Of those coaches, only 1 man made the Pro Football Hall of Fame as a player (Mike Ditka).  Only two men earned Pro Bowl status as players (Mike Ditka and his mentor, Tom Landry, who made it to one Pro Bowl as a punter for the New York Giants in the 1950s).   None of the other Super Bowl winning coaches earned Pro Bowl status as a player.   Thus, in football, it appears that the findings are even more pronounced.  Championships are generally not won by coaches who were formerly superstar players.  

Are Technical Experts Better Leaders?

James K. Stoller, Amanda Goodall, and Agnes Baker have published an intriguing Harvard Business Review article titled, "Why the Best Hospitals are Managed by Doctors."   In the piece, they state the following based on their research: 

Support for the idea that physician-leaders are advantaged in healthcare is consistent with observations from multiple other sectors. Domain experts – “expert leaders” (like physicians in hospitals) — have been linked with better organizational performance in settings as diverse as universities, where scholar-leaders enhance the research output of their organizations, to basketball teams, where former All Star players turned coaches are disproportionately linked to NBA success, and in Formula One racing where former drivers excel as team leaders.

The final sentence surprised me a bit.  I'm a lifelong basketball fan, and the conventional wisdom certainly has been that All-Star players do not always make the best coaches.   Consider the struggles of NBA greats such as Dave Debusschere, Isaiah Thomas, Bob Cousy, Willis Reed, Elgin Baylor, Bill Cartwright, Kurt Rambis, and Wes Unseld.  In addition, who can forget Magic Johnson's very short coaching career with the Lakers?   He won just 5 of 16 games and quit coaching.   

Given the conventional wisdom, I took a look at the research.  Goodall wrote a paper with Lawrence Kahn and Andrew Oswald about NBA coaches.   They studied NBA coaches from 1996-2004, and they found that former all-stars have a higher coaching winning percentage than non-stars, and former players overall do better than non-players.  The results were statistically significant.  I decided to probe a bit further though.  What about championships?  Did former players excel at winning championships as coaches?  Here are the all-time results for professional basketball championships:  

• 13 former NBA All-Stars have won championships as a coach, totaling 18 championships. 
• 9 former players, who never earned All-Star status as players, won 24 championships. 
• 10 men who never played in the NBA won championships, totaling 28 championships. 

Yes, 22 former players earned championships vs. only 10 non-players.   That's a large difference. However, only 41% of the coaches who won championships were all-stars, and only 26% of the championships were won by coaches who were all-star players. Moreover, many All-Stars earned a single championship as a coach, while many non-stars or non-players built a legacy of multiple championships (consider Popovich's tenure with the Spurs as the most recent example).   Interesting... I'm not sure what to make of this data, but I certainly think it's worth further investigation.  Do similar patterns hold true in other professions?  

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.

Jimmy Kimmel's Take on New Year's Resolutions

I posted this funny video clip from Jimmy Kimmel last year just a few days into the new year.  It's worth another look!

Merchandising, Choice, and Shopper Satisfaction

Wharton's Barbara Kahn explains her new research on how merchandising layouts affect buying behavior as well as shopper satisfaction.

The Benefits & Risks of International Experiences

A team of scholars has published an interesting new study in the Journal of Personality and Social Psychology regarding the impact that foreign experiences have on our behavior (Jackson Lu, Jordi Quoidbach, Francesca Gino, Alek Chakroff, William Maddux, and Adam Galinksy).  They built upon prior research that has demonstrated that foreign experiences bring certain important benefits to individuals.  Specifically, prior work has shown that foreign experiences foster cognitive flexibility and enhance creativity.   They also reduce intergroup bias.  

This new study shows that foreign experiences have negative impacts as well.  These scholars conducted eight studies using multiple research methodologies.  They found that foreign experiences enhance moral flexibility.   By that, they mean that foreign experiences increased moral relativism, and thereby enhanced immoral behavior on the part of individuals.  The findings held true even for people of different ages and cultures.  The study certainly does not mean that we should limit our international educational, travel, and work experiences.   However, it does sound a note of caution about the effects these experiences have on us.  The benefits can be substantial, but some important risks do arise.   

The Durability of First Impressions: Amazing Findings

Our parents often told us to work hard to make a positive first impression. They reminded us that first impressions matter a great deal, and that it's hard to recover from a bad start with someone. Well, it turns out that our parents were more right than we could have ever imagined. Let's take a look at some fascinating new research from Cornell Professor Vivian Zayas and her co-authors, Gul Gunaydin and Emre Selcuk.   Their study is titled, "Impressions Based on a Portrait Predict, 1-Month Later, Impressions Following a Live Interaction.” 

They asked 55 research subjects to examine photographs of a woman with whom they were not acquainted previously.    The scholars asked the individuals to record their impressions of the woman in the photograph.  The researchers asked if the subjects would like to be friends with the woman.  In addition, the research subjects rated the woman on personality attributes such as emotional stability, conscientiousness, extroversion, and openness to new experiences.   In some photos, the woman smiled. In others, she presented a neutral expression on her face.  Between one and six months later, these research subjects met the woman in person.   Only four people remembered seeing the woman in the photographs.  They were excluded from the study's subsequent analysis.   What about the other 51 research subjects?   Their initial impressions from those photographs shaped their impressions of the woman months later in the face-to-face interaction. Zayas told the Cornell Chronicle, "What is remarkable is that despite differences in impressions, participants were interacting with the same person, but came away with drastically different impressions of her even after a 20-minute face-to-face interaction."  

Rethinking How You Set Your Goals (and form New Year's Resolutions)

Duke's Dorie Clark has some good advice in her HBR blog post regarding goal setting strategies. Clark first cites some interesting research on the ineffectiveness of to-do lists:

Indeed, one indication of this is the pervasive use of to-do lists, which attempt to keep a handle on one’s responsibilities and are, according to one LinkedIn study, used by 63% of professionals. That would be great if we reliably accomplished what we set out to do. But the startup iDoneThis analyzed their users’ data and discovered that 41% of the to-do list tasks users inputted were never accomplished — little wonder in a world where the average professional has 150 tasks to be done at any given time, according to research by psychologist Ray Baumeister and John Tierney.

Clark then argues that individuals should make the same type of shift in planning and goal setting that corporations should make.    She makes the point that corporations need to move away from annual strategic planning rituals toward a shorter planning cycle that allows for nimble adaptation to changing competitive circumstances.  Similarly, Clark advocates moving away from the New Year's Resolutions technique toward a strategy of setting goals and revisiting them several times during the year.  Moreover, she argues for limiting the number of objectives that you establish at any given point in time.  Focus on the bigger goals rather than the lengthy to-do list.  Surely, you do have some routine tasks that you must accomplish.  However, Clark argues that we need to separate the mundane tasks from the bigger goals.  If not, we will always keep pushing aside the big meaningful task and focusing instead on trying to cross of  the minor items on the to-do list... so that we can at least feel some sense of progress on a daunting task list.  Clark summarizes her argument as follows:

The point of goals, of course, isn’t to successfully complete tasks we blindly set ourselves to years ago. Nor is it to maximize our accomplishment of small bore trivialities. Instead, what counts is our ability to master the right kind of big goals — the ones that can change your life, like positioning yourself for a promotion to the C-suite or writing a book or launching an entrepreneurial venture. You can only accomplish those kinds of goals when you’re willing to question assumptions regularly and re-evaluate as necessary, and when you give up the temporary dopamine hit of crossing easy tasks off your to-do list, in favor of making a dent in the handful of major projects that really matter.

Why Design Thinkers Need Grit

Lili Ermezei, Creative Strategy Director at Wonder Agency, makes the case in this terrific blog post that, "Being gritty is essential for successful design projects."   I agree wholeheartedly.  Some teams struggle during the design thinking process generate meaningful insights from their field research.   They settle for conclusions and interpretations that are superficial.  Others struggle because they converge too rapidly on a solution.  They fail to gather and accept sufficient user feedback, and they don't iterate effectively.   

Enlightened trial and error requires grit.  You have to be able to persist despite multiple failed prototypes and experiments.  You have to encounter numerous instances of negative feedback and persevere.  Many people become frustrated with the non-linear nature of the design thinking process. Grit certainly helps in this messy process.  

The Importance of Self-Reflection

Former Baxter International CEO Harry Kraemer recently described an important daily ritual to Kellogg Insights (Kraemer now teaches at Kellogg).  Kraemer has engaged in a nightly practice of self-reflection for nearly four decades.  He found this ritual highly useful throughout his career as a very successful business executive.  Kraemer argues that self-reflection has three important benefits:

1. It helps you set priorities and adjust them over time.   You can evaluate whether you are dedicating time, attention, and other resources in a way that is aligned with your priorities.  
2. It protects you against the possibility of a painful surprise.  Self-reflection enables you to anticipate what might go wrong and be better prepared for those contingencies.  
3. It helps you lead your team more effectively.  You can assess how the team is performing and what adjustments need to be made to enhance performance (including changes in the way you lead the team).  

The Link Between a Happy Spouse and a Healthy You

Scholars William Chopik and Ed O'Brien have conducted some fascinating research on the link between your spouse's happiness and your health.  According to the Booth Review, 

A number of previous studies have linked a person’s own happiness to health and longevity, but the researchers wondered if being around “happy others” might have a similar effect. To test the theory, Chopik and O’Brien assessed the health and happiness of nearly 2,000 couples, ages 50 to 94, over a period of six years. Both partners rated their individual happiness and life satisfaction, and answered questions about their personal physical health, including their activity level and any chronic health problems.  It turned out that the happiness of a person’s spouse was strongly linked to how healthy the individual was—in measures of overall health, physical impairment, and activity level. And this seemed to work for both partners. Even more, the effects of a partner’s happiness on a person’s health were independent of the individual’s own happiness level. “The current study demonstrates that happy partners seem to substitute as proxies for a happy self,” write Chopik and O’Brien.

The study left me wondering... What about happy co-workers, and even happy bosses?  Does your work context have a substantial impact on your health too?  It seems to me that it should.  Perhaps Chopik and O'Brien will examine that link next.  

Five Skills that Innovators Need

Lisa Kay Solomon and Emily Shepard shared some thoughts about innovation with a Stanford Business School class. They focused on five  skills that one must master to innovate successfully. Here's their list:

1. Observe:   Watch what others are doing, demonstrate empathy, and and record your observations of the world around you.   Keep a journal of your observations.
2. Question:  Be curious.  Ask good questions to get out the root of the problem you are trying to solve.
3. Associate:  Expose yourselves to environments where ideas from different domains come together.  Innovations often come from combining seemingly unrelated ideas.  
4. Experiment:  Sketching, drawing, and storyboarding can be simple ways to play with your ideas and to test out concepts.  
5. Network:  Don't just learn from other experts in your field.  Try to learn from people in other fields, far and wide. 

Leading Dispersed Teams

Eric McNulty, director of research at the National Preparedness Leadership Initiative, has written a blog post for Strategy + Business that addresses how to lead dispersed teams effectively. McNulty argues that teams should not be managed virtually the entire time that they are working together on a project. Instead, a geographically dispersed team should come together in person from time to time. He argues that in-person meetings offer several key benefits. Perhaps most importantly, McNulty argues that in-person meetings facilitate the formation of trust among team members. Higher levels of interpersonal trust increase a team's effectiveness for a number of reasons. Here's an excerpt: 

One of the primary reasons to get teams together has to do with the hardwiring of the human brain, says Valérie Berset-Price, founder and president of Professional Passport, a firm that coaches, trains, and troubleshoots with international and cross-cultural teams. The brain is always scanning for risk, according to Berset-Price, and among the things it uses to determine if someone is friend or foe are non-verbal cues. Those are absent in teleconferences and flattened in all but the best video conference systems.

“Building trust is a multisensory experience,” she says. “Only when people are physically present together can they use all of their senses” to establish that needed trust. Without a bond, conflict or disengagement can more easily arise and is more difficult to resolve. But when a group has the human connection that makes them a true team, “people can move sky and earth together,” Berset-Price adds... The multiplicity of cultural and linguistic challenges are more easily navigated when people work side-by-side to solve problems as well as share a meal, learn a bit about colleagues’ backgrounds, and swap stories about kids, sports, and other non-work issues. Team members are reminded of their colleagues’ humanity and learn to respect and better understand each other in ways that don’t materialize when they only engage remotely. A team becomes more productive and cohesive as a result.

Are You a "First-Principle" Thinker?

In last week’s New York Times Corner Office column, Adam Bryant interviewed Abe Ankumah, CEO and founder of the software company Nyansa. Ankumah discussed the importance of cultivating “first principle” thinkers in your organization. He wants people who don’t just to creating a solution without first understanding and defining the problem in a crystal-clear fashion. Here’s Ankumah explaining his “first principle” approach: 

I think start­ups kind of take on the value system of their founders. There are three of us who started the company, and we’re all first­-time entrepreneurs. We tend to be very “first principle” thinkers. What I mean by that is when you’re trying to solve a problem, you start by trying to understand the essence of the problem, rather than starting with what the answer should be and then working your way to justifying it. So it’s all about making sure that everyone understands the problem we’re trying to solve. And to do that, you have to maintain a broader perspective and listen very carefully to people.

The Cost of Not Speaking Up

David Maxfield has written a good article for Harvard Business Review titled, "How a Culture of Silence Eats Away at Your Company." He argues that people often say that they would speak up if they had a serious concern or dissenting opinion at work, but in an actual situation, they tend to be much more reluctant. Unsurprisingly, people say one thing and do another. My experience discussing this topic with many managers in a variety of industries confirms Maxfield's observation. Maxfield goes on to explain a simple experiment he conducted on this topic: 

At VitalSmarts, we’ve researched the propensity for people to stay silent before. In a previous study, we asked people what they would do if someone cut in front of them in line. Most people said they’d promptly and skillfully tell the person to head to the back of the line. But when we put their predictions to the test, we found something else. We went into a busy mall with confederates and a hidden camera to see what people really do when faced with a line-cutter. Here’s what we found: The line-cutting victims stand around looking frustrated yet never say a word. A few make dirty faces behind our confederates’ backs or complain to their neighbor. In our study, only one in 25 spoke up.

What's the downside of not speaking up? Naturally, the most crucial danger is that key risks will remain hidden in organizations. Bad news will not rise to the top. In the most extreme circumstances, a catastrophic failure could occur. Consider the costs of people not speaking up at GM with regard to the ignition switch scandal, or the similar dynamic that occurred at Volkswagen with regard to the emissions testing scandal. 

Maxfield argues, though, that there are other very real costs of a culture of silence. He makes the point that people don't simply remain silent. They waste a great deal of time and energy in their frustration over the issue. Here's an excerpt from his article:

Instead of speaking up in these situations, our subjects admitted to engaging in one or more resource-sapping behaviors including: complaining to others (78%), doing extra or unnecessary work (66%), ruminating about the problem (53%), or getting angry (50%). These behaviors aren’t just unhelpful; they’re costly. We found the average person wasted 7 days complaining, doing unnecessary work, ruminating about the problem, or getting angry — instead of speaking up. A shocking 40% of our respondents admitted to wasting two weeks or more.

An Effective Fix for Bored, Disengaged Employees

Chief Learning Officer magazine reported this week on a study by Udemy about boredom and disengagement in the workplace.  The study found that 43% of respondents were bored at work.  80% believed learning new skills would enhance their boredom.  Bored workers were twice as likely to leave the firm.  Females and millennials were more likely than men and baby boomers to report that they were bored at work.  

Why these feelings on the part of so many workers?   People get bored at work for several reasons. First, they are stuck performing the same routine day after day.   People value some variety in their work.   Second, they have no autonomy.   They simply must follow the directives of others, with no ability to suggest and implement better ways to accomplish the organizations's goals and objectives.  Third, they don't understand the big picture.  These workers do not comprehend how their work is contributing to important organizational goals.  The sense of mission is simply not there.   Finally, they are not being challenged.  They are not being asked to learn new skills, take on difficult challenges, and develop personally.  

What's the fix?  Give workers a clear sense of mission.  Show them the importance of their work, how it fits into the bigger picture.  Provide them the autonomy to recommend and execute better ways of getting the work done.  Instill some variety into each person's workweek, so that they are not stuck in a dull routine.  Finally, provide them opportunities for learning and development, through both new challenges on the job or off-line training and education.  

Innovative Environments: The Bell Labs Story

Zara: Can Competitors Match Its Fast Fashion Model?

Patricia Kowsmann wrote a terrific article about Zara today.  Zara, as many of you know, is a highly successful Spanish apparel retailer.  In the article Kowsmann explains how quickly Zara can bring a new design to the retail floor, ready for customer purchase.  Here's an excerpt:  

A black, high-collar women’s wrap coat, fastened with a metal ring, was hung out for sale one recent morning at Zara’s flagship store in New York.  “Customers asked for hardware this season,” the manager said, holding out the ring. That kind of feedback, he added, can inspire a new style that reaches his store within weeks.  This coat took 25 days.

Recall that I blogged about The Gap's troubles several days ago.   The Gap finds itself in trouble for several reasons.  One cause of the company's problems is its inability to cope with fast fashion competitors such as Zara.  Kowsmann's article points out that many competitors, including the Gap, have emulated Zara's strategy of bringing manufacturing closer to its retail stores.  This supply chain strategy enables Zara to move more quickly and to adapt more easily to changing customer preferences.  However, Kowsmann explains that simply matching the location strategy that Zara has employed for its manufacturing facilities won't provide the winning formula for many of these retailers. Why?  Here's Kowsmann:

But experts say it would be hard for competitors to replicate the Inditex model without a more thorough overhaul of the way they design, manufacture and distribute their products.  The Spanish retailer’s rivals might move production closer to home, but they “just don’t have an organization set up to react quickly to what is trending,” said Liz Dunn, founder of Talmage Advisors, a retail consulting firm.

In short, Zara's competitive advantage does not come simply from its sourcing strategy.  It entails an entire integrated system of activities.  The New Yorker's James Surowiecki once wrote about the company, and he explained this very point.  Zara has a whole package that is very hard to imitate.  Placing factories closer to stores may have some benefits, but that doesn't mean these rivals can match Zara's fast fashion success.

Treatment of Failures at Foundry X

Will Analytics Save the Gap? Not Without a Strategy Reboot!

Khadeeja Safdar reported in the Wall Street Journal this week about CEO Art Peck's efforts to turn around apparel retailer The Gap. According to the article, "The Gap Inc.'s market value has shrunk to about $10 billion, from roughly $40 billion at its 2000 peak. Revenue has stalled at about $16 billion—flat from a decade ago." The Gap owns several retail chains (including Banana Republic, Gap, and Old Navy). 

The article points out that, "The 61-year-old CEO is blunt in his criticism of the industry’s long fascination with creative executives who are given broad powers to set the overall image of a brand. 'We have cycled through so many, and each has been proclaimed as the next savior,' he said. In the end, they were 'false messiahs.'" Peck favors combining science with art. He hopes analytics can help drive better merchandising decisions, rather than relying on the intuition and foresight of powerful creative directors for each brand. 

I would argue that no amount of focus on analytics can save The Gap, particularly its namesake brand. The company has a strategy problem first and foremost. That problem has to do with the competitive positioning of the three brands. Each major brand does not have a distinctive competitive positioning. Moreover, the Gap brand is clearly stuck in the middle, trapped with an ambiguous strategy somewhere between the low cost position at Old Navy and the differentiated position at Banana Republic. That problem has existed for more than a decade. Until the company solves that problem, no amount of reforms in its merchandising process can save this once-iconic brand. 

Moreover, as the article notes, the Gap has failed to adapt to the fast fashion strategies of competitors such as Zara. The Spanish retailer has developed a completely different strategic positioning and unique value chain. Copying one or two elements of Zara's strategy will not suffice. Zara is successful because of the entire system of activities and choices that they have made. The Gap has made a vastly different set of choices, and they have undertaken quite different activities. Adapting the Gap's value chain to fit the new competitive environment will be very difficult.

Does Variety Make Us Happier?

We have all heard the expression, "Variety is the spice of life."  Is it true?  Do we value variety highly?  Does it make us happier?  Years ago, social psychologists Richard Hackman and Greg Oldham developed their now-famous job characteristics model.  They argued that five key characteristics affected outcomes such as job satisfaction, intrinsic motivation, and quality of work produced.  One of those job characteristics was skill variety.   If a job required employees to employ a variety of skills and capabilities, that had a positive effect on these key outcomes.   

New research by Jordan Etkin and Cassie Mogilner looks at variety in a slightly different context.  They conducted a series of experiments to explore whether engaging in a variety of activities increased happiness. They found that variety had a positive impact, but only if that variety did not occur in a very short period of time. Etkin explains in this article from Duke's Fuqua School of Business:

"It seems the pivot point is around a day," Etkin said. "We find that over longer periods of time — a day, a week or a month — spending time on more varied activities does lead people to feel happier afterwards. But over shorter time periods — an hour, 30 minutes or 15 minutes — people feel less happy after spending time on more varied things."

Etkin went on to explain why too much variety in a short period of time could have a negative effect on happiness:

"When people think about variety, they think it's exciting, stimulating and interesting. But we also derive a lot of happiness and satisfaction from feeling we accomplished something with our time. What we find is that shorter time periods really don't give people enough time to transition between varied activities and still feel productive."

Should States Stop the Strict Enforcement of Non-Compete Agreements?

Over the past few years, Massachusetts has witnessed a vibrant debate about whether the state should stop the strict enforcement of non-compete agreements that employers require many employees to sign.   Many entrepreneurs and venture capitalists have argued that Massachusetts is at a substantial disadvantage to California, a state that does not typically enforce non-compete agreements.  A new article from Yale Insights (a publication of Yale's School of Management) examines the research on this topic.  Scholars Olav Sorenson and Matthew Marx write about their work on this subject.  They argue that non-compete agreements inhibit entrepreneurship and slow economic growth.  Here's an excerpt:  

States that enforce non-compete agreements and those that enforce them more strictly have fewer startups. Entrepreneurs usually have prior experience in the industry they enter, or in a closely related one; non-compete agreements can thus prevent them from striking out on their own. Even if they can found their own firms, these agreements hamper their ability to hire early employees. As a result, a dollar of venture capital goes further—in terms of creating more jobs and more economic growth—in states that restrict the enforcement of non-compete agreements. Some of our research indicates that venture capital creates two to three times as much economic growth in regions that do not enforce these agreements as it does in regions that do.

States that enforce non-compete agreements also suffer from a brain drain, with sought-after employees leaving states like Massachusetts, which enforce non-competes strictly, for states like California, which do not. Many of the students we teach at MIT and Yale to move to California for this very reason. The enforcement of non-compete agreements therefore imposes an economic cost on all of us. We support these reforms not so much because they might help to right some of the wrongs associated with non-competes—though they should help to do that as well—but because they would promote economic growth.

Don't Eat Lunch at Your Desk: A Small Tip For Enhancing Creativity

Robin Camarote has a good article at Inc.com about a small change in our daily routine that can help boost our creativity and problem-solving effectiveness.   She argues against eating at your desk, and she notes that research supports her recommendation.  Here's an excerpt:  

Whether you run out and grab something from a restaurant or bring leftovers from home, about 40 percent of us eat lunch at our desks. Most of us do this because we believe we'll get more done. And if you're like me and often work from home, it might seem utterly ridiculous to sit down at the table to eat when there is no one to talk to and the computer and phone are just a couple feet away. I believe I'll get through more items on my to-do list if I multi-task.

But working through lunch only feels more productive. In fact, "...research shows that there are tremendous performance advantages to stepping away from your computer, and even more pluses if you can get outside. Taking a break from cognitively taxing work improves creative thinking," says Kimberly Elsbach, professor of management at the Graduate School of Management at the University of California at Davis, "and everybody's job has a creative component, such as problem-solving, managing teams or finding creative solutions." Not to mention taking a break from that steady stream of emails helps reduce stress and, in turn, helps keep you be healthier.

Who Drives for Uber and Why?

Jonathan Hall and Alan Krueger have published a new National Bureau of Economic Research working paper about Uber.  They explore the backgrounds and motivations of Uber drivers.   Many people have been critical of Uber, arguing that it is wrong for Uber not to treat their drivers as employees (they treat them as independent contractors).  Others have been debating the impact of the so-called "gig economy" - does it help or hurt the average worker?  For these and other reasons, the scholars found it interesting to explore survey data from 2014-2015 about Uber drivers.  The findings are fascinating.  Here are selected excerpts from the paper.  You can read more here.

Uber's driver-partners are highly educated. Nearly half of Uber's driver-partners (48 percent) have a college degree or higher, considerably greater than the corresponding percentage for taxi drivers and chauffeurs (18 percent), and above that for the workforce as a whole as well (41 percent).

In addition, most driver-partners do not appear to turn to Uber out of desperation or because they face an absence of other opportunities in the job market—only eight percent were unemployed just before they started working on the Uber platform—but rather because the nature of the work, the flexibility, and the compensation appeals to them compared with other available options.

Around 80 percent of driver-partners reported that they were working full- or part-time hours just before they started driving on the Uber platform. Only eight percent of driverpartners in 2014 (and 10 percent in 2015) said they were unemployed just prior to partnering with Uber. This low percentage is notable given that, for the economy overall, about 25 percent of new hires came from unemployment and 70 percent came from nonemployment in 2014 and 2015.13 The large share of drivers who partnered with Uber while they had another job suggests the role that Uber plays in supplementing individuals’ income from other sources.

In 2015, 52 percent of driver-partners worked full-time on another job, 14 percent of driver-partners had a part-time job apart from partnering with Uber, and 33 percent of driver-partners had no other job.

Nearly half of driver-partners view income earned on the Uber platform as a supplement to their income but not a significant source (48 percent).

Is One-Stop Shopping a Good Thing?

When many firms pursue diversification strategies, they argue that they can provide one-stop shopping for clients.  This logic implies that one-stop shopping adds value for the customer, and that the multiple business units inside the corporation are more valuable together than apart.  For many firms, cross-selling becomes a key initiative, to try to provide that one-stop shopping experience (Wells Fargo, anyone?).   Does one-stop shopping make sense though?  Do customers actually want to purchase a series of related services from one supplier?   Would you like to have all your financial relationships with one firm, or would you prefer to purchase your insurance at one firm, secure a mortgage at another, and invest in bonds at yet another company?

Olivier Chatain and Denisa Mindruta have written a paper on this topic. The paper is titled, “Estimating Value Creation From Revealed Preferences: Application to Value-based Strategies."  The authors presumed initially that one-stop shopping created value for clients.  After all, the firm provided customers more convenience, and it could apply learning from one aspect of a customer relationship to the provision of other products and services.   Synergies seemed readily available.  The research, however, demonstrated that significant drawbacks may exist to a one-stop shopping strategy.   I'm not shocked; I've always been skeptical of such strategies.   I think firms overvalue synergies routinely.   Moreover, I'm not sure customers actually want to put all their eggs in one basket.   They also get annoyed at times when firms are constantly engaging in cross-selling tactics.  

Chatain and Mindruta studied law firms in this research.   Chatain explains the findings:

What we think is that — especially for the law firms we were looking into — … even though you may know a client well, each time [you provide a new service to him], it’s almost like [starting] a different subject. You really have to start over and learn a lot about the client.

An alternative explanation [for our results] is that some clients are very worried about having one supplier of service serving multiple areas. So even though you might be the best expert for me, if you’re already my best expert for two or three other subjects in law, I may want to deal with someone else because I might be afraid if I get all the information from the same supplier, I might be missing out on some important themes.

I might have a preference of diversity in terms of input, which was something that is apparently more important than the savings you can realize by bundling all these products together.

Partnering to Get Younger

Many firms struggle at times with an aging customer base.  We have seen firms such as Harley Davidson and Talbot's face this challenge in recent years.   Neiman Marcus provides another example of a firm that has had difficulty attracting younger shoppers.  According to Fortune, the average age of a Neiman Marcus shopper is 51 years old.  What is Neiman Marcus doing to attract younger shoppers?  They have come up with an interesting and creative strategy.  They are partnering with Rent the Runway, a firm whose focus is millennials.  Their average age is 29 years old.   Rent the Runway will open small boutiques in select Neiman Marcus stores.   Rent the Renway appears to seek access to shoppers who want the touch and feel available in a physical location - something that their online business model does not provide.   

Mutually beneficial partnerships, such as this one, might be an effective strategy for firms who face an aging customer demographic.  What's the risk?  Certainly, one worry is cannibalization.  Will they take sales away from one another?  A more interesting question, though, is whether those young consumers, the millennials, will convert to purchasers at Neiman Marcus.  Can these folks afford the premium-priced goods at Neiman Marcus?  A key strategic risk emerges if Neiman Marcus begins to offer lower-priced goods to cater to these young shoppers. That move might compromise their premium, differentiated competitive positioning and their reputation for high quality.   Moreover, what if they cause a decline in satisfaction among their core customers by carrying more of the types of clothes that attract millennial shoppers?  Older women may not like the fashions that millennials seek.  Getting younger is a challenging proposition for any firm; it's not as simple as it may seem.  

Design Your Way to a Better Life

Dave Evans and Bill Burnett have written a terrific new book titled, Designing Your Life: How to Build a Well-Lived, Joyful Life.  Evans and Burnett discuss how people are often encouraged to find their passion and pursue that vocation in their life.  They point out that it can be very difficult to discover one's passion simply by sitting in a dorm room or apartment dreaming up potential visions of the future.  Introspection and reflection alone do not allow for this discovery to occur.  

What's the alternative mechanism for discovering what you want to do in your life?  They argue that individuals should apply the principles of design thinking.  They should prototype and experiment early and often.  They should try a variety of things, expose themselves to different domains, pursuits, and professions.  Then they should reflect on these experiences and consider what makes them happy, what motivates and inspires them, and what they consider rewarding.   Moreover, individuals should consider the circumstances in which they feel intellectually challenged and highly engaged.  

How does one experiment and prototype?  They take internships in different industries or companies, shadow someone in a particular profession, work on course projects in different domains, network with people in various roles, volunteer in various organizations, etc.   In short, they design different ways to test whether they, in fact, are passionate about a particular job, role, industry, etc.  

Doubts about "Choice Overload"

Edmund Andrews has written a good article about the research of Stanford Professor Itamar Simonson and colleagues.   Andrews discusses how Simonson's latest work challenges the commonly held view about "choice overload" that has become popular in recent years.  Andrews writes:

For well over a decade, researchers in consumer behavior have debated whether the ever-expanding array of goods creates “choice overload” that can actually discourage people from buying. Barry Schwartz, a psychologist, wrote a famous 2004 book on what he called the “paradox of choice.”  But many other scholars — not to mention marketing executives — have been doubtful. Customers may groan at the bewildering choices they face when ordering something as simple as coffee, but they still seem to want them. And companies keep offering them. In fact, a 2010 survey of more than 50 separate experiments on choice overload found that the results of bigger selections were essentially a wash. Big assortments discouraged consumers in some studies but encouraged them in others. On average across the studies, the impact of a big selection was about zero.

What has Simonson found in his research?  He conducted a series of experiments, and he has found that the way choices are presented matters. In the experiments, he examined the situation in which a person begins by considering whether to make a purchase at all, and then tries to determine which particular item to buy.   In contrast, he looked at the situation in which someone tries to select among a broad assortment and then determines whether to buy.   Simonson found that "choice overload" does not exist if someone begins by thinking about whether to buy at all.   In that case, having lots of choices appears to be a very good thing, and people are more likely to buy if presented with many choices. Andrews writes, "If, however, a person begins by picking a favorite from an assortment of options, and only then deciding whether to buy, a large selection makes the task harder and lowers the likelihood of buying."

Disrupt Your Routine to Ignite Creativity

Blythe Harris, Stella and Dot's cofounder and chief creative officer, shared a few tips for stimulating creativity with Fast Company's Elizabeth Segran. For instance, Harris suggested that people should purposefully disrupt their usual routine on occasion.   They need to seek inspiration by learning and seeing new things, meeting different types of people, and exploring domains where they have little expertise.  Here is an excerpt: 

"Harris believes strongly in taking inspiration trips. She was just in Chile, learning about local artisans. She's created entire collections after particularly inspiring trips to India and France. To this end, Stella & Dot invests heavily in sending Harris and other designers to foreign countries.  But you don't have to spend a lot of money to see things you wouldn't ordinarily see. An important part of this process is learning new things. So Harris also encourages her team to take classes in new fields. For instance, architecture has been particularly helpful to members of the design team. "If you don't have the budget to travel, you can disrupt your routine by going to work a different way, go to a new restaurant, or find ways to meet new people," Harris says. "When you disrupt your thinking like that, it actually slows down time, and you start to be able to take in all your creative inputs differently."

I concur wholeheartedly with Harris' recommendation. In fact, neuroscience supports this suggestion. Research shows that "pure novelty spurs the brain." Specifically, the substantia nigra/ventral tegmental area of the brain has a substantial impact on learning. According to Science Daily, "Researchers Nico Bunzeck and Emrah Düzel report studies with humans showing that the substantia nigra/ventral tegmental area of the brain does respond to novelty as such, and this novelty motivates the brain to explore, seeking a reward."

Should Disney Sell ESPN?

The Wall Street Journal reported this morning on Disney's quarterly earnings announcement, noting that the news disappointed investors.  "Declining income at ESPN continued to overshadow quarterly results at Walt Disney Co., with the sports powerhouse posting lower advertising and subscription revenue that dragged company earnings below Wall Street expectations."  These results continue a multi-year slide in subscriber numbers at ESPN, as many American consumers "cut the cord" - ending their cable television subscriptions.   Some people estimate that ESPN has lost more than 10 million subscribers in the past several years.  

This news raises a key question for me:  Should Disney sell ESPN?   That question may shock some people, as ESPN has been a substantial contributor to Disney's total net income since it was acquired as part of the Disney acquisition of Capital Cities/ABC two decades ago.   However, Disney's corporate strategy has evolved considerably since that time.   During the second half of Michael Eisner's tenure as CEO, Disney diversified well beyond the businesses that leveraged the animation studio as a central asset (acquiring ABC, owning baseball and hockey teams, etc).  However, during Bob Iger's tenure, characters have become the driving force of the corporate strategy once again.   The three major acquisitions during Iger's tenure have focused on expanding the character portfolio, so that Disney can leverage those characters across multiple platforms (i.e. Pixar, Marvel, and Lucas Films).  In many ways, Iger has returned Disney to its roots.   Below you will see famous chart created by Walt Disney himself to describe synergies at the company.   One has to ask:  How does ESPN fit into this chart?   Absent major synergies, and facing a long term disruption to ESPN's business model, might Disney be better off divesting the business unit?   Alternatively, Disney has to take a hard look at reinventing the business model at ESPN, rather than tweaking the strategy.   A reinvention seems necessary given the long term trends regarding cord cutters.   

What Will Our Rivals Do?

Do you want to spark creative thinking in a team meeting? David Burkus recommends asking how competitors might overtake, surprise, and/or outflank you. Here's an excerpt from his latest column for Inc.com:

Instead of thinking up what you should do, think about how your rivals are working to counteract what you're already doing? How would you drive yourself out of the market? Research suggests that we're able to think of more creative solutions when our frame of reference is someone else, rather than ourselves. In addition, if you think of what you're competitors would do to steal your customers, you can think of ways to turn that around and gain more customers yourself.

I recommend taking it one step further. Ask some members of your team to role play the competition. Have them devise strategies to destroy your business, or responses to your next proposed strategic move. That type of role play can open some eyes and help you reframe a situation to spark creative thinking.

How We React To Disconfirming Feedback

Francesco Gino has conducted research into how people react to critical feedback.  Unsurprisingly, she finds that we do not deal well with feedback.   Well, perhaps there is some surprise here. After all, I seem to read often these days that millennials love feedback.  I've always wondered about the veracity of that statement.  It seems that it has become conventional wisdom without much data to support the conclusion.   Gino's research shows that we do not like disconfirming feedback - i.e. critiques that are more negative than our own self-evaluations.  Moreover, we try to distance ourselves from those that offer us disconfirming feedback and seek out others to add to our network that will affirm our positive self-evaluations.   Here's an excerpt from Gino's HBR article about this research:

We found that in the year following feedback, an employee was more likely to eliminate someone from his or her network who offered “disconfirming” feedback (i.e., feedback that is more negative than one’s own self-evaluation) than a reviewer who provided “confirming” feedback. More specifically, when a colleague’s review was one point lower on a seven-point scale than one’s own self-review, the employee was 44% more likely to drop the relationship with that colleague.

We also found that when receiving negative feedback from fellow colleagues with whom they must retain a working relationship, employees tried to create a more hospitable network by seeking new colleagues who were relatively disconnected from their current circle.

In follow-up laboratory studies, we found that people engage in such behaviors because disconfirming feedback threatens their own views of their skills and accomplishments.

How EOS Overtook Chapstick and Blistex

Lip balm... It doesn't seem like a market ripe for innovation, does it?  However, EOS (maker of those pastel-colored, spherical-shaped lip balm products) has overtaken industry leaders such as Chapstick and Blistex in a few short years.   Fast Company recently spoke to the founders about the strategy that has led to so much success.   Elizabeth Segran writes, 

The lip balm category struck them as a prime candidate for innovation, since the vast majority of products on the market "were indistinguishable" from their 100-year-old predecessor, Teller says. Many brands appeared to be driven primarily by cutting costs and competing on price, he points out. "It appeared to us that everybody in this category was being lazy. That was an opportunity."

EOS chose their target market carefully.  They focused on millennial women, rather than trying to be all things to all people (generally, the existing products approached all customers uniformly).  Specifically, they targeted "millennial women between the ages of 25 and 35 who were style conscious."  Why?  Their research showed that these women tended to be heavy users of lip balm, yet they did not find the application of lip balm to be enjoyable at all. Co-founder Sanjiv Mehra notes, "The products that women depend on every day should deliver moments of delight that elevate these daily routines." They made a series of other choices that fit with this target market. They tried to "engage all five senses, from soft round packaging that felt good in the hands to the colors of the orbs, to the smells, to the way the flavors tasted, and even to the clicking sound the sphere makes when it closes." Segran writes that the founders tried to build an emotional connection with the customer. They weren't just selling a utilitarian product. They wanted their product to be fun, even delightful.

What a terrific story!  The EOS entry into this "tired" market offers several important lessons.  First, if many existing incumbents are trying to be all things to all people, then a strategy with a laser focus on a specific target market might be quite successful.  Second, empathy with the users can deliver innovative design concepts.  Understanding these millennial women delivered key insights that led to an innovative product tailored to their needs.   Third, customer needs go beyond the obvious service that is provided.  Yes, people don't want chapped lips.  However, these millennial women cared about more than the quality of the balm itself.   EOS' focus on the five senses demonstrates one can delight the customer by paying careful attention to many details about the customer experience.  Ultimately, EOS is selling more than lip balm, just as Starbucks is selling more than coffee.