Can Data Analytics Make Your Product Boring?

We live in an age in which companies are investing heavily in data analytics and algorithms.  Clearly, these analyses are often very helpful in making better decisions.  However, I'd like to pose a critical question as leaders ponder the impact of analytics in their organizations.  Can analytics make your product or service boring?  Could it lead to strategy convergence in your industry?  In other words, might an intense focus on analytics by all competitors lead to less much product differentiation?

Consider the case of the National Basketball Association (NBA).   In the 1986 NBA season, teams averaged 3.3 three-point attempts per game.  League MVP and champion Larry Bird attempted 194 attempts for the entire season.   That number led the entire league.  Last year, teams averaged 35.1 three-point attempts per game.  26 players attempted more than 500 three-point shots during the season.   In 1986, games involved a wide array of shooting.  Teams had powerful low-post players such as Hakeem Olajuwon and Kevin McHale.  They had players who could slash to the basket and others who had perfected the mid-range jumper.  Today, the game involves an overwhelming number of three-point shots and very little low-post play.  In the 1980s, some teams played a bruising, slower, physical game.  Others played a run-and-gun, fast-break game.  Today, nearly all teams rely heavily on long-distance shooting. 

Fans can disagree over whether today's game is better than the 1980s version of NBA basketball. However, it is difficult to argue that today's game is more differentiated than the 1980s version.  Most assuredly, teams all play a much more similar style of play today.  Strategy convergence has taken place at an incredible rate.   What's driven this change?  Analytics.  The data clearly say that teams should take a high number of three-point shots.  It simply makes a great deal of sense if you want to win. 

What's the lesson for business leaders?  Analytics may drive what seem like clearly better decisions.  Yet, it might just lead to strategy convergence, which may be harmful in the long run.  Your product may become much more similar to those of your competitors.  Distinctiveness falls, and in the long run, that may actually harm profitability for all rivals.  

Amazon CEO Andy Jassy on Shaping Your Career Journey

Amazon CEO Andy Jassy recently penned a blog post about career planning and development. Mostly, the post offers a series of clichés such as "find your passion" and "don't be afraid to fail." However, one point bears emphasis and reflection. Jassy argues as follows:

"I don't think that you have to know what your final destination is in your job early in your life. Maybe not even in your 40s, 50s, and 60s. I think that you have a chance to keep writing your own story and reinventing your own story.  Before I got to Amazon, I had tried sportscasting and sports production, I coached a soccer team, I worked in a retail golf store, I did product management, I tried investment banking, I tried sales, I tried a lot of things.  I really do believe it's perhaps as important to figure out what you don't want to do as what you want to do, because it actually helps you get more centered on what really makes you happy. So don't be afraid to try a lot of different things and don't let people tell you that whatever you've done—even if you've done it for a while—is what you must do. You have the opportunity to write your own story."

Most of my young students feel a great deal of pressure about their career choice and job search as they complete college.  They often think they have to have it all figured out.  If only they thought hard enough, talked to enough people, found the right mentors... they would land the perfect job and know precisely what career they should choose.  Then, all they have to do is begin to set some concrete goals for the next 3, 5, 10 years... and they are off to a great start.  

The reality is much different, of course.  Most will switch jobs frequently, particularly in the early part of their careers.  Some will switch to completely different professions, or different functional areas within the business world.  The shifts will occur for various reasons, including the emergence of incredible opportunities, changes in family situation, etc.  Some, though, will make substantial shifts because they are not satisfied with their early choices, don't find them fulfilling, or discover that they are simply not well-suited for those roles.  Here, Jassy's advice becomes so important.  We should not think that we have to have it all figured out.  We should be willing to experiment, particularly early in our career.  We will only know what we enjoy, and what we are skilled at, if we experience it for ourselves.  Talking to others is helpful, but not sufficient, for coming to these conclusions effectively.  

The willingness to experiment should not end early in your career, according to Jassy.  Here I agree wholeheartedly as well.  New technologies will emerge, creating new threats and opportunities that will shape people's careers.  The willingness to learn will be crucial, and so will the willingness to adapt.  Those who began their careers 35 years ago in retail could hardly have imagined the landscape today.  Yet, opportunities still exist for those willing to put aside their early career goals and rethink what is best for them today.  All of this change may be unsettling, but the first step is to accept that the career path will not be linear for most of us, even later in our lives.  

Southwest Pursues a Me-Too Strategy

Source: Wikipedia

This week, Southwest Airlines announced a major strategy shift. Alison Sider of the Wall Street Journal reported that, "Southwest Airlines plans to start charging for checked bags, a seismic shift that will boost revenue but potentially give its fiercely loyal passengers a reason to shop around. 'Bags fly free' was a policy so sacrosanct that Southwest trademarked the phrase and devoted a section of a book celebrating its 50th anniversary to it."  She also reported that, "Southwest is adding a bare-bones fare similar to its rivals’ basic economy tickets, with restrictions galore, including no advance seat assignment."  This latest change comes after other major changes including the move away from open seating, announced in July, as well as the decision to sell tickets on platforms such as Expedia.   Southwest has made these changes after pressure from an activist investor, Elliott Investment Management.  The firm pressed Southwest to add five new board members in October.  

The stock market reacted positively to the news of the strategy changes at Southwest. Sider reported that, "Shares in Southwest surged more than 8% Tuesday, on a day when several airlines tempered their financial outlooks for the first three months of the year."  I understand that the changes likely will result in new revenue and improved profitability in the short term.   For that reasons, investors are cheering.  However, I would offer a cautionary word on this strategic shift.  Abandoning many of the classic elements of Southwest's strategy means that the firm has lost of much of its distinctiveness.  What sets it apart now from other airlines?  In the past, we could articulate a whole host of distinctive features of the Southwest model.  Now, it looks more and more like any other airline.  In the long run, becoming less distinctive will make it more difficult to achieve superior profitability.   Competitive advantage typically does not derive from me-too strategies.  

Two research papers are relevant to this question about Southwest's strategy.  First, in 2013, Jost Daft and Sascha Albers published a paper titled "A conceptual framework for measuring airline business model convergence."  They studied the European airline industry and measured the extent to which the strategies of competitors converged over time.  They found a remarkable amount of convergence, with one glaring exception.  They wrote:

“A comparison of the business models of the 26 [European] airlines in 2004 and 2012 revealed a decrease of distance of nearly 19 percent. This considerable and statistically tested reduction of differentiation is [an] indicator of the convergence of airline business models…Ryanair, which is known to be fundamentally focused on its initial cost-saving business model design, is the only airline that was able to even increase the average distance to all other airlines.”

What's interesting about the one outlier in their study? Ryanair.  The Irish airline, run by brash CEO Michael O'Leary, has been one of the most profitable airlines in Europe for the past two decades.  Controversial? Yes. Profitable? Definitely.  

A second paper that warrants attention here was published by Stewart Thornill and Roderick White. The paper, published in Strategic Management Journal in 2007, was titled "Strategic Purity: A Multi-Industry Evaluation of Pure vs. Hybrid Business Strategies."  They examined data regarding the question of whether a pure strategy does better than a hybrid one, referring to Michael Porter's concept of pure "low cost" vs. "differentiation" strategies.  In other words, is being "stuck in the middle" a big risk, or can many firms pull of this hybrid approach?   Here is what they found: 

"Does strategic purity pay? Most theorists believe strategic purity—the extent to which a business pursues one type of generic strategy over another—contributes to better performance. By defining the strategy space consistent with the theory, and employing improved design and methods, our study of 2,351 businesses finds a significant relationship between strategic purity and performance. Purity does appear to pay."

In short, the distinctive, low-cost position at Southwest produced competitive advantage and superior profits for many years.  They lost their cost advantage over the years, and now they are eroding their distinctiveness.  Are they at risk of trying to be all things to all people?  Other than price, what will attract customers to Southwest moving forward? Will it be superior customer service?  According to JD Power's 2024 airline industry results, "Southwest Airlines ranks highest in customer satisfaction in the economy/basic economy segment for a third consecutive year."  Can that result be sufficient to set Southwest apart in the cut-throat airline industry?  Will these changes affect that service ranking?  These are the key questions that management must confront moving forward.  The company has many positive attributes and a tremendous history on which to build.  It will be quite interesting to see how it navigates these choppy waters in the years ahead. 

increase; green up pointing trianglSplans to start charging for checked bags, a seismic shift that will boost revenue but potentially give its fiercely loyal passengers a reason to shop around

Interviewing Candidates Who Have Prepared Using Generative AI Technologies

Navio Kwok writes in the MIT Sloan Management Review that job candidates increasingly are utilizing generative artificial intelligence to prepare for interviews.  They are providing job descriptions and company data, as well as information about themselves, and then asking for help simulating the interview, anticipating questions, and generating strong responses to those queries.  Kwok sounds an alarm though:

However, there is growing concern among hiring professionals that candidates using generative AI are gaming the interview process. Research suggests that GenAI use has a material influence on hiring decisions: In one recent study, candidates who used such tools to prepare received higher overall interview performance ratings compared with those who were unassisted by GenAI.

This finding only exacerbates concerns about the job interview process. Several years ago, I drafted a post about Yale Professor Jason Dana's research on the flawed approach and poor results of many job interviews. Dana's work demonstrated that hiring managers often draw erroneous conclusions from interviews. He makes the case that people often hear what they wish to hear.  Reflecting on his research, he wrote, "The key psychological insight here is that people have no trouble turning any information into a coherent narrative....People can't help seeing signals, even in noise."

Kwok recognizes that we cannot stop candidates from using generative artificial intelligence to prepare for interviews.  However, we can take some steps to insure that we are not being duped by these candidates.  First, Kwok advises that in-person interviews are important, so that candidates cannot use AI in real time to generate responses.  Second, Kwok argues that the right types of follow-up questions are critical to assessing a candidate's qualifications and capabilities.   For instance, Kwok recommends asking the candidate to explain their thought process in detail, as well as their rationale, when explaining key decisions they have made in the past.  Kwok also recommends asking the candidate to explain what options were considered, but rejected.  Finally, Kwok suggests that hiring managers pose probing questions about the challenges and obstacles that the candidate faced, and how they addressed those unanticipated issues.  He also recommends asking the candidate to explain what he or she might do differently next time. 

Moving beyond these thoughtful suggestions, I would recommend requiring candidates to take on a challenging task, rather than simply answering questions.  Give them a problem and ask them to present on that issue.  Or, ask them to do some work that is similar to what they will encounter on the job, evaluate that work, and then ask them about how they approached the task.  Require people to DO, rather than SAY what they have done.  That is the best remedy for the challenges Kwok and Dana describe regarding the interview process. 

Managing Cognitive Load During Long Meetings

What is cognitive overload and why is it important to consider as managers? The Mayo Clinic describes this challenge as follows: "When there is too much information to process, you may feel cognitive overload. This happens when you reach a point of paralysis of information — not being able to process and then act on what is heard."

When I'm teaching, I always try to be very aware of the cognitive load that I'm imposing on students.  I want them to be engaged in challenging and rigorous analysis, solving tough problems, and debating with their peers.  The cognitive load can be very high at times. I'm cold-calling intermittently.  They have to be on their toes.  However, I try to shift gears pretty frequently during class, knowing that the best teaching often has a change in pace, content, or pedagogy every 10-12 minutes.  When I change things up, I might occasionally engage students in a brief task that offers them a bit of a cognitive break.  For example, I might show a quick video about the company or leader we are discussing, or I may ask them to ask them to get up and go to the whiteboard to brainstorm some options for the company moving forward.  The students are still engaging in critical thinking, but this shift gives them a bit of a cognitive break.  They are engaging in something a bit less stressful, and/or they are moving around a bit in the room.  Then, in a few minutes, they are ready to dive into a different, quite complex issue.  

This same approach to managing cognitive load can be useful in meetings, particularly those that are lengthy in duration.  Having people sit in their chairs for hours discussing a series of complex financial performance metrics can be difficult.  People will eventually become less attentive and productive. They may find their cognitive performance deteriorating due to fatigue and stress.  Therefore, managers need to think about giving them a cognitive break during these meetings.  That does not just mean having a coffee break here or there.  You can intermittently introduce lighter topics or a brief activity that gets them out of their chairs and up to the whiteboards.  Movement, change of pace, and topic selection all help to manage cognitive load in a way that leads to more effective meetings. 

Gender Divide on AI Adoption

Are men more likely than women to adopt generative artificial intelligence tools in their work?  Indeed, that is what scholars Nicholas Otis, Solène Delecourt, Katelynn Cranney, and Rembrand Koning have discovered. They recently published a working paper titled "Global Evidence on Gender Gaps and Generative AI."  Here is an excerpt from their paper:

The findings above document that gender gaps in generative AI are nearly universal. We find women use generative AI less than men in data from 18 studies covering 143,008 people from across the world as well as data on who uses top generative AI websites and apps. Moreover, equalizing access does not appear to fully close the gap, even when presented with the chance to use generative AI, women are less likely to use this new technology than men. Akin to efforts to equalize female labor market participation and pay (England, Levine, and Mishel, 2020), it appears that social, cultural, and institutional frictions have led to a gendered gap in generative AI adoption.

Why does this gender gap exist?  HBS Working Knowledge recently interviewed Rembrand Koning about the research.  The article, by Michael Blanding, reports that, "the research suggests women are concerned about the ethics of using the tools and may fear they will be judged harshly in the workplace for relying on them."  

Why is the gender gap finding so consequential?  Two important ramifications must be considered.  First, will the differential usage lead to the exacerbation of gender biases?  In their paper, the scholars write:

This disparity has the potential to be significant. As generative AI systems are still in their formative stages, the under-representation of women may result in early biases in the user data these tools learn from, resulting in self-reinforcing gender disparities (Cao, Koning, and Nanda, 2023). Such biases in user data—similar to those that have previously led to racial disparities in generative AI performance—could result in generative AI systems that reinforce gendered stereotypes and in tools that are less effective at the tasks more often performed by women (Koenecke et al., 2020; Guilbeault et al., 2024).

Secondly, the lower adoption rates by women may affect their career opportunities and future compensation, according to these scholars.  Thus, further work will be needed to understand what's driving the gender gap, and how it may be affecting employees and their careers.  

Thinking Carefully about Boomerang Employees

How often do employees return to your company after departing for a promising opportunity elsewhere?  Why did they leave, and what caused them to return?  Anthony C. Klotz, Andrea Derler, Carlina Kim and Manda Winlaw have conducted some useful research on the topic of boomerang employees.  They found that returning to an organization where an individual once worked is quite common. Based on their analysis of extensive employee work records, "28% of “new hires” were actually boomerang hires who had resigned within the last 36 months."  Clearly, employees depart and often discover that the grass indeed was not greener elsewhere.  

What does this boomerang phenomenon mean for employees and employers?  For employees, the research implies that individuals must do more homework before jumping ship.  They need to go beyond what recruiters might be telling them and try to ascertain precisely what their role and responsibilities will be.  Moreover, they need to try to determine how the culture and values as articulated might differ from the actual practice within the organization.  Chris Argyris used to describe this schism as the difference between espoused values and values-in-use.  Employees also need to focus on how they leave their existing organization.  Ian Morris, co-founder of Likewise and former CEO of real estate software company Market Leader, once advised my students that they should always "leave well" when departing an organization.  You never know if and when your path may cross with that of a former co-worker or manager.  Preserving relationships during and after the departure may be very important for one's career.  It surely will help if you become a boomerang employee.

For companies, the boomerang phenomenon means two things. For the companies losing talent, managers  should maintain open lines of communication with talented former employees.  The research shows that many boomerangs occur shortly after the one year mark at the new company. Thus, managers should reach out around that time to see how things are going for the former employee at their new organization.  For the companies gaining talent, they need to think about how they can check in regularly with new employees to see if they are finding the position consistent with their expectations.  Identifying discrepancies between expectations and reality as early as possible can help to avoid misunderstandings, clarify roles and responsibilities, and make adjustments to better match workers' professional goals with organizational needs and demands.   Don't wait for the one-year merit review to have an in-depth conversation with a new employee because they may already have one foot out the door at that point.  

Creative Ideas Really Do Emerge More Often from the Periphery, Not the Core

Andy Grove, Former CEO of Intel

Do great ideas come from incumbents or from outsiders in a particular field?  Conventional wisdom says that outsiders usually introduce the boldest, most original innovations.  Is that true?  Lee Simmons recently wrote an article for Stanford Insights about the work of Paul Vicinanza, Amir Goldberg, and Sameer Srivastava.  The three scholars developed an incredibly large and diverse dataset, and then they used a deep learning model to examine the information.  They found that prescient ideas actually do come from outsiders more often than from those at the "core" of a field.  

The scholars examined over 100,000 quarterly earnings calls, more than 4 million judiciary rulings, and approximately 5 million speeches delivered in the U.S. Congress.   They used BERT, a deep learning model, to examine the texts.  The model rated each text based on the level of "prescience.  In other words, the speaker needed to not only offer an original idea, but it had to be an accurate prediction of what would come to be in the future.   Simmons reports on the scholars' findings: "The results were striking: In all three fields, they found that prescient ideas were much more likely to emerge from the periphery than the core. 'In studies of creativity, people tend to focus on brilliant individuals,' Goldberg says. 'But unless you think there are more geniuses on the margins, this suggests that where you sit matters at least as much as who you are.'" 

There it is... a person's position and perspective may matter just as much, if not more, than their particular knowledge or skillset.  You simply see things differently when you are the core of a field as opposed to the periphery.  Of course, that doesn't mean that you are doomed to not be innovative if you are an incumbent at the core of your industry or field.  You can take specific actions to move to the periphery, scan the external environment more broadly, and identify new ideas emerging at the margins of your domain.  Andy Grove used to say that, "snow melts at the periphery."  By that, he meant that new threats and opportunities often emerged first at the margins of an organization.  People at the core were often insulated from these new trends.  So, he encouraged his people to constantly get out to the periphery of his organization to spot and understand new trends.  

Do Those Super Bowl Commercials Increase Sales?

Companies will spend an enormous amount of money on Super Bowl commercials during Sunday's big game.  Sporting News reported that companies will spend an average of $7 million for a 30-second Super Bowl commercial.  Of course, you might be wondering:  How much of an impact do those commercials have on subsequent purchases?  I dug through some research on the topic, and I found one particularly interesting paper by Wesley R. Hartmann and Daniel Klapper.  They published their research in Marketing Science several years ago.  

Hartmann and Klapper examined how commercials impacted sales after the Super Bowl.  They found a positive relationship between the advertising and product purchases during a subsequent sporting event.   Specifically, they examined how Super Bowl ads impacted consumption of products such as beer during the March Madness college basketball tournament, which takes place about 5-6 weeks after the Super Bowl.  Here is their summary of the findings from the research: 

We measure the effect of ad viewership on post–Super Bowl sales. Without an obvious horizon for the effects, we measure the effect separately for each week following the game. While the first few weeks appear to follow a typical decay pattern, the advertising effects show resurgence in weeks when shoppers make purchases to consume during subsequent major sports broadcasts. This pattern suggests the hypothesis that Super Bowl advertising may build a complementarity with sports viewership more broadly.  To test this, we collected market-week-level data on viewership of the National Collegiate Athletic Association (NCAA) basketball tournament and interacted it with the Super Bowl ad exposures. We found that purchases for consumption during viewership of the NCAA tournament were augmented if the brand’s Super Bowl ad viewership was high.

Who Makes Those Private Label Products In Your Grocery Store and Why?

Ever wonder who manufactures the private label products you purchase at the grocery store?  Most of us suspect it is one of the large branded consumer products companies, but it is sometimes difficult to determine which firm specifically supplied that product to the grocer.   Why do these big national brands choose to produce private label products?  Scholars Yu Ma, Kusum Ailawadi, Mercedes Martos-Partal, and Oscar Gonzalez-Benito have conducted an in-depth study of private label manufacturing, and they offer some interesting insights.  They studied the private label market in Spain, examining data for six of the largest retailers in the country.   

First, they confirm a well-known fact about private label production.  The large brands have an inherent advantage when producing private labels.  They can leverage economies of scale to produce those private label goods at low costs.  Moreover, manufacturing the private label goods, and further taking advantage of scale economies, can lower their costs of producing their branded products.  

Second, they find that manufacturers may be supplying private label products in hopes of strengthening their relationships with key retailers.  In so doing, they hope to gain more shelf space for their branded products.   The scholars confirm that retailers do carry more of a manufacturer's branded products if that company supplies private label goods to their stores.   If a manufacturer exits the private label business, they tend to lose shelf space for their branded goods.  

However, interestingly, they find that the national brands do not gain market share in their categories simply because they have more shelf space and more availability of their product in the stores.  In the end, the consumer drives the success of the brands.  More shelf space doesn't mean more sales, and ultimately, a retailer may take shelf space away if products don't sell.  

One thing that they do not examine is why some branded manufacturers are more successful at private label production than others.  I suspect that some branded goods companies simply do not have the efficiencies and cost structure required to offer private label goods at competitive prices.  Moreover, attempts to become more efficient might harm the quality of the branded goods the firm supplies.  

Why Some Employers are Disappointed with Gen Z Hires

https://www.monitask.com/

Fortune's Orianna Rose Royle reports that, "six in 10 employers say they have already sacked some of the Gen Z workers they hired fresh out of college in recent months."  She cites data from a survey of nearly 1,000 business leaders conducted by Intelligent.  Royle offers some more data from the Intelligent study: 

Employers’ gripe with young people today is their lack of motivation or initiative—50% of the leaders surveyed cited that as the reason why things didn’t work out with their new hire. Bosses also pointed to Gen Z being unprofessional, unorganized, and having poor communication skills as their top reasons for having to sack grads. Leaders say they have struggled with the latest generation’s tangible challenges, including being late to work and meetings often, not wearing office-appropriate clothing, and using language appropriate for the workspace. Now more than half of hiring managers have come to the conclusion that college grads are unprepared for the world of work. Meanwhile, over 20% say they can’t handle the workload.

Now you may or may not have experienced these hiring challenges.  Some have argued that these complaints are overblown, and that they are typical of an older generation of managers that does not understand younger workers' mindsets and habits.  Still, one cannot easily dismiss these concerns expressed by managers.  Their perceptions matter because they will affect hiring practices, as well as the experience of those new hires during their initial months of employment.  

What strikes me, though, is that these hiring managers are not complaining about a lack of business skills such as data analysis, and they aren't pointing out a lack of content knowledge in specific business disciplines.  Instead, they are focused on how young workers conduct themselves.  These managers are focused on the basic blocking and tackling of becoming a professional. Can you show up on time?  Can you communicate clearly?  Can you dress appropriately?  The lesson for those of us in academia is very clear.   We cannot focus only on teaching content knowledge and analytical skills.  We have to prepare students for the day-to-day interactions that will take place in the workforce.  For young workers, the lesson is also very clear: being smart is not nearly enough to succeed in the workplace.  If you are late, disorganized, and/or cannot communicate clearly, no one cares how knowledgeable you are. 

Reducing Customer Pain Points: The Savannah Bananas

My former student, Jon Huntley, and I are working on a new case study about the Savannah Bananas, the wildly successful and highly entertaining barnstorming baseball team co-founded by Jesse and Emily Cole.  The company provides a wonderful example of how to identify and alleviate pain points in the customer experience.  In his book, Banana Ball (written with Don Yaeger), Jesse explains how the Bananas sought to find and eliminate all the friction in the fan experience.  

“Here’s what I don’t understand about many businesses.  Why do they continually do the things that their customers hate? Why are people endlessly put on hold, while a message plays that tells them how ‘important’ their call is, but they do a slow burn while waiting to talk to an actual human being… and maybe they still hang up in frustration.  In the Bananas’ organization, we have a word for this – friction.  We looked at all the friction points from a baseball experience – ticket fees, price gouging on parking and concessions, as well as limited access to autographs and fan photos with their favorite players – and we did the opposite.”

Jesse Cole explains that improving the customer experience involves a focus on both macro-frictions and micro-frictions.  At the macro level, the Bananas had to overcome the perception that baseball games were too long, slow, and boring.  At the micro level, the Bananas mapped the entire customer journey, from buying tickets to arriving at the ballpark, watching the game, and returning to their cars in the parking lot.  They identified each of the frictions, or pain points, along that journey.  They are relentless about eliminating friction.  

They use several methods to identify and eliminate pain points. First, employees pose as Undercover Fans during games.  Second, senior leaders in the organization work on the front lines at times to see the processes and fan interactions up close.  Third, the organization takes photos and video of the fans throughout the ballpark to see when and why they are frustrated.  Finally, they constantly look for opportunities to transform pain points into moments of joyful entertainment.  For instance, most people hate being put on hold.  The Bananas have created such entertaining voicemail messages and hold music that fans enjoy the wait.  Many people become frustrated by the wait times in the concession areas.  The Bananas try to reduce those wait times, but they also have developed all sorts of entertainment on the concourse.  

Sounds simple, right? Why do many organizations fail to alleviate these pain points?  In my view, three main reasons exist. First, managers become too isolated from the true customer experience.  When they "experience" the customer journey, it's not real.  Employees know they are watching and inspecting, and they create a "false" process for managers. Second, managers do not empower front-line employees to eliminate those frictions.  They constrict their freedom and autonomy such that the employees feel powerless to address problems that are clear to them on the front lines.  Third, and perhaps most importantly, managers convince themselves that an amazing product should be sufficient to satisfy customers.  It's like the doctor who thinks that patients should be happy if they receive the appropriate treatment to remedy their illness, even if patients had to experience long wait times, confusing insurance forms, an array of unexplained fees, and unclear instructions about medication and other treatments.  A great product alone is not sufficient to satisfy customers.  How you deliver that product matters.  In baseball, a competitive, well-played game is far from enough to satisfy fans.  That's the key insight that the Bananas have used to transform the ballpark experience into a magical one for fans. 

Negotiating a Job Offer: Step Back, Think Broadly

As the new semester begins, many soon-to-be-graduates are deeply immersed in the job search process.  Some already have job offers and are contemplating whether to accept those positions.  During this process, many students and recent graduates ask me about negotiating with their potential employers.  Can I negotiate? What should be the focus of my negotiation?  How do I make sure that I don't harm the relationship before I even start working?   For those students, I highly recommend a Harvard Business Review article by my friend Hannah Riley Bowles and her co-author Bobbi Thomason.  They write:

Although reaching agreement on pay and benefits is important, failure to think more broadly about your career could mean losing valuable opportunities for advancement. For instance, women are increasingly urged to negotiate for higher pay as a way to close the gender wage gap. However, studies have shown that women’s “80 cents on the dollar” is explained more by differences in men’s and women’s career trajectories than by differential pay for doing the exact same job. Our research and our work coaching executives suggest that negotiating your role (the scope of your authority and your developmental opportunities) is likely to benefit your career more than negotiating your pay and benefits does. And at times of work-life conflict, negotiating your workload and the conditions that affect it (including your responsibilities, your location, and travel requirements) may be critical to remaining gainfully employed and moving forward professionally.

They offer terrific advice for job-seekers.  Step back from your focus on the job offer that presents itself at the moment.  Start instead by considering your long-term career goals and aspirations.  How can this job help you achieve those longer term objectives?  What will it take to achieve those goals?  How can you craft the opportunity in front of you to help fulfill those aspirations?  Work backward from this focus on career goals to the more immediate issue of the potential job you are considering.  Most importantly, think broadly about all aspects of the opportunity, rather than simply about compensation.  I find this last point so important, particularly for new graduates.  An extra $5,000 may sound enticing to a student with very little remaining in their bank account at the end of college.  However, taking the long view is so critical in that situation.  Investments in growth and development, with ample opportunities to learn, will provide a long-term payoff that far exceeds that extra compensation here and now.  

How to Ask for Advice (and Why Many Ask Incorrectly)

Source: WikiHow

When we ask for advice from others, we would like their independent opinion.  In other words, we would benefit a great deal if we did not influence their response.  However, many of us frame our question or request in a way that does bias the advice we receive.  

Jessica Reif, Richard Larrick, Jack Soll have published a new paper titled "The inclusion of anchors when seeking advice: Causes and consequences." They write, "Sometimes advice seekers include their own thinking in their requests for advice, providing anchors that make it difficult for their advisors to access their own independent judgments."  For example, you might ask a colleague: How many people should I interview for an open analyst position on my team?  Alternatively, you might ask: Do you think that interviewing five people is appropriate when searching for a new analyst for my team?  In the second case, you have anchored the other party by providing a number to them.  In the first case, the more open-ended request for advice improves the chances of receiving an unbiased perspective.  

It seems obvious, right?  Don't anchor others when seeking advice. Yet, many of us do just that. Why?  The authors find that people who worry about appearing competent and/or diligent are more likely to anchor others when soliciting advice.  In other words, we often worry about the impression that we are making.  Asking a completely open-ended question makes some us feel as they though we may seem clueless to the other party.  

How does one signal competence without anchoring the other party (i.e., while preserving the independence of the other party's advice)?  Feif, Larrick, and Soll demonstrate that one can do so by using a "preparation signal."  They offer an example: “I have calculated what I think is reasonable but am interested in hearing what you think."  In short, let the other party know that you have done some research and come to your own conclusion, but you do not wish to disclose because you want their unbiased advice.  In one of their studies, they tested the usefulness of such a signal.  They concluded, "The key insight is that a preparation signal– an indication that the advice seeker made an estimate prior to the interaction but is withholding it– may be similarly effective in accomplishing impression management objectives without introducing potentially biasing information into the advice interaction. This finding is important because it offers advice seekers a strategy for simultaneously accomplishing impression management and independence goals."

Withstanding External Pressure When Making Decisions

Source: NFL.com

Conventional wisdom often asserts that strong familiarity and cohesion within a group leads to a high risk of groupthink.  In other words, a strong sense of social belonging within a team can lead to pressures to conform, which in turn can diminish the quality of decisions that a team makes.  However, might that strong in-group familiarity be helpful when it comes to resisting external pressures?  Amanda Ferguson and her colleagues studied that question in a new paper titled, "Relieving the Pressure: Team Familiarity Attenuates External Conformity Pressure on Team Member Decisions."  

Ferguson and her colleagues conducted an ingenious study of NCAA football officiating crews.  They examined data from 2012-2015 to measure "crew familiarity" - i.e., how often had referees worked together.  Then, they evaluated officiating crews' performance during the 2016 football season.  Ferguson and her co-authors studied whether crews with more experience working together were more or less vulnerable to pressure from the home crowd when making penalty calls.  In short, the home crowd represented what they called "external conformity pressure."  They discovered a meaningful relationship between in-group familiarity and external conformity pressure, particularly when the stakes are very high: 

"Crews with 20 games of experience working together call 0.92 fewer penalties on the visiting team when under high pressure, and crews with 30 games of experience working together call 1.56 fewer penalties on the visiting team under these conditions. Although the magnitudes of changes in penalties may seem small, they represent anywhere from a 15% to 25% difference from the average number of visiting team penalties, which is consistent with effects reported in previous studies on the influence of crowds on referee penalty calls."  

In other words, in-group familiarity and cohesion seems to provide a protective effect, leading teams to not be as susceptible to external conformity pressure, particularly in high-stakes situations.  The scholars conducted a second experimental study examining the same factors.  That study largely corroborated the findings from the NCAA referee research. 

What's the practical implication for business leaders?  We know that many managers feel pressure to conform to industry standards and conventional wisdom.  Companies often tend to exhibit herd behavior in industries, with competitors mimicking the actions of industry market share leaders. Perhaps, more seasoned management teams with a history of working together are less likely to succumb to the pressure to conform to "standard practice" within the industry.  They might be more likely to take risks, be different, and stake out a distinctive competitive position.  Teams with less familiarity may not be able to resist the pressure to conform to conventional wisdom.   

Some of My Favorite Books That I Read in 2024

 

Here are some of the thought-provoking and interesting books that I've read in 2024.   I hope you enjoy taking a look at some of these stimulating reads.  

Selecting a Leader: Lessons from the Patriots' Jerod Mayo Experiment

Source: Yahoo Sports

Selecting a leader can be a vexing challenge for many organizations.  As the Harvard Law School Forum on Corporate Governance reported last year, the median CEO tenure in S&P 500 companies dropped by 20% from 2013-2022.  The median tenure of a CEO was 4.8 years according to that research.   The National Football League is even more challenging when it comes to leader selection.  The average tenure of an NFL coach equals roughly 3 years.  

Here in New England, a debate has intensified in recent days about the future of Patriots head coach Jerod Mayo.   The team has fallen mightily from its two-decade run of dominance with Tom Brady as its quarterback.   The Patriots dismissed their legendary coach, Bill Belichick, last year and replaced with him with young defensive assistant Jerod Mayo.  Now, the team has only won 3 games (against 11 losses) to date this season, and the young head coach has struggled badly.  Was it a good hire, and would it be wise to move on from a new coach after just one year?  Is that fair to Mayo?

First, we have to review a few basic facts that suggest Mayo would be an outlier if he succeeds as head coach.  

• According to an ESPN study from 2009-2018, the average head coach in the league had 19.5 years of coaching at various levels before becoming an NFL head coach.  Mayo had just 5 years of experience.
• That same story concluded that "It's common for new coaching candidates to have more than one influence."  Mayo had only played and coached for one man, Bill Belichick, in his entire playing and coaching career.
• Former Belichick assistants have mostly floundered as head coaches in the league, as I documented in a 2022 blog post. At the time, I compiled the win-loss record of former Belichick assistants. I wrote: "175 wins, 252 losses, and 1 tie for a winning percentage of 40.9%. That's awful. Only one of his former assistants managed to compile a winning record (Bill O'Brien with 52 wins and 48 losses).
• Finally, in another blog post from 2021, I examined the idea of the curse of expertise among NFL coaches.  I wrote, 
• "33 coaches have won the 54 Super Bowls that have taken place. Several coaches have earned multiple championships, including Bill Belichick (6) and Chuck Noll (4). Of those coaches, only 1 man made the Pro Football Hall of Fame as a player (Mike Ditka). Only 2 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." 
• I attributed this lack of championship success by star players to the curse of expertise. I described this challenge as follows: "Put simply, experts sometimes have a difficult time teaching much less experienced and accomplished people. Why? They forget what's it like to be in the novice's shoes. They can't predict the types of challenges and problems that the novice will face when mastering a new skill. In many cases, the expert may not even be fully aware of the "how" behind certain highly effective results. It comes so naturally to them that they don't have a complete understanding of the process that leads to those successful outcomes."

Now, none of these statistics suggests that Mayo has no chance at turning things around in New England.  Some great coaches have had awful starts to their career and then gone on to remarkable success (see Bill Walsh and Tom Landry, for example).  They inherited terrible teams, embarked on a lengthy turnaround process, and learned from early stumbles.   

Some news reports suggest that the Kraft family wishes to stick with Mayo despite the tough first year.  However, the Kraft family has to consider whether they might be succumbing to the sunk cost trap.  Are they reluctant to cut their losses because of how much they have invested in Mayo?  Is he truly better than other alternatives that are going to be available this offseason?

Companies face similar challenges when hiring leaders.  Sometimes, they choose to value attributes and skills, or even personality, rather than emphasizing depth of experience.  That might be the right call; experience is not the only valuable element of a person's qualifications.  However, companies should question whether they are, at times, under-rating the value of experience - both in terms of years and quality/range of past work.   Are they being wowed by charisma, or simply blown away by how well someone interviews?  Understanding the types of experiences that are most likely to help someone succeed is crucial.  Learning on the job is difficult for any leader, but particularly for those who don't have a reservoir of relevant experiences upon which they can draw in challenging situations.  

Amplifying Ambiguous Risks at Nvidia

Source: Getty Images

How do leaders make sure they are hearing the unvarnished truth? How can they cut through the bureaucracy and access unfiltered information? Writing in today's Wall Street Journal, Ben Cohen describes one technique employed by Jensen Huang, CEO of Nvidia. Cohen draws from a new book by Tae Kim (“The Nvidia Way").   Cohen and Kim describe the infamous T5T memos that Huang reads each week. 

T5T notes (Top 5 Things) come from employees at all levels of Nvidia.  Huang reads them all.  They describe issues that they are noticing, concerns they have, or simply exciting and interesting things that they are working on in their areas.  He reads them all while sipping a glass of his favorite Scotch on a Sunday evening.  Cohen describes Huang's rationale for reading all these emails:

"The documents that make it to a typical CEO tend to get so watered down along the way that they’re liable to leave a puddle on his desk. Huang doesn’t bother with any of them. He doesn’t believe in formal strategic planning or status reports, either. “Status reports are meta-information by the time you get them,” Huang said last year. “They’re barely informative.” He doesn’t want information that has already made its way through layers of management. What he wants is 'information from the edge,' he said last month in a public interview with Laurene Powell Jobs."

In research with Amy Edmondson and Richard Bohmer, we have described how organizations tend to downplay ambiguous risks. Leaders and their teams discount warning signs that are unclear and fraught with incomplete information. As a result, organizations miss opportunities to recover from initial problems and develop solutions. Larger, more serious failures result from the inability to assess ambiguous threats effectively. Huang seems to be purposefully using the T5T memos to identify and amplify these ambiguous risks, and to make sure that the bureaucracy doesn't dampen or paper over important threats.

In Kim's book, Huang explains, “I’m looking to detect the weak signals. It’s easy to pick up the strong signals, but I want to intercept them when they are weak.”

Do You Really Want a Team Full of Self-Starters?

Is it effective to have many proactive members on your team?   You might think the answer is quite obvious.   Who wouldn't want a set of self-starters on a team?  Well, think again.  Kyle J. Emich and his co-authors have written an interesting new paper titled "Better Together: Member Proactivity Is Better for Team Performance When Aligned with Conscientiousness."  Interestingly, they used the Everest Simulation that I co-authored with Amy Edmondson as the basis for one of two studies conducted for this paper.   

These scholars find that the alignment of proactivity with conscientious leads to the best results.  In other words, teams are most effective if highly proactive individuals are also quite conscientious.  Meanwhile, teams are better off if the least conscientious members are not very proactive.   Why does this alignment (high-high and low-low) work best for teams?  The scholars find that it leads to more effective coordination among team members. They write:

At the outset of this paper, we asked how organizations should create teams that are proactive, but that also engage in the planning necessary to coordinate that proactivity and perform well. Taken together, our studies reveal that teams in which member proactivity and conscientiousness align within team members across the team are more coordinated and perform better than teams in which these attributes are unaligned.

It makes intuitive sense to me.  You do not want self-starters who take initiative, but then are unlikely to do the hard work required to follow through on their commitments.  We have all been part of groups in which some people don't fulfill their commitments.  Think about the Project Aristotle research project conducted at Google by Julia Rozovsky.  She and her colleagues studied more than 150 teams at Google, and they tried to identify the attributes that distinguished the highest performing teams from the lowest.  Dependability was one of the five key characteristics of the highest performing teams.  In those groups, members could count on others to do what they said they would do.  

Whole Foods Tries Small Format Stores... Again

Source: https://media.wholefoodsmarket.com/

Roshan Fernandez reports in today's Wall Street Journal about Whole Food's renewed attempt at operating small format stores. Fernandez writes that "The 9,100 square-foot Daily Shop location is about a quarter the size of a regular Whole Foods, and sells items at comparable prices. 'We’re serving a previously unmet need in the neighborhood,' said Nicole Davia, a Whole Foods senior vice president."  Whole Foods has opened several of these Daily Shops in New York, with plans to expand to Washington, D.C. soon. 

As it turns out, Whole Foods has tried small format stores previously, and that effort failed. In 2016, the company launched an experiment with a series of small format stores labeled "365 By Whole Foods Market."  Those stores sold primarily private-label items under the 365 label that Whole Foods sells in its larger locations.  The notion was to offer a lower-priced selection in these small format stores, with the target being millennial customers who were resistant to the high prices at Whole Foods.  The company was reacting to the "Whole Paycheck" image that turned away some shoppers.  At the time, Fortune's Beth Kowitt reported on the launch of the 365 stores:

“Our goal is to compete in the marketplace without lowering the Whole Foods standards,” Turnas (head of the 365 stores) told Reuters during a recent store tour. He said 365 stores will complement Whole Foods’ premium, full-service sister brand – often dubbed ‘Whole Paycheck’ in popular culture in reference to its perceived higher prices. But the new chain will have to work hard to avoid being labeled “a cheaper Whole Foods”, said Kevin Kelley, a principal at strategy and design firm Shook Kelley, which has worked with Whole Foods and other grocers.

When I teach strategy, I often invoke this story as a classic example of straddling two quite different business models... and failing as a result.  365 was quite distinct from the Whole Foods' premium grocer model, but not as lean as Aldi or as much of a fun treasure hunt experience as Trader Joe's.  It was hopelessly floating in the middle, unclear about who it truly wanted to be.  The result was confusion, both internally and for the customers.  

This time, Whole Foods is sticking with its premium, upscale positioning with the new small format stores.  Thus, it seems that they have addressed one major mistake from the attempt a decade ago.  Now, the question becomes whether they can operate small stores efficiently.  Fernandez quotes former Wal-Mart executive Bill Simon, who says, “If they’re going to operate a bunch of small-fresh stores, the degree of difficulty is as high as you’ll see in retail."  Simon and others point out that many larger grocers fail at small format stores because of the logistical challenges, as well as the difficulty stocking a sufficient number of higher margin items in the limited shelf space.  Aldi and Trader Joe's have perfected the small format model, but many large format grocers don't fully understand the difficulty shifting from their supercenters to these much smaller footprints, often in congested, urban areas.   If Whole Foods can figure it out, there is clearly opportunity here, as many customers do like the concept of "fill-in" trips to smaller stores that are located near their homes and workplaces.  

When to Express Gratitude: Timing Matters

Many employees would love to hear more expressions of gratitude from their leaders.  They often indicate that they do not receive sufficient recognition for taking on challenging work and achieving  tough objectives. As Thanksgiving approaches, perhaps leaders might consider how to say thank you to team members who have engaged in an extraordinary effort in pursuit of a challenging goal. However, leaders would be well-served to not just think about how to say thank you, but when they do so.

New research by Professors Hooria Jazaieri and Olivia O'Neill indicates that the timing for expressions of gratitude matters a great deal. They write, "According to our research, however, thanking people after they engage in their tasks does not provoke the same resilience and perseverance as expressing gratitude before the task begins."

In a series of studies, these scholars found that demonstrating gratitude before an employee embarks on an unpleasant task can help "counteract some of the negative emotions associated with the task."  Moreover, they found that anticipatory expressions of gratitude can foster more persistence on the part of their employees as they encounter obstacles and difficulties.  Why do anticipatory acts of gratitude have more beneficial impact than after-the-fact thank you statements?  The scholars argue that articulating one's gratitude before employees embark on an unpleasant task "can help cultivate employees’ sense of purpose and value."   As a result, employees demonstrate more resilience when encountering setbacks and obstacles.  

Retraining Your Brain to Cope with Negative Feedback

Have you ever become incredibly stressed and anxious after receiving negative feedback?  Have you spent more time worrying than actually addressing the corrective actions you might take in light of the criticism?  David Rock and Chris Weller have written a useful article for Fast Company about coping with negative feedback.   They offer some helpful tips.   Rock and Weller argue that your brain moves into a "threat state" when you receive negative feedback, and that mental state prevents you from moving forward constructively. They write:

The stress we feel during and after a negative feedback conversation is a form of a threat state—in particular, a threat to our sense of status. The brain senses danger, so it shuts down precious cognitive resources and diverts energy toward worrying about our standing and reputation. Cognition and threat, therefore, work as a kind of seesaw. As one is high, the other necessarily is low.

Rock and Weller argue that you may need a quick break (a walk is helpful) to calm down if you are feeling extremely anxious.  Then, you should assess the situation and engaging in practices they call labeling and reappraisal.  Labeling entails naming the emotions that one is experiencing and that might be getting in the way of thoughtfully considering how to improve based on the input one has received.   Then, they encourage people to "reframe part or all of the negative situation in a more positive light. For instance, if you’re given feedback that you don’t speak up enough in meetings, instead of feeling embarrassed or dejected, can you reappraise the situation as a positive in that your manager respects your opinions?"  

Having reappraised the criticism, individuals can examine why their performance led to the negative feedback.  Perhaps some obstacles have gotten in the way of doing good work.  Or, perhaps you became sidetracked and fell into some bad habits.   To develop a corrective action plan, individuals should imagine what improvement looks like.  What will success look like?  How will they behave in the future if they have addressed these concerns?  What changes will they have made to their work habits? How will others perceive them if they have undertaken a set of corrective actions?  Imagining a better, more productive self can help one move past the negative emotions that crowd out learning and self-improvement in the face of unexpected negative feedback. 

Why Airbnb CEO Brian Chesky Doesn't Believe in One-on-One Meetings

In this interview, Airbnb founder and CEO Brian Chesky argues against the use of recurring one-on-one meetings between leader and team member.   Here is an excerpt: 

I don't believe in one-on ones and almost no great CEO in history has ever done them... the one-on-one model is flawed it's a recurring one hour one-on-one meeting where the employee owns the agenda and what happens is they often don't talk about the things you want to talk about.  You become their therapist.  They're bringing you problems, but often times they're bringing you problems that you want other people in the room to hear.  There are very few times employees should come to you one-on-one without other people.  Perhaps if they're concerned about something if they're having a difficult time in their personal life, if they want to confide in you with something that they don't feel safe telling a group, but that should be infrequent.   If that's happening frequently that is a very ominous sign.  [I prefer] recurring group meetings in which everyone hears each other's views, where there are  notes taken.  It's very transparent.  [We all know] the topic, what decision was made, who was in the room, who had input.  If the process was unfair in some way... or inadequate, there is at least a record of the process, and people can weigh.  

Chesky loves to be provocative with regard to leadership style and process.  Here again he's offering a fresh perspective, and one that warrants serious consideration.  He's pointing out a serious risk associated with one-on-one meetings.  Specifically, he has two worries.  First, Chesky doesn't want decisions being made in these meetings, rather than in group settings where the person's peers can offer their perspectives on the same issues.  He wants the productive conversation and give-and-take that emerges from group dialogue and debate.  He doesn't want to make decisions in a vacuum.  Second, he worries about the one-on-one meeting becoming what he calls a "therapy session."  He thinks that quick check-ins as needed can occur if someone has a personal concern or problem, but he sees no reason for a recurring meeting to talk about personal matters.  Moreover, Chesky does not think the employee should be driving the agenda of these recurring one-on-one meetings.  

Chesky makes some strong points.  He's certainly correct that leaders should not be sacrificing transparency and the value of constructive debate by learning about perspectives and viewpoints too often in one-on-one rather than team meetings.  On the other hand, he doesn't talk about the value of one-on-one meetings as forums for providing coaching, mentoring, and constructive feedback.  Perhaps those meetings don't need to take place weekly, but most employees do need some opportunity to solicit and receive coaching and constructive criticism in a private setting.  In the end, I don't think the issue is WHETHER to hold recurring one-on-one meetings, but HOW leaders and their team members use the meetings.  It should not be a complaint session.  It should not primarily be a decision-making meeting.  It should be an opportunity to drive personal improvement and enhance performance.  

Are You Willing to Pay More for Products Someone Loved Creating?

Writing for Kellogg Insight, Dylan Walsh reports this month on some fascinating new research by Jake Teeny, Anna Paley, Robert Smith, and Daniel Zane. Teeny and his colleagues examined the relationship between willingness-to-pay and the level of enjoyment a seller derives from creating a product. Walsh summarizes the findings:

As a whole, the studies showed that buyers actually associated production enjoyment with greater product quality and value, consequently increasing how much they were willing to pay for it. And yet sellers often charged less for the products and services that they enjoy providing, even though they also believed them to be of higher quality.

The scholars argue that potential buyers seem willing to pay more for products when they believe that sellers have experienced high levels of intrinsic motivation while creating the products.  In other words, if the seller valued the process of creating the product as much, if not more, than the good itself, then buyers seem willing to pay a higher price for the product.  On the other hand, they argue that sellers price the product with their own enjoyment in mind.  If you are performing an unenjoyable task, you might charge more for a particular service.  If you are doing something very enjoyable, you may perceive some of your "compensation" has come in the form of that satisfaction and pride.  As a result, you may not expect as high of a price for the product from the buyers.  

What does this mean for sellers?  Think carefully about showing your customer how much effort and passion has gone into the creation of a good or service.  You might just command a higher price as a result.  And sellers... not shortchange yourself when placing a value on something you loved creating. 

Does this research have lessons for employees in larger organizations? Perhaps it does.  Do we demand less monetary compensation if we truly love our job?  Are we shortchanging ourselves in these situations?