The New Everest Movie

On Friday, September 18th, the new movie - Everest - premieres at theaters across the United States.  The film chronicles the tragic events that took place on the world's highest mountain in May 1996.   Rob Hall and Scott Fisher, two experienced expedition leaders, died on the mountain along with several others.  Jon Krakauer wrote a best-selling book about those events (Into Thin Air).  I'm curious to see the movie, as I wonder how accurately it will depict the decisions and events of May 1996.   I'm looking forward to the film, as I have spent more than a decade studying this particular tragedy as well as expedition teams in general.   I've spent consider amounts of time interviewing climbers, including several people who were on the mountain when this tragedy occurred.  My work has focused on how expedition teams make decisions, and how leaders behave in these circumstances.  

My work on Everest expedition teams has included the following:

- Harvard Business School case study (and teaching note)

- Everest: Leadership and Team Simulation (a simulation for teaching about team decision making)

- California Management Review article about the 1996 Everest tragedy
- Great Courses lecture series - The Art of Critical Decision Making (Lecture 2)

- Ivey Business Journal article on how to avoid the sunk cost trap

- ILJE article titled  Teaching Business Leadership Using Non-Business Case Studies: The Mount Everest Example

I've also written about Everest climbing teams in my book, Why Great Leaders Don't Take Yes for an Answer.   Below you will find two videos about my work.  One focuses on the simulation, while the other discusses the leadership lessons from the catastrophe.  

Hire a Superstar or Dump a Toxic Worker?

Should you make it a priority to hire the next superstar talent for your team, or remove the toxic worker who is dragging the group down?  Which action has the most impact?  Kellogg's Dylan Minor and his co-authors have examined this question.  They define toxic workers as those who engage in violations of company policy and/or act unethically.   These scholars find that toxic workers actually induce others around them to behave inappropriately at times.  Moreover, these people drive good people away, leading to costly turnover in the organization and a talent drain. For these reasons and others, they can do serious damage to a team.  These scholars actually quantified the positive impact of adding a superstar to your team versus the impact of removing a toxic team member.  They conducted their study based on more than 58,000 hourly service workers at 11 firms.   They found that removing the toxic member and replacing them with an average performer created more than twice the value of simply adding a superstar to the team to replace an average member. 

Can Experts Predict the Next Great Startup Success Story?

Scholars Erin Scott, Pian Shu, and Roman Lubynsky have written a fascinating new paper about startups.  They examined a dataset of 652 ventures from MIT's Venture Mentoring Service (VMS).   The service attempts to match startups with mentors.  The mentors receive data about a variety of startup ideas.  They must decide what they think about the ideas without having an opportunity to review information about the founders or to meet the team in person.   The researchers then examined how many of these startups went on to have their products commercialized successfully.  

Overall, the more highly rated ideas did have a better chance of being commercialized.  However, that was not the case for all types of startups.  They grouped the ventures in terms of high R&D intensity industries (i.e. life sciences, energy) and low R&D intensity industries (i.e. software, consumer products).  Highly evaluated ideas tended to be more likely to be commercialized successfully in the high R&D intensity group, but no such relationship was found in the low R&D intensity group.  HBR's Walter Frick explains this finding: 

Think of it this way: if the venture “idea” includes patent-protected technology in an industry with high entry costs, it’s going to be easier to determine that the venture has commercial potential. For web and mobile ventures, which are less likely to have intellectual property, and where entry costs are lower, it’s harder to know up front whether a venture will have a real, sustainable competitive advantage.

Finally, the researchers examined whether experts were better at predicting success.   Frick writes, "The researchers checked to see if “expert” mentors were any better at picking ideas than the group overall. They looked at mentors with experience in the venture’s industry, as well as mentors with a PhD. Neither group was any better at predicting which ideas would succeed."  

Role Playing the Competition

When formulating strategy, leaders should ask members of their team to role play the competition from time to time.  Stepping into rivals' shoes can be an effective way to anticipate their strategic moves and prepare a counter-move.  In most cases, such competitor role plays focus on trying to anticipate the most damaging action that a rival might take.  We try to envision the worst case and prepare for it.  However, companies should also consider a very different scenario when role playing the competition.  They should also anticipate the ways in which key rivals might stumble badly.  What could a competitor do that would be damaging to its own position in the market?   Then, leaders want to challenge their teams:  How would we take full advantage of that stumble by the competition?  Are we ready to capitalize on that mistake?   Effective strategy formulation is not simply about anticipating the worst case scenario.  It's also about asking:  Are we well-positioned to take advantage of what could be a very good situation for us?  Do we have the capabilities, resources, and skills to capitalize on such a circumstance? 

Leading Cross-Cultural Teams

In this month's issue of HBR, Erin Meyer writes about the challenges of leading cross-cultural teams.  She has some good tips on how to prevent communication breakdowns and enhance team effectiveness.   I would like to highlight one of Meyer's recommendations.  Here is an excerpt from her article:

Train everyone in key norms.

When entering a new market, you’ll inevitably have to adapt to some of the local norms. But you should also train local employees to adapt to some of your corporate norms. For example, L’Oréal offers a program called Managing Confrontation, which teaches a methodical approach to expressing disagreement in meetings. Employees around the world hear about the importance of debate for success in the company. A Chinese employee told me, “We don’t do this type of debate traditionally in China, but these trainings have taught us a method of expressing diverging opinions which we have all come to practice and appreciate, even in meetings made up of only Chinese.”

 

Two points should be stressed here.  First, managing a global team is not simply about adapting to local culture.  It is also about deciding what core norms and principles should be applied globally.  Four Seasons, for instance, is known for doing an excellent job of adapting to local cultures.  However, all hotels and employees around the world adhere to some common guiding rules and principles that insure a consistent high quality brand experience.   Second, the L'Oreal example above provides a good model for how to handle the issue of conflict in meetings.  In some cultures, it will be much more difficult to encourage people to speak up and express dissent.  L'Oreal has recognized this challenge and addressed it head-on.  That's something all global teams should consider.  

How to Deal With Skeptics

Matt Forrest Abrahams and Burt Alper have posted a Stanford Business piece titled "How to Handle Audience Skepticism."   They argue that reframing can be a powerful technique for addressing criticisms, objections, and tough questions.  Here's an excerpt focused on how paraphrasing can help when responding to a skeptic:

Paraphrase to address emotional skepticism. Paraphrasing is a listening tool where you reflect back what others say in your own words. Effective paraphrasing affords you several benefits (e.g., ensures that you heard someone correctly, values the other person’s contribution, allows you time to think, etc.). As a framing technique, paraphrasing allows you to acknowledge the emotion of someone’s question/objection, then pivot your response to the world of logic.

In my work, I've written about how reframing and redescribing can be powerful tools for handling contentious situations.  They can be methods for helping keep conflict constructive.  Here are two excerpts from my book, Why Great Leaders Don't Take Yes for an Answer:

On reframing: 

 When individuals seem to be locked into their positions, leaders need to find a way to alter the way that people perceive the situation. Too often, when debates get heated, individuals begin viewing the situation as a contest to be won or a test of wills. They believe that they are playing a zero-sum game, when, in fact, win-win solutions still may be achievable. Individuals stop thinking about new sources of information that might be examined or the possibility of new alternatives that might prove superior to any of the options currently being debated. They begin to worry more about losing face if the decision does not go their way rather being concerned about the impact on the organization. In these circumstances, leaders need to shift the focus back to the problem that needs to be solved. 

On redescribing:

Sometimes conflict becomes dysfunctional because one set of individuals tries hard to convey an important idea, but they cannot present the supporting evidence in a persuasive manner. They become increasingly frustrated, because they do not understand why others do not find the data compelling. It seems so obvious to them! Soon they begin to attribute the others' inability to comprehend their argument to a personal deficiency on the part of those they have failed to persuade. They think, "How could an intelligent person not understand this point?" Cognitive psychologist Howard Gardner, a pioneer in the study of the multiple dimensions of human intelligence, has argued that people can avoid these frustrating situations through a strategy that he calls redescription. As Gardner writes, "Essentially the same semantic meaning or content, then, can be conveyed by different forms: words, numbers, dramatic renditions, bulleted lists, Cartesian coordinates, or a bar graph. Multiple versions of the same point constitute an extremely powerful way in which to change minds."

How To Create An Environment Of Collaboration

Recently, Stephanie Vozza interviewed me for an article she has now published in Fast Company.  The article is titled, "How To Create An Environment of Collaboration."  You can read it by clicking here. 

What is Intuition? Excerpt from my Great Courses lecture series

Here is a brief excerpt from my lecture series, The Art of Critical Decision Making, from The Great Courses.

The Virtues of the "Pile-on Meeting" at HGTV, Food Network, and Travel Channel

In this week's New York Times Corner Office interview, Adam Bryant interviewed Kathleen Finch, chief programming officer of HGTV, Food Network and the Travel Channel.  Finch describes a particular technique she uses to generate great ideas at her networks. She calls it the "pile-on meeting."  Here's her explanation of this method: 

I have a meeting every few months that I call a “pile-on meeting.” I bring about 25 people into a room and go over all the different projects that are coming up in the next six months, and the goal is that everybody piles on with their ideas to make those projects as successful as they can be.  The rule walking into the meeting is you must forget your job title. I don’t want the marketing person just talking about marketing. I want everyone talking about what they would do to make this better. It is amazing what comes out of those meetings.

I like the concept a great deal.  I would point out that several conditions must be present to insure that such a meeting is highly effective.   First, the leader has to establish a safe environment where everyone, regardless of position or title, feels safe speaking up.  Second, people have to adopt the "yes, and" philosophy... building on each other's ideas, rather than always being critical and poking holes in other's proposals.  Third, when people do critique others' ideas, they have to be constructive.  They can't attack people personally.  They must focus on the issues, not the personalities.  Moreover, they have to encourage the generation of new options, rather than just attacking the existing ideas.   Finally, the leader has to enforce the shared norms, the rules of engagement.  If people become to parochial, or they simply defend the interests of their functional area, the leader needs to call them on it.  That need not be done publicly, but enforcement of the group norms must take place.  

Three Myths and Lessons from the NFL Deflateglate Debacle

Yes, all of us here in New England enjoyed yesterday very much.  Our four-time Super Bowl winning quarterback prevailed in federal court over the National Football League and its commissioner, Roger Goodell.  As I reflected on this debacle over the past seven months, I discovered three myths that have prevailed at times.   As we debunk each myth, we find lessons for all organizations and leaders.  

Myth #1:   Attendance, television viewership, revenues and profits are at an all-time high.  Recent scandals and public relations disasters have not decreased any of these key metrics.  Therefore, these major stumbles on the part of the NFL don't actually matter much.

Reality:  Serious leadership and public relations mistakes have consequences, even if they do not lead to revenue and profit decreases in the short run.  Why?  Consider other stakeholders for a moment.  When a company stumbles badly as the NFL has, you have to ask yourself:  How do these events affect other constituencies besides our customers?  For instance, does this crisis affect employee engagement?  Does it diminish our ability to attract and retain great talent?  Consider whether top female lawyers are more or less willing to work for the NFL in the wake of the Ray Rice scandal.  Similarly, you can ask:  Are other organizations more or less willing to partner with the NFL on key initiatives?  You can certainly imagine how some organizations might choose to partner with other sports or entertainment entities because of the negative publicity that might come with a close affiliation with the NFL.   

Myth #2:  The owners have (and should) back Roger Goodell as commissioner because he has been good for the bottom line.  Sales and profits have soared under his leadership. 

Reality:  In major league baseball, a new metric has emerged in recent years.  It's called WARP (wins above replacement player).  How much value does a player provide ABOVE AND BEYOND that of a hypothetical replacement player (an inexpensive Triple A call-up who plays the same position).  When we think about leadership of a major organization, we should consider that person's VARL (value above replacement leader).  Could some other leader step into the job of NFL commissioner and achieve similar financial results.  I would contend that many other talented people could attain the revenue and profit levels achieved by the NFL during Goodell's tenure.  The sport is simply that popular, and the groundwork for that success was laid by Goodell's predecessors.   Too often, companies provide incredibly high compensation packages for CEOs because the board somehow convinces themselves that the person is indispensable.   Instead, they should seriously ask: What is this CEO's VARL?  

Myth #3:  Better data lead to better decisions. A better investigation would have led to a very different result. 

Undoubtedly, the NFL bungled this entire inquiry.   Top executives' lack of knowledge of the Ideal Gas Law, for instance, is simply astounding.  However, better data do not always to improved choices.  The bottom line:  this entire matter is an incredible example of the power of confirmation bias.  Put simply, people look for and rely upon data that confirms what they already believe.  The investigators fell into this trap.  They gathered and assimilated data in a highly biased manner.  The reporters and analysts all fell into the confirmation bias trap.  Fans naturally exhibited the bias as well. We all saw what we wanted to see in the data.  The same confirmation bias affects corporate decisions of all kinds.  More data do not always lead to better decisions, because we gather and analyze data in a biased manner.  

Five Crucial Strategy Questions

Freek Vermeulen, Associate Professor of Strategy and Entrepreneurship at the London Business School, has published a terrific post on the HBR blog this week.  It's titled, "5 Strategy Questions Every Leader Should Make Time For."  Here are his five key questions about competitive strategy:

1.  What does not fit?

2.  What would an outsider do?

3.  Is my organization consistent with my strategy?

4.  Do I understand why we do it this way?

5.  What might be the long term consequences?

I especially liked this advice about what doesn't fit.  Vermeulen writes:

Ask yourself, of the various activities and businesses that you have moved into, do they make sense together? Individually, each of them may seem attractive, but can you explain why they would work well together; why the sum is greater than the parts? As the late Steve Jobs explained to Apple’s employees when he axed a seemingly attractive business line, “Although micro-cosmically it made sense, macro-cosmically it didn’t add up.

Google Changes Its Logo: Does it Matter?

Google announced today that it has changed its logo (see the before/after comparison here).   While the shift may not be substantial, it did cause me to ponder the impact of a logo change.  After all, some companies spend considerable amounts of money on logo redesigns.  Does it matter at all?  I found an article from several years ago in Business Week that addresses this topic.  It describes research by Rice University Professor Vikas Mittal, West Virginia Professor Michael Walsh, and Penn State Professor Karen Winterish.   The scholars found that customers with high brand commitment tend to have the most significant negative reaction to logo changes.  These high commitment customers also reported that they would be less likely to buy that brand in the future.  Casual customers did not have this type of strong adverse reaction to logo changes. Mittal explained how managers must apply this research as they redesign logos from time to time:  "One strategy may be to manage the reactions and expectations of strongly committed consumers by actively soliciting their input and perhaps pre-notifying them before the changes are revealed to the broader public. Giving the strongly committed such a feeling of being an 'insider' may strengthen their self-brand connection and mitigate the potentially negative effects of logo redesign."

Can Exercise Enhance Creativity?

In this video, NYU Professor Wendy Suzuki explains her research that explores the link between physical exercise and creativity. 

Google and Alphabet: What are the risks?

Should we have been shocked by the Google/Alphabet news?  Actually, I don't think so.  Let's step back for a moment and think about Google's collection of businesses.  The company is incredibly creative and innovative, but in the end, one major business generated most of the profits: search.   That business is certainly as mature as a steel company, but it's much further along in the life cycle than many of the new ventures that Google has launched (such as driver-less cars).   How do investors look at companies with a big business generating lots of cash, and a set of smaller more speculative ventures that are users of cash.  Well, they become skeptical of too much cross-subsidization, particularly if the synergies among the businesses are limited.  We have seen the pressure on Google in recent quarters, as investors demand returns from the high-profit search business.  They don't want to see too much of that cash diverted to unprofitable and speculative ventures.  On the other hand, we know that new ventures often struggle when embedded in larger organizations.   They need a certain level of autonomy to flourish.  Therefore, it makes sense to separate out the new ventures.  It gives them a better chance to grow with some independence, and it enables the main search business to focus on optimizing returns.  

Are there some risks though of this new structure?  A discussion on the Knowledge@Wharton site has highlighted some of those key risks very well.  Here's an excerpt:

According to Wharton emeritus management professor Lawrence Hrebiniak, “transparency … is good, [but] I don’t know if transparency translates into profits.” Trouble could follow if Google’s investments in projects like driverless cars and drones don’t make money, he adds. “The transparency could cause some investors to rethink whether they want to be invested in these other businesses and prefer to put their money in Google,” he says. “There might be some pressure, in time, to divest some of these bad businesses on the non-Google side.”

The Impact of Inauthentic Behavior: How Does It Feel to be a Phony?

Kellogg Insights reports on the latest research by Francesca Gino, Maryam Kouchaki, and Adam Galinsky.   They examine the impact of inauthentic behavior - or "phoniness" to put it simply.  What happens we were act like phonies, perhaps to stay in the good graces of a boss at work?   These scholars demonstrate that inauthentic behavior actually makes us feel immoral.  Moreover, it makes us want to engage in some moral behavior (e.g. helping or serving others) to compensate for that bad feeling about ourselves.   The scholars suggest that low employee engagement in many workplaces may result, in part, from the fact that people feel immoral about phony behavior that they have engaged in at work.  What's the implication for business leaders.  Here's an excerpt from Kellogg Insights summarizing the scholars' conclusions:

For business leaders, these consequences are worth keeping in mind. If employee dissatisfaction is based on a violation of moral values—even at a subconscious level—it might be worth considering how authentic employees are allowed to be in their particular role. “It seems to be true that to act in accordance with one’s own self, emotions, and values is a fundamental aspect of well-being,” Kouchaki says. “Leaders might want to factor that in. The knowledge that inauthentic behavior has costs and that prosocial behavior”—like assisting or mentoring a colleague—“increases moral self-regard—this is something leaders might consider when designing their organizations.”

Live Chat: Tonight (Wednesday, 8/26) at 7pm!

What questions about business do you have? Join me and The Great Courses for a live online chat tonight from 7-8pm.  As you many of you know, The Great Courses offers wonderful opportunities for lifelong learning by providing audio/video courses by professors from universities throughout the country.  I've enjoyed creating three courses for the company (topics: decision-making, leadership, and strategy).   Here's the link to join the discussion.  Hope to interact with many of you this evening!   

Wal-Mart, Sam's Club, and Costco: A Key Strategy Lesson

The Wall Street Journal published an article today (by Sarah Nassauer) titled "Sam's Club Aims to be Less Like Wal-Mart."   The article quotes the Rosalind Brewer, chief executive of Sam's Club:  "“We want to be less of a Wal-Mart."  The article goes on to explain Brewer's thinking:

The new strategy means carrying fewer products that appeal to households that earn $45,000 a year—Wal-Mart’s sweet spot—in favor of targeting wealthier shoppers with more organic food, brand-name clothes and 1,000-thread count Egyptian cotton sheets, she said during a recent interview.  Sam’s struggle to shake an early focus on mainstream consumers has become a liability as club stores have evolved into a favorite among more affluent shoppers who are able to pay a membership fee for access to discounts on items from large screen TVs to bulk boxes of peaches. At the same time, big- box retailers and grocery stores have embraced discounted bulk sizes, without a membership fee. Rival Costco Wholesale Corp. has thrived, building stores in wealthy enclaves and delivering strong annual sales gains.

The story of Costco and Sam's Club offers a key strategy lesson for all managers.   Think about the wholesale club business for a moment.  Who is the typical consumer?  The data show that they have a substantially higher income than the usual Wal-Mart customer.  Does that surprise you?  Consider the wholesale club business for a moment.   You have to pay an annual membership fee.   You buy in bulk.  Therefore, while you may save on a per unit basis, the total cash outlay on a typical shopping trip is quite high.  You need an SUV to get the goods home, because they are bulky.  Moreover, you need a good-sized house with an ample pantry space to store the goods.  In short, the wholesale club model is more attractive to customers with a higher level of disposable income than many Wal-Mart shoppers.

Consider Costco's success.  They figured out who the customer was in this business, and they tailored their entire business model to this consumer.   For that reason, Costco locates in wealthier suburbs, and they offer premium goods in many categories.  They have become the largest retailer of wine in the country.  They know their customer.   Why has Sam's Club stumbled a bit in the past?  Wal-Mart built Sam's Club and tried to leverage all that was successful and effective about their value chain in the discount retailing business.  However, the activities and choices that were well-suited for discount retail were not necessarily tailored effectively to the wholesale club  business.  You see the temptation though.  Successful firms want to leverage their existing capabilities, choices, and activities when they move into a new market segment.  Yet, that effort to leverage what they do well may become a stumbling block if the new segment has some crucial differences for which they should account. Costco could build a business model well-suited to the more affluent customer because they were building from scratch. 

Should You Pursue Market Share in Fast-Growing Industries?

Mark Chussil of Advanced Competitive Strategies has an interesting post on Harvard Business Review this month.  He questions several myths about competitive strategy.   He writes, "Say you are competing in a fast-growing industry. How much do you care about profits versus market share?  It’s a common rule of thumb that businesses should go for market share in fast-growing in­dustries. It’s conventional wisdom, though, not a law of physics; you don’t have to go for share."  

Chussil examines the wisdom of pursuing growth vs. profits using a complex computer simulation.  He finds the majority of people tend to pursue growth in fast-growing industries (55% vs. 45%).  What happens when people aim for market share gains.  Chussil writes, "And yet in over 173 million tournament simulations – every unique combination of the 700+ strategies for the three competitors in the fast-growth industry – the quest for market share led to price wars 90% of the time, subtracting value from the industry. In other words, following the “rule” produced results worse than if the participants had taken naps and done nothing at all." 

Chussil does not argue that you should always prefer profits to growth.  Instead, he simply makes the point that we should not blindly follow conventional wisdom.   For instance, he points out that the conventional wisdom suggests we should keep our strategies secret from our rivals. Yet he describes the situations in which revealing our strategies can actually be value-enhancing.  He offers good advice.  Beware the conventional wisdom when it comes to formulating competitive strategy.  You simply cannot boil strategy down to a formula or a few rules of thumb. 

Brief Clip from The Great Courses lecture series on Competitive Strategy

Back to the Blog!

I'm sorry for the lengthy period since my last blog post.  I enjoyed several weeks away with my family, and now I'm back on campus preparing for the start of the semester.  I'll be posting regularly starting today.  I hope you enjoy the blog.