Do Temporary Incentives Harm Intrinsic Motivation?

For many years, the conventional wisdom has been that offering temporary incentives reduces intrinsic motivation. University of Chicago Professor Oleg Urminsky summarizes the view held by many scholars and practitioners in the fields of business and education:   

The view that a temporary incentive could undermine intrinsic motivation has had a major impact on policy, particularly in relation to children and education. The author and lecturer Alfie Kohn has published several books on the topic, including one called Punished by Rewards: The Trouble with Gold Stars, Incentive Plans, A’s, Praise, and Other Bribes. Appearing on the Oprah Winfrey Show in 1996, he explained why he saw rewarding kids as a bad idea: “One of the findings in psychology that has been shown over and over again [is that] the more you reward people for doing something, the more they tend to lose interest in whatever they had to do to get the reward.”   He went on to talk about grades as problematic incentives, and he went further in his book, writing that verbal praise is coercive and should be avoided because it contains an implied threat to withhold praise in the future.

Urminsky describes new research conducted by University of Buffalo’s Indranil Goswami.  He points out that Goswami doesn't just measure what happens immediately after an incentive disappears.  Instead, he tracks the effects of incentives over time.   What did Goswami find?  Indeed, intrinsic motivation appears to drop when a temporary incentive is removed. However, that drop is extremely short-lived. After a short period, motivation returns to the pre-existing level, and in fact, it increases rather quickly to a point slightly higher than the original level. The charts shown here demonstrate the prediction from prior research vs. the new findings. Urminksy concludes, "The results are inconsistent with the dire warnings about incentives. Providing a temporary incentive can yield a boost in behavior while people are being paid, and only a small and brief decline afterward. Maybe incentives work pretty well after all."  He calls for more research given these interesting findings that challenge our conventional wisdom.  I agree.  We certainly need to learn more before we simply adhere to the pre-existing beliefs that incentives absolutely reduce intrinsic motivation.  

Advice for Graduates - Class of 2018

As commencement approaches for the Class of 2018, I would like to take a moment to offer a few words of advice.  This year, I write with a fresh perspective, as I have a graduating senior. My daughter, Grace, will be graduating high school in two short weeks (sigh!).   I ask that you consider these words from former President Teddy Roosevelt.  

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat. 

In today's world, we have far too many critics and not enough doers.  It is far too easy to point fingers and find fault with the actions of others, without looking in the mirror.   It is too easy to explain what's wrong with the way things are done now, without offering alternative paths forward.  Be solution-oriented.  You do not have to set out to change the world with one bold leap.  Instead, consider how you can make your workplace, community, or home a better place tomorrow, with one small step or two.  If we each take those small steps, together we can make a real difference.  

How will you make a difference?  You do not have to possess formal authority to create positive change.  Hone your skills of persuasion and influence.  Build coalitions, marshal resources, and connect with others who can help and support you.   Demonstrating true leadership often means exercising influence without authority.  

Finally, be passionate about your ideas, but never allow yourself to become too rigid.  As they say, argue as if you are right, but listen as if you are wrong.   The best thinkers and leaders have "strong opinions, loosely held" as Stanford's Bob Sutton has suggested.  Do not succumb to confirmation bias.  Seek out discordant data and disconfirming evidence.   Consider why the opposite might be true.  Encourage those around you to speak up, express dissent, and ask provocative questions.  

I wish you all the best of luck in future endeavors, with hopes for much personal and professional success.   Congratulations, Class of 2018!  

Making Sure People Recognize Their Impact

Adam Bryant, formerly of the New York Times, interviewed Deborah Bothun recently and posted her comments on LinkedIn.   Bothun spent 21 years at PricewaterhouseCoopers.  The two now owrk together at Merryck & Co, a leadership development consultancy.   Bothun explains that she wants everyone in an organization to understand that they can make an impact on the customer, the organization's mission, and the P&L.   She explains about the latter in this excerpt:

Another one of my themes is that often people don’t think of their role as having a P&L impact. Everybody’s role ultimately has a P&L impact. No matter what functional area you’re in, you need to be responsible for the commercialization of that organization.   Regardless of what you do, you need to understand how what you do drives revenue or drives cost. That way, you become more knowledgeable about the drivers in your area and how they intersect with the drivers of growth in other areas, and you become more integrated into the whole team. And if you can start to think that way, you’re going to have a much better chance of moving in the direction you want.

I'm in full agreement with Bothun.  If people at all levels understand how they can make an impact, they can be encouraged and empowered to bring forth ideas for making the organization more successful.  People will be more motivated if they recognize the ways in which their work matters, and how their efforts can enhance the organization's overall success.  

Better Governance: Redesigning Board Meetings at Netflix

David Larcker and Brian Tayan have written an article about Netflix redesigned management's relationship with the Board of Directors, while also rethinking how board meetings should be conducted. They describe how Netflix built a more transparent relationship with the board, while helping the directors gain a better understanding of the business and the management team. Larcker and Tayan explain:

Netflix takes a radically different approach. It incorporates two unique practices. First, board members periodically attend (in an observing capacity only) monthly and quarterly senior management meetings. What’s more, communication with the board comes in the form of a short, online memo that allows directors to ask questions and comment within the document. Executives can amend the text and answer questions in what is essentially a living document. We believe these two innovations meaningfully contributed to Netflix’s extraordinary performance in recent years.

I find the memos be particularly interesting as a means of preparing directors for a fruitful discussion at the board meeting itself.   The roughly 30-page online memos provide links to supporting analysis and to the Netflix systems, so that directors can examine raw data behind the conclusions.  Directors can post questions and comments on this memo before the meeting.  Fellow directors, as well as the executive team, can review these questions prior to the board gathering.  The board meetings themselves become a dialogue, rather than a series of canned presentations filled with tons of powerpoint slides.  

This format provides for a much more productive board meeting.  In my view, management and board meetings should always involve a healthy dose of preparation.   The meetings themselves should be about dialogue, not documents.  The written materials should be distributed and reviewed prior to the in-person meeting.   Insuring equal access to information means that people can come to the table prepared to discuss a topic and not disadvantaged because some in the room have seen the data while they have not.   

What's stopping many boards from adopting these types of practices?  Of course, you know the answer.  It takes a chief executive who is very secure and confident in their abilities, and one who is willing to listen to tough questions and dissenting views.  Moreover, it takes a committed board with members who are prepared to put in the work prior to the meetings.  

Crediting the Team vs. the Individual

Min Kay, Devon Proudfoot, and Rick Larrick have written a new article titled, "There’s No Team in I: How Observers Perceive Individual Creativity in a Team Setting."   The authors focus on the extent to which we attribute the quality of creative output to an individual vs. the team as a whole. In a discussion about the research, Larrick explains, "“Any time that you have so much of a company’s success tied up in the perceived success of a single individual, there’s a risk.” 

Source: Wikimedia

In explaining the experimental research findings from the research he conducted with his colleagues, Larrick states, "“It’s striking how little people adjust for the role of a team unless they’re hit over the head with the image of a team."  Indeed, in their studies, these scholars found that showing people an photographic image of all team members actually enhanced the extent to which they attributed the creative success to the group vs. an individual. However, if people are simply told about the presence of a team, but not shown the visual image, they are more likely to give an individual a great deal of the credit for the creative output. 

Larrick concludes, "If you want people to have faith in a team that can sustain success over time even with potential turnover, that’s when you want to call attention to it being a team output that is more about process and culture than one person.”  I would add that the best leaders insure that others know about the importance and the contribution of the entire team.  Moreover, they don't attribute to much of a project's success to their own actions, but instead recognize the valuable contributions of those working with them.  

Leaders: It's Not About You!

Amy Modglin wrote a terrific column for Forbes titled, "Leadership: It's Not About You." She explains that shifting the focus to your people enables an organization to achieve much greater success.   Modglin argues:

View your people as your biggest success. A good leader supports those around them. Your focus should be on developing them, helping them succeed, and watching them grow into the people they want to become. When your people are successful, it is a reflection on you as a leader... Acknowledge and appreciate people. Everyone wants to be valued. It is critical as a leader to give your people credit and recognition for the incredible things they do. One of the reasons people leave a job is because they feel underappreciated. A leader should never take the credit for the work that their people do. A good leader is a generous leader who recognizes people.

Now you might conclude (rightfully) that this philosophy is rather obvious.  Of course, it's not about you as a leader.  Of course, you should appreciate and recognize your people's contributions.  Yet, so many leaders do not do so effectively.   Why?

1.  The longer you stay in a job with considerable success, the more you become convinced as a leader that you are the reason for a great deal of those results.  

2.  Outsiders often attribute FAR too much of an organization's success to the leader at the top.   Leaders begin to believe their own press clippings.  

3.  Fundamental attribution error:  We blame others' failures on their internal weaknesses, but explain away our own failures as a result of uncontrollable outside forces. 

4.  The Board often exacerbates the problem by reinforcing the notion that the leader is "indispensable" to the organization.  

Scattered Priorities

Author and consultant Ron Carucci wrote an article recently for Harvard Business Review, and he described how some leadership teams struggle with scattered priorities. He writes:

One study, done by the consulting firm RHR International, showed that among high-performing leadership teams, 93% are able to prioritize the most important issues and 96% focus on the right issues. By contrast, in low-performing leadership teams, only 62% prioritize well and 53% are seen as being focused on the right issues. The implications for an organization whose leadership team is poorly focused are serious: Wasted resources, wasted effort, and widespread confusion become the norm.

Why do leadership teams find themselves exhibiting scattered priorities?   Here are a few reasons based on my own work with various organizations:

Source: Juan Martinez via Flickr

1.  Top executives engage in reactionary behavior based on a recent event or trendy topic that struck a chord with them.   

2.  Executives don't want to make the hard choices.  Therefore, they spread resources around to too many initiatives, in part because they don't want to disappoint key managers.   Conflict avoidance plays a role here too. 

3. Leadership teams always add items to the strategic agenda, but never step back and consider removing key initiatives.  Thus, the breadth of the agenda grows larger and larger over time.  

4.  Executives make the mistake of thinking that they will grow revenue more quickly if they simply expand their product and service offerings.   They expand and diversify because it seems the easy route to growth, rather than thinking about how to deepen their existing competitive position as a means of achieving growth objectives.

5.  Top leaders assume that declaring issues as priorities is motivating for employees.  They don't realize that employees actually become demotivated if they experience confusion about the strategic agenda, and if they feel stressed and torn in different directions.  

The Death Spiral at Struggling Restaurants

Source: Wikimedia

I see it time and again.  A restaurant begins to face declining revenues for competitive reasons.  Perhaps fast casual restaurants begin to take share, as Panera and others have done.  Perhaps dietary trends cause a shift in consumer preferences.   As the restaurant grapples with declining sales, it makes two moves to try to reverse its fortunes.  First, it broadens the menu, adding a variety of new dishes.  This move often backfires for two reasons.  The new menu items blur the firm's distinctive positioning in the marketplace.  What precisely is this restaurant all about, and what does it specialize in these days?  Broadening the menu also adds a signficant amount of complexity to the operation.   Speed and quality of service suffers.  As the menu expansion fails to generate strong revenue growth, the restaurant makes its second big move. It cuts costs, particularly with regard to staff.  Of course, speed and quality of service declines even further as a result of the cost cutting.  The death spiral intensifies.   

We have seen this death spiral transpire at Bertucci's, a pizza restaurant based here in the Northeastern United States.   Over the course of the past two years, I have seen the menu continue to expand.  Service has suffered.  As service declined, people stopped going to the restaurant.  Cost cutting affected the quality of the experience.  Several weeks ago, the company filed for bankruptcy.  It's unfortunate, as the company once offered a terrific family dining experience.  

Hiring Lessons from the NFL Draft

Source: Wikimedia Commons

Last night, the 2018 National Football League Draft began.  During this annual event, each team selects the most talented college football players to add to its roster for the coming year. Unfortunately, picking players is incredibly challenging.   Are some teams consistently better than others at selecting players?  Wharton Professor Cade Massey has studied the draft for years, and he finds that talent selection is much like beating the market with regard to financial investing - i.e. it is very difficult to do. He concludes, "Some teams have great years, other teams have bad years - and it matters. But those differences aren't persistent year-to-year, which tells me that they are chance driven. Something between 95 and 100 percent - I'm not exaggerating - of team differences in the draft is driven by chance."

What can companies learn about talent selection from the NFL draft? Massey offers a very useful recommenation about enhancing the quality of the draft selection process. His advice has important implications for the hiring process in any company:

NFL teams have dozens of scouts and a complicated method of getting multiple looks at their prospects. Even marginal prospects are seen by more than one scout, and the top guys might be evaluated by a dozen different people. In some teams a scout will know the previous scouts’ opinions before forming his or her own while other teams keep scouts blind to previous evaluations. This is a key difference.

People are impressionable. When they are exposed to other’s opinions before forming their own, they tend to anchor on the existing view. More generally, the “wisdom of the crowd” depends on the independence of the respective opinions within the crowd. Yet that independence is easily compromised, in many ways—anchoring, of course, but also common backgrounds, training, friends, etc. You may think you’re getting 5-6 opinions when effectively you’re getting only 1.5! 

A good hiring process explicitly pushes against these compromising factors: Don’t let people talk to each other or see other’s opinions before providing their own, expose the candidate to judges in different ways and at different points in time, and bring people with different perspectives into the process. More independence is often the biggest improvement an organization can easily make in their hiring process.

Consider your own hiring practices in your organization?  Have you created and maintained independence during the evaluation by multiple interviewers?  If not, you might consider "keeping your judges apart" as Massey suggests.  

All In For Bryant!

Tomorrow, April 25th is Bryant Giving Day.   If you are a Bryant alumnus, please consider supporting the university during this special philanthropic event.   In particular, I hope that you will designate your gift to specific academic programs that impacted you greatly and prepared you well for career success.   Consider a gift to support Bryant IDEA, the Honors Program, the Archway Fund, the International Business program, the Supply Chain program, or another academic area about which you are passionate.  Please also share your passion with fellow Bryant alumni and encourage them to give as well.  Thank you very much for your support.  As a faculty member, I'm so appreciative of the alumni support that has enabled us to do so many great things at Bryant during my twelve years at the school.  We could not have created many of the outstanding new academic programs without your help. Thank you!  You can donate by clicking here.  

Three Questions to Ask About Your Growth Strategy

Source: Pixabay

Who doesn't love top-line growth?  With a surge in revenues, leaders can provide new opportunities for highly effective employees.   Financial rewards for employees often rise as well.  Not all growth is profitable though.  Some growth can generate short term increases in profits, but damage the firm moving forward in serious ways.  Here are three key questions you should ask about your company's growth strategy:

1.  Are we compromising our awesome customer experience as we try to grow quickly or grow in new directions?   Many companies find themselves disappointing long-time core customers when they seek to attract new consumers.  Why?   Wait times increase due to congestion, workers become overwhelmed with new obligations and offer less personal service to customers, and product proliferation creates confusion for customers and employees alike.  

2.  Are we spreading our resources too thinly across multiple initiatives and lines of business?  By resources, I mean not only financial capital.   Executives need to think about how they are allocating their people, as well as how they are allocating leadership attention across the organization.  

3.  Are we making our brand and our competitve positioning less distinctive in the marketplace?  Sometimes, growth in new directions blurs customers' understanding of who you are and what you stand for in the industry.   They used to know that you clearly stood for x, and that you didn't do y and z.  They understood that you were the best at x in the industry.  Now they aren't sure if you are the best at x, y, or z, and they aren't sure what your value proposition is.  

Top 100 Socially-Shared Leadership Blogs

Thank you to the Center for Management and Organization Effectiveness for again recognizing this site as one of the top 100 socially-shared leadership blogs of the year.   In the 2018 ranking, this blog stood at #64.  Thanks to all the readers for sharing my posts with others through a variety of social media platforms!  

Power Causes Leaders to Miss Opportunities to Connect People

Source: Blue Diamond Gallery

Blaine Landis and his colleagues have conducted new research regarding how power impacts leaders' actions with regarding to brokering connections among people in different parts of their organizations.   They derived their findings from two studies. The first focused on workers in a marketing and media agency.  The second study was an experiment conducted with 330 people who were working full-time at various companies.  

Landis' work demonstrates that power tends to diminish people's ability to identify opportunities to connect people who could benefit from sharing information, resources, ideas, etc.   On other hand, if someone identifies the opportunity for them, powerful leaders are quite willing to help connect people.  The converse is true for those with low power. They are more likely to spot opportunities to broker connections among people, but they are less willing to take action to make those connections happen.  

This study confirms what we have seen in a number of other studies about power.   When leaders have a great deal of power, they act differently.  In many cases, they act in ways that are not effective for their teams and organizations.  Many factors can increase the power distance between chief executives and their subordinates.   One key factor, of course, is tenure.  Leaders can become entrenched in their positions over time, and as their tenure in office lengthens, they accumulate more power.  Certain deleterious effects can occur though as their power grows.  Leaders need to work on enhancing their self-awareness in these situations, so that they can identify the negative effects that their behavior may have on the organization.  

Mergers and the Winner's Curse

We often hear people talk about the winner's curse. What does that term mean? Imagine that people are bidding in an auction, and they do not know the market value of the item being sold. Each bidder consults experts to provide them estimates of the value of the item. Naturally, the experts will provide a range of values. Who wins the auction? The highest bidder, of course. That person's experts would have provided estimates at the high end of the range of values. If the item's actual market value equals roughly the average of the expert estimates, then the winning bidder would have paid a price higher than the actual market value. Behavioral economists call this phenomenon the winner's curse. Many people have noted that the winner's curse provides an explanation for why many companies overpay for acquisitions, and thereby do not achieve their desired return on investment.

A new empirical study examines the actual returns to a merger in a novel way.  Ulrike Malmendier, Enrico Moretti, and Florian Peters examined the pre and post-merger performance of both the acquiring firm in a deal and the other firms that failed to provide the highest bid and therefore lost out on the deal.  Interestingly, the winners of the bidding war and losers did not differ significantly in terms of stock price performance prior to the deals.  However, after the deal, the losers' stock returns were 24% better than the winners during the three years after the deal.   Apparently, losing out on the deal did not turn out to be a bad thing at all.  Perhaps the winners really were cursed.  

Why Bryant?

Bryant University's Academic Innovation Center

As high school seniors make their college decisions this month, I thought that I would offer my perspective on why Bryant University is a terrific choice for young people.   I've been a faculty member at Bryant for twelve years now, and I truly love the community.   Here are my top ten reasons why students should choose Bryant:

1.  Outcomes!  Students at Bryant University achieve very successful outcomes at the end of their four years here, no matter the way you measure results.   If you would like to measure learning outcomes, then consider the student performance on the Educational Testing Service's Major Field Test in Business.  Our mean student performance ranks ahead of 90% of the institutions that administer this exam to graduating seniors. As for job placement, our students secure terrific jobs and earn strong salaries. The federal government’s College Scorecard ranks our institution very high in return on investment among peers (including top school in Rhode Island).   Money magazine ranked us as one of the top 50 colleges in the nation that add the most value.  Finally, in terms of graduate school placement, our students have gained admission in the past few years to prestigious graduate schools including MIT, Columbia, Cornell, Duke, University of Chicago, UVA, Yale, Vanderbilt, Northwestern, Emory, NYU and many more.  

2.  Competitive Success:  Our students participate regularly in academic competitions around the country, and they have excelled.   They have routinely outperformed students at much larger universities.  Our students have won the National Financial Plan competition twice in recent years, and we have a finalist again this year.   Our Collegiate Entrepreneurs Organization has earned Best Chapter in the nation on five occasions over the past eleven years. A Bryant team won first place in the Asset Management Case Competition in Boston this month.  Our finance students took home first place this winter in the multi-asset category at the GAME financial forum on Wall Street.  Our teams also have earned a top 10 finish in the National Collegiate Sales Competition and made the finals of the PwC xTax competition.   At the Federal Reserve Challenge this year in Boston, our students earned second place, finishing ahead of teams from Yale, Dartmouth, Boston College, Bentley, and many others.  

3.  Hands-on, Experiential Learning:  Our students do not simply sit and listen to lectures and memorize facts from textbooks.  Bryant has pioneered many forms of experiential learning.  Our students complete many projects for companies over the course of four years here, gaining critical practical experience on issues ranging from logistics to marketing to international business.   Many employers cite this practical hands-on experience as a critical differentiator for our students.  We also have teams of students dedicated to investing more than $1 million of Bryant funds in both equities and fixed income securities, providing them valuable practical experience.  Many schools have equity investment funds, but few have also developed opportunities for students to gain experience with fixed income investing.  

4.  Innovation:  Bryant University became a national pioneer when it created the first-ever design thinking program for all first-year students (the IDEA program).   All students at Bryant, regardless of their major, are introduced to this highly effective creative problem-solving methodology in a hands-on, immersive program during their first year.   Bryant also pioneered the use of upperclassmen as mentors to the first-year students in this program, and we have involved 150-200 alumni in this program each year as mentors and judges.    We like to say that we teach innovation here at Bryant AND we teach innovatively.  We have dedicated ourselves to finding new and creative ways to teach and learn on campus, with faculty constantly experimenting with new methods and techniques.  

5.  Faculty Achievement and Expertise:  Our faculty do not simply sit in the ivory tower pondering big ideas.  Most of our business faculty have practical experience in the private sector prior to becoming academics, and they continue to gain important knowledge through their consulting work with many organizations.   Our  full-time faculty includes a former managing director at Putnam Investments, a former senior economist at the Office of the Comptroller of the Currency, the former Chief Analytics Officer at Epsilon, a retired partner from KPMG, a former US Air Force logistics officer, a former Senior Deputy Director at the the US Treasury's Office of Thrift Supervision, and many more individuals with valuable real world expertise.  Moreover, our faculty have assembled impressive scholarly records with research publications in leading journals.   We have a number of Fulbright scholars on our faculty, and professors such as Ken Sousa and Charles Quigley have published popular textbooks.  

6.  Leadership Opportunities:  We provide our students with a variety of leadership opportunities here on campus.  As a result, they develop their leadership capabilities in many ways beyond the classroom. We give them the freedom to pursue their interests and take the initiative to create amazing new experiences.  For instance, our students created and organized our first-ever TEDx Bryant conference.   They also put together the Bryant University Northeast Entrepreneurship Conference completely on their own.  Our students take on critical leadership roles in our IDEA program, serving as mentors to first-year students and helping to organize the entire program.  

7.   Student Research:  Our students have the opportunity to collaborate closely with faculty members on research projects, with conference presentations and publications resulting from some of this work.  For instance, our Honors students produce theses during their senior year, and a number of students have published their work.  For example, one thesis led to a published case study about startup accelerators, while another published a journal article about the efficacy of the devil's advocate in team decision making.  

8.   Mentorship:  Our faculty members teach small classes, and we get to know the students very well.  As a result, we spend a great deal of time mentoring our students, helping them discern their career path, and assisting in the job search process.  Many firms reach out to our faculty when they have specific hiring needs, and we are able to direct these companies to specific students with the knowledge that they need.  Our faculty don't just spend time with students in the classroom or at office hours.  In our small, close-knit community, we interact with students in many ways beyond the classroom, forming relationships that last a lifetime.  

9.  Service:  Our students engage in service in a variety of ways.  They organize the Special Olympics on campus, put together an impressive Relay for Life event each year, and raise funds for a wide variety of organizations.  However, they do not just volunteer their time. We have ample opportunities in the curriculum where students engage in service learning.  Thus, they explore interesting intellectual questions in class, and they apply their knowledge through work in the field with non-profit organizations.  Bryant is one of the only schools where every student in the core required management course must complete a service learning project of their choosing. 

10.  Global Perspective:   We have infused a global perspective throughout the university.  Our students can not only study abroad, but also pursue internships in foreign countries while they are studying abroad.  Our international business students also work on consulting projects where they help local companies expand their global footprint.   We have many students pursuing minors in foreign languages, giving them an enhanced ability to work in international settings.  We have hired faculty with expertise in emerging markets around the world.  Finally, our Chafee Center for International Business serves several hundred local companies each year, providing export assistance, training, and the like.  The center provides our students with opportunities to work on campus, gaining valuable research and consulting experience.  

As you can see, Bryant University has much to offer, thanks in large part to many faculty members who are passionate about their vocation and who are care deeply about their students.  I hope that this brief essay has been helpful as students consider their college choices this April.  Good luck, everyone! 

Innovation: What Problem Are You Trying to Solve?

Innovators and entrepreneurs need to ask themselves: What problem are we trying to solve?  Seems simple, right?  Yet, in all too many cases, companies simply build new products and services in search of new revenue growth without clarity on this question.   Let's take one current example that puzzles me.  Fast Company reports today on a new Twitter poll launched by Heinz:

On Wednesday, Heinz announced potential plans to bring “mayochup” into the world. It’s half ketchup, half mayonnaise, and if you ask some people, 100% wrong. The food-processing company announced Thursday it’s contemplating selling the new product, provided it garners enough interest. It launched a public poll on Twitter, asking Americans to make the hard decision for them: “Want #mayochup in stores? 500,000 votes for yes and we’ll release it to you saucy Americans.”

What problem is this new product trying to solve?  Are we so lazy that we need to buy pre-mixed condiments for our burgers?   Perhaps.   Maybe their consumer research has identified a real customer need here.  If so, I'd be curious to hear what they have discovered. 

Regardless of this particular innovation's success or failure, this story reminds us to keep asking the question:  What customer pain point are we alleviating, and what need are we fulfilling?  Growth will come if we solve real problems for our customers.  If not, we risk spending on innovations that fall flat in the marketplace. 

Understanding Unethical Behavior

Maryam Kouchaki, Nour Kteily,  and Adam Waytz have conducted experimental research to examine repeated unethical behavior.   What psychological mechanisms drive serial offenders to lie and cheat time and again?   These scholars found that individuals try to escape taking personal responsibility for their deceitful actions by blaming their own personality.   It's sort of a "Woe is me, I can't control these bad attributes that drive my behavior" type of thinking.  Kouchaki notes, "Because morally questionable behavior is uncomfortable, people don’t want to take responsibility for it."  

The scholars call it self de-humanization.   Individuals conclude that they have less capacity for self-control, that they don't have the capacity to prevent themselves from making bad choices. Kouchaki explains, "You behave consistently with your self-view that you lack these human capabilities of agency and experience."  In other words, people adopt a negative self-image as a way to justify their unethical behavior.   A vicious cycle ensues.  Bad choices beget this rationalization process, which then makes it easier to cross the line and lie/cheat/steal in the future. 

Learning Styles: The Conventional Wisdom is Wrong!

Many leadership development professionals continue to adhere to the view that people learn more effectively if we adapt pedagogy and instruction to their learning styles (i.e. some people are visual learners, while others prefer to absorb information by reading and writing, etc.).  Many educators in our schools continue to adhere to this conventional wisdom as well.  Unfortunately, a stream of research strongly suggests that learners do not benefit if we adapt instruction and pedagogy to their preferred style.   Individuals might feel as though they gained more knowledge when employing their preferred style, but objective results indicate that they do not learn more effectively.  

A new study confirms this conclusion about learning styles.  Scholars Polly Husmann and Valerie Dean O'Loughlin conducted a study with 426 anatomy students at a university.  They administered the VARK - a commonly used survey to assess learning style.  The researchers shared the results with the students at the start of the semester, and they shared information from the VARK website about study tips associated with each learning style.   They surveyed them later about their study habits, and they examined their grades.   

What did they find?  No correlation existed between dominant learning style and course grades.  In fact, most students did not actually utilize the study strategies most commonly associated with their learning style.  Most importantly, those students who did use the strategies connected with their preferred learning style did not achieve higher grades in the anatomy course.  

When Saying Thank You Can Get You in Trouble

Jeremy Yip, Cindy Chan, Kelly Kiyeon Lee, and Alison Wood Brooks have conducted a study regarding competitive negotiations that, to some extent, is rather disheartening.  They explored whether expressions of gratitude may be detrimental during negotiations.   Specifically, they explored whether "negotiators are likely to respond selfishly and opportunistically to gratitude expressed in competitive deal-making situations."   

The scholars conducted a series of experimental studies to explore how expressions of gratitude affect a counterpart's behavior during a negotiation.   Here are their findings:

Study 1a:   In a negotation over a price of a backpack, buyers made more selfish counteroffers if the seller expressed gratitude after receiving the initial offer.  

Study 1b:  The scholars replicated their findings from Study #1 using a different context.  In this case, two parties engaged in a rental property negotiation.  

Study 2:  The scholars found that, "Grateful counterparts are more likely to infer that their counterparts are particularly forgiving, which encourages exploitative behavior."  

Study 3:  Using the rental property negotation again, scholars found that gratitude elicits selfish behvaior, but expressions of excitement do not.  

Study 4:  The researchers found that expressions of gratitude tend to induce selfish deception on the part of counterparties, i.e. they were more likely to lie in an effort to achieve a better outcome.  

Can Spotify Grow Its Way to Profitability?

Shira Ovide has written a good column for Bloomberg BusinessWeek regarding Spotify's IPO. In the article, she highlights a crucial difference between the Netflix and Spotify business models. It's a distinction that I've discussed in depth with my students.   It's a wonderful lesson in marginal vs. fixed costs.   Here's an excerpt from Ovide's column:

However much Spotify resembles Netflix in spirit and business approach, the services diverge in a way that makes Spotify’s path to profit significantly trickier. The video streaming company’s programming expenses don’t rise as it lures more subscribers. But as Spotify gets bigger, its streaming music costs increase; it can’t grow its way to profitability. Spotify’s product—35 million songs—costs the company more as more people sign up. 

Ovide does acknowledge that some costs will fall as Spotify continues to grow.  As the company gains more clout, it can negotiate better royalty deals with content providers.  Still, growth alone will not drive strong profits.  Marginal costs will remain positive, unlike Netflix.   Ovide argues that Spotify will have to diversify its revenue streams, as it has begun to do and as its chief financial officer discussed recently.  Ovide raises one other possibility, but she dismisses it as unlikely - that is, could Spotify develop its own content, as Netflix has done.  In other words, could it sign up musicians directly, disintermediating the record labels.  That's a highly risky strategy that could undermine the entire business though.   

The future will be fascinating to watch.  As a Spotify customer, I enjoy the service a great deal.  They clearly have lowered the cost for me to listen to the music that I love.   Will advertisting be a key revenue stream moving forward?  In the past, that has been the path to profitabilty for a number of companies.  Yet the Facebook crisis suggests that people are growing a bit more concerned about what a reliance on advertising can do to online platforms.  The Facebook mess should cause Spotify to tread carefully as it tries to drive new revenue through advertising.  The challenge will be to develop this revenue stream in a responsible manner, and in a way that does not scare off customers who are now waking up to the downside of "free" online platforms.