How Subscriber Declines May Affect the Netflix Culture

Source: Variety.com

Recently, my students read No Rules Rules, the book about the Netflix culture by founder and CEO Reed Hastings and INSEAD Professor Erin Meyer. I asked students to analyze the question: Is the Netflix culture transferable to other organizations? If so, under what conditions? The students did a terrific job debating this question among themselves and with six other faculty I invited to class. Then, the news broke just a few days later about the loss of 200,000 subscribers last quarter, along with the expectation of more churn to come. Netflix faces pressure because of price hikes that may have finally dented demand, as well as intensifying pressure from other streaming services such as HBO Max and Disney+. The recent news sparked a new question for me: How will the new competitive circumstances and performance decline affect the Netflix culture? Will the unique culture be a crucial asset that enables Netflix to bounce back, as it has in the past when faced with challenges? Or, will the culture be tested by these new circumstances?

Let's consider a few attributes of the culture.  Hastings argues that talent density is the crucial foundation for the Netflix culture.  Will the strong talent enable Netflix to find innovative ways to reinvent themselves in the face of competitive pressure?  Or, will the firm find it much harder to attract top talent now that the go-go growth years may be behind them?  Culling the "adequate" employees, while retaining the stars, may become challenging as the firm seeks to cut costs.  Will "adequate" stretch to include some very talented people, and how will that affect the environment within the firm?  

Netflix also prides itself on an environment of radical candor.  However, challenging times can cause psychological safety to suffer.  A culture of candor can become a culture of fear if leaders are not careful about how the "postmortems" are conducted in the wake of recent stumbles.  

Finally, what about the vaunted autonomy that has made Netflix a welcoming place for highly creative individuals who enjoy taking initiative, experimenting, and taking calculated risks?   Will senior leaders find it necessary to curb autonomy as they seek to turn the ship around?   If so, employees accustomed to a great deal of freedom may find it quite frustrating. 

Bottom line:  Cultures are often tested in times of adversity. They can either be the glue that keeps a firm together and helps organizations overcome obstacles, or they can come unglued by decisions that seem to conflict wit the norms and values to which employees have become accustomed.  It will be interesting to watch how the Netflix culture evolves as the firm navigates these much more turbulent competitive times. 

Successful Mentor-Mentee Relationships

Source: Monterail.com

Kellogg Insight features a very good article this week on how to be a better mentor (and mentee).   I found the tips to be quite useful.   One of the most interesting points made in the story centers on research by Kellogg Professor Brian Uzzi and his co-authors.  Here is the excerpt:

An analysis of the careers of more than 37,000 scientist mentors and mentees confirmed that having a mentor who is at the top of their game improves a mentee’s odds of ultimately becoming a superstar themselves by nearly sixfold.

But here’s something surprising. The study also suggests that the most successful mentees are those who go off to work in a different subject area, charting their own paths.

“When a student gets this ‘special sauce’ and they apply it to being a mini-me of their mentor, they still do well. But if they apply it to an original new topic of their own, they do even better,” Uzzi says.

This special sauce, the researchers argue, goes far beyond specific technical skills or subject-matter expertise, and includes tacit knowledge of how groundbreaking work is ideated and produced. This highlights the importance of mentors and mentees spending time and working through problems together, rather than simply ensuring that discrete skills are mastered.

This research strengthens advice offered later in the article by former IBM Chief Marketing Officer Diana Brink.   She argues that mentees need to own the agenda in these relationships.  They should be focused on how to secure the help and advice needed to achieve their goals, rather than simply trying to pursue the career path that the mentor may have chosen and attained quite successfully.  

Rise in Perfectionism Will Damage Our Ability to Innovate

Source: Skill Collective

London School of Economics Professor Thomas Curran and York St. John Univesrity Professor Andrew Hill have published an important new study about perfectionism.  They find that perfectionism is on the rise among young people in the UK, USA, and Canada.  They attribute some of this rise in perfectionims to "anxious, overly involved, and/or overly controlling forms of parenting."  In short, "increases in parental expectations and parental criticism offer the most plausible explanation for rising perfectionism to date."  The scholars stress that they are not blaming parents.  They believe larger systemic and structural forces are creating this pressure. 

The rise in perfectionism creates a host of concerns, including about young people's well-being in the face of such pressures.  However, I'd like to also stress the implications for innovation in our organizations.  Innovation requires the ability to test out new ideas, experiment and prototype, and iterate quickly based on feedback.  Naturally, such experimentation comes with a fair dose of failure.  My concern with the rise in perfectionism is that young people will be afraid to expose their ideas to others and open themselves up to constructive feedback. They will wait to refine their ideas, in hopes of making them perfect, before testing them out with others.  This reticence to put ideas out there before they are "complete" may lead to lost opportunities to improve those ideas, and it may slow down the process of innovation substantially.  We need young people to be willing to share their incomplete, "minimally viable" concepts with others, and then to build upon and improve those concepts based on the input from others...without constant fear of failure. 

Sucession Problems? Howard Schultz Returns as Starbucks CEO... Again

And you thought the HBO hit show Succession was fascinating... how about Starbucks for some boardroom succession drama?!  Several days ago, we learned that Kevin Johnson has decided to step down as Starbucks CEO.  In addition, the company made the surprising announcement that Howard Schultz would return for his third tenure as CEO.  Starbucks announced that Johnson had informed the Board of Directors about one year ago that he intended to step down around this time.  This news left many corporate governance experts scratching their heads.  Why go to Schultz as interim CEO if the board had a year to plan for the succession?  Did the Board stumble in an effort to replace Johnson, or is there some other reason for going back to Schultz once again?  In a Forbes article by Jena McGregor, experts offered some perspective on the potential pitfalls of this decision: 

Still, corporate governance experts say the move includes some potential succession pitfalls. Bringing back a CEO a second time—or a third—can impact future CEO recruitment, says Jason Schloetzer, a professor at Georgetown University’s business school who studies CEO succession.

“When you have a culture among the management team where the founder is still around and still actually pretty heavily involved, it can be difficult to recruit somebody who wants to do their own thing,” he says.

Meanwhile, CEOs who return to a job—especially those as successful as Schultz was in his second tour of duty—may try to do things that brought them success before, even as employees’ mindsets and public expectations may have changed.

Such CEOs can “essentially operate in a repeat methodology,” says Steve Mader, a strategic partner with executive search firm ON Partners who formerly ran the board practice for Korn Ferry. “But things change. [The] solutions five years ago are not necessarily good solutions now.”

Naturally, we will learn more in the coming weeks and months about Starbucks' succession plans.  Perhaps the Board simply had to wait for their preferred candidate to be available.  However, even if that is the case, the move to Schultz doesn't come without pitfalls as described above.  The situation certainly speaks to the need for succession planning long before a leader indicates that they are thinking of stepping down.  The best leaders cultivate and develop talent, including the people who can step into their shoes.  That process should begin soon after the day a leader assumes a role, not when they begin to contemplate stepping away.  

Negativity Bias: Conservatism in Funding Novel Projects?

Source: capital.com

Is your organization's resource allocation process biased against funding original ideas or novel projects?  Jacqueline Lane and her colleagues published a fascinating paper in Management Science in 2020.  They examined a "conservatism bias" in funding novel projects.   The scholars conducted an examination of the review of scientific research proposals.  They argue that, "The greater power of negative information suggests that information sharing among expert evaluators can lead to more conservative allocation decisions that favor protecting against failure rather than maximizing success."  In short, if people share their evaluations with one another, it tends to lead to a focus on risks and pitfalls,and therefore, creates a bias against original, potentially groundbreaking ideas. Here is their more detailed summary of the findings:

Using quantitative and qualitative measures, we found a clear and reproducible pattern: Negative information had a much stronger effect on people’s attention, information processing, and behavior, consistent with the negativity bias found in other domains (Baumeister et al. 2001, Rozin and Royzman 2001). Qualitative comments accompanying the evaluators’ decisions to adjust their scores suggest that, as a result of exposures to critical information, evaluators devoted greater attention to evaluation-criteria-specific tasks, such as scrutinizing the proposal for critiques and weaknesses. In contrast, exposures to neutral and higher scores led to shorter comments, with a greater focus on non-criteria-specific aspects of evaluation, such as confidence in their judgment or achieving consistency with the other reviewers, which did not prompt additional information processing of the evaluation task at hand. Thus, provided with the opportunity to deliberate and influence each other, evaluators are more likely to focus on proposal weaknesses than strengths. This asymmetry suggests that reviewers are more concerned with false positives (i.e., type I errors) than false negatives (i.e., type II errors), as the furnishing of negative information weighs more heavily on reviewers’ decisions than positive information of comparative magnitude. This finding may help explain what many see as “conservatism bias” in funding novel projects, which has conjured slogans such as “conform and be funded” and “bias against novelty” (Nicholson and Ioannidis 2012, Boudreau et al. 2016). If the risk of proposals is associated with their weaknesses, then, relative to independent evaluations, postsharing evaluations favor more conservative projects. These decisions, in turn, directly shape the disruptiveness of innovation occurring at the knowledge frontier.

Fran Horowitz' Turnaround at Abercrombie & Fitch

Source: bizjournals.com

Fran Horowitz, CEO of Abercrombie & Fitch, has led quite a turnaround at the company over the past several years (the firm manages both the A&F and Hollister brands). She inherited a company spiraling toward a similar horrible fate experienced by other struggling brick-and-mortar apparel retailers in recent years. Horowitz managed to reverse the decline. Under her leadership, A&F has rebounded to reach a revenue level last achieved in 2014. The firm's share price has almost quadrupled during her tenure.  

Fortune recently published an in-depth look at the turnaround.  As I read the article, authored by Phil Wahba, I was struck by two key elements of Horowitz' leadership.   She offers us one important lesson about business strategy and another about organizational culture. 

First, with regard to competitive strategy, Horowitz noticed that the A&F and Hollister brands had converged to the point of becoming indistinguishable.   Horowitz noted, “The simple conclusion I came to was that the brands had really become melded into one.  It was essentially the same product with just a different logo across the chest, at a different price.  She set out to create brands with distinct competitve positioning.  I would argue that many multi-brand apparel retailers have faced a similar predicament.  In desperate search of synergies among their subsidiaries, the firms have watered down the distinctive aspects of each brand.  They have reduced costs, but at the expense of a developing strategies that stood out from one another.  Wahba writes, 

On a more fundamental level, Horowitz started to put distance between Hollister and Abercrombie & Fitch so they weren’t interchangeable and didn’t risk being seen by shoppers as commodities, something that was draining their pricing power. “We had an opportunity to separate the brands and get them each on their own path,” she says.

The problem was that for years, the two brands had shared a merchandising and design team, so the products were very similar. For instance, a Hollister parka and one at Abercrombie would have almost the same design, with only tiny touches—a difference in color, say—to set each brand apart. So Horowitz gave each brand its own dedicated teams.

She also zeroed in on making sure they served different markets. For Hollister, based on data drawn from tons of in-person consultations with shoppers, the company determined that the target customer would remain a 17-year-old looking for clothes that invoke the feeling of a carefree, endless summer. Abercrombie, meanwhile, would “age up” and look to cater to 25-year-olds looking for casual, quality clothing. (But 25 is an average: A&F does carry items aimed at an older shopper, including $40 Def Leppard men’s t-shirts.)

In terms of organizational culture, Horowitz tackled the transformation of a top-down culture where front-line employees' ideas and perspectives were not valued. Wahba describes the culture under the previous CEO:

Jeffries’ top-down management approach worked well...until it didn’t. By the 2010s, his my-way-or-the-highway approach meant the company was missing important cultural shifts and falling out of step with its consumers, who were becoming less interested in company logos and airs of exclusivity. And the CEO eventually became notorious for his imperious management style.

The point here is very important. Creating a culture of low psychological safety not only demoralizes your employees, but it means you miss KEY shifts in customer behavior and market dynamics.  The people closest to the customer are not able to provide critical feedback and information to senior managers plotting overall strategy. Hollister President Kristen Scott, hired by Horowitz to help lead the transformation, notes, "“It took years, really, to get everybody comfortable reporting back what the customer was really asking for.”

Apparel retailer is a highly competitive industry.  The future may still present major pitfalls for A&F.  However, Horowitz' turnaround reminds us not to sacrifice distinctive competitive positions in desperate search for corporate synergy, and not to forget the impact that low psychological safety can have on an organization's ability to sense changing customer behavior, wants, and needs. 

Fun & Creative Techniques to Tackle Challenging Goals

Wharton Professor Katy Milkman, author of How to Change: The Science of Getting from Where You Are to Where You Want to Be, argues that we should try more often to "reach individual and team goals by relying on short-term gratification instead of willpower." Milkman explains that willpower simply isn't a very effective strategy for goal attainment for most of us. Here's her description of what researchers consistently find:

The research is clear: It doesn’t work. We tend to be overconfident about how easy it is to be self-disciplined, but a big payoff far down the road — or even knowing that a change is simple or cheap — just isn’t enough to keep us motivated. Economists call this tendency to favor instantly gratifying temptations over larger long-term rewards “present bias.” Unfortunately, it’s universal, and one of the biggest barriers to change.

What techniques work more effectively than simply relying on willpower alone?  One strategy she advocates is called "temptation bundling" - something I've blogged about in the past.   Milkman also argues that adding a little fun to our strategies for goal attainment can be highly effective.  Many firms, for instance, have pursued gamification strategies to encourage employees to achieve certain objectives.  Sometimes, even more creative options can be very successful.   Milkman describes one such highly imaginative approach to encouraging people to pursue a healthier activity: 

Every day, nearly 100,000 passengers rush through Stockholm’s Odenplan metro station. Each one of them has a choice: To get to and from their train, they can take the stairs or the escalator. To encourage the former, making a difference to people’s health (9% of premature deaths worldwide are attributed to inadequate exercise), a team of technicians funded by Volkswagen’s “Fun Theory” initiative turned the staircase into a set of giant, working piano keys. The result? Because taking the stairs was now fun, 66% more people than usual chose the stairs over the escalator. 

Strategic Deterrence: P&G, Clorox, and the Bleach Category

Source: Fortune.com

This month, we have read and heard a great deal about strategic deterrence at the geopolitical level.  The news spurred me to think about how I teach in our business strategy course about deterrence with regard to incumbents and potential entrants in a particular industry.  I often tell students the story of Proctor and Gamble's attempted entry into the bleach market in the 1980s.  Clorox, of course, was the massively successful and entrenched incumbent in the category (as they still are today).  Former P&G CEO A.G. Lafley recounted the story of P&G's failed entry into that market in a Harvard Business Review interview in April 2011.  The article was titled, "I Think of My Failures as a Gift."  Here's an excerpt from Lafley's remarks: 

In the 1980s P&G tried to get into the bleach business. We had a differentiated and superior product—a color-safe low-temperature bleach. We created a brand called Vibrant. We went to test-market in Portland, Maine.   

We thought the test market was so far from Oakland, California, where Clorox was headquartered, that maybe we could fly under the radar there. So we went in with what we thought was a winning launch plan: full retail distribution, heavy sampling and couponing, and major TV advertising. All designed to drive high consumer awareness and trial of a new bleach brand and a better bleach product.

Do you know what Clorox did? They gave every household in Portland, Maine, a free gallon of Clorox bleach—delivered to the front door. Game, set, match to Clorox. We’d already bought all the advertising. We’d spent most of the launch money on sampling and couponing. And nobody in Portland, Maine, was going to need bleach for several months. I think they even gave consumers a $1 off coupon for the next gallon. They basically sent us a message that said, “Don’t ever think about entering the bleach category.”

I use this story as an example of how an incumbent can send a very strong signal to a potential entrant, in hopes of deterring that firm from entering the market.  The signal essentially states loudly and clearly that the incumbent will fight aggressively if the other firm enters the market, rather than accommodating that entry.   Incumbents would like to issue this type of credible threat if they can, because any signal that they will pursue accommodation makes it more likely that the challenger will enter their market.  The key is to make the threat of a fight highly credible.  Putting a free gallon of bleach on every doorstep is a classic example of a clear and credible threat. 

Interestingy, Lafley notes that he learned a valuable lesson from this failure.  He explains, "When Clorox tried to enter the laundry detergent business a few years later, we sent them a similarly clear and direct message—and they ultimately withdrew their entry."

Louis Vuitton, Luxury Brands, & Inflation

The Wall Street Journal reports today that Louis Vuitton "increased its handbag prices globally this week, in some cases by double-digit percentages, according to Bernstein Research."  Louis Vuitton, of course, is a major brand house within the global luxury brand conglomerate, LVMH.  The parent company owns a variety of luxury brands including Bulgari, Givenchy, Tiffany, Christian Dior, Moët & Chandon, and Dom Pérignon.  Last year, I published a case study about LVMH's acquisition of the American jeweler, Tiffany.  Thus, I took special interest in this news today. 

The article quotes LVMH's CEO, Bernard Arnault: “We have an advantage on quite a few other companies and groups, which is that we have a degree of flexibility on our prices. In the face of inflation, we have the ways and means to react.” In addition, the article quotes Kathryn Parker, an analyst at Jefferies Group: “Luxury really is immune.  They have the pricing power to offset any underlying cost inflation.”

The story caught my attention because many firms will face an interesting challenge in the months ahead.  As costs rise, can companies increase prices accordingly to maintain margins? Unlike LVMH, some firms will find it difficult to pass on those increased costs in the form of higher prices. Companies need to ask themselves: Are we investing in the activities that will maintain or enhance willingness-to-pay on the part of our customers? In some industries that are quite different than luxury goods, competitors with deep pockets and strong balance sheets will take the opportunity to NOT raise prices as much and try to grab market share during this inflationary period.  Similarly, companies with huge cost advantages over rivals may undercut their competitors and steal customers.  If they have a cost advantage, competitors will not be able to match those price cuts without seriously damaging their bottom lines. Therefore, understanding the competitive landscape, and the cost structure and balance sheets of your rivals, is critical as one contemplates price increases.  

As firms think about how to adjust prices given the rampant inflation taking place, they have to think carefully about the investments required to continue to maintain or enhance willingness-to-pay.  Are we investing appropriately in research and development, product quality, customer service/experience, and the like?  Do people perceive our products as having higher value rival and/or substitute products?  Those firms making the right investments will be able to increase prices to account for cost inflation, while others will find customers balking at the price tag for their products and services.  

Becoming More Resilient: Three Excellent Tips

Source: Entrepreneur.com

At several faculty meetings in recent weeks, my colleagues and I have been discussing how and why many college students seem to be suffering from a lack of resilience.  Obstacles, challenges, and failures turn quickly into crises for many students.  Some struggle to overcome seemingly small setbacks.  To some extent, all of us have exhibited insufficient resilience over the past two years; the pandemic has worn us all down in many ways.  With these recent conversations in mind, I started searching for some good resources on resilience. I came across a few excellent tips from Lauren Eskreis-Winkler, an assistant professor of management and organizations at the Kellogg School of Management (Northwestern University).  She offers several suggestions for how to shape and develop organizational cultures that foster employee resilience.  

1.  Focus on learning from our own successes and others' failures.  Eskreis-Winkler reminds us that attribution bias causes individuals to struggle when it comes to learning from our own failures.  That inability to reflect and learn from our failures inhibits our resilience at work.  She explains:   “People do not struggle to learn from their own success. Nor do they struggle to learn from others’ failures.  Someone else’s failure is not upsetting or threatening. It’s just information."  In short, promote learning whenever you can, and recognize that some forms of learning are much easier to accomplish than others.  Use attribution bias to your advantage! 

2.  Try to remove the stigma of failure.  She argues for more transparency when it comes to projects that do not achieve desired goals.  Employees need to understand that they are not alone.  Mistakes and failures occur all the time.  She explains: “Business leaders can create cultures where the actual rate of success and failure is known to each employee.  This normalizes failure in an organization, creating an environment where a certain rate of failure for new products and initiatives is totally acceptable. This knowledge alone makes people less upset by personal failure, and as a result, more likely to learn from it.”  I would argue that the tone needs to be set at the top.  If senior leaders are open to discussing their own mistakes and failures, that goes a long way to removing the stigma of failure for all employees in the organization.  

3.  Stop framing activities and initiatives as "wins" versus "losses."   We can learn and improve in anything that we do, even if we have been quite successful or if we have stumbled badly.  In every "successful" initiative, we can find opportunities for improvement.  In every "failed" project, we can find small victories, moments of strong performance.  I'm reminded here of the U.S. Army's After-Action Review process.  They try to learn from every mission.  They purposefully did not create a post-mortem process, whereby they would only try to identify causes of failure.  Instead, they seek to review all missions, no matter the outcome.  They always look for opportunities to learn and improve.  Think about how demoralizing it is to be asked to participate in a post-mortem.  You are being labeled a failure in that situation, and you probably are fearful of the outcome of that analysis.  The U.S. Army tries to avoid that labeling, so that everyone is focused on how to get better, no matter the performance to date.  

The Fall of Peloton

Source: NPR

The Wall Street Journal reports today that Peloton CEO and co-founder John Foley is stepping down from the company.  The firm also announced 2,800 layoffs.  The newspaper reports on the precipitous decline in the company's fortunes over the past few months:

For a while Peloton enjoyed high times as a pandemic darling, with homebound customers ordering its exercise equipment and streaming its virtual classes. Its valuation soared. But its fortunes sagged as lockdowns eased and gyms started to fill up again. The company’s value had fallen from a high of around $50 billion roughly a year ago to around $8 billion last week.

I've watched the fitness industry closely over the past few years, ever since I wrote a strategic management case study about Planet Fitness.  As I have observed Peloton's struggles, I'm struck by three important themes.  

1. When I wrote the Planet Fitness case, I observed that fads have dominated the gym industry for years.  As a result, customers are quite fickle.  They become attracted to a new fitness concept, with high hopes of achieving various personal goals: stronger body, better cardio fitness, weight loss, etc.  Inevitably, many customers do not achieve their goals.  When that happens, what do they do?  Do customers blame themselves or the gym?  Of course, they tend to find fault with the gym, or the method, that they have been pursuing.  They seek a "better" alternative.  As a result, customers seem to migrate from fad to fad over the years.  Companies in industries with similar "fad-driven" demand need to stay carefully attuned to sudden shifts in consumer demand.  

2.  One of the most challenging elements of the fitness center industry structure is the highly attractive and plentiful substitutes.  What is the alternative to going to the gym?  Everything from working out at home or at the corporate/university gym to running outside to signing up for Jenny Craig or Weight Watchers.  Peloton, of course, is a substitute for going to the gym.  The threat of substitutes is high for firms in the  gym business.  Of course, the same goes for Peloton!  They face the same substitutes.  People can exercise outside, go to the gym, etc.  They have attractive, and in many cases, cheaper alternatives available.  Firms in all industries need to be attuned to the threat from substitutes.  Often, this threat is much more serious than the threat from direct competitors.  

3. Finally, Peloton is an example of a firm that may simply not be able to sustain the pandemic-driven demand surge as we move (hopefully) beyond the pandemic.  For all firms, the lesson is that they will have to closely monitor consumer behavior as we move beyond the omicron wave of the pandemic and toward more normalcy. If we move toward COVID being endemic, then consumer behavior may start to change in unpredictable ways. What has worked during the pandemic may no longer work as well in terms of attracting and serving and retaining customers. Companies will need to keep a close eye on changing patterns of consumer behavior as we move through these next phases of the pandemic. The key will be to not just survey customers, but to observe them and to empathize with them so as to understand their changing pain points and needs.

Best Practices for Virtual Meetings

Two years into the pandemic, we have all become quite accustomed to virtual meetings.  For some of us, we feel as though our teams have improved their ability to communicate and collaborate virtually.  Others have encountered various frustrations and grappled with Zoom fatigue.  Recognizing these challenges, Kellogg School Professor Leigh Thompson has offered us three important recommendations for improving virtual meetings.   

1.  Work on engaging in constructive conflict with others.  Start with low-stakes situations and decisions, and use those discussions as an opportunity to build your team's capability to have thoughtful, productive, and positive debates.  Thompson explains in this excerpt from a Kellogg Insight article about her work: 

With fewer social interactions with our colleagues that allow us to constantly adjust and modify our communications, expressing disagreement virtually is more likely to go off the rails. And, in the absence of strong social cues and corresponding brain activity that is triggered by real human connection, we may feel less inhibited and be more likely to crack that snarky joke at a colleague’s expense. “People are not as nice when they’re communicating virtually,” says Thompson.

Even when intentions are good, misinterpretations abound. “Most people believe that they’re being hard on the problem, but the recipient feels that they’re being personally attacked,” says Thompson.

Add to this the reality that we cannot simply run down the hall or initiate an impromptu one-on-one conversation to clear up these misconceptions, and perhaps it is unsurprising that some teams overcorrect and avoid conflict at all costs.

But avoiding conflict altogether simply cannot be the solution. After all, some conflict is key to high performance. Thompson cites studies that find that a certain amount of task conflict is associated with higher creativity. For example, in one study of diversity in biotech labs, conflict was associated with more patents.

2.  Take advantage of the opportunity for creativity to flourish amidst a more level playing field.  Thompson notes, “Substance matters a heck of a lot more than style, virtually.  There is no head of the Zoom table.”  Use the technology to engage in brainstorming that is more effective than the usual group discussions that occur in person.  Ask people to write down their ideas in advance of the meeting and then share them with the group using a variety of virtual tools available.  I personally like the use of JamBoard by Google.  Breakout groups also can be very effective at stimulating creative problem solving.  

3.  Don't just stick to business.  Thompson explains the virtues of "small talk" in virtual meetings:

In one study—presciently conducted before the pandemic—Thompson and a Stanford colleague asked Kellogg MBA students to negotiate a fictional business deal with peers from Stanford in a remote environment (via email). But there was a twist: while some groups got straight to business, others were instructed to have a five-minute phone call, with the only rule being that they could not discuss the business matter. They were told to “schmooze,” says Thompson.

The results? The teams that schmoozed with their virtual negotiation partners were more likely to come to an agreement. These quick phone calls seemed to act as a virtual handshake, erasing some of the distance between teams by helping them see the humanity in one another.

For more from Professor Thompson, check out this webinar she delivered recently. 

When Hiring Leaders from the Outside Fails

Source:  NBC Sports

When organizations struggle and falter, they often look to the outside for new leadership.  They hire CEOs from companies that they consider to be top notch.   If the firm has excelled, then presumably, it has star members of the C-suite who could make terrific CEOs elsewhere.  So goes the logic.  Of course, we know that these outside hires don't always work out.  The question is why. 

I've been thinking about this topic over the past few weeks, as we have witnessed a number of National Football League teams fire their head coaches.   Among these firings, two more of New England Patriots' head coach Bill Belichick's proteges lost their jobs as head coaches of other teams.  Observing these dismissals, I decided to compile the NFL win-loss record of all of Belichick's former assistant coaches during his time as the boss in New England:  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).  

Why have Belichick's proteges failed so miserably?  Several hypotheses come to mind. 

1.  The most obvious conclusion:  None of these assistants had Tom Brady as their QB!  As we all know, even Belichick has a losing record as a coach without Brady.  More generally, these proteges didn't have all the other talent that accompanied Brady in New England. University of Texas coaching legend Darrell Royal once said, "It's not about the X's and the O's, but the Jimmys and the Joes."  In other words, perhaps we overrate coaching and don't attribute enough of team success to the players themselves.  In corporate terms, perhaps we place too much credit for success at the feet of a few top executives at successful firms and forget about the impact of many others supporting them.  

2.  Some of these proteges try to copy the Belichick style and system in its entirety rather than adapting to the new situation in which they find themselves.  Moreover, these proteges attribute the Patriots' success to some factors that are not, in fact, the primary drivers of the team's high performance.  Kalyn Kahler wrote an article for the Bleacher Report two years ago titled, "When the Patriot Way Goes Wrong." She wrote:

"Listen, we all want to replicate the Patriots' success, but the track record of guys that come out and seem to try to replicate it is tough among front office and coaches," says another source, who has interviewed coaching candidates coming from New England, including Patricia. "Authoritarian, very hierarchical organizations, whether they are in football or otherwise, that's what you get: You don't get people to develop their own way.... "There is a sort of skepticism when people interview people coming out of New England," the source who has interviewed Patriots coaches, including Patricia, says. "Some of the New England ways have been so draconian. ... The league does look at those experiences and say, 'Are these guys trying to replicate a really, really difficult model to replicate?' It is certainly a focus when you talk to those prospects."

Many business leaders make the same mistake.  They try to import the exact methods and techniques to which they attribute their former organization's success.  They fail to assess the situation and adapt accordingly. 

3.  Many of these proteges had little or no professional football experience outside of working for Belichick in New England.   Therefore, they did not have a solid understanding of how different his methods were from those to which other players and coaches were accustomed.  A incomplete appreciation of the culture of other organizations left them ill-prepared to take over another team.   Business leaders fall into the same trap if they take on a CEO role after spending their entire career in one organization (think about some of the former GE executives who stumbled elsewhere).  

4.  Perhaps these Belichick proteges believed that the Super Bowl rings on their finger would automatically generate buy-in and commitment on the part of the players on their new teams.   However, it doesn't work that way.  Yes, people will respect your past success, but you still have to build buy-in from the ground up.  You have to cultivate trust and respect.   Moreover, you have to convince players that the methods are key to winning.  They aren't stupid. They see Tom Brady on the Patriots and think, "Are these dictatorial methods really the path to winning, or were those rings simply a result of having the greatest QB of all time?"  Rightly or wrongly, that's the way some will think.   Business leaders face similar challenges when they switch organizations.  Employees will quickly tire of hearing that certain methods "worked before in my prior organization and can work again here."  

5.  Finally, one has to consider the impact that Belichick's hands-on style may have on the development of talent in his organization.  Note that Belichick's mentor, Bill Parcells, has had a coaching tree that has been far more successful (Belichick, Tom Coughlin, Sean Payton, etc.).  Similarly, Tom Landry and Bill Walsh had incredibly successful coaching trees.  Does the way that those coaches led their teams matter? Perhaps they delegated more effectively, and in so doing, they developed the coaching talent around them more successfully.  Understanding the leadership style of a person's former boss may be critical as you hire C-suite executives from another firm.  Did the person work for a micromanager, and as a result, are they as prepared to make decisions on their own as you would like them to be?

The "Kill the Company" Exercise

 

Author and consultant Lisa Bodell has created a simple, yet ingenuous, exercise for stimulating change and innovation at companies. Like many people, she noticed how unproductive many strategic planning processes could be. She also observed the barriers that prevented managers from recognizing the need and urgency for change. Therefore, Bodell asks executives to engage in a powerful exercise to reshape their thinking. She directs them to put themselves in the shoes of their firm's primary competitors. Then Bodell poses the question: What could those rivals do to attack and even destroy our company? The exercise exposes a series of key vulnerabilities. Then, managers can rank those threats from most to least substantial. The exercise also enables managers to identify key assumptions and beliefs, perhaps taken-for granted as part of the conventional wisdom, that deserve questioning and challenging. Moreover, Bodell urges managers to ask the all-important question: Why do these vulnerabilities exist? What practices, processes, and choices leave us in a position of weakness vis a vis our primary rivals? Bodell also notes that managers then can turn this exercise around and examine their key competitors in a new light as well. They can pose the question: If we address some of these weaknesses effectively, could we gain the upper hand on some of our rivals? Which shortcoming, if addressed, would provide us a powerful competitive advantage?

Warming Up Before Solving a Tough Problem

Source: NY Times

Suppose your team has a very challenging, complex problem to solve.  You would like to generate some creative solutions to that problem.  What might you do BEFORE you gather the team together as a mechanism for stimulating more innovative thinking?   You could encourage the team to warm up before tackling the issue together.  What types of "warm-up" should you engage in before "running the race" together?  

1.  Physical activity:  As Annie Murphy Paul notes in her fabulous new book, The Extended Mind, engaging in some physical activity can be an effective way to enhance your brainpower.  Moreover, getting outdoors for that activity can be especially powerful.   Getting the blood moving is essential to thinking clearly and creatively.  

2.  Be an anthropologist:  Rather than simply immerse yourself in spreadsheets and data, go out into world and observe some actual customers.   Watch how your firm's products and services are actually being used, and watch for those pain points experienced by your customers. 

3.  Imagine someone else tackling this problem:  Scholars Evan Polman and Kyle Emich have shown that research subjects are more likely to solve a challenging problem if they imagine someone else faced that particular predicament (rather than being in that situation themselves).   

4.  Engage in an improv exercise:  A simple "yes-and" exercise can be a powerful way to get people to lower their inhibitions, think more freely, and become more comfortable offering bold and original ideas despite some reservations or concerns.  

5.  Brainstorm questions, not answers:  Ask the team to come up with different questions that they would like to answer regarding this problem.  What might they like to learn more about in this situation?  These efforts can be effective at helping people reframe the problem before the team in a manner that may stimulate more creative thinking.  In many cases, the initial frame may be too narrow, and therefore, it may constrain the range of options considered.  

6.  Gather some physical materials:  We can think more creatively if we have objects to touch, feel, and work with along with our team.  They might enable us to build mock-ups as we later brainstorm together, or we might use the materials to illustrate a customer pain point more clearly (rather than simply using words spoken or on a page).  

7. What would we never do?  Ask the team to generate a list of solutions that your company would NEVER choose.  Then ask the team to explain WHY these options would not be considered.  What orthodoxy or conventional wisdom does that reveal? Should that conventional wisdom or these assumptions be questioned before trying to solve this problem? 

Unlocking Creativity

Today marks the 3-year anniversary of the publication of Unlocking Creativity. To celebrate, I'm giving away 10 copies of the book! To enter the drawing, please share a post describing a useful technique employed by you/your team to improve creative problem solving. Tag me on social media & use #unlockingcreativity to enter the drawing. 

 

Widen Your Lens: How Might I Learn From Others Far From My Technical/Industry Domain?

Source: Forbes.com

For the most part, we tend to focus on learning from others within our technical or industry domain.  However, adopting this narrow lens means we are missing out on some valuable and impactful learning opportunities.  When working with companies, I often encourage them to go beyond simply benchmarking their direct rivals.  I pose the question: Who is world class at solving a complex problem that you are facing at the moment?  Who has come up with an ingenuous solution to a thorny issue confronting your organization?  Go study that organization.  Don't try to copy what they are doing, because naturally, they are in a totally different context. Instead, attempt to discern some key principles regarding how they have solved that particular problem. Then consider how you might apply those principles to develop enhanced practices within your own organization.

My favorite example of this type of "stretched" or "widened" lens for learning comes from a story I read in the Wall Street Journal several years ago. The article, by Gautam Naik, is titled, "A Hospital Races To Learn Lessons Of Ferrari Pit Stop: Auto Crew Teaches Surgeons Small Errors Can Add Up On the Track, or in the ICU." The article tells the familiar tale of how surgeons in at Great Ormond Street Hospital, a UK-based pediatric care center, were worried about the possibility of medical errors during "handoffs" - i.e., those crucial times when a patient is transferred from one unit to another, or from one clinical care team to another. "Fumbled handoffs" represent a common source of medical accidents. Naik writes, "A 2005 study found that nearly 70% of preventable hospital mishaps occurred because of communication problems, and other studies have shown that at least half of such breakdowns occur during handoffs.

Naik describes a fascinating moment that occurred one day as Drs. Allan Goldman and Martin Elliot watched one of their favorite sports on television. The physicians observed in awe as a Formula One auto racing pit crew engineered a remarkably efficient and safe handoff each time the driver entered the pit during a race. They decided to try to learn from these racing crews and apply those lessons to their work in the hospital. Naik describes what happened next:

In early 2005, Dr. Elliot, Dr. Goldman and Mr. Catchpole traveled to Ferrari's headquarters in Maranello, Italy, and sat down with Nigel Stepney, the racing team's technical director. As a test car roared around a nearby track, the visitors played a video of a hospital handover and described the process in pictures.  The Ferrari man wasn't impressed. "In fact, he was amazed" at how clumsy and informal the hospital handover process appeared to be, recalls Mr. Catchpole, now a researcher at Oxford University.

In that meeting, Mr. Stepney described how each member of the Ferrari crew is required to do a specific job, in a specific sequence, and usually in silence. By contrast, he noted, the hospital handover was often chaotic. Several conversations between nurses and doctors went on at once. Meanwhile, different members of the team disconnected or reconnected equipment to a patient, but in no particular order.   In a Formula One race, the "lollipop man" with a paddle ushers the car in and signals the driver when it's safe to go. But in the hospital setting, it wasn't always clear who was in charge. Though the anesthesiologist had nominal responsibility to take the lead during a handover, sometimes the surgeon assumed that role -- or no one at all.  The crew at Ferrari trained for the worst contingencies. "If Michael Schumacher comes in five laps early because it's raining and he wants wet-weather tires, they're prepared," says Mr. Catchpole, referring to the Ferrari driver and seven-time world champion, who recently retired. The hospital team dealt with problems as they came up.

After carefully distilling key lessons from the study of the auto racing pit crews, the doctors at Great Ormond Street Hospital developed a new protocol for handoffs.  The procedure was detailed - 7 pages of carefully orchestrated steps for a safe transfer of the patient.  What happened when the physicians implemented this new protocol?  Errors and information omissions decreased by more than 40%!  Importantly, the doctors didn't try to simply copy what they observed.   Instead, they identified key principles and approaches that could be adapted and applied in their quite different context.   That "translation" and "adaptation" is essential when learning outside your own technical/industry domain.  

Fighting Decision Fatigue

Source: Discover Magazine

Rachel Feintzeig has written a Wall Street Journal article this week titled "Decision Fatigue is Real: Here's How to Beat it This Year."  The article notes that many people are feeling overwhelmed during the pandemic by the sheer number of seemingly consequential decisions they must make, both personally and professionally.   Scholars describe a phenomenon called anticipatory regret, in which people look ahead to why they might be unsatisfied with the choice they are about to make, and as a result, they find themselves unable to act now.  

What can we do to overcome decision fatigue?  I was reminded of a research study from many years ago, conducted by Stanford Professor Kathleen Eisenhardt.  She studied the speed of strategic decision making in what she called "high velocity environments" - contexts in which conditions were changing quickly and unpredictably.   Eisenhardt found that the CEOs who could overcome hesitancy and make faster decisions tended to consult frequently with "experienced counselors" or "confidantes" during the decision-making process.  These individuals served as vital sounding boards, and they helped the CEOs overcome their hesitation about moving forward.  The confidantes can leverage their own experience and knowledge to help the CEO sift through alternatives and assess risk.   They can offer an objective assessment when perhaps others are only advocating for their preferred course of action.  Finally, Eisenhardt found that consulting with a experienced confidante can help boost the confidence of the CEO in the face of high uncertainty and ambiguity.  They can help leaders overcome analysis paralysis.  

So, who then will serve as your experienced and trustworthy confidante?  Can they be an effective sounding board for you, so that you can overcome decision fatigue, make timely choices, and move forward?   I would note that this confidante need not always be on your team.  The individual may be outside your team or organization, yet willing to lend an ear when you need advice and a sounding board on a tough decision. Their outside status may be helpful, because they won't have all the biases and allegiances that may shape the perspective being offered by team members.  

A Lesson In Setting (and Achieving) Our Goals

Source: Mission to Learn

We can learn a great deal about setting and achieving goals by studying how people engage in physical exercise. That's precisely what University of Pennsylvania scholar Katy Milkman has done very successfully in her career. She features some of that insightful research in her terrific new book,

How to Change: The Science of Getting from Where You Are to Where You Want to Be.

In one study, Milkman examined the behavior of approximately 2,500 employees at Google.  She studied their exercise habits.   In this NPR interview, Milkman explains the motivation for and structure of the study: 

And we had this insight from research on habits that it seems like the kinds of people who form the stickiest habits have a really consistent routine. They do it in the same time, at the same place over and over again. And so we thought, OK, what if we sort of adopt that insight and build it into our program? One group was basically encouraged to go to the gym at a really consistent time. Then we have a second group, and this is the comparison, where they also told us their ideal time, say, 9 a.m., and we reminded them to go at that time, but we encouraged them to go whenever it was convenient for them. And as a result, that group went at about the same frequency but in a more varied manner. So half of their gym visits were at this consistent time and the other half were all over the place.

What do you think?  I bet you think that the group committed to always going to the gym at 9am would adhere to their exercise goal more successfully.  Well, that's what I thought before I read the results too.  However, that did not turn out to be the case!  She explains why: 

But the big surprise to me was that it was actually the group who had gone at the same frequency but in a more varied way. And when we dug into the data, we figured out why. The answer seems to be that the people who had formed those routines that were really consistent were really rigid. So more often than not, they're going to the gym at that time if they're going, and they actually did form a slightly stickier habit after the end of our program around visiting the gym at that usual time. But if they don't go at that time, they don't go at all, right? So you miss your 9 a.m. slot? Oh, I'm not going to the gym today. Whereas the other group, they go to the gym at 9 a.m. a lot. But if they missed 9 a.m., they have a fallback plan. So then they make it at noon or at 5. And as a result, net net, they're going to the gym more. And so what this taught us was that a really important component of habit is actually having some flexibility. It needs to be I have a first best plan, but when that doesn't work, I'm going to get there anyway.

The lesson here regarding flexibility seems especially important as we navigate unpredictable and turbulent circumstances in our external environment these days.  However, remember that the flexible group still aimed for that 9am gym visit.  They didn't leave their goal completely wide open.   However, they did have a contingency plan - a commitment to get to the gym whenever convenient if they could not visit at 9am.  That combination of a routine coupled with some flexibility seems to be the sweet spot when it comes to successfully achieving our goals.  

It's More than OK to say "I don't know."

Source: Lean Enterprise Institute

Mandy Gilbert, Founder and CEO of Creative Niche, wrote an interesting article several years ago for Inc.  The title of the essay was, "Why Saying 'I Don't Know' Is a Sign of a Strong Leader."  The article reminded me of a conversation I had with a UK-based CEO in the early days of the COVID-19 pandemic.  She recounted a story of her first meeting with her top management team after shutting down the corporate offices in March 2020.  This CEO started the meeting by telling the team, "I just want to remind you all that I haven't been through a global pandemic either.  So, let's figure this out together."  Here's what Gilbert wrote in her article that reminded me very much of this story of the CEO confronting the pandemic with her senior team: 

When faced with an obstacle, your gut reaction may be to exert your expertise and quickly provide a solution. However, a much more powerful alternative would be consulting your team out of the gate.ate. "Let's figure this out together" will only have positive outcome. Not only will this show you value their opinion, but it will also help the team come to the right solution. Your colleagues could have been through something similar in a previous role, and consequently offer valuable insight on what the next steps should be.

Some of the biggest wins can come out of not knowing. Admitting you don't know what to do evens the playing field. When everyone feels equal, the problem solving process becomes collaborative rather than authoritative.

Success achieved through a group effort is much more powerful than when achieved through a single person. Imagine the camaraderie and culture that will start to cultivate when the team solves a problem or reaches a target together? As a leader, collaboration should always be your number one priority -- not your self-pride.