Innovators Think Like Global Travelers

I'm here this week at Oxford University in the UK with 2 colleagues and 22 Bryant University students.  As we move about the school and the city, I'm reminded of how valuable international travel can be for us.  We benefit not simply because of the cultural competence we build, but because thinking like a traveler is an essential habit of an innovative thinker.  Tom Kelley of IDEO talked about this critical habit/skill in a talk some years ago at Stanford University.  I think you will enjoy this short video clip: 

Are You Feeling Uncomfortable? It May Be a Sign of Learning & Progress

Source: Three Teachers Talk

My dissertation adviser and mentor, David Garvin, used to love to quote Dr. Peter Carruthers of the Los Alamos National Laboratory.   Carruthers once said, 

“There’s a special tension to people who are constantly in the position of making new knowledge.  You’re always out of equilibrium.  When I was young, I was deeply troubled by this.  Finally, I realized that if I understood too clearly what I was doing, where I was going, then I probably wasn’t working on anything very interesting.”   

The quote came to mind when I read about a new set of studies by Kaitlin Woolley and Ayelet Fishbach.  Kasandra Brabaw recently wrote about the research for the University of Chicago's Booth Review.  The scholars examined whether discomfort could be a motivating force for people or an impediment to learning and performance.  The authors conducted a series of experiments (both in the field and online).  They encouraged some of the research subjects to "seek out discomfort and take it as a measure of progress toward their goal."  Their findings demonstrated that being encouraged to seek discomfort increased motivation to take on emotionally challenging tasks.  Why?  People tended to reappraise discomfort as a positive cue, as a sign that they were making progress and learning something valuable.  In some of their experiments, the scholars showed that you don't have to even tell people that discomfort should be seen as a sign of progress; they tend to come to that conclusion on their own in certain circumstances.  

At the end of the feature about this research, Brabaw summarizes the key lessons, with a word of caution as well.  She writes, 

"Woolley and Fishbach make sure to point out the danger of taking it too far. Just like sharp and unexpected pain can be a cue to stop exercising, emotional pain can be a signal to take care with your mental health, they write. But taken cautiously, adopting a “no pain, no gain” mentality when you know something will make you feel awkward, sad, scared, or uncomfortable can boost your motivation to stick with it."

Power Can Be Dirty, But It Doesn't Have To Be

"Power Can Be Dirty, But It Doesn't Have To Be." - That's the title of Chapter 2 in Julie Battilana and Tiziana Casciaro's new book:  Power, For All.  The book offers an in-depth examination of how individuals wield power in organizations.  The authors argue that we all have to understand how power works and how we can use our power in constructive ways to achieve important objectives.  In Chapter 2, they argue, "Power is neither inherently moral nor inherently immoral.  History shows us that power can be used for virtuous purposes as well as dishonorable ones.  Whether it becomes dirty in our hands depends on how we gain and keep it and the purpose for which we use it."  

How should think about the power we may possess (or lack)?  In this interview, Casciaro explains:

Power comes from control over valued resources. You have power if you have something that the other person or group needs or wants and if they have few alternatives to you to get it, such that you control their access to that valued resource. So in any power relationship, you want to ask: “What is it that people want?” Because if you understand that, you are well equipped to try to deliver it. And “Who controls access to it?” Because if you figure that out, you can create some dependency so that people need you to get a desired resource.

Every power relationship, no matter with whom or in what context, can be read and understood based on the four elements that result: Do you have what the other party wants? How many alternatives to you do they have to get it? But you’re not done. Because whether you have power over them is conditional on whether they have power over you. So you also need to know: Do they have something that you want? Do you have alternatives to them for getting it?

These four elements are always playing with each other in a power relationship, and they give us four strategies to rebalance power with somebody: get them interested in the resources you’ve got, become less substitutable as a source of those things, make yourself less interested in what they’ve got, and increase the number of your alternatives to get what they’ve got.

Of course, power can be intoxicating, as the authors acknowledge and explain.   To protect against the corrosive effects of power, they argue that we must cultivate humility and empathy in our leaders at all levels of an organization.  Empathy, of course, has become a much-discussed concept lately, particularly during the pandemic.  Leaders need to work hard on developing empathy with their employees as well as their customers.  That takes a concerted effort to avoid the isolating nature of top leadership positions.  I also believe fervently that leaders need to make sure that they are retaining some level of normalcy in their lives.  It is certainly more efficient for top executives to have someone else grab your dry cleaning, order your groceries delivered, and hire landscapers to take care of your lawn.  However, engaging in some of these activities yourself, rather than outsourcing them, will keep you connected with how many of your employees and customers live on a daily basis.  It keeps you grounded.  No amount of leadership workshops can replace the empathy-building that occurs from engaging in these simple tasks of daily life.  If you want to be empathetic and humble, think about how you live your life, not just how you conduct yourself at work.  

Knowing Who You Are, and Who You Are Not

Some companies try to be all things to all people, and they often achieve mediocre performance (or much worse).  Others have a clearly defined target market and make sound decisions about how they will stand our from the competition.  They make tradeoffs - determining precisely what they will not do (that others in the market typically do).  A few companies go so far as to clearly articulate the tradeoffs they are making, even in their marketing materials.  Recently, we received a brochure in the mail from Viking.  The pamphlet described their various cruise offerings.  My wife and I have never been on a cruise, and we didn't have any prior knowledge about Viking.  I was struck by one page in particular in the brochure though.  It proclaimed, "What Viking Is Not: We do not try to be all things to all people. Instead, we focus on delivering meaningful experiences to you."  As you can see below, the company then explained specifically what it did not provide or offer (making for a stark contrast with many other cruise companies). 

Gene Sloan, who has written about cruising for more than 25 years, recently published a lengthy article about Viking.   Sloan wrote (underlining is mine for emphasis),

There are some cruise lines that try to be all things to all people. Viking isn’t one of them. The upscale cruise brand has carved out a niche since its founding in 1997, catering specifically to a certain type of thoughtful, inquisitive, generally older traveler who is looking to explore the world and learn a thing or two along the way.

Most Viking customers are approaching their retirement years — or are already there — and they’re eager to finally see all the places they didn’t have time to visit when they were raising kids and establishing careers in their younger years. For this subset of travelers, Viking offers a wide range of both ocean and river cruise itineraries that have a heavy focus on the destinations visited. These aren’t cruises where it’s all about the ship.

Viking voyages bring a lot of extended stays in ports where passengers get more time to explore historical sites and experience the local culture than is typical on cruises. The line offers included-in-the-fare tours in every port, allowing every passenger on board to get a guided experience during stops without having to pay extra. (In general, Viking voyages are highly inclusive, in keeping with its “no nickel-and-diming” philosophy.) On board, Viking’s programming revolves heavily around what the line calls “cultural enrichment” — lectures by experts on topics related to the places its ships visit as well as cultural and culinary offerings that often have a local tie-in.

What Viking ships don’t offer is a lot of onboard amusements aimed at families and younger travelers. In fact, the line doesn’t even allow children under the age of 18 on its ships. It’s one of the only major cruise brands in the world with such a rule. Viking ships also don’t cater to the party crowd. If it’s a floating celebration that you’re looking for in a vacation, this isn’t the line for you. As Viking founder Torstein Hagen likes to say, a Viking cruise is the “thinking person’s cruise,” not the “drinking person’s cruise.”

Michael Porter wrote about the importance of making strategic tradeoffs many years ago.  Many companies falter on this issue though.  They want to have it all, and they are obsessed with top line growth.  Moreover, they are afraid to so loudly and clearly proclaim to potential customers who they are AND who they are not.  However, the lesson here is critically important.  Exclaiming clearly who you are not will make you all the more attractive to the target market on which you have set your sights.  

From Technical Expert to Leader: From Certainty to Vulnerability

Recently, Matt Abrahams conducted a podcast interview with Dr. Lloyd Minor, Dean of Stanford Medical School (pictured to the left).  Minor described the transition from practicing medicine, and in particular surgery, to becoming a complex institution's leader.  He explained that clinical practice often involves situations in which there is a clear correct answer...and a clear wrong answer.  Leading an organization often means finding yourself in much more ambiguous situations.  Effective leaders recognize that the "right" answer may not be obvious in many circumstances, acknowledge what they don't know about the issue at hand, and invite input from others to help them sort through an ambiguous situation.  Here's an excerpt from this terrific interview:

There is a clear right and wrong with most things in my clinical field. Sure. You know, leadership is very, very different from that. I rarely find myself do I get it right the first time. And I depend upon the feedback of others. And the thing is if, unless this is, you know, a critically important time sensitive decision, and we were faced with many of those during COVID, in those cases, you do the best you can and, and you recalibrate very quickly. In cases that are not as acute as they have been during COVID, you can put up a straw person, you can float an idea, you can express your opinion in your belief about this is the way we think we should go. And some of that will be embraced, some of it won’t, but if you take the feedback. It’s not gonna affect your credibility as a leader.

 It’s very different than a surgical procedure. You wouldn’t want to tell a patient before you do a surgical procedure. You know, I think I’m gonna do it this way today, but that may not work. And so, you know, we’ll then do something different tomorrow or next week. I mean, no one wants to hear that. And for me, that was a recalibration as a leader. And I feel really fortunate to have had both sides represented. And I think it’s made me able to act definitively when the circumstance requires it. And when people around me expect me to act definitively and also to be more graduated and incremental when the situation justifies that approach.

Lessons from the House of Gucci

I just finished reading Sara Gay Forden's terrific book: House of Gucci: A Sensational Story of Murder, Madness, Glamour, and Greed.   Forden wrote the book two decades ago, but it has recently received a great deal of renewed attention due to the release of the movie starring Lady Gaga.  The book is filled with family intrigue, squabbles, and of course, a murder plot.  However, the book also provides a compelling examination of the rise, fall, and rebirth of the Gucci enterprise over the years.   As such, it offers a number of important management lessons.  

For me, one intriguing lesson centers on the attempt by Maurizio Gucci to restore and enhance the Gucci brand when he tooks over from the prior generation.  His instincts were solid in that he was quite worried about the dilution of the brand that had occurred over the years.  The desire to drive top line growth had led the company to develop and sell less expensive products for the masses.  The problem, of course, is that such efforts often make it much more difficult to remain highly attractive to the luxury consumer willing to pay top dollar for a quality product, but only as long as it retains a high degree of exclusivity.  This growth trap ensnares many companies pursuing niche differentiation strategies. 

Recapturing the premium positioning after a brand has been diluted can be very difficult.  The reason is that it takes time to change consumers' minds about a brand.  Moreover, trimming the product portfolio can be challenging to execute.  The company has to essentially retrench to restore the brand, but that can be very painful to do.   Maurizio tried to execute a "cold turkey" approach to restoring the brand.  His efforts to quickly eliminate lower-priced, lower-quality products led to a precipitous drop in revenues.  At that point, he had not yet done the groundwork required to transition the product line.  He failed on the execution of what is admittedly a tricky repositioning exercise.  Over time, new professional management managed to implement the repositioning very successfully, restoring the brand's luxury image.  In the end, strategy and vision are important, but execution often proves to be the difference between success and failure for a brand repositioning effort.  

Changing Culture: Speaking Up at Boeing

Source: Wikipedia

Julie Johnsson wrote a story for Bloomberg this week about the attempted cultural transformation at Boeing.   The company has faced an uphill struggle trying to address safety deficiencies in the aftermath of the 737 MAX crashes and production troubles with its best-selling Dreamliner. As many have documented (including in my case study about the 737 MAX), Boeing seemed to be characterized by an enviroment of low psychological safety in which engineers were reluctant to speak up about safety concerns. The article focuses on efforts led by Chief Aerospace Safety Officer Michael Delaney to transform the culture and improve problem detection in the manufacturing and engineering operations at the firm. Here's an excerpt from Johnsson's story:

Delaney, who took over the newly created position last year, is trying to instill a more open and transparent culture where employees speak up without fear of retaliation. That’s one facet of a larger framework he’s putting in place, known as a safety management system, that uses data and other tools to address risks before they flare into broader issues.  His deputy, Al Madar, pointed to one counterintuitive sign the approach is starting to take root: Boeing saw a record number of safety reports filed by employees in March and April.  “That data tells me what we’re doing is working,” said Madar, who oversaw American Airlines Group Inc.’s operational safety program before joining Boeing.

This point about the data is very important for any organization on a journey to improve quality and detect problems or errors more effectively.  Remember that improving pscyhological safety is often a key element of a program aimed at improving product/service quality.   In the early stages of a successful effort to enhance psychological safety, reports will (and often should) show MORE reports of incidents or problems, not fewer.   At first, these data may seem alarming. Could quality or safety actually be getting worse?    Actually, the rise in reported incidents typically means people are becoming more comfortable speaking up and sharing their concerns.  A failure to see a rise in reported incidents would be concerning, as it would indicate that perhaps people are still reluctant to come forward with bad news.   Naturally, you need to examine other metrics to be sure that the rise in reported incidents does not represent a serious deterioration in your operations.  Hopefully, some additional research will reveal that incident reporting is being driven by higher levels of psychological safety. 

Quitting Your Job the Right Way

 

Image source: https://uvaro.com/blog/the-great-resignation

Over the last few years, I have heard alumni from my university (Bryant University in Smithfield, Rhode Island) repeatedly stress the importance of "leaving well" when resigning from a company.   Many young people may not recognize the benefits of quitting your job the "right" way, but it is very important.  You never know when you may encounter some of those colleagues again in a future role.  Moreover, your reputation will spread in what are often small circles and dense networks.   Take great care to protect your personal brand when quitting a job.  

What does it mean to quit the right way?  For starters, it means giving more than the usual two weeks notice if possible.  Help make the transition smoother for the individual taking over for you.   Set them up to thrive, rather than simply "mailing it in" during your final weeks.  That individual will be incredibly grateful, and others at the firm, including your managers, will take notice.  Don't bad mouth your boss or the company either.  When asked why you are leaving, focus on the exciting new opportunity ahead of you, rather than the challenges and problems at your current employer.  Your frustrations may be very real, but expressing them publicly does little good in most cases.  Perhaps most importantly, reach out to those people who have mentored you, provided you assistance, taught you a new skill, or given you a key opportunity at your current employer.  Express your gratitude to them for these contributions to your personal development.  Finally, spend some time with any individuals you have mentored during your time at this employer.  Make sure they know that you are still available to act as a sounding board, and express your interest in their continued development.  If you take these actions, you will feel much better about your departure, and you will have build lasting goodwill that may benefit you in the future.  

Don't Eliminate the Small Talk

https://www.jeffnobbs.com/posts/small-talk

Like so many people, you might be tired of endless meetings.  Your calendar seems filled with a vast array of meetings, leaving you little time to do your own work.   You might be tempted to make meetings more efficient by just "getting down to business" and eliminating the "small talk" at the start.  I might suggest that you rethink that strategy. Small talk serves a useful function.  It helps us build relationships, create empathy and trust, and encourages us to seek to understand one another.  Dan Bullock and Raul Sanchez recently summarized a key finding regarding the science of small talk in an article for Fast Company.

Still, small talk has the power to make or break a job prospect, a networking encounter, and an intercultural relationship. Going beyond utility conventions and intentionally noticing the semantics of a conversation can land a new business deal or networking opportunity. In the business world, expertly crafted small talk can be used as the icebreaker that leads to the next business pitch, a fail-safe to get relationships back on track, or even simply as agency for building rapport with partners before a negotiation.

You may wonder why you sometimes feel like you’ve known a person after only exchanging a few words. The familiarity has its roots in interpersonal synchronization, where speech rhythms, walking patterns, and even breathing match with those of others simply from our shared perceptions that we notice as we acquaint ourselves with each other.

Findings from Princeton University in the act of human communication and storytelling revealed a powerful phenomenon called “neural coupling,” where our brains essentially get in sync during the act of storytelling. Researchers monitored audience members and storytellers via MRI machines and found that their brain waves synchronize during a powerful story, revealing that stories are one of our most powerful transcultural ingredients for communication. Just think of a networking situation where you jump-start a conversation with phrases like “Have you ever . . .,”; “What if . . .”; and “Did you know that . . .”

Stories can be lightning rods that supercharge our conversations, actively “syncing up” our minds so that we’re not just sharing meaning with each other, but human experience itself.

Publix & Wegman's: Engaged Employees, Happy Customers

 Last month, Beth Kowitt penned a good article for Fortune about the unique organizational culture and work practices at Publix and Wegman's.  She tries to explain why the companies are highly popular with customers and well-known as good places to work.  She points out that employee turnover is usually very high in the supermarket industry, and it has only gotten worse during the pandemic:

Most striking about the Publix and Wegmans streak is that supermarket jobs, already notoriously low paying, have become even more grueling over the past two years as workers put their lives at risk by showing up every day in the middle of a pandemic. Layer on the stress of dealing with disgruntled customers, and it’s clear why so many workers have reached a breaking point. In December 2021 some 786,000 retail employees quit—a record in an industry already plagued by high turnover. The sector has become the melting pot of all the big labor market issues of our time: minimum wage, the Great Resignation, a desire for remote work and flexibility, the childcare crisis.

Kowitt explains some of the things that Publix does differently.  She stresses that Publix has not responded to the Great Resignation by trying to replace humans with technology. Publix is privately held and still partially owned by the founding family, providing some protection from the usual pressures faced by publicly traded companies. The chain invests heavily in worker training so that the employees know the products and can converse with customers about those items.  The firm has a "promote from within" culture. Kowitt writes that, "Store managers have an average of 24 years at Publix, and 90% of them started out working on the floor." She also explains that don't tend to hire meatcutters from other chains. Instead, they bring on entry-level employees into the meat department and train them how to become meatcutters.  Finally, the employee equity plan provides real skin in the game for everyone and creates an incentive for people to build their career for the long term at the company.  Kowitt explains:

"With 230,000 employees, Publix is by far the largest worker-owned company in the U.S., and that has a lot to do with why people stick around. Employees who work at Publix for a year and at least 1,000 hours receive shares that can only be traded with the company. Just like at a startup where workers are given equity, the model entices people to stay. It’s money on top of their salaries (last year, Publix employees who qualified got the equivalent of 8% of their earnings). But Jones says Publix benefits, too. By having skin in the game, workers are invested in the company’s success. It’s an ownership structure that has turned many Publix associates into millionaires—the kind of lore that gets passed down."

As I read about Publix, I thought about one other key benefit of largely developing their managers from within the company, rather than hiring from the outside.  The managers have a much easier time empathizing with the front-line employees. Why?  They have been there!  They have worked at the checkout counters, bagged groceries, unloaded trucks, and stocked shelves.  Having done that work creates a genuine understanding of the obstacles and challenges front-line workers experience every day.  As companies think about the benefits of developing their talent in-house rather than constantly going outside to attract managers, they might consider the power of empathy and the inherent advantage of building empathy by having people promoted from the front lines to managerial positions.  

Does Remote Work Harm Creativity & Innovation?

Source: Enterpreneur.com

Melanie S. Brucks & Jonathan Levav have published a new paper in Nature titled, "Virtual communication curbs creative idea generation."    The scholars conducted a laboratory experiment as well as a field experiment with 1,490 engineers from five nations around the world.  The researchers found that remote collaboration hampers idea generation.  However, they found that remote collaboration has no impact on the ability of groups to select the best ideas to be implemented.   Here's an excerpt:

Here we show that, even if video interaction could communicate the same information, there remains an inherent and overlooked physical difference in communicating through video that is not psychologically benign: in-person teams operate in a fully shared physical space, whereas virtual teams inhabit a virtual space that is bounded by the screen in front of each member. Our data suggest that this physical difference in shared space compels virtual communicators to narrow their visual field by concentrating on the screen and filtering out peripheral visual stimuli that are not visible or relevant to their partner. According to previous research that empirically and neurologically links visual and cognitive attention as virtual communicators narrow their visual scope to the shared environment of a screen, their cognitive focus narrows in turn. This narrowed focus constrains the associative process underlying idea generation, whereby thoughts ‘branch out’ and activate disparate information that is then combined to form new ideas. Yet the narrowed cognitive focus induced by the use of screens in virtual interaction does not hinder all collaborative activities. Specifically, idea generation is typically followed by selecting which idea to pursue, which requires cognitive focus and analytical reasoning. Here we show that virtual interaction uniquely hinders idea generation—we find that videoconferencing groups generate fewer creative ideas than in-person groups due to narrowed visual focus, but we find no evidence that videoconferencing groups are less effective when it comes to idea selection.

Naturally, more research will be need to be conducted to see if others can replicate these findings in other contexts.   Perhaps the ability for remote work groups to collaborate creatively will be stronger in other circumstances or with the right type of leadership/facilitation.  However, this study highlights a very important phenomenon: the narrowing of cognitive focus.  Teams will need to be acutely aware of the negative effects of this "tunnel vision" as they work in remote and/or hybrid environments.  

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.