Porsche vs. Ralph Lauren: The Danger of Diluting Brand Equity

Fortune reports this week on the contrasting situations at two iconic brands: Ralph Lauren and Porsche. At Ralph Lauren, revenues and margins are rising. CEO Patrice Louvet has executed a sustained campaign to "elevate" the brand.  Louvet rightfully came to be concerned that the company's growth strategy came with significant brand equity risks.  He recognized that the company needed to act forcefully to raise willingness to pay.    Fortune's Peter Vanham writes:

Before he arrived in 2017, Ralph Lauren “expanded in places where we probably shouldn’t have, which drove higher levels of promotional activity,” Louvet told me. “It was like the boiled frog phenomenon. I’m sure it was well-intended. Each year, we thought it was just marginal. But after a few years, you realize it’s not going to end well.”

Since then, he said, “we’ve had our eyes wide open on tough choices.” Joining Ralph Lauren after almost three decades at P&G, the native Frenchman took a page from his old employer’s turnaround book. To escape from the price race to the bottom, the company “took a one-year, painful hit” to reset consumer expectations. Then, during COVID, Louvet reset the distribution strategy, and closed two thirds of its wholesale presence.

Meanwhile, Fortune's Christiaan Hetzner reports on the recent challenges at Porsche. Hetzner writes that the Porsche CEO, Oliver Blume, has announced a second major round of cost reductions at the luxury automaker. Hetzner concludes that the company is "drifting deeper and deeper into its biggest crisis in decades."  Blume apparently attributes the troubles to a slowdown in EV demand, a tough price war in China, and the high new tariffs imposed by President Trump.  While these factors clearly have affected Porsche's business, I wonder if the troubles point to a deeper strategic challenge. Over the past two decades, Porsche has expanded beyond being the producer of its iconic super premium sports cars.  Porsche sells sedans and SUVs around the world.  Has that growth begun to impact the brand, and can the company continue to command the high willingness to pay that it generated in the past?  Will Porsche require the type of brand reset executed by Ralph Lauren?  

What Happens When We Compare Ourselves to Generative AI?

Source: https://itsoli.ai/

What happens when we compare ourselves to generative AI?  What conclusions do we reach about our own capabilities? Taly Reich and Jacob Teeny have examined these questions in a new paper titled, "Does Artificial Intelligence Cause Artificial Confidence? Generative AI as an Emerging Social Referent."  The scholars conducted several experiments in which they exposed people to precisely the same work, but told some that it was performed by AI and others that it was completed by human beings.  Interestingly, the  researchers found that people exhibit greater self-confidence (with regard to completing a creative task) when they believe that the work they observed was completed by a generative AI model rather than fellow humans. Teeny offered some explanation in this feature from Kellogg Insight:

"From a practical standpoint, self-confidence is such an important driver of innovation, and past research shows so much of our behavior is driven by the simple perception that we are capable of doing that behavior, whether it’s to undertake a piece of creative work or apply for a dream job... Much of our self-perceptions are based on how we compare ourselves to others. If we’re exposed to people we believe are really good at something, we may think, ‘Oh, I’m not as good at that [task] as I thought I was.’ But if we’re exposed to people who do something poorly or who we believe are less skilled, we think, ‘I’m actually pretty good at that.’”

Of course, simply having more self-confidence does not mean people actually will perform well on a subsequent task.   In one of their studies, Reich and Teeny show that those who had compared themselves to an AI model did no better at a creative task than the individuals who compared themselves to other humans.  

Scarcity, Pricing, and Luxury Goods: The Case of the Birkin Bag

Source: Teen Vogue

Why do we exhibit a strong desire to buy something that is not readily available?  Many people would say that we all fall victim to FOMO at times (Fear of Missing Out).  Psychologists have posited that "reactance theory" helps explain our behavior.  In short, this theory argues that we become very uncomfortable, and perhaps even anxious, when our freedom is constricted.  As a result of that discomfort, people have an even stronger desire to purchase a product.  Of course, consumers also care about status.  Thus, they value products more if many others cannot purchase it.  Having a product that others can't get their hands on turns out to be very enticing.  Thus, luxury goods manufacturers tend to use limited time offerings, special exclusive collections, and other related strategies to entice consumers.  They intentionally create scarcity so as to stimulate demand and enhance willingness to pay on the part of potential customers.  

No company has mastered scarcity better than Hermès.  The company markets the famous Birkin bag, named after British actress Jane Birkin, who inspired Hermès Executive Chairman Jean-Louis Dumas to create the leather bag during a conversation aboard a flight in 1984.  A classic Birkin 25 bag sells for more than $12,000 today.  Could the company raise prices even further?  Given the even higher prices on the resale market, it seems the firm could raise prices. However, as Carol Ryan wrote this week in the Wall Street Journal, Hermès chooses to drive profitability through a different strategy. She writes:

The brand limits how many it produces, so demand far outstrips supply. Hermès could easily jack up the price but has found a smarter way to profit from the Birkin’s popularity that is less likely to alienate loyal clients.  To get a Birkin, shoppers must build a relationship with one of the brand’s sales assistants and wait to be offered a purse. This creates a perception that the biggest spenders get access to Birkins and encourages customers to splurge on other goods to build the equivalent of an “Uber rating” at the Hermès store.

If you would like to learn more about the incredibly successful luxury goods firm Hermès, I highly recommend the episode of the Acquired podcast that tells the company's long and storied history and breaks down its competitive strategy. 

Scarcity does not only apply in the luxury goods market though.  Special limited offerings prove to be an essential part of the "treasure hunt" experience at value-based retailers such as Zara, Costco and Trader Joe's as well.  For these firms, the business model calls for drawing customers in to find those special offerings, but then hoping to sell them many other items while they are in the store.  At a company such as Zara, customers visit more often than the usual apparel retailer, because they know that products won't stay in the stores for a long time.  At Trader Joe's, special seasonal offerings will come and go, causing people to act quickly to grab popular items. 

Rethinking the Exit Interview

We all know that employee turnover can be extremely costly for organizations.  Yet, we also recognize that many firms struggle with employee retention.  Managers sometimes cannot determine why people are leaving. They try to use exit interviews to learn about the conditions creating turnover, but they fail to arrive at concrete conclusions.  Often, departing employees hold back in those exit interviews, rather than disclosing completely the reasons for their move to a different company. 

Writing in Harvard Business Review, Ethan Bernstein, Michael B. Horn, and Bob Moesta explain a different approach to learning about what drives people to switch jobs.  They write,

As we noted earlier, exit interviews can be a bit of a joke. People usually assume it’s too late to address why they are leaving—so they say safe things and move on.  We’ve found that it’s more productive to interview employees about their previous roles soon after they’ve started something new. That’s essentially what we did in our research. By closely examining the pushes and pulls that compelled each person’s most recent job move, you can better understand what might motivate your employees to make another change soon—and, conversely, what might make them choose to stick around. You can frame these talks with employees as your way of identifying important features of their experience so that with their input you can create a workplace that they’ll want to “rehire” each day.

This strategy makes a good deal of sense to me.  These conversations can be useful in two key ways.  First, managers can get to know their new employees - what motivates and drives them, what they care deeply about, and what they love (and don't love) about their work.  Second, managers can begin to detect themes across their employee population.  What type of people are attracted to the organization?  Why are people self-selecting this company?  What, if anything, made them hesitant about taking a new job here?  The answers to these questions can shape a company's recruitment and retention strategies.  Finally, I would argue that the answers to some of these questions may emerge during the interview process.  Yet, managers are often focused on selecting the best candidate, rather than thinking about the interview process as an opportunity to learn about what motivates people to switch jobs.  Mining the interviews for this additional information could be very useful. 

Will Using AI at Work Damage Your Reputation?

How does using AI at work shape others' perceptions of you?  Could you enhance or damage your reputation by leveraging AI extensively?  Jessica Reif , Richard Larrick, and Jack Soll have published a fascinating new paper on this topic titled "Evidence of a social evaluation penalty for using AI."   The scholars conducted a series of experiments to examine how people perceive those that use AI extensively at work.   The authors concluded, "This work provides experimental evidence that people incur a social evaluation penalty for using AI tools at work. This generates a dilemma for employees: The productivity gains they can achieve with AI tools carry a social cost." 

Duke Fuqua Insights reported on this study's findings: "The study found that employees judge colleagues who use AI as less competent and lazier, and recruiting managers may act based on this perception by penalizing job candidates who rely on AI to complete tasks." On the other hand, if the manager also uses AI to enhance efficiency and productivity, this social penalty goes away.

Will these attitudes about AI shift over time? The authors think so. They write, "Perceptions of technology tend to be influenced by its age, and thus the social evaluation penalties we documented are likely to shift as AI tools become more commonplace and organizational norms around their use continue to develop."

What do I take away from this research?  What is the practical implication?   For me, I recommend that employees explain their rationale for using AI to enhance productivity and efficiency.  You have to make your case to the skeptics in your organization and provide evidence of the how it improves workplace performance.  Don't just assume others recognize its merits.  However, you also don't want to disparage colleagues and managers who might be resistant, or who might perceive AI users as lazy or incompetent.  Give them concrete evidence of its benefits, rather than making conceptual arguments.  Invite them to collaborate with you on projects that involve the use of AI.  Help them see firsthand how it can help them.  Finally, don't downplay the risks and problems associated with AI use.  Acknowledge the challenges associated with hallucinations and biases.  Explain how you try to address those risks in your work.  

Deep Curiosity to Solve Hard Problems

Recently, AMD CEO Lisa Su spoke at Stanford's Graduate School of Business. She described how leaders should be aiming to provide opportunities for their people to tackle hard problems. She argued that you won't be sure they can achieve those ambitious goals, but your job is to create those opportunities and provide them support. For employees, their goal should be to have an intense curiosity about solving tricky problems and an interest in exploring new challenges. Together, a leader looking to provide challenges and an employee with curiosity can be a perfect match. Here's an excerpt from Lisa Su's interview:

Well, I think the most important thing for all of us is to have a deep curiosity of just solving problems. That’s my view of the world. When I think about… In the early part of my career, some of the most difficult things, like the first product I ever worked on was a product that was a microprocessor, and we were just about to announce the processor and nothing worked. I mean, the chip did not work. We didn’t know why it didn’t work, but the company was about to announce it. And you think, “Oh, that’s terrible.” That’s very stressful. But actually, what it is it allows you to really galvanize teams on really taking, opening up every ounce of creativity you have to figure out, okay, how are we going to figure out why is this not working and how do we bring it, move the projects forward?

And so that’s what I view as the beauty of hard problems. You can work on anything in life, but when you work on a really hard problem, or in a company context, when you work on, let’s call it the most important projects, you can garner an incredible amount of just resources, creativity, focus that will allow you to do something that you wouldn’t imagine possible. That’s what I believe is the most important thing managers do or leaders do. What leaders do is they actually bring teams together to do something that nobody thought was possible. And that’s what I enjoy about the world that we’re in, is that you’re working on problems that are super interesting and quite impactful to the industry, and you’re also working on something that someone hasn’t done before.

Are You Leaning on AI Because You Are Afraid To Speak With Your Manager?

Are You Leaning on AI for Advice and Feedback Because You Are Afraid To Speak With Your Manager?  Perhaps many employees are doing so these days.  Fortune's Brit Morse writes:

Given an increasingly personal reliance on AI, HR professionals should also take note of where employees—and especially the youngest office workers—are getting career advice. Around 40% of employees overall say they rely more on ChatGPT than their manager to answer questions about work, with nearly half (49%) of Gen Zs agreeing. Pichura career coach for Resume.org.) notes that this generation is accustomed to receiving instant feedback, and when they’re not getting that from their manager, they may look to other sources instead.

What do we make of these findings?  I see two forces at play here. First, managers may not be providing the type of constructive, real-time advice and feedback that employees desire.  Second, many employees may be leaning on AI models because they are not comfortable speaking with their manager about their performance and opportunities for improvement.  I'm certainly not against using AI to enhance your productivity and performance on the job.  However, something very important is missing if we are avoiding conversations with our managers out of discomfort or conflict avoidance tendencies.  Managers need to make themselves more accessible and need to help their employees become more comfortable asking for help.  Employees need to tackle their discomfort head-on, and they must be willing to hear the hard truths needed to enhance performance. 

The Pressure To Appear Confident

Do you feel pressure at times to appear confident in your decisions and plans? Are you actually certain, or are you trying to put on a brave face for your team members and/or external constituents? Are you afraid of appearing as though you are not sure how to proceed, or how the future will unfold for your organization? Fast Company's Kate O'Neill addresses the topic of confidence in a great new article titled Why the best leaders embrace ‘strategic disappointment’ (and how you can, too)  

O'Neill argues that the more success you have, the more likely you will disappointment your followers at some point. After all, expectations grow quickly if you deliver good results.  Moreover, she argues that you are probably not pushing the boundaries of innovation if you never disappoint.  O'Neill argues that we have to work through lofty expectations and potential disappointment, rather than trying to avoid ever disappointing others.  Managing expectations (our own and others' expectations) means understanding feelings of confidence very clearly. She writes: 

Part of the challenge is that we fundamentally misunderstand confidence. As Nobel laureate Daniel Kahneman explains, “Subjective confidence in a judgment is not a reasoned evaluation of the probability that this judgment is correct. Confidence is a feeling, which reflects the coherence of the information and the cognitive ease of processing it.”  In other words, our feeling of confidence often has more to do with how neatly our story fits together than with its actual likelihood of being correct. This creates a dangerous dynamic in leadership, where seemingly “confident” decisions may simply reflect coherent but flawed narratives, especially when those narratives align with what stakeholders want to hear... True confidence comes not from eliminating uncertainty, but from understanding precisely what we know and what we don’t, and responding appropriately.

In my view, this last sentence makes a crucial point. The best leaders acknowledge the gaps in their own knowledge and expertise.  As Microsoft CEO Satya Nadella says, they are "learn-it-all" leaders, not "know-it-all" leaders.  You can be confident without fooling yourself into thinking you have made all the correct assumptions and have made clear and accurate predictions of how the future will unfold.  Christa Quarles, CEO of Alludo, put it well when she says that effective and authentic leaders explain, "Here's what I know.  Here's what I don't know.  Now let's assemble the team and the people to go solve those problems in a holistic way."  

Hiring and Collaborating with Higher-Paid Employees

Source: Berkeley Economic Review

What happens when we know that others are paid more than us?  Does it affect our willingness to collaborate with them?  What about hiring decisions? Are we more or less likely to hire someone who may earn more than us?  Cornell Professors Kevin Kniffin and Angus Hildreth examined this question in a series of experimental studies.  They found an interesting, but not surprising, dichotomy when it came to collaboration vs. hiring.

First, the scholars discovered that, "People chose to collaborate with higher- rather than lower-paid peers unless explicitly told that their potential collaborators’ knowledge, skills, abilities, and experience were similar, suggesting that pay was viewed as a signal for competence."  On the other hand, they found that, "People were less likely to hire a candidate with a higher (versus lower) pay history for a subordinate position on their team."  

This study has some very interesting practical implications with regard to the pay transparency movement.   The collaboration finding seems quite positive, though one has to wonder whether it is appropriate for workers to always use pay as a sign of competence.  In some organizations, we know that compensation and position is not at all a sign of strong capabilities!   The hiring dynamic is perhaps more problematic.  We would hope that people would hire the best talent, and that they would not feel threatened by someone who had excellent capabilities warranting high compensation.  Naturally, though, people's emotions are affected by compensation differences.  If it means that we don't hire the best people, then that would be very worrisome. 

How to be a Supercommunicator

Have you met someone who is a highly effective communicator who engages you in enjoyable and helpful conversations with ease?  Why are they so effective at making conversation?  Recently, I read Charles Duhigg's terrific book, Supercommunicators: How to Unlock the Secret Language of Connection.  Charles earned a Pulitzer Prize as a writer for the New York Times.  Many years ago, he was my student in the MBA program at Harvard Business School.  In Duhigg's book, he explores the behaviors and methods of people who are particularly effective at connecting with others.  When he published the book, Duhigg sat for an interview with McKinsey & Company.  He commented on one very important trait of supercommunicators: 

Supercommunicators ask ten to 20 times more questions than the average person. Those questions can include something like, “That’s interesting. What did you think of that?” or “What did you say next?” They pose questions that invite us into the conversation.  Some of their questions are “deep questions.” These questions ask people about their values, beliefs, or experiences. An example of this could be as easy as saying, “You’re a lawyer. What made you decide to go to law school?” They ask questions that dig into learning who people are. They aren’t overly intimate questions but an opportunity to share who we are. People love the opportunities to share those things, which could feel amazing.

Duhigg notes that supercommunicators also are very good at detecting the type of conversation in which others wish to engage.  Is it an emotional, practical, or social conversation?  Many people mistakenly approach all conversations as practical ones, i.e., we are trying to solve a problem together.  Sometimes, though, others do not want help coming up with a plan of action or making a decision.  Instead, they want to share how they are feeling and would like someone to simply listen and empathize.  In short, you have to understand the purpose of the conversation.  In other words, what does the other party want from the dialogue?  

Finally, Duhigg stresses one technique that is very helpful in any conversation.  The term for this approach is "looping for understanding."  Sometimes, people describe it as the "playback" method. When we engage in looping or playback, we are listening actively, restating what we believe we have heard, and then we seek confirmation from the other party.  In short, we ask: Did I understand you correctly?  That question enables others to clarify their thoughts and helps us avoid misunderstandings.   

The Value of Companies with Many Occupational Options for Employees

Is it valuable for an employee to seek out employers that will offer the possibility of a variety of roles that they may fill over a period of years?  New research by Professors Inês Black and Ana Figueiredo suggests that role variety boosts wages, employee retention, and job satisfaction.  Duke Fuqua Insights recently summarized their research:

• workers starting their career at firms with more occupational variety switch occupations internally more often within the first 10 years;
• as a result, workers starting their career at firms that offer more job titles tend to have higher wages in 10 years;
• independently of firm size, the more occupations a firm offers, the more likely it is to retain their employees.

Professor Black goes on to comment on the impact that role variety can have on retention: "For every one more occupation that I offer to my workers, I'm 10% more likely to retain them 10 years from now," she explained.  

Role Playing the Competition at Dick's Sporting Goods

In 2021, Dick's Sporting Goods introduced a new store format: Dick's House of Sport. These stores are  experiential retailing at large scale.  The stores exceed 100,000 square feet, and they feature rock-climbing walls, batting cages with HitTrax technology, golf hitting bays with simulator technology, putting greens, and a service department that will repair bicycles and other athletic equipment. In 2024, Dick's experienced strong comparable store sales growth, and they have announced plans to open 16 more locations this year. CEO Lauren Hobart commented on the new format:

The success of House of Sport and Field House concept stores isn’t just about climbing walls and large-scale experiences, Hobart said – although that helps.  “The experience is delighting athletes,” Hobart said. “We’re seeing athletes drive longer distances. They’re spending more time when they come. The community is just absolutely embracing House of Sport.”  Vendors like them too because they have more potential to bring a brand to life, with opportunities such as the “Collab” approach that looks like small brand stores within the large House of Sport concept, Hobart said.

How did Dick's Sporting Goods create this new concept?  Executive Chairman Ed Stack explained recently in a Forbes article:   “The brief I gave everybody was we need to sit down, and we need to design the concept that will kill Dick's Sporting Goods.”  I love this idea.  It reminds me of Lisa Bodell's "Kill the Company" exercise.  Bodell explains: "Kill the Company [allows you to] pretend that you are your number-one competitor. You have three minutes: How will you put yourself out of business?"  Stack used this type of thinking with Hobart and her team to develop the Dick's House of Sport concept.  It certainly represented a bold bet - doubling down on brick-and-mortar in an age of e-commerce disruption.  Yet, so far, the investment in experiential retailing seems to be paying off.  Are you ready to role play your competitors and ask the question: What could they do that would be devastating to our business?  It might just lead to a creative breakthrough.  

Indecisive? Do You Know The Right Thing to Do, Yet Still Hesitate?

Source: Michigan Daily

Have you ever found yourself "doom scrolling" on Netflix while your friend or spouse implores you to simply, "Pick something already!"  Many of us have experienced this type of indecision.  We are overwhelmed by choice in those cases.  In other situations, we encounter equally good, or equally poor, courses of action, and we can't decide amongst these roughly comparable options. 

In my research, I've found another form of indecision that occurs frequently.    Indecisiveness does not always stem from an inability to determine the best course of action.  Instead, in some cases, individuals know precisely what to do, but they resist moving forward anyway? Why?  They know that the implementation of this course of action will be quite bumpy.  There will be challenging pitfalls to avoid and obstacles to overcome.   They know it will be painful at times.  They aren't quite certain how to tackle these challenges.  Thus, they resist making a decision at all.   They delay the choice, even though they know it is the right thing to do.  Perhaps you can relate...

What can we do in these situations?  First, we can identify precisely what skills, resources, and talent will be needed to address these implementation challenges.  We have to identify the gaps in our own expertise and identify the people to complement us and provide the know-how to execute our planned course of action successfully.  Second, we can reflect on those past situations we have encountered in which implementations have not gone as planned.  We should consider what strategies have worked for us in the past.  How have we overcome obstacles, pivoted effectively, and iterated when initial plans faltered. Reflecting on lessons learned from those circumstances will help us become more decisive in this moment. Third, we can imagine what success will look like.  Many people have heard of the pre-mortem method.  That's when we imagine what failure will look like, and then identify what is likely to cause that poor outcome.  The pre-mortem can be very helpful when we face a risky decision.  However, if we are indecisive, sometimes the pre-parade can help us move forward.  In that method, we imagine what a great success would look like, and we identify what will be the key drivers of that success.  Then we can start working on putting those conditions in place to insure success.  

Can AI Enable Us To Focus More on the Work We Love to Do?

Source:  Doyenhub Software Solution

Most of the attention on AI these days seems to focus on how it can make us more productive, as well as how it may even displace some workers whose tasks can now be automated.   However, a new study examines a slightly different question.  It explores whether AI can change the nature of work.  Might we engage in different activities as a result of the impact of AI, and might we even have more time to do what we truly love to do? 

Manuel Hoffmann and his colleagues have published a new working paper titled "Generative AI and the Nature of Work."  They examined the results of a natural experiment associated with the use of GitHub Copilot, a generative AI tool for software developers.  The findings illustrate an interesting shift in the work that developers were doing.  First, the generative AI tool enabled software developers to spend more time coding and less time on administrative tasks related to project management.  Second, they found that developers engaged in more exploratory work with the introduction of this AI tool.  In other words, developers conducted more experiments and spent less time on established projects.  The scholars summarize the key results as follows:

Copliot eligible developers engage with an additional 15 new repositories on average relative to ineligible peers. Beyond simply interacting with a new set of repositories, we also find evidence that generative AI enables developers to gain exposure to a wider range of technologies. In Panel B, we can see that eligible developers increase their cumulative exposure to new programming languages by 21.79% relative to the baseline. We also estimate a version of this cumulative programming language exposure measure weighted by the median salary reported by software developers who use that language.21 Access to Copilot induces developers to experiment with programming languages that command a 1.41% higher salary relative to a baseline of $119,371 (an increase of $1,683).

I found this paper to be quite thought provoking.  It makes perfect sense to me.  If AI is making us more productive, then what are doing with that new time have on our hands? Are we just doing more work in a given period of time, or are we sometimes using that "new time on our hands" to engage in innovation work?  Are we learning new skills, trying out new ideas, creating new products and services, and inventing better work processes?   These outcomes may not only be beneficial for the organization, but rewarding and fulfilling for us personally.  

Does Competing Outside of Work Harm Collaboration at Work?

Source: ESPN

What can we learn about collaboration at work from professional soccer players? A new study offers some fascinating insights.

First, why did scholars Thorsten Grohsjean, Henning Piezunka, and Maren Mickeler become interested in studying soccer players? They noted that people sometimes find themselves competing with their colleagues in settings outside of the workplace. For example, senior executives may find themselves sitting on the boards of directors of competing firms. They may be raising funds for non-profit organizations that are competing for the same grants from local foundations. Or, they may be donating to competing political candidates. Does this competition outside the workplace impact the interpersonal dynamic at work?   To answer this question, they adopted a novel research approach with the setting being professional soccer.   

Grohsjean, Piezunka, and Mickeler focused on the fact that many professional soccer teammates compete against each other during international tournaments such as the World Cup. Each teammate will play for his or her home country, and then they return to being teammates on their professional club the next season. The scholars decided to look at how World Cup competition affected collaboration among teammates the following season.  Specifically, they examined whether these teammates, who had competed against one another in the World Cup, would pass the ball more or less frequently when returning to their professional club the next season.  According to these scholars, "The average number of passes between treated players in the post-Cup season drops by about 11%." 

This startling finding suggests that we should be keenly aware of the potentially deleterious effects of competition among colleagues outside the workplace.  Spillover effects are real.  

Can Data Analytics Make Your Product Boring?

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

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

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

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

Amazon CEO Andy Jassy on Shaping Your Career Journey

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

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

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

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

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

Southwest Pursues a Me-Too Strategy

Source: Wikipedia

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

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

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

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

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

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

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

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

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

Interviewing Candidates Who Have Prepared Using Generative AI Technologies

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

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

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

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

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

Managing Cognitive Load During Long Meetings

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

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

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