Thursday, December 31, 2009

The Anti-Mainstream Brand

This fun article about the resurgence of Pabst Blue Ribbon beer, over on Fortune's website, provides a vivid example of how a small brand can be successful by positioning itself as anti-mainstream, directly in opposition to the values of the market leaders.

Pabst sales have risen by approximately 30% this year. Fortune writer Beth Kowitt writes that, "But the lagging economy isn't the only thing energizing PBR. The brand has also cultivated a reputation as a hipster, offbeat beer -- or what the president of the National Beer Wholesalers Association, Craig Purser, likes to call "retro chic" -- positioning itself as an alternative to big, mainstream brands."

Interestingly, the new brand positioning did not emerge from the Pabst marketing team's minds. Instead, they noticed a surge in sales in Portland, Oregon. Upon visiting the city, they learned that Pabst had found a loyal following among the members of the hipster, music crowd. A new brand positioning was born! Customers drink Pabst specifically because it is not Budweiser, and because it does not market itself the way that those mainstream brands do. It seems to me that many other smaller brands in other markets have an opportunity to position themselves as anti-mainstream, or anti-market leader in their image and values. One way to start understanding how to cultivate that image might be to look closely at a particular area where a small brand seems to be having local success, as Pabst marketers did.

Wednesday, December 30, 2009

Splitting Chairman-CEO Role

Senator Charles Schumer has proposed mandating that public companies split the role of Chairman and CEO. Dennis Carey, a partner at executive search firm Korn Ferry, argues in the Wall Street Journal that such legislation would not be productive. Carey raises some interesting points, and I do agree that government should not be legislating any such change. However, I do not think that citing successful situations such as those at IBM or Proctor and Gamble necessarily provides a compelling argument for not splitting the role. One could easily cite plenty of counterexamples of firms where perhaps splitting the role would be beneficial. We have seen too many examples of all-powerful Chairman/CEOs who have had boards effectively in their back pocket.

What Carey hints at but does not address specifically is that, fundamentally, corporate governance will not improve simply by making structural or legal changes in the way Boards operate. Companies need to focus on the dynamics in the boardroom and the process of monitoring and control. In the end, the quality of the dialogue in the boardroom will drive performance more so than any structural change.

Tuesday, December 29, 2009

Meaningful Work

In the 1970s, scholars Richard Hackman and Greg Oldham developed their job design model, in which they argued, among other things, that people will exhibit high degrees of internal motivation if they believe they are performing meaningful work. In this article on the Business Week website, Nick Tasler argues that making the meaning of work more clear to employees can be a very effective, low cost mechanism for enhancing organizational performance. For instance, Tasler describes how Volvo encourages customers and employees to share stories of how people avoided serious injury in a car crash thanks to the automaker's safety features. Similarly, Medtronic invites customers to corporate meetings to share their stories of how the firm's medical devices saved their lives.

Tasler's article cites the research of Wharton Professor Adam Grant in this area. Here is an excerpt from the Business Week column:

"According to research by Adam Grant, an associate professor of management at the Wharton School, making this connection doesn't just improve morale. It also has a huge impact on the bottom line. Grant has discovered that when people get to meet a living, breathing person who benefits from their work, their job performance skyrockets. In one study, Grant found that university fund-raisers who listened to a scholarship recipient tell how the assistance had benefited him increased by 200% the number of weekly calls they made to potential donors. The average amount of funds they brought in jumped 500%, from $400 per week to more than $2,000 per week.

That's an impressive increase in performance by any standard. It's especially so when you consider what did not happen to create the surge in productivity. The callers were not offered a raise. They did not go through extra training to sharpen their interpersonal skills or persuasion techniques. Their managers did not receive extra training on how to be more charismatic or transformational. It required no internal branding effort to communicate a newer, more inspiring vision. The only expense incurred by the organization—time or money—for this dramatic increase in productivity was the 10 minutes of time that fund-raisers spent listening to the beneficiary of their work."


As I read this article, I was reminded of a visit that I paid to Edwards Lifesciences several years ago in southern California. Edwards Lifesciences produces heart valves. The company executives explained that they occasionally brought customers in to meet the person who had worked on their actual valve replacement. These meetings often proved remarkably emotional, incredibly inspiring, and of course, motivational to all. Executives credited these types of efforts to demonstrate the meaning of the work with helping to create an incredibly dedicated workforce which also exhibited remarkably low turnover.

Your Next Move

My friend and former HBS colleague Michael Watkins has a new book out titled Your Next Move. In this follow-up to his best-seller, The First 90 Days, Michael has identified eight typical career moves that managers make in their careers. He explores the challenges one faces with each type of move, and then offers sound, practical advice for how to navigate the pitfalls a manager is likely to encounter during that transition. Michael grounds his work in extensive field research, as well as his consulting work with thousands of managers around the globe. I think every manager ready to navigate a career transition will find this book insightful and useful.

Monday, December 28, 2009

Technology that Harms the Consumer Experience

In the past year, Bank of America has introduced new ATM technology. Instead of depositing checks in an envelope, you insert checks directly into the ATM. The machine scans the check and reads the amount, and then it completes the deposit. Sounds great, right? Well, the technology certainly has promise, but I find that it actually worsens the consumer experience if you have multiple checks to deposit. The process becomes considerably slower than the old envelope method if you are trying to deposit three or four checks. Moreover, it becomes very tedious if the scanning technology fails to read the check amount properly. In that case, if you have forgotten the precise amount of the check you wish to deposit, you face a very frustrating further slowdown.

I raise this example not to bash Bank of America. The technology clearly has great promise. However, Bank of America's ATM provides a vivid example of a company rolling out a new technology that has great benefits for the bank, but actually has some serious negatives for the customer. The bank is not alone. Many companies do this, focusing on how a technology can improve efficiency or accuracy for the firm, without understanding how it may hurt a critical feature of the user experience (in this case, speed).

Saturday, December 26, 2009

Best Business Books of 2009

Thank you to Leadership Now's blog for naming my book - Know What You Don't Know - one of this year's best leadership books!

Thursday, December 24, 2009

Research on Social Networking

In this article on the HBS Working Knowledge site, Professor Mikolaj Piskorski explains his research on social networking, including some interesting findings regarding the demographics of MySpace vs. Facebook users, gender differences in the use of social networking, and how Twitter usage patterns differ from other platforms.

Wednesday, December 23, 2009

Making Tech Complex but not Frustrating

My former HBS colleague Andy McAfee has a great column at Forbes.com about how companies such as Apple, Amazon, and Google have been able to enhance their technologies and make them more complex without frustrating consumers. McAfee focuses on four key principles:

1. Evolve, don't upgrade: Focus on making a series of smaller incremental improvements rather than major upgrades that can be disconcerting and confusing to users.

2. Keep the core interface constant: Think about the consistency of the Amazon's website or Apple's iPod interface.

3. Don't even talk about it: Let the consumers discover the enhancements on their own.

4. Let the users opt in: Provide new features that are optional for the consumer, and that the customer can begin to use as they become comfortable with these technological changes. Think about the App Store from Apple.

By the way, if you are not familiar with Andy's work, I highly suggest that you check out his blog.

Tuesday, December 22, 2009

Helping a friend who's been laid-off

Keith Murray offers advice to anyone who has a friend who's been laid-off over on his blog. It's a terrific post, particularly as we approach the Christmas holiday.

100 Day Plans

This article at Fortune.com describes the culture and management practices at a small boutique innovation consulting firm in NYC called Fahrenheit 212. While much of what is described may only be applicable in a start-up environment, the "100 Day Plans" that the firm employs seem quite interesting and more broadly applicable. Writer Nadira Hira explains:

"Every 100 days, everyone gets together, locks the doors, ditches the cell phones, and sits down to a company-wide strategy session. Together, they set the company's goals for the next 100 days. And they go around the table to hear how each staffer -- execs included -- did on his personal deliverables over the last 100 days. They ask each other questions, weigh in with their own perspectives on their colleagues' work, and do lots of ribbing, reflecting, and cheering. And if the fear of being embarrassed in front of rowdy colleagues weren't enough, staffers work directly with their managers to lay out their individual plans for the next 100 days and actually grade themselves on their last 100-day plan -- and at the end of the year, the scores are added up to help determine incentive bonuses and future compensation."

Why do I love this practice? First, it moves away from strategic planning as an annual exercise that's more about creating piles of documents than it is about candid dialogue. In a fast-moving world, it seems much more appropriate to revisit the strategy every three months or so, and to do so via a vigorous open dialogue as opposed to "death by Powerpoint." Second, this 100 days exercise creates a powerful sense of accountability, with people being held responsible by their peers, not just their bosses. Third, the process promotes transparency, which ultimately has many positive effects. Finally, the meetings provide opportunities for prompt feedback, giving people time to engage in corrective action as they work on projects... rather than waiting until a year has passed and the project is complete before hearing any formal feedback.

Monday, December 21, 2009

Are you a micromanager?

The Wall Street Journal has an article today about CEOs getting into the weeds much more during this downturn. While the article explains why leaders feel the need to be more hands-on at this tumultous time, it also cites the risk of micromanagement. This leads to the question: how do you know if you are micromanaging with possible negative consequences? Here are three signs:

1. You begin to find many decisions being kicked up to you on issues you feel do not belong on your desk... A sign that people may be afraid to make decisions on their own.

2. Your schedule becomes increasingly crowded with meetings at which you are being asked to essentially validate decisions made at lower levels, or to review numerous minor status update meetings on projects.

3. People seem to wait for you to express your opinion before offering ideas at meetings. That sign is most dangerous of all. It shows that folks are afraid to speak up and are waiting for a cue from you rather than offering original and creative thoughts without fear of repurcussions.

Friday, December 18, 2009

Tired of Boring Training Sessions

Nearly all employees have taken part in mandatory training that they found boring, repetitive, and difficult to apply to their daily work. In this column in Fast Company, Chip and Dan Heath explain how one technology consulting firm created a highly engaging ethics training video. This firm created a fictional TV series, patterned after the popular NBC hit The Office. The series profiled a variety of ethical transgressions in hilarious fashion. Employees clamored for more, as they enjoyed it so much! Check out the video below:

Aggrieva Season 1, Episode 6 from Resonate Pictures on Vimeo.

Keynes vs. Hayek

Wednesday, December 16, 2009

Listening to vs. Understanding Your Customers

Michael Norton, assistant professor of marketing at Harvard Business School, has published a case study about elBulli, a unique and incredibly popular restaurant in Spain. In this article discussing the case, Norton makes an interesting distinction between listening to customers vs. understanding them. Norton explains the chef/owner's thinking: "AdriĆ 's idea is that if you listen to customers, what they tell you they want will be based on something they already know," Norton observes. "If I like a good steak, you can serve that to me, and I'll enjoy it. But it will never be a once-in-a-lifetime experience. To create those experiences, you almost can't listen to the customer."

Congress and the Auto Dealers

Here we go again! As many predicted, Congress cannot help but meddle in the auto industry, particularly given the government ownership stakes. Alex Taylor of Fortune writes:

"Last week, House and Senate leaders agreed to a proposal to give the right of arbitration to terminated GM and Chrysler dealers, which are said to number more than 2,000. In other words, Congress, after complaining that the two companies don't know how to make a profit, is imposing a new requirement that will make it more difficult for them to make a profit."ress

Dealer rationalization must occur for the American automakers to turn the corner toward a sustainable profit-generating business model. No one with any sense of how businesses and markets work would argue otherwise.

Tuesday, December 15, 2009

The Design of Business

I just finished reading Roger Martin's new book, The Design of Business: Why Design Thinking is the Next Competitive Advantage. Martin, the Dean of Toronto's Rotman School of Business, has become a thought leader in the area of how design thinking can be applied to business, and I enjoyed his prior work on the "opposable mind." I think this book does a nice job of highlighting the power of what Martin calls "abductive thinking" - while also exposing the dangers of over-emphasizing reliability in organizations at the expense of exploratory, creative work. The book, however, has one substantial weakness. Martin fails to actually take the time to explain to the reader how designers do their work. As a result, the discussion of design thinking remains rather abstract and conceptual. It would have been helpful to walk the reader through the design process, and THEN show how that process has application to the broader field of business.

Why We Buy

I am thoroughly enjoying the book, Why We Buy: The Science of Shopping by Paco Underhill. The author explains how his firm has mastered the power of observation to understand how shoppers behave and how retailers can use that understanding to drive sales. Every retailer, large and small, should read this book. I especially love ideas such as the "butt-brush" effect - the idea that customers don't like being jostled from behind as they shop. I also like the "decompression zone" - the idea that customers make a transition as the enter a store, and they often walk right past signs and other materials in this decompression zone. The book has many more interesting conclusions based on intense observation over many years. It's a great read for consumers too; you will never think about shopping the same way again.

Friday, December 11, 2009

Colbert on the Federal Reserve

With thanks to Greg Mankiw, on whose blog I discovered this great clip from the incomparable Colbert:

The Colbert ReportMon - Thurs 11:30pm / 10:30c
Fed's Dead
www.colbertnation.com
Colbert Report Full EpisodesPolitical HumorU.S. Speedskating

Restructuring at Talbots

Talbots announced a complex financial restructuring this week, along with news that the company had returned to profitability. The earnings report provided an unexpected surprise to Wall Street analysts.

What has Talbots accomplished with its recent restructuring? First, the divestiture and shutdown of non-core assets and unsuccessful diversification plays has left Talbots more streamlined and focused on its core women's apparel business. Second, the financial transaction announced this week enabled Japanese retailer Aeon to divest its stake in Talbots, and it reduced Talbots' leverage substantially. As a result, the company finds itself with a stronger balance sheet. Moving forward, it has secured a credit facility from GE Capital to help it finance future growth plans. Third, the earnings report indicates substantial progress toward streamlining the company's cost structure. All these moves position Talbots more securely as they prepare for what is hopefully a stronger economy in the year ahead.

What still troubles us about this once-great company? Well, Talbots reported a same-store sales decline of 15.9%. That's a huge decline. If the company cannot reverse that steep decline, then all these financial maneuvers will be for naught. Ultimately, Talbots has to find a way to walk a tight rope... specifically, it must continue to freshen its image and product line while not alienating its traditional demographic. The company has always faced an interesting question: to what extent should it try to appeal to younger women? In my view, a laser focus on women 35 and older probably has merit. Trying to be all things to all people surely will lead to disaster. Having said that, the company has to find a way to adjust to the fact that the 35 and older demographic looks like quite different than it did a decade ago. That target market's wants and needs have changed, and the company must find a way to adapt to those changes without alienating long-time, loyal customers.

Behaving at the Office Holiday Party

Susan Adams at Forbes writes a column on how not to behave at the office party. The photos are hilarious.

Thursday, December 10, 2009

Virtual Teams

Anne Fisher of Fortune has a very good article on making virtual teams more effective at IBM. In addition to the points that Fisher makes, managers should consider what I call the "three Rs" of successful virtual teams.

First, what are the ground RULES by which the teams will operate? How will they communicate with one another? What are the shared norms of behavior? What will be expected of folks in terms of availability, response times, etc.?

Second, what are the ROLES of each team member? Making sure each person has a clearly defined role can be especially critical for a virtual team.

Finally, what are the RESPONSIBILITIES of each member? How is the task divided among the members? What are the interim deliverables? One challenge with any team is the diffusion of responsibility: when everyone is responsible, no one is responsible. Making sure accountability is clear proves especially critical with virtual teams.

Wednesday, December 09, 2009

Should Film Studios Acquire Videogame Companies?

Breakingviews.com has a short piece over at Fortune.com about whether film studios should acquire video game makers. Rolfe Winkler and Rob Cox write that:

The argument for entertainment companies buying video-game makers is compelling. Publishing video games is like making movies: Invest millions developing titles and pray for blockbusters... These larger groups could lay claim to content and corporate synergies that offset the volatility in performance of the film business.

I do think a strong argument exists for film companies acquiring video game makers. Disney owns a film studio and a theme park, thereby leveraging a common resource - i.e. its characters. Similarly, it could leverage characters developed in its film studio into the video game business as well. Some arguments can be made that integration makes sense, as opposed to always relying on licensing arrangements.

However, offsetting volatility is NOT a valid argument for acquiring video game firms. That argument smacks of the classic arguments for conglomerates, i.e. diversification of risk. Shareholders can diversify on their own; they don't need firms to do this for them.

Tuesday, December 08, 2009

Compensation Committees

James Citrin of Spencer Stuart, the executive search firm, offers an interesting suggestion for how we can restructure the work of the compensation committees on a firm's Board of Directors. Citrin advocates broadening the mandate of the committee to include not only pay issues, but also leadership development and succession.

Public Speaking Myths

Every executive should take into consideration these three myths about public speaking, outlined by Nick Morgan over at Forbes.com

Monday, December 07, 2009

Southwest Airlines - Linda Rutherford

Linda Rutherford, an executive at Southwest Airlines, spoke at Bryant University this morning. She delivered a terrific presentation, with particular focus on the airline's culture. Rutherford explained that Southwest puts people first, customers second, and shareholders third - a unique way of thinking about how cultivating the right work environment can lead to great benefits for customers and investors.

She also explained how the Golden Rule sits at the heart of the company culture; everyone is reminded that the Golden Rule should permeate all decision-making and interactions with internal and external customers.

Finally, Rutherford offered some great insights into how Southwest hires. She noted that they hire for attitude, though they do not use personality tests. They also use a 3x3x3 rule: at least 3 interviews, with 3 different people, at 3 different times of day. I thought the last part was particularly intriguing - Rutherford explained that people are different at various points in the day, and Southwest wanted to see how people interacted in early morning, mid-day, and late in the day. All in all, I learned a great deal from this presentation about a company that truly stands out in an industry which has incredibly low profitability overall.

Luxury Ate My Morals

From the Ideas Section of the Boston Sunday Globe:

Luxury ate my morals

IF POWER corrupts, then what does luxury do? In a new study, business school researchers fi nd that it doesn't take much for luxury to do its thing. Students reviewed pictures of either luxury or nonluxury shoes and watches. Later, they were asked to evaluate several business scenarios from the perspective of a CEO. Students who had been exposed to the luxury items were significantly more willing to produce a polluting car, sell buggy software, and sell a violence-inducing video game. In addition, these students were also less likely to identify prosocial words in a letter scramble. In other words, priming people with luxury makes them more selfish. The authors wonder if managers make different decisions "at a luxury resort as opposed to a modest conference room."

Chua, R. & Zou, X., "The Devil Wears Prada? Effects of Exposure to Luxury Goods on Cognition and Decision Making," Harvard University (November 2009).

Friday, December 04, 2009

Final Round: Classics for Leaders

Two final books to profile: Made to Stick by the Heath brothers and Influence: The Psychology of Persuasion by Robert Cialdini. Every leader must be able to influence and persuade others. Richard Neustadt once wrote that even US Presidents cannot get things done merely by giving orders. That goes for military generals too. Historian Stephen Ambrose wrote that Eisenhower knew he could not succeed in leading the Alkied forces by being a table thumper. He needed to persuade many people on both sides of the Atlantic, and he needed buy-in. These two books really help us learn how to exercise influence and how to present our ideas in ways that have a lasting impact.

Thursday, December 03, 2009

Round 4 Classic Books for Leaders

Today we feature two classics on negotiation and conflict resolution: Getting to Yes by Roger Fisher and William Ury, and Ury's complementary book - Getting Past No. Every leader must negotiate with external parties, but also with colleagues and subordinates. The ability to resolve disputes is essential for a leader. These books provide sound, practical advice rooted in extensive scholarship over many years. One example of the terrific advice: Focus on interests, not positions when a dispute emerges. In so doing, you can often discover mutual potential gains rather than remaining stuck in a zero sum game mentality.

Wednesday, December 02, 2009

Fresh Blood at GM?

Fritz Henderson resigned at General Motors yesterday. Will we finally see fresh blood at GM? Several months ago, I ran a post in which I calculated the average tenure at GM for the top management team, based on data found in Fortune magazine. The average tenure at the firm was 28.5 years! Since that time, two members of the top team have resigned: Fritz Henderson and Mark LaNeve, VP of US Sales. Henderson was replaced by the Chairman of the Board, while LaNeve was replaced by Susan Docherty. You would think that this should dramatically reduce the average tenure. However, it has not. LaNeve had only been at GM for 8 years, while his replacement has been there for 24 years. Thus, with these two changes, and even though Whitacre has zero years of tenure at GM, the average tenure of the top team members remains 27.1 years. Fresh blood? Not much. 77 year old Bob Lutz has the lowest tenure at GM of anyone other than Whitacre!

Round Three: Classic Leadership Books

Today, I would like to highlight two classics written decades ago. In 1962, the preeminent business historian Alfred Chandler, Jr. published Strategy and Structure: Chapters in the History of American Industrial Enterprise. He examined four companies in great depth: DuPont, General Motors, Standard Oil of NJ, and Sears. Chandler traced the evolution of the administrative structure of large American companies, and he argued that "different organizational forms result from different types of growth." Simply put, structure follows strategy. Of course, over time, many strategy scholars and consultants turned this descriptive observation into a normative statement: strategy should drive structure. Chandler's book proves to be quite profound because it shows us the challenges and weaknesses associated with various organizational forms, and it demonstrates that structure must be dynamic, adjusting to the market realities and the changing strategic objectives of the firm. At the same time, you can see that there is no "perfect" structure for a company; all organizational forms have their weaknesses.

Joseph Bower published his book, Managing the Resource Allocation Process, in 1970. In that book, Bower examined how companies make capital investment decisions. He provided great insight into how firms actually allocate resources; he demonstrated how the financial analysis is just a small part of the picture. He also showed how many new strategies emerge from below in organizations. Most importantly, he demonstrated how structure drives strategy at times in corporations - providing a great complement to the arguments put forth by Chandler. Bower defined structural context as more than just reporting relationships. It included the monitoring and control systems, as well as rewards and punishments, that a firm puts in place. He argued that the structural context shaped the types of investment proposals that emerged in organizations. In that way, structure shaped the evolution of strategy. Senior executives, thus, had to take great care in how they shaped the structural context, not only in terms of how it fit the current strategy, but in terms of how it might affect the emergence of new ideas, adaptations, and innovations over time.

Tuesday, December 01, 2009

Round 2: Classic Leadership Books

In today's post, I'm focusing on two more complementary classics that every leader should go back and read. Today's books: Victims of Groupthink and The Wisdom of Crowds.

In The Wisdom of Crowds, by James Surowiecki examines how "none of us is as smart as all of us." He shows us how and why the pooling of our collective intellect can lead to much better conclusions and decisions. For instance, he starts the book with the example of the game show, Who Wants to be a Millionaire? He tells us that, when contestants ask the audience to vote, the answer with the most votes is the correct one a whopping 91% of the time. Surowiecki explains how various forms of mass collaboration, including prediction markets and open innovation efforts, capitalize on the wisdom of crowds. Of course, he also points out that the collective wisdom only materializes if "independence" exists among the parties contributing in the process. In other words, once we put people in a group where social influence processes can unfold, then we are not always able to achieve such collective wisdom. Put people in a conference room and allow group dynamics to unfold, and suddenly, collective wisdom turns to faulty logic. That point leads us nicely back to another management classic by Irving Janis.

Janis wrote the book, Victims of Groupthink, back in 1972. The term groupthink soon became part of the management lexicon around the world. Janis examined a series of very important presidential decisions, and he showed how a very smart, well-intentioned, and capable group of people can sometimes make poor decisions because of pressures for conformity that arise within teams. In short, he showed how and why we sometimes "go along to get along" in groups. His theory offered an explanation of how group cohesiveness can sometimes become unproductive, leading to a premature convergence on a single alternative, self-censorship on the part of many members, and direct pressure on those trying to put forth dissenting views. His classic fiasco was the Bay of Pigs, and he then offered the Cuban Missile Crisis as a contrasting positive example of how a group can combat groupthink effectively. Janis' theory and examples show us how and why many groups do not achieve their potential, i.e. why we often do not marshal and integrate the intellect of team members in a way that produces true collective wisdom.