Marina Gorbis's Blog, page 1323
January 22, 2015
What Netflix and Starbucks Know About Cash Flow

Netflix just announced its best quarter ever. Its subscriber count went up 13 million worldwide, and investors are enthused. Its U.S. business ended 2014 with 39.1 million subscribers, not far off our 2012 prediction that there were at least 40 million U.S. households who seemed likely to sign up for its streaming video service.
The success Netflix is enjoying was far from certain if you recall the summer of 2011. That’s when the company suffered through the Quikster controversy and a protest over its price increase. I was in the minority when I wrote that the price increase was a good thing. I wrote that not as a growth strategist, but as a loyal, happy Netflix consumer. I was very pleased with my decade-long relationship with Netflix. I trusted the brand. I knew my demand for streaming would go up over time. And I felt certain that Netflix would take my extra $1 per month and invest it wisely for my benefit.
And it did. It took my dollar, combined it with many dollars from like-minded customers, and invested it in things like original content, including “House of Cards,” for which Kevin Spacey won the Golden Globe.
Netflix’s ability to make a big bet like this stemmed from its certainty of latent demand—in other words, that people signing up for a monthly service showed a real commitment not only to become customers but to stay customers. For that to happen, consumers must know their demand for a product or service is predictable and likely to go up. The consumer must also have sufficient trust in the brand’s willingness and ability to understand, predict, and invest in meeting that demand.
Both of these were true for Netflix. Americans’ demand for media is very high. As Steve Hasker, Nielsen Global President, says, American consumers now have a second 40 hour per week job: consuming media, much of which now streams over phones and computers. And consumers could be confident that Netflix, with its recommendations engine, could reliably meet that demand.
When customers can foresee their demand for a product or service rising and trust a company enough agree to a monthly payment (thus providing regular cash flow), they are essentially enabling the company to build what customers want. Think of it as Kickstarter for established companies and their consumers.
Converting consumer certainty into consumer cash flow is a key part of making money from digital business models, many of which use subscription models. From a consumer standpoint, digital payments can be more convenient and are potentially safer. But mostly it taps into the wisdom from Mark Cuban of creating as much transactional value from cash as possible. When consumers are certain about their latent demand, they are increasingly willing to provide positive cash flow in exchange for better value or more benefits. “Saving 30 to 50% buying in bulk — replenishable items from toothpaste to soup, or whatever I use a lot of—is the best guaranteed return on investment you can get anywhere,” as Cuban says.
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Improving cash flow is extraordinarily healthy for any business. If you can better predict consumer demand with more certainty, whether via subscription business models like Netflix or Amazon Prime, you can improve forecasting. This allows you to better manage operating and capital expenses. It can also improve working capital. Consider the Starbucks loyalty card, which consumers buy pre-loaded with cash. In early 2014, Starbucks said consumers loaded $1.4 billion to those payment platforms. According to Bloomberg Businessweek, in 2013 Starbucks made $146MM on interest investing the float, or 8% of total profit.
Digital payment innovations that tap into consumers certain about their latent demand are at the heart of successful digital business models. And brands that have earned high degrees of trust with great loyalty and passion—whether in a sexy category or not—are in the best position to capitalize on it.


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Evaluate Your Leadership Development Program
Despite studies showing that succession is an essential part of strategic planning, many companies ignore leadership development to focus on more immediate challenges. But your organization’s future success depends on identifying and developing the next generation of its leaders.
According to a 2014 survey from Deloitte, 86% of business leaders know that their organizations’ future depends on the effectiveness of their leadership pipelines — but a survey of 2,200 global HR leaders found that only 13% are confident in their succession plans, with 54% reporting damage to their businesses due to talent shortages. To improve your leadership development strategy, look at the criteria you’re using to identify potential leaders, what you’re doing to assist with their development, and how you’re measuring their success.
Establish a set of clear and defined leadership competencies, so HR and other stakeholders know whom to fast track for leadership. Too often, companies demand a laundry list of vague qualities, such as creativity and innovation, which fail to align with organizational needs. Or they rely on subjective metrics, such as likability, loyalty, whether someone is “due for promotion,” etc. This puts you at risk of missing out on true top talent and promoting the wrong people. And it confuses young, promising managers about what skills and behaviors they need to develop to advance their careers.
A McKinsey & Company report also said, “Too many training initiatives we come across rest on the assumption that one size fits all and that the same group of skills or style of leadership is appropriate regardless of strategy, organizational culture or CEO mandate.”
Senior leaders must determine the specific leadership skills and behaviors needed to successfully execute the company’s strategy. Whether your organization is planning a merger, entering new global markets, ramping up sales operations, or creating a flatter corporate structure, it’s important to first think about what skills are needed to successfully execute the initiative. For example, when a U.S. company promoted someone to head its product and content development unit in India, it assessed what skills would enable him to succeed: cultural sensitivity, an ability to build multicultural teams, a flexible communication style, and a high tolerance for uncertainty. With executive coaching and targeted leadership development, the executive was able to transition with the necessary competencies.
Aside from the skills needed to execute on specific strategy initiatives, research has noted that high-potential leadership talent generally demonstrates a drive to excel, a “catalytic learning capability,” and an enterprising spirit, coupled with the ability to sense real risk. Focus your leadership development program on strengthening employees’ ability to deliver strong and credible results, to master new types of expertise, and to uphold behavioral standards that reflect the company culture and values. Credibility is especially important, as building trust and confidence among colleagues leads to an ability to influence a wide array of stakeholders.
Consider how leadership talent is fast-tracked within your organization. Studies have shown that leadership development is most effective when high-potential employees are formally identified as such. Organizations must be clear about whom they’re eyeing for leadership and how much they’re investing in them. This investment can take the form of enhanced development opportunities, such as special assignments or training, rewards and incentives, greater authority, additional resources, and increased feedback.
Pair potential leaders with mentors and executive coaches to aid in their development. Give challenging job-specific assignments that tie in to the overall business strategy, and then provide more frequent feedback so adjustments can be made in real time. The key for these interventions is to keep the momentum going. These aren’t one-off initiatives or stand-alone workshops without follow-up. You want to sustain and expand your development program to address business challenges in real time.
Create a process for measuring overall performance and growth. Once the necessary leadership competencies have been determined, targeted assessments at various stages of a development program can help keep future leaders on track. There are numerous assessments that measure everything from problem-solving and decision-making styles to emotional intelligence to identifying one’s approach to innovation. Using 360-degree assessments throughout the program can show you whether employees are learning the desired leadership competencies or whether adjustments need to be made.
Some companies have proven themselves to be models of effective leadership development. Look at P&G, IBM and GE — the top three companies for leaders, according to a ranking by Chief Executive. P&G and IBM both make developing leaders from within a priority and invest heavily in training, and IBM has a standardized leadership track. GE has shifted its leadership development focus under new CEO Jeff Immelt, putting greater emphasis on drawing innovation and new ideas out of its high potentials.
Organizations that fail to develop strong future leaders will inevitably see that high-potential talent — already in short supply — head elsewhere. By then, expensive executive searches may need to be repeated, there may be a loss of strategic momentum and investor confidence, and the company may flounder with a CEO who is out of step. It’s time to protect your company from inadequate leaders, who, at best, hurt a company’s bottom line, and at worst, threaten its legacy.


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Why a Messy Workspace Undermines Your Persistence
The disorganized accumulation of papers and coffee cups scattered across your desk may help you project the impression that you’re working at full throttle, but in fact it’s probably dragging you down. We’ve found that people sitting at messy desks are less efficient, less persistent, and more frustrated and weary than those at neat desks.
But wait, you may say. No one who has worked in a busy office for more than a week can possibly keep a neat desk — the work comes at you too fast. Or you may say that you like your mess, that it’s as comforting as a little nest. To which we say yes, it can be challenging to keep a desk neat. And yes, a mess can be comforting, even freeing, in a sense: You don’t have to worry about things becoming disordered, because they’re already disordered.
But look at the data:
In one of our experiments, more than 100 undergraduates were exposed either to an uncluttered space or to a work area where papers, folders, and cups were scattered over shelves, a desk, and the floor, like so:
Measuring the impact of mess. Source: Boyoun (Grace) Chae and Rui (Juliet) Zhu
Measuring the impact of mess. Source: Boyoun (Grace) Chae and Rui (Juliet) Zhu
Then, in a separate room, they were asked to undertake what was described as a “challenging” — actually, it was unsolvable — task that consisted of tracing a geometric figure without retracing any lines or lifting the pencil from the paper. Those who had been exposed to the neat environment stuck with the task for an average of 1,117 seconds before giving up, more than 1.5 times as long as those who had been exposed to the messy space (669 seconds). Other experiments produced similar results.
Persistence in a frustrating task is a classic measure of what’s known as self-regulation, which is essentially your ability to direct yourself to do something you know you should do. Self-regulation can be undermined by depletion of mental resources, and that’s exactly what we think was going on. The mess posed a threat, in a sense: It threatened participants’ sense of personal control. Coping with that threat from the physical environment caused a depletion of their mental resources, which in turn led to self-regulatory failure.
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The evidence for this chain reaction comes from another aspect of the experiment: If participants wrote about their personal values, an exercise known to restore mental resources, the disorganized environment had no effect on their persistence on the fiendish task.
So even though it can be comforting to relax in your mess, a disorganized environment can be a real obstacle when you try to do something.
And although we don’t have data to back this up, we conjecture that a mess of your own creation may affect you even more strongly than a mess that’s been imposed by someone else. A self-created mess can become overwhelming because it serves as evidence that you’re unable to control your environment.
We’re aware that other researchers have found there’s a benefit to a disordered environment: It seems to help people break from convention and be more creative. A team led by Kathleen D. Vohs of the University of Minnesota found that people in a room where papers were scattered on a table and the floor came up with five times more highly creative ideas for new uses of ping-pong balls than those in a room where papers and markers were neatly arranged.
The two sets of findings aren’t necessarily contradictory. In fact, it could be that the depletion effect of disorder caused people to engage in primarily affective or divergent thinking, which enhanced creativity.
In any case, our research has made us think about other factors at work that may deplete employees’ mental resources and therefore undermine their self-regulation and persistence. One possibility that comes to mind is extreme self-consciousness — ruminating about others’ perceptions. Employees might find it depleting to wonder: What do people think of me? Of my work quality? Of my appearance? It’s very possible that this kind of thinking hurts performance.
It can be challenging to turn off rumination. In comparison, solving the messy-environment problem is relatively easy. Because of our research, both of us have become more aware of the value of an ordered environment. We both keep our desks neat, and one of us (Chae) makes sure to maintain an orderly home. The reasoning: A neat environment at home allows her to head into work on Monday morning feeling fresh and restored.


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An Approach to Ending Poverty That Works
Ending extreme poverty by 2030 is the BHAG – the big, hairy audacious goal – of our generation. While skepticism abounds, momentum is on our side, with poverty rates falling in every region of world.
Unfortunately, these trends still have little to no impact on the lives of a critical and chronically marginalized subset of the extreme poor around the world, those living on less than 60 to 70 cents per day. At BRAC, where I work, we call this subset the “ultra-poor.” Microfinance and other market-based interventions don’t generally reach them. Predominantly women, they face chronic food insecurity, malnutrition, gender discrimination and often abuse. They also bear the brunt of climate change— especially in rural areas where inclement weather and the increasing frequency of storms can hurt agricultural yields and contribute to malnutrition — not to mention countless other external challenges.
If we’re to end poverty, we can’t ignore them. All of us — researchers, policymakers, governments, social entrepreneurs, nonprofit development groups, microfinance institutions, corporations, and philanthropists — have a role to play in bringing them into the widening zone of prosperity. And we may have found a way to do this.
BRAC began grappling with the problem of the ultra-poor in the 1990s. Despite decades of success fighting ill-health, illiteracy, and poverty, BRAC saw its programs still weren’t reaching women trapped in this chronic cycle of dire poverty.
We tested different approaches and in 2002, we began deploying a new set of interventions now known as the “graduation” approach, which provides these women with a host of services and benefits to move them out of ultra-poverty and eventually into sustainable livelihoods. That methodology has in turn been tested by other nonprofit organizations in other contexts, with pilots in eight countries as varied as Yemen, Ethiopia, and Haiti, with support from the World Bank’s Consultative Group to Assist the Poor, the Ford Foundation, and the MasterCard Foundation.
Our research has shown that the vast majority of participants in these programs – 75 to 98%, depending on the geography – not only leaves the category of ultra-poverty within 24 months, but remains on an upward trajectory even four years after they’ve stopped receiving direct benefits.
What sets the graduation approach apart from other attempts to reach the poorest is, in part, the mixed methods used. Discussion abounds in the development sector today about the best ways to empower the poor. Do you give them cash or assets? Is it better to attach conditions, or do the poor know best how to spend their money? BRAC’s short answer to these questions is yes, all of the above. That’s why we’ve taken a multi-intervention approach.
And perhaps we’ve overlooked the most important question of all: Are we really reaching those most in need?
Targeting is crucial. We need to make sure scarce resources are deployed efficiently. To do this, BRAC first identifies regions with high concentrations of ultra-poor. Then, using a method called “participatory wealth ranking,” we establish a group of 40 to 50 villagers and community leaders who rank the wealth of each household in the area. Community members outline their own criteria and identify the poorest living among them. BRAC staff then goes door-to-door to visit selected participants and verify their circumstances with questionnaires. These surveys vary by region, but may include how many meals she eats a day, number of people in her household, access to clean drinking water, etc. Including the community in this process also fosters a support network for participants as they go through the program.
From there, participants receive set of six interventions over the course of 24 months. They get a productive asset, like a goat or a cow; intensive hands-on training that includes livelihood training to maximize revenue from their asset and in-person coaching in the form of a weekly visit from a BRAC worker; a weekly cash stipend to give them some breathing room while they learn their new livelihood; healthcare recommendations; and financial planning services with additional support from the community.
It is an intensive, integrated approach that works. It probably sounds expensive, too, but it isn’t as costly as one might think. It costs less than $500 per person for the full two years in Bangladesh. The long-term drag of not intervening — namely that of malnutrition, resulting in stunted growth and intellectual development, untapped labor potential, and so on — is estimated to cost $3.5 trillion each year, 5% of the global gross domestic product. To put things in perspective, reaching every ultra-poor family in Bangladesh (6 million families or 17% of the population at $500 per household) would cost the country $3 billion, less than .5% of GDP over six years.
Munshi Sulaiman, previously a researcher at BRAC and now pursuing post-doctoral studies at Yale, is looking at the cost-effectiveness of graduation-style programs in several countries. He is authoring an as yet unpublished study comparing these programs to 50 other government and NGO livelihood and cash transfer programs in Asia, Africa and Latin America.
“We found the graduation approach isn’t necessarily more expensive than other programs of a comparable scope,” Sulaiman says. “In some cases it actually works out to be cheaper, especially when you take effectiveness into account. These graduation programs are more consistent in achieving impact than other programs we looked at.”
Dozens of governments are now looking at ways to integrate graduation programming into their social protection policy and efforts. The Kenyan government recently hired BRAC to assess the viability of the graduation approach in some of its most difficult, climate-change prone areas where droughts have caused displacement and food insecurity.
I’d like to see the private sector, philanthropists, and social entrepreneurs throw their weight behind this idea to end poverty for all.
There’s a lot of talk about resilience in the world these days; the ultra-poor are the paragons of resilience. We need to tap into their creative power. We need to imagine a world where they don’t just survive – they thrive.


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99% of Networking Is a Waste of Time
Building the right relationships — networking — is critical in business. It may be an overstatement to say that relationships are everything, but not a huge one. The people we spend time with largely determine the opportunities that are available to us. As venture capitalist and entrepreneur Rich Stromback told me in a series of interviews, “Opportunities do not float like clouds in the sky. They are attached to people.”
To say Stromback is a great networker is an understatement: he was introduced to me as “Mr.Davos” for good reason. He has spent the last ten years attending the Mecca of networking events — held by the World Economic Forum every year in Davos-Klosters, Switzerland. The New York Times described him as the “unofficial expert on the Davos party scene.” Every year, he knows where the big events will be because he has so many people feeding him information, and he makes sure to be at the center of the action. Over time, this has turned into a surreal set of relationships. When a Middle East Prince was asked to meet with some Fortune 500 CEOs, he reached out to Stromback to attend and facilitate the meeting; when the Vatican was trying to negotiate a peace treaty of sorts they asked Stromback to help.
People also come to him because they feel they’re not getting enough value at Davos. “They chase for more and get less,” says Stromback, who finds the notion almost unimaginable. “The forum is the most influential community in the world. It’s the United Nations, G20, Fortune 500, Forbes List, tech disrupters and thought leaders all brought into one.”
Much of what he has learned from a decade at Davos flies in the face of generally-accepted networking advice. Below are snippets of my conversations with Stromback about his counterintuitive advice. Use it at Davos — or any other networking event:
Don’t care about your first impression. “Everyone gets this wrong. They try to look right and sound right and end up being completely forgettable. I’m having a ball just being myself. I don’t wear suits or anything like that. I do not care about first impressions. I’d almost rather make a bad first impression and let people discover me over time than go for an immediate positive response. Curiously, research I read years ago suggests that you build a stronger bond over time with someone who doesn’t like you immediately compared to someone who does. Everything about Jack Nicholson is wrong, but all of the wrong together makes something very cool.”
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99 percent of any networking event is a waste of time. “99% of Davos is information or experience you can get elsewhere, on your own timeframe and in a more comfortable manner. When I had my white badge access [an official pass to the conference center] — which I don’t bother with anymore — my friends would laugh because I never went to a session. [But] that’s not where the highest value is. What you can’t get outside of Davos is the ability to have so many face-to-face interactions which either initiate or further key relationships.”
Sleep from 4-8PM every day. “I nap every day in Davos sometime between the hours of 4-8pm. It’s the most efficient time to catch up on sleep so I can be fresh when the time is opportune. The opportune moments happen while dancing at one of the nightcaps or at a chateau where only a select group of people is invited. The conversations there can go on until the early morning hours.”
The key to networking is to stop networking. “Nobody wants to have a ‘networking conversation,’ especially those who are at the highest levels of business and politics. They are hungry for real conversations and real relationships. It just has to be authentic, genuine and sincere. I don’t look at people’s badges to decide if they are worth my time. Davos is 3,000 influential people and I need to be selective, yet authentic — focused, yet open to possibilities. In the end, I put myself in the most target-rich area and then just go with the flow and spend time with who I enjoy.
You’re not required to go to the big-name parties. “I maintain a broad and deep global network of C-level relationships without wining and dining face-to-face with people 90% of the time. But you need to know where people will be. For example, one year I told someone, “Don’t go to the Bill Gates party this year.” He asked me why? And I told him, “Because no one will be there.” He went and couldn’t believe I knew ahead of time. But I just knew the party was at the wrong time in the wrong location. It’s all about understanding where to be and when.”
Live in Detroit (or somewhere like it) the rest of the year. “Most people who are focused on building relationships at the highest levels live in London, New York City and Washington, D.C. They are immersed in the scene 24-7. I prefer to be disengaged 90% of the time. I live in Bloomfield Hills, in the Detroit area, and I don’t do anything social there. I love Detroit because no one comes to visit, and there are very few distractions. This is my escape for crucial family time. Being removed from the fray 90% of the time reduces a lot of drama.”
As Stromback — a self-declared essentialist — put it, “Davos is 99% distractions; you have to know what to avoid.” When asked how he would respond to the idea that most people don’t like networking because it’s time intensive and distracting from their “real work” he said, “The answer is to be extremely efficient and focus on what is truly essential.” This jibes with my own personal point of view on the world: Almost everything in life is worthless noise, and a very few things are exceptionally valuable. This is as true in networking as it is in almost every other area of life.


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How the U.S. and India Can Strengthen Their Business Ties
Barack Obama is the first American President to visit India twice while still in office. When he leaves New Delhi on January 26, the bilateral benefits of the time invested might flow for a decade or longer—but it will depend on how well both sides manage some of the barriers that have kept the two giant countries from working together well in the past. As executives with deep experience in both countries, we see at least three ways that the President—and anyone developing business in India—can improve the mutual understanding between the two countries.
Focus on Relationships: Business relationships between Indians and Americans, like political alliances, develop over time. Trust cannot be won quickly. While this might seem obvious let us look at the reality on the ground.
Many large American corporations send expatriate executives to India for one- or two-year terms. By the time these arrivals start to understand the textures of India, it is time for them to leave. We see some companies limiting their India offices to suites inside of upscale hotels. Sometimes for three years or more. A few companies locate their India-focused expats in Singapore, Dubai, or Hong Kong. While these are comfortable locations, many Indian customers assume these companies are not yet committed to India. While there is nothing wrong about developing a phased relationship with India, success will be limited if Indians perceive that the relationship is also tentative, not just phased.
Some years ago one of us (Bagla) took a top executive of a major agricultural company from California to India for his first business visit to meet distributors. At the time, many of the legacy distributors operated from tiny congested locations in the heart of the old walled city of Delhi and most offered to meet us at our hotel. We advised the client to accompany us to their place of business instead. While a few of them were embarrassed about their location in the short run, all were impressed by our client’s willingness to brave the dust and noise of Khari Baoli. This outreach started the relationship building on a proper footing.
Proceed with patience: Last September, Indian Prime Minister Narendra Modi and President Obama took the highly unusual step of writing a joint op-ed piece for the Washington Post. Many seasoned India hands chuckled at the line that pointed out “the full potential of our relationship is yet to be realized.” This is true since small countries such as the Netherlands and Taiwan have larger trading relationships with the United States than India does today. Lack of cultural dexterity on the part of American executives and diplomats is one key bottleneck in developing the relationship more fully.
There is a nuance in the final sentence of that op-ed piece: “Forward together we go — chalein saath saath.” Some Americans are getting impatient with the pace of progress in India already because they have interpreted this message as “Let’s run together.” We think that it is better construed as “Let’s walk together.” And you must walk in India before you can run. Such walking can build more durable and productive business relationships. One such enduring corporate relationship is a 50-50 joint venture between Tata Motors of India and the Cummins Engine Company of Indiana. Most advisors would propose a 51-49 JV in India to be clear who is in control. Co-equal shares imply and require the kind of trust that is built by walking together before you run or fly.
Adapt your communications style: In dealing with Japan, China or Germany, most Americans recognize that they need a translator or interpreter. But not in India. There is an illusion of full communication since most of them appear to speak English. There are two layers of fallacy in this assumption that lead to stress.
The first layer that becomes apparent to visitors is the use of Indian English. In India a hotel can sometimes mean a restaurant, a bullet can be model of a motorcycle that sells more than Harley Davidson, and a bisleri can mean bottled water. Someone might ask President Obama if he likes curd (plain yoghurt) with his Indian dal. If there are hoardings along Sardar Patel Marg to welcome him and his team at they drive in from the airport, we are just talking about billboards.
There may be talk about the loin (lion) represented in the “Make In India” logo, particularly if the Indian speaker is not convent-educated. The visiting Department of Energy team might be told, if they have earned the trust of their Indian counterpart that Mr. Modi hopes to eliminate load-shedding in India. The Education team may hear that some deemed universities want to collaborate with American community colleges. If a senior Indian aide confides, “My Mrs. is out of station so I am not bringing my tiffin with me to work this fortnight,” the Obama team needs to understand that his wife is travelling so he’s not bringing his lunch with him.” These and hundreds of other terms are explained, in the Indian English Dictionary, the busiest section of Bagla’s website.
The answer to the second-layer fallacy cannot be found in a dictionary, however. Sometimes the intent of an entire action is misunderstood. Like most Asians, Indians are indirect communicators, and the normal blunt American style makes them uncomfortable. It is hard for them to decline an unreasonable request, particularly from a foreign visitor. It is difficult, but important for Americans (and Western/Northern Europeans) to appreciate that indirect communication can be equally effective in delivering a message compared to direct communication.
This second layer fallacy creates mismatched expectations on both sides and can erode trust rapidly. One example occurred when, after a prolonged and turbulent democratic process in both countries, and at the high point of the 2008 financial crisis, both houses of Congress approved a landmark civil nuclear agreement between India and the United States. Almost immediately, then Secretary of State Condoleezza Rice showed up in Delhi to take the agreement to “the next stage.” But the Indian side wasn’t ready yet. They had more walking to do and Secretary Rice was trying to fly. Six years later Westinghouse Electric and GE Nuclear are still waiting to see business emerge from this agreement.
When presented with American bluntness, some Indians interpret it incorrectly as crudeness. Others have told us in confidence that many American appear to be “simpletons.” To overcome this barrier, Americans need to include team members who are adept at indirect communication. For example instead of asking,”Is everyone on board with our plan?” you might consider a less direct approach, such as, ” I’d like to hear from everyone about one area of concern you have before moving forward on this plan.”
It is good that President Obama’s team includes seasoned India hands such as Assistant Secretary of State Biswal, who served as Assistant Administrator for Asia at USAID, and Assistant Secretary of Commerce Kumar, who founded and ran the US-India practice for a Big Four accounting firm. Business people who travel without seasoned advisers on their team often miss key points; worse still, they reach erroneous conclusions about key issues.
Subtle but significant barriers have prevented the two largest democracies in the world from working together more closely. The openness and diversity of both India and America make it possible, however, for any open-minded and humble person in either country to learn about what drives their counterparts in the other nation. Workshops, articles like this one, and books can provide part of the answer. But the rest of the answer depends on what happens in the field, where companies must identify, nurture, and reward employees who want to be adept at both direct and indirect communication; or they must supplement their team with trusted external advisers. There is always room to improve mutual understanding between the two cultures, whether you are in politics or in business.


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January 21, 2015
Who Has Paid Sick Leave, Who Doesn’t, and What’s Changing

For decades, whether you can call in sick and still get paid has been determined by where you work. Because of this, millions of Americans — 43 million private-sector workers, as President Obama reminded us in the State of the Union — are out of luck, forced to make tough choices about whether to work when they — or their children or parents — have the flu.
An initial glance at the private sector looks as though access to sick leave has improved. While the percentage of workers with access to holiday and vacation days has stayed the same or decreased over the last 20 years, those with paid sick, personal, and paid leave has jumped:
And the cost of sick time as percentage of total compensation has remained the same. So it’s not costing companies any more than it did in the early 1990s.
Good news, right?
Not so much. When you look at the numbers a little closer, it becomes clear that there’s a significant divide in terms of who gets paid sick leave. For one, according to the U.S. Bureau of Labor Statistics, the jump in access to paid sick leave is at least in part due to more Americans working white-collar jobs. This is particularly evident when you break down who has sick leave by sector, with full-time management workers receiving the vast majority of sick leave benefits, leaving service workers and part-timers in the dust. The more you earn, the more likely you are to have paid sick leave.
It’s in this climate that Obama is proposing up to seven earned paid sick days for all Americans, citing Connecticut’s 2011 law as precedence. While many expected that law to lead to costly abuse — with employees calling in sick whenever they felt like taking time off — according to data from the Center for Economic Policy and Research, those shenanigans never materialized:
In addition, only a third of eligible employees even used the benefit, and they used fewer days on average than they were allotted.
Obama’s proposal will obviously face an uphill battle in a Republican-controlled Congress, but even the mention of it gives companies the opportunity to rethink the benefits they’re offering employees. For one, we know that higher pay and benefits boost productivity and decrease turnover in the service sector.
Just as with health care, meditation rooms, and Foosball tables, sick leave is today treated as a perk — something certain employees get at certain companies. The Obama administration’s proposal would make it more like a safety regulation — something every company adheres to, for every employee.
The paradox is that although white-collar workers are more likely to have paid sick leave, they balk at using it; meanwhile, a whole host of people don’t have it and thus couldn’t use it even if they wanted to. In the end, all of this means that millions of people are going to work sick, albeit for different reasons and with different repercussions. Even absent government regulation, it couldn’t hurt private companies to do a little rethinking of why that happens, and what can be done about it.


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Companies with a Formal Sales Process Generate More Revenue
How well is your company managing its sales pipeline? Research conducted by Vantage Point Performance and the Sales Management Association revealed that 44% of executives think their organization is ineffective at managing theirs. (The survey included 62 B2B companies, 39% of which have revenue greater than $1 billion and 37% of which have revenue greater than $250 million.) This statistic is discouraging because there is a direct correlation between effective pipeline management and strong revenue growth.
In our survey of B2B companies, executives were asked to rate their company’s year-over-year change in revenue on a scale of 1 to 7, with 1 representing “drastically decreased revenue” and 7 representing “drastically increased revenue.” Executives were also asked to rate their company’s effectiveness in managing the sales pipeline. On average, companies that reported having ineffective pipeline management had an average growth rate of 4.6; companies with effective pipeline management had an average growth rate of 5.3, a 15% increase. Even more interestingly, companies that mastered three specific pipeline practices saw 28% higher revenue growth.
What did these top companies do to achieve such a high level of success? Here are the three best practices that these all-star sales forces have in common, as well as ways to implement them in your company.
Clearly define the sales process. Pipeline management includes how the sales pipeline is designed, how it is measured, and how it is used to drive sales rep performance. However, at its most basic level, the sales pipeline is merely a representation of a company’s sales process. We discovered that sales forces were most effective at managing their sales pipelines if they had invested time in defining a credible, formalized sales process. In fact, there was an 18% difference in revenue growth between companies that defined a formal sales process and companies that didn’t.
So what does it mean to have a formal sales process? For starters, it means having clearly defined stages and milestones that are universally understood by your salespeople. Your sales team shouldn’t have to guess where a particular deal stands or how they should be managing deals in each stage. In addition, your sales process should align with how your customers move through their buying process. Too many sales teams use generic sales processes, and consequently get generic sales performance. Invest the time in developing a unique process for your team, and make sure that they understand how to use it.
Spend at least three hours a month on pipeline management. In addition to having a solid process in place, our research revealed the importance of dedicating enough time and resources to carrying it out well. Companies in our survey that spent at least three hours per month managing each rep’s sales pipeline saw 11% greater revenue growth than those that spent fewer than three hours per month. But success doesn’t just depend on the amount of time that’s spent on pipeline management – how the time is spent is just as important.
Many sales forces believe they are spending a lot of time managing their pipelines when in reality they’re spending a lot of time creating forecasts. If your pipeline management discussions revolve around close dates, probabilities, and deal sizes, then you are forecasting. Period. If, however, you spend your time discussing the overall health of your sellers’ pipelines and how they can shepherd more deals to successful closure, then you are managing your pipeline in a productive way. The primary focus of a pipeline meeting should be to help reps develop a game plan to move deals forward, not just scrubbing CRM data and forecasting revenue.
Train sales managers on pipeline management. Our research also revealed that 61% of executives admit their sales managers have not been adequately trained in pipeline management strategies and techniques. This begs the question, “How can we expect our sales managers to do something well when we haven’t prepared them to do it?” Companies that had trained their sales managers to manage their pipelines saw their revenue grow 9% faster than those that didn’t. But not just any training will do. Sales managers need targeted training to address specific pipeline management challenges.
Most pipeline training that sales managers receive is limited to how they log in to their CRM tool and generate reports. What they really need is training in how to make better pipeline management decisions. For instance, sales managers need to know how to determine the ideal pipeline size for each rep. They need to know at what point in the sales process their actions have the biggest impact. And they need to know how to structure pipeline meetings so they enable coaching rather than inspection. Even these few skills can have a significant impact on sales force performance.
Ultimately, pipeline management is a critical activity for all sales forces, and better pipeline management can make a huge difference in sales performance. Our research shows that there are no secrets to realizing this increased performance — you must define your sales process, commit to good pipeline management, and enable your managers to carry it out. If you integrate these best practices into your sales force, you can expect to nail your forecasts, hit your quotas, and see your sales reps succeed beyond what you thought possible.


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How to Craft an Agile Marketing Campaign
Meticulously designed marketing campaigns are a relic. As research on disruption and market transitions suggests, you’re better off these days if you can quickly identify and adapt to changes in your environment. Sure, you can anticipate multiple outcomes, with branching if-then plans and hypothetical scenarios — but those plans are only as effective as events are predictable. It’s extremely difficult to say how long current trends will remain significant — innovative technologies are popping up faster than we can forecast — and it’s impossible to tell which new trends could emerge during your campaign and thwart your efforts.
So marketers must develop the same mind-set and skills that allow agile tech and product-development teams to manage complex projects with many unknowns and moving parts. Here are some recommendations for doing that.
Think “outline,” not “campaign.” If you chart your campaign in such detail that it’s unalterable, you run the risk of being pinned down when something unexpected arises.
For the perfectionists out there, this may be a frightening thought. Many marketers have built their careers on following a series of highly detailed plans based on copious data. You still can, and should, draw on customer research, but leave room for growth. Map out your starting point, in as much detail as you wish, and then roughly outline your vision for the first few milestones in your campaign, keeping your plans tenuous and easy to adjust.
Consider this sample outline, from a firm that was launching a new clothing line.
Phase I (Weeks 1-4): Announcements and Initial Advertising
Submit press release detailing new clothing line and reinforce through social media.
Go live with new clothing products on the e-commerce platform, and schedule the release of images and links on social profiles.
Add banner to homepage, showcasing our new fleece-lined jacket, projected to be our top seller.
Initiate e-mail blasts to current customers, first announcing the new product line, then introducing discounted offers in subsequent weeks.
Introduce weekly articles, each highlighting a new product, and syndicate through social media.
Begin Google PPC campaign for new products, highlighting the fleece-lined jacket and seasonal keywords.
Phase II (Weeks 5-8): Ad Reinforcement and Consumer Engagement
Reach out through other advertising channels: magazines, direct mail, TV
Phase III (Weeks 9-12): Introduce and Promote Sale on New Products
Phase IV (Week 13): Analyze and Regroup
Note that the first phase of launch is outlined in detail, while subsequent phases are described in broad strokes. This allows you to measure impact and determine whether to keep going, make adjustments, or scrap what you’ve got and start over. The clothing company found that its fleece-lined jacket was underperforming and quickly substituted another product for it. The PPC ads were carrying significant traffic, but not converting, so in Phase II those were replaced with a direct-mail campaign.
Start small. It’s also good to plan modestly at the start and gradually become more ambitious, as you test the waters — especially if you’re venturing into a new channel. For example, if you’re going to run a series of pay-per-click advertisements, begin with a budget of only a few hundred dollars. Run it for a few weeks, analyze your results, and if you’ve been successful, increase your budget. This way, if a more attractive medium comes along — or if an unexpected obstacle interferes with your campaign — you’ll have a chance to make adjustments or bail out before you’ve spent too much money.
The same rule applies to scope. You might restrict your efforts at first and ramp up when your audience grows.
Take breaks. As you venture forth, pause frequently to reevaluate your position. If you’ve sketched out a minimalistic outline, you might do this when you get to each loosely defined milestone. Review the effectiveness of your current efforts, including projected profitability. Determine what changes have occurred in your environment, such as new competitors, technologies, or trends. And then tweak your strategy.
To carry out these recommendations, you have to pay close attention to your surroundings. Regularly visit industry news sites to stay on top of developments and consider how they could affect your marketing plans. Watch what your competitors are publishing and how well-received their ideas are. Keep in close touch with your target audiences, as well — conduct regular user surveys and measure how existing and potential customers interact with your brand. Track behavior on your website, through social sharing, and in reviews and comments. How are people’s priorities changing? What new tools are they using to make their lives easier? Adopt new trends early, and drop them when they appear to decline in relevance.
Agility doesn’t come naturally. You have to be at peace with the fact that, more often than not, you can’t predict what’s coming next. But this is a skill you can cultivate through awareness and practice. And really, to survive, you don’t have a choice.


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Dysfunctional Products Come from Dysfunctional Organizations
Producing great products isn’t just about creativity and execution. It’s also about organizational alignment. Let me tell you a quick story. One of my alumni, Eli, recently finished a contract with a government transportation agency. She had been tasked with spending time with the agency’s customers – regular citizens – to identify usability issues in their mobile app. She had quickly discovered that the app was basically a trainwreck. People couldn’t understand how to use it, frequently lost money during the ticket purchasing process, and often got frustrated attempting to pay bus fare with an electronic ticket.
Eli presented her work to executives and product owners in a two hour meeting. As the meeting progressed, the lead product owner got more and more agitated, and eventually exclaimed, “I can’t control any of these issues!” and stormed out. It became clear that the people who hired her were using her consulting as a weapon in the organization to compensate for interpersonal and cultural issues – to highlight misalignment.
As we were chatting about this experience, she offered a tremendously insightful view of what happened. “The problems in their software are directly indicative of the problems in their organization.” The company had layers of bureaucracy and management, siloed functions, and a culture of friction and defensiveness. Their product had layers of disconnected functionality, siloed capabilities, and generated obtuse experiences for users. The dysfunction in the organization became the dysfunction in the product, and that was passed on to the customers.
This is interesting as an intellectual curiosity – we can compare successful products to unsuccessful products and make inferences about the organizations that produced them, and how the “sausage is made.” But it has much more practical implications in the other direction. We can look at the way our own companies operate and make inferences about how our products are perceived. If the process, culture, and day-to-day experience of the organization is chaotic or broken, we can start to predict that our customers are experiencing an equally broken product or service. Since Eli shared this insight, I’ve observed its validity in many products and companies. Of course, there are exceptions, but on the whole it seems true that bad products point to bad alignment.
How can this misalignment be avoided or corrected? First, let’s clarify that we’re talking about a certain kind of alignment – i.e. congruence around a clear vision or goal for a product. This type of alignment is typically attempted in a meeting, where people discuss strategic direction and how the product fits into this. Ideally, everyone involved forms a basic shared understanding of how the world is and how the product is meant to improve it. But more frequently, because words carry ambiguity, meeting attendees leave without a clear understanding of just what they’ve actually agreed to. And even if alignment is achieved during the meeting, it begins to erode the minute the meeting is over. As time goes by, the shared vision splinters. I’ll ask myself “Did we mean this, or that?” – and since I’m moving quickly, I’ll answer it on my own. Then I’ll act on my answer. Other meeting participants will do the same. And as I make decisions independent of others, we become disjoint. Call this “alignment-attrition” – as the time window between our interactions increases, our alignment decreases.
This dynamic operates differently in different kinds of organizations. In an early-stage startup, for example, everyone sits next to each other. It’s hard to shake alignment in this context, because the window for alignment-attrition is so small. If you sit next to me and we have a conversation and “align” on a direction, there’s only a time window of about 15 minutes that can pass before we have another conversation and course-correct if things have gone sideways. But in a larger company, weeks or even months can go by, and the potential for alignment-attrition is enormous.
In these more distributed contexts, a visual model becomes one of the most effective tools for minimizing alignment-attrition. A visual model captures and freezes a thought in time. By building a visual model together, alignment is offloaded to and “frozen in” the diagram. Your thoughts, opinions, and views will change, but the diagram won’t, and so you’ve added a constraining boundary to the idea – and a tool for concretely visualizing how the product vision is changing. Herein is the magic of leveraging visual thinking in a large, distributed organization. A visualization of a product strategy (or almost any strategy) is easily consumable, while a requirement document is not. A visualization can be viewed by many at once, while it’s difficult to collaborate on generating a spreadsheet or specification. And most importantly, a visualization formalizes an emergent idea and solidifies it at a moment in time.
Here are some concrete process steps for reducing alignment attrition with visual thinking:
Facilitate an interactive workshop between constituents early in the process.
Rather than having a traditional meeting with a powerpoint and a lot of talking, structure the meeting with creative activities – storyboarding, sketching, or other forms of making.
After the workshop is over, capture the visual output, and revise it to be crisp and concise.
Circulate the visual broadly amongst the stakeholders, and ask for feedback on it; integrate changes, and as you work through the project, continue to revise the visualization and publish it periodically.
Besides enhancing and maintaining alignment, these steps help mitigate other important problems associated with conventional product management. Traditionally, a product manager might view her job as one of dictating requirements for features and functions in a product. In this model, alignment becomes less important than conformity. Top-down authority mandates what everyone works on, and a requirement document attempts to act as the rulebook. This almost always results in the people “lower down the chain” feeling disenfranchised. Not only are they not aligned, but worse, they feel no pride of ownership in the actual strategic direction that’s been set. If the foot soldiers carrying out all the tactical jobs of product creation have no visibility into the larger direction of the organization, and are unable to answer the question, “Why am I doing this?,” not only does this jeopardize the product, but it misses out on a huge opportunity for leveraging and increasing the positive engagement and productivity of the organization.
As companies grow and struggle with increasingly complicated and ambiguous product challenges, visual thinking, and product processes built around concrete visuals, help to clarify the challenge for everyone involved – and to increase the likelihood of creating a successful product.


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