Marina Gorbis's Blog, page 1326

What We Know, Now, About the Internet’s Disruptive Power

In 1979, before a single IBM PC was ever sold, or the first cell phone network was created, or the digital HDTV standard was even conceived, Harvard sociologist Daniel Bell had no trouble foreseeing the convergence of computers, TV, and telephones into a single system that would allow the transmission of data and the interaction of people and computers in real time. In an HBR article that year entitled “Communications Technology—for Better or for Worse,” he easily envisioned a world in which people would buy cars online, or share them to commute rather than own their own; read the news, get the weather, check the classifieds, peruse catalogs, and access financial information on their TV screens; and work together from remote locations over digital connections.

A visionary thinker, Bell had already coined the term “the post-industrial society” a half-dozen years before in a famously influential book, which correctly predicted that such a convergence would shift the economies of developed nations from manufacturing to services and create new technical elites working for new science-based industries.

That wasn’t as magical as it might seem, he argued in the 1979 piece, since the required technologies already existed in some form or other. The question was not whether they’d be combined but in what order, at what rate, and at what scale.

As the dot-com bubble heated up in the early 1990s, a number of thinkers turned their attention to developing frameworks to help executives answer those questions in HBR, and their work forms a solid foundation for navigating the digital transformation that’s still playing out.

First among these were BCG executives Philip Evans and Thomas Wurster, writing some 18 years after Bell’s article in the seminal “Strategy and the New Economics of Information.” What was important about the Internet from a strategic point of view, they could already see in 1997 when the Web was barely three years old, was that it eliminated the trade-off between the amount of information that can be shared (its richness) and the number of people you can share it with (its reach) – a trade-off that had formed the basis of many companies’ competitive advantage.

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The implications of that insight were becoming obvious for companies that sold information, like newspapers and encyclopedias. But every business is an information business, they stressed. Supplier relationships, brand identity, process coordination, customer loyalty, and many switching costs were all forms of information. The more your competitive advantage depended on maintaining that trade-off between richness and reach, the more vulnerable it would be.

So where once a company might establish a competitive advantage by creating rich connections between a narrow group of select suppliers (that was the essence of just-in-time manufacturing in the 1980s), or thin connections between a large group of people (as Citibank did with currency traders), now they could do both at once, and so could anyone else. No need for an expensive direct sales force to choose just the right kind of car insurance for you when you can reach customers with customized sales pitches online. No need to create an expensive taxi fleet when you can gather, track, coordinate, and compensate a group of drivers willing to share their rides over the phone.

To work out how vulnerable your company’s competitive advantage is, Evans and Worster offered a still-useful list of diagnostic questions, which begins by identifying the information that holds your value chain together and where you are currently making trade-offs between richness and reach. It’s still worth a look now.

Amid the rubble of the dot-com bust in 2001, Michael Porter weighed in on the question of how to gauge which businesses “active on the internet,” as he put it, were real and which were destined to go the way of Pets.com when their venture funding dried up. The only reliable measure of economic value for a company, he argued eloquently in “Strategy and the Internet,” is not the size of its user base or its stock price or even its revenues but only sustained profitability. Prospects for profitability vary widely from industry to industry, according to the strength of the five forces that create each one’s specific structure. Nevertheless, Porter did venture to make some general conclusions about the Internet’s effect in one very useful chart entitled “How the Internet Influences Industry Structure,” in which he maps the effects of internet technologies on each force in turn.

In general, he confirms what most executives intuitively feel, that while some trends might help companies sustain or even increase their profitability (by increasing the size of markets, boosting efficiency, and dampening the power of suppliers by enabling direct contact between a company and its customers), mostly the Internet intensifies competition and decreases profit margins.

Fast forward a decade or so, and the Internet’s power to decrease profit margins has become the stuff of legend. Napster, Amazon, and the Apple store have annihilated Tower Records and Musicland; digital cameras replaced film and then smartphones upended camera makers. But the questions of timing and scale are still the minds of Clay Christensen and Maxwell Wessell in 2012.

In “Surviving Disruption,” they point out that disruption, digital and otherwise, is less a single event than a process that plays out over time — “sometimes quickly and completely, but other times slowly and incompletely. More than a century after the invention of air transport, cargo ships still crisscross the globe. More than 40 years after Southwest Airlines went public, tens of thousands of passengers fly daily with legacy carriers. A generation after the introduction of the VCR, box-office receipts are still an enormous component of film revenues.”  In other words, when a business will be disrupted is surely as important a question as whether, and in that article they offer a highly practical way to predict how vulnerable your business is, identifying five barriers than can slow disruptors down.

Then last year Michael Porter returned to apply the five forces framework to the next phase of the digital economy – the internet of things. And unlike the first round, which, Porter pointed out didn’t create new industries so much as digital versions of existing industries, this time the hardware, software, and networks that connect previously discrete objects together are creating products that cut across traditional industry boundaries — and enabling entirely new ways to create sustainable value. And so the answer to the question of “How Smart, Connected Products Are Transforming Competition,” can’t be easily summarized in a simple chart, and Porter takes us through the myriad possibilities for boosting and depressing profitability, step by step so once again you can map your business against the changing currents.

Back in 1979, Daniel Bell didn’t have much sympathy for people who felt helpless in the face of technological innovation. “In the last decade or more we have heard much of the acceleration of the pace of change,” he wrote 36 years ago. “It is a seductive yet in the end, a meaningless idea other than as a metaphor. For one has to ask, ‘Change of what?’ and ‘How does one measure the pace?’” After all, he points out, a man born in 1800 and who died in 1860 would have seen the coming of the railway, the steamship, and the telegraph. One born in 1860 who died in 1920 would have witnessed the birth of the telephone, electric light, the automobile, and motion pictures.

When we worry about the pace of change, Bell suggests, we’re focusing on the wrong variable. What is definite in not that the pace of change is accelerating but that “the scale on which changes have taken place has widened, and changes in scale, as physicists and organization theorists have long known, requires essentially a change in form.” The question we should be asking is not what utterly unpredictable new things will turn up to annihilate our businesses but what form of organization is appropriate to capitalize on them. A knotty question to be sure, but not an impossible one.

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4 Ways to Make Conference Calls Less Terrible

No one wants to sit on a boring conference call, especially when they have other work to do. But that’s the reality for a lot of people, at least according to recent InterCall research on the rise of mobile conference calls and employee conferencing behavior. With 82% of employees admitting to focusing on other work while on a call (along with other, less tasteful non-work distractions), disengagement — at least during virtual meetings — has started to become standard practice. While some may argue that these employees are still engaged in other work, it raises questions about the productivity and value of these meetings.

The good news is that companies can make their meetings more relevant and productive by making a few simple adjustments — even though many of them go against some familiar office habits.

Stop striving for inclusiveness. Time, not technology, accounts for the majority of associated meeting expenses. Unfortunately, online calendars, scheduling apps and email distribution lists have created a monstrous meeting invite reflex. It’s become too easy to send blanket, one-hour meeting invites to 10 people when only five are relevant to the agenda.

Businesses need to break free of the notion that all attendees should be on a conference call from start to finish. With a little upfront planning around which topics will be discussed at any given point in the meeting, managers can stagger invitations. If the marketing budget won’t be covered until the last half hour of an FY planning meeting, try inviting the marketing team to that 30-minute portion only.

Aside from facilitating more efficient meetings, it puts valuable time and flexibility back in your employees’ workdays. It also proves to your employees that you value their time just as much as your own. Oftentimes managers may worry that employees feel left out or that they are missing something if they are not invited to every meeting. But if you take the time to share relevant information, either through a quick chat in another meeting or via a recap email, you can build trust and save valuable work hours. Chances are, your employees will actually thank you for giving them some time back in their day.

Start using video. In 2014, for the first time ever, 50% of employees used live video and web cameras in more than a quarter of their conference calls, according to recent Wainhouse Research (WebMetrics: Meeting Characteristics and Feature Preferences, 2014). Despite this milestone, video conferencing remains a point of contention, and its adoption curve is a matter of psychological acceptance. The idea that everyone in a meeting can watch what you’re doing deters many workers, as does the dissonance between what we see in the mirror and what’s reflected on our laptop or tablet screens.

But as video becomes more pervasive in our personal lives, we will all have to get over this reluctance to adopt it in our business lives. Younger workers, with their penchant for selfies and inclination to social sharing, are also playing a large role in accelerating video’s acceptance among all members of the workforce. We can already see the impact of video conferencing among those who have adopted it. Wainhouse Research has found that of the employees who use video and web cams during meetings, 74% like the ability to see colleagues’ reactions to their ideas, and nearly 70% feel it increases connectedness between participants.

But don’t abandon the physical conference room just yet. Most organizations’ physical office conference spaces look nothing like they did 20, even 10 years ago. They’ve evolved beyond a long table and phone to include white boards, projectors, flat panel screens, web cameras, and surround sound. Participants may not use each accoutrement in every meeting, but the options for dynamic collaboration are there if they need them.

That said, it shouldn’t take 20 minutes for a presenter to figure out how to use a webcam; he or she shouldn’t have to restart an audio or web-based call in order to distribute multimedia content, either. Digital accessibility works when it’s inherent, intuitive and seamless. This only occurs when employees are trained and comfortable using all the features today’s conferencing solutions are capable of.

Understand technology use versus abuse. Technology is essential to innovating the conference call and boosting staff engagement. When applied incorrectly or misunderstood by end users, it can cripple both efforts. Managers have to use utmost discretion when implementing conferencing tools in a way that’s useful to employees, not abusive to their time or productivity.

In other words, just because you can video conference from your iPhone before boarding a flight doesn’t mean you should. Organizations should dictate a new form of meeting technology etiquette, one that respects staff flexibility, and their right to efficient, uninterrupted work time and collaboration. Part of this decorum includes redefining “full deployment.” Rather than give all employees the same basic conferencing tools, give them what they really need to fulfill their unique responsibilities. Mapping the technology to the user, not vice versa, increases the likelihood that staff will take advantage of these resources and deliver a higher return on investment.

Audio-only conference calls still permeate offices everywhere, but the status quo won’t hold for long. Changes in technology and workforce composition are happening too fast, forcing the rules of business communication to shift accordingly. Remember: Humans are multi-sensory creatures. Meetings aren’t one-dimensional either. In order to better engage your employees when you meet as a group, you might want to start by how you communicate with them.

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Case Study: Can a Work-at-Home Policy Hurt Morale?

Amrita Trivedi couldn’t help overhearing the heated argument outside her office door. As general manager of the Noida, India, office of KGDV, a global knowledge process outsourcing (KPO) company, she had always encouraged healthy debate on her team, but she was surprised that her head of human resources, Vijay Nayak, and her top project manager, Matt Parker, were going at it in the hallway.

“It’s a benefit they earned, Vijay!” Matt said. “And they’re hard workers. It’s not like we’re just picking our favorites and sending them home to watch TV and bake cookies.”

“But we’re creating a two-tier system,” Vijay responded. “The people left in the office are feeling demoralized. They want to work at home too. And they don’t see why they can’t.”

“They can when they earn it!” Matt practically shouted.

Amrita opened the door. “Vijay,” she said, “are you ready for our meeting?”

Matt sheepishly excused himself and walked away.

“What was that all about?” Amrita asked as she and Vijay sat down.

“Matt’s work-at-homers,” he replied.

(Editor’s note: This fictionalized case study will appear in a forthcoming issue of Harvard Business Review, along with commentary from experts and readers. If you’d like your comment to be considered for publication, please be sure to include your full name, company or university affiliation, and e-mail address.)

 

With headquarters in New Jersey and another office in Manila, KGDV offered a range of services, including market and legal research, but its largest and fastest-growing business was for the publishing industry—converting, indexing, and abstracting journal articles, which its clients, mostly U.S.-based publishers­, then sold to libraries, research institutions, and individual subscribers. Like many KPO companies, it compensated employees on the basis of their output. The more they accomplished, the more they earned—and in the case of the library project Matt ran, the more likely it was they’d be permitted to work remotely.

But Vijay wasn’t happy with how things were going. “We’re facing a potentially disastrous situation,” he said.

“What do you mean?” Amrita asked. “Matt’s reports show huge jumps in productivity. He told me last week that he wants to get even more people in the program. And I’ve heard only good things about the work-at-home employees.”

“That’s the problem,” said Vijay. “You only hear positive things about them. Meanwhile, the hundreds of employees who work in the office feel at a disadvantage. Even if they stay late and work hard, they can’t seem to produce as much as their counterparts who work remotely. The productivity gap keeps widening, which means the compensation gap does too. I’m afraid we’re going to start to lose them. Maybe in droves.”

“Wait. Six months ago you and Matt both sat right here singing the praises of this program.”

This was true. A little over a year earlier, the library project had been growing so fast that the company was running out of office space for necessary new hires. Matt had convinced Vijay that they could accommodate more employees over the longr un if some people worked from home. A similar program had been successful in KGDV’s Philippines office, so Amrita felt comfortable approving a test run.

Matt had worked with Vijay to identify 20 willing candidates from the top 25% of performers on his team and set them up with the technology and support they needed to do their jobs remotely. There had been some hiccups at the beginning, mostly around tech issues, but they’d been resolved within the first month. By the two-month mark, the remote workers were generating almost double the normal output. So Amrita had agreed to let Matt move 25 more employees into the program. Four months later they’d increased the number to 75 and filled the vacated workstations with new hires, upping headcount without adding infrastructure costs. Now Matt had 100 people working from home.

“I was fully on board, but that was before I saw the side effects,” Vijay explained. “Every time a top performer is transferred into the program, the shoulders of those left behind slump a little lower. And my team is fielding lots of complaints.”

“You know headquarters expects us to grow the library project by 25% this fiscal year,” Amrita said. “The demand just keeps increasing.” In fact, she was scheduled to present the expansion plans at the quarterly meeting the following week. “We’re at 98% capacity in this building. To meet the numbers New Jersey is throwing around, we’d need to move at least another 200—maybe 300—employees to home offices and fill their seats here.”

“I know. But if morale continues to slip, we’re going to have a whole different set of empty seats to fill. Honestly, Amrita, Matt isn’t seeing the big picture. I really think we should take time to fully evaluate the program before we expand it again.”

“From what I heard through the door, Matt adamantly disagrees with that,” she replied.

“Of course he does,” Vijay said.

 

Will the Tide Turn?

Late that evening Amrita was headed down to the gym in the basement of the office when she ran into Matt.

“I’ve been looking for you,” she said.

Matt’s face flushed. “I’m sorry about earlier.”

“That’s OK. Do you have time to talk about it now?”

“Here?”

“Why not? I think we’re the last ones in the office.” They sat down on the steps.

“I know Vijay is concerned about retention, but I think he’s being too cautious,” Matt said. “You’ve seen how much more efficient it is to have employees at home. Our output is up and we’re saving money at the same time. And so far, it’s helped with attrition, not hurt. Our rate is down by 5%, which is outstanding. People see the opportunity to work from home as a huge benefit.”

“But Vijay thinks the tide is going to turn. If the people stuck at the office feel like second-class citizens who can’t ever reach the work-from-home goal, why wouldn’t they leave?”

“He’s giving a lot of weight to the comments of one or two disgruntled people—people, I don’t need to remind you, who aren’t top performers. If they can’t reach a level of productivity that qualifies them to work at home, then maybe they’re not suited for this.”

“You’re saying it’s OK if we lose some of your office-based people?” she asked, surprised.

“No, of course not. But honestly, I don’t see the widespread dissatisfaction that Vijay is describing. My job is to run this project profitably with high quality, and that’s what I’m doing. I’m meeting those objectives. What else can I do?”

Amrita thought about her upcoming presentation, the growth that the executive team was looking for. “Just show me that Vijay is wrong.”

 

From the Horse’s Mouth

Later that week Matt knocked on Amrita’s office door and asked to come in. He had Nisha and Amal, two library project team members, with him.

“I wanted you to meet a couple of my stars,” he said. He explained that Nisha had been in the first wave of employees to start working at home, and she loved it.

“I come into the office once or twice a month for meetings, but mostly I get to make my own hours,” Nisha told Amrita. “If I feel tired, I go for a walk. If I feel energetic at 3AM, I work then. This is the happiest I’ve been at a job in a long time.”

“Nisha’s been our top producer for the past six months,” Matt pointed out.

Then it was Amal’s turn. Matt explained that he’d been hired only two months earlier, so he wasn’t yet eligible to work at home, but he was trying hard to get his output up. “It’s a big part of why I came here,” Amal explained. “Most of the other jobs I considered were entirely office-based and involved a long commute. It takes me 45 minutes to get here, but at least I know I may not have to do that forever. I wanted more freedom.”

If Amrita hadn’t known Matt better, she would’ve thought he’d scripted their lines. But he was too straightforward for that.

“I really appreciate your coming in—especially you, Nisha,” she said.

“No problem—I was in for a training anyway,” Nisha replied.

After the two employees left, Matt asked Amrita what she thought. “I wanted you to hear it from the horse’s mouth,” he said.

“They were persuasive, but they’re just two of 500 employees, Matt. If unhappy employees were as willing to talk to the boss, I’m sure Vijay could get two of them in here too. Why don’t the three of us sit down and hash this out? I’m sick of hearing it from both sides, and I need to figure out what I’m going to say in that quarterly meeting next week.”

 

About Survival

They met that afternoon in a fourth-floor conference room that looked out on the city. Amrita reiterated that she would have to make a recommendation to the executive team; if its growth plans were at risk, she said, she needed to tell the team that.

Matt got right to the point. “This is about the India office surviving. Our customers have more work than we can handle right now, and if we turn them away—‘Sorry, we don’t have the capacity, the infrastructure, the people’—they’ll go to our competitors. There are too many KPO companies in Noida, in India—more every day—for us to be turning down work.”

“But we need to grow smartly,” Vijay said. “And this program has expanded very quickly. Maybe we should pause and take stock of where we are before we push it further.”

“Didn’t you hear what I just said?” Matt retorted. “The ship is leaving, Vijay, and KGDV needs to be on it. We’re turning money away right now, and we stand to lose some of our biggest clients.”

“What about adding more in-office employees 20 or so at a time? We could grow the project more slowly,” Vijay asked.

“Where are they going to sit? Should we start putting two to a desk? Assign half our people to the graveyard shift? Or spend a year and more than a million dollars building a new facility—and turning down business in the meantime?”

Amrita looked at Vijay and shrugged. “He’s got a point.”

“But this experiment is just a year old,” Vijay said. “If we double down on it now, before we know how it works over the long term, we’re taking a huge risk. The output increase and cost savings have been impressive, of course. But they’re short-term results. We don’t know yet whether those employees will continue to be as productive in the next year and beyond. And it’s hurting our employee development. We thought this program would create healthy competition, but it has created two classes. The good performers get even better, and the poor performers get worse.”

“You’re hearing more complaints?” Amrita asked.

“Yes.”

Amrita caught Matt rolling his eyes. “If they want to work at home so badly, let them,” he said. “I don’t see why more employees can’t take advantage of the program. Let’s lower the output threshold and free up even more desks. We’ve got the proof—not just in our own numbers, but in Manila’s, and in all the research out there. People are more productive at home. Period. This is the future, Vijay: the office-less company.”

Vijay shook his head. “That’s not realistic. Sure, many Indian companies are letting employees work from home, but just one or two days a week. The remote employees on the library project are almost never in the office. We have no connection to them. We don’t even know how they manage to complete so many projects in so little time.”

“You think they’re cheating?” Matt was getting angry again.

“No, that’s not what I’m saying,” Vijay replied. “If we can’t see them, work side-by-side with them, then we don’t know what they’re doing so well. We can’t capture their best practices and share them with others. There’s a business benefit to having people together in the same building, and I fear we’re not reaping it. Instead we’re sending our best and brightest home to work in a vacuum. There’s no cohesion if everyone is spread out in his or her own corner of the city.”

Matt was quiet for a moment. Then he said, “Amrita, you met Nisha the other day. She comes in for trainings and meetings. It’s not like she’s a faceless number. She’s a valuable employee.”

“But for every Nisha you bring in here, I can show you an employee who’s frustrated and increasingly disengaged by being stuck in the office,” Vijay countered. He turned to Amrita. “I strongly feel that we should slow this program down.”

Matt turned to her too. “Amrita, I respect Vijay’s feelings. But the numbers clearly say we should be moving full steam ahead.”

 

Question: Should the India office expand its work-at-home program?

(Please remember to include your full name, company or university affiliation, and e-mail address.)

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When Do Regulators Become More Important than Customers?

While working with a huge Russian hydrocarbon company in Texas last year, our innovation conversation quickly zeroed in on customers. Who was the energy giant’s most important customer? Which customer had the biggest impact on new value creation? What customer would matter most in five years?

The wide-ranging English/Russian debate raged for 20 minutes. Then one of the engineering executives, a fracking enthusiast and unconventional extraction technologies champion, spoke up. The answer, he declared, was now obvious. The company’s most important customer — by far — was Russia’s government. Strategic success required pleasing Vladimir Putin’s Kremlin.

The room went quiet. That single comment rebooted the entire discussion. No one disagreed. The innovation roadmap was hauled out and reviewed less in the spotlight of global opportunities than the cold reflection of domestic politics. State satisfaction mattered more than market disruption.

The unhappy innovation inference? Your most important customers may not be the people who buy your products but the ones who regulate your company and industry. With apologies to Ted Levitt, a new “Marketing Myopia 2.0” has emerged. Instead of rethinking “What Business Are We In?,” the better question may be “What Will Our Regulators Do?.” That’s not cynicism; that’s savvy risk management.

Uber didn’t hire former White House advisor David Plouffe by accident. The regulatory handwriting was on the wall and not just in the United States. The app-enabled car service faces resistance and even protests worldwide. But its miseries enjoy great and growing company. Wherever disruptive innovations have captured mind-or marketshare, regulators — not users and consumers — quickly become the customer most worthy of woo. Incumbents and competitors petition for relief and restraint. Twenty-first century market competition in disruptive business environments quickly becomes regulatory lawfare. Upstart innovators are seen as insurgents; they may not have to be crushed, but can’t be allowed to flourish. May the best lawyers and lobbyists win.

For an Uber, Airbnb, Weibo, Google, 23andMe and most strategically-situated post-industrial disruptors, managing regulatory combat quickly assumes primacy over managing either innovation investment or customer satisfaction. Their managements increasingly have to play the odds: What is more likely to get a better and safer return on investment — a really talented software development team in Bangalore, Bogata, or Cambridge? Or a really good lobbyist or ”fixer”—in Brussels, Beijing, or Washington D.C.?

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These questions, of course, aren’t hypothetical.

All companies — innovative or not — must respect and observe the rule of law wherever they compete. But that creates perverse incentives. The more important laws and regulations become, the more incentive there may be to create more of them. Finding innovative ways to change regulations may prove faster, better, and cheaper than innovatively improving products and services. This is the essence of the Nobel Prize-winning work in Public Choice economics — that lawmakers and regulators have incentives to preserve, protect, and extend their influence and reach. The late James Buchanan, the Nobelist father of Public Choice, described this as “politics without romance.”

George Stigler, another Nobel economist, identified and described the concept of regulatory capture — a sort of economics Stockholm Syndrome  where regulators supposedly empowered to protect the public good end up protecting the individuals and organizations they are supposed to regulate.

Needless to say, these behavioral pathologies lead directly to crony capitalism — where favors, waivers, and selective enforcement of the rules matter as much, or more, to marketplace success as innovative genius. These phenomena are global. And as disruptive innovators in fields from digital self-expression, health care, retail, tourism, and transportation seek to scale globally, they’ll find regulators scaling right along side them.

As a rule, innovators are interested in creative destruction; regulators are not. As a rule, regulators make the rules. The rise of disruptive innovation guarantees a rise of restrictive rules. Those rules assure that regulators become more important, not less. Will regulators become more important to innovators than customers? Follow the money: if legal and lobbying budgets are growing faster than innovation and research budgets, we’ll know the answer.

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What Kind of Leader Do You Want to Be?

It’s the question missing from so much of leadership development: “What kind of leader do you want to be?”

We facilitate and encourage self-awareness among up-and-coming leaders (what kind of leader you are), get them to map their journeys so far (what has made you the leader you are), share knowledge and ideas (what kind of leader you should be), and help them acquire new skills and adopt new behaviors (this is how you can become that kind of leader).

But we don’t focus strongly enough on arguably the most central components to successful leadership – leadership intent (the kind of leader you want to be) and impact (the legacy you want to leave). As a shorthand, I refer to these two components, combined, as your “leadership footprint.”

In my experience, many have thought about their leadership footprint at some point, but few have defined it clearly enough to guide their behavior and evaluate their “success.” Of those who have, fewer give it regular consideration – letting it guide their daily decisions – or share it with others, to get feedback and be held accountable.

Here’s an example of how this looks in action. Gail Kelly, CEO of the Westpac Group, one of Australia’s biggest banks and winner of the “Most Sustainable Company” award at the World Economic Forum in Davos this year, has spoken openly and honestly about her personal leadership legacy goals. She’s described these goals as “generosity of spirit.” There are two key elements to generosity of spirit, according to Kelly. The first is believing in the power of people to make a difference (leadership intent). The second is creating an environment that empowers them to flourish to be the best they can be and thereby make that difference (leadership impact).

Kelly does also think about leadership tactics, but these act in service to the greater leadership footprint she’s defined. She defines leaders who have this generosity of spirit as having humility, listening to others, and demonstrating empathy. They are not selfish, intolerant, judgmental, quick to shoot the messenger or find scapegoats, and they don’t sit on the fence to see which way something works out before they decide if they’re going to support it. They deliver feedback honestly and in a timely manner – you don’t wait six or twelve months for your annual performance review. Poor performance is dealt with quickly. And perhaps most importantly, managers choose their assumptions. As Kelly puts it, “I choose to assume that you (my colleague) want the best for me personally and for others. I am generous in my assumptions of your underlying motivations and your intent towards me. Hard as it may be at times, I will assume good intent.”

This approach seems to be working for Westpac – in their internal engagement surveys, 97% of Westpac Group employees report that they can see how their work is linked to the purpose of the company.

I’m certainly not arguing that the one-stop shop for everyone’s leadership success is this idea of generosity of spirit. It works for Gail Kelly because it’s a footprint she has personally chosen and defined. She builds it into her leadership team and ties it directly to results she wants to see in the business.

We shouldn’t all have the same leadership success criteria. We have to define it ourselves. Leaders must give themselves space, time, and permission, and ask for help where they need it, in order to clearly define the culture of leadership they want to build around them. They must assess – both from their own observations and others’ feedback – how they are living up to it, and make the changes necessary to keep building it on a day-to-day basis.

Central to creating a leadership footprint is:

Defining the kind of leader you want to be.
Knowing clearly how that aligns with, and helps achieve, your organizational vision and purpose.
Fostering self-awareness, reflecting on your own behavior and encouraging others to give you feedback.
Recognizing differences that may arise between your intent and your impact.
Self-regulating. As Emma Soane of the LSE says, “The strength and the challenge of self-regulation is ensuring that you have coherence between your personality, your behavior, and your leadership goals.”
Choosing the assumptions about yourself and others that you need to rely on for your leadership footprint to be realistic and sustainable.

My challenge now to every client, whether established or new to their leadership journey, will be the same as the question I need to regularly ask myself: Do you know — and are you mindful on a daily basis of — what leadership footprint you want to make?

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When to Sell with Facts and Figures, and When to Appeal to Emotions

When should salespeople sell with facts and figures, and when should we try to speak to the buyer’s emotional subconscious, instead? When do you talk to Mr. Intuitive, and when to Mr. Rational?

I’d argue that too often, selling to Mr. Rational leads to analysis paralysis, especially for complex products or services. And yet many of us continue to market almost exclusively to Mr. Rational. The result is that we spend too much time chasing sales opportunities that eventually stall out. We need to improve our ability to sell to Mr. Intuitive.

We default to selling to Mr. Rational because when we think of ourselves, we identify with our conscious rational mind. We can’t imagine that serious executives would make decisions based on emotion, because we view our emotional decisions as irrational and irresponsible.

But what if Mr. Intuitive has a logic of his own? In recent years, psychologists and behavioral economists have shown that our emotional decisions are neither irrational nor irresponsible. In fact, we now understand that our unconscious decisions follow a logic of their own. They are based on a deeply empirical mental processing system that is capable of effortlessly processing millions of bits of data without getting overwhelmed. Our conscious mind, on the other hand, has a strict bottleneck, because it can only process three or four new pieces of information at a time due to the limitations of our working memory.

The Iowa Gambling Task study, for example, highlights how effective the emotional brain is at effortlessly figuring out the probability of success for maximum gain. Subjects were given an imaginary budget and four stacks of cards. The objective of the game was to win as much money as possible, and to do so, subjects were instructed to draw cards from any of the four decks.

The subjects were not aware that the decks were carefully prepared. Drawing from two of the decks led to consistent wins, while the other two had high payouts but carried oversized punishments. The logical choice was to avoid the dangerous decks, and after about 50 cards, people did stop drawing from the risky decks. It wasn’t until the 80th card, however, that people could explain why. Logic is slow.

But the researchers tracked the subjects’ anxiety and found that people started to become nervous when reaching for the risky deck after only drawing 10 cards. Intuition is fast.

Harvard Business School professor Gerald Zaltman says that 95% of our purchase decisions take place unconsciously – but why, then, are we not able to look back through our decision history, and find countless examples of emotional decisions? Because our conscious mind will always make up reasons to justify our unconscious decisions.

In a study of people who had had the left and right hemisphere of their brains severed in order to prevent future epileptic seizures, scientists were able to deliver a message to the right side of the brain to “Go to the water fountain down the hall and get a drink.” After seeing the message, the subject would get up and start to leave the room, and that’s when the scientist would deliver a message to the opposite, left side of the brain asking “Where are you going?” Now remember, the left side of the brain never saw the message about the fountain. But did the left brain admit it didn’t know the answer? No. Instead it shamelessly fabricated a rational reason, something like, “It’s cold in here. I’m going to get my jacket.”

So if you can’t reliably use your own decision-making history as a guide, when do you know you should be selling based on logic, or on emotion?

Here’s the short rule of thumb: sell to Mr. Rational for simple sales, and Mr. Intuitive for complex sales.

This conclusion is backed by a 2011 study based on subjects selecting the best used car from a selection of four cars. Each car was rated in four different categories (such as gas mileage). But one car clearly had the best attributes. In this “easy” situation with only four variables, the conscious deciders were 15% better at choosing the best car than the unconscious deciders. When the researchers made the decision more complex – ratcheting the number of variables up to 12 — unconscious deciders were 42% better than conscious deciders at selecting the best car. Many other studies have shown how our conscious minds become overloaded by too much information.

If you want to influence how a customer feels about your product, provide an experience that creates the desired emotion. One of the best ways for a customer to experience your complex product is by sharing a vivid customer story. Research has shown that stories can activate the region of the brain that processes sights, sounds, tastes, and movement. Contrast this approach to a salesperson delivering a data dump in the form of an 85-slide power point presentation.

Rather than thinking of the emotional mind as irrational, think of it this way: an emotion is simply the way the unconscious communicates its decision to the conscious mind.

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A No-Layoffs Policy Can Work, Even in an Unpredictable Economy

In today’s economy, organizations are supposed to treat employees almost as free agents, with low expectations of loyalty on either side. The concepts of lifetime employment and generous employee benefits are seen as old-fashioned throwbacks to paternalism.

But paternalism works — even in the twenty-first century, and even in an industry undergoing disruption. My own workplace is an example.

In the 15 years since I joined Scripps Health, we haven’t laid off anyone. That isn’t the norm in my industry, obviously. Hundreds if not thousands of hospitals have responded to trends such as shorter average hospital stays, fewer surgeries, a shift to outpatient and home care, and reduced reimbursements by consolidating or overhauling their operations and laying off staff.

We’ve certainly had to change too. Sometimes that’s meant eliminating positions, but we didn’t tell the affected employees to leave. A small minority voluntarily left Scripps, but most went elsewhere in the organization. When we were aiming to close a small chemical-dependency hospital in 2013, for example, we looked hard into unmet needs in the area. We decided to simultaneously start a new outpatient clinic nearby, and that’s where the hospital staff ended up.

We believe a no-layoffs philosophy is good for employees’ physical and psychological health — it’s well known that job insecurity can be harmful. And it’s with employees’ health in mind that we also offer generous benefits: Our insurance, wellness, and employee-assistance programs are more extensive than those of most health systems. We want our people to focus on patients, and they can’t do that unless their own health or family concerns are taken care of.

We support these policies through three key practices:

A preference for insiders. We rarely hire from the outside. Employees whose positions have been eliminated go through our Career Resource Center, where they’re trained for other open positions. When our marketing department needed two new people, it kept the positions open for a while in order to take on two employees coming through the CRC from departments that were shrinking. Neither had much marketing experience, but we invested in their development, and after retraining they moved over. Our bias toward insiders means sacrificing some flexibility in hiring. But the added employee motivation more than makes up for that shortcoming. And we haven’t suffered financially: Fifteen years ago we were losing $15 million a year and physicians had just voted no confidence in management. In recent years we’ve had a balanced budget, a AA bond rating, and a unified organization.

Serious accountability. Although we won’t fire you if you’re redundant, we will fire you if you fall short of the goals we develop with you. We’ll give you a lot of training and support, but at the end of the day, we’re all about meeting the needs of patients in a sustainable way. We can’t do that if our employees aren’t performing. So we do let some people go. That includes executives. I tell my senior team that they can miss their annual targets once, but if they don’t turn around their operations quickly, they won’t be here to miss them a second time. So far we haven’t had to fire any executives for missing their targets, although one of them did have to report monthly to the board on his remediation plan until the numbers turned around.

Frontline connections. We’ve worked to avoid the kind of blame-driven, watch-your-back culture I’ve seen in some organizations. We do that by connecting the front line with management in a continuing dialogue. We want all of our employees to understand the larger concerns and priorities of their hospital, clinic, or administrative department, to know how their jobs matter, and to feel free to ask questions of their supervisors. We even offer reluctant managers cue cards to help them start conversations. As a result, employees and managers throughout Scripps feel connected not just to their work buddies but to the overall organization, and employees partner with management to solve problems.

There has been a lot of talk over the years about making nonprofit organizations more businesslike. I’m all for giving nonprofits more financial discipline and planning, but that doesn’t mean they should treat employees like quasi-free agents. I’ve seen what it’s like to carry out mass layoffs — I had to do that in the 1990s at a hospital that was in bad financial shape. I vowed never to let myself get into that position again.

Instead, nonprofits need to match institutional discipline with authentic goodwill toward employees, developing effective employee-assistance and wellness programs and eliminating anxiety about job security. Who knows? If enough nonprofits master this balancing act, then maybe we can teach the for-profit world something for a change.

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GE’s Culture Challenge After Welch and Immelt

It’s an established fact that the life cycles of companies and many products have been shrinking. But what’s often not appreciated is that culture also has a life cycle and that it, too, is getting shorter.

Culture is often associated with the individual at the helm — so much so that the return of a former chief (Steve Jobs returning to Apple, A.G. Lafley going back to P&G) is often intended and viewed as a kind of restoration. However, true culture turnaround requires a complete psychological shift across the entire organization. It is relatively easy for new organizations to start with a clean sheet of paper in creating a culture. But for organizations that have been around for a while, the shift involves quite a bit of shedding and rewiring.

How do long-established companies make this transformation? How do they understand the need to change and create the energy and urgency around it? How do they match a shift in strategy (which is called for in times of change) with a shift in culture? I suspect that many organizations get into trouble not because of a failed strategy but because of a frozen culture. If this hypothesis is true, how do we make culture change a lever for growth as opposed to taking it as a given?

At GE, we have stayed competitive for more than 130 years because of our relentless quest for progress on all fronts, including culture. We believe that there is no such thing as a 130-year culture. In our opinion, culture is contextual, and what would have been appropriate in the 19th century, when the company was a one-product, one-country organization, is very inappropriate in today’s far more globalized environment. (GE now operates in 175 countries across the globe.) So a constant reengineering of our business portfolio, operating model, and culture has been a key to our evolution.

For an organization to endeavor to change its culture, it needs to take its cue from what changes in its strategy. Sometimes strategic shifts are driven by external events, such as the post 9/11 environment or the onset of the Great Recession in 2008. Other times, shifts may be driven by disruptions and disrupters like the one happening in the transportation and hotel markets right now thanks to the likes of Uber and Airbnb. Of course, leaders, too, can set a different tone: Jack Welch, Lee Iacocca, Lou Gerstner, and Steve Jobs all did that.

Whatever the prompt, a strategic shift often cannot happen without a culture shift as well.

The cultural shifts that GE has made over the last couple of decades were clearly set within the context of their respective eras in the business world. Let’s take the 1990s. The context demanded operational excellence. Companies in industrial businesses had to drive costs down and execution up and create foolproof processes to ensure quality. Accordingly, Jack Welch’s drive to Six Sigma involved an intense focus on controlling costs, quality, and execution on both the infrastructure and behavioral sides (e.g., the forced ranking of employees, and the “4Es” of energy, energize, edge, and execution that leaders were expected to demonstrate). The result was a tight, control- and process-oriented, operationally focused, cost-conscious organization.

In the first part of this century, innovation became the priority. Operational excellence had made us vulnerable to disrupters that were figuring out new ways to move mainstream. New industries were spawned, some existing ones became obsolete, and others (e.g., telecom, music, and aviation) experienced upheavals. The decade also saw the rise of formidable emerging-market competitors and opportunities.

Accordingly, Welch’s successor, Jeff Immelt, drove GE to achieve growth through innovation. In fact, we defined growth as a process. This was aided by encouraging innovation (through “imagination breakthroughs,” a way of protecting growth ideas) and launching a massive commercial training operation that built commercial and marketing capabilities. The behavioral dimensions of this effort were focused on values like external focus, clear thinking, imagination, courage, inclusiveness, and expertise. The result was growth and scale. We grew our presence around the world and expanded our definition of emerging markets from China, India, and Brazil to include Algeria, Angola, Chile, and Vietnam.

Now that the Great Recession is behind us, the business world is undergoing yet another shift. There are three drivers behind it.

An increasingly inter-connected world in which any one issue can trigger a “tsunami.” The plunge in oil prices is an example. Not even the best pundits predicted that the fall would be so rapid and so dramatic. This is good news for some industries and bad for others. Or take Ebola. What’s happening in West Africa is not confined to that part of the world alone.

The rise of the millennial generation in the workplace.  At GE, we specifically commissioned a group of millennials, called the Global New Directions group, to help us understand what kind of an organizational culture they would like to see. They told us they were ready for a more horizontal, agile, “connect and inspire” model as compared to the “command and control” model the boomers are used to.

Employee engagement. Here, we use our employee surveys as a tool for culture change. Our employees clearly told us that our organization had to shift its culture — that we had to become more decentralized and simpler to do business with, and had to delegate power to where the action is.

GE has responded to this new context and feedback by making simplification our operating rhythm. The tenets of simplification include customer intensity, lean management, and a complete reimagination of IT — not as a cost to be outsourced but as a strategic lever that must be maximized. Digital intensity is an imperative.

Using tools learned from Silicon Valley, GE launched FastWorks, which relies on lean start-up principles. This new way of working results in better outcomes for our customers, faster. FastWorks is about constantly experimenting, learning, and iterating, and the customer being at the center of everything we do.

To facilitate this new operating model, we have had to create a new cultural template that demands new ways of behaving. We even called our new cultural orientation “the GE Beliefs” to ensure that people changed their frame of thinking to the new way. The GE Beliefs are: Customers determine our success, stay lean to go fast, learn and adapt to win, empower and inspire each other, and deliver results in an uncertain world. They reflect a renewed emphasis on acceleration, agility, and customer focus. Interestingly, the GE Beliefs were crowdsourced from our employees for the first time — an attempt to drive a culture that the employees wanted to see.

In a fast-moving world, we have also realized that annual events are passé. Every operating rhythm has to become more agile, responsive, nimble, and focused. Consequently, we have moved away from an annualized strategic-planning process to a more continuous process of checking on the environment and context and pivoting where necessary every quarter. Reviewing the people and organizational-capability equations is also more continuous. And we are changing the way we do performance appraisals from an annual event to a more real-time approach. All these “interventions” reinforce the new culture — one of speed, simplicity and customer focus.

When culture is not given enough attention, it becomes an obstacle to change. Just as they do with strategy, companies should make constantly examining their cultures a part of their operating rhythm.

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A Consultant’s Guide to Firing a Client

We all have limited time, and despite our best efforts at triage, email and meetings will probably always remain low-grade annoyances. But if you want to dramatically enhance your productivity, it pays to zero in on the biggest source of stress and wasted time: problematic clients.

Some entrepreneurs and executives fight to hold onto business at all costs, recognizing that it’s easier to retain a customer than to win a new one. That’s true, but many business leaders are loathe to fire clients, even when it’s the right move. I’ve been a consultant for the past nine years, and my client list today looks dramatically different than it did when I launched, in large part because of strategic decisions I made to let some clients go and take on others. Here’s how to recognize when it’s time for your business relationship to end.

When you’re doing work you no longer want to do. In the early days of your business, almost any contract feels like a win. You may be willing to accept assignments outside your sweet spot. PR? Board development? Strategic planning? Sure, why not? But over time, you learn where you excel, and where you’d like to focus. In the early days of my consulting business, I worked with a prominent education nonprofit, helping them with communication projects, from messaging to media outreach. But over time, I became less interested in the tactical – calling up reporters to come to press conferences – and more interested in media and marketing strategy. They still needed the former, but I just couldn’t bring myself to do it anymore. If you have “legacy assignments” that no longer appeal or that don’t make strategic sense for your business, you’re better off referring them to someone else who’s eager for the work instead of doing a half-hearted job out of a misguided sense of loyalty or because you want the money.

When your client wastes your time. It’d be nice if everyone focused on results, not face time – but sadly, that’s not the case. (Even Best Buy, the originator of the innovative “Results Only Work Environment” program, later rescinded it.) There’s something to be said for small talk and “getting to know you” conversations (famed psychologist Robert Cialdini says neglecting these forms of relationship-building is one of the top mistakes that American professionals make). But if your clients push this too far, they’re taking money out of your pocket. I once had a consulting client who insisted that I attend her weekly staff meetings. It was a relatively lucrative contract, so I agreed; I assumed we’d be discussing strategic issues that were relevant to my work. Instead, I quickly discovered that everyone went around the table discussing everything they’d done the previous week, and everything they were going to do for the coming week. I knew more about their comings-and-goings than I did about my friends, family, or neighbors. When I spoke to the managing director and suggested my time could be better deployed elsewhere, she put her foot down: “You’re our consultant, and we want you at that meeting.” I continued to attend, but only until my initial contract ran out. If the client doesn’t respect your time, or your judgment about how best to help them, they’re treating you like a lackey.

You and Your Team



Getting More Work Done


How to be more productive at work.

When you’re locked into low fees. You may be working with a great client doing interesting projects, but if you’ve been collaborating for a while and have gained experience in the interim, you may have outgrown your existing fee structure. When I started as a consultant, I knew precious little about pricing; I’d guess wildly with scarce information to base things on besides my previous experience as a salaried employee. As I gained experience, I realized I’d been underpricing – but clients grow accustomed to having you at a certain rate and may be unwilling to accept new fees. As you learn more and grow your brand, you may need to move upmarket and work with a different set of clients who don’t blink at what you’re worth.

When your client is never satisfied. If you find your clients growing increasingly demanding, it’s worth a conversation. They might have unspoken expectations that you’re not meeting (because you don’t know they exist). It might be something easy to address, in which case you’ve spared yourself a potential rift. But equally important, you may discover that their desires are downright unrealistic. The same client who insisted I attend their staff meetings had enjoyed a years-long media bonanza prior to my work with them; a prominent newspaper editorialist was a huge fan of their work, and wrote about them regularly. She retired a month before I started my consulting contract, leaving a barren landscape of newspaper coverage…for which I was blamed. Until I succeeded in replicating the frequent media panegyrics that they’d previous enjoyed, they wouldn’t be satisfied. And that was never going to happen.

Firing a client is a difficult decision. But it doesn’t have to be awkward or contentious the way that firing an employee often is. For one thing, an employee generally expects ongoing employment, while you most likely have a fixed contract with your client (to deliver 50 airplanes, or create a marketing strategy, or provide six months of executive coaching). Unless your relationship has become toxic, it’s best to hang tough until your contract is up for renewal, and then gently explain to the client – who might be thinking the same thing – that this is the perfect point to wind down your engagement. If they require future assistance, you can recommend some good options – that aren’t you. After all, to make room for better, more strategic, and more lucrative clients, you have to be willing to let go of the ones that are holding you back.

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What Everyone Should Know About Managing Up

Photo by Andrew Nguyen

Having a healthy, positive relationship with your boss makes your work life much easier — it’s also good for your job satisfaction and your career. But some managers don’t make it easy. Bad bosses are the stuff of legend. And too many managers are overextended, overwhelmed, or downright incompetent — a topic that HBR has covered extensively over the years. Even if your boss has some serious shortcomings, it’s in your best interest, and it’s your responsibility, to make the relationship work.

HBR recently ran a special series on managing up, asking experts to provide their best practical advice for navigating this important dynamic. Together, these pieces provide a good primer on how to maintain an effective, productive working relationship with your own boss.

To start, consider the type of manager you have. Many pose a unique set of challenges that require an equally unique set of skills to handle. Perhaps you’re dealing with:

A brand new boss, someone you’ve never met before.
A manager you don’t see face-to-face because she works in another location
An insecure boss (hint: it’s important to know how to tame his ego)
An all-knowing or indecisive boss
A manager who gives you conflicting messages
A long-winded boss
A hands-off boss
A manager who isn’t as smart as you
A boss that’s actually a board of directors

No matter what type of manager you have, there are some skills that are universally important. For example, you need to know how to anticipate your boss’s needs — a lesson we can all learn from the best executive assistants. You need to understand what makes your boss tick (and what ticks her off) if you want to get buy-in for your ideas. Problems will inevitably come up, but knowing the right way to bring a problem to your boss can help you navigate sticky situations.

You and Your Team





Managing Up




Best practices for interacting with your boss.

There will, of course, be times when you disagree with your boss, and that’s OK — as long as you’ve learned to disagree in a respectful, productive way. Still, despite your best efforts to build a good relationship, there may come a time when you’ve lost your boss’s trust. It happens. And while it may take some diligent effort on your part, it is possible put the relationship back on track, even if you feel like your boss doesn’t like you.

And if you scoff at all the talk of bad bosses and think, “I have a great boss,” be careful. It’s possible to like your boss too much. And being friends with your manager can be equally tricky. You don’t want your boss to be your only advocate at work. You need to find ways to demonstrate your worth to those above her as well.

Perhaps the most important skill to master is figuring out how to be a genuine source of help — because managing up doesn’t mean sucking up. It means being the most effective employee you can be, creating value for your boss and your company. That’s why the best path to a healthy relationship begins and ends with doing your job, and doing it well.

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