Marina Gorbis's Blog, page 1340

Get Your Organization to Run in Sync

Hundreds of consumers standing in line at your local Apple store.  Thousands of protesters rushing to flood the streets of Kiev, Istanbul, or Hong Kong.  Millions of fireflies blinking on and off in complete unison. Even the unconscious beating of your heart. These are all synchronized systems.

So it is curious that the institutions we build—and put so much conscious effort towards—are so rarely able to synchronize.  Despite our best efforts, most organizations operate disjointedly.  Fortunately, research into network science has begun to shed light on how synchronization happens and how we can make our enterprises function more effectively. Three elements are key.

1. Small groups. Most leaders tend to think on a macro level.  That shouldn’t be surprising, because our efforts tend to be focused on our responsibilities.  So if we’re responsible for an entire organization, then we tend to think in those terms and act accordingly.

However, actions are influenced at the grassroots.  As Solomon Asch showed in his famous conformity experiments, we tend to adopt our views our peer group.  In fact, his research showed that we conform to those around us even when their views are demonstrably untrue.

Asch’s research helps explain why it is so hard for enterprises to adapt to new challenges.  It may be possible to create alignment among the leadership team, but that consensus will break down once the individual members return to their working groups.  There, they will find that they are confronted with local majorities opposed to the global leadership view and, in time, even leaders will conform.

That’s what appears to have happened at Blockbuster.  Faced with a competitive challenge from Netflix, CEO John Antioco came up with what seems, even in retrospect, to be a viable plan.  Nevertheless, various groups within the enterprise balked at the plan, Antioco was fired, and Blockbuster went bankrupt.

So leaders need to treat new initiatives not as mere organizational governance, but as a grassroots movement of small, interconnected groups, each with varying thresholds of resistance—some enthusiastic, others hostile and many in between. Moving an idea forward is not just a matter of persuasion, but also of managing the connections between constituencies.

2. Loose connections. Those close to us tend to have the same limited knowledge we do.  They have similar experiences, are confronted with similar challenges and share many of the same personal relationships.  So while our views tend to correspond to our peer group’s, the information most valuable to us usually lies outside of it.

That’s exactly what sociologist Mark Granovetter found he began studying how people landed jobs in communities around Boston.  It wasn’t through close friends that people found employment, but more distant acquaintances—friends of friends.  He called the phenomenon the strength of weak ties.

It is the combination of tight circles and loose connections that drives high performing organizations.  A study of star engineers at Bell Labs found that the most accomplished ones worked in a close-knit group, but also frequently reached out to people outside of it.

Another study of Broadway plays found the same thing.  If no one in the cast and crew had worked together before, then results were poor.  However, if there were too many existing relationships, then performance suffered as well.  You need the right mix of cohesion and diversity in order to achieve both innovation and operational efficiency.

And that’s what makes synchronized organizations top performers—they are not only aligned internally but also able to adapt to new information that arises externally.

3. Shared context. In nature, the purpose of a system is hardwired.  Nobody has to tell a pacemaker cell in the heart what it is supposed to do.  However, in organizations it is incumbent on leaders to set direction.

Gary Hamel and C.K. Prahalad called this concept strategic intent. Southwest Airlines has prospered by being “the fun low cost airline” and seeks to be nothing else.  Google strives to “organize the world’s information.”  Apple creates products that are “insanely great.”  It is the mission that drives the strategy, because that’s what defines what winning looks like.

Yet a clear mission, although important, is not enough.  There also must be a shared context of values and beliefs.  Apple, for example, has committed to specific design values and an integrated architecture.  Former Google CEO Eric Schmidt has described his company’s values at length in a new book called How Google Works, which emphasizes how Google seeks out “smart creatives” and strives to build a working environment where their ideas can thrive at scale.

Firms with strong value systems seamlessly adapt to new challenges.  Apple and Google, of course, have been successful across a variety of market contexts.  Less familiar examples include the thriving business of McDonalds in India, where it must cater to vegetarian diets, and Cosmopolitan magazine’s success in Islamic countries where public discussions about sex are taboo.

So how do you get your organization more in sync? Most leaders focus on strategies and plans because that is what stakeholders are asking for.  It is easier to formulate a story based on market analysis than it is to promote better organizational health.  Nevertheless, studies have shown that it’s the informal networks within an organization that are crucial to success.

We can no longer rely on hierarchies.  The problem is not that they have suddenly become illegitimate, but that they are slow and the world has become fast.  It is no longer enough to merely plan and direct action, today we must inspire and empower movements of belief.

So in addition to their role in formulating strategy and optimizing financial performance, managers must also seek to create synchronized organizations to carry out strategic intent.  That requires a focus on small groups, loosely connected — but united by a shared context.

How to Handle Stress in the Moment

You hear a lot of advice about how to reduce stress at work. But most of it is about what to do over the long term — take up yoga, eat a healthy diet, keep a journal, or get more sleep. But what do you do when you’re overcome with stress in the moment — at your desk, say, or in a meeting? Perhaps you’ve heard bad news from a client or were assigned yet another project. How can you regain control?

What the Experts Say

Eighty percent of Americans are stressed at work, according to a recent study by Nielsen for Everest College. Low pay, unreasonable workloads, and hectic commutes were the top sources of tension, followed closely by obnoxious coworkers. What exacerbates the problem is that “people walk into work already laden with stress,” says Maria Gonzales, the founder and president of Argonauta Strategic Alliances Consulting and the author of Mindful Leadership. “If there is a hardship at home, you bring that to the office and it gets layered with your professional stress and — if you’re not careful — it can spiral out of control.” How well you react to and manage daily stressors “impacts your relationships with other people, with yourself, and how others perceive you,” she says. Justin Menkes, a consultant at Spencer Stuart and the author of Better Under Pressure says it’s critical “to get a handle on your reaction to the stressful things that happen to you in the moment.” Here are some techniques to do just that.

Identify your stress signals

Train yourself to recognize “your physiological signs of stress,” says Gonzales. Perhaps your neck stiffens, your stomach clenches, or your palms sweat. These are all the result of what’s happening inside your body. “The minute you start to experience stress, your pulse races, your heart beats faster and hormones [including cortisol and adrenaline] are released,” she says. “This compromises your immune system and your ability to experience relaxation.”  When you’re able to recognize the signs — instead of ignoring them — you’ll be able to start addressing the underlying cause of the stress.

Don’t think of it as stress

“Most often the reason your blood pressure rises at work is because you’re being asked to do something important” by your boss or a colleague and you want to succeed, says Menkes. “The stress symptoms are telling you: This matters.” Shift your thinking about the task causing you distress and instead try to view it as “an opportunity to move forward that you want to take seriously,” he adds. The goal is to “use that adrenaline pop” to focus your nervous energy, “heighten your attention, and really apply yourself.”

Talk yourself down

When you’re stressed, the voice inside your head gets loud, screechy, and persistent. It tells you: “I’m so angry,” or “I’ll never be able to do this.” To keep this negative voice at bay, “try talking to yourself in a logical, calm tone and injecting some positivity” into your internal dialogue, says Gonzales. “Say something like, ‘I have had an assignment like this in the past and I succeeded. I can handle this, too.’ Or, if you are faced with an unrealistic request, tell yourself: ‘I am going to calm down before I go back and tell my manager that completing this assignment in this amount of time is not possible.’”

Take three deep breaths

Deep breathing is another simple strategy for alleviating in-the-moment tension. “When you feel anxious, your breath starts to get shorter, shallower, and more irregular,” says Gonzales. “Taking three big breaths while being conscious of your belly expanding and contracting ignites your parasympathetic nervous system, which induces a relaxation response.” You can do this while also lowering your shoulders, rotating your neck, or gently rolling your shoulders. Deep breathing also helps preempt stress symptoms if you need to, say, get on a tense conference call or deliver bad news in a performance review. “When your mind becomes crowded with negative thoughts, let deep breathing occupy your mental real estate,” says Gonzales.

Enlist a friendly ear

You shouldn’t have to face nerve-wracking moments at the office alone. “Everyone needs to have somebody they trust who they can call on when they’re feeling under pressure,” says Menkes. “Select this person carefully: You want it to be somebody with whom you have a mutual connection and who, when you share your vulnerabilities, will respond in a thoughtful manner.” Sometimes venting your frustrations aloud allows you to regroup; at other times, it’s helpful to hear a new perspective. This kind of relationship takes time to build and requires nurturing, and it’s likely you will be asked to return the favor. “When you do, it’s incredibly gratifying to be on the other end.”

Make a list

Creating a to-do list that prioritizes your most important tasks is another way to combat feeling overwhelmed. “The act of writing focuses the mind,” says Gonzales. “Do a brain dump and write out everything you need to do and note whether it’s professional or personal, so you make time for both,” she says. Next to each item, indicate when the task needs to be completed. And here is a critical step: “Identify which are ‘important’ and which of those items are ‘urgent.’”  Those are the ones to tackle first.” Once those are finished, move on to the other things that are more routine. “If you spend all your time on the time-consuming mundane things, you may never get to the important things which is how we get ahead,” she says.

Project an aura of calm

Ever notice how when you’re speaking to someone who’s agitated, you start to feel agitated too? That is because stress is contagious. “When someone palpably feels your tension, they react to it,” says Menkes. He suggests “trying to modulate your emotions” when you find yourself in a tense conversation. Force yourself to “keep your speaking voice gentle and controlled,” adds Gonzales. Talk in a reasonable and matter-of-fact manner. “If you are persistently calm, others will be too,” she says.

Do

Identify what your physiological signs of stress are so you can work to alleviate the tension
Counteract stressful situations by taking deep breaths
Find someone whose judgment you trust who can listen and provide counsel

Don’t

Forget the reason you feel stressed in the first place — you are being asked to do something important and you want to succeed
Let the negative voice in your head spiral out of control — talk to yourself in a logical, gentle tone
Project your stress onto others — speak in a calm, controlled way and others will too

Case study #1: Think positive thoughts

Cha Cha Wang was seven months into her job as a business analyst at an online services company when her manager came to her one afternoon and asked for assistance. He needed her to turn around a comprehensive financial forecast for the company. And she had a week to finish it.

“My heart started racing,” recalls Cha Cha. “Our company was newly public and I wanted to do as good a job as possible. I felt like I had two voices inside my head. One was saying: ‘That is impossible. There’s not enough time to do it,’ and the other was saying: ‘You have no choice; it has to get done.’”

Cha Cha excused herself to the bathroom, looked in the mirror, and took a deep breath. She reflected on her days as an MBA student and her stint as a consultant. “In business school and in consulting, you’re inundated with a lot of different assignments and you have to juggle multiple deadlines,” she says. “I told myself: ‘I can do this. My personal life will go on hold for a week and I will not get much sleep, but it will get done.’”

Having calmed her initial stress reaction, Cha Cha then focused on the “tactical execution” of the project. She made a detailed list of all the financial data she needed; she then scheduled meetings with colleagues who had that information. After each session, she incorporated new figures into her statistical models. She worked late every night that week, but she finished the financial forecast by the deadline.

“When I was younger, I reacted more emotionally [to stress],” she says. “But now that I am a little more seasoned, and I’ve worked in several different jobs and tested my limits, I know what I can do.”

Case study #2: Vent to someone who will help you recover and move on

Pablo Esteves, the director of strategic partnerships for Emzingo — a company that runs leadership immersion programs for business schools — had been working on a proposal for a potential client for months. He had visited the prospective client on site and the two had gone back and forth over the proposal numerous times before he submitted it. Pablo expected to hear good news.

But instead, he received an email from the school’s administrator that said: “We see the value in what you’re doing and we like what you’re doing, but it’s not for us.” Pablo immediately felt stressed out. His pulse started racing and he knew that he needed to talk to someone to calm down. “I knew exactly who I could vent to,” he says.

Pablo, who is based in Madrid, sent an email to his colleague and friend, Daniel, who lives in Peru.  He explained what had happened. Within an hour, the two men were on the phone. Daniel patiently listened to his problems, agreed with Pablo on certain points, and then offered his own perspective and advice. “He helped me understand why things maybe didn’t work out this time, but he also told me that we had other clients who were going to come through,” says Pablo. “He helped me regroup.”

The pep talk helped. After the call Pablo felt less stressed about the rejection and energized about focusing on new projects.

More on reducing stress: 

Nine Ways Successful People Defeat Stress

The Best Way to Defuse Your Stress

Reduce Your Stress in Two Minutes a Day

Using Algorithms to Predict the Next Outbreak

There’s no doubt that our world faces complex challenges, from a warming climate to violent uprisings to political instability to outbreaks of disease. The number of these crises currently unfolding – in combination with persistent economic uncertainty – has led many leaders to lament the rise of volatility, uncertainty, complexity, and ambiguity. Resilience and adaptability, it seems, are our only recourse.

But what if such destabilizing events could be predicted ahead of time? What actions could leaders take if early warning signs are easier to spot? Just this decade, we have finally reached the critical amount of data and computer power needed to create such tools.

“What is history? An echo of the past in the future,” wrote Victor Hugo in The Man Who Laughs. Although future events have unique circumstances, they typically follow familiar past patterns. Advances in computing, data storage, and data science algorithms allow those patterns to be seen.

A system whose development I’ve led over the past seven years harvests large-scale digital histories, encyclopedias, social and real-time media, and human web behavior to calculate real-time estimations of likelihoods of future events. Essentially, our system combines 150 years of New York Times articles, the entirety of Wikipedia, and millions of web searches and web pages to model the probability of potential outcomes against the context of specific conditions. The algorithm generalizes sequences of historical events extracted from these massive datasets, automatically trying all possible cause-effect combinations and finding statistical correlations.

For instance, recently my fellow data scientists and I developed algorithms that accurately predicted the first cholera outbreak in 130 years. The pattern that our system inferred was that cholera outbreaks in land-locked areas are more likely to occur following storms, especially when preceded by a long drought up to two years before. The pattern only occurs in countries with low GDP that have low concentration of water in the area. This is extremely surprising, as cholera is a water-born disease and one would expect it to happen in areas with a high water concentration. (One possible explanation might lie in how cholera infections are treated: if prompt dehydration treatment is supplied, cholera mortality rates drop from 50% to less that 1%. Therefore, it might be that in areas with enough clean water the epidemic did not break out.)

The implication of such predictions, automatically inferred by an-ever-updating statistical system, is that medical teams can be alerted as far as two years in advance that there’s a risk of a cholera epidemic in a specific location, and can send in clean water and save lives.

Other epidemics can be predicted in a similar way. Ebola is still rare enough that statistical patterns are tough to infer. Nevertheless, using human casualty knowledge mined from medical publications, in conjunction with recurring events, a prominent pattern for Ebola outbreaks does emerge.

Several publications have reported a connection between both the current and the previous Ebola outbreaks and fruit bats. But what causes the fruit bats to come into contact with humans?

The first Ebola outbreaks occurred in 1976 in Zaire and Sudan. A year before that, a volcano erupted in the area, leading many to look for gold and diamonds. Those actions caused deforestation. Our algorithm inferred, from encyclopedias and other databases, that deforestation causes animal migration – including the migration of fruit bats.

We have used the same approach to model the likelihood of outbreaks of violence. Our system predicted riots in Syria and Sudan, and their locations, by noticing that riots are more likely in non-democratic regions with growing GDPs yet low per-person income, when a previously subsidized product’s price is lifted, causing student riots and clashes with police.

The algorithm also predicted genocide by identifying that those events happen with higher probability if leaders or prominent people in the country dehumanize the minority, specifically when they refer to minority members as pests. One such example is the genocide in Rwanda. Years before 4,000 Tutsis were murdered in Kivumu, Hutu leaders such as Kivumu mayor Gregoire Ndahimana referred to the minority Tutsis as inyenzi (cockroaches). From this and other historical data, our algorithm inferred that genocide probability almost quadruples if: a) a person or a group describes a minority group (as defined by census and UN data) as either a non-mammal or as a disease-spreading animal, such as mice, and b) the speaker does so 3-5 years before they’ve been are reported in the news a minimum of few dozen times and have a local language Wikipedia entry about them.

After an empirical analysis of thousands of events happening in the last century, we’ve observed that our system identifies 30%-60% of upcoming events with 70%-90% accuracy. That’s no crystal ball. But it’s far, far better than what humans have had before.

What would it mean to NGOs, construction companies, and health organizations to know that droughts followed by storms can lead to cholera? What would it mean to mining companies, regulators, environmental organizations, and government leaders to know that mining leads to deforestation, and that deforestation leads to fruit bat migrations, and that fruit bat migrations may increase the risk of an Ebola outbreak? And what would we all do with the information that certain linguistic choices and policy changes can result in widespread violence? How might we all start thinking about risk differently?

Yes, “big data” and sophisticated analytics do allow companies to improve their profit margins considerably. But combining the knowledge obtained from mining millions of news articles, thousands of encyclopedia articles, and countless websites to provide a coherent, cause-and-effect analysis has much more potential than just increasing sales. It can allow us to automatically anticipate heretofore unpredictable crises, think more strategically about risk, and arm humanity with insight about the future based on lessons from the relevant past. It means we can do something about the volatility, uncertainty, complexity, and ambiguity surrounding us. And it means that the next time there’s a riot or an outbreak, leaders won’t be blindsided.

Our Emotional Attachment to Local Currencies

The Brixton Pound was first issued as paper money in September 2009. Two years later, the electronic B£ pay-by-text platform was announced. Launched with the partnership of the Bristol Credit Union, the Brixton Pound is now used by 650 businesses, with £528,000 of the currency in use in both electronic and paper format.

The Brixton Pound is a medium of exchange, but it is not technically a legal tender since it does not constitute a government-backed promise to pay the bearer. However, Council Staff from the city can take part of their salary, on a voluntary basis, in electronic Brixton Pounds and all trade performed with the currency attracts corporation tax and VAT.

The Brixton pound is a good example of a new phenomenon that I call tribal money. Tribal money is a currency that is created not by a national institution or authority, but by a group of people with common cause. Supporters of the Brixton Pound use the slogan, “Creates Community Pride.” Other areas in the UK and beyond are also experimenting with new currencies. There are 70 complementary currencies in Spain alone, for example, and more than 5,000 worldwide.

Why is “tribal money” on the rise at the same time that barriers to trade and globalization are falling? Classical economics argues that money performs three functions: to give value to tradable goods; as a means of payment; and as a reserve of value. However there is an important and often overlooked, fourth function: to provide a sense of belonging. Money provides a sense of identity. It is no coincidence that coins and notes bear the images of monarchs, presidents, and national heroes.

The Brixton Pound performs the first two functions well: it gives a value to tradable goods; and it can be used as a means of payment. It is probably not so good at the third function, as a value reserve — complementary currencies tend to lose value over time. But most of all, what the Brixton Pound provides is a sense of belonging. It is about being part of a tribe.

During the nineteenth century, newly created nation-states looked for unifying elements to bond a society together. This took different forms: a national constitution a national language; national banks; and a national currency, including national symbols in the newly issued banknotes. For instance, the creation of the Spanish peseta in 1868 went in parallel to the establishment of the Banco de España in 1856, and its monopoly in 1874 of issuing currency, eliminating all other currencies in use at the time (escudos, reales, and maravedies). After the establishment of the peseta, bank notes, coins, and stamps were created having all the symbols of the Spanish nation: kings, queens and other political and cultural icons.

But today, pesetas, francs, deutschmarks, lira, and drachmas – all of which had a special place in the national psyches of their origin countries – have been replaced by the euro. (Tellingly, the UK, an island state, still retains the pound.) Nation-states, at least in Europe, don’t mean what they once did.

As identification with the old nation states loses strength, tribal affiliations are becoming stronger. Think of Scotland in the UK; Catalonia in Spain; or South Tyrol and Sardinia in Italy. Tribes are no longer defined by national borders but by communities of interest. As the symbols of national pride decline, the tribe becomes the carrier of identity – and wants to adopt its own currency. Viewed through that lens, it makes perfect sense that community-based complementary currencies are emerging now.

There is still no great emotional identification with the European Institutions. They are too big, too abstract, and too far away to elicit our emotional attachment. But humans have a fundamental need to belong to a community in which we can contribute and participate. Independent currencies provide a sense of continuity and belonging that European citizens feel in these transitional times.

The emotional attachment to money as part of a community culture – literally and emotionally a tribal currencies often underestimated. But it constitutes a relevant and important aspect to the future of Europe – and the rest of the world.

Engaging Your Older Workers

Older workers — those who are at or approaching the traditional retirement age of 65 ­— are the fastest-growing segment of the workforce and one of the fastest-growing groups in the overall population. In the U.S. the number of individuals aged 65 or older will increase by about 66% between now and 2035. The growth is driven in part by the Baby Boomer generation, but even more so by an increased life expectancy that’s creating more healthy years for more people.

As we learned in our research for our book, Managing the Older Worker, people who are 65 today have about the same risk of mortality or serious illness as those who were in their mid-50’s a generation ago. The percentage of the population over age 65 who are at serious risk of mortality or life-threatening illness will grow by only about 16% between now and 2035, which means that there will be a huge cohort of healthy individuals in that age group who want and need to work. These changing demographics will transform the U.S. labor market and society as a whole. Any employer who wants to engage a skilled, motivated, and disciplined workforce cannot afford to ignore them.

And yet, these workers are being ignored to some extent. About three quarters of individuals approaching retirement have for some time said that they would like to keep working in some capacity, yet only about a quarter of them actually do. Something is keeping them from working, and that something is on the employer side.

Engaging the older workforce should not be such a big challenge. Older workers tend to be in the workforce because they want to be — relatively few look for jobs because they need them to survive. (During the Great Recession we heard a lot about people not being able to retire because of finances, but we’re hearing that less now.) Older workers want to keep working first and foremost because it keeps them engaged with other people, and also to feel as though they’re contributing. Money is further down the list. Older workers also know what they are getting into and what is required when they accept a job — much more so than younger workers.

So, why aren’t we seeing more older employees in the workforce? The problem seems to be getting them in the door in the first place. Discrimination is certainly one reason. Evidence suggests that we are more biased in our views of older individuals than we are of minorities and women. It’s easy to see that bias if we compare the images that come to mind when we contrast the words “older,” which brings up negative stereotypes, and “experienced,” which brings up positive ones.

The other challenge is fear. Younger supervisors are often afraid of managing older employees because these older workers have more experience than they do. The less experienced managers may wonder, “How can I say, ‘Do this because I know best’ when often I don’t know best?” Older workers may also have some initial trouble being managed by younger supervisors, especially those with less practical experience than they have. But it’s up to supervisors to shape the relationship beginning with the first interaction by saying how they want to use the older worker’s experience, while pointing out what their own responsibilities are for setting goals and holding people accountable.

It’s not just a confidence issue. Younger supervisors may find that what works with most of their staff doesn’t work for older employees. They aren’t as fearful of being fired (they’re already at retirement age) and they have less interest in promotions or a big payout in the future.

So how do you keep an older worker engaged? Start by acknowledging and using their experience. Certainly this is true for any age group: Everyone wants their expertise to be recognized, especially by the boss. But with older workers, it’s even more important, because they typically have a lot of experience — so ignoring it is especially irritating. And older workers themselves can be prickly about being managed by someone who knows less than they do.

The military has developed some good tactics for recognizing and appreciating older workers’ expertise based on the efforts of generations of junior officers fresh out of college and struggling to manage older, more experienced sergeants. Military leaders now advise those officers to treat their experienced subordinates as partners, at least behind the scenes.  The supervisor is still in charge, but he’s missing an opportunity (and is more likely to make a mistake) if he doesn’t check in with his more experienced subordinates — at least to hear their thoughts — before making important decisions. The supervisor still sets the goals and holds people accountable for meeting them. But the subordinates have a big say in the execution, and when they walk out of their private meetings with their managers, they need to be on the same page.

In the workplace, it’s useful to check in with individual older workers to ask them what problems they could foresee in executing a specific task (“Here’s what we need done”). If you don’t take any advice they offer, it’s helpful to explain why not (“I know it’s an aggressive deadline, but it’s important to finish this before the new manager takes over”).

In terms of their interests, older workers tend to be more like young workers than like their middle-aged peers. Their big financial needs are typically behind them, work is often a source of social interaction for them, and they care more about the good works that their employer might be doing than the cohorts in middle age. Supervisors should consider giving older works jobs with more customer interaction (frontline jobs) or those dealing with internal customers.

Research also suggests that putting older and young workers together helps both groups perform better. They make good allies in part because of their similar interests, but because of their different stages of life, they are less competitive with each other than workers in the same age cohort might be. That means that they are more likely to help each other and to form good teams.

The bottom line is that companies looking to increase engagement, performance, and loyalty need to do a much better job of engaging this growing — and valuable — segment of the workforce. For employers who say they want a workforce that can “hit the ground running,” that doesn’t need training or ramp-up time to figure out what to do, that will be conscientious, and that knows how to get along with others, older workers are the perfect match.

We Need More Transparency on the Cost of Specialty Drugs

The economics principle “The more you concentrate your buying power, the better your pricing” applies in health care, too. That’s why health insurance companies can offer customers lower premiums by restricting the size of provider networks. They send more patients to fewer hospitals — and get a better deal per patient, passing on at least some of the savings to you.

Next up for restrictions: specialty drugs. These expensive medicines treat diseases, such as specific cancers or multiple sclerosis, that affect relatively small populations. That means you may not get the drug your doctor wants to prescribe — or if you do, it will cost you a lot more money.

Theoretically, there’s nothing wrong with this. If the choices are medically appropriate, the savings to the system should justify the restrictions. But that’s a big “if.” We don’t know how a payer decides to give one specialty medicine preference over another. The drug formulary is a giant black box.

If this opaque process yielded good decisions, you could stop reading now. But it doesn’t. Brian Bresnahan and colleagues have found that pharmacy and therapeutics (P&T) committees sometimes favor the wrong drugs. In effect, more cost-effective medicines may be ranked lower in a formulary while less cost-effective drugs earn better slots. Somewhere between 600 and 1,000 P&T committees are making these kinds of decisions today.

The Current Process

To understand how all of this works, you first have to see the payer’s point of view. The fastest-growing costs in health care today are for specialty drugs. Take Sovaldi, launched by Gilead Sciences in late 2013 as a treatment for hepatitis C virus (HCV) infection and recently superseded by Gilead’s newest drug, Harvoni.

Sovaldi represented a true medical breakthrough relative to previous HCV treatments — much shorter duration of therapy, dramatically reduced side effects, and very often a cure. But Sovaldi, Harvoni, and a raft of coming competitors also represent a staggering new economic reality. Sovaldi itself costs about $84,000. Harvoni costs $95,000 for 12 weeks of therapy (roughly equivalent to the cost of Sovaldi and the other drugs that must be taken with it), although Harvoni will cost $63,000 for patients who need only eight weeks of treatment.

In a July 2014 JAMA article, Troyen Brennan and William Shrank, respectively the chief medical and scientific officers at CVS Caremark, a major pharmacy benefit manager (PBM), estimated that with as many as 3 million eligible HCV patients in the U.S., “treatment of patients with HCV could add $200 to $300 per year to every insured American’s health insurance premium for each of the next 5 years.” Meanwhile, analysts’ predictions of total 2018 U.S. sales for Sovaldi, Harvoni, and their competitors cluster between $11 billion and $13 billion.

Sovaldi and Harvoni are just two examples of the explosion in spending on specialty drugs — 20% a year, according to the PBM Express Scripts. That is roughly four times the percentage rise in the cost of health care overall. Given current trends, specialty drugs will account for about half of the U.S. total drug bill within a few years.

That’s precisely why insurance companies and PBMs, largely at the behest of their employer customers, are narrowing their specialty-drug formularies. This practice encourages patients and physicians to choose from a more restricted list of options. And not all the choices are easy — a plan may no longer pay for, say, a rheumatoid arthritis medicine on which a patient is doing well, forcing her to self-experiment with the plan’s other (cheaper) preferred agents.

How to Crack Open the Box

Arguing that payers should not restrict drug formularies would be naive. As costs rise, there’s no other choice. But we contend that, as the stakes of these decisions grow, the transparency and the rigor of the decision-making process must increase proportionately.

To illustrate the problem, let’s start with an example from October 2013, when Express Scripts decided to exclude 46 drugs from its formulary. Several press reports noted that the PBM wouldn’t disclose its rationale, other than to say that its independent P&T committee had found that the excluded drugs offered no additional value over that of existing, lower-cost drugs.

It’s certainly reassuring when P&T committees are independent. But should patients, employers, and physicians simply trust that the independent decisions are medically and economically reasonable for all parties involved when the rationale isn’t published — and particularly when PBMs (and plans) make money through negotiated manufacturer rebates on the drugs they buy? Indeed, the average formulary decision-making process would hardly pass scientific muster. In one analysis, Gordon D. Schiff and colleagues noted that formulary decision making was “often subjective, unsystematic, and incomplete.”

What’s lacking is an evidence-based, systematic, transparent, and customizable approach to how formularies are developed. In effect, we need a database that assesses the value of each drug objectively, albeit from the payer’s point of view, and then allows a payer to make an appropriate choice for the specific population served. That’s no simple task.

An ideal, open-box solution would have four features:

It would incorporate a decision-making framework that accounts for the key criteria on which plans construct their formularies.
It would gather the data and source materials required for a decision.
It would systematically assess the drugs themselves, relative to their competitors, according to the evidence on clinical efficacy and economic impact.
It would do all of these things transparently, so that any interested party could check the logic and the details of each assessment.

The Challenges of an Open Box

The potential impediments here are many. The insurance-company pharmacists who prepare the materials for P&T committees might find their jobs threatened. PBMs and payers might not want their decisions to be second-guessed, particularly given that these often earnings-conscious companies have economic incentives for choosing particular drugs. And pharmaceutical companies might not like how an objective tool judges their drugs. In short, lots of stakeholders have a vested interest in keeping the process as it is: unsystematic, subjective, and opaque.

And yet plenty of other systems rate quality. Similar ratings-based approaches have been developed for physician and hospital performance and for selected high-cost medical services. Even the U.S. government’s Centers for Medicare & Medicaid Services sponsors a website that compares hospitals and physicians on the basis of quality. And several clinical groups — most notably the American Society of Clinical Oncology — have talked about developing a scorecard that assesses the relative cost-effectiveness of competitive drug regimens, for use by physicians as they treat patients who are often overwhelmed by the cost of cancer care.

Decisions about which drugs to include in and exclude from formularies are part of a larger problem. As a society, we have decided not to allow doctors the freedom to practice medicine as they see fit — because we won’t pay for it. We outsource most of the decision making to insurance companies and PBMs. But we don’t require the decisions to be made transparently, systematically, and based on evidence — even though obscure economic incentives can influence, if not dictate, these institutional choices.

The time has come for us to demand that drug-formulary decisions be made using the best information available — and in broad daylight.

Bureaucracy Must Die

Almost 25 years ago in the pages of HBR, C.K. Prahalad and I urged managers to think in a different way about the building blocks of competitive success.  We argued that a business should be seen as a portfolio of “core competencies” as well as a portfolio of products.  By building and nurturing deep, hard-to-replicate skills, an organization could fatten margins and fuel growth.  While I still believe that distinctive capabilities are essential to distinctive performance, I have increasingly come to believe (as I argued in an earlier post) that even the most competent organizations also suffer from a clutch of core incompetencies. Businesses are, on average, far less adaptable, innovative, and inspiring than they could be and, increasingly, must be.

Most of us grew up in and around organizations that fit a common template. Strategy gets set at the top. Power trickles down. Big leaders appoint little leaders. Individuals compete for promotion. Compensation correlates with rank. Tasks are assigned. Managers assess performance. Rules tightly circumscribe discretion. This is the recipe for “bureaucracy,” the 150-year old mashup of military command structures and industrial engineering that constitutes the operating system for virtually every large-scale organization on the planet. It is the unchallenged tenets of bureaucracy that disable our organizations—that make them inertial, incremental and uninspiring.  To find a cure, we will have to reinvent the architecture and ideology of modern management — two topics that aren’t often discussed in boardrooms or business schools.

Architecture. Ask just about any anyone to draw a picture of their organization — be it a Catholic priest, a Google software engineer, a nurse in Britain’s National Health Service, a guard in Shanghai’s Hongkou Detention Center, or an account executive at Barclays Bank — and you’ll get the familiar rendering of lines-and-boxes. This isn’t a diagram of a network, a community, or an ecosystem — it’s the exoskeleton of bureaucracy; the pyramidal architecture of “command-and-control.” Based on the principles of unitary command and positional authority, it is simple, and scaleable. As one of humanity’s most enduring social structures, it is well-suited to a world in which change meanders rather than leaps. But in a hyperkinetic environment, it is a profound liability.

A formal hierarchy overweights experience and underweights new thinking, and in doing so perpetuates the past. It misallocates power, since promotions often go to the most politically astute rather than to the most prescient or productive. It discourages dissent and breeds sycophants. It makes it difficult for internal renegades to attract talent and cash, since resource allocation is controlled by executives whose emotional equity is invested in the past.

When the responsibility for setting strategy and direction is concentrated at the top of an organization, a few senior leaders become the gatekeepers of change. If they are unwilling to adapt and learn, the entire organization stalls. When a company misses the future, the fault invariably lies with a small cadre of seasoned executives who failed to write off their depreciating intellectual capital. As we learned with the Soviet Union, centralization is the enemy of resilience. You can’t endorse a top-down authority structure and be serious about enhancing adaptability, innovation, or engagement.

Ideology. Business people typically regard themselves as pragmatists, individuals who take pride in their commonsense utilitarianism. This is a conceit. Managers, no less than libertarians, feminists, environmental campaigners, and the devotees of Fox News, are shaped by their ideological biases. So what’s the ideology of bureaucrats? Controlism. Open any thesaurus and you’ll find that the primary synonym for the word “manage,” when used as verb, is “control.” “To manage” is “to control.”

Managers worship at the altar of conformance. That’s their calling—to ensure conformance to product specifications, work rules, deadlines, budgets, quality standards, and corporate policies. More than 60 years ago, Max Weber declared bureaucracy to be “the most rational known means of carrying out imperative control over human beings.” He was right. Bureaucracy is the technology of control. It is ideologically and practically opposed to disorder and irregularity. Problem is, in an age of discontinuity, it’s the irregular people with irregular ideas who create the irregular business models that generate the irregular returns.

In this environment, control is a necessary but far from sufficient prerequisite for success. Think of Intel and the extraordinary control it must exert over thousands of variables to produce its Haswell family of 14-nanometer processors. This operational triumph is tempered, though, by Intel’s failure to capitalize on the explosive growth of the market for mobile devices. More than 60% of the company’s revenue is still tied to personal computers, and less than 3% comes from the company’s unprofitable “Mobile & Communications” unit.

Unfettered controlism cripples organizational vitality.  Adaptability, whether in the biological or commercial realm, requires experimentation—and experiments are more likely to go wrong than right—a scary reality for those charged with excising inefficiencies.  Truly innovative ideas are, by definition, anomalous, and therefore likely to be viewed skeptically in a conformance-obsessed culture.  Engagement is also negatively correlated with control. Shrink an individual’s scope of authority, and you shrink their incentive to dream, imagine and contribute.  It’s absurd that an adult can make a decision to buy a $20,000 car, but at work can’t requisition a $200 office chair without the boss’s sign-off.

Make no mistake: control is important, as is alignment, discipline and accountability—but freedom is equally important. If an organization is going to outrun the future, individuals need the freedom to bend the rules, take risks, go around channels, launch experiments, and pursue their passions. Unfortunately, managers often see control and freedom as mutually exclusive—as ideological rivals like communism and capitalism, rather than as ideological complements like mercy and justice. As long as control is exalted at the expense of freedom, our organizations will remain incompetent at their core.

There’s no other way to put it: bureaucracy must die. We must find a way to reap the blessings of bureaucracy—precision, consistency, and predictability—while at the same time killing it. Bureaucracy, both architecturally and ideologically, is incompatible with the demands of the 21st century.

Some might argue that the biggest challenge facing contemporary business leaders is the undue prominence given to shareholder returns, or the fact that corporations have too long ignored their social responsibilities. These are indeed challenges, but they are neither as pervasive nor as problematic as the challenge of defeating bureaucracy.

First, only a minority of the world’s employees work in publicly-held corporations that are subject to the rigors and shortcomings of American-style capitalism. Bureaucracy, on the other hand, is universal.

Second, most progressive leaders, like Apple’s Tim Cook or HCL Technologies’ retired CEO Vineet Nayar, already understand that the first priority of a business is to do something truly amazing for customers, that shareholder returns are but one measure of success, that short-term ROI calculations can’t be used to as the sole justification for strategic investments, and that, since corporate freedoms are socially negotiated, businesses must be responsive to the broader needs of the societies in which they operate. All this is becoming canonical among enlightened executives. Yes, work still needs to be done to better align CEO compensation with long-term value creation, but that work is already well underway. And while some CEOs still grumble that Anglo-Saxon investors are inherently short-term in their outlook, their argument breaks down the moment you realize that investors often happily award a fast-growing company a price-earnings multiple that is many times the market average.

Simply put, at this point in business history, the pay-off from reforming capitalism, while substantial, pales in comparison to the gains that could be reaped from creating organizations that are as fully capable as the people who work within them.

I meet few executives around the world who are champions of bureaucracy, but neither do I meet many who are actively pursuing an alternative. For too long we’ve been fiddling at the margins. We’ve flattened corporate hierarchies, but haven’t eliminated them. We’ve eulogized empowerment, but haven’t distributed executive authority. We’ve encouraged employees to speak up, but haven’t allowed them to set strategy. We’ve been advocates for innovation, but haven’t systematically dismantled the barriers that keep it marginalized. We’ve talked (endlessly) about the need for change, but haven’t taught employees how to be internal activists. We’ve denounced bureaucracy, but haven’t dethroned it; and now we must.

We have to face the fact that any change program that doesn’t address the architectural rigidities and ideological prejudices of bureaucracy won’t, in fact, change much at all. We need to remind ourselves that bureaucracy was an invention, and that whatever replaces it will also be an invention—a cluster of radically new management principles and processes that will help us take advantage of scale without becoming sclerotic, that will maximize efficiency without suffocating innovation, that will boost discipline without extinguishing freedom. We can cure the core incompetencies of the corporation—but only with a bold and concerted effort to pull bureaucracy up by its roots.

 

This post is part of a series leading up to the 2014 Global Drucker Forum, taking place November 13-14 in Vienna, Austria. See the rest of the series here.

The Internet-Connected Engine Will Change Trucking

It’s happened to all of us. You’re driving down the road and the “check engine” light appears on your dashboard. It could be something simple, like time for an oil change, or it could be something bigger. What do you do? Lose your car for a day while you take it to a service station? Keep on driving and hope for the best?

If you’re a commercial truck driver, the stakes are higher. An unplanned repair visit means losing a day of revenue, and potentially hurting your delivery schedule, for a condition that might be very minor. But if you decide to keep driving, you risk something far worse happening to your engine – and your livelihood.

This kind of uncertainty is a fact of life for many drivers. But Daimler Trucks North America (DTNA) is using the Internet of Things to resolve the uncertainty. DTNA is the largest heavy-duty truck manufacturer in North America, selling trucks under brands such as Freightliner, Western Star, Thomas Built, and Detroit Diesel through more than 1,300 dealers. In 2013, the company released a service called Virtual Technician to help existing drivers while also enabling new business models and revenue streams. According to CIO Dieter Haban, whose team identified the idea and led product development, “the innovation combines telematics, mobility, central mission control, big data analytics, and a seamless process from the truck to the driver, fleet manager, and ultimately to an authorized service outlet.”

DTNA’s engines continuously record performance data and send it to their Detroit Diesel Customer Support Center (CSC).  When a fault occurs, a team of CSC Technicians examine the data in real time and offer a recommendation. If it’s just a routine repair, technicians can help the driver schedule a service appointment for some convenient time and location. But if it’s a more severe condition, they might say “You need to bring your truck in for service right away. There’s a service station 75 miles down the road. When you get there, we’ll have a service bay open and all of the parts we need on hand. You should be in and out in two hours.”

This kind of service is more than just convenience. It brings certainty to a situation where uncertainty can drive tension into the driver/manufacturer relationship.  By capturing information that formerly was available only from an in-person diagnostic test, Daimler Trucks North America creates customer loyalty and reduces risk for commercial drivers.  It’s like driving a truck with a team of technicians on board.

Haban described the savings: “From the time a fault is realized, ordering parts, to getting the truck in the shop and repaired, we eliminated all wasteful steps.  This cuts down the time tremendously.”  But the savings go beyond efficiency. The service gives drivers confidence, and that’s important for a driver who operates alone, often hundreds of miles from home. Drivers are willing to pay for that certainty.

DTNA’s new service offers a number of important lessons for delivering IoT solutions, and digital transformation in general:

Look beyond the limits of the pre-digital age. Why is repair service so maddening? It’s because technicians can only diagnose and recommend services when your vehicle is actually in the shop. Daimler Trucks North America executives saw how IoT technology could fix this fundamental flaw in the design of the repair process, making the process smoother and more efficient for drivers and technicians alike.

Build and share a transformative vision. To the senior leadership team, this wasn’t just about telematics or new revenue. Putting a virtual technician on board each truck was just the start of a much broader process of changing the relationship between drivers or fleet operators and the company. DTNA leaders created this vision, communicated it widely inside the company, and then listened to ideas that could extend the vision.

Lead from the top. Digital transformation often crosses organizational silos, meeting many types of inertia and conflict along the way.  It takes strong top-down leadership — a combination of persuasion, incentives, mandates, and examples — to make this kind of change happen.  Virtual Technician touches many parts of DTNA, from IT to engineering to customer centers to dealers. Building the service required decisive leadership to invest in the innovation, negotiate across boundaries, address issues, and engage hundreds of people in making the vision real.

Ensure that you have a strong digital platform. DTNA executives had to build a platform that connected engines on the road, engineers and technicians in the control center, and systems in the dealers into a unified process. Failing to connect a link in the chain would lead to service failures and unwanted delays. For example, if dealer service systems were not part of the solution, a driver might arrive for service only to have to wait for a bay to open, or for parts to arrive.  Building a platform that spans different organizational units, and even beyond the boundaries of DTNA, is challenging, but it is the foundation for everything else.

Foster close collaboration between IT and business leaders. In Daimler Trucks North America, the CIO is responsible for innovation, not just for IT. Business and IT leaders work closely together to identify and implement ideas. According to Haban, digital transformation is “a joint effort of IT and business. Nobody says ‘I’m the digital guy.’” This is important; neither IT nor business can do it alone.

Stay attuned to new possibilities.  The Virtual Technician capability is becoming the centerpiece for new service offerings. For example, fleet managers are willing to pay for a service that lets them know, in real-time, where every truck is, how well it’s working, and when it will next need repairs. The data can also help DTNA understand how to improve its engines, help customers choose the right equipment configurations, or optimize inventory management. And management is paying attention to many other opportunities.

Looking forward:

To date, more than 100,000 trucks have activated the Virtual Technician service. More than 85% of users have already received a notification of needed services, and 98% were satisfied with the notification process. Customers report higher satisfaction and higher uptime on their vehicles equipped with Virtual Technician.

DTNA’s new capabilities make many other services possible for the company and its corporate family. Daimler could offer these services to commercial drivers and fleet managers in other parts of the world. It could extend its engine-focused service to other parts of the truck, like wheels or suspensions. And who knows — Mercedes drivers may someday get the same type of service for their passenger cars.

The internet of things is enabling new possibilities for digital transformation in every industry. It is creating new opportunities that were only dreams a decade ago. Take a look at your business.  What can you do that you couldn’t do before? Start to do it now, before someone else does.

Divestment Alone Won’t Beat Climate Change

The fossil fuel divestment movement — an increasingly popular approach with environmentalists — primarily tries to convince pension funds, university endowments, and other asset holders that their investments in oil and coal are unethical because of impact of fossil fuel emissions on the world’s climate. Proponents argue that divestment is a symbolic statement that can discourage fossil fuel consumption by stigmatizing the industry. Despite its recent successes, we believe this approach is limited.

Both of us have done work on sustainable development and are keen to see a transition away from fossil fuels in order to limit climate change. But divestment alone is not the answer.

The key argument for fossil fuel divestment is that the cost of carbon dioxide emissions and other pollutants are not being accurately priced by the market. Divestment can theoretically address this market failure by limiting investment by the fossil fuel industry by depressing company valuations and thereby increasing the cost of capital. The economics of that argument are valid, but it remains uncertain how large the impact of divestment would be. For many companies, most of the capital expenditures are financed from internal cash flows and bank financing. Therefore, for major oil and gas firms and big coal companies, divestment looks like less of a constraint. (For smaller companies it could well prove to be a bigger one.)

Divestment also runs the risk of unintended consequences which could thwart environmentalists’ objectives. Markets have a fundamental correction mechanism for when a company’s valuation falls significantly below its cash flow generating capacity: at some point a buyer steps in, often from private markets. Private equity funds do this best, buying up cash rich companies that are undervalued by public markets. Were divestment ever to succeed in lowering the valuations of fossil fuel companies, an unintended consequence could be a shift from public markets to private markets, if carbon tax regulations are not enforced fast enough. Such a shift could hurt transparency; companies that go private have minimal reporting obligations and they typically become very opaque. This could limit everyone’s ability to engage the management of these companies in a discussion around climate change. In this case, divestment would clearly backfire.

Although divestment has sparked a needed debate, we feel it cannot exclude or replace parallel engagement efforts by shareholder and stakeholders.

Engagement calls for more transparency in the investment decisions of the fossil fuel industry. Shareholders could lobby management to consider climate impacts in all investment decisions, and push firms to avoid spending cash on high-cost, high-carbon capital expenditures. Instead, the firm could return the capital to shareholders as higher dividends or share buybacks, or diversify into other areas which might be less risky than fossil fuels.

If engagement works, then capital expenditures by fossil fuel firms are reduced, yielding lower carbon. Simultaneously, the risk profile of the company can be reduced and potentially share prices can even rise – a win-win.

The question is: will management be receptive to shareholders’ pleas? It is impossible to know, and may vary on a case-by-case basis. However, management should be willing to listen, since an engagement strategy zeroes in on the most carbon-intensive projects rather than seeking to devalue a company’s entire asset base (as divestment does).

None of this is to say divestment has no value. Right now, divestment is causing companies and investors alike to pay attention to the risks of climate change. In other words, if targeted engagement is the carrot, targeted divestment is the stick as the enforcement mechanism for those companies unwilling to engage. This mutually reinforcing process stands a better chance of reducing high cost new fossil fuel development than either approach on its own.

Fossil fuels will have to be part of the transition to a clean-energy future. Ultimately, the goal should be limiting new business development by fossil fuel companies. And rather than focusing only on ethics, the argument should focus on reducing risk to those companies themselves by pursuing a climate-secure global energy system.

Win Over the Person Blocking Your Deal

After two and half decades of doing deals in Silicon Valley I could write a dissertation on what I’ve discovered. Instead, I’ll posit one big, bedrock idea that eludes even the most seasoned of dealmakers: Success in deal making is not primarily about numbers or relationships or even timing. What matters most at the highest levels in business is the ability to leverage the dynamics of position.

When I was younger I spent a year as a professional poker player. After doing some statistical analysis of my playing, I realized that I made almost all of my money when playing hands “in position.” In other words, understanding where I sat at the deal table in relation to everyone else was the single most important factor in winning the game. Contrary to popular lore, being a winning poker player has little to do with bluffing or reading people or being a statistical wizard, and everything to do with maximizing the value of position.

In deal making the same thing holds true. Where someone sits within an organization determines both their underlying motivations and their risk profile — the two factors that determine whether they will say yes or no.

In a previous article, I wrote about the triangle of stakeholders: champions, decision makers, and blockers. Each of these individuals is uniquely positioned to influence a major deal and ultimately get it done or shut it down. In this piece, I’ll focus on the player in the triangle with the sharpest sword: the deal blocker.

There are numerous books, seminars, and courses on the subject of getting from “no” to “yes.” Whether the topic pertains to sales, diplomacy, or politics, the advice canon is vast. Yet there’s precious little available on the dissenter’s rationale.  In order to turn deal blockers into advocates (or silent agnostics, worst case), we need to understand their motivations — and we do that by considering their position at the table. Blockers nix the deal because, from where they sit, it is in their best interest to do so. The job of the dealmaker is to turn that around.

What shapes the deal blocker’s motivation? In my experience, it comes down to three basic drivers: respect, advancement, and self-preservation.

Respect. For some blockers — I’ll call them experts – saying “no” is a simple matter of personal pride. They know far more about a specific domain (finance, technology, law) than you do and they want everyone to see that. Why? Because these blockers are less powerful then they are respected — and they want to maintain that high level of respect. This is why lawyers seldom recommend a deal. It’s not their job. Their job is to point out everything that could go wrong. Experts will parse your pitch with a magnifying glass, looking for flaws. And because of where they sit in an organization, experts are risk-averse. If a deal they support goes south they are an easy scapegoat because they don’t have a lot of political clout.

Winning over experts is a two-step process.  First, you have to speak to them in language they understand (legal, technological, or what have you). Remember, these are not business owners, so presenting the corporate upside of what you are offering won’t help. What they care about is preserving the respect and trust of their colleagues, and that requires that they maintain a critical stance. In other words, you need to help the experts look smart. By simply showing them the respect they deserve, you are giving them part of what they need to get out of your way. Next, surround yourself with powerful internal and external supporters. Creating an environment where experts can safely jump on board, and insulating them from the side effects of failure, allows them to maintain their prestige and support the deal.

Advantage. Other blockers say “no” to the deal because it’s actually to their advantage to knock it down.

One such blocker—the competitor—is the champion of a competing idea or solution. From where they sit, competitors can enhance their own prospects by using your deal to make theirs look like a better alternative. Competitors are open to risk because they are willing to raise the stakes to ensure their own success. The best way to encourage competitors to support you is by forming an alliance that will help them close their deal. Perhaps your deal will create a market for theirs or serve as a test case?  Your deal will look good to competitors if they can tether their success to yours. If that doesn’t work your only option is to isolate that person so his/her opinion doesn’t have the necessary gravitas to block you.

A similar breed of blocker, the doubter, doesn’t ever really say “no” to the deal—but he won’t support it either. Since he has nothing specific to gain by saying yes (he isn’t the champion), he plays devil’s advocate. Why? Because if the deal goes bad, it’s safer on the sidelines. In reality, many doubters are looking for a reason to get in the game and say yes. They want to be a champion. They key to converting doubters, then, is to offer them enough upside to coax them out of the shadows. This can be in the form of a promise to include them on the team, have them speak at an event, introduce them to an industry luminary, or whatever that person might value.

Self-preservation. The next type of blocker, the traditionalist, is someone who’s always done something a particular way. Traditionalists rely heavily on precedent. It’s how they’ve made their mark in the organization — with a one specific process, technology, or incumbent account. By saying yes to something new, the traditionalist is putting his old-line position in jeopardy. Traditionalists are risk-averse because their livelihood depends on it.

The wholesale adoption of “cloud” computing is one example. There are huge numbers of people who have built their careers installing and maintaining software and systems. With cloud computing 90% of that disappears. What happens to the traditionalists who spent 20 years overseeing the last generation of technology? They either get on board or they disappear. The best way to get this type of blocker on your side, then, is to make change seem inevitable. As much as traditionalists fear change, they are more afraid of missing out or being left behind. Bringing the traditionalist on-board gives him hope that he can transition his domain into the inevitable new normal.

The reality is that all blockers say no (or yes) because it is in their best interest to do so. And their motivations, like your own, are dictated by their position around the deal table. By leveraging that, you can neutralize their concern in a way that allows them to either benefit from the deal or get out of the way with their credibility intact. This understanding, in deal making as well as poker, is what separates the professionals from the amateurs.