Marina Gorbis's Blog, page 1384

How Virtual Humans Can Build Better Leaders

The aviation industry has long relied on flight simulators to train pilots to handle challenging situations. These simulations are an effective way for pilots to learn from virtual experiences that would be costly and difficult or dangerous to provide in the real world.

And yet in business, leaders commonly find themselves in tricky situations for which they haven’t trained. From conducting performance reviews to negotiating with peers, they need practice to help navigate the interpersonal dynamics that come into play in interactions where emotions run high and mistakes can result in lost deals, damaged relationships, or even harm to their — or their company’s — reputation.

Some companies, particularly those with substantial resources, do use live-role playing in management and other training. But this training is expensive and limited by time and availability constraints, and lack of consistency. Advances in artificial intelligence and computer graphics are now enabling the equivalent of flight simulators for social skills – simulators that have the potential to overcome these problems. These simulations can provide realistic previews of what leaders might encounter on the job, engaging role-play interactions, and constructive performance feedback for one-on-one conversations or complex dynamics involving multiple groups or departments.

Over the past fifteen years, our U.S. Army-funded research institute has been advancing both the art and science behind virtual human role players, computer generated characters that look and act like real people, and social simulations — computer models of individual and group behavior. Thousands of service men and women are now getting virtual reality and video game-based instruction and practice in how to counsel fellow soldiers, how to conduct cross-cultural negotiations and even in how to anticipate how decisions will be received by different groups across, and outside of, an organization. Other efforts provide virtual human role players to help train law students in interviewing child witnesses, budding clinicians in how to improve their diagnostic skills and bedside manner, and young adults on the autism spectrum disorders in how to answer questions in a job interview.

Our research is exploring how to build resilience by taking people through stressful virtual situations, like the loss of a comrade, child or leader, before they face them in reality. We are also developing virtual humans that can detect a person’s non-verbal behaviors and react and respond accordingly. Automated content creation tools allow for customized scenarios and new software and off-the-shelf hardware are making it possible to create virtual humans modeled on any particular person. It could be you, your boss, or a competitor.

Imagine facing a virtual version of the person you have to lay off. Might you treat him or her differently than a generic character? What if months of preparation for an international meeting went awry just because you declined a cup of tea? Wouldn’t you wish you’d practiced for that? If a virtual audience programmed to react based on your speaking style falls asleep during your speech, I’d be surprised if you didn’t you pep up your presentation before facing a real crowd.

It is still early days in our virtual-human development work, but the results are promising. An evaluation of ELITE (emergent leader immersive training environment), the performance review training system we developed for junior and noncommissioned officers, found that students showed an increase in retention and application of knowledge, an increase in confidence using the skills, and awareness of the importance of interpersonal communication skills for leadership.

A related study showed that subjects found the virtual human interaction as engaging and compelling as the same interaction with a live human role-player. I can say from personal experience that asking questions of the students in a virtual classroom can be exhilarating (and unnerving when the virtual student acts just like a “real” student, slouching in boredom and mumbling an answer). Unlike a live human actor, however, a virtual human does not need to be paid, can work anytime, and can be consistent with all students, or take a varied approach if needed. Virtual human systems can have the added advantage of built-in assessment tools to track and evaluate a performance.

Technology alone is not the answer, of course As I recently wrote in “Virtual Reality and Leadership Development,” a chapter of the book Using Experience to Develop Leadership Talent, virtual humans and video game-based systems are only as effective as the people who program them. No matter how convincing a virtual human is, it’s just an interface. If the instructional design behind it is flawed it won’t be effective. So we focus as intensively on what a virtual human is designed to teach, how learning will occur, and how to continuously improve its performance as on the technology itself.

I believe simulation technologies are going to change the way we educate and train the workforce, particularly in the area of social skills. In time, just as a pilot shouldn’t fly without practicing in a simulator first, managers and leaders will routinely practice with virtual humans for the challenging situation they’re sure to encounter.

When the Jobs Go Away, They Take Your DNA

The End of Manufacturing and the Birth of…Sequenced in the U.S.A.: A Desperate Town Hands Over Its DNAPacific Standard

Eleven years ago, a full tenth of Kannapolis, North Carolina, residents were laid off when the town's textile mill closed. This could be the start of yet another story about the decline of manufacturing in America, but it's not. It's a much more nuanced tale. You see, aside from a Walmart, Kannapolis's most promising economic opportunity is in the hands of Los Angeles billionaire and health and life-extension aficionado David H. Murdock. Murdock purchased the old mill in 2004 and turned it into what journalist Amanda Wilson describes as "a public–private campus that would host research efforts broadly in his areas of interest." Yes, it employs people — but primarily people with advanced degrees from out of town. Regular old residents are offered the opportunity to work at the genomics lab as research subjects.



"At any given time, Kannapolites can take part in studies of nutrition, longevity, or cognitive or physical performance; eat a standardized diet; or spend time in a metabolic chamber while their vital signs are monitored — sometimes for $30 to $250 and up," reports Wilson. As you can imagine, this is where things get complicated. It's worth your time to read the entire piece for all the reasons why.

Clean Up Your Subcontracts 4 Tips for Business to Ensure Ethical, Slavery-Free Supply ChainsThe Guardian

It may not seem like a topic for a listicle, but this quick rundown of what businesses need to keep in mind to avoid exploiting vulnerable people – and becoming embroiled in often well-deserved PR nightmares — is entirely useful. After acknowledging how complex and unwieldy supply chains have become, Jessica Burt poses the question: "How can you ensure you aren't contracting with a criminal?" The answer: Do your research, audit supply contracts, understand the pressures your suppliers are facing, and don't be satisfied with the bare minimum. "Going above and beyond the basic rules, truly interrogating your supply chain, pre-empting cumbersome legislation, and taking voluntary action should be the target of any forward-thinking brand," says Burt. Amen.

Take a Good, Hard Look In Market Basket Protests, Three Lessons for Corporate AmericaWBUR

Here in Massachusetts, you can't go anywhere without someone mentioning what's happening at Market Basket, a grocery chain with loyal employees and stores that are almost impossible to navigate on weekends because they’re so packed. The backstory involves warring factions of the family business, the ousting of the company's beloved CEO, and subsequent employee protests that have resulted in firings, boycotts, and empty shelves. While the story may seem local, its lessons are anything but, argues MIT's Thomas Kochan. To start, it demonstrates just how frustrated workers are with "short-term, self-interested owners and corporate executives who choose to line their own pockets at the expense of the workforce and their customers."



Maybe most important, the events are "sending a message to business schools across America that it is time to teach the next generation of managers how to lead companies in ways that better balance and integrate the interests of all stakeholders,” including frontline employees and communities that support the business.

Searching for MeaningComputer Engineering: A Fine Day Job for a PoetThe Atlantic

I love this Q&A with poet TJ Jarrett, whose literal day job is as a senior integration engineer working on a decision system for medical-equipment purchases. At night she goes to a loud bar where she writes poetry, some of which will appear shortly in the collection Zion, her second volume of poems. IT suits her well. In fact, she sometimes feels that she’s found her dream job. She sees connections between her two kinds of work: Whether she’s troubleshooting code or imaginatively exploring black Americans’ lives under Jim Crow laws, one of the themes of her poetry, she has to “watch the parts coming together like gears and ask good questions. How did it come to be like this?” —Andy O’Connell

SighWomen Penalized for Promoting Women, Study FindsThe Wall Street Journal

We know that women are penalized in a multitude of workplace situations, such as when they negotiate salary. New research out of the University of Colorado puts the terrible icing on this often depressing cake by finding that women who promote women up the ranks are rated less highly by their bosses — and the same is true of nonwhite managers who boost the careers of nonwhite employees. But when it comes to white men, the authors found that they got a bump in performance scores when they were perceived as valuing diversity.



One of the study's authors, David Hekman, says he thinks the results go back to notions of self-interest: "People are perceived as selfish when they advocate for someone who looks like them, unless they’re a white man." And if executives who aren't white men "believe it’s too risky to advocate for their own groups" — which this research seems to bear out — "it makes sense that successful women and nonwhite leaders would end up surrounded by white males in the executive suite."

BONUS BITSInside Stories

Is T.J. Maxx the Best Retail Store in the Land? (Fortune)
Burger King Is Run by Children (Businessweek)
The Fasinatng … Frustrating … Fascinating History of Autocorrect (Wired)

Collaborate Across Teams, Silos, and Even Companies

Everywhere I turn right now, I hear leaders talking about their need for collaborative leadership. It’s being identified as the fundamental differentiator in achieving strategic objectives. In order to make a difference though, it has to go beyond the polite, thoughtful behaviours of involving others, sharing information and lending strength when it’s needed. I define real collaborative leadership as: facilitating constructive interpersonal connections and activities between heterogenous groups to achieve shared goals. It is proactive and purpose-driven.

Dubai Airports offers a case study. Leaders there are being incredibly proactive in their collaborative leadership efforts, with a very clear purpose. While already running the world’s busiest airport (passenger traffic grew to almost 66.5 million in 2013, a 15% rise on the previous year), they recognized that to achieve their vision of becoming the world’s leading airport company, they need to drive a new service culture through the 3,400-person organization. But they knew they couldn’t make a meaningful change in their culture alone. To change customers’ real experience of Dubai Airports, they needed to engage their vendors and partners as well.

One of the outcomes is a customer-service training program that is being rolled out over a three-year period across many stakeholder organizations and 43,000 employees. The Dubai Airports team is investing in training for over 39,000 people outside of their own organization, aiming to ensure behavioral consistency and therefore customer experience consistency at every possible touch point. Samya Ketait, VP for Learning and Development says, “This is a huge project, but a worthwhile one. It means that regardless of who you meet at Dubai Airports – a police officer, a cleaner, an immigration officer… you should have the same positive customer experience. Collaborating with our stakeholder leaders has made this possible.”

While it’s spoken of highly in organizational life, it’s not something that necessarily comes easily. It may seem like a lovely, generous gesture of Dubai Airports to offer to provide customer-service training for so many other organizations’ employees, but the leaders from outside who bought into this collaborative processes had to weigh the costs of their employees’ time out of work to participate, and to trust Dubai Airports with training their teams in a way that would match their own organization’s values and objectives. To sustain the three-year collaborative process and achieve its goals, these leaders recognized the behaviors that would make it work. When it comes to collaborative leadership, these factors can drive success:

Focusing on interests rather than positions. As with negotiations and conflict resolution, one of the most important keys to successful collaborative leadership is focusing on interests rather than positions. When leaders are “collaborating” they are typically not from the same team – otherwise we would most likely frame it as “teamwork.” What makes teamwork different from collaboration is the goal. In collaborative leadership cases the goals may be different – the leaders may have different positions, but yet common ground can be almost always be found at the level of interests. In collaborating with others ask, “What’s most important to you here? What really matters?” Encourage their openness and foster trust by sharing personally what your main drivers are.
Being an agent and a target of influence. We spend a lot of time in leadership development helping professionals to have greater influence (i.e. be a more successful agent of influence). Rightly so, as influence (e.g. influencing people towards common goals) is at the core of what constitutes leadership. Of equal importance when it comes to collaborative leadership, is being prepared to be a target of others’ influence. This requires: openness to alternative ideas; inquisitiveness to understand the foundation of others’ arguments before pushing back and asserting one’s own ideas; and recognition of the value the other party has and therefore can add to the collaborative venture.
Having clear roles and responsibilities. Research has shown that where leaders are successfully leading together, they have a clear sense of who is responsible for what. Mapping out these roles and responsibilities early, and refining them along the collaborative journey, ensures a smoother road.
Sharing and acknowledging the credit. We know that acknowledging our own part in a problem, even if it’s taking only 5% of the blame, alleviates tension during conflict and leads to faster reconciliation. The reverse is true of facilitating collaborative success. Acknowledging others’ contributions – be they big or even incredibly small, in the success of our ventures, energizes them in our collaborative efforts. Nothing undermines collaborative leadership like one leader taking — be it actively or passively allowing others to allocate them — all the credit.
Carving out space and time to collaborate – and a mission worthy of that effort. Too often in organizational life we know we’re meant to be collaborating and so try to squeeze it into our schedules when really we just want to get the pressing things on our to-do list done, or collaborate simply to the point of meeting our own immediate priorities. In order for collaborative leadership to be purposeful and sustainable, it needs to meet all parties’ true interests, warrant their time, and help them achieve their core objectives. Leaders need to highlight why this particular collaboration matters (not just extol “collaboration” in general), what difference it will make, and encourage the project’s participants to create the time and space it deserves.

One of the most exciting parts of the collaborative leadership journey is that while it is purpose-driven (there are clear goals and objectives in mind to achieve along the way), the end is unwritten: we never know where our collaborative leadership efforts may take us. One door opens another possibility and one creative venture prequels another.

The Evidence Is In: Patent Trolls Do Hurt Innovation

Over the last two years, much has been written about patent trolls, firms that make their money asserting patents against other companies, but do not make a useful product of their own. Both the White House and Congressional leaders have called for patent reform to fix the underlying problems that give rise to patent troll lawsuits. Not so fast, say Stephen Haber and Ross Levine in a Wall Street Journal Op-Ed (“The Myth of the Wicked Patent Troll”). We shouldn’t reform the patent system, they say, because there is no evidence that trolls are hindering innovation; these calls are being driven just by a few large companies who don’t want to pay inventors.

But there is evidence of significant harm. The White House and the Congressional Research Service both cited many research studies suggesting that patent litigation harms innovation. And three new empirical studies provide strong confirmation that patent litigation is reducing venture capital investment in startups and is reducing R&D spending, especially in small firms.

Haber and Levine admit that patent litigation is surging. There were six times as many patent lawsuits last year than in the 1980s. The number of firms sued by patent trolls grew nine-fold over the last decade; now a majority of patent lawsuits are filed by trolls. Haber and Levine argue that this is not a problem: “it might instead reflect a healthy, dynamic economy.” They cite papers finding that patent trolls tend to file suits in innovative industries and that during the nineteenth century, new technologies such as the telegraph were sometimes followed by lawsuits. But this does not mean that the explosion in patent litigation is somehow “normal.” It’s true that plaintiffs, including patent trolls, tend to file lawsuits in dynamic, innovative industries. But that’s just because they “follow the money.” Patent trolls tend to sue cash rich companies, and innovative new technologies generate cash.

The economic burden of today’s patent lawsuits is, in fact, historically unprecedented. Research shows that patent trolls cost defendant firms $29 billion per year in direct out-of-pocket costs; in aggregate, patent litigation destroys over $60 billion in firm wealth each year. While mean damages in a patent lawsuit ran around $50,000 (in today’s dollars) at the time the telegraph, mean damages today run about $21 million. Even taking into account the much larger size of the economy today, the economic impact of patent litigation today is an order of magnitude larger than it was in the age of the telegraph.

Moreover, these costs fall disproportionately on innovative firms: the more R&D a firm performs, the more likely it is to be sued for patent infringement, all else equal. And, although this fact alone does not prove that this litigation reduces firms’ innovation, other evidence suggests that this is exactly what happens. A researcher at MIT found, for example, that medical imaging businesses sued by a patent troll reduced revenues and innovations relative to comparable companies that were not sued. But the biggest impact is on small startup firms — contrary to Haber and Levine, most patent trolls target firms selling less than $100 million a year. One survey of software startups found that 41% reported “significant operational impacts” from patent troll lawsuits, causing them to exit business lines or change strategy. Another survey of venture capitalists found that 74% had companies that experienced “significant impacts” from patent demands.

Three recent econometric studies confirm these negative effects. Catherine Tucker of MIT analyzed venture capital investing relative to patent lawsuits in different industries and different regions of the country. Controlling for the influence of other factors, she estimates that lawsuits from frequent litigators (largely patent trolls) were responsible for a decline of $22 billion in venture investing over a five-year period. That represents a 14% decline.

Roger Smeets of Rutgers looked at R&D spending by small firms, comparing firms that were hit by extensive lawsuits to a carefully chosen comparable sample. The comparison sample allowed him to isolate the effect of patent lawsuits from other factors that might also influence R&D spending. Prior to the lawsuit, firms devoted 20% of their operating expenditures to R&D; during the years after the lawsuit, after controlling for other factors, they reduced that spending by 3% to 5% of operating expenditures, representing about a 19% reduction in relative R&D spending.

And researchers from Harvard and the University of Texas recently examined R&D spending of publicly listed firms that had been sued by patent trolls. They compared firms where the suit was dismissed, representing a clear win for the defendant, to those where the suit was settled or went to final adjudication (typically much more costly). As in the previous paper, this comparison helped them isolate the effect of lawsuits from other factors. They found that when lawsuits were not dismissed, firms reduced their R&D spending by $211 million and reduced their patenting significantly in subsequent years. The reduction in R&D spending represents a 48% decline.

Importantly, these studies are initial releases of works in progress; the researchers will refine their estimates of harm over the coming months. Perhaps some of the estimates may shrink a bit. Nevertheless, across a significant number of studies using different methodologies and performed by different researchers, a consistent picture is emerging about the effects of patent litigation: it costs innovators money; many innovators and venture capitalists report that it significantly impacts their businesses; innovators respond by investing less in R&D and venture capitalists respond by investing less in startups. Haber and Levine might not like the results of this research. But the weight of the evidence from these many studies cannot be ignored; patent trolls do, indeed, cause harm. It’s time for Congress to do something about it.

Most Managers Think of Themselves as Coaches

As a manager, do you think of yourself as a leader or as a coach? Do you, for instance, feel it’s important that your staff see you as an expert or do you prefer to create an egalitarian environment? Are you the person who solves problems or helps your staff come up with their own solutions? Are you more comfortable being directive or collaborative?

Results of a survey we’ve been conducting indicate a stronger desire to display coaching attributes than we were expecting.

Our assessment consists of 30 items we have tested and correlated to the most important attributes associated either with strong, top-down leadership or excellent coaches.  (If you have not yet, we encourage you to take the assessment now, so that you can compare your scores with the those we present below.)

More than 2,00o readers responded to the survey. The results represent a global audience with 60% of respondents from the U.S., 10% from Europe, 9% from Asia, 6% from Canada, 2% from Central/South America, 2% from Africa, and 11% who did not identify their location.  Respondents represent a fairly even mix of all levels in the organization: 20% executive management, 23% senior management, 27% middle management, and 30% supervisors or individual contributors.

You can compare your scores to others in the chart below here, which displays ranges of scores we’ve so far collected for the three different attributes. A negative score indicates a preference strong, direct leadership, managing through applying your expertise and through giving advice and clear direction. A positive score indicates a greater desire to act as a coach. Generally speaking, we have found through our research and our experience, excellent coaches would rather help others discover an answer for themselves than give advice. They prefer to act collaboratively rather than tell people what to do. And they prefer to act as an equal rather than as an expert.  And as we analyzed the data, we were surprised (and frankly, pleased) to see that three-quarters of scores were positive, indicating that the vast majority preferred to manage through coaching.

Years ago, Joe recalls sitting through an introduction by the CEO of a Fortune 50 company that had grown dramatically by acquisition. In his presentation, he said, “The reason we bought all these different companies was that we felt like they would be worth more together than they would running as separate entities. The only way we get that value is through your efforts to collaborate and work together.”  Most of the CEOs across the world have given that same speech. Apparently, people are hearing the message.

Well, perhaps. What we’ve tracked here are people’s desire to act in a particular way, not what they actually do. We imagine many readers are saying to themselves, “My boss does not seem that interested in letting me discover my own solutions.”  Or many could be musing, “It’s true that sometimes we desire an open, collaborative conversation only to find ourselves barking out directions and orders.” That can happen, but there’s a world of difference between organizations in which people fall short of a collaborative ideal and those that don’t subscribe to it at all.

As we looked further into the results, we found those in top management positions to have the strongest desire to be more collaborative and help others find their own solutions; supervisors ranked the lowest. That jibes with our own experience, in which we find supervisors often believe that they are expected to give advice, give orders, and assure that orders are executed. But, remarkably, even this group prefers coaching to directive leadership to some degree.

We find these results so heartening because, frankly, we’ve seen supervisors and managers who were really good at getting results by giving lots of direction and advice and staying on top of all the details.  A really effective autocratic leader can be efficient and quick about getting things done. But something suffers in the process.  People wait for orders.  They stop taking initiative.  Their level of engagement declines slowly—and often rapidly—as time progresses.  It can be easy in the effort to get the job done to lose sight of the long-term goal of helping people get better at getting the job done. The enormous value of coaching is what it does to develop people and create an ever more engaged and empowered team of employees.

In China, Breathing Is a Work Hardship

Expatriate employees of Coca-Cola working in China receive 15% bonuses because of the country’s air pollution, according to a Bloomberg article about a report in the Australian Financial Review (local Chinese aren’t eligible for the bonus). Panasonic has announced that it too will compensate expatriates in China because of air pollution. The U.S. State Department offers a “hardship differential” to employees who serve in posts with difficult circumstances, including unhealthful conditions; the differential ranges from zero in Kunming, China, to 30% in industrial areas such as Shenyang.

CEOs, Get to Know Your Rivals

In an interview, Cisco CEO John Chambers once remarked on his intimate knowledge of rival CEOs. He claimed that based on this insight he could anticipate their market moves one or even two steps in advance. I thought he might be exaggerating, making good copy but lacking substance.

I decided to test his claim by interviewing current and former C-suite executives, including Bob Crandall, former CEO of American Airlines; David Norton, former CMO of Harrah’s casinos; Will Ethridge, CEO of Pearson Education; and Pat O’Keefe, former CEO of Watts Water Technologies. From plumbing equipment to casinos, these executives all agreed: what Chambers said was not only true but almost an understatement. In fact, I began to see four different strategies for keeping track of — and out-maneuvering — rivals:

Look for weaknesses that present opportunities. “It’s important to understand your rival’s weak spots and strategy,” says Will Ethridge, Pearson Education’s former CEO. “I knew one rival whose CEO was focused on driving profitability and bringing up margins. I knew that meant he would be relatively focused on short-term results while mostly ignoring product development. I also realized he would go after our top sales people to meet those short-term sales goals. So we worked extra hard to protect our key sales people. At the same time, we continued to invest in long-term product development and overseas markets, knowing it was unlikely he could follow us in the short term.”

Play to your strengths, not your rival’s. David Norton, former CMO and SVP of Harrah’s/Caesars points out that you must appreciate your counterpart’s competencies and weaknesses, as well as your own. Gary Loveman, then CEO of Harrah’s, was an MIT-trained economist. He had recruited other quant experts, such as Norton, formerly of American Express. They saw the casino business as a great numbers experiment. Among their rivals was Sheldon Adelson, CEO of Las Vegas Sands Corporation, who they believed operated from gut feel. He made a killing by opening casinos in Macau and Singapore.

Adelson’s bold move in Asia had outflanked Harrah’s. But Norton says the executive team didn’t conclude that they should abandon their quantitative strengths in favor of big rolls of the dice. Instead, Loveman decided to apply their deep quantitative knowledge of customer behavior in casinos and double down on U.S. expansion, out-maneuvering Adelson in the domestic market.

“We used data to personalize our marketing and become more efficient in attracting and holding onto customers,” says Norton. “And when it came to expanding our presence in the U.S. market we knew no one else would go to the extent we did, investing heavily in analytics, training and so on to build a comprehensive loyalty program.”

Encourage employees to monitor rivals, too. Former American Airlines CEO Bob Crandall, like Chambers, watched his counterparts, but more broadly he encouraged the entire corporation to watch the competition at all levels.

“It’s like running a national intelligence network,” he says. “If you are running it right, everyone is aware that anything and everything is important, and lots of information trickles up to management. For example, if a ticket agent in Chicago hears from an agent at another airline that the rival airline is looking for additional gate space, she should tell the local manager, who calls the division head who feeds it up the line. Senior management could then make some guesses about what the rival is up to, and could either add flights to use existing gates more intensively or take other action to blunt the success of whatever the rival might do.”

Meet the competition in person. You don’t have to watch your rivals from afar – or engage in deception to get close to them. In fact, face to face contact can pay off in unexpected ways. Pat O’Keefe was CEO of Watts Water Technologies, a global plumbing, water safety, and control equipment company. According to O’Keefe, his mandate was to grow Watts, largely through acquisitions. He spent most of his time seeking out and learning about acquisition candidates.

“I was personally obsessed with looking at our competitors,” said O’Keefe. “I wanted to know more about them than other bidders, when and if the time came to make them an offer. But there was no point in deceiving them. Their CEOs all knew who I was and they would very willingly show me their products. I visited them regularly to ask if they might like to join the Watts family of companies.

No matter the industry, John Chambers is right. CEOs not only can, but should, be watching their counterparts closely, assessing their strengths, weaknesses and predilections, and developing counter-measures accordingly.

The Future of Talent Is Potential

Linda Hill, Harvard Business School professor, and Claudio Fernández-Aráoz, senior adviser at Egon Zehnder, on the talent strategies that set up a company for long-term success. Linda is the coauthor of Collective Genius, and Claudio is the author of It’s Not the How or the What but the Who. Both authors will be speaking at the World Business Forum, October 7–8, 2014.

Download this podcast

Why CEOs Should Follow the Market Basket Protests

Somebody must have done something really right at Market Basket.

Thousands of the supermarket chain’s employees have organized rallies at their local stores and at the company’s headquarters during the last week. Were these employees rallying for higher wages, better benefits, and predictable schedules — the needs so many retail employees face? No, they were demonstrating to help their ousted CEO, Arthur T. Demoulas, get his job back (he was fired in June after coup led by his cousin, Arthur S. Demoulas).

At a time when we see so much division between CEOs who represent the 1% and their workers who representing the 99%, this is amazing.  Other CEOs should take heed.  Such support is priceless.

Market Basket is a profitable family-owned regional chain of 71 supermarkets in Massachusetts, New Hampshire, and Maine, with around 25,000 employees. According to Forbes, it’s the 127th-largest private company in the United States, with $4.6 billion in revenue. It has a loyal customer base who value the chain’s low prices and good service — as evidenced by the thousands of customers who have signed petitions backing the employees. The combination of low prices and good service is delivered by a loyal, committed, and capable workforce. If you visit a Market Basket store, take a look at the employee name badges — which include length of employment — and you will likely be impressed by how long people have been working there.

Market Basket employees don’t seem to stick around just for the wages and good benefits, however. The rallies for Demoulas suggest that they truly believe in his leadership and the direction he set for the company.

Yet, as I visited Market Basket stores and talked to employees during the last two days, I saw that they are not just fighting for their ousted CEO and his leadership and guidance. They are fighting for their values, their culture. They are fighting to remain an organization that takes care of its customers and its employees, a place where they can be proud to work.

Several employees told me they worry that Market Basket will become like any other supermarket. They worry that to make a quick buck, the company will increase its prices or reduce its service or reduce employee benefits or profit-sharing — maybe all of these.

These employees recognize that a “good jobs strategy” that allows companies to deliver great returns to investors by taking care of employees and offering low prices and great service to customers is a rare strategy to see in their industry. They recognize that it is a strategy worth a fight. They are right.

How Internal Entrepreneurs Can Deal with Friendly Fire

We know some of you find being an “internal entrepreneur” disappointingly difficult. You are frustrated by employers who thwart your entrepreneurial efforts on a routine basis. But that’s how it is supposed to be!  Large organizations, with rare exceptions, are created to scale up and master repetition without error or variance. They are professional Predict, Plan & Execute (“PP&E”) machines, and as they have evolved over time, are carefully engineered to stamp out anything that induces uncertainty. The stock market demands this—and the systems, structures, and procedures (including the career path of your boss) support and reward it. For you to expect this situation to change quickly or without some pain is naïve and, quite possibly, mean-spirited. Imagine you are a professional long-distance runner and decide to switch careers and become a professional tennis player. Think it might take a while?  Organizations can take 10 times longer to change.

But we see signs of change. Innovation is the number one topic on CEOs’ minds in various surveys. Many companies are creating chief innovation officers. There has been explosion in the past 10 years of conferences and popular and academic books, articles and blogs on the topic. Scores of boutique consulting companies and every major consulting firm now has an innovation practice.

We’re optimistic about the future of innovation in organizations, but for sure the continued dominance of the “PP&E model” makes things difficult for you. Perhaps hardest of all is the disappointment and frustration that comes from people you see on your team constantly and systematically rejecting what you believe is a commonsense action toward some sort of improvement. The external entrepreneur can experience this sort of market non-acceptance on a daily basis. While it can be dispiriting, the best don’t let it get to them. What makes it particularly difficult for the entrepreneur inside is that it feels like you are taking “friendly fire” from your own team. That’s because you are!  But you can’t let that get you down. It’s not personal. Your organization would do it to anyone trying to operate outside of the PP&E operating system.

Our first bit of advice for those of you in this situation is:  persist. Your internal situation is not that different from the external entrepreneur who must “befriend” her market—thinking of it as a treasured counselor teaching her about current reality—and never treat it as an adversary. True, this is difficult, but it is nonetheless required. You must change your mindset about opposition—from foe to friend—and then work hard to maintain it. You will never succeed if you view your organization and your colleagues as enemies. All of this is just as true for your perception of your boss; perhaps more so.  Both you and your organization are in transition, and wherever the organization is right now is not as good as where it is going to be. You can help, but not if you don’t appreciate them.

Second, here’s a way to think about your situation—a simple diagnostic framework—that we’ve found helpful in our work with internal entrepreneurs. You, your boss, and your organization can each be in one of four modes: Make It Happen (Make), Help It Happen (Help), Let It Happen (Let) or Keep It from Happening (Keep). If you personally are not in the Make mode, you should stop selling your idea now. But assuming that you are… do your own diagnosis of your boss and your organization and an appropriate action strategy will become obvious. For example, if your organization is actively trying to suppress innovation (Keep) but you have a Make, Help, or even Let boss, you can try—very quietly. Or maybe your firm has a Strategic Innovation Imperative (look at the annual report for clues if you don’t know) but your boss wants you to do your job and nothing else (Keep).  If senior management hasn’t helped him to change, it won’t be easy for you. You might be able to build support outside of your workgroup but it will be difficult and dangerous. You will probably be better off moving either to a more supportive boss or outside the organization.

Assuming that you really care about your innovative idea and your boss grants you some freedom to operate, you need to use the practical Act-Learn-Build steps that we talked about in a previous post, “Act Like an Entrepreneur Inside Your Organization.” Through your efforts you will help your boss be a better coach of you and others, and you will help your organization be more capable of supporting innovation and entrepreneurial behavior. If you don’t, chances are that you don’t care enough, and you should simply (and now happily) accept things as they are.