Marina Gorbis's Blog, page 1387

The Case for Listening to the Maniacs

Off the Bell CurvePay Attention to Your “Extreme Consumers”Working Knowledge

Marketers worry too much about the average consumer and don’t spend enough time thinking about “extreme” customers — those quasi-maniacs who passionately love or hate a brand. Because extreme consumers share other consumers’ thoughts but amplify them to the nth degree, they can lead marketers toward breakthroughs, say Jill J. Avery and Michael I. Norton of Harvard Business School. “Lovers or haters of a product can be the canary in the coal mine — an early warning system that can alert managers to problems,” says Avery, who by the way has a great piece on consumer relationships in the current issue of HBR.



Studying extreme consumers can help companies look at products in new ways. For example, in interviewing people who detest video games, one set of researchers came up with the insight that a lot of games are too complicated and controllers are too hard to maneuver; the result was the Wii. —Andy O’Connell

Still Spinning How Amusement Parks Hijack Your BrainThe Boston Globe

Because it's summer, and because I have a deep and abiding love of fried dough, here's a fun little piece from the Globe on how theme parks are (kind of brilliantly) designed. Aside from all the bright colors and other elements of sensory overload, Leon Neyfakh explains that "the modern amusement park is, beneath the flash and chaos, a carefully tuned psychological machine…pushing buttons you didn't even know you had." For example, games are designed on the "appeal of almost, but not quite winning" and rides like the Giant Drop “tap into the strange mechanism in your brain that allows you to enjoy the rush of a simulated near-death experience." And long lines? It’s all in the way you think about them: "A 2010 study published in the Journal of Marketing Research found that amusement park guests who focused on the number of people behind them in line expressed more excitement about the ride they were going on, and were more likely to enjoy it, than those who focused on the number of people in front of them."

Tormented SoulsSympathy for the Comcast Rep from HellThe Awl

No doubt you've already heard the call: 8 painful minutes between a Comcast customer service representative and a reasonable man who simply wants to cancel his service, no questions asked. Except, of course, the rep has a lot of questions — why he's canceling, why he doesn't want the fastest service in all the land, why the reasonable man won't just give him any kind of concrete answer. Most of the internet was outraged upon hearing this, and for good reason — but The Awl's John Herrman does an excellent job of taking a step back and recognizing the obvious: "If you understand this call as a desperate interaction between two people, rather than a transaction between a customer and a company, the pain is mutual."



The problem is that "the customer service rep is trapped in an impossible position, in which any cancellation, even one he can't control, will reflect poorly on his performance" — especially if he can't get a reason out of the caller. In other words, Hermann concludes, "Comcast, the organization, is tormenting them both."

Born That WayLady Gaga Is Still Schooling MarketersForbes

One thing they don’t teach you in summer rock ’n’ roll camp is that in order to be a great pop star, you need a great thesis. The Rolling Stones’ was something like: A middle-class life isn’t worth living. Drake’s is: You only live once. Lady Gaga’s might be summed up as: It’s cool to be different. But not only does Lady Gaga have a great and sticky thesis, she’s endowed with a sharp mind for branding. Like all powerful brands, hers offers newness and diversity, a good lesson for all consumer companies, writes Denise Lee Yohn. Ms. Gaga also knows how to connect with customers: When fans throw clothing, she puts it on and poses for pictures. And she’s a relentless storyteller, using the time between songs to tell personal yarns that expand on her ideas about the value of differences. She defends her thesis, in other words. Maybe every brand needs a great thesis too. —Andy O’Connell

Keeping Them GuessingA Push to Give Steadier Shifts to Part-TimersThe New York Times

There are 27.4 million Americans who work part-time; the number of those who wish to work full-time has doubled since 2007, to 7.5 million. And 47% of younger, part-time hourly workers get their schedules a week or less in advance. These stats, reported by Steven Greenhouse, are a major pain point between workers and managers who, armed with data on when customers shop and eat, constantly adjust schedules to maximize efficiency and profits. Part-time workers are already struggling to make ends meet. Sporadic, unpredictable schedules add to their burdens by making it harder for them to find child care, and sometimes they arrive at work only to find their shifts canceled.



Municipalities and even the federal government are starting to address these issues. Corporate groups, of course, aren't happy about the "bureaucratic environment" they say will result. But as Fair Workweek Initiative director Carrie Gleason says, "It's gotten to the point where workers, especially women workers, are saying, 'We need a voice in how much and when we work.'"

BONUS BITSGetting Paid

Mind the Gap: How One Employer Tackled Pay Equity (The Wall Street Journal)
When the Boss Says, 'Don't Tell Your Coworkers How Much You Get Paid' (The Atlantic)
Coke Pays Employees to Breathe China's Air (Bloomberg View)

How 6 Countries Compare on Executive Gender Balance

All countries are not equal – in gender as in much else. Our Annual Country Scorecards show how national culture and legislation impacts companies’ progress on gender balance. Where many European and North American companies have been on a slow but steady gender-balancing journey, big business in much of Asia is (at best) only just waking up to the issue. Here is a short travelogue of corporate gender balancing across a few key countries, based on data from the top 20 Fortune Global 500 companies in each one. You’ll find the more detailed reports here.

France: Pushing quotas and operational roles

Last year, following France’s introduction of quotas imposing a minimum of 40% of women on corporate boards, there was a significant improvement of the gender balance on boards. In 2014, are we witnessing a trickle-down effect? There has been a subsequent improvement from 11% to 15% of female Executive Committee members, and 70% of companies in the top 20 now have at least one woman on their senior executive teams – up from 60% last year.

France is one of the rare countries to have so many of their most senior women in operational roles, rather than the staff and support function jobs that has been the initial answer of so many companies trying to balance their teams. Forty nine percent of female ExCo members in France are in operational roles, the highest percentage among our country surveys.

But out of 20 companies, just four are responsible for well over half of all the female executives, and three companies account for 12 of the 17 with line responsibilities. So let’s applaud SNCF, France Telecom, Group BPCE, and CNP Assurances for “getting it.” Their progress hides a pretty mediocre showing among the rest.

UK: Essentially staying the same

The UK top 20 has so far failed to act on the buzz created by the Davies Report, which urges more balance on corporate boards. If UK business is changing, it’s not obvious among their top companies. The number and percentage of women in senior executive roles in the top 20 are almost identical to a year ago – 15% then, 16% now. Likewise, the number in line or operational roles is essentially static.

The only notable movement comes from a turnover in companies that make it to the top 20. We can report that half the companies in this year’s list have two or more female faces at the executive table – though they share that table with anywhere from 7 to 14 men. And three companies still have men-only executive committees. Yet we’re told the pipeline is getting stronger.

Germany: Still tough for a working gal

Last year, Germany had a slight increase in the number of female executives among its top companies, which are fiercely resisting the fast-spreading EU quota legislation (from 6% to 9%). That obviously didn’t go down so well, as this year, Germany has dropped back down to 7%. Now, there are only 10 women out of 135 executive committee members in the country’s top companies. Over half still don’t have a single woman in their top teams – and many of those that did are losing them. Since last year, Continental, Deutsche Telekom, E.ON and Siemens all lost women – Siemens lost two (N.B. as we go to print, we hear they are headhunting a woman to head their energy business). Lufthansa is the only company in the group to have two women on its five-person ExCom, making it Germany’s only gender balanced leadership team.

For a country led by Angela Merkel, whose cabinet is 35% female, it’s startling to see so little progress on gender in the private sector. It’s time for German business to recognize the world has changed.

China: Half the sky falling?

Some reports say Chinese business is among the most gender balanced in the world, and Mao famously said that women hold up half the sky. Among international companies, China’s country operations are routinely more gender balanced in management than many of their Western counterparts. Yet looking at China’s top companies, it’s hard to believe that the country is making women a significant part of its future.

Of the 203 executive committee members on the executive teams of the country’s top companies, there are eight women – 4% of the total. Two have line roles, the rest are in staff jobs. The number of companies with a female senior executive has gone down since last year. According to a recent survey from Nanyang Technological University, only 12% of publicly listed companies in China have at least one woman senior executive – so we could applaud the fact that 35% of the top 20 do, but it’s hardly comforting.

Let’s draw hope from Alibaba (still privately owned and therefore not on our list), where five of the 14 members of its executive team are women. Let’s hope that this is the new face of Chinese business leadership. In the meantime, we acknowledge the Bank of China as the only Chinese company in the top 20 to have two women (25%) on its top team.

Chinese capitalism is, at least, ahead of Chinese communism – the Politburo remains 100% male.

Japan: Where Womenomics goes to die

Japanese Premier Shinzo Abe thinks he has the answer to Japan’s steadily aging workforce – acceleration of the engagement of women in the economy. “Active participation of women is at the core of [Abe’s] growth strategy,” said a government spokeswoman after a speech in April last year, in which he called for women to fill 30% of senior positions by 2020.

But, he has a long way to go. In our survey of Japan’s top 20 companies, just two women appear in the list of 230 Executive Committee members – both in support roles. The vast majority of Japan’s largest corporations has not a single female senior executive. From where does Prime Minister Abe think another 60 women executives will miraculously appear in the next six years, to help him reach his pie-in-the-sky target? His own party has a pitifully low female representation – around 10%. Japan is 124th in global ranking of women in national parliaments – well behind China or Saudi Arabia.

Abe has said he will improve childcare provisions and encourage training for women returning to work. A bit of training for Japanese men to help them adapt might also be a good idea, given the traditionalist attitudes of many in his own party and in society at large.

When I visit Japan I see highly educated and energetic young Japanese women dashing to and from work with all the determination and drive of their male colleagues. Many of them refuse to marry in order to preserve their jobs and independence in a stiflingly traditional culture. Too bad the country, the economy, and the future are still losing out on their potential.

USA: Nicer – but nice enough?

First, some praise. Progress is progress. A fifth of top executive posts are now held by women – up from 18% last year. Most companies (70%) now have two or more women on their executive committees. Only three have none. Since last year’s report, five more companies have appointed a woman to the top team. A third of companies have achieved what we call ‘Critical Mass,’ where there is at least a 25% representation of both genders on top teams. 40% of these senior executive women have operational responsibilities. And three (HP, IBM, and General Motors) have women chief executives – the only female CEOs in our country reports. All three of those companies (and women) are under intense scrutiny right now, amid problems of poor performance, or product recalls – in IBM and GM’s case – pre-dating Ginni Rometty and Mary Barra’s arrival.

Yet after decades of both gender and diversity work, is 20% of top executive posts enough to be considered balance? Should we celebrate a country where the key message of one of its top female executives in 2013 was for other women to ‘lean in’ and try harder?

Hopefully, these improvements are the result of companies and their leaders trying harder. I look forward to next year’s numbers, to see if the U.S. really is getting closer to “critical mass.”

End Abusive Behavior on Your Team

Managers aim their abuse at those who are least likely to defend themselves. That is the finding of a disturbing new study by Pedro Neves (published in the Journal of Occupational and Organizational Psychology), which looked at 193 supervisor/employee pairings in a variety of different industries.

I found the results troubling, but sadly they resonated based on my experience as an executive team advisor in dozens of organizations.

Here is a summary of Neves’ findings.

Employees with poor core-self evaluations (an aggregate measure related to self-esteem and sense of control) and poor coworker support were more likely to experience aggressive behavior from their supervisor (belittling, blaming, etc.). That is, the weakest employees receive the brunt of a bad manager’s abuse.

The propensity to target aggression at the people least likely to retaliate was exacerbated when the supervisor was in a stressful or threatening situation (in this case post-downsizing). Supervisors under stress did not become universally more aggressive, just more aggressive toward the weakest members of their teams.

Employees with low core self-evaluations did not respond to the abuse directly. Instead, they decreased their effort on their job duties and reduced their discretionary effort on other tasks that support the team or the organization.

In these findings, I immediately recognized a pattern of team dysfunction that I described in my book You First and that I wrote about in a previous post for HBR. This toxic dynamic is created and worsened by three distinct roles: the wicked manager who is preying upon the weak, the wounded victim who fails to defend him- or herself, and the witnesses who do nothing to interrupt the unhealthy interaction. Anyone playing any of these roles can change the team by changing their behavior.

If You Are the Manager

First, if you are a manager, hold up a mirror and ask yourself whether you play into this destructive dynamic. If you are honest with yourself, do you take out your frustrations on the person on your team who is least likely to fight back? Is there someone on your team caught in a vicious cycle where his victim mentality has become a self-fulfilling prophecy?

Just making yourself aware of this will start to change it for the better. Then, decide what to do. Is there is a constructive way to address the things that are frustrating you so that you don’t pass your emotion on to the team? Even being aware that your frustrations come from outside your team will help. If you have angst that comes from uncertainty about your own situation, don’t take it out on your subordinates, try to address it directly by asking for clarity from your manager. If you’re angry about a decision from above, find an appropriate outlet to express your concerns so they don’t get projected onto the team.

Next, make a decision about the weak team member. There is no point having a helpless person on your team. If it’s not worth the investment to turn his behavior around, find another home for him or exit him from the organization. If the person has a unique skillset or important relationships with customers, it might be worth the investment to help them succeed. Invest in building the person’s confidence and increasing his credibility with his teammates.

Your negative words and body language toward the weak team member have demonstrated to his coworkers that they don’t need to respect or support him. If you pay attention to your own behavior, you’ll probably notice that you don’t make much eye contact with him and that your body is usually aimed away. Start shifting those subtle cues while you also focus on being inviting and open in how you interact with him.

If You Are the Victim

If you’re the victim of the abusive manager, stand up for yourself. Your attempts to grin and bear it without pushing back are inviting more aggression. First, you need to realize that your boss’ behavior is likely being triggered by stress she is under (i.e., it’s about something other than you). When you present an easy target, she gets a chance to let off some steam at your expense.

Let your manager know that you will not be a punching bag anymore. Say something strong and respectful such as “I think we can resolve this without raising voices,” or “My report had each of the pieces that we discussed when we met on Tuesday.” Where it makes sense, enlist the support of your coworkers “Brad, could you weigh in on this, we talked through this approach.”

Finally, don’t get even by reducing your efforts on the job. It may feel unfair and you may feel disengaged, but the last thing you want to do is give your manager a valid basis for her treatment of you. Every time you feel the desire to switch off your computer a little early, channel that into a productive conversation or an important project.

If You Are the Witness

If you observe this kind of destructive relationship between your boss and one of your teammates, get off the sidelines and do something. Watching silently as a coworker is abused is no better than standing idle as a kid is bullied on a playground. Remember, the research showed that the supervisor abuse was much more likely to be targeted at people who didn’t have the support of their coworkers.

Reach out to your teammate and provide support, advice, and coaching. If there are things you believe she can do to come across as more confident, pass along your ideas. In meetings, if you see abusive behavior, try to defuse it. For example, if someone continually interrupts her, ask that people hear her out. You might try something like: “I’d like to hear what Sally has to say.” If the boss criticizes her, be vocal when you disagree. Lending some of your confidence and credibility might be the boost she needs to reclaim some respect from the team and the boss.

Any one person can disrupt an unhealthy dynamic by behaving in a new way. It takes the willingness to see and acknowledge the bad behavior and the courage to do something differently. It’s worth it.

How Comcast Sets Its Customer Service Reps Up to Fail

You’ve probably heard the audio by now — eight excruciating minutes of back-and-forth between a Comcast customer who wants to cancel his service without giving a reason, and the customer service rep who digs for one nonstop. If not, take a listen:

 

Curious about what might be going on, management-wise, behind the interaction, I spoke with Frances Frei, a professor and senior associate dean at the Harvard Business School and the co-author of Uncommon Service: How to Win by Putting Customers at the Core of Your Business. An edited version of our conversation is below.

Aside from the general reaction from the internet – that the service rep is a jerk – I’m wondering what you make of this call. 

Sure. The public has it wrong, by the way.

How?

Imagine if I told you that I am the leader of a company and am telling people that customer retention is the future, that it’s the salvation of our organization. I fire up the troops and say, “We are the best and no one should rationally want to leave us. The only thing you have to do is to help people understand we are the best. You have all the facts at your disposal, we are going to give you incentives. I know you can do it – you can turn anyone.”

This results in everyone thinking they are better at their jobs when they turn a customer.

When I listen to this thing, I hear a guy really trying to please his bosses. I find it reprehensible — there is no way he just made up that this was the right way to behave. He is clearly doing what was asked of him in a vague way: remind people that we are the best, and if you can just get them to talk about why they are leaving, you can remind them why we are the best.

Now, was he the most emotionally intelligent person?  No, but I would love to know: Where are they sourcing their employees from, and do they have any business to expect people to be both driven and emotionally sensitive?

The employee was not set up for success.

So what would it look like if he was set up for success?

There are some customers who want to leave because they don’t know any better. With that subset, a company would want to do everything it could to keep them.  Now, there is another subset that is leaving for idiosyncratic reasons — or no reason at all. I want them to be ambassadors, so I would recommend being as gracious as possible. You can educate the customers who are wrong about an issue, but there is no way this rep received that nuanced message.

Do you have a sense of whether the internal tracking mechanisms, having to fill out reasons why people are leaving or that sort of thing, played into what happened at Comcast?

I think this guy’s performance was measured not on whether the customer was going to be an ambassador afterwards, but whether or not he got to ring the bell that he converted somebody who wanted to leave. There is a pretty clear performance measure going on behind the scenes.

What would a better incentive system look like?

They could have easily done it differently, and I am not even sure I would measure on conversions.  I would measure on the question, are these customers likely to be ambassadors for our organization at the end of the phone call? That would be the only measure.  I am sure it would get more retention than their current system does.

How would you measure that? It seems like a harder thing to gauge.  

Actually, many companies have systems where, for example, they call or email people back and you ask them how they are doing. It’s a very well-understood thing.

So when it comes to Comcast – and people tend to hate cable companies more than other businesses –

Because of stuff like this.

Exactly, and we’ve all had similar experiences. So why wouldn’t they just change the way they handle customer service?

In industries like cable, when the customer dissatisfaction is so great, it is because you feel like you are banging your head against the wall.  That’s why we often blame the person on the other end of the phone, but I have been in enough of the organizations to know it is not the employee’s fault.

But, really, how seriously does the average person really consider an alternative to cable, even if they hate cable? That’s because the cable industry has a long history of no competition, so I think a lot of its profits and customers have been guaranteed. But the industry needs competition like nobody’s business, because in competitive environments, you wouldn’t get away with this.

It’s like the old days of the post office before FedEx came along: Because cable has been protected from competition, and it makes them profitable. It makes us have to suffer.

It almost seems like the restrictions being placed on customer service reps and others on the front lines are becoming more and more absurd — and aren’t actually helping customers or companies. For example, employees at car dealerships who say they need a 10 on a satisfaction survey or else they’ll be considered to be a failure.

It makes me so crazy. It’s run amok.

Auto dealers are the most notorious, that if you give us a 5 it’s a pass, if you give us a 4, it is a fail.  I had a man from a pest control company that had a guy leave a survey and say, “You might not notice, but I don’t get my bonus unless you check a 10.”

Now, first of all, that must mean that the way in which they are doing the survey is the laziest way in the world — and they probably are using them in a really dopey way, too.  And the employees are finally the ones who are surfacing it.  That is a shameful act on the part of the organizations.

In addition, you are not going to get honest feedback. It’s based on perverse incentives, and they’re causing a lot of problems. It’s a caricature. It’s a Saturday Night Live skit.

Just stop the madness. Just stop it right now.

It sounds like the employees are basically the only way that we understand these major systemic problems with companies — and often at the employees’ peril.

Yes, because the experience gets delivered through the employees, we often blame the employees. And if you have a good service experience, you think the employee must have gone to heroic efforts to overcome the system.

That variation doesn’t make any sense, and it goes back to job design. Again, these companies are not systematically setting employees up for success. And then they worry about customers complaining on social media – well, they give us no other outlet.

Taking a step back, are there any companies that do a really good job when it comes to customer service calls?

Oh yes. Just call Zappos. At Zappos, the employees, no matter what your problems are, they will all do a good job. They are not judged by how quickly you get off the phone; they are judged by how good of an experience you have.

So why is it that we have call centers that give you the perverse incentive to get off of the phone as quickly as possible, or the perverse incentive of making sure a customer stays, no matter why they’re leaving?

Why not be judged for whether customer is deeply satisfied at the end of the call?

The Industrial Revolution That Never Was

Every schoolchild learns that the industrial revolution began in England. Forests have been felled to demonstrate why England, and only England, had the culture and institutions to be the birthplace of modern industrial capitalism in the late 1700s. Yet the creation of large-scale factories nearly began not in England, but in Great Britain’s American colonies, 250 years ago. The American version failed miserably, because culture and institutions were not enough to kindle an economic revolution.

It was in June of 1764 that a merchant named Peter Hasenclever landed in New York with plans to build a network of factories unlike any the world had seen. Hasenclever, then 48, had been an international businessman almost since birth. He had grown up in northwestern Germany, where his father owned mills that heated small amounts of charcoal and iron together to make steel that could be hammered and sharpened into knife blades. He had lived and traded in Belgium, France, Portugal, and Spain. His acquaintances included Frederick the Great, king of Prussia, who wanted Hasenclever’s advice about encouraging a textile industry.

Hasenclever moved to London in 1763. A few bribes persuaded Parliament to grant him British citizenship, and with it the right to invest in Great Britain’s American colonies. Wealthy from his years in Spain, Hasenclever sank £8,000 into a partnership with two English traders. None of the three had been to America, but all sniffed opportunity in making iron.

Parliament normally opposed manufacturing in America in order to protect jobs at home. But the desire to protect British industry had foundered on a dangerous reality: exhausted mines and depleted forests could no longer meet the Royal Navy’s endless demand for iron. Much of the Navy’s cannon and plate was made from iron bars imported from Sweden. Worried about the security risk should Sweden cut off supplies, Parliament opened the door to iron imports from the colonies.

Hasenclever and his partners reckoned they could earn an annual return of 20 to 30 percent by making iron in America and trading it across the Atlantic. To smooth their way, they made the acquaintance of some gentlemen who could influence the government’s purchases of iron, such as Major General David Graeme, private secretary to Queen Charlotte, and George Jackson, soon to be named deputy secretary of the Admiralty. These aristocrats and their friends put up £40,000 to form the American Company. Hasenclever would run the company’s business in America, and the partnership of Hasenclever, Seton, and Crofts would transport its products and sell them in Britain.

In January 1764, Hasenclever’s cousin traveled to Germany, where he secretly recruited miners, masons, ironmakers, and forgemen in the face of a ban on emigration of skilled workers. Meanwhile, Hasenclever set sail for New York.

Soon after landing, he purchased 10,000 acres of rocky, inaccessible land in the Ramapo Mountains, a range of low but extremely rugged hills barely 30 miles northwest of the city. The property included several ancient mines and ironworks. The proprietors of New Jersey colony approved his plans to make iron after its investigators reported, “In our opinion the land is entirely unfit for any purpose but that Mr. H proposed to employ it in.” As the first of 535 German workers and family members arrived in late summer, abandoned mines were reopened and old hearths relit. By November 1764, the American Company was making iron.

New Jersey was littered with tiny ironworks in the 1760s. Most were bloomeries, glorified blacksmith shops in which an ironmaker – often a slave unable to refuse a dangerous job – would heat a lump of ore over charcoal in a hearth. Standing inches from the hot coals, the ironmaker would reach in with a bar to push aside dirt and rock and lift the glowing mass of metal, called a bloom, on to an anvil where he could hammer out more impurities. A day of heavy labor might produce a few bars of iron, 14 feet long and two inches on a side.

Bloomeries were crude, but they were much cheaper to build than the main alternative, blast furnaces. A blast furnace was an egg-shaped stone oven 20 feet high designed to sustain very high temperatures for months on end. Coal or charcoal fueled a fire made white hot by blasts from a leather bellows. Ore would be fed in, and the ironmaker would cook it along with a flux, such as limestone, at temperatures far hotter than a bloomery could achieve. Eventually, the iron would separate from the mass, and molten iron would trickle down into molds, known as pigs. Pig iron was brittle, but the cast pigs could be hauled to a forge, reheated, and beaten into wrought iron bars.

This was by any measure a primitive industry. Ore was extracted a few pounds at a time with picks and shovels. Bloomeries and blast furnaces produced tiny quantities of metal each day. Their biggest customers were blacksmiths who hammered a few inches of heated iron bar into a horseshoe or a hinge. Some pigs were processed by workers pounding small pieces of charcoal into molten iron until the carbon in the wood diffused into the metal, arduously producing enough carbon steel to hammer out a few knives or axe heads.

Hasenclever’s strategy was far grander. The American Company was to be a transatlantic enterprise that would produce large amounts of high-quality iron and, eventually, steel. He, his partners, and the American Company’s investors would control every stage of the operation, from mining on remote New Jersey mountainsides to selling metal bars in London.

To realize this vision, the company acquired yet more land, until it owned 34 square miles of forest around Ringwood, New Jersey, and 53 mines. German stonemasons erected three blast furnaces, two stamping mills, seven forges, and 10 coalhouses to turn trees into charcoal. To furnish ore, limestone, and timber, 214 company-owned oxen pulled carts over miles of company-owned road hacked out of the wilderness. New dams impounded four reservoirs, including the body now known as Tuxedo Lake in New York State. Four water-powered sawmills cut lumber to shore up mines and frame buildings.

Peter Hasenclever’s ironworks may have been the most ambitious industrial enterprise of its day. But while Hasenclever took a long-term view of the colonies’ promise as a home for industry, his investors tired of his endless expansion plans. They wanted dividends, and on that score the American Company was doing poorly. Storms destroyed millraces and waterwheels, requiring outlays for reconstruction. The mills could produce iron only until winter made the roads impassible and brought the waterwheels to a halt; for three or four months a year, there was nothing to sell. To the frustration of those titled gentlemen back in London, the American Company did not make much of a profit.

Technology was part of the problem. Machinery that would let a large mill turn out iron bar more cheaply than a small one was not to be had. The more charcoal the blast furnaces consumed, the further Hasenclever’s timber cutters needed to range for trees, driving up costs. Ore, pigs, and bars all were transported one wagonload at a time, with no cost saving as volume increased. Scale was of no benefit, so expansion consumed ever more cash without bringing higher returns.

But even more troublesome than the lack of technology were the cultural underpinnings of eighteenth-century British capitalism. The American Company was not a corporation in a modern sense, but part of an assemblage of partnerships. In 1766, one of Hasenclever’s London partners was declared bankrupt, dragging the other two partners with him. With Hasenclever’s financial status now clouded, his partners in the American Company grew nervous. They looked more closely into his affairs, alleging he had spent £54,000 of their money expanding the business, far more than the £40,000 they had agreed to put up.

The investors sent a series of managers to take over the operation in New Jersey. Hasenclever ignored them, and turned to William Franklin, the colonial governor of New Jersey, for support. Franklin’s investigators reported in July 1768 that “Mr. Hasenclever has accomplished a great deal” and concluded that none of his expenditures were unnecessary. Nonetheless, he was summoned to London to face charges of mismanaging company funds. Now, class differences came into play, as the aristocratic investors pursued court action against the self-made capitalist. The legal outcome was never in doubt. The ironworks were closed down. Peter Hasenclever never returned to America.

So it was that, a quarter of a millennium ago, the industrial revolution in New Jersey came up short. For the next half century, inventive entrepreneurs would apply their efforts to textile mills in the English Midlands, not to forges in the American wilds. Through many changes of hands, the American Company’s furnaces and forges would make iron on and off until after the Civil War. When new technology reshaped steelmaking a few years later, though, Hasenclever’s mills in the Ramapo Mountains were too antiquated to take part in the revolution.

 

Your Company Can Benefit If a Top Politician Is Your Friend

The stock of companies whose top executives or major shareholders were friends of Nicolas Sarkozy outperformed other firms’ stock by 3% after Sarkozy’s election as president of France in 2007, according to Renaud Coulomb of the Paris School of Economics and Marc Sangnier of Aix-Marseille University. For comparison, past researchers have estimated the returns to being connected to powerful officials at 5% in Italy and Turkey and 8% in China. Sarkozy, who served until 2012, was recently put under official investigation in France and charged with corruption and influence peddling.

Don’t Sell a Product, Sell a Whole New Way of Thinking

We all know the story.  A team creates a groundbreaking new innovation only to see it mired in internal debates. When it is eventually launched in the market, there is an initial flurry of sales to early adopters, but then sales cycles become sluggish. Pilot customers are enthusiastic, but broader adoption is slow even with customer support and training. All the pieces are in place to create “disruptive innovation” and “cross the chasm,” but the results are disappointing. What’s missing?

The problem is that data, information, and value propositions are not enough to sell innovative products. We all know the saying, “I’ll believe it when I see it.” But when it comes to innovation, the truth is often “I’ll see it when I believe it.” To sell your idea to executives, buyers, and users, you have to change not only what they think, but how they think. Without the right mental model, they won’t see the problem, understand the benefits, or make the change.

Mental models are how the brain makes sense of the vast amount of information to be processed every moment of every day. They are the lens through which we see the world. The filter that separates the signal from noise. The framework for attributing cause and effect. The “sorting hat” to decide what makes into our conscious awareness.

To understand the power of mental models, consider Dr. Ignaz Semmelweis, an Austrian physician working in the 1840s. He observed that the death rate for puerperal fever fell tenfold when doctors washed their hands before treating patients. He shared his findings with his colleagues to introduce handwashing as a standard practice. Despite the data, his fellow doctors dismissed his findings. In fact, his colleagues and even his own wife thought he was losing his mind. They had him committed to a mental institution where he died shortly thereafter.

Why couldn’t Semmelweis persuade people of his innovation? In the 1840s, the mental model of disease was an imbalance of four “humours” in the body such as phlegm, bile, and blood. Every disease was entirely internal and unique. With this mental model, Semmelweis’ colleagues couldn’t see how handwashing could affect a person’s health. It didn’t matter what the data said.

A few decades later, Louis Pasteur proved that germs, not humours, were the primary cause of disease. With this new mental model, doctors could understand how handwashing would affect health. Personal hygiene became a new standard of care. Unfortunately, this was too late for Dr. Semmelweis. He had failed to shift his colleagues’ thinking, and thus failed to shift their behavior.

Innovators change the lens through which we see the world. Companies that successfully market and sell innovation are able to shift how people think not only about their product, but about themselves, the market, and the world. Steve Jobs was one of the great mindshifters of our time. He championed the mantra “think different” and shifted the way people think about technology to be more personal and human.

Shifts in mental models go deeper than traditional thought leadership. Most thought leadership tries to establish a company as an expert within the existing mental model. Shifts in thinking challenge the prevailing model.

Over the last ten years, Salesforce.com has grown from an upstart to a market leader in enterprise software. From the beginning, Salesforce.com has focused on shifting the paradigm of computing as much as shifting customers over to its product.

For years, the company’s marketing strategy has focused on the idea of “No Software,” reflecting the shift from packaged, installed software to cloud computing and software-as-a-service. Salesforce.com recognized that only after buyers understood the mental model of cloud computing could they understand the benefits of Salesforce.com as a product.

To put the power of mental models to work in your business, start with three steps:

A. Identify the shift

The first step is identifying the underlying shift in thinking. This is different than your value proposition. It’s an assumption (usually unconscious) about how the world works.

To find the shift, ask yourself a few questions. What was the original insight that led to the innovation? Where do you feel people “don’t get it” about your solution? What is the “aha” moment when someone turns from disinterested to enthusiastic?

Try to frame it as a From and a To. This is not about bad to good, just better for the current context. As an example, consider companies selling software and services related to “big data.” The shift is not about “simple to intelligent” or “smaller to bigger.” In the area of data, the “aha” might relate to a shift in thinking about decision-making (from intuition to analytics), in data models (from spreadsheets to algorithms), or how the data is used (from target to empower)

B. Find the sticking point

Next, determine how mental models are getting in the way of your success. The sticking points are usually in one of three areas. You can tell which one by the associated symptom.

PRESENT: The model of how things work today. Do people fail to see a problem that seems obvious to you? If so, they are operating with a different model of the current state. This is often because they don’t see how things are related. As an example, the movie An Inconvenient Truth was successful in shifting many people’s mental model of the relationship between greenhouse gases and global warming. If you are trying to get people to see a problem or opportunity, focus on disrupting their existing mental model.
FUTURE: The model of how things could be in the future. Do people recognize the problem, but fail to see how your solution could solve their problem? This was the situation faced by Dr. Semmelweis in his Vienna hospital. People agreed that mortality was a problem, but they couldn’t see how handwashing could make a difference. If you are trying to get people to understand the benefits of your solution, focus on shifting their thinking in a way that reveals why your solution would be effective.
TRANSITION: The model for how to bring a new future into being. Do people recognize the problem, and the value of your solution, but fail to make the change? Sometimes people recognize the need to jump from the trapeze bar they are on, and can see the merits of the new bar you are offering them, but feel they can’t make the jump. In this case, focus on a mental model related to the transition. Define a roadmap that explains to them how to get from where they are to where they want to go.

C. Build the program

Shifts in thinking don’t happen overnight, any more than going to a weekend yoga workshop makes you flexible. Think of it like learning a second language or building a new habit – in this case a mental habit. People need to see how the new way of thinking plays out in different contexts and situations.

“The really good innovations – the ones that change the world – need to be explained before they’re accepted,” Beth Comstock, the Chief Marketing Officer of GE, recently wrote. One of GE’s mantras is therefore “mindshare before market share.” GE’s strategy focuses on being a “content factory” to disseminate powerful stories. Interestingly, GE is also the home of Crotonville, one of the world’s top corporate universities. Perhaps in the future we will see corporate universities expand beyond employees to serve customers and clients as well.

Albert Einstein once said, “We cannot solve our problems with the same thinking we used when we created them.” Companies that help customers shift their thinking will be more effective at solving problems and ultimately selling products.

To Do Things Better, Stop Doing So Much

Greg McKeown, author of Essentialism: The Disciplined Pursuit of Less, on the importance of being “absurdly selective” in how we use our time.

Download this podcast

You Can’t Be a Great Manager If You’re Not a Good Coach

If you have room in your head for only one nugget of leadership wisdom, make it this one: the most powerfully motivating condition people experience at work is making progress at something that is personally meaningful. If your job involves leading others, the implications are clear: the most important thing you can do each day is to help your team members experience progress at meaningful work.

To do so, you must understand what drives each person, help build connections between each person’s work and the organization’s mission and strategic objectives, provide timely feedback, and help each person learn and grow on an ongoing basis. Regular communication around development — having coaching conversations — is essential. In fact, according to recent research, the single most important managerial competency that separates highly effective managers from average ones is coaching.

Strangely, at most companies, coaching isn’t part of what managers are formally expected to do. Even though research makes it clear that employees and job candidates alike value learning and career development above most other aspects of a job, many managers don’t see it as an important part of their role. Managers think they don’t have the time to have these conversations, and many lack the skill. Yet 70% of employee learning and development happens on the job, not through formal training programs. So if line managers aren’t supportive and actively involved, employee growth is stunted. So is engagement and retention.

Can you teach old-school, results-focused line managers to coach their employees? Absolutely. And the training boosts performance in both directions. It’s a powerful experience to create a resonant connection with another person and help them to achieve something they care about and to become more of who they want to be. If there’s anything an effective, resonant coaching conversation produces, it’s positive energy. Hundreds of executive students have reported to me that helping others learn and grow is among the most rewarding experiences they’ve had as managers.

Starting today, you can be significantly more effective as a manager — and enjoy your job more — by engaging in regular coaching conversations with your team members. As you resolve to support their ongoing learning and development, here are five key tips to get you started.

Listen deeply. Consider what it feels like when you’re trying to convey something important to a person who has many things on his mind. Contrast that familiar experience with the more luxurious and deeply validating one of communicating with someone who is completely focused on you and actively listening to what you have to say with an open mind and an open heart. You can open a coaching conversation with a question such as “How would you like to grow this month?” Your choice of words is less important than your intention to clear your mind, listen with your full attention, and create a high-quality connection that invites your team member to open up and to think creatively.

Ask, don’t tell. As a manager, you have a high level of expertise that you’re used to sharing, often in a directive manner. This is fine when you’re clarifying action steps for a project you’re leading or when people come to you asking for advice. But in a coaching conversation, it’s essential to restrain your impulse to provide the answers. Your path is not your employee’s path. Open-ended questions, not answers, are the tools of coaching. You succeed as a coach by helping your team members articulate their goals and challenges and find their own answers. This is how people clarify their priorities and devise strategies that resonate with what they care about most and that they will be committed to putting into action.

Create and sustain a developmental alliance. While your role as a coach is not to provide answers, supporting your team members’ developmental goals and strategies is essential. Let’s say that your employee mentions she’d like to develop a deeper understanding of how your end users experience the services your firm provides. In order to do so, she suggests accompanying an implementation team on a site visit next week, interviewing end users, and using the interviews to write an article on end user experience for publication on your firm’s intranet-based blog. You agree that this would be valuable for both the employee and the firm. Now, make sure that you give your employee the authorization, space and resources necessary to carry out her developmental plan. In addition to supporting her, you can also highlight her article as an example of employee-directed learning and development. Follow-up is critical to build trust and to make your coaching more effective. The more you follow through on supporting your employees’ developmental plans, the more productive your coaching becomes, the greater your employees’ trust in you, and the more engaged you all become. It’s a virtuous cycle.

Focus on moving forward positively. Oftentimes in a coaching conversation, the person you’re coaching will get caught up in detailing their frustrations. “I’d love to spend more time building my network, but I have no bandwidth. I’m at full capacity just trying to stay on task with my deliverables. I’d really love to get out to some industry seminars, but I can’t let myself think about it until I can get ahead of these deadlines.” While it can provide temporary relief to vent, it doesn’t generate solutions. Take a moment to acknowledge your employee’s frustrations, but then encourage her to think about how to move past them. You might ask, “Which of the activities you mention offer the greatest potential for building your knowledge and adding value to the company?” “Could you schedule two hours of time for developmental activities each week as a recurring appointment?” “Are there skills or relationships that would increase your ability to meet your primary deliverables?” “How could we work more efficiently within the team to free up and protect time for development?”

Build accountability. In addition to making sure you follow through on any commitments you make to employees in coaching conversations, it’s also useful to build accountability for the employee’s side of formulating and implementing developmental plans. Accountability increases the positive impact of coaching conversations and solidifies their rightful place as keys to organizational effectiveness. If your employee plans to research training programs that will fit his developmental goals, give these plans more weight by asking him to identify appropriate programs along with their costs and the amount of time he’ll need away from work, and to deliver this information to you by a certain deadline. (And then, of course, you will need to act on the information in a timely manner.)

What will coaching your employees do for you? It will build stronger bonds between you and your team members, support them in taking ownership over their own learning, and help them develop the skills they need to perform and their peak. And it also feels good. At a coaching workshop I led last month in Shanghai, an executive said the coaching exercise he’d just participated in “felt like a bungee jump.” As the workshop leader, I was delighted to observe that this man, who had arrived looking reserved and a bit tired, couldn’t stop smiling for the rest of the evening. He was far from the only participant who was visibly energized by the coaching experience.

So go ahead and take the interpersonal jump. You will love the thrill of coaching conversations that catalyze your employees’ growth.

IBM and Apple: From Rivals to Partners in 30 Years?

The lynchpin of the new IBM-Apple alliance will be this simple phrase in the first sentence of their joint press release: “an exclusive partnership.” It sounds so innocent—a sentiment reflected at every human marriage. The two will become one.

But business combinations are not human marriages. About ten years ago, when New Jersey Superior Court judge Margaret McVeigh settled a partnership dispute between Amazon.com and Toys-R-Us, she wrote: “Long term commitment in a world where the technology is advancing almost on a daily basis is difficult to maintain. . .What constitutes an exclusive partnership continues to be a challenge not only for individuals who work on the partnership daily, but for business entities.”

For IBM and Apple, this partnership challenge looms even larger than it did for Amazon.com and Toys-R-Us. One reason for this is that the competitive arenas in which the new Apple-IBM partnership will play are fraught with multiple allegiances. In particular, their main competitor is following a distinctly “open” model that welcomes multiple partners. Google’s Android surpassed Apple’s iPhone in units sold precisely because it is sold by many players, such as Samsung, HTC, and Motorola.

The next shoe to drop in this battle, it now seems, may well be an announcement of an open, non-exclusive alliance in the Android world that ties together Google’s own cloud services with the enterprise reach of all those IBM-rivals left out of the exclusive deal with Apple, in particular HP and Oracle. (But the fact that these two are not quite on speaking terms may not help such a combination.)

This scenario is reminiscent of the 1980s, when in microcomputers Apple famously competed with an exclusive model against the “open” model of the IBM PC. Apple’s tightly-controlled approach failed then, and IBM’s wide-open approach succeeded, though IBM itself did not capture as much value as other players in the IBM PC ecosystem (Intel and Microsoft did).

Another reason the partnership challenge looms large today for IBM and Apple is that they have tried this before—and failed. The recent press releases of the bride and groom don’t refer to this, but history is clear. Yes, the press releases do admit that the two firms used to be arch-enemies in the 1980s. (As often happens, such rivalry yielded wonderful art—just watch one of the best Superbowl commercials of all time.) And yes, this phase is over and done with.

But we have not gotten an accounting of what happened a bit later in the early 1990s, when IBM and Apple formed the AIM Alliance—the “M” standing for Motorola, which was also part of the deal. At that time, all three companies were down on their backs, beaten down by the Wintel alliance. So they reached for a partnership that aimed to create a powerful new processor and companion software. Motorola and IBM were to work on the PowerPC chip, and Apple and IBM were to work on software in two joint ventures (colorfully named Kaleida and Taligent). Furthermore, IBM was to help sell Apple equipment in its enterprise accounts.

By the late 1990s, most of these initiatives had failed, save for the IBM-Motorola part, which did manage to produce a new chip design. The IBM-Apple part ended in delays and disagreements in software development, changes-of-heart on whether Apple technology would be licensed to others, and other such matters. The part about IBM selling Apple into its enterprise accounts sounded pie-in-the-sky from the start and, it seems, never happened. And, perhaps more importantly, Intel had forged ahead, redoubling its research efforts and producing ever-more powerful microprocessors. The PowerPC processor did get used in Apple machines for a few years, until Apple, too, switched to Intel (and now uses ARM too). The Apple-IBM joint ventures and the whole AIM Alliance faded away quietly after a rowdy start.

Like their attempted marriage in the 1990s, the new Apple-IBM alliance will either succeed fast, or unravel slowly. Samuel Johnson said that a second marriage is “the triumph of hope over experience.” Business combinations are not marriages. But we can ask now: What have IBM and Apple learned from their own experience that will justify the new hope? Investors ought to wait to hear that before getting giddy at the wedding announcement.

What lessons should they have learned from their experience? Here are some tests questions:

What will “an exclusive partnership” mean, concretely? A key success factor in any alliance is that the partners clearly delineate the scope of where they will cooperate and where they will compete. “Good fences make good neighbors,” wrote Robert Frost. Companies like Xerox and Fuji Photo Film followed this rule in their 50-year joint venture. In the IBM-Apple case: will IBM be able to make and sell cloud services and mobile software for Android and Microsoft machines? If it develops “industry specific” applications for the iPad, as the press release promises, will it also be able to develop comparable applications for other platforms?  From Apple’s point of view, if a smart, independent developer comes up with a killer “enterprise” app for iOS, can Apple sell this independently of IBM? You can go on and on asking such tricky questions, as we hope Apple and IBM have done; the test is—where did they decide to put the fence, and will it soon need mending (as Robert Frost also warned)?


“Unique IBM cloud services [will be] optimized for iOS,” the wedding announcement says. It’s impossible for us to see inside the resource allocation of IBM to understand what this implies. But another key success factor in any alliance is that each partner must devote internally sufficient resources to achieve what it promised to its external partner. IBM has many other pans in the fire, just like it had in the PowerPC days. Will the new work for Apple iOS get “optimized” sufficiently to beat out other enterprise solutions, such as might be offered by Android, Microsoft, and even by IBM itself?


Finally, will the partners be able to move fast enough in a competitive arena that is extremely dynamic? Mobile . . . Cloud . . . Data Analytics: Can you think of three fields that are more fluid today? Advantage will be to the swift. Alliances are great for putting together resources—that is why Apple+IBM is such an impressive formula. But contractual alliances are notoriously poor in making quick decisions, unless they sport an effective and well-staffed governance structure. So far, the press releases from IBM and Apple are silent on how this new partnership will be governed.

So, yes, the formula is powerful. Apple+IBM may well represent the idea that 1+1=3. But to succeed in that, the partners must also ensure that 1+1=1. The marriage must stick.