Marina Gorbis's Blog, page 1398

7 Reasons Your Company Can’t Hire

Since the beginning of the recession, hiring managers are taking much longer to fill open positions. BLS data shows that in May the number of open jobs reached its highest point since the summer of 2007, but the rate of hiring is still well below its pre-recession peak. While many human resources managers cite structural issues like the skills gap as a key explanation, recruitment strategy plays a crucially important role.

We recently surveyed more than 2,000 hiring managers about their recruiting behaviors and tactics. What a surprising number of them are (and in some cases aren’t) doing is effectively making it much more difficult to find the right person for the job. Here are seven examples that, if corrected, will spur U.S. hiring while ensuring both the employer and employee win.

1. Excluding salary ranges on job descriptions.  According to the survey, 46 percent of employers exclude salary and wages from their job listings, and the idea that companies should disclose a projected salary range before the interview phase will be a nonstarter for many employers. Some companies keep pay secret to enter salary negotiations with a strong playing hand. Other times, employers don’t want salaries to foment internal politics.

But transparency can be a huge advantage from a recruiting perspective – especially if the company is offering compensation packages at the market rate or better. Job seekers are not only more likely to apply when they see a salary range listed, the transparency is a sign that the company is forthright and willing to engage in dialogue. Moreover, the tactic can provide a huge advantage over competitors who choose to offer less or hide that information in the job listing.

2. Writing all job listings the same, regardless of audience. Fifty-three percent of employers use the same messaging to promote their employment brand and job opportunities to workers in all age groups. This approach wouldn’t fly in advertising or marketing, where segmenting target audiences by demographic underlies every message we read, hear or see in media. If a hospital, for instance, is searching for experienced nursing professionals, it’s safe to assume they’ll be attracted to different aspects of the job than nurses fresh out of college.

Research in The Talent Equation, a new book co-authored by CareerBuilder CEO Matt Ferguson, confirms this.  The authors studied data from more than 2 million job seekers who were asked what compelled them to apply for certain jobs. Millennials were much more likely to cite work-life balance and development opportunities, while older generations placed greater value on security and organizational prestige.

3. Hiring candidates only if they had the same job title as the open position. Forty-seven percent of employers primarily hire candidates who already hold the same job title as the open position. This is a shortcut that can significantly cut down on the quality of the candidate pool.  Screening resumes by job title ignores the reality that skills and competencies are much more important factors in determining a person’s ability to do the job. A former sociologist with advanced statistics training may not have been a market research analyst in the past, but she certainly has skills befitting market research work.

Too many quality candidates are being eliminated before the interview stage. This statement, it’s important to note, also applies to screening out the long-term unemployed.

4. Recruiting without labor market data. Eighty-three percent of employers don’t routinely use data intelligence – such as studying the supply and demand of labor in a city or region – during job recruitment. This is like a salesperson wandering a subdivision of unoccupied homes waiting for someone to answer the door.

Outside of a few metropolitan areas, employers cannot assume there are enough job seekers with the requisite skills and education to fill openings for certain high-skill occupations. To find an experienced web developer in a smaller market, employers may have to go to another city or state to recruit. Alternatively, knowing there’s a shortage of workers in an occupation should lead companies to either raise wages to attract new labor or encourage them to work more closely with local universities and community colleges to ensure degrees are lining up closely with available jobs.

5. Failing to build a talent pipeline. Sixty-two percent of employers do not have a talent pipeline (a list of prospective, interested candidates) they can tap into when jobs open up.

This is a problem for a simple reason: The threat of extended vacancies in high-turnover positions can have deleterious effects on productivity and morale, and since most large organizations already know what their high-turnover jobs are it makes sense to prepare ahead of time. Companies that continuously recruit frequently cite lower cost-per-hire and time-to-hire.

6. Setting up technological barriers for job seekers. Sixty-nine percent of employers say job seekers cannot apply to jobs on their career site if they’re on a mobile device. On the surface, mobile optimized job applications might seem like less of an imperative than other items on this list. However, smart phones and tablets are quickly becoming the primary vehicle for web access in the U.S. and around the world. Job search behaviors are quickly following suit. For instance, mobile traffic accounted for just a few percentage points of CareerBuilder’s web traffic in 2010. Today it’s headed north of 50 percent.

Passive job seekers – people who are already happily employed, often recruiters’ ideal targets — are not likely to return to a desktop later to apply for jobs they found on mobile. Moreover, past research has found that job seekers of all skill and education levels are on board with mobile job search. This trend isn’t reversing. Companies need to update their career sites now.  Busy, ambitious people won’t be impressed with your company if they have to take an hour to re-type their resume using a clunky web interface.

7. Ignoring retention efforts. More than a third (37 percent) of hiring managers say their organization does not make any efforts to avoid turnover.

Employee retention is obviously important, but what does it have to do with talent recruitment? First, lowering turnover reduces the burden on recruiters, allowing them to focus on what they do best: engage meaningfully with candidates without being overwhelmed by a carousel of new openings. Secondly, retention efforts lead to a happier, more engaged workforce, who will become recruiters’ strongest asset over time. People simply want to work for companies that are known to treat its workers well, and oftentimes, they’ll place that priority above salary and job title.

Regardless of industry or company size, there’s likely a tactic within every organization inadvertently slowing down the hiring process. As demand for labor continues to increase, it’s important for companies to identify trouble spots now – not only to ensure they can hire the best talent, but to avoid stifling the economy’s newfound momentum.

Ethics for Technologists (and Facebook)

I recently finished writing a book about business experimentation and its future. In retrospect, if I had to write it again, I’d include a section or chapter on ethics.

The ongoing explosion of technologically-enabled business opportunities inherently expand the ethical dilemmas, quandaries and trade-offs managements will confront. Consider the global controversies surrounding Facebook’s “social mood contagion” experiments. (Full disclosure: My brother is a senior Facebook executive; this post does not reflect our conversations.) As Big Data resources and analytic opportunism become more prevalent, larger themes materialize around the nature of relationships between organizations and their communities of interest. Ongoing organizational learning is essential — but does that justify treating selected customers and clients as virtual lab rats or guinea pigs? What level of explicit consent or awareness permits customers to become resources to be exploited, explored, or cultivated for knowledge and insight? Indeed, what does “informed consent” even mean when neither the customer nor the researcher can know in advance what the potential risks and impacts of —say—a social media experiment may be?

What makes today—and tomorrow —so very, very different from even a decade or five years ago is how the cost and complexity of running serious “large scale” human experiments have radically declined. Marketing experiments that might have cost hundreds of thousands of dollars in 1995 might cost a couple of hundred dollars in 2015; maybe less. Literally every individual and organization with a web presence has both the ability and opportunity to cost-effectively perform real-time experiments on people that would have been impossible in the 20th Century. Everyone online can—if they want to make the effort—become an amateur Asch, Skinner, Zimbardo, Pavlov, Ariely, Kahneman and/or Vernon Smith. Every business can —and will—treat their digital media platforms as laboratories and R&D facilities. Indeed, as I’ve mentioned elsewhere, the Internet is the greatest research, development and experimentation medium in the history of mankind. (And “the internet of things” has barely begun…)

More people—smart and dumb, honorable and sleazy, careful and sloppy—will be running more and more experiments for you, with you and on you; sometimes with your explicit knowledge and consent, more likely not. Most of the times people won’t mind or won’t care….but sometimes, they will. A lot.

So the ethical question and challenge organizations should openly—not secretly or quietly—confront is:  How can we honestly, openly and authentically demonstrate that our experiments are reasonable, fair and safe?

I am pleased to report that this turns out not to be a difficult question to answer or challenge to meet. In fact, it’s fairly easy and straightforward: The organization must be ready, willing and able to make employees, their friends and their families a full and equal part of the experimental protocols. In other words, an organization should not run any experiments on customers or clients that it would not run on the families, friends and colleagues of its managers, leaders and employees.

For example, if your organization wants to run an experiment seeing if certain words, images and memes can influence the social media communications of your best customers, you better make sure that relevant family members, friends and colleagues are similarly exposed and monitored. If you’re reluctant —or they’re reluctant—to participate in such a protocol, you had better fundamentally rethink what you are doing. If your organization’s experiments treat your family, your colleagues’ families and their friends with the same care and respect that they treat your customers and clients, you are unlikely to be successfully accused of hypocrisy and exploitation. To the contrary, you will be setting a standard that is clearly understood by all—whether they agree with it or not.

Let me emphatically stress that this experimental heuristic is not a variant of The Golden Rule. This has nothing to do with what experiments you or the researchers would be willing to perform on yourselves. Indeed, the rich and controversial history of medical self-experimentation confirms an important bias every organization should know: Innovators are happy to use themselves as guinea pigs and lab rats for their ideas. They’re passionate and committed to the pursuit of knowledge. They’re exactly the wrong people to be determining the perceived risks and appropriateness of experimental designs and impacts. In purely human terms, serious researchers are the worst possible judges of their own proposed experiments.

Consequently, experiments and experimental designs should become part of the everyday conversation of the firm—just like its brand value proposition and corporate mission. Human experimentation shouldn’t be the province of the researchers, innovators and lawyers—it should be a part of the larger discussion and debate of how the organization wants to collaborate and work with customers and clients. Indeed, the fact that one’s family and friends can and will be a part of those experimental protocols means that employees will take extra care in viewing how they want to experiment with, for and on their customers and clients.

Will some of those experimentation discussions and debates become heated? Will honest and honorable people disagree about what kinds of experiments are appropriate for friends and families and customers? Of course. But those are good arguments. Those are arguments that force real leaders to understand and persuade rather than command and impose. The ethics of innovative experiments are better and healthier when they’re open and shared rather than concealed and departmentalized. Just as the war is too important to be left to the generals, human experimentation is too important to be left to the researchers and lawyers. If an experiment is good enough for your best customer, it’s good enough for your best friend.

A Great Negotiator’s Essential Advice

The Program on Negotiation (PON), an active Harvard-MIT-Tufts consortium, draws lessons from the world’s best negotiators. This year, PON honored  PON has annually granted this award to a range of remarkable men and women such as former Secretary of State James Baker, Lazard CEO Bruce Wasserstein, and U.S. Special Trade Representative Charlene Barshefsky.

Tommy Koh became the youngest ambassador ever appointed to the United Nations and later served as Singapore’s Ambassador to the United States. During his remarkable career, described in detail here, Koh played central roles in some of the most complex international negotiations ever held. For example, he:

Led negotiations over China’s recognition of Singapore while preserving Singapore’s important relationship with Taiwan;
Served as President of the Third United Nations Conference on the Law of the Sea in which thousands of delegate-negotiators hammered out a “constitution for the oceans” that was ultimately ratified and/or signed by 197 countries;
Chaired negotiations at the Rio “Earth Summit”—likely the high point of international environmental cooperation, with the final session attended by no fewer than 130 heads of state/government—that produced global agreements on forests, biodiversity, desertification, and climate change, etc.; and
Acted as Chief Negotiator for Singapore in talks leading to the U.S.-Singapore Free Trade Agreement.

While most of us will not undertake negotiations of this complexity, Koh’s approach offers powerful lessons for all negotiations. Koh himself emphasizes often-neglected “fundamentals,” such as:

1. Master your brief. There is simply no substitute for doing your homework on the issues, the people, and the context in which you’ll be negotiating.

2. Build a talented, happy, and cohesive team. Negotiation is not usually an individual sport.

3. Build a common fact base.  In many disputes, disagreement arises less from a clash of interests and more from disparate understandings of the situation. Develop the facts of the case jointly with your counterparts.

4. Think outside your own box. Along with analytical intelligence, which is absolutely essential for negotiating, exercise both emotional and cultural intelligence. Koh observes, “The beginning of wisdom is to understand that we all live in our own cultural box. We should therefore make an attempt to understand the content of the cultural box of our negotiating counterparts. This will help us to avoid violating cultural taboos such as serving pork to American Jews or food that is not halal to our Malaysian or Arab friends. At a deeper level, it will help us to understand how our American, Chinese, and Malaysian friends think and how they negotiate. Armed with this understanding, we will able we will be able to customize our negotiating strategy and tactics to suit each negotiating partner.” Koh stresses the importance of negotiating both with your head and your heart; connect emotionally with your counterparts and make airtight arguments.  This is often done best over informal meals; in Malay, this is called “makan diplomacy.”

5. “Think win-win.” Koh emphasizes that sustainability calls for the deal to be fair and balanced.

These five points have value in almost any negotiation. But, for those carrying out more complex negotiations — let alone those with thousands of negotiators like the Law of the Sea or the Earth Summit — Koh offers this additional advice:

1. Educate. In high-stakes, multiparty dealmaking, technical sophistication and understanding of the issues can vary widely, leading to serious conflicts.  For example, a critical and contentious issue in the Law of the Sea talks involved the economic and technical aspects of an emerging industry that would mine deep seabed “nodules” made of copper, cobalt, nickel, and manganese. To help shape a shared understanding, Koh recruited an MIT team that had independently built an analytical and financial model of a seabed mining operation to give a series of influential seminars and analyze proposals for feasibility.

2. Minimize, then expand your circle. To make progress in large-scale negotiations, look for an opportune moment to “miniaturize” the process by finding a small subgroup of negotiators — not necessarily from the largest or most important countries — who are widely respected for their technical knowledge and are seen to hold the values of the group that they will informally represent. As this miniaturized negotiation begins to make real progress, carefully expand it to bring others along.  For example, on a key issue under negotiation by 172 countries, Koh finally miniaturized the larger stalled process to include only Fiji, Pakistan, Argentina, and the United States, with their small-scale agreement ultimately expanding into a full consensus.

3. Wage your campaign on several fronts. Think in terms of multi-front “negotiation campaigns” rather than specific deals. While you need to have an ultimate deal in mind, in reality you must orchestrate a series of smaller deals that set it up.  For example, when negotiating the U.S.-Singapore Free Trade Agreement, Koh had a U.S. counterpart — Ralph Ives from the Special Trade Representative’s office — with whom he interacted extensively. Yet, in parallel, Koh also coordinated multiple deals on each at least five fronts: 1) other Executive Branch agencies, 2) the U.S. Congress, 3) key companies and trade organizations from the U.S. business community, 4) the Singaporean government, as well as, 5) potential opponents of a free trade deal representing organized labor, human rights, and the environment.  As a result, the U.S.-Singapore Free Trade agreement was successfully signed in 2004.

From studying great negotiators like Tommy Koh, we can learn (or re-learn) the fundamentals as well as inventive approaches to truly challenging negotiations.

To learn much more from Koh, watch the 2014 Great Negotiator sessions held at Harvard Law School here and here. 

Focus On: Negotiating




Win Over an Opponent by Asking for Advice
The Best Negotiators Plan to Think on Their Feet
Two Kinds of People You Should Never Negotiate With
Why Women Don’t Negotiate Their Job Offers

It’s Time for Boards to Cross the Digital Divide

Is there any aspect of your daily life and business that is not significantly affected by digital technology? Not likely. Just think about all the ways that digital is integrated into your own daily routine. The ever-growing digital wave is washing over just about every facet of our personal and organizational lives, our consumer experiences, and across every industry and sector in its impact on business models and processes.

So one would think that, in light of this, boards of directors would be actively steering their organizations through the digital revolution, right? According to recent research, it appears not. This is disturbing. Despite prominent calls to action, and despite digital’s ubiquity in the press and in many discussions of strategy and tactics across organizational functions, it appears that boards are still not seeing the value of digital. Why?

One possible reason is that the financial crisis and the recessionary period that followed have driven corporations to skew their board appointments towards including more risk management and conventional corporate experience, at the expense of more tech-savvy and digital knowledge. In this view, with renewed economic activity, boards will soon catch up with the C-suite’s enthusiasm for all things digital.

Don’t bet on it. A more likely explanation for the continuing disconnect is that this is a different and particularly pernicious variety of digital divide. Data supports the fact that this digital divide is more pronounced at board level than in other organizational echelon, and that it is generational in nature. A 2012 survey of board practices reported that almost none of the large-cap companies had a director under the age of 40. Though several digitally-savvy board appointments have been well publicized recently — for example, Walmart inducted Marissa Mayer; Disney nominated Sheryl Sandberg; and Starbucks recruited Clara Shih — if the data is right, such examples would appear to be exceptions rather than the rule.

What’s more, this digital divide seems to be evolving in the wrong direction. Research indicates that the average age of independent directors in the S&P 500 companies inched up to 62.9 years in 2013 from 60.3 in 2003, an all-time high. (Of course, age isn’t everything; nor is having a digitally-savvy non-executive director a guarantee of success for your digital transformation.)

The continuing gap between the magnitude of the digital challenge and the digital awareness of many corporate boards matters for at least two big reasons. First, with the rise of the digital economy, we are entering a new era of managerial innovation with both opportunities and major risks. Boards cannot remain isolated from this fundamental change. Second, our research at Capgemini Consulting with MIT has shown that successful digital transformation is a top-down leadership exercise. Boards must play a strong leadership role, fully integrating digital into their strategy-formulation and ongoing monitoring activities.

Digital transformation is about a careful transition between the old and the new, balancing risk management, value creation and long-term sustainability, which are precisely the key roles of boards. As with any significant shift in the larger business and economic context, it is the duty of the board to exert the required pressure on the CEO and the management of the company to understand and address the impact of digitization on the operations and the long term position of the organization. Senior executives have, for the most part, been making the necessary progress in their understanding of the need for digital transformation in their own companies. If, as the data indicate, boards have not, then it is time for boards to perform their own digital transformation.

So what should boards focus on to overcome this harmful digital divide? Here is a litmus test:

First, boards should ensure that they recognize the scale and the pace of the digital impact on the corporation. Finding the right tempo is an art form.  The digital transition needs to both protect profitable operations and assets, while making the transition to a new digital business or digitally enhancing part of the existing business.

Second, boards should step up their understanding of the digital risk profile of the organization. This means they will need to more fully understand how digitization impacts the company’s business model and the part of the value chain that it operates in. Board members need to ask themselves: Where are the vulnerabilities with regard to digital? Are there opportunities for new entrants and competitors to disrupt the existing business model?

Third, boards also need to understand how digital can help the organization create more value. Again, board members need to ask themselves: Do we understand how customer experience can be enhanced through digitization? Can we use the possibilities of these new digital technologies to drive innovation? What step changes in productivity are possible through digitizing our operations and connecting our workforce more efficiently?

Finally, boards also need to ensure that the digital transition is being adequately funded for successful implementation.

If you, as a board chairman or member, have a hard time raising these issues or getting your board colleagues to discuss them in any depth, the company could be at risk. What to do? Start a process of digital education for the board. Go outside of your company and industry to see how other companies (and not just tech-related companies) have used digital technology to transform their performance. Get closer to the executive team leading the change to understand the strategy, the priorities and the expected benefits. Ensure that the interactions between the board and the management are more frequent around the topic of digital transformation. And, finally look closely at your board composition. The addition of the right digitally-savvy board members could make a crucial difference.

With digital technology and its impact on business growing exponentially, corporations cannot afford a massive digital divide between the board and executive management.

Get Your Brain Unstuck

It’s 10:20 pm — and you’re still at the office. Any moment now, the cleaning crew will arrive and the vacuuming will start and you’ll have to put on your headphones just to hear yourself think. Your wife calls, asking if she should wait up. “Leaving any minute,” you tell her, staring up at an empty screen. You haven’t produced anything substantive for hours. Yet for reasons you can’t understand, it’s been impossible to walk away. Even now, the answer seems so close.

If your work involves creative thinking, you are bound to encounter times like this — times you feel stuck. Perhaps you’re not sure how to start a project, respond to a client email, or structure an upcoming presentation. You’re trying to be productive, yet as you turn the problem over in your head again and again, you find yourself running into the same barriers.

When this happens, a common reaction is to redouble your efforts. Who doesn’t love a good persistence story? Most of us have been taught that the only thing standing between us and a successful outcome is hard work.

But the research tells us something different. While grit does have its role, when it comes to creative solutions, dogged persistence can actually backfire.

A funny thing happens when you’re thinking about a problem. The more time you spend deliberating, the more your focus narrows.

It’s an experience familiar to all of us. When you first encounter a problem, certain solutions immediately burst to the fore. Occasionally, none of them seem quite right, so you try to reexamine the issue, giving it a fresh look, and then another. Before you know it, something counterproductive happens. You lose sight of the big picture and become fixated on details. And the harder you try, the less likely it is that unexpected, novel ideas will enter your train of thought.

It’s at this point that you’ve reached a point of diminishing returns on your efforts.

So what should you do?

Research suggests that when you find yourself at an impasse, it’s often fruitful to use psychological distance as a tool. By temporarily directing your attention away from a problem, you allow your focus to dissipate, releasing its mental grip. It’s then that loose connections suddenly appear, making creative insights more likely.

While most of us intuitively know that a three-day weekend or an extended vacation can yield a renewed perspective, those options aren’t always available, especially when we’re facing a deadline.

But that doesn’t mean that we can’t reap the benefits of psychological distance in our day-to-day work. Here are three practices that can help.

1. Struggling for more than 15 minutes? Switch tasks.

In an earlier post, I described the perils of task switching. When we’re making good progress, allowing distractions to hijack our attention can derail our focus. But the moment we experience ourselves getting stuck, the rules shift. Here, a well-timed distraction can be a boon to creativity.

When we let go of a problem, our perspective expands. This explains why we discover so many solutions in odd places, like the shower, the commute back home, or the visit to the gym. Redirecting our attention to an unrelated task also provides room for incubation, a term psychologists use to describe nonconscious thinking. Studies show that following a brief distraction, people generate more creative solutions to a problem than those who spend the same period of time focusing on it intently.

The trick is to recognize when you are feeling stuck and resist the temptation to power through. In many cases, it is precisely when we are at our most discouraged that we can derive the greatest benefit from walking away.

2. For tasks requiring creative thinking, schedule multiple sessions over several days.

Often, the most productive way of resolving a difficult problem is to alternate between thinking about it very deeply and then strategically shifting your attention elsewhere. Instead of setting aside one continuous block of time to work on a creative project, schedule shorter, more frequent sessions. By planning multiple periods of deep thinking, you’re guaranteed a few transitions away from your task, ensuring that your focus expands.

3. Put mind-wandering periods to good use. 

Creative solutions rarely emerge when we’re in the office. Which is why it can be helpful to keep an ongoing list of “thinking problems” that you can access on the go. Glance at your list just before entering mind-wandering periods, like when you’re going out for a sandwich or traveling between meetings. A new context can lead to a fresh perspective.

Ultimately, the key to harnessing the power of psychological distance involves accepting that often, the best ideas don’t appear when we’re pushing ourselves to work harder. They prefer sneaking up on us, the moment we look away.

What You Need to Know About Segmentation

The marketers of Clearblue Advanced Pregnancy Test, a product that can tell you if you’re one-week, two-weeks, or three-plus weeks pregnant, asked a couple of D-list celebrities to tweet out their positive tests back in 2013. As Businessweek’s Jessica Grose reported, the maker of the test, Swiss Precision Diagnostics, has a 25% share of the at-home pregnancy-testing industry and is targeting its marketing efforts at Millennials. Grose quotes IbisWorld researcher Jocelyn Phillips as pointing to the high-tech aspects of Clearblue’s test, also noting that young women might be more willing to shell out more money for such technology — the digital version costs about $5 more than the boring old blue and pink line version.

There is nothing new about this kind of segmenting in the pregnancy test market, however. And it’s actually a really useful (if not slightly unsettling) example of how you might segment potential customers with very different needs and behaviors.

For example, you could segment the market for early pregnancy tests based on demographics such as age and income, or you could segment the market based on consumers’ price sensitivity. But in this situation, it is useful to ask why: Why would a woman want to take a pregnancy test? And are these reasons the same for everyone? A little bit of thought would suggest that there are two groups of women: hopefuls, those who want to be pregnant, and fearfuls, those who are afraid that they might be pregnant.

How would you identify these two segments and market to them differently? Often companies offer multiple products that appeal to different market segments and let customers self-select. That is, the firm does not identify customers in various market segments; instead, the customers reveal their market segment identity by choosing different products. Quidol, a company based in San Diego, California, created two different products to appeal to two segments in the market for early pregnancy tests: the hopefuls and the fearfuls. The actual test products were almost identical, but the two products were given different names and package designs, were placed in different aisles of a drugstore, and were priced differently.

Segmenting, at its most basic, is the separation of a group of customers with different needs into subgroups of customers with similar needs and preferences. By doing this, a company can better tailor and target its products and services to meet each segment’s needs. This isn’t, as McKinsey’s John Forsyth says, simply for marketing or retail firms. “We see many, many companies saying, ‘I want to get more consumer-driven and customer-facing. But sometimes the organizations don’t know how to start. I’d say you really start with a basic understanding of your consumers or customers, right? And that’s segmentation.”

It sounds straightforward but often it isn’t. Here are a few pitfalls that many companies fall into when they start thinking about segmentation. One, companies rarely create a segment  — more often they uncover one. Two, segmentation and demographics are very different things. “You have two people, we know they’re the same age, we know they’re British citizens, and we know they’re of royal blood,” explains Forsyth. “One of them is Prince Charles. The other is Ozzy Osbourne, the Prince of Darkness. They’re in the same demographic segment, but I can’t imagine marketing to them the same way.”

And three: you have to ask yourself why you want to segment and what decisions you’ll make based on the information. “Many companies say, well, I think I just need a segmentation,” says Forsyth. “But before you even start the segmentation, you need to really understand why you’re doing it and what some of the actions are that you’re planning to take, based on what you think you might see. It helps you understand what’s actionable in terms of driving a company’s business.”

Once you’ve answered these questions, you have to decide whether you want to start segmenting by needs or behaviors. “If you’re doing something strategic and you’re trying to figure out if you have the right brands, the right value proposition, the right product line, then I would say you should start with needs or attitude segmentation,” explains Forsyth. This is basically trying to identify what needs your product or service is or could meet.

“But if you think you’ve got that pretty much under control,” he continues, “and you need to understand how to go to market or target your digital and TV spending, then I would start with behavior.” This involves trying to identify differences in customer groups based on their buying and lifestyle patterns, for example.

Regardless of your approach, a useful segmentation should include these six characteristics:

1) Identifiable. You should be able to identify customers in each segment and measure their characteristics, like demographics or usage behavior.

2) Substantial. It’s usually not cost-effective to target small segments — a segment, therefore, must be large enough to be potentially profitable.

3) Accessible. It sounds obvious, but your company should be able to reach its segments via communication and distribution channels. When it comes to young people, for example, your company should have access to Twitter and Tumblr and know how to use them authentically — or, as Clearblue smartly did, reach out to celebrities with active Twitter presences to do some of your marketing for you.

4) Stable. In order for a marketing effort to be successful, a segment should be stable enough for a long enough period of time to be marketed to strategically. For example, lifestyle is often used as a way to segment. But research has found that, internationally, lifestyle is dynamic and constantly evolving. Thus, segmenting based on that variable globally might not be wise.

5) Differentiable. The people (or organizations, in B2B marketing) in a segment should have similar needs that are clearly different from the needs of other people in other segments.

6) Actionable. You have to be able to provide products or services to your segments. One U.S. insurance company, for example, spent a lot of time and money identifying a segment, only to discover that it couldn’t find any customers for its insurance product in that segment, nor was the organization able to design any actions to target them.

Now you can start breaking down segments by who buys, what they buy, and why they buy (or use or view, etc.) it. The pregnancy test interactive above is a great example of how this works.

There are also prominent failures that companies should heed. One of the most infamous is when Bic decided to segment its young female consumers. The “Bic Cristal for Her” writing utensils were thinner, designed with more pastel colors, and priced higher than other pens. Women, in general, were offended, taking to Amazon to write some very creative reviews. The pen market, in other words, was not as heterogeneous along gender lines as Bic had thought.

When thinking about how you segment, John Forsyth has several suggestions. For one, he notes, “focus groups are dead. If you’re still using focus groups, you’re using 30-year-old technology.” A much better way to understand customer needs and behaviors is to spend time with people in their homes, stores, or health clubs. “You watch them, you talk to them while they’re doing the kinds of things we want to be observing.”

This type of qualitative research is all the more important because it showcases real stories that are key to convincing stakeholders. “When we illustrate things with qualitative research, we get CEOs going, ‘Wow, you’re really telling me my marketing strategy is all wrong and I need to change it,’” says Forsyth. “It’s very powerful, and it’s really exploded in the last 10 years.”

Big Data and technology have changed how companies approach segmenting. “The old model, particularly in the market research world was, ‘I understand people’s needs and attitudes, and behaviors will come from that,’” Forsyth explains. “Today, in many situations, [marketers] have flipped it to say, ‘I’m going to do segmentation based on their behaviors, and then I’m going to try to understand the needs that drive behavioral differences.”

He warns, however, that this type of segmentation is “a lot harder to do than people think, and I don’t think we’re anywhere near being good at it yet.”

Forsyth’s also seeing a lot of movement in the area of segmenting emerging markets worldwide, which poses a number of challenges. For one, scales marketers use to measure needs or behaviors in one country may be way off in another due to different cultural norms.

He also notes that affordability is still a huge factor in developing countries, too, whereas it may not be elsewhere — as the $20 pack of digital pregnancy tests demonstrates nicely.

This post includes material adapted and reprinted from ​Core Reading: Segmentation and Targeting, HBP. No. 8219, by Sunil Gupta, which is part of Harvard Business Publishing’s Core Curriculum in Marketing. Copyright © 2014 by the Harvard Business School Publishing Corporation; all rights reserved.​  The segmentation characteristics are adapted from Philip Kotler and Kevin Lane Keller, Marketing Management, 14th ed. (Upper Saddle River, NJ: Prentice Hall, 2012). 

All Hail the Humble Solar-Powered Trash Bin

The solar-powered trash compactors that have appeared on the streets of Philadelphia and other cities can go 4 times as long as old-fashioned wire baskets before needing to be emptied, saving municipalities millions of dollars, according to CNN. Not only that, they send alerts when they’re full, making pickup much more efficient. Philadelphia was able to reduce the size of its trash-collection crews by 73% as a result.

Should Marketing or R&D Have More Power?

R&D and marketing typically come at product development from different angles, and R&D’s “things” approach is often at odds with marketing’s “people” focus. In companies where R&D is very powerful, marketers can sometimes be heard complaining about products that are hard to understand and use. Where marketing is more in charge, R&D’s complaints tend to be about a lack of imagination, of too many incremental innovations.

So when it comes to new-product development, which function should have greater influence with the senior management team, R&D or marketing?

Researchers have strong feelings about this. First, a comment from Ruth Maria Stock, a professor of marking, innovation, and HR at Technische Universität Darmstadt in Germany, and PhD candidate Ines Reiferscheid, also at Technische Universität Darmstadt. Their recent research on this subject got me thinking about it.

Ruth Maria Stock and Ines Reiferscheid

This is a crucial dilemma for many companies. In the ideal firm, R&D and marketing inform and counterbalance each other, with R&D providing brilliant technical solutions and marketers injecting equally brilliant creative ideas and customer insights into the new-product-development process. It’s sort of like the human brain—the left side and the right side are supposed to work together in perfect harmony.

But that doesn’t usually happen. Just as some people seem to be more left-brained and others more right-brained, certain companies favor the R&D lobe, some the marketing lobe of the corporate brain. And sometimes the power shifts back and forth.

Our research shows that especially in highly competitive industries, executives should resist making R&D too dominant in order to dazzle customers with a steady stream of new products and the latest technologies. Studies have shown that offering cutting-edge products isn’t enough to increase a firm’s performance. You need marketing’s input.

Microsoft discovered that after it eliminated the “Start” button in Windows 8. Consumers found the new technology so much more cumbersome that Microsoft restored the button in Windows 8.1.

Every company makes missteps like these. But our research shows that the problem of R&D dominance can sometimes go even deeper. Overly powerful and visible R&D units can have a chilling effect on marketers, marginalizing their inputs and demotivating them. The consequence: Firms’ newly developed products provide less value for their customers, and sales drop.

Our advice for senior corporate leaders: Beware of giving R&D too much power. Allow marketing to contribute—and contribute visibly—to your firm’s newly developed products.

Next, a very different point of view from Ram Mudambi, a professor and the Perelman Senior Research Fellow in Strategic Management at the Fox School of Business of Temple University, and Tim Swift, an associate professor in management at St. Joseph’s University. They’ve studied the role of strategic innovation in corporate performance.

Ram Mudambi and Tim Swift

The answer to the question depends on where a company is in its cycle of exploitation and exploration. When a company’s products are fresh to the marketplace, a dominant marketing department can help the company exploit them, boosting sales and building up the brand. But over the long term, marketing doesn’t drive company performance—breakthrough innovation does. If your existing products are mature, the returns on them and on incremental innovations to those products will inevitably fall and margins will shrink, no matter how good your marketing. At some point, you’re going to need radical innovation to get your company back in the game.

Our research shows that certain companies have a knack for knowing when to stop exploiting their existing products and start refocusing on exploring for new ideas, either through ramped-up R&D or a quest for entirely new business models. Those that make this switch increase their performance after the transition.

But because searching for new ideas requires a significant investment, and thus a diversion of resources from lucrative short-term revenue sources, corporate leaders are often thwarted by powerful forces in their attempts to shift into exploration mode. Marketing, even in forward-looking companies, is often one of those powerful forces.

That’s because marketing is all about reinforcing and extending the existing brand. No disrespect to marketers, but they’re unable to imagine, much less measure, consumer responses to breakthrough products and business models that don’t yet exist. If marketing continues to dominate even when products are mature, you’ll get relentless pressure for incremental innovations that are ultimately pointless, and too little support for the hunt for radical ideas.

Companies often need what we call “boundary spanners” to bridge the gap between R&D and the managers who are focused on short-term returns.

A number of corporate leaders excel at overcoming corporate inertia and adopting radical ideas. John Chambers is one. In his early years as CEO of Cisco, the company dominated the market for low-cost internet routers, but once that business became commoditized, it switched to home network solutions. That’s a commodity business now too, and—surprise—Cisco isn’t in it anymore. The company is now into multimedia web conferencing, which represents at least its third major episode of exploration. In fact, if you look at the company’s R&D spending, you can see three distinct peaks, each apparently corresponding to a period of intense exploration. Cisco also appears to be very good at acquiring small companies that are developing radical ideas: It has acquired about one company a month over the past decade. Integrating acquisitions is one of its core competencies.

Sometimes Cisco has been punished on Wall Street for poor earnings performance. Indeed, it’s probably not a coincidence that companies with good track records of making timely transitions from exploitation to exploration tend not to have stellar stock performance. They’re not the media darlings.

But in the long run, they develop new visions for the future—a role that is far beyond the abilities of marketing. These new visions lead to innovations that support superior performance. Such firms are still churning out profits long after their media-darling competitors are gone.

The New Marketing Organization

An HBR Insight Center




Why Technology Won’t End the Marketing Hierarchy


A Method for Better Marketing Decisions
Innovation Is Marketing’s Job, Too


Don’t Propose Marriage to a Customer Who Wants a Fling​

Use Small Wins to Build Trust Between Partner Companies

Douro Boys is a group of five independent wineries in the Douro River Valley in Portugal that built an alliance network after realizing that they could not compete on their own. The partners act almost as a single firm, sharing knowledge about wine making and markets. Their wines, such as “Quinta do Vallado” or “Niepoort” now routinely get over 90 points by the Wine Spectator and sales have doubled over the last ten years.

But as Joao Ribeiro, CEO of a partner winery, likes to repeat, Portuguese business people tend to be staunchly independent. So it was very difficult to get five companies to work towards the same long-term goals. The partners had to make small steps to establish trust.

They achieved this through an unusual exercise: the CEOs of the five companies decided to pool a small amount of their best wine to make 500 bottles of a one-off premium wine they called the “Douro Boys Cuvee”. They auctioned the bottles off at Christie’s at an average price of 300 euros, a price that put the Portuguese wine on par with high-end Bordeaux. The success of this small joint project instilled a strong sense of collective achievement among the member companies, which helped them to work on other projects much more effectively.

Douro Boys solved the problem of trust building among alliance partners by achieving a small win, an initiative (or a small number of initiatives) that partners can accomplish within a maximum of twelve (or even six) months after starting collaboration. We are not talking about conquering a new geographical market or investing millions of dollars in joint R&D. A small win can be as simple as winning a new client together or modifying an existing product to serve a small new customer segment.

When I started working on my book Network Advantage: How to Unlock Value from Your Alliances and Partnerships, I was often struck by how little attention alliance partners pay to the importance of small wins.  They tend to focus instead on mobilizing their stakeholders around big, audacious goals.

Setting such goals is important, of course, but you first need to develop trust. Otherwise, a partner will not share their knowledge or resources with you. And the small win is the shortest way towards developing trust: it helps partners to learn about one another and develop informal rules of collaboration. This leads to familiarity, familiarity leads to trust, and trust leads to improved information and/or resource sharing.

Here’s another example. N2build is a startup that wants to disrupt the construction industry by using new composite materials. For example, some of the innovative fuselage material in a Boeing Dreamliner could also be used to make wall panels or roofs for houses. The new composites have higher insulation properties, are more resistant to the elements and, after substantial R&D, can cost much less to manufacture than conventional building materials.

N2Build has a large network of R&D alliances: it collaborates with researchers at the Fraunhofer Institute in Germany, Massachusetts Institute of Technology, and INEGI (National Institute of Mechanical Engineering and Industrial Management), the eminent Portuguese research institute.

But researchers are often not the best collaborators: they tend to prefer to work on solving problems within their academic disciplines without engaging in cross-department collaboration. What’s more, institutions like these are accustomed to working with multinational corporations or space agencies rather than startups. INEGI in particular was skeptical of N2build’s ambitious goals.

The small, yet decisive win for N2Build was to organize seminars within INEGI that brought together scientists from INEGI’s different departments to discuss the idea of how composite materials can disrupt the construction industry. The researchers later commented that it was extremely unusual — as a matter of fact, a first in INEGI’s 25 years history — to have people from all around the institute together in the same room brainstorming towards a common goal. The event was a turning point for INEGI.  It is now an integral part of N2build’s R&D activities and has opened doors to other scientific collaborations.

Correos, the Spanish postal service operator, uses the same strategy to build partnerships in the e-commerce domain. It collaborated with Luis Krug, a Spanish Internet entrepreneur and now the CEO of Pixmania, to build an e-commerce platform Comandia.com. The goal is to become one of the largest online marketplaces in Spain to connect companies of any kind, including small or very large retailers, to their customers. But before the two companies joined forces to work on Comandia, they started with a small win: collaboration over the Oooferton.com website. This was a discount webshop started by Luis Krug in 2009 on which Correos worked as a logistics partner and had to adapt its logistics chain in order to handle a wide variety of products. The two partners learned a lot about each other and developed trust, which then lead to Comandia, a much more ambitious project in terms of the number of potential sellers and customers.

If your company is planning a strategic alliance, aim for a small win first — this strategy works just as well with customers, suppliers, and competitors.

Why Technology Won’t End the Marketing Hierarchy

A few years ago one of the most vexing questions for marketing executives was whether big corporations were going to have to do what Bharti Airtel had done.

In 2004, Bharti Airtel, the Indian telecomm company, had outsourced its vast network and IT operations—a move that Ranjay Gulati saw as indicating “more progressive and forward-looking” thinking than was evident in many Western corporations. He argued that the traditional closed, hierarchical, and efficiency-oriented model was living on borrowed time.

Airtel’s move left many executives stunned. Through its outsourcing agreements, Airtel had shrunk to its core. Virtually everything except customer management and building the brand was left to partners. Airtel’s move quickly transformed the mobile-phone market in India as other telecomms followed suit.

This change was reverberating through the corporate community in 2008 when the American Marketing Association undertook a scenario-learning study to try to help marketers see what the future might bring. The learning comes from considering several plausible alternative futures. In light of what seemed to be the compelling logic of shrinking to the core, one of the big questions was: What’s going to happen to the traditional corporate organization? Looking ahead to 2015, marketers were wondering whether there would still be a role for hierarchy in marketing. We could easily envision a landscape of lean, open, networked firms that managed their customers and their brands themselves but outsourced everything else to partners. An unsettling prospect, to say the least.

So now that 2015 is almost here, has that come to pass?

The hierarchy is still in place. It has proved to be remarkably resilient.

Now, by “hierarchy” I don’t mean a stifling bureaucracy. I’m talking about a self-contained structure of multiple skills and responsibilities organized within clear lines of authority, one that allows the organization to do a lot of marketing tasks on its own. Hierarchies have long been under attack because of their supposed inability to adjust quickly to new developments in markets and consumer interests, because of their supposed high cost, and because silos slow the flow of ideas and information. All these problems are compounded when there are many layers.

But hierarchies have their advantages.

For one thing, they keep critical functions in house, out of competitors’ view. If you can do your analytics within your own walls, you don’t have to expose your talents, capabilities, algorithms, and resource-allocation decisions to prying eyes.

For another, it can be difficult to find good external partners. True, there are many companies offering services such as data analytics, help with creating viral campaigns, social-media mining, and search-engine optimization. But the number of really good firms in these fields is limited, and many of them have already been snapped up by the biggest companies.

Then there’s the perennial difficulty of managing partnerships. The rate of disappointment in alliances and joint ventures is around 50%, partly because partners’ objectives inevitably diverge as circumstances change.

Hierarchies’ longevity, however, is due to more than these factors. In today’s forward-thinking companies, hierarchies are proving to be highly versatile. Rather than being destroyed by digital technology, they’re strengthened by it. Technologies have allowed the marketing organization to become more efficient and effective.

For example, the boundaries with other functional disciplines are blurring. Instead of siloed specialists there are cross-functional teams that are coordinated with shared information. Most food companies have a single team managing mega-accounts like Walmart or Whole Foods, made up of professionals who were previously in sales, marketing, IT, or supply-chain management.

Within marketing the silos are collapsing. These more integrated organizations look more like a hub with spokes than the familiar horizontal-boxes-and-arrows model. The CMO may now be called the chief engagement officer or chief customer officer to signal a shift in priorities. Roles akin to product manager, customer insights manager, PR manager, and advertising director are the spokes and rim of the wheel around the CMO, who is the hub and coordinator.

This emerging model of marketing organization is also flatter and more open. We’re finding an amalgam of agencies and other partners that give access to expertise in areas like social media and customer analytics that is hard to find.

So those who speculated about the end of the hierarchy were premature. They didn’t take into account the hierarchy’s ability to adapt with the aid of information technology. It is a flatter, more relaxed hierarchy—but still a hierarchy!

The New Marketing Organization

An HBR Insight Center




A Method for Better Marketing Decisions
Innovation Is Marketing’s Job, Too


Don’t Propose Marriage to a Customer Who Wants a Fling​
The Content Marketing Revolution