Marina Gorbis's Blog, page 1421

Attracting Top Contributors to an Open Innovation Project

“Not all smart people work for you,” begins Henry Chesbrough’s classic 2003 HBR article on the merits of open innovation. Firms must find a way to tap into external knowledge and ideas to innovate. Today, this premise is the basis for crowdsourcing, crowdfunding, open source development, and more. In each case, firms face a challenge: how to attract and motivate the best external contributors.

A recently published paper by researchers at Duke and the London School of economics sheds light on this issue by studying contributions to open source software. It suggests that to attract the most productive contributors, companies may have to give up more control over their project. At the very least, they need to consider the values of the community they’re hoping to attract, and not just offer financial or professional incentives.

In an attempt to determine what motivates open source contributors, the researchers looked at data from SourceForge.net, a site that hosts open source software projects. They measured various factors that might affect a developer’s chances of contributing to a project, like whether contributions were credited publicly, whether the project had a corporate sponsor, and what kind of software licensing the project used.

While they found that different types of projects attract different types of contributors, one consistent finding across types of contributors and projects was the importance of reputation as a motivator for contributing. Projects that more frequently publicly credited contributors attracted more contributions. This finding is consistent with recent research from Harvard on the motivations of Wikipedia contributors, which found evidence that social image is a primary motivator. For open innovation projects, the lesson is clear: make contributions transparent, and design tools that validate top contributors’ status in the group.

Giving credit is easy enough, but one of the paper’s other key findings points to a tradeoff for companies between attracting talented contributors and maintaining control. The authors found that developers who mostly contribute to openly licensed projects, or who contributed anonymously, were far more productive than those who mostly contributed to more commercially oriented projects. They attribute this to the power of intrinsic motivation.

The authors argue that to attract more of these highly productive, intrinsically motivated developers, firms must consider licensing their software projects more openly. (Open source software licenses vary, from those that are very friendly to commercial activity and so “less open,” to those that require all future variations of the code be made freely available, and so are “more open.”)

This lesson applies beyond software, and is ultimately about more than control. Developers in the open source community are often motivated by an ideological preference for openly licensed software. Hence this intrinsically motivated group gravitates to such projects. Firms considering any kind of open innovation — crowdsourcing a new product idea, encouraging app development based on one of its platforms, etc. — must appeal not just to professional or financial rewards. They must tap into the values of the community they’re looking to engage.

That could mean making a project more open, prioritizing a social aim alongside a commercial one, or investing the firm’s time and money into other open projects valued by the community of interest. These commitments might make open innovation more expensive in the short-term, but they may well pay for themselves by bringing more talented contributors to the table.

Can You Be Too Rich?

Is there such a thing as too rich?

Like most reasonable people, I agree whole-heartedly that people who accomplish greater, worthier, nobler things should be rewarded more than those who don’t. I’m not the World’s Last Communist, shaking his fist atop Karl Marx’s grave at the very idea of riches.

So. Perhaps I’ve asked an absurd question. Perhaps there’s no such thing as too rich — anywhere, ever. But try this thought experiment: Imagine that there’s a single person in the economy who is so rich he’s worth what everyone else is, combined. If there were such a person, he’d be able to buy everything the rest of us own. In time, his family, inheriting his wealth, would become a dynasty; and he could, by bestowing favors, direct the course of society as he so desired. In all but name, such a person would be a king; and no one else’s rights, wishes, desires, or aims could truly matter. And so no society with such a person in it could be reasonably said to be free.

It seems to me, then, there is such a thing as too rich, at least for people who wish to call themselves free. The only question is: Where is the line is drawn? How rich is too rich?

Imagine that you’re so rich you can afford the finest of every good in the economy. The best education, the best car, the best champagne, and so on. Would that be a justifiable level of wealth for a person to not just enjoy — but to aim for? A lot of people would probably say yes.

Now imagine you’re so rich that you can buy the finest of every good in the economy not just once — but 10 times over. Everything. The 10 finest homes. Meals. Doctors. Servants. Entire wardrobes. Apartments, mansions, investment portfolios. The 10 best yachts. Ten private jets. Would that be an excessive level of wealth?

Suddenly, such a level of wealth begins to sound not just unreasonable, but senseless. After all, what possible purpose could owning 10 gigantic homes, yachts, or jets serve? Why should anyone want to be that rich? Not just rich — but super rich?

What is it that induces a sense of repugnance in many of us — in most sensible people — about not just riches, but super-riches? Why is it that when an invisible line is crossed, our attitudes to wealth transform from admiration, to repulsion?

The doctor; the businessman; the neighborhood banker — all these are likely to be merely rich; and probably, many would argue, justifiably so. Their riches can be evidently seen to reflect a contribution to the common wealth. There is a purpose to their work, which requires long years of training and discipline, to which society rightly assigns a steep value.

But to paraphrase the famous line from The Great Gatsby: the super-rich are very different from the merely rich. The super-rich are not just worth millions; but billions. And they are not doctors; businessmen; bankers. They are hedge fund tycoons; “private equity” barons; privateers who have bought the natural resources of entire countries whole; CEOs with golden parachutes the size of small planets. And their wealth is questionable; not just in moral terms, but also in economic ones. For what useful purpose do speculation, profiteering, and company-flipping serve? In what way do they benefit the societies that incubate them?

The rich, if they do not plant prosperity’s seeds, at least tend to its branches — but the super-rich appear to be merely picking off the choicest fruit.

When societies allow the rich to grow into the super-rich, they are making a series of mistakes. The mistake is not just that a class of super-rich are fundamentally undemocratic because they hold the polity ransom. The mistake is not just that a class of super-rich is fundamentally uneconomic because the super-rich hoard vast amounts of capital, starving the economy of investment, opportunity. The mistake is not just that a class of super-rich is fundamentally inequitable because it is essentially impossible that any human being has single-handedly truly created enough value to be worth tens of billions. The mistake is not just that a class of super-rich is fundamentally unreasonable because there is no good reason for anyone to want such extreme riches. The mistake is not just that a class of super-rich is fundamentally antisocial, for the super-rich will never have to rely on public goods in the same way that the merely rich still need parks, subways, roads, and bridges.

All those are small mistakes. Here is the big one.

When societies allow the rich to grow into the super-rich, they are limiting what those societies can achieve.

Imagine a bountiful forest. And then — no one can say quite why — a small handful of the trees suddenly grow tall. Much taller. They became so tall and strong and broad that they block the sunlight from all the other trees. The other trees begin to wilt, and wither, and disappear. Their roots crack, and split, and turn to dust. And one day, not long after, even the roots of the tallest trees can find no water, can grip no soil. They begin to fall. Soon the whole forest becomes a desert.

A dry academic term like “income inequality” doesn’t really begin to cover it, does it?

When super-riches grow unchecked, no one wins — not even the super-rich themselves, in the long run. Everyone’s possibility is stifled when the invisible line from rich to super-rich is crossed. And that is precisely why no society should desire a class of super-rich; for it assures us that a society’s human potential will be eroded. And that is precisely why the moral sentiments of most reasonable people are instinctively, naturally opposed to the idea of super riches.

At this juncture, I’m sure that defenders of free markets will complain: Who are you to say that anyone shouldn’t be super-rich? But it is precisely defenders of free markets who should object most vehemently to the super-rich. I defy you to find me a fully-fledged member of the super-rich today who isn’t a monopolist, a scion, an oligarch … or all three.

Is there such a thing as too rich?

Here is my answer: No forest should become a desert.

Road Metaphors Are Powerful in Encouraging Goal-Directed Action

University freshmen put more effort into an academic task after thinking about their futures as a physical journey than after thinking of their coming years as a series of boxes, says a team led by Mark J. Landau of the University of Kansas. After being asked to visualize themselves as seniors and viewing an image of their undergraduate years as a path extending into the distance, the research participants solved 50.8% of a set of mental arithmetic problems; those who had viewed a metaphorical image of their years as a set of wooden trunks solved just 38.9%. The findings suggest that corporations, as well as sports teams and health communicators, might do well to employ journey-framed metaphors to encourage goal-directed action.

What an Entrepreneurship Ecosystem Actually Is

Fostering entrepreneurship has become a core component of economic development in cities and countries around the world. The predominant metaphor for fostering entrepreneurship as an economic development strategy is the “entrepreneurship ecosystem.” It should come as no surprise, however, that as any innovative idea spreads, so do the misconceptions and mythology. Here is a quick true-false test that will serve as a reality check on entrepreneurship ecosystems, and on the connection between entrepreneurship and development more generally. It’s important to get this right, because the emergence of entrepreneurship as a policy priority has paralleled (and is at least partly in response to) disappointment with dictated industrial policy, barren “cluster” strategies, and the failure of a limited focus on a set of macroeconomic framework conditions (the so-called “Washington Consensus”). If we’re to prevent the enthusiasm for entrepreneurial ecosystems from also fizzling out, we need to get a better grip on what the term really means.

You know that you have a strong entrepreneurship ecosystem when there are more and more startups.

False. There is no evidence that increasing the number of startups per se or new businesses formation stimulates economic development. There is some evidence that it goes the other way around, that is, economic growth stimulates new business creation and startups. There is also some reason to believe that the number of small businesses is negatively related to national economic health and the Kauffman Foundation  recently reported that as the US economy is improving and good jobs are increasing, the number of startups is decreasing. In fact, encouraging startups may be bad policy.

Offering financial incentives (e.g. angel investment tax credits) for early stage, risky investments in entrepreneurs clearly stimulates the entrepreneurship ecosystem.

False. There are actually few, if any, good evaluations of the impact of near-ubiquitous angel tax credits. One study of one of the oldest such schemes, the Entreprise Investment Scheme, started in England in 1994, suggests that it stimulated a significant increase of small investments (less than $10,000) by inexperienced investors who believed they received worse returns than the alternatives. In fact, the majority of venture capital investments are in California, New York, Massachusetts, and Israel, with no direct financial incentives other than fully-taxable profits.

Job creation is not the primary objective of fostering an entrepreneurship ecosystem.

True. Because no one owns or represents an entrepreneurship ecosystem, there can be no one objective that motivates all of the actors. The motivation for fostering entrepreneurship entirely depends on who the actor or stakeholder is. For public officials, job creation and tax revenues (fiscal health) may be the primary objectives. For banks, a larger and more profitable loan portfolio may be the benefit. For universities, knowledge generation, reputation, and endowments from donations may be the benefits. For entrepreneurs and investors, wealth creation may be the benefit. For corporations, innovation, product acquisition, talent retention, and supply change development may be the benefits. Many stakeholders must benefit in order for an entrepreneurship ecosystem to be self-sustaining.

In order to strengthen your regional entrepreneurship ecosystem, it is necessary to establish co-working spaces, incubators and the like.

False. There is no systematic evidence that co-working spaces contribute significantly to growing ventures. There are many anecdotes of high-growth ventures in all segments which got their starts in incubators, but there are also many more examples, less visible perhaps, of very success ventures that made no use of co-working space. Some entrepreneurs find that co-working spaces diminish their creativity or distract them from their focus. Others feel that the network gives them access to information and ideas. Whether they are a help or a hindrance, these types of intentionally created support mechanisms are at most just a small sliver of the entire entrepreneurship ecosystem, and whereas they may be helpful, they are not necessary.

If we want strong entrepreneurship ecosystems we need strong entrepreneurship education.

False. Surprisingly, there is no reason to believe that formal education in entrepreneurship leads to more, or more successful, entrepreneurship; there is, however, some evidence that it is irrelevant. Well-known entrepreneurial hotspots such as Israel, Route 128, Silicon Valley, Austin, Iceland and others, had significant entrepreneurship long before there were courses in it. These arose organically, first and foremost due to access to customers and employable talent, as well as access to capital. I taught the first masters course on technological entrepreneurship in Israel at the Technion in 1987, 15 years after Israel’s first tech IPO on NASDAQ and when the entrepreneurial revolution in Israel was well underway. This is not to say that entrepreneurship education is not helpful, rather that it is probably not on the critical path to a regional entrepreneurship ecosystem.

Entrepreneurs drive the entrepreneurship ecosystem.

False. This is an oft-heard statement, but there is a critical difference between being one essential element out of many — which entrepreneurs clearly are — and being the driver. There is no one driver of an entrepreneurship ecosystem because by definition an ecosystem is a dynamic, self-regulating network of many different types of actors. In every entrepreneurship hotspot, there are important connectors and influencers who may not be entrepreneurs themselves. In Boston several bankers and professors were crucial catalysts in the 1970s and 1980s. In Israel there were three or four investors involved in many of  the early successes. In emerging markets, NGOs such as Endeavor and Wamda have been key catalysts.

Large corporations stultify entrepreneurship ecosystems because they prey on entrepreneurs and their ventures.

False. Of course, many large corporations do indeed take defensive action against entrepreneurs who challenge their markets. But it is not possible to have a vibrant entrepreneurship ecosystem without a broad spectrum of business “flora and fauna.” This is true for a variety of reasons, two of which are: (1) corporations are important customers and market channels for entrepreneurs, not just competitors, and (2) flows of talented executives to and from larger corporations feed entrepreneurial success. Entrepreneurs and entrepreneurship definitely do not occur in a business vacuum.

According to entrepreneurs the top three challenges everywhere are access to talent, excessive bureaucracy, and scarce early stage capital.

True. But this does not mean that they are right. Whether in Boston, Tel-Aviv, Reykjavik, Milwaukee, St. Petersburg, Johannesburg, Buenos Aires, Rio or Bogota (all places where I have conducted workshops and have conducted informal surveys on the question) raising capital, finding talent, and overcoming bureaucracy are three of the top challenges entrepreneurs ascribe to their environments.  As I have argued, this is such a ubiquitous phenomenon that it probably reflects something fundamental about the generic process of entrepreneurship, rather than a deficiency of the ecosystem. The process of entrepreneurship intrinsically generates a feeling that risk capital is difficult to raise and in short supply.

Banks are irrelevant for the entrepreneurship ecosystem because they don’t lend to startups.

False. Yes, it is true that banks don’t, and shouldn’t lend to startups. That is not the business they are in.  Yet banks, even if they never directly engage or interact with entrepreneurs, help financial markets mature and indirectly impact the entire value chain of investing. In fact, bankers have made a lot of money investing in somewhat later stage technology companies, which in turn increased the confidence of early stage investors that if their investments grew, they would find the capital to fuel their expansion.

Family businesses squash entrepreneurial initiative in order to protect their “franchise.”

False. I have heard it said by well-known promoters of entrepreneurship that family businesses achieve scale or maximize their contribution to open markets while remaining family businesses because they, for the most part, achieve their growth through special connections and protections. Yet experience in even the most advanced economies (e.g. Denmark) suggests that corporations with ownership structures from family to public to cooperative are essential to, and highly facilitative of, the entrepreneurship ecosystem.

How well did you score? If you got over 50% correct, then you are in very exclusive company. The above reality check is just a starting point. Entrepreneurship does indeed create many positive economic and social spillovers, yet the only way that policymakers, civil society, corporate leaders, and entrepreneurs themselves can truly set the context for successful economic development is to separate myth from reality and shake free from the many misconceptions that exist. Only then will we be able to accelerate the formation of entrepreneurship ecosystems. They are too important to leave to chance.

 

How Data Visualization Answered One of Retail’s Most Vexing Questions

Sometimes it’s relatively easy to know what your customers are doing. In e-commerce, advances in tracking and analytics have made it possible for retailers to understand what individual customers are doing before they make a purchase, and to gather and analyze hundreds and thousands of data points to identify trends.

Brick-and-mortar stores haven’t had the same advantage.

“Retailers are all using scanner data to track what happened at the point of sale,” says Sam Hui, an associate professor of marketing at NYU’s Stern School of Business. “But they have no idea what’s really happening at a point-of-purchase decision.”

This is changing with the emergence of location analytics. Take Alex and Ani, which designs and retails jewelry, and Belk, a department store chain. Both have signed on with Prism Skylabs, a software company, to map in-store customer behavior.

By using a store’s existing security cameras, or installing new ones, Prism (no relation to the NSA program) is able to track the movement of a store’s customers and identify patterns.  “We’re not really looking at any individual; we’re looking at what a group of people over a period of time do,” says senior vice president of managed services Cliff Crosbie. “That’s the really big thing: Identifying what a volume of people do over a period of time, and how you read that information.”

In many ways, Prism is capturing the simplest aspects of shopping, aspects ecommerce websites now take for granted. “Retailers want to know what parts of their store are busy, and where customers particularly shop. So, if there’s a promotion on, when do people stop there and what do they do?” Prism can also track what happens on individual days, or over time, using a dashboard like this (rather than reams of Excel spreadsheets):

These simple, color-coded data visualizations allow retailers to turn a store floor into an analytics narrative. (A new version also takes weather into account.)

Prism can also convey information on customer movements as a heat map. Consider this example from Alex and Ani during a pilot program during last year’s holiday season, which tracked customer movement on the floor over a three-week period. The redder the location, the more frequently it was trafficked:

For chief technology officer Joe Lezon, the results were both helpful and surprising. “We now know that there was a certain area in our store people went to more often,” he told me. “We also realized that 98% of the people turned right when they first entered the store.” Lezon, along with Alex and Ani’s head of merchandising and head of sales operations, used the data to inform product placement.

In one instance, a slower-moving product was moved to a more trafficked location, resulting in an uptick in sales. And when the location of store’s more popular items were shifted, Lezon and his team were able to watch the process by which customers were able to locate them.

Both Lezon and Greg Yin, Belk’s vice president of innovation, told me that the heat mapping is particularly valuable when it comes to maximizing the value of staffing – making sure customers have a salesperson to assist them, easing the burden of the busiest times on sales associates.

Yin also says collecting and visualizing this data has helped his company test out in-store assumptions quickly. “I don’t think we’re in a place in the industry right now where we can invest 12, 18 months in a long [research] project because the technology will have changed by then,” he explained. “It’s not about building out big, long-term solutions. It’s about building a foundation in our stores and online so we can move as our customer moves.”

And while there are some privacy concerns, Prism, unlike other kinds of online tracking, promises a level of anonymity.

“We’ve had cameras in stores for years,” Yin reminds me. “But the nice thing about Prism is that it’s anonymizing. There’s no personal data being reflected because it’s all aggregated.” At the same time, he recognizes that “when we’re talking about location-based marketing, we’re really talking about personalization.”

And when it comes to personalization, there has to be a give-and-take between the customer and the store; “research shows that many customers are willing to opt into these kinds of things as long as there’s some kind of [benefit] in exchange.”

He notes, however, that the kind of bartering with personal information that’s resulted in so many successful recommendation algorithms, for example, doesn’t necessarily translate to the in-store experience. “We have to understand that the online customer is different than the in-store customer, and that the expectations might be different,” he says. “When you get into facial recognition and trying to assess out the demographics of a customer coming into your store, then you’re getting into a little bit more of a gray area.”

And when it comes to just physically walking into a store, there’s no real way for a customer to opt out of becoming a data point that, presumably, might make the shopping experience better in the future.  A 2013 Pew study found that 64% of American adults cleared their cookies and browser history to become less visible online; even Prism’s Cliff Crosbie notes that more people are switching off their WiFi in stores. While Prism’s technology removes the actual images of customers – something Crosbie says is “the right thing” to do – being tracked is still a hidden part of the shopping experience.

This is all the more important considering the fact that companies are just starting to experiment with how location analytics can both improve a shopper’s experience and boost their own sales. “We can correlate a slight uplift in the sales for slower moving products,” says Lezon.”But in general, this is a tough metric.”

“We could definitely see, after changing a display, the traffic really picking up there,” Yin explained. “The next obvious piece is to really be able to triangulate some sales against that.”

Those sales are what’s most important to Yin. “I don’t come in every morning and say, “How am I going to innovate today? That doesn’t really exist,” he explains. “The question is, ‘How do we drive business? How do we provide a great customer experience? How do we best equip our associates?”

“This is a really interesting time in retail,” he continues. “All of these technologies are starting to come together – whether it’s mobile, whether it’s social, whether it’s analyzing a lot of data – and they’re coming together to meet the customer. At the end of the day, understanding customer behavior in stores and being able to take actions on it is a problem we’re trying to solve.”

For Joe Lezon, the ultimate goal is the coupling of data based on a customer’s online and in-store experience.

“My ideal situation, to be honest, is: Gretchen, you walk into my store,” he says to me. “I know who you are. I know why you’re there: Your daughter’s birthday is next week and you want to buy her a gift. At the same time, I know what you’ve purchased in the past so I can actually help direct you to the right products.”

“How do you merge all the data together to get a full 360-degree view of the customer? That’s where all this is going.”

Imagine what that visualization might look like.

Editor’s note: This post was updated on May 9 at 2:30pm ET.

Persuading with Data

An HBR Insight Center




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Generating Data on What Customers Really Want
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Case Study: Where to Launch in Africa

Benard Kenani spotted his uncle as soon as he walked into the hotel lobby. Uncle Michael was sitting at a corner table with two other men, also in suits, both of whom were laughing at one of his jokes. That was typical of Michael, a successful executive in Nigeria, whose affable disposition was widely admired. He quickly stood up when he saw his nephew.

“Welcome to Lagos!” he shouted across the room. He proudly introduced Benard to the others, referring to him as “one of Nigeria’s up-and-coming entrepreneurs.”

Right after the men left, Benard corrected his uncle. “You know I haven’t decided if Nigeria is the place to start my business yet.”

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

Michael shrugged off the comment. “What matters to me most is that you’re finally going out on your own, achimwene. It’s what you’ve always wanted. ”

Michael, like Benard, had been born and raised in Lilongwe, the capital of Malawi. Like many talented Malawians, he had left the country as a young man to seek opportunities elsewhere, settling in Nigeria a decade ago. He now ran a thriving manufacturing enterprise.

Benard had left Malawi, too, after winning a scholarship to study in the UK, where he’d completed both his university degree in economics and an MBA. But he’d been drawn back to Africa by the burgeoning opportunities there and a desire to be closer to home. After six years as a manager at a packaging company in Kenya, he now felt that he had enough experience to start his own business. His uncle, along with several other friends and family members, had committed to investing in it.

Benard was in Lagos to see his uncle and seek advice about where to establish himself. Though Benard had an ambitious vision of someday running a venture that spanned the continent, he knew he needed to focus on one country at the start.

“But you’re seriously considering Nigeria, right?” Michael said.

“Yes, of course.” Benard nodded as he opened his laptop. “The market is competitive, but my research suggests that there are still opportunities in some specialty packaging markets. I’ve run some projections.”

Michael interrupted Benard, closing his computer. “You just need to look around! The BBC, the New York Times, the Economist — the whole world is talking about how fast Nigeria is growing. We’re on the cusp of joining the G20. If you want to be on the forefront of Africa’s growth right now, Nigeria is the place to be.”

“I agree. There are many factors that make it an attractive market. If everything continues at this pace, I’m confident that I can be profitable in the next year or two,” Benard said. “But I’m also worried.”

He saw the puzzled look on Michael’s face as he continued, “The political environment makes me nervous. And I’ve been reading a lot recently about growing instability and how that could threaten the country’s prosperity.”

“Sure, those are risks, but you’re going to find risks everywhere. You also need to think about the upside of basing yourself in Africa’s largest economy. Where else are you considering?” Michael asked, quickly adding, “Wait…don’t tell me Malawi.”

Benard gave his uncle a nervous smile. He knew this was coming.

“Benard, when did you become so sentimental? Your vision is so much bigger!”

“With the expertise I can bring to the business, within a year I’ll be the number one packaging manufacturer there —”

Michael quickly stopped him. “But what does that matter? Number one in Malawi?”

“That’s just the start. Malawi will give me a base to launch into other east African markets — Zambia, Mozambique, Rwanda, even Tanzania — and then move into other businesses. I don’t want to be stuck in one place. I want to build across markets to achieve scale. ”

The apprehension on Michael’s face made Benard realize he should try a different approach. “Abambo, remember when you started out here in Nigeria, it wasn’t such an enormous economy. As the country has grown, so has your business. There are other smaller African economies poised for growth, and I can be a part of it. I already have a potential business partner in Lilongwe that can help get me started.”

“If that’s what you’re concerned about,” Michael interjected, “I can line you up with three potential partners here tomorrow. Just say the word.” He asked Benard when he expected to make a decision.

“Soon,” Benard said. He explained that he had told his boss that he would be leaving to start a new venture and had taken the week off to finalize his plans for it.

“I will support your business no matter what you decide,” Michael said. “But you need to think about where the money is now. That’s where you want to be.”

The Potential of Malawi

The following day, Benard flew to Lilongwe. He was eager to meet with Amara Desta, his potential business partner in Malawi. She had inherited a small packaging business from her father. Because she’d been preoccupied with several other successful entrepreneurial ventures, however, she’d done little to develop it. For the past year, Amara had been looking for ways to divest the business, ideally by finding someone to buy a majority stake from her. Benard’s father had introduced them during his last visit home.

“I simply haven’t had the time to put into the business,” Amara explained as she showed Benard around the manufacturing facility. Indeed, many of the machines were outdated, and several were no longer functioning. “Luckily, we’re still in the enviable position of often having more orders than we can fill. Your father probably mentioned that our customers are primarily tobacco producers.”

Tobacco accounted for more than 70% of Malawi’s exports, and tobacco packaging offered some of the most attractive margins among the products sold by Benard’s current employer in Kenya. If he just made a few equipment purchases and built off Amara’s existing relationships, he could get started right away. But he also realized that it was risky to set up a business where almost all the demand would come from one sector.

“You must enjoy being back home,” Amara said.

“Yes, I would love to spend more time here,” Benard responded, thinking about his childhood in Lilongwe. His family, as well as many of his friends, were still nearby. “Attractive as it is on the personal side, I want to make this decision objectively, based on the economics.”

“Malawi has more to offer than most people think,” Amara noted as she proudly rattled off a list of the country’s recent improvements to him as if he were a visitor, not a native. Though the 10 years Benard had been away from Malawi hadn’t felt long, he understood why those who’d stayed now treated him like an outsider.

“And the demand is there,” Amara continued. “The tobacco growers would love to buy packaging in country. Right now, the costs to import packaging are exorbitant. Producing domestically would dramatically lower them, and we’d quickly capture much of the market. We’re perfectly situated for later expansion into other markets in east Africa too, if that’s of interest to you.”

Benard agreed to be in touch with Amara in the coming week and excused himself to go meet his father, Kwende, for lunch.

Kwende was eager to hear about Benard’s meeting with Amara. “There’s lots of potential there, right?” Kwende asked enthusiastically. “It seems like a good partnership. You both bring such assets to the table.”

“It’s true. But, abambo, I know you want me here, and I think that’s clouding your judgment.”

“Listen, I’m not as successful as your uncle Michael, but I’ve been looking into this. Start in Malawi, and after you’ve succeeded here move into other countries. Focusing on one of the bigger markets like Nigeria and Kenya may seem safer now, but that can always change. By diversifying into several smaller markets, you’ll still have a business if there is political or economic upheaval in one place.”

“I’ve thought about that. In fact, the woman I spoke to in Rwanda argued the same thing.” Benard had been in touch with the head of the Rwanda Development Board, a government agency that was providing incentives for small-business owners as part of its postgenocide rebuilding efforts. She’d made several compelling arguments for establishing the business there, including a growing economy and reduced bureaucracy.

“She’s right. While some of these other markets might be less lucrative today, as they continue to grow, so too will your business.”

“Uncle Michael also raised the issue about a skilled labor shortage here,” Benard said. “It looks like Amara has struggled with that. I need to be sure I can hire people with the appropriate skills. If I can’t find my employees locally, it’s going to dramatically increase costs.”

“Benard, everyone is going to tell you to go to the big markets like Nigeria, South Africa, or Kenya. There’s still money to be made there, no doubt, but it’s also tremendously competitive. Malawi, Rwanda, Mozambique — they are low-hanging fruit by comparison. Sure, you’re going to face some significant challenges — labor problems this month, infrastructure ones the next. But you’re ambitious! Don’t you want to be a leader and put back into the country what it gave you?”

Back in Nairobi

One week later in Kenya, Benard knocked on his boss’s office door. After inviting Benard in, Peter Agambu, the CEO of the company, quickly got to the point. “I’m sorry that you’re going to be leaving us to go out on your own. Have you decided where you’ll be setting up your business?”

“I met with my uncle in Nigeria and a potential partner in Malawi. There are attractive opportunities in both markets. I also spoke with a government agency in Rwanda, and they’ve set up a ‘one-stop shop’ to help new businesses get all their permits. It’s now one of the easiest places to set up a business on the whole continent. So there are many options, but it’s hard to see the clear front-runner.”

“For me it was easy,” Peter replied confidently. “Kenya was a big market, and I’m originally from Nairobi, so I knew the place well. I just had to learn about packaging.”

Peter had hired Benard right out of business school and had been his mentor ever since. In Peter’s view, entrepreneurs needed to focus on one country to succeed in the African marketplace. Africa was so culturally and politically diverse that a business that spanned multiple markets would need a huge centralized infrastructure. “Dreaming of a successful pan-African business is just that — a dream,” he’d once told Benard.

Benard recognized the challenges. There were unquestionably significant hurdles associated with expanding into multiple markets. Countries in Africa might be geographically close, but differences in language, culture, and political systems often made them seem much farther apart. Even getting from one place to another was difficult. Countries that were practically neighbors might involve several plane connections, and travel could consume an entire day.

Still, Benard believed Africa was changing and that many smaller markets that had historically been overlooked by ambitious entrepreneurs like himself were now among the most attractive.

“I bet your uncle encouraged you to strongly consider Nigeria,” Peter said. “There’s certainly a lot of excitement about its growth and potential. Even those of us outside Nigeria are now talking about it. While you might be fighting for a smaller piece of market share, it can still be very profitable to be a relatively small player in a big market.”

“That’s certainly true,” Benard replied. “But there’s no reason I can’t build a profitable business by launching in a smaller market. Of course, the trouble is, if I start off there, I’ll need to expand into other countries to gain scale, and I’ll be creating exactly the type of business you always cautioned against, because it’ll be difficult to manage.”

“My strategy was my strategy, Benard. What’s yours?”

Question: Should Benard begin his new packaging business in Nigeria or Malawi?

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

3 Questions Executives Should Ask Front-Line Workers

The higher up you go in an organization, the harder it is to stay in touch with what’s really happening on the front lines.  And the bad news—if you hear it at all—is presented only in the best possible light.  How do you get the real truth about what’s happening out in the field?  How do you stay connected to all corners of your organization?  I have found that three simple questions, asked with the intent to learn, can help you stay in touch with reality and be a better leader:

Get out of your office and ask, “How can I help you?”

Doug Conant, while he was CEO of Campbell Soup Company, knew that if he was going to transform the company culture, he had to ask the simple question, “How can I help you?” He asked it continually of his employees, his suppliers, and his customers—and he demanded that each of his managers do the same too. Conant knew that as a leader he needed to show he cared about the employees’ and customers’ agendas if he wanted them to care about the company’s agenda. With this one question, people knew that Conant cared, had high expectations, and was committed to solving problems, adding resources, and removing barriers.  Through literally thousands of these connections with people, Conant was able to stay in touch, build confidence, motivate, and create urgency for transforming Campbell Soup.  He reversed precipitous declines in market value, employee engagement, financial results, and corporate responsibility.

Get out on the front lines and ask, “Why are we doing it this way?”

Mark McKenzie, the CEO of Senior Care Centers, a large skilled nursing company in Texas, often asks, “Why are we doing it this way?” He asks to learn, not to criticize. He knows that as the company grows, which it is doing rapidly, it will need new systems and new structures, and all of these need to be aligned with delivering outstanding patient care. McKenzie is building a culture of asking “why” and getting everyone engaged in the joy of being heard, seeing things change, and measuring progress.

Get out to your farthest perimeters and ask the question, “How are we doing in living out our values?”   

Stanley Bergman, the CEO of Henry Schein, a $10 billion global medical supply company, visits each company office at least once per year in every part of the globe. He meets with the country leaders and the product teams. Yes, he has great financial controls and excellent budget targets for each country and each product line but, as he says, the most important reason to visit is connecting with the people. In each office he visits, he makes sure he and his top people reach out to every person in the building. No one is left out. The questions he asks them are about values and how they are being demonstrated. He might ask a salesperson, “Are we living into our values as a company in ways that support you?” He wants the truth and he has established a reputation as someone who listens—and takes action based on what he hears. He continually relates the story of what Henry Schein is doing and will do, and he’s tireless in his commitment to show that each individual is a valued contributor to “Team Schein.” His entire message is, “I want to be certain you are getting everything you need to do your job well, and that we show you respect all along the way.”

Three questions, three stories. Each one puts you in closer touch with reality, builds trust, and inspires high performance.  Each time you ask these questions, you’re also acting as a role model for others in your organization.  Being present, asking the right questions, and listening to what your customers, employees, suppliers, and investors have to tell you creates an invaluable feedback loop for your performance as a leader and for the organization as a whole.  Do it consistently and others will follow with astounding results.

To Create a Real Connection, Show Vulnerability

The hardest part of my business failing was not the loss of the business. It was the loss of the identity that came with being a successful entrepreneur.

I had become so attached to this identity that when others asked how the non-existent business was doing, I said, “Great!” The chasm between the image of being financially set for life and owning a failed business was painful. I felt like a fraud.

When I finally got up the courage to start telling the truth, I could feel a weight lift off my shoulders. I had no idea how much stress I had been causing myself. To my huge surprise, instead of shunning me, people actually treated me with more respect and confided in me with their challenges. I wondered how had I been so wrong in judging other people’s reactions.

In his highly cited research, University of Georgia social psychology professor Abraham Tesser found that when someone close to us outperforms us in a task relevant to us, it often threatens our self-esteem. The more relevant the task is, the greater the threat we feel.

My personal experience matches the research. As much as I would like to be purely happy for my closest friends when they achieve something amazing, sometimes part of me feels diminished. I wonder why I haven’t been able to duplicate their successes, attributing it to advantages they had over me or their superior abilities.

In talking with Dr. Tesser, I learned that what I thought of as insecurity is actually part of being human: “In our studies, when we gave people information about someone else’s success who is close to them in an area they’re also trying to be good at, they say they feel proud and behave that way, but, in fact, they weren’t. When we surreptitiously video-recorded them you could see disappointment and negative affect in their face. Their behaviors did not reflect how they said they felt.”

While I had always looked at this mechanism as a negative force in society, Dr. Tesser’s belief is that people reconstructing their worldviews to constantly think about what they’re best at actually helps the divisions of labor in society. And yet I wondered if it was really necessary for us to try and hide our disappointment, as his study participants did. What if we shared our mixed feelings with others?

In 1997, Arthur Aron, a social psychologist and director of the Interpersonal Relationships Lab at Stony Brook University, performed a groundbreaking study that answers this question.

He and his research team paired students who were strangers. The students were given 45 minutes to ask each other a series of questions. Half the pairs were given questions that were factual and shallow (e.g., a favorite holiday or TV show). The other half were given questions that started off as factual but gradually became deeper (e.g., the role of love in their lives, the last time they cried in front of someone else). The final question was, “Of all the people in your family, whose death would you find the most disturbing?”

After the 45 minutes, Aron’s team asked the participants to rate how close they felt to their partner. Pairs from the second group formed much deeper bonds. In fact, many of these participants started lasting friendships. In one longer version of the experiment, two participants even got engaged a few months after the study.

Aron’s team also surveyed a broad selection of students not involved with the experiment and asked them to rate how close they felt to the closest person in their life. Aron then compared these scores with the ratings of the study participants who had asked each other the deeper questions. Amazingly, the intensity of their bonds at the end of the experiment rated closer than the closest relationships in the lives of 30% of similar students. A 45-minute conversation created a connection that was perceived as closer than the closest connection with someone people known for years.

Only presenting an idealized version of ourselves separates us from others.

The mistaken assumption is that if people find out who we really are underneath, they’d remove themselves from our lives. The reality is that if we share the ups and downs of our human experience in the right way in the right context, we build deeper connections. In so doing, we can break down the roles we play (e.g., client/customer, boss/employee, fundraiser/philanthropist) and connect with each other as humans.

In a world where people compare their behind-the-scenes with others’ highlight reels, we can surprise ourselves, and put others at ease, by sharing our full humanity.

The Power of Reflection at Work

It Does Help to ThinkReflecting on Work Improves Job Performance Working Knowledge

Very few companies give their employees time for reflection, especially when competitive pressures are escalating. Usually the imperative is to double down and work harder – don't stop to think, just drive forward. But new research demonstrates the value of reflection in helping people do a better job. A working paper by Francesca Gino and Gary Pisano of Harvard Business School, Giada Di Stefano of HEC Paris, and Bradley Staats of the University of North Carolina shows that reflecting on what you've done teaches you to do it better next time. The researchers did a series of studies, all showing that reflection boosts performance. "Now more than ever we seem to be living lives where we're busy and overworked, and our research shows that if we'd take some time out for reflection, we might be better off," Gino tells Working Knowledge. –Andy O'Connell

Four Calculations Keep an Eye on the Wild Cards When Playing Alibaba's IPOFinancial Times

Unless you were hiding under a rock this week (or, in my case, deadlines), news of Alibaba's IPO filing likely filled your reading list and Twitter feed. One of my editors pointed me toward this long-view piece, in which Richard Waters analyzes the four calculations that will be vital for the company's continued growth. The first: managing the "deep – and increasing – seasonality in Alibaba's sales." Then the company will have to smartly deal with its "take rate" – how much money it keeps for itself with each transaction. Right now it's about 2.7%; eBay, in contrast, has a take rate of 8%. Third is the shift to mobile – while Alibaba's mobile-purchase numbers are up, they could be higher. Last is what Waters calls "the most important of all. Alibaba has become an almost pure-play bet on one of the world's big growth stories: Chinese consumer spending."

Computers Everywhere! The Future of Work Looks Like a UPS TruckPlanet Money

UPS "was a trucking company," says NPR producer Jacob Goldstein. "Today it's a technology company" where people and computers work collaboratively to deliver packages more efficiently. Among the things the company's "rolling computer" can pick up on: Where a truck is, how fast it's going, how the engine is performing, and whether there's a dog at a scheduled stop. According to Jack Levis, the company's head of data, one minute per driver per day is worth $14.5 million. While some pre-Big Data solutions were already in place before his tenure (people figured out, for example, that right-handed drivers should put their pens in their left pockets to access them quicker), Levis and his team are always drilling down to shave seconds off a route, which can often make the driver's life a little easier. When they realized, for example, how long it took to start the truck and open and close the back door, the company installed remote starters and door-openers to speed up the process.

Smart BugsHow Malaria Defeats Our Drugs Pacific Standard

A small region of Cambodia has been the source of parasitic mutations that have consistently rendered malaria drugs useless. In exploring why this should be, Ed Yong takes us on a trip along the roller-coaster course of malaria science, with its giddy highs and depressing lows. Each time there's a success, the single-celled parasite Plasmodium falciparum mutates to turn success into failure. Some think the reason so much of this mutation happens in one corner of Cambodia is the area’s unregulated use of antimalarial drugs. Others think the parasites there are particularly good at mutating, that they're like cancer cells – highly evolved to mutate successfully. Despite an influx of money and organizational know-how from groups like the Gates Foundation, there are many reasons why it may never be possible to eliminate the disease. One big challenge is compliance: getting local people to participate in anti-malaria programs. Do we face a global storm of malaria? If one arrives, the world will finally sit up and notice the emergency – but at that point, it may be too late to intervene. –Andy O'Connell

"Racial Realism"Only Minorities Need ApplyThe New York Times

When it comes to hiring and race today, John D. Skrentny writes that while "employers increasingly treat race not as a hindrance but as a qualification," they may be doing so in problematic ways. "Racial realism," as he calls it, consists of selecting and managing employees on the basis of race, not to encourage equal opportunity, but "to improve service and deliver profits for employers." Hospitals will "racially match physicians and patients to improve health care," for example, and police departments do the same to "reduce crime and police brutality." The problem, says Skrentny, is that "nonwhite employees who are promoted to fill racially defined roles have trouble leaving them." There can also be wage penalties – a 2008 suit against Walgreens resulted in the company paying $24 million to black managers "who objected to being placed in black neighborhoods, which typically had lower sales and thus lower compensation." Skrentny recommends that employers use evidence, not stereotypes, when they feel that race may be a job qualification. In such cases, there must be opt-outs and time limits.

BONUS BITSMall Madness

From Retail Palace to Zombie Mall: How Efficiency Killed the Department Stores (Collectors Weekly)
Big Retailers Find it Hard Shopping for a CEO (The Wall Street Journal)
Interactive: Ikea Store Openings (Mike-Barker.com)

Strategic Humor: Cartoons from the June 2014 Issue

Enjoy these cartoons from the June issue of HBR, and test your management wit in the HBR Cartoon Caption Contest at the bottom of this post. If we choose your caption as the winner, you will be featured in the next magazine issue and win a free Harvard Business Review Press book.

 

“Let’s hear it for technology!”

S. Gross

“I’m sorry—we require at least three fake references.”

Rolli

And congratulations to our June caption contest winner, Michael Robert Olson of Minneapolis, Minnesota. Here’s his winning caption: 

“Jerry never could truly grasp the concept of clickbait.”

Cartoonist: Crowden Satz

NEW CAPTION CONTEST

Enter your caption for this cartoon in the comments below—you could be featured in the next magazine issue and win a free book. To be considered for the prize, please submit your caption by May 21.

Cartoonist: Ken Krimstein