Marina Gorbis's Blog, page 1433

What Violence and War Do to Global Output

Creating violence of various kinds and then attempting to contain and quell it cost the world $9.46 trillion in 2012, according to research by the Institute for Economics and Peace. That’s 11% of gross world product. By contrast, the recent financial crisis cost just 0.5% of 2009 global output, Talia Hagerty writes on Pacific Standard. The IEP has posited eight “pillars” that support peace: a well functioning government, equitable distribution of resources, free flow of information, a sound business environment, a high level of human capital from factors such as education and health, acceptance of the rights of others, low levels of corruption, and good relations with neighbors.

The Right Way to Measure Executive Diversity

Having spent the last five years of my career working hand in hand with many of the world’s most well-known companies on efforts to advance women and diverse professionals into leadership roles, I read with interest the recent study and blog post by my esteemed colleague Avivah Wittenberg-Cox. Avivah has undertaken an ambitious scorecard to measure the progress of women into corporate leadership around the world. Unfortunately, her approach, which has become typical of approaches to measuring progress on diversity, misses meaningful and important dimensions of the path to progress. As important as it is to track progress in terms of numbers, it’s equally important to recognize other measurable, but subtler, ways diversity is making an impact on a company and its business. We should be looking at culture, climate, and especially commitment to diversity and inclusiveness of leadership, regardless of who sits at the table.

In a majority of the world’s companies, the idea that diversity is important, especially at senior levels, has become widely accepted. Nearly every major company has taken on efforts to attract, retain, and advance women and diverse employees. Along with these efforts, a huge and growing array of award granters, raters, and scorecard vendors has emerged to help companies benchmark, track progress, and measure success. From Working Mother to DiversityInc to the Catalyst Awards, many organizations are trying to spur action by calling out those who’ve done it best.

Avivah Wittenberg-Cox likely hopes her scorecard (PDF) will also spur companies to faster action by highlighting their failure to get sufficient numbers of women into key roles. In her recent study, she examined the representation of women in leadership at 300 of the world’s biggest companies across the U.S., Europe, and Asia. She then classified companies on a scale of “asleep” to “balanced.” In these ratings, companies including Siemens, Google, Costco, Deutsche Bank, and ArcelorMittal were classified as “asleep” because they have exclusively male executive teams.

The problem with this classification, and some others like it, is that simple numbers can’t capture the context or content of company diversity efforts. In fact, many of the companies that are rated “asleep” have serious leadership commitments to diversity and have poured vast resources into supporting the advancement of women and diverse professionals over the years. Siemens, for instance, does not currently have any women on the managing board. However, until very recently, there were two. In Germany, Siemens faced intense scrutiny about this. The change reflects not a lack of commitment to diversity by Siemens, but a substantial effort by their new CEO to restructure the company and prepare it for the future. In the process, some extraordinary women, including Janina Kugel, have been promoted to highly visible roles internally, and it’s likely a matter of time before women are again on the Board.

Google and Deutsche Bank also have a massive, global focus on diversity with enormous commitment at all levels of the organization. Branding any of these companies as “asleep” discounts the valuable work in progress and the real investment these companies are making every day. I’m not arguing that they shouldn’t prove their commitment by ensuring executive-level diversity, but there are a thousand complex factors that play out in senior leadership diversity, which can’t be fully captured or understood with representation numbers alone.

A large and growing body of evidence, including a recent study on the subject authored by Bersin by Deloitte, shows that beyond just the numbers of diverse individuals in key roles, the behavior and attitudes of all leaders, white men included, matter as much as the numbers of diverse individuals in leadership. This idea — now often referred to as “inclusiveness” — is essential not just to reaping the full rewards of diversity, but to creating a meaningful role for everyone in the diversity journey. No matter who you are, leading inclusively reaps rewards in terms of employee engagement, retention, and even marketplace success. Inclusive leaders build better businesses and market impact because they leverage all the perspectives and people around them — inevitably benefiting those employees and the company bottom line. It’s so important that MBA programs, including the Columbia Business School with the guidance of Dr. Katherine Philips, are incorporating it into the curriculum.

More holistic and meaningful diversity scorecards should consider inclusiveness as well as representation; they are both equally important. By showing not just who’s in a particular job but what kind of commitment a company has to fully embracing their people, we recognize and encourage a fairer, more comprehensive view of diversity progress. We should be asking whether employees across gender, generation, culture, sexual orientation, and seniority feel that top leadership in their company is seriously committed to progress on diversity. Do they feel they are valued by the company and by the people they report to? Do they believe they are fully contributing their unique perspectives and skills, and that their differences are respected and embraced? Can they advance equally as majority colleagues? And are their ideas are heard and recognized?

We are all impatient for greater progress on diversity. Numbers and measures matter enormously. But we should be looking at more complete measures that truly capture the full scope of the issue. Where progress is being made, even if slower than we’d like to see, we should applaud it. These are hard and complex challenges, and every piece of progress has to be appreciated for the context, complexity, and value it has. The path and the measurements of the progress on diversity will never be as simple as just the number of women at the executive table.

This Weekly Meeting Took Up 300,000 Hours a Year

How much time does your organization squander? My colleagues and I gathered data about time use at one large company and found that people there spent 300,000 hours a year just supporting the weekly executive committee meeting. Click the arrow below to find out where all those hours went:

Some of that time was productive, no doubt. But organizations in general are remarkably cavalier about how they invest their scarcest resource, the time of their people. In this month’s HBR, we analyze why companies waste so much time and what they can do to conserve it.

How companies can use time effectively is just one piece of a larger and ultimately more important puzzle: how to increase the productivity of their people. Boosting human capital productivity (HCP), we have found, is a powerful and often-neglected pathway to better performance.

Our research quantifies what’s at stake. Using a decade’s worth of data for the S&P 500, we looked at revenue per employee, a crude but useful measure of HCP. Then we compared those figures with each company’s financial performance. Since revenue per employee varies widely among industries, we confined our comparisons to companies in the same business.

The results jumped out at us. The best companies — those in the top quartile of revenue per employee — did 30% better than their peers in return on invested capital, 40% better in operating margin, and 80% better in revenue growth. Those differences contributed to a whopping 180% differential in total shareholder return over the 10-year period.

Predictably, the differences were larger in people-intensive businesses, like software development, and smaller in capital-intensive industries such as semiconductor manufacturing. But the leaders in HCP outperformed the laggards in every industry. The difference in profitability, of course, makes a lot of sense — if you get more revenue per employee, chances are your costs are going to be lower than rivals and your profits higher. But higher HCP also goes hand in hand with significantly higher growth rates, a correlation easy to overlook.

Many business leaders intuitively understand the connection between HCP and performance, so companies around the globe have been trying for years to improve productivity. The most common approach is to cut head count and hope you can generate the same or more revenue with fewer people. But how often does that work? Many executives we talk to have led repeated restructurings, streamlinings, and right-sizings in the years since the financial crisis, without much to show for it. At some point, most realize that they can no longer increase HCP by reducing the denominator of the revenue-per-employee calculation. Instead they have to focus on increasing the numerator: the output they get from each employee.

So how can companies increase the numerator? In our experience, the key is to look closely at five potential obstacles and assess where they stand on each one:

A company’s people may not be up to the job — the basic stock of human capital may lack the necessary skills to deliver great performance.
The company may have good talent, but it deploys those people in ways that limit their effectiveness and output.
The company may have great people and potentially effective teams, but its organizational structure interferes with high performance.
The way people interact and communicate may require too much time for the level of output generated. (That’s where managing your scarcest resource comes in.)
Finally, none of those may be the real issue — rather, it’s that your people aren’t sufficiently engaged or inspired to deliver their best work.

Take a look around you. Is anybody wasting your — or your organization’s — time?

 

Data Doesn’t Speak for Itself

I trained as a statistician and first joined Bell Labs in the network performance group. A year or two after I started, it was time for my first big presentation at AT&T Headquarters. I completed my prep well in advance and rehearsed carefully. Then I was off to the big meeting.

It could not have gone worse. The only impressions I left were bad ones. Young hothead that I was, I blamed everyone but myself, including the audience: “The average manager up here can’t even understand a pie chart!”

An established veteran of many such presentations looked me square in the eye and said, “Of course not, Tom. It’s your job to make it so they don’t have to.”

That was my first lesson in data presentation. As a data presenter, you face a tall order in getting others to comprehend and believe data. You have to think through your audience’s background and present data in ways that advance their understanding. The best way to do so is to make your plots and the accompanying explanations easy to understand. As Edward Tufte advises, label the axes, don’t distort the data, and keep chart-junk to a minimum.

The plot below is a typical result of a well-conceived and -executed data quality program. But it features too many unfamiliar terms such as “accuracy rate” and “fraction perfect records.” Without additional explanation, the audience may find themselves lost.

Start by explaining how to interpret the chart at its most basic level: “Here is a time-series plot of the results of our data quality program. I know most of you are familiar with such plots, but let’s make sure we’re all on the same page here. As you can see, we focused on the quality of customer data. The x-axis is time, and here I’m showing one point every month. The y-axis is the fraction of data records that were created perfectly each month. That’s how we’re measuring accuracy. It is a tall standard, and I’ll have more to say about that in a minute.” Then, explain to your audience how to read the data presented within the chart: “The green line displays our actual results. The blue line shows the target we set for ourselves, and the red lines are control limits. These are a bit technical. I’ll explain later. Now before I dig in, are there any questions about how to read the chart?”

Note that you’ve told your audience where you’ll be expanding, but you’re focusing on the basics of reading the chart first. This lets them fully comprehend the visual, so they can then put their full attention toward listening to your explanation of the data to come.

Now tell the story of the data in a powerful, animated fashion. In this case, there is much to tell, including how and why the program started; the joys and challenges surrounding the documentation of customer requirements; measurements against those requirements, including the logic of the choice of metric on the y-axis; improvement projects; and how you established control — essentially the implications of those red lines. Point out the impact of each out on the plot as you proceed.

Different audiences will have different needs, and you should tell the story in the simplest and most direct way you can for each. For example, a technical community may wish to understand the details in your choice of metric and the software used to draw the plots. A senior leader may wish to understand the significance of the story for extending data quality across the organization. While the main story will be the same for each, the emphases should be very different.

Be aware that many people are skeptical about analytics, big data, data mining, and statistics (perhaps recalling the famous observation, “There are three kinds of lies. Lies, damned lies, and statistics.”). Whether this skepticism is justified or not, it does enormous damage by slowing, or even stopping, the penetration of good ideas into organizations. As a data presenter, you have a sacred trust to build support for data among your audience. You must:

Present the facts in the most straightforward, accurate way you can. This is especially true when the results aren’t favorable. Further, if your results are counter to established wisdom, simply state that this is the case.
Present a comprehensive picture. Leaving out a key fact is the worst kind of lie.
Provide proper context, including where the data originate and what you’ve done to ensure they are of high-quality. (If you’ve done little, you must explicitly state, “The data are of unknown quality. This could impact results.”)
Summarize your analysis, including shortcomings and alternative explanations for the results you see.

It is fine (and often appropriate) to state your opinion, but you must clearly separate your opinion from the facts. Even the best analysis goes only so far; then intuition takes over. Make the dividing line clear.

Now take your concern for the audience a step further. Successful oral presentations live on as people pass on PowerPoint decks or links to them. People reading a slide deck alone will not have the benefit of your oral explanations, so you must think of their needs as well. As I heard in my early days at Bell Labs, “People spend an average of 15 seconds looking at a chart. Don’t make them spend 13 of those seconds figuring out how to read the chart. Build in explanations in wherever possible. Even better, make the graphic tell the story.”

With this in mind, take two steps. First, provide your explanation of how to read the chart in the notes page of your PowerPoint or slide deck program. Second, annotate the graphic, as below. While annotations do not replace a well-told story, they do give the reader some inkling of what’s involved.

To most audiences, an ounce of insight is worth a ton of analysis. Thus, one outstanding graphic that cuts to the heart of the issue at hand and guides next steps is worth more than hundreds of mediocre ones. Seek that graphic. Presented this way, data are power.

None of what I’ve proposed here is particularly difficult in practice, once you have an important insight or result to share. Leaders — even skeptics — hunger for ways to improve their departments and companies. Your job as a data presenter is to tap into and satisfy that hunger in the simplest, most transparent way that you can.

Persuading with Data

An HBR Insight Center




Data Goes Best With a Good Story (and Vice Versa)
Presentation Tools That Go Beyond “Next Slide Please”
The Right Colors Make Data Easier To Read
Why You Have to Generate Your Own Data

Please Stop Ideating

Surely it makes sense that the more ideas we have, the better our innovation track record will be. Not true, it turns out.

Firms that hold ideation sessions − those in which a group guided by outside consultants generate ideas for new products and services − generate little additional revenue from new offerings compared to those that don’t. That was a finding of a study of consumer-package-goods companies that I led.

How could this be? Aren’t more ideas better?

Actually, coming up with an idea turns out to be relatively easy; refining a concept until it becomes an economic success is the hard part. Consider this example: The first known claim of inventing a hand-held mobile phone was made in 1906. Yet it took another 70 years of development before one that actually worked was produced.

In fact, most companies have an abundance of ideas. At one firm with a particularly dismal record of innovation, about 800 new product ideas sat frozen at the corporate level.

As a chief marketing officer of an iconic groundbreaking brand once told me, “The hard part of innovation isn’t coming up with an idea; rather it’s picking the right one to develop.”

When working with groups at organizations that face big challenges and enormous pressure to innovate, I tell them, “I’m very certain one of you in this room has the right answer. The problem is the 200 wrong answers also in the room.”

Let’s face it, ideation is fun. It’s a taste of freedom away from the constraints of an everyday job, and it can feel pretty exhilarating. And yet an ideation-fest invariably creates an illusion of generating new ideas that’s followed by disappointment when it becomes clear that none are actually being developed.

Someone will always claim they participated in an ideation session that produced an incredible new breakthrough. But even when true, a few examples of success from the multitude of ill-considered sessions conducted annually around the world hardly constitute an impressive track record justifying the time and money invested.

And it gets worse. Not only might an ideation session fail to improve innovation, it can actually impede the process. Many times I’ve witnessed leadership teams leaving these sessions confused by all the additional new product ideas they need to consider.

Does all this mean ideation sessions are worthless? Not when they have the right focus. Ideation sessions that shift the focus away from creating new ideas to capturing all existing ideas, clarifying, and then prioritizing them enables the organization to begin the critically important task of deciding upon the few powerful ideas they need to develop.

When there are many ideas on the table, how do you prioritize?

It’s time to apply what you’ve learned in the past to develop criteria for whether or not to invest in a given idea in the future. Research shows that learning from past mistakes and successes has, by far, the biggest impact on increasing revenue from new products. For instance, perhaps over the years you’ve discovered that for a new product to flourish, a highly influential customer must commit in advance to incorporate it into its own products. So that becomes a primary consideration in deciding which new products to pursue.

The key is implementing a formal and mandatory review of all successful and unsuccessful new products or services to capture everything learned. Then use this to develop and refine explicit criteria that are religiously followed when selecting the ones to develop and launch.

So think twice before holding that next ideation session. By digging a little deeper you’ll realize that the session will likely produce little of value if its focus is mostly on generating new ideas. Instead, focus your innovation efforts on what will pay off in the long run and relentlessly refine an idea until it becomes the equivalent of the next handheld mobile phone.

As You Start Your Career, Focus on People Skills

All across the country, this year’s soon-to-be graduates are revving up to start their careers. You may be one of them. You’re already thinking about what you’ll do when get into your new position. You’re smart and energetic, and you’re eager to commit both of those attributes to moving ahead. But is that enough to succeed? Unfortunately, no.

Brains only take you so far. Smarts get you through the gate, but everyone in your cohort of incoming hires has the hard skills required to qualify for the position. The fact is, the link between merit and success is forged through soft skills — ones you may not be able to attain on your own.

You need a helping hand, someone to show you the ropes, decipher the unwritten codes of conduct, and guide you through the corporate jungle. You need a sponsor, which is different from a mentor. A sponsor serves as your advocate. They open the door to career-changing opportunities, by making important introductions to senior leaders, expanding the perception of what you can offer the organization, and offering powerful backing to help you soar and protection when you stumble.

But most important, a sponsor helps you develop your executive presence, so that when those opportunities arise, you will be perceived as the undoubtedly right candidate. Executive presence is the “it factor,” a heady combination of confidence, poise, and authenticity that convinces the rest of us we’re in the presence of someone who’s going places. It’s an amalgam of qualities that telegraphs that you’re in charge — or deserve to be.

Executive presence is not just a measure of performance: After all, it’s a given that every entry-level hire is ready to work hard and excel — that’s why you all were hired. Rather, executive presence is a measure of image: whether you signal to others that you “have what it takes,” that you’re leadership material.

Research from the Center for Talent Innovation found that executive presence rests on three pillars:

Gravitas. This is the core characteristic, with 67% of the 268 senior executives surveyed saying that gravitas is what really matters to move to a leadership position. More than intellectual horsepower, gravitas is about signaling that you have the confidence and credibility to get your point across and create buy-in when the going gets rough.
Communication. People know you have gravitas because you communicate the authority of a leader through your bearing, speaking skills, and ability to command a room. That’s why 28% of executives surveyed put this attribute at the top of the list of leadership materials.
Appearance. While only 5% of leaders consider appearance key in executive presences, all recognize its power as a critical filter — and its potential for derailing talented up-and-comers.

These three pillars are universal and interrelated. If your communication skills ensure you can command a room, your gravitas grows exponentially; conversely, if your presentation is rambling and your manner timid, your gravitas plummets. And while you may be the smartest guy or gal in the room, no one will pay much attention to what you say if they’re distracted by the coffee stains on your shirt or a neckline gaping down to your navel.

How do you know how people perceive you? Ask your sponsor for feedback. After all, they are in the perfect position to hear the whispered comments or spot the telltale clues that you either hit the mark or missed it.

Make your request for advice timely, specific, and prescriptive. The blanket, “How am I doing?” usually returns a blanket answer (“Fine!”). Better to laser in on a recent encounter that required considerable executive presence — a meeting with a leader in the firm or a presentation to a group of clients — and request an assessment on your body language, speech and delivery, attire, or command of the room.

Of course, not every sponsor is an ace at giving clear feedback. If you don’t understand, it’s up to you to clarify the confusion. Ask, “How is what I’m doing getting in the way of my job?” Continue to ask questions like these until you can identify specific steps to improve the way you’re presenting yourself.

Then, demonstrate that you will act on the feedback you’ve been given. Unless you show that you’re willing to course-correct, your sponsor might conclude that you’re not worth the time and energy it takes to impart feedback in the first place. That could mean something as obvious as ditching the graduate student wardrobe for a polished, mature look. A common communications improvement is learning to distill a rambling presentation style into three succinct bullet points. Because gravitas is an amalgam of knowledge and confidence in that knowledge, one way to enhance it is to immerse yourself in a particular subject so that you stand out for your expertise.

The good news is, nobody’s perfect — especially when you’re starting out. It’s within your power to do something about it. If you’re able to find the right support and crack the code of executive presence, you’ll be first in line for the next plum assignment and set your career off on the right foot.

This is the fourth post in a blog series on using mentorship to advance your career. Sylvia Ann Hewlett is a contributor to the HBR Guide to Getting the Mentoring You Need.

Read the other posts here:

Post #1: Three Questions to Advance Your Career

Post #2: Engage a Mentor with a Short-Term Project

Post #3: Find the Right Mentor During a Career Transition

If Customers Knew How You Use Their Data, Would They Call It Creepy?

There is so much promise in what data can do, opening up opportunities for optimization and uncovering insights from correlations. There is more data coming from more places everyday, and every sector of the economy is becoming increasingly data-driven. But while data is flowing in novel ways, for most consumers it’s all hidden in a big data black box.

As the public becomes more distrusting of data practices with each Snowden dispatch, how do you take advantage of the opportunities offered by data without alienating consumers? There are two keys for using data to gain a competitive advantage while minimizing the risk of consumer backlash: transparency and dialogue.

Individuals don’t have the access or tools to build a complete understanding of where our data goes, how it is used, and how it impacts our lives. Savvy consumers might try to reverse engineer behavioral patterns that could explain why an ad follows us around on the web. But these are guesses, at best. The causal relationships between our actions, our data, and its far-reaching effects remain obscure. So we don’t know who to trust, and we have no way of holding all the players in the data ecosystem accountable.

Firms looking to stay ahead of privacy concerns should be forthright about how consumer data is being used and what value is being created — for the firm, for the customer, and for third parties. Most companies already say that they are all about their customers, but inherent power asymmetries mean consumers need better assurances and convincing proof.

As the number of uses for data continues to grow, more and more of these uses have the potential to raise consumers’ ethical and normative hackles. For example, data brokers are reselling browser behaviors as proxies for race and socioeconomic status, serving as inputs for discriminatory and predatory loans.

Firms have a competitive interest in clarifying their role in what is a messy and poorly defined ecosystem. Even data brokers are starting to acknowledge the need to foster a discussion about the ethical uses of data. Consumers and firms are bound to have different ideas of what constitutes reasonable uses of data. One way to maintain customer trust is to be honest about those differences and then engage consumers in conversations about data tradeoffs. If you don’t get in front of these questions on your terms, you can be sure consumers will adjust their preferences or consumer protection regulation will force the issue.

So how do you get your data story straight so that your employees and your consumers know where you stand? Instead of talking about how you could use data, start talking about how you should use data, taking customers’ potential reaction to those uses into account. It’s not always possible to know how consumers will react, but here are four guidelines to consider:

Gut check your data uses. If consumers knew how you were using data, would they cringe? It is a deceptively simple exercise, but it’s a good start for testing norms.

Provide value to consumers. Data uses should not just affect the bottom line. As consumers, we’re making tradeoffs with our data; for example, we sometimes reveal our purchasing habits in exchange for loyalty rewards. Explicitly acknowledge this exchange of value and make it real for consumers.

Tell stories that make data uses concrete. When we talk at the scale of big data, we lose sight of the individuals affected by those data-driven decisions. There’s a reason the Target pregnancy story is so compelling—it exposes the data use practices of the company while illustrating the real effects felt by one family. But it’s better If you are able to tell stories about how individuals benefit from the positive impacts of your data practices.

Open a dialogue about norms. Your personal appetite for acceptable uses of data is probably different from your neighbor’s. Cultural norms don’t develop in a vacuum; they exist between people with varied interests. So talk to your customers about their expectations. This goes beyond privacy policies. Develop a human-readable values statement that reflects your company’s norms about how data should be used. “Don’t be evil” doesn’t cut it.

As a society, we’re in the middle of figuring out how data can and should be used. It’s an ongoing process, and one that is best done out in the open. Firms that get their data story straight, consider consumer reactions, and engage consumers to get buy-in will be best positioned to succeed in a data-driven future.

Decreased Congestion in Beijing Undermines Air-Pollution Efforts

Beijing’s recent attempt to reduce air pollution by requiring drivers to take their cars off the road one day a week has had the effect of reducing congestion and raising speeds, which has led to increases in emissions of particulates, according to a team led by Cong Sun of Tsinghua University in China. As a consequence, there has been little or even a negative impact on air quality, which may help explain why Beijing has faced increasingly serious air pollution since imposing the one-day-a-week driving restrictions, the researchers say.

How to Execute a 15-Word Strategy Statement

There is no shortage of stories and anecdotes to illustrate how the best strategies can nearly always be reduced down to a brief but powerful statement and even more ink has been spilled describing the dangers of strategy statements that read like detailed action plans.

But how do you go about actually crafting — and using — a 15-word strategy statement?

My approach is based on narrative techniques. I begin by working with clients to write a story based on this template:

Once upon a time there was (insert a name who exemplifies your target customer/consumer) …. . Every day he/she (insert here his/her frustration or job to be done) …. . One day we developed (insert here the product/solution and what are actually the 2-3 things we offer or not) … . Until finally (insert here the end result for the customer/consumer compared to competition) … .

A few years ago, I facilitated a strategic innovation workshop for a swimwear manufacturer. We were trying to put together a value proposition for very occasional swimmers who don’t like to practice the sport in a pool, and whose water experience is essentially little more than paddling in the sea or sitting in a small private pool.

We started by watching videos of these swimmers, from smartphone footage taken by sales people visiting public pools around the world that had then been posted on an internal collaboration platform, along with observations from the people taking the shots about what the swimmers seemed to find most difficult.

The workshop participants clustered the individual swimmers’ pain points into a number of categories, which they ranked along two metrics. The first metric was a product of the degree of the pain and how many swimmers experienced it and the second was a measure of actionability: could a new product or service feature resolve the problem?

With this information we designed a value proposition together, using the Blue Ocean Strategy canvas approach, on which value propositions can be compared in terms of their features. The canvas had two lines, one for the company’s proposition and one for the industry standard, so that we could see how we would differ from the competition.

With a better understanding of the pain-points of the targeted occasional swimmers and the kind of value proposition that could tempt them into the water, the workshop participants were able to build a storyline. They came up with the following narrative:

“Once upon a time there was a woman called Rosemary, who had learned and practiced only the basic swimming techniques to float and make short moves in the water. Every single time she visited a pool, she felt unease due to a perception of breathing water risk, immediate physical fatigue due to incorrect stroke movements and inconvenience related to the pool check in and out process. One day, our company developed a set of products and services that offered Rosemary all she needed to enjoy her pool experience. Finally, someone had brought joy to Rosemary’s pool experience and she moved from the gym to the water for her winter exercise.

Once we reached agreement on the strategy story, we were then able to distill from it a 15-word statement that identified the job the company had to do and for whom: “We aim to bring joy to the pool experience cycle of every swimmer, nobody excluded.”

Guided by this statement the company designed and developed a number of add-on product features, including most notably a pair of plastic fins that could be fixed on to most goggles to facilitate breathing, a big problem for most beginners.  The plastic fins make it easier to breathe into the air pocket by the swimmer’s head by enhancing the bow wave from the head, thus protecting the swimmer’s mouth and nose from splashes and water drops. Because the swimmer struggles less to breathe, she can concentrate on her stroke and swim better, and generally have a more comfortable pool experience.

The narrative exercise of creating a clear strategy statement had helped the workshop understand what kind of value proposition the company needed to create in order to attract a new class of customers and resulted in a clear strategy statement that both coordinated people internally and positioned the company attractively in the market.

The Big Question for E-Cigarettes: Replacement for Tobacco, or New Market?

The supposed benefits of e-cigarettes are front and center today, with news that the FDA will propose new rules for regulating the devices. At stake is the future of an industry already generating $2 billion in revenue in the U.S., and expected to grow dramatically, perhaps even outstripping the market for traditional cigarettes. But is this new market a replacement for the existing cigarette market, or is it creating new demand? The former would likely mean a substantial improvement in public health; the latter would mean a steep increase in nicotine addiction.

“The regulators face a conundrum,” according to John Quelch, a professor at Harvard Business School and at the Harvard School of Public Health, and author of a recent HBS case study on e-cigarettes. “On the one hand, the e-cigarette does represent a waypoint for a smoker to be able to potentially quit. That’s the plus side. The minus side is that the e-cigarette may draw into nicotine usage an entire array of new users.”

So far, the growing popularity of e-cigarettes has mostly been among current and former smokers, as the case study documents. To date, e-cigarettes seem to be replacing an existing market more than creating a new one, although there is no guarantee that this will continue.

What worries public health experts is the third bar: by 2011, just under 2 million U.S. adults who never smoked tobacco had tried e-cigarettes. More worrying still, nearly 7% of U.S. high school students had tried e-cigarettes in 2011-2012, and 2% were current e-cigarette smokers. While the majority of current e-cigarette smokers in the group were also tobacco smokers, the vast majority of those students who tried e-cigarettes were not. It’s impossible to say for sure how many of these non-smokers who try e-cigarettes will end up taking up the habit. Worse still is the possibility that e-cigarettes might be a gateway into tobacco smoking.

While research into e-cigarette use is limited to date, the case authors attempted to estimate the net impact of e-cigarettes on tobacco smoking. As the chart below illustrates, they believe that an uptake in tobacco smoking by those who try e-cigarettes is mitigating the decline of the tobacco cigarette market.

Sales of tobacco cigarettes have been falling in the U.S. for some time, declining 27% between 2000 and 2011. But if some users who try e-cigarettes will end up switching to tobacco as the case suggests, e-cigarettes’ ability to accelerate that decline will be partially offset. Quelch, says that increased regulation of e-cigarettes could also have the perverse effect of slowing the decline of tobacco cigarette sales.

“If you have the e-cigarette industry regulated the same way as tobacco, then basically all marketing is shut down,” he told me. “New entrants in the e-cigarette industry can no longer easily establish their brands.” Tobacco companies’ control of the e-cigarette market — made possible by a series of acquisitions starting in 2012 — “enables them to control the price of the product,” said Quelch. “Through controlling the price and distribution of the product they can then control or influence heavily the migration speed of tobacco users to e-cigarette usage.” Without much competition they can keep e-cigarette prices high to discourage tobacco smokers from switching.

The regulations announced this week are modest, prohibiting e-cigarette sales to minors and subjecting the product to FDA review. Advertising of e-cigarettes remain legal, as do flavors like grape and bubblegum that seem aimed beyond current smokers. For now, at least, it is perfectly legal to target e-cigarettes to an entirely new market.