Marina Gorbis's Blog, page 1441

Managing Creativity: Lessons from Pixar and Disney Animation

Ed Catmull is a co-founder and the longtime head of Pixar Animation Studios, which struggled for 10 years from its founding in 1986 until the runaway success in 1995 of its first feature film, Toy Story. With the acquisition of Pixar by Walt Disney in 2006, Catmull became president of Walt Disney Animation Studios and Pixar.

In his new book Creativity, Inc., Catmull expands on his ideas about managing a creative company that he explored in his 2008 HBR article “How Pixar Fosters Collective Creativity.” I spoke with him by phone. This Q&A has been edited and condensed.

Walt Disney is a huge company with some overlapping activities in different areas. For instance, Pixar, obviously, does computer animation and so does ILM [Industrial Light & Magic]. Does this create pressure to adopt the same technology or the same processes?

We had a conference here yesterday of 250 technical people from the various divisions around Disney. There was obviously Pixar, but also Walt Disney Animation, WDI [Walt Disney Imagineering, which designs the company’s theme parks], Industrial Light and Magic, Disney Interactive [Disney’s game division], and ESPN. It was based upon something that we brought to Walt Disney Animation when John Lasseter [the chief creative officer of Pixar and Disney Animation] and I went down there eight years ago [to head it]. The thing that would happen in most companies is to say, “Well, here are two businesses that are similar. So let’s consolidate the tools and the workflow, that is, the way of working, and let’s consolidate the R&D so that we’re not duplicating it.”

We took the exact opposite approach, which was to say to each studio, “You may look at the tools that the other has, you may use them if you want, but the choice is entirely yours.” They each have a development group that’s coming up with different ideas, but because we said, “You don’t have to take ideas from anybody else,” they felt freer to talk with each other.

The underlying hardware keeps changing, the software keeps changing, everything’s changing. So the best thing we can have is different groups pursuing different ideas and then sharing them. And it helps it move faster.

There was some unhappy news about one of your films in production. Pixar announced in September that the release of The Good Dinosaur, originally scheduled for 2014, would be postponed to 2015. This will be the first year since 2005 in which Pixar has not had a feature film to release. There must have been some difficult conversations leading up to this decision.

We have had a substantial difficulty with every film that we made. That has included complete restarts. Toy Story 2 was a restart. Ratatouille was a restart. And The Good Dinosaur is a restart. In the past, because we were a little company, nobody paid attention or they didn’t know. It’s because Pixar is successful that now people are paying attention and saying, “Oh, what’s going on there?” What’s going on is what has always gone on: Ultimately, there’s a criterion whether the film is good enough and we don’t let the other stuff get in the way of it.

One thing I don’t believe in is the notion of a perfect process. Our goal isn’t to prevent all the problems; our goal is making good movies.

Pixar has around 1,200 employees and a lot of them are in on secrets about Pixar’s film pipeline. Yet it’s very rare for information about Pixar films to be leaked. Why is that?

There’s a very good reason for it. I will use a counter-example: When we first got to Disney Animation, there were a lot of leaks. People were going crazy trying to stop them. All I knew was that it was one or two people who were talking inappropriately and it was not good for the morale of the studio.

I got up in front of everyone at Disney Animation. I pointed out that when you make a movie, when you first put it up on the reel, it doesn’t work. [A story reel is a video of a series of sketches, often with some simple animation − in effect, a mock-up of the planned film.] In fact, the first versions are disastrous. We have meetings afterwards where various directors, story people, and others get together and have hard discussions about making the film work. When that meeting is over with, the director and his team have to go back to their crew and talk about the things that didn’t work. They have to trust the crew with what they’re telling them. And the things that don’t work will then seep throughout the studio. I said that if somebody goes and speaks to other places or talks to a blogger, which is what was happening in this case, what they do is they break that trust.

When I said that, the entire audience burst into applause. For the one or two people who were talking to bloggers on the outside, what they saw was that everybody else in the studio was really upset that somebody was doing this. So the message didn’t come from me, the message came from that response of the audience − and whoever was doing it stopped doing it.

My belief is that the way you keep secrets is you tell people the information; you let people know what the problems are so they have ownership in the solution. If we don’t trust them, so we’re trying to keep secrets away from everybody, then they feel less ownership and in fact they’re more likely to talk about it outside. So it’s by an act of collusion that we get the ownership that keeps the problems in-house.

Do you think that the success that you and John Lasseter have had with Disney Animation and Pixar after the acquisition helped to give [Disney CEO] Bob Iger the confidence to make the other big bets he’s been making on acquisitions, such as Marvel and Lucasfilm?

We took Disney Animation, which at the time eight years ago was completely dysfunctional, and we turned it around. Every one of the six films that have been made since we’ve been there has been a critical success. By the time we got to Frozen, the marketing organization completely lined up behind it worldwide, built upon the earlier successes. It has passed a billion dollars. There’s a good chance that by the time we’re done, Frozen will be the number one animated film of all time. [This did happen in late March.] So, yes, Bob Iger is very happy.

The one thing we were really adamant about was that the two studios not be integrated together. We established an absolute rule, which we still adhere to, that neither studio can do any production work for the other. For me, the local ownership is really important. We put in place mechanisms to keep each studio’s culture unique.

It’s a model that Bob’s using at Marvel. Marvel has a completely different culture than Pixar does, or Disney Animation, and he lets them run it their way. You want to have mechanisms to bridge between them, but you don’t interfere with that local culture.

Do you think 3D animation is going to become democratized the way publishing has been? For instance, in the way that desktop publishing has made tools of design and layout accessible to anyone?

Well, the underlying hardware and software tools are continually changing and their price points are changing. What that means is that it will become increasingly easy for smaller groups to get together to try something and when that happens it will give certain people opportunities to be creative in unforeseen ways. The very existence of the tools and the changing cost structure means that you are more likely to have some unexpected event happen.

You can look at a lot of areas and say that. We’ve watched this in the music. We see it in publishing. There are a lot of people that try to resist it, but the underlying economics will basically overpower the resistance. The resistance is actually wasted time. If people accept the fact that it is coming, whether or not they like it, then try to learn from and adapt to it and get expertise in it, the better equipped they are to deal with it and help formulate what the new thing is.

The second part of the issue is what is that new thing? For years, I’ve had people ask me, “What’s the next big thing?” I’ve realized that although I had been part of a group that has helped change the technology, I’ve never predicted well the rate at which it’s going to happen or how it’s going to happen. I’ve relied upon general trends and openness to change. But my predicting powers are notably weak.

I will give an example. As I was leaving school, the University of Utah, it was clear to me that the next thing that was going to happen was computers would be used to help in manufacturing. It was crystal clear.

And it didn’t happen, or it took another 30 years. The reason it didn’t happen was that companies went for a more short-term gain, which was to go to lower-cost labor overseas. The people who did that are now retired; they consider themselves to be management geniuses, but they basically dismantled the U.S. manufacturing infrastructure.

In other words, we can look and say, “Okay, what does the technology allow?” But, in fact, it sits in an ecosystem of short-term gains, ego, misconception, fear of losing market position, and so forth, which can mess the process up and make it highly unpredictable.

How to Discuss Pay With Your Employees

Talking about money with your employees can be uncomfortable. Even when you’ve got good news to share — a generous bonus or a well-deserved promotion — assigning a number to the value of someone’s work is tough. It’s especially difficult if you’re not the one calling the shots (most managers don’t set their own compensation budgets). Whether it’s your decision or not, one thing is certain: it’s a critical part of a manager’s job to have frank and open discussions with employees about pay.

What the experts say

According to a recent PayScale survey, 73% of leaders don’t feel “very confident” in their managers’ ability to have tough conversations about compensation with their employees. This is in part because many bosses lack the information they need to do so, notes Tim Low, Vice President of B2B Marketing at PayScale. But it’s also because these types of discussion can be challenging — for the manager and the employee. “It’s awkward for everybody,” says Karen Dillon, author of HBR Guide to Office Politics and co-author of How Will You Measure Your Life? Still, avoidance is not an option. As V. G. Narayanan, the Thomas D. Casserly, Jr. Professor of Business Administration at Harvard Business School and chair of the Board of Directors Compensation Committee Executive Education Program, says, “These are the most important conversations you have throughout the year.” Here’s how to master them.

Talk early and often

When you sit down with an employee to talk about salary, there shouldn’t be any surprises. “The more frequently you have the conversation, the easier it is,” says Narayanan. He suggests you start the year by discussing compensation. Talk about what kind of bonus or raise the employee might expect if she meets her goals — or doesn’t. Then have regular check-ins throughout the year to talk about how he is performing. That way, he won’t be taken aback by your formal evaluation and salary decision at the end of the year.

In that initial conversation, you might consider asking the employee what they expect in the coming year in terms of a raise and bonus. Narayanan says this can help stave off later disappointment and level expectations. Plus, he explains, if you allow your employees to imagine themselves in the decision-making role, they’re likely to be much fairer.

Do performance evaluations separately

Compensation should be linked to performance, but Low advises discussing the two topics separately. “If you talk about money in the shadow of performance, it will sound like white noise and your employees will just fixate on the compensation,” agrees Narayanan. Instead, deliver the formal evaluation first, focusing on personal growth and development. Then wait several weeks to deliver news about raises or bonuses.

Involve others, if possible

Everyone has favorite employees — “We’re human beings — we like some people and don’t like others,” Narayanan says — but there are ways to counteract those natural biases. He recommends working on compensation decisions in teams of two or three.  “When more people make the call, employees know there are checks and balances, and that the process is fair and consistent.”

Prepare for the conversation

Dillon says that rookie managers often make the mistake of walking into these conversations without a plan. Even if you’re a seasoned leader, it’s helpful to work out what you’re going to say ahead of time. Write down your main points and rehearse them. Think through how you’re going to represent the company while also being yourself. “You have to wear the corporate hat but you don’t have to act like a robot,” says Dillon. She suggests using empathy to prepare. “Ask yourself: How is this person going to hear my message? It’s unlikely that you’ll be giving them a raise they’ll be absolutely joyous over. But what you say should persuade them that what you are giving them is fair,” she says.

Communicate their value

In most cases, this conversation is an opportunity to tell employees how important they are to the organization. “You’re in a partnership with your employee and you have to let them know that you deeply value their contributions,” says Dillon. Don’t just let the bonus or raise figure speak for itself. Make it clear that you appreciate their work. “You want to inspire them to continue to create value,” says Narayanan.

Provide context

When employees are disappointed by their raise or bonus, it’s often because they lack information. “They might be a cog in a wheel but they have to understand the wheel,” says Narayanan. Share the big picture with them: How the company is performing compared with competitors and the range of raises or bonuses the organization is offering this year. Low suggests: “Ground it in facts. Explain what people are getting for this job with this title in this market with these skills,” says Low. “It’s incumbent on you to understand what it means to be paid fairly.”

You’ll also want to explain how the decision behind the numbers was made. This can be difficult if you weren’t the one making the call — but give as much information as you can. Don’t engage in conversation about other employees’ pay. If someone gripes that a colleague is making more, respond with something like, “I’m only willing to talk with you about your compensation and performance. It’s not fair to talk about others.”

Be ready for a reaction

Even if you think you’re giving great news, be prepared for some emotion. These are loaded conversations. “You can’t be Santa Claus and give everyone everything they wish for,” says Narayanan. “When an employee gets upset, make sure you hear them and recognize their emotions but don’t cave,” warns Dillon. If there’s a way to address their concerns — perhaps you can see if there’s more money available — offer to get back to them in a few days. It’s your job to go to bat for the employee if you feel it’s warranted. “But don’t leave the door open unless you intend to take action,” she says. Whatever you do, don’t reward managers for throwing tantrums. That sets a bad precedent for future conversations.

Principles to Remember

Do:

Make clear how much you value the employee — don’t let the bonus or raise speak for itself
Explain how the decision was made so the employee understands you’re being fair
Rehearse what you’re going to say and how you’re going to respond to any complaints

Don’t:

Wait until the end of the year to talk about compensation­­ — it should be an ongoing conversation
Deliver compensation news at the end of a performance review — space the two conversations out
Be surprised if the employee gets upset — even if you think you’re delivering good news, it might be less than she expected

Case study #1: Help your employee prepare for bad bonus news

Ravikrishna Yallapragada had a tough message to deliver. One of the software developers on his team (we’ll call him Chad) wasn’t hitting his targets. “As a result, he wasn’t going to receive a salary increase, bonus, or stock,” Ravi says.  Fortunately, the news didn’t come as a surprise. Ravi had been talking with Chad since the beginning of the year about how compensation decisions would be made. “At that time, I explained how performance was linked to pay,” he says. Chad knew that if he exceeded expectations, his bonus would be within a certain range, but if he missed his goals, it would be zero.

Ravi also had several one-on-one meetings with Chad through the year to give him feedback on what was going well and what needed improvement. Because his employee was underperforming, Ravi also documented the discussions every two months. At their year-end meeting, Chad was initially upset. “But as I showed him the data, he accepted the fact. He knew why he wasn’t getting a raise or bonus,” Ravi says. “I then coached him on how he could avoid this next year and asked him to take responsibility to improve his performance.”

Unfortunately, despite Ravi’s best efforts, Chad didn’t improve his performance and he was eventually let go.

Case study #2: Explain the rationale behind compensation decisions

Two years ago, Mila Deconda (not her real name), the COO of a New York state agency, hired a deputy CIO to join her team with the intention of quickly promoting her. The current CIO had been underperforming and Mila wanted to let him go once Sara (also not her real name) was up to speed. After eight months, Mila offered Sara the senior position. “But when I told her what the salary was, she was kind of shocked,” Mila says. It was a $10K increase over Sara’s deputy CIO salary but still significantly lower than what she’d made in her previous job. “She had taken a significant pay cut to come here and I knew she was expecting more, especially because she had an insider perspective and knew how hard the job was going to be,” Mila says. “So I knew going into the conversation that she was going to be upset.”

She started by explaining how valuable Sara had become and how much she wanted her to take the role. Then she explained the reasoning behind the limited raise: The agency was under incredibly tight budget constraints and simply couldn’t have salary parity with private sector jobs or other public sector ones.

Sara came back to Mila a few days later with a PowerPoint showing what people in similar positions at other agencies and in the private sector were making. “She wanted to demonstrate that the number wasn’t competitive, and she was right,” Mila says. “But I asked her to see the situation from my perspective. She knew she was already the highest paid person on my team. If I increased her salary, I would lose credibility with everyone else. It was a really hard conversation but she understood the position I was in.”

Instead of additional money, Mila offered Sara other benefits, including a bigger staff. “I’ve compensated by letting her hire new people to her team and finding other ways to signal to her that I support her hard work.”

Gratitude Is the New Willpower

Patience is a virtue, especially when it comes to building capital. But as with most virtues, it’s not always easy to muster, since it usually requires resisting temptations for gratification on the sooner side. Should you put the extra $1,000 earned this month in your retirement savings or use it to buy a new suit? Should you approve money from the firm’s “rainy-day” fund to cover travel for senior executives (yourself included) to a lavish conference this summer or let it continue to accrue as a buffer for future challenges? Such decisions – a type referred to by economists as intertemporal choices – are characterized by options that offer different rewards as time unfolds. That is, they contrast smaller pleasures or gains now with larger pleasures or gains later.

Almost everyone – from individual investors to CFOs of large corporations – would probably agree that the best way to choose between such options would be to objectively weigh the potential costs and benefits offered by each. But, as the past two decades of psychological research has revealed time and again, the human mind isn’t entirely objective. It’s a well-established fact that we discount the value of future rewards. For example, if given the choice between receiving $75 dollars today or $100 in a year, most people would opt for the former even though a 30% annual return on an investment is difficult to beat. Of course, discounting as a function of time isn’t inherently illogical. Some level of it makes good sense; you never can be absolutely sure you’re going to be around in the future to reap the reward. But our minds tend to discount future value quite excessively – a phenomenon that significantly contributes to problems ranging from credit-card debt to substance abuse.

The usual advice for combatting the desire to spend money for short-term gratification has centered on using willpower to tamp down emotional responses. Squelch that craving for a shopping spree! Although this strategy certainly can work at times – especially since emotions like sadness have been shown to exacerbate financial impatience – it’s not optimal. The big mistake comes from assuming that all emotions pose a problem for financial decisions and need to be controlled. If you stop to think about it, not every emotion we feel is tied to present desires. Some, like gratitude, are associated with situations that involve accepting a short-term cost to further future gains. Feeling grateful reminds most people that they should expend capital – time, effort, or money – to repay another, thereby solidifying a relationship that might be beneficial in the future.

My colleagues Ye Li, Jennifer Lerner, Leah Dickens, and I decided to test how the experience of gratitude effects discounting and financial impatience. We designed an experiment (now in press at the journal Psychological Science) that presented participants with a set of 27 questions, which pit a desire for immediate cash against a willingness to wait for larger rewards at various times in the future. For example, one question required study subjects to choose between receiving $54 now or $80 in 30 days. To increase the stakes, participants knew they had a chance to obtain one of the financial rewards they had selected; it wasn’t purely hypothetical. If they chose the immediate cash, they’d be paid then and there; if they chose the delayed amount, we’d send them a check. However, before they made these decisions, we randomly assigned each one of them to recall and briefly write about an event from their past that made them feel (a) grateful, (b) happy, or (c) neutral.

As we expected, individuals who wrote about neutral or happy times had a strong preference for immediate payouts. But those who’d described feeling grateful showed significantly more patience. They required an immediate $63, on average, to forgo receiving $85 in three months, whereas the neutral and happy groups required only $55, on average, to forgo the same future gain. Even more telling was the fact that any given participant’s degree of patience was directly related to the amount of gratitude he or she reported feeling. It’s important to note that positive feelings alone were not enough to enhance patience: Happy participants were just as impatient as those in the neutral condition. The influence of gratitude was quite specific.

We see broad implications for these findings, since they suggest that gratitude can foster long-term thinking. We all recognize the fact that willpower can and does fail at times. Having an alternative source of patience – one that can come from something as simple as reflecting on an emotional memory – offers an important new tool for long-term success. And that itself is something to be grateful for.

What Business Can Learn from the Greatest Comeback in Sports History

During last fall’s America’s Cup, Oracle Team USA staged the greatest comeback in modern sports history. On September 18, Skipper Jimmy Spithill’s crew was behind 8-1 in the best of 17 series. In just over a week, they rattled off eight straight victories to defeat Team New Zealand, 9-8. New Zealand didn’t get slower; Oracle got that much faster.

Hoping to find some generalizable lessons from the spectacular turnaround, we spent time learning about what happened that week from one of the crew, grinder Gilberto Nobili.  What we heard suggested six pieces of advice that leaders of land-based businesses might do just as well to heed.

Cross-fit your company. This Cup was a departure from previous ones in various respects. For one thing, to attract a wider audience, it was held within the confines of San Francisco Bay. And to amp up the spectator experience, the AC 72 – a boat that sails faster than the wind powering it – was introduced. Both put new demands on crews. On a traditional ocean course, a great deal of activity would go into tacking and setting a course, followed by a long period of relative inactivity. On an AC 72 in a bay, there is no such thing as inactivity. The boats require nearly constant maneuvering – and a crew continually in motion.

Nobili credits a cross-fit training regimen for helping the team prepare, not just physically but also psychologically: “A key element of the cross-fit approach is that every day presents a different challenge. It got us used to thinking and doing different things together every day.” It’s that mental exercise that carries over as a lesson for businesses. Companies tend to creating rigid routines for specialized tasks to achieve productivity, but they pay for that in reduced agility and resilience. They, too, need to build the “connective tissue” that will allow people to make smart, spontaneous moves to create customer value, in coordination with others.

Learn quickly from disruption. This Cup also featured a disruptive innovation: the practice of “foiling.” Sailboats have always sailed through the water; the new speed possible with the AC 72 allowed them to rise above the water. But it’s no small matter to control a foiling boat – and the reigning champion Oracle saw no reason to take the risk. As Nobili explained, “We designed our boat for displacement sailing. We didn’t think about foiling. New Zealand approached the race differently. They designed a 33-foot foiling boat years ago and then built their AC 72 with those lessons in mind.” As Oracle’s losses mounted, the new reality became clear: “We wouldn’t win if we couldn’t foil; New Zealand had a head start of many months.”

To Oracle’s credit, it responded fast. Designers reworked the boat itself, reshaping and repositioning foils and wings and redistributing weight; meanwhile the crew practiced the techniques. The stunning outcome underscores the lesson for any business: When disruption hits your business, recognize it, and start making your own transformation instantly.

Make your luck. Both teams assumed foiling was a downwind technique. Downwind legs are essentially straight (and thus don’t require lateral resistance from the underwater foils) and the angle to the wind (wind from “behind” the boat) offers enough boat speed to lift the boat from the water. So the first thing Oracle set out to learn was how to foil downwind.

But San Francisco Bay is a relatively small area. Oracle couldn’t sail downwind for a long distance to practice. They would quickly run out of Bay and need to work their way back upwind to try foiling again. The crew could have used the time sailing upwind to recover. Instead they tried foiling upwind – and discovered a winning strategy. Our study of the race interval data makes it clear that it was Oracle’s upwind foiling that drove their comeback.

The generalizable point here is that what began as an irritating constraint turned into a piece of luck – but only because Oracle approached it with curiosity. If the race had been held on a traditional ocean course, the ideal conditions would have prevented the discovery. Likewise, managers make their own luck when they look with fresh eyes at conditions they are facing and refuse to be limited by assumptions.

Gather resolve from your setbacks. Race preparation presented a number of challenges to Oracle. Nobili recalled, “We broke a foil the second or third day we had with the first boat. That stopped us for a month.” When the boat was repaired, they sailed for five days before crashing it. As a result, “we had to commit to the design of the second boat without enough time sailing the first to learn what worked and what didn’t.”

But the team found an upside. The setbacks, Nobili said, “put our team in a situation where we realized: we need to stand up.” The benefit – which has just as much application to business settings – was to instill a rough-and-ready mindset that they could call on later. “It ended up serving as something that made us a little bit stronger in spirit and changed how we reacted to the situation of falling behind.”

Keep the focus on “How could we do better?” In the early days of the Cup, as Oracle’s losses mounted, there were many opportunities to second-guess and point fingers. Instead, Oracle kept the focus on the only thing that mattered: getting faster in the next outing. Nobili told us, “After each race, crew members did their best to offer ideas on how to improve performance. When someone offered an idea, others would quickly try to build on it.”

The race format doesn’t provide a chance to test ideas before committing to them. Each evening the sailors needed rest. Overnight, technicians made adjustments to the boat. The next morning, the crew would be sailing a boat rather different from the one they raced the previous day. How could Oracle decide which risks to take?

The answer is contained in an example Nobili recalled: “When we were down 6-1 or 6-0, I began talking with the guy in front of me about an idea and he said, ‘Let’s try it – it won’t be worse.’ Elaborating on a point we think managers should take to heart, he explained: “If a change could slow the boat down, you don’t even try. But if an experienced crew and skipper agree it might make the boat faster, you must try.”

Respect the data. Sailors pride themselves on their ability to feel when their boat is in a groove, performing at its peak. But the AC 72, as the most “wired” race boat ever built, produces data that sometimes counters that gut feel in challenging ways. As Nobili said, “In the AC 72, sometimes you have to trust the number more than your feeling – and that works only if you have good numbers and good tools.”

Of course, the same is true for businesses where executives are often inclined to ignore data that doesn’t match what a trusted manager or important customer said in some recent conversation. Better metrics often produce surprises – by revealing, for instance, the loyal customers who are actually unprofitable to serve – and the disloyal ones who are profitable. But if sailors with their feet planted on a deck can learn to rely on data, then managers surely can, too – and whichever type of helm they stand at, they might stand to win.

European Tax Avoiders Stay One Step Ahead of Authorities

In an effort to curb tax evasion, in 2005 the European Union began requiring Swiss banks to withhold taxes in the amount of 15% on interest earned by EU households, but in many instances the initiative hasn’t led to greater tax compliance or the repatriation of funds to the depositors’ home countries, says Niels Johannesen of the University of Copenhagen. Instead, many depositors have simply adopted new tactics for avoiding taxation. Swiss bank deposits owned by EU residents declined by 30% to 40% relative to other Swiss bank deposits in the two quarters immediately before and after the tax was introduced, with much of the money going to accounts in offshore centers such as Panama and Macau, Johannesen says.

Nigeria’s GDP Just Doubled on Paper: What It Means in Practice

Earlier this week, Nigeria ascended to the position of Africa’s largest economy following a recalculation of its GDP by the country’s National Bureau of Statistics. The long overdue exercise (the last one was in 1990) nearly doubled the country’s economy pushing GDP up to $510bn from $270bn. There is a general consensus among economic analysts and commentators that the changes are merely cosmetic — they certainly do not affect the daily lives of most average Nigerians, and their timing might be politically motivated given the upcoming 2015 elections which are expected to be highly contested. However, from the perspective of managers and CEOs operating in Nigeria, there are some important implications.

First, there will be some changes in the competitive landscape. Nigeria’s Finance Minister Ngozi Okonjo-Iweala mentioned the “psychological impact” of the announcement on foreign investors. Before the announcement, the stock market capitalization to GDP ratio for Nigeria was 33%, compared to 270% for South Africa. Post announcement, the ratio is 18%. Emerging market investors looking for upside potential in Africa will look at those numbers with interest. At the same time, inbound foreign direct investment into Africa may become more comfortable with basing operations in Nigeria or using the country as an entry point into Africa. The result for managers presently in Nigeria is that they will likely face more competition for assets and human capital. To succeed, they will increasingly need to craft a differentiated strategy based on superior knowledge of the Nigerian market.

In providing a better picture of the Nigerian economy’s constitution, the rebasing calculations also highlight the growing importance the Nigerian (and African) consumer. Before the rebase, oil and gas represented 32% of the economy; under the new set of data it contributed 14%. Much of the balance comes from previously unreported, consumer-driven sectors. For example Nigeria’s Nollywood film, music, and mobile phone industries have experienced rapid growth over the past decade. Managers that can develop disruptive strategies to tap into this booming consumer market will place themselves in a good position for success in Nigeria. They will need to innovate on platforms for marketing and distribution in order to overcome the persistent infrastructural challenges that the country faces.

Finally, Nigeria’s rise to the position of Africa’s largest economy provides the perfect sales pitch for raising foreign capital and recruiting foreign talent. Managers and CEOs launching new ventures should exploit the opportunity market to attract new investors with relatively low familiarity to the Nigerian market. They should also take measures to build their talent pipeline by marketing aggressively to well-educated diaspora members and foreign talent abroad.

Nigeria’s GDP rebasing can indeed be considered an exercise in window dressing. But it also provides the perfect opportunity for companies already operating in the country to pause and rethink their strategy for long-term success in what will be a very important market for Africa and the world.

What Matters About Mozilla: Employees Led the Coup

Brendan Eich had been CEO of Mozilla only two weeks when he resigned under pressure last Thursday because he’d financially supported California’s Proposition 8, banning same-sex marriage, in 2008. Whether you view his resignation as a form of mob rule that stifles free speech or as a necessary outcome for a mission-driven open-source organization that must maintain the goodwill of employees, one thing is clear: we are going to be seeing a lot more of this.

Two things stand out about the Mozilla case. First, the most critical voices came from within the organization. And second, employees’ protests zeroed in on the political activities of the CEO, not those of the organization. In a sense, it was like a recall election.

But what brought us to this point? Information and communication technologies such as social media have reduced the cost and increased the speed of collective action, from flash mobs to Tahrir Square. Consider the unbidden “Starbucks Appreciation Day” rallies by gun-toting supporters of open carry last August, for example, or apps that make it easier to boycott target companies such as Koch Industries.

The history of activism toward corporations shows a remarkable increase in agility. In 1991, the HR department of Tennessee-based restaurant chain Cracker Barrel Old Country Stores sent out a memo stating that the company would not employ those individuals “whose sexual preferences fail to demonstrate normal heterosexual values,” and the company fired more than a dozen gay employees. The policy was later rescinded, but the New York City Employee Retirement System filed a shareholder proposal to explicitly adopt a policy against gay discrimination, which the company was unwilling to do. (It is still legal in 29 states for employers to discriminate on the basis of sexual orientation.) The SEC allowed the company to leave the proposal off its proxy ballot until May 1998, and in October of that year it finally appeared for a shareholder vote, where it lost by a substantial margin.

Contrast this several-year shareholder campaign with the recent experience of the Susan G. Komen For The Cure Foundation. When the Foundation announced on January 31, 2012 that it would no longer provide funds to Planned Parenthood to support breast cancer screenings for low-income women, it immediately generated a firestorm of opposition on social media, with over a million tweets sent within two days. By the end of that week it had reversed course and restored the funding, which in turn generated opposition among detractors of Planned Parenthood. The controversy continues to dog the foundation and its employees.

Employees are perhaps the most important constituents in these brouhahas, because they are the ones who have the most intense day-to-day engagement with the company and its values. (Look at how fervently they reacted when Eich assumed the top job at Mozilla.) And that engagement with values makes sense: Our employers are linked to our identities, after all. We’re often called on to be company representatives, expected to speak on behalf of our organizations, whether it’s our official job or not. When someone I meet learns that I teach at the University of Michigan, for example, I might be asked to explain the school’s stance on affirmative action. Corporate recruiters who visit business schools are asked not only about job opportunities but also about the company’s approach to carbon reduction, domestic partner benefits, human rights codes for suppliers, and policies around community engagement. Recruiters bring news back to their company about what the new talent is looking for, where it informs changes in practice.

Now combine this intense focus on social issues with the ease of obtaining information about things like CEO political contributions. A recent article in Administrative Science Quarterly (the journal I edit) reports that new CEOs who had a prior history of donating to Democrats tended to increase the firm’s corporate social responsibility efforts more than Republican CEOs did. Firms that appointed Democrats to the top job increased their contributions to Democratic PACs; those that appointed Republicans increased contributions to Republican PACs.

How did the researchers know about CEOs’ political proclivities? By compiling 10 years’ worth of data on their campaign contributions, which are public record. (If you want to find out your CEO’s political donation history, go here.) In short, political contributions, like Eich’s donation to the Prop 8 campaign, are an open book — very easy to find online and aggregate.

Of course, it’s not just political contributions that are so readily available. As Facebook activity, tweets, blog posts, and other online traces of one’s orientation become a true permanent record, we might expect to see prospective CEOs thoroughly vetted on their politics before being offered the job. As with politicians, one errant tweet many years back might turn out to be disqualifying.

Boycotts against organizations are nothing new. But thanks to technology, it’s easier for employees, investors, donors, and customers to engage in social movements aimed at companies and nonprofits. Those organizations, in turn, are finding themselves dragged into political debates they might prefer to avoid.

Which Messages Go Viral and Which Ones Don’t

A recent study demonstrated that we can successfully predict which messages will go viral and which will not. This study showed that the ideas that are destined to spread have a characteristic signature at their origin — that is, quite literally, within the brain of the sender. These messages specifically activate key regions in two circuits in the sender’s brain: the “reward” circuit, which registers the value of the message to the sender, and the “mentalizing” circuit, which activates when we see things from the point of view of the person who receives the message. From the moment we first formulate a message, these two factors play a key role in whether or not they will go viral. The more you value an idea that you want to spread, the more likely you are to be successful at spreading it.  In addition, the more accurately you can predict how others will feel about the message, the more likely you are to be successful at spreading this idea. These findings are profound because they imply that we can predict which messages will go viral and which ones will not based on these two factors. If this is the case, how can you optimize both of these factors in the messages that you would like to spread in your business?

Let’s take a look at “value.” On the surface, it would seem that any idea that you want to spread is one that you might value, but have you really examined this value enough to communicate the essence of it? For example, if you are a biotechnology fund manager who wants to communicate the importance of investing in biotechnology, you may think that your value is in your recent success in investing for shareholders, but if you are a reasonable person, you will likely also have doubts about this. Hence, the value that you create for shareholders will create a value “x” that will activate your own reward center. But this activation will not be as large as when you also register that your actual value is that you are investing in helping to cure people from their illnesses or shorten their durations of suffering (”y”).  You may not be right all the time, but if this is your genuine reward, your brain’s reward circuit will be activated because this will always be true. Also, if you really recognize how emotionally satisfying this will be to you, this will provide further value and activate the reward center even more (“z”). Thus value has financial, social and emotional implications, all of which can add up (x + y + z) to enhance activation of the reward center of your brain.

Similarly, the degree to which you can predict the way your audience will feel may also involve multiple dimensions. How will they feel about the fact that you have a history of success in biotechnology investing? How will they feel about their own investment in the well-being of the world? Do they care about communicating this to their families? Would they be excited about the rapid advancements in this field and seeing the newness of the opportunity? Here again, these different aspects of how your audience thinks will help to accentuate the activation in your mentalizing circuit — where you form a mental picture of the audience’s needs and wants.

In addition to these factors, the study also showed that regardless of personal preference, if you have the explicit intention to spread a message, the message is more likely to spread. For example, for that same biotechnology investor, it would make a difference if he or she actually wanted to spread the message rather than just passively feeling that the message is valuable. This implies that it matters when you think of how a message can be useful to others rather than simply thinking about yourself.

All three factors (value, mentalizing, and intention to spread) point to the fact that the social currency of a message matters at the very source of the message.  If the message has value and takes into account the needs of others, and if you are committed to spreading this message, it is more likely to reach many more people than if you were just communicating a message that you were excited about.

Improve Decision-Making With Help From the Crowd

Most decisions in organizations are made by escalating them up the management hierarchy — and it’s usually the highest paid person in the room’s opinion (“HIPPO”) that prevails. The HIPPO model of decision-making will likely always be with us. But with the rise of digital technology, and with it the ability to get immediate feedback from customers and communities, crowdsourcing has become a powerful alternative for driving important decisions. The challenge is finding the right ways to introduce crowdsourcing into your management processes so that it opens up and democratizes decisions, harvesting the accumulated thoughts and perspectives from your customers and across your organization — but without bogging things down.

Consider these three examples from the frontiers of management:

Funding decisions at most organizations are made by senior management or maybe an independent panel. “Crowdfunding” relies instead on “the crowd” to make decisions by soliciting contributions from a large group of people, usually an online community of volunteers. Kickstarter is one of a growing number of crowdfunding platforms for gathering money from the public to fund all sorts of projects.

IBM saw these online social systems for investing in new ventures and decided they would like to develop a similar system internally for selecting innovative projects. In January 2013 they created “IBM iFundIT,” a program in which volunteers decide where to spend seed money using an intranet site for proposing ideas, commenting, volunteering, and funding. Instead of the typical process where technology projects are picked by a review board, people in IBM’s IT community can participate as submitters, backers, and evaluators. Employees submit their projects to a community and promote them through IBM’s Facebook-like internal social networks. Funding is raised over a period of eight weeks. 600 volunteer investors had up to $2,000 each to invest in the project(s) of their choice. Over 1,000 IBMers participated from 30 countries, applying to get part of the seed fund of $300,000. 160 projects were submitted and 20 reached their funding targets ($10,000-$30,000).

Given the success of the program in 2013, IBM’s CIO decided to invest $7 million to expand iFundIT in 2014. This expansion shows how social networking systems have begun to cross over from the consumer world to corporations to drive innovation. Not only does this approach give more control to employees, it results in innovative projects that are launched in a matter of weeks, not months.

New product development is traditionally approached by researching and developing new products in laboratories, take prototypes to customers for their reactions, and then go to production. Software companies have developed an alternative approach (“Agile” and “Scrum”) that uses rapid cycle testing of product features to see what customers like. Customers, instead of engineers or managers, make decisions on product designs in an ongoing dialogue.

For a number of years IBM has provided a forum to exchange new ideas for IT systems and apps: the “Technology Adoption Program” is a website where innovators can test their projects with early adopters and prove business value through adoption. Within the apps world it is almost impossible for smart managers to decide which app is a good idea in advance. A good idea is usually figured out after the fact, not before. (Who would have thought Candy Crush would take off the way it did?) When it comes to new products and services, customers are the key to success. So rather than have managers look at product ideas and pick the best solution, IBM provides a Technology Adoption Platform for employees to put up new apps, and then they measure use and let the wisdom of crowds make decisions on what goes forward.

What you work on is decided by bosses in almost all companies. But not at Valve Software, creators of video games (Half-Life, Counter-Strike, Portal), a game engine, and online gaming platform. Founder and CEO Gabe Newell says, “In 1996, we set out to make great games, but we knew back then that we had to first create a…place where incredibly talented individuals are empowered to put their best work into the hands of millions of people, with very little in their way.” They’ve been boss-free since 1996. “We don’t have any management, and nobody ‘reports to’ anybody else,” says Valve’s handbook for new employees. Newbies aren’t told where to work. Instead, they are expected to decide on their own where they can contribute most. Most desks at Valve are on wheels, so after figuring out what they want to do, workers push their desks to the group they want to join. There are no titles. Reviews happen by peers, and structure emerges. It may sound crazy and extreme, but it’s a useful benchmark question to ask the next time you’re stuck in a bureaucratic argument between functional silos: “What if we all had a shared objective to do the right thing for the customer?” In this case, though, the crowd is the community of employees, and the approach is about empowering workers, increasing speed, and eliminating waste.

In a world where continuous innovation is increasingly critical and organizations must move at the pace of software companies, competitive success — perhaps even survival — requires moving beyond exclusive use of hierarchical decision-making, drawing on the power of crowdsourcing and markets wherever possible. As my colleague Steve Stanton observed, “The combination of multiple perspectives offers a wider set of possibilities than simple seniority. Of course crowds can be wrong, or turn into thoughtless mobs, but if the process is designed carefully, with the right checkpoints and safeguards in place, crowdsourcing can bring fresh insights for wider consideration.” These examples show just a few ways your management processes (e.g., planning, budgeting, recruiting, and training) could be reengineered.

This revolution in decision-making processes will challenge conventional management approaches and shift power from your current leaders to employees and customers. It will surely meet resistance. The critical question is, will today’s leaders be willing to give more say to employees and customers, as IBM and Valve have? It will take trust in the cumulative wisdom of your customers and employees. For many organizations, this may take a long time, but for some, the revolution is already underway.

Why Your Analytics are Failing You

Many organizations investing millions in big data, analytics, and hiring quants appear frustrated. They undeniably have more and even better data. Their analysts and analytics are first-rate, too. But managers still seem to be having the same kinds of business arguments and debates — except with much better data and analytics. The ultimate decisions may be more data-driven but the organizational culture still feels the same. As one CIO recently told me, “We’re doing analytics in real-time that I couldn’t even have imagined five years ago but it’s not having anywhere near the impact I’d have thought.”

What gives? After facilitating several Big Data and analytics sessions with Fortune 1000 firms and spending serious time with organizations that appear quite happy with their returns on analytic investment, a clear “data heuristic” has emerged. Companies with mediocre to moderate outcomes use big data and analytics for decision support; successful ROA—Return on Analytics—firms use them to effect and support behavior change. Better data-driven analyses aren’t simply “plugged-in” to existing processes and reviews, they’re used to invent and encourage different kinds of conversations and interactions.

“We don’t do the analytics or business intelligence stuff until management identifies the behaviors we want to change or influence,” says one financial services CIO. “Improving compliance and financial reporting is the low-hanging fruit. But that just means we’re using analytics to do what we are already doing better.”

The real challenge is recognizing that using big data and analytics to better solve problems and/or make decisions obscures the organizational reality that new analytics often requires new behaviors. People may need to share and collaborate more; functions may need to set up different or complementary business processes; managers and executives may need to make sure existing incentives don’t undermine analytic-enabled opportunities for growth and efficiencies.

For example, at one medical supply company, integrating the analytics around “most profitable customers” and “most profitable products” has required a complete re-education of the account sales and technical support teams both for “upsetting” and “educating” clients on higher value-added offerings. The company realized that these analytics shouldn’t simply be used to support existing sales and services practices but treated as an opportunity to facilitate a new kind of facilitative and consultative sales and support organization.

The quality of big data and analytics, ironically, mattered less than the purpose to which they were put. The most interesting tensions and arguments consistently revolved around whether the organization would reap the greatest returns from using analytics to better optimize existing process behaviors or get people to behave differently. But the rough consensus was that the most productive conversations centered on how analytics changed behaviors rather than solved problems.

“Most people in our organization do better with history lessons than with math lessons,” one consumer product analytics executive told me. “It’s easier for people to understand how new information and metrics should change how they do things than getting them to understand the underlying algorithms … We’ve learned the hard way that “over-the-wall” data and analytics isn’t the way for our internal customers to get value from our work.”

Getting the right answer—or even Asking the Right Question—turns out not to be the dominant concern of high ROA enterprises. The questions, the answers—the data and the analytics—are undeniably important. But how those questions, answers and analytics align, or conflict, with individual and institutional behaviors matters more. Sometimes, even the best analytics can provoke counterproductive behaviors. Don’t fail your analytics.