Marina Gorbis's Blog, page 1448

How to Deal with Unfamiliar Situations

Have you recently switched jobs or positions and wondered “What’s going on here?” Have you been given a new task or a new technology that’s completely unfamiliar? Are you working with people who come from different backgrounds and not really sure if you’re all on the same page? Dealing with unfamiliar situations and people is challenging, of course, because we don’t yet have everything figured out. Over time, we adjust. But how can we get better at dealing with the new and unfamiliar—from the start?

Brain science tells us a lot about the answer to this question. The biological challenge is that we are wired to recognize and process familiar people and situations from a young age. For example, children “know” when a face is their own race versus a different one at a very early stage because their brains are wired to detect this. In addition, the brain of a mother is wired to respond specifically to the familiarity of her own infant as compared to that of another. In fact, for all adults it takes only 200 milliseconds to register whether a face is familiar or not and recent research shows us that we process familiar faces with almost double the efficiency than unfamiliar faces. Furthermore, the brain treats “threat” in the same way if you or someone familiar to you is threatened, but responds differently if the person who is threatened is unfamiliar. These differences apply not just to unfamiliar people, but to unfamiliar processes as well. Thus, when someone or something is unfamiliar, the brain is less engaged and empathic and has to use greater effort as well. This is clearly an advantage when it comes to protecting one’s “own” or responding with speed in familiar situations, but what can we do when the people around us or situations in which we find ourselves are constantly changing and unfamiliar as in the current business environment?

First, building up trust and focusing specifically on steps related to this can override the discomfort of unfamiliarity. How do we know this? A recent study demonstrated that when men are given oxytocin—a “trust” hormone—unfamiliar female faces will appear to be more attractive because the trust that oxytocin creates activates the brain’s reward center and overrides the anxiety of unfamiliarity. Many other studies have also shown that oxytocin does in fact enhance trust, possibly because it enhances the distinction between self and other and increases the positive evaluation of others. Thus, trust actually changes how the brain perceives other people.

This implies that when a person or situation is unfamiliar, setting up structures and processes that enhance trust will increase engagement. What are some of these things? Clear communication, being on time, delivering on promises, and fulfilling contractual obligations are good ways to create a climate of trust when things are unfamiliar. And speaking of contracts, in today’s more casual business environment, you may be more inclined to ignore the contractual elements of a business relationship, or even overlook a mutual non-disclosure agreement.  It is probably best not to do this for the obvious reasons—and you miss an opportunity to build trust.

Second, stress also plays a role in how we handle unfamiliar situations or people. Stress makes the brain less “friendly” toward novelty—we tend to want what we’re used to even more rather than having to deal with something new when we’re stressed. If you have just entered an unfamiliar situation or find things changing all the time, be aware that your brain will try to slam on the brakes and make a U-turn to old ways of doing things.  Hence it is critical that when we are in unfamiliar situations, we must check in with ourselves to deliberately reduce our stress levels. If not, we will be prone to making habitual decisions that were relevant to the past and not the present or future. This has been recognized as a particular vulnerability of leaders, even good ones and is a bias we may completely ignore.

Finally, on a different note, a recent study revealed that when we’ re moved by art, even when it is unfamiliar, it activates brain networks associated with the self. That is, art evokes an emotional experience that connects us with ourselves despite being unfamiliar. We may be moved by intangible elements of the art that connect with corresponding intangible aspects of ourselves. This overrides the otherwise unfamiliar art and make us feel known. Thus, when you find yourself in a culturally unfamiliar environment, look for shared subjective characteristics rather than differences only. As a start, you could connect on vision, mission or intent in a way that expresses your subjective intention and voice, which will help to transcend any existing differences in how you look or behave. Also, elevating a relationship to an art form by producing beautiful and not just timely work will enhance resonance and connection when you are unfamiliar.

Unfamiliar situations can cause a brain-jam if we do not approach them with a conscious sense of how to be. Building up structures that enhance trust, decrease stress and creating an emotional connection with people or a project can help the brain navigate its way to your goals.

The Flawed Premise Behind the Candy Crush IPO

As you may know, King Digital, the company behind the blockbuster game Candy Crush Saga, is about to IPO. The company is seeking a valuation of up to $7.6 billion.

Let me put that in the style it deserves: seven-point-six billion dollars!

I’m not the only one using boldface italics and exclamation points. Jim Surowiecki in the New Yorker and Felix Salmon at Reuters (and many, many others) have analyzed the IPO. The Surowiecki / Salmon consensus is basically, as summarized by my colleague Walt Frick, It’s irrational for the market to value a company that produced a fluke hit so high, but it’s totally rational for the CEO to selfishly want to go public, since the market is valuing them so much higher than they’re actually worth. Surowiecki thinks that the cost of the capital will be too high; the company will actually have to deliver on its promise, and delivering on promises to shareholders is a pain in the neck. Salmon thinks that the market is so frothy that companies have to have a credible plan to IPO just to seem viable as an acquisition.

That’s all well and good, but let’s try to assess King Digital’s core claim: that they have a system for producing addictive games. If you believe that claim, then, given the size of the market for mobile games, you might be willing to pay $21 to $24 per share for a piece of the magic. Of if you’re a tech company looking to own that magic formula, you might be willing to acquire the whole company the day before the IPO for around the market valuation.

So, do they have a magic formula? Let’s start with their one hit game, Candy Crush. It is in fact really well designed around all of the principles of gamification. As this article in Time summarizes: it makes you wait, it provides positive rewards, you can play with one hand, paying is optional but easy, it’s social and nostalgic and escapist, and there’s always more. Fair enough. I’ve spent lots of hours playing the game. So have my wife and daughter and countless others. (If you haven’t played or seen it, go ahead an download the app. I’ll wait a couple of months for you to come back.)

But is this a magic formula? Maybe. But it’s definitely not a secret magic formula. These are well-known principles behind game design and have been used successfully before (e.g., Zynga’s FarmVille for a recent example). Raph Koster published a book illuminating the principles over ten years ago.

And what if it were a secret magic formula? Would that be enough? Probably not. The formula is necessary to have a hit — but not sufficient.

That assessment is based on the work of some Columbia University sociologists, including Matt Salganik. In his interview with HBR, Salganik explained that having a cultural product of good quality is not enough. It’s social processes that makes one good product take off rather than some other equally good (or even better) product.

Salganik and colleagues ran a series of experiments to see how hit songs take off (see the interview for details), but their findings are equally applicable to any cultural product: books, TV shows, and, yes, mobile games. As Salganik said:

Higher quality songs, as a group, will outperform the lower quality ones, but which high-quality song is going to break out is impossible to figure out beforehand. In the experiment, we rewound the world and saw the range of possible outcomes that could have happened – and they’re all over the place!

That is, you cannot predict blockbusters. And that includes the Harry Potter books, the Mona Lisa, “Gangnam Style,” and, yes, Candy Crush.

Having the magic formula for producing addictive games is a necessary component for success (cf. Flappy Bird), but by itself it’s not sufficient, not when there are going to be other games out there that are just as well designed. One way that King Digital could still win is if they could flood the market with games that are all well designed in the same way Candy Crush is. To date, this has not been their strategy.

King Digital is hoping the market will overlook these complications, and perhaps it will. But over time, the problems with a strategy that seeks to produce cultural hits based on a well known formula is bound to run into trouble.

Online Security as Herd Immunity

Online security is only successful if every company does its part.

That was the message of Edward Snowden’s keynote conversation at the SXSW Interactive conference this week, conducted via (highly protected) video link. I was one of the thousands of tech professionals who made up the audience for his first live video appearance, which focused on the need for stronger security practices in the face of government surveillance. “We rely on the ability to trust our communications,” Snowden argued. “Without that we don’t have anything. Our economy cannot succeed.”

I’ve done some pro-vaccination work in my professional life, and Snowden’s exhortation reminded me of nothing so much as the argument for vaccination. That’s because like the effectiveness of online security as Snowden described it, the effectiveness of vaccination depends on herd immunity: as long as enough of the community is vaccinated, diseases like measles and rubella are unheard of.  But herd immunity only works if everybody does their part: if too many people depend on their neighbors’ vaccination rather than vaccinating themselves, we get disease outbreaks instead of a healthy community.

Just as all members of a geographic community benefit from widespread vaccination, all members of the business community benefit from widespread immunity to government (or competitor) surveillance. The ability to keep communications private allows  employees to innovate and collaborate, without their ideas getting scooped by competitors. Private web browsing allows talented professionals to find and apply for your job openings, without fearing that their current employer will notice. Private payment systems allow customers to buy your products, even if they are personal or embarrassing.

But, as with herd immunity, the benefits of privacy are available only if a critical mass of companies and individuals make the effort to protect it. Widespread adoption of privacy tools sustains the market for strong encryption and security software – a field that demands constant innovation to stay ahead of both hackers and government surveillance. Widespread adoption of privacy practices ensures that companies can use privacy-enhancing tools whenever they need them – without being flagged as suspicious. And widespread caution about collecting and retaining data prevents governments (or data brokers) from getting access to datasets that can be used to profile and target specific individuals.

Implementing strong privacy safeguards comes at a personal or business cost, however small: it takes a little bit of extra time and a little bit of extra effort, in part because existing privacy tools aren’t always easy to use. (Again, if more companies adopted strong privacy practices, it would help create market demand for better and more usable tools.) For those of us who put a lot of personal information online in the context of building a social media presence, there is also the potential reputational cost of sacrificing a little bit of visibility or engagement in favor of some degree of discretion.

In urging companies and individuals to assume these small costs, Snowden sounded much like vaccination advocates who encourage each of us to do our part for herd immunity. As with vaccination, it’s tempting to let other people do the heavy lifting: as long as a critical mass of companies use privacy-enabling tools like encryption and anonymized browsing, you know those tools will be available whenever you or your employees need to use them, so it’s easy to forego individual vigilance.

If, on the other hand, unsecured web browsers are the norm in corporate environments, a company that does use the anonymizer Tor or encourages employees to use their “private browsing” option looks like a company with something to hide. If the vast majority of transactions are itemized and trackable through loyalty cards, credit cards and social login, the transactions your customers keep private start to look suspicious. If companies collect and retain large amounts of data – even data that looks innocuous – it helps build the datasets that governments and some businesses (like insurance companies or advertisers) can use to profile, target and advantage (or disadvantage) specific individuals. And if companies cut corners in network design or data management, they make all that data accessible to hackers as well as government intelligence agencies.

Rather than eroding the expectation of online privacy, companies can and should help to build it. Big data is now the name of the game, but as Snowden said on Monday, “you should only collect the data and hold it for as long as necessary for the operation of the business”; any additional data represents a risk for your customers and for your business. Companies can protect the privacy of the data that they do collect by ensuring that all drives and network communications are encrypted. And as Snowden argued, companies not only have a responsibility to encrypt communications (something too many companies have done only since Snowden’s revelations came to light), but to develop technologies that protect privacy in a “simple, cheap, effective way that is invisible to users.”

Companies that take these measures are not only contributing to a business environment in which privacy is the norm: they’re also building value for their own shareholders. A company’s networks and security are only as strong as its weakest link: a single employee using a low-security password may be all it takes to compromise corporate systems. It’s not enough for a business to trust that generalized security and privacy norms will provide herd immunity for the free market: each and every organization has an immediate stake in encouraging its employees to adhere to the highest security standards.

And that’s what makes me hopeful that not only SXSW attendees, but the larger business community, will heed Snowden’s call to arms. Companies have self-interested reasons (as well as a legal duty) to drive stronger security practices.  But it’s up to each and every company to do its part.

Craigslist Saved Consumers a Lot of Money While Crippling Newspapers

Craigslist, the online-ad site, saved the placers of classified advertisements $5 billion from 2000 through 2007, according to an analysis by Robert Seamans of New York University and Feng Zhu of Harvard Business School. It also had a profound impact on U.S. local newspapers, siphoning off classified advertisers and leading to decreased classified-ad rates, increased subscription prices, reduced circulation, and declines in display advertising. It also set up a consumer expectation that classified advertising would be free.

Why Good Managers Are So Rare

Gallup has found that one of the most important decisions companies make is simply whom they name manager. Yet our analysis suggests that they usually get it wrong. In fact, Gallup finds that companies fail to choose the candidate with the right talent for the job 82% of the time.

Bad managers cost businesses billions of dollars each year, and having too many of them can bring down a company. The only defense against this massive problem is a good offense, because when companies get these decisions wrong, nothing fixes it. Businesses that get it right, however, and hire managers based on talent will thrive and gain a significant competitive advantage.

Managers account for at least 70% of variance in employee engagement scores across business units, Gallup estimates. This variation is in turn responsible for severely low worldwide employee engagement. Gallup reported in two large-scale studies in 2012 that only 30% of U.S. employees are engaged at work, and a staggeringly low 13% worldwide are engaged. Worse, over the past 12 years these low numbers have barely budged, meaning that the vast majority of employees worldwide are failing to develop and contribute at work.

Gallup has studied performance at hundreds of organizations and measured the engagement of 27 million employees and more than 2.5 million work units over the past two decades. No matter the industry, size, or location, we find executives struggling to unlock the mystery of why performance varies so immensely from one workgroup to the next. Performance metrics fluctuate widely and unnecessarily within most companies, in no small part from the lack of consistency in how people are managed. This “noise” frustrates leaders because unpredictability causes great inefficiencies in execution.

Executives can cut through this noise by measuring what matters most. Gallup has discovered links between employee engagement at the business-unit level and vital performance indicators, including customer metrics; higher profitability, productivity, and quality (fewer defects); lower turnover; less absenteeism and shrinkage (i.e., theft); and fewer safety incidents. When a company raises employee engagement levels consistently across every business unit, everything gets better.

To make this happen, companies should systematically demand that every team within their workforce have a great manager. After all, the root of performance variability lies within human nature itself. Teams are composed of individuals with diverging needs related to morale, motivation, and clarity — all of which lead to varying degrees of performance. Nothing less than great managers can maximize them.

But first, companies have to find those great managers.

If great managers seem scarce, it’s because the talent required to be one is rare. Gallup finds that great managers have the following talents:

They motivate every single employee to take action and engage them with a compelling mission and vision.
They have the assertiveness to drive outcomes and the ability to overcome adversity and resistance.
They create a culture of clear accountability.
They build relationships that create trust, open dialogue, and full transparency.
They make decisions that are based on productivity, not politics.

Gallup’s research reveals that about one in ten people possess all these necessary traits. While many people are endowed with some of them, few have the unique combination of talent needed to help a team achieve excellence in a way that significantly improves a company’s performance. These 10%, when put in manager roles, naturally engage team members and customers, retain top performers, and sustain a culture of high productivity. Combined, they contribute about 48% higher profit to their companies than average managers.

It’s important to note that another two in 10 exhibit some characteristics of basic managerial talent and can function at a high level if their company invests in coaching and developmental plans for them.

In studying managerial talent in supervisory roles compared with the general population, we find that organizations have learned ways to slightly improve the odds of finding talented managers. Nearly one in five (18%) of those currently in management roles demonstrate a high level of talent for managing others, while another two in 10 show a basic talent for it. Still, this means that companies miss the mark on high managerial talent in 82% of their hiring decisions, which is an alarming problem for employee engagement and the development of high-performing cultures in the U.S. and worldwide.

Sure, every manager can learn to engage a team somewhat. But without the raw, natural talent to individualize; focus on each person’s needs and strengths; boldly review their team members; rally people around a cause; and execute efficient processes, the day-to-day experience will burn out both the manager and his or her team. As noted earlier, this basic inefficiency in identifying talent costs companies hundreds of billions of dollars annually.

Conventional selection processes are a big contributor to inefficiency in management practices; little science or research is applied to find the right person for the managerial role. When Gallup asked U.S. managers why they believed they were hired for their current role, they commonly cited their success in a previous non-managerial role or their tenure in their company or field.

These reasons don’t take into account whether the candidate has the right talent to thrive in the role. Being a very successful programmer, salesperson, or engineer, for example, is no guarantee that someone will be even remotely adept at managing others.

Most companies promote workers into managerial positions because they seemingly deserve it, rather than because they have the talent for it. This practice doesn’t work. Experience and skills are important, but people’s talents — the naturally recurring patterns in the ways they think, feel, and behave — predict where they’ll perform at their best. Talents are innate and are the building blocks of great performance. Knowledge, experience, and skills develop our talents, but unless we possess the right innate talents for our job, no amount of training or experience will matter.

Very few people are able to pull off all five of the requirements of good management. Most managers end up with team members who are at best indifferent toward their work — or are at worst hell-bent on spreading their negativity to colleagues and customers. However, when companies can increase their number of talented managers and double the rate of engaged employees, they achieve, on average, 147% higher earnings per share than their competition.

It’s important to note — especially in the current economic climate — that finding great managers doesn’t depend on market conditions or the current labor force. Large companies have approximately one manager for every 10 employees, and Gallup finds that one in 10 people possess the inherent talent to manage. When you do the math, it’s likely that someone on each team has the talent to lead. But given our findings, chances are that it’s not the manager. More likely, it’s an employee with high managerial potential waiting to be discovered.

The good news is that sufficient management talent exists in every company – it’s often hiding in plain sight. Leaders should maximize this potential by choosing the right person for the next management role using predictive analytics to guide their identification of talent.

For too long, companies have wasted time, energy, and resources hiring the wrong managers and then attempting to train them to be who they’re not. Nothing fixes the wrong pick.

Thriving at the Top

An HBR Insight Center




Developing Mindful Leaders for the C-Suite
Meet the Fastest Rising Executive in the Fortune 100
If President Obama Can Get Home for Dinner, Why Can’t You?
To Get Honest Feedback, Leaders Need to Ask

Research: CEOs Matter More Today Than Ever, at Least in America

How much credit does the CEO deserve when a company is performing well? Is success really attributable to a single executive, or are economic and industry trends ultimately responsible? What about the rest of the organization? These questions are part of a rich research tradition that seeks to explain which factors account for a company’s performance. Particular attention is paid to a factor known as the “CEO effect,” which is the portion of company performance that is associated with who’s in charge.

A forthcoming paper by researchers at the University of Georgia and Penn State suggests that CEOs matter more than ever for U.S. companies, and takes a stab at explaining why. The new paper confirms a pattern discovered by previous research: the CEO effect seems to be increasing over time. In other words, the CEO of a company is a more significant predictor of that company’s performance than at any time since the question has been measured, starting in the mid-twentieth century. Moreover, the authors offer a relatively simple explanation, which is that CEOs simply matter more than they used to.

It’s important to note that this research can’t say anything about what makes CEOs important. The researchers tracked when CEOs took the reins at a representative sample of U.S. public companies, and then measured whether different CEOs presided over significantly different levels of performance, even after taking into account industry, firm, and year (which accounts for macroeconomic changes). The chart above shows an increase in the impact of CEOs on an average of three metrics: return on sales, return on assets, and market-to-book ratio.

The increase is undoubtedly interesting, but which is more surprising: that CEOs seem to matter significantly today, or that they mattered so much less in the mid-twentieth century? As the authors write:

In the period 1950-1969, company performance in a given year was due overwhelmingly to factors that were relatively easy to comprehend, notably macro-economic conditions, industry factors, and the firm’s overall health and position. By the period 1990-2009, these straightforward contextual factors were not nearly as predictive of performance.

In the period from 1950 to 1969, for instance, just knowing the industry a company was in predicted 38.7% of differences in performance. By contrast, from 1990 to 2009 industry predicted only 3.7% of the difference. That gap is telling, and the authors see it as evidence that what has changed goes well beyond CEO leadership. A combination of forces — including the shift of emphasis toward maximizing shareholder value and the role of technology in increasing the pace and complexity of business in countless sectors — made business more dynamic and less predictable. It’s against that backdrop that CEOs have been empowered to pursue new strategies and markets, often across the globe. The result has been an increase in CEO impact.

It’s worth noting that other research has found the CEO effect to vary considerably between industries, in somewhat counter-intuitive ways. The more resources a CEO has at his or her disposal to invest, the more their decisions will tend to matter (for good or ill) — that fits broadly with the conclusions drawn in this new research paper. On the other hand, high-growth industries have been shown to be less subject to the CEO effect, because the plethora of opportunities for success make it easier for mediocre executives to succeed. Taken with this new research, this suggests something of a paradox: an increase in business dynamism has amplified the impact of CEOs over time, but that effect is at its highest in companies where industry and economic constraints still limit the firm’s options.

There is one final explanation that the new paper’s authors consider, and that is that markets simply think CEOs matter more, and naively bid their share prices up and down accordingly. They can’t rule this possibility out, and that uncertainty is telling in that it reinforces their most interesting conclusion. American business has become more unpredictable in recent decades. CEOs may in fact matter more as a result, but so too do forces we do not fully understand.

Can You See the Opportunity Right in Front of You?

Do you find your household thermostat to be endlessly fascinating? How about that smoke alarm installed in your basement — spend much time gazing at it with wonder? Tony Fadell did. The founder of Nest has had a lifelong penchant for looking at mundane everyday household devices and wondering Why hasn’t somebody improved this thing? That tendency led him to reinvent the aforementioned gadgets — and recently resulted in a $3 billion payday, when Nest was acquired earlier this year by Google.

Jack Dorsey, the co-founder of Twitter, became similarly fascinated by those clunky credit-card reading contraptions, used by retailers to take a card imprint. They seemed hopelessly outdated in a mobile culture of on-the-go transactions. Dorsey reasonably wondered why there wasn’t a simpler, more portable device that could be used anywhere, enabling anyone to accept a credit card. This led to the creation of Square, a sleek card reader that could be plugged into any smart phone or tablet.

The stories behind these two red-hot tech successes show that innovation opportunities are often right in front of us — but they may involve objects or situations that are so familiar, so mundane, that we fail to pay any attention to them. Which brings us to the late comedian George Carlin and the powers of vuja de.

That term was made up by Carlin, in a bit of wordplay that put a twist on the familiar concept of déjà vu, that sensation of being in a strange circumstance yet feeling as if you’ve been there before. Imagine the reverse of that: you’re in a situation that is very familiar, something you’ve seen or done countless times before, but you feel as if you’re experiencing something completely new. This is vuja de, Carlin told his audience: “the strange feeling that, somehow, none of this has ever happened before.”

Carlin died in 2008, but I spoke with his daughter, the comedian and radio host Kelly Carlin, who is writing a memoir of life with her father. She feels the vuja de way of looking at the world — of observing familiar, everyday things as if one were seeing it for the first time — is the way Carlin went through his life and it’s how he got much of his material. “When the familiar becomes this sort of alien world and you can see it fresh, then it’s like you’ve gone into a whole other section of the file folder in your brain,” Kelly Carlin said. “And now you have access to this other perspective that most people don’t have.”

Carlin used that perspective to develop a style of observational, questioning humor that could be thought of as the “Why” school of comedy. “It was observing our everyday life — baseball, dogs and cats, the way someone stands in front of the refrigerator — and asking, Why do we do things the way we do them?” Kelly Carlin explains. She often interviews other comedians on her podcast series Waking from the American Dream, and told me she thinks comedians in general are more apt to have a vuja de perspective. “Most comics grew up feeling like they didn’t belong,” she says. “They were the class clowns, the outsiders — it was natural for them to stand back and observe, and to wonder about what everyone is doing.”

Jerry Seinfeld, an heir to Carlin who developed a similar observational approach in his comedy, shared that same fascination with mundane behaviors and quotidian details. “I do a lot of material about the chair,” he told an interviewer recently. “I find the chair very funny. That excites me. No one’s really interested in that – but I’m going to get you interested! It’s the entire basis of my career.” But before he can make us care about a chair, Seinfeld must make it interesting to himself — he must look at it fresh, from a vuja de perspective.

Vuja De and Innovation

Stanford University professor Bob Sutton, author of the new book Scaling Up for Excellence, was among the first to make a connection, more than a decade ago, between the Carlin vuja de perspective and innovation. Sutton, and later Tom Kelley of IDEO, pointed out that innovators could potentially spark new ideas and insights if they could somehow manage to look at the familiar—their own products, their customers, their work processes—as if seeing it for the first time. Adopting this view, business leaders and managers might be more apt to notice inconsistencies and outdated methods, as well as untapped opportunities.

But it isn’t easy. IDEO’s Kelley thinks people fail to notice opportunities that may be right in front of them because, as he wrote in his book The Ten Faces of Innovation, “they stop looking too soon.” And it’s not just how long you look, but what you choose to notice: In Sutton’s writings on vuja de, he advises “shifting our focus from objects or patterns in the foreground to those in the background.”

For a change in perspective, it can be helpful to step back from everyday routines and habitual behaviors. As Sutton puts it, if you want to open yourself up to vuja de insights, stop operating “on automatic pilot.” In a business context, this might involve injecting some element of newness into overly-familiar work routines — such as shaking up teams, changing schedules, or even just holding your meetings in a different and unusual place. Getting out of the office bubble is key: powerful vuja de insights have been known to happen in kitchens, coffeehouses, and all the places where people are living their lives and doing everyday things in routine ways that bear watching.

Of course, vuja de isn’t just a way of looking at things; it involves a certain mindset that questions assumptions and refuses to accept things as they are. Here again, there is much to be learned from Carlin, who not only studied the world around him but challenged it, at every turn. Carlin mapped all the inconsistencies and irrational behaviors, and railed against them: When we’ve lost our keys and are searching for them, why do we keep checking in the same few places, over and over? It doesn’t make sense!

Carlin, in the end, was a commentator; he brought inconsistencies and irrational behaviors to light, but wasn’t in a position to change them. Innovators, on the other hand, can actually address some of those failings and shortcomings they notice. Think of the creation of Airbnb, which sprang from a situation that easily could’ve been a Carlin bit: Did’ya ever notice that when the convention comes to town, nobody can get a room at a hotel—but at the same time, there’s all these empty rooms and unused sofabeds in people’s apartments. Hey, here’s a clue, people: Rent the damn sofabeds!

Carlin would’ve gotten a laugh out of it. But the founders of Airbnb, combining vuja de observation with entrepreneurial action, found a way to rent the sofabeds and launch a new industry.

Surviving a Start-Up’s Transition from Projects to Processes

“Why change my leadership style? It got us to this point, where we’ve established a real beachhead in our market.”

These are the famous last words of many an entrepreneur. Failing to realize that critical transition points in the growth of an enterprise require leaders to shift emphasis, they blindly stick with what has been working up to that point. The company stalls. Confusion grows among key team members, investors, customers and suppliers.  And, ultimately, the failure to understand the demands of the transition lead to the failure of the company itself.

One such abrupt transition — from project to process mode — occurs once a company launches its initial sales efforts and begins to service its first customers. A project is a one-at-a-time exercise performed by a team assembled specifically for that task. It is the ad hoc nature of the project that enables the flexibility and agility required to capture the first real customer.  If the entrepreneur has recruited the type of people usually attracted to startups — people who like fast-paced projects — then they will likely find working as a team in the project mode extremely satisfying.

Most entrepreneurs understand that they need to be flexible and agile in order to figure out how and what potential customers will buy from them. But flexibility and agility must begin to make way for reliability and efficiency if the company is to deliver the kind of consistent product or service required to maintain happy customers and win new ones. Reliability and efficiency require that work be performed in a process mode, where tasks are accomplished repetitively in a prescribed fashion, resulting in minimal variation and cost.

But most entrepreneurs instinctively resist switching from the project to the process mode. I hear entrepreneurs use excuses like, “there are a few more things we can do to make our product even better,” or the classic, “we are working well as a team, why change how we work?” The teams that have been recruited to successfully create a new company, product or service also resist this change.  They ask why they need to change from the ‘fun’ mode into a mode most project-loving people despairingly and naively call ‘bureaucratic.’

The dangers of staying in a pure project mode too long are many. Projects, no matter how well led, produce inconsistent results. Entrepreneurs cannot afford disappointed customers, and most won’t forgive poor products or services just because they were experiments.

Staying in project mode too long also opens up opportunities for competitors. How many entrepreneurs have seen their great ideas copied by a more cost-effective competitor destroying all the value they had created to that point — irrespective of patents?

Staying in the project mode too long also makes the enterprise too reliant on the founder. No enterprise can become self-sustaining if the skills of its founder have not been replicated in an effective process.  And staying in project mode too long frustrates the employees the entrepreneur will need to rely upon to manage effective processes. People who enjoy making something better and better make good process managers, and these people typically like organization and feel uncomfortable with the change and disorganization that often accompany project mode.

A strong and savvy leader with a sense of the needs of the enterprise will understand that this transition needs to take place to create a more competitive and self-sustaining company. Savvy leadership is also required to know how to lead both the experimental, creative, project-loving people recruited to help capture the first customer and the organized process-loving people required to implement efficient and reliable processes. Also, a strong and savvy leader will want to develop processes that do not require her unique talents.

The first step toward successfully making the transition is to explain why the shift from projects to processes is critical to the well-being of the enterprise. A compelling explanation gets the team comfortable with the need to design and develop reliable and efficient processes — and it pre-empts cries of ‘bureaucracy.’

Although work in a maturing enterprise is progressively dominated by processes, projects never go away entirely.  After all, you need a project to create or even improve a process. Leaders who understand the differences between projects and processes will keep the good project-loving people, who found and captured the first customers, assigned to project work while process-loving people focus on helping the enterprise become increasingly efficient and reliable.

The transitions required in a rapidly growing and maturing startup are unforgiving, and for many entrepreneurs the project-to-process change is particularly tricky. It’s one of the reasons entrepreneurs have such a high rate of failure and why those who understand it greatly increase their odds of survival.

How Location Analytics Will Transform Retail

Any company building an online presence wouldn’t think twice about the need for sophisticated web analytics. In fact, 98% of IR500 retailers use some form of web analytics. It’s become an essential tool for understanding online customer behaviors and driving site improvement efforts.

Despite its success online, relatively few companies with physical venues employ advanced analytics solutions that track customer behaviors in their physical spaces. As a result, most companies are flying blind when it comes to understanding their customers in the analog world.

This is changing fast, however. A growing number of firms in the emerging field of location analytics are making it possible to bring the power of web analytics into the physical world.

By leveraging connected mobile devices such as smartphones, existing in-venue Wi-Fi networks, low cost Bluetooth-enabled beacons, and a handful of other technologies, location analytics vendors have made it possible to get location analytics solutions up and running fast at a minimal cost. Customer tracking data is typically sent to the location analytics vendor where it is analyzed and accessed via online dashboards that provide actionable data tailored to the needs of specific employees — from the store manager to the executive C-suite.

Already, the scale of data collected by early adopters of this technology is staggering. Location analytics firm RetailNext currently tracks more than 500 million shoppers per year by collecting data from more than 65,000 sensors installed in thousands of retail stores. A single customer visit alone can result over 10,000 unique data points, not including the data gathered at the point of sale.

And RetailNext isn’t alone. Euclid Analytics collects six billion customer measurements each day across thousands of locations, and multiple location analytics firms surveyed said they are adding hundreds of new venues each month. Location analytics firms are even pushing beyond company-owned venues. Locately and Placed use opt-in apps on customer devices to track everywhere customers go 24/7 and can even send intercept-style surveys to them at key moments of truth.

For their part, venue owners — from retail to airports to education to amusement parks — are applying insights gathered from location analytics to all aspects of their business including:

Design. After analyzing traffic flows in their stores, a big box retailer realized that less than 10% of customers visiting their shoe department engaged with the self-service wall display where merchandise was stacked. The culprit turned out to be a series of benches placed in front of the wall, limiting customer access. By relocating the benches to increase accessibility, sales in the department increased by double digits.
Marketing. A restaurant chain wanted to understand the whether or not sponsoring a local music festival had a measurable impact on customer visits. By capturing data on 15,000 visitors passing through the festival entrances and comparing it to customers who visited their restaurants two months prior to the festival and two weeks after, they concluded the festival resulted in 1,300 net new customer visits.
Operations. A grocery store chain used location analytics to understand customer wait times in various departments and check-out registers. This data not only enabled the company to hold managers accountable for wait times, but it gave additional insight into (and justification for) staffing needs for each department throughout the day and optimal times to perform disruptive tasks such as restocking shelves or resetting displays.
Strategy. A regional clothing chain was concerned that opening an outlet store would cannibalize customers from its main stores. After analyzing the customer base visiting each store, they discovered that less than 2% of their main store customers visited their outlet. The upside: the outlet gave them access to an entirely new customer base with minimal impact to existing store sales.

Further, by combining location data with existing customer data such as preferences, past purchases, and online behavioral data, companies gain a more complete understanding of customer needs, wants and behaviors than is achievable with online data only.

Just as web analytics is an essential tool on the Web, location analytics will become a must-have for designing, managing, and measuring offline experiences. With leading companies such as American Apparel, Bloomingdale’s, Verizon Wireless, Swatch, and London City Airport already onboard with location analytics, it will become commonplace in venues — especially for major brands — over the next several years and a major competitive gap for those that don’t adopt the practice.

The difference between how firms operate their businesses today and how these efforts will change with location analytics is profound. Beyond creating more efficient, effective and meaningful services, firms will begin to rethink the notion of customer value. The ability to identify, track, and target customers in physical locations will enable companies to extend preferential status and rewards to customers based on their behaviors, rewarding them based on the number and frequency of visits, where they go in venues, and their exclusive loyalty (i.e., not visiting competitor venues).

Location analytics will also exacerbate the growing digital divide within companies. It used to be that those with operational experience were on the fast track to the C-suite, but no more. Leaders with digital chops and an understanding for how to translate digital-age innovations such as location analytics into compelling analog world experiences are now the ones to watch.

We are in the Age of the Customer. In order to survive and prosper, firms must embrace customer intimacy — online and offline — as a core competence. No doubt, many firms will continue to fly blind when it comes to understanding customer behaviors in their venues. A few will survive, but many will likely hit a brick wall. The smart money, however, will be on the firms that embrace customer centricity and technologies like location analytics that make it possible.

Assess Your CEO’s Strategic Fit Over Time

Roger Federer can arguably be considered the greatest tennis player of all time, having won 16 Grand Slam titles—and yet he lost every French Open Championship he played against Rafael Nadal.  Few would suggest that Nadal was a better overall tennis player. But on the clay courts of Paris’ Roland Garros stadium, he was the best player. And even though no one would deny Roger Federer’s overall tennis prowess, no one expects that he would win in every conceivable situation. So why do we assume that our CEOs will?

Like Federer, some CEOs consistently win in one context but lose in another.  If you’re involved in CEO selection, this requires that you both hire the right CEO and understand when the company’s strategic situation suggests that a different CEO is more likely to win. Retaining a leader whose profile no longer fits the strategic imperatives of the business can have disastrous business consequences.  Two poignant examples:

Steve Ballmer was a strong fit for Microsoft’s challenges when he was promoted to CEO in 2000.  The company’s twenty years of entrepreneurial success had positioned the company to reap greater financial rewards using a more disciplined operational focus.  Ballmer effectively led this shift and saw strong revenue growth from it.  However, by the middle of the decade, Google was growing, YouTube was forming, and “operational excellence” wasn’t a differentiating strategy in technology.  Ballmer had done his job, but the strategic needs of the organization had shifted.  As CEO fit decreased, Ballmer’s performance followed and he was pressured out of the job in late 2013.
In the late 1990’s, Home Depot’s rapid growth had outpaced its corporate infrastructure and was hiding serious cost management challenges.  Their board hired Robert Nardelli from GE to quickly install the organizational foundation necessary to continue the company’s growth and better manage costs.  Nardelli’s background and personality were a perfect fit for that challenge and he delivered some of the company’s most profitable years.  But with the infrastructure and discipline in place, the company needed a leader who could drive innovation-based growth.  No one should have expected Nardelli to transition to fit with the new challenge and profile needed, but the board didn’t pro-actively change CEOs and Nardelli suffered through a needlessly messy exit.

As these examples suggest, we’re successful not just because of our individual capabilities but also because of how those capabilities fit with specific challenges. The science behind this is called Person-Environment Fit and its intuitive conclusion is that we’re more effective when we “fit” with our environment.  Fit is particularly important for senior executives since the research on this topic shows a direct link between an organization’s performance and the level of alignment between its strategy and the profile of top managers.

The problem is this: While unique aspects of a CEO’s profile that determine fit with an organization—such as career experience and personality factors—will largely remain static, internal and external factors that determine what a company needs from its CEO will change over time.  This means that, as the company changes, CEO fit will decrease and performance will suffer. In addition to the research, a review of public company CEO history confirms both that poor fit leads to poor performance, and that fit changes over time.

The implication of this is that boards should actively assess the degree of alignment between the CEO and the strategic needs of the business, and remove CEOs to maximize fit as the corporation’s needs change.  Most boards are used to a rigorous selection process before hiring a new CEO; but how should a board assess fit during the tenure of a CEO?

One way is to assess the CEO’s fit on two key dimensions where the CEO’s role and influence are distinct: Strategy and Change. The CEO sets the company’s strategic choices and serves as the company’s most visible and prominent leader during large scale change. The better a CEO fits with the company’s strategy and change needs, the more successful that CEO should be. Boards should assess CEOs on both dimensions regularly—not only when considering the CEO for the job in the first place, but throughout the CEOs tenure in the job.

A simple tool for this purpose is what we call the Executive Fit Matrix. This matrix allows boards to cross the two dimensions—Strategy and Change—and determine fit by comparing a company’s strategic direction with the capabilities needed by their CEO.

To Assess Strategy Fit:  Authors and academics classify strategic choices in many ways, but the two most enduring categories are 1) seeking a cost advantage or 2) seeking a differentiation advantage.  These strategies anchor each end of the strategy continuum and corporate strategies will typically align with one of these choices.

To Assess Change Fit: The taxonomy of the change dimension isn’t as well established, but it’s fair to say that some companies will be experiencing high amounts of change (start up, turn around, economic shock, etc.) and others the typical day-to-day changes that mark corporate life.  We’ll label the two ends of the change spectrum as High Change and Low Change.

Looking at the matrix, it’s easy to see why Ballmer and Nardelli, both initially great fits, became liabilities for their companies.  Ballmer took over, and excelled at, a Box 2 challenge. When Microsoft’s competitors moved into Box 1 with innovative products for the Internet and later the cloud, Ballmer couldn’t drive the necessary innovation and change that Microsoft needed to keep pace. Similarly, Nardelli successfully turned-around Home Depot (Box 4) but failed to lead the company into the operational excellence marked by Box 2.

Fit is an essential factor in any senior leader’s performance, but infinitely more so for the CEO given their central role in the organization’s success.  The board’s responsibility is to regularly assess and try to optimize the fit between their company’s top leader and the company’s strategic challenges.  Hiring the right CEO may be a high-profile activity, but proactively managing CEO tenure to ensure the best fit will drive the best performance for the future.