Marina Gorbis's Blog, page 1455

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 They seemed hopelessly outdated in a mobile culture of on-the-go transactions.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.

The Breakfast of Champions: No Longer a Champion Itself?

It’s still a thrill and an honor for Olympics athletes to appear on the Wheaties box, but their images apparently aren’t doing much to sell the cereal: The 91-year-old brand is lagging behind competitors, with a falling market share that’s now barely 1%, according to the Wall Street Journal. Compare that with another General Mills brand, Cheerios, which has a 12% share. Some 474 athletes have appeared on the Wheaties box, starting with Lou Gehrig in 1934; the most recent are winter Olympians Mikaela Shiffrin and Sage Kotsenburg.

Be Kind to Your Employees, but Don’t Always Be Nice

At 39, I was the CEO of a company with a few hundred employees. Depending on the day and the employee you asked, I’d rate anywhere from a zero to a seven on the unkindness scale (10 being a tyrant). I’d guess that I normally hovered around 4.5. I doubt anyone would have rated me a 10—that takes a particular kind of malevolence. I wasn’t taken to raging, other than on one occasion when the lives of the participants in our Montana AIDS Vaccine Ride (a 1,500-person, seven-day bike ride across the Rockies to fight the disease) were in jeopardy during a horrific mountain wind storm that literally blew our temporary city apart. But day to day, I was fairly consistently stern and serious.

Stories of the raging, maniacal CEO are the stuff of legend, from American Apparel’s CEO, Dov Charney, who was accused of choking an employee with both hands, to Walt Disney, whose underlings warned each other he was approaching by repeating the line from Bambi, “Man is in the forest!” Bill Clinton was infamous for his temper tantrums. Even Tim Cook, Apple’s seemingly mild-mannered CEO, terrifies people. In an upcoming book on the CEO, author Yukari Iwatani Kane writes, “When someone was unable to answer a question, Cook would sit without a word while people stared at the table and shifted in their seats. The silence would be so intense and uncomfortable that everyone in the room wanted to back away…Sometimes he would take an energy bar from his pocket while he waited for an answer, and the hush would be broken only by the crackling of the wrapper.”

Is fear and intimidation the only way to build a truly great (not just really good, but great) company? Is kindness a recipe for mediocrity? It’s a tough question. And let’s not kid ourselves that we are always the champions of kindness. When we, as customers, are on the receiving end of a consumer brand screw-up, whether it’s an airline gate attendant ignoring delayed passengers or a software update that disables our cell phone, we sure wish that the company had a dictator at the top prohibiting a culture where these things could happen.

But the choice between kindness and greatness is a false choice. First, there’s a difference between malevolent intent and anxiety-driven unpleasantness. Although some of my employees may have perceived me as unkind, with rare exception I never intended it. Mostly I was consumed with the enormity of the responsibility on my shoulders. There was crushing pressure to keep expenses on our charity events low, and equally intense pressure to make sure the events were safe and the experience was second to none. My company’s future hung in the balance on this tight rope. I felt pressure to keep costs down but pay our talented people more. There were difficult clients holding large receivables over our heads, threatening cash flow. There was the constant demand to continue innovating and to grow. Some leaders may be able to handle that pressure more gracefully than I did, but it doesn’t change the fact that when I acted badly, it was without malicious intent. A friend of mine is a famous entertainment industry executive. He says, “I get paid to worry.” The tendency—and the willingness—to be on guard about everything is part of why some people are able to lead when others are not. And anxiety on the inside rarely produces a nice exterior.

But there’s a more important distinction to consider: There’s a difference between being kind and being nice. Vince Lombardi wasn’t a nice guy. But he drove his players to be the best they could be, and in hindsight, they loved him for it. I’d much rather play for a coach committed to my true potential and willing to sacrifice my perception of him or her in the short term than a coach who’s more concerned about being liked. I’d rather work for someone who loves me than someone who’s nice to me.

The key is permission. It’s not kind to drive me to be the best I can possibly be when I haven’t agreed to it; when I haven’t asked for it.

Ultimately, it’s not a choice between kindness and greatness. It’s a choice between creating or forgoing context. You have to create and maintain a context in which people are expected to rise and want to rise to be their absolute best—where you have people’s express permission to push them beyond their comfort zones. The keys to making that happen are:

Tell all potential employees that they are going to be pushed at your company and that it is going to be the best experience of their lives.
Confirm that they are agreeing to a culture and context of greatness before they come on board.
Hire professionals whose only responsibility is to keep that context alive at all levels.
Help people distinguish between malevolent intimidation and tough love. It will look messy, but when the intent is positive people will feel it.
Establish a zero-tolerance policy for malevolent behavior.
People are human. There will be bursts of anger or pettiness or condescension. When that happens, make sure that you have systems and professionals in place to help people talk it through and talk it out.

Now you can create a culture that is kind AND great. Loving AND powerful. It just won’t always be nice.

How to Have a Eureka Moment

In the ancient world, the Greeks believed that all great insights came from one of nine muses, divine sisters who brought inspiration to mere mortals. In the modern world, few people still believe in the muses, but we all still love to hear stories of sudden inspiration. Like Newton and the apple, or Archimedes and the bathtub (both another type of myth), we’re eager to hear and to share stories about flashes of insight.

But for those who have to be creative on demand, these stories don’t offer much practical advice on how to have a eureka moment of their own. Long walks or hot showers may be where we think out best ideas come from, but those are hardly available options in the middle of a crowded workday. While research hasn’t exactly validated the existence of divine muses, it has given us some insight into how eureka moments happen…and how to make them happen more often.

Eureka moments feel like flashes of insight because the often come out a period when the mind isn’t focused on the problem, what psychologists call a period of incubation. Incubation is the stage where people briefly step back from their work. Many of the most productive creative people intentionally set a project aside and take a physical break from their work believing that this incubation stage is where ideas begin to come together below the threshold of the conscious mind. Some people juggle various projects at the same time under the belief that while their conscious mind is focusing on one project, the others are incubating in their unconscious. The insights that come after incubation are what feel like we’re tapping into the same idea-generating force that powered Newton and Archimedes.

A team of researchers led by Sophie Ellwood recently found empirical evidence for power of incubation to boost creative insight. The researchers divided 90 undergraduate psychology students into three groups. Each group was tasked with completing an Alternate Uses Test, which asks participants to list as many possible uses for common objects as they can imagine. In this case, the participants were told to list possible uses for a piece of paper. The number of original ideas that were generated would serve as a measurement of divergent thinking, an important element of creativity and a significant step toward finding a eureka-worthy insight.

The first group worked on the problem for 4 continuous minutes. The second group was interrupted after two minutes and asked to generate synonyms for each word from a given list (considered to be another task that exercised creativity), then given two more minutes to complete the original test. The final group was interrupted after two minutes, given the Myers-Briggs Type Indicator (considered an unrelated task), and then asked to continue working on the original alternate uses test for two more minutes. Regardless of the group, each participant was given the same amount of time (4 minutes) to work on their list of possible uses for a sheet of paper. The research team was then able to compare the creativity that resulted from continuous work, work with an incubation period where a related task was completed, and work with an incubation period where an unrelated task was completed.

The researchers found that the group given a break to work on an unrelated task (the Myers-Briggs test) generated the most ideas, averaging 9.8 ideas. The group given a break to work on a related task placed second, averaging 7.6 ideas generated. The group given no break but four continuous minutes of work time generated the least possible uses, averaging 6.9 ideas. The research team had validated the idea that incubation periods, even those as brief as a few minutes, can significantly boost a person’s creative output.

One possible explanation for these findings is that when presented with complicated problems, the mind can often get stuck, finding itself tracing back through certain pathways of thinking again and again. When you work on a problem continuously, you can become fixated on previous solutions. You will just keep thinking of the same uses for that piece of paper instead of finding new possibilities. Taking a break from the problem and focusing on something else entirely gives the mind some time to release its fixation on the same solutions and let the old pathways fade from memory. Then, when you return to the original problem, your mind is more open to new possibilities – eureka moments.

More interestingly, their research offers hope for those with packed calendars. Recall that Ellwood’s team found that group of participants who switched to unrelated work generated the most ideas. This suggests that an effective way to incubate a problem in need of a eureka moment is to switch to an unrelated, but still work-related, task. This could be a totally different work project or even better something a bit more mundane, like responding to emails or cleaning out your contacts. Anything that takes your mind off the problem at hand and gives your mind a break will boost your odds of having a eureka moment when you return to that problem. If you need a creative insight on demand, consider structuring your workday to leave some mundane tasks undone, saving them for when you need to incubate. When you switch back, you might just find yourself shouting “eureka.”

Loose Ties Are Abundant, but Risky, at the Top

The decor varies greatly in the offices of the 550 CEOs, government officials, and heads of NGOs interviewed as part of our research on leadership — but hands down, photos are the most popular accessory. There are some shots of families and vacations, but most of the pictures show these senior leaders with prominent people. Playing golf with Jack Nicklaus. Smiling with President Obama at a state dinner. Laughing with another CEO at Davos.

Global leaders pride themselves on having many connections across industries and sectors. As experts on networking will tell you, these sorts of “loose ties” are essential to the machinery that gets things done. But when they come apart, they can do a lot of harm.

Take Jim Owens, one of our interview subjects, who spent his entire career with Illinois-based Caterpillar. He might not strike you as a cosmopolitan leader, but the former chairman and CEO has strategic ties throughout the world. During his acclaimed six years at the helm, Owens brought Caterpillar profitably through the 2008 recession. He also is a major player in national circles, having served on the boards of IBM, Alcoa, and Morgan Stanley, and as a member of the Council on Foreign Relations, the Business Council, the Business Roundtable, the Institute for International Economics, and the President’s Economic Recovery Advisory Board (PERAB). To borrow a term from Wharton management professor Michael Useem, Owens is most definitely a member of the global elite’s “inner circle.”

Back in February 2009, Owens’s ties were severely tested. The first meeting of PERAB was convened, President Obama was trying to get his economic stimulus plan through Congress, Owens was chairing the Business Council, and Caterpillar was losing a lot of money. Owens had befriended Obama when he was a senator and genuinely liked him, though politically they were poles apart. At the PERAB gathering, Owens persuaded the President to talk off-the-record with the Business Council the following week; in return, Obama asked to visit Caterpillar’s factory in Peoria to promote his stimulus plan. That plant was being hard hit with layoffs, so Owens suggested Obama speak at a different factory, but the president insisted on Peoria because it’s the home of Caterpillar’s corporate headquarters.

At the factory, things took a bad turn. Obama declared, “Yesterday Jim . . . said that if Congress passes our plan, this company will be able to rehire some of the folks who were just laid off.” In fact, Owens had said nothing of the kind. As they’d flown to Peoria together on Air Force One, Owens had explicitly stated that the layoffs were an outcome of an international market crash, and the stimulus plan was irrelevant to this particular factory. During a press conference that afternoon, Owens tried to endorse the idea of a fiscal stimulus in general while making it clear that layoffs would persist. When pressed, Owens tried to hedge his answer, but the media portrayed him as calling the President a liar. Within hours Obama’s chief of staff, Rahm Emanuel, excoriated Owens and said that he had torpedoed the President’s entire day and should have just stayed home.

Ripples spread. In an effort to undo the damage, President Obama invited the press to his meeting with the Business Council. Instead of talking off-the-record with Council members, the President delivered a speech to the Council and the press. It was a disaster for everyone involved. A misunderstanding between one executive and the President drove a wedge between the President and leaders of the nation’s business community.

Conflicts like this are common in the upper reaches of powerful institutions. Usually they’re outside the media spotlight; to outsiders, the networks of the powerful seem relatively cohesive and harmonious. We found quite the opposite in our research on leaders. An unintended consequence of increased diversity at the top is that there are far fewer “strong ties” between powerful leaders. Contrary to popular opinion, they did not go to elite schools together (only 14% of those interviewed went to an Ivy League college), nor do they consider one another good friends, as the rancor in Washington makes all too evident.

While increased diversity among the elite brings cross-pollination of ideas and institutions, it also comes with real risks. The President’s conflict with Owens was a surprise to everyone because the two assumed that their casual friendship and shared goal of promoting financial stimulus was enough to guarantee shared talking points on this key issue. But in reality, loose ties are most dangerous when senior leaders have common goals but different frameworks for decision making. As Max Weber might have put it, the President was motivated by an ethic of conviction, doing everything possible to achieve his end goal, which was getting the bill passed. Owens, however, operated out of an ethic of responsibility – the ends were not enough to justify misleading his workers or the press. Both ethical frameworks can be used appropriately, but the lack of a common framework produced a conflict, which in turn generated a series of problems that took much more time and energy to manage than either leader had to spare.

When utilizing loose ties, leaders need to be mindful of divergent commitments, even when they have a common cause. Ultimately, both the President and Owens achieved their ends, but they also damaged the prospect of collaborating in the future. After the incident in Peoria, Owens and his wife were invited to a state dinner (he recalls that President Obama welcomed them “like we were old fellow Illinoisans”). Though the conflict was, on the surface, forgiven, Owens was not reappointed to PERAB. Some fractures go too deep for splints.

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More CEOs Should Tell Anti-Environment Shareholders to Buzz Off

Apple CEO Tim Cook recently said something to a shareholder that you very rarely hear: take a hike. I’m paraphrasing, but only slightly.

At the company’s latest shareholder meeting, a think tank, NCPPR, pushed Apple to stop pursuing environmental initiatives like investing in renewable energy. Cook went on a tirade — or at least what passes for one from the very cool and collected CEO. He made it clear that he makes choices for reasons beyond just the profit motive. As he put it, “If you only want me to make decisions that have a clear ROI, then you should get out of the stock.”

Cook’s gut reaction to defend actions that don’t have a clear ROI is admirable — and he has the legal right to make strategic decisions and investments, as does every CEO. But he missed an important opportunity because much of what he was talking about — particularly investing in renewable energy — does in fact have strong ROI benefits, just not ones we can always measure.

For the sake of argument, let’s put aside the easy environmental wins that pencil out in any ROI calculation: energy efficiency and the increasingly common no-money-down renewables options (using “power purchasing agreements” to lease your roof and pay the solar provider the same, or less, than you currently pay per kilowatt-hour).

That leaves at least three other deep benefits to investing in green power on your own facilities in ways that may take longer to pay back in traditional terms. First, making significant amounts of your own power at zero variable cost is more than nice; it’s a hedge against volatility and smooths out expenses, which makes business planning easier.

Second, generating power, and possibly building ‘microgrids’ to create energy independence for your facilities, offers some serious resilience benefits. Consider Walmart’s significant commitments to energy efficiency and renewables. At one of the company’s sustainability  ”milestone meetings” in 2013, one senior exec said the initiatives would “help us keep our stores up and running no matter how bad the weather is or who else might be down.”

Third, the brand value of walking the talk is significant. Employees, especially the younger ones, increasingly want to see the companies taking these measures — I have one large CPG client making a significant, visible move to renewables at its facilities for precisely this reason. In addition, the story you tell customers can affect sales. One of the largest hotel chains in the world showed me the questions it got from big corporate customers — the ones deciding where to buy hundreds of rooms for big events. The list included multiple questions about whether the hotel chain purchased or used renewable energy.

By creating an energy-price hedge, building resilience, and driving brand value, deep green investments create significant value and thus do have a strong ROI. The problem then is not with the value creation, but with the tool of ROI and how we define it. None of the benefits I mention show up in a traditional ROI calculation, but operating while your grid-based competitors can’t, for example, is a very nice “R” on your “I.” Most importantly, none of these benefits are directly about tackling what NCPPR calls “so-called” climate change. They create direct (and indirect) value for the company aside from the shared benefit of a stable climate.

So ill-informed (or biased) shareholder activists, by demanding that companies like Apple avoid green investments, are actually working against shareholders’ interests (if you believe shareholders are those who want a more valuable company, not those traders flipping stocks in fractions of a second).

Don’t get me wrong about Cook’s statements. I’m thrilled. This was an important moment in business and for CEOs. Pushing back on relentless pressure to do only what seems right in the quarter is critical for success in a volatile world. And he was right in the larger sense that ROI should not drive all decisions. Companies need to invest in innovation and resilience, which may require projects that pay back over longer periods of time or in ways that are not easily measured.

In this way, Tim Cook is onto something important. He is perhaps taking his company down a road to a big pivot, moving away from focusing on short-term earnings only and building longer-term, sustainable value. And he’s building a more resilient company — an idea I explore in more depth in my upcoming cover story for the Harvard Business Review magazine.

The argument I wish brave execs like Cook would make, however, is not just that they can do things that have a public good element. He should say in no uncertain terms that these renewable and green investments are flat out good for business. Full stop.

When It’s Time for the CEO to Go

At a directors’ meeting of a specialty appliance firm I was advising a few years ago, the agenda featured the selection committee’s report presented by Stefan, chairman and CEO. The board members had expected to get a list of the candidates to succeed Stefan, who was past retirement age. However, Stefan informed the board that, despite an extensive search, the selection committee had determined that no candidate was yet qualified: the three insiders needed at least four to six years’ seasoning, while the outsiders (in spite of their outstanding track records) lacked the kind of expertise that would fit the future needs of the company.

After a short discussion, the board agreed that Stefan should postpone his retirement for another four years. Yet several directors remained troubled. Something wasn’t quite right. Were there really no competent external candidates out there? And why did no one in the company qualify? What had happened to the leadership development pipeline all these years? As the company seemed to be on a holding pattern for the past two years, wasn’t it time to bring in somebody new? But was it also possible that the members of the selection committee, knowing Stefan’s attachment to his job, were in reluctant to confront him about succession?

How long should a CEO stay in his job?   The most common response I usually have from CEOs is seven years, plus or minus two. It’s a reasonable number: seven years is probably the period of maximum effectiveness for most people in what can be a very stressful job.   I think also that the nature and challenges of the job evolve over time, going through three distinct phases:

Entry: This is the “honeymoon period”, the one time that a CEO has an open playing field. Most likely, it’s the period when he or she is most willing to learn, experiment, and innovate. It is also the point at which a CEO is prepared to take risks and make major changes, particularly if brought in as an outsider.  During this time the CEO is unlikely to perform at full potential. This is to be expected: many new things have to be assimilated: she has to gain control over a new environment, get to know her various constituencies, and select key lieutenants, the people who will help make it happen. She may also have to “kill” wounded princes, executives who had hoped to get her job.
Consolidation: After a new CEO has established what his or her leadership is all about, in terms of direction, strategy and style, the second phase, the period of consolidation sets in.  If everything has gone well, he will start to see the fruits of all his work in the honeymoon phase. He has alliances with key stakeholders and top executives are committed to the course he has chosen. He has a good working relationship with the board. He delivers good results and is secure in his role.   The traps here, of course, are complacency and rigidity; as they approach the end of this phase, some CEOs start to resist even minor changes.
Decline:  You know that a CEO has reached this stage in the cycle when the company has few or no new products planned for the near future and there are no initiatives to find new markets. Furthermore, there is no new blood coming into the top ranks of organization. Everyone sings to the CEO’s same old tune. The company is probably accumulating a lot of cash because top executives are running out of ideas about how to use it.  It’s during this phase that a CEO starts having problems. He may have stopped listening to other people’s ideas.   The job has become routine.  Performance is slipping.  In a fast paced industry, the problems tend to become apparent quickly; declining CEOs in a relatively stable environment can get away with it for longer.

So what is to be done when a CEO starts to decline?  The best scenario, of course, is if that the CEO himself realizes what is happening, acknowledges his increasing ineffectiveness, and looks for new horizons when the going is still good.  Ideally, that is at the point when they are at that sweet spot of being at the peak of their performance, just before the decline.

But many CEOs find it very hard to admit that the time has come to pass on the baton.  Paradoxically, this reluctance doesn’t mean they stay closely involved; many actually distance themselves from day-to-day operations.   The reason is that because the day-to-day job has become routine, they look elsewhere for mental stimulation.

As long as they stick to safe pursuits (social, environmental or artistic causes, say), this is OK, maybe even reinvigorating.  The danger is that they may instead look for stimulation by involving the company in risky new ventures — typically a big acquisition. This offers a quick and emotionally gratifying solution to the company’s operational inertia (that they’re often aware of) as well as their own sense of inner unrest, anxiety, and boredom.  Deals are exciting, they impress the CEO’s peers, and they allow the CEO to pretend that he’s addressing the company’s growing problems.

It’s precisely at this stage that the board needs to step up.   If the CEO was an exceptional performer during the honeymoon and consolidation stage, this is unlikely to happen; human instinct is to trust the track record.  Over time, the CEO may even have filled the board with people indebted to him or her, who do not really take their review function very seriously. The result is that the board takes action only when things become really catastrophic — by which time it is often too late.

Leadership programs can also provide a form of stock taking. Through reflection — studying  “the leader within” — the CEO can increase his self-awareness and by working in a group he can exchange ideas with peers in similar situations.   Quite often, leaders who engage in this discover that they do in fact want to step down and find another job in a new environment.   Other CEOs take on a role as mentor or leadership coach to younger executives, which is a highly effective way of maintaining continuity in the organization and also helps to reduce the CEO’s anxiety about leaving.

In Stefan’s case, his reluctance and the board’s to contemplate change meant that it was eventually forced on them.  A well-known activist shareholder bought a sizable stake in the company and laid out the case for major change in the financial press. It didn’t take long before he was given a seat on the board.  With the help of fellow shareholders, he pressured the directors to push Stefan aside and appoint a new CEO.