Marina Gorbis's Blog, page 1462

All Work Has Meaning (Almost)

Mitch Barns, the new Nielsen CEO, recently recounted a story of how a young leader who was asked two pointed questions at a Q&A session. “Do you think the work we do has any redeeming social value? And more specifically, do you think our work does any good in the world?”

I’m sure this is a question that has emerged from the mouth of many a millennial–and, if we’re being honest, from ours as well.

It’s an age old question. Karl Marx called it the alienation of labor, when the fruits of labor can’t be seen by the laborer. Greek mythology brings us Sisyphus, a former king punished by the gods to push an immense boulder up a hill and watch it roll down and do it forever. The book of Ecclesiastes from the Bible says: “Yet when I surveyed all that my hands had done and that what I toiled to achieve, everything was meaningless, a chasing after the wind”.

The more meaning, purpose, and significance you can ascribe to your work, the more likely it is you’ll work harder, be more productive and successful, and enjoy it along the way. Daniel Pink in his book, “Drive,” further articulates meaning/purpose/significance as self-direction, learning, and creating, and doing better for oneself and the world as keys to high performance cultures. The question is can you see it in your job, in your company, and in your industry?

There are three ways to look at the world regarding meaning, purpose, significance at work. First is the view that no work has it. Second is the view that only some work has it. Finally, some believe all work has it.

The first view is one that many hold–and one that retirement services marketers love to espouse. Just hang in there long enough, and then bliss will come in when you’re done working. But according to NPR, only 29% of retirees said leaving the workforce made their lives better.

The second view is also popular. Companies that are more mission-oriented (such as healthcare and non-profits) or more future-looking (such as technology starts ups) or frankly more fun/high passion categories (such as entertainment companies) have an advantage in this regard. Other companies are left with more ‘means to an ends’ view, like “I’m providing jobs”. Which is good to have something, but it could leave an employee thinking the grass is greener.

I believe nearly all work has tremendous meaning, purpose and significance. Author and pastor Tim Keller notes that certain professions—say, if you’re a meth dealer—may be excluded. Mitch Barns’ answer is that meaning at work comes from creating and providing, but also that measurement matters for growth and innovation. As Bill Gates put it in his recent Gates Foundation annual letter: “I have been struck again and again how important measurement is to improving the human condition.” All businesses create and provide products and services that provide real benefits, otherwise, people wouldn’t buy them. And importantly, different consumers may draw different benefits and meaning from your products. The key is to make sure everyone in the company truly understands the diversity and depth of those benefits.

A great way to discover your work’s true meaning is to go deep with consumers with extreme behavior. Most companies actively try to weed out ‘odd consumers’ as anomalies. But they can be extremely insightful.

Don’t believe me? I once spoke a woman who worked in retail who loved office products. It was extremely important to her identity to have her paperwork organized, beautifully symmetric, and aesthetic. Her company wouldn’t provide her a good three-hole punch to organize all the contracts she got. So she took her favorite single-hole punch that did the job so well. After hearing her story, we gifted her a heavy duty three-hole puncher (retail cost ~$25). She started to cry as she was deeply grateful…not just for the hole puncher, but because she knew she was truly understood without being judged, but celebrated for who she was and what was important to her. Seeing a customer like this can provide a huge lift to employees of an office supply company, who probably don’t view their products as inspirational or empowering.

Another way to go deep is via psychological drawings. It’s a great way of unlocking not just rational benefits, but deeply emotional and amazing life aspirational benefits that their favorite categories provide. Generac, the leading standby generator manufacturer (machines that provide backup power when your power goes out), did this and unlocked a well of emotion that they hadn’t seen before. They saw men drawing their generators as super heroes protecting their family, and women drawing the fear of being without one like sinking on the Titanic. This exercise led them to change their marketing from technical specs to testimonials of real consumers telling their stories of how Generac saved their lives and homes. It has helped their business double in the last 2 years to $1.2 billion.

Every category has these consumers. And every consumer has a story to tell that can not only energize a culture, unleash innovation, and drive significant profitable growth. Which means every company can grow. And this is the meaning, significance and purpose I get from my work.

But companies routinely underestimate the meaning, purpose and significance because they don’t look hard enough at the diversity and depth of their consumers. Sadly, this is often because the leaders of a business are not necessarily themselves consumers of the business. I know of one firm where 60% of its top employees were emotionally blasé about their category. I would assert that businesses with truly strong cultures are companies where nearly all the employees are consumers or are deeply embedded with their consumers.

Maybe someday, more companies will make being an invested consumer of the category a potential requirement for recruiting and rewarding. Maybe we’ll hire not just for demographic diversity, but also for diversity in consumer behavior. Imagine a beer company recruiting a cadre of hard-core wine and spirits drinkers? It may not be a bad idea to follow the Godfather’s advice to ‘keep your friends close…and your enemies closer.’ Maybe LinkedIn and search firms will have a series of profile questions that allow us to list what products and services we are hard core consumers of.  Wouldn’t that make it easier for folks to find their dream job?

Imagine how much faster you could grow your career, your company and your industry if we were all in our dream jobs, working side by side with a deeply understood, diverse set of consumers who were also our colleagues?

Develop the Leaders You’ve Been Overlooking

Say the word leader and most people immediately think of those with business cards that says “manager,” “director,” or other such lofty title. That is, the people who hold positions of stature within a company’s hierarchy, to whom several individuals report, and whose influence comes in great measure from the positions they hold.

But anyone who has worked in organizations knows that there are also people without managerial titles, and who have no direct reports, and yet wield great influence and make critical contributions to the firm. These are the highly professional individual contributors. They may be petroleum engineers in an oil company, software engineers in a technology organization, industrial designers in a toy company, or pilots in an airline.  In many cases they have deliberately chosen not to pursue a managerial career. Perhaps they prefer technical work. Or perhaps they want to avoid the budgeting, reporting, and steady round of meetings that management jobs entail.

In some organizations (like, say, the National Football League), their importance is obvious, and rewarded. In the early 1980s, Jack Zenger heard Michael Eisner acknowledge another such group when Eisner was president of Disney. He talked of the importance of taking care of the people in any organization who made unique, pivotal contributions, and who were easy to overlook.  “In Disney,” he said, “these people are our animators.”  They conceived the endearing cartoon characters and brought them to life through their craft. Even today, when this work is done with computer-generated graphics rather than laborious drawings, that function remains vital to the organization.

We submit that every organization has such people.  It may be someone in product development who without any direct reports, plays an essential role in the selection and development of new products.  It may be a key salesperson, who because of some unique connection with customers exerts a powerful influence on the organization’s go to market strategy.

In our opinion, these individuals meet the important criteria of true leaders, but they often get overlooked for any kind of leadership development because they don’t manage or supervise anyone and aren’t thought to need training in management basics like budgeting.  Yes, they may be included in the mandatory compliance programs such as safety or data security, but those programs don’t do much to advance their leadership acumen or behavior.

We think there’s a huge opportunity to provide this group with much of the same development experiences their managerial colleagues receive. For several years, we have conducted development sessions for more than 1,000 such professional, individual contributors. Their response to, and the outcomes from, these development sessions have been very similar to comparable sessions we’ve conducted with managers. In particular, we’ve found that they greatly appreciate receiving the same kind of feedback from others that developing leaders receive in 360 evaluations by their peers, bosses, and direct reports.

While they’re not rated by a group called direct reports (since they don’t have any), they can receive, and benefit from, feedback from peers, from their boss, and from colleagues in different parts of the firm.  Some invite feedback from customers and suppliers. (Perhaps we should call their feedback reports “270s.”)

We can see a host of reasons for investing in this group.

First, investing in their leadership development will make these valuable people feel highly valued, signaling that the organization respects their contribution enough to provide for their continuing development.

Second, talented individuals are more inclined to stay with organizations when they feel they are progressing. In most large organizations, a similar percentage of this group is eligible for retirement in the next five years as their management colleagues (that is, more than a half), and their departure would be a huge loss for the organization.  

Third, they will enjoy increased success. These professional individual contributors succeed in part because of their professional expertise, but just as much because of their ability to work well with others, and communicate effectively with other departments and levels of the organizations.  Leadership development efforts can make them better team players, improve their communication skills, and teach them to be better coaches, skills that are particularly important for people who, given their lack of formal organizational power, must accomplish nearly everything they do through informal influence.

Fourth, some of them could well develop into excellent managers, and they could begin such a transition with­out a shift in their formal position. There are obvious advantages to identifying management potential before promoting some other valuable contributor who will turn out to be unsuited or unhappy in that role. What’s more, as they learn to be more effective interpersonally and become more attuned to the people issues, many with management potential may become increasingly open to managerial roles. Even those who don’t will be more apt to adopt some of the perspectives and behaviors of managers—such as being concerned about developing others and not always taking the short-term, expedient path of “Oh, here, let me do that.”

Individual contributors are a huge assets for every organization. Yet they typically fail to show up on anyone’s radar screen for development. We believe organizations are missing a great opportunity to retain these key people, to help them be even more influential, and to prepare a portion of them for key managerial positions in the firm. How could these forgotten resources be benefiting your own organization within the seasons to come?

Brands Aren’t Dead, But Traditional Branding Tools Are Dying

Back in the days when the internet was young, many believed that as it grew brands would become a thing of the past. Leading information economy thinkers propagated this view, including Carl Shapiro and Hal R. Varian, who published the highly influential book, Information Rules, in 1999 (Varian is now chief economist at Google). The book predicted that the power of brands would shrink as people had access to more and more free information. This has clearly turned out to be wrong. In fact, the web has become dominated by, yes, a few big brands.

Still, the notion that a bigger world wide web means smaller brands is surprisingly resilient. Most recently Stanford professor Itamar Simonsen and author Emanual Rosen have argued in their new book Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information and in their recent blog post here that marketers need to reevaluate the idea that brands are critically important in consumer’s purchasing decisions. They claim: “…brands are less needed when consumers can assess product quality using better sources of information such as reviews from other users, expert opinion, or information from people they know on social media.”

The case for the decline of big brands follows a strikingly clear logic: The primary role of a brand is to make it easier for consumers to choose which products to buy. If consumers have immediate access to information that helps them make those decisions such as user reviews and expert opinion, the value of a brand will fall. Proponents of this theory point to the explosive growth of the mobile web as compelling evidence. It’s undeniable that we are not far from a future where most Western consumers have instant access to the accumulated mass reviews of every product that Simonsen and Rosen describe.

But this doesn’t make the “death of the brand” theory any truer than it was 15 years ago when Varian and Shapiro put it forward. In fact, the exact opposite is true. As digital disrupts more marketplaces, brands become more important and more valuable. Take a look at the various brand rankings: Digital brands such as Apple, Google, Microsoft, IBM, Intel, and Samsung are in the top 10 of most rankings. This is not because the likes of Coca Cola, McDonalds, and Mercedes have become less valuable. The digital brands have just turbocharged past them. If brands are truly unimportant in a digital world, why is it so brand dominated? Why do so many people choose Google search over Bing when only experts can tell which has the most accurate results? Why has Apple become the most valuable company in the world with over-priced products and inferior functionality?

Because brands still matter immensely. The mistake Simonsen and Rosen make is to confuse the value, role, and meaning of a brand in today’s digital economy with the methods used to build the brand. What sets the Googles and Apples of the world apart from older brands is how they’ve built their brands. Google has hardly spent anything on traditional advertising (although the company wisely, as all its profitable revenue comes from advertising, doesn’t brag about it). Instead, the company has kept the brand meaningful and relevant to people’s lives through free services and cool ideas. Apple relaunched the brand with the ad campaign “Think Different”, but has since withdrawn from image-building ads and kept a much smaller marketing budget than peers, focusing it brand efforts on creating an insanely well-designed, holistic product experience. The company’s advertising is limited to boring product shots.

The role of a brand is—and never was—just about solving an information problem. It’s about providing meaning and satisfying emotional needs. These fundamental human needs have not changed. To the contrary as consumers experience information overload, there might be a tendency to gravitate toward what’s known and comforting. Sure, disruptive digital services explode and take over the world in an instant, but to go from being a popular service like Pinterest and Whatsapp to a brand that commands a proper price premium is still a long road.

So instead of discussing “brand versus not brand” marketers and executives should ask themselves: How can we strengthen our brand when the traditional tools such as advertising, corporate identity programs, and PR are becoming impotent?

Part of the answer is in making the brand more—not less—central. In a hyper-transparent digital world, consumers instantly know the difference between what a company says and what it does. Organizations can no longer draw clear lines between marketing and product development, between communications and services. Brand builders must embed themselves across the customer value chain. Products and services must be able to tell a story and communicate value without an extra advertising layer on top. As information is more and more available and the importance of brands increases, the ability to tell a meaningful story through actions and products, not words, is the only way to win.

A Successful International Assignment Depends on These Factors

What are your thoughts on international assignments? Take our survey and let us know.

The prospect of an international assignment can be equal parts thrilling and alarming: Will it make or break your career? What will it do to your life at home and the people you love? When you’re thinking about relocating, you start viewing questions of work and family — difficult enough under ordinary circumstances — through a kind of high-contrast, maximum-drama filter.

As our article in the March issue of Harvard Business Review shows, senior executives who successfully combine their professional and personal lives make deliberate, strategic choices about whether, when, and how to work abroad. Of the 82 leaders we surveyed, 32% said they had turned down an international assignment because they didn’t want to move their families, and 28% said they had done so to protect their marriages. Virtually none of the men had turned down an international assignment because of cultural concerns, but 13% of the women had. In short, executives aren’t jumping at every opportunity to relocate, even though international assignments are popular because of growing world trade, saturated domestic markets, and increased competition.

If you have a partner or spouse, and perhaps children, what factors should you weigh when offered a position in a different country? Consider the impact it will have on your own human capital — that is, your ability to achieve your goals and dreams — and on your family’s human capital.

Your Human Capital

Your human capital amounts to all the resources you bring to the table — your skills, experiences, and networks. It’s your capacity to get things done, to be an effective agent on the job and in your life. It’s your engine, your juice. You are reading this blog post right now in the hopes of increasing it.

Clearly, an international assignment can burnish your skills, deepen your experiences, and widen your network. But it can also put you at risk of failing at your company and of weakening your professional and personal relationships back home.

In general, the more carefully you plan for change, the better your chances of wisely managing your human capital in an international post. If you relocate, you’ll need to adapt to differences in language, etiquette, industry regulations, and so on. Before deciding whether to accept such an assignment — and certainly before embarking on one — do your research to avoid being blindsided by the unexpected. Understand in detail how the job would differ from your current one and how it would be similar. What would your success metrics be in the new position? To what extent does your company maintain a consistent corporate culture across regions? Is it a strong culture, with a sense of belonging and well-defined procedures? Or is it more of a loose confederation of relatively independent subunits? If the latter, investigate the subculture of the branch you’re thinking of joining, just as you’d do if you were joining a new company.

And don’t forget that an international assignment also involves coming back. Develop a plan for staying in contact with valued colleagues and mentors in your home country while you are away, or you may find your return to be nearly as difficult as your departure. Expatriated workers, even those who do well overseas, are often dissatisfied with their assignments upon return and feel that they do not have the opportunity to put what they learned into practice. And some expats decide to leave their companies.

Your Family’s Human Capital

When executives relocate, “trailing” loved ones are at high risk of dissatisfaction. That’s actually one of the most commonly identified reasons for failure on a global assignment. A partner or spouse who relocates has a lot to lose in continuity. Typically, there’s no local corollary for his or her own job, networks, and relationships back home.

Don’t rely on your organization to preempt or solve that problem. Despite the crucial role played by partners and spouses, many companies do not include them in the selection process or in whatever pre-departure training is offered. So it’s on you, the executive, to bring your family members on board and engage them in the process of researching your potential new home.

Anecdotally, we’ve found that some of the most successful overseas assignments involve partners who use the move to navigate a transition of their own. Can your partner take advantage of the time abroad to earn an advanced degree, enter a new industry, learn a new skill, or raise young children? If so, this might be the ideal time to accept an international assignment. It could be an adventure and an opportunity for the entire family — not a sacrifice everyone else is making for your career.

Researching the potential move should be a family project. Any connection to the new country is good. Partners and spouses who speak the language have much more positive experiences than those who do not. Do you or your partner have any extended family or old college roommates where you’re thinking of moving? Are there worship centers for your religion or alumni clubs for your alma maters? Even a little bit of familiarity can go a long way toward making a new place more manageable.

If you have children, engage them in decisions about your global move, such as picking the right school. And try to relocate at a time when it will help, not hurt, the human capital and relationships they are developing. Children can benefit from the chance to learn another culture — and parents can benefit from the fact that kids will always pick up new languages and technologies faster than they do. However, the executives we surveyed and interviewed have advised against moving teenagers. They feel that teens should be allowed to form the crucial building blocks of their adult human capital — friendships, social skills, academic and “life” competencies — in the environment where they’re likely to live as adults.

Take our survey to help everyone learn more about how managers perceive overseas assignments. In the coming weeks, we’ll write about the responses we receive from readers on hbr.org. We’ve learned a lot from the leaders in our research sample — and we’d like to compare your perspectives with theirs.

Thriving at the Top

An HBR Insight Center




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Company Culture Is Part of Your Business Model

A few years back, I was waiting for the light to change at 51st Street and Fifth Avenue in NYC.  As I stood there, an elderly south Asian man came up next to me with a cart loaded with breakfast food that he was delivering to a meeting. When the light changed we both moved forward.  As he pushed the cart, he did not see a small gap at the edge of the sidewalk. His cart wheels got stuck. He continued to push, the cart toppled over, and the food (still in its wrappers) spread all over the road.

As I looked at him, I saw dread in his eyes. I bet he assumed he was about to lose his job.

Suddenly a group of about a dozen people swarmed from behind us and began picking up the food. They’d restacked everything in the cart in less than a minute. A few bagels were lost, but the damage was minimal. The old man smiled, clearly relieved.

As the group of breakfast rescuers headed north on Fifth Avenue, I walked fast to catch up with them. They were obviously together. They explained to me that they worked for a software company near Chicago and were on a team trip to Manhattan as a reward for outstanding performance.  In their company, they explained, the culture is very strong, and part of their firm’s ethos is that you should help people who need help, because someday you’ll need their help in return.

I was impressed by the simple way this group articulated the most basic aspect of their corporate culture: Help each other.

Every company has a culture, like it or not.  Most cultures just form organically, usually around the personalities of the founders. Sometimes that is great: Earlier in my career I worked in a fantastic culture at Lotus, which had formed around founder Mitch Kapor. But more often than not, it is bad.  And, once a culture forms, they are really hard to change.

Culture, in my mind, is the single most important attribute to successful companies.  Inevitably, when things don’t go well for a company, the culture is what has a lot to say about whether or not you make it.

I think leaders should think of their culture as the first and most important business model that they create.  It is the platform from which the more traditionally thought of business models emerge.  A great culture enhances your ability to create great business models (and execute on them too!)

In my own company, a health care startup, I had a chance recently to set an example.  I am a die-hard Red Sox fan. The last time the Sox won the World Series at Fenway was 1918.  Last fall, I had tickets for Game 6 of the World Series, which fell on a Wednesday, and by the weekend before it was clear that this could be the evening when the Red Sox could win the Series at home.

Many weeks before, however I’d set up an important meeting with a very large prospect in St Louis—the city, coincidentally, whose team was playing the Red Sox in the Series. Many people had changed their schedules to be there for the meeting. I really wanted to cancel it to go to the game in Boston, but I decided that would be selfish. It would create problems for other people so I could attend something that would be fun, but hardly essential. So I gave up my World Series tickets, and I attended the out-of-town meeting.

The cultural point I was trying to make in our very new company is that we are all in the together, and even the CEO must show respect for others’ time. If you disrespect someone’s time, you are disrespecting them.

One company’s culture I particularly respect is athenahealth.  I know the founders, Jonathan Bush and Todd Park, and I witnessed how much thought they put into forming the right corporate culture from the moment the launched the company. They might not have thought of it as a business model expressly, but it was.  Today they fully appreciate that much of their success derives from the intentionally created culture.  It took a while for them to get real traction in the market, but the culture kept them in the game until things really started to click. Athenahealth values teaching and learning, which helps it attract talent that wants to learn and grow.

When someone is leading a startup, it’s tempting to focus primarily on the business model, customer development, or product-market fit. But it’s important, even in the very early days, to actively think about culture. Look at five years and think about what your company should look like, and what you want employees to value. Have your team write down five behaviors it wants to see from its leaders, and five behaviors it will expect from employees.  Spend time thinking the culture through and be specific.

Thinking proactively about your company’s culture as an integral part of its business model is a good start. The next step is to actually start behaving in ways that make it a reality.

A Partial Confession Makes You Feel Worse Than Full Disclosure (or No Disclosure)

A partial confession to a misdeed may appear to be a low-emotional-cost alternative to a full confession, for the obvious reason that it wouldn’t require you to fully reveal what you’ve done. But in an experiment, people who partially confessed to cheating felt worse afterward than those who had fully confessed, as well as worse than people who hadn’t confessed at all (about 2.2 on a five-point negative-affect scale, versus about 1.8 for full confessors and nonconfessors), says a team led by Eyal Peer of Bar Ilan University in Israel. Confession is a powerful way to relieve guilt, but it works only if you tell the whole truth.

Why Amazon Should Unbundle Prime

In 2005, Amazon introduced its Prime service, which provides members with unlimited “free” two-day delivery (as well as discounted overnight delivery) on eligible products for $79 a year. In the vein of famed pitchman Ron Popeil, over the years Amazon CEO Jeff Bezos has “stuffed the bundle” by including extras such as movie/television streaming and Kindle book borrowing.

Not surprisingly, Prime has been a wildly successful marketing vehicle that attracts new customers, increases sales (new members increase their purchases by an estimated 150% after joining), and serves the needs of high volume customers. Amazon claims it has at least 20 million Prime members, having signed up 1 million new subscribers in the third week of December 2013 alone. Consumer Research Intelligence Partners estimates the average Prime customer spends $1,340 annually, compared to the $529 for regular customers (not Prime, don’t own a Kindle, nor use an Amazon credit card). Given these figures, Prime members account for roughly 36% of Amazon’s $74 billion in annual revenues. Forrester Research estimates that Amazon loses between $1 – $2 billion on Prime annually, presumably this loss figure does not take into account the marketing benefit of higher sales.

Citing higher shipping and fuel costs, Amazon recently announced plans to raise the price of Prime by $20 to $40 (roughly a 25 – 50% increase). Amazon should be concerned that such a significant price boost will lead to members dropping Prime and as a result, thwart growth. In an admittedly unscientific Wall Street Journal poll, 47% of respondents indicated they would not pay more for Prime.

For such a cutting-edge company, it’s disappointing that Amazon views pricing as a simple “up or down” lever. This is so draconian and unimaginative–pricing can be much more creative. The strategy of pricing involves understanding the simple fact that customers are different – they have different needs and different valuations.

The first relevant difference between Prime customers is their shipping needs: high-volume buyers are getting a great deal at $79, while those who purchase less (i.e., key customers who Amazon is trying to grow purchases from) may be asking “is it worth it?” The downside of offering any unlimited plan is the over-consumers, a situation Red Lobster encountered in 2003 with its “Endless Crab” promotion. Higher than expected food costs for the promotion triggered one of the worst stock routs ever for Red Lobster’s parent company (Darden Restaurants), losing $405 million in market value in one day. The challenge for Amazon is that raising prices may lead to an adverse selection problem – only heavy users will remain and the cross-subsidy from more moderate users will evaporate – leading to further losses.

Just as important, the key components of Prime (shipping, streaming, Kindle library) are rag tag in terms of how they relate to each other. There’s no clear reason to believe, for instance, that someone who highly values two-day shipping will also enjoy streaming. Some Prime customers probably don’t have Kindles, and have no use for the Kindle library. As a result, customers who happen to enjoy and take advantage of all three services (shipping, streaming, Kindle library) are likely more willing to absorb the price hike relative to those who don’t.

The solution to Amazon’s pricing dilemma is straightforward: unbundle the components of Prime. By unbundle, I mean instead of making a “take everything in the package or leave it” price hike, allow customers to purchase what works best for them.

Much like cell phone carriers serve customers with varying usage needs, Prime should provide different shipping options. The premium option can be the current unlimited service, albeit at a steeper price. A lower-priced option could require a purchase minimum of, say $25, to get free two-day shipping. This will curb shipping losses from irksome small dollar orders such as $5 scissors. Another variant is to offer a classic two-part fixed/variable pricing strategy. For instance, there could be a $50 annual Prime membership that gives members the right to receive two-day shipping  at a variable price of $1 – $2 a package.

Given that streaming and the Kindle library have little to do with shipping, there’s no clear reason to include them in the Prime bundle except to elicit a “wait, there’s more” urge to buy. Why not simply offer streaming and the Kindle library a la carte or as an extra option to those who purchase a shipping option?

Unbundling Prime and providing choices better serves customers, which increases the popularity of this critical growth program. Amazon’s challenge provides two key pricing lessons to all managers. First, understand and respect that customers have different needs. One price does not fit all – provide pricing options to serve the diverse needs of customers. Just as importantly, when implementing a significant pricing increase, it’s critical to offer customers lower priced options. No one likes “take or leave it” ultimatums.

How to Tell if Someone Is Lying

Researchers in the academic, business, and military communities have spent years trying to uncover a few simple methods for detecting trustworthiness but, despite their best efforts, continue to come up short. All those books promising to teach you how to spot liars through body language? None has empirical support.

The temptation, of course, is to look for one “tell” that indicates someone can’t be trusted. Is it a false smile? Shifty eyes? The reality, though, is that any single cue is ambiguous. If someone touches her face, she might subconsciously be trying to hide something — or she might have an itch.

To accurately infer another’s intentions, you need to look for a set of cues — gestures that together can more accurately predict or reveal motivation. Here’s how my colleagues and I identified the four key ones (with the help of a robot, of course):

This is an excerpt from David DeSteno’s March 2014 article, “ Who Can You Trust ?” 

With Fewer New Firms, the High-Tech Sector is Losing its Dynamism

Believe it or not, America’s high-tech sector has become less dynamic and less entrepreneurial in the last decade. That’s the key takeaway of a recent Kauffman Foundation report I co-authored.

Despite the fanfare this vital segment of the economy and its start-ups have received in recent years, the high-tech sector is experiencing a consolidation of activity away from young firms into more mature ones, and the pace of job creation has been on a persistent decline. While it’s true that high-tech companies have been well-represented among the fastest growing firms in the past few years, the high-tech sector–like the rest of the economy–is less dynamic overall.

What do I mean by “dynamic”? The study of business dynamism involves measuring the flows of firms and workers underlying the private economy. Businesses are constantly being formed, growing, shrinking, and closing. Labor markets reflect this churning: some jobs are created while others are destroyed, and some workers move into new roles as others seek to replace them. New and superior ideas replace existing and inferior ones, while more productive firms usurp less productive ones.

A particularly important component of this dynamic process is the entrepreneur, who starts a venture to create a new market or to replace incumbents in an existing one. Entrepreneurs also play an outsized role in new job creation. While older and larger firms account for the substantial majority of employment levels, new and growing young firms drive net new job creation overall.

The process of business and labor market churning is a messy one. But it’s also fundamental to modern economies. Research has firmly established that this process of “creative destruction” fuels productivity growth, making it indispensable to our sustained economic prosperity. In other words, a more dynamic economy is a key to higher growth.

But business dynamism is breaking down.

Forthcoming research from economists at the University of Maryland and the Census Bureau shows that business dynamism has been declining across a broad range of sectors during the last few decades–and the single biggest contributor is a declining rate of entrepreneurship. A host of indicators point to a workforce that has become more risk-averse, and therefore less likely to change jobs or start a new venture.

I recently teamed up with two authors of the aforementioned research to produce the Kauffman report, John Haltiwanger of the University of Maryland, and Javier Miranda of the Census Bureau. We surveyed how these trends might apply to the high-tech sector, looking at data through 2011 and using a broader definition for high-tech that stretches beyond software and Internet companies to include things like computer hardware, life sciences, aerospace, and scientific research. What we found surprised me.

Though the high-tech sector was particularly dynamic and entrepreneurial during the 1980s and 1990s–a period when the same was not true across the economy–all that changed in the 2000s. The job creation rate (representing expanding firms) has been on a sharp decline since the beginning of the last decade, while the job destruction rate (representing contracting firms) has held about steady–squeezing net job growth in the process. By 2011, the rate of overall labor market churning in high-tech had converged with the rate for the total private sector.

Even more striking was the declining entrepreneurship. Young firms that I’ll call “start-ups”– those aged five years or less–comprised 60% of all high-tech firms in 1982. That figure fell to 38% by 2011. About half of this decline took place after the dot-com bust dissipated. The decline in both entrepreneurship levels and rates during the period associated with the Great Recession were sharper in high-tech than for the rest of the economy.

A decline in high-tech dynamism might be particularly problematic for future growth. Aside from the direct impact on productivity this sector has on technology-adopting segments of the economy, the high-tech sector itself plays an outsized role in income, employment, and productivity growth overall. Of the job-creating young firms, high-tech start-ups are particularly dynamic–growing at twice the rate of a typical young business, and high-tech firms account for an outsized share of America’s fastest growing businesses.

How does this analysis square with talk of a “tech bubble”? One answer is that this activity, which is concentrated in web and mobile, represents only a subset of the broader high-tech sector. There’s good reason to believe that the last two years have ushered in a new wave of these typically leaner start-ups, and early-stage VC and angel investment data would back that up.

On the other hand, it may genuinely reflect slower growth across the broader high-tech sector. That appears consistent with one recent analysis that shows high-tech job growth slowing in 2013 after a rapid expansion the two years prior. Taken in the context of a longer-term decline, segmented green shoots wouldn’t reflect a robust recovery.

While this work may pose more questions than answers, the results make it clear that we must do more to promote a dynamic and entrepreneurial high-tech sector right now.

The Art of Crafting a 15-Word Strategy Statement

In the January issue of HBR, Roger Martin sets out some rules for avoiding common mistakes in strategy making. As he writes in “The Big Lie of Strategic Planning”, the first rule is “keep the strategy statement simple.” Rather than a long, often vague document, the company’s strategy should summarize the chosen target customers and the value proposition in one page.

I couldn’t agree more. In my consulting work, I take this idea even further by asking my clients to summarize their strategy in less than 15 words. This statement must identify the target customer, the value proposition, and how the latter fits two requirements:

Focus: What you want to offer to the target customer and what you don’t;
Difference: Why your value proposition is divergent from competitive alternatives.

Sounds simple. But it’s more difficult than it seems. The 15-word constraint is a test that often reveals a profound lack of alignment among managers. In a 100-page strategy document you can state everything you want, which makes everyone in the organization feel comfortable. The trouble is that managers then interpret the 100 pages according to their view and aspiration of the company’s strategy. The result: one planning document, many different strategies.

All great business strategies can be summarized in a short headline. Easy to understand and communicate, they convey clarity internally and externally to the customer. Clarity is so important for good strategies that companies should make an effort to understand what it means and how to achieve it.

Neuroscience can help us in this endeavor. Clarity, as several studies demonstrate, depends a lot on the Contrast Principle. We understand something better when we see it in comparison with something else than in isolation.

To understand the power of comparison, let me retell this famous old advertising story.  One day, an advertising executive and a colleague were having lunch in New York’s Central Park. On the way back, they saw a blind man begging for money. He had a cup for donations, and a sign read: “I am blind”. Passers-by ignored him. The executive stopped and offered to alter the wording on his sign to increase the donations. He took out a marker pen and scribbled four words. Passers-by started stopping, and soon the cash poured in. What did he add? The sign now read: “It is spring and I am blind.”

IKEA is a company that exemplifies the power of strategic clarity. Many people believe that its success is rooted in its business model; others point to the service experience. For me, IKEA’s success is mostly due to the clarity of its strategy. Most businesses try to build their market around what they offer. What’s intriguing about IKEA is that it consciously designed its value proposition and brand identity around contrasts: a set of negatives (things they do not offer) and a few positives (things they offer).

Initially, specialty furniture retailers thought that IKEA’s value proposition was absurd. It offered minimal variety. Stores were designed to propel customers through the labyrinth spaces without sales support. No delivery, no assembly. Not even the promise of durability. What IKEA did was to replace the warehouse atmosphere associated with most discount furniture retailers with a cheerful, innovative look and feel, wrapping its bare-bone offerings with an amusing set of attributes. It offered other items besides furniture (housewares, unique toys), and customers could drop children off a brightly designed, company-operated day care center.

IKEA’s value proposition is focused (clearly states what to do and not to do) and different (divergent compared to alternative offerings). For the consumer, IKEA has a clear positioning in their minds and is sharply contrasted with other value. This case and other great business strategies underscore how critical that is. Keeping to a 15-word limit can help you achieve that kind of clarity and avoid the confusion and misalignment so easily hidden in a 100-page document. Practice it in your next strategic workshop and see what happens.