Marina Gorbis's Blog, page 1466

Spending Growth Comes from the Wealthy, Not the Middle

Since the end of the recession in 2009, inflation-adjusted spending by the top 5% of U.S. earners has risen 17%, compared with just a 1% average rise for everyone else in the country, according to The New York Times. As a consequence, companies in many sectors, from retail to restaurants to appliance makers, are catering to the affluent, despite the large numbers of people in the middle of the income spectrum. The Times quotes John G. Maxwell of PricewaterhouseCoopers as saying it’s better for businesses to aim at high- or low-income demographics; “You don’t want to be stuck in the middle.”

The First Strategic Question Every Business Must Ask

What business are you in?  It seems like a straightforward question, and one that should take no time to answer.  But the truth is that most company leaders are too narrow in defining their competitive landscape or market space.  They fail to see the potential for “non-traditional” competitors, and therefore often misperceive their basic business definition and future market space.

This is because it is much easier to see the world through the lens of today — and through the lens of research analysts who make comparisons to the competitors that look most similar and sell the most similar products. But the biggest threats usually come from oblique competitors that are solving the same problem, in a different way with an alternate offering, for the customer.

Examples help make this clear.  In the late ‘90s, with the Internet’s commercial revolution in its first heyday, my colleague Dick Harrington was running the Thomson Corporation, a holding company with substantial assets in newspapers.  The simple but critical and powerful insight by Dick at the time was that Thomson was not really in the newspaper business, but in the advertising business.  The real competition wasn’t really other large newspaper and print publishers. It was everyone taking aim at newspapers’ revenue sources — classifieds, display ads, job postings. At the time that meant Craigslist, it meant eBay, it meant Monster.com. A few years later it meant Google. Especially Google.

It was this understanding that led Dick to sell off the group’s newspapers in the early 2000s and begin Thomson’s transformation into the information services behemoth that is now Thomson Reuters. If he had seen his world only as newspaper publishing, Thomson would instead still be looking for a strategy for long-term survival alongside other struggling publishers.

Similarly, traditional broadcasters and cable companies are now facing the reality of a host of non-traditional competitors.  This was a core theme at the Online Publishers Association’s recent annual summit, where I spoke. Some of its members (think the largest broadcast network names you know) can see the writing on the wall:  YouTube, Netflix, and any other network sourcing or producing original programming content are the competition. Just as there has been a massive share-shift away from newspaper advertising, the billions of dollars of advertiser spend on traditional broadcast and cable TV is also up for grabs. And even though executives in the industry know all this, it’s still hard for them to break away from the NBC-vs.-ABC-vs.-CBS mindset and focus on their future market rather than the present one.

Getting your business definition and competitor set right requires two things: first, an understanding of who your customer is, and second, an honest view of both the high level and detailed use-case problem you are solving for them.  Back to the newspaper example, our customer was not the end-user reader, but the advertisers. The higher-level problem we were solving was getting the right quality and quantity of audience (the readers) connected to their ads.  The detailed use-case issue was understanding when we were providing national or broad reach exposure versus detailed local or regional targeting.

Some of the most highly valued modern-day businesses owe their success to their leaders’ ability to evolve their businesses into areas that are at first not necessarily obvious.  Zappos, for example, is less of an e-commerce business than an exceptional customer service company, which has allowed it to go well-beyond its start as an online shoe retailer to sell a broad range of items. And Zappos’s parent company, Amazon, is becoming as much a provider of online infrastructure (Amazon Web Services) as it is an online retailer.

Industries and companies disappear when they underestimate oblique and non-traditional competition.  This concept of getting the right business definition and relevant competitive set is certainly not new, and it’s not limited to industries being disrupted by new technologies. Take the soft-drink industry, which has been using the concept “share of stomach” to emphasize that innovation and competition are always around the corner.  Functional beverages, anyone?  Enhanced water?  New juicing/cleansing beverages?

Figuring out where things are going next isn’t as easy as just asking your customers, either. As Henry Ford is reputed to have said, “If I had asked my customers what they wanted, they would have said a faster horse.” Instead, he gave them mass-produced cars, and changed the world — not to mention the competitive landscape for transport providers.

Today, that kind of world-changing innovation seems to be happening faster and faster.  New megatrends are fundamentally altering market dynamics and business definitions.  These trends include the share economy, crowdsourcing, the mobile and tablet revolution, Big Data, and what I sense will be perhaps the most disruptive of all to business definitions — the Internet of things. Some 50-plus billion devices, by Cisco’s estimate, will be Internet-enabled and connected over the next decade. Google’s recent $3.2 billion purchase of smart-home device maker Nest is clearly a bet on this trend of a ubiquitous and always-on Internet across an infinite array of devices.

The megatrend of the Internet of things may challenge or even revolutionize the search interface as we know it, since we will be in a world with more contextualized information and ability for marketers to “sense” and “respond” in new untethered and increasingly screenless internet spaces. Whether those interactions are by voice or touch and feel, there is no doubt that existing web incumbents that are part of the screen-based web need to make investments to prepare for a radically different modality of searching and marketing information.

So the critical question for businesses to ask — more now than ever — is not what business you are in today, but what business you should be in tomorrow.

Study: Green Advertising Helped BP Recover from the Deepwater Horizon Spill

Greenwashing works — that’s one interpretation of a recent working paper from the National Bureau of Research examining the impact of advertising on oil company BP. In the paper, economists from the University of Maryland, University of Michigan, and Brown set out to measure the influence of BP’s pre-spill green advertising campaign on the company’s performance following the 2010 Deepwater Horizon oil spill. Using gas prices, sales, and station affiliations, as well as data on BP’s ad spending, the researchers reach a troubling conclusion: consumers did “punish” BP temporarily following the spill, but that punishment “was significantly reduced by pre-spill exposure to BP advertising during the ‘Beyond Petroleum’ campaign years.” In other words, green advertising functioned as an insurance policy against the cost of an environmental disaster.

Here’s an example of the BP “Beyond Petroleum” campaign that ran from 2000 to 2008:

Ads like this one seem to have had a measurable effect on consumers’ purchasing decisions in the wake of the largest offshore oil spill in U.S. history. Specifically, the researchers reached three notable findings:

Consumers punished BP temporarily. The result was a 4.2% decline in the company’s prices relative to competitors and a 3.6% decline in sales, by the researchers’ measure. But this response peaked in August 2010, approximately four months after the disaster. The paper suggests that this finding supports a model of consumer behavior that seeks to punish bad behavior, rather than an updating of beliefs about a company and its practices that would suggest a longer term consumer response.
The environmentally conscious punished BP more, while the rich punished it less. In order to test their hypothesis that environmentalists would react more harshly toward BP, the researchers created a measure of environmentalism for a given geographical area. This measure combined hybrid registrations, membership in the Sierra Club, LEED-certified green buildings, and donations to the Green Party. By this metric, “punishment was significantly more intense in greener areas.” But there’s a catch: all else equal, higher income areas tended to punish BP less harshly. And because higher income communities tend to be more environmentally conscious, the two factors basically canceled each other out.
The more BP had spent on advertising in an area pre-spill, the less severe that area’s punishment. This result held true for multiple measures of advertising, including one that accounted for ads during the spill. Not only did consumers punish the company less at the pump, the measure of station affiliations — capturing whether a station owner changed brands in response to the spill — was impacted by ad spending as well. In areas with low pre-spill advertising, BP lost some stations; in areas with high pre-spill advertising, switching was significantly less common.

It’s important to note that the paper has no formal mechanism for distinguishing the impact of green advertising from advertising in general. So in theory it’s possible that this effect could be achieved by any old ad campaign. But that is not the researchers’ interpretation. As they put it, “Our results imply that consumers’ value of environmental stewardship may give firms incentives to greenwash” because “green advertising plays more of a persuasive role than an informative role, shifting beliefs rather than providing information about and commitment to environmental quality.”

According to the authors, the findings “suggest a role for government (or other organizations) to monitor environmental stewardship claims, and to provide additional regulatory incentives for firms to internalize the environmental repercussions of their production decisions.”

Without such monitoring, greenwashing is likely to proliferate for the simple reason that it seems to work.

Microsoft and the Case for the Insider CEO

Yesterday’s announcement by Microsoft that insider Satya Nadella would take over as CEO hardly seemed to inspire investors. The company’s stock price barely budged, no doubt in part because Nadella had been the rumored frontrunner, but also perhaps because he was widely seen as the “safe” choice. But does that imply that an outsider CEO would be better for Microsoft? The evidence says otherwise.

Instead, the appointment of a new CEO from within Microsoft’s ranks is evidence of a healthy succession process, says Joseph Bower, professor at Harvard Business School. “The board should be developing insiders,” he argues, and the fact that Microsoft has done so is a signal that it is succeeding at the succession process.

Insider CEOs have an intimate knowledge of the firm’s capabilities, customers, and employees. Outsiders, by contrast, can take years to acquire the necessary familiarity with a company’s structure and operations. “There’s a tendency to look at the job of CEO like driving a car,” said Bower. “When you rent a car, you adjust the mirror, you turn the key and there you go. You never look under the hood. Companies aren’t like that.”

Research by Bower and others suggests that insider CEOs outperform outsiders, as Bower wrote for HBR in 2007:

Strong evidence supports the notion that a well-groomed insider is a key to sustained company performance. In my analysis of 1,800 successions, for instance, I found that company performance was significantly better when insiders succeeded to the job of CEO. Other researchers, including Jim Collins in Good to Great, have come to similar conclusions working from different data sets.

More recent research published in 2010 by HBR found more mixed results, with insiders and outsiders performing roughly the same. But notably, firms tend to pay more for outside CEOs than for insiders.

If outside CEOs are more costly and offer, at best, comparable performance, why do many firms pass over internal candidates? “When an outsider comes in, you get a pop in the stock,” Bower told me, citing evidence from the hire of GE executives by other firms. Yet research has shown that market reaction to a new CEO does not predict subsequent performance.

If Nadella’s twenty-plus years of experience at Microsoft will be an advantage, the challenge for insiders like him is maintaining enough outside perspective to know which things must change. Here again Bower is optimistic, pointing to some evidence that Nadella took contrarian positions with respect to open source and developer tools in previous roles.

Although industry and macroeconomic trends likely play a larger role in firm performance than does any single executive, data suggests that the CEO does have a measurable impact, albeit one that varies across industries. The impact of any Microsoft CEO likely falls in the middle of this spectrum. Somewhat counterintuitively, the fact that Microsoft is competing in a dynamic, high growth, and opportunity-rich industry suggests the CEO will have less impact. (When opportunities are hard to come by, the importance of CEOs taking advantage is magnified.) At the same time, the fact that the firm does have the resources to invest in R&D and acquisitions suggests the opposite.

One potential pitfall in what otherwise seems to have been a well thought-out succession process will be the relationship between Nadella as CEO, John Thompson as chairman, and Bill Gates in his newly expanded product role. “Conventional wisdom,” said Bower, “is that this is very, very hard to pull off.”

Leadership Is Not a Solitary Task

An inspiring historical story is once again making the rounds at least partially because of its inclusion in Malcolm Gladwell’s new book, David and Goliath. In it, Gladwell tells the story of the French town of Le Chambon-sur-Lignon, which became a safe haven for Jews in Nazi-occupied France during World War II. Led by minister André Trocmé, the residents of Le Chambon-sur-Lignon saved between 3,000 and 3,500 Jews (in addition to others seeking refuge) from 1940 until the end of the war, bringing them into the community and hiding them from French and Nazi officials. By any measure, their actions were courageous and inspiring. They were also an example of the power of community in leadership.

We often think of leadership as a solitary task. Buying into Thomas Carlyle’s “great man” theory of history, we speak of leadership in solitary and personal terms. And certainly, history is filled with examples of men and women like Trocmé, Rosa Parks, Nelson Mandela, and Mother Theresa who took bold individual action. But most real change — even the change driven by those aforementioned leaders — is community-driven and community-focused. Some of the greatest accomplishments in business, politics, and culture have come not from individual initiative alone but from those working in, with, and for community.

First, great leadership often starts in community. When facing great odds or forced to deal with unusual or trying circumstances, few of us are fortified enough to act alone, without counsel or support. This is a point often hammered home by Harvard Business School professor and former Medtronic CEO Bill George, who is a vocal advocate for what he calls “True North Groups.” These are gatherings of peers and mentors with whom we can share. They can counsel us as we face difficult problems and hold us accountable for acting in accordance with our values. Others have advocated similar constructs, such as a personal board of directors. And I’ve noted before the measurable benefits of mentorship. In short, no man is an island, and we are better leaders when we are rooted in a community empowered to counsel us, challenge us, and hold us accountable.

Similarly, great leaders often realize they must act not in isolation but with community. André Trocmé could never have shielded Jewish people in Le Chambon-sur-Lignon on his own; it took the collective efforts of the entire town. Few great changes happen until and unless a critical mass of community members collectively decides to own and execute the solution. William Wilberforce is often credited with leading the antislavery movement in the United Kingdom, for example, but would have accomplished far less without the broad-based support of Britain’s Clapham Sect and a number of antislavery organizations. Steve Jobs was a visionary when he started Apple, but his effectiveness suffered early in his career when he failed to mobilize his Board of Directors behind his vision. And any former management consultant can tell you that the easiest way to fail in a project is to come up with the “right” solution in isolation, without first worrying about getting the input of and ownership by the broader client organization. Ships have captains, but they are only turned when the entire crew works as a community to shift the ship’s direction. One of the easiest ways for a leader to fail is to forget that her power is limited in isolation and nearly endless if amplified throughout the collective intelligence and resources of the community.

Finally, the most inspiring leadership is that done for community. There are certainly moments when we do things purely for ourselves, and that’s not all bad. A distance runner racing to win a marathon is no less admirable if she is racing only to test her own boundaries and achieve an individual victory. But few will follow a leader who is focused solely on his own goals, and many of the most inspiring leadership victories are those done in service of a community.

This is obviously true in the world of nonprofits and human rights. Our greatest heroes are those who sacrificed themselves for the good of their communities — people like Clara Barton, Martin Luther King, Jr., Mahatma Gandhi, and Harriet Tubman. But it’s also true in business. Marketer Simon Sinek has noted that, “People don’t buy what you do; they buy why you do it. And what you do simply proves what you believe.” Many of the most motivated employee and customer bases are so motivated because they see an element of community service in the work their companies do. Whole Foods, for example, professes a motto of “Whole Foods, Whole Planet, Whole People,” framing their mission in terms of environmental purity and human wellness. They have engaged the employee base with a dedication to Whole Foods customers, to team members, and to outside charities. TOMS is famously founded on the premise of sharing its success (and the prosperity of its customers) with those in need. Zappos has built its reputation on providing excellent service for their customer community. People don’t like to follow leaders who are dedicated only to their own personal glory, but they will sacrifice everything for leaders and communities who give them a higher calling, a greater purpose. And whether in politics or business, leadership for community is almost always the most powerful.

These are old principles, but they are worth remembering. Lofty achievements like those of the little village of Le Chambon-sur-Lignon are only achieved in community, with community, and for community. And the more we keep those principles front of mind, the greater chance we have to lead lives that do our communities a service.

It’s Time to Put Your Strategy on a Diet

David Packard once famously quipped, “More companies die from overeating than starvation.” As it turns out, recent studies about dieting show that Packard’s clever metaphor might be more instructive than he ever imagined — and they can provide modern leaders with important lessons about planning and strategy.

Here are four of those lessons.

Limit Your Plate Size. If you feel like your team has “too much on their plate,” you might consider using a smaller plate. Cornell psychologists led by Brian Wansink have found that plate size is one of the biggest predictors of overeating. Simply using smaller plates does wonders for limiting your calorie intake while requiring almost no self-discipline at meal time.

Leaders can shrink their plate size by setting limits on the number of priorities on their strategic plan. There is no magic number, but I recommend shooting for four priorities as a starting point for the year. Then every quarter should have no more than one top priority or “decision pulse.” You might still end up serving a five-course meal to your team each quarter, but your job as the leader is to make it crystal clear which one course is the main dish.

Let Them Eat Cake…Tomorrow. So what to do with all the valuable initiatives and worthy causes that didn’t fit on your small plate? Those would-be priorities go on your strategic non-action plan — your list of value-added initiatives that you are consciously putting on the back burner until next quarter or next year.

Here’s why it works: psychologist Nicole Mead found that dieters were more successful when they didn’t swear off chocolate cake forever, but instead told themselves, “I’ll have cake tomorrow.” Self-deprivation is hard. Promising to banish a coveted treat from the menu forever and ever is like one of those promises we know we’re going to break the second we make it. It feels much more doable and reasonable to say “I will let myself eat sweets again, but just not tonight.” Similarly, you can “eat” the items on your non-action plan again, just not today.

Avoid the “What-the-Hell-Effect.” Ever tried committing to eating only celery or drinking only water at happy hour, only to be persuaded to have just one little martini or salsa chip (baked not fried, of course)…which sets off a chain of events ending with pints of beer and buffalo wings? Psychologists call this the “What-The-Hell-Effect.”  Once we get a little off course, it’s too easy to rationalize that the day is lost anyway so “what the hell,” may as well dig in and enjoy.

A small plate and a non-action plan can be overpowered by the hullabaloo of the average work day. Invariably, urgencies arise, fires need to be extinguished, and colleagues will need your expert counsel. By 10 a.m. every day can turn into a “what the Hell” day, in which your priorities lay untouched next to the empty bag of spicy Doritos and cheese dip.

The solution is scheduling “priori-time” every morning. Carve out as little as 10-15 minutes on your calendar very first thing every morning that you will devote to your top priority — and only your top priority. Don’t check email. Don’t listen to voicemail. Don’t chat with your colleagues. Even if it’s just staring blankly at your written priority for 15 minutes, you’ll be amazed at your progress by the end of one week, let alone a quarter or a year.

Surround Yourself with Healthy Eaters. Obesity is contagious. A fascinating study in the New England Journal of Medicine found that when your friends become overweight your odds of becoming overweight triple. Similarly, some company cultures are just strategically gluttonous cultures. As one client recently told me “being triple-booked is worn like a badge of honor around here.” Her company is far from unique. The prevailing belief is that limiting the number of projects and priorities you take on will be a career-damaging sign of weakness or incompetence. One study we conducted revealed a troubling paradox: While 71% of people believed they would become more productive if they focused more on top priorities at the expense of lesser priorities, over half of that same group believes they would simultaneously lose respect from their peers and their boss.

Did you catch that? For all the lip service organizational leaders pay to staying focused and prioritizing, the general belief is that the actual practice of staying focused will cause you to lose respect in your organization. As a leader, the simplest things you can do to turn the tide is to show your team your non-action plan and co-create one with each of your direct reports. Make sure your plan includes at least one or two projects that will surprise them. Maybe it’s a pet project you’ve been attached to; another business they know you’ve wanted to acquire, but are waiting on; or a new product you’ve been itching to launch but are delaying until next year. It could be anything that clearly reveals your self-restraint in service of the top priorities.

If Michael Porter’s assertion is correct that “the essence of strategy is choosing what not to do” then adopting these “dieting” habits could turn you into a superb strategist. At the very least, they will spare you some indigestion.

The Pipe Dream of Big Marijuana Revenues

On Friday, President Obama offered a “cautionary note” about the legalization of marijuana. “If we start having a situation where big corporations with a lot of resources and distribution and marketing arms are suddenly going out there peddling marijuana,” he warned, “then the levels of abuse that may take place are going to be higher.”

Obama is not alone in suspecting that it is only a matter of time before Big Tobacco moves in. Certainly there has been much excitement expressed in various quarters about the profit-making potential of this budding industry. And while the activity to date has all been of an entrepreneurial nature, the expectation is that the increasing legalization of marijuana to include not only medical but recreational use will make for very attractive business opportunities. Indeed, federal and state governments are counting on that, anticipating that it will be a healthy source of tax revenue.

But there is a catch that many people have not thought about. The marijuana plant is sturdy and not difficult to grow—indeed, in areas where hemp was produced for use during World War II, volunteer hemp plants sometimes still appear growing wild in fields. A Canadian-published magazine distributed throughout North America provides articles on how to grow the plant, and the Internet is awash with articles containing specific cultural techniques.

So imagine a near future when marijuana seeds and even starter plants could be sold through garden centers and other similar outlets much like tomato seeds and plants are sold today. These seeds and plants could be grown in a backyard garden (or even a flower pot on a patio) with the same degree of difficulty as growing fresh tomatoes.

Let’s explore why that might make marijuana an unattractive business proposition for a Philip Morris USA, RJR Reynolds, or Lorillard. To be sure, there are also no laws restricting individuals interested in growing tobacco in a home garden for roll-your-own cigarette-making. But few people grow tobacco plants to make their own cigarettes. Why not? Because it is very hard to duplicate the product quality that a large-scale manufacturer can achieve. Cigarette and other tobacco brands keep their loyal customers, despite very high federal and state taxes on their products, thanks to specific strategies to make those products more appealing to use. Typically a given cigarette brand blends leaves from many different types of tobacco, and also adds special flavorings. Manufacturers guard these recipes closely. Any home gardener seeking to produce cigarettes like the branded ones they have enjoyed would have a very hard time duplicating this blending and flavoring. It might well be impossible. At least, it would be so difficult as to justify simply buying the manufactured product, even at a premium price, and even with high federal and state taxes added.

Think, too, about another sin-taxed good that is possible to make at home: beer. Yes, federal law restricts the quantity produced at home. However, the reason that most beer lovers do not brew their own is that they don’t like the taste of what they are able to make. Getting beer right is beyond the capabilities of the vast majority of people. All but a tiny number of beer drinkers consider it a better option to pay the price and the tax associated with highly regulated commercial brands.

So is marijuana more like growing fresh garden tomatoes, or more like growing tobacco for roll-your-own cigarettes or perhaps making beer at home? Given that only leaves from a single plant are needed to produce quality marijuana, and given that the plants are readily grown, they are closer to tomatoes than tobacco. Think about the many varieties of tomatoes available as seed or as starter plants to home gardeners. Imagine a world in which marijuana plant breeders are equally adept at improving the marijuana genetics for producing a high-quality, easy-to-grow plant. There is a reason there is no highly consolidated industry known as Big Tomato.

Even now, federal and state governments are looking to impose taxes or other restrictions on otherwise soon-to-be legal marijuana production as a way to regulate production and raise revenues. Some have hit upon the notion that they could tax seeds and plants sold at garden stores. The problem for governments is that the purchaser of even only a few taxed starter plants obtained from a commercial garden store could retain the seed from some of these plants, and soon grow plants from the continuing (untaxed) supply of home-grown seeds.

To the extent that businesses set high-margin prices and governments impose taxes similar to those on most tobacco and alcohol products, this will only drive much greater marijuana production in home gardens and patio plots.

The startup companies rushing into business, planning to make their fortune by selling commercial marijuana products, are responding to a real signal: the avid interest of a large base of consumers. And for growers who were in the business to start with, illicitly, the changing laws might seem like a dream come true. They are already quite adept at the horticultural procedures for growing the plant, and legalization removes their biggest source of costs: having to hide what they were doing from the federal government. But the companies who sell cigarettes, beer, wine, whiskey, and bourbon know there is another factor required to turn consumption demand into a profitable business. Their products are moneymakers because they require specialized resources and skills to produce – resources and skills that very few individuals have at home.

If a high-quality marijuana joint can be made by anyone with the initiative to merely collect and dry the leaves of a single home-grown plant, what is the specialized knowledge that makes marijuana production a profitable commercial enterprise?

So we should probably give up on the hope that legal marijuana will be a significant source of tax revenue for federal or state governments. Nor will it represent a blockbuster business opportunity for producing firms. Could we envision a world in which joint manufacturers compete in a highly discerning market – where large numbers of customers are happy to pay a dramatically higher price for, say, a blend of leaves from various marijuana plants with different characteristics and some specialized flavorings? It could be possible, and if so, the major cigarette manufacturers, not small start-up companies, would be the ones most able to do it. But I’ll believe it when I see it.

A Board’s Unrealistic Hopes Can Derail a CEO Succession

Whether it’s the world’s largest technology company or a small manufacturer trying find its niche, just about every organization looking for a new chief executive faces the same problem: How do you find a leader who can both innovate and create a culture of disciplined execution?

Boards that are searching for CEO candidates often say they’re looking for another Steve Jobs. That’s flawed logic. First, there is no other Steve Jobs. Second, a Steve Jobs clone simply wouldn’t work in most organizations. He was an iconic founder who built a company and a culture that were uniquely suited to his leadership style.

Fortunately, there are plenty of other leaders capable of sustaining both execution and innovation, but boards often don’t know what qualities to seek in a candidate. Such a leader must clearly understand how to pull cultural levers that exploit existing efficiencies, and at the same time must be able to draw out and nurture employees’ ideas. That means encouraging employees to be vulnerable, to take risks, and to share new ideas. So it’s important for the CEO to have what might be called connectivity—the ability to link people with one another and to connect ideas with other ideas. Leaders also need mental agility and—this is crucial—empathy.

Why empathy? Because a large organization has constituents with a wide range of viewpoints. A leader has to not only be able to learn from all these different constituents, but he or she also has to be able to persuade them of his or her ideas. Doing that requires finding out what drives people and where they’re coming from—it requires empathy.

The people-intensive aspect of the CEO job leads a lot of boards to assume that the top candidate must be an extrovert. But I’ve come to see that a complete extrovert would be almost as unsuited to the top job as a complete introvert. What’s needed is an ambivert—someone who can learn to embody both extroverted and introverted tendencies, regardless of natural predisposition.

An ambivert can go out among the masses and motivate people or convey a vision, then retreat to a quiet room and think deeply about strategy or about how to connect ideas into something new that consumers will value. An ambivert can engage with constituents, but can also concentrate. To be an effective leader capable of driving an innovative culture, a CEO has to constantly shuttle between those two poles, which can be psychologically taxing. So an ambivert has to be mentally strong, and good boards must properly assess this resilience ahead of time.

In their search for the leader who is going to take the company to the next level, boards often overlook the question of fit: Is the candidate a good match for the company’s culture and goals?

We’re not saying the next CEO should be a replica of the past CEO. That can be a recipe for disaster, since it destroys authenticity. Corporate cultures often need some shaking up, and the arrival of a new leader is the perfect occasion for that. In order to address the question of cultural fit, the board must determine which pieces of the existing culture should be retained and which are expendable. For example, the company might be willing to let go of some of its bureaucratic rigidity while maintaining a culture of transparency and hard work.

Once the board has figured out which elements of the culture it wants to retain, it should assess whether candidates are truly aligned with those values and capable of carrying them forward. Boards shouldn’t be mesmerized by past accomplishments or a couple of good interviews. The best boards dig deeply, assess properly, and talk to each candidate’s past constituents—bosses, direct reports, board members, clients, customers, regulators, and investors. They don’t just focus on the obvious strengths and admired personality traits; rather, they find people the candidate has upset in the past, and they probe to find out exactly why these people were unhappy.

Contrary to popular belief, some of the best innovators come from within the company. Home-grown candidates often can be among a board’s best options if they’ve been identified early and developed to maximize their innovative potential. That may sound almost heretical coming from a partner in an executive search firm, but it’s true. A lot of boards, unfortunately, still wait too long to start the succession-planning process. They often don’t assess the true innovative potential of their rising stars until it is too late.

In many cases, this shortsightedness creates a vicious circle in which high-potential executives get inadequate exposure to the board and aren’t placed in enough “crucible” leadership-development positions. In the end, that lack of exposure and lack of experience disqualifies them from consideration for the CEO post. If the board handles the succession process correctly, internal candidates can very well be the best cultural fit for the company, well equipped to both innovate and execute.

Fit, potential, and the value of internal candidates are just a few of the elements of what’s perhaps the most important aspect of CEO succession planning: pragmatism. Too often, boards develop unrealistic wish lists and unrealistic expectations. Even if they don’t explicitly ask for “the next Steve Jobs,” they want what amounts to the same thing—a charismatic, visionary, exciting, superhuman CEO whose stream of brilliant ideas will elevate the company to greatness. Wish lists like those, which circumvent tough choices and trade-offs, are why CEO failure rates remain way too high.

How Exactly Will We Move Away from Fossil Fuels?

Investors who have significant money tied up in the fossil fuel industry — every pension and market fund, essentially — are facing a massive risk. The logic, according to the International Energy Agency (IEA) and banks like HSBC, is this: as the world migrates away from carbon-based fuels, trillions of barrels of oil and billions of tons of coal — the assets sitting on the books of energy companies — will become “stranded,” or worthless.

It’s a compelling argument, but only if we can answer a key question: How exactly will those assets become stranded? That is, what will prompt a fast enough migration from fossil fuels to cause their value to plummet? I see a few plausible paths: government regulation, straight economics (when cleaner energy crowds out fossil fuel investment because the returns are better), or a social movement that propels voluntary action. Let’s quickly look at each.

1. The Stick: Regulation 

The organizations talking about stranded assets seem to assume that governments will price carbon at some point. As a recent report on the subject from the NGO Ceres said, “According to the IEA, more than two-thirds of the world’s proven reserves of fossil fuels will be unusable prior to 2050 if necessary carbon regulations are enacted [emphasis added].”

That’s a mighty big “if.” While some regions are experimenting with carbon taxes, and Clean Air Act regulations in the U.S. are making coal plants more expensive, regulation is not truly impeding global fossil fuel use.

Ultimately, the political will for fundamental change is lacking. In the State of the Union speech last Tuesday, President Obama said that climate change was a fact and touted the growth of solar energy in America. But he also bragged about increased production of natural gas and oil. Very few politicians will take on those powerful lobbies, so a price on carbon is likely a fantasy in the U.S. for now. And partly because of America’s intransigence, 19 years of global negotiations on binding limits on carbon have led nearly nowhere.

2. The Carrot: Money 

On this path, we choose renewables because they’re cheaper, which is far more plausible every day. In significant swaths of the world, wind or solar power is more than competitive with fossil fuels. About half of the new energy capacity put on the grid globally is now renewables, and the picture going forward is even better. Bloomberg New Energy Finance has estimated that between now and 2030, around 70% of the power generation the world will add will be renewables.

This level of investment is happening because the economics work. But it doesn’t mean we’ll be stranding many assets any time soon – the installed base of carbon-based energy systems is really large. Renewable energy does provide 21% of electricity globally, but modern renewables (like solar and wind, not hydro), which would really displace coal and natural gas, only provide 5%. Renewables are a long way from dominating electricity enough to make fossil fuel energy a bad investment.

And when you look at mobile energy use (that is, cars), the story is even clearer. To strand oil assets, we’d need to drive mostly electric vehicles or use a lot more public transportation. And while the new electrified vehicles market is growing fast, it’ll be many years until those technologies dominate.

3. The Guilt or Enlightenment: Moral Suasion 

We could, in theory, see a vast voluntary movement toward clean energy by companies and individuals — even faster than what they’re purchasing already where the economics do work. But it is tough for public companies in particular to spend money when they think it doesn’t pay back in traditional ROI terms.

That said, organizations could recognize that the additional benefits from a larger, quicker move to onsite renewables — including having a hedge on fuel prices, inspiring employees and customers, and building resilience to extreme weather and grid outages — adds up to real value, even if it’s hard to measure.  Companies and consumers could also decide it’s cool to use clean power. The Toyota Prius sold millions of units not because it saved money on fuel, but because of what detractors noticed was a certain smugness or pride in driving it (I’m guilty as charged).

We could also see moral pressure to move away from fossil fuels. The growing divestment movement, led by the NGO 350.org, is an attempt to make investing in fossil fuel companies morally equivalent to investing in South Africa during the anti-apartheid movement. The next generation — the students leading the campaign now — may never work for or buy from the old energy industry.

But moral campaigns are highly unpredictable and we can’t count on this path to get us there.

Ultimately, second path is clearly the most likely, and the clean economy will dominate over time on purely economic terms — a variable cost of basically zero for renewable energy will win out. But will it be fast enough to turn fossil fuels into stranded assets any time soon? I doubt it, since companies and countries aren’t even doing all the clean energy projects that pay back quickly, or don’t require any money down. It’s not just about economics.

That’s why we need all of these efforts to work in conjunction — movement on any one of them will give momentum and credibility to the others. The social and government pressures will accelerate investment and thus improve the economics. And in return, if companies start buying a lot more renewable energy, they will help build the market, improve the economics, and give cover to politicians to take action.

In short, all three paths are valid and tough, but together, they should do the trick. They’d better.

Your Weakness May Be Your Competitive Advantage

Midway through the workshop I was teaching on professional reinvention, I gave participants an assignment: create a narrative citing your professional strengths. After the break, a woman named Alison raised her hand. “This one was difficult for me,” she said. “I thought about what was special about me: I’m a strategic thinker, and I can get things done. But other people can do that, too. I’m not sure how I can really stand out as I’m applying for jobs.” She isn’t alone. For many of us, it’s hard to identify exactly what about us — if anything — is valuable or unique.

As Phyllis Stein, the former head of Radcliffe College Career Services, told me when I was researching my book Reinventing You, many of her highest-achieving clients are also the most self-critical. They’re very aware of their weaknesses, she said, but find it much harder to see their strengths.

“What job are you applying for? And what did you do before?” I asked Alison.

“I used to sell medical equipment,” she said, “and now I want to do project management for medical equipment companies.” Her vision of herself was cloaked in deficiencies: she didn’t have any project management experience on her resume, and her competitors surely would.

But her background was actually perfect, if only she’d tweak her perspective. As most hiring managers know, it’s incredibly rare to find a candidate that meets all your desired criteria. While other applicants might have project management experience, they may not have worked in the medical equipment industry. It would be just as easy for Alison to argue that her familiarity with the industry – and what customers were saying on the ground — would be a far more valuable asset. The key is changing your frame to focus on your advantages, not your shortcomings.

When you’re trying to understand your unique abilities, it helps to think about scarcity. What background or skills do you have that might be rare in a given context? There are plenty of people with medical equipment sales experience in the world, but probably very few who were applying for this project management position. If you can make your case with confidence, you can use scarcity to your advantage and position yourself as a desired, limited resource.

That strategy succeeded for me a decade ago when I was hired as the executive director of MassBike, Massachusetts’ statewide bicycling advocacy organization. Most of the applicants were, like the board members, bicycling fanatics who embraced hard-core distance riding and geeked out on their equipment. I was a casual commuter cyclist with an interest in urban planning, and a good knowledge of political advocacy and media relations.

In my job interview, they started with what they thought was a nice softball question: what kind of bike do you have? They expected some banter about the virtues of certain manufacturers; what they got was a panicked look and two words. “It’s blue.” I had no idea about the make or model; I used it to get around town. But I pressed my advantage: I knew very little about bicycling, I told them, but the board could teach me. Meanwhile, I could help the organization win political battles and newspaper coverage, two crucial but underrepresented areas. The pitch worked, and I was hired.

To understand what’s so special about you, you have to compete on your playing field, not someone else’s. If you let others set the terms of the debate — How much project management experience do you have? What do you know about bicycle mechanics? — you will lose almost every time. There will always be someone who knows more than you do about a given topic, or who has more directly relevant experience.

Instead, you have to seize the confidence to say their criteria are irrelevant (or at least less relevant), and there’s another yardstick that matters more. Too many professionals accept the limitations of other people’s viewpoints, and see themselves as falling short. When you understand what you possess that’s scarce, and are strong enough to make the case for yourself based on your own metrics, you’re likely to be far more persuasive than you ever imagined.