Marina Gorbis's Blog, page 1499

Can You See the Opportunities Staring You in the Face?

We all suffer from inattention blindness. We focus so intently on a particular task that we don’t notice the weird thing that’s right there in plain view. The person walking by in a gorilla suit, for example.

Companies suffer from inattention blindness too. And in a business context, the weird thing that gets overlooked can turn out to be a crucial differentiating factor. If one company doesn’t notice it, another will—to great advantage.

A perfect example is the high-end retail company that, like its competitors, needed to close certain stores because more and more customers were buying online or via catalog. But unlike its competitors, this company sensed that the closure of a store might have harmful network effects.

In a study of customer data on purchases made by people who lived within a short driving distance of its stores, the company could see that customers were visiting stores to look at the merchandise, then going home to compare other options and make their purchases. Closing a store would deprive customers of their showroom. The hunch that this would hurt sales was corroborated by a dip in online and catalog sales in areas around stores that had previously closed.

Not only did the company end up closing fewer stores than it originally thought necessary, it now had a new method to evaluate the overall positive impacts that new or relocated stores would have on the retailer’s bottom line—across all sales channels.

The importance of stores’ network effects is just the kind of thing companies often miss when they’re focusing intently on the mass of conventional data they collect on customer behavior. In fact, I’ve come to believe that less than 1% of the data is truly useful.

The challenge, of course, is figuring out which 1% really matters, and with the recent explosion of data types and sources, making that kind of distinction is getting harder and harder. Big-data initiatives are proliferating, and the information is getting more complex all the time. In the next couple of years—not decades, but years—companies will have access to data not only from customers’ mobile devices, but from wearable tech and automobiles, for example. Soon, retailers will have all kinds of information about customers who are walking through stores and will be able to send them targeted messages. There’s a lot of potential benefit for both retailers and customers.

But only if the data is well managed and well understood. Statistics literacy isn’t very high in most businesses. A few educational institutions have realized this and are making a push to turn out business graduates who know their way around a regression analysis. But for the most part, businesspeople aren’t familiar enough with statistics to use them as the basis for good decisions. If you don’t understand the numbers, you can go a long way down a bad road very quickly. That’s why every team charged with making decisions about customers should include a trusted individual who understands statistics. If that understanding isn’t between your own two ears, make sure you bring a person with that skill set onto your team.

But let’s say you’re a small organization—a group of restaurants, say, or a retail chain with just a few locations. You don’t have anyone on staff with a statistics background, and you can’t afford to hire such a person. There’s one thing you can do to ensure that you make informed decisions and don’t let the numbers lead you astray: Get a solid understanding of who your core customers are, what their value is to the company, and what your objectives are. Learn which customers are profitable and which ones aren’t, and decide what you want to do to increase the profitability and number of good customers. Use that information as the center point of all your decisions.

Will that cure your inattention blindness? Maybe not entirely, but if you can get a good understanding of what distinguishes a good customer from a bad one, and a sense of what makes your good customers tick, you’ll immediately cut half the noise out there. That will make it a lot easier to see the opportunities that are staring you in the face.

From Data to Action An HBR Insight Center




You’ve Got the Information, But What Does It Mean? Welcome to “From Data to Action”
How is Big Data Transforming Your 80/20 Analytics?
To Understand Consumer Data, Think Like an Anthropologist
To Avoid the Customer Recency Trap, Listen to the Data

The Big Benefits of a Little Thanks

Francesca Gino and Adam Grant, of Harvard Business School and Wharton, respectively, discuss their research on gratitude and generosity.

Download this podcast

An Oddity: Ex-Smokers Earn More than Those Who Have Never Smoked

It has been well documented that smokers make less money than nonsmokers, but it’s less widely known that former smokers earn a 7% wage premium over people who have never smoked, according to an analysis of nearly two decades of U.S. data by Julie L. Hotchkiss of Georgia State University and M. Melinda Pitts of the Federal Reserve Bank of Atlanta. The reasons for the ex-smokers’ higher wages are unclear; the authors cite past research suggesting, somewhat cryptically, that people who are able to stop smoking tend to have individual characteristics that are associated with higher productivity.

Welcome to the “Designed By Me” Era

Since at least the early ’90s, we’ve been hearing that Mass Customization is going to change the consumer landscape, but by and large, we still buy manufactured goods the way we have since the middle of last century. With the exception of custom-crafted luxury goods like bespoke tailored suits and mega-yachts, most of our purchases are still very standardized, and “customization” means picking the 256GB hard drive over the 128GB, or selecting the Sport Package for your new car. Physical product customizers such as Nike iD and Moto Maker have earned strong customer followings, but they’re still closer to “designed for me” than the “designed by me” experience we’ve been promised.

But despite the slow progress, I believe that we’re finally at the cusp of a new era in product design, in which truly “designed by me” products will be available in a range of categories. The most successful manufacturers of the next ten years will be those who seize this opportunity before their competitors do.

This shift is being brought about by three developments. First, we’ve seen dramatic improvements in flexible automated fabrication, exemplified by innovations like Tesla Motors’ robot-heavy car factories and Nike’s revolutionary Flyknit process. Second, rising labor costs and stronger currency are reducing the appeal of high-volume Chinese manufacturing, and nudging more companies to move operations closer to their headquarters or their customers. Third, the demand for more personalized experiences, nurtured by our highly customizable digital devices, is on the rise. Combine these three, and you have a future in which companies offer customers fine-grained control over their manufacturing output, and earn loyalty and competitive advantage in return.

Consider the very unexciting process of buying a washing machine. Like most major appliances, you do this out of necessity not desire, picking the best from a range of pretty-good options that fit your budget. But what if that changed? What if buying a washing machine was more like commissioning a couture gown? What if you could custom-order the exact machine you wanted, designed to fit your narrow hallway closet or your need to launder massive piles of baseball uniforms, with an interface as complex or simple as you like: a touchscreen, a dial, or maybe just a big red button marked WASH? What if you could have it installed and ready to use within a week? Would you pay more for this kind of customized experience? If you’re like the thousands of global consumers my colleagues and I have interviewed over the past few years, the answer is yes, provided the price premium isn’t too great and delivery times are short.

Nike no doubt had this willingness in mind when it reinvented shoe manufacturing in 2012 with the Flyknit line. In contrast to the labor-intensive cut-and-stitch process that has defined the athletic footwear industry for decades, Nike figured out how to knit a shoe from the sole upward in one piece, using a single, highly configurable machine. The immediate advantage is a lighter, closer-fitting shoe that athletes love, but ultimately it’s the ease of doing short production runs that sets the process apart. When a unique one-off is barely more expensive than a mass-produced generic, shoppers get “enough multicolored variations to make a Missoni envious,” and Nike gets an instant classic, embraced by fashionistas from New York to London.

It also makes production more customizable and distributed: A recent Businessweek article predicts a store where customers can have their feet scanned and quickly receive shoes built to fit them and their style preferences exactly. A recent Fast Company profile hints that Flyknit’s small footprint and low labor intensity could help Nike put more factories in more places, slashing time-to-market as well as import duties.

But what about “real” products – ones that still rely on capital-intensive processes like metal stamping, injection molding, and circuit board printing? For one answer, go to the former GM/Toyota factory in Fremont, California where Tesla Motors is building entire electric cars — from sheet metal to finished product — in just four days. The young company only produces one vehicle at the moment, the Model S, but in a way that defies traditional inventory-based manufacturing.

By populating the factory with over 160 robots, programmed to perform tasks from welding and painting to seat installation, Tesla has fit its entire operation into a fraction of the plant’s total space, and reduced its dependence on outside vendors. This makes it possible to replicate the factory in other parts of the world, closer to customer demand – something Tesla has already begun doing. It also lets the company modify its manufacturing line in a matter of days, not months. So far, Tesla has used this flexibility to improve efficiency and engineer its own electric-specific car designs, but an easy next step would be to give customers a level of control over their purchases that competitors cannot touch. The company has also announced plans to start producing a sub-$40,000 car in the next few years, suggesting it could soon be far more than a niche player.

This wouldn’t matter if consumers hadn’t developed a taste for customized products, but the explosion in popularity of smartphones and tablets has taken care of that. We’ve grown to love our digital devices because we can quickly make them entirely our own, simply by installing apps and adjusting settings. Unlike the electronics of the ’80s and ’90s, tablets and smartphones are platforms, not products, that invite us to tinker and modify until they’re just right — an experience that customers find incredibly seductive. The first manufacturers to offer something similar in a physical product will almost certainly transform their categories.

But doing so will not be cheap or easy. Nike and Tesla have both sunk years of effort and millions of dollars into their innovative manufacturing methods, and anyone wishing to emulate their achievement in a different field will have to, as well. But more than just time and money, the shift will require a new kind of thinking, seeing physical products as platforms, too. The real design challenge won’t be coming up with a perfect object, but a perfect process: a reliable way of making thousands of variations on a product, quickly and accurately, and giving customers influence over the outcome at a fundamental level.

The tools to do this are already here. Besides the highly visible examples above, other technologies are conspiring to make fabrication more nimble, including low-cost, high-accuracy 3D printing, CNC milling, and laser cutting. Once written off because they didn’t fit into the high-volume world of offshore manufacturing, these processes are increasingly suited to a more automated future that prizes the flexibility of shorter runs over rock-bottom labor costs. 3D printing in particular has been a darling of the Maker movement for years, and while low-res processes like Fused Deposition Modeling have limited application in the manufacturing world, others show more promise. Laser Sintering, which works at higher resolutions in a wide range of materials, is already used by Space X (another Elon Musk venture) to quickly fabricate custom titanium parts for spacecraft; the Energica electric motorcycle manufactured by Italy’s CRP Group uses 3D-printed fairings made from a custom polymer called Windform, with results that rival carbon fiber for strength and lightness.

While this technology is getting us closer, and the consumer desire certainly there, what we still don’t have is a broad understanding of how to design for this hyper-personalized future. The washing machine example above is just one idea among thousands, but it raises immediate issues. How much leeway do your customers get? How do you design the customization process to be satisfying as well as precise? How do you build customer preference into a product line, but maintain brand consistency? Designers in the digital world have been wrestling with these questions for years. In the physical world, we have some catching up to do.

It’s worth it, though. I would even argue that we don’t have much of a choice. The combination of demand, speed, and automated flexibility are pushing us quickly to a point where physical products will be held to the same expectations as digital ones. When armies of robots can craft a car from scratch in a few days, how soon until a built-to-order washing machine becomes the new normal?

Managing People on a Sinking Ship

As the continued bad news from Blackberry reminds us, no company’s future is secure. When your business is facing declining sales, a potential buy-out, or even certain closure, how do you manage people who are likely panicking about their future? Can you keep your team’s motivation and productivity up? The short answer is yes: Even when it’s clear that a company’s in trouble, there are ways to help team members stay focused, deliver results, and weather the storm.

What the Experts Say

In a crisis, you may think you need a whole new set of management approaches. But don’t throw out your Management 101 book quite yet. Kim Cameron, a professor at Michigan’s Stephen M. Ross School of Business and author of Positive Leadership: Strategies for Extraordinary Performance, has studied organizations that are downsizing or closing and he says that, instead of abandoning best common practices, the most skilled leaders reinforce them. “Good management is good management. Treating people well, helping them flourish, and unlocking potential are all good practices regardless of the environmental circumstances,” he says. Amy Edmondson, a professor at Harvard Business School and author of “Strategies for Learning from Failure,” says that of course it’s not easy to “keep people enthused, engaged, and working hard when they know the company may not be around.” But it’s not impossible either. Here are six principles to follow when your organization starts to feel like a sinking ship.

Look for opportunities to turn things around

Sometimes it’s clear that the end is near. Your manufacturing plant is slated to close. A larger company has bought your business unit. But in other situations, there may be a glimmer of hope. “There is often a short window of opportunity to do something differently,” Edmondson says. If there’s a chance of saving the company, focus your team on doing two things. First, seek input from customer-facing employees. Their front-line perspective could provide valuable insight into how your company needs to change. Second, do small experiments with alternative business models. Edmondson suggests you ask, “What kinds of products and services would customers welcome that we don’t offer?” The goal is to alter the organization’s course away from the one that got you into this mess.

Give your team a larger purpose

To keep people focused, give them something to work toward. “Identify a profound purpose that is more important than the individual benefit,” says Cameron. People want to believe their work matters in any situation. This can be tough when the company’s success is no longer the goal but you might select something that employees value personally — leaving a legacy or proving critics wrong. Cameron studied the manager leading a GM plant that was going to close in two years. To inspire employees who knew the end of their time with GM was near, he told them to do their very best so that senior leaders would be sorry when closing day came.

Provide reasonable incentives

Find ways to reward good work. After all, if the company is failing and employees are going to collect a paycheck anyway, why wouldn’t they spend their last three months on Facebook? “It’s the leader’s job to answer the question: What’s in it for me?” says Edmondson. Make clear what they will get if they do their best in this trying time. Will they learn a skill that will help them find their next job? Will the acquiring company be keeping some staff? How will the experience help them grow professionally? “If you can’t find a way to truthfully explain why they should help you get the job done, you’re out of luck,” says Edmondson.

Show people they matter as individuals

Don’t just offer the same things to everyone, however. People want to still be seen as individuals. Tailor your message and the incentives to specific team members. Whenever possible, give them personal attention and care. When news of the crisis hits, meet with your employees one-on-one. Cameron suggests you say something like, “We want you to flourish and will do our best to take care of you even though we may not be here in the future.” Find out what matters most to them and do your best to meet those needs. There may be some people who can’t handle the uncertainty; in those cases, do what you can to help them find a position at another company.

Be honest and authentic — always

Both Cameron and Edmondson are adamant that being transparent is crucial in these circumstances. “Whatever you know, share it with your employees,” says Cameron. Edmondson agrees: “Be as honest as you possibly can.” Don’t try to protect people from the truth or ignore what’s happening. “You can’t not talk about reality,” says Edmondson. And don’t say anything you don’t mean. In tough situations like these, people are on high alert for lies and inauthentic messages.

Don’t ignore emotions

People are going to be upset, afraid, and angry. Don’t pretend that these feelings don’t exist. Instead, make room for them. “You don’t want to dismiss emotions. It only drives them underground and makes them more deeply felt. It’s important to acknowledge feelings, especially negative ones,” says Edmondson. Tell people that you’re available to talk whenever they want. Encourage people to get together without you so that they can say things they might not want to express in front of a boss.  “The best practices I’ve seen are lots of huddles — people getting together and just having conversations about what’s going on,” says Cameron. Don’t play the role of psychologist though. If people need more specialized support to deal with what’s going on, refer them to outside help, such as trained outplacement counselors.

Principles to Remember

Do:

Focus people on a meaningful goal
Be 100% honest about what you know — share any information you can
Encourage your team to get together without you to talk about what’s happening

Don’t:

Expect that people will perform if you’re only giving them a paycheck — give them more meaningful incentives such as professional growth
Treat people the same — remember they’re individuals with different needs and goals
Pretend that something bad isn’t happening — be transparent and welcome expressions of emotion

Case study #1: Take care of your team

For thirteen years, Michael Feeley worked as a recruiter at a staffing firm in New York City. He managed a small sales force and a temporary staffing division and he loved his job. “The company came first for me. I was a loyal and trusted employee,” he says. However, soon after the economic crisis in 2008, the company struggled to maintain its hiring fees and retain clients. Senior leaders decided to cut salaries in the hopes of keeping the operation afloat. They looked for a company that could possibly acquire them.

During this crisis, Michael took a transparent and supportive approach with his team. “Honesty was the only way to live and work through it,” he says. He told his team everything he knew and did his best to support them. He spent time listening to their fears and trying to give them confidence and comfort. “I wanted them to feel good about themselves and the work they had to do every day,” he says. To keep them motivated, he was clear that he was living through the same thing. “We were all in the same boat and the people I worked with wanted to know that I was right there with them — fears and all,” he says.

As a manager, Michael felt compelled to take care of his team. “I had a deep and sincere obligation to be useful and to know what they thought, felt, and wanted to do in this emergency,” he says. He focused on the facts that he thought would help them stay engaged: the company delivered a product that was well respected in the marketplace; the owner had always looked out for his employees; and the organization had survived difficult times in the past.

Despite all best efforts, however, the office did eventually close. Michael and his team members were lucky. “We were fortunate, even in a tough job market, to transition into work pretty quickly,” he says. And many, including Michael, were able to find jobs that better suited them. “That is one of the positive things that came out of the situation — people were clear about what they did and did not want to do,” he says.

Case study #2: Create an “us vs. the world” attitude

Marc Lawn was managing a global team of 100 people when sales at the company started declining. He says the business, which sold products to companies in the tech and media space, had lost touch with its customers and had ignored important changes in the way they made purchases. When it became clear that the company was in real trouble, Marc spent time with each person on his team explaining the situation and determining who might be incapable of handling the ambiguity. “Some people don’t cope well with uncertainty,” he says, so he helped those people — 12 total — find new roles outside the company.

For the people who stayed, Marc cultivated an “us vs. the world” attitude. He explained that this was an unprecedented challenge for the company and that they would not be able to succeed without all of them. “The objective of the group was to prove everyone wrong and show that we could save this thing,” he says. He focused his team’s attention on the near-term and encouraged them to accomplish specific tasks in small, manageable chunks. To ensure momentum, he celebrated successes and rewarded every job well done. When he spoke with members of his team, he conveyed a message: “Anything is possible, no matter how grim the situation, with the right skills, and with a team ready to fight for each other.”

The company was able to survive by getting rid of one part of the company and acquiring a new business unit. “Last year, the business had a record year, which shows that you can make it work with a ‘no regrets’ attitude,” he says.

Who’s Running Your Business in China?

Nearly every prospective Chinese employee who I met with in the 1990s shot out the following sentence once — if not multiple times — during their job interviews:

“I will do my best!”

Young people were extremely eager to work for multinationals, to be associated with famous brand names, and to learn from the best companies in the world.

Today, the “I will do my best” attitude still prevails. But Chinese employees have learned that the management skills and systems in multinationals in China come in many flavors, from the exceptional to the abysmal. So they are very demanding that their multinational employers also “do their best” and “be the best.” And that means providing world-class training, clear and lucrative career paths and, increasingly, a work-life balance that allows people to enjoy the fruits of their success.

I have lived in Beijing since 1990 and hired and managed many hundreds of Chinese people over the years. When I was running Dow Jones’ businesses in the 1990s, the predominant trait of Chinese staff was an insatiable hunger to learn, and an impatient drive to move up fast. In the 2000s, when I ran a research and consulting company and worked with a variety of advisory firms, Chinese employees retained those earlier traits, but were also quick to engage in job-hopping, as the red-hot China market’s demands outpaced the available professional talent.

Today, as chairman of , I have a deep view into the China operations of dozens of multinationals, and through that I can see that management in China is going through yet another phase. The work ethic of Chinese employees is still fierce. Their ambitions remain formidable. But, like the Chinese economy itself, multinationals in China are in need of “rebalancing” their work force.

The days when Goldman Sachs and McKinsey threw piles of money at overseas-educated returnees are long gone. MBAs are a dime a dozen in China today, and people who invested $100,000 or more for graduate degrees are settling for annual salaries in the $30,000 range. So the truly talented in this group need to see that they have a future, or they will find one elsewhere. Multinationals also are littered with highly compensated employees who were promoted beyond their experience and skill levels during the boom years. One further complication: by increasing the number of annual college graduates from 2 million to 6.5 million between 2000 and 2010, China is churning out a workforce with an inconsistent quality of education and with white-collar expectations in an economy most in need of top technicians, skilled production workers and executives who can run global operations.

For multinationals in China, it is time to cultivate and cull. Companies need sophisticated and sustainable programs to identify their most talented employees, and they need to focus on training and retaining them. Grow-Your-Own is still the best way to instill the company culture and integrate China management into global operations. Hiring senior Chinese managers from other multinationals or state-enterprises often carries with it a “culture bomb” of dictatorial and secretive practices that still pervade the China management world.

Culling your management ranks should include expat and local managers. Top talent in China will run away from companies with muddled management systems and mediocre managers very quickly. Chinese employees can recognize in a nanosecond if they have joined a company in which top managers are discards from headquarters, or if those in the middle are uninspired bureaucrats clinging to titles they don’t deserve. They will shrewdly grab whatever money and titles they can — while professing undying loyalty — to prepare for their next company.

Top talent in China is in search of mentors. They want capable leaders who they can learn from, and whom they can truly trust to look out for them — both in their professional and personal lives, as the workplace in China is more often than not a person’s main social circle. Multinationals that send their sharpest managers to China, and keep them in China for a long time, will attract and retain the best Chinese talent. Multinationals willing to cull their ranks of mediocre middle managers and corporate political players and replace them with enlightened Chinese managers and mentors will have a stable work force that integrates well with global operations.

This all starts at the top. Determining who runs your China operations is the most important decision a CEO can make. A leader who possesses equal parts IQ and EQ, and a thorough understanding of your business, is a good start. A decisive person who is steeped in integrity, humility and humor is also helpful in order to work in the very unpredictable and challenging Chinese business environment.

China’s new leadership this month has unveiled an agenda of wide-ranging economic reforms that will undoubtedly present new opportunities as well as considerable uncertainty for multinationals as the detailed policies emerge and unshackled local competitors gain strength. Nimble companies with enlightened managers and unified management systems will have the best shot at success.

China’s Next Great Transition An HBR Insight Center




If You Want to Change the World, Partner with China
Ten Predictions for China’s Economy in 2014
How Chinese Companies Can Develop Global Brands
The Chinese Steamroller Is Already Sputtering

Tips for Energizing Your Exhausted Employees

Even though the people in your unit are overstretched, scarred by the budget ax, and sick to death of change, you’re about to present them with a wrenching new challenge.

It’s your job to get them excited about it. What’s your plan?

I have a story about just such a situation, and, oddly enough, a dress made out of birdseed figures prominently in it. But before I get into that, consider how prevalent this situation is—how often you’ve had to go to your change-weary employees and ask them to dig deep yet again.

Motivating people is difficult under the best of circumstances: As Gallup’s latest State of the American Workplace survey showed, 70% of U.S. employees aren’t engaged at work, a statistic that has not budged much in a decade. Regardless of your industry, if you poll your team, you’ll likely find that they’re feeling overtaxed, and that their “joy quotient” at work is seriously down. But it gets even harder when employees have already faced a series of crises, as is the case with so many workers today (those lucky enough to still have jobs). Just as they’re getting used to doing more with less, you have to motivate them to throw themselves heart and soul into a critically important new initiative.

I keep thinking of the health-care IT professionals I’ve worked with for much of my career and how they must be dreading the long, rough road that lies ahead for them. After years of cutbacks, the latest incarnation of health-care reform is putting intense new financial pressures on hospitals throughout the U.S. These organizations must make new investments, projected to be in the tens of billions of dollars, to implement electronic health records—and they have to find ways to save money at the same time. A lot of this will fall on the IT people.

A few years ago, I was in charge of strategic planning and IT when Massachusetts General Hospital was implementing the requirements of Massachusetts’ health-care reform, which became the model for the U.S. Affordable Care Act. After years of belt-tightening, there was little fat in the IT budget to cut, but new spending cuts were coming. If we waited for the annual budget cycle to come around, layoffs in the IT department would be inevitable. So it was imperative that we make thoughtful changes to preserve service levels, avoid layoffs, and maintain employee morale during the hard times that were surely ahead.

With time to plan, we knew we needed to engage the staff in thinking creatively about how best to reorganize IT operations to optimize available resources. It was clear from the rich literature on motivation and from my own experience that employees would need five things:

A solid understanding of the relevance of their work to the hospital’s mission.


A chance to use their skills and expertise to make a positive contribution.


More control over their work environment and their future.


Opportunities to develop new friendships and interdisciplinary collaboration.


New tools and the support necessary for their efforts to succeed.

My role was to be the catalyst that sparked the team’s creativity. At the first of two retreats, I confessed to being inspired by watching Project Runway with my teenage daughter. In case you don’t watch reality TV (really?), aspiring fashion designers on the show face challenges and someone is eliminated each week until the winner is crowned. In one episode, the designers had to make a couture creation solely out of materials they could get in a pet store. When I saw the incredible dress someone had made out of birdseed, I thought: There’s no limit to peoples’ creativity. Why couldn’t the IT staff design a beautiful future with the considerable resources it still had?

The IT Department traditionally worked in closed teams according to project or division. At that first retreat, we broke down those silos and created four teams, mixing people from all levels and corners of the organization. We described the challenge before them: continue to provide current (or improved) service levels, support all new health-reform-related initiatives, and propose budget cuts.

We invited two renowned physicians who were leading patient-care-redesign efforts to present their initiatives and talk about how IT was critical to the hospital’s mission. Next, an IT expert who had accomplished similar objectives in another industry presented tips and tools for our teams to consider. Finally, IT leaders stated that they were committed to implementing the best ideas. Thus armed, each team was assigned a mentor (à la Project Runway’s Tim Gunn) and given six weeks to find novel solutions.

At the second retreat, the groups presented their ideas. This was their opportunity to use the insights they’d gained from the front lines to show the suits how they could deliver patient-centered service more cost-effectively. Just as important, the group was highly energized. Although participation was voluntary, every person offered to serve on an implementation task force. This was extraordinary, considering how overburdened the staff had seemed at the outset of the endeavor. New friendships were formed and team members were excited to see their ideas put into action.

The immediate benefits were considerable. We met the first objective of avoiding layoffs and ill-advised cuts in the next budget cycle. Staff members were gratified to have had a say in how spending cuts would be made, particularly since they knew they’d have to live with the consequences of the choices.

I recently caught up with Keith Jennings, the current CIO, to see if some of the longer-term initiatives had achieved the intended results. The most promising idea—our birdseed-dress equivalent—had been to create a centralized testing and training resource to serve all software installations, so that those functions wouldn’t have to be replicated for every application. It had an outcome we could not have predicted at the time, because the scale at the hospital was insufficient to realize significant efficiencies in the two-year period we had set for the project. However, now that Partners Healthcare, of which the hospital is a member institution, is implementing electronic health records across the entire system, it’s possible to achieve economies on a much larger scale. Though it has taken longer than we’d expected, the groundwork that group laid six years ago helped set the stage for greater savings than we could have imagined when we focused on Massachusetts General alone.

So here’s your plan. It’s pretty simple, actually: Energize your exhausted employees by showing them how essential their work is to the organization’s mission, giving them a structured opportunity to contribute, supporting their efforts to innovate, and committing to implementing their best ideas. Don’t underestimate the value of giving people the chance to develop initiatives that improve the quality of their work lives and to address problems that have been vexing them for years.

It takes time for managers to learn what’s on the minds of their team members, but the return on that investment may well mean getting a stronger product and a more enduring commitment to achieving great results over the long term.

Order in the Strategy Court

As followers of Dilbert all know, personal and office politics pervade organizational life.  If pressed, therefore, most of us would agree that that whenever you have a) ambitious people with a variety of visions, b) limited resources, and c) serious flaws with decision tools, any strategic decision is largely an outcome of power plays and politics.

The trouble with this “Dilbertian” view of strategy is that it is too cynical and unsystematic. It encourages executives to apply the dark arts of Machiavelli in order to influence their company’s direction and it offers no guidance to CEOs trying to make their systems generate good ideas and strategies.

There is a Better Way

Corporate decision-making doesn’t have to be reduced to the law of the jungle.  In fact, we can draw on society’s evolution for inspiration.  Philosophers long ago realized that the application of due process and clear rules-of-the-game for political discourse and the resolution of conflicts — a well-defined legal system, in other words — were the chief hallmarks of a healthy community.

The same, we believe, is true for corporations.  Executives in search of a system of strategic planning and development that is both organized and rule-based but open to diverse perspectives, conflict, and argumentation could do a lot worse than borrow from the Law.  After all, squaring this circle is precisely what a legal system is supposed to do.

Why the Model Works 

Let’s look at two ways in which the Law mirrors organizational reality. Firstly, executive committee (hereafter “excom”) members resemble lawyers in they represent divergent perspectives from which “Justice” (i.e., the right strategy and decisions for the organization) should emerge. A few examples:

Customer Service VPs are supposed to keep customers happy. If they do so by customizing service, they face off against Supply Chain VPs whom are rewarded for standardizing product delivery;
HR VPs develop talent, requiring that the latter take staff away from work, thus forcing them to face-off with Operational VPs who want to keep staff working to meet quarterly forecasts;
CFOs protect the bottom line, which leads to face offs with any peer who needs to spend money to achieve their goals.

Second, excom members resemble lawyers in that they have “clients” (i.e. their staff) who want them to plead their case before the “court” (i.e. the excom). Staff expect their excom member to fight for their interests, to obtain funding for their projects and ensure cuts happen elsewhere. If executives are unsuccessful in pleading their “client’s” case, they cannot be assured of the latter’s loyalty for long.

The Benefits It Brings

Given the lousy reputation of the legal profession, we would forgive you for thinking that the “strategy-as-law” analogy and its “excom as court” corollary could increase politicking and imperil teamwork. But the fact is that it can actually bolster teamwork and support a rational process for strategy development by promoting

Clearly argued business cases.  To begin with, treating strategy making as a trial process requires that advocates of a particular strategic decision brought before the Excom explain how it would advance the company’s strategy, just as judges insist lawyers justify how their case upholds the law. All too often, excom members present their case on grounds that simply reflect their unit’s perspective. As a result, they don’t create a common ground for discussion with colleagues. By obliging executives to explicitly reference the organization’s strategy, CEOs establish a common ground uniting excom members as a team, yet allowing for different perspectives to emerge.

Precedent-setting.  The strategy-as-law model also provides guidance to CEOs in that it requires them to “set precedents”, that is make explicit how decisions align with the strategy, just as judges explain how their rulings respect the law. This not only helps to clarify the strategy, but also promotes “out of court settlements” between excom members: as the strategy’s contours become clearer with every “precedent”, executives bring fewer disputes before the excom, thus wasting less excom and CEO time and encouraging teamwork outside the excom.

Clean debate. Just as a lawyer’s code of conduct ensures lawyers treat each other respectfully and disclose evidence so that all parties can fully prepare, so should excom ground rules. When excom members break these rules, CEOs should take a page out of judge’s playbook and hold them “in contempt”.  Too often CEOs let rule breakers off the hook and effective teamwork is the victim.

A distinction between decision-making and decision-taking. In the legal system, decision-making occurs in court where judges listen to lawyers’ arguments. Judges then exit the court for deliberation and decision-taking. This mirrors what happens in many organizations:  CEOs listen to executives debate strategic issues in the excom — the decision-making phase — but they don’t deliberate and take their decision before the excom. They huddle with a few close advisors, their “inner” cabinet” who are asked to leave unit hats at the door, and it is then that decisions are taken.

A common mistake rookie CEOs make is to ask all excom members to leave their unit hats at the door at the very beginning of the process. The result is that the expression of diverse viewpoints (a main benefit of teamwork) is suppressed and political jockeying is forced underground where the strongest prevail. Trust diminishes and trade-offs inherent in strategic discussion remain hidden. With the strategy-as-law analogy, CEOs learn to make the decision-making vs. decision-taking distinction clear so that excom members know when to express their unit perspective and when to wear the CEO’s hat.

The excom as court model is not perfect (no model ever is) but it can help CEOs figure out how to support a rational, rule-based evolution of their strategy that allows executives to openly debate trade-offs without being accused of parochialism. And, after all, isn’t that what good teamwork is all about?

Use Your Sales Force’s Competitive Intelligence Wisely

The vast majority of your marketing data, whether from purchases or surveys, tells you about your business customers’ past behaviors. But the past is over. Your job as a manager is to know what your customers will do next month or next year. Who has data about the future?

Your salespeople, that’s who.

The sales force has abundant information about the initiatives and products that your competitors are planning and, therefore, the kinds of choices that your customers will be facing in the near future. That competitive intelligence can not only help individual salespeople become more effective, it can also help your company make better strategic decisions.

But research I conducted with Douglas E. Hughes of Michigan State University and Adam Rapp of the University of Alabama shows that in the wrong hands, competitive intelligence can have a negative impact on sales and market share. So if you acquire information from customers, you’d better use it well, or it may hinder, rather than help, your sales efforts.

My colleagues and I have seen numerous examples of sales forces gaining important competitive knowledge. In one case, the salespeople for a consumer-goods company got a good look at a newly designed soft-drink bottle that a competitor was planning to introduce. In other cases, sales reps found out about competitors’ plans to introduce new types of cooking oil and mayonnaise before the products went to market. In each instance, the companies were able to act quickly on the information to introduce their own products and avoid losing weeks’ worth of sales.

Business customers are the source of this kind of information. They hear from manufacturers’ reps not only about new forms of packaging and new products, but also about such things as planned pricing, discount policies, and marketing initiatives. They release this well-guarded information judiciously, however. The reps who are most likely to receive it are those who have formed strong customer relationships and engage in customer-oriented extra-role behaviors.

Being customer-oriented means focusing on long-term customer satisfaction and placing the customer’s needs first while actively endeavoring to develop solutions that enable the customer to reach its goals. That might mean, for example, assisting a customer in its negotiations with another supplier, if that kind of help is requested. Engaging in extra-role behaviors means going above and beyond to help the customer.

It’s easy to see how in the context of this type of high-trust relationship, a customer would be willing to divulge proprietary information picked up from another supplier’s rep. But that’s not to say customers release information just to be nice. They provide knowledge in the expectation of some sort of benefit. They might expect the salesperson who receives it to offer better terms, for example, or to provide greater levels of effort and commitment.

That’s why the salesperson’s response to the information is critically important. Our research has found that reps who are able to make the best use of competitive information are those who are highly adaptive — that is, they’re able to interpret the information and adjust their selling approach accordingly.

The flip side is that salespeople with low adaptability run into trouble when they acquire competitive information. They fail to respond to the intelligence gleaned from the customer, either because they don’t care enough to use it or they’re unable to. When low-adaptive sellers fail to use customer-supplied information to more strongly position a product to meet the customer’s needs, the customer gets a negative impression of the company’s products.

Salespeople who make use of customer information for the customer’s sake tend to be more successful in selling, and they get more information. Those who don’t make good use of it find that their sources dry up. Customers ask themselves, “Why should I share any more information with that rep?”

The strategic value of competitive intelligence can be far-reaching. But we all know that information doesn’t always flow freely between sales reps and the rest of the company. To open up that flow, encourage salespeople to participate in the decision-making process. That will help the reps see the importance of the information they glean from customers. Your marketing people may be surprised at just how much the sales force knows about competitors’ prices and discount policies, as well as about the concerns your customers are voicing about your and competitors’ products.

Companies with poor information about competitors are stuck being reactive, lurching from defensive tactic to defensive tactic as new products appear, seemingly out of nowhere. Cultivating a rich source of intelligence on competitors’ projects and products, as well as any new market segments they’re targeting, gives you time to be strategic in your responses.

From Data to Action An HBR Insight Center




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