Marina Gorbis's Blog, page 1511
November 8, 2013
Women Have Trouble Letting Go Because They Have A Lot to Prove
Women tend to hold on to their frustration longer than men. They take things more personally. They have trouble moving on. These generalizations are all backed up by research, interviews, and feedback from managers. So why do women have such a hard time moving on from bad experiences in the workplace? A lot of it is environmental. Some women report feeling pressure to do everything right when working in male-dominated environments. This makes it harder to handle mistakes, setbacks, and criticism. Men, on the other hand, are able to adopt a live-to-fight-another-day mentality, and can rebound much more quickly.
November 7, 2013
Independent Bookstores Should Negotiate a Better Offer with Amazon Source
Yesterday, Amazon.com launched Amazon Source, a program that will pay retail outlets for selling Kindle e-reading devices and accessories. Retailers can buy the products at a 6% discount and earn a 10% commission on ebook sales recorded for a given device for the next two years. Amazon also offered booksellers a plan under which they can receive a 9% discount and forego any commission revenue.
Putting aside the gut reaction that many booksellers have toward their arch-disruptor Amazon, the idea of a digital partnership with the company has some appeal. Independent bookstores have few options that would allow them to compete on price or selection. Their better options are likely to be found in focus — a specialty of some kind — and service.
The real problem is this: the offer is flawed.
Although the number of independent bookstores in the United States has stabilized in the last three years, independents are still wary of Amazon. Since its founding in 1994, the company has actively competed on price, selection, and speed of delivery.
Unsurprisingly, then, the American Booksellers Association was not impressed with Amazon’s announcement. Oren Teicher, the ABA’s executive director, told book publishing daily digest Shelf Awareness, “It appears that Amazon.com has again fashioned a program that benefits the retailer it cares about most — that is, Amazon.” Other independent booksellers echoed Teicher’s claim.
This concern is understandable given the magnitude of Amazon’s disruptive force. Few independent booksellers can match Amazon’s discounted book prices. They are also at a disadvantage when it comes to selection; even a larger independent store will stock fewer than 100,000 titles, while online retailers like Amazon offer millions. In some markets Amazon offers same-day delivery, undercutting one of the primary benefits of a nearby physical bookstore. Online bookselling has certainly resonated with consumers. According to Bookstats, a database developed to track revenues, prices and unit sales in the book industry, online retail sales accounted for 48.2% of publisher revenues in 2012. This is almost double the 27.5% share reported only two years earlier.
Although physical books continue to make up the bulk of online sales, sales of what Bookstats calls “non-physical products” (ebooks, audiobook downloads, digital course materials and web-based products and services) represented 19.0% of publisher revenues in 2012. Ebooks alone made up two-thirds of that volume. That growth has been particularly strong in trade books, the titles most often found and bought in physical bookstores. And Kindle captured two-thirds of all ebooks bought last year.
Independent bookstores have responded in part by developing IndieBound, their own online retail store. The American Booksellers Association partnered initially with Google and now with Kobo, an e-reading platform with its own devices, to allow member stores to sell technology and ebooks. Both efforts have met with some success, but they could not be considered game-changing developments.
This leaves independent booksellers in a tough spot. Consumers now buy books online at least half the time, far more than any other retail channel. While “online” is not synonymous with “Amazon,” the company is generally recognized as a standard-bearer for making online shopping convenient and hassle-free. Membership programs like Amazon Prime, which eliminates shipping charges for a set annual fee, make the site a first option for many book buyers. So booksellers are hardly incentivized to bolster the behemoth’s business by now selling Amazon’s e-readers and enabling even more Kindle purchases.
However, given Amazon’s dominance, booksellers interested in serving their communities and gaining from growth in the eBook market should, in fact, consider selling Kindles. In fact, booksellers should want to own the device relationship because giving digital readers a reason to come to a physical store opens up a dialogue and a service opportunity.
Indeed, before the announcement, Amazon Source was piloted at two Seattle-area independent bookstores. When contacted by Shelf Awareness, both booksellers spoke favorably about the program.
So how could booksellers — and Amazon — actually make this program work?
Rather than turn a blind eye to a significant share of the eBook market, these retailers should consider negotiating for better terms.
With the 6% discount on device sales, Amazon Source provides a commission on sales for only two years. The work an independent bookseller does to win a customer over should, and often does, last a lifetime. The affiliate revenue — the commission for having sold the device that created the eBook relationship for Amazon — should last as long as the device does.
This is in Amazon’s interest as well. As the majority of book sales will soon take place online, discovery becomes publishing’s Holy Grail. The Amazon platform is a reasonable option when you know what you want. An independent bookseller can be a much more effective option when a reader doesn’t start with the right book in mind. That’s one of the service advantages that independent bookstores already offer.
This can be a bitter pill for independent bookstores to swallow. Amazon has changed the landscape for bookselling in the United States, and many independent bookstores have suffered as a result. The ABA naturally wants to protect the interests of its members.
However, walking away from a mutually beneficial partnership with Amazon not only guarantees only that booksellers will have no access to any part of the eBook market now served by Amazon, it also hurts their ability to make an impact on the growth of the book market overall by reducing the likelihood that digital readers will gain access to the insight and understanding that a local bookstore can provide. Amazon and independent bookstores both play significant roles in promoting the growth of reading: rather than quibble over how to slice a static or shrinking market, they need to find a way to partner around digital reading in order to grow the entire pie.
The Problem with the CEO’s Job Title
The title Chief Executive Officer is something of a misnomer. The task of a CEO — and for that matter of any manager — is not wholly or even primarily about execution. In fact, when the CEO starts to “do” things, and starts becoming more “active,” that is usually when a company gets into trouble. An effective CEO makes things happen principally through his executive colleagues, aptly called “Chiefs” too: the CFO, CCO, and COO. Of course, given that these team members are Chiefs as well, they also should not be doing too much, either. Their job is to make sure that, in turn, their teams do most of the “execution” work. And so on.
In fact, if you ask successful executives to describe what keeps them so busy, you’ll typically get a list of six truly distinct tasks:
Visioning, or framing of their firm’s business challenge;
Planning, or generating potential solutions to the issue at hand;
Deciding, or making a commitment to a course of action;
Explaining the rationale that led to this commitment, and presenting the legitimate expectations stakeholders can hold about the results that will be produced, about how this will be done, and about the rewards that successful execution allows (all of which may cause a change in the decision taken);
Executing, where all energies are devoted to the execution of the decisions, until results are realized, and which concludes with the distribution of rewards; and finally
Evaluating, where one evaluates both the process followed in generating a vision, and the outcomes thus obtained and the rewards shared, with a search for errors that may have occurred, and for corrections and adaptations that need to be made for errors not to be repeated in the future.
Few executives, of course, are good at all of these tasks. The key to identifying where the greatest need for improvement is, therefore, to ask executives this question: what is your biggest improvement wish concerning your boss and colleagues in the executive team you are a member of?
Answers to this question are diverse, but have a common and remarkable pattern: first, the activity least identified actually concerns Executing (5 in the above list). This answer is a stark opposite to the commonly heard complaint from CEO’s that the greatest difficulty they face concerns execution! Secondly, the large majority of answers (typically above 70 to 80%) lie in the first four steps. Thirdly, the single biggest frustration of business executives in their “up-teams” lies in tasks 3 and 4: Deciding and Explaining.
These questions to followers reveal what business executives want from their CEOs and their senior executives: make clear decisions and communicate them to us, with their rationale and implications. Trust us, support us, and leave execution to us — and stop thinking that the execution problem is (only or largely) with us. Execution, when well framed, well motivated and well prepared, is the easiest step in management: all that is left, under those conditions, is to execute what we agreed upon in our meetings. The difficult task lies in the preparation of execution, and after execution, in proper evaluation, learning and correction.
The language used in business at the top is thus a problem: it anchors executive action (and mindset) precisely where the challenge does not lie! Perhaps, therefore, it’s time to change the label: The British term Managing Director or the French equivalent Directeur Général both appear superior to CEO. But perhaps an even more accurate title would be Chief Decision Officer as this is the task that rests most fully on the shoulders of the boss. Chief Framing Officer probably won’t work (because of the acronym confusion with Chief Financial Officer) but perhaps Chief Evaluation Officer would (at least it shares the acronym).
The point here is not so much to replace a bad title with another partially flawed one, but rather to identify the duality at the heart of the executive’s job: responsibility for actions mostly and largely taken by others, that are influenced by (always imperfect) framing, and the need to (always imperfectly) make adaptations revealed through imperfect execution. CEOs do not so much execute as influence execution through framing, decision-making, and evaluation. Of course, it would be better if their job title did reflect that fact.
High Stakes Decision Making An HBR Insight Center
Managing “Atmospherics” in Decision Making
The Six-Minute Guide to Making Better High Stakes Decisions
Learning From Bad Decisions in “Disaster Lit”
That Hit Song You Love Was a Total Fluke
The Best of November 2013
All healthy human beings have an inner stream of thoughts and feelings that include criticism, doubt, and fear: “I’m a fake.” “He’s a jerk.” “It was the same in my last job.” This is natural. But suppressing these kinds of thoughts causes as much trouble as succumbing to them. Here the authors offer up a simple, and practical, alternative to taming the beast within, adapted from University of Nevada psychologist Seven Hayes’ Acceptance and Commitment Therapy. First, recognize your patterns. (“I think quite a few people are jerks, don’t I?”). Label your thoughts when they arise. (That’s the difference between thinking “He’s a jerk” and realizing, “I’m thinking that he’s a jerk”). Accept your thoughts for what they are. (“When I think people are jerks, I’m worried that something important is at stake.”). Then act, but according to your values. (“Am I the kind of person that criticizes when something important is at stake, or do I pitch in?”). But don’t just take their word for it -- try the process out for yourself, with the accompanying emotional agility exercise.
FeatureDismantling the Sales MachineBrent Adamson, Matthew Dixon, and Nicholas Toman
“Wanted: experienced sales professionals looking to maximize earning potential in a fast-paced, competitive sales organization.” This is a description of the salesperson of the past—the one who follows a carefully honed sales process designed to close the highest volume of sales before the quarter ends from people already ready to buy. But nowadays if you wait until customers have all the information they need to buy, the only way you’re going to get their business is to compete on price. Far more lucrative are the sales organizations that create demand, rather than just respond to it. Salespeople in these companies demonstrate creative solutions to needs customers don’t already know they have, sometimes with funds they don’t yet realize they might access.This is good news for creative thinkers—but bad news for most sales reps today. In their extensive research, the authors found only 17% of existing sales employees score high on the skills needed for this new kind of selling.
How I Did ItRakuten’s CEO on Humanizing E-CommerceHiroshi Mikitani
His parents were aghast when he left his prestigious job at the Industrial Bank of Japan to start up a new-fangled website in 1997. Today, Rakuten is the world’s third-largest marketplace for e-commerce (behind Amazon and eBay) with nearly 10,000 employees. It sells $15 billion worth of goods in 13 countries by bringing scale to the personalized experience of boutique shopping. By giving vendors a chance to tell their stories in their own way, Rakuten has shown it’s possible to create richer relationships with vendors than some people have with their friends—and sell the most unlikely things. Who ever thought you could sell fresh eggs online for more than they cost in the local market?
FeatureStrategy: The Uniqueness ChallengeTodd Zenger
The more time it takes financial analysts to evaluate your company’s strategy (either because it’s unique or because it spans several industries), the more likely it is that they won’t bother. And if they don’t understand your strategy, they won’t value your firm as highly. That’s what the author found when he and colleagues at Olin Business School examined all 7,630 companies publicly traded in U.S. capital markets between 1985 and 2007. Sometimes, they just come right out and admit it, as PaineWebber did in confronting Monsanto’s strategy to gain R&D synergies by constructing a portfolio of businesses spanning the chemicals, biotech, and agribusiness sectors. Because it was so hard for analysts with differing expertise to even schedule a time to meet, PaineWebber actually suggested that the only way Monsanto would get a proper valuation is if it unbundled itself. So what’s a creative company to do? Zenger argues that companies seeking a fairer hearing have only two options—make their strategic information more accessible or find investors who will take the long view. Monsanto’s experience would suggest those investors might be well rewarded: After a series of complex strategic moves, and 11 years after being judged by analysts as essentially worthless, Monsanto’s market cap reached $57.5 billion.
For a Breakthrough Idea, Start by Examining Customer Touch Points
Wharton Business School professor Ian MacMillan wrote in a 1997 HBR article that companies seeking to differentiate themselves should examine every element of the customer value chain to find opportunities for improvement. In the 15 years since the article was written, this has become increasingly common practice. But the approach has far greater application than it is typically given. More than a tool for differentiation, it is a tool for spurring creative thinking.
Often in the ideation process, ideas are focused exclusively on improving a specific service or product. However, limiting your thinking in this way is a fast-track to uninspired ideas. Breakthrough ideas come when you look beyond the product or service to rethink every touch point, or every element of the customer value chain, as MacMillan puts it.
I recently worked with a retail bank that was trying to reduce the number of in-bound customer service calls pertaining to how a specific line of credit worked. Not surprisingly, nearly 80% of the incoming calls were from first-time users; customers had taken out a line of credit at the branch and then were confused about how and when they could use it, how interest was calculated, and their options for repayment.
Rather than trying to improve the product or beef up the instructions to make its function more clear, which the bank had repeatedly tried to do over the years, the redesign team decided to completely reimagine the initial touch point – the moment when their customers would first experience the product. They turned to Apple for inspiration.
The banking team ordered a MacBook Pro and marveled at how the product made them feel when they opened the box – the quality of the packaging materials; the simple elegance of the assembly instructions; the beautiful design of the product itself. Why, they wondered, couldn’t their financial product create the same type of emotion for their customers? After all, the line of credit was providing them with a sense of financial security.
With the Apple experience fresh in their minds, the banking team redesigned the touch points surrounding the line of credit product – from how the product was delivered (in a beautiful box with a luxurious feel that makes the user feel they are opening a gift) to the color-coded operating instructions. What’s more, they provided customers with a product playbook, which included several examples of how the product could be used with multiple scenarios. Within six months of making these changes, call volume had declined by more than 40%.
This breakthrough did not come from rethinking the product, but rather, from rethinking the customer touch points. In reimagining how your own customers interact with your organization, consider the following questions and examples:
How do your customers participate in product launches?
Vitaminwater used its Facebook page to poll fans on which new flavor they preferred for their next big product launch. They also used an app to design their new packaging.
How do your customers provide feedback?
Southwest Airlines consistently monitors customer feedback using Net Promoter, a tool that measures customer satisfaction by tracking whether a customer would recommend the airline to a family or friend. Using Net Promoter, Southwest Airlines managers can securely monitor how their teams are performing every day and keep a pulse on what customers are saying and thinking about the airline.
How do your customers actually receive your offering?
The Kindle ships in environmentally-friendly yet functional packaging to support their brand.
How do customers interact with your offering in an ongoing way?
Gatorade has a “Mission Control Center” that monitors its brand in real time across all social media, which allows customers to participate with the brand.
How do customers get your offering repaired, replaced, or modified?
Zappos reinvented the shoe-buying experience by offering multiple reviews of each product, great multi-dimensional views, free overnight delivery, and free returns.
While it can’t be denied that occasionally a product or service truly does need to be revamped, too often we jump to that conclusion without first considering the various other ways we can add value for our customers. In your next ideation session, put the product or service on the backburner, and instead consider how you can improve each customer touch point. I predict you will see more creativity, innovative thinking, and breakthrough solutions for you to better serve your customers.
Liberating Patients from Mechanical Ventilation Sooner
At the Mayo Clinic, we implemented sedation-weaning and ventilator-weaning protocols and a color-coded communications scheme in the ICU in an effort to more quickly identify mechanically ventilated patients who were able to be awakened and breathe on their own.
The Challenge
Timing is everything, but for critically ill patients on a mechanical ventilator (MV), or breathing machine, it’s the only thing. We know that the earlier we liberate patients from the MV, the better — it reduces the rate of mortality — but premature extubation can lead to a host of other problems. The key is to correctly and quickly identify mechanically ventilated patients who are able to breathe on their own.
The Solution
A spontaneous breathing trial (SBT), during which a patient is temporarily weaned from the MV on a daily basis, has become standard practice; however, a spontaneous awakening trial (SAT), which involves daily interruption of a patient’s sedation, has been shown to reduce the amount of time a patient remains on the MV. Although the use of the SAT or SBT alone can decrease the length of time a patient is on the MV, the pairing of the two protocols could reduce the mortality rate more than the use of SBT alone. We explored the combined use of the SAT sedation-weaning protocol and the SBT ventilator-weaning protocol in our ICU.
Because our providers acknowledged an association between the SAT and SBT, we also conducted a survey to determine the reason the combined protocols were not yet integrated in our ICU. We surveyed 196 of our providers, including ICU registered nurses (RNs), respiratory technicians, and physicians, and recorded 87 responses. Communication problems (27%) were the most cited barrier — medical team daily work schedule (24%), unit staffing (21%), and physician availability (21%) encompassed 93% of the total reported barriers.
The Implementation
The protocol was implemented between November 2011 and May 2012. To improve communication among ICU staff, my colleagues and I added a communication scheme with color-coded signal cards that are posted at the patient’s bedside.
Card 1: A for “Awake”
Card 2: AB for “Awake and Breathing”
When a patient passed the SAT, an RN posted the A card. If the same patient also passed the SBT, a respiratory technician replaced the A card with the AB card, which indicated to the ICU team that the patient was ready for extubation.
The Evidence
Before we instituted the SAT and SBT protocols and color scheme program, 46% of our providers acknowledged an association between SAT and SBT. After adopting the program, the providers’ perception of an association between the SAT and SBT increased by 14%.
We should note that we did not collect patient outcomes data — this project was designed only to improve our compliance with the SAT and SBT protocols, which have been proven to be beneficial. Future investigations need to be performed to observe patient outcomes.
The Next Steps
We believe this intervention improved communication among our ICU staff and further linked the SAT and SBT in the minds of our providers. As a result, this protocol has become the standard of care in our ICU. Further stakeholder deployment of social marketing, which combines marketing concepts with research and best practices to influence behavior for greater social good, is a good path to improving communication among providers. In an era of increasing costs, similar inexpensive interventions can be effective for multidisciplinary team building, patient safety, and improved outcomes.
Follow the Leading Health Care Innovation insight center on Twitter @HBRhealth. E-mail us at healtheditors@hbr.org, and sign up to receive updates here.
Leading Health Care Innovation
From the Editors of Harvard Business Review and the New England Journal of Medicine
Constraints on Health Care Budgets Can Drive Quality
A Role for Specialists in Resuscitating Accountable Care Organizations
Make Physicians Full Partners in Accountable Care Organizations
Employee Engagement Drives Health Care Quality and Financial Returns
What Business Can Expect from China’s Third Plenum
Beijing’s business circles are buzzing this week about what the Communist Party of China (CPC) is cooking up for the Third Plenary Session of the 18th Party Congress, scheduled to start on November 9, 2013. This meeting of the extended CPC leadership may prove to be exceptionally important; China’s new leaders are likely to announce an economic blueprint for the next decade at the conclave. Expectations are soaring, and comparisons have been made to the historic Third Plenary of the 11th Party Congress in 1978, which resulted in the opening up of the Chinese economy.
Over the last year, China’s new leaders have made no secret of their desire to refocus the economic model on efficiency and productivity and to get away from quantity and speed alone. Many of the reforms needed to ensure that have been discussed publicly for months. However, it might be best to look at this plenary as the starting-point of a change process that will take many years to implement. Decisions at such meetings typically provide general guidance, which is open to interpretation, so CEOs should lower their expectations in terms of the announcement of measures as well as the policy direction.
China’s new leaders face unprecedented challenges in terms of the complexity of policy measures and their implementation. Resistance, or in the best case, lack of cooperation can be expected from entrenched interest groups, particularly from the leaders of state-owned enterprises and local officials. So it will be in the leadership’s interest to implement several reforms in phases and, in some cases, to experiment and find out what measures it should build on later. For instance, reforms of the state owned enterprises-dominated sectors and the opening up of the government-monopolized sectors will both be launched gradually or delayed to an opportune moment because of the political resistance it will spark.
The announcement of the creation of the Shanghai Free Trade Zone, a measure that is likely to focus on financial reforms, seems to be an experiment, for instance. It’s a major announcement in principle that has wide repercussions, such as the further opening up of the financial sector, but its implementation will be announced gradually.
After the plenum, there will be some more clarity about where the leadership wants to take China in the medium and long terms, and the policy direction on financial and tax reforms, land reforms, urbanization, etc. will become clearer too. Don’t expect to get a picture of how all that will hang together or what it all means exactly. That’s going to be a trial-and-error process which will last several years, and in true Deng Xiaoping style, it will entail “crossing the river by touching the stones,” with the added difficulty being the presence of crocodiles in the water.
At the same time, look at the bigger picture. The CPC’s third plenum is the first step in a change process that started around a year ago with the appointment of the new leadership at last year’s plenary session. Before that, there was no discussion about reforms in China; in fact, the pro-reforms faction in the CPC had been sidelined and silenced. There was skepticism about whether the then leadership-in-waiting would even embark on the reforms that China required.
The situation has changed since then; there’s now a consensus about the necessity to make a shift to efficiency, innovation, productivity, and, ultimately, consumption. Furthermore, there’s an awareness of the urgency; most leaders admit that pursuing the current model will increase the risk of a major economic or social crisis. The current discussion is only about what to reform, how to do so by getting the right people in place, and figuring out how to overcome key obstacles. That’s a huge and hopeful shift.
The policy environment will provoke considerable uncertainty in the business environment in China in the future. There will be new opportunities for foreign companies as the economy transforms itself, but they have to learn how to handle an environment of uncertainty and volatility in order to take advantage of them. That will require the development of new corporate capabilities and resources. What worked in China in the past will no longer suffice to succeed in future — and even the CPC’s Third Plenum will not be able to change that.
China’s Next Great Transition
An HBR Insight Center
Is It Time to Be Skeptical on China?
Do You Really Want to Bet Against China?
Which Management Style Will China Adopt?
China’s Impending Slowdown Just Means It’s Joining the Big Leagues
Why Your Innovation Contest Won’t Work
What’s the best way to quickly improve innovation in your organization?
That was the question posed to me recently by Warwick, the head of innovation for the Australia and New Zealand region of a multinational engineering firm. He asked because their CEO had just announced a new innovation initiative. It’s an idea contest – submit your ideas, and the person that submits the best one wins $10,000.
If you think about this for a minute, you can see a few assumptions about innovation that underlie this contest:
The main problem the firm has with innovation is that they don’t have enough ideas.
The reason that people aren’t innovating is that they aren’t being paid enough to do so.
Idea generation is the best place to invest money to improve innovation.
All three of these assumptions are false, and that is why this initiative isn’t going to work. This is the most common innovation mistake that I see: acting like innovation is all about generating new ideas.
Innovation is the process of idea management – so, yes, you need great ideas to innovate, but that is only part of it. You also need to be able to select ideas. Once you’ve done that, you need the ability to execute them. While all this is going on, you have to keep people inside your organization enthusiastic about the ideas. And at the end of all of this, you have to get your great new idea to spread. To innovate, you need to be good at all of these things.
Morten Hansen and Julian Birkinshaw refer to this process as the Innovation Value Chain, and they say that to innovate successfully, you need to be good at all of these steps.
Over the past five years, I have had all of my MBA and Executive Education students evaluate the Innovation Value Chain within their organizations. Over that time they have analyzed the innovation capability of more than 300 organizations. They cover the full spectrum – large multinationals and tiny start-ups; for-profit, not-for-profit and NGOs; private sector, government units and university sections.
Out of all of these organizations, only about 10 are idea-poor. That’s less than 4%. The other 96% of organizations have problems with other parts of the innovation process. So the first assumption of Warwick’s CEO is wrong. We know that there are actually plenty of good ideas in the firm – the bigger issue is figuring out how to sort them out and get them executed.
The second assumption is just as wrong. The CEO is assuming that the best way to motivate innovative people is with money. This is a bad approach to take with innovation and other creative work. Dan Pink does a great job of summarizing the research on this in his book Drive. The research shows that to motivate work built on creativity, people need autonomy, mastery and purpose.
The problem here is that it is a lot easier to offer a $10,000 prize than it is to design work so that people have autonomy, mastery and purpose. That requires an entirely new approach to management for most organizations. This is why many innovation initiatives fail – managers simply try to bolt an innovation initiative onto an existing business model that is ill-suited to innovating. If you want to start thinking about how to make changes in this area, answer this question: what would I do differently if everyone reporting to me were a volunteer?
The third assumption is also wrong. This follows from the discussion of the first assumption. If innovation is a process, and most firms are weakest in activities other than idea generation, than it should be clear that the most sensible place to invest money is in the area where you’re weakest.
So why do organizations focus on improving idea generation, when this is almost never the problem? Because idea generation is the easy part! It’s the one area where you can show measurable improvement almost immediately.
But if your main weakness is idea selection, or idea execution, then generating more ideas won’t help. In fact, generating more ideas can actually make you less innovative, because the weaknesses in other parts of the process will sink the new efforts, which in turn increases the frustration of your people – demotivating them.
So what should Warwick’s CEO do?
The first thing that I would recommend is evaluating the firm’s innovation strengths and weaknesses. The Hansen and Birkinshaw article includes a quiz for this, but there is an even better version available in the Australian Public Sector Innovation Report. The assessment will indicate which part of the process is the weak link in the chain.
Once this weakness is identified, take the $10,000 and invest it in improving that part of the process. It will likely involve making genuine changes in the way things are managed. But it will lead to genuine improvement too. After six months or a year, run the assessment again to see if things are better. If they are, start working on the next weakest link in the chain. Over time, innovation really will improve.
I wonder if I could submit that idea into the contest?
Blockbuster Becomes a Casualty of Big Bang Disruption
DISH Networks, the owners since 2011 of video rental giant Blockbuster, announced Wednesday the shuttering of all remaining company-owned retail locations and of Blockbuster’s DVD-by-mail service. The shutdown will be completed by early 2014, bringing to a close a dramatic story of rise and fall at the hands of disruptive technological innovation, or what we have called “big bang disruption.”
Classic disruptive innovation says that a cheaper, but lower-quality, innovator can eventually overtake an incumbent by gradually siphoning off customers the incumbent doesn’t find it profitable to defend. As the disruptor improves its offering, though, the incumbent’s position becomes increasingly fragile. Big bang disruption differs in that the start-up offers an innovation that’s not only cheaper, but better — higher quality, more convenient, or both — almost right off the bat. The Blockbuster-Netflix skirmish is a case in point.
For years, Blockbuster seemed unbeatable. At its peak, the company operated 10,000 stores. As recently as 2002, the company had a market value of $5 billion. Then in 1997, Netflix happened. The scrappy start-up built a distribution model that relied exclusively on mailing DVDs to customers through the low-cost U.S. postal service. It was almost as convenient as a neighborhood retail store but at a fraction of the price—and without the late fees that annoyed Blockbuster customers.
Where big bang disruption comes into play is with the advent of Netflix’s streaming video service in 2007. At the time, less than 50% of U.S. homes had a broadband connection, but CEO Reed Hastings clearly saw the writing on the flat screen. The gamble on streaming content has paid off handsomely. Netflix now represents the single largest source of Internet traffic in much of the world, helping to drive both adoption and network expansion. Today, 70% of U.S. homes have broadband, and network operators continue to invest in ever-faster cable, satellite, and fiber-based technologies. Just last week, for example, industry research consortium Cable Labs released a new cable transmission standard, DOCSIS 3.1, which promises transmission speeds up to 10 Gigabits per second—enough for multiple streams of next-generation ultra-high-definition programming.
With the launch of its digital service, Netflix moved from a slightly less convenient but cheaper competitor to the realm of big bang disruption—an innovator offering better and cheaper goods than Blockbuster. For a monthly fee, Netflix customers can watch all the movies and television programs they want, whenever they want, and without ever leaving the house and without the need for physical media of any kind.
Netflix’s digital transformation has led the company to even more dramatic innovations, including original programming such as “House of Cards” and “Orange is the New Black.” In September, Netflix became the first video distribution company to win a major Emmy award. It is now the largest paid television “network” in the country, with close to 30 million subscribers.
Blockbuster ultimately launched its own digital download service. But by then its one-time core assets — retail stores — had become expensive liabilities, weighing down the company’s effort to compete in the winner-take-all kind of market that is often characteristic of Big Bang innovation. Revenue and profits continued to decline. In 2010, the once-unbeatable company declared bankruptcy.
Satellite maverick DISH bought what was left of Blockbuster for a little over $300 million the next year, largely for the value of the digital service and its 3.3 million customers. Since then, DISH has been busily cutting costs, shutting down hundreds of retail locations across the U.S.
With this week’s announcement, the company has acknowledged the accelerating decline in value of Blockbuster’s remaining physical locations, assets stranded by the lightning-fast pace of digital disruption. In a statement, DISH President and CEO Joseph P. Clayton said, “This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment.”
That’s an important insight. In markets where customers can shop, buy and consume goods and services digitally, innovation is increasingly being driven not by the marketing plans of even dominant providers so much as the seemingly insatiable appetite of consumers for the newest technology. Companies no longer offer—consumers now demand.
DISH continues to see hope of a return on its investment in Blockbuster. But like many companies whose physical products, distribution channels and retailing operations have suddenly gone digital, the value that remains will come not from the stores and inventory that once dominated Blockbuster’s balance sheet. It comes instead from what economists call the intangibles–including copyrights, trademarks, and patents.
As DISH’s Clayton put it: “Despite our closing of the physical distribution elements of the business, we continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings.”
In the strange new world of better and cheaper innovation, every industry will experience similar transformations. Yet most executives, in our experience, underestimate the potential of digital disruptors. In doing so, they systematically undervalue their own intangible assets.
Why not start now to get to know them better? They may show the only path to escape when your blockbuster products get wiped out by big bang disruptors.
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