Marina Gorbis's Blog, page 1521

Don’t Blame IT for Obamacare’s Tech Troubles

“Many eyes, shallow bugs.” Perhaps the HealthCare.gov gang that couldn’t code straight had never heard this software mantra. One can’t be sure. The Centers for Medicare and Medicaid Services, the agency overseeing the technically troubled Affordable Care Act exchanges, has done a far better job concealing the details of its systems design, development, and deployment practices than producing working websites. IT experts uncharitably observe that what the President describes as “glitches” are symptomatic of deeper digital dysfunctions. Are they right?

Unfortunately, that’s the wrong question. The better question and concern is, where was the leadership and oversight helping to assure Obamacare’s implementation success?

Blaming programmers, coders, and project managers for disgraceful design flaws and technical turmoil is too easy and obvious. Crap rolls downhill. Look deeper. The underlying truth for virtually every large system’s implementation initiative is that success demands leadership and oversight that holds itself accountable for assuring best practice. Good governance, not superior technical chops or ready access to alpha geeks, is how you build complex systems that deliver reliable and resilient value for money. Good governance provides oversight, insight, and foresight. Emerging problems are flagged sooner; project leaders present their testing protocols and outcomes; and updated expectations are clearly communicated throughout the enterprise. Contingencies are constantly reviewed and appropriately revised. That’s what serious systems developers do.

Whether organizations implement a standard Enterprise Resource Planning (ERP) system or create something new, the literature of case history and empirical evidence make abundantly clear what works and what doesn’t. Known “worst practices” include “create the project plan by working backwards from a drop-dead system completion date” and “skip the testing phase because the project is way behind schedule.” Does any of this sound familiar? Obamacare’s leadership and governance simply wasn’t serious.

In my work on complex systems procurement (PDF) and participation in project and program reviews, the only variable more important than the quality of the people doing the work was the integrity of the individuals responsible for governance. They understood how to be supportive while holding management accountable. They demanded — and got — visibility, transparency, and insight into how management defined and adhered to best practice. They wanted discussion and debate around technical trade-offs. Most of all, they wanted to better manage risk by rigorously reviewing and learning from test outcomes. Actions speak louder than words. Successful IT systems demand serious IT governance. Where was it?

Based solely on Government Accounting Office reports and media coverage, it’s unclear which — if any — best practices in systems and software development were being followed. Even worse, there’s virtually no discussion of how project milestones were measured, assessed, and reviewed. The few serious tests conducted suggest that that iterative learning from smaller scale design and deployment was less a goal than an afterthought.

In other words, the role of leadership and governance was conspicuous by its absence. Indeed, the GAO observed that when given the chance to comment on its June 19 report, “the Department of Health and Human Services (HHS) emphasized the progress it has made in establishing exchanges, and expressed its confidence that exchanges will be open and functioning in every state by October 1, 2013.”

How could HHS not have known? Please. That’s neither technical failure nor software glitch; that’s a failure of leadership and oversight. These are issues of character and culture, not technology and money.

Over a year ago, this blog asserted that the key to any successful innovation rollout is a commitment to testing:

Testing for validation is all about leaders looking for compliance and adherence to plans; testing for learning is about leadership that expects people to be attentive, agile and adaptive. What kind of leadership do you think leads to a sustainable innovation culture? Yes, look at innovators, their schedules and their budgets. But if you want to understand how smart and serious they are, look at the testing regimes they submit their innovations to. Are you impressed? Or do they flunk?

That’s why listening to the way the President and HHS Secretary Kathleen Sebelius talk about Obamacare’s rollout failures is so disheartening and disappointing. “…Nobody’s madder than me,” said the President, who earlier observed that no one called for Apple to shut down or discontinue its iPhones after glitches had been discovered.

But, of course, Apple demonstrably knows what it is doing. Moreover, when Apple had problems, its CEO Tim Cook publicly apologized. The President and Secretary Sebelius did not. Tim Cook understands that Apple has customers who have choices and who deserve real value for money. It’s not clear what the President, Secretary Sebelius, and the ostensible overseers of Obamacare’s technologies understand.

The simple and inarguable truth is that the technical teams struggling to build Obamacare’s exchanges on a demanding deadline aren’t as technically talented or capable as Apple’s technologists. Precisely because these developers and managers were more “typical” and “average” than world-class, they needed an oversight and accountability leadership that would step up to the challenge. They didn’t get it.

Many eyes, shallow bugs. The next iteration of network development needs to be more open, more transparent, and more accountable. Or it will fail. Again.

Timberland’s CEO on Deciding to Engage with Angry Activists

You can tell a lot about how your day is going to unfold by the number of e-mails that are waiting for you. I’m a pretty early riser—4 AM most days—so I typically start out ahead of the game when it comes to e-mails. But on June 1, 2009, they kept coming, and coming, and coming.

The first one accused Timberland of supporting slave labor, destroying Amazon rain forests, and exacerbating global warming—all in the first sentence. The second was the same as the first. The fan mail was from Greenpeace supporters reacting to a newly released Greenpeace report about deforestation in the Amazon. The senders didn’t threaten a boycott but said they were “concerned” and urged us to work with Greenpeace to find a “permanent global solution” to both deforestation and climate change.

As a CEO, I’m used to getting angry e-mails. But these were different. Even though their text was a form letter pulled off the Greenpeace website, it was well written and informed. And it was coming from a potent activist organization, suggesting a problem I wasn’t intimately familiar with. Even in my early-morning haze, I knew that was a bad combination.

My first response to the e-mails was to be pretty angry myself. Of all the environmental problems Timberland has been actively committed to addressing, deforestation tops the list. We’ve planted a million trees in China; we host community regreening events in cities all over the world. Our logo is a tree, for crying out loud. How much more ridiculous could this campaign be? It would have been laughable—if not for the 65,000 Greenpeace supporters who were buying into the allegations.

The Origin of Hides

As much as I didn’t want to admit it, Greenpeace was asking a legitimate question: Where was our leather coming from?

The fact is, the origin of hides has never been easily traceable: They’re treated as a waste product by slaughterhouses, which are mostly interested in the meat. In some parts of the world, hides are sold in batches of two or three by guys on the side of the road. The lack of traceability in our materials supply chain is almost archaic. I thought Greenpeace had raised a good question and that there was value in trying to answer it.

We called Greenpeace within a few hours of receiving the first e-mail, but it took days to get someone knowledgeable about the issue to come to the phone. While we waited for the organization to talk to us, our supplier tried to get some answers. To illustrate its claim that ranchers were illegally clear-cutting the Amazon forest, Greenpeace published pictures from Google Earth showing cows grazing in places that had been forest just a month before. In conversations with our supplier, we learned that it didn’t actually know where ranchers were pasturing their cattle—so Greenpeace might be right. Hmm…not the answer I was hoping for.

My next question for the team: If our supplier didn’t know where the cattle originated, could we start figuring it out? Could we track where specific cows were grazing? Our engineers concluded that the task was arduous but not impossible; although there wasn’t a system in place to capture and manage that data, there could be, given enough time and resources. What would make it impossible, they said, was if the companies further up the supply chain—the cattle ranchers and the slaughterhouses—were unwilling to go along with it.

It’s called a supply chain for a reason: There are a lot of links—ranchers, slaughterhouses, tanneries. In the scheme of things in Brazil, we’re a very small player with very little leverage. To its credit, Greenpeace understood this. So it didn’t come after shoe companies only—it also targeted companies that buy beef, including Wal-Mart and other grocery chains. It applied pressure to Brazilian politicians, who turned to Brazilian law enforcement, which began going after the ranchers who were breaking the law. Greenpeace effectively brought a coalition of pressure against every link in the chain simultaneously—a powerful tactic, and one it knew would work.

Crafting a Response

Dealing with the supply chain would take weeks, if not longer—but in the meantime, we had 65,000 love notes to respond to. Bill Clinton likes to say that when it comes to winning votes, you need to consider two kinds of people: the Nos and the Maybes. Now, the Nos are against you all the way; you can’t win their votes, so you shouldn’t waste time trying. Every election, he says, is won or lost on the Maybes—they’re your fighting chance. Even though we had no way of differentiating Nos from Maybes, given the cookie-cutter e-mail, we knew we had to craft a response that had the best possible chance of winning the Maybes (provided there were any in the bunch)—those who might, just might, see that we were trying to do the right thing.

Our response ended up evolving over time. Writing an e-mail response may seem like a no-brainer, but we worked really hard to get it right. For instance, if an e-mail had come from an Italian internet address—even if the message was in English—we replied in Italian. And we watched how many senders replied. We never expected that everyone would write back and say, “Wow, we never realized you were great guys!” but we did hope to hear from activists who appreciated our response. And some of them did.

By July, we’d begun to make progress in working with our supplier and in consulting with our competitors and with Greenpeace. Although Greenpeace had hoped that we’d simply come out with a high-level statement agreeing with its position, we wanted to really understand the problem—and to make sure our supplier had a system in place that could be implemented and sustained.

On July 22, Nike announced that it would require its Brazilian leather suppliers to certify in writing that their hides hadn’t come from deforested areas. Now, Nike is huge—a much bigger player than we are in terms of leather sourcing—and its suppliers would have to start mapping and tracking ranches all over the country. A few days later—seven weeks after the e-mail onslaught began—we reached a similar agreement with our supplier.

At the end of July 2009 we issued a statement praising Greenpeace for bringing the matter to the industry’s attention, and it was able to declare victory. In return, it issued a statement saying that Timberland had taken a leadership position on the issue, which was as gratifying as praise from an organization that has painfully put you through the paces can be.

Did any of this make a difference for the issue of deforestation in Brazil? The jury’s still out and probably will be for a while. But I believe there’s real value in the outcomes we’ve already seen and in the lessons I’ll take with me as I continue to work to make Timberland a more responsible and sustainable organization—the same path I was on before the first e-mail came in, and the same path I’ll be on tomorrow.

This is an excerpt from How I Did It: Timberland’s CEO on Standing Up to 65,000 Angry Activists from the September, 2010 issue of Harvard Business Review.

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Five Power Skills for Discovering Radical Ideas

Innovation starts with new and novel ideas. Over the last 20 years, we have worked with many world-class brands to help find their next “big thing.” During the initial phases of our work together, it becomes obvious that they have plenty of good ideas. Finding ideas is never the problem — initially. The challenge is finding radical ideas consistently year after year.

When we surveyed over 300 global executives between 2008 and 2009, one of the primary concerns they expressed was their inability to compete long term without a solid innovation engine that can grow their top line. In order to do this, your company needs a process to source radical ideas that can catapult your business to new heights, open up new markets, or bring in completely unfamiliar profit streams.

But in today’s ever-connected world, finding radical ideas seems to be getting tougher for companies. With this in mind, we started to document and study the best-in-class skills of our client companies and their intrapreneurs. Here are five power skills we discovered to help you find uncontested space.

1. Develop Creative Discontent. The best corporate intrapreneurs are never satisfied with the status quo. When times are good, revenue is good, customers are happy, and everyone seems to be making their quarterly performance metrics, intrapreneurs are not satisfied. They need creative discontent. Creative discontent is not about anger, unhappiness, or any other emotional state regarding others; it’s discomfort with your current state of mind. When an intrapreneurial leader is discontent, he asks big questions and challenges himself and others to find big ideas.

An effective way to create creative discontent is to ask questions that shake people up. Bold questions force others to get out of their comfort zones and stretch for solutions they normally would never search for. Let’s say you’re in the energy sector. You may ask, what are some risky investments that stand a high chance of failure but, if successful, enable larger technological leaps that promise earthshaking impact? Or, how can we economically make lighting and air conditioning 80% more efficient? Answers to these questions are not easy to find inside most corporate walls. It will force your key talent to go where they have not yet been.

2. Use Convergence Thinking. What two or more areas are merging? The business game is changing due to convergence — a process by which the boundaries across industries, businesses, markets, geographies, and/or customer experiences become blurred, resulting in new business opportunities for serving customer needs and improving customer value. Cosmeceuticals, for example, is the new industry emerging from the convergence of the personal care/cosmetic and pharmaceutical industries. This industry is fueled by advances in chemistry and biotechnology that allow the use of pharmacological and cosmetic therapies in areas where, earlier, surgical intervention was needed.

Three major factors drive convergence: technology, competition, and the customer. Each factor directly influences convergence, and the three may indirectly influence each other. The essence of convergence is that it is driven by new forms of competition — both within and across industries — and the collapsing boundaries between industries. Convergence is not simply about combining ideas and technology; it is a primary leadership competency that allows organizations to design the right future.

3. Find Pivots. Everything, everyone, and every system evolves over time. Change creates opportunities for innovation, and if the amount of change is disproportionate in size, there is opportunity for movement in a completely new direction — a pivot.

Broadcast television to viral videos, email systems to social media, public libraries to Wikipedia, medical doctors to nurse practitioners — these are all examples of pivots. Apple created the online entertainment business retail pivot. Amazon created the online retail pivot to outcompete brick-and-mortar book retailers. Today, YouTube and Netflix are actively pivoting the entertainment production industry by creating new original online video channels.

Companies who can see early disruptors in an industry can easily identify potential pivots and associated radical ideas. Pivots don’t occur overnight; they can be seen. You can teach people how to find pivots. A few of our clients have set up innovation colleges and universities to teach their leaders, managers, and top talent how to find pivots (and the other four skills mentioned here). These are structured training and work-study programs that certify a certain level of proficiency, similar to typical green-belt and black-belt programs for Six Sigma initiatives. Once they find it, they work on finding radical ideas and developing business proposals for top executives to review. The faster you identify the pivots, the quicker your ability to make strategic choices between various radical ideas for your next big innovations.

4. Overturn Orthodoxies. To find radical ideas, most organizations promote learning new tools, techniques, and methods. The more important barrier to innovation is the inability to forget things that prevent innovations from arising. Identifying and overturning old organizational conventions or boundaries enables breakthrough applications to be born; in so doing, they frequently push companies with deeply held conventions out of the marketplace.

Some of the world’s biggest brands were created by challenging industry orthodoxies. Starbucks would have never existed had they believed that no consumer would pay more than $2 for a cup of coffee. Challenging orthodoxies can provide clarity on existing paradigms worth changing to improve your business model, products, services, processes, customer experience, or brand. Challenging them does not require you to overturn the laws of nature, Rather, it allows you to redefine the perceived constraints and boundaries regarding the industry business model, consumers/customers, and the delivery and service model, as well as to assess how value is delivered to customers and how a product or service is designed, manufactured, and supported.

5. Think Frugally. Frugal innovations require frugal thinking — an ability to engineer cost‐conscious solutions to address large unmet needs of internal and external customers. The primary driver of frugal thinking is scarcity of time and resources. Frugal thinking forces individuals to be highly creative just to accomplish routine jobs. It is not about being cheap. With the daily pressures of limited time, resources, and money, it is crucial to help everyone find more creative ways to innovate.

Start‐ups become successful because they are frugal in their origins. They remain resourceful and flexible during growth. Even if the company is large, successful corporate innovators have a natural ability to think on their feet, tap into just the right internal and external resources, and convince others to follow their ideas. Many Western firms have self‐imposed boundaries on what a product should be, how it should be sold, or how it should be packaged and delivered. Your intrapreneurs should identify such assumptions and challenge them constantly.

Teach these five power skills to the leaders and top talent in your organization. They can help keep your innovation pipeline full. By practicing these skills, your team will improve critical and creative thinking skills, leading to many game‐changing opportunities for your organization.

Bureaucracy is a Bogeyman

We frequently accuse large and complex companies of being bureaucratic, but what about them do we really want to see change?

The dictionary says bureaucracy is a means of coordinating activities through standardized rules and procedures. It was originally seen as a good thing – a way of allowing organizations to survive changes in leadership, and to resist the capriciousness of powerful individual leaders with vested interests. We might not like the idea of Italian bureaucracy very much, but it beats having Silvio Berlusconi in charge. But over the decades, the term has gradually taken on negative overtones, and become shorthand for the complexity that makes large organizations slow-moving and uninspiring to work in.

I spend a lot of time working with executives on how they might declutter, simplify, or speed up the inner workings of their organizations. And I always push back when they say bureaucracy is the problem. What exactly is going wrong, I ask them? Bureaucracy is a convenient bogeyman, as it can mean anything that is bad about big companies. But if these executives are going to make their companies suffer less from it, they had better figure out how to identify the precise problems it causes, and focus directly on them.

To do this, it turns out to be much more powerful to focus on a simple anecdote about an irritating problem than to make a general complaint about a faceless monster. I’ll use one from my own recent experience to make the point.

Last week my small consultancy business received a payment of £3,000 for some consulting work I had done for one of the top 20 companies in the UK. Let’s call that client Megafirm. I did the work in March 2012. Yes, 2012. It took 20 months for them to pay me.

I guess I should have been angry or frustrated at this delay, but in fact the longer it went on the more I became intrigued by what was happening (or, in fact, not happening). At no point in this 20-month period was there any dispute about whether my small business (my wife and I) was owed the money. Everyone we spoke to in the company was polite, helpful, and increasingly apologetic. And yet somehow they couldn’t pay us.  Some sort of glitch in the payments system meant that the initial invoice wasn’t paid on schedule, at which point the problem disappeared into a big black hole.

As the delay in payment entered its second year, I started to see that my tiny problem was emblematic of a common weakness of bureaucracies.  Who, I asked myself, owned this problem? If I had been trying to get paid by a small company, the answer would have been obvious. I would have talked to the boss, and he or she would have pulled out a checkbook – end of story. But trying to get paid by a global company with 80,000 employees, I came to realize that noone owned the problem.

In theory there were three plausible owners. One was my immediate client, the guy I did the work for. He was on my side, and indeed suitably embarrassed by the whole thing. But he was powerless and, truthfully, not that interested – after all, he has his own job to do, and chasing invoices was a waste of his time. Then there was the person who ran the payables department, or whatever that internal function was called in Megafirm. But to this day, I still don’t know who that person might have been, if indeed he or she existed in the first place. (We spoke to people in processing centres in London, Mumbai, and Warsaw, but how they were connected to each other was entirely unclear.) And then there was the person at the top – the Chief Financial Officer in this case, to whom we eventually wrote a letter (just at the point, as it happened, when the money finally arrived). But while he was ultimately accountable, he was also completely removed from the action. I don’t think he understood the payables process in his company much better than we did. The only value in seeking his involvement was as a vague threat to the people in Mumbai and Warsaw.

So who really owned this problem? The answer should be pretty obvious by now: I did! Or rather, my wife did, as she was the one who spent hours sending emails and calling people in India and Poland. Megafirm had outsourced the management of the problem to us.

Think about this failing at a broader level, and the implications are scary.  When companies become too complex to manage, they create costs to others. Of course, it is well known that they make life miserable for their employees –Karl Marx observed this more than a century ago.  But equally importantly, they also impose a burden on the others who have to deal with them. Suppliers don’t only struggle to get paid; they suffer from unclear guidance and decision delays. Customers despair at the lack of joined-up thinking between the various divisions. Regulators and government officials are confused as to whom to talk to. If you are a business leader, you don’t want to see any of these developments occur.

To get back to where I started, the problem created by bureaucracy in general and revealed by an anecdote in particular is a lack of accountability. I don’t mean internal accountability – I am sure someone inside Megafirm is nominally in charge of the payables process – I mean external accountability. And it is a general tendency. Think back, one more time, to the global financial crisis and what caused it. The big banks had well-intentioned formal processes for risk management, but no one was really, genuinely accountable for the risks they took. And the result, as with my unpaid invoice, was that the outside world ended up owning the problem (risk) and its consequences (financial meltdown).

The good news is that lack of accountability is a problem we can actually do something about. Here is a simple fix for Megafirm: provide all suppliers with the name and email address of the person who is responsible for payables, so that when the process goes awry (which probably isn’t that often) we know whom to talk to. A similar logic can be applied to all other internal processes prone to bureaucratic torpor. Ask: Is the process fulfilling its purpose? How are stakeholders being affected by its activities? And how can their input be used to help improve it?

We will never banish bureaucracy, in part because there are some good reasons for it to exist. But we should always seek ways of keeping its worst tendencies in check, by homing in on the specific problems it creates. Get past the vaguely menacing bogeyman to focus on the right culprit, and the answers are usually pretty simple.

This post is part of a series of perspectives leading up to the fifth annual Global Drucker Forum in November 2013 in Vienna, Austria. For more on the theme of the event, Managing Complexity, and information on how to attend, see the Forum’s website.

The Hidden Dangers of Playing It Safe

Last year Dina, a CEO I’d been working with, felt that leaders on her team were playing it too safe.  They weren’t finding and pursuing new growth opportunities and it was crippling the organization.  She kicked off her October management team meeting, which I was attending, by reading the following passage from my book:

The dangers of taking too much risk are very clear. We’re reminded of them in the news every day. Businesses, families, and individuals are ruined in shocking fashion—“150-year-old bank and pillar of Wall Street is gone in the blink of an eye”; “Major oil company loses $90 billion in market value in three months”; “Kite surfer tries his luck in a hurricane and slams into a building.” Astounding lapses in judgment are everywhere. The warnings of overambitious risks are clear—watch yourself and don’t do anything stupid.

Unfortunately, we rarely hear any warnings about playing it safe.

We don’t see news headlines that say, “Low-risk approach forces local business to file for bankruptcy,” or, “Stunningly conservative move pushes global pharmaceutical company to the brink of failure,” or “Man retires after a mediocre career and feels painful remorse for never having laid anything on the line.”

The dangers of playing it safe aren’t sudden, obvious, and dramatic. They don’t make headlines. They develop slowly over time and are almost impossible to pinpoint. This fact often makes them more dangerous than the high-profile missteps we see and hear about in the news because, like a slow leak in a tire, you don’t see or feel these dangers on a daily basis. You become aware of them only when you realize that you’re stuck and you’re not really sure how it happened.

The dangers of playing it safe are hidden, silent killers.

When she was done reading the passage, she looked up and asked the group:

“If a journalist observed our organization for a few months, what headline would she write?”

It was a great question.  I was familiar with the challenges the organization was facing and was eager to hear the answers.  After a few tepid responses, Walter, the CFO, threw out a grenade headline: Company tries desperately to hang on to aging cash cows and antiquated ways of doing business in the flawed hope that they can maintain the status quo forever.

I loved it.  At first the team didn’t know what to do with it.  There was a collective “did-he-just-say-that!?” look on everyone’s face.  It was quickly followed by several attempts to caveat and soften his headline.  Rashid, the COO, commented, “Sure we’re struggling, but that’s just the market, we’ll bounce back.”  Walter stood his ground against the status-quo onslaught.  People got uncomfortable.  A heated conversation ensued about just how antiquated and “in jeopardy” the cash cows really were.  Then the discussion died down with no clear resolution.

I was frustrated.  I didn’t think the meeting was very productive.  I felt that Walter had just given the management team a well-deserved kick in the pants—and they summarily dismissed it without letting it sink in.

Three months later I realized my assessment had been wrong.

By the January meeting, Rashid had a different attitude.  Armed with negative customer feedback he had collected because of Walter’s comments in October, he too had concerns about the organization’s growth prospects.  He felt they were falling into a false sense of security.  Walter’s headline had stuck with Rashid, irritating him and motivating him to understand the issues better—just what the headline was supposed to do.  Rashid was beginning to see what Walter was seeing.

The October and January meetings became a tipping point in jarring people out of their comfort zones, forcing them to realize they had to make some tough strategic decisions.  In the ten months since those two meetings there’s been a marked improvement in the focus and energy of the management team and broader organization.

Watching this unfold, one of the lessons I re-learned (for about the 68th time in my career) is that change works in mysterious ways.  If you had asked me a year ago if Walter would be the one to throw out the initial grenade, I would have bet against it.  And if you’d asked me if Rashid would be the tipping point to change, I would have also bet against that.  But there they both were, leading the charge.

However, I think the bigger lesson here is one of context.  What context motivated Walter and Rashid to do what they did?—to push, to question, to challenge the status quo, to see the dangers of playing it safe for what they are, and to move towards deeper understanding and action.  Neither of them had a history of this behavior.  What changed?

It was the culture that Dina had created over the past year:  Question everything.

What does this business look like in five years?  What are our customers worrying about today?  What will they be worrying about tomorrow?  What are our employees seeing but not saying?  Where are we communicating effectively?  Where are we failing to communicate?  What strengths aren’t we capitalizing on?  What opportunities are we letting slip through our fingers?  How would we try to beat ourselves if we were our competitors?  What weaknesses would we exploit?  And where are we settling for “good” when we should really be going for “great?”

Over the past year Dina had been asking these questions incessantly and demanding others do the same.  She’d been pushing people to make themselves uncomfortable in searching for answers.  In some instances she’d move the organization towards action.  In others she’d just leave the questions hanging, letting people sit with the Socratic discomfort for a while.  In all situations she made it clear—if you’re not critically reflecting on what you’re doing, you don’t know what you’re doing.  The world is moving too fast.

Ultimately, Dina realized a fundamental truth about playing it safe that we should all keep in mind—while it’s dangerous in the long term, it just feels better in the short term.  And so people naturally gravitate towards playing it safe.  Moreover, playing it safe has a below-the-radar, how-bad-could-it-really-be quality which creates an insidious dynamic that’s tough to penetrate.

Dina’s solution to breaking through the tendency to play it safe was simple; attack it every day in the organization.   Bombard it with tough and thoughtful questions.  Hold other people accountable for doing the same.  Then hold them accountable for strategizing and executing.  In essence, make it more uncomfortable to play it safe than to think critically and take risks.

What Do You Fail to Notice When You’re Hard at Work?

83% of two dozen radiologists who were searching for a lung nodule didn’t see the white outline of a standing gorilla that researchers had inserted into a computed tomography scan, even though it was 48 times the size of the average nodule, says a team led by Trafton Drew of Harvard Medical School. All of the participants reported seeing the gorilla when, after the experiment, they were shown the CT scan and asked if they noticed anything unusual about it. Past studies have demonstrated that people who are engaged in a task often fail to notice unrelated images and occurrences; the current finding suggests that this “inattentional blindness” affects even experts.

BART Workers, Striking an Unfamiliar Note

Once again, hundreds of thousands of Bay Area commuters face a perilous commute stemming from a paralyzed transportation system. The culprit? Another bargaining impasse between workers and management at the region’s commuter rail system, BART. The Bay Area’s congestion is a daily headache for many even when the BART trains are all operating, and thus made all the more miserable – and costly – with much of the rail system idled. As one resident recently told the New York Times, the strike is “inconvenient for the masses.”

But inconvenience is the point. A strike that inconveniences no one but the workers involved is guaranteed to fail. Why should management settle if it doesn’t face pressure from its customers, or, in this case, passengers? Strikes, especially effective ones, have always been inconvenient – even to the masses – but what they had in the past that they lack today is a familiarity with average Americans.

Strikes in the United States were once extremely common, with millions of Americans participating in a work stoppage each year. Millions more had a family member or friend walking the picket line, people who could explain the issues involved and the reasoning behind the action. In the post-World War II years, roughly 1 in 20 Americans walked picket lines annually. Some years the ratio rose to close to 1 in 10. Even as late as the 1970s, hundreds of large strikes – strikes involving 1,000 or more workers – shook the economy every year.

Despite a labor force that has grown dramatically over the past half century, the number of work stoppages has plummeted. In 2009, for example, there were only five large strikes in the United States. And while the number has ticked up a bit more recently, it remains at historic lows. The fraction of the workforce participating in strikes each year is now miniscule. Put simply, strikes like the ongoing BART dispute rarely occur anymore, and thus the ones that do feel to many Americans all the more unreasonable and inconvenient. Over a half century of declining union memberships means that fewer and fewer Americans are even aware of what a union is, let alone what unions once did – such as strike, and strike often. Among these unorganized workers, the little they do know of unions is that unionized workers’ pay and benefits often exceed their own. Decades of wage stagnation and growing economic instability has helped foster suspicion toward these organized workers who seem to be playing by different rules. “Why should they have what I don’t?” has become a common question among the millions of unorganized workers lacking union protections.

But while strikes – and the unions that organize them – have largely disappeared from workplaces across the nation, the issues that motivate them have not. In the case of BART employees, “what they have” includes a middle-class wage, a generous employer-provided health insurance plan, and a pension. It also includes some semblance of control over work schedules, allowing for the type of predictability that is necessary to balance work and family responsibilities. These are exactly the qualities of life once taken for granted by middle-class Americans, organized or not. And these are exactly what employers have jettisoned in an increasingly successful quest to save on labor costs and maximize profits. What unions once did was push back against these employer efforts. And what strikes once did was convince employers to take unions seriously.

These strikes of decades past were often offensive tactics used by unions to win large concessions at the bargaining table. Today’s stoppages – rare to begin with – are usually defensive, aimed at preserving the status quo in contract stipulations or limiting the concessions sought by management. Here the BART strike is typical: the unions have already agreed to increase employee contributions to their healthcare and pension plans, and are aiming to hold the line on scheduling, safety, and other work rules. This type of concession bargaining has been going on for decades, and as a result many contracts for union members are beginning to resemble those of their non-union peers. Those asking “Why should they have what I don’t?” may not need to worry much longer.

The decline of the strike in the United States has enormous benefits. It keeps production humming and passengers moving. It saves the economy millions in lost wages and declining profits. It makes daily life more convenient. But there is a cost to such a convenience. The issues at the heart of the BART impasse weigh on the minds of millions of average Americans today, organized or not. Reliable work schedules, decent pay, affordable healthcare, and a comfortable retirement – not only do these conditions comprise the very definition of a middle-class life, they are, and have always been, contested. Without the threat of a strike to get employers’ attention, the contest has become increasingly one-sided.

11 Ways Big Companies Undermine Innovation

In centuries past, explorers searched for the legendary city of El Dorado, where everything was made of gold. Today, at large organizations, innovation is the new El Dorado. Consultants and keynote speakers all purport to provide maps to it. Chief executives and business unit leaders weave the word innovation into their PowerPoints, hoping it will magically yield better product ideas, or miraculous improvements to existing processes.

I’m not (only) mocking the cult of innovation. Something very real is happening here: as it becomes cheaper and easier for startups to upend existing businesses with new offerings, big companies are realizing that they can’t continue to rely on their time-worn methods for cultivating and developing new products, and lumbering into new markets.

But in pursuing new strategies like open innovation, hackathons, corporate venture capital investing, or the “lean startup” methodology, the hulking mass of corporate culture and structure can get in the way. It’s like heading to the jungle to hunt for El Dorado in an overstuffed Winnebago.

I’ve spoken with more than twenty innovation-oriented executives over the past three months, at multi-national giants like Intel, Whirlpool, General Mills, and Publicis Groupe, always opening the conversation with the same question: How do companies shoot themselves in the foot when it comes to innovation? I also interviewed entrepreneurs who have been acquired into big companies. These were the 11 answers I heard most often. All of them describe various kinds of corporate underbrush that need to be hacked through before real innovation can happen.

No definition or metrics for what success means. “One of the typical flaws I’ve seen in innovation programs is starting without a clear view of strategy: What is it supposed to do? What do you want out of it?” asks Moises Norena, global director of innovation at Whirlpool.


It must be instantly apparent and quantifiably demonstrable how every new idea has billion-dollar potential, or 18-month return-on-investment. Ideas don’t move forward without scads of spreadsheets modeling every aspect of cost and benefit. “It’s a sign that things aren’t working when there’s a lot of deferring commitment, asking for more analysis and data,” says James Euchner, vice president of global innovation at Goodyear.


Seeking more influence and power, the company’s Chief Information Officer has altered his title, becoming Chief Innovation Officer. Sorry, but innovation doesn’t tend to radiate from the corporate data center.


The innovation team is considered “the CEO’s thing,” disconnected from business units and their most pressing concerns. “You need to embrace lots of people, so they feel they are part of the story,” says Rishad Tobaccowala, chief strategy and innovation officer at the digital ad agency VivaKi, part of the Publicis Groupe.


Innovation is expected to happen in cubicles and around conference tables. “I can’t tell you how many  companies I know that have innovation programs, but no space to foster creativity,” says Julia Austin, formerly VP of innovation at the tech company VMware. “Large spaces with whiteboards and comfy places to sit so people can brainstorm ideas are critical.”


Ideas don’t gain momentum if they’re seen as potentially competing with existing products or services, or threatening today’s business relationships.


The paradox of proximity. If innovation groups are connected too closely to business units, they are typically asked to collaborate on near-term projects that can impact revenue quickly. But if they off on their own working on long-term, truly disruptive projects, it can be hard to get participation from business units when they need it.


Fear of releasing “alpha” or test versions of new products and services to get early market feedback. Entrepreneur David Rose calls the alternative approach “Let a thousand flowers bloom, then mow.”


Every good idea is expected to spring from the hermetically-sealed world of the corporation. Those from outsiders are consistently undercut. “A decade ago, our lab was the world,” says Peter Erickson, senior vice president of innovation at General Mills. “Today, the world is our lab.”


Company culture doesn’t tolerate — or understand how to learn from — failure. Staffers who are linked to failed projects see their career prospects dim.


Lack of commitment. Innovation initiatives get started, but then are de-prioritized as strategies shift — or executives leave. Corporate venture capital programs especially have the tendency to come and go when enthusiasm for startups abruptly ends. Erickson at General Mills says, “Innovation is not a short game. It’s the art of playing the long game.”

Negotiation Strategies for Doctors — and Hospitals

A 54-year-old man presents to the Emergency Department (ED) with crushing chest pain and is found to have an ST-elevation myocardial infarction (heart attack). The patient needs a heart catheterization with likely stent placement, but he insists on leaving the ED. The emergency physician is unable to convince him otherwise despite confirming that he understands the risks and consequences of his decision. He leaves and returns via ambulance several hours later in cardiac arrest. Could this story have ended differently? Quite possibly, yes.  But not with skills that are taught in medical school. Now consider a host of other conflicts: from interdepartmental turf wars, to poorly designed agreements between hospital systems and insurance providers, to the difficulties encountered in aligning hospital goals and incentives with those of contracted physician groups.  In these and many other interfaces within our health care system, the limitation is neither incompetence nor ill intent, but rather a dearth of negotiation skills and acumen.

Negotiation is the process by which two or more parties with different interests or perspectives attempt to reach agreement. The domains in which negotiation is relevant can vary widely. We might negotiate business transactions, international agreements, marital disputes, or just about any kind of conflict. Regardless of the context, however, negotiation is fundamentally about human interaction. Whether we are discussing money, terms of peace, spousal relations, or healthcare policy, the fundamental question that negotiation theory helps us tackle is this: how might we engage with others in a way that yields better outcomes and understandings? As anyone involved in the health care system knows, hospitals and health professionals are faced with this question every day.

With that in mind, we explore some of the ways in which a negotiation lens may be of value to medical professionals, administrators, and other stakeholders in the health care sector. In facing the inevitable tradeoff between breadth and depth of coverage, we have opted to focus on only a handful of core insights from the field of negotiations, while devoting more attention to providing examples of how these insights can be applied to doctors and hospitals.  As such, this is not an overview of what is possible, but a mere sampling.

Here, then, are three insights that expert dealmakers and diplomats use in their practice and which can easily be applied within the healthcare arena.

Focus on Interests, Not Positions

Positions are what people want; interests are why they want it. One of the greatest obstacles to resolving conflicts is our tendency to focus on positions—which are often irreconcilable—rather than on underlying interests, which may actually be compatible. For example, trauma surgeons and emergency physicians at a Level I Trauma Center will often both demand that they should be in charge of trauma resuscitations.  Since only one person can be in charge, the positions are fundamentally incompatible. But what are the underlying interests of each party? The trauma surgeons value the role of “Captain of the ship” as it is a requirement for Level One certification by the American College of Surgeons. The ED physicians may care little for that title, but are concerned about preserving the educational experience for their residents. A compromise that names the trauma surgeon as the Captain of the ship and allows the ED residents to lead the resuscitations and do the procedures addresses the interests for both parties.

Too often, health professionals fall into the trap of thinking that there is one correct answer (solution, diagnosis, prescription), and that it will win the day; but human interactions are more complicated than that.  Consider the patient who was having a myocardial infarction and was informed that he needed a heart catheterization. Even after having all of his questions answered, he insisted on going home without having the procedure. The doctor could have dismissed this as irrationality and allowed the patient to leave against medical advice, but instead, in this case, he decided to dig deeper and ask, why, precisely, are you unwilling to do this?  It turns out that the patient had a dog at home and he was concerned about abandoning the dog, possibly for days. A brief discussion followed by a phone call to a friend helped arrange care for the dog and allowed the patient to agree to the procedure.

Effective health professionals, like exemplary dealmakers, understand that having a learning mindset is essential in negotiation: you are there to figure out how the other person sees the world, what is driving their behaviors, and what precisely is keeping them from agreeing to your seemingly reasonable demands.

Framing Matters: It’s not just what you say, it’s how you say it.

There is an old anecdote about two monks.  The first says, “I asked the abbot if I could smoke while I prayed, and he said no.”  The other monk replies, “That’s strange.  I asked the abbot if I could pray while I smoked, and he said yes.”  When communicating, clearly the substance matters; but style and structure matter as well.

Over the past four decades, social psychologists, behavioral economists, and negotiation theorists have catalogued a wide variety of ways in which information can be communicated more effectively to nudge others towards collaboration and compliance. Let’s consider just one of the many healthcare domains in which such skills may apply: HIV testing is considered an important issue from a public health standpoint, but patients are often reluctant to sign up for it. Research on what has been called the status quo bias demonstrates that at-risk patients may be significantly more likely to get the tests done if the choice is framed as “opt-out” (the default is set at getting tested, but you have the choice to refuse) rather than “opt-in” (the default is not to be tested, but you can choose to do it).  The key is to understand that going against the default option presents a psychological barrier—and this knowledge can be leveraged to increase testing. Other research, on loss aversion, offers yet another way in which to increase compliance: patients may be more likely to get the tests or treatments if the information is not presented as “here are the benefits of…”, but rather as “here is what you stand to lose if you refuse”.  The same tactic may improve negotiation outcomes when it comes to securing funding for capital investments, research, safety initiatives, or hiring.

As another example of the relevance of framing, this one in the policy domain, diverse stakeholder groups (e.g., FDA, legislators, insurance companies, hospital systems and doctors) often negotiate over the appropriate risk/reward balance pertaining to new procedures, drugs or innovations.  Research shows that our risk tolerance shifts depending on the way options are framed.  People are relatively more likely to accept risk when choices are presented as means of avoiding losses and they’re more risk-averse when the same choices are presented as opportunities for gains.  Consider, for example, a hospital administrator who must decide between two growth initiatives: opening a new clinic in a growing area versus the riskier option of merging with a neighboring hospital.  Let’s say both initiatives have the same anticipated level of success (i.e., the same expected value), but the merger has both higher potential upside and potential downside (i.e., higher variance).  Research suggests that when the options are considered with a “gain frame” (e.g., “we are doing well financially, now let’s try to do even better”), the less risky option of opening a new clinic will be relatively more attractive.  But if the decision-maker adopts a “loss frame” (e.g., “margins have been shrinking and we want to avoid further erosion”), the preference may shift towards the riskier option of merging.

Negotiation Space: Keep an eye on all of the parties that are relevant to this negotiation, not just those who are at the table.

A 75-year-old man with a mild congestive heart failure exacerbation is seen in the ED and is treated and released with instructions to follow-up with his primary care provider. How likely is it that the follow-up appointment actually occurs? What would make it more likely? In Detroit, where one of the authors is an emergency physician, the doctor may now do the following: he asks the patient for the phone number and permission to call his daughter and recruits her to make sure he will make the appointment. She promises that he will not miss it. What many physicians have learned is that the daughter is a key player in this interaction and can significantly impact the likelihood of success.

A negotiation strategy is more robust if it takes into account all of the relevant parties; if someone can influence the negotiation or is influenced by the negotiation, you need to take that person into account. Should this person be involved in the discussion or kept out of it?  What role might they play in the plan’s implementation?  Might they be a spoiler?  What do their interests and incentives tell us about their likely actions and reactions as the negotiation unfolds?  With whom should we discuss matters first, and who should be approached later if we are to work towards consensus or cooperation?

Similar issues arise in myriad contexts, such as board room decisions that go badly in practice because front line medical professionals (doctors, nurses, etc.) are not brought into the discussion, or legislative and policy decisions that fail to take into account how the interests and perspectives of health care professionals and other stakeholders will support (or obstruct) the hoped for outcomes. A decision or policy may seem brilliant (or at least the best option) when considering the interests and constraints of the people at the table, but may become a terrible idea the moment you broaden your vision to include other parties that are relevant.

Negotiation, like the delivery of healthcare, is at its core about understanding and engaging with people more effectively.  Health care professionals and administrators who develop the skills of effective negotiation will find that they are better equipped to heal, collaborate and innovate.

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




Britain’s Patient-Safety Crisis Holds Lessons for All
An Obstacle to Patient-Centered Care: Poor Supply Systems
India’s Secret to Low-Cost Health Care
Intelligent Redesign of Health Care

Leading in Complex Times

If you’re a business leader today you are working to understand and balance the perspectives of an unprecedented variety of stakeholders – from NGOs becoming more voracious in their demands to workers who are increasingly hard to engage – and doing so in a world that is more transparent and connected than ever before. It’s a tough challenge.

I found myself reflecting on this recently while speaking with two business leaders in one of the world’s great pharmaceutical companies. The conversation turned to the growing complexity of the business environment, and the question was inevitably posed: What had I, as a business professor, managed to figure out about what it takes to succeed under such conditions? In no particular order, here are my thoughts:

No Illusions, Eyes Wide Open

Some 15 years ago my colleague Sumantra Ghoshal and I wrote business cases on three companies that were then leaders in their sectors: BP, Royal Bank of Scotland, and Nokia. In one way or another, and for rather different reasons, all of these companies have since struggled. So my first observation is that leaders must constantly acknowledge that their companies are subject to an onslaught of destabilizing forces. Being vigilant and observant about the nature and velocity of these forces is crucial. Effective leaders in complex environments do not succumb to a belief in their invincibility – they keep their eyes wide open to the reality of the world.

Authenticity, Tempered by Custodial Responsibility

Over the course of our conversation, the executives and I arrived at the hot topic of authenticity. Various proponents of this notion have urged leaders not to try to conform to a narrow description of what a leader does, much less copy someone else’s style. Leaders are urged to be themselves. Only those perceived to be authentic and who are comfortable bringing their whole selves to work can gain others’ trust and inspire them to pull together. It seems to me that this emphasis on authenticity is an important counterbalance to earlier assumptions that people gained leadership powers by dint of titles or positions in hierarchies. And it certainly resonates with the world’s reverence for Steve Jobs, who created the world’s number one brand while obstinately refusing to be anything but himself.

At the same time, growing complexity in the business environment creates a challenge. For people in organizations facing an external world of mounting chaos, being led by groups of highly idiosyncratic leaders, however authentic, could be confusing and distracting. In particular, when a leader is not a founder, he or she inherits a role as a custodian, and is entrusted with growing and passing on to future generations of employees and shareholders the value that past generations sowed. So yes, be authentic – but don’t break the mold so completely that others need to spend energy figuring out how to engage with your leadership. The world is complex enough without this further variable to be considered.

Strength in Diverse, Collaborative Teams

Thinking again about the problems encountered by BP, RBS and Nokia in the past decade, as different as they were, it’s possible to see a common factor. These firms lacked diverse, highly collaborative leadership teams. At RBS, CEO Fred Goodwin isolated himself from his colleagues, failed to listen to others, and became increasingly selfish in his behavior. At Nokia, the senior leadership team was for a long time extraordinarily homogenous (mostly men, mostly from Finland, mostly software engineers, mostly educated in Helsinki). How likely was it that they would be on top of the rapid developments in Asian consumer markets, or in technology and design emanating from Silicon Valley? At BP, we know top management found it difficult to integrate US assets and build collaborative relationships with the leaders of US acquisitions – contributing to a problem with implementing safety standards globally.

Simply put, as businesses are increasingly challenged by dynamic change and crises, it becomes ever more crucial for their leadership teams to have sufficient diversity to see what is happening from different perspectives, and sufficient collegiality to work collaboratively with each other even when under stress.

There is undoubtedly much more that could be said about leading well in complex business environments. Indeed, in a conference next month – the Global Drucker Forum, in the wonderful city of Vienna – I’ll be participating in a bigger conversation. There will be more smart people seeking answers they can take back to their organizations. Together, we’ll make the way forward for leadership a little clearer.

This post is part of a series of perspectives leading up to the fifth annual Global Drucker Forum in November 2013 in Vienna, Austria. For more on the theme of the event, Managing Complexity, and information on how to attend, see the Forum’s website.