Marina Gorbis's Blog, page 1525

Are You on the Red Team or the Blue Team?

Among male participants in a competition experiment, those who chose to represent themselves with red trapezoidal symbols on a scoreboard proved to have blood-testosterone levels that were about 10% higher than those who chose blue trapezoidal symbols, says a team led by Daniel Farrelly of the University of Sunderland in the UK. Those who chose red didn’t perform any better on the competitive task, however. It’s unclear whether the color choices were the result of learned or innate associations, the researchers say.

Can You Invent Something New If Your Words Are Old?

Is “Orange Is the New Black” or “House of Cards” a TV show?  We can watch them on our smartphone, tablet, computer or TV.  And, unlike traditional TV shows, which are released an episode per week, we can watch the whole season at once, totally disrupting the sense of time the television channels have taught us to expect. And yet, as Kevin Spacey recently pointed out at the Edinburgh International Television Festival, we still talk about that form of media in terms of its traditional viewing source.  It’s still a TV show, even if it’s more like an episodically-punctuated-video-feed.

Many of our words are archaic, not just “TV show.”  How many of us still say, “Will you tape that show for me?” when no tape is involved.  We talk about albums, records, and filming.  We “dial” and “hang up” the phone.  At the tollbooth, we “roll down the window” even though we’re not rolling anything.  We refer to a child as a “carbon copy” of her dad. Even our icons are out of date.  You click a magnifying glass to search. (Perhaps Sherlock Holmes, somewhere, approves.) You click a floppy disc to save. (Do your kids even know what that is?) Your mail icon is an envelope. (Too bad for the post office that you don’t need a stamp.)

The words and images we use to describe things affect our thinking. What if the words we use are limiting the solutions we can create?

What if instead of being asked to create a “TV show”, we were asked to create a story using video?  Would it open our mind to more options than broadcast or cable TV? A YouTube channel? Vine or Instagram videos? Something entirely different? What if, when you need a package for your new product, instead of thinking of a package as a separate container to be discarded, it was part of the product itself in some way? Would it still be a package? Would it still need to be thrown out? At a much simpler level, will the solution change if we change our words from “satisfying customer needs” to “delighting customers”? What if we “thrill our customers with easy service” instead of “making it easy to talk to customer service”?  Just by using different language, we can find more ways to be innovative in how we approach problems and opportunities.

Language is paradoxical.  In some ways, it doesn’t keep pace with the rate of societal and technological change (e.g., TV show, carbon copy) and in others, new words are created almost daily in response to our fast-changing world (e.g., selfie, MOOC).  There is a balance between using the past to understand the present and guide the future, on the one hand, and on the other, creating something fresh that leaves the old behind.  We need analogies to understand the new (eg, horseless carriage) yet they also hold us back by it constraining our thinking (eg, horseless carriage).

So I have a challenge for you. Watch your language and the language of those around you.  See what words you are using and how you’re using them. Do they help you and your organization move forward? View the world differently? Open your mind to new possibilities? Or do they constrain how you view the world?

And when you change the words, does the world change as well?

What the Great Fama-Shiller Debate Has Taught Us

It’s a little hard to imagine a Nobel Prize in physics being shared by (1) a guy famous for advancing a particular hypothesis and (2) a guy famous for relentlessly attacking that hypothesis. This of course is what the Nobel committee has done with this year’s economics award, with the added Hegelian twist of giving another third of the prize to a guy who came out somewhere in between. Thesis (Gene Fama)! Antithesis (Bob Shiller)! Synthesis (Lars Peter Hansen)!

This is, to a certain extent, further evidence that economics isn’t a science like physics is a science (and yeah, yeah, the economics Nobel isn’t a real Nobel prize). But that’s not because economists are all frauds — it’s at least partly because economics is harder than physics. And the interaction over the decades between the differing ideas of Fama and Shiller, while maybe not exactly scientific, has certainly been enlightening, and had a huge impact on the world.

Like a lot of people, I know much more about Fama and Shiller than about Hansen. That’s partly because Fama and Shiller have been willing (downright eager, in Shiller’s case) to explain their work to the public, while Hansen apparently prefers to sit in his office and do math. It’s also because Fama and Shiller are the obvious poles of the debate, while Hansen is one of a number of people who have been plowing the extensive acreage between them. I think he got the Nobel nod (instead of somebody like Andy Lo, or Mordechai Kurz, or Roman Frydman) because he was (1) very early to the game, (2) a macroeconomist (the Nobel people generally seem more comfortable with macro than with finance), and (3) most suited to being shoehorned into a narrative of steady scientific progress. It’s also possible that Hansen just got the prize because his work is so great and/or has spawned lots of productive further research, but I’m really in not in a position to judge that — his stuff is really dense. So I’m not going to pretend that I know much about his contributions; you need to go elsewhere for that.

Fama and Shiller, though, are people I spent years thinking about, reading about, and talking to for a book I wrote a few years ago. I could go on about them forever, but here’s the very short version of why they’re important:

Fama studied finance at the University of Chicago’s business school in the early 1960s, then started teaching it there. This was a time of great ferment in financial research at Chicago and a few other campuses, occasioned by the arrival of a few new ideas and a few more big computers. At the annual meeting of the American Finance Association in 1969, Fama presented a paper (published the next year in the Journal of Finance) summing up what he and others had learned about stock market behavior over the previous decade and sketching out a way forward. “Efficient Capital Markets: A Review of Theory and Empirical Work” laid out the evidence that stock market prices were hard to predict using past price behavior (that is, they followed a “random walk”) and even information about corporate performance, and that professional investors generally failed to beat the market. He suggested taking things a step further, and testing whether the stock market was actually “efficient” in the sense that it “provide[d] accurate signals for resource allocation.”

The way to test this, Fama said, was in conjunction with a theory of “market equilibrium under uncertainty.” The main model available at the time was the Capital Asset Pricing Model, which says that a stock’s returns over time should be commensurate with its riskiness in relation to the overall market. Early tests of CAPM came out reasonably well, and by the end of the 1970s Fama’s former student Michael Jensen was (in)famously declaring that “I believe there is no other proposition in economics which has more solid empirical evidence supporting it than the Efficient Market Hypothesis.”

Research into stock market prices had also been popular at MIT in the 1960s, and MIT’s Paul Samuelson even authored the first paper mathematically demonstrating that a rational stock market would be a random, unpredictable one. But Samuelson never believed that real-world markets approached this ideal, and MITers were critical of the hardening Chicago conviction that they did. Shiller, who got his Ph.D. from MIT in 1972, devised his own test of market efficiency, asking in a paper published in the American Economic Review in 1981, “Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?” His answer: Why yes they do!

Shiller’s paper was hugely controversial at the time, and if you bring it up with old-guard finance professors they still tend to grumble about it. Perhaps his claim that the Efficient Market Hypothesis was “one of the most remarkable errors in the history of economic thought” had something to do with that. But within a few years — especially after the market crash of 1987 — it was widely accepted that yes, stock prices did appear to be much more volatile than the economic and corporate fundamentals that they were supposedly reflecting and predicting. For a time most finance scholars still argued that it was impossible to say until after the fact when exactly market prices were out of line, but the tech stock bubble of the late 1990s and early 2000s changed a lot of minds about that.

It didn’t change Fama’s mind. He still contends that those who speak of market “bubbles” are being intellectually sloppy. But his students have with his encouragement documented lots of apparent market inefficiencies, and his own empirical work has done as much damage to the EMH as he proposed it in 1969 as Shiller’s has. In a study published in the Journal of Finance in 1992, Fama and co-author Kenneth French found that, contrary to earlier evidence, the Capital Asset Pricing Model didn’t do a very good job at all of explaining stock market returns in the U.S. from 1941 through 1990. Fama and French chose to try to save EMH by jettisoning CAPM and replacing it with their own multi-factor risk model in which the small-stock effect and the value stock effect are said to “explain” price behavior (others have since added other factors). But it’s just as valid to hold on to CAPM and label these effects market inefficiencies. As CAPM loyalist Fischer Black of complained of Fama and French in 1993: “They don’t want to hear about theory, especially theories suggesting certain factors or securities are mispriced.” But Fama had framed his hypothesis in a way that it could be tested, and has been pretty relentless about testing it. You can applaud that without embracing his conclusions.

Meanwhile, Shiller, for all his criticisms of the Efficient Market Hypothesis, still seems to endorse a very loose version of it. He has shown that asset prices have a tendency to overshoot, but he’s nonetheless generally a big believer in financial markets, frequently arguing that what we need are more markets and more ways to hedge our risks. His extracurricular activities, from his books to the Case-Shiller real estate price indices he co-created, are best seen as attempts to educate market participants and get them to do a better job of setting prices.

Fama’s main work outside of academia has involved advising the big small-stock index-investing firm Dimensional Fund Advisors, founded by his former students David Booth — after whom the Chicago business school was renamed in 2008 after he gave it $300 million — and Rex Sinquefield. His research also played a big role in the creation and rise of the index investing industry in general. And his most important and consistent message through the years, that it’s really hard to beat the market, remains really good advice.

So I’ll admit that it’s an odd combination of Nobel Prize recipients. But it’s not necessarily an incorrect one.

Always, Always, Always Show Up

Three years ago, as I was putting the finishing touches on my book Dare, Dream, Do, a friend sent me a link to a contest sponsored by Oprah. The prize was your own talk show.  Immediately, I was thrilled by the giddy fear I feel when I know I’ve got to take something on.

Almost simultaneously, I began to explain to myself why this audition was a no-go: I would have to take a day off of work, drive from Boston to New Jersey, fill out a lengthy application, get up long before dawn to be one of the first 500 people in line, and subject myself to the humiliation of a cattle call in a Kohl’s parking lot.  As I told all of this to my friend Liz, she gently observed, “I find it ironic that you are writing a book daring people to dream, but you won’t.”

That was all I needed.  I pride myself on not giving up.  So I went.  As you may have surmised, I didn’t win my own talk show.  I didn’t even make it past the first cut. After all the work of getting to the audition, waking up early, thinking about what I was going to say, and carefully selecting my most Oprah-worthy outfit (!), I stumbled. While I gave my elevator pitch, my nervousness made me note-dependent, my affect flat, and my voice monotone: there was nothing about my thirty seconds that would inspire people to dream and disrupt.  Afterward I was deflated.  Disappointed. I’d suited up and shown up (at 3 o’clock in the morning, no less) to my dream, but some small part of me held back. I made myself go, but I didn’t pour my whole soul into it.  I hadn’t given up, but I hadn’t really shown up, either.

I’ve always repeated the mantra “never, never, never, never give up.”  These words of Winston Churchill’s have rallied me for years; they are a core tenet of our family motto, and hang, framed, on the wall just inside the front door of our home.  But I’ve started to wonder if not giving up is sufficient.  Of course persistence is essential. But I wonder if the pluck of true grit embodied by the words “never give up” has morphed into a euphemism for something more fatalistic: I won’t give up… but I’m still sort of waiting to get picked by life’s lottery.

Last year, for example, I was approached about a senior management role at a fast-growing Boston start-up, but ultimately they didn’t offer me the job.  There are likely a variety of reasons why things didn’t work out, but I have since learned that my not “showing up” was a contributing factor.  There was nothing in my behavior that would indicate that I passionately wanted in. As with my Oprah audition, I’d really, really wanted it – so much that my instinct was to hide just how much.

Jules Pieri, who was recently named one of 2013’s Most Powerful Woman Entrepreneurs by Fortune Magazine, is a woman who is now reaping the rewards of standing up. Pieri is the Co-founder and CEO of The Grommet, a retail site devoted to promoting innovative, undiscovered products and the stories behind their makers.  In 2012, Japanese e-commerce giant Rakuten invested in The Grommet and the company has been soaring ever since. But her path has not been scattered with rose petals – for years the site survived on a slender budget, living from one desperately needed cash-infusion to the next when no VCs would invest major capital during the 2008-9 recession. Pieri made many personal sacrifices to keep her dream alive: she did not take a vacation for three years, she was unable to regularly visit her mother in Detroit who was battling cancer, and her son had to get emergency financial aid to stay in college. Jules never gave up—but she also  fully showed up, day after day.

A look at some of the research has convinced me that maybe Woody Allen was right, and 80% of success really is just showing up. According to Keith Simonton, professor of psychology at UC Davis, the odds of a scientist writing a groundbreaking paper (defined as the number of citations in other works) is directly correlated to the number of papers that the scientist has written — not to how smart the scientist is.

Rob Wiltbank, professor of strategic management at Willamette University, tracked the returns of the Angel Oregon Fund and found no material difference in the returns of the winners and the finalists in various pitch competitions over a 10-year period.

We all dream about winning, but it’s the showing up that counts.

Even though we can’t necessarily control the outcome.  Sarah Ban Breathnach said, “When you use expectations to measure a dream’s success, you tie stones around your soul.  Dreams may call for a leap of faith, but they set the soul soaring.” There are no regrets when we invest ourselves fully and show up to ourselves. Happily, we get lots of chances.

I’ve recently had one of those chances.  Another opportunity has come up that I’m well qualified for, and I recently learned that I made the short-list, largely because I raised my hand and said, “I want this.”

Dreaming is at the heart of disruption.  Whether we want to disrupt an industry or our personal status quo, in order to make that terrifying leap from one learning curve to the next, we must dream.  The good news is that the causal mechanism for achieving our dreams is always, always, always showing up:  and as we show up, our future will too.

Intelligent Redesign of Health Care

The health care industry has survived economically by cross-subsidizing margin shortfalls in one activity with the revenues generated from others. But the very existence of these cross-subsidies is symptomatic of deep flaws in the health care reimbursement system. As we move forward we need to be mindful of two principles that must be at the heart of any fundamental health care reform:  “no margin, no mission” and “if you can’t measure it, you can’t manage it.” As the era of health care cross-subsidization ends, these principles must guide our actions.

The University of Texas MD Anderson Cancer Center is seeking to reduce its cost structure by redesigning its health-care-delivery model to reflect the true costs of care (the early stages of the project were described in a 2011 Harvard Business Review article by Robert S. Kaplan and Michael E. Porter). To obtain an understanding of the costs, the center is applying a combination of two management tools: process mapping from industrial engineering and activity-based costing from accounting. Specifically, the center wants estimates of:

The costs of caring for groups of patients with similar conditions
The actionable cost savings from process improvement
The benefits from better utilization of capacity

The center will then tie the cost to patient-outcome measures, which will enable it to design a system that improves the quality of outcomes, motivates efficiency and improved capacity utilization, reduces costs, and assures patients and providers that any cost improvements will not reduce the quality of care delivered. The belief is that this kind of intelligent redesign will be less dangerous for patients than the across-the-board cuts of line-item expenses mandated by government and administrative entities.

The project requires clinicians to learn process mapping and cost-accounting tools that are not taught in medical school or residency. Intelligent redesign starts, therefore, with teams of clinicians and business analysts working side by side to examine processes of care.

The first step in the assessment of a health-care-delivery model involves a step-by-step mapping of each event in a patient’s complete care cycle. A high-level example of the output of this exercise is shown in the exhibit “New Head and Neck Patient Registration at the MD Anderson Cancer Center.”

For costing purposes, the maps must identify who performs each step and estimate the time spent by each resource (person or piece of equipment) at that step. Due to the unique circumstances of individual patients, the map includes decision nodes, which allow alternative care paths to be followed when appropriate for the patient’s specific circumstances. Each colored box in the exhibit represents a different category of health care provider. Circles indicate the time estimates for each step in the process. Diamond-shaped boxes represent steps that may or may not be needed in a process, depending on patient characteristics, and the probability estimates of the next step is indicated in the adjacent percentages.

Project team members with finance expertise contribute by supplying the cost rate for each person and equipment involved in the care processes. The direct costs of supplies and drugs are added to each process and finance team members again contribute by accurately assigning support costs that formerly were allocated arbitrarily as so-called “overhead costs.” The sum of all these elements represents the cost of each care process.

The new approach produces accurate, detailed, and transparent costs for each care process as well as the cost of all the unused capacity in the system. The results are often surprising; for example in the pilot project described in Kaplan’s and Porter’s 2011 HBR article, one finding was that most providers’ existing cost systems underestimate the cost of new patient evaluation services by 15% to 20%. And by tracing costs accurately to care processes, any improvements in a process can be easily translated into actual cost reductions. Among the improvements identified in the pilot were:

A process change in anesthesia assessments producing a cost reduction from about $250/case to $160/case, without adversely affecting any outcome;
Redeployment and realignment of personnel allowing for a 16% decrease in staff in the center
A 19% increase in the number of patients seen

Rather than forcing a trade-off between mission and margin, process-improvement opportunities identified through this kind of analysis usually enable the provider to reduce costs while simultaneously improving clinical outcomes and patient satisfaction through reduced wait times and more timely, higher-quality medical care.

These projects do, however, require institutional commitment because mapping clinical and administrative processes and tying each process to its resource costs are not currently part of routine business operations. Physicians, therefore, need to take the lead in unlocking the tremendous potential in these tools by collaborating with administration, finance, and performance-improvement teams to control costs, improve quality, and eliminate the waste and excess capacity we all acknowledge exists in our health care system.

Once we stop cross-subsidizing health care delivery, we can build a reimbursement system that is accurate, transparent, and a stimulus for continuous improvements. A value-based system that is based on knowledge of the efficient processes and costs incurred over an entire cycle of care will enable health care organizations to negotiate a fair price for care and be rewarded for delivering higher quality care at a lower cost.

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




Leading Health Care Innovation: Editor’s Welcome
Why Less Choice Is More in Health Insurance Exchanges
Doubts About Pay for Performance in Health Care
Coaching Physicians to Become Leaders

Emerging Market Firms Need a Diaspora Strategy

Emerging market diaspora populations have been on the rise, thanks to the continued march of globalization, and today’s diaspora communities are better connected with their homelands than ever before.  That’s due both due to increasing information flows (e.g. democratized communication technologies like Skype) and more physical touch points (e.g. more global travel and larger immigrant communities). Emerging markets and their indigenous companies should see this as an opportunity to boost their competitiveness. But first they require a better understanding of the “jobs” diaspora members are trying to do when they re-engage with their home country or culture, and need to align their strategies to fulfill them.

Why does the diaspora matter? Clearly one reason is remittances: according to the World Bank, over $400 billion was sent back to developing countries in 2012. In Nigeria for example, recorded remittances rose from $2 billion in 2000 to $20 billion in 2010 (a whopping 26% annual growth rate). These transfers feed directly into the domestic economies of emerging markets and boost growth, but they do not necessarily push the country up the development ladder. However, there are two important stages of innovation that do help push emerging markets up that ladder: one involves borrowing developed market technologies and knowledge and adapting them to form new domestic industries (addressing domestic non-consumption); the other involves taking existing domestic technologies or products and exporting them to developed markets. The latter is a vital part of the final climb from developing to developed status — no economy has managed the climb without spawning globally competitive brands. In their October 2013 HBR article on diaspora marketing, Nirmalya Kumar and Jan-Benedict E.M. Steenkamp make the argument for diaspora as a cost-effective platform for emerging market companies seeking to build a global brand.

The knowledge and technology transfer stage, however, is where most developing markets are focused today. Diaspora can play a crucial role in this process for three reasons:

They often achieve above-average success in immigrant communities, and wield influence across many levels of society. As such, they are well-positioned to use their expertise and capital to facilitate knowledge transfers and bridge the gap between emerging and developed countries.
They are inherently motivated to develop their countries of origin.
They are low-touch (or no-touch), compared to non-diaspora investors. They already understand the risks and know how to navigate them.

Today most emerging market countries and their companies have a haphazard approach towards engaging their diaspora. The result is that remittances have grown strongly, but coordinated transfers that build up capabilities have not kept up. To address this imbalance and reap the benefits of the diaspora opportunity, a more targeted approach is required.

Understand the motivations of diaspora communities

The first step is to understand what makes diaspora communities tick. Universities provide a helpful analogy. When engaging with a university after graduation, every alumnus is trying to do a “job”. Sometimes it is a functional job, like improving one’s knowledge on a certain topic or investing for financial gain. Most of the time, however, it is a social or emotional job, like reconnecting with friends, “paying the university back”, or being recognized by peers.

Similarly, diaspora communities can engage their native country with functional jobs (e.g. financial gain) and social/emotional jobs (e.g. self-discovery, need for belonging, family assistance etc.). These social and emotional needs often outweigh the functional needs, and also need to be balanced with obligations in the “host” country.

Emerging market institutions and companies should know their diaspora, not just demographically, but by the jobs they are trying to achieve. University alumni campaign programs often invest disproportionately to understand motivations through detailed surveys. Similar efforts should be directed at diaspora communities to create a “jobs-based segmentation” that facilitates how resources are deployed.

Create engagement opportunities at all levels

In order to foster broad diaspora engagement, emerging market institutions and companies should create opportunities for diaspora communities to be involved at all levels. Some diaspora members may be interested in moving “back home” to take up a position at a local firm, while others may have family obligations in their host country and prefer to provide part-time consulting advice. Still others may need to first be convinced that their efforts will bring just rewards.

Emerging market institutions and companies have limited resources  — in terms of capital, people and technology — to court their diaspora, so it is important to seek highly leveraged ways of creating opportunities. Universities often achieve leverage by creating communication channels through alumni leaders, who are not paid employees but have dotted line reporting relationships with the central organization. Through local meetups, these leaders give alumni the opportunity to engage with the school with just their information and ideas. Emerging market companies and institutions can also have community engagement managers who organize local diaspora meetups and act as information liaisons between both sides.

Technology also provides an excellent means of creating engagement opportunities. Even busy overseas professionals with families may be able to spare a few hours a week to mentor young entrepreneurs or act as consultants to domestic companies via web or mobile platforms.

Measure impact and reward engagement

It is important to define the right metrics and measure them steadfastly. If the goal is technology transfer, an appropriate metric may be how many new ventures or products were launched with assistance from diaspora members. If long-term infrastructure buildout is key, the focus could be on diaspora participation in these projects. Universities with strong alumni outreach programs are particularly good at tracking and refining metrics for alumni participation in various campaigns.

Another consideration is how to reward exemplary members of the diaspora. The pre-eminence of social and emotional factors in the “jobs” the diaspora are trying to do hints that most of their incentives should be non-monetary, e.g. national recognition or status. Peer influence through diaspora community sub-groups, for example, is likely to be more effective at driving wide participation than the promise of financial rewards. It is important that these reward incentives are aligned with the right performance metrics.

Ideally, any emerging market’s diaspora strategy should be led by a coordinating body (like the government) and embedded in the operating priorities of the country’s institutions. But the private sector also has a role to play in pursuing more opportunistic lines of diaspora engagement, and companies can step in to lead the way in the absence of an effective government approach. Ultimately, if emerging market institutions and companies are to capture the diaspora opportunity and translate it into competitive advantage, a step change is required in their diaspora engagement models.

The Five Rules Every New CEO Should Follow

Last week, an executive who was on the verge of being promoted to head his large global publicly traded company asked for my advice on how to be effective as a brand new CEO.  I gave him a list and he was so appreciative that I was motivated to write a blog about it.   There were five recommendations on my list:

1)    Grow the Pie

The most fractious and difficult thing to do in an organization is to take resources away from someone who is used to receiving them.  For this reason, growing the revenue pie is critically important to the success of a CEO’s reign.  If a CEO attempts to reallocate the existing resources in order to improve the organization’s prospects, endless fights and a firestorm of protests will ensue.

If instead, the focus is on increasing revenues, investment capacity will increase and new resources can be funneled to growth priorities without needing to cut absolute resources to non-priority areas. Over time, as the revenues grow, the non-priority areas will become an ever-smaller piece of the puzzle and when the success of the priority areas has been made manifest, the CEO can shut down the non-priority areas without much hassle or fuss.

2)    Follow Due Process

CEOs really don’t have to follow due process.  For example, they have the power to sack anyone they want.  However, it is critically important not to do that because everybody watches with a keen eye and wonders whether they will be objects of arbitrary decisions as well.  Suck it up and suffer until such time as a manager who you would rather remove immediately can be given feedback and a fair chance to improve.  That is a lesser evil than to establish in your team’s mind that you make up your own rules.

3)    Consult Whenever Possible

Consult wherever and whenever possible with your team before making decisions, even if it drags out the decision-making.  This is because your team needs to feel and function genuinely like a team.  As CEO, there will be times when you have to make a decision without any support from your team because from your CEO perspective you can see that it is the right decision and your team can’t.  You can get away with these decisions without destroying the team dynamics, but only if you save it for very rare occasions.

4)    Set High Strategy Standards

The easiest thing for managers to do is to avoid making the explicit choices that are essential for quality strategy. But mediocre strategy results in lots of work for little reward. So it is critical for a new CEO to establish that direct reports have the responsibility for making logically consistent and unique strategy choices in their areas of responsibility. You need to signal that you won’t create their strategy for them but will help if asked — because nothing is more important than having a high bar for strategy.

5)    Maintain a Big Tent

The new CEO needs to signal from inception that the organization will be a big tent that welcomes diversity, not a monoculture with only people who resemble the CEO. It is much harder to find the requisite personnel for a monoculture and the reward if you do find them is that they are less effective!

My favorite ‘CEO’ of all time is former Baltimore Orioles baseball manager Earl Weaver, who won multiple World Series Championships with rag-tag assortments of personalities that were arguably the most diverse that baseball has ever seen.  He could always sign or trade for players to fit in his tent because of the breadth and inclusiveness of his definition of ‘fit’. My least favorite is Pete Rose who insisted that every player manifested the ‘Charlie Hustle’ persona for which he was famous in his former life as a superstar player.  Rose traded away players who ‘didn’t fit’ and built monoculture teams that hustled their way to persistent mediocrity.

I encouraged the new CEO to act immediately on these five recommendations because in the rough-and-tumble world of the modern CEO, second chances are rarely given.  And if a CEO starts off reallocating the existing pie, declaring force majeure, acting unilaterally, accepting mediocre strategy and closing ranks to only the comfortable colleagues, the die gets cast pretty quickly.  So make those first few moves deliberately — and in accordance with this list.

Meet the New Face of Diversity: The “Slacker” Millennial Guy

In the past, men demonstrated their manliness at work by mooning the trading floor (to quote one conversation I had recently) or pounding their chests à la Alpha-Ape (to quote someone I interviewed a few years back).  “Come back with your shield or on it,” a partner used to joke in the 1980s whenever someone in my husband’s BigLaw firm went to court. Extreme schedules remain a key metric of manliness.  “He’s a real man; he works 90-hour weeks. He’s a slacker; he works 50 hours a week,” commented a Silicon Valley engineer.

And men are paid handsomely for putting in such hours. An important new study by Youngjoo Cha and Kim A. Weeden reports that the wage premium for “overwork”—working more than 50 hours a week—has risen sharply. In 1979, there was actually a wage penalty for overwork; but this turned into a wage premium after the mid-1990s. Because men tend to overwork more than women, the rising overwork premium raised men’s wages more than women’s, and has effectively erased the advantage women gained by increasing their higher education levels.

All this helps explain why, according to one survey, 75 percent of male executives are married to homemakers.  It’s simply not possible to work 90 hours a week and see to your own basic needs – much less support someone else’s career. It works the other way, too: with only one salary to rely on, those husbands need all the wage premium they can get. But there’s an impact of these kinds of arrangements – he works all of the time, she does all the housework – on organizations. A recent study reported that male managers in such marriages found organizations with egalitarian gender attitudes less appealing and were more likely to give women low job evaluations.

This mindset, created by the peculiar demography of upper-level management, is increasingly out of sync with most of the workforce. Younger men increasingly want schedules that work around family needs — just as women have been demanding for years.

While the media, consumed with the idea of “mommy wars” and “queen bees,” has largely missed the tug of war that has emerged among men, sociologists have been busy uncovering the change. Statements like that of the Silicon Valley engineer who expressed resentment at his manager’s demands by saying, “[he] doesn’t have two kids and a wife, he has people that live in his house, that’s basically what he has,” as reported by Marianne Cooper, are increasingly common among younger men.  “It’s akin to winning a pie-eating contest where the prize is more pie,” observed a law firm associate, rejecting law firm partnership as a goal.

This creates a big gap between older men and their protégés. Katherine Kellogg, in her important study, found that the brotherhood of surgeons was dominated by Iron Men who see themselves as “the biggest, baddest SOBs around, beating up on the meddies [medical residents] and beating upon radiologists.” Iron Men live for the operating room, dismiss post-op care as boring, scorn rest (“I am hardcore and I need no sleep!”), and brag that a surgical residency program has a 110 percent divorce rate (“Guys would come in married, get divorced, get remarried, and get divorced again”).

What’s intriguing is that many younger men won’t play the game. Kellogg studied four Boston hospitals’ response to a new accreditation requirement that surgical residents be limited to 80 hours a week, down from the traditional 120-hour schedule.

Women supported the new 80-hour rule—no surprise—but so did many Millennial men. Kellogg found three main groups of such men:

One group, which she termed “patient-centered men,” wanted to spend more time listening to patients. This highlights the point, too often forgotten, that 24/7 work ethic often compromises work outcomes—a finding reported in a variety of industries, including Silicon Valley and consulting. Another group rejected Iron Men’s work-all-the-time ideals. “You want to get home to see your kids. You want to see your kids grow up,” said one. For a third group, the issue was not work-family balance but manliness itself. They found the Iron Men’s macho displays off-putting and inconsistent with their image of what it took to be an egalitarian man, a self-image that was important to them. In one hospital, all these groups banded together and changed residents’ schedules to observe the 80-hour a week rule.

In this, Millennial men are joining another group of longstanding skeptics: blue-collar men. While elite men “often view ambition, dynamism, a strong work ethic, and competitiveness as doubly sacred because they signal both moral and socioeconomic worth,” as Michèle Lamont has written, blue-collar guys disagree. To them, this looks more like selfishness. Lamont’s 2000 study quotes a bank supply salesman: “A person that is totally ambitious and driven never sees anything except the spot they are aiming at.” An electronics technician agreed, criticizing people who are “so self-assured, so self-intense that they don’t really care about anyone else…. It’s me, me, me, me, me.”

This cross-class disagreement also emerges clearly in Naomi Gerstell and Carla Shows’s study contrasting emergency medical technicians with physicians. The doctors typically devoted their lives to work and had wives dissatisfied by their inattention to family life. The EMTs also worked longer hours than their wives but were involved in everyday fathering in ways doctors were not, picking kids up from day care or school and staying home when they were sick. EMTs used shift swaps to facilitate child care. Many worked overtime only after consultation with their wives, who vetoed it when they felt the work would interfere with family needs. Others refused overtime completely. “I will totally refuse the overtime. Family comes first for me,” said one.

These EMTs sound a lot like the Millennial surgeons. Both groups of men are reinventing the meanings and the metaphors of work. The surgeons who aligned against the Iron Men abandoned the image of staff surgeon as hierarchical warlord, replacing it with an image of a team coach. “They referred to chiefs as ‘coaches’ rather than ‘commanders,’ to [senior residents] as ‘team members’ rather than ‘wingmen…’ and to interns as ‘rookies’ or ‘good prioritizers’ rather than as ‘beasts of burden.’”

Millennial men are beginning to do what women have done for decades: to work as consultants or start their own businesses that give them the flexibility for better work-family balance. A forthcoming study of New Models of Legal Practice by the Center for WorkLife Law (which I direct) documents lawyers in their prime who left large, prestigious law firms so they could practice law in ways that allow them to be more involved in children’s lives.  When he started his own virtual law firm, said a former in-house lawyer, “I had a two-year old and a baby and I definitely wanted to be at home and spend time with my kids and my wife and I saw there was an opportunity.” Being able to work at home, for him, was “a big benefit.” Big Law refugees signal the growing generational divide among elite men about what it means to put family first, and what it means to be a man.

Like blue-collar guys, these younger professional men have different understandings of ambition and different ideals of fatherhood. If they’re unable to change their organizations to allow time for family life, like the young surgeons were, they will leave. (Big Law, take note.)

Increasingly, managing fatherhood involves difficult conversations about what it means to be a good father, an ideal worker, and a “real” man. Today, managing diversity is not limited to women, LGBTQ individuals, or people of color. Diversity also means managing men who aren’t like you—and don’t want to be.

Applying a Face Cream Can Help You “Save Face”

Research participants who had been induced to recall awkward moments such as walking into opposite-sex restrooms showed a decrease in embarrassment if they applied what was described as a restorative cream to their faces (an average decline of 1.69 on a zero-to-10 embarrassment scale), says a team led by Ping Dong of the University of Toronto. The findings show that people can metaphorically “save face” by use of a physical product – yet another demonstration that many psychological metaphors have physical spillovers. The researchers point out that the study was conducted in Asia, where concepts of losing and saving face are more pervasive than in the West.

The Age of Social Products

We are moving from a world in which physical products are separate to one in which they are connected.  Computers were just the beginning.  Appliances and engines now send alerts when they need to be serviced.  Cameras upload their photos automatically.  Vending machines trigger their own restocking.  Crops feed and water themselves.

This shift has many monikers:  “The Internet of Things” and “The Internet of Everything” are two of the most popular. But the history of the Internet suggests that this is just the beginning.  The real change will happen when products aren’t just connected, but social.  Instead of the Internet of Things, we should be thinking about the Social Network of Things. To take advantage of this shift, you need to start thinking about the social life of your products.

What makes the Internet of Things possible is the confluence of multiple technologies:  inexpensive sensors, wireless networks, and cloud computing.   The ability to access data and computing resources from anywhere means that products don’t need to have computers and memory built into them.  They can just use the cloud.  Put sensors, a simple processor, and a wireless connection together and you have the makings of an intelligent and connected product.

The Internet of Things is already expected to transform customer service, business models, and advertising.  But we should remember the evolution of the Internet.  The early days (Web 1.0) was about computers talking to computers.  A few years later (Web 2.0), people started talking to people.  The Internet was disruptive as a connected infrastructure, but it became explosive when it got social.

Today, most of the discussion about the Internet of Things is about products being connected.  But just because your product is connected doesn’t make it social.  For products, the real revolution will come when objects aren’t just passing information back and forth, but collaborating around a shared purpose.

This insight is behind Google’s recent acquisition of Waze for $1.1 billion.  Google already has the best map and traffic program, so why would they want another one?  Was it just to keep it out of the hands of Apple or Facebook?  We think not.

Among other things, Waze cracked the code on social products.  Google Maps is a data network, while Waze is a social network, in this case of cars, phones and people.  Waze creates a constantly updating repository of traffic information, much like Wikipedia creates a dynamic repository of encyclopedic information.  However, in this case, it is cars, phones and people who are collaborating to create the body of knowledge.  Waze provides a glimpse of how the car can become a social device by using the little data created by each individual car and driver.  According to the head of Google Maps, the goal is “to harness the power of Google technology and the passion of the Waze community to make it easier to navigate your daily life.”

Waze shows us how the cars of the future will not only connect to each other but also leverage the collective intelligence of that community of connected cars. We can see this in other areas as well.  Connected e-readers already help every individual reader benefit from the actions of the community. Nike is betting on a future with connected shoes, where each individual shoe learns from the data aggregated from a network of connected shoes. Social products leverage the power of the community to learn from other products.

So how do you create a social product?

First, you need a product that is smart and connected.  You can build your own (like the thermostats and home alarms from Nest) or use someone else’s device.  It might be a smartphone (think Waze), a consumer device with open APIs (like Nike’s FuelBand), or a commercial device with a strategic alliance (like  Opower and electric utilities).

Second, you need to make the product social.  This requires a platform where people and products are connected in a collaborative network.  Each individual product and each user benefits from being part of a community of fellow products and users. For example, Nest’s thermostat and smoke detector work together.  When the alarm detects carbon monoxide, it tells the thermostat to turn off the furnace.

In the case of Waze, each car and driver benefits from the information gleaned and aggregated from the community of cars and drivers.   That’s not all.   A Department of Transportation study demonstrates how cars of the future will talk to each other.  Cars within 1,000 feet of one another will send out their speed and location to the others, which will then notify the driver as needed.  Google’s driverless cars will be able to make adjustments automatically.  In this future state, is it the cars that are driving, or the social networks?

If you are considering building a strategy around social products, you have a few choices.   You need a connected product, a social network of people, a social network of products, and a collaborative platform for interaction, data exchange, and analytics.  The good news is that you don’t have to do all of this yourself.

Instagram leveraged an existing connected product (smartphone camera) and an existing collaborative platform (Facebook) to create a social network of connected camera-phones.
Qualcomm Life is creating a new collaborative platform to transform existing connected devices (for mobile health and fitness) into social products.  Recognizing they also needed a social network of people, they recently purchased HealthyCircles to help physicians, patients, and families coordinate care and support.
Nike is creating an entire ecosystem of connected products (Hyperdunk+ shoes), social network of products (FuelBand), social network of people (Nike+), and collaborative platform (Digital Sports).

The Age of Social Products will change the basis of competitive advantage.  Companies have traditionally focused on product supremacy, outdoing their competitors with better features and attributes.  In an age of social products, competitive advantage comes not from product features but from network effects.  Companies succeed by having products that better leverage the intelligence of the network of other connected products. This is a shift in mindset from standalone-product thinking to connected-platform thinking.

The Age of Social Products is dawning.  Companies that create products that are smart, connected, and, most importantly, social, will not only survive, but thrive.