Marina Gorbis's Blog, page 1551

Decision Making, Top Gun Style

When Tom Cruise's "Maverick" inverted his F-14 fighter jet and gave "the bird" to his Soviet opponent in the opening scene of 1986's Top Gun, Cruise assured himself a lighthearted place in the history of the Cold War. What that scene also did, however, was provide one of cinematography's great examples of a key concept of air-to-air combat: the OODA loop. Maverick's uncanny ability to move rapidly through a complex decision cycle, always ending up in a superior position, not only made for great cinema but also represented one of the more complex theories to emerge from 20th Century military thinking.

The brainchild of now-deceased Air Force Colonel (ret) John Boyd, OODA (short for Observe, Orient, Decide, and Act) became a cornerstone of training for air-to-air combat in the latter half of the 20th Century. The OODA loop was Boyd's way of simplifying a four-step cycle which he considered the backbone of an air-to-air engagement. When two pilots faced off in a dogfight, the pilot who was able to observe the variables, orient his aircraft to the best possible position relative to his opponent, decide on the best course of action to engage his opponent, and act rapidly on that decision would win the fight. The OODA loop has been popular with military planners ever since, driving everything from selection of personnel to large-scale military plans.

Special operations teams, for example, are known for their detailed planning, intensive training, and utilization of advanced technology. This effort goes far beyond "being prepared." It is a conscious strategy to outpace the OODA loop of the opposition. Each element is designed to more effectively Observe the situation, Orient oneself or unit appropriately, Decide how best to maneuver, and take effective Action.



The OODA loop is well-suited for individual or small-team situations like aerial dogfights and ground skirmishes. But is the modern battlefield, enterprise, or marketplace too complex for the theory to hold?



We believe modern leaders face the same problem as Boyd's fighter pilots decades ago: they need to make decisions better and faster than the opposition. Like fighter pilots, they must acquire data, turn data into insight, and then act on that insight. The difference is that modern leaders must enable entire organizations to have this capacity.



Can an organization learn to move like a fighter pilot? Can thousands of people collectively Observe, Orient, Decide, and Act?



In previous posts, we've discussed how special operations teams re-oriented their decision process in Iraq and Afghanistan in order to exponentially increase their ability to receive, analyze, and create collective understanding of broad amounts of data. This understanding ultimately drove a decision and action cycle that was able to outpace the terrorist networks they faced.



In the corporate world, organizations are also beginning to create large-scale OODA loops. Social media monitoring is one of the key technologies for creating OODA loops. During the Super Bowl blackout, Oreo received a lot of attention for its tweet, "You can still dunk in the dark." This didn't happen by accident. Lisa Mann, then VP of Cookies at Oreo-maker Mondelez International (she's since moved up to Senior VP of Global Gum), had set up a "social media command center" — one that would have been very familiar to any special operations team. All of Oreo's agencies and stakeholders were physically and virtually connected. "Everyone [was] in place to jump on a real-time marketing opportunity," Mann said. Oreo had designed a system to give it an OODA advantage.

Dell is also using social media monitoring tools to Observe, but going further by creating OODA loops that extend beyond marketing into the entire organization. Dell has a permanent Social Media Command Center that monitors conversation and activity for every one of its products across all social channels. What sets Dell apart are the relationships between the Command Center and the lines of business. The communications channels enable the organization to respond quickly to what is observed in the marketplace. For example, Dell was able to change the pricing on a product in a single day, neutralizing a potential customer insurgency.



Some CEOs are beginning to apply large-scale OODA loops within the executive suite. New York City Mayor Michael Bloomberg is known for putting his desk right in the middle of the action with line of sight to everything happening around him. Facebook CEO Mark Zuckerberg also has his desk in the middle of an open office, and has now hired Frank Gehry to create an entire corporate campus as a single open office.



The CEO of Scotts Miracle-Gro, Jim Hagedorn, is taking a different approach. Fittingly, Hagedorn spent his younger days as a jet fighter for the U.S. Air Force where the OODA loop became second nature to his thinking.



Hagedorn wanted to replicate what happens inside a jet fighter's mind. Scotts' Situation Awareness Room enables senior leadership to physically gather and share information in an open, common space. The room is ringed with real-time data tied to strategic priorities and advanced video-conferencing systems. The SAR is the central node of the network, intended to create collective understanding, then rapidly disperse decisions and plans for action.



Scotts' Situation Awareness Room is well designed to Decide, and Act. But how do you get the data you need to Observe and Orient? Scotts' answer is the Analytic Center of Excellence. A group of hand-selected personnel will each represent key nodes of the larger organization and sit right next to the Situation Awareness Room. The team will feed data and analysis to help leaders better Observe and Orient prior to Decide and Act.



What approach should you take? You might focus on collaboration in an open office like Facebook, or a highly structured intelligence network like Scotts. There isn't a single right answer, just the right answer for you. Can you beat the competition to Observe the situation, Orient yourself to your goals, make Decisions swiftly, and take effective Action? If so, then you will have become a modern day "Maverick" and a Top Gun leader for the digital age.

Investors Will Like Your Company Better if You Shorten Its Name

On average, companies with short, simple names attract more shareholders, generate greater amounts of stock trading, and perform better on certain financial measures than companies with hard-to-process names such as National Oilwell Varco and Freeport-McMoRan Copper & Gold, say T. Clifton Green of Emory University and Russell E. Jame of the University of Kentucky. A 1-step increase in name "fluency" on a 5-step scale, such as reducing name length by 1 word, is associated with a 2.53% increase in market-to-book ratio, which would translate to $3.75 million in added market value for the median-size firm in the authors' sample. Selecting an easy-to-process company name is a low-cost method for improving investor recognition and increasing firm value, the authors say.

How to Use Psychometric Testing in Hiring

Roughly 18% of companies currently use personality tests in the hiring process, according to a survey conducted by the Society for Human Resource Management. This number is growing at a rate of 10-15% a year according to many industrial and organizational psychologists, as well as the Association for Test Publishers.

When used correctly, cognitive and personality tests can increase the chances that new employees will succeed. Since the cost of a bad hire is widely estimated to be at least one year’s pay, there are huge incentives for organizations to get hiring right. Unfortunately, too many organizations use the wrong psychometric assessments in the wrong way. Here’s what organizations need to know in order to minimize potential risks and maximize the predictive accuracy of these tests.

Know the law. Organizations, hiring managers, and HR need to keep legal compliance in mind when they add psychometric tests to their pre-employment screening system. Because of anti-discrimination laws, assessment tools (especially cognitive ability tests) need to be job-relevant and well validated. In the United States, because of the Americans with Disabilities Act, tests generally need to respect privacy and not endeavor to “diagnose” candidates in any way.

One recent example of an organization that has changed its assessment battery due in part to concerns about racial discrimination and poor prediction of job performance is the National Football League. Unless jobs involve law enforcement, weaponry or other special safety considerations, organizations should not ask candidates to take any assessment that was designed for the purpose of diagnosing susceptibility to depression, risk for other kinds of mental illness, or any kind of personality disorder.

Know the business needs. Psychometric tests will not help you if you don’t have well-established measures of job performance. Too often, organizations focus more on the predictors, or “independent variables,” than on what is being predicted, or “dependent variables.” If an organization doesn’t have quantitative measures of employee performance on the job, then there is no basis for statistical correlations of how well psychometric tests (or any other kind of candidate evaluation for that matter) predict performance.

Once you know the business needs, make sure you find a test that will actually evaluate those characteristics. For instance, while there are laws that prohibit companies from discriminating or invading candidates’ privacy, there are no laws that prohibit companies from using strange or invalid assessment tools. If a company wanted to use astrology to pick a Scorpio instead of a Libra as the new CFO, there wouldn’t be any legal risks to doing so (as long as there wasn’t any correlation between astrological sign and candidates’ membership in “protected” classes of people). But most people recognize that horoscope would be the wrong categorization tool for filling your open job. What they don’t realize is that other, often-used tests might also fail to predict the desired results.

For instance, while the Myers-Briggs Type Indicator (MBTI) is quite popular with many organizations, it should not be used for employee selection. The MBTI was not developed for that purpose and is not intended for personnel evaluation — even the test’s publisher warns against using it in that way.

Reduce the risk of cheating. In order to safeguard against the possibility that candidates will ask others to take tests, especially cognitive ability tests, on their behalf, organizations should “proctor” the assessment test, either by having the candidate take the assessments in their offices or by monitoring candidates via video conference if they are remote.

Keep in mind that some candidates may be tempted to “game” the results. Compare the candidate’s references and interview ratings with their results to determine if the two are consistent. If a candidate for a sales job seems shy and understated in interviews and is described as quiet and introspective by her references, but tests as a people person who constantly needs to be in the limelight, this discrepancy may raise the question of whether the applicant is attempting to engage in “impression management” in order to come across as a more ideal candidate.

Some psychometric tests have built-in measures that indicate whether a candidate’s pattern of responses may reflect an attempt to come across a certain way or whether the candidate’s answers are incongruent with one another. Using multiple psychometric tests can help organizations get a more consistent picture. But don’t overdo it. Even a well-developed, legally defensible, and predictive assessment battery will not add value if candidates feel it is too time-consuming or intrusive.

Share test results with candidates. While in most psychological research, “informed consent” gives candidates the right to see their results, few organizations provide access to the reports based on the psychometric tests that applicants take. Often, organizations even ask candidates to sign a document waiving their right to see their results. But there are both ethical and pragmatic benefits to sharing results, regardless of whether a candidate receives or accepts an offer of employment.

Any candidate can benefit from the feedback of a well-validated, job-relevant psychometric test report. The candidates who receive and accept offers will appreciate that the reports can provide a helpful basis for discussions about their “onboarding,” and the candidates who either do not receive or do not accept an offer will still appreciate the organization’s professional courtesy of sharing the feedback with them.

(If you would like to take a personality assessment for free online, which will provide results that are similar to some of the well-validated personality tests on the market that organizations use — and where the confidential results will come directly to you — try the IPIP 120.)

Test the tests. A well-developed performance appraisal system should evaluate job performance quantitatively (not just qualitatively). This gives the company “criteria for correctness” that it can use to measure how well its pre-employment screening tests actually predict success on the job. It’s best to think of this process of validation as a scientific research endeavor, with the hypothesis being that a given psychometric assessment will predict job performance, and with that hypothesis being subject to ongoing empirical validation with the potential for disconfirmation. If an assessment doesn’t predict performance over time, stop using it.

High performing organizations constantly evaluate and improve their candidate evaluation systems by paying attention to predictor variables, outcome variables, and the correlations between the two. Psychometric tests should be subject to the same rigorous testing and validation as the candidates they are being utilized to assess. When hiring managers and HR utilize the right methodology to select and retain the right psychometric tests, they can significantly raise the probability of selecting and retaining the right talent, too.

The End of Banks as We Know Them?

Last week my father received a phone call from the branch director of his long-standing bank to offer him a new product. My father, instead of listening with confidence to the advice of a trustworthy agent, was immediately suspicious. He dreaded another 30-page prospectus full of small print — and another potential trap. My father's experience is mirrored all over the world. Millions of people have lost confidence in banks.

But the dissatisfaction and disappointment with our banks runs deeper. The last bank in my hometown closed a year ago. After serving the community for more than thirty years, it was no longer seen as economically viable. Another casualty of cost cutting, it simply closed its doors — even though local people and businesses that had used that bank all their lives still relied upon it. Again, this story is repeated around the world. This, we are told (in expensive TV ads), is progress. A global world needs global banks — whether we as their local customers like it or not.

But something has been lost along the way. Even before the banking crisis of 2008, something was gradually, but undeniably, in decline. Trust. Millions of savers and borrowers listened (and still listen) to reports of record profits at their bank — even as they are told their local branch is closing to save costs. The two facts do not add up. Today, the belief among ordinary account holders that banks are there to serve us has all but disappeared. Where once they were regarded as pillars of the community, banks are increasingly seen as the unpalatable face of big business.

In many cases, banks have sacrificed the needs of the local community — and indeed the belief in the community ideal — in the scramble to go global. That globalization has come at the cost of local service. What the banks seem to have forgotten is that the global village is made up of millions of local communities. (The banking sector is not alone in this. In industry after industry, companies have gone global with something approaching abandon, often with little regard for the local communities that gave them life.)

So, why is this and does it matter? And, perhaps more importantly, can anything be done to fill the yawning gap in local communities all over the world? My research suggests that there is a viable alternative to local banks. It is something I call community financing.

Community financing refers to a form of cash-flow that channels the financial resources of the savers of a community into the well-being of that community via economic activities, which members of the community believe should be undertaken and therefore willingly supports with their savings.

There are many examples of Community Finance initiatives around the world, some large some small. Think of Kiva, Kickstarter, or microlending. But it's not all about internet startups or social enterprise. One of my favorites is the story of the JAK Members Bank (or JAK Medlemsbank), a co-operative member-owned financial institution based in Skovde, Sweden. The bank does not participate in capital markets; all of its loans are raised solely from member savings. In 2011, JAK had assets (savings) of 131 million Euros and 38,000 members, who are each allowed one share in the bank and determine its policies and direction.

JAK relies on the "saving points" system — members accrue points for saving and use them to apply for a loan. The idea is that you are allowed to take out a loan for yourself to the same extent that you allow other people to receive loans. The bank uses a simple accounting rule to ensure its own sustainability: overall, earned savings points must equal spent savings point. JAK does not charge or pay interest on any of its loans (a principle it shares with Islamic banking).

To see how this works in practice, consider a true story. An entrepreneur in the small community of Skatteungby, some 300 kilometers from Stockholm, asked the JAK Bank for a loan to develop a shop. Although he remained ultimately responsible for paying back the loan, the project was able to go ahead because he enjoyed the support of individuals within the community who wanted the shop. Enough people in his local community made a deposit from their personal savings into the account to finance the shop, fulfilling the saving schema that JAK requires for granting a loan. In this scheme, the risk stays at the bank, the responsibility of repayment to goes to the entrepreneur, and the community foregoes the potential gain in interest in their deposits in exchange for having a local activity in the town desirable by many of their members. This is one of the sharing risks schemes that characterize community finance.

Such initiatives are now on the increase around the world, not just in emerging economies but in the developed economies of the West. They offer a fresh approach to financing local businesses and providing local banking services. They also offer a chance of redemption for the traditional banking system.

Let me explain.

Since modern banking began in the 17th century to offer a channel from people's deposits to people's needs, the number of people using the banking system has grown steadily reaching percentages of more than 90 percent of bank users in countries such as the U.S. or the UK, making it difficult for citizens to believe that we could do without them. But, since the beginning of the 20th century, different crises of liquidity and debt have given banks a bad reputation.The growing distrust of conventional banks is provoking an outflow of deposits to entities outside the conventional banks and even some outside the regulated system in different crowd-finance platforms, peer-to-peer lending systems and cooperative lending entities. These initiatives are suddenly becoming popular. They provide micro lending services to local community businesses. Some such as Accion in the USA , or Fondo de Solidaridad de Granada, have been around for years. Others, such as "Bank on Dave" in the UK are newer.

Elsewhere, other alternative community financing initiatives are underway. For example, new technologies have made it possible to develop crowd sourcing lending platforms, such as Kickstarter in the USA, or or Goteo in Spain , for peer-to-peer financial services. Some of these initiatives are regulated by financial authorities, some leave on the margins as private associations, but all are becoming increasingly popular to fill the gap left by traditional banking. In parallel financial inclusion, through financial literacy or providing banking services to financial excluded communities are part of the new landscape such as Kenya Post Office Savings Bank.

The fact that people may trust more an unknown virtual platform in the web than its neighboring bank is not as crazy as we might think, if we consider that default rates of some of these systems are estimated to be less than two percent when the banking system might get as high as eight percent or even 10 percent in the case of credit cards.



And yet can we seriously envision that the next level of finance, at least for the personal loans or small business, will leave the banks? And do we really want it to? If this happens, the long process to provide the financial system with regulation and security controls will be undermined, and we would lose centuries of banking expertise in analyzing loans and risks. If banks are perceived to be providing loans to the governments and large corporations ignoring the personal loans and/or small business, alternative systems will grow provoking serious consequences for depositors as well as for the system itself, unless there is a way to re-gain the lost confidence.

My generation (and my mother's before me) grew up watching It's a Wonderful Life in tears every Christmas eve. The classic film offers an eloquent lesson in how much good a bank can do for a community. For decades it has been the most avidly watched Christmas film. Deep down many of us believe that, as James Stewart puts it, "A good bank is the one that does good to its community and a bad Bank is the one that feeds the avarice of corrupt individuals." Simple but powerful.

For traditional banks, the clock is ticking. But it's not too late.

Research: Middle Managers Have an Outsized Impact on Innovation

Just the mention of “middle managers” is enough to make people’s eyes roll back. But these supposedly boring cogs of the corporation, these objects of derision in Dilbertland, can have a profound impact on innovation and performance. Companies need to pay attention to them and reward their special talent at making the best of the restrictions and limitations of their positions — of making lemonade from lemons.

For decades, researchers and businesspeople have assumed that in the thick of large organizations, what matters is process. Are the right resources available? Are incentives effective? If the organization isn’t being innovative, the solution must be structural.

My study of computer-game makers shows something different — that individuals matter a lot. And of all the individuals, the choice of who is middle manager on vital projects goes the furthest in explaining why some firms do better than others.

In a gaming-company context, middle managers have the job title of “producer” (primarily because it is thought to be a cooler-sounding title than “project manager”), and they supervise designers, who are the sources of creative ideas. After controlling for many factors, such as the genre of the game and the size of the project, I found that individual producers account for 22.3% of the variation in company revenue. Designers, by contrast, account for just 7.4% of the variation — a relatively marginal impact. For comparison, everything else that’s part of the firm, whether it’s senior managers or strategy or marketing, accounts for just 21.3% of the variation in firm performance. (The rest is due to exogenous factors such as changes in technology and the marketplace, as well as some of the natural variation in any creative products). What’s more, the talent of individuals was portable — when they left one company for another, they took their ability with them.

Producers’ impact extends beyond firm performance. When I looked at which group was responsible, and to what degree, for variations in product quality, as measured by critics’ responses to games, the numbers were similar.

Why do project managers have such a large impact? The answer has to do with the difficult, but often critically important, situation they find themselves in. Higher-ups don’t give them the resources they want, and subordinates are annoyed by the directives the project managers are mandated to promulgate. Squeezed from above and below, they have to make do. Some people are very bad at this and destroy value. But some are really good at it. The best have a knack for turning restrictions on resources into creative solutions. It’s almost magical.

For example, think of the middle manager (yourself, perhaps?) whose team, for budget reasons, was never restored to full strength after a couple of departures, and who responded by reassigning responsibilities in a creative way that made everything work better — to the point where everyone wondered why those additional people were ever needed.

Middle managers’ position is also critical in that they function as the facilitators, nurturers, and selectors of creativity. They’re the ones to get the creatives excited about a project, keep them on time and on budget, solve interpersonal problems, and select from the creatives’ ideas. They speak up when the creatives’ ideas are unrealistic or too difficult to implement. Good middle managers can also help create “collective creativity,” making sure that the sum of innovative work is greater than its individual parts by establishing healthy team dynamics.

When you study companies, you see that the good project managers are widely known. There’s respect for their abilities — sometimes it’s grudging, but it’s real respect. Everyone has a sense of how important they are.

But that doesn’t stop companies from ignoring them. The middle-management position is usually seen as a way station to “real” management. Companies make little effort to retain the most effective middle managers. A lot of project managers buy into this view, accepting that they should do everything possible to shed the “middle” label and move on.

But the reality is that good middle managers are a valuable resource. If you take a really effective middle manager out of his or her role, it’s unlikely that someone else will be able to do the job as well. And a number of managers like the middle. They know they’re effective there. Companies would do better to support the best of these managers and encourage them to stay in the middle, if that’s their chosen profession (and it is a profession).

One way to encourage them to stay is to frame the job description so that it doesn’t sound like a stepping-stone to something else. Another is to create a career path that doesn’t necessarily involve promotion out of project management. Have them aim for the role of “chief project manager.” Assign them to teams where they can deploy their special talents in interesting, challenging ways. Does one of them excel at fast turnarounds? Another at getting creative people to stop fighting? Another at resurrecting supposedly doomed projects? Make sure these skills get used.

Most of all, don’t think of middle managers as interchangeable parts. They are individuals, and many have significant talents.

Corporate leaders spend a lot of time worrying about the impact of their strategy. But they overlook the impact of the people who make the thousands of small, critical choices that truly make the difference between success and failure.

Executing on Innovation

An HBR Insight Center




Why Is Innovation So Often Synonymous With Disappointment?
How Corporate Venture Capital Helps Firms Explore New Territory
Innovation Isn’t an Idea Problem
Five Ways to Innovate Faster

Apple's iPhone Pricing Strategy: Good, Not Great

With yesterday's iPhone release, Apple changed things up by going to a "good-better-best" pricing strategy on its new devices. As it always does, the company showcased a new and improved iPhone model — the 5S — which provides faster processing, a better camera, and James Bond-like fingerprint security technology. Prices for the 5S in the U.S. start at $199 for customers who commit to a 24 month contract, and $649 for those who prefer not to be tied to a two-year financial obligation. Apple also released a lower priced iPhone, the 5C (many view the "C" as a moniker for "cheaper"), which in essence is old technology — similar to the current iPhone 5 — in a plastic backed case available with a variety of new colors. 5C prices in the U.S. start at $99 on contract and $549 off-contract.

But in my view the good-better-best pricing strategy (in this case "better-best") makes sense for Apple for a couple key reasons:

Giving customers more choice will generate growth. I often use the analogy of early-bird, regular, and chef's table options that are available at many gourmet restaurants. This strategy allows customers to choose the price that works best for them. Newly married couples on a budget, for instance, opt to arrive before 6:30 PM while dining high rollers willingly pay a hefty premium to hob nob with the chef. A similar type of self-selection will occur with these two iPhone options. By serving the price sensitive market, Apple will grow its business with new early-bird customers.

It will preserve the 5S's margins. In my consulting work with companies, I've been in similar situations as Apple now faces. Often times a premium product with large market share encounters a new wave of competition that is winning customers via rock bottom prices. For proof of Apple's woes in this area one need look no further than the recent Siri-bashing Windows 8 Tablet ads, whose punch-line is $250 cheaper price tag than the iPad. To combat this pricing pressure, I inevitably recommend introducing a lower priced version — a fighter brand — which competes with new entrants and serves price sensitive customers. With the 5C in place as a fighter brand, the 5S is now better positioned to customers who highly value the handset and can continue to command a premium.

The stock market reacted harshly to Apple's new strategy primarily due to the 5C's $549 off-contract price. But why does the high off-contract price matter? In emerging markets such as China, buying handsets off-contract is very popular and the 5C's relatively high price isn't going to generate long lines of "I must have it now" customers. Analysts had previously predicted the off-contract 5C price to be around $400 and when the actual price of $549 was announced yesterday, investors got skittish.

The analysts blew it and Apple is now a victim of unrealistically set expectations (as I discussed earlier today in an interview with Bloomberg TV). For the right to offer iPhones to their customers, wireless carriers typically pledge to sell large volumes. Verizon, for instance, has reportedly committed to purchase over $23.5 billion in iPhones in 2013 alone. Because of these deals, there's no way that Apple would have offered a cheap off-contract 5C price. This would induce customers to buy off-contract — which would hurt its wireless supply partners who are hustling to meet their commitments. In fact, it wouldn't surprise me if these high volume deals with wireless suppliers such as Verizon prohibit Apple from selling cheap off-contract phones.

What's interesting is the intended outcome of the 5C — attracting price sensitive iPhone customers who buy on-contract — could have also been accomplished with a new pricing strategy. Taking a page from the car leasing industry, carriers should offer customers a range of choices. If $199 upfront for the premium 5S on contract does not work for a customer, offer them $100 upfront plus an extra $5 per month for the 24 months of the contract, or no money down and an extra $10 monthly finance payment. Customers typically focus on what it's going to cost them today and often gladly tradeoff a lower upfront payment for a few extra dollars a month obligation. And just like car leases, monthly payments can be further reduced if customers pledge to return the phone in 24 months (presumably to trade-up to a new iPhone).

While the off-contract 5C pricing won't move the needle in emerging markets, the key to success in these markets is to push on-contract (in essence, financing) or lease pricing options. Apple needs to promote these pricing practices to help customers understand that leasing or financing over time via contract are time-honored strategies used by customers to buy luxury products. It's estimated, for instance, that over 60% of BMW and Mercedes new car sales in the United States are leases.

The 5C will accomplish exactly what Apple intended in the on-contract market — provide an early-bird $99 option, which is good. But what prevents this strategy from being great is the lack of a viable pricing-related growth strategy in emerging markets, which I believe is easily solvable.

The "Instant Referendum" That's Undermining Your Leadership

Outgoing New York City Mayor Michael Bloomberg knows more than a thing or two about running huge, complicated organizations and digital media. So when he notes in a farewell interview that, thanks to social media, there's now "an instant referendum on everything; I think it's going to make governing more difficult," private sector managers better get nervous, too.

The Arab Spring and other Twitter-credited uprisings get virtually all the headlines, but the C-suites and high-profile executives at enterprises worldwide are increasingly conducting "instant referenda" on their presentations, decisions, and actions. The digital institutionalization of the instant referendum makes leadership and management more difficult, as well. The more controversial or confusing the leadership decision, the harsher and more influential the instant judgments of that referendum can be.

Don't think for a moment that mid-level J.C. Penney managers and employees weren't sharing their unhappiness and concerns during Ron Johnson's troubled tenure there. At Microsoft, no sooner had Steve Ballmer's resignation set the company's digital tongues a'wagging than another internal debate broke out in the wake of the company's multi-billion-dollar Nokia acquisition. Are Google's employees running comparable referenda on the impact that a cofounder's relationship status may have on their company?

The water cooler hasn't vanished; it's simply become virtual, transported into the cloud. What's fundamentally different, of course, is the new speed and scalability of sentiment. Where rumors and reactions once took weeks to coalesce into enterprise attitudes, internal networks and "gray market" social media now compress into days. Global firms — indeed, any organizations of size and/or scale — are now captive to social-mediated that can turn quiet doubts into open skepticism and reluctant accommodation into passive resistance.

Managing — or at least influencing — information cascades will become one of the core communications competencies of top-level executives. Facilitating favorable cascades will matter as much as killing one in its virtual tracks. If information is cascading in private Twitter, Facebook, and/or LinkedIn networks, executives may indeed have to ask to "friend" or "follow" hub colleagues and subordinates.

At one European global financial firm, I saw heavily lawyered internal communications about an internal problem managed so poorly that managers across the enterprise collectively lost respect for the senior executive tasked with handling it. The instant referendum in the aftermath almost instantly devalued that executive's brand within the firm. He had to rehabilitate himself in face-to-face meetings throughout Europe to make up for losing that referendum. Needless to say, he and the corporate communications folks monitored the internal chatter that followed his make-up sessions. Issues of privacy and anonymity for these informal "off-network" referenda become managerially challenging, as well.

In instant referenda environments, being likable and/or highly competent counts for a lot. Leaders and managers want to be seen as either nice or credible enough to get the benefit of the doubt for a difficult decision or a controversial choice. Being more accessible or responsive can help. Similarly, so might "information inoculation" strategies and tactics where — like with a good vaccine — people get exposed to just enough of the decision or conflict to prevent uncontrollable outbreaks of negative sentiment.

Does this create the real risk that managers and leaders appear afraid of negative reactions from their subordinates? Yes, it does. Does it also create the possibility that employees and colleagues will be even angrier and more resistant to leaders who behave as if their reactions don't much matter? Why, yes.

Michael Bloomberg knows things have changed. In the digital enterprise where BYOD has become the new normal, instant referenda are an emergent phenomenon that leaders and managers ignore at their peril. The more important — and controversial — the decision, the more important that instant referendum will prove.

Poker players worldwide understand the admonition that if you can't spot the fish at the table in the first half hour, then you're the fish. In the socially mediated enterprise, leaders who aren't really aware of their internal referenda aren't really leading.

The Right Way to Find a Career Sponsor

As part of her employer's mentoring program, every month Willa meets one-on-one with Joan, a former EVP at the same global financial services firm. Warm and nurturing, Joan is a tireless champion of working mothers like Willa, having herself negotiated a flex arrangement working out of her home in Connecticut while overseeing operations in India.

Joan is unquestionably Willa's role model as well as mentor. But is she the senior leader best positioned to get Willa promoted to her dream job of heading up M&A at corporate headquarters? Probably not.

As sympathetic confidants, mentors can't be beat. They listen to your issues, offer advice, and review approaches to solving problems. The whole idea of having a mentor is to discuss what you cannot or dare not bring up with your boss or colleagues. But when it comes to powering your career up the corporate heights, you need a sponsor. As I explain in my new book, Forget a Mentor, Find a Sponsor, sponsors may advise or steer you but their chief role is to develop you as a leader. Why? Not so much from like-mindedness or altruism, but because furthering your career helps further their career, organization or vision. Where a mentor might help you envision your next position, a sponsor will advocate for your promotion and lever open the door. Sponsorship doesn't "rig the game"; on the contrary, it ensures you get what you deserve — and will propel your career far more than mentors can.

When scanning the horizon for would-be sponsors — and yes, you need more than one — many high-potential women make the mistake of focusing on role models rather than powerfully positioned sponsors. My research shows that they align themselves with people whom they trust and like or who, they believe, trust and like them. According to survey data from the Center for Talent Innovation, 49% of women in the marzipan layer, that talent-rich band just under the executive level, search for support among someone "whose leadership style I admire." What style is that? Forty-two percent are looking for sponsorship from collaborative, inclusive leaders because that style of leadership is one they embody or hope to emulate.

The problem is, those aren't the leaders with the power to push promising women to the corporate heights. CTI research found that only 28% of men and women at U.S. companies say that inclusive collaborators represent the dominant style of leadership at their firm. Instead, nearly half of respondents — 45% — say the most prevalent model is the classic, command-and-control leader who wants his lieutenants to fall in line behind him. Twenty percent perceive their top management to be competitive types — hard-edged, hard-driving guys who value quarterly bottom-line results above all. Very few — 6% — describe their chief as a charismatic visionary who, because he or she is focused on the big picture, seeks out tactical, pragmatic support.

In short, what female talent values and seeks in a sponsor just isn't on offer among those with real power in the organization. This profound mismatch helps explain why so many women — 40% — fail to find the real deal: Sponsors who can deliver. As one woman ruefully told me, "I wasted ten years talking to the wrong people."

To avoid that mistake, be strategic as you search your galaxy of supporters for would-be sponsors. Efficacy trumps affinity; you're looking not for a friend but an ally. Your targeted sponsor may exercise authority in a way you don't care to copy but it's their clout, not their style, that will turbocharge your career. Their powerful arsenal includes the high-level contacts they can introduce you to, the stretch assignments that will advance your career, their broad perspective when they give critical feedback — all ready to be deployed on behalf of their protégés.

Look beyond your immediate circle of mentors and managers. While you should, of course, impress your boss — who can be a valuable connection to potential sponsors — seek out someone with real power to change your career. Would-be sponsors in large organizations are ideally two levels above you with line of sight to your role; in smaller firms, they're either the founder or president or are part of his or her inner circle.

Sponsors don't just magically appear, like fairy godmothers (or godfathers), to hard-working Cinderellas. Sponsorship must be earned, as I'll describe in my next post — not once but continually. But when you link up to the right sponsor, the result can change your career.

What's the Status of Your Relationship With Innovation?

How important is innovation these days? Increasingly important, if one goes by the frequency of the word appearing during earnings calls that publicly traded companies have with investment analysts. In 2008, the word appeared 1,733 times in earnings calls for 435 large publicly traded companies. That's an average of about four mentions per company (Starbucks topped the list with 139 mentions). In the last four quarters where full data are available, the total was 3,299, or about 7.5 mentions per company (Nike, recently named the world's most innovative company, topped the list with 239 mentions).

But just talking about innovation doesn't mean a company is really serious about it, or is approaching it in a way that has as a reasonable chance of success.

Innovation — particularly that which pushes a company into new markets or new businesses — requires a serious ongoing commitment. But what we've found in our work with companies across a wide spectrum of industries over the past few years is that many corporate leaders who think they are seriously committed to innovation are really just flirting with it. There's nothing wrong with flirting, or even taking the next step and having an innovation fling, as long as leaders recognize that they aren't likely to get significant returns without making serious commitments.

Unfortunately, because innovation so frequently is confused with creativity or the generation of ideas, many companies dramatically overestimate their commitment to innovation. That leads to corporate disappointment when creative ideas don't translate into substantial growth businesses. As we described in Building a Growth Factory, a serious commitment typically requires (among other things) dedicated resources, a disciplined approach, and serious executive involvement. These kinds of commitments help to overcome some of the most common execution challenges companies face:

• Moving at a glacial pace because over-stretched managers are trying to fit efforts into small cracks in their calendars

• Unintentionally force-fitting a disruptive idea into the company's current business model, blunting its long-term potential

• Playing it overly safe because employees know that the rewards for success are miniscule but the penalties for taking even well thought out risks that don't pan out are prohibitive

So how can you tell how truly committed your organization is? Inspired by the somewhat tongue-in-cheek quizzes that populate fashion magazines, we created a short quiz. Find a colleague, and see how you fall on the following seven questions.

1. Who is working on innovation?

a) What's innovation? (You might want to stop the quiz now.)

b) Some people spend bounded time on innovation (e.g., "Free Thinking Fridays")

c) We have dedicated resources who eat, breathe, and sleep innovation

2. What's in it for them?

a) Suffering — it's their job. If they screw up, they'll feel it

b) Glory — the spotlight shines bright when they succeed

c) Riches — we have specific incentive programs for innovation

3. What is the background of the people working on it?

a) Some of our best performers

b) Internal talent that has a demonstrated history of successful innovation

c) Blend of internal talent and external hires with a proven track record

4. What are they working on?

a) Nothing specific — it takes 1,000 flowers, right?

b) All hands are on deck for a single make-or-break "bet the company" initiative

c) We have identified a handful of strategic opportunity areas we are exploring

5. Where does the money come from?

a) Our budget is focused on operating priorities, so there isn't any money for it

b) We don't have a budget for innovation, but we find money when we need it

c) We have a dedicated budget for innovation

6. What is leadership's role?

a) Get out of the way — we don't want to constrain it

b) We have a special quarterly meeting where senior leaders talk about it

c) We have a member of the executive committee or board who owns it

7. Word association — innovation is...

a) Random! We just hope for the best

b) Fun! We support it but don't constrain it.

c) A discipline! We approach it systematically.

Give yourself one point for every "A" answer, three points for every "B" answer, and five for every "C" answer in the right column.

If you scored:

• Fewer than 10 points: You tease! You are still just flirting with innovation.

• Between 10 and 25 points: All right, you've had your innovation fling. Are you ready to get serious?

• More than 26 points: Congratulations! You have made the life-long commitment to innovation

Ask colleagues to take the version of the quiz that we have posted at www.innoquiz.com. Once we get enough data we'll summarize the results to see what patterns emerge.

Innovation has its moments of fun, no doubt, but success requires discipline and hard work. Just like many other areas of life, real results don't come without real commitment.

Executing on Innovation
An HBR Insight Center





Why Is Innovation So Often Synonymous With Disappointment?
How Corporate Venture Capital Helps Firms Explore New Territory
Innovation Isn't an Idea Problem
Five Ways to Innovate Faster

Cracking the Mobile Advertising Code

"Mobile first." That phrase is increasingly shaping marketing decisions, and for good reason. In 2012, $10 billion in sales were made through mobile channels. That's expected to rise to $30 billion by 2016. In addition, 55 percent of smartphone owners use their smart phones to research purchases. Those numbers have mobile advertisers salivating. But they need to focus on real opportunities and not false hopes.

The Achilles' heel of mobile apps

While consumers are spending more time on their smartphones, recent research reveals that the vast majority of this usage — as much as 76 percent — is on mobile apps. Despite the popularity of apps, however, most mobile ad dollars go to search, which is better at targeting users and tracking ROI. Despite the popularity of apps, brands spend more than ten times as much on paid search advertising as they spend on ads on apps.

Why the discrepancy? There are a few reasons:

Limited targeting capabilities. Thanks to cookies, brands can target ads to customers online both on their site and on other sites users visit after they leave (aka "re-targeting"). That's because cookies track what sites customers have visited and what they've clicked on. Cookies can't do that well on mobile apps.

Lack of a closed loop. Though many purchases influenced by mobile are completed on other channels (e.g. in a store or online), there's no way to track that. Without any way to credit mobile's influence on purchases, it's impossible to determine the ROI on mobile ads.

Ineffective ad formats. Most mobile ads are banner ads, which are already poor performers in the online world. Ads that are large enough to be seen on mobile screens are often considered invasive by users. Ads that are small are often too hard to see.

Audience fragmentation. The top 250 apps on Android and iOS have a total audience of 52 million people — equivalent to the reach of three primetime shows on broadcast television. Moreover, these apps are constantly changing, with 45 percent turning over every 30 days and 85 percent every three months. As an advertiser, the fragmentation makes it difficult to get to a critical mass of viewers and the turnover forces advertisers to constantly evaluate new apps.

What marketers should do

In our experience, companies aren't thoughtful enough about where they allocate their mobile ad dollars. They tend to adopt a "spray and pray" mentality and use the excuse that the challenges of tracking mobile ad effectiveness make a more considered spend impractical. However, we've seen companies that thoughtfully align their ad spend to relevant stages of the consumer decision journey can have success.

Awareness and consideration. While mobile phone use is most closely associated with completing transactions or tasks, people are increasingly turning to their smartphones for entertainment. Our research shows that video traffic on mobile devices in Europe, for example, is expected to increase six times by 2016 while digital video advertising spend will increase four times. This trend has created an opportunity to develop engaging content that increases brand awareness. Kiip, a mobile rewards network, offers real or virtual rewards from brands when a user reaches a certain goal in a game. In 2012, it delivered 200 million rewards, with redemption rates of 10 to 25 percent per reward.

Evaluation and purchase. While mobile search is still a good place to buy ads, companies can find effective ad opportunities at a consumer's evaluation and purchase stages. Photo ads inserted into Facebook's mobile newsfeed, for example, have shown promising results to date. Some 50% of Facebook users are on Facebook's mobile app when they're in a store. Ads need to tap into this burgeoning mobile-social shopping behavior. Companies also should consider investing in automated algorithms to serve ads that recommend what product to buy next based on a user's purchase behavior.

Loyalty. Consumers spent six times as much time on retailers' apps in December 2012 compared with the previous year. According to the 2013 Maritz Loyalty Report, 91 percent of customers in loyalty programs are likely to download a loyalty program app. Ad dollars should go to developing useful and relevant apps that bond customers with the brand. Companies need to create compelling offers (such as discounts, free delivery, early access) to convince customers to download apps. Walgreens, for example, has seen a massive surge in its loyalty program that incorporates its app that customers use to earn rewards and manage prescriptions.

Even with a better understanding of how a customers' decision journey should direct ad spend decisions, companies also need to be more deliberate about where they spend those dollars. User time is concentrated today on a handful of applications but marketers often simply spread their spending across a wide array of them. Until better targeting techniques come along, brands should focus their ad spend on the most popular and relevant apps.

We believe the industry will make significant progress to address mobile's shortcomings in the next 6 to 12 months. In the meantime, marketers should drive deeper engagement across the consumer decision journey, test and learn, and build the capabilities needed to thrive in a mobile world.