Marina Gorbis's Blog, page 1554

Just How Valuable Is Google's "20% Time"?

Reports of the death or deliquescence of Google's "20% time," which allows employees to devote one day a week to side projects, may well be exaggerated. They certainly inspire less controversy than Yahoo's targeted euthanizing of telecommuting. But both emphasize the importance of Silicon Valley's most precious value-added differentiator: technical talent.

The care, feeding, and culture of productive talent deserve all the attention and debate they get — and more. Virtually everyone who's made money from the App Store or competed against a Salesforce.com or SurveyMonkey viscerally understands the huge differences between "pretty good" developers and those best described as "terrific." "Acqu-hiring" has become both a buzzword and a best practice for a reason. Relative to the enormous economic value talent can deliver, gluten-free gourmet cafeterias and concierge service represent a small price to pay.

But employing talent is one thing. Keeping it productively innovative and innovatively productive is another. What happens to self-image and individual expectations as enterprise definitions of "productively innovative" and "innovatively productive" change? If people believe they've been promised the opportunity to devote up to one day a week pursuing disruptive innovation insights, they're arguably entitled to feel a little cheated or miffed when told to "double down" on their day jobs. At a certain point, innovation cultures are as much about "credibility" as creativity and ingenuity.

That's why Google presents such a special case. No one doubts founders Larry Page and Sergey Brin are passionately committed — intellectually and emotionally — to innovation as core to their entrepreneurial identities and effectiveness. That sensibility made Google Google.

Yet it's also true the company shut down Google Labs, its popular intrapreneurial playground and beta site, to the surprise and disappointment of employees and customers alike. More than a few Googlers also feel that Google X — the "disruptive/new paradigms" skunkworks operation launched in 2010 — now owns "big think" innovation hearts and minds of their founders. Google X innovation gets to create the future, they observe, while Google innovation gets to improve the business. Their innovation discretion shrinks while Google X's horizons expand.

Is this perception unfair or inaccurate? Certainly, many people inside the company and out agree that Larry Page took the late Steve Jobs's advice and admonitions very seriously: "The main thing I stressed was focus," Jobs said. "Figure out what Google wants to be when it grows up. It's now all over the map. What are the five products you want to focus on? Get rid of the rest, because they're dragging you down. They're turning you into Microsoft. They're causing you to turn out products that are adequate but not great."

Neither Steve Jobs nor Apple culture encouraged, nurtured, or celebrated 20% time among employees to inspire innovation. To the contrary, Apple's clarity of vision and relentless dedication to user experience and design assured that the company's world-class talent would overwhelmingly focus their efforts on delivery, not novelty. Apple innovation culture was more top-down alignment of talent than facilitation of bottom-up empowerment. But successfully delivering that vision to overwhelming market approval proved intoxicating and addictive for much of the company's top technical talent.

But I don't think the story is Page or Brin becoming more Jobs-like or that Google's innovation culture has pruned individual discretion in favor of greater organizational alignment. My view — reflected in the comments of many Googlers — is that the company is internally debating how its most talented employees generate the most valuable innovation. Do they productively innovate better by more rigorously focusing on their ongoing projects? Or do curiosity-driven and/or passion-driven initiatives lead to measurably better innovation outcomes?

Google has publicly defined itself as an organization that wants to be data driven in its most important business decisions. The company has put people analytics of individual talent and team performance alike at the core of managing itself. Yes, there's flakiness and inherent subjectivity in many of the metrics. But the simple truth is that Google as both a culture and a global enterprise wants to take more data more seriously.

The obvious result? Google's innovation culture is being shaped as much by the performance data of its people as by their technical intuitions and insights. In other words, tomorrow's Google won't embrace 20% "free time" for everyone; innovation best practice will mean some individuals and teams will have as much discretionary time as they need while others will have virtually nil.

You've got a problem with that? Well, the data suggest you shouldn't. I don't doubt for a minute that Google's founders and top leadership will ultimately rely on their gut instincts and intuitions — albeit richly informed by data — when the time comes to hire, fire, and/or acquire. Nor do I doubt that the care, feeding, and culture of technical talent will increasingly be determined and defined by data. That's where credibility will come from and, yes, that's what will sharpen entrepreneurial focus, as well.

C'mon, IT Leaders. Take a Chance!

Businesses mostly seek to avoid risk. Leaders equate risk with potential failure, so organizations have morphed into hierarchical, fixed systems to constrain variability within an acceptable range that has become progressively narrower. As a result, in recent years, innovative ideas have been stifled and entire industries have fallen into the death spiral of cost/price cutting commoditization. Enterprise IT is no different.

To respond to the volatility, uncertainty, complexity and ambiguity of the business environment today, IT leaders need to address risk differently by looking at it in totality and questioning their assumptions, challenging long-held assertions and recognizing both the analytical fallacies and less-than-perfect cognitive processes they use. Instead of risk = bad, leaders need to understand that today, calculated risk = innovation, meeting marketplace demands, leapfrogging competition and creating true profit.

Understanding Risk

Risk is a necessary feature of innovation. It requires us to weigh all the potential benefits and harms of one choice of action over another, and to balance positive potentials and stated priorities to achieve desired outcomes versus potential harmful outcomes. Few IT leaders understand and consider all these risk factors in their decisions and develop the skills to address them:



Decision risk: To make a decision or not, when the consequences of not making a decision, not challenging common wisdom or re-evaluating basic business assumptions, overly weighted worst cases, invisible bureaucratic biases, or prejudicial framing (relative, absolute, 40% loss = 60% win) all contribute to decision risk.

Adoption risk: Adopting technologies or responding to market, business, and technology trends too quickly or too slowly; reactively or over thought, without considering how non-technical implications or unintended consequences contribute adoption risk.

Execution risk: A wrong execution model or poor execution can make a project run too long and cost too much, leading to a total loss of focus and a reduction in value creation. It also comes from not adequately considering the organization's energy, skill, and policies to accomplish the project.

Leadership risk: Psychology has found that "for most people, the fear of losing $100 is more intense than the hope of gaining $150", and IT leaders are no exception. This loss aversion prevents taking appropriate risks.

Identity risk: Constraining innovation to known specific infrastructure or platform stack; focusing on project completion success rather than value creation success; attending more to technology issues than business issues; taking psychological shortcuts like "the illusion of knowledge" where familiarity hides ignorance and the "the illusion of truth" where repetition substitutes for evidence; overconfidence—all these contribute to identity risk.

Cultural risk: Having a "failure is unacceptable" culture causes total risk avoidance or an inability to cut losses and walk away from a decision that doesn't work out — a trap of "escalation of commitment to a losing course of action." It prevents the wisdom of learning from failure.

Reputation risk: C-suites fear their brand's reputation, neglecting what's best in creating value for the business or customers and letting the bureaucratic brand image which mistakes appearance for relationship and form for content prevent experimentation.

Measurement risk: Fail to measure the real goal of innovation, focus on project progress rather than value created and turning management measures into goals instigating aberrant behavior.

Opportunity risk: Applying scarce resources in one area of IT precludes investment in another, which presents the risk of missing an opportunity. inaction disguised as patience and impatience also contribute to opportunity risk.

This taxonomy should help IT leaders take better-calculated risks in the future, as long as they bear these six truths in mind:

The failure to take on value-adding IT projects is worse than taking on IT projects that fail. Failing to deliver new capabilities to the organization is the most significant risk controlled by IT. Almost half of IT projects run over budget and about 56 percent deliver less value than predicted. Fear of failing means many choose to do nothing. However, it is not failed projects as much as projects not taken on that will most influence the future success of an enterprise. Research from the Standish Group suggests higher failure rates result in more total value generated for the enterprise. Accept failure, do not accept not trying.
A focus on acquiring gains will lead to better results than a focus on avoiding losses. Many new projects get hung up on the chance of failure. Business and IT leaders need to view the glass as half full--40 percent chance of failure is a 60 percent chance of success. The value of an IT investment must not be based on its cost, but rather on the capability to generate value that it might bring to the organization. There is no safe innovation, only varying risk and reward.
Trying to preserve past investments delays value creation. Businesses make irrational, fallacious decisions on prior sunk costs. IT is particularly prone to this when trying to force fit everything into a previously acquired hardware or software platform, regardless of its applicability to the problem being addressed. Trying to preserve past investments or force-fit capabilities into unsuitable platforms delays value creation, increases prospective costs unnecessarily, and creates applications that are not fit for actual use. Sunk costs don't count.
IT creates risk confusing leadership, governance, and managing. IT often fails to step up to its leadership role, identifying instead with "aligned with the business." This outdated thinking can be disastrous. IT must lead by showing how technology is applied in IT itself, then influencing and guiding the organization in making the right decisions and coming up with an innovative product plan. Then, IT must direct and restrain, but not hinder the use of technology--how it is developed, sourced and applied in the best interests of the organization and its stakeholders with appropriate governance mechanisms. Lastly, IT must monitor and manage the delivery and application of IT to serve the organization, even if it is not the primary source of delivery. The risk of a wrong decision is much less than the risk of no decision.
Small IT failures provide great opportunities to learn. This is called "failing forward." Risk doesn't involve putting all of your funding into a huge project only to watch it crash and burn. Rather, IT leaders should fund small innovation projects preferably of non-mission-critical nature as experiments first. The lessons learned from "thinking big, starting small" can be critical when it does come to the bigger projects down the road and helps to earn credibility when IT presents a business case for them. Don't measure and punish failure; measure and celebrate learning.
Failing fast and moving forward is a big win. If IT projects have to fail or a strategy needs to change, failing fast helps prevent losing big. Small, agile cycles of development and risk assessment help to measure goals, evaluate success and easily change execution strategy. Asset light models always beat capital investment until predictable scale is achieved. If the next step needs a budget, it is too big a step.

If IT leaders can take better calculated risks, organizations can be tremendously successful. Companies with broader risk management outlooks and practices outperform their peers, according to a survey from Ernst and Young. Apple, Amazon, and Google are not the only examples risk taking of game-changing innovations.

Dun and Bradstreet, known for their insight on businesses, went a notch ahead when they launched data-as-a-service. Even more impressively, their spin out Dun & Bradstreet Credibility Corp. totally transformed and integrated its existing technology platforms from several expensive legacy systems into a single platform utilizing SaaS, Cloud, and open source technologies.

Netflix is another example of disruptive innovation. The movie-by-mail program was enhanced by the streaming option in 2010 and slowly they killed all their competition like Blockbuster. Interestingly, they started with changing a simple concept of "late fees" and eradicating them even though the move could lead to loss of revenue.

Tech innovation is almost dead in the financial industry. Our own experience with tradeMONSTER, a small startup founded in 2006, has become a leader in online trading by taking risks like being the first browser-based trading platform, the first html5 mobile trading platform, and by offering disruptive option trading tools based on an open source trading platform.

What is the key similarity behind all such examples? Leadership overcoming a "fear to fail" by broadly balancing all risks enabling ground breaking innovations resulting in business growth, customer preference, industry recognition and awards.

Reinventing Corporate IT
An HBR Insight Center





A Board Director's Perspective on What IT Has to Get Right
IT Doesn't Matter (to CEOs)
The New CTO: Chief Transformation Officer
Google's CIO on How to Make Your IT Department Great

To Simplify, First Clear the Underbrush

This post was coauthored by Lisa Bodell.

Many people envision the upper rungs of the corporate ladder as an inspired, innovative place where leaders spend their time on stimulating projects that shape the organization's future. But this vision is not always a reality. In many companies today, even the most tenured individuals are just as bogged down with policies and procedures as their entry-level colleagues, if not more so. In addition, the focus on producing short-term results often leaves little time for long-term strategy — the area where the expertise of experienced professionals is needed most.

To make way for innovative and big-picture thinking, managers need to clear the underbrush that often chokes productivity. This is the first of seven strategies for simplifying your organization that we outlined in an earlier post. Here are four best practices to get you started:

Pick up the phone. Sure, having an email chain to document interactions can be useful to reference, but it frequently takes more time to write an email than to simply explain details in a live conversation. If you find yourself struggling to organize your thoughts in an email, stop and ask yourself if it would be quicker to vocalize the situation. Having a two-way conversation out loud is also helpful for answering questions immediately, and preventing future back-and-forth messages.

Encourage streamline ideas. Let's face it, most people work on tasks that aren't always the best use of time. Senior leaders who assign these tasks can be so far removed from certain processes that they aren't aware when assignments are more trouble than they're worth. Sign-offs required in triplicate? Recurring meetings that no longer serve a purpose? Separate reports that include the same information? Encourage employees to keep an eye out for inefficient tasks and challenge them to suggest a new way of doing things. Ask: What meetings can we eliminate? What reports can we stop doing? What steps in a process can be removed right now? Make it clear these suggestions won't be taken as complaints, but instead viewed as creative ideas for improving productivity. For example, one senior manager did this by sponsoring a yearly "spring cleaning" that was essentially a contest for identifying low-value or time-wasting tasks. (And of course it can be done any time of the year.)

Rethink "reply all." One of the biggest time-sinks in the corporate world is managing an ever-growing inbox. To simplify the process of sorting through emails, people should be clear about what they need from specific people. If someone is copied as an FYI but no action is required, say so at the beginning of the message. Even better, try this trick: add 'NNTR' — No Need To Respond — in the subject line of your email. Train staff to also consider whether people should be taken off the email chain, rather than automatically replying to all. Some companies, like Ernst and Young, discourage internal blasts by making the reply all button harder to access in Lotus Notes. By adding to the number of clicks needed to reply all, the company sends the message that it should only be used in specific situations.

Stop reviewing low-impact work. Another opportunity for freeing up time is to get out of the business of checking and double-checking your people's work products. If you've hired good people and trained them appropriately, you probably don't need to review all revisions of their assignments. Sure, when documents are being sent to potential clients or very senior managers, it's a good idea to make sure they are thoroughly reviewed. However, not all work products have that kind of impact on business outcomes. So for outputs that are not mission-critical, make it clear to staff members that it is their responsibility to proofread their own work and ensure their own quality control — and that you trust them to do a great job.

All organizations are slowed down by unnecessary underbrush that reduces productivity. And while you'll never get rid of all of it — and it will always keep coming back — these best practices can give you a starting point for clearing some of it away.

This post's coauthor, Lisa Bodell, is the founder and CEO of FutureThink and the author of Kill the Company.

A Gender Curiosity: Parents with All Girls and No Boys Own More Stock

For unknown reasons, married couples with only female children are about 6 percentage points more likely to own stock than those with both male and female offspring, according to a study of a large U.S. database by Vicki L. Bogan of Cornell University. The phenomenon is limited to stocks; there's no impact of offspring gender on a couple's likelihood of holding mutual funds, for example. Having only male children has no effect on stock ownership, except in the case of single mothers, who are more likely to own stock if they have only boys.

Here's What Really Happens When You Extend a Deadline

In June, the Obama administration pushed back the deadline for employers with fifty or more workers to provide health insurance for their employees by a full year — until Jan 1, 2015. Admittedly, the implementation of anything as complex as the Affordable Care Act is going to take time, and those involved have been working furiously to try to meet the government's deadlines. So, at least with respect to this particular part of the ACA, everyone has an additional year to get everything just right. Sounds like a good thing, doesn't it?

Only — how furiously do you think everyone with this new, extended deadline is working now? Are they still burning the midnight oil... or are they saying to themselves, Let's take a breather. We've got plenty of time.

What happens when we move back deadlines — once we get past the initial feeling of sweet relief? Research suggests we have a lot of difficulty using our newly-found time wisely. We wind up facing the same problem again — the same time pressure, the same stress, the same feeling-not-quite ready — only now we've gone an additional week, or month, or year without reaching an important goal.

So why do we squander the time extensions we are given, and what can we do about it? The answer to the latter requires an understanding of the former, so let's start there.

Problem #1: We lose motivation

It was first observed by researchers in the early part of the last century that one's motivation to reach a goal increases as one's distance from the goal decreases. Whether you are a salesperson trying to reach a sales target, or a rat running down a tunnel to get a piece of cheese, the closer you get to success, the more intensely you pursue it. Psychologists call this largely unconscious mechanism the "Goal Looms Larger Effect," meaning that the nearer you are to the finish line, the larger the goal "looms" in your mind — the more it dominates your thinking, and benefits from your attention.

Whenever you push back a deadline, you are increasing the distance once again between you and the finish line. Now, more urgent goals will loom large, and your original goal will languish in the back of your mind.

Problem #2: We procrastinate



In 2012, the IRS received over 10 million tax extension forms — a number that increases every year. Also increasing, according to Turbo Tax, is the number of people who wait until the last two weeks of tax season to file. What do we have to thank for these trends? E-filing. That's right — now that it is quicker and easier to file our taxes, or file for an extension, we are waiting even longer to do so. E-filing takes the pressure off, so it's easier for those with a tendency to procrastinate to delay.

But that's ok, because I work better under pressure, says the procrastinator. Well, I'm here to tell you that you don't. No one does. Psychologically, saying your work is better under pressure makes zero sense, because "pressure" is just another way of saying "just barely sufficient time to complete whatever I'm doing." How can less time help you do a better job? This is like claiming that you are more rested when you give yourself fewer hours to sleep.

It's really far more accurate to say that if you are a procrastinator, you work because there is pressure. Without pressure, you don't work. Which is why pushing back a deadline is absolutely terrible for procrastinators. (Though naturally, they are usually the ones asking for extensions in the first place.)

Problem #3: We are terrible judges of how long things take



Psychologists call this the planning fallacy — a pervasive tendency to underestimate how long it will take to do just about anything — and it can be attributed to several different biases. First, we routinely fail to consider our own past experiences while planning. As any professor can tell you, most college seniors, after four straight years of paper-writing, still can't seem to figure out how long it will take them to write a 10-page paper.

Second, we ignore the very real possibility that things won't go as planned — our future plans tend to be "best-case scenarios." And as a consequence, we budget only enough time to complete the project if everything goes smoothly. Which it never really does.

Lastly, we don't think about all the steps or subcomponents that make up the task, and consider how long each part of the task will take. When you think about painting a room, you may picture yourself using a roller to quickly slap the paint on the walls, and think that it won't take much time at all — neglecting to consider how you'll first have to move or cover the furniture, tape all the fixtures and window frames, do all the edging by hand, and so on.

If you push back a deadline without addressing the poor time planning that landed you in hot water in the first place, you will likely end up in hot water again down the road.

How to Make Good Use of an Extended Deadline



If we want to solve Problems 1 & 2 — keeping motivation high and keeping the pressure on for procrastinators — we need to find ways to shorten the distance between where we are now and where we want to end up. The most effective solution is to impose interim deadlines, effectively breaking a larger goal up into discrete sub-goals spaced out strategically in time. These deadlines need to be meaningful as well — if it's no big deal to miss the deadline, then it's not a real deadline.

Research by Dan Ariely and Klaus Wertenbroch suggests that many of us understand this implicitly. In one of their studies, students had to turn in three papers by the semesters' end. Only 27% of them chose to submit all three on the last day — the majority established earlier deadlines for one or more of the papers voluntarily. In fact, roughly half the students chose to impose deadlines optimally, evenly-spacing them throughout the semester. Those that did turned in superior work and received higher grades. (So much for working best under pressure, eh?)

To solve Problem #3, you need to be very deliberate when it comes to project planning. Specifically, you need to make sure you explicitly:

consider how long it has taken to complete s similar project in the past,
try to identify the ways in which things might not go as planned, and
break the project down, spelling out all the steps you will need to take to get it done, and estimating the time necessary to complete each step.

If it's not possible to set interim deadlines or make sure actions are taken to avoid the planning fallacy, then you really should try to avoid pushing back your deadline altogether. The odds are good that you'll have little to show for it but wasted time.

Stanford Medical School's Plan to Attract More Female Leaders

The Stanford School of Medicine (SSoM) recently launched an initiative to increase the representation of women on its faculty. The program is rooted in data that should resonate with any business or profession confronting its own gender gap in the leadership ranks.

Like many organizations, SSoM requires an "all-in" commitment from its faculty members, which often translates to punishing hours that aren't exactly conducive to work-life balance. Such work-life conflicts significantly impacted the SSoM's ability to recruit and retain women. SSoM has a stable of policies (PDF) which offer flexibility options — including unpaid leave for up to a year after the birth or adoption of a child; grants of up to $5,000 per year for childcare; on-site childcare options; grants for dependent care expenses incurred while traveling to attend professional meetings; temporary reductions from full-time to part-time status for family-related needs, etc. However, the utilization rates for these policies were low, and they were often seen as incompatible with professional norms of success. SSoM realized that a much fuller response was needed to combat the threats to faculty excellence and growth. Recognizing that leadership support and engagement is fundamental to the success of any cultural shift, the SSoM embarked on its effort with the full commitment of leaders throughout the University.



That effort has taken root in the development of a strategic focus on flexibility that can serve as a blueprint for any workplace. It includes an analysis of flexibility practices at other institutions and the collection of detailed data from within to better understand the individual flexibility needs of SSoM faculty and the specific cultural barriers that were inhibiting the use of existing opportunities.

Not surprisingly, the results demonstrate that when existing flexible policies are not aligned with the culture of the workplace — in this case, academic medicine — it results in a dynamic that inhibits their use. Specifically, (1) professionals are concerned that they will look less committed to their careers if they opt-in to flexibility policies and (2) they fear placing an extra burden on their already overburdened colleagues. SSoM's data shows that professional identity drives behaviors — as well as attrition — when the demands of a 65 hour workweek lead to a high rate of dissatisfaction with work-life integration and create significant work-work conflict as a result of the many demands on a faculty member's time.

Research has also shown that male STEM professors spend more time engaging in activities that directly relate to career advancement, devoting 42% of their work hours to research, compared to 27% for female professors, who spend more time on service and mentoring activities that do not necessarily get rewarded.

Armed with this data, SSoM is now moving forward with a comprehensive program to integrate flexibility policies as a core element of the faculty advancement process. A key aspect has been the development of Academic Biomedical Career Customization (ABCC). ABCC is a comprehensive program designed to increase the cultural acceptance of work-life integration plans and policies. The program is based in part on Deloitte's Mass Career Customization framework. A key component includes planning conversations between faculty members and their Division Chiefs that focus on developing a short- and long-term strategy to achieve career objectives and leverage existing policies. The ultimate goal is to help faculty better combine their work and life goals.

Another major innovation is the development of a banking system that allows faculty to earn rewards for time spent on certain activities that benefits their departments or divisions, but that frequently go unrecognized. For example, the banking system allows hours spent mentoring students and participating on committees to be converted into support mechanisms such as grant writing assistance, meal deliveries, and housecleaning.

The program is currently being implemented as a pilot involving 50 faculty members across six divisions within the medical school. According to initial surveys of the participants, the early results are positive. Participants appreciate the value of engaging in a thorough career planning process that includes work-life concerns and offers support mechanisms. The pilot will continue for another year to allow for additional data collection and opportunities to ensure successful integration into the school's culture. SSoM anticipates that this program can be scaled throughout the medical school at the conclusion of the pilot phase.

The School of Medicine's efforts are combatting the well-worn argument that flexibility initiatives cannot work in certain settings. Perhaps it will be a group of STEM specialists who can clearly demonstrate through leadership support and detailed data that flexibility — and attracting more female leaders in turn — isn't rocket science. It's about creating the right culture.

Women in Leadership
An HBR Insight Center





Women: Let's Stop Allowing Race and Age to Divide Us
Tell Me Something I Don't Know About Women in the Workplace
A Fairer Way to Make Hiring and Promotion Decisions
"Feminine" Values Can Give Tomorrow's Leaders an Edge

How IT Professionals Can Embrace the Serendipity Economy

With Frederick's Taylor invention of scientific management in the 1880s, and its subsequent assimilation into what we now consider modern management, organizations have used logic and rationality to the eliminate waste, to seek efficiency, and to transfer human knowledge to tools and processes. This perspective created the industrial economy lens through which most managers perceive their operations.

The industrial age economy does not exist in a vacuum. Running alongside it is the Serendipity Economy, an economic space where often random, always unanticipated interactions occur that may lead to value. Industrial age measures can't evaluate Serendipity Economy results, leaving its outcomes like invention and innovation, process improvements, and new businesses relegated to the evidence of anecdote.

IT professionals need to recognize and embrace the Serendipity Economy in order to better understand the impact of technology investments, improve employee engagement and drive business transformation.



Serendipity into Performance

The depths of The Serendipity Economy can't be plumbed in a single short post, but its principles and implications can be spelled out so IT professionals can turn ideas into action.

The process of creation is distinct from value realization.

Consider the slide deck. Microsoft provides productivity tools that create presentations quickly and efficiently. But nothing in Microsoft's Office suite ensures that the resulting presentation represents anything of value. Cost and time savings should never be the primary reasons for purchasing or upgrade decisions. IT needs to create models that examine and reflect the potential for enhanced value coming from such systems. For companies with existing productivity suites, the incremental improvements of new productivity features is small; however, the integration of collaboration features may significantly improve the value realization of the underlying productivity suite.

Value realization is displaced in time from the act that initiated the value. A presentation developed for a conference does not produce much value until it is actually presented, an event which may occur weeks or months after the document is completed. Technology investments work the same way. Take for example 7-Eleven, a company that implemented enterprise social networking with no idea as to it eventual use. It languished for months until 7/11/2011, during the company's birthday celebration, when franchise managers started sharing merchandizing practices. The managers haven't stopped talking to each other. Not only have managers started sharing merchandizing insights, but they also share maintenance tips, and the corporate offices now regularly tap store manager knowledge to help interpret business intelligence results. The implication for IT leaders is that for horizontal technology, like collaboration and enterprise social networking, look past time and cost savings and track longer term, often unanticipated payoffs.

The measure of value requires external validation. Once a presentation is delivered, the only way an organization knows if the message landed is to ask. Serendipity Economy outcomes can't be assigned a value associated with their means of production. These outcomes require feedback in the form of surveys, discussions or collaborative feedback to determine what value they may have contributed. Thus, if a process doesn't result in direct value, then track and ask. Tags like #newproduct or #processimprovement can provide entry points for monitoring the progress of ideas that arise from, or quickly develop, within enterprise social networking environments. Use short, specific surveys to understand if new technologies, or new ideas, are taking hold, and what value, if any, they may have generated, and how long it took for that value to be realized.

Value is not fixed, and cannot be forecasted. The value of a knowledge asset varies depending on who receives it, when they receive it and their perceived need for that asset at the time. This can't be forecasted. Technology as well, deployed at one point in time, and deemed useless, may reveal value as personal, business and technological circumstances change. So, don't assign too much validity to return on investment models for horizontal IT products or services. The forecast will likely be significantly discounted from actual results that arise from serendipitous activity.

You can't anticipate the network's potential for value or any actual value it may produce. The Serendipity Economy is not bound by the creation of assets, artifacts, or things. It also encompasses human networks. Because of complex interactions, the current value of a network may change significantly depending on who takes part, the topic of engagement, and the ability, capability, or permission to execute. That means small pilots won't demonstrate the ultimate value or utility of any horizontal product or service. Rich and complex networks will result in serendipitous activity much more so than pilots. Deploy widely early and monitor a broad spectrum of results for productivity improvements and serendipitous outcomes.

Serendipity may enter at any point in the value web, and it may change the configuration of the value web at any time. Value webs represents human networks at work. These dynamic webs result in different potentials for generating and absorbing value. Changes in value webs reinforce the fluctuating value of knowledge or ideas, and this instability essentially eliminates the ability to forecast value from the current state. IT leaders should therefore deploy systems that can adapt to changes, and leverage those changes to produce outputs and outcomes that might not have been anticipated by the designers. In collaborations systems, for instance, don't overly engineer processes so that they constrain a system's ability to adapt. The Serendipity Economy often unconsciously drives the broad adoption of enterprise social networking because it more readily captures, tracks and facilitates serendipitous activities than systems designed to control rather than empower.

Courage and Patience

IT leaders and their business counterparts need to acquire the patience to monitor serendipitous activity, and the courage to protect technologies and ideas that may take time to mature, or changes in circumstance to reveal their true value — and the willingness to empower people to embrace, explore and follow serendipitous activity wherever it may lead. That means not just finding serendipity in the business, but examining your own shop for new value that can't be found in lines of code per day or the speed of a call center response.

Reinventing Corporate IT
An HBR Insight Center





A Board Director's Perspective on What IT Has to Get Right
IT Doesn't Matter (to CEOs)
The New CTO: Chief Transformation Officer
Google's CIO on How to Make Your IT Department Great

Health-Care Executives: How to Prepare for the Onslaught of Confused Consumers

It's hard to see anything clearly from inside a jar. I know because I sit inside one much of the time. I'm a health-plan executive, and my jar is the U.S. health-care system.

From the inside, it's impossible to know how consumers think — or, more urgently, how they're going to behave in the very near future when many of them have to buy their own health insurance via exchanges.

It's time health-care leaders took a few lessons from the business world — in particular, from consumer-marketing experts, who often have to battle to get their own companies to see outside the jar. As a marketer by trade, I've waged that fight myself, and I know that looking into the lives of real people often yields real surprises.

The health-care jar can be a very comfortable place, though. Inside, we have our own language, rules, and oddities. In fact, we seldom even realize we're in a jar, let alone deign to accommodate people unfamiliar with our world. But we're going to have to accommodate them, and soon.

Market and regulatory forces are combining to shift health-care decision-making responsibility onto end users, and in 2014, approximately 10 million consumers will begin buying their own insurance. The new online exchanges will be a marked improvement over today's health-insurance purchase process, but if you've ever tried comparison-shopping for insurance, you know what's going to happen. Without a lot of education and support, consumers are going to find they're unable to make sense of the options.

Are those of us in the health-care industry ready for this onslaught of confused consumers? Judging from what I've seen, we're not. No, we're not ready at all.

I recently facilitated a round-table discussion at a Massachusetts consumer-empowerment conference where heads of hospitals, health plans, government agencies, and associations tried to take off their industry-expert hats and think like consumers. Their task was straightforward: evaluate hospitals for a hypothetical knee surgery. They looked at data — presented in a tidy grid unlike any I've seen in real life — about costs, complications, and volume of procedures. The participants at one table complained that these data points were insufficient. How many procedures had each surgeon performed? How long would recovery take? And how likely were their knees to be fixed? (Of course, the irony here is that the people wishing for more data were the very people with access to the real data and the clout to publish it.)

The experts at this conference ended up making the "right" choice — the larger of two community hospitals. Like wine novices ordering the second-least-expensive wine in a restaurant, they made a respectable choice that wouldn't have broken the bank. They were not swayed by hospital brand or a primary-care doctor's recommendation. But to me, their choice didn't reflect real consumer behavior, like mine.

After all, if I had to pick, I'd go for the most expensive option, which bears a striking resemblance to the teaching hospital where my husband works. Even though I know better, when faced with a decision about my own health care, I am affected by brand, and I doubt I am alone. In my day job, I care a lot about the total cost of care, but when it comes to my family's care, I do not. If my copayment is the same, it's actually not economically rational to care. In fact, many consumers assume that the higher-priced option is better. Most consumers do not seek the best option for society as a whole, no matter how much insiders might wish they would.

For our health-care system to enable consumers to shoulder the responsibility coming their way, health-industry leaders need to get outside of the jar. Instead of "playing" the patient, we need to understand what actual consumers want, what matters to them, and what information they need in order to make decisions.

This is the same challenge faced by consumer-marketing people in business. Like health-care leaders, most corporate executives are very comfortable inside the jar. It's not easy to get them to look outside, but it can be done. If forward-looking marketers were to advise health-care leaders about solving their jar problem, they'd say:

1. Recognize you're in a jar. You can't solve a problem until you acknowledge it exists. Look around. Are you surrounded only by people who think, talk, and act like you? Do you design "new" approaches with little input from end users, or without a clear-eyed view of how much impact it will really have? If so, guess what: You're in a jar.

2. Ask for help to get out. If you've been in the jar for a while, you'll need directions to find your way outside. First, realize you don't have all the answers. Then seek help. Establish a dialogue with employees. Survey your customers. Collaborate with other companies — even across industries — on best practices. Pay attention not only to what your competitors are doing, but also to what other industries are doing. (Perhaps health care can learn from the Cheesecake Factory?) Remember: When you ask questions you signal strength, security, and maturity — not weakness.

3. Act on the basis of input. You need to do something with the information you collect. Not only will you lose credibility with the people you've asked if you ignore what they tell you, but you are also likely to miss out on valuable insights that can help you hone a competitive advantage. Too many business executives busy themselves with gathering data, but then fail to put that data to work — or, worse, they dismiss or explain away whatever they don't like. In the past, successful leaders were supposed to know what to do, and to prove their competence by making bold, independent decisions. Today, however, leaders must be more connected — to one another, and ultimately to the customer. That means you have to listen, and then respond and adapt on the basis of what you hear. In health care, for instance, we're learning that it simply doesn't work to will patients to do what we think they should. Rather, we must acknowledge what consumers actually do, and understand why — if we're to have any chance of changing their behavior.

4. Lather, rinse, repeat. In today's marketplace, there's no time for resting on laurels. Customers are constantly changing, as society does, and organizations must evolve accordingly. Keep tapping on the glass. You might even want to push the jar over and venture outside.

Marketers always start with questions about the customer: Who are they? What makes them tick? I don't hear these questions very often inside the U.S. health-care jar, though. As I travel across the world to learn about other health-care systems, I'm finding the most forward-thinking health-care leaders are observing and responding to signals from patients, and, indeed, whole communities. We need to do the same. Outside the jar, consumers are ready to tell us what they want and need. We just need to get out there, ask, and listen.

Blackberry Forgot to Manage the Ecosystem

The story of Blackberry underlines a new truth about the competitive landscape we live in: success or failure isn't a function of a good product or service, or a well-run, cost effective company with a sound capital structure. It also requires an effective strategy to manage your ecosystem.

This was Blackberry's failure. The company had become complacent about its remarkably loyal customers and didn't recognize the threat posed by rival ecosystems. Like many established firms before it, Blackberry blew the opportunity to become a nodal player and leverage the energies of its complementors, in the way that Apple does with its apps.

But incumbents don't always have to lose in the game of value capture. By playing their cards right, they may be able to sustain their position and both create a value proposition that will appeal to the end customer, and keep their suppliers and complementors in check.

In the July issue of HBR, Wharton's John Paul MacDuffie and I report the results from our research on how value migrates in industry ecosystems. We consider why in sectors like the computers of the 1980s value can migrate from the former integrated firms, giants such as IBM, to the new specialists that spring up in the industry ecosystem, such as Microsoft and Intel, and see what makes the "bottleneck," the core of the system's value, shift around in the sector.

We then consider why other sectors, such as automobiles, despite the hype and the expectations of change and value chain reconfiguration, have been remarkably stable. Despite the massive outsourcing that has happened in cars, value appropriation (in terms of share of market capitalization in the ecosystem) still rests with car manufacturers and not the ever-growing component makers.

Our research offers an explanation about what drives value to move or not.

We find that firms that succeed are those that proactively manage the structure of their sectors and keep a set of suppliers working for them in hierarchical, closed supplier networks. IBM made the mistake of opening up its sector through a set of standards which ultimately led to its demise, whereas today's Apple has a carefully controlled set of suppliers and complementary players to support its value proposition.

The solution is not to be vertically integrated but, rather, to control by managing differentiability — i.e., being the actor along the value chain who guarantees the product quality and shapes the experience — as well as manage the replaceability of other actors along the value chain. Automobile manufacturers have kept the lion's share of the sector as they managed to control the sector and shape the experience.

Bain & Company famously predicted in the 1990s that cars would soon look like computers, with giant suppliers ruling the sector. And Deloitte is once again predicting that with the advent of the Electric Vehicle, the sector will disintegrate and value will migrate.

Yet this doesn't look likely to us. Rather than seeing the car industry go the way of the computer, as many predicted, Apple is now pushing the computer sector to increasingly resemble cars: Hierarchical, tightly managed supplier networks, a keen eye for technology integration, a focus on the differentiation in the eyes of the final customer. Apple, unlike Blackberry, hasn't just grasped the importance of a solid value proposition; it is focused on managing the ecosystem and bringing value its way.

Of course, life always looks easier when you're the kingpin of the ecosystem. What's exciting is to consider not only how successful kingpins can defend their position, but also how upstarts might upset the sector.

By becoming go-to outsourcees, leveraging the need of incumbents to save on assets, and patiently moving up the food chain to become solutions providers, or by carefully managing the standards game to gain a toehold in broader markets, aspiring entrants may emulate the shift of firms like Huawei or Honhai from sub-assemblers to industrial giants.

There is no denying that strategy has become more complicated, and that it's far easier to analyse than engage in real-time problem solution. But if we look start looking more carefully at what drives the movement of value in our industries we may be able to re-think our strategies before it gets to be too late to respond.

Sellers Charge More Than They'd Pay to Buy What They're Selling

In an experiment, people who were asked how much they would demand to sell a coffee mug set a price that was 2.2 times greater, on average, than the price other participants said they would pay to buy such a mug, according to a team led by Promothesh Chatterjee of the University of Kansas. Because people ascribe enhanced value to an object that they associate with themselves, they nonconsciously view a sale as a threat. Thus they demand more to give it up than they (or others just like them) would be willing to pay to acquire it, the researchers say.