Marina Gorbis's Blog, page 1560

America's Brand with Frontier Entrepreneurs

Walter Landor was a branding legend who helped companies from Coca Cola to Levi's define their brand for the public. "Put simply," he said famously, "a brand is a promise." The more important the promise and the better you fulfill it, the better your brand.

Few countries rely on their brand promise as much as the United States. Beyond its power in binding Americans together, the US brand promise has a powerful influence abroad. Ronald Reagan is famous for articulating a vision of the U.S. as "a city on a hill." That precise image was also evoked by John F. Kennedy when he was President-elect, and long before him by Massachusetts Bay Colony Governor John Winthrop. "We shall be as a city upon a hill," Winthrop wrote in 1630, "the eyes of all people are upon us." From its earliest origins, America has been conscious of the message she projects abroad.

I spent much of the last year writing a book on how CEOs in Africa think about their continental ambitions. Along the way, I learned a bit about America's brand promise abroad, and why people "buy" America. Many (really almost all ) of the African CEOs I met with have an enormous appreciation for the US, far outstripping trade and investment flows between the US and Africa. Nigeria's Tony Elumelu pointed out to me that "Even in the very Muslim parts of our country, you will see kids on the street with an Obama T-Shirt. I myself stayed up watching each of your presidential debates and your election." Kenyan business leader (and popular DJ) Chris Kirubi has pictures of US leaders on his screensaver. In the latest polling by Pew, the US enjoys massively favorable ratings in every African country surveyed.

Some might ascribe the favorable perception of the US to the strength of American media. But American media have not exactly bathed themselves in glory when it comes to Africa. Most African businessmen I know take the US media to task for routinely stereotypical portrayals of Africa. They are fond of the US despite our media, not because of it.

In my experience, it's the American brand promise that is resonating abroad. That promise rests on three characteristics. None is ever-present in the US, but their evocative power is great, and they resonate with the experience of business leaders I've met.

Opportunity. The promise of the US is a culture that creates opportunity for all, regardless of where they originate. It's a powerful message in every frontier market I've visited. Mobile technology CEO Ken Njoroge and I were talking recently about his company Cellulant when he peered past the thin glass partition separating his workspace from a bullpen of young engineers. "I want them to see you don't need to be someone's cousin to make it," he said. "Ken and Bolaji (Ken's Nigerian partner) are guys who came around starting with no money and built a successful business. That's going to change the mindsets of the twenty-somethings out here."

Individuality. The primacy of the individual is captured in our myths, in our politics, and in our Constitution, in which individual rights are protected even at the expense of majority rule. Bharat Thakrar, who leads Africa's largest communications firm, speaks with passion about the rugged individuals "who migrated West. It was not easy but the guys with the [expletive] went and did it. They went, they settled, and they succeeded." For all the controversy of that imagery, its power abroad is substantial.

Liberty. "We can sit today with government and... without fear or favor, you are able to question and discuss openly issues and new ideas of where to go in this country." That's how Kenyan business leader Vimal Shah describes today's Kenya. He said it with a bit of a wonder, because in many markets it's not true. Business, like other elements of society, are compelled to self-censor significantly or be marginalized by a powerful state. The US brand holds out the promise that businesses, civic organizations, and individuals can voice dissent and still thrive.

My point is not that these business leaders seek to replicate the US; they do not. Nor is it that the US has lived up to its brand promise all the time, for we surely have not. But when we do, we build up capital abroad, and an extension of power few nations can match.

Colorado Senator Mark Udall recently said that, in the effort to achieve US security, "The Bill of Rights is the biggest, baddest weapon we have." Pew's just-completed survey from across emerging markets supports Udall's point:

Conversely, when the US does not fulfill its brand promise, we erode our capital and undermine American interests abroad. And there's reason to be concerned that we're doing that today. The decreasing income mobility in our economy; the stalling of immigration reform; the expanding surveillance by our state all erode our brand overseas.

Immigration reform may be the least intuitive of these. I was brought around on this by James I Mwangi, my friend and the general managing partner of the firm where we both worked. Born in Kenya, James earned his way to Harvard and then to jobs with McKinsey & Co. and Dalberg, contributing to US commercial and social wealth while learning skills that would propel him to leadership in Africa. Yet that was not the experience of many other talented Africans who studied in the States. "The U.S. has a resource in Africans graduating from top American schools," he said. "If the U.S. were more open to them staying and working in the U.S. for a few years, you would get several years of good utility from them. It would also cement a really favorable impression of the U.S. with many of the people who will be leading Africa in the future. That would serve the U.S. better than frog-marching these graduates directly to the airport upon getting their diploma."

Immigration reform is rightly the subject of a deep policy debate, as are income mobility and the balance of liberty and security. As we debate the prescriptions, we correctly focus on the consequences at home. However, at the same time, we have a unique opportunity to strengthen or weaken our global brand promise. We should be conscious of the unique power that brand provides. Given the high barriers our rivals face in duplicating that power, we should have a bias towards it.

Taking Your Brand Global Is Easier Than You Think

There's a prevalent myth that I've encountered repeatedly in my years advising companies with intentions of going global — that it's a massive project, one that takes extensive advance planning, and one that only the largest companies can pull off successfully. This conclusion is understandable. After all, it's hard enough to build a business within one's home market.

Recently, I spoke with the head of marketing at a multi-billion-dollar company which had been global for decades, long before it became trendy. In reviewing the countries and languages he appeared to be targeting with his website, I asked him why the company had selected the specific markets they are in today. His answer? "We didn't. It just kind of happened."

This process plays out repeatedly, even among some of the world's largest brands. Take Apple as a prime example. After opening up retail locations throughout the United States, the American stores were flooded by foreign buyers purchasing iPhones in bulk in order to take them back and sell them to the scores of people yearning for these products overseas. At first, Apple didn't target these international customers in a strategic way, which would have been making their products easily available in those countries from the start. Instead, they noted the demand and, little by little, gradually expanded their global footprint; to the point where today, a great deal of their growth strategy is focused on other countries. At the end of their 2012 fiscal year, 83% of new Apple Stores were found in international locations.

While it's true that many companies make a concerted decision to enter a given market, it's actually more common to see the reverse scenario take place — their customers make the decision for them, or at the very least, these customers play a significant role in steering the company toward those decisions. As a result, more and more companies are going global without any sort of grand master plan. Instead, they are easing into an international presence one small step at a time, often learning as they go, creating plans in response to what they learn, and experimenting along the way.

In the past, launching a presence in a new country required an office in that location, several trips to scout out office space, and a significant commitment of both time and money. But in today's digital age, people in faraway places can find your website, learn about your company, and have an experience with your brand. Marketers and brand managers today cannot always control the traffic streams — and their sources — that arrive at their website. Customers are more empowered than they used to be.

Marketers are empowered by this new world order too, but in a different way — through analytics. While they may not be able to strictly control who is visiting their website and where these visitors are coming from, they can use demographic and behavioral data in order to determine the next best steps the company should take. If they see significant traffic from a given country or in a given language, this data can help inform the decision to launch a website for a specific locale.

Yet, sometimes, even when all of the signs are clear that demand exists outside of a company's home market, many companies ignore the data — and therefore, the market opportunity — due to a fear of how hard it will be to expand across international borders. They envision massive up-front costs with unclear return on investment. The word "international" seems far bigger and scarier than it really is.

The problem for many of these companies is figuring out what to do next. How do you capitalize on these signs of potential global momentum?

Add a little fuel to the fire with translation. If you're already seeing international interest among your customer base, consider translating some of your online marketing content in order to make your products and services that much more accessible — and desirable. Don't make the expensive mistake of translating everything at once. Instead, try a "test launch" or a pilot in a given country.

Support your customers without going overboard. Many companies believe that they have to provide full-fledged customer service and support to customers in every language and country into which they expand. The reality is that if you're already seeing interest from your customer base without any support at all, even providing minimal support (online help, for example) will often be a step in the right direction — at least until you have more customers, and therefore more revenue, to fund greater levels of client service.

Increase your sales and marketing presence. As you begin to see more traction from your small-scale efforts, consider amping up your sales and marketing presence for the international locations that seem most promising, using research and your own analytics to inform your decisions. As you see return on investment, you can provide more in-language content and spend more on local campaigns. You might even want to hire salespeople who speak the language of your newfound customers — but they don't necessarily need to live there. You can recruit expats who live in your country but would love to travel back home frequently until you're confident of the need to hire locally.

Decide whether you need a physical presence. You might never actually need a physical office location in the country where your customers are located. Granted, this decision is made easier for dot coms, digital media companies, SaaS developers, and others who primarily sell on the web. However, even if you are selling physical goods, a wiser strategy may be to take advantage of distributors and resellers in order to obtain the same benefits without investing in actually setting up camp in another geography.

Don't panic when you spot global demand for your products and services. Instead, start making small, incremental investments in expanding your global presence. Before long, you'll see that going global is simply a path — not an obstacle course.

How Women Drive Innovation and Growth

Women represent a growth market more than twice as big as China and India combined. They control $20 trillion in global consumer spending, own or operate between 25-33% of all private businesses, and earn an estimated $13 trillion. This "power of the purse" is growing rapidly; expectations are that it will swell to $18 trillion by 2014. For companies that figure out what women want, the future looks rosy indeed.



But CTI research reveals that, while most companies target women as end-users, few effectively leverage the talent most likely to know what these end-users want and need: female employees. Specifically, we find that companies fail to realize the full innovative potential of women in their midst because leadership either doesn't know how to elicit their insights or lacks the perspective necessary to endorse their ideas.

In 2007, Rajashree Nambiar, head of branch banking for Standard Chartered India, acted on a hunch. She hired a firm to survey the bank's female clientele, whom she suspected weren't happy with the service they were getting. Their findings affirmed her own experience: women felt condescended to and intimidated by the male bankers they encountered. So Nambiar proposed that two down-at-the-heels branches in Kolkata and New Delhi undergo a complete overhaul. Not only would the staff, including the security guards, be female; the way they delivered financial advice and even the kind of products they offered would acknowledge women as wage-earners, purse-wielders, entrepreneurs, and family supporters. One such offering, the Diva card, induced them to transfer balances to a credit card that acted as a social club and networking nexus. The bank supported her idea. Between 2009 and 2010, the Kolkata and New Delhi all-women's branches drove net sales up for the bank by 127 percent and 75 percent, respectively, compared with a paltry 48 percent average among its other 90-plus Indian branches.

It's hardly surprising that women have valuable insights when it comes to devising products or services that better serve female clients and customers. What our research shows, however, is that teams with even one woman come to feel the "point of pain" necessary to perceive new opportunities and act on them. For companies tasked with understanding female consumers (and 74% of our respondents work for companies that target women), tapping women improves the likelihood of their success by 144%.

Having women among the firm's innovators is but half the equation, however. Women's ideas won't translate into marketable products or services unless leadership backs them. Consider the Standard Chartered example: Just as important as Nambiar's idea was the environment in which she pitched it. She felt she could afford to propose an unorthodox idea; she believed executives would be receptive to the business case she constructed. Had leadership been less receptive, she might have kept her observations about the problem — and her thoughts on its solution — to herself.

Our study finds that a "speak-up" culture, where all voices get heard and everyone feels welcome to contribute, is indeed crucial to unlocking women's insights. Leaders who make sure women get equal airtime are 89% more likely than non-inclusive leaders to unleash women's innovative potential. Leaders who are willing to change direction based on women's input are more than twice as likely to tap into winning ideas. And leaders who make sure each female member on the team gets constructive and supportive feedback are 128% more likely to elicit breakthrough ideas.

To capture a piece of this crucial new market, our research shows, companies must develop and deploy two kinds of diversity: inherent — meaning more women and people of color make up the workforce — and acquired, meaning leaders behave inclusively to foster the speak-up culture that unlocks a broad spectrum of perspectives and toolkits. Companies replete with both inherent and acquired diversity, we find, out-innovate and outperform the competition. Employees who work for companies like these are 45% more to report that their company improved market share in the last 12 months. And they're 70% more likely to report that their company captured a new market in that time frame. That's a remarkable testament to the impact of diversity — not just on innovation, but on market growth.

Bottom line? Companies don't need more Boy Geniuses. To court the $20 trillion market of female consumers, companies need to get serious about leveraging female talent.

The Steep Psychological Price of Starting Your Own Company

Too High?


"Fake it until you make it" might sound like a manageable way to approach your entrepreneurial efforts, but it's also worth considering this man-riding-a-lion analogy from EnSite Solutions CEO Toby Thomas: "People look at him and think, ‘This guy's really got it together! He's brave!’ And the man riding a lion is thinking, ‘How the hell did I get on a lion, and how do I keep from getting eaten?’" This quote is only one of the candid and deeply felt points relayed by the entrepreneurs interviewed for this piece on the anxiety, depression, and stress that often go hand-in-hand with building a start-up (95% of which fail). The good news is that people are slowly talking publicly about their bouts with depression and the factors that lead to it. Vulnerability, says former entrepreneur and psychiatrist Michael A. Freeman, might actually be a positive trait for leaders to have. He also suggests that redefining failure, keeping close human connections, and separating net worth from self-worth can go a long way in easing a mind amidst the chaos and competition of building a company from scratch.

What a Shirt Can (and Can't) Do

Kevin Plank, the Man Under the Armour Men's Journal

Under Armour, a $2 billion company known for its tight-fitting, sweat-wicking clothing, is run by Kevin Plank, a man who legendarily took a simple idea — making workout clothes more comfortable — and built it into an empire. And now Plank, with his innovative foresight and devotion to the city of Baltimore, is making his biggest bet yet. In this glowing yet skeptical-in-all-the-right-places article, Jason Fagone introduces readers to the SpeedForm, a shoe made in a bra factory that just might be Under Armour's best chance at chipping away Nike's 40% hold on the athletic shoe market. Plank says the shoe is cheap enough to be made in the U.S. — and could bring 25,000 jobs to Baltimore. But he's not just trying to save his city while simultaneously beating Nike. By joining the Head Health Initiative (a joint technology venture between the NFL and GE that focuses on detecting and preventing brain injuries), Plank is also not-so-subtly getting his foot in the league's door — one that's propped open by Nike (of course), which currently holds the contract to make NFL uniforms. But measuring heart rates with clothing is one thing; preventing brain damage is another. As Fagone claims, "innovation probably can't do anything to protect the shy sack of mayonnaise that is the human brain if the human it belongs to is hitting another human with the force of 15 to 20 Gs." This all begs the question: when you have both the best of intentions and the desire to cut into a market, where's the line between doing good and losing track of its feasibility?

Go Figure

Why Job Dissatisfaction Diminishes Auditing Quality Australia School of Business

In the up-or-out world of Big-Four accounting firms, turnover among junior auditors is a fact of life. No one expects these people to be happy, and if senior management pays any attention to them, they tend to worry only about making sure the few obvious stars aren’t among the disgruntled masses thinking of leaving. But a new study by Australian School of Business accounting professor Gary Monroe and colleagues suggests that these firms might want to take a closer look at life at the bottom of their organizations. The researchers asked 76 young auditors in Malaysia, most of whom worked for one or another of the four major accountancies, to rate their job satisfaction and then asked them to weigh in on a tricky inventory valuation. The unhappy juniors consistently rated the value of the inventory higher than their happier counterparts. Why? The researchers chalk it up to an unconscious desire to please the client in an effort to open up future employment opportunities — a mind-set that, the researchers argue, exposes their employers to significant risk from both inaccurate work and the appearance (if not the fact) of a conflict of interest. —Andrea Ovans

Can They Sense My Dislike of Ben Roethlisberger?

Scientists Seek to Help Advertisers Capitalize on How We Watch Sports The Guardian

With DVR and iPhones (not to mention regular trips to the fridge for a beverage) keeping us nice and occupied, it's no secret that advertisers are scrambling to figure out how to keep TV viewers engaged. And because sporting events are more likely to keep viewers engaged during the entirety of a few hours, the financial stakes for companies and networks are astronomically high: Verizon, for example, spent $345.5 million in 2011 on ads, and companies are increasingly wondering whether parting with so much cash for broadcast is actually worth it. MediaScience, also called Ad Lab, is a research facility in Texas that is trying to answer these questions by paying people to watch sports in their building — "resembling living rooms and giving off the scent of fresh linen" — while tracking "which viewing angle of a goal or touchdown makes hearts beat fastest." It's unclear as to whether televised sports will wind up being tested "as rigorously as the sort of consumer goods you can buy in a supermarket," but one of Ad Lab's initial findings — that viewers found an ESPN news ticker helpful, not distracting, during commercial breaks — probably gave the advertisers a brief yet needed sigh of relief.

It Can Be Done!

Making Red Tape Fun Boston Globe

"Papers, Please" is a video game about bureaucracy. Seriously. Jesse Singal goes into detail about the bizarre and sort of brilliant idea behind the dystopian game created by Lucas Pope. As a player, you have a seemingly simple objective: working a border crossing checkpoint to make sure "among other concerns, that the issuing country and city match, that the photo matches the person you’re looking at, and that their documents aren’t expired." Yeah, it may not sound all that fun (or different from your daily slog), but Singal explains that it's compelling because it allows you to carefully think through the everyday decisions we're all required to make under the cloud of time, money, and influence. In the game, you have some power but work for a state that has much more, and you're charged with balancing these pressures. On the one hand, you need to do your job efficiently in order to feed your family; on the other, you might be morally inclined to let a scared asylum pass through the border without proper documentation (something that will cost you). "It's a wonderful example of how video games can be used to help shed light on complicated human social structures," Singal explains. Wonderful, terrifying, and, for some, too close to home. And now I know what I'll be doing all weekend.

BONUS BITS:

Cheers?

How the Coffee Cup Sleeve Was Invented (Smithsonian Magazine)
The Case for Getting Drunk at Work (Slate)
Industries' Dirty Little Secrets (Reddit)

What's to Be Learned from Ousted Leaders?

Stephen Joel Trachtenberg is by all accounts a mensch. And what people used to call a stitch. When you meet him — for me it was at a BankInter-hosted gathering of scientists, business innovators, and policy experts in Madrid — you're struck by his no-nonsense style and gruff Brooklyn charm. No matter your age, Trachtenberg is likely to address you as "kid." The straight-talking President emeritus of George Washington University in Washington, D.C. is the son of working-class, New York Jews who seems never to have forgotten where he came from.

Trachtenberg is a lawyer by training who earned degrees at Columbia, Yale, and Harvard. He did a stint in the Johnson administration before becoming an exceptionally successful university president. From early days, he was a scrappy leader. A Jesuit friend of mine at neighboring Georgetown once told me, with admiration, how for years Trachtenberg outfoxed the rival school in everything from strategy to marketing to real estate acquisition, and in the process transformed underdog GW into a national powerhouse.

At some point in his nearly two decades at George Washington (he retired in 2007), Trachtenberg must have noted that he was beating the odds on tenure. Meanwhile, for his peers in US higher education, those odds are only getting worse. From 2006 to 2011, presidents' average length of service dropped from eight and a half years to seven, continuing a long-term trend.

A few years ago, Trachtenberg, together with Gerald B. Kauvar (a research professor and expert in Victorian literature) and former university chancellor E. Grady Bogue, undertook to discover how it is that seemingly competent leaders so often find themselves out on the street. The series of interviews they conducted turned into Presidencies Derailed: Why University Leaders Fail and How to Prevent It (Johns Hopkins University Press). It's a book with relevance far beyond academe.

Some of the case studies put forth by Trachtenberg, Kauvar, and Bogue yield straightforward lessons. Their basic words to the wise? If you don't want to fail as a university president, 1) always meet your business objectives; 2) communicate clearly; 3) never stop tending to your key constituencies; and 4) be resilient. The last, referring to the ability to adapt to the unexpected and recover quickly from setbacks, is particularly hard to master. I have also heard General David Petraeus call it the single most important aspect in running a counterinsurgency (which some university presidents might sometimes feel called on to do).

The derailed presidents in the 16 case studies assembled here all stumbled badly in one or more of the above-mentioned areas. Sometimes a divided or misguided board contributed to their derailment. The book is spiced with anecdotes, although in most instances the authors seek to protect the identity of those involved.

But beyond these basic rules, there's also a valuable reminder throughout the book that durable, effective leadership is an "intricate dance," as the authors put it, too nuanced to be explained by one-size-fits-all formulas.



Case in point. Trachtenberg thinks a university has to be run like a business. Bills have to paid, money has to be respected, he told me in a recent email. Yet the book also emphasizes that the academic enterprise is unique. An institution of higher education, with its hearts-and-minds mission and its complex blend of stakeholders — students, faculty, parents, trustees, alumni, donors, state and local authorities and community — is hardly a business pure and simple. (The same, by the way, can be said about newspapers. So I hope Amazon founder and CEO Jeff Bezos, who just acquired the Washington Post, will add Presidencies Derailed to his reading list.)

Incidentally, Trachtenberg has his critics — any strong leader does. But he's a guy rooted in something, who seems to be comfortable in his own skin. After meeting him, I also looked into his last book, Big Man on Campus, a memoir. It's good storytelling, with pearls of wisdom enclosed in vignettes that make you laugh out loud. Or at least chuckle. Like the occasion when Trachtenberg bumps into a desperate student who borrows a few bucks to get himself through the weekend. The student, without knowing whom he's dealing with, tries to give the president an unsigned check as reimbursement.

My own takeaway from reading both books is this. Great leadership seldom results from a focus on ROI über alles. And it is possible to discern patterns in the successes and failures of leaders. But no great leader's accomplishment can be wholly described by the few lessons that are transferable from enterprise to enterprise or across different fields and industries. The central and most fascinating pieces of the leadership puzzle are judgment, wisdom, character, and emotional intelligence. So simply stated. So elusive time and again.

How do you train a leader to be a mensch?

CIOs: Scenario Planning Can Save Your Job

It's the rare CIO who applies scenario planning to the business of IT. Yet, in a function driven by innovation and the uncertainties surrounding the application and implication of future technologies, not using scenarios is tantamount to management malpractice.

Scenarios can help IT organizations create more resilient plans, practice for business climate changes, and better drive innovation. IT often falsely believes that once a vision is set, a single narrative must dominate its future. But that belief leads to misalignment as the future unfolds contrary to the assumptions underlying the vision. IT leaders should acknowledge that they need to develop a way of sensing directional shifts early, so that they're not caught flat-footed by the next thing that will disrupt the foundations of their business or their infrastructure.

Creating More Resilient Plans

Any IT professional who believes that their intuition or logic about a future will prove accurate hasn't worked long in IT. Scenarios help IT create more resilient plans by providing a new testing mechanism for everything from portfolio management to the consumerization of IT to employing cloud services.

Let's consider the last example: many organizations are making a big bet on cloud services. This decision brings with it a range of threats, along with new opportunities. Threats range from periodic, temporary outages, to catastrophic failure from the dissolution of the provider, to a merger or acquisition that requires rethinking existing relationships and perhaps renegotiating existing service contracts. Opportunities might include reducing portfolio complexity, driving down costs, and shifting talent from tactical to strategic work. These threats and opportunities require a clear way to test how they will play out against various social, technological, and economic assumptions.

The way threats and opportunities play out will affect talent needs, in-house infrastructure investments, security models, and the deployment of mobility solutions, just to name a few implications. For IT professionals, scenarios help them create a deeper, richer view of the potential futures.

Practice for Business Climate Changes

Building resilient IT plans that take into account future uncertainties in the technological realm is just the start. For IT to deliver its best value to the business, it must test its assumptions about applications, business needs, even its own roll in the business, against the larger context of the business climate.

Much of the fall-out of the Great Recession was exacerbated by the failure of organizations, public and private, to understand how technology and automation would perform under the stress of unusual circumstances. Those organizations did not effectively use tools like scenarios to help them imagine what could happen, let alone establish technological contingencies for mitigating the impact of systemic failures like the dissolution of Lehman Brothers or averting automated trading cascades in various markets.

For many industries, technology has become the transformative force. Often that technology does not directly arise from existing information technology, but IT will be called upon to integrate, leverage, and ensure service levels and communications to support the business transformation. Scenarios can play a strategic role in helping both the business and IT understand how these new technologies might evolve, what information technology support they may require, and where the risks may lie.

Scenarios and Innovation

Many organizations look to IT to help innovate products, processes, and business models. But there is a problem: there is no data about the future. IT cannot foretell which technologies or vendors will dominate in the future. But if IT leaders document uncertainties and create scenarios, they can provide better-informed guesses, and more importantly, monitor the uncertainties to determine which of their imagined futures is most likely to unfold.

As CIOs strive to provide more strategic value, scenarios can offer a tool to help facilitate business transformation. IT, perhaps more than any other individual function, faces mounting uncertainties that affect how the CIO's organization is run, but also how well the organization as a whole adapts to a more technologically enabled future. As marketing, for instance, takes up its own technological destiny with online and mobile ads, app development, marketing automation, and the deployment of digital experience, IT owes the organization guidance and governance on these developments--and they owe their business partners a robust way to help them mitigate the risks and maximize the opportunities.

Today's CIOs who want to prosper in tomorrow's tumultuous business climate need to embrace scenarios as a framework that will infuse their leaders with strategic perspective and meaningful doubt, and offer tools for working through both. The best of tomorrow's IT leaders will help their entire organizations recognize the impact of uncertainty, and force them to grapple with its implications in every decision they make.

Reinventing Corporate IT
An HBR Insight Center





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Beware the Sirens of Management Pseudo-Science

Management is not an exact science, they say. And I guess most things that involve the study of human behavior cannot be. But I sometimes wonder if that is the reason — or the excuse — that the business sections at airport bookshops are so full of nonsense.

Quite often these books are written with panache. And the authors — aspiring "management thinkers" and "gurus" (never scientists) — have an excellent sense of the pulse of the business public. They are neither crooks nor charlatans; they write what they believe. But that doesn't make their beliefs right. People can believe vigorously in voodooism, homeopathy, and creationism.

A common formula to create a best-selling business book is to start with a list of eye-catching companies that have been outperforming their peers for years. This has the added advantage of creating an aura of objectivity because the list is constructed using "objective, quantitative data." Subsequently, the management thinker takes the list of superior companies and examines (usually in a rather less objective way) what these companies have in common. Surely — is the assumption and foregone conclusion — what these companies have in common must be a good thing, so let's write a book about that and become rich.

In Search of Excellence and Built to Last, to name a few classic examples, followed that formula — including the getting rich bit. One piece of advice to come out of such tomes, for instance, has been to create a strong, coherent organizational culture, like most of high-performing firms studied. However, we now know from academic research that a strong culture is often the result of a period of high performance, rather than its cause. In fact, a very coherent culture can even be a precursor of what is called a competency trap, where firms get stuck in their old beliefs and ways of doing things. Not coincidentally, the list of superior companies frequently starts unravelling when the book is still at the printer's.

Another formula is to introduce a new and fashionable management practice, such as Six Sigma, Lean, or the ancient Total Quality Management and ISO9000. The book not only describes the practice but also introduces us to the success stories of early adopters, in the form of awe-inspiring interviews and case studies.

However, nowadays, we know from academic research on such practices that in the long run they usually do not create any value, that early adopters are motivated to exaggerate their benefits, that they can stifle long-term innovation and that in the process of popularizing the practice, the original version (which might have worked for the company that developed it) becomes distorted, oversimplified, or just plain ineffectual. Most of them go out of fashion after a while, and some years later get smirkingly referred to as a fad.

But the books continue to sell, new lists of excellent companies emerge, and fads resurface. And that is perhaps no wonder, because it is only human to be susceptible to the beguiling songs of Sirens that bear the promise of prosperous times. But sometimes it makes sense to do what Odysseus instructed his men to do, when the Sirens were in sight: plug your ears with beeswax and just sail past.

Emerging from a Bad Mood into a Good Mood Can Make You More Creative

People who were plunged into bad moods by being asked to write about distressing experiences, but were then put into good moods by being asked to write about joyful events, were subsequently better at imagining creative ideas for improving university teaching than people who had been in positive moods all along, says a team led by Ronald Bledow of Ghent University in Belgium. For example, their average originality score by independent raters was 4.12 on a 7-point scale, versus 3.53 for the others. An episode of negative mood can lay the foundation for high creativity at a later point in time, the authors say.

How To Choose The Next Head of the Fed

As allies of Larry Summers and Janet Yellen, the two candidates for chairmanship of the Federal Reserve, are busy "waging behind-the-scenes efforts" (in the words of The Washington Post), it might be useful to provide an independent notion of how the decision should be made.

At the moment, there seems to be little consensus on just how the two differ and which differences matter most. The New York Times recently published a 2000-word article trying to divine the likely policies of Summers versus Yellen. Googling Yellen vs. Summers nets some 12.5 million results. The Economist observed:

The low tone of the debate is disappointing. Not enough attention is being paid to the candidates' economic views. In a 2003 study of past Fed chairmen Christina Romer and David Romer of the University of California, Berkeley, reckon that a candidate who subscribes to a "sound" framework of basic monetary principles is most likely to do well.

We think relative monetary policy expertise is far from the key factor that should bias us toward one over the other.



Recent scrutiny of the U.S. financial services industry has mainly focused on two issues: the corruption and malfeasance of financial institutions (money laundering, betting against their own clients, etc.), and the transfer of business risk from "too big to fail" institutions to taxpayers, leading to a "heads I win, tails you lose" relationship between the finance and the rest of the economy. The debate has been about enforcement and regulation of the industry. Both valid points, but both miss the crucial issue.

The deeper question concerns the function of the financial sector within the macro economy. Here also there are two issues. The financial industry accounts for about 8% of GDP, but about 32% of corporate profits. These excess profits are extracted from the real economy — consumers and businesses — and constitute a drag on non-financial growth. The recent suit against Goldman Sachs for running aluminum ingots back and forth among warehouses, inflating the price to OEMs and thus consumers, is a stark example.

But worse, the financial sector no longer serves its proper purpose: to enable productive real-sector investment. The credit tightening, despite huge spreads, of the last four years offers broad evidence. Instead the industry has become a mechanism for the systematic concentration of income and wealth. It is to a great extent through the activities of finance that the increase in national income of the past three decades has been distributed in large part to the owners of financial firms and assets, rather than to the middle class.

This question — the drag on the productive economy and on who participates in growth — affects every individual in the society. And it will influence the long-term future of the U.S. economy. History shows that concentration of wealth to the 1% and the 0.1% cannot continue indefinitely. Though it's hard to imagine financial executives and regulators being marched to the guillotine, the protests of the Occupy movement and the one-day strikes of minimum wage workers are certainly signals of discontent. But "revolution" — in the sense of a shift of power and influence away from those who currently hold it — could come at a much grander scale, through the loss of faith in global market capitalism within the developing world. Malaysia's suspension of currency conversion to lock out speculators during the 1997 "Asian Contagion" is a precedent, when Prime Minister Mahathir putting Malaysians' interests above those of holders of Malaysian bonds. Parts of Africa already see more advantage in allying with China than with the West.

Financial reform should not be perceived as a zero-sum struggle between financiers and their regulators, though it is the outcome of this struggle that the Summers vs. Yellen bout centers on. It should be drawn as a question of growth strategy and economic policy, ensuring that Western companies retain their license to operate in the future global economy. And in the long run the West's financial sector will be better off as a result.

Let the Justice Department enforce the money laundering and fraud laws; let the Secretary of the Treasury ensure that trading risks are the responsibility of traders. But as for the Chair of the Fed? The President should choose the person who best understands that the financial system should serve the economy and the society, not the other way around.

The Rise of the Megacorporation

An interview with Richard Adelstein, professor of economics at Wesleyan University and author of The Rise of Planning in Industrial America, 1864-1914.

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A written transcript will be available by August 30.