Marina Gorbis's Blog, page 1572

Five Ways to Innovate Faster

One of the most common complaints senior executives have about disruptive innovation is its seemingly snail-like pace. How is it, they wonder, that it takes us forever to pursue ideas that promise to create new markets when the world seems to be innovating at a dizzying pace?

This frustration is compounded by the fact that the usual levers senior executives use to get things to go faster — creating tight deadlines, flooding the project with resources, checking in more frequently — don't seem to work, and in many cases cause teams working on disruptive ideas to actually go slower.

Why is that? Tight deadlines, frequent check-ins, and additional resources indeed help to accelerate execution of a strategic plan. But succeeding with disruption first requires developing a strategic plan that can be executed. As innovation thought leader Steve Blank notes, a startup is a temporary organization searching for a scalable business model. Accelerating the search for a strategy is a very different challange than executing that strategy.

There are five ways to accelerate the search for a viable new-growth model:

Form small, focused teams. Small teams almost always move faster than large teams. One of Jeff Bezos's rules of thumb inside Amazon.com is that teams should be able to be fed by no more than two pizzas. The mistake many large companies make is that they think a new venture is like a mini-version of the core business, one that needs to be staffed with representatives from corporate functions like legal, quality assurance, and so on. Bloated teams are ill-equipped to rapidly search for a compelling model; small, nimble teams maximize flexibility and the speed of learning. Ideally the entire team should be fully dedicated and located together so they can make real-time decisions, but at the very least the project leader should be full time to minimize time-sucking distractions.
Push to learn in market. The epigraph in Blank's latest book (with Bob Dorf), The Startup Owner's Manual, says it all: "Get out of the building!" Large companies are used to relying on desk research and consultants to size markets and sharpen strategy, but the search for tomorrow's business has to be conducted in or close to the market. Remember, markets that don't yet exist are notoriously difficult to measure and analyze, so the team should spend as much time as possible with prospective customers, partners, and suppliers. Even richer lessons come when a team goes beyond talking, to actually attempting to produce, sell, and support its offering, even if it is that offering has some limitations.
Measure learning, not results. It's hard to set precise operational milestones when you don't know what the business model is going to be. And in search mode financial forecasts are unreliable. When IBM is working on uncertain new growth efforts, by contrast, it measures things like the number of customers a team interacts with, or the speed with which a team creates prototype (see the recent Harvard Business Review article "Six Ways to Sink a Growth Initiative" for more). Executives should pepper teams with questions like, "What did you learn? What do you still not know?" The innovator should be able to spin a conceivable story about how the idea could have material impact, but leaders should focus on the plausibility of the assumptions behind the story, not the output of a spreadsheet based on specious assumptions.
Tie funding to risk reduction, not the calendar. Most venture capitalists don't hand out funds on a quarterly or yearly basis, as most corporations do when they fund ongoing operations. Rather, they provide sufficient capital for the entrepreneurs to address critical uncertainties like whether they can overcome key technical challenges, hire the right team, or convince customers to pay for a given solution. If the founders remove that uncertainty, they get another round of funding. If they do not, well, the VC moves on to the next company in its portfolio. Companies need to remember that not every idea is destined to turn into a compelling business. Better to pull the plug early than to unnecessarily waste time and resources.
Ensure decision makers have the right experience to guide the team before the data are clear. Important new growth initiatives are typically overseen by a company's top management. But if the intent is to search for a new business model, the company's top team almost by definition lacks experience with it. Perhaps some members of the executive committee who have nurtured a new venture in the past should be involved. Augment them with outsiders who have spent enough time with start-ups to know how to grapple with uncertainty or with subject-matter experts who have spent enough time in a market to understand its nuances. Otherwise the need to invest in educating management will slow the team's progress even more.

Here is one litmus test to gauge the degree to which you are following the approach I've just described. Ask the team the ratio of time spent preparing materials for management (or conducting desk research to feed into materials for management) versus time spent with customers, developing products, or talking to potential partners. If the ratio is higher than 1:3, you have a problem.

These five pointers won't guarantee success. But following them will enable a team to discover as quickly as possible if there appears to be a viable path forward. If there is, then all the disciplines companies use to scale businesses typically prove helpful (unless the model that emerges has stark differences with the core business — but that's a different post). If there isn't, then at least the company learned that quickly and can move on to the next idea.

Today's CIO Needs to Be the Chief Innovation Officer

Enterprise IT as we have known it is rapidly becoming obsolete, and the traditional role of the CIO is increasingly irrelevant. As game-changing technologies transform every business process, they also give us the ability to create new products and services that were impossible just a few years ago. Therefore, the CIO's role must shift from protecting and defending the status quo to embracing and extending new innovative capabilities.

The old way was about technology-centricity; the new way is about technology-empowered business strategies. The old way was information management; the new way is information intelligence. The old way was IT systems management; the new way is platforms that enable new value chains and integrated ecosystems. The old way was cost management; the new way is driving business transformation and accelerating growth.

Today's world of business is not just changing — it's transforming. What's the difference? Change is doing something in an incrementally different way. Transformation is doing something so drastically different that it becomes a qualitative shift, not just quantitative. The move from wax cylinders, to acetate discs, to LPs, to CDs — these were all change. CDs to MP3s? Suddenly I can carry my entire music library in my shirt pocket, and my digital music player (which also happens to be my smart phone containing GPS, videos, and so much more) has no moving parts, unless you count electrons. That's a transformation.

In the early 1990s, Barnes & Noble superstores changed how we shop for books. By the mid-1990s, Amazon was transforming how we shop for books, which then transformed how we shop for everything. As we all know, technology made this transformation possible.

Transformation Drivers

Today, technology-driven transformation is happening all around us. A few weeks ago, I was a keynote speaker at a large international technology conference and one of the demonstrations to illustrate game-changing technology involved using an iPad and a high-speed connection to fully control three of the most powerful workstations engineers have access to. All were located in different parts of the country, yet with only the iPad wirelessly streaming to a large screen, thousands of people could see what the engineers were seeing and the user could control each workstation as if he was there. Doing all of this from an iPad was impossible just a few months ago.

I was in China two months ago consulting with CIOs who were not only using software as a service (SaaS), but several were also in the process of implementing hardware as a service, connectivity as a service, collaboration as a service, and security as a service. And the real excitement was around implementing everything as a service (XaaS). Clearly, IT is quickly becoming an integrated collection of intelligent services that are on demand, on the move, and on any device.

The visual, social, virtual, and mobile transformations that are already happening are creating a new golden era of technology-enabled innovation, and the CIO needs to be leading the charge.

So what has enabled the business environment to go from merely changing to transforming? It's all thanks to three change accelerators: the exponential advances in processing power, bandwidth, and storage. I have been tracking their trajectory for the past thirty years and they have now entered a predictable new phase due to their exponential growth — a phase that will transform every business process. Think of it this way: Based on the technology-enabled hard trends that are already in place, over the next five short years we will transform how we sell, market, communicate, collaborate, innovate, train, and educate. And if you don't do it, someone else will. In fact, with all the business processes technology is transforming, nothing is transforming more than the role of the CIO.

The New Role

The CIO's traditional role, which is one of managing information, IT systems, and cost, has itself transformed to creating new competitive advantage, new products, and new services. Traditionally, the CEO was the innovator, but many of today's CEOs — as well as the rest of the C-suite — are unaware of what is technologically possible now or in the future. However, the CIO does have interest, access, and the understanding of that type of information and knowledge, which is why the CIO position needs to transform into the Chief Innovation Officer.

Of course, not all CIOs will embrace their new role. As our environment transforms, human nature is to hunker down because we want to find comfort. Many will be far too busy doing what they have always done. Many will spend a lot of time protecting and defending the status quo. Why? Quite simply, because we're familiar with it. We know how it works. We have an investment in it. It has made a lot of money for us. It got us to where we are today. Therefore, the mindset is that we have to protect and defend it any way we can.

An additional burden the CIO has is the nature of their work itself. They have to maintain the existing system to make sure it's working, that there are no breaches, that it's being upgraded, etc. After all, you have to keep the organization running smoothly during the transforming time. But if that's all you're doing — maintaining what's already there — then your role is tied to the past and your relevance is decreasing every day. So while you do have to maintain your current and past systems, your new most important role is to drive internal and external innovation. And because innovation is increasingly technology-driven, the CIO is in a perfect position to lead this evolutionary revolution.

The fact is that the ability to innovate has never been more possible and has never happened faster. In transformational game changing times such as what we're experiencing now, the key rule is this: If it can be done it will be done ... and if you don't do it, someone else will. Likewise, if you don't change the focus of your CIO role, someone else will.

Reinventing Corporate IT
An HBR Insight Center





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Why Can't a CIO Be More Like a CFO?

You Found Your Product-Market Fit. Now What?

In every start-up, finding initial product-market fit is a magical moment. Before this occurs, the sales process is a craft or an art, custom-made by the founder or evangelist sales VP. You dive deep into a customer development process, working closely with a few customers who feed you requirements and are willing to trial an imperfect product that is evolving quickly.

But once you achieve initial product-market fit and are down the Sales Learning Curve (PDF), suddenly you are faced with a new challenge: how do I scale up the sales efforts? How do I build a repeatable, scalable sales process that is like an industrial machine, not a crafts project?

Across our portfolio and in my own entrepreneurial experience, I have seen three main sales models work successfully in scaling B2B sales:

1) Enterprise;

2) Telephone;

3) Developer-driven.

B2C sales and customer acquisition efforts are a different matter (and one I'll perhaps address in a future blog), but for B2B, those three models are the most common pattern. I'll discuss each one below.

1) Enterprise Sales

The enterprise sales model is a pretty simple one and was the predominant model ten to twenty years ago in the IT industry. If you want to scale sales, you hire more sales reps. Find a new sales rep with industry experience, a rolodex and a strong track record. You assign an annual quota to each rep, train them, feed them some sales tools and assign them a sales engineer (particularly for more technically complex products) and coach them along the way. After 3-6 months, they work their way down the learning curve, close their first deal and are off to the races.

The typical quota for a sales rep varies by type of business model (SaaS vs. perpetual), product gross margin (e.g., 80-90% software products vs. 40-50% advertising products) and company maturity (e.g., a "jungle" stage company would have a lower quota than a "highway" company). Typically you want to see a 3x ratio between the contribution margin per rep (factoring in the lifetime value of the customer, or LTV) and the cost per rep to acquire that customer, fully loaded (i.e., customer acquisition cost or CAC).

For example if you have a 90% gross margin SaaS software product and assign a $1.1M in quota for a rep (i.e., $1m in contribution margin) that makes $250K at target and assume another $50k in benefits and travel costs and $30k in marketing and support costs for a total of $330K, then you have a 3x LTV:CAC ratio in year one. Another rule of thumb for SaaS companies, some focus on "the Magic Number", which is the ratio of new sales to sales and marketing expenses.

If the customer is a recurring customer, then they are more valuable and a lower quota might be tolerated, although a separate group of account reps are often accountable and paid commissions for the renewal revenue. If the marketing support is greater and the product is more mature, than a higher quota might be assigned. In my former company, Open Market, we had rising quotas each year as we got more mature, from (if memory serves me) $1.1M to $1.3M to $1.5M to $1.7M to, finally, $2M in annual quota.

Advertising sales reps, with a 40-50% gross margin, might have $3-5M in annual quota.

Although it is an excellent fit for complex enterprise-class solution selling, many people think classic enterprise sales, as a standalone go to market model, is broken. When you analyze it carefully, unless you can support large quotas due to very large deal sizes, it can simply be too expensive to hire senior sales representatives, distribute them around the country, set up offices and support them. Many are therefore proponents of a sales model that relies more on telephone-based selling, as described below.

2. Telephone Sales

The telephone sales model is based on a group of lower-paid, typically younger sales representatives that sit in cubicles next to each other and make call after call. To implement this sales model effectively, there needs to be a tight coordination between sales and marketing to generate qualified leads and to feed these leads to the sales organization. There also needs to be a large target universe of potential customers to justify the volume of calls - the model simply doesn't work if your target market pool is in the hundreds or even thousands.

Sales reps in this model may be closers or simply openers who qualify leads carefully and then hand them off to the closers (in this scenario, the telephone-based representatives are often called business or sales development representatives — BDRs or SDRs). Many organizations will have two separate groups - a group of SDRs that are nurturing leads and conducting product demonstrations and a group of telesales reps who are closers. It is not uncommon for the SDRs to be right out of college or, at most, have only 2-4 years of experience and be earning base salaries as low as $30-40K. Their quotas may be as low as $400-500K, but their salary at target might be only $80-100K. With no travel budget and no field offices, the numbers pencil out nicely. The telesales team can also be a nice training ground for enterprise sales reps - a path that can be cheaper and less risky than hiring someone externally.

Generating a high volume of leads for the telephone sales rep is the key to making this model work. It is all about (highly qualified) leads, leads, leads. Leads may be through inbound marketing techniques (such as webinars, blogging, white papers or other forms of content marketing) or outbound marketing techniques ("smile and dial" against a list of prospects). The Hubspot folks (who are terrific in this area) estimate that each SDR in their mid-market group needs 150 leads per month to be productive and busy while for the small business team, they target feeding 2000 leads per sales rep per month. This is an appropriate number to figure out and model to help guide whether you need to ramp up marketing (demand generation) or sales (closing) as you scale.

To that point, a well-run telesales operation will be super metrics-driven. You can measure EVERYTHING - how many calls per day per rep, how many connects per call, how many positive conversations lead to follow-up, how many demonstrations, how many proposals, etc. These measurements help with the "machine-building" process as you can more predictably assess how you are doing at any given time and where you need to focus your resources - more leads, more SDRs, more closers, etc. The best sales VPs of telesales operations are more like accountants than charismatic salespeople. If you hire a charismatic leader as your head of sales, make sure you hire a director of sales operations to support them. I never fully appreciated the value of this role until I saw it in action myself at Open Market where the director of sales operations managed all the numbers and operational details, freeing up the charismatic sales VP to hire, lead and close the big deals.

Alignment between sales and marketing is critical in any sales model, but under the telesales model it is even more critical. Organizationally, SDRs may even work under the marketing organization while the closers work for sales. Whatever the organizational configuration, the definition of a lead, clarity on the quantity of leads being targeted, and alignment on the quality of a lead required before handing off from marketing to sales are all key elements to work through. Marketing automation platforms are particularly helpful here so that you can track someone from website visit all the way down the funnel through close.

Again, there are many who believe even the telesales model is flawed and outdated. Hiring armies of young, inexperienced professionals and training them to become sales reps and operate in a "boiler room" style environment can be expensive. To achieve friction-free revenue (and who doesn't want friction-free revenue?), a third sales model has emerged which I'll call "Developer Driven".

3) Developer Driven Sales

My partner, Chip Hazard, wrote a terrific blog post on the power of developer-driven adoption, something we have seen play out very successfully at a few of our portfolio companies, but most notably 10gen (maker of MongoDB). As Chip points out, if you can architect your product as a platform (build APIs that are accessible to 3rd party developers) and get bottoms-up adoption from the development community, you can drive adoption without investing heavily in sales. Chip's examples are mainly from technical products (his main area of expertise), but this approach can be employed for any product where customers can trial, see value quickly and begin adoption without taxing your sales resources.

To do this effectively, you often need to employ a freemium business model - making it easy for a developer or customer to try your product for free, get set up and quickly self-provision (ideally within 5 minutes) without ever speaking to anyone at the company. This provides the ultimate inbound marketing model - customers contact you when they have tried your product and are convinced it provides them with value. Once value is established and the product usage ramps up, you can hear the cash register ringing.

Instead of hiring telesales people, you hire "Community Managers" who arrange hackathons and meetups, actively engage the community on the forums, and shares relevant content through various social channels. When things are really working well in a developer driven model, developers are embedding your platform in their products and each developer becomes a marketing agent for the company. In effect, your developer support team becomes your marketing team.

Summary

The magic in developing a go to market strategy is that there is no "one size fits all" approach. Many companies will design their sales and marketing machine as a blend of each of these approaches. Use a developer-driven model to drive trial and inbound activity. Telesales to close high-volume, smaller deals. And then enterprise sales for the select strategic deals with average sales price (ASP) > $100K.

Different phases of your business will see more emphasis on one area than another. For example, many companies embark on a freemium model initially, then depend on inbound upsell, later hire a telesales team to ramp up the upsell process by adding outbound activities, then hire an enterprise team to close the big deals. Dropbox is an example of a company that has followed this path with tremendous results.

The main point is that you need to be as strategic and thoughtful in designing your go to market model as you are in your product or company strategy. Only then can you evolve from a crafts model to a machine.

This post was adapted from "Seeing Both Sides"

Bad-Luck Numbers that Scare Off Customers

If you live in the West, chances are that you've visited a building without a 13th floor or boarded a plane without a row #13. In fact, you probably rarely think twice about the fact that these numbers are so frequently skipped in your home culture, but you might be surprised to see the numbers 4, 9, or 17 omitted when you are traveling abroad.

Superstitions exist in many parts of the world, but the numbers associated with bad luck — or good — tend to vary from one place to another. While this kind of information is generally known to natives within a given market, it isn't intuitive to foreigners. As a result, companies often make unintentional numerical and cultural blunders when launching their presence in a new market.

At Smartling, we compiled a research roundup on superstitions regarding numbers around the world, which we vetted with translators in our global network. We found that knowing about numerical superstitions is important for any business that seeks to expand internationally — especially in the realm of international marketing. Here are some common places we found where numbers can get your company into trouble:

Pricing. Customers in the West might raise eyebrows at a product priced at $6.66, but people in many parts of the world would not. In Chinese, the pronunciation of 666 sounds like the phrase, "things going smoothly" and is considered to be very lucky. Many businesses even hang the number above their door. However, in Japan specifically, the number 9 is a bad-luck number that sounds like "suffering" when spoken aloud; so a price of $9.99, while common in the West, would be viewed negatively.

Phone numbers. You would never ask a customer to dial 1-800-death-death-death, death-death, death-death in order to reach you. However, this is what you'd be requesting if you choose a toll-free number ending in 444-4444. In some Asian languages, like Chinese and Japanese, the number 4 is actually a homonym for the word "death." As a result, most Asian companies avoid using these numbers entirely.

Addresses. When scoping out a new office location in another country, if you spot that the price is inexpensive relative to surrounding properties, you might want to take a closer look at the street number, building number, or unit number. In Mandarin, 7456 (qī sì wǔ liù) sounds like "to make me angry" (qì-sǐ wǒ -le), and 250 can mean "imbecile" and is sometimes used as an insult. Many customers do not want to visit an address that conveys something negative, and some might even consider it bad luck to send correspondence or make deliveries to such a location.

Product names. It's common for companies to release products in a numbered series. However, many companies remove the number 4 or the number 13 due to their bad luck connotations in the East and West, respectively. Japanese camera maker Fuji skips the series 4 and jumps directly from series 3 to series 5 for this reason. Likewise, Canon introduced its Powershot G15, skipping both G13 and G14.

Images. Be mindful of the numbers your images may convey. Often, numbers that are visible in the background of an image might be innocent in one country but provoke fear in another. For example, a photo of a soccer player with a big number 17 on his jersey might look fine to audiences in most parts of the world, but in Italy this number is considered very unlucky. In fact, at the winter Olympics in Turin, the 17th curve on the bobsled track was referred to as "Senza Nome" (without name) instead of referring to it with the unlucky number 17. Also, make sure to check the number of people or items you are displaying in a given picture — the number can be viewed as unlucky in some markets. For some Vietnamese, it's considered . The person in the middle will supposedly die.

Whether you're dealing with launching a mobile app, crafting an advertising campaign, or simply naming a product that will be sold in another country, there are two surefire ways to avoid exposing your brand to numerical faux pas. First, train your staff to watch out for the most widely known and high-risk unlucky numbers. Second, make sure that your non-native employees always work with people in the local market when making important decisions about numbers, especially ones that will be front and center for your brand. Doing some preliminary research and involving your company's in-country human resources — partners, distributors, agencies, and even customers — will help you ensure that when it comes to effectively communicating with your target market, you've got their number.

Your Moral Reasoning Is Influenced by Your Physical Senses

Research participants who were given 2 teaspoons of a bitter herbal supplement made harsher judgments of such actions as shoplifting and library-book theft, rating these behaviors an average of 78 on a 0-100 scale of "morally wrong," whereas people who had sipped only water rated the scenarios at just 62, says a team led by Kendall J. Eskine of the City University of New York. People who had sipped berry punch were even less harsh in their judgments. The research underscores that what we think of as purely "moral" reasoning can be strongly influenced by intuition and physical feelings.

Your Company Is Only as Good as Your Writing

Good writing: Businesses claim to practice it, support it, and value it. But more often than not, their money isn't where their mouth is. Poor grammar and jargon-riddled writing are rampant. We're great at inventing terms — the instruction manual for my toaster refers to the lever that pops up the toast as the 'Extra-Lift Carriage Control Lever' — but poor at communicating what we actually mean.

We could learn a thing or two about communication from our forefathers. One of the most effective speeches of all time, Lincoln's Second Inaugural Address, was only 701 words. Of those, 505 were words of one syllable and 122 had two syllables.

Great leaders consider communication a core competence, so why don't more businesses? Manufacturers spend millions on safety training to get people to wear hard hats, but spend very little to make sure their safety critical work instructions are written clearly.

That's not good enough. Effective writing must be a company-wide endeavor.

If my marketer misses a typo while writing about a product, I want my packaging staff to catch it before the design gets sent to print. If my technicians don't capitalize a tool's name consistently, I'd hope my videographer notices the error when he glances at the report on their desks. When I'm writing an essay, I always ask my software engineers for constructive feedback. (I'm not too proud to admit that many of them are better writers than I.)

Over the years, I've worked hard to foster an atmosphere where everyone has the right to critique, question, and suggest. Just because most team members don't have "professional writer" in their job descriptions doesn't mean writing is off limits to them. Everyone here is a writer.

In my experience, the practice of good, collaborative writing makes the difference between great business and bad business — a sale or no sale.

Last year, I kicked up a bit of a stir 'round these parts when I wrote "I Won't Hire People Who Use Poor Grammar. Here's Why." I confidently declared myself a "grammar stickler," unwilling to hire qualified applicants if they couldn't pass a basic grammar test.

After the article was published, I heard back from a lot of different people. Some disagreed. One participant in a New York Times debate exclaimed that my "requirements that viable candidates write with Strunk and White on their minds are highly questionable." Others wholeheartedly shared my convictions. The range of feedback is to be expected. After all, the grammar debate tends to be divisive.

The feedback did prove one thing: It's not easy to talk about writing. Certainly not in business. Writing, even writing in public arenas, is always personal. It exposes the writer's ideas and ability (or inability) to navigate language. Writing is vulnerability.

Plus — and this is the frustrating part — there is no right way to write. Even the most basic rules are fuzzy. Prepositions aren't something you should end a sentence with. You should never start a sentence with "because." Why not? Because. Sentence fragments are unforgivable. Unless they're not.

We like to think that we learned everything there is to know about grammar in our 10th grade English classes, but the conventions are constantly changing. The standards shift. That makes writing hard — and difficult to talk about.

Writing is a tricky balancing act, juggling dozens of nebulous constraints. Writers have to think about audience, and about style, and about tone — factors that are hard to anchor down. In business, writing is inextricably tied to company identity: writers have to think about what a company stands for, where it's going, and how that company should be presented to the public. Difficult considerations.

I've found that topics that are the most uncomfortable are usually the ones that need the most discussion. Writing is one of them. It's a conversation that is crucial to have — with everyone.

For the last 10 years, iFixit has been writing and hosting free, open source repair manuals for every thing. We weren't always as good at it as we are now. Like many publishers, we didn't have an open dialogue about what we'd written — not within the company and not with the public. And, in our early years, our writing suffered for it. In fact, some of our initial instructions led users astray — resulting in broken computers and cameras and cell phones. That was our fault, and we knew it.

But we kept writing. And we rewrote. And we talked about writing with everyone.

We started collecting tips: Keep sentences short. Don't verb nouns. Using 'you' makes you seem friendlier. Our list grew fast. Together, we worked to nail down just how iFixit sounds. Writing — and talking about writing — with each other gave us a cohesive voice.

Soon, we realized we'd written a book. And we realized that it would be an incredible shame to keep it to ourselves. Today, since so many HBR readers wrote to us asking about iFixit's writing process, I have that handbook to share with you.

Our free Tech Writing Handbook is the culmination of years of practice, of continually sharing our opinions and perspectives. We found out that writing has unintentional consequences: it's revelatory. The more you write, the more you learn about yourself. Writing about our company, about our mission, and about our users helped us understand them better. It helped us understand our vision.

If good writing is important to you and your company (as it should be), feel free to share our book with your writers (which should be each and every member of your company). Crib from it, revise it, repurpose it. Or better yet, write your own — because you can't all be on the same page if it's a blank page.

For Corporate Cosmopolitanism, Start at the Top

If your company's management team isn't as global as its target markets, you aren't alone. Some 30% of U.S. companies admit that they have failed to fully exploit their international business opportunities because of insufficient internationally competent personnel. Could the problem start all the way at the top?

In my 2011 HBR article, The Cosmopolitan Corporation, I argued that a cosmopolitan leadership team just might be the critical organizational ingredient for firms to succeed in a world that is neither global nor local but rather a complex combination of the two (what I call World 3.0).

And now there's new data to support that.

Only 14% of the world´s 500 largest corporations by revenue, the Fortune Global 500, are led by a CEO who hails from a country other than the one where the corporation is headquartered, as Herman Vantrappen and I reported this June in Fortune. The percentage of non-native CEOs is significantly lower for smaller, less international companies — and the share of foreign CEOs and board members rises only to ~30% among the world's 100 corporations with the largest foreign assets (excluding financial sector firms). Among corporations in the U.S. S&P 500, a 2008 report from Egon Zehnder indicated that only 7% of board members were foreign nationals, 9% had degrees from non-U.S. institutions, and 73% had no international work experience at all!

Dig a few layers deeper into firms' management teams and the situation doesn't look much better. According to a recent survey, 76% of senior executives reported that their organizations needed to develop global leadership capabilities, but a mere 7% felt they were doing so effectively. A 2005 survey by the Boston Consulting Group found that only 7.5% of the top 200 managers in the firms sampled came from a set of 16 emerging markets where the firms intended to generate 35% of their growth over the next 5 years.

For Western MNCs, unglobalization at the top hurts most in the struggle to tap growth in emerging markets, where foreign MNCs are falling behind as local competitors grow their sales and profits almost twice as fast. Asking high-potentials in emerging markets to trust against visible evidence that their career progress will be unconstrained by home-country or home-region bias is becoming an increasingly tough sell. In 2010, Chinese professionals expressed only half as strong a preference for working in a foreign multinational over a local firm than in 2007.

Firms based in emerging markets are starting from even farther behind at cultivating cosmopolitanism. Only 1 of the 96 Fortune Global 500 companies from the BRIC countries has a foreign CEO. As they seek to differentiate and build brands in advanced economies rather than competing mainly based on low home-country cost bases, this will become an increasingly important problem. (The U.S. sits right at the global average with 14% non-native CEOs. Leading the list are small countries mainly in Europe, with Switzerland on top with 73%.)

Cosmopolitanism, of course, isn't only about top management diversity. Firms have implemented a variety of other techniques to try to become more cosmopolitan:

Recruiting, developing, and assigning bridging roles to bicultural individuals.
Broadening the current management team's mindsets. Rooted maps can help them see how the world looks different depending on where they're coming from and what they're trying to accomplish.
Educating managers to understand cross-country differences using concepts such as my CAGE (cultural, administrative, geographic, and economic) distance framework and tools like the CAGE Comparator™
Rotating country managers between countries (as opposed to only exporting managers from company headquarters), and allowing managers from other countries to spend time at HQ.
Rethinking cutbacks on expatriation. Yes, expats are expensive (on average 2-3x home salary), but it takes at least 3 months to become immersed in a new location and appreciate how business works there.
Broadening executives without relocating them by involving them in multinational tasks forces and cross border work, or even bringing the HQ experience to them by locating business unit headquarters outside of the firm's home country.
Managing career development to make sure non-natives and even returning expats don't systematically end up on the slow track.
Utilizing assessment tools such as my GAP Survey to track and manage your progress.

The Cosmopolitan Corporation, like cosmopolitanism in individuals, is something that requires continuous cultivation and nurturing. And like the personal journey of opening up to those who are different from ourselves, it's a deeply individual path, but one that can be eased and inspired by stories from others. The first step is to share them.

How Category Creation Is Reinvigorating Classical Music

I spent a decade of my life — from 6th grade through college — practicing and performing my viola. I loved the music itself, but I really enjoyed the relationships and experiences it provided. I got to tour the country performing or competing. I was part of a string quartet that earned $200-an-hour playing weddings, conferences and even cruise ships — not a bad gig for a 16 year old. But at a certain point, it became clear that it wasn't a viable career for me. The road ahead as a professional musician required even more investment in schooling with an uncertain payoff. Symphony spots were rare and competitive, and perhaps more to the point, I doubted I was good enough.

But the real challenge was the demand for classical music was dying, at least in the traditional way. Symphonies were bleeding money and becoming even more dependent on donations. Younger music fans seemed less interested in paying for expensive tickets, wearing fancy clothes, and committing two to three hours listening intently without coughing or falling asleep. For a generation that's come of age in the YouTube world, symphonies feel like an inefficient form of entertainment.

This is where folks like the Piano Guys may be saving classical music. They have created a new category for classical music: Fun, breakthrough innovation in the form of five minute videos that showcase their classical music skills, but also their CGI skills in creating fun, funny and funky parodies. Instead of selling tickets, they post their videos and sell advertising. (They also use the traditional model of selling CDs — they were just signed by Sony last year.) If you haven't seen the Piano Guys, watch a few of their videos and you may be hooked. You'll laugh at their Star Wars parody, be amazed at their rendition of Pachelbel's Canon, or cry at their Les Miserable tribute to our men and women in uniform...but I guarantee you won't fall asleep.

How many other categories can't grow because they refuse to challenge the conventional wisdom of tradition, or this is the way it's supposed to be? Sports like baseball may find demand waning because fewer people have 3 hours to watch a sport. And just as consumers don't want to sit through three movements of a symphony for their favorite finale, categories that are highly bundled are being disrupted... even in car rentals by category creators like Zipcar.

There's another industry that seems to be begging for category creation: High-end dining. In the past, dining at top restaurants has required a certain kind of dress, a lofty price tag, and enough time for a leisurely experience. That's changing. Newer restaurants allow for more casual dress, and chefs like David Chang, founder of the Momofuku empire, are allowing people to come as they are and enjoy high end cuisine at a great price.

For too many years, classical music has required consumers to conform to its rules and regulations. Like the restaurant industry, it needs to consider changing its model to appeal to a broader population.

The Piano Guys are a move in that direction — and one I hope goes further. I long for the day I can wear shorts and a t-shirt, and pay $50 (or less) for a good seat just to hear short excerpts from Beethoven's 6th symphony, Brahms piano quartet, and the best of John Williams — all with a beer in my hand. Until that day, I have the Piano Guys.

The Growing Power of Inside Sales

The number of inside sales jobs has increased dramatically in recent years, far outpacing the growth in jobs for field salespeople. We spoke with Mike Moorman, a senior leader in ZS Associates' B2B sales and marketing practice and a leading authority on sales management, about how inside sales (which refers to sales positions done remotely from headquarters, without face-to-face meetings with clients) is transforming the way that B2B companies interact with their customers.

Mike, can you give us some examples of companies that are shifting resources into inside sales?

Yes absolutely, over the last several years B2B companies have been ramping up their inside sales investment.

Astra Zeneca has replaced virtually all of its field sales force support for its mature brand Nexium with a 300-person inside sales team. The team provides for most doctors' basic needs for samples and information at a substantially reduced cost.
IBM has invested in social media training, toolkits and personalized digital pages to help its inside salespeople generate leads and manage account relationships. Early results include a 55% increase in Twitter followers and a significant increase in the number of high-quality inbound leads.
SAP has refocused its large and growing inside sales team towards working with channel partners, rather than directly with customers, as part of a strategic initiative aimed at increasing channel sales to 40% of the company's total sales by 2015.

Many B2B companies are making inside sales a priority. I've seen companies investing to create new inside sales teams, adopt advanced analytics to measure and improve productivity of those teams, realign inside and field sales to optimize market coverage, provide value-based selling tools tailored to inside sales, and upgrade their inside sales customer engagement processes and skills.

Why do you think so many companies are turning to inside sales?

Three primary factors give momentum to inside sales. First, B2B sellers feel competitive pressure to cut costs, and they're seeking more efficient ways to sell. Second, B2B buyers are becoming more comfortable purchasing and collaborating remotely; they use the web to research product information, are comfortable communicating and collaborating with sellers using methods such as email, social media, and conference calls, and in fact prefer these methods over face-to-face communication for some sales tasks. Third, new easy-to-use online webinar and videoconferencing technologies make it possible for inside salespeople to create customer intimacy without field interaction.

What types of selling situations or tasks are most compatible with inside sales?

Most B2B selling models include both inside and field sales, and the challenge and the opportunity come in determining the sweet spot for inside sales within an overall selling model. Effective use of inside sales requires partitioning the sales job and dividing it among inside and field salespeople according to some or all of the following dimensions. Different companies divide it in different ways:

By market segment. Use inside sales for the entire sales process in small-to-medium-sized businesses that have straightforward needs and moderate-to-low potential. Use field sales to manage large accounts with complex needs and buying processes, and more opportunity.
By stages of the customer engagement process. Use inside sales to supplement field sales activities in large accounts, especially early in the sales process (e.g. lead generation) or late in the sales process (e.g. repeat purchases). Use field sales for tasks that benefit from a "high touch" approach.
By products/services. Use inside sales to sell transactional offerings and solutions with lower buyer risk that don't require on-site assessments or collaboration. Use field sales to sell more complex products and services that require a consultative approach and customization.
By geography. Use inside sales to reach non-strategic accounts in remote areas and field sales to cover accounts in metropolitan areas.

How does increased use of inside sales impact the job of field salespeople?

I see two main implications for field salespeople. First, many companies are experiencing a bifurcation of sales jobs. Inside salespeople are taking over more sales tasks to drive cost effectiveness. In conjunction, the bar is rising for field salespeople. Buyers are no longer interested in meeting live with "information providers"; they expect field salespeople to bring new ideas and to create and prove substantial value.

Likewise, executives are increasingly reluctant to invest in expensive field sales resources unless those resources clearly provide greater customer and company value. The role and profile of a field salesperson is becoming similar to the role and profile of a key account manager — someone who brings business acumen and problem solving skills, and that can help buyers define opportunities and tailor solutions. Field salespeople need to develop new competencies as consultative sellers, and often companies find that some field salespeople who were successful in the old world lack the characteristics required for success in the new one.

Second, although field salespeople still have a clearly defined role as face-to-face sellers, technology enables them to accomplish more sales activities remotely to optimize efficiency (smart use of time) and effectiveness (impact with customers). Increasingly, field salespeople are selectively leveraging email, social media, webinars and video conferencing to maximize their own productivity and enhance the customers' experience. In this regard, the line between field sales and inside sales is blurring. For field salespeople, this means developing new technology and communication competencies.

What kind of results can companies expect?

When appropriately utilized, inside sales reduces cost-of-sales by 40-90% relative to field sales, while revenues may be maintained or even grow. Benefits include:

Reduced sales force cost-per-contact and increased number of contacts per day
Increased revenues in accounts that were lowest priority for field sales, but are high priority for inside sales
Greater access and faster response times for customers
Increased effectiveness by specializing inside salespeople by industry, product or activity, without the increased territory size penalty that specialization creates for field sales teams
Flexibility to scale up the size of inside sales teams without relocation of salespeople
Better coaching and development for inside salespeople who share a working location with their manager, resulting in shorter ramp-up and more apprenticeship.

When focused on the right market segments, stages of the customer engagement process, and product/services, inside sales drives huge sales force efficiency improvements with little or no effectiveness loss. As customers get more comfortable buying in this way, I expect the impact will become even greater.

To Make Innovation Stick, Try Trying

There Isn't an App for That


Why do some innovations flourish while others flounder? Atul Gawande tackles this question in The New Yorker, using the medical field — arguably one of the places where innovation is most important, given its life-saving capabilities — as ground zero. He analyzes the different paces at which antiseptics and inhalant anesthesia were embraced by doctors and patients, as well as the more modern challenges of fighting cholera and infant mortality. Gawande argues that invisibility of the target problem is one of the biggest obstacles facing innovation on a global scale. "This has been the pattern of many important but stalled ideas," he writes. "They attack problems that are big but, to most people, invisible; and making them work can be tedious, if not outright painful." Ultimately, this means that the future of innovation isn't in the latest app or mobile platform. It's in taking the time and money to make very real human connections, "the key force in overcoming resistance and speeding change." In other words, you can't simply ask people to change their behaviors, or even require them to. You have to use mentorship to make an innovative idea the norm.

Turn the Page

The End: Barnes & Noble in Silicon Valley Businessweek

"He was a Silicon Valley dreamer in charge of a bookstore chain." This line from Businessweek's Susan Berfield is a darned good summary of what went wrong for Barnes & Noble and its former CEO, William Lynch. The piece analyzes the company's reluctance to get in on digital until it was too late, showing how that hesitation led to an unwinnable battle against both Amazon and Apple. For Berfield, Lynch's decision-making involved a strategic error: trying to compete with the iPad after the early success of the Nook. The development of the Nook Color, which took place in Silicon Valley, proved divisive for the company, which is based in New York. And as Lynch tried to wrangle 300 developers and designers, Nook's sales dropped 26% in a year amid talk that the company should be split up. Then Lynch resigned, and the Nook may be no more. "It's an expensive accessory for a shrinking bookstore chain," notes Berfield. Perhaps the company should have focused on its bread and butter: books and people who like to read them.

Be the Change

Gazing into the Future of American Business in China On Leadership

Once upon a time, American companies thought they were being global if they had manufacturing plants in China. Then the companies that considered themselves truly global went a step further, staffing their Chinese operations with Chinese managers. Now leading U.S. companies such as Honeywell are taking globalization to another level: They're trying to get their Chinese units to operate and compete just like Chinese companies, says Christian Murck, the outgoing president of the American Chamber of Commerce in China. That means being as quick to market as Chinese companies. It means shifting new-product approvals to China to speed response times. It also means matching Chinese companies' cost structures — no small feat. Essentially, U.S. companies are now trying not just to prevail against their Chinese competitors but to "become the Chinese competitor," Murck says. Worth a try, at least. —Andy O'Connell

RIP Backup Plan

The Last Days of Big Law The New Republic

We've already bid our goodbyes to stable careers in manufacturing (and, well, long and stable careers in almost everything). Now we lay to rest the promise of being a well-off lawyer for life, because "there are simply many, many more high-priced lawyers today than there is high-priced legal work." The New Republic's Noam Scheiber describes this drastic shift in the profession through the lens of Mayer Brown, a big Chicago law firm once known for its collegiality and benevolence. Now, squeezed between ever-more-frugal corporate clients and rainmaker partners who want to keep all the money to themselves, it sounds like a terribly unpleasant place to be (that is, if they'll even take you for more than a contract position to read documents). The rest of us, it seems, can no longer reassure ourselves by saying, "If this doesn't work out, I can always go to law school." —Justin Fox

Oh Shush

The Art of Silence Psychology Today

You don't often hear that being quiet can help you get ahead, but think about it: Only by shutting up can you force yourself to listen, and listening might be the best thing you can do to become more effective in your job, writes Alex Lickerman. How else can you be sure that the solutions you eventually propose will really solve the problems you’re working on? Lickerman, an internist, says that when he silences himself and listens to his patients first, he often discovers that his preconceived notions about them are wrong. He had assumed that a patient was objecting to cardiac catheterization out of fear of complications, but it turned out the patient was simply worried he couldn't lie flat for the required six hours afterward. Listening is far more powerful than speaking, he says. When you speak, you're not learning. And how often do you really influence people by your words anyway? —Andy O'Connell

BONUS BITS:

In Retrospect...

Not Even Silicon Valley Escapes History (The Atlantic)
Lance Armstrong Is Right: His Sponsors Should Have Known He Was Doping (Quartz)
Intern Dressed as Royal Guard Stands in Stifling Heat Outside Pizza Hut (Gawker)