Marina Gorbis's Blog, page 1580

The Coming Branded-Currency Revolution

Coupons. Gift cards. Loyalty points. These tried-and-true tools of the retail trade might not be as sexy as other forms of marketing. But together they account for more than $165 billion in purchasing power ($110 billion in gift cards purchased, $48 billion in loyalty points earned, and more than $5 billion in product coupons redeemed). That's almost as much as total e-commerce sales.



These instruments share a common objective: to influence purchase decisions by equipping consumers with incremental spending power for specific brands and retailers. But consumers use them independently and individually (combining their value, when possible, takes a lot of manual effort), and store them in different places — often in drawers or folders where they lay forgotten and unused.



This is changing as coupons, gift cards, and loyalty points all become digital — and, more important, mobile. Mobile enables all of this purchasing power to converge in one place, and potentially be used interchangeably and collectively, always within easy reach for consumers.



What does this mean for retailers and brands? The mistake would be to think that they can keep doing what they have always done, but just add a little digital to it. Instead, retailers need to think about coupons, gift cards, and loyalty points not only as three separate tools, but as different forms of Branded Currency.



Economists define currency as a store of value and a medium of exchange. All of these instruments are stores of value, and by going digital and mobile, they become far more effective mediums of exchange.



The first wave of this convergence has made it easier for consumers to use their coupons or points for payment. Card-linked offers enable consumers to load coupons to their credit cards or loyalty accounts in advance of purchase. Valid offers are automatically applied as a credit when consumers' cards are scanned at the point of sale. Consumers like it because they don't need to remember or present individual coupons. Another approach is Shop-with-Points. As an example, Amazon enables consumers to use their credit card loyalty points as a way to pay for purchases on the site. Shoppers can see their balance and apply their points as easily as using a gift card or credit card.

Where the first wave made possible convertibility, the second wave introduces much greater convenience. Mobile wallets, like Apple's Passbook, bring coupons, gift cards, and loyalty cards together in one place without the constraints of a physical wallet. This innovation is good, but it's a bit of a horseless carriage, still tied to the mental model of a wallet. Consumers still need to manually figure out which instruments can be combined and which cannot, prioritize them based on expirations, calculate the math on their own, and then present them at point-of-sale one at a time.



The third wave will be the mobile portfolio manager, the automobile to the mobile wallet's horseless carriage, which marries the convertibility of the first wave with the convenience of the second. When you treat coupons, cards, and points as convertible instruments, fully leverage the power of digital and mobile technology, and add intelligence into the system, you get an entirely new possibility: calculating and comparing purchasing power, converting currencies, prioritizing usage, and dynamically creating scannable barcodes or other methods for combined payment. Soon consumers will be managing their Branded Currency the way they use Mint to manage their bank, credit, investment, and other financial accounts.

There is a lot of talk these days about brands as publishers. But the successive waves of Branded Currency suggest that retailers will also need to think like bankers who mint their own currencies. Market leaders will be those who best help consumers manage and spend Branded Currency from their portfolios, offer the best exchange rates, create the most liquidity, and make the most efficient markets. Retailers who adopt and execute smart Branded Currency strategies will gain relative share of wallet and have deeper, more enduring relationships with consumers.

Starbucks is perhaps the most advanced retailer in the area of Branded Currency. Most retailers treat their gift card program as an afterthought. Starbucks, on the other hand, has turned it into a hub for competitive advantage. In fact, CEO Howard Schultz considered the combination of mobile payments and social networking as central to the company's "blueprint for growth."



In 2011, Starbucks launched Android and iPhone apps that enabled customers to mobilize and easily reload their plastic cards or purchase new digital gift cards. Most Starbucks customers use the gift card not as a present for others, but as an easy way to pay for purchases, redeem offers, and earn rewards. In effect, they transformed their gift card into a mobile payment/loyalty card and their mobile app into a wallet for their Branded Currency. Over 7 million people now use Starbucks' mobile app to make 4.5 million payments a week, accounting for at least 10% of Starbucks total U.S. revenue. Over 10 million Starbucks eGifts, the digital version of a gift card, have been sent just since 2012.



The strength of Starbucks strategy is not in any single program or promotion. It is the way that the entire Branded Currency system works together to provide an integrated and seamless experience for the customer. They knit together a variety of technologies and platforms from Apple, American Express, CashStar, Facebook, Square, and daily deal providers to promote and execute their deals, offers, and payments across digital, mobile, and social channels. But most importantly, by having its own Branded Currency system, Starbucks maintains control over the customer experience, relationships, and data.



Many technology companies including Apple, Google, eBay and Square are hoping brands will rely on their platforms to integrate and manage coupons, offers, gift cards, payments, and rewards.



Apple has been quietly creating a platform for managing branded currency in the form of its Passbook app and a newly filed patent. If brands aren't careful, they will be as beholden to Apple for digital and mobile coupons, payments, and loyalty as record companies are for digital music, book publishers are to Amazon for digital books, and social game publishers are to Facebook.



As the market for Branded Currency converges and grows, brands will fall into three categories.



(1) Losers: Some brands will continue to operate their coupons, deals, offers, gift cards and loyalty programs the way they always have, as separate standalone programs, and will adopt mobile technology reluctantly. These brands will steadily lose their competitive edge and share of consumer spending.

(2) Laggards: Some brands will play catch up, adopting best practices after they are widely accepted, and rely on the platforms developed by technology and financial services companies. They will stay in the game, but will be in the middle of the pack, either unable to control the customer experience, lacking full access to their data, and losing margin to the platform provider.

(3) Leaders: A few brands will set the pace by creating an integrated approach to using Branded Currency as a vehicle for customer engagement. They will aggregate deals, offers, payments, and loyalty; unify online and offline; and put mobile at the center. They will work with other third-party platforms and wallets, but not be beholden to them. As a result, they will use their data to create value for their customers and bring a unique brand experience to every touchpoint. They will enjoy increased frequency and spend, forge stickier relationships, and greater and more sustainable profitability.

Will you be a loser, laggard, or leader? History, current trends, and the billions of dollars at stake would suggest it's time to start building your Branded Currency strategy and system now.

Should Barnes & Noble Turn into a Mini-Mall?

I feel genuinely badly for Barnes & Noble and its recently resigned CEO William Lynch. It has done by far the best job of anybody in the industry as traditionally constructed — and that is just not good enough. I don't think B&N can be accused of blindness. When it built out its vast network of stores, there really wasn't a meaningful threat from online sales or digital books. People bought books in bookstores, and B&N built the best chain of bookstores, bar none.



It is even hard to say that when Amazon came along, B&N should have followed suit immediately and committed to an on-line model. It is not at all clear to me that B&N had any of the skills, capabilities, talent, or experience to become a successful on-line bookseller. Yes, it could have done an Amazon me-too, but as a legacy player, they would have never been given the ultra-cheap capital that Amazon has always had. And shareholders would have excoriated B&N for not making the earnings on its retail network that their high expectations dictated.



So I suspect that B&N was largely fated to be sideswiped by a fundamental paradigm shift in its industry and, while better than Borders, heading smartly in the same direction.



What would I do if I were running B&N today? Good question. I probably would take a close look at what Indigo, the B&N of Canada, is trying to do. It is attempting to become a lifestyle shopping destination in categories in which books play a consequential part but extending far past books. Categories like house and home, cooking, kids, babies, paper and self-help are tied to big book categories. Indigo can have a legitimate hope of creating a shopping experience across the category that integrates books-and-beyond in a compelling enough way to get enough traction with customers to fill up the store.



It is probably a long shot and B&N probably has a lot more locations than this approach could support. But it is a way of utilizing the book heritage to provide a shopping experience that no one, including Amazon, would be able to match.



And if I were to do it, I would use the approach that Harrod's employs. Most people do not realize that while Harrod's looks like a store, it is actually a mini-mall with each merchandise area leased out to an independent seller — an extension of the model that department stores use with their cosmetics/skin care floor.



I would turn each B&N into a mini-mall in which each individual category is run by a lessee who is expert in that particular category. B&N would act as the systems integrator, putting together a multi-category offering that attracts sufficient customers into the mini-mall. It would also use its book-buying experience and power to stock each lessee with the book inventory required for their category assortment.



Would I bet my own money on this approach? I probably would not. But it may be superior to the other legitimate alternative, which is to liquidate B&N now and return to capital-holders whatever net proceeds can be accumulated (if any can). But wait. There is always private equity. Maybe they should call Bill Ackman and see whether he wants to give the category another go.

Disengaged Employees? Do Something About It

New data on employee engagement is in, and it's downright discouraging. As this post by HBR's Gretchen Gavett noted, Gallup's research shows that engagement among US workers is holding steady at a scant 30%. This means seven out of ten people are either "checked out", or actively hostile toward their employers. Seven out of ten.

Study after study shows that employee engagement, an index of bringing one's best and full self to work, is not just an organizational nicety. It is a business imperative, linked to a number of performance outcomes, including profitability, customer satisfaction and turnover. A 2012 report on human capital from McKinsey added to the evidence, noting that organizations with top scores in employee motivation are about 60% more likely to be in the top quartile for overall business health. Companies I work with in my consulting practice who have done their own internal research have found similar linkages.

Of course, engagement is an emotional and deeply personal experience; it's not simple or straightforward to address. But leaders must do so, for the sake of not only their employees but also their companies. Here are pointers to help you to make real inroads in this area:

Understand the basics of positive psychology and engagement research. At the end of her post, Gavett refers to an HBR classic on employee motivation, in which the famed management psychologist Frederick Herzberg argued that workers respond positively to more responsibility and authority in their daily tasks. This finding is resonant with self-determination theory, a well-established research program in psychology that has identified the universal human need for autonomy. In other words, people generally do well when they are empowered to make choices and decisions for themselves. Plenty more research has been done on work engagement, showing that factors such as social support and feedback can drive positive experience. Managers and HR professionals need to understand these and other robust psychological theories to more effectively shape their engagement efforts. A wealth of information is out there, ready to be put to good use.

Find out what engages your employees, not someone else's. While broad research is a valuable resource, it can only take an organization so far. No theory or model is useful in the abstract. What matters is your business and your people. Ironically, most organizations use engagement results punitively; they focus on what is going wrong, and on why people aren't as engaged as they could be. A better approach is to figure out what's already working in your business, and find ways to replicate it. Go to the most engaged individuals, teams and business units, and help others model what they do. I've used this approach to help businesses identify a unique "engagement signature" suited to their culture and context.

Encourage grassroots engagement. Engagement cannot be mandated, but it can be ignited. Once you understand what matters to your employees, you can support its expression and replication far and wide. Empower your people, particularly the most engaged employees, to share stories, exchange ideas and disseminate best practices across the business. A well-designed piece of media, such as a video "starring" members of a thriving business unit, can gain traction and become a source of encouragement for others. With the rise of social media and digital workplace technologies, it's easier than ever to connect employees and make engagement contagious.

Recognize engagement as a moving target, and check back often. While certain elements of employee engagement will surely hold over time, it's not something that can be assessed and addressed just once. Research shows that engagement fluctuates daily, and with changing circumstances. What engages people during a surge in business may be very different from what helps them bring their best selves to work in a recession. To keep your organization engaged, you must remain engaged, curious, and connected yourself.



The next time Gallup or McKinsey do their polls, I'd like to see those engagement scores rise. What would it take to engage half, three quarters or 100% of the workforce? Imagine what it would mean to business success, employee happiness and productivity.



What are you doing about employee engagement, and what can you share with others? Let's begin the conversation today.

Craft a Sustainable Career

Imagine crafting a sustainable career for yourself. Year after year, you perform work that makes full use of your skills and challenges you to develop new ones. Your work not only interests you, it gives you a sense of meaning. You enjoy opportunities for learning and development. You work with people who energize you. You are confident that your skills and competencies make you valuable and marketable and that you can access opportunities through your network. You are able to fit your work together with the other things in your life that are important to you, like family, friends, and leisure.

This is a rosy picture, to be sure; some would even call it unattainable. For a taste of what is usually associated with the word career, check out the Urban Dictionary's definition, which characterizes a career as "an affliction whose symptoms are loss of life & liberty, general purpose misery, and resentment towards those who are unaffected" and "a euphemism for 'professional labor camp.'"

The entry is facetious, yet it does point to an undeniable truth: many employees spend the better part of their waking hours engaged in work that gives them nothing more than pay. "The mass of men lead lives of quiet desperation," wrote Henry David Thoreau in Walden in 1854. Today, over two-thirds of employees are disengaged at work, according to a recent Gallup survey of 150,000 workers. Economic stagnation and unequal access to opportunity keep a sustainable career out of reach of many. Even among the socioeconomically privileged, investment in education, hard work, and commitment to a company is no guarantee of career success and fulfillment.

However, there are steps you can take to maximize your chances of enjoying sustainable career success over the long term. Consider the example of Dan, who worked as sales engineer in the late 1990s for a company that developed voice recognition technology — a perfect fit for his background in and passion for linguistics and computer science. A few years later, the firm merged with its chief competitor. While Dan's job title remained unchanged, his responsibilities shifted in an unfavorable direction. Instead of the more creative work of synthesizing customer needs into technical solutions, at which he excelled, he was tasked primarily with developing proposals and statements of work. Not only did this work fail to capitalize on his strengths, it frustrated him and required skills he lacked. Thus, Dan found himself in a common catch-22: wanting to move into a position that would better fit his skills profile and enable him to recapture his outstanding job performance; he faced diminished prospects of mobility within the firm because he was underperforming at his new responsibilities. Furthermore, given the recent merger, this low point occurred at a time when he needed to demonstrate his value to managers from the acquiring company who weren't familiar with his track record.

To craft his career, Dan explored options for performing interesting work that exploited his talents and offered room for career growth while also increasing the value he provided to his company. He scoured the internet for information about other firms in the industry and found that many competitors employed solution architects, a position that didn't exist in his company at the time. Having gained broad experience with the development and deployment of voice recognition solutions in various contexts over the years with his employer, he realized that the solution architect role would both suit his existing skill profile and work preferences while also increasing his impact in the firm and opening up paths for increased learning. In addition, his research suggested that the role would support the company's strategic objective to take a dominant market position in the rapidly-growing market for voice recognition technology in mobile devices.

Using his respected industry knowledge, market insight, and professional network, he developed a proposal to create a solution architect. He explained how the new position could also enhance retention of high-value employees by providing an alternate career path for other sales engineers who were seeking opportunities for growth within the company. He used evidence from performance appraisals and multi-source feedback to demonstrate that his qualifications matched the position's requirements.

Management accepted his proposal and appointed him to the newly created position, an opportunity that kept him learning, engaged, and performing at his peak, which in turn ultimately led to a promotion a few years later. As expected, the role proved valuable for the company, which in turn hired additional solution architects from outside and promoted other employees into the position.

If you'd like to craft your own career, try out these strategies, which I recommend in my career management courses and workshops:



Embrace the fact that you are the pilot of your career. No one else has direct access to your ambitions, interests, and values, and no one is going to take you by the hand and help you create a fulfilling career. The more you practice career crafting, the better you get at it.

Develop a discipline of identifying and documenting the ways in which you add value to your employer. Spend a few minutes at the end of each week to record what you've learned and accomplished as well as to record feedback received. Just 5-10 minutes of systematic effort weekly will soon yield a rich archive of material that you can use to deepen your self-awareness, hone your career goals, and document your value.

Link your accomplishments to your career goals. Discuss your goals with your manager periodically, even if this process is not formalized. Maintain positive, productive relationships with people who can help you to access opportunities.

Pay close attention to developments in your industry and to the strategic direction of your firm. Understand your firm's core competencies — the parts of its operation that drive its competitiveness in the marketplace — and make sure that you play a contributing role. Look for ways to get involved in growth areas.

Seek opportunities to work with people who energize you. Many of my executive students recount that their biggest career boosts have come from working alongside smart, energetic, connected people who have taken an interest in them. These productive opportunities are much more likely to occur when you actively seek them out.

A sustainable career is dynamic and flexible; it features continuous learning, periodic renewal, the security that comes from employability, and a harmonious fit with your skills, interests, and values. The keys to crafting a sustainable career are knowing yourself — what interests you, what you do best and not so well, what energizes you — and being acutely attuned to the fields and companies you're interested in, so that you can identify places where you can add value. The "follow your passion" self-help industry tends to under-emphasize this key point: all of the self-awareness in the world is of little use if you can't pitch your passion to a buyer. A sustainable career is built upon the ability to show that you can fill a need that someone is willing to pay for. This holds not only when you're starting a business or looking for a new job; it's also an important springboard for refining your current job and your career trajectory to make it more ideal.

Prepare for the New Permanent Temp

The fastest-growing segments of America's job market — by far — are temporary and part-time employment. According to the Bureau of Labor Statistics, the number of US part-time employees hit a record high of 28 million. Temporary employment has jumped 50% since the depths of the financial crisis. This "ephemeral workforce" phenomenon isn't just American; the UK has also set records in the contingently employed. Something profoundly structural is going on. Even healthier economic growth won't make it go away.

More companies want far greater flexibility with far fewer people. Their greatest human capital concerns have shifted. They seem increasingly focused on productively cultivating that core 20% to 25% of people who reliably generate the 70% to 80% of enterprise value. They're rethinking their economic relationships with the rest.

Workflows and innovation initiatives have been artfully reorganized around "projects" to facilitate faster, cheaper and easier contingent participation. Technology makes reviewing, refining, redesigning and revising both jobs and job descriptions as dynamic as a commodities trading desk.

Have people been commoditized? Of course not. But the ways people's knowledge, skills and expertise get plugged into the workplace has been. For roughly half of America's workforce, the role, rules and requirements of "the job" are dramatically different than they were even a decade ago. Just ask anyone working in the health care, financial services, automobile, retail, media, publishing, education, advertising, real estate or defense industries.

It's not that troubled economies and disruptive innovations inherently shed more jobs than they create; it's that ongoing global restructuring of markets makes temporary and/or part-time employment more attractive for more organizations. Outside of the enterprise core group, bringing full-time employees onboard is increasingly seen as a riskier and less rewarding business bet.

And higher education isn't offering the human capital cure. A recent McKinsey & Co. study suggests that almost half of recent college graduates are working in jobs that don't really require a degree. Do we really believe MBA or law degree credentials would better procure their full-time employment?

As this blog observed literally three years ago: "Most people looking for a job today aren't competing against each other. They're competing against alternative ways to getting that job done. For most organizations, people are a means and medium to an end. They're not hiring employees, they're hiring value creation. If they can get that value — or most of it — from contingency workers, outsourcing, automation, innovative processes or capital investment, why wouldn't they? If [technically] tweaking a process or program empowers three people to do the work of five, then tweakonomics is the way to go. The profound difference between today [2010] and 2005 is that good hires looked like better investments than great tweaks back then. In 2010, good tweaks look like better bets than even great hires."

The "New Permanent Temporary" has arguably been the biggest employment change since I wrote that post. Like Smartphones, part-timerism's global growth proliferates. In fact, temps with Androids and iPhones already use services like Gigwalk and LinkedIn to more profitably find and manage their part-time and/or temporary work. Amazon has its below-the-radar "Mechanical Turk" workplace market. For the gainfully underemployed, everyday is BYOD; their technologies are becoming their toolkits. Technology doesn't just facilitate automation and innovation; it makes contingent, temporary and part-time job markets more efficient and effective.

The economic irony for both sides of the enterprise equation is that maximizing the value of part-time employment has become a full-time job. Employers from WalMart to PepsiCo to Adecco to Microsoft pay premiums to assure their armies of independent contractors and temps cost-effectively get the job(s) done. Conversely, serious part-timers quickly learn that productively juggling several temporary positions requires more skill than luck.

Holding the uncertainties around Obamacare, government regulation, automation and/or economic growth responsible for full-time employment aversion misses the larger point. The rise of part time jobs means the absence of full-time commitment. Growing number of employers are increasingly committed to not being committed.

It's analogous to the demographic rise in cohabitation before marriage: the nature and expectations around formal commitment are being redefined. Just as cohabitation doesn't necessarily lead to marriage, temporary and contingent employment doesn't necessarily lead to full-time jobs.

The most serious question going forward is not simply whether or how more full time jobs return, it's whether or how part-time and temporary workers become more valuable. Will employers invest in developing the knowledge, human capital and capabilities of their contingent workforces and independent contractors? Or is the new "permanent temporary" merely about a fair day's work for a fair day's pay?

As Daniel Pink's Free Agent Nation and Tom Malone's E-Lance Economy argued well over a decade ago, the innovatively self-employed can earn handsome livings if they're willing to adapt, invest in themselves and learn. But who invests in the not-as-innovative and not-quite-as-adaptable part-time worker? Who is their Salman Khan? What are their media and mechanisms for becoming more valuable?

As the brilliant economist, Treasury Secretary and former Harvard University President Larry Summers , "In the history of the world, no one has ever washed a rented car." If this implies that no employers will invest in the upgrade of their "rented" temps and part-timers, that bodes very poorly for this rising class of worker.

My bet? Underemployed assets are frequently undervalued assets. Undervalued assets attract savvy investors and entrepreneurs. Prepare for the next New Permanent Temporary.

The CIO in Crisis: What You Told Us

Enterprise IT is in crisis — no doubt about it. Our research, conducted in partnership with Harvard Business Review, The Economist, CEB (formerly the Corporate Executive Board), Intel, and TNS Global, finds that corporate leadership has lost confidence in the CIO as a strategic partner and views IT as a commodity rather than a difference-maker.

Clearly the roles of CIO and the IT organization need reinvention — and that's the conversation we've been having over the last few months in webinars and posts. (See also here, here, and here.) This conversation has generated a lot of interesting conversation via blog comments, emails, and face-to-face interactions at conferences and meetings and has revealed a few more insights that should factor into our evolving thinking.

CIOs need to understand business better, but the C-suite should understand technology's potential better. While the CIO needs to understand the business to add value, equally true is that senior leadership and the board of directors don't understand how to incorporate technology in their strategy, and some don't even see the need to do so. As gerajohm commented, "The best executives I have met have had a great understanding of how to use technology to gain competitive advantage and improve operations. They also worked with the CIO to help them to understand the business. They worked together to identify the technologies that could improve the company's competitive advantage versus technologies that were needed to support the business. Once this was done, the executive leadership and CIO focused on implementing technologies that improve the company's competitive advantage."



Every other function of the organization is as out of touch as IT. Victorio M. commented, "Reading this post is both humorous and disheartening. Humorous because, as a Human Resources practitioner, I hear similar calls for change within my profession. So it's not just us! Yet it's disheartening because it's yet another organizational function that appears to not be able to keep up with the pace of business, staying stuck in a transactional, as opposed to strategic, frame of mind." The Management Innovation Exchange is currently running a competition to "hack" the human resources function to enable organizational adaptability. As real space and cyberspace merge, do financial practices like budgeting provide value over their costs of time, money, effort, agility? All the parts of the organization have to come together and build a common language to discuss their markets and their enterprise. They need to have a common appreciation of each other's purpose. The CIO must step up and mentor the C-suite on the potentials, possibilities, threats and opportunities of information technology, but likewise, the HR lead needs to discuss the impact of a free-agent workforce, the head of legal needs to discuss the impacts of open innovation and IP sharing, and so on.



As IT steps up as mentor, it needs to mature as well. IT needs to step up, but collaboratively — not as the smartest guys in the room. One commentator said, "About 10 years ago, IT people suddenly became business process experts. Strategy in IT is one thing, but the process experts suddenly began giving advice about areas in which they were not experts and honestly felt they should lead strategic planning for the entire organization." If IT and the CIO come to the party talking like engineers, only offer convergent lines of thought (analytical, rational, quantitative, sequential, constraint driven, objective and detailed focus) and don't offer a more holistic, shaded divergent thinking point of view (creative, intuitive, qualitative, subjective, possibility driven, holistic with conceptual abstractions), then they have missed the point.

CEOs sense the problem perhaps more than CIOs do. This is a totally unscientific finding, but it is what I experienced during the two weeks of article-writing and the culminating webinar, in which I engaged directly or indirectly with a large number of CIOs, IT managers and CEOs. There were a significantly larger number of CIO/IT conversations that took place in conference or meeting situations, and the CEOs generally self-selected by reaching out to discuss or gather more information. Unless I pointed out the topic, many of the IT people were generally unaware or just tangentially aware. The CEOs were actively aware, concerned, looking at alternatives such as chief digital officers, or creating "not-so-shadow" IT organizations under the CMO. Few of the conversations originated with IT people, unless they were already engaged in trying to address the issues (another self-selection bias?). A number of the conversations started with the assumption that social engagement, collaboration and analytics were not part of IT, but the responsibility of marketing.



The bifurcation of IT and business is a myth. There have been two paths of discussion around this. One is the concept of alignment. The other is the idea that as IT socially enables companies, the actual concept of management and how we organize and structure work as practiced today begins to disappear. There were numerous discussions around COBIT and ITIL — popular IT process- and service-management frameworks — and there is a lot that COBIT in particular offers. But too often, it turns alignment into supplication or worse, subservience. The CIO must understand and execute on the differences among leadership, governance, and managing. The CIO must lead by showing the way IT can impact the organization both positively and negatively, sometime leading by how technology is applied in IT itself, then influence and guide the organization in making the right decisions. Then the CIO must direct and restrain the use of technology - how it is developed, sourced and applied in the best interests of the organization and its stakeholders with appropriate governance mechanisms. Lastly, the CIO must execute by managing the procurement, provisioning, monitoring and management of the delivery and application of IT to serve the organization. Several discussions focused in on understanding the difference between delivering IT and applying IT. If you are delivering IT, then you are a surrogate IT company that might not be aligned with the enterprise. If you are applying IT to the business, then by definition you have to be aligned with the business, or fail.

Multiple roles, one company versus one role, multiple companies. Historically, people got to the C-suite by progressing up the career ladder in one discipline, moving among multiple companies until they made it to an executive role in finance, sales, etc. Now, however, the model is changing. In successful companies, top executives rotate among multiple disciplines in increasing levels of responsibility until they advance to the C-suite. Leaders then have a multi-disciplinary understanding of the organization, rather than an exclusive, deep knowledge of just one area. And as we are learning, good leaders do not have to be discipline-specific if they engender trust and responsibility in their organization. Many CEOs expect their next CIO to come from marketing instead of their or another IT shop.

I started looking into the role of the CIO with the assumption that the onus was on CIOs to step up IT's game to enable their enterprise to succeed in the future. One observation from all this is that there is an endemic problem across the C-suite: there has been such a long-standing culture of domain and functional specialization focused on efficiency that the overall gestalt of the business and its efficacy at creating and maintaining a customer has been lost.

But that doesn't relieve CIOs of their responsibility to change IT to enable the business to better change. For aspiring CIOs, the best thing for your career is to leave IT and move to other departments — even if it involves taking a step back. Preferably, these roles need to be part of the value chain, facing either customers or partners, and eventually both. Then, step back into IT. This idea could be true for all departments — for instance, new business managers should come from outside the business function to encourage a holistic view of the business.

For existing CIOs, ask yourself a few questions. Are you generating customer value? Are you (or do you have the potential to be) the best in the world at what you are doing? Are you required to do what you are doing? Using the answers to those questions, what do you need to stop doing, start doing or do differently? Where are you spending your time interacting and relating to the rest of the organization? What resources should you have and how should you allocate them? What activities consume most of your efforts and what outcomes are you expecting from them? And lastly, what are you really focusing on and what questions are really driving you?

The point of all this is to pose these questions to everyone in the C-suite — not necessarily to be answered, but to start the collaborative, co-creative process to discover the answers and to continue the conversation.

Reinventing Corporate IT
An HBR Insight Center





How to Compete When IT Is Abundant
Can UX Save Enterprise IT?
The Metamorphosis of the CIO
Shadow IT Is Out of the Closet

Increase Your Team's Curiosity

Does your team have a difficult time making decisions that everyone supports? If so, you may be suffering from a lack of curiosity.

Try this: Next time you're in a team meeting, count the number of times you make a statement and the number of times you ask a question. If you're like most team leaders, you'll find that you make many more statements than ask questions and some of the questions you ask aren't really questions.

Research shows that in effective teams, members share their own views and ask others their views. By combining transparency and curiosity, teams keep the discussion focused, get all the information on the table, learn why members have different views, and create solutions that take into account all team members' perspectives. As a result these teams have stronger performance and better working relationships.

When leaders learn that they aren't asking question, they often overcompensate by asking a lot of questions and withholding their own views. This leaves team members feeling interrogated rather than engaged.

Not all questions are created equal. To develop an effective team, it's not enough to ask questions. You have to be genuinely curious. When you are genuinely curious, you ask questions to learn what others are thinking. When you aren't genuinely curious, you ask questions to make a point: rhetorical questions.

See if you can tell which of the following questions are genuine and which are rhetorical:

"You don't really think your solution will work, do you?"
"If we implemented my proposal, what problems, if any, would it create in your divisions?"
"Why do you think I asked you to follow up yesterday?"

Questions 1 and 3 are rhetorical: they don't really ask for an answer but implicitly state the speaker's own views or ask you to guess what the speaker is thinking. Asking rhetorical questions demonstrates a lack of both curiosity and transparency.

Rhetorical questions can feel good to ask. They are a way to score some quick — and often clever — verbal points. But rhetorical questions undermine your team's working relationships and reduce its ability to make high-quality decisions. Rhetorical questions enable you to ask others to be accountable without being transparent about your own views, leading team members to feel insulted, defensive, or discounted. As a result, team members trust you less, withdraw from the discussion, and withhold relevant information that the team needs to make good decisions.

Here are a few questions you can ask yourself to determine whether what you are about to ask is a genuine question (like question 2 above.) If you answer yes to any of the following questions, the question you're about to ask isn't genuine.

Do I already know the answer to my question?
Am I asking the question to see if people will give the right (preferred) answer?
Am I asking the question to make a point?

Another way to figure out if you're about to ask a rhetorical question is to give yourself what I call the "You Idiot" test. Here's how it works:

Privately say to yourself the question you plan to ask. For example, during your team meeting your direct reports have just told you that they will miss the final deadline and incur additional costs on a key project, the very outcomes you were trying hard to avoid. Feeling frustrated, you're tempted to respond, "Why do you think I asked you to finish the work before the end of this fiscal year?"

At the end of your private question, add the words "you idiot." Now you're saying to yourself, "Why do you think I asked you to finish the work before the end of this fiscal year, you idiots?"

If the question still sounds natural with "you idiots" at its end, don't ask it. It's really a statement — a pointed rhetorical question.

Change the question to a transparent statement that shares your view, including your reasoning and your feelings. Then add a genuine question that helps you learn more about the situation. In this case you might say, "That really bothers me because it already puts next year's budget at risk. Help me understand; what happened to make project expenses spill over into next fiscal year?"

Shifting from rhetorical to genuine questions may be more difficult than it seems. That's because the questions you ask and the statements you make are driven by your mindset: the set of core values and assumptions that unconsciously guide your behavior.

If you're operating from a unilateral control mindset, rhetorical questions enable you to control your team, by telling them (implicitly) what you think and not allowing them to influence you.

If you're operating from a mutual learning mindset, you are both curious and transparent. You are curious: you see each team member as having a different piece of the puzzle you all need to solve, so you ask genuine questions to elicit information and ideas. You are transparent: you express your point of view, clearly and explicitly — not disguised in a rhetorical question. By being transparent about your own concerns and curious about your team members' experiences and perspectives, you improve working relationships, develop more creative solutions, and achieve more accountability and commitment to decisions from all team members.

So check your questions: are you asking rhetorical ones?

How Your Company Can Help Build Tomorrow's Sustainable Cities

By 2050 the number of people living in cities will have nearly doubled, from 3.6 billion in 2011 to more than 6 billion. Yet the world's urban areas are already overcrowded and, particularly in developing countries, suffer from shortages of clean water, electricity, and other resources essential to the support of their exploding populations and fragile economies.

The problems created by rampant urbanization are among the most important challenges of our time. They also represent one of the greatest opportunities — and responsibilities — for the private sector.

Before your company starts investing in this area, it's important to consider how your resource-efficiency initiatives measure up on both technological and financial sophistication. The products and services that new cities will require, and that provide the return investors and entrepreneurs need, optimize both.

Your potential offerings can be positioned according to these characteristics on an "efficiency matrix." The matrix is useful for determining the current strategic position of a company's products, services, and investments, but it's most valuable for envisioning where the company might profitably head. It's explained below:

For more, read my full article in this month's issue of HBR, "Building Sustainable Cities."

Hard Times May Make You More Likely to Gamble Away Your Money

Do people with bleak economic prospects hold more tightly to their money? No, they're more likely to gamble it away, says a team led by Michael J.A. Wohl of Carleton University in Canada. In an experiment, people were more than twice as likely to gamble $10 on slot machines if they first read an article warning of an unstable economic climate, poor job prospects, and higher costs. Periods of hardship can lead people to make risky and detrimental financial decisions, the researchers say.

Insourcing at GE: The Real Story

GE's "insourcing" of appliance manufacturing to the U.S. has been trumpeted as a major reversal of the trend of sending jobs abroad to lower cost locations, and has been characterized in the press as a kind of "onshoring" story. I see it differently: as a "NUMMI deja vu" story. You may recall that NUMMI was a joint venture of Toyota and GM, where Toyota took over one of GM's worst plants and turned it around with a new management system — using many of the same people and the same unions. GE's insourcing is actually quite similar. So, how did GE do it?



First, a little relevant history: In the 1950s economic expansion drove growing demand for appliances. To meet this demand, GE created GE Appliance Park in Louisville, Kentucky, which reached a peak of 23,000 employees in 1973. In the early 2000s, as part of a huge offshoring trend in the business economy, GE shifted manufacturing to suppliers such as Samsung and LG. But these suppliers became competitors and ever-harder to work with. Then at the end of 2007 the housing market crashed. By the summer of 2008 GE leadership wanted to sell the appliances business or spin it off.



During that difficult time Dirk Bowman, former GE Appliances General Manager of Manufacturing, went to GE Chairman Jeff Immelt with a proposal. Bowman aimed to increase manufacturing capability and bring manufacturing jobs back to the U.S. from Korea, China, and Mexico. Immelt asked why production should be put in old factories in a union environment. Dirk's answer was: "We can save on transportation and be closer to our customers. We can have engineering work more closely with production. We can work smarter than Korea, China, and Mexico, using 15-20% of the labor they use." Immelt was convinced, and GE Appliances got a $1 billion investment.



The challenges GE faced were daunting. If the goal was to leapfrog the competition in every product line while revitalizing U.S. manufacturing, management had to take a big swing. The $1 billion plan envisioned 11 new product platforms in six different manufacturing sites. GE needed to reduce new product development cycles from 3-4 years to 1-1.5 years. The plants had been on life support, so they needed major repairs. The workplace was divided into functional areas; no one knew how to work together. All the laboratory equipment had been given away. The only people left were tough survivors, so the bench was not deep. The company needed to rebuild expertise and capabilities. It needed to recruit huge numbers of people in a short period of time. It needed to invest in new development labs and to co-locate teams.



In the summer of 2009 management decided to bring production of a water heater back to the U.S. from an Asian contractor. GE manufacturing leaders started applying "Lean" thinking and tools to a "model line" for manufacturing in Appliance Park. They introduced a new cross-functional team structure for improvement — the "Big Room." Functions were seated together with a common goal: working on the value stream from consumer research to testing. They put the schedule up on the wall so everybody knew what was happening. There was a fishbone diagram of the production flow (the backbone was the main flow, and the branches were the sub-assemblies), and a cardboard mockup of the factory layout which also showed how the equipment would look. At 7:45 a.m. each day leaders met, then at 8:00 a.m. everyone met to review the prior day, and what they would do that day. Then at 4:15 p.m. everyone met again to review what they'd done. The water heater that resulted was a new design, with better performance: 20% fewer parts and 50% less labor. Inventory was reduced 60%, labor efficiency improved 30%, time-to-produce was reduced 68%, and space required for the line came down by 80%.

The development team was extremely cohesive. But the problem was, the culture needed to change outside the "Big Room" and very few cultural change efforts had been made since 1994. Employees were anxious: the business had been up for sale in 2008 and 2009, and there had been little to no investment in plants or training. The purpose of their work was being redefined through continuous improvement, but the clarity across functions and among the workforce was fuzzy.

As the leadership began to introduce a new way of working together it had to solidify trust in the workforce and instill a level of confidence that continuous improvement was not just another initiative that would pass. This would be a journey.

To spread the new culture more broadly, management decided to form another cross-functional team (a "Little Big Room") to define tenets about how they would operate. A team of 16 curious, honest, and bold people — including production operators and leaders from HR, engineering, purchasing, operations, and training — were selected. Everyone who joined the team had to leave his or her job for four months. They visited the furniture manufacturer Herman Miller and auto supplier Autoliv to see what mature Lean operations looked like. They saw hourly workers deeply engaged in reviews of operational performance measures, solving complex problems. The GE team developed a purpose and nine guiding principles — the "Appliances Performance System." The biggest shift was to focus on making work better for front line operators and put everyone else in support of operators...shifting the paradigm to support versus command and control.



To further shift the culture, Dirk Bowman made a commitment that nobody would lose his or her job due to Lean, but that everybody's job would change every day. The union president echoed the same message. The union acted as a second set of leaders to help execute and reinforce changes. To demonstrate their deep commitment, in December 2011 GE rolled out team leader training. GE Appliances now has a dedicated learning organization that in 2012 trained 3,000 employees on the fundamentals of the Appliances Performance System.



So, while the macro story may be about jobs coming back "onshore," at its core this is really a process and a culture story. GE Appliances is proving once again that the balance of process and people, aligned with a clearly articulated and understood purpose and vision, is the source of improved performance and capability development. With leadership engagement and support, this system will thrive.