Marina Gorbis's Blog, page 1583

Mobile Payments and the 'Wow' Factor: Q&A With Square CFO Sarah Friar

While marketers strategize heavily around how to help consumers decide what to buy, how much time do they spend thinking about how they will pay? This area of innovation is where mobile payment companies want to play, especially in markets where such technology is less than ubiquitous.

San Francisco-based Square, led by Twitter co-founder Jack Dorsey, is among the companies looking to lead this genre. For the uninitiated, Square offers two technologies — a card reader for merchants to use, which is called Register, and the other a mobile interface for customers to pay, which is called Wallet. With over 3 million users, Square processes more than $15 billion in transactions annually. We asked Square's CFO and Operations Lead, Sarah Friar, for perspectives on this technology, what it means for marketers, and how to manage in the world of mobile innovation. Below is an edited version of our conversation.

Help us understand the two sides of Square. There is the part for businesses and then the part for consumers. Is one of them more important?

We absolutely think both sides are incredibly important if you want to build a very powerful network. We definitely started on the merchant side of the counter, so for our sellers, we wanted to create that dramatic moment where they went from not being able to accept things like credit cards to being able to come online and accept credit cards like any other kind of grown-up business would do. I think we have created a "wow" moment for them.

The other side of the counter, as you mentioned, is the consumer side. That's where Square Wallet comes into play, and I think we came to it more secondarily because we had to begin to build a network of merchants to make Wallets have value. That's a huge part of the symbiotic effect between the two.

So, this changes the way marketers can communicate with their customers. Are there any specific ways that you've seen marketers use this technology effectively?

What we see very much with our merchants is as they come on to Square Wallet, we see them utilize just basic specials, like 10% off your first purchase. Or using punch cards. So those are some ways to drive a meaningful sense of loyalty, but I think we are only scratching the surface of that.

I think most bigger merchants certainly don't want to be in the price-discounting market. That doesn't ultimately drive loyalty, it just ends up hurting your top line. The thing that drives loyalty is understanding a particular pain point. I think the airlines have done this well with allowing me to just skip through security lines in first-class or allowing me to board the plane first. These are effectively free giveaways, but they inspire so much loyalty.

That comes back to knowing your customer, and that's where I get really excited. With Wallet, you start to really understand your customer, so it isn't just about giving away freebies. It is much more about giving me things that are important to me.

Square has taken its own approach to marketing, which some could say is less traditional.

I think ultimately we believe that the product has to sell itself ... those moments where people go "Wow, I need this for my business."

Before I joined Square, I don't think I had that same kind of sensibility for how important design is, and that design is a technical competency. When you have great design, it creates that sense of people loving a product and it spreads. Why we don't spend huge amounts of money on marketing and definitely not on sales is actually purposeful. I think it would make us lazy on the product, because then you are effectively subsidizing poor product with people who are persuading and manipulating a customer.

I want us to stay in this viral mode. The more we can make the product just sell itself and act and be used beautifully with no issues, that just keeps the pressure on the product organization to build the best they can.

There is a push and pull around having a human touch versus being technology driven. There are a lot of tools right now for personalization, but how do you really make that valuable?

A lot of technology fixates on the point of sale, and, I always say, by the time I get to the point of sale, I hope that I'm 99% through the experience. If not, it means you just put me in a line that lasted forever. So instead, use technology to actually greet me at the door or maybe it is before the door.

If you shop places like Nordstrom, one of the things I love most is that I order online, I order multiple sizes, they get delivered home, my kids try on, we decide which one doesn't fit, and then I usually enter the store with something to give back before I begin a shopping experience. The more that you can make that easy and quick because of technology, then it becomes really valuable, rather than just tapping my phone at the point of sale.

Square just expanded into Japan. It feels like the US has been a bit slower to adopt mobile payment technology.

On the mobile side, definitely when you move to a market like Japan, you become incredibly empathetic to the differences that culture makes to everything. Since commerce is such a basic human function, you become a total research analyst on how the cultures work. What drives a culture like Japan to be so tech forward? They love design. In fact, when we did our launch, Jack [Dorsey] showed the book Wabi-Sabi and said, every Square reads this when they enter Square. It's a wonderful concept of design and organic and the outside world coming together.

Secondarily, it's definitely a market that loves trends. The trend itself moves very quickly, but their ability to adopt it is so fast that things go by in the blink of an eye. I think that is something we need to be careful of — we don't want to be faddish, we want to be an underpinning of a shift. One of our big drivers into Japan was clearly the fact that you have tremendous smartphone adoption. Once you're in a country like Japan, if you can be successful, there is a lot of staying power. There is a deep loyalty in the culture.

Are there any trends that you find most exciting in the mobile space right now, things that people should really be watching?

Big data. I think we are only scratching the surface of what we can do with data in the right way.

I realize there are two sides to this, there are all the concerns and fears of privacy and keeping things confidential, but weighing that against just how much better my general life experience is when people know me better and can react ahead of me to things they know that I will want. I think the more that big data can be used to create these wonderful experiences that people have opted into, that is incredibly exciting.

Do you have words of advice for people who are trying to manage the world of mobile innovation?

One of our values is break the rules. As a CFO, that kind of terminology can sometimes scare the wits out of me, but it's break the rules, don't break the law, but break the rules and do not be held back by what has gone before. If you want to be innovative, you need to not say this is how it has always been and I am just going to increment my way there.

The other value I always think of when giving people advice is, give it soul. Don't forget your customer. At the end of the day, I think people get really caught up in technology for technology's sake, but spend time with your customer and go out and feel their pain. We can get way ahead of them with all gee-whizzy-bang amazing stuff, and then you have a coffee shop that is counting cappuccino cups, trying to figure out how many cappuccinos they have sold. Go live in your customer's shoes for long periods of time and never forget your customer as you innovate.

That is the great yin and yang — do transformational things but always bring it back to solving a real problem, not a problem you've made up in your head.

Innovations in Digital and Mobile Marketing
An HBR Insight Center





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Prices in Red Affect Men but Not Women

Men who saw red discount prices for toasters and microwaves agreed more strongly that they'd save "a lot of money" than men who saw black prices (4.26 versus 2.56 on a seven-point scale), says a team led by Nancy M. Puccinelli of Oxford's Saïd Business School. But this didn't happen when the research subjects were induced to think carefully about the prices, suggesting that red's happiness-inducing effect sways men's perception of discounts only when they're not paying close attention. Women were unaffected by the prices' color, perhaps because they were already paying closer attention than the men to the discounts, the researchers say.

The Business-Friendly Legislature Known as SCOTUS

The U.S. Supreme Court's annual term is winding down, with key decisions still to come on gay marriage, voting rights, and affirmative action in university admissions. There's been lots of speculation that, given who has already written opinions for this term, the remaining decisions are likely to be dominated by the court's Republican-appointed majority.

Such prognostication is easy and kind of fun (political numbers guy Sean Trende labels it "Supreme Court bingo"), but it does give rise to uncomfortable thoughts. Supreme Court opinion counting is basically vote counting, which sounds like something you do with a legislative body, not a court of law.

The notion that Supreme Court justices are effectively legislators with really long terms first occurred to me after the controversial Bush v. Gore ruling in 2000. It wasn't so much the result as the voting breakdown, with five Republican appointees affirming Bush's electoral-college victory and the two Democratic appointees plus two Republican picks who had long since switched to the court's "liberal" wing (David Souter and John Paul Stevens) opposed. It also didn't strike me as the worst way to decide a disputed presidential election — by falling back on a vote by the indirect products of past presidential elections.

The current enthusiasm for Supreme Court bingo, plus a recent New York Times report claiming that the current Court is the most business-friendly in more than half a century (more on that later), got me looking deeper into the argument that justices are just a peculiar sort of legislators. I quickly learned that it is not even remotely a new idea. Mention it to someone who has taken a constitutional law course at a mainstream law school (in this case, my wife), and she will nod as if it's the most obvious thing in the world. In political science, it turns out, the dominant theory of why judges rule the way they rule is that it's all about ideology. Lee Epstein, William A. Landes, and Richard A. Posner recently published a book-length revisionist study that finds that most federal judges are actually just out to do what's best for their careers, but even their research shows that for the Supreme Court (something of a career pinnacle already) ideology appears to be key.

Is this necessarily a bad thing? In his 1978 Cornell Law Review article "The Supreme Court as a Legislature," law professor Geoffrey C. Hazard Jr. points out that the Constitutional Convention in Philadelphia in 1787 seriously considered creating a "Council of Revision" to review and amend the work of Congress — an explicitly legislative role that to a certain extent the Supreme Court inherited. In Federalist Paper No. 78, Alexander Hamilton acknowledges that, while it is the job of the judicial branch to dispassionately ascertain the meaning of the Constitution, judges might "be disposed to exercise WILL instead of JUDGMENT." Appointing them to lifetime terms, he continues, might at least contribute to an "independent spirit" keeping their decisions from being too obviously political. And the landmark 1803 Marbury v. Madison decision, in which the Supreme Court first asserted its authority to void the actions of the executive branch and the decisions of the legislative branch, has long been cited as an example of Realpolitik as much as jurisprudence.

Still, in his 1986 history The Rise of Modern Judicial Review, political scientist Christopher Wolfe makes a persuasive case that something significant changed late in the 19th century, when the Supreme Court went from relying on the Constitution as the ultimate authority to citing "natural law" — which of course gave justices a lot more leeway to effectively make their own laws. From 1890 to 1937, this judicial activism focused on striking down state and federal attempts to regulate business. Then the ideological balance on the Court shifted, and the liberal majority became, in Wolfe's telling, even more willing to look outside the Constitution for reasons to, most famously, end school segregation and throw out state anti-abortion laws.

Wolfe disapproves of this activist turn. His complaint is not that justices have strayed from the "original intent" of the Constitution's framers — in the 1790s and early 1800s, those framers disagreed so vehemently about the federal government's proper role that defining original intent seems a fool's errand. Instead, Wolfe favors what he calls a "traditional" approach in which justices start with the words of the Constitution even as they interpret them in what may be diametrically opposed directions. By locating authority for their rulings outside the Constitution, the argument goes, legislator-justices have grabbed too much power and threatened the legitimacy of the Court.

For a non-lawyer, it's not hard to muster sympathy for this argument. When Supreme Court justices become "little more than Senators with lifetime appointments," as New York magazine's Jonathan Chait put it last year (only to have the phrase inexplicably edited out of the final version of his piece), they become objects of resentment more than respect. If they're really just legislating, why the heck do the justices all have to have law degrees? They don't, officially, but there hasn't been a justice without one since Stanley Forman Reed retired in 1957. Even worse, why do they all have to go to law school at Harvard or Yale? Every current justice did, although Ruth Bader Ginsburg was at least unconventional enough to transfer to Columbia before getting her degree. It is, when you think about it, pretty weird that the U.S. places so much political power in the hands of such an elite, unaccountable group. Few other countries grant their judges the kind of clout that the Supremes enjoy.

During the Rehnquist years (from 1986 to 2005), the Supreme Court did make a bit of a turn back to traditionalist ways — although mainly by reasserting the rights of states in relation to the federal government, not by shrinking the authority of the Court. Since John Roberts took over as chief justice in 2005, meanwhile, many observers say the defining tendency of the Court has been less Constitutional traditionalism than friendliness to business (which explains what this examination of judicial power is doing on hbr.org).

The most impressive piece of evidence for this assertion (and the backup for the New York Times article cited above) is a new Minnesota Law Review article by the aforementioned trio of Epstein, Landes, and Posner (respectively, a political scientist who teaches law too, an economist who teaches at a law school, and a famously prolific judge and writer) documents the Court's attitude toward business with painstaking detail. By looking at Supreme Court cases going back to 1946 where businesses faced non-business opponents, and smaller businesses faced bigger ones, they rated the Court and the justices on (big-)business-friendliness. By their measure, the Roberts years have been the most business-friendly, by far, since 1946, and Roberts and colleague Samuel Alito the two most business-friendly justices.

What to make of this? At one level this is great news for business, in particular big business. In a gridlocked city where lobbying by individual businesses and industries often bears fruit, but the legislative priorities of the business community as a whole — corporate tax reform, entitlement reform, tort reform — have been making no progress lately, the Supreme Court offers a rare haven of friendliness and decisiveness. And while the current term has offered no headline grabbers akin to the Citizens United corporate-campaign-spending decision of three years ago, it has delivered two rulings that make it harder to file the class-action lawsuits which frequently target big business. (Both pitted the Court's Republican-appointed majority against the Democratic-appointed minority.)

But political victories often carry in them the seeds of future losses. I'll leave aside the possibility that the legislative priorities of big business aren't actually in the long-term interest of U.S. business or the economy, and focus on the more obvious risk: backlash. In his 2012 best-seller Unintended Consequences, former Bain capital partner Ed Conard (approvingly) describes the relatively business-friendly political and economic climate of the past few decades as a byproduct of the Supreme Court's decision in the abortion case Roe v. Wade — because evangelical voters outraged by the decision joined with what Conard calls "pro-investment voters" to create a new majority. No court decisions in the Roberts years have engendered that much outcry, but the court's approval ratings are dropping. This decline may have more to do with general disdain for Washington than anything in particular that the justices have done, but it does stand to reason that years of pro-business rulings could eventually engender a political reaction.

Then again, eventually can take a while, and Roberts does seem aware that there are limits to how far the Supreme Court can safely go. His surprise opinion last year affirming the bulk of President Obama's health-care reform law (which many business groups, such as the U.S. Chamber of Commerce, opposed) was widely seen to have been brought on by fears of the backlash that would have ensued if the Court struck the law down. If that was really his motivation (we won't know for years, if ever, of course), it was a fundamentally political decision meant to prevent the Supreme Court from becoming seen as a fundamentally political body.

I am — in case you haven't noticed — still struggling with whether I think this is a bad thing or a good thing (please feel encouraged to try to persuade me one way or the other). But it's definitely an interesting thing.

Should You Write a Book?

It may be that everybody has a book in them, but not everybody is sure if they should try to get it out of them. Why should I write a book? How long does it take? What does a book do that a blog or Tweet can't do? Does anybody really read books anymore? Do I have to write a book?

These are the questions I get from would-be idea entrepreneurs — people who want to go public with a deeply-felt idea so as to influence how people think and behave and, as a result, create some kind of change in their company, discipline, or community. Given the uncertain status of the book in today's ideaplex (my term for all of those activities — from TED to Twitter — by which we create, communicate, and consume ideas) these are smart questions to ask.

The answer is different for everybody, but there are many valuable roles a book, and only a book, can play in taking an idea public and gaining respiration for it — that is, making it come to life and breathe on its own. (All of these assume the book does not totally stink.)

Keycard to the ideaplex. Yes, you can make your entrance to the ideaplex with a blog, video, or a conference talk. But the book is the most widely-accepted credential at the largest number of content venues. "Has new book" is a standard, and often required, box to tick for the gatekeepers who control access to areas of the ideaplex you would most like to enter: lecture halls, television studios, boardrooms, media pages, special events, people's minds. Charlie Rose rarely says, "My next guest has just posted a cat video."

Evidence of effort. Books are hard to write and everybody knows it. They demand more rigorous thought and require a greater preponderance of material than any other form of expression. If you put in the work and do the thinking, people will usually grant you a larger measure of authority than if you have put in the work and done the hard thinking but haven't written a book.

Crime-stopper. Take a look at the notice on the reverse of the title page of your book. It says Copyright © Me. All rights reserved. That means the rule of law has your back. Not infallible, for sure, but if you ask any of the high-profile authors who have run afoul of copyright provisions recently I bet they'll say the law can have pretty sharp teeth.

All-purpose tool. The book is a calling card, an icebreaker, a doorstop, a representative, a leave-behind, a marketing brochure, a love letter, a non-lethal weapon, a time-whiler, a discussion-starter, a manifesto, and an excuse to start a group whose real purpose is to gossip or drink wine.

Gateway. The book can't (and shouldn't) contain everything you know. It should be an enticing entry to the world of you and your content assets — your other writings, your talks, videos, seminars, special events, emblems, merchandise, teachings, and affiliations — a world that you can continue to expand and update, so that the book, while unchanging, takes on new meanings over time.

World's most beautiful (utilitarian) object. The book is a work of art and an elegant technology. It is a tangible form that enables you to hold an abstraction in your hands. It is also, you have to admit, a great gift item.

Wellspring of future endeavor. The book is the end of a period of work, and the beginning of another, often more important, one. It is not the final word on your topic, but rather the start of a conversation about it. With a book, you can lay the groundwork for a whole life's enterprise.

There are also some aspects of writing a book that are not so pleasurable, and you should take these into careful consideration before plunging ahead, including:

Special (rather weird) process. Writing a book is different from any other process you may be familiar with or good at. It is a creative endeavor more like personal art-making than commercial innovation. Parts of it are driven by mysterious forces of the unconscious that simply cannot be plugged into a flow chart or spreadsheet. As a result, the process can be frustrating, torturous, or so time-consuming that you'll want to give up.

Personal trial. Writing a book is intellectually, emotionally, and physically taxing. It is also quite exposing and revealing — of your knowledge, the quality of your ideas, your writing skills, and your personality. You are putting yourself out there in a big way, which you may not want to do.

Irrevocability. You cannot take a book back. It doesn't slowly fade from memory like a live presentation does, or get lost in the sauce of the blogosphere. It's there and will always be there and if you aren't happy with it, or change your mind about something in it, you're stuck with it.

Backlash. You believe your book is great and that your motives in writing it are honorable. Yes, you want a lively conversation about your book — that's what respiration is all about — but when that first negative comment, sarcastic Tweet, or full-throated rebuttal comes along, you may feel taken aback or unjustly attacked.

It's not over when it's over. Books do not sell themselves. After writing the book, there is publishing, promoting, and promulgating to be done. That process also has uncontrollable parts (Will it get a good review? Will people buy it?) but if you don't work at selling the book, it may not gain the respiration you would like or it might be ignored completely, which is far worse than backlash.

So there is no all-purpose answer to the question, Should I write a book? That's why I usually answer it with a question of my own: Is it impossible for you not to?

If your answer is yes, Godspeed.

We Took a Vote. You're Fired.

Leave Your Title at the Door


Let's say you have a coworker who’s disruptive or isn't pulling his weight. Your company probably has a hierarchical process for deciding the proper course of action, and that process probably doesn't put you at the center of the matter. But you probably don't work at Menlo Innovations, where there are no bosses (at least in the traditional sense). Instead, the decision to fire (or hire or promote) someone is based on group consensus. So does this approach — which is also the premise of a new reality show called Does Someone Have to Go? — actually lead to more-productive employees and companies? Matthew Shaer takes a hard look at this question. Columbia Business School professor Adam Galinsky, for example, touts some of hierarchy’s benefits: "It reduces conflict, helps with role differentiation, and vastly increases coordination." But Menlo and other companies like GitHub, IDEO, and California tomato processor Morning Star have done away with hierarchy and, in some senses, even given employees the (blessed?) burden of running their companies’ day-to-day operations. The article doesn't outright glorify or condemn these work environments. Instead, Shaer leaves us with food for thought: "It’s possible that the triumph of the flattened office may be the creation of work environments in which leaders organically arise, and all employees feel a sense of ownership, whether real or imagined."

Stop Judging Me

Free Perks and Upgrades: Could They Actually Embarrass Consumers? Journal of Consumer Research

Most managers assume that customers love getting gifts, especially in front of other people. In fact, a survey of retail managers suggests that a majority think customers are happier getting preferential treatment in public than in private. That’s probably why stores are always dreaming up events like surprising the millionth shopper with a shower of confetti and a cartload of free groceries. But sometimes all this hoopla makes people really uncomfortable. New research led by Lan Jiang, an assistant professor of marketing at the University of Oregon, shows that if you give a shopper an unearned reward, she’ll probably have mixed feelings if she’s observed by other people, such as shopper No. 999,999, who didn’t get anything. All it takes is the presence of one other person for the (un)lucky consumer to start feeling negatively judged. Unless, of course, the observers have higher status than she does, in which case those mixed feelings go away. — Andy O'Connell

Where's the Beef?

It’s No Accident Facebook Made Instagram’s New Videos Exactly as Long as a Television Commercial Quartz

Forget six seconds. Or at least that's what Instagram seemingly wants you — and the people who sell you things — to think per yesterday's announcement about its new video capabilities. While there are many takes on what this means about competition with Vine (are they apples and oranges? Or is there a direct fight for users, marked in part by Vine taking off on its parent platform, Twitter?). Christopher Mims smartly argues that the real battle lies in video advertising – and that Instagram, now owned by Facebook, is "going to get us all watching television ads again." It's an attractive value proposition: It's projected to be a big part of the 13.4% growth in digital ads between 2013 and 2014. What may be more important, the 15-second time frame allows for advertisers to upload already-created TV spots, which can then be featured on Facebook. Mims predicts that Mark Zuckerberg is "setting up Instagram, and by extension Facebook, to be a new home for one of the most lucrative forms of advertising."

First See-Through Pants, Now This

Why Lululemon's "CEO Wanted" Ad Is Bad for the Brand Fast Company

A word to the wise: A "humorous" help-wanted ad for candidates to replace your just-resigned CEO isn't exactly the best PR move Winnie Kao, who has written approvingly about Lululemon's "brilliant brand voice" in the past, takes a much more critical stance on the yoga-gear company’s attempt at irreverence this week. She points out that customers visit Lululemon's web site to learn about products, not to read about financial or corporate news. And the decision to post a “CEO Wanted” sign on the home page was timed terribly. "When a recent divorcée makes fun of relationships, it’s more awkward than funny," she writes. "When a company says that their CEO is quitting, and makes a joke of it, you’re not sure whether to laugh or be concerned." Kao also points out that smart use of the correct medium is vital: Social media is often a better place than the home page to be cheeky or snarky. She offers examples of companies that have succeeded with humorous tweets. So remember, companies: Not all of you are The Onion. At least not all the time.

Ethical Quandaries

Inside the Mind of the British Banker Reuters

This fun video presentation of a YouGov poll of 1,000 UK bankers shows that (not surprisingly) 75% of them think their colleagues are overpaid, and fully two-thirds believe some colleagues are compensated in a way that encourages inappropriate behavior. Even more disturbing, one in six say they've been personally bullied into doing something counter to their ethical values or their customers' interests. Reuters reporter Axel Threlfall says he finds it hard to believe the bankers when they say they were attracted to the industry as much by career opportunities and the prospect of interesting work as the salaries. I guess it’s all in how you define “interesting work.” — Andrea Ovans

BONUS BITS:

Getting Around

If the World Were Run Like Airlines (Wall Street Journal)
Water, Public Transportation, and the Future of Los Angeles (Pacific Standard)
Brazilians Spend as Much as 26 Percent of Their Income to Ride the Bus (Atlantic Cities)

The Great Dereliction

A quick thought experiment: name a leader in a position of power you (really) admire, trust, and respect. Not just the head of an "alternative" company or political party, but a well-known, mainstream, orthodox, leader of the status quo. Can you?

Even after a few moments to reflect and consider, most people can't name a single one. Obama? Bernanke? Cameron? Blankfein? They're hardly Churchill, Roosevelt, Lincoln, or even JP Morgan.

I'd like to advance a simple thesis: today's leaders are failing on a grand, epic, global, historic scale — at precisely a time when leadership is sorely needed most. They're failing me, everyone under the age of 35, and everyone worth less than about $50 million. I can excuse leaders who are boring, mean, stingy, greedy, uninteresting, self-obsessed, vacuous, and generally lame. I can even excuse lying, cheating, and stealing. But I can't excuse the fact that they've failed.

If I had five seconds with today's so-called leaders, I'd simply, firmly, gently say (and I bet you would, too): You've failed to provide us opportunity. You've failed to provide us security. You've failed to provide us liberty. You've failed to provide us dignity. You've failed to provide us prosperity. So: resign. Quit. Step aside.

The world is (still) wracked by crisis. But here's the thing. The solutions to this crisis are straightforward. While there are nuances, and complications, it's also true that today's leaders can act, right now, right this second, in much greater degree, with much fiercer conviction, to make things not just marginally better — but dramatically so.

I used to think: this is an institutional crisis. We're surrounded by "banks" that blow up economies composed of "corporations" which mostly make you want to submit to lethal injection rather than show up for your soul-sucking "job" so you can deliver another few pennies of "profit" that doesn't have much real value except how many megabucks were looted today in "markets" that are populated by zombie vampire cyborg robots trading worthless bits of imaginary "money" at lightspeed for the benefit of "shareholders" who are mostly pension "funds" that don't provide security for anyone but "chief executives" who don't execute much but the careers of "managers" who don't manage much but the mass assembly of powerpoints for the production of "goods" that don't actually benefit anyone to buy with "money" we don't have anymore to live lives we don't really want to impress people we mostly hate so our "gross national product" adds up to more and more and more McShit every quarter.

But all that's not even really the problem. Now I think: this is a crisis of leadership — because though these institutions are deeply broken, they're not going anywhere anytime soon. Why? Because today's leaders are their staunch allies, not their adversaries. It's going to take nothing less than a new generation of leaders to reform, re-imagine, and redesign, and revolutionize all the above, and more. Real leaders — not high-fiving, bro-hugging wannabes.

What we've got, then, is a great dereliction: leaders who are incapable of fixing the broken institutions that are creating a lost generation, a planetary meltdown, a never-ending series of financial crises, mass unemployment, and a(t least another) lost decade. You'd think with all those icons blinking in the heads-up display, our leaders would act at least a little, well, concerned. But mostly, they seem to be clueless.

Let's admit it. Today's leaders don't just seem out of touch with reality — they are. It's like somebody decided to put Krusty the Clown, Homer Simpson, George Michael Bluth, and the Kardashians in charge of the world. Actually, I retract that. Homer, Krusty, and George Michael would probably do a better job. But we'd probably fire the Kardashians, amirite? That's the point: we can't seem to fire the tragicomically hapless, perpetually bewildered, totally bungling crackpots that are in charge of, well... the rest of our lives, the planet, and humanity's future.

Scared yet? You should be. Here's the simple fact: the leaders of the world aren't fit for the job. And it's time we sent them — yes, most of them — packing.

So let's you and I speak seriously for a few moments.

We're orphans in the gutter, disowned by the past, abandoned by the future. You know it and I know it. We're a lost generation that's being sacrificed by our leaders, who could and should act, if not to stop the hurricane, then at least to shelter us a little bit from the wind.

The old, greying men wag their fingers and sneer at you and I. Their hypocrisy comes to infect us with the slow, sure poison of cynicism. Why, we ask, should we bother to be leaders — when they, giving themselves the name, have surely proven unworthy of the word? When the men who call themselves our leaders are barely worthy of the term "managers", why, then, should we believe in their principles, ideologies, dogmas? When our leaders fail us, why should we believe, anymore, in leadership? When our leaders can't lead, why should we look anywhere but backward, downward, inward?

And yet it is in obligation that we find not imprisonment, but liberation; the chance to become who we are capable of becoming. It is obligation to the possibility of one another — leadership's purest form — that frees us to be more than mere lovers, friends, partners, fellow travelers on a dusty road; but to become husbands, wives, father, mothers; to be worthy of the proud titles: citizens, councilors, executives, representatives, Senators, Presidents, Prime Ministers — to be worthy of the word leaders.

If we don't lead now, it is clear: no one will.

The world needs a new generation of leaders. Now. And it needs the old generation of leaders — failing and unable to even comprehend their own failure — to step aside.

Leaders: We don't come to supplicate you; to beseech you; to beg you; to petition you. We come to replace you.

Every generation believes, "It's our time now." While still young, every generation presumes that they will be the ones to change the world. Here's the truth: some do.

Will we? Or will we, too, be derelict?

There's only one way to find out.

New Research: Where the Talent Wars Are Hottest

Given the forecasts of uncertain global economic growth, we might expect companies to hold off from hiring new employees and to limit whatever international hiring they do to emerging markets. But our global survey of more than 1,000 corporate directors, conducted in partnership with WomenCorporateDirectors and Heidrick & Struggles, said otherwise. The vast majority of board members told us their companies are hiring in double-digits and across the globe.

So the war for talent is on. Are you and your company ready? Do you know what world regions and industries are generating the greatest demand for talent? Is your company prepared to defend your talent from aggressive raids by competitors?

The most active sectors in hiring will be materials and IT & telecommunications, with more companies planning to bring on employees and to add a greater percentage to their workforces. At the other end of the spectrum, we found the fewest companies plan to hire in the two industries most driven by uncertainty and regulation: financials and health care.

Geographically, the majority of companies in every region are hiring, but more companies in Australia & New Zealand, and North America plan to hire than many other regions.

And while companies are still hiring in emerging markets, more are committed to hiring in their home regions, especially in Asia where 100% of companies plan to hire within the region. We also find that companies in developed areas plan to hire in other developed regions (e.g., North America in Western Europe and vice versa) and many countries in developing regions are moving into developed regions (e.g., Asia into North America).

All this presents a special challenge for Western European companies. Our research found they are one of the regions struggling most to establish great talent management practices, among them hiring, assessing, rewarding, and firing talent. If companies do not hire well, they hire more because there are a higher percentage of hiring mistakes — an inefficient and costly undertaking. If, in addition, companies are managing their underperformers out poorly, the costs rise even further.

With the war for talent taking place on all fronts, companies must have great talent management practices and systems in place. But too many don't, according to our research. This is especially true in the high-growth materials sector, which is executing most poorly on many talent management practices.

Also, given the predominance of hiring across all regions, defending one's best and brightest against encroaching competitors must be a top priority. Their phones will assuredly be ringing. And companies also have to be prepared to not only attract, recruit and retain top talent — but diverse top talent. Our research found that companies are doing a very poor job leveraging diversity in their workforces. They are missing enormous opportunities and will have little chance of defending themselves and outpacing their competitors if they do not begin to tap into the great pools of talented women and other underrepresented groups in the workplace — and get diversity right.

Methodology

We surveyed to more than 1,000 board members in 59 countries. (U.S. boards made up 37% of the sample while 62% of boards represented were from outside of the U.S.) We analyzed the data along several dimensions including geography and industry. Specifically, we did a geographical breakout by eight major world regions: Asia; Africa; Australia and New Zealand; Eastern Europe & Russia; Latin America; the Middle East; North America; and Western Europe (due to low sample size or domination by one or few countries in a region we have excluded three regions, Africa, Latin America and the Middle East, from our findings).

The industry breakout was done using eight major sectors (similar to those in the Global Industry Classification Standard system): Consumer Discretionary (e.g., consumer durables & apparel, retailing, education, media, hotels, restaurants & leisure); Consumer Staples (e.g., food, beverage & tobacco, household and personal products); Energy & Utilities (e.g., oil, gas & consumable fuels, electric, gas and water utilities); Financials (e.g., banking & financial services, insurance, real estate); Health Care (e.g., pharmaceuticals, biotechnology & life sciences, health care equipment and services); Industrials (e.g., aerospace & defense, construction & engineering, industrial conglomerates, professional services, textiles); IT & Telecommunications (e.g., computers & peripherals, electronic equipment & components, semiconductors, wireless telecommunication services); and Materials (e.g., chemicals, metals & mining, paper & forest products).

Cyber Security in the Internet of Things

Every enterprise will be affected by the Internet of Things (IoT), the growing phenomenon by which not only people, but also "things" — vehicles, commercial and industrial equipment, medical devices, remote sensors in natural environments — are linked to networks that are connected to the internet. Expect the impact on your business to be profound.

In particular, expect it to challenge your conception of cybersecurity and your ability to deliver it in IoT-enabled digital networks, your commercial operations, and your partner ecosystems. Paradoxically, the very principle that makes the IoT so powerful — the potential to share data instantly with everyone and everything (every authorized entity, that is) — creates a huge cybersecurity threat.

Just as the consumerization of IT spawned the BYOD (Bring Your Own Device) activity that is severely testing cybersecurity regimes today, so too will the IoT spawn an outbreak of "data democratization," where data will be shared more widely than ever, in real time. The IoT will demand another round of risk management strategy review, new network security evaluation tools, and business model revisions. Like all major changes in the commercial environment, this one will create challenges, but also opportunities for firms to benefit from new demands for IoT cybersecurity.

Why do we say IoT requires new thinking about cyber security? Mainly because of the level of data sharing involved. This is a fast-evolving feature of the IoT, around which industrial equipment markets have not yet aligned. Note that we can trace the origins of the IoT to the early efforts by engineers in Original Equipment Manufacturers (OEMs) to find ways to monitor, objectively and in real time, how the machines they designed for customers actually performed in the real word. They tended to use the terms telematics and mobile resource management. Soon, however, it became clear how valuable such data would be to their colleagues in product marketing, and in turn to customer service and technical support. As for the customers themselves, they received some benefits, such as maintenance alerts but, generally speaking, they had access to little real-time data, and it was difficult to work with when they did get it.

Today, growing numbers of customers recognize how that data could inform their own operations, and even feel it is rightfully theirs, leading to battles over who owns and has access to what data, who is responsible for securing it, and a long list of other related questions. What's more, as systems built by different OEMs interact, there is infighting among them as to what constitutes sensitive or competitive intelligence. Simultaneously, everyone must address the question of how shared access to data exposes them to new legal liabilities with their trading partners.

New approaches to cybersecurity are needed to address access to and deployment of this shared data. Participants need to guarantee each other that there will be no breach with so many moving parts across so many different networks and organizations.

At the same time that the IoT's shared data creates new issues for cyber security, its use in certain applications makes the need to ensure security all the more urgent. Consider that 85% of America's critical infrastructure — electric grid, gas and oil pipelines, bridges and tunnels — are in the private sector where cybersecurity is fragmented and uneven. These markets are aggressively interested in the IoT's proven cost savings and performance improvement potential. Yet this complex network can only be protected collaboratively as multiple stakeholders have shared interests in common assets. What's more, government resources, with their own unique cyber security mandates, are critical. It is no exaggeration to say that the functioning of society's infrastructure and our access to sufficient energy depend on our establishment of new cyber security regimes oriented to the Internet of Things.

Let's bring this down to how you as a company will experience the IoT as you begin to invest in it. We predict it will differ from your previous forays into traditional IT, mobile, and social networks in three ways, and all of them have implications for how you think about data security:

Your IoT business model won't involve "freemium" offerings. The IoT provides an irresistible opportunity for you to offer value-driven, and value-priced, services. But paying customers will demand greater access and control to "their" data, in contrast to their demands of most social and many mobile solutions, simply because "they" are paying.

Your usual privacy policies won't fly. Again, the IoT will be about data democratization. So the kind of opaque 'user agreement' that authorizes the service provider to remarket or redeploy user data will not be acceptable. Your new policy will be more akin to "those who deployed the devices determine access rights." The customers, that is, and not the service providers will determine who has rights to what.

You'll move beyond monitoring to control. Fully realizing the value of IoT will require connected devices do more than supervise, monitor, and report. They must also deliver new levels of autonomy to operations. But that autonomy will require devices to operate in independent, if coordinated, peer-to-peer mode, and support remote access to control functions. Deployers will have to ensure secure-two-way communications among devices.

As a business investing in the IoT you'll need to establish new standards of construct (that is, the technologies to secure the IoT) and new standards of conduct (the policies to secure the IoT). Your first step should be to acquaint yourself with Resilient Networking principles. Resilient Networking is a concept that explores network/cyber security in more connected, automated, and dynamic digital networks — in other words, IoT. Some of this work has been released to the public in a white paper [pdf] developed for The Department of Homeland Security.

You should plan, too, to devote serious time and thought to developing policy around your IoT investments. Ask 'why' something should be connected before connecting it. Who will benefit? How? A set of key questions like these becomes a very useful framework for working with partners to frame mutually agreed policies.

Succeeding in the IoT era will depend on defining and deploying not only the right cybersecurity technologies, but also the right policies and operations. The potential of the IoT to yield value for you, your customers, and all of society is vast. We must rethink the cyber security regimes that threaten to limit it.

Data Under Siege
An HBR Insight Center





Is Anyone Really Responsible for Your Company's Data Security?
The Public/Private Cooperation We Need on Cyber Security
Embrace the Complexity of Cyber Defense
Why Businesses Should Share Intelligence About Cyber Attacks

Big Acquisitions Can Fall Apart Over Tiny Details

In September 2005, Alphahealth*, a large American healthcare company acquired the British company Pharmateam*.

Pharmateam was an ideal target. With just a few hundred employees, the company was relatively small and affordably priced, but it had a solid product portfolio, over a century of history, and healthy financials. Moreover, it was a private company so that at the right price, all the shares could be acquired quite easily and rapidly. Alphahealth expected it to be their entry point into the British market. Management proudly announced the deal as part of its strategy of foreign expansion.

However, the deal took the employees of Pharmateam by surprise. Although aware of consolidation pressures in the industry, the announcement came out of the blue. For a quintessentially English organization, suddenly becoming part of a large American multinational felt strange and eerie.

They noticed one other curious detail: the formal announcement of the take-over included a photograph of Pharmateam's managing director shaking hands with Alphahealth's CEO. But Alphahealth's CEO was not wearing a tie. More puzzlingly, their own managing director was not wearing a tie either; something clearly not in keeping with their traditional ways of conduct.

Two weeks later, Alphahealth's CEO issued a memo to Pharmateam's employees explaining the deal and declaring respect for Pharmateam's achievements and history. It also stated that employees no longer needed to wear a tie to work, in line with Alphahealth's "friendly" and "approachable" culture. Alphahealth had used this approach for all its acquisitions to date, because although it wanted to avoid cultural clashes and integration troubles, it sought a common corporate culture, and taking off the tie seemed a good place to start.

While the vast majority of Pharmateam's employees diligently obliged, albeit awkwardly,, a small proportion refused, stubbornly coming to work wearing ties. Although a small minority, they represented a broader sentiment: as one employee (who had removed his tie) stated, "For us, it represented professionalism. We were at work, not play. The tie allowed many of us to separate our work life from our private life". Although the managing director frowned upon the tie-wearing employees, they willfully persisted.

As Alphahealth introduced further simple changes (like changing the color of the walls of Pharmateam's offices from its traditional blue to the corporate red), several Pharmateam employees responding by putting their ties back on. In ensuing weeks, the group of tie-wearing employees kept growing.

Soon tie-wearing employees began to sit together on one side of the company's cafeteria, while non-tie-wearing people occupied the other side. Whenever another employee would appear back in his tie, a round of cheers and applause would erupt. As one employee recalled: "Each day, we would eagerly await the arrival of the employees to see if any more had decided to join our movement by turning up to work with a tie". In a show of solidarity, some of the female employees started to wear suits and ties as well. Some employees brought an extra tie to work to try to convince their colleagues to join them and become converts too. Before long, the majority of employees had their ties back on.

Within two years of the acquisition, Alphahealth decided to spin off Pharmateam, resulting in a management buy-out, after which the Managing Director was fired. One Pharmateam employee recalled how they had gathered around a computer screen to check out his LinkedIn profile — where he was listed as "in between jobs" — including a headshot photograph of him, wearing a tie.

Reflecting on how they had felt when asked by Alphahealth to remove their ties, and why they had resisted, that employee added: "It made clear to us that the Americans had no respect for our rich history. It was with great joy that we would remove our ties in the car park on a Friday afternoon as we get into our cars to drive home — sometimes via the pub. This small weekly moment of joy was about to be removed by our American owners who think they can come in and bully us with their 'culture.'"

Most executives are aware of the dismal track record of mergers and acquisitions; academic studies have shown that 60-80 percent of all acquisitions fail. Most executives will also emphasize that integration problems and cultural clashes can be fierce, disruptive, and persistent. Yet, despite this widespread awareness, acquisitions still overwhelmingly fail to create value and cause major problems.

Part of that is because companies continue to underestimate the impact an acquisition can have on the individuals involved. Beyond the fact that the new employer has a different culture, habits, and processes, being acquired affects someone's identity.

For many of us, our identity is in large part determined by our profession and our employer. One of the first things we're asked at a party, for example, is "What do you do?" and "Who do you work for?" Having to change that answer represents a fundamental shift in our identity, and when the shift is not self-imposed, it may lead to confusion, anger, and obstruction.

Research on identity consistently shows that seemingly minor details can have big consequences. For example, in an experiment, Professors Christopher Bryan, Gabe Adams, and Benoît Monin urged people to either "don't cheat" or "don't be a cheater." Using the latter phrasing ("don't be a cheater") would reduce the number of people cheating by more than 50 percent. In other experiments, using the noun rather than the verb eliminated cheating altogether. Although it seemed a trivial change in wording, it had such a big effect because "don't be a cheat" alludes to a person's self-image and identity, where a verb does not.

Similarly, seemingly trivial changes in the way people are expected to dress or behave when at work can have a profound impact on their feelings of identity — and the extent to which they perceive that their identity is under threat. We express the invisible values and beliefs that comprise identity through observable practices. As in the case of Alphahealth and Pharmateam, even a practice that seems of little consequence can become a symbol of identity — or resistance.

Pharmateam's people rallied around the humble necktie. It provides a cautionary tale of why many executives — at their peril — still underestimate the profound impact an acquisition can have on people's self-image and identity, and why so many acquisitions still struggle to succeed.

* Not the company's real name.

When You're Trying to Persuade, Consider the Seating Arrangement

People in a circular seating arrangement had a more positive impression of a travel ad urging them to make family and friends a priority than of an ad saying "Make yourself a priority" (3.78 versus 2.75 on a 7-point scale); but people in an angular seating arrangement, such as in rows at right angles, favored the self-oriented ad (3.82 versus 2.41), say Rui (Juliet) Zhu of the University of British Columbia and Jennifer J. Argo of the University of Alberta, both in Canada. Seating arrangements affect persuasion by activating fundamental needs: Circular seating highlights the need to belong, whereas angular arrangements prime the desire to be unique, the researchers say.