Marina Gorbis's Blog, page 1587

Give Your Performance Management System a Review

Nearly every mid to large size company in the world now has some kind of performance management system, a process that in theory should help people set to achieve goals and ultimately drive performance. Yet only 14% of organizations are actually happy with their performance management system as it stands, according to industry research firm CEB. Despite that, so far only 3% of companies are doing anything radical around how they manage performance. The rest are tinkering on the surface, altering the number of goals being set, shifting from a 3 to a 5-point rating scale, or changing the rating criteria.

While I respect that significant change in a large organization is tough, tinkering isn't doing much. Research shows that there is no measurable impact on performance linked to the number of ratings people have, or from altering the wording for these ratings. It seems that we need a significant rethink of the whole concept of how we manage performance.

Driving this need are seismic changes in demographics as well as how work is structured today. Annual goals might have worked 20 years ago, but between new technologies and a rapidly changing economy it is hard for goals to be relevant for more than a quarter. Even quarterly feedback does little for younger generations craving to learn something useful every week from their boss. And consider the fact that most of the time performance is only discussed with one manager - even when that employee is involved in a half dozen emergent teams unrelated to his manager's work. The nature of work has become more relational and creative than ever, with a greater need for collaboration — which some performance systems accidentally inhibit.

The first step in any difficult change program is to acknowledge that your company has a problem. To help recognize that problem, maybe it's time you gave your performance management its own performance review. There are many ways to do this, including identifying the real business goals of having a performance system, and seeing if these goals are being achieved through employee surveys. You could also collect data about the actual behavioral impact that annual employee conversations have on teams.

I will share more on these kinds of approaches in future posts, for now I wanted to share an even simpler idea: A 5-point rating scale for performance management itself. Here's how I would craft the ratings — read through and think about where your company's system falls:

Tier one: "Needs to go"

While your performance management system showed promise during recruitment, it's turned out to be a dud. It hasn't achieved any of company goals. Heck, it probably never knew it had goals. Worse still, no one wants to work with it anymore. It's time to move this system on to new pastures and let it find a place more suited to its talents.

Tier two: "Needs improvement"

Your system has personality issues. Despite achieving a few goals and having good technical skills, it often rubs people up the wrong way. People complain about its lack of authenticity, inflexibility, and glaring blind spots. In short, the system is underperforming and needs to have a breakthrough soon if it is going to stick around.

Tier three: "Good but inconsistent"

Your performance management system is like the wind in summer. Things fly along, then there are long stretches of nothingness, people becalmed in a sea of unmotivated action, waiting for something better — feedback of any sort, a career discussion, any puff of positive wind in their sails. You wish your system raised performance more consistently throughout the year, yet you can't quite bring yourself to let it go, because, sometimes, it works.

Tier four: "Strong performer"

Your performance management system does a solid job most of the time. It gives employees the feedback they need to feel appreciated once in a while and helps them generally understand how they can develop. While not a stellar system, you're happy with what you have and can't see yourself firing this system any time soon. You'd love it to be a top performer, but hey, at least it's consistent.

Tier five: "Top performer"

Your performance management system consistently motivates top talent, stretches mid-level performers, and helps your low performers self-select out. When times are tough and bonuses are tight, your performance management system helps folks stay engaged for better times. Everyone who works with your performance management system loves it, and wishes they could be it when they grow up.

So, how does your performance management system rank? If it is low, how long has it been at that level, with no consequences? Should you let your system languish another few years on a low tier, hoping it will improve? Oh, and if you decide to rank your own firm, be sure to keep things confidential. No one likes feedback going public. Even performance management systems have feelings.

Beware the Cannibal In Your Product Line

Kantar Worldpanel predicts that 75% of growth for consumer products companies in the next decade will come through new product development. And yet, more than half of senior executives declare themselves unsatisfied with the financial returns of product innovation. Why? Because their innovation models don't determine where the growth is actually coming from. So, companies end up developing a product that tested well in market research only to find out later that they've got a cannibal on their hands, chipping away at their existing market share.

The value-destroying menace of cannibalisation is the dirty little secret of the innovation industry. Launching a new product that steals a large proportion of market share from a company's existing portfolio is a bad idea. The problem is that traditional approaches to identifying winning innovation don't screen out cannibal products until very late in the process, after significant sums have been spent — and when there is great temptation to ignore the findings of research and push on anyway.

What's worse, the traditional innovation process doesn't just ignore cannibalisation — it can actively favor cannibal products over ideas that would grow a market or a company's share of it. Concept screening, the process of assessing which ideas have the greatest potential, tends to focus on the total trial they would achieve. Judged by these rules, concepts that involve launching a variation of an existing brand tend to do very well, since shoppers respond to a brand they already know. This is why supermarket shelves are often filled with variants of established products. Unfortunately, these types of product launches are most inclined to cannibalism, draining sales from the very brands they had hoped to leverage. For example, the new quadruple-blade razor that's launched under a well-known shaving brand will probably gobble up most of its share from the triple-blade razor that brand was already selling quite successfully. Similarly, the introduction of laundry pods have caused the entire category to shrink, as people now use the correct volume of detergent, whereas overuse was previously the norm.

The seductive power of cannibal concepts becomes even more of an issue when times are tight and the pressure is on for new products that can deliver a return on investment. If that return is initially measured only in terms of total sales, then cannibals start to look like safe bets — rather than the threat to profitability that they so often are. In most cases, sales of new products command far lower margins than those of established brands — which means that the time and effort expended to launch a cannibal can actively erode value across the portfolio as a whole.

It's easy to find examples of cannibal products failing to deliver the benefits that their total sales volume might suggest: our research shows that the launch of Dove deodorant for men has undermined sales of its sister Axe/Lynx deodorant; a great deal of Coke Zero's growth has come at the expense of the existing Diet Coke.



But to understand the full damage cannibals can do, let's look at a slightly older example. Back in 1994, Kodak launched the low-cost Funtime film; only to take it off the market when it stole share from Kodak's existing products. Now, this was bad in and of itself — but imagine if instead of ploughing R&D dollars into Funtime, Kodak had focused on ways to make money from the emerging worldwide web and digital cameras. The big problem with cannibals is that they tend to drown out truly innovative ideas that can have a far more positive effect on a company's fortunes.

So, how do you recognize a cannibal in the concept stages? It starts with focusing on incremental growth, rather than on total sales. My company, TNS, has shown that judging concepts based on incremental growth rather than the traditional "biggest is best" approach results in a different decision on which ideas to proceed with 40% of the time. To weed cannibals out of the innovation process, you need a model that focuses on incrementality from the start; one that has the right techniques and strategies for measuring it — and the right idea development process to deliver it. Here's a quick three-step guide to finding ideas that can deliver genuine growth, rather than growth at your own company's expense:

1. Demand to know incremental volume

Your company doesn't need a new product to deliver a lot of sales — what you need is for that new product to deliver profitable growth. Incremental volume is the only true measure of growth potential. Yet traditional approaches to innovation only address this towards the end of the process, through "share of requirements" analysis that gives an average view of how the new product will affect consumers' existing spend in the category. The problem is that this general overview lacks the precision and credibility to sway investment decisions at such a late point in proceedings, when significant resources have already been invested in a product's development.

2. Analyze individuals, not averages

If you want to measure incremental volume with any accuracy, you need individual-based modelling techniques that take into account the individual spending patterns of each person who will buy the new product, rather than drawing general assumptions from average numbers. As a simple example, the impact of somebody who buys an existing product on a weekly basis and switches about half of their purchases to a new product is far greater than a shopper who buys an existing product only monthly, but ditches it entirely in favor of the new product. Effective individual-based modelling doubles the accuracy of incremental sales predictions when compared to aggregate calculations (see chart).

3. Invest in finding the right ideas, not just developing the ideas you have

Businesses invest considerable sums in developing winning ideas; they pay far less attention to finding the right incremental ideas to develop. Innovation needs to be guided by an integrated understanding of customer needs, the competitive landscape, and a tried-and-tested approach, identifying the area where a winning concept is likely to be found and exploring that area with creativity and imagination.

With all of that said, cannibals can have their uses. Where an existing product is under threat, a carefully-designed cannibal can help to protect the bottom line. The iPad mini is a great recent example: in the context of the Kindle Fire and other smaller, cheaper tablets, it's an understandable attempt to protect Apple's overall market share.

Cannibals, therefore, aren't always bad news. But the situations in which they can be valuable are very specific — and demand a precise understanding of how the new product will affect consumers' spending. If you are intentionally planning to launch a cannibal, you need an even deeper understanding of incrementality.

Don't risk letting cannibal concepts hijack your innovation process. In complex markets and with intensifying pressure on innovation to deliver results, you simply can't afford to turn a blind eye.

In Praise of the Generalist (CEO)

Yes, you can become a CEO if you come out of a specialized field such as marketing or finance, but you probably won't earn as much money as a generalist CEO whose specialty is being a manager. The annual pay premium for generalist CEOs (those who have held a number of positions in a range of companies in varied industries) is 19% relative to chief executives who have had relatively few jobs in a limited range of companies and sectors, according to a team led by Cláudia Custódio of Arizona State University. That amounts to nearly $1 million in extra compensation per year, the researchers say.

If Your Mobile Strategy Can Win Here, It Can Win Anywhere

As a marketer, I work to engage women online with brands and causes. Ultimately, however, we hope for more than merely sales or action: we want to build a relationship with our audience. Ideally, a brand and a woman of influence interact directly, one to one. But there's something that's increasingly coloring our relationship. It's her phone. The phone is more than our hardware. It's our lifeline.

A stunning 64.7% of emails to my all-female marketing database are opened on iPhones, likely because many on my mailing list are busy moms who often aren't in front of a computer. Whitney Broadwell of Women for Women International notices the same trend: "This time last year, 12% of our email opens were through mobile, now it's 33% and climbing every month."

If you're marketing to women through social media, imagine your conversations mediated by a smartphone screen. According to a 2013 survey by Nielsen, "Nearly 60% of women use Facebook/access Facebook multiple times a day on their device/computer compared to approximately 45% of men." Women, already social media power users, are increasingly exercising that influence via their phones.

In some countries, women's access to mobile media is quite literally a lifeline, because mobile health services fill a revolutionary gap by providing crucial medical and financial information.



But, possibly because it has such great potential for improving welfare, the developing world far outpaces the US in creating a system where mobile phones — marketed specifically to women — are truly essential tools. So I asked several leaders in the mobile health space what they've learned from developing world direct-to-consumer mobile programs that could inform American mobile marketing programs.

Utility, customization, and segmentation are key to the success of mobile marketing to women in the developing world. Choice, too, is crucial: all mobile programs are opt-in and easy to opt out of.

Kirsten Gagnaire is the Global Director of the Mobile Alliance for Maternal Action (MAMA), launched in May 2011 by former Secretary of State Hillary Clinton. A mom of a 10- and a 14-year-old, she contrasts American moms' access to online health information, to the services provided, often by single feature phones, in the developing world.



The information we take for granted — think of a quick search on Babycenter.com or watching a video on a hospital website — is not accessible to women in poverty in the developing world. There, women may rely on others in the community to provide information that may turn out to be inaccurate or even harmful. Mobile phones can help fill that information vacuum.

Gagnaire notes, "The way they get vital health information is through their mobile phones. Our program addresses local myths, stresses the foods they should eat, and helps provide vital health information. For example, in Ghana one of the major causes of infant death was the infection of the umbilical cord. There is a myth you shouldn't take the baby outside for six weeks after birth because of evil eye. Now we can send moms a message on the signs of infections and when to take the baby to the clinic."

She continues, "mobiles are prolific...even if she doesn't have a phone, someone does. She'd be able to access a handset capable of making calls and basic SMS. So we've developed a suite of messages based on the BabyCenter model that are sent two or three times a week, covering pregnancy and up to baby's first year of life."

MAMA's text messages, which meet WHO and UNICEF standards, are timed to a woman's stage of pregnancy and her baby's age. And these messages use strong market segmentation. For example, Gagnaire notes, "How are we going to deliver the messages? How do women in that market get information? In Bangladesh it's SMS and voice, but most of the mothers using our messages are illiterate: so we use voice messages. In South Africa, women are more literate but SMS is expensive, so we use the mobile web. Our messages are accessible though askmama.mobi."

More curious to me, however, was this question: A big part of successful marketing to women is relationship-building. A big part of relationship-building, in established markets, relies on visual cues. So how do we build a relationship when all you have is a non-visual basic phone?

mHealth (mobile health) providers have learned that it's all in the messenger. Some programs use simple game characters to put a face to the advice provided via phone — after all, pregnancy through the first year of a baby's life is a long time for mothers to text or call a stranger. Gagnaire notes, "How do we build a relationship? In Bangladesh, we've created Dr. Apa, a character who delivers jingles, vignettes, and skits. Women begin to recognize Dr. Apa, and recognize her voice and trust what she says."

"We take user testing and rapid iteration very seriously. We went where women are under a tree, in their homes, and at clinics and listen to what they want. We play messages and ask what voices they like, what they don't. We find the accents that work, the music they like and the terms they understand. Putting our work into their context is so important to building relations and trust."

Cathryn Stickel, Operations Manager of Frontline SMS, notes that while in the United States, 97% of mobile subscribers will read an SMS within 15 minutes of receiving it, in the developing world text messages have become like email: a deluge to be managed when you have time. It's a cautionary tale as marketers in the West rush to cash in on the mobile gold rush.



"I was just in Mumbai, where internet penetration is low, mobile penetration is high. Spam SMS is a fact of life there. In the rest of the world people are more dubious of mobile marketing. But in the US we think our SMS is so important we have it sent to the front of our phone and user experience! 97% of mobile subscribers will read an SMS within 15 minutes of getting it."

"I wouldn't want to see us go to where I have seen the situation in India go where people don't trust their SMS. It's a delicate push."

This impacts FrontlineSMS' work. In India, organizations have to communicate with the government and get an exception before working with local groups to create programs that use their open source technology to solve problems ranging from providing services to pregnant women, rape or sexual violence survivors. In Haiti, FrontlineSMS powers KOFAVIV, which connects women who've been raped to medical and legal services via SMS.



I asked Cathryn how she builds depth without a relationship or visuals. She answers, "SMS is not step one. You're going to have a hard time engaging with someone with SMS alone. The relationship needs to be personally established and then reinforced using SMS."



Still, while emerging markets are the frontier of mobile marketing, there are some barriers that marketers in established economies don't have to worry about. As Stickel points out, in many emerging market countries, female phone ownership is an emotionally charged issue. Due to cultural barriers, women are less likely to have a mobile at all. In some villages, FrontlineSMS learned, a woman with a phone may even be perceived as promiscuous.



"A lot of big organizations will say we need to get every woman a phone. But it's not that simple. It gets under my skin a bit to say 'we need to get all women a phone' and women need to use that phone to cast off their oppression. Women can get in trouble for having a phone — what we're trying to do at FrontlineSMS is to make phones such useful tools that it becomes a financial liability for the family to not let the woman have a phone." Options go beyond maternal and child health and allow the phone software system to help in paying for school costs, to analyzing the right fees to charge for agriculture at market.

Despite challenges like this, mobile marketing in the developing world empowers those with extremely limited resources and offers powerful lessons for US marketers learning to build customer relationships through a phone. Let's learn from this and make sure the next "killer app" in the US mobile market helps us lead better lives, not just pass the time while waiting for the bus.

Innovations in Digital and Mobile Marketing
An HBR Insight Center





How Advertisers Can Maximize Mobile Conversions
The Mobile Shopping Life Cycle
Quality vs. Frequency: What's Your Mobile Strategy?
When Digital Marketing Gets Too Creepy

When Personalized Ads Really Work

Imagine that you've just looked at a really nice hotel on your favorite online travel site, but you haven't yet booked your trip. Next, you're off browsing other websites, and an ad for your favorite travel site pops up. Would you be more likely to go back to them and book your vacation if the travel ad had a picture of the specific hotel that you just browsed? Or will you be more likely to go back if the travel ad is a general ad for their brand? This is the kind of question online retailers are asking themselves every day, and, in fact, many choose to show the ad with the picture of the hotel. After all, Marketing 101 teaches us to get personal and specific with our marketing communications. That's called "dynamic retargeting," where the seller dynamically adjusts the content of the ad to the product(s) the consumer viewed earlier on their website. But is dynamic retargeting really more effective than showing the generic ad?

We decided to look empirically at this question using data from an online travel site. However, understanding the effectiveness of marketing interventions is notoriously difficult. For this research, the site ran a randomized controlled trial, also called a "field experiment" or "A/B test", where they randomly showed consumers either a generic retargeted ad or a dynamic retargeted ad. This approach allowed us to compare which of the two types of ads was more effective.

Surprisingly, we found that on average, dynamic retargeting (ads showing the specific hotel people looked at) is less effective than showing a generic ad for the company (in this case, the travel site). This means that when firms aim to sell to customers who have been on their site before, they are, on average, better off advertising just their brand, rather than a specific product or service.

Given industry excitement about dynamic retargeting, this was a surprising result, so we then asked ourselves why this was the case and whether there were instances when a specific ad might be just as effective, or even more effective.

We started off with the insight that data on users' browsing habits can reveal a lot of information about consumers. In this instance, the travel site recorded all advertising exposures across the web, whether consumers were retargeted or not. Since the site was a heavy advertiser across the web, they had a fairly good idea which sites their potential customers visited and when. Importantly, we were able to identify when customers visited a travel review site, like Tripadvisor or HotelMe. So we checked the effectiveness of different types of retargeting before and after consumers visited a travel review site. This analysis revealed important insights: Before customers visited a travel review site, generic ads were much more effective than advertising the specific product in a dynamic ad. However, after having visited a review site, customers responded positively to both ads.

We think this happens because the way people approach their purchase evolves over time. When they have only a broad idea of what they want — for example a relaxing vacation — advertising the brand to them is a better strategy than showing them specific hotels. The rationale is that if a consumer has not yet decided whether to make a trip to Greece or to Florida, there is no point showing them a specific hotel in Greece. But once they start thinking about the specific product details and the trade-offs between attributes, then they are more open to ads that communicate such products. We then go one step further by showing that product-specific retargeting can beat generic brand advertising if it is shown not only after potential customers visited a review site, but also on days on which they are actually browsing travel-related sites. Basically, the further and more active someone gets in their purchase cycle, the more effective dynamically retargeted ads get.

This research has three main takeaways for marketers:

Marketers should be cautious in their approach to very personalized advertising. It may appear to be effective only because firms tend to show personalized ads only to their very best customers, possibly because of a lack of data on other potential customers.
Optimal advertising content varies over time and should be honed to reflect the stage the customer has reached in the purchasing process.
Our findings illustrate the importance of implementing randomized controlled trials, also called A/B tests or field experiments. Specifically, in online advertising, many moving parts determine a consumer's decision. Only an experiment that randomly gives a marketing intervention (e.g., shows an ad) to a subset of consumers, but not to a control group, allows researchers — or managers — to accurately isolate and measure the effect of such marketing activities.

So, the next time you think about running an online ad, be sure to do your homework first and select the right ad for the right moment to maximize your ad's effectiveness.

Innovations in Digital and Mobile Marketing
An HBR Insight Center





How Advertisers Can Maximize Mobile Conversions
Quality vs. Frequency: What's Your Mobile Strategy?
Being Digital Demands You Be More Human
CMO's: Build Digital Relationships or Die

Why We Need to Redefine Intelligence

An interview with Scott Barry Kaufman adjunct assistant professor of psychology at New York University and author of Ungifted: Intelligence Redefined.

Download this podcast

A written transcript will be available by June 21.

Even Cement Can Be Special

Companies in commoditizing industries tend to follow one of two strategies: either they try to find new services to offer around the product or they compete on price. The one certain outcome of these two strategies, of course, is to accelerate the commoditization process itself.

But, as an HBR article on this topic once pointed out, even commodities have customers. And where there are customers there can be differentiation. And where there is differentiation, there can be innovation.

Lets look at a company in an industry whose product is almost synonymous with the word commodity: cement. The Italcementi Group, an Italian headquartered company is one of the world's largest cement producers worldwide. Perhaps drawing on a national affinity for design, Italcementi has rediscovered cement as the raw material of architectural beauty, transforming a drab, gray powder into a technologically advanced and aesthetically sophisticated building material.

Italcementi has achieved this through a co-innovation process with great contemporary architects. Taking a lead from the fashion industry where celebrities like Giorgio Armani are influential trend-setters, Italcementi targets "archistars", rock-star architects whose ideas influence the behaviors and choices of the mass of architects.

Behind each partnership with an archistar, there is always a commissioned landmark project. Take for instance, the case of the pioneering Dives in Misericordia church in Rome. Commissioned by the Vatican in 1998 and inaugurated in 2003, this project sealed Italcementi's partnership with the American architect Richard Meier. Meier's design for this symbolic structure called for the use of extraordinary concrete, offering not only durability, but also a long-lasting brilliant white color. In order to satisfy this need, the Italcementi perfected TX Active, a photocatalytic white cement with self-cleaning properties based a technology that had been investigated years before but never before developed.

Another example is the Italian Pavilion for the Shanghai World Expo in 2012, designed by Giampaolo Imbrighi. This project called for cement walls able to filter light. Italcementi took on the challenge and for the first time developed a transparent, light-transmitting material called i.light. A great success with over six million visitors in five months, the building became a permanent fixture.

Through the co-innovation process, architects get an essential raw material tailored to the needs of their projects. From Italcementi's perspective, the payoff is reduced risk. First, the work is associated with an actual revenue-generating project, which offsets development costs. Second, the product gets introduced with all the splash and hoopla associated with landmark project, increasing public awareness. Finally, the association of the product with an archistar increases the likelihood that other architects will incorporate the product into future mainstream, commercial projects down the line.

To support these innovation projects, Italcementi has created the i.lab, a research and innovation center designed by Meier and located in the Kilometro Rosso Science Park (Bergamo, Italy). At the i.lab, both renowned and emerging architects can count on a research facility where they can co-ideate with Italcementi R&D personnel. Italcementi has taken great care in the selection of R&D staff (about 20 people plus the R&D Director), who learn how to speak the "language" of architects. Meanwhile, for Italcementi's senior executives nurturing the relationships with archistars is a top priority.

The new approach is starting to pay dividends. In 2013, profit margins are projected to increase for the first time in many years and new patented products like TX Active and i.light are expected to account for 30% of total turnover by 2018.

Italcementi shows us that commoditization is not destiny; in any industry there is scope to differentiate and innovate.

Good Leaders Don't Use Bad Words

During a painfully dull futures workshop Down Under, a simple word change helped transform a stagnant discussion.

The facilitator, with a world-class flair for bafflegab and platitude, had asked the group to envision products customers might desire a decade hence. The conversation regurgitated cliché after customer-centric product cliché until the moment the team rejected and replaced the facilitator's language.

Instead of brainstorming new "products," the group instead collectively chose to imagine future "offers." The word forced a different discipline of design thinking. "Offers" usefully blurred categorical and cultural distinctions between "product" and "service" innovation. Making an "offer" looked and felt different than selling a "product." The more people talked, the clearer it became: "offers" was simply a better word and organizing principle for generating more innovative innovation scenarios. "Offers" liberated participants, where "products" constrained them.

Language matters. A lot. Amazon, for example, lists over 3000 publications about "product innovation" and roughly 800 for "service innovation." According to its search engine, however, the world's largest bookseller doesn't have a single "offers innovation" title. Is that an opportunity?

As Mark Twain once observed, "The difference between the almost right word and the right word is really a large matter — it's the difference between the lightning bug and the lightning."

At Australia's Amplify Festival, former IBM Chairman/Europe Hans-Ulrich Maerki observed that one of the most important organizational and cultural shifts that occurred in the aftermath of IBM's $3.5 billion acquisition of PricewaterhouseCoopers Consulting over a decade ago was a subtle but profound shift in language. That acquisition signaled IBM's global commitment to become more of a professional services firm. But the company's internal and external vocabulary alike emphasized the computer giant's "product" origins.

After the acquisition, says Maerki, IBM began emphasizing "clients" over "customers." The PwC consultants relentlessly stressed that "customers" were about managing transactions but "clients" were about investing in relationships. IBM needed to redesign itself around serving clients, not selling customers. That was a distinction with an operational and organizational difference. (Maerki similarly observed that IBM soon stopped using "committee" in favor of "team" — another word-swap that ultimately had meaningful managerial impact.)

Changing important words helped change important behaviors.

Critics might argue that this emphasis on language is sophistry and wordplay. After all, actions speak louder than words and people pay — and invest — closer attention to incentives. This may be true. But the real question confronting leaderships is how much can language alter thoughts and influence behaviors? If the right words can cognitively and creatively reorient enterprise conversations, executives need to think twice about the vocabulary they outsource to their ad agencies and HR.

Too often, the default language of truisms, platitudes and clichés dominate communications. Perfectly good words like "innovation," "quality" and "morale" get flensed of all useful and usable meaning. There's a good word for that observed managerial behavior — laziness. Rather than invest real thought and effort into language that differentiates and adds value, executives — not unlike that facilitator — pick words that make it a little too easy to think a little too conventionally. Commodity words yield commodity outcomes.

In a truly global economy, ironically, opportunities for language-driven/language-enabled differentiation abound. Linguistics should be a source of design insight and competitive advantage. English may be — sorry — the "lingua franca" of global business but there's a wealth of languages for innovators and entrepreneurs to draw upon in their efforts to get their people to "think different."

While the nuances of "product" and "offer" or "customer" and "client" hold profound implications in English, truly understanding the meaning of, say, "kyosei" or "kaizen" in Japanese or "jeitinho" in Portuguese/Brazilian can also be sources of innovation inspiration. I am struck by how rarely global enterprises cultivate non-English words as "cultural software" to get their international employees — and customers/clients — engaged and aligned.

What are the Hindi, Tagalog and Mandarin words that should be redefining customer expectations and value creation over the next decade? How might "Spanglish" or Indonesian slang come to influence business vocabularies worldwide? Actions speak louder than words. But, inevitably and invariably, words describe actions and aspirations alike. The more global you are, the less lazy your organization needs to be about the words it chooses.

Why Businesses Should Share Intelligence About Cyber Attacks

Today's business leaders are allocating more resources to cyber security, yet appear to have less to show for it. The reason for this disconnect: the fundamental paradigm driving cyber security has not changed with the times.

Most businesses try to prevent cyber attacks by focusing on their internal networks. They map their networks in detail, identifying every device on those networks and plugging security holes, to minimize vulnerabilities in software and hardware. They use signature-based products to identify malware before it enters their networks. This approach is expensive, difficult to implement, and doomed to failure when facing sophisticated adversaries — it is nearly impossible to identify and patch every vulnerability, even in a medium-sized business. And attempts to prevent cyber attacks in this way will not scale with the new technologies that businesses are adopting, such as mobile devices and cloud computing.

Think of the current approach as a soccer goalie trying to defend his goal by turning his back to the players on the field and instead staring intensely at the net. The goalie hopes that by understanding the nature of his net in great detail, he can block the shots that come his way. He may get lucky once in a while, but most shots are going to find their way around him. Focusing on vulnerabilities is like staring at the net; it diverts time and energy away from the action on the field — at a great cost to the team.

A better strategy is needed.

Our first advice to the goalie would be to turn around and focus on the potential shots headed toward him. Even better, he could study game film to learn the tendencies of his opponents (e.g., how do they prefer to set up for corner kicks?), identify their strengths and weaknesses (e.g., this forward prefers his left foot for shots on goal), and share that information with fellow defenders. Pattern recognition would enable the goalie to anticipate where shots will come from and to position himself accordingly, greatly decreasing the chances of the opposing team scoring a goal.

The analogy applies readily to businesses; they must go beyond vulnerability management and develop threat-based cyber defenses. To do this, they need to develop an understanding of their adversaries. At the tactical level, businesses will benefit from capturing data on every intrusion attempt and successful intrusion in their enterprise. They can then develop threat indicators, such as IP addresses and time stamps, that can be used to detect intrusions. By examining this data over time, organizations can begin to see tendencies and patterns, just like the goalie studying game film.

It is important to keep in mind that many cyber attacks, especially those from state-sponsored cyber spies, are not one-time events. Adversaries develop campaign plans for acquiring targeted information and will execute these plans patiently over a period of months or years. The more information that can be gathered about an infiltrator's methods, either from attacks on your own enterprise or on another organization, the stronger your defenses.

Most businesses cannot guard against sophisticated adversaries on their own; nor can they catch every intrusion. Sharing threat data amongst businesses gives a more complete picture of an adversary's campaign tactics — a predictive edge that can prevent future attacks.

The key is to share the right kind of data. In soccer, all teams have access to the same film, but closely guard their analysis and game plan. Sharing threat indicators is like sharing game film: it provides useful data that, when analyzed correctly, can be extremely beneficial. It stops short of revealing proprietary information.

There are challenges to data sharing. Processes and infrastructure must be established for sharing cyber threat data securely and quickly. The key element to establishing these mechanisms is not technical, it is human. Businesses will not share information with entities they do not know. Those in the same industry or region should partner and build personal connections. With trust established, automated processes can be put in place to rapidly disseminate cyber threat indicators.

Trusted relationships encourage a "neighborhood watch" model where businesses work together to strengthen overall security. Each business will naturally have its own interests, but these interests in the aggregate benefit the entire community.

Business executives face the reality that traditional cyber defenses will not stop cyber attacks — regardless of increased spending or added resources. Our adversaries share intelligence about us; it's time we did the same.

Data Under Siege
An HBR Insight Center





Why Your CEO Is a Security Risk
Beware Trading Privacy for Convenience
Four Things the Private Sector Must Demand on Cyber Security
Does Your CEO Really Get Data Security?

The Cognitive Bias Keeping Us from Innovating

Any five-year-old has no trouble turning an old blanket and a couple of chairs into an impenetrable fort. But as we get older, knowledge and experience increasingly displace imagination and our ability to see an object for anything other than its original purpose. This is called Functional Fixedness and while you probably won't need to build a fort during your professional career, chances are you do suffer from it and it is impacting your work. How can I be so sure? Well ... you're human, right?

Like the Curse of Knowledge I've written about before, Functional Fixedness is a well-known cognitive bias. I'm actually glad it exists because if it didn't, my industry probably wouldn't exist. Clients often hire Open Innovation companies like ours when their research and development teams can't get past — or maybe over is a better word — the way they have always looked, and where they have always looked for solutions.

While Functional Fixedness has no doubt been around since Man first tied a sharp rock to a stick with a length of vine and called it a spear, it was Gestalt psychologist Karl Duncker that originally coined the term after conducting what has become a famous (among psychologists, anyway) cognitive bias experiment. Study subjects were handed a candle, a book of matches, and a box of tacks and asked to figure out how to stick the candle to a wall so that when lit the wax wouldn't drip on the floor. The simple solution was to remove the tacks from the box, set the candle upright in the box, and then tack the box to the wall. The problem was, most participants' understanding of the box as an object used for holding the tacks was so strong and entrenched, they couldn't imagine that it could also become a makeshift shelf. They were literally unable to "think outside the box."

Companies often struggle to develop breakthrough products because they are hobbled by Functional Fixedness. Technologists, engineers, and designers not only have their own expertise, they have their own way of applying their expertise. Ironically, the more success they've had with their approach to a solution, the harder it is to imagine a different one.

Getting back to that five-year-old, what Open Innovation does is replicate the process he or she goes through to see the potential of a fort in a couple of chairs and a blanket. Usually it takes the child's mind, unhindered by experience and fueled by imagination, just seconds to make connections between what they're trying to create and objects that have an unrelated use. Skilled Open Innovation practitioners — who granted take a little longer — source solutions to specific problems in the same way; by enabling a connection between a need and potential solutions that reside in unrelated industries.

Here's an example. PepsiCo needed to find a way to reduce the amount of sodium in its potato chips without reducing the salty flavor that customers love. Its search — despite looking across the entire food industry and not only the snack industry — had not produced a viable solution. So we helped express the need and craft a technical brief in a way that cast a wider net. That brief, Nanoparticle Halide Salt: Formulation and Delivery, was then "marketed" to a broad audience of technical experts. Proposals came in from a variety of industries and organization types, including energy and fuels, pharma, and engineering services. The winning response to the brief came from the orthopedics department of a global research lab. The scientists there had developed a way to create nano-particles of salt which they needed to conduct advanced research on osteoporosis. For PepsiCo, this wasn't in itself the ultimate solution, but the search yielded a valuable new partner and perspective. It went on to solve its problem in a truly innovative way.

Of course, the first step in dealing with functional fixedness is determining how much you're suffering from it in the first place. In our business, collaborative innovation is crucial, so we worked with Caliper, a specialist in human capital assessment, to find a way to gauge an individual's relative strength at it. Together we created a tool to measure more than 20 related traits. The questions related to what we termed "idea orientation" get at the person's ability to overcome functional fixedness. Those with high idea orientation are motivated to develop creative, original solutions, while low scorers are inclined to use well-established methods.

Any exercise in assessing traits raises the question of whether they can be strengthened. Can someone tasked with innovation take steps to move beyond functional fixedness? I believe it is possible. Try running cross-industry, cross-discipline technology searches — unearth some dramatically different ways to tackle problems —and you'll see how minds begin to expand.

If you suspect your R&D staffers will bristle at anything that challenges their abilities, consider setting up a Functional Fixedness SWAT team — a hothouse group of innovators who embrace the idea of collaborating with solution providers outside their industry walls. Companies who have done this have noted that, through their example, such teams can inspire others to evolve from a closed-loop process to an open one. And thus, the R&D department that at first seems to be an impenetrable fortress can turn out to be a much more flexible set of chairs and a blanket, with the people inside still innovating like five-year-olds.