Friday, May 11, 2018

An Ode to the Thief of Time

strategy+business, May 11, 2018

by Theodore Kinni

In late 1934, a department store magnate named Edgar Kaufmann engaged Frank Lloyd Wright to design a weekend home in the woods an hour or so southeast of Pittsburgh. It was a huge boon for Wright — his reputation had waned, commissions had dried up in the Depression, and his home and studio were threatened with foreclosure. The architect visited the Kaufmann site, asked for a survey, and then, the story goes, didn’t do a damn thing.

Nine months later, Kaufmann unexpectedly visited Wright’s studio to look at the design for his new home, which, he had been told, was progressing beautifully. Wright reportedly put pencil to paper for the first time. Two hours later, he presented Kaufmann with a plan for Fallingwater, an acknowledged masterpiece of residential architecture.

“The only way to explain the nine months Wright spent not working on Fallingwater is by procrastination’s perverse logic. Nothing was the only thing that could be done in such a situation,” writes Andrew Santella in Soon, his engaging, meandering, and, of course, overdue exploration of the behavioral the rest here

Saturday, May 5, 2018

If You Cut Employees Some Slack, Will They Innovate?

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, May 4, 2018

by Yasser Rahrovani, Alain Pinsonneault, and Robert D. Austin

The idea of using slack resources — in the form of time, technology, and support — to bolster employee innovation falls in and out of favor. The return on slack innovation programs can be prodigious: 3M Co. attributes the development of the Post-it Note to its 1948 decision to allow employees to devote 15% of their paid time to side projects; and Google says its “20% rule,” which upped the ante on slack time devoted to innovation, yielded Gmail, AdSense, and Google Earth. But few, if any companies, have stuck with time off for innovation and other slack-based programs for as long as 3M. Even Google has reportedly waxed and waned in its commitment to its 20% rule.

Given the significant investment that slack-based innovation programs require, the decision to adopt one shouldn’t be made off the cuff. But what are the factors underlying that decision and how should such programs be designed? To begin to answer these questions, we conducted in-depth interviews of knowledge workers in different industries to understand what motivated them to take risks and explore new ideas, and, more specifically, whether and how slack resources might have contributed to their innovativeness. We then created and refined an empirical model based on the factors and relationships that appear to influence employee innovation and tested it using a sample group consisting of 427 employees from North American companies.

We found that different types of employees respond in different ways to slack innovation programs; that different kinds of slack resources are better suited to certain types of employees than they are to others; and that different kinds of slack innovation programs produce different kinds of innovation. Companies can use these findings to design more effective slack innovation programs and maximize their returns on slack the rest here

Wednesday, May 2, 2018

The Future of Work is Human + Machine

Learned a lot lending an editorial hand here:

Boss Magazine, May 2018

by David Mallon

The debate surrounding today’s smart machines often reminds me of the legend of John Henry, which dates from the dawn of the Second Industrial Revolution. You may remember John Henry as the “steel-driving man” who went head-to-head against a steam-powered hammer to prove that a man could outperform a machine. He won the contest, but his heart burst in the effort and John Henry died.

In the modern version of that American folktale, machines are coming to take away our jobs again. This time, it is robotics, artificial intelligence, and other digital technologies that will supposedly transform our companies into employee-less buildings filled with automatons. However, as I read through our research at Bersin and the thought leadership being produced throughout Deloitte, I’m seeing a very different story.

For instance, when our Deloitte colleagues analyzed the impact of automation and robotics in the UK from 2001 to 2015, they discovered that more than 800,000 jobs had been lost, but nearly 3.5 million new jobs had been created. Moreover, on average, those new jobs paid nearly £10,000 more annually than the lost jobs.

Based on findings like these, I’ve become convinced that the real story is not an adversarial one in which human is pitted against machine. Instead, the future of work is a story of an augmented workforce—a story of human + machine.

There will be disruptions in the augmented workplace, too. To be able to successfully navigate them, companies and employees will need to act in ways that help ensure human + machine adds up to a sum greater than its the rest here

Monday, April 23, 2018

How to Cure a Bad Case of Metric Fixation

strategy+business, April 23, 2018  

by Theodore Kinni

The Tyranny of Metrics is a pearl of a book. And like all pearls, it was born of an irritation. As chair of the history department at the Catholic University of America, Jerry Muller found himself — and his school — devoting more and more precious time and resources to performance measurement and reporting.

Some of this activity was useful, admits Muller. “But much of the information was of no real use, and indeed, was read by no one,” he writes. “Yet once the culture of performance documentation caught on, department heads found themselves in a sort of data arms race.” In one instance, Muller was urged to add more statistical appendixes to a yearlong department survey, because “the report would look less rigorous than that of other departments” without them. Moreover, the university found itself hiring more and more data specialists, up to and including a new vice president for assessment.

This experience, which Muller describes as an irritating pinprick, inspired him to look more closely at metrics. And that investigation resulted in a concise and clearly argued polemic, which, Muller writes, is “for anyone who wants to understand one of the big reasons why so many contemporary organizations function less well than they ought to, diminishing productivity while frustrating those who work in them.” Read the rest here.

Thursday, April 12, 2018

Are American Workers Dying for their Paychecks?

strategy+business, April 12, 2018

by Theodore Kinni

Jeffrey Pfeffer, the Thomas D. Dee II Professor of Organizational Behavior at the Stanford Graduate School of Business (GSB), hasn’t been particularly sanguine about business management for a couple of decades now — perhaps he never was. From his Machiavellian take on power to his skepticism about leadership education, his recent books have punctured conventional wisdom and challenged executives to do better. In his brutal new book, Dying for a Paycheck, Pfeffer steps up the attack.

The book’s thesis is straightforward and blunt: American workplaces and management practices are destroying individual and organizational health. To prove it, Pfeffer partnered with GSB colleagues Joel Goh, a doctoral student (now a professor at the National University of Singapore), and Stefanos Zenios, a professor of operations, information, and technology, and surveyed a broad range of employee health and wellness research.

They identified 10 workplace exposures within the control of employers that significantly affect human health and longevity. And we’re not talking about the industrial accidents that plagued the American workforce a century ago. Rather, the exposures in the 21st century include: being laid off; not having health insurance; irregular work shifts; working more than 40 hours weekly; confronting job insecurity; facing work–life conflicts; having low control over one’s job and job environment; facing high job demands; having low levels of social support at work; and working in unfair situations. Read the rest here.

Monday, April 2, 2018

How Leaders Can Play the Loyalty Card

strategy+business, April 2, 2018

by Theodore Kinni

In his 2007 book Think Big and Kick Ass in Business and Life, a well-known real estate developer and reality television star discussed employee loyalty at length. “I value loyalty above everything else — more than brains, more than drive, and more than energy,” he wrote.

But is that an effective people strategy for a large-scale organization? Probably not. The idea that leaders should place personal loyalty above all else when appraising employees is something of an outlier in the literature of management. Experts have a lot to say about the duty of CEOs to employees. But vice versa? Not so much. In the few instances I’ve found in which loyalty arises as an employee duty, it’s always framed as loyalty to the company or the company’s mission, not as personal loyalty to the CEO.

That doesn’t mean that employee loyalty isn’t important to leaders. It is, in fact, vitally important. Leaders need people who will stand by them when the going gets tough, who won’t undermine them as they seek to execute plans, who will trust them when the way forward isn’t entirely clear, and who won’t sell them out at the drop of a hat.

But how do you get loyal employees? It seems there are three common approaches. Read the rest here.

Sunday, April 1, 2018

Global Mobility Involves a Top-down, Bottom-up Effort

Learned a lot lending an editorial hand here:

Boss, April 2018

by David Mallon

Getting the right people to the right place at the right time is a perennial challenge for large, multinational companies. Recently, however, the need to address that challenge has become more pressing.

One reason is rising nationalism and the backlash against globalization that often accompanies it, which is making it more difficult for companies to execute effectively on global talent strategies. On the opening day of the 2018 World Economic Forum in Davos, India’s Prime Minister Narendra Modi called out the globalization backlash as one of “the three most significant challenges to civilization as we know it,” along with climate change and terrorism.

Another reason is the division of the world’s talent markets, which can exacerbate the need for a mobile workforce and a strong employer brand. According to the International Labor Organization, the job markets in developed economies, including Europe, the U.S., and Canada, are likely to continue to tighten, while in developing economies, particularly in Latin America, the pool of available talent is likely to expand.

A third reason is the growing demand among top talent for more productive, engaging, and enjoyable work, which, for many, includes international assignments. Millennials want to work for global companies with aspirations beyond profit-seeking. The Deloitte Millennial Survey 2017 found that millennials view business positively, but they also believe that multinational businesses are not fully realizing their potential to alleviate society’s biggest challenges.

Together, these conditions are raising the mobility stakes for multinational companies. They also explain why more and more executives are asking my colleagues and I at Bersin, “How can we improve global mobility?” Read the rest here.

Wednesday, March 21, 2018

When SMART Goals Are Not So Smart

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, March 21, 2018

by Martin Reeves and Jack Fuller

We rarely question the need for goals, and the familiar acronym SMART instructs us that good goals should be specific, measurable, achievable, realistic, and time-based. But none of these attributes say anything about the context in which we are setting goals.

Are SMART goals effective in every context? If not, what kinds of goals are most useful in what kinds of contexts? These are important questions at a time when competitive environments are constantly morphing and new ones are unexpectedly emerging.

Why We Need Goals

Every company needs goals. Goals fulfill several functions: coordination (to align intentions); abbreviation (to summarize a complex effort); prioritization (to ensure that activities and processes don’t become an end in and of themselves); calibration (to tell us how to allocate or invest resources); and evaluation (to tell us if we are making progress).

In stable, predictable environments, it makes sense to set goals that are specific and measurable. For instance, some markets, such as confectionary and cosmetics, grow with gross domestic product (GDP) and follow relatively predictable trends. Thus, a company like Mars Inc. can plan out a multiyear strategy in its core categories.

In more dynamic and uncertain environments, however, SMART goals can be problematic. It’s hard to manage to specific, time-based targets when demand, technology, business models, and competitor sets are incessantly shifting, as is common in emerging or recently disrupted industries, like genetic testing services or augmented reality technology. In such cases, companies need goals to do other jobs, like prompt new thinking or encourage experimentation and learning in situations they have not encountered before. Read the rest here.

Tuesday, March 20, 2018

Bringing Mindfulness to Your Career

Insights by Stanford Business, March 19, 2018

by Theodore Kinni

A woman takes a moment to pause and practice mindfulness  | iStock/Wavebreakmedia 
A thousand years ago, there was a cobbler who hated his work, but could not escape it. One day, heartsick, he met a monk, who suggested that he practice his craft as a meditation — by reframing the attention, intention, and emotion with which he approached his work. He followed the monk’s advice. Today, he is remembered as the Divine Cobbler, one of India’s 84 mahasiddhas, gurus who reached enlightenment through mindfulness.

Stanford Graduate School of Business lecturer Leah Weiss, principal teacher and trainer in Stanford’s Compassion Cultivation Program, opens her new book, How We Work: Live Your Purpose, Reclaim Your Sanity, and Embrace the Daily Grind, with the cobbler’s story. It still strikes a chord today, she says, because “nothing provides more opportunities than the workplace for us to feel discouraged, disappointed, bored, overwhelmed, envious, embarrassed, anxious, irritated, outraged, and afraid to say what we really feel.”

Of course, most people today are not as trapped in their jobs as the cobbler. But leaving a job we don’t like may not alleviate the suffering. “It’s like breaking up with one person after another and another in romantic relationships. There’s a common denominator in what’s not working,” says Weiss.

Here she discusses why the grind makes us better leaders and how to practice mindfulness to reconnect to your purpose. Read the rest here.

Saturday, March 17, 2018

Getting the Autocratic Leaders We Deserve

strategy+business, March 13, 2018

by Theodore Kinni

A couple hundred years ago, the French philosopher Joseph de Maistre wrote, “Every nation gets the government it deserves.” As with other great one-liners, de Maistre’s bon mot has been repeated many times since, and somewhere along the line it morphed into “We get the leaders we deserve.” How we feel about this bromide depends on the leader sitting in the seat when it is uttered.

Right now, I find it discomforting. A good part of that feeling stems from my reading of Open Source Leadership: Reinventing Management When There’s No More Business As Usual (McGraw-Hill Education, 2017), by Rajeev Peshawaria, an experienced leadership professional who has served as chief learning officer at Coca-Cola and Morgan Stanley. Peshawaria is now CEO of the Iclif Leadership and Governance Centre, a nonprofit consultancy based in Kuala Lumpur. “Perhaps the biggest inconvenient truth of the current times is this,” he writes. “We’ve been idealizing democratic and all-inclusive leadership far too much, when the need of the hour is — and always has been — autocratic, top-down leadership.”

Photograph by Hero Images / Alamy

Peshawaria doesn’t define autocrat, so I assume he means leaders who rule with unlimited authority or whose influence or power is undisputed. He supports his conclusion that we need more autocratic leaders with data — specifically the results of Iclif’s survey of 16,000 senior and midlevel executives in 28 countries. In it, he provided a list of famous (but not infamous) leaders, such as Nelson Mandela, Jack Ma, and Mahatma Gandhi, and a mixed bag of leadership traits. About half of the traits represented inclusive, democratic behaviors, such as “relied on consensus and support” and “listened to find middle ground.” The other half represented top-down, autocratic qualities, such as “dared to be different” and “remained firm in their course of action.” The executives were asked to identify the top three traits that the leaders had in common. The autocratic traits came out on top.

Then, Peshawaria asked the executives to rate the following statement: “In order to drive unprecedented success for the organization in today’s fast-paced environment, a significant amount of top-down leadership is required.” Three-quarters of the respondents agreed or strongly agreed. Read the rest here.

Saturday, March 10, 2018

Seven Technologies Remaking the World

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, March 9, 2108

by Albert H. Segars

Once upon a time, business leaders could leave technology to the technologists. But today, we are at the starting line of a universal technological revolution — one that is fundamentally altering four key realms of our world: commerce, health care, learning, and the environment. Given the pervasive and diverse nature of this revolution, business leaders must understand the technologies that are driving it, the capabilities they offer, and their potential impacts.

This report provides executives with a lexicon to the revolution. It identifies seven core technologies — pervasive computing, wireless mesh networks, biotechnology, 3D printing, machine learning, nanotechnology, and robotics — and describes their implications for commerce, health care, learning, and the environment. Use it as a guide and a basis for strategic discussion as you and your team seek to understand today’s business frontiers and the opportunities that lie ahead.

Seven Technological Sparks

“You’re only given one little spark of madness,” said the late actor and comedian Robin Williams. “You mustn’t lose it.” Williams used his spark to ignite his comedic rocket and blast past the established boundaries of his craft. Technology provides a similar spark: It enables us to push beyond the established boundaries of our world.

The mechanized spinning of textiles, large-scale manufacturing of chemicals, steam power, and efficiencies in iron-making sparked the first Industrial Revolution (1760-1840). Railroads, the telegraph and telephone, and electricity and other utilities sparked the second Industrial Revolution (1870-1940). Radio, aviation, and nuclear fission sparked the Scientific/Technical Revolution (1940-1970). The internet and digital media and devices sparked the Information Revolution (1985-present). In each instance, the inflection point that marked the new revolution was the appearance of new technologies that fundamentally reshaped key aspects of the world, such as commerce, health care, learning, and the environment.

Today, we see technological sparks everywhere. They are emerging from the digital, chemical, material, and biological sciences, and they are precipitating a revolution that is altering nearly every dimension of our lives.

But what are the dominant technologies driving this revolution? And how will they shape and reshape the world of commerce — and the world at large? These are critical questions for executives, and the answers will determine how value will be defined in the future, how businesses will be structured and managed, and where new opportunities for profitable growth may lie.

To help executives answer these questions, I conducted two surveys of veteran technology entrepreneurs working in companies in a variety of sectors, analyzed the results, and then developed and assessed the validity of the findings in a series of individual interviews and field visits. The study revealed seven classes of technology that are driving today’s universal revolution: pervasive computing, wireless mesh networks, biotechnology, 3D printing, machine learning, nanotechnology, and robotics.

Each of these technology classes exhibits three distinctive and rapidly evolving capabilities that are significantly different, more advanced, and larger in scope than the technologies of past revolutions. Read the rest here.

Friday, March 2, 2018

Meeting the Challenges of Global Mobility

Learned a lot lending an editorial hand here:

HR Technologist, March 2, 2018

by Jonathan Pearce and Mark Solow

A well-developed capability for global mobility is essential for companies seeking to develop and manage top talent, achieve business objectives, and foster a global mindset. Of the 10,400 businesspeople in 140 countries who participated in Deloitte’s 2017 Global Human Capital Trends survey, 68 percent agreed that “a mobile workforce is an enabler of business and talent strategies.”

The problem? Only 3 percent of the respondents rated their companies as “world class” in global deployments.

There are good reasons for this gap: global mobility is a complex, risk-laden, and disruptive undertaking. Moreover, it’s costly to move employees around the world. Our experience working with multinationals tells us that it costs approximately three times an employee’s salary (and typically, these are executive and professional salaries) to deploy someone on a traditional long-term global assignment. And that does not include the productivity losses commonly incurred as employees move themselves and their families to new and unfamiliar locales.

That’s needed is a way to manage global assignments that is simple, personalized, and predictive, in a manner that better serves the needs of workers and the companies for which they work. Read the rest here.

Thursday, March 1, 2018

Accelerate Employee Learning to Increase Your Company's Clock Speed

Learning a lot lending an editorial hand here:

Boss Magazine, March 2018

by David Mallon

And so it has: Since the 1960s, fewer and fewer employees are doing rote work, and more and more of them are being called upon to do processing work—that is, work that requires ongoing employee learning.

It’s not news that the pace of business is accelerating. The adoption rate of new technologies is on the rise: customer demand shifts with the click of a mouse, and new and disruptive competitors appear out of thin air. Increasingly, the clock speed of your company—its strategic and operational response times—is becoming a key determinant of its survival and success.

How can you increase your company’s clock speed? The first and perhaps best way to start moving the needle is to help increase the speed of employee learning.
Work is Learning

More than a half-century ago, Marshall McLuhan, the Canadian media guru, wrote, “The future of work consists of learning a living (rather than earning a living).”

And so it has: Since the 1960s, fewer and fewer employees are doing rote work, and more and more of them are being called upon to do processing work—that is, work that requires ongoing employee learning. Thus, the ability to learn quickly has become a key enabler of both employee performance and organizational clock speed.

In an era when work is learning, long-established ways and means of employee training and development (T&D) are approaching their sell-by dates. Pulling people off the job to impart knowledge and skills is inefficient at best.

Increasingly, it’s ineffective, too. That’s because of the half-life of much of the knowledge and many of the skills that are being imparted is shrinking—especially when that employee learning is focused on jobs that people are doing today, but are less and less likely to be doing tomorrow.

Instead, companies should be enhancing the ability of employees to learn many new skills and to respond to constant change on the fly. They should be following the example of what we at Bersin call “High-Impact Learning Organizations” or HILOs. Read the rest here.

Wednesday, February 28, 2018

A Better Way to Bring Science to Market

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, Feb. 28, 2018

by Joshua S. Gans

In 2012, when the Creative Destruction Lab (CDL) at the University of Toronto’s Rotman School of Management was launched, the audacious target of this seed-stage program for massively scalable, science-based companies was $50 million in equity creation in five years. In 2017, CDL companies surpassed $790 million in equity creation. Such is the power of a market for judgment.

A market for judgment is a nexus between science and technology. By science, I mean the kind of knowledge that is produced in academic institutions and research labs. By technology, I mean the commercial application of that knowledge. A market for judgment is a place, like CDL, where the producers of knowledge meet and mingle with businesspeople and investors.

Markets for judgment are necessary and valuable because science and technology are mismatched in several ways. They are mismatched in geographic terms: Science is concentrated in universities, which are located all over the world; technology aggregates in a few places, such as California’s Silicon Valley and Cambridge, Massachusetts, in the U.S. The landscape of science is the gently undulating Great Plains whereas the landscape of technology spikes like Mount Olympus.

The distribution of scientific and technological talent is also mismatched. I think that may be because of the antithetical nature of the two jobs. Scientists are supposed to go down fruitless paths; it’s part of their process. Technologists are supposed to go down fruitful paths; in their process, fruitless paths are decidedly unwelcome and potentially destructive.

In short, although science and technology are supposed to go hand in hand, they usually can’t get that close. CDL was designed to determine if we could bring science and technology closer together by building a market for judgment. Read the rest here.

Wednesday, February 21, 2018

How to Get Time on Your Side

Image result for pink when

strategy+business, Feb. 21, 2018

by Theodore Kinni

The vagaries of time can be bewildering. One day, you drive through heavy traffic as if in a 
perfectly choreographed dance number; the next, it feels as if you’ve entered a demolition derby. One day, you’re brimming with ideas; the next, your creativity well is as dry as Death Valley. Timing is everything, right?

Actually, no. That’s what Daniel Pink declares in the last sentence of his illuminating and often surprising new book, When: The Scientific Secrets of Perfect Timing. “I used to believe that timing is everything,” he writes. “Now I believe that everything is timing.”

What Pink means is that there are predictable oscillations present in the days of our lives, and in individual and group work, that affect the outcomes we are working toward. In When, he argues that we can improve our chances of success in work and life if we simply recognize these oscillations and use them to our advantage. This may seem akin to casting runes, but in his trademark style, Pink supports his thesis with a convincing and nuanced reading — and synthesis — of a wide variety of scientific research.

Much of the research that Pink offers stems from the application of big data and analytics. Take, for instance, the study of 26,000 earnings calls from 2,100 companies over a span of six and a half years conducted by three business professors. They discovered that the tenor of calls and their effects on stock price are related to the hour in which they are held. Calls made first thing in the morning tended to be positive. Call results declined until lunchtime, when there was a small bounce, and then declined again until after the closing bell. (What time is your next earnings call?) Read the rest here

Monday, February 19, 2018

The Power of a Free Popsicle

Insights by Stanford Business, Feb 19, 2018

by Theodore Kinni

a person holding a popsicle | iStock/etorres69Los Angeles boasts plenty of terrific hotels. At this writing, the top three on TripAdvisor are the Beverly Hills Hotel, Hotel Bel-Air, and the Peninsula Beverly Hills. If you can get a room at any of them for under $700 per night, TripAdvisor says you’re getting a “great value.”

The fourth name on the list is the Magic Castle Hotel. You can snag a room there for $199, but TripAdvisor doesn’t call that out as a great rate. The Magic Castle Hotel, as Chip Heath, the Thrive Foundation for Youth Professor of Organizational Behavior at Stanford Graduate School of Business, describes it, “is actually a converted two-story apartment complex from the 1950s, painted canary yellow … [with] a pool that might qualify as Olympic size, if the Olympics were being held in your backyard.”

How does the Magic Castle Hotel maintain such an enviable TripAdvisor ranking among the 355 hostelries it lists in LA? In their new book, The Power of Moments, Heath and his brother, Dan Heath, a senior fellow at Duke University’s CASE Center, trace it to the hotel’s ability to create “defining moments.” These moments, they say, are ones that bring meaning to our lives and provide fond memories.

One of those defining moments is the Popsicle Hotline. Visitors at the hotel’s pool can pick up a red phone on a poolside wall to hear, “Hello, Popsicle Hotline.” They request an ice-pop in their favorite flavor, and a few minutes later, an employee wearing white gloves delivers it on a silver platter, no charge. It’s a small defining moment that doesn’t cost much to produce, but has paid off for the Magic Castle Hotel.

In The Power of Moments, the Heath brothers identify four metatypical defining moments. Elevation moments transcend ordinary experience, like the arrival of an ice-pop on a silver platter. Insight moments rewire our understanding of the world, like George de Mestral pulling burrs from his clothes after a hike and getting the idea for a new kind of fastener that he named Velcro. Moments of pride accompany achievement, which is why employee recognition is such a powerful tool. And moments of connection — like weddings, graduations, and retirements — strengthen relationships. Read the rest here.

Friday, February 9, 2018

The End of Scale

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, Feb. 9, 2018

by Hemant Taneja with Kevin Maney

For more than a century, economies of scale made the corporation an ideal engine of
 business. But now, a flurry of important new technologies, accelerated by artificial intelligence (AI), is turning economies of scale inside out. Business in the century ahead will be driven by economies of unscale, in which the traditional competitive advantages of size are turned on their head.

Economies of unscale are enabled by two complementary market forces: the emergence of platforms and technologies that can be rented as needed. These developments have eroded the powerful inverse relationship between fixed costs and output that defined economies of scale. Now, small, unscaled companies can pursue niche markets and successfully challenge large companies that are weighed down by decades of investment in scale — in mass production, distribution, and marketing.

Investments in scale used to make a lot of sense. Around the beginning of the 20th century, the world was treated to a technological surge unlike any in history. That was when inventors and entrepreneurs developed cars, airplanes, radio, and television, and built out the electric grid and telephone system.

These new technologies ushered in the age of scale by enabling mass production and offering access to mass markets. Electricity drove automation, allowing companies to build huge factories to churn out a product in massive quantities. Radio and TV reached huge audiences, which companies tapped through mass marketing. The economies of scale governed business success.

Scale conferred an enormous competitive advantage. It not only lowered fixed costs — it also created a forbidding barrier to entry for competitors. Organizations of all kinds spent the 20th century seeking scale. That’s how we ended up with giant corporations, and universities with 50,000 students, and multinational health care providers.

Today, we’re experiencing a new tech surge. This one started around 2007, when mobile, social, and cloud computing took off with the introduction of the iPhone, Facebook, and Amazon Web Services (AWS), respectively. Now, we’re adding AI to the mix. AI is this century’s electricity — the technology that will power everything.

AI has a particular property that supplants mass production and mass marketing as a basis of competitive advantage. It can learn about individuals and automatically tailor products for them at scale. This is how the GPS navigation app Waze gives you a route map tailored to your destination at a specific moment in time — a map that probably won’t work for anyone else or at any other time and doesn’t need to. AI enables mass customization for increasingly narrow markets. If a product is custom built specifically for you, you’ll probably prefer it to a product that’s built for millions of people who are only kind of like you.

This is the basis of economics of unscale. The winning companies in today’s tech surge are companies that profitably give each customer exactly what he or she wants, not companies that give everyone the same thing.

There is another, equally important way in which the current tech wave is propelling economies of unscale. Because companies can stay nimble and focused by easily and instantly renting scale, they can adjust more quickly to changing demand and conditions at much lower cost and with far less effort.

Thus, scaled companies find themselves beleaguered by unscaled competitors. Stripe is an unscaled financial services company based in San Francisco that is challenging the big banks. Airbnb, also based in San Francisco, is an unscaled hotel company that is taking customers away from the big chain hotels. Warby Parker is a New York City-based unscaled eyewear company that is threatening the big eyewear brands.

If economies of unscale will rule in this new world of business, how can a corporation, which, by definition is a large, scaled-up enterprise, compete and thrive? Read the rest here

Wednesday, January 31, 2018

The Truth About Corporate Transformation

Learned a lot editing this article from the BCG Henderson Institute:

MIT Sloan Management Review, January 31, 2018

by Martin Reeves, et. al.

Transformative Corporate Change Technology Strategy LeadershipCorporate transformation sits atop the strategic agenda for many CEOs. While transformation is ideally undertaken preemptively, in practice it is much more commonly a reaction to changing — and challenging — circumstances. Such transformations represent a fundamental and risk-laden reboot of a company, with the goal of achieving a dramatic improvement in performance and altering its future trajectory.

Given the stakes, we were startled to find that the research underpinning the design and execution of corporate transformations is surprisingly thin. As a result, transformations are often guided by beliefs that, while seemingly plausible, are more anecdotal than empirical in nature. It’s time for a more evidence-based approach.

To study corporate transformation and its success factors, we analyzed financial and nonfinancial data of all U.S. public companies with $10 billion or more market cap between 2004 and 2016. We identified companies with a demonstrated need for fundamental change, namely, those companies with an annualized deterioration, relative to their industry average, in total shareholder return (TSR) of 10 percentage points or more over two years. This definition provided us with a large data set for empirical analysis including more than 300 companies across different industries over more than a decade.

Further, we trained a proprietary algorithm to quantify the strategic orientation of companies, based on semantic patterns within the “Management’s Discussion and Analysis” section of 70,000 10-K filings. We built a prediction model to identify formalized transformation programs, based on restructuring costs and major corporate announcements (as reported by Standard & Poor’s Financial Services LLC). And we conducted a multivariate regression analysis to determine the impact of a number of factors on change in TSR during transformations...Read the rest here.

Tuesday, January 30, 2018

How to Lead Cynics

strategy+business, January 30, 2018

by Theodore Kinni

We (and by we, I mean a random sample of American adults) have a pretty cynical opinion of you (and by you, I mean business executives). According to a Gallup poll conducted in December, 28 percent of us rate your honesty and ethical standards as low or very low, 54 percent rate them as average, and just 16 percent rate your honesty and ethics as high or very high. To put this in perspective, business executives rank just below lawyers. Among the 22 professions covered in the survey, only advertising practitioners, members of Congress, car salespeople, and lobbyists rank lower.

It’s certainly not my place or my intention to impugn the honesty and ethics of any single business leader, or any professional for that matter. But there is clearly a lot of cynicism out there these days. So if you’re not good at leading cynical people, chances are you’re not good at leading a lot of the people you’re supposed to be leading.

I like to think I know a bit about what it takes to lead cynical people because I’m one of them, by nature and by nurture. Often, business leaders are advised not to hire people like me. The conventional wisdom holds that cynics’ jaundiced world view makes us too difficult to be led. Worse, our rotten attitudes are going to infect our coworkers.

This is untrue. It’s possible that a small number of us are truly irredeemable cynics. But most of us are not. “Scratch any cynic and you will find a disappointed idealist,” as George Carlin, the late, great comedian (and a world-class cynic), put it. Cynics can make great employees, but only if you can allay our suspicions about your motives and reignite our idealism. To achieve that, I earnestly propose three simple guidelines. Read the rest here.

Tuesday, January 23, 2018

When a Japanese Company Adopted English as a First Language

strategy+business, January 23, 2018

by Theodore Kinni

On March 1, 2010, Hiroshi Mikitani, the founder and CEO of Rakuten, a Japan-based e-
retailer, announced that henceforth English would be the official language of the company’s 10,000 employees. Moreover, declared Mikitani, who often was billed as Japan’s Jeff Bezos, any employee who didn’t become fluent in English within two years would face demotion.

The initiative, dubbed “Englishnization” by Mikitani, shocked Rakuten’s 7,000 or so 
Japanese employees — 95 percent of whom did not speak their employer’s newly established lingua franca. It also made headlines around the world, and drew some domestic fire: “It’s stupid for a Japanese company to only use English in Japan when the workforce is mainly Japanese,” said Honda Motors CEO Takanobu Ito. (Five years later, Ito would be out and English would be in at Honda, too.)

Rakuten’s Englishnization didn’t shock Tsedal Neeley, author of The Language of Global Success: How a Common Tongue Transforms Multinational Organizations. “By mandating English,” writes the associate professor at Harvard Business School, “Rakuten was prepared to join the approximately 52 percent of multinational companies that had adopted a language different from that of their originating country in order to better meet global expansion and business needs.”

In The Language of Global Success, Neeley reports the results of her five-year longitudinal study of the initiative, which began a couple of months after Mikitani’s announcement. She also ticks off the reasons companies need a lingua franca. Communication and knowledge exchange top the list. Rakuten was operating in a fast-moving and highly competitive sector. And by 2010, the 13-year-old company was pursuing a strategy of global expansion. It was clear to Mikitani that the language barriers within Rakuten were bogging down everything — integration of acquisitions, management of business units in 27 countries, the minutiae of daily work. For instance, an email from an English-speaking employee in the U.S. to a Japanese colleague required translation, as did the reply and any additional messages — and the translations themselves often required interpretation. As you might guess, even simple exchanges could drag on for days. Read the rest here.