Sunday, March 30, 2014

Killer quotes #6

"There are many pleasant fictions of the law in constant operation, but there is not one so pleasant or practically humorous as that which supposes every man to be of equal value in its impartial eye, and the benefits of all laws to be equally attainable by all men, without the smallest reference to the furniture of their pockets."

             —Charles Dickens, Nicholas Nickleby

Wednesday, March 26, 2014

The d'oh of healthcare reform

In which I publicly complain about healthcare reform on s+b's blog for the first and last time:

The Long Road to U.S. Healthcare Reform

The team keeps sending me emails. The March 31 application deadline for coverage in 2014 is fast approaching and they’re concerned: “Millions of Americans are already benefiting from the quality, affordable health coverage available to them through the Marketplace. We want to make sure you join them.”

I appreciate that. Really. I can’t remember a time in the past 20 years when our health insurer has expressed any interest in whether my wife and I had quality, affordable coverage. Instead, it sent us annual rate increases—usually 15 to 20 percent—accompanied by a generally incomprehensible policy. Every three to four years, as the cost of our policy made the draconian risks of self-insuring start to look good, my wife renegotiated it—that is, she reduced our coverage until it reached a level that we could afford.

Of course, I was gung ho about healthcare reform. For years, I happily anticipated the competitively priced insurance that would be available on the government-run exchanges. In good humor, I waited out the silly death-panel debates and the heroic debugging of And then, finally, I gleefully registered and followed the simple instructions to get my quote. The payoff? Higher deductibles and less comprehensive coverage at a cost approximately US$100 per month more than our existing policy. D’oh!

This is a long-winded explanation for why I wasn’t particularly thrilled to receive an advance copy of the long-titled Reinventing American Health Care: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System (Public Affairs, 2014), by Ezekiel J. Emmanuel. The author was a beacon of sanity throughout the battle over reform. He is the chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania and served as a special advisor for health policy to the director of the White House Office of Management and Budget for a couple years.

In his new book, Emanuel does what he does best—clearly and logically explains the U.S. healthcare system. In doing so, he reprises many of the promises that he and other reform advocates have made before in the guise of six “megatrends.”
  • The Affordable Care Act (ACA) will force a radical restructuring of the insurance industry as providers and payors integrate, and markets become more competitive.
  • The chronically and mentally ill will get better care.
  • The demand for highly expensive acute care will fall.
  • Employer-sponsored health insurance will disappear.
  • Healthcare cost inflation will subside.
  • Changes in medical education will eliminate the shortage of health professionals.
Theoretically, this prescription is just what the doctor ordered. The only problem is that Emanuel’s megatrends are predications about the future, and as he says, “Making predictions is highly risky.” The reality, which Reinventing American Health Care does not shirk, is that the ACA will not deliver the above benefits until sometime between 2020 and 2025 —and there are many ways in which it can go off the rails between now and then.
So, it turns out that quality, affordable healthcare is still quite a ways away for me and my wife. In the meantime, our insurer says that our policy is going to get cancelled next year because it supposedly doesn’t conform to the standards mandated by the ACA, and our choices on are significantly more expensive than the $1200 per month we’re paying now. Good thing we dodged the socialized medicine bullet.

Thursday, March 20, 2014

Kotter and McGrath on management structures for change

In my weekly book post for s+b's blog, both John Kotter and Rita Gunther McGrath argue that change will inevitably overwhelm hierarchical management systems, but their solutions differ:

Alternative Systems for Corporate Survival
Change, according to Harvard Business School professor emeritus and change management expert John Kotter, is coming faster than ever. And that’s a big problem because change is the great destroyer of corporations.

In Accelerate: Building Strategic Agility for a Faster-Moving World (Harvard Business Review Press, 2014), Kotter argues that companies cannot adapt to change mainly because of their hierarchical management systems. These systems are designed to coordinate large groups of people in the consistent and efficient delivery of products and services—and they do it well. They are, Kotter says, “absolutely necessary to make organizations work.”

Here’s the conundrum: You can’t jettison the hierarchical system that runs your business, but if you don’t, it could kill your company. The very strengths of the hierarchical system become fatal flaws when swift change is required, Kotter says. It slows down communication and the flow of information. The policies, rules, and procedures that govern its workings become barriers to change. Its main focus—the maintenance of business as usual—takes precedence over new business. And the siloes, complacency, and habitual behavior it spawns inhibit new strategic initiatives and innovation. Earlier this year, in an interview with strategy+business, Rita Gunther McGrath discussed this same idea. As an example, she highlighted Kodak’s inability to adapt to the digitization of photography, which led to the 120-year-old company’s bankruptcy in 2012.

So what do you do? In her book, The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business (Harvard Business Review Press, 2013), which Walter Keichel picked as the best strategy book of 2013, McGrath suggests setting up different management systems for different businesses. Core businesses need the hierarchal management system that is focused on efficiency and wringing out every dollar of profit before change inevitably forces you to sell them off or just close them down. Emerging businesses need a more entrepreneurial management system, which is designed to move fast and capture new opportunities.

Kotter has a different prescription. He thinks that both management systems can exist within the same business as a “dual operating system.” Behind the hierarchical system is a secondary system that has a network structure with multiple nodes and connection points, and is charged with executing strategic initiatives. This network has “no bureaucratic layers, command-and-control prohibitions, and Six Sigma processes” and it is “populated by a diagonal slice of employees from all across the organization and up and down its ranks,” writes Kotter. Thus, the people in the network system are simultaneously working in the hierarchical system.

Both these solutions suggest that the Shiva-like destruction of companies is not inevitable. But that doesn’t mean that we’re going to see lots of companies living to Methuselah-like ages. McGrath identified only 10 companies out of all publicly held firms that she thinks have demonstrated an ability to weather the storms created by fleeting competitive advantage. Kotter doesn’t name any of the companies he uses as cases in his book, but in his YouTube video, he says that only “0.001 percent” of companies currently have a dual operating system in place.

Wednesday, March 12, 2014

"The most insightful management training film ever made"

My weekly book post on s+b's blog is up:

The Freaky Friday Management Technique

Ben Horowitz’s first book, The Hard Thing about Hard Things: Building a Business When There Are No Easy Answers (HarperBusiness, 2014), is a humorous and often insightful book of managerial advice that seems certain to attract a big audience. Horowitz is the cofounder of Andreessen Horowitz—a venture capital firm with a portfolio that reads like an homage to the latest Internet bubble—and his popular blog purportedly has close to ten million readers.

The book reveals that Horowitz is a straight shooter with a penchant for quoting rappers. You don’t see a lot of rap lyrics in business books, even though both executives and rappers spend a lot of time talking about money. Like most rappers, Horowitz seems to have picked up his professional chops on the street—but in his case, that means the not-so-mean streets of Silicon Valley. He also has a rapper’s love for profanity. He describes it at length in chapter 6, which leads off with a particularly colorful lyric from the song “All Gold Everything” by Trinidad James. As you might expect from a guy who claims to have “developed CEO Tourette’s syndrome,” Horowitz finds profanity useful in the workplace, with the exception that it not be directed at people: “When the CEO drops the F-bomb, it gets repeated. And that’s good if you want your message to spread throughout the company. (On the other hand, it’s extremely bad if you don’t want your employees talking like a bunch of gangsta rappers.)” C’mon, Ben, isn’t this entire chapter just an elaborate excuse to avoid the adult responsibility of curbing your own tongue?

My favorite tactic in the rather inscrutably titled The Hard Thing about Hard Things, though, is considerably less edgy, and more useful to leaders, particularly those confronting the problems associated with organizational silos.

“Many years ago,” Horowitz writes in chapter 8, “I encountered a particularly tricky management situation. Two excellent teams in the company, Customer Support and Sales Engineering, went to war with each other. The sales engineers escalated a series of blistering complaints arguing that the Customer Support team did not respond with urgency, refused to fix issues in the product, and generally inhibited sales and customer satisfaction. Meanwhile, the Customer Support group claimed that the sales engineers submitted bugs without qualification, did not listen to valid suggested fixes, and were alarmists who assigned every issue the top priority. Beyond the actual complaints, the teams genuinely did not like each other. To make matters worse, these groups had to work together constantly in order for the company to function. Both teams boasted superb personnel and outstanding managers, so there was nobody to fire or demote. I could not figure out what to do.

“Around this time, I miraculously happened to watch the motion picture classic Freaky Friday, starring the underrated Barbara Harris and the incomparable Jodie Foster. (There is also a high-quality remake starring Jamie Lee Curtis and the troubled but talented Lindsay Lohan.) In the film, mother and daughter grow completely frustrated with each other’s lack of understanding and wish they could switch places and, through the magic of film, they do.

“Through the course of the movie,” he continues, “by being inside each other’s bodies, both characters develop an understanding of the challenges that the other faces. As a result, the two become great friends when they switch back. After watching both the original and the remake, I knew that I had found the answer: I would employ a Freaky Friday management technique.

“The very next day I informed the head of Sales Engineering and head of Customer Support that they would be switching jobs. I explained that, like Jodie Foster and Barbara Harris, they would keep their minds, but get new bodies. Permanently. Their initial reactions were not unlike the remake where Lindsay Lohan and Jamie Lee Curtis both scream in horror.

“However, after just one week walking in the other’s moccasins, both executives quickly diagnosed the core issues causing the conflict. They then swiftly acted to implement a simple set of processes that cleared up the combat and got the teams working harmoniously. From that day to the day we sold the company, the Sales Engineering and Customer Support organizations worked better together than any other major groups in the company—all thanks to Freaky Friday, perhaps the most insightful management training film ever made.”

Excerpt is reprinted courtesy of HarperBusiness, an imprint of HarperCollins Publishers. Excerpt © 2014 by Ben Horowitz.

Tuesday, March 11, 2014

Be Our Guest Q&A

Adriana Dunn over at StellaService's happycustomer blog kindly invited me to do a Q&A on Be Our Guest. Here it is:

Book of the Month: Be Our Guest: Perfecting the Art of Customer Service by Ted Kinni

Walt Disney shows Disneyland plans to Orange County officials in December 1954. Photo courtesy Orange County Archives.

In the Disney Institute’s Be Our Guest: Perfecting the Art of Customer Service, author Ted Kinni reveals the secrets to delivering magic to your customers the Walt Disney way.

The Walt Disney World resort enjoys a 70% return customer rate, and the Disney Approach to service has led to three decades of providing professional development programs through its Disney Institute. But just how does a company that was “all started by a mouse” and now employs 175,000 cast members worldwide ensure that its customers’ expectations are consistently being exceeded on such a grand scale? The Disney Magic, as you’ll read in Be Our Guest, is part art and part science — and Kinni details how the company approaches raising the bar at every customer touchpoint.

We think this book makes for a great read regardless of your industry or job title, especially given how much room there is for improvement when it comes to customer service. We spoke with Kinni over email to get a sense of what it takes to deliver Disney-level Quality Service to customers.

Your book discusses the “offstage” – the nuts and bolts of creating practical magic at Disney. What are some of the key takeaways from the process in which Disney consistently delivers exceptional customer experiences?

TK: The key takeaways in Be Our Guest are embedded in something that the Disney Institute calls the Quality Service Compass. There are four points on the compass. The first point is the art and science of guestology. You need to know and understand your customers (at Disney parks and resorts, customers are called guests, which helps create an entirely different mindset about how they should be treated). The second point is quality standards. You need to establish the criteria necessary to deliver great service and the metrics needed to determine how well you are delivering it. The third point is delivery systems. They are the three systems—cast (that’s Disney-speak for employees), setting, and processes—needed to deliver your quality standards. The fourth compass point is integration. You need to integrate the three systems so that they work together as one. If you box the compass—that is, if you work through each compass point in sequence, you can consistently deliver exceptional experiences.

Businesses are often faced with the challenge of scaling customer service operations. Disney employs 175k people worldwide — how have they successfully scaled Quality Service as the organization continues to expand?

TK: The secret is a systematic approach to service. When you look at companies that fail to scale customer experiences and service efforts, you usually find that they have missed one or more of the compass points. Sometimes, a company loses touch with the market as its customer base grows and changes. Sometimes, a company fails to define and measure its quality standards, and thus, there are no clear targets to hit. And often, the delivery systems break down or work at cross purposes to each. Maybe there’s a big influx of new employees who don’t get trained properly or the company’s technological capacity is overwhelmed by a surge of new customers. If you haven’t taken a systematic approach to service, you don’t have anything to scale.

What are some of the benefits the Walt Disney Company has enjoyed as a result of its relentless dedication to Quality Service?

TK: Brand equity, longevity, financial success. In 2013, Disney was #14 on Interbrand’s list of the world’s most valued brands. The brand is valued at $28 billion. The company has been around for 90 years and it’s now the largest media conglomerate.

A lot of this success is attributable to Disney’s park and resorts business. Walt Disney founded the modern theme park industry in 1955, when he opened Disneyland. Today, the industry is highly competitive and guests just don’t come back if they have a bad experience, especially when discretionary spending is constrained. Yet, Disney’s parks and resorts earned $14 billion in 2013 compared to $11.5 billion in 2008. And the Disney name is on eight of the top 10 most visited parks in the world. That’s a testament to Quality Service.

You note several times in the book that the simple fact is that everything speaks to customers. How does this apply to ecommerce websites where the customer is typically only interacting with technology throughout the transaction?

TK: The idea that everything speaks to the customer—that every customer touch point, whether it involves person-to-person contact or not, communicates something about a company’s attitude about service—is really important in ecommerce. Visiting a website is like visiting a theme park; using an app is like getting on a ride. Everything on every page and every click in every process should be designed to enhance the customer experience. If it doesn’t, you risk losing the customer.

What can ecommerce executives focused on customer service learn from the Disney approach to service?

TK: They can learn a lot, but here’s two big things. The first is that customer satisfaction is not enough. Exceeding customer expectations is the key to brand differentiation and customer loyalty in ecommerce and every other kind of business. Every customer arrives with a set of expectations. If that set of expectations isn’t satisfied, that customer isn’t going to come back. But that doesn’t mean the opposite is true: Customers who are satisfied might or might not come back. They might not come back if a competitor launches an interesting, new website or if their friends recommend another site. That’s why Disney thinks that the goal of service should be exceeding guest expectations instead of simply satisfying them. If you’re are committed to exceeding expectations, you will be the company with the best site and your customers will be recommending you to their friends.

The second is that service excellence isn’t built on heroic saves. It’s about eliminating the need for heroic saves. Quality Service is the result of a measured, consistent, and managed approach to understanding and exceeding the expectations of every guest at every touch point. It is hundreds and hundreds of little things that add up to world-class service, and for all of those things to happen, service excellence has to be embedded in the mindset of every employee, in the corporate strategy, and in the day-to-day operations of the business.

What types of objective data does Disney collect on its customers, and how is it applied to improve operations and service levels?

TK: The data that guestology generates comes from an ever-growing number of demographic and psychographic sources—surveys, listening posts, utilization studies, etc. Right now, the parks and resorts business is spending upwards of $1 billion to roll out the My Magic+ system, which will provide RFID-enabled wristbands to park visitors. Eventually, these wristbands will streamline and personalize the experiences of 30 million park visitors annually. They will also generate an endless stream of data about how Disney’s guests spend their time in the parks. All of this data will become fodder for continuing to improve every aspect of the guest experience.

How do you think Walt Disney would answer the question: Is the customer always right?

TK: Channeling Walt is way above my pay grade, but I bet he would say yes and no. Everything Walt ever did—animated and live films, television, and theme parks—was created with the customer in mind. He said, “You don’t build it for yourself. You know what the people want and you build it for them.” So, in that sense, Walt was convinced that the customer was always right.

I don’t know if Walt would say that every individual customer was always right. Nobody is always right. But we do know that he believed that all customers must be treated with respect and that whenever possible their expectations should be exceeded. That’s the ideal, right?

Wednesday, March 5, 2014

What doesn't work for women at work

My weekly book post on s+b's blogs is up today:

Outing Gender Bias
I’ve never had any problems with women in the workplace. In fact, as far as I’m concerned, they can have the workplace. But, unfortunately, that says more about how I feel about working than how I feel about working with women. And with International Women’s Day approaching, I find myself compelled to admit that I’m as likely to exhibit gender bias as the next guy.

Here’s how I know: A while back, I attended an all-hands strategy+business editorial meeting during which we discussed our coverage of business books, among many other things. I had an idea about our book reviews, and as is my wont, I blurted it out. Everybody liked it. We decided to adopt it. I patted myself on the back (also my wont): Good thinking, Ted!
A day later, while considering what needed to done to implement the idea, it dawned on me that I had heard the idea before. Not once, but twice. In each of the previous two all-hands editorial meetings, female members of the team had suggested the exact same idea. I remembered that my reaction had been a distinct “meh” and that their suggestions hadn’t gone anywhere…except to the area of my mind reserved for stolen ideas. (My wife and writing partner believes that this particular area of my brain is extremely well developed.)

As it turns out, there was something more insidious going on than run-of-the-mill intellectual thievery. Joan C. Williams, a professor at the University of California Hastings College of Law, and the founder and director of its Center for WorkLife Law, and her daughter, Yale University School of Law student Rachel Dempsey, find that the “stolen idea” phenomena is related to a common type of gender bias that they call “prove it again!” In their book, What Works for Women at Work: Four Patterns Working Women Need to Know (NYU Press, 2014), they explain that the “prove it again!” pattern requires women to demonstrate their competence repeatedly, far more often than men, because “information about men’s competence has more staying power than equivalent information about women” the rest here