Thursday, December 18, 2014

A robot ate my job

My latest book post on the strategy+business blog is up:

Automation’s Adverse Effects

Nicholas Carr is an every-silver-cloud-has-a-dark-lining kind of guy. In Does IT Matter? Information Technology and the Corrosion of Competitive Advantage (Harvard Business Review Press, 2004), he argued that IT is not a sustainable competitive advantage because new tech can be adopted so quickly by other companies. In The Big Switch: Rewiring the World, from Edison to Google (W.W. Norton, 2008), he articulated the Big Brother–like social and economic consequences of the then-nascent idea of cloud computing. And in The Shallows: What the Internet Is Doing to Our Brains (W.W. Norton, 2010), Carr contended that being online can rewire our brains in harmful ways.
I don’t always agree with Carr, but I read his books because they are always timely, thought provoking, and highly useful for puncturing the sometimes irritating claims of digital utopians. His new book, The Glass Cage: Automation and Us (W.W. Norton, 2014), is no exception.
The Glass Cage arrives close on the heels of breathless announcements about driverless cars and delivery drones, the kinds of automation advances that promise to take us into uncharted territories. They also prompt Carr to wonder what might happen to us as machines take over more and more of the tasks that once required the human touch. 
“If you want to understand the human consequences of automation,” Carr writes, “the first place to look is up. Airlines and plane manufacturers, as well as government and military aviation agencies, have been particularly aggressive and especially ingenious in finding ways to shift work from people to machines.”
The silver cloud of aviation automation has been an impressive reduction on accidents: From 1962 through 1971, there were 133 deaths per million passengers on U.S. commercial flights; from 2002 through 2011, there were 2 deaths per million passengers. The dark lining, Carr reports, is that “a heavy reliance on computer automation can erode pilots’ expertise, dull their reflexes, and diminish their attentiveness.” This has resulted in avoidable accidents attributed to pilot error, such as the loss of a commuter flight heading for Buffalo, NY, in which 50 people died, and the downing of a Rio de Janeiro-Paris flight, in which 228 people died, both in 2009.
While these are dramatic examples outside the norm, Carr says they show how “automation remakes both work and worker.” They also raise a question that leaders in all kinds of companies might want to keep in mind as they pursue the efficiencies of automation: What will the cost be in terms of human capital?
One cost is the possibility that more and more errors will arise from automation complacency, in which the seeming infallibility of computers lulls us into a false sense of security, and automation bias, in which we give undue weight to digital information. Another cost could be the loss of the employee skills that have been automated—and worse, an inability to relearn those skills once they are gone. Yet another, according to Carr, could be a stifling of “curiosity, imagination, and worldliness”—which sounds pretty bad in a time when innovation is often touted as the only reliable competitive advantage.
What’s needed to avoid these consequences is an approach to automation that captures the consistencies and efficiencies that it offers without losing the human judgment and intuition that machines can’t replace. This is the goal of human-centered automation. “Rather than beginning with an assessment of the capabilities of the machine,” writes Carr, “human-centered design begins with a careful evaluation of the strengths and limitations of the people who will be operating or otherwise interacting with the machine… The goal is to divide roles and responsibilities in a way that not only capitalizes on the computer’s speed and precision but also keeps workers engaged, active, and alert—in the loop rather than out of it.”
The Glass Cage is not as much a solution to automation’s dark lining as it is a reminder that every business decision involves tradeoffs. Nicholas Carr is giving us a look at what those tradeoffs might entail as automation reshapes the world of work. It’s going to be up to the companies that adopt it to figure out how to capture its benefits without succumbing to its deleterious side effects.

Tuesday, December 9, 2014

Raises by the pound?

My latest s+b book post:

Improving Employee Well-Being by Default

Companies are instituting all sorts of health programs aimed at enhancing the quality of life and productivity of their employees, and reducing costs. The other day, for example, a friend showed me her Fitbit—a digital pedometer—provided by her Fortune 500 employer. The company even created a friendly competition around the device that includes healthcare rebates and gift cards for those employees who record a fixed number of steps, and rewards to those who record the most steps.
Although these kinds of programs certainly encourage employee fitness and health, Cornell University marketing professor Brian Wansink says that too often “wellness programs are like New Year’s resolutions: They’re enthusiastic and bold, but they never seem to deliver.” The problem, which Wansink explains in Slim by Design: Mindless Eating Solutions for Everyday Life (William Morrow, 2014), is that programs like the one around Fitbit require employees to make a conscious effort to become healthier. As a result, they are easily tripped up by their unconscious behaviors and emotions.

Wansink’s solution, which will sound familiar to readers of cognitive psychologists like Daniel Kahneman and behavioral economists like Dan Ariely, is to make healthy choices the default choices for employees. “Becoming slim by design works better than trying to become slim by willpower,” writes Wansink. “That is, it’s easier to change your eating environment than it is to change your mind.”

That’s why he likes commonsense and easily implementable ideas such as putting free fruit in break rooms instead of donuts; signs that give the number of calories on vending machine choices and loading the least-healthy options in the lowest slots of the machines; and in cafeterias, making salad the standard side dish and offering half-size dessert portions.

These ideas only touch the surface of the many ideas that Slim by Design offers for the workplace, as well as four other “zones that booby-trap most of our eating”—home, restaurants, grocery stores, and school lunchrooms. The basis of these ideas is research that Wansink has conducted over the past quarter-century, most recently at the Cornell University Food and Brand Lab, where he serves as director.

In one of those studies, Wansink and his team discovered that moviegoers not only ate less when snacks were packaged in smaller bags, but that more than half of the subjects said they would willingly pay 20 percent more for the smaller packages. He recalls reporting that counterintuitive finding to a couple of dozen Nabisco executives in 1996, who were “staring at me with their mouths frozen open—like I was Medusa with snakes for hair or like I had just finished yodeling.… Just like in a cartoon, I could see a big collective thought bubble above their heads: ‘SELL LESS AND MAKE MORE?’”

One idea in Slim by Design to improve the health of employees really stood out: Make 10 percent of manager’s pay contingent on improving the health of the employees he or she supervises. “Imagine what would happen if your boss—along with the other managers in your company—were graded, promoted, and paid partly on how she tried to help make you healthier. Again, healthy employees are good for business—fewer sick days, fewer medications, and fewer heart attacks,” says Wansink. “Yet, if even just 10 percent of your manager’s annual salary was based on what she did last year to help improve your health, it would be okay—not weird—for you to sit on a highway-cone-orange exercise-ball chair instead of a black office chair. One-on-one walking meetings would become normal, and desktop lunches might start to look antisocial. You might be thanked when you bring in fruit on your birthday but given the stink eye if you brought two dozen donuts or five pounds of bagels.”
What would managers think of such a plan? Wansink asked a group of them if they would rather work for a company that tied 10 percent of their evaluations to employee wellness or one that didn’t. The result: 64 percent said that they wanted to work for the former company, believing it to be “a more dynamic, progressive industry leader, with room for more advancement.”

Sounds like a winning scenario to me, unless you’re the employee who brought in those donuts.

Tuesday, December 2, 2014

Fast, simple, cheap experimentation

My latest book post on strategy+business:

How to Avoid Bad Investments in Good Ideas

In late 1999, while it was still the 800-lb gorilla in the video rental market, Blockbuster Video called in some outside help to address its biggest customer complaint: late fees. One of the calls was to Michael Schrage, then a research associate at MIT Media Lab, whose book, Serious Play: How the World’s Best Companies Simulate to Innovate, had been recently published by Harvard Business School Press.

Schrage’s brief, as he explains it in his new book, The Innovator’s Hypothesis: How Cheap Experiments are Worth More Than Good Ideas (MIT Press, 2014), was simple: “Help Blockbuster transform late fees from a primary pain point into a marginal concern for the company and its customers.” So he did some poking around in Blockbuster’s databases and stores.

Schrage found that the hapless customers who were paying the most in late fees were also the company’s most prolific renters. And even as they continued to patronize the company, these customers were venting their frustration to Blockbuster employees, as well as to other existing and potential customers. Several of them sued the company. (One of them, Reed Hastings, turned out to be something less than hapless. After being charged US$40 in late fees on Apollo 13, he founded Netflix, which had no late fees and played an instrumental role in driving Blockbuster into bankruptcy in 2010.)

“But,” writes Schrage, who has also contributed to s+b, “this seething ‘renters’ rebellion’ coexisted with an irrefutable business fact: The money was great.” In those pre-streaming days, analysts estimated that that 20 percent or more of Blockbuster’s pretax profit came from customers who couldn’t get it together to return rentals on time.

Blockbuster was considering several costly and complicated solutions to the conundrum, but Schrage thought that the company didn’t know enough about its late-fee customers to undertake a major initiative. Instead, in a meeting with management, he proposed a simple, inexpensive experiment in which a dozen or fewer Blockbuster stores would send reminders to customers to return movies before late fees were incurred. “I went down in flames,” recalls Schrage.

Blockbuster wanted to eat its cake and have it, too. The company was looking for a big, strategic-level solution that would eliminate the customer service problem without putting its revenues at risk. The one it adopted—an extended rental period after which the customer was charged the full price of the movie—proved not only unpopular, but illegal. The plan was abandoned, the company reinstituted its original late fee policy, and the downward spiral continued.

In rejecting his proposal, Schrage claims that Blockbuster misunderstood the true nature of innovation: He cites economist Joseph Schumpeter who called successful innovation a feat of will, not intellect. Further, he says the company missed the importance of uncomplicated, cheap, and fast experimentation.

Schrage’s thesis in The Innovator’s Hypothesis is that “creative experimentation, with and within constraints, makes high-impact innovation a safer, smarter, simpler, and more successful investment.” Experimentation weeds out otherwise seductive ideas that can’t be implemented, like the plan Blockbuster adopted . It brings to light insights that lead to unanticipated solutions. It also creates a bias for action: When you run an experiment, you’re actually doing something, not just talking about it.

Accordingly, half of Schrage’s new book is devoted to an innovation methodology called 5x5 that captures the benefits of experimentation. In the 5x5 approach, writes Schrage, “A minimum of 5 teams of 5 people each are given no more than 5 days to come up with a portfolio of 5 ‘business experiments’ that should take no longer than 5 weeks to run and cost no more than 5,000 euros to conduct. Each experiment should have a business case attached that explains how running the experiment gives tremendous insight into a possible savings of 5 million euros or a 5-million-euro growth opportunity for the firm.”

Schrage says that he’s been facilitating these 5x5 exercises in companies, under the auspices of MIT’s Sloan School of Management and the Moscow School of Management since 2009. The results: “There are always—without exception—at least three or four experiments that make top management sit up straight, their eyes widening (or narrowing, dependent on temperament), and incredulously ask, ‘We can do that!?’”

At a time when fast-track innovation is invariably pegged as a prerequisite of corporate success, 5x5 sounds like it might make a pretty interesting business experiment in and of itself.