The Transformational Power of Recommendation

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, November 24, 2020

by Michael Schrage




Image courtesy of Paul Giovanopoulos/theispot.com

Wikipedia defines recommendation engines (and platforms and systems) as “a subclass of information filtering system that seeks to predict the ‘rating’ or ‘preference’ a user would give to an item.” But as a tool, technology, and digital platform, recommendation engines are far more intriguing and important than this definition suggests.

In data-driven markets, the most effective competitors reliably offer the most effective advice. When predictive analytics are repackaged and repurposed as recommendations, they transform how people perceive, experience, and exercise choice. The most powerful — and empowering — engines of commerce are recommendation engines.

Recommendation engines have been essential to the success of digital platforms Alibaba, Amazon, Netflix, and Spotify, according to their founders and CEOs. For companies such as these, recommendation engines aren’t merely marketing or sales tools but drivers of insight, innovation, and engagement. Superior recommendations measurably build superior loyalty and growth; they amplify customer lifetime value. Computing compelling recommendations profitably reshapes human behavior.

The influence and purpose of recommendation engines are not limited to customers or consumption. Large employers, most notably Google, have adopted and adapted recommendation engines as internal productivity platforms to nudge workers to their best decision options. Indeed, in late 2016, Laszlo Bock, the senior vice president of people operations at Google, left the company to launch Humu, a recommendation-engine startup for advising workforce behavior change.

While data remains the essential advisory ingredient, the global recommendations revolution reflects profound and ongoing algorithmic innovation, enabling machine learning and AI to power improvements in deep learning and generative adversarial networks. Successful recommendation engines learn how to learn. The more people use them, the smarter they become; the smarter they become, the more people use them. Done right, recommendation engines enable virtuous cycles of value creation.

The networked nudges and prompts of recommendation engines increasingly influence people’s choices in clothing, entertainment, food, and medicine; they also influence the texts we send, which friends we contact, the customers and prospects we prioritize, the experts we seek, the job candidates we hire, the investments we choose, the memos we edit, and the schedules we follow.

But prompts and nudges shouldn’t obscure the subtle but vital design principle that makes the recommendation-engine value cycle more virtuous: Recommendation is about ensuring better options and choices, not obedience or compliance. Recommendation engines don’t seek to impose optimal, best, or right answers on their users. To the contrary, their point and purpose are greater empowerment and agency. Influence, not control, is the algorithmic aspiration. In this, successful recommendation-engine design depends more on how recommenders seek to influence than on how much they know.

Recommendation engines transform human choice. Much as the steam engine energetically launched an industrial revolution, recommendation engines redefine insight and influence in an algorithmic age. Wherever choice matters, recommenders flourish, and this profound digital transformation of choice will only become more pervasive as recommenders become smarter. Better recommenders invariably mean better choices. Read the rest here.

The New Elements of Digital Transformation

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, November 19, 2020

by Didier Bonnet and George Westerman




Image courtesy of Michael Glenwood Gibbs/theispot.com

Since 2014, when our article “The Nine Elements of Digital Transformation” appeared in these pages, executive awareness of the powerful and ever-evolving ways in which digital technology can create competitive advantage has become pervasive. But acting on that awareness remains a challenging prospect.

It requires that companies become what we call digital masters. Digital masters cultivate two capabilities: digital capability, which enables them to use innovative technologies to improve elements of the business, and leadership capability, which enables them to envision and drive organizational change in systematic and profitable ways. Together, these two capabilities allow a company to transform digital technology into business advantage.

Digital mastery is more important than ever because the risks of falling behind are increasing. In 10 years of research, we have seen digital transformation grow increasingly complex, with a new wave of technological and competitive possibilities arriving before many companies mastered the first. When we began our research, most large traditional enterprises were using digital technologies to incrementally improve parts of their businesses. Since then, this first phase of activity has given way to a new one. Advances in a host of technologies, such as the internet of things, artificial intelligence, virtual and augmented reality, and 5G, have opened new avenues for value creation. More important, leaders now recognize the need for — and the possibility of — truly transforming the fundamentals of how they do business. They understand that they have to move from disconnected technology experiments to a more systematic approach to strategy and execution.

Some companies have successfully graduated from the first phase of digital transformation and are diving into the second. But many are still floundering: In 2018, when we surveyed 1,300 executives in more than 750 global organizations, only 38% of them told us that their companies had the digital capability needed to become digital masters, and only 35% said they had the leadership capability to do so. This has become more worrisome than ever: As COVID-19 accelerates the shift to digital activity, digital masters are widening the gap between their capabilities and those of their competitors.

These conditions prompted us to reexamine the elements of digital transformation that we proposed in 2014. While strong leadership capability is even more essential than ever, its core elements — vision, engagement, and governance — are not fundamentally changed, though they are informed by recent innovations. The elements of digital capability, on the other hand, have been more profoundly altered by the rapid technological advances of recent years. Read the rest here.

When Employees Speak Up, Companies Win

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, November 17, 2020

by Ethan Burris, Elizabeth McCune, and Dawn Klinghoffer





Business headlines suggest that employees are speaking up more than ever. Activist employees are calling out their companies over where and with whom they do business, burned-out employees are asking for more and more unique work-life accommodations, and concerned employees are raising questions about hiring practices and promotion decisions in light of institutional biases. Often, these instances of speaking up — called employee voice behaviors — result in an embarrassingly public airing of organizational issues.

Yet our research reveals that the headlines are not an accurate reflection of the current state of employee voice. We asked 6,000 employees of a Microsoft business unit to tell us how often they spoke up to their managers. In addition, we asked how many of 15 topics they spoke up about, such as their immediate job assignments, the culture of their teams, how employees are treated across the organization, the strategy of the company, and the work-life balance alternatives available to them. We found that relatively few employees consistently share their thoughts and opinions about a multitude of work issues with their managers: Just 13.6% of the surveyed employees said that they speak up on more than 10 of the topics. Slightly more are silent: In fact, 17.5% said they do not speak up at all. The largest group of employees — 47.1% — said they speak up on five or fewer topics, typically on issues related to their jobs.

If we assume that these findings reflect similar tendencies in other organizations, leaders should be concerned, because employee voice is not a voice of complaint or protest per se. It encompasses the willingness of employees to speak up about opportunities for improvement. These efforts are not a prescribed part of employees’ jobs; they are a voluntary communication of constructive ideas to leaders that enable learning and effective change in work groups of all sizes, from teams to entire organizations. Yet these efforts to tell the truth can involve confronting leaders, who can feel challenged or even threatened, especially when the proposed changes involve things that leaders have helped create or for which they are responsible.

More and more, companies are seeking to expand efforts to listen to their employees by inviting them to share their opinions and ideas in areas that are outside of their day-to-day tasks. For instance, in 2014, in the aftermath of a recall of 6 million vehicles for an ignition flaw linked to at least 13 deaths, General Motors launched its Speak Up for Safety program, which asked employees across the company to speak up about anything that might impact customer safety. The growing use of innovation platforms and ecosystems is another example. In addition, during the global COVID-19 pandemic, we’ve seen companies frequently survey employees on topics such as physical and mental health and their working conditions.

The effectiveness of all these efforts depends on employees’ willingness to use their voices. In this study, we sought to examine the benefits of a more expansive employee voice, the factors that determine voice behaviors, and the ways in which companies can encourage those behaviors. Read the rest here.

What people like you like

strategy+business, November 11, 2020

by Theodore Kinni




Photograph by Paper Boat Creative

I don’t set much store in the endless stream of recommendations offered by Amazon, Netflix, Spotify, and most other online businesses. Occasionally, a book, flick, or song pops up that delights me, but most of the suggestions I get either miss the mark or appear suspiciously advantageous to recommendation engine operators and their advertisers.

Michael Schrage, visiting fellow at the MIT Sloan School of Management’s Initiative on the Digital Economy and s+b contributor, awakens us to the potential of delightful discovery in his latest book, Recommendation Engines. “Recommendation inspires innovation: that serendipitous suggestion—that surprise—not only changes how you see the world, it transforms how you see—and understand—yourself. Successful recommenders promote discovery of the world and one’s self,” Schrage writes in its introduction. “Recommenders aren’t just about what we might want to buy; they’re about who we might want to become.”

If this smacks of techno-utopianism, well, there is a strong strain of that ideology running through Recommendation Engines. For the most part, however, Schrage grounds this rosy view in the powerful effects that recommenders are already producing and balances it with acknowledgment of these systems’ potential for abuse. He also provides a short history of recommendations and a suitably technical description of how recommendation engines work and are built.

To date, the powerful effects of recommenders have manifested themselves mostly in commerce. Schrage cites a variety of facts in this regard: a survey that found recommendations account for approximately 30 percent of global e-commerce revenues; another that found online shoppers are 4.5 times more likely to buy after clicking on a recommendation; and research that “strongly suggests” recommendations drive roughly a third of Amazon’s sales. Read the rest here.

The Rising Risk of Platform Regulation

Learned a lot lending an editorial hand on this article:

Sloan Management Review, November 11, 2020 

by D. Daniel Sokol and Marshall Van Alstyne 

On Oct. 6, 2020, the U.S. House Judiciary Committee’s antitrust subcommittee released a 450-page report following a 16-month inquiry into the digital economy. It recommended fundamental changes to antitrust laws generally and targeted the Amazon, Apple, Facebook, and Google technology platforms specifically. Several weeks later, the U.S. Department of Justice filed suit against Google, accusing it of using “anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising and general search text advertising.” Similar regulatory initiatives aimed at platforms are underway around the world, including in the European Union, United Kingdom, Japan, Korea, and India.

The blizzard of regulatory action swirling around platforms is producing new rules and laws, expanded powers for existing regulatory authorities, and the establishment of new regulatory authorities. These outcomes will not only affect Big Tech but also many other companies, in industries such as construction, health care, finance, energy, and industrial manufacturing, that have adopted or are considering adopting platform business models.

Few platform operators and owners have fully considered how the growing regulatory risk — which includes breakups, line-of-business restrictions, acquisition limits, and interoperability and data portability mandates — could derail their businesses. As a result, they could be caught off guard, just like many companies were caught off guard when the Sarbanes-Oxley Act of 2002 mandated board restructurings and expanded executive financial accountability in the aftermath of accounting scandals. Read the rest here. 

Best Business Books 2020: Management

strategy+business, November 9, 2020

by Theodore Kinni



Illustration by Martin O’Neill; icon by Harry Campbell

This year, COVID-19 upended management-as-usual. Sure, managing is still a matter of getting things done in organizations — divvying up objectives into tasks, ensuring employees have the resources and skills to complete the tasks, overseeing their progress, and helping them when they get bogged down. But where and how people work has changed — radically and overnight in many companies and, in some, maybe permanently.

None of this year’s best business books on management were written for managers per se. But each focuses on capabilities that can help managers identify and cope with pandemic-related challenges.These developments have given rise to new needs and stresses that affect the people you are responsible for managing — needs such as going to work (or going back to work) safely, and stresses such as working while surrounded by kids instead of colleagues — and thus, they’ve also affected your performance as a manager.

In the year’s best business book on management, Tiny Habits, Stanford University professor B.J. Fogg shows how to change your behavior and help others change theirs, too — an essential skill at a time when we are all being called upon to develop new habits. In Acting with Power, Deborah Gruenfeld, also at Stanford, explains how an unconventional view of power can enable you to support people in ways that far exceed the limits of your positional authority. And in You’re Not Listening, journalist Kate Murphy offers an uncommonly insightful exploration of how to actually meet the dictates of an exhortation we’ve all heard before: “Listen!” Read the rest here.

To Cut Costs, Know Your Customer

Learned a lot lending an editorial hand here:

Sloan Management Review, November 4, 2020

by Vikas Mittal, Shrihari Sridhar, and Roger Best




Image courtesy of Robert Neubecker/theispot.com

The economic disruptions caused by the ongoing pandemic are forcing myriad decisions on CEOs of B2B companies. Often, the most pressing decisions are whether and how to cut costs.

As in business downturns past, some CEOs are implementing across-the-board salary cuts and widespread furloughs, while others are taking a more piecemeal approach — renegotiating vendor contracts; trimming underperforming products, regions, and divisions; and shifting to lower-cost sales channels. Our research shows that both of these approaches can be misguided.

A more effective cost-cutting strategy should begin — and end — with customer focus.

Customer focus tends to be overlooked during cost cutting because it is usually seen as a revenue enhancement strategy. This is a mistake: B2B companies that ignore what customers value when they are cutting costs leave a lot of money on the table.

In our benchmark assessment of 626 publicly traded B2B companies and 4,105 of their customers, we found that companies with high levels of cost cutting and low levels of customer value — as measured by customer satisfaction — had the worst gross margins, while companies with high levels of both cost cutting and customer value had the highest margins. In other words, cost cutting that is devoid of customer value sank margins.

B2B companies can pursue cost reduction with a customer focus in three ways: by reducing value-added waste to deliver more compelling customer value, by improving the effectiveness of customer acquisition and retention, and by narrowing focus to those strategic initiatives best aligned with customer value. Read the rest here.

The Six Dysfunctions of Collaborative Work

Learned a lot lending an editorial hand here:

Connected Commons, June 2020

by Rob Cross and Inga Carboni


Beth was excited when the CEO asked her to take over a high-profile commercialization project that had been struggling. The leader in charge of the effort—one expected to double the technology firm’s revenues in the coming decade—had recently accepted another job. Beth accepted the job on the spot.

In her first week, Beth dug in. She found the project fully funded and staffed by 64 carefully selected people from departments across the company, including engineering, marketing, finance, and quality assurance. The threeday, offsite visioning session held to launch the project had been attended by the entire team and was, by all accounts, a resounding success. Three concurrent work-streams—focusing on research, product development, and marketing and sales—were identified and a well-respected leader was appointed for each one.

Yet, ten months later, the project was badly behind schedule and bogged down. Everyone with whom Beth spoke was frustrated with the slow pace of progress. They were all pointing fingers, but in different directions. The CEO believed the problem was a failure of leadership. The departing project leader blamed team members for not devoting enough time to the project. One team member said the problem was poor meeting management; another said key decisions weren’t being made in a timely manner.

What should Beth do? Appoint new workstream leaders? Relaunch the project? Restructure the group or the work? Add more people to the project team? Schedule more meetings or provide an online work platform? ...read the rest here