Friday, December 09, 2016

Are You a "First-Principle" Thinker?

In last week’s New York Times Corner Office column, Adam Bryant interviewed Abe Ankumah, CEO and founder of the software company Nyansa. Ankumah discussed the importance of cultivating “first principle” thinkers in your organization. He wants people who don’t just to creating a solution without first understanding and defining the problem in a crystal-clear fashion. Here’s Ankumah explaining his “first principle” approach: 

I think start­ups kind of take on the value system of their founders. There are three of us who started the company, and we’re all first­-time entrepreneurs. We tend to be very “first principle” thinkers. What I mean by that is when you’re trying to solve a problem, you start by trying to understand the essence of the problem, rather than starting with what the answer should be and then working your way to justifying it. So it’s all about making sure that everyone understands the problem we’re trying to solve. And to do that, you have to maintain a broader perspective and listen very carefully to people.

Thursday, December 08, 2016

The Cost of Not Speaking Up

David Maxfield has written a good article for Harvard Business Review titled, "How a Culture of Silence Eats Away at Your Company." He argues that people often say that they would speak up if they had a serious concern or dissenting opinion at work, but in an actual situation, they tend to be much more reluctant. Unsurprisingly, people say one thing and do another. My experience discussing this topic with many managers in a variety of industries confirms Maxfield's observation. Maxfield goes on to explain a simple experiment he conducted on this topic: 

At VitalSmarts, we’ve researched the propensity for people to stay silent before. In a previous study, we asked people what they would do if someone cut in front of them in line. Most people said they’d promptly and skillfully tell the person to head to the back of the line. But when we put their predictions to the test, we found something else. We went into a busy mall with confederates and a hidden camera to see what people really do when faced with a line-cutter. Here’s what we found: The line-cutting victims stand around looking frustrated yet never say a word. A few make dirty faces behind our confederates’ backs or complain to their neighbor. In our study, only one in 25 spoke up.

What's the downside of not speaking up? Naturally, the most crucial danger is that key risks will remain hidden in organizations. Bad news will not rise to the top. In the most extreme circumstances, a catastrophic failure could occur. Consider the costs of people not speaking up at GM with regard to the ignition switch scandal, or the similar dynamic that occurred at Volkswagen with regard to the emissions testing scandal. 

Maxfield argues, though, that there are other very real costs of a culture of silence. He makes the point that people don't simply remain silent. They waste a great deal of time and energy in their frustration over the issue. Here's an excerpt from his article:

Instead of speaking up in these situations, our subjects admitted to engaging in one or more resource-sapping behaviors including: complaining to others (78%), doing extra or unnecessary work (66%), ruminating about the problem (53%), or getting angry (50%). These behaviors aren’t just unhelpful; they’re costly. We found the average person wasted 7 days complaining, doing unnecessary work, ruminating about the problem, or getting angry — instead of speaking up. A shocking 40% of our respondents admitted to wasting two weeks or more.

Wednesday, December 07, 2016

An Effective Fix for Bored, Disengaged Employees

Chief Learning Officer magazine reported this week on a study by Udemy about boredom and disengagement in the workplace.  The study found that 43% of respondents were bored at work.  80% believed learning new skills would enhance their boredom.  Bored workers were twice as likely to leave the firm.  Females and millennials were more likely than men and baby boomers to report that they were bored at work.  

Why these feelings on the part of so many workers?   People get bored at work for several reasons. First, they are stuck performing the same routine day after day.   People value some variety in their work.   Second, they have no autonomy.   They simply must follow the directives of others, with no ability to suggest and implement better ways to accomplish the organizations's goals and objectives.  Third, they don't understand the big picture.  These workers do not comprehend how their work is contributing to important organizational goals.  The sense of mission is simply not there.   Finally, they are not being challenged.  They are not being asked to learn new skills, take on difficult challenges, and develop personally.  

What's the fix?  Give workers a clear sense of mission.  Show them the importance of their work, how it fits into the bigger picture.  Provide them the autonomy to recommend and execute better ways of getting the work done.  Instill some variety into each person's workweek, so that they are not stuck in a dull routine.  Finally, provide them opportunities for learning and development, through both new challenges on the job or off-line training and education.  

Tuesday, December 06, 2016

Innovative Environments: The Bell Labs Story

Zara: Can Competitors Match Its Fast Fashion Model?

Patricia Kowsmann wrote a terrific article about Zara today.  Zara, as many of you know, is a highly successful Spanish apparel retailer.  In the article Kowsmann explains how quickly Zara can bring a new design to the retail floor, ready for customer purchase.  Here's an excerpt:  

A black, high-collar women’s wrap coat, fastened with a metal ring, was hung out for sale one recent morning at Zara’s flagship store in New York.  “Customers asked for hardware this season,” the manager said, holding out the ring. That kind of feedback, he added, can inspire a new style that reaches his store within weeks.  This coat took 25 days.

Recall that I blogged about The Gap's troubles several days ago.   The Gap finds itself in trouble for several reasons.  One cause of the company's problems is its inability to cope with fast fashion competitors such as Zara.  Kowsmann's article points out that many competitors, including the Gap, have emulated Zara's strategy of bringing manufacturing closer to its retail stores.  This supply chain strategy enables Zara to move more quickly and to adapt more easily to changing customer preferences.  However, Kowsmann explains that simply matching the location strategy that Zara has employed for its manufacturing facilities won't provide the winning formula for many of these retailers. Why?  Here's Kowsmann:

But experts say it would be hard for competitors to replicate the Inditex model without a more thorough overhaul of the way they design, manufacture and distribute their products.  The Spanish retailer’s rivals might move production closer to home, but they “just don’t have an organization set up to react quickly to what is trending,” said Liz Dunn, founder of Talmage Advisors, a retail consulting firm.

In short, Zara's competitive advantage does not come simply from its sourcing strategy.  It entails an entire integrated system of activities.  The New Yorker's James Surowiecki once wrote about the company, and he explained this very point.  Zara has a whole package that is very hard to imitate.  Placing factories closer to stores may have some benefits, but that doesn't mean these rivals can match Zara's fast fashion success.

Tuesday, November 29, 2016

Will Analytics Save the Gap? Not Without a Strategy Reboot!

Khadeeja Safdar reported in the Wall Street Journal this week about CEO Art Peck's efforts to turn around apparel retailer The Gap. According to the article, "The Gap Inc.'s market value has shrunk to about $10 billion, from roughly $40 billion at its 2000 peak. Revenue has stalled at about $16 billion—flat from a decade ago." The Gap owns several retail chains (including Banana Republic, Gap, and Old Navy). 

The article points out that, "The 61-year-old CEO is blunt in his criticism of the industry’s long fascination with creative executives who are given broad powers to set the overall image of a brand. 'We have cycled through so many, and each has been proclaimed as the next savior,' he said. In the end, they were 'false messiahs.'" Peck favors combining science with art. He hopes analytics can help drive better merchandising decisions, rather than relying on the intuition and foresight of powerful creative directors for each brand. 

I would argue that no amount of focus on analytics can save The Gap, particularly its namesake brand. The company has a strategy problem first and foremost. That problem has to do with the competitive positioning of the three brands. Each major brand does not have a distinctive competitive positioning. Moreover, the Gap brand is clearly stuck in the middle, trapped with an ambiguous strategy somewhere between the low cost position at Old Navy and the differentiated position at Banana Republic. That problem has existed for more than a decade. Until the company solves that problem, no amount of reforms in its merchandising process can save this once-iconic brand. 

Moreover, as the article notes, the Gap has failed to adapt to the fast fashion strategies of competitors such as Zara. The Spanish retailer has developed a completely different strategic positioning and unique value chain. Copying one or two elements of Zara's strategy will not suffice. Zara is successful because of the entire system of activities and choices that they have made. The Gap has made a vastly different set of choices, and they have undertaken quite different activities. Adapting the Gap's value chain to fit the new competitive environment will be very difficult.

Monday, November 28, 2016

Does Variety Make Us Happier?

We have all heard the expression, "Variety is the spice of life."  Is it true?  Do we value variety highly?  Does it make us happier?  Years ago, social psychologists Richard Hackman and Greg Oldham developed their now-famous job characteristics model.  They argued that five key characteristics affected outcomes such as job satisfaction, intrinsic motivation, and quality of work produced.  One of those job characteristics was skill variety.   If a job required employees to employ a variety of skills and capabilities, that had a positive effect on these key outcomes.   

New research by Jordan Etkin and Cassie Mogilner looks at variety in a slightly different context.  They conducted a series of experiments to explore whether engaging in a variety of activities increased happiness. They found that variety had a positive impact, but only if that variety did not occur in a very short period of time. Etkin explains in this article from Duke's Fuqua School of Business:

"It seems the pivot point is around a day," Etkin said. "We find that over longer periods of time — a day, a week or a month — spending time on more varied activities does lead people to feel happier afterwards. But over shorter time periods — an hour, 30 minutes or 15 minutes — people feel less happy after spending time on more varied things."

Etkin went on to explain why too much variety in a short period of time could have a negative effect on happiness:

"When people think about variety, they think it's exciting, stimulating and interesting. But we also derive a lot of happiness and satisfaction from feeling we accomplished something with our time. What we find is that shorter time periods really don't give people enough time to transition between varied activities and still feel productive."

Should States Stop the Strict Enforcement of Non-Compete Agreements?

Over the past few years, Massachusetts has witnessed a vibrant debate about whether the state should stop the strict enforcement of non-compete agreements that employers require many employees to sign.   Many entrepreneurs and venture capitalists have argued that Massachusetts is at a substantial disadvantage to California, a state that does not typically enforce non-compete agreements.  A new article from Yale Insights (a publication of Yale's School of Management) examines the research on this topic.  Scholars Olav Sorenson and Matthew Marx write about their work on this subject.  They argue that non-compete agreements inhibit entrepreneurship and slow economic growth.  Here's an excerpt:  

States that enforce non-compete agreements and those that enforce them more strictly have fewer startups. Entrepreneurs usually have prior experience in the industry they enter, or in a closely related one; non-compete agreements can thus prevent them from striking out on their own. Even if they can found their own firms, these agreements hamper their ability to hire early employees. As a result, a dollar of venture capital goes further—in terms of creating more jobs and more economic growth—in states that restrict the enforcement of non-compete agreements. Some of our research indicates that venture capital creates two to three times as much economic growth in regions that do not enforce these agreements as it does in regions that do.

States that enforce non-compete agreements also suffer from a brain drain, with sought-after employees leaving states like Massachusetts, which enforce non-competes strictly, for states like California, which do not. Many of the students we teach at MIT and Yale to move to California for this very reason. The enforcement of non-compete agreements therefore imposes an economic cost on all of us. We support these reforms not so much because they might help to right some of the wrongs associated with non-competes—though they should help to do that as well—but because they would promote economic growth.