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Updated: 2 hours 12 min ago

Why Startups Like Uber Stumble Over Problems They Could Have Avoided

7 hours 38 min ago

News this week that Uber’s CEO was stepping down likely was not a surprise to those who have been following the company in the headlines.

In our work over many years, we have learned enough to know that you have to be on the inside of any company to have the full picture of what went wrong and how. But we do know from our research that rapidly growing companies — especially unicorns like Uber — face a high risk of stumbling.

As a business term, “unicorn” was coined to describe a rarity: In 2011 there were just 28 early-stage companies, still privately owned, with investment valuations of $1 billion or more. Today there are more than 200 unicorns, with a total value estimated by CB Insights at almost $700 billion. Uber is one of them: Its valuation rose to a record-setting $68 billion just seven years after its founding, despite reporting losses of more than $700 million in the first quarter of this year.

But when we tracked those 28 unicorns (along with 11 similar companies with valuations of $600 million or more) over the period from 2011 to the present, we found that 33% failed to grow at all and another 28% grew less than expected. Nearly two in three died or stumbled. Unicorns and near-unicorns actually are much more prone to self-induced internal breakdowns than they are vulnerable to adverse events in the marketplace.

And they’re not alone. One of the hardest acts in business is scaling a business rapidly and profitably. Bain’s research concludes that of all new businesses registered in the U.S., only about one in 500 will reach a size of $100 million — and a mere one in 17,000 will attain $500 million in size and also sustain a decade of profitable growth.

More often, they trip over themselves. Research for our book The Founder’s Mentality found that 85% of the time, the barriers to growth cited by executives at rapidly growing companies are internal — as opposed to, say, external threats such as unreceptive customers, a misread business opportunity or the moves of a dangerous competitor.

The title of our book celebrates the internal energy and sense of insurgency that propels rapidly growing companies, but the book also warns of four predictable internal growth barriers that all too often trip up these companies during their pursuit of scale.

One of these is what we called the unscalable founder. We believe the founder’s mentality is a strategic asset. Nurtured correctly, it can help a company achieve scale insurgency — a company with the benefits of both size and agility. But many individual founders aren’t scalable. Individual founders can become a barrier to growth if they are unable to let go of the details and micromanage, or fail to build a cohesive team around them, or allow hubris to get in their way. We found 37% of executives at growing companies described the unscalable founder as a major barrier to their success.

Scaling a business requires enormous determination — it’s like catching lightning in a bottle.

Typically, founders discover a repeatable model of success that is extraordinary and are rewarded for ignoring distractions and focusing ruthlessly on that single insurgent mission and the repeatable model that delivers it. But over time the market changes and the company needs to change its model. The same founder who was rewarded for ignoring distractions previously is often the last person to adapt.

The skills that help founders get their company to take off also are the opposite of those needed to sustain new growth. Founders focus on speed, ignore good process, and relish breaking the rules of the industry they are trying to disrupt. They cut corners, ignore detractors, and avoid naysayers. Their Herculean efforts are responsible for the firm’s creation, but also its chaos. Once the company reaches cruising altitude, its leaders need to listen more to competing voices and invest more time in emerging stakeholders.

Founders also often are responsible for driving their teams to stretch and accomplish far more than ever seemed possible, often at enormous personal sacrifice. Yet this can make it impossible for them to replace or supplement these foundational team members with new professionals who can take the organization to the next level. The founder remains too loyal to the original team.

Founders who both create and successfully scale their company are like lightning striking twice — the miracle of creation and the miracle of sustainable growth in the same person. That is rare.

The other three barriers described in our book underscore the challenge. Some 55% of executives cite the problem of revenue growing faster than talent: The company grows so quickly that it has trouble attracting the quality and amount of talent that it needs. And as growth creates complexity, complexity becomes a silent killer of growth: 22% of executives cite a lack of accountability as the company expands and the rules become unclear. At its worst, this can breed a toxic culture. Perhaps most perplexing, 25% of executives cite loss of the voices at the front line as the growing company becomes preoccupied with internal matters, numbing it to customer feedback that can improve the business model or to the concerns of frontline employees.

In our study of unicorns, we took a closer look at 10 that stumbled the hardest, companies like Groupon, Zenefits, Jawbone, GoPro, and Zynga — a group that experienced a peak-to-trough valuation decline of about 75% on average. We concluded that about half encountered major external market challenges that clearly contributed to the decline; we found that these external factors always impeded the progress of the company in combination with a well-documented internal breakdown.

For instance, GoPro discovered that to really fulfill its growth potential it was going to have to not just become a manufacturer of small camera devices — a difficult business to defend against the large consumer electronics companies like Sony — but also create an ecosystem of services (uploading to the cloud) and products (drones with cameras) that would differentiate it in the future. This is what founder Nick Woodman described as becoming a sort of “mini Apple,” a much harder strategy to successfully execute. That challenge was reflected in a near 50% revenue shortfall in 2016 from what analysts had expected, ultimately triggering a decline in the company’s valuation down to $1 billion from its onetime high of $12 billion.

In contrast to the moderate frequency of external breakdowns, literally every one of the fallen unicorns we studied encountered well-documented internal issues that contributed to or actually caused the stumble. Consider Zenefits, a provider of efficient online employee benefits services for small and medium-size companies. In early 2015 Zenefits announced that its revenues were going to increase by a factor of 10 that year, to $100 million, causing investors to flood it with money at a valuation of over $4 billion. The core idea for the company had been well proven, the market was certainly large and untapped, and Zenefits was clearly in the lead. Yet according to the company itself, Zenefits stumbled because it wasn’t prepared internally for scaling up. When its valuation collapsed by 55%, and its CEO-founder was replaced, the new CEO wrote an email to staff noting, “It is no secret that Zenefits grew too fast, stretching both our culture and our controls.’’ For instance, the company’s “frat-like” culture became too dysfunctional to run a tight operation in a highly regulated industry, and some of the measures taken to certify new employees in health insurance law became severely compromised.

If these are the rock stars of business — surrounded by the best investors, boards, and advisers — what about the rest? To dig deeper into the challenges facing high-growth companies, we held more than 25 workshops across the world, assembling a group we called the Founder’s Mentality 100. These are companies that attained early success and scale, and showed further promise and desire to grow by five or even 10 times over the coming years. When we surveyed executives in these private discussion sessions, we found a consistent story: Only 15% of the time did these leaders feel that the primary threat to achieving their plans was external (a superior competitor, a new business model, government regulation, market shifts or saturation). The majority were internal factors — factors they should be able to control.

When monitoring our health, doctors use a set of proven questions and tests. With so many company growth stories coming undone because of internal causes that their leaders could have controlled, what is the equivalent protocol to diagnose growing companies? We suggest asking these five questions to assess the general health of a business and its ability to grow to large scale:

  • Is your founder scaling the team at a pace to address the opportunities and challenges of a scale insurgent?
  • Do we have a talent plan to match our growth plan? If not, how do we close the gap?
  • Is the voice of the customer and the front line as strong as it used to be? How do we know?
  • Is our insurgent mission, so inspirational in the early days, still strong, or is it getting diluted?
  • Do people still feel an owner’s mindset that drives accountability and immediate problem solving?

If you are part of an organization with bold growth ambitions, make sure you are asking these five questions early and often.

How to Integrate Data and Analytics into Every Part of Your Organization

9 hours 13 min ago

Many conversations about data and analytics (D&A) start by focusing on technology. Having the right tools is critically important, but too often executives overlook or underestimate the significance of the people and organizational components required to build a successful D&A function.

When that happens, D&A initiatives can falter — not delivering the insights needed to drive the organization forward or inspiring confidence in the actions required to do so. The stakes are high, with International Data Corporation estimating that global business investments in D&A will surpass $200 billion a year by 2020.

A robust, successful D&A function encompasses more than a stack of technologies, or a few people isolated on one floor of the building. D&A should be the pulse of the organization, incorporated into all key decisions across sales, marketing, supply chain, customer experience, and other core functions.

What’s the best way to build effective D&A capabilities? Start by developing a strategy across the entire enterprise that includes a clear understanding of what you hope to accomplish and how success will be measured.

Insight Center

One of the major American sports leagues is a good example of an organization that is making the most of its D&A function, applying it in scheduling to reduce expenses, for example, reducing the need for teams to fly from city to city for games on back-to-back nights. For the 2016–2017 season, thousands of constraints needed to be taken into account related to travel, player fatigue, ticket revenue, arena availability, and three major television networks. With 30 teams and 1,230 games in a regular season stretching from October into April, trillions of scheduling options were possible.

The league used D&A to arrive at a schedule that:

  • reduced the number of games teams played on consecutive nights by 8.4%
  • reduced instances of teams playing four games in five days by 26%
  • reduced instances of teams playing five games in seven days by 19%
  • increased the number of consecutive games teams played without traveling by 23%
  • allowed each team to appear on one of the league’s premier TV networks at least once, a success that had not been achieved in the league in any prior year

Technology aside, keys to success included a clear strategy for building the new scheduling system and a commitment across the organization to seeing it through with an unwavering eye on improving the experiences for everyone involved — including players, fans, referees, and TV networks.

Companies can follow the league’s lead by first understanding that successful D&A starts at the top. Make sure leadership teams are fully immersed in defining and setting expectations across the entire organization. Avoid allowing strategy setting and decision making to occur in organizational silos, which can produce shadow technologies, competing versions of the truth, and data analysis paralysis. Before starting any new data analysis initiative, ask: Is the goal to help improve business performance? Jumpstart process and cost efficiency? Drive strategy and accelerate change? Increase market share? Innovate more effectively? All of the above?

When answering these questions, it’s important to understand that D&A teams are not data warehouses that perform back-office functions. Your D&A function should be a key contributor to the development and execution of the business strategy by supplying insights into key areas, such as employees and customers, unmet market opportunities, emerging trends in the external environment, and more.

Leadership teams must recognize that being successful will take courage, because once they embark on the journey, the insights from data analytics will often point to the need for decisions that could require a course correction. Leaders need to be honest with themselves about their willingness to incorporate the insights into their decision making, and hold themselves and their teams accountable for doing so.

Cultural resistance can also become a bigger obstacle than anticipated. But it’s underscored by the findings of two recent studies showing that just 51% of C-suite executives fully support their organization’s D&A strategy. Gartner estimates D&A projects falter 60% of the time. Why? We’ve observed that it’s often because they are not supported by the right organizational structure and talent and are not aligned with the business strategy.

Some organizations have D&A capabilities spread across functions, or rely on a few data scientists to provide insights. Some are too reliant on technology tool kits and rigid architectures, and not enough on creating the right environment to effectively leverage people with the right expertise to drive D&A projects forward. These sorts of models usually are not capable of achieving truly transformative D&A.

Consider the case of a large global life sciences company that spent a significant sum of money building an advanced analytics platform without first determining what it was supposed to do. Executives allowed their technology team to acquire a lot of products, but no one understood what the advanced tools were supposed to accomplish or how to use them. Fortunately, executives recognized the problem before it was too late, conducting an enterprise-wide needs assessment and rebuilding the platform in a way that inspired confidence in its ability to drive efficiency and support business transformation.

In another case, a major financial services organization built a robust technology platform based on stakeholder needs. But after building it, executives soon discovered they lacked the organizational structure and people to use the platform successfully. Once they addressed those needs, the company was able to use the great platform to achieve significant savings in operating costs.

According to KPMG’s 2016 CIO Survey, data analytics is the most in-demand technology skill for the second year running, but nearly 40% of IT leaders say they suffer from shortfalls in skills in this critical area. What’s more, less than 25% of organizations feel that their data and analytics maturity has reached a level where it has actually optimized business outcomes, according to International Data Corporation.

Formally structured systems, processes, and people devoted to D&A can be a competitive advantage, but clearly many organizations are missing this big opportunity. In our experience, companies that build a D&A capability meeting their business needs have teams of data and software engineers who are skilled in the use of big data and data scientists who are wholly focused on a D&A initiative.

While structures vary, the team should be seamlessly integrated with the company’s existing providers and consumers of D&A, operating in cohesion with non-D&A colleagues — people who really understand both the business challenges and how the business works — to set and work toward realistic and relevant strategic goals. The teams should also have the complete support of executive leadership, and their goals should be fully aligned with the business strategy.

In an age where data is created on a scale far beyond the human mind’s ability to process it, business leaders need D&A they can trust to inform their most important decisions — not just to reduce costs but also to achieve growth. And the best will use D&A to anticipate what their customers will want or need before they even know they want or need it.

Can Insurance Companies Incentivize Their Customers to Be Healthier?

11 hours 33 min ago

Behavioral economists know well the power of instant gratification and overoptimism that too often lead to poor decisions — like reaching for an extra slice of cake or putting off the dreaded morning run. The behavioral biases play out in a simple paradox: People overconsume health care but underconsume prevention, and insurers or taxpayers are left with the bill. The same plays out with many lines of insurance, where the immediate benefits of poor choices outweigh the often hidden cost of dealing with their consequences, such as reckless driving or failing to flood-proof infrastructure in highly exposed communities.

Of all industries, insurance has a unique opportunity to align its commercial interests with preventive behaviors. Insurers, along with public services, can directly “monetize” better individual behavior as healthier or safer individual outcomes, lower claims costs, and improve risk pools, which can be translated into lower-priced premiums and a competitive advantage in the marketplace. Insurance is therefore a natural shared value industry — one that can employ the idea proposed by Harvard Business School professor Michael Porter and Mark Kramer of FSG in 2011. This new research report highlights how insurers are applying the model.

What makes prevention today different from past efforts (e.g., fire prevention dating back centuries) is how it can be done. First, a wide range of new technologies and data analytics allow tracking who and what is changing, making it possible to establish individualized targets, remedies, and incentives. Second, a systems approach helps companies go beyond single interventions to engage the entire insurance value chain — including local businesses, communities, and government — in the pursuit of these prevention gains. Third, with measurement linking risk-reduction milestones to improved business results, customers can be rewarded dynamically, with behavior-based pricing that encourages positive behaviors and leads to a virtuous shared-value cycle between risk reduction and profit.

Consider the Vitality program developed by the South African insurance company Discovery over 25 years ago. Vitality provides people with incentives to improve their health through gym memberships, discounts on healthy foods, and other awards based on the achievement of personal health goals, and then rewards members dynamically through lowered annual premiums, free travel, and perks.

The result is a structural transformation of insurance. Additional economic value is unlocked, creating benefits for the member (more years of healthy life), the insurer (reduced claims over time), and society (healthier, more productive citizens). Vitality members generate up to 30% lower hospitalization costs and live from 13 to 21 years longer than the rest of the insured population (up to 41 years longer than comparable uninsured populations).

In addition to using this shared-value approach in its wholly owned South African and UK businesses, Discovery has established a global network of insurance partners that employ it, including John Hancock Financial (U.S.), Manulife (Canada), Generali (Europe), AIA (Asia Pacific), and Ping An (China). Altogether, the model is employed in 15 markets, impacting over 5.5 million people.

Other companies are applying similar models to other types of insurance. One example is IAG’s comprehensive program in Australia to prevent car accidents. It is working with car manufacturers to improve vehicle security and safety standards and is offering customers reduced premiums for selecting safety features such as automatic emergency braking. IAG also uses its extensive geomapped motor vehicle claims data to identify dangerous crash zones, alerts customers when they are near these dangerous zones, and engages local governments to fix related infrastructure deficits. Pilot projects show that a single improved highway ramp can save lives and save IAG approximately $600,000 (AUD) per year.

Another example is Redwoods Group’s program in the United States to help its 400 youth-serving customers protect children. It invests $3 million per year in consulting services that reduced drowning deaths and reported instances of child abuse by 85% and 65%, respectively, in less than 10 years. The reduction in drowning deaths alone saves the company $6 million in insurance claims per year. Redwoods underwrites $43 million in premiums per year in a market previously considered uninsurable and enjoys a 95% customer retention rate.

Such examples are featured in FSG’s new research on shared value in the insurance sector, along with efforts by sector leaders to reach more underserved customers with insurance and better leverage their asset management side to create the context for prevention. Insurers that incorporate society’s needs into their strategies, building on existing and new capabilities, are finding lasting competitive advantage. Both today and in the future, creating shared value is an imperative for insurers that aim to grow profitably and sincerely want to provide risk protection and prevention to customers.

6 Reasons Salespeople Win or Lose a Sale

12 hours 28 min ago
Steven Moore for HBR

Why does a salesperson lose a sale?

It’s a question I’ve studied for years, as part of the win-loss analysis research I conduct.

There’s a tendency to assume that the salesperson lost because their product was inferior in some way. However, in the majority of interviews buyers rank all the feature sets of the competing products as being roughly equal. This suggests that other factors separate the winner from the losers.

In order to identify these hidden decision-making factors, more than 230 buyers completed a 76-part survey. The research project goals were to understand how customers perceive the salespeople they meet with, explore the circumstances that determine which vendor is selected, and learn how different company departments and vertical industries make buying decisions. We had six key research findings:

#1: Some Customers Want to be Challenged

What selling style do prospective buyers prefer? The survey shows 40% of study participants prefer a salesperson who listens, understands, and then matches their solution to solve a specific problem. Another 30% prefer a salesperson who earns their trust by making them feel comfortable, because they will take care of the customer’s long-term needs. Another 30% want a salesperson who challenges their thoughts and perceptions and then prescribes a solution that they may not have known about.

From a departmental perspective, under 20% of accounting and IT staffers want to be challenged, while 43% of the engineering department does. Over 50% of marketing and IT prefer a salesperson who will listen and match a solution to solve their specific needs. The sales department equally preferred having a salesperson listen and solve their needs and being challenged; HR was equally split across all three selling styles.

There’s an interesting explanation for selling styles preferences, which is based on whether the buyer is comfortable with conflict. Seventy-eight percent of participants who preferred a salesperson who would listen and solve their specific needs agreed with the statement: “I try to avoid conflict as much as I can.” Conversely, 64% of participants who preferred a salesperson who challenges their thoughts disagreed with the statement and are comfortable with conflict.

#2: It’s Really a Committee of One

Whenever a company makes a purchase decision that involves a team of people, factors including self-interests, politics, and group dynamics will influence the final decision. Tension, drama, and conflict are normal parts of group dynamics, because purchase decisions typically are not made unanimously.

One critical research finding is that 90% of study participants confirmed that there is always or usually one member of the evaluation committee who tries to influence and bully the decision their way. Moreover, this person is successful in getting the vendor they want selected 89% of the time. In practicality, it can be said that a salesperson doesn’t have to win over the entire selection committee, only the individual who dominates it.

#3: Market Leaders Have an Edge

In most industries a single company controls the market. Compared with their competitors, they have a much larger market share, top-of-the-line products, greater marketing budget and reach, and more company cachet. For salespeople who have to compete against these industry giants, life can be very intimidating indeed.

However, the study results provide some good news in this regard. Buyers aren’t necessarily fixated on the market leader and are more than willing to select second-tier competitors than one might expect. In fact, only 33% of participants indicated they prefer the most prestigious, best-known brand with the highest functionality and cost. Conversely, 63% said they would select a fairly well-known brand with 85% of the functionality at 80% of the cost. However, only 5% would select a relatively unknown brand with 75% of the functionality at 60% of the cost of the best-known brand.

Not surprisingly, the answer to this question differed by industry. The fashion and finance verticals had the highest propensity to select the best-known, top-of-the-line product, while manufacturing and health care had the lowest.

#4: Some Buyers Are “Price Immune”

Price plays an important role in every sales cycle. Since it is a frequent topic during buyer conversations, salespeople can become fixated on the price of their product and believe they have to be lowest. However, decision makers have different propensities to buy, and the importance of price falls into three categories. For “price conscious” buyers, product price is a top decision-making factor. For “price sensitive” buyers, product price is secondary to other decision-making factors such as functionality and vendor capability. For “price immune” buyers, price becomes an issue only when the solution they want is priced far more than the others being considered.

Study participants were asked to respond to different pricing scenarios, and their responses were analyzed to categorize their pricing tendency. From a departmental perspective, engineering would be classified as price immune; marketing and sales as price sensitive; and manufacturing, information technology, human resources, and accounting as price conscious. From an industry perspective, only the government sector would be classified as price immune. Banking, technology, and consulting would be price sensitive, while manufacturing, health care, real estate, and fashion are price conscious.

#5: It’s Possible to Cut Through Bureaucracy

The most feared enemy of salespeople today isn’t solely their archrivals; it’s buyers’ failure to make any decision. This is because every initiative and its associated expenditure is competing against all the other projects that are requesting funds. Do the departments have different abilities to push through their purchases and defeat their company’s bureaucratic tendency not to buy?

The answer is yes. Based on the research results, sales, IT, and engineering have more internal clout to push through their projects as opposed to accounting, human resources, and marketing. Therefore they’re better departments to sell into from the salesperson’s perspective.

#6: Charisma Sells in Certain Industries

Imagine three salespeople who’ve pitched products that are very similar in functionality and price. Which would you rather do business with:

  • A) A professional salesperson who knows their product inside and out but is not necessarily someone you would consider befriending
  • B) A friendly salesperson who is likable and proficient in explaining their product
  • C) A charismatic salesperson who you truly enjoyed being with but is not the most knowledgeable about their product

While top selection in every industry was the friendly salesperson, the media and fashion industries selected “charismatic salesperson” more than most, and the manufacturing and health care industries had the highest percentage of “professional salesperson” responses.

Many salespeople behave as if buyers are rational decision makers. In reality, human nature is complicated, and a mix of factors — some rational, some not — determine how buyers evaluate sales reps and who they select. Ultimately, it is the mastery of the intangible, intuitive human element of the sales process that separates the winner from losers.

When Health Care Providers Look at Problems from Multiple Perspectives, Patients Benefit

12 hours 43 min ago

Mr. Smith was ready to be discharged home after his laryngectomy, an extensive operation that removes a patient’s throat due to cancer. In the opinion of Dr. Lu-Myers, he was a capable man who had passed his physical and occupational therapy evaluations with flying colors. Mr. Smith had fulfilled the doctor’s list of clinical discharge criteria, and she was eager to send him home. She planned to entrust him and his family to manage his dressing changes, as well as his tracheostomy and drain care, with the support of frequent outpatient nursing visits — all very routine protocol, especially for someone who seemed alert and capable.

The day before Mr. Smith was to be discharged, Dolores, his nurse, approached Dr. Lu-Myers with some concerns: “Mr. Smith seems depressed to me, and you know, his wife has never come by to visit. I’m worried about us discharging him.” Dolores explained that Mr. Smith was undergoing a divorce, his children were not around, and he would likely be living alone. With the responsibility for his care now a concern, it was unsafe to discharge him. The care team ultimately found him a temporary rehabilitation facility where he recovered for two weeks until he was ready to go home.

This fictionalized vignette highlights an important aspect of health care: Providers often have vastly different ways of seeing and treating patients, as differences in profession, specialty, experience, or background lead them to pay attention to particular signals or cues and influence how they approach problems. For instance, one person might assess a patient through a clinical lens, focusing on whether the patient meets clinical criteria for discharge, while another might see the patient through a personal or social lens, considering the patient’s broader support system at home.

How these lenses are brought together to inform decision making can have profound implications for patients. While diverse perspectives and approaches to care are important, if they are not managed appropriately, they can cause misunderstandings, bias decision making, and get in the way of the best care. For instance, had the providers in Mr. Smith’s case not communicated effectively, he may have been sent home too soon, which could have led to complications or readmission.

Unfortunately, this collaboration tends to be the exception rather than the norm in many health care organizations. Communication failures are a common cause of patient harm. They are often due to a culture that does not promote the systematic sharing of differing perspectives, instead supporting a hierarchy of power and one-way transmissions of information — both of which hinder effective communication.

Differences in the lenses providers use to see and make sense of patients’ needs extend beyond physicians and nurses. For instance, when emergency department physicians handed off patients to hospital wards, they agreed with hospital physicians about the patient’s primary problem in fewer than 50% of handoffs. This is closely linked with ineffective communication and frequently leads to increases in medical errors and malpractice claims.

Insight Center

Even within the same specialty, providers can have varying perspectives and approaches to care, due to their different backgrounds and experiences. Female physicians, for example, are more likely than male physicians to follow evidence-based practice and to engage in more preventive services (e.g., cancer screening) and communication (e.g., information giving, partnership building). Research has also demonstrated that male cardiologists are more likely to conduct invasive cardiac procedures on the average patient than their female counterparts are (which may be warranted for some patients but less so for others). Similarly, other health care professionals, such as system administrators and managers, also bring varying perspectives to their work that can influence the care patients receive, as highlighted in research by one of us (Jemima) on the racial backgrounds of opioid treatment program managers.

Each way of seeing a particular issue has its pros and cons; what matters is that providers learn to consider each other’s perspectives and communicate effectively when working together. This is the only way teams can reach a shared understanding of a patient’s diagnosis, identify and resolve any blind spots around an issue, and develop more-robust, well-rounded treatment approaches.

Similarly, individuals must learn to appreciate the limits of their own perspective and seek to adopt other lenses when complex problems demand it. We all adopt a default way of seeing any given issue, which can bias our choices and cause us to overlook other important details. This has been demonstrated in the classic “invisible gorilla” experiment, where participants were so focused on counting basketball passes in a video that they failed to notice someone in a gorilla suit walk by. And this tendency has been shown to impact health care providers as well. For example, in one study (inspired by the gorilla experiment), researchers asked radiologists to examine a set of CT scans of lungs for anomalous nodules. What the researchers didn’t disclose was that they had placed an image of a gorilla (larger than the average nodule) on one set of the lung images. The result: 83% of the radiologists missed the gorilla.

In our work to promote more-effective decision making and evidence-based practice, we have come across at least two ways that health professionals can get better at communicating with each other and adopting multiple lenses themselves.

Create an environment that supports perspective sharing and effective communication among team membersThe multidisciplinary care team model, championed in modern health care, brings together different providers (e.g., physicians, nurses, social workers, and other specialists) to treat patients. This works best when teams communicate effectively and integrate their diverse perspectives.

Our colleagues at the Johns Hopkins Armstrong Institute for Patient Safety and Quality have shown how utilizing multidisciplinary teams in emergency departments can decrease the risk of misdiagnosis — a costly error that can result in patients being undertreated or overtreated. For instance, many patients come to the ER complaining of dizziness, a symptom that can indicate a variety of possible diagnoses. They found that including a physical therapist in the emergency department care team helped them more accurately diagnose causes of dizziness among ER patients, resulting in better treatment, better patient satisfaction, and faster discharge. This is because the physical therapist had specialized knowledge of a vestibular assessment technique that can help diagnose cause of dizziness.

But in order to leverage the benefits of others’ expertise, teams need to prioritize open communication. This requires a strong cultural shift toward voicing opinions and concerns and away from the often siloed, hierarchical, and blaming culture that can predominate in health care settings. Building this culture requires both top-down and bottom-up efforts, but leaders can set the tone through their actions and the behavior they reward among care team members.

One way to create this culture is to have teams practice sharing and adopting different lenses using simulations. We have begun implementing a case-based teaching exercise among surgeons, anesthesiologists, nurses, and technicians who work together to deliver surgical care to patients at Johns Hopkins. The goal is to help them recognize, surface, and integrate different lenses. In our simulation they must decide how to deal with a problematic surgeon who is receiving many complaints from coworkers. The exercise reveals team members’ different default ways of seeing the situation and allows them to practice adopting different lenses and combining each other’s different perspectives. In doing so, they can hone the effective communication needed to make better decisions during patient care.

Importantly, improving patient care doesn’t always mean bringing in different specialties, but it does involve team members being willing to acknowledge different perspectives and learn from one another. Sharing lenses with other people in one’s field — such as male and female surgeons sharing how they’d approach a particular patient — can give providers a more comprehensive view of a patient and a more robust plan for action. This is critical for improving care.

Build individual providers’ capacity to adopt multiple perspectives. Not all patient care decisions are made in a team setting, so individuals must also practice applying different lenses to overcome the limitations of their default lens and improve their decision making. For example, they can ask, “If I was viewing this as my colleague would, would I see something else?”

Leaders in health care organizations can help by creating more opportunities for different professions to “shadow” one another. For instance, having a physician spend a few days working closely with and observing a nurse in a hospital might help them better understand how nurses respond to patient requests or challenges. Likewise, physicians, nurses, and others who work in one particular specialty might gain new lenses by rotating through a different specialty. While this rotation is common in clinicians’ early careers (e.g., during residency), ongoing exposure throughout their careers may help broaden their expertise and improve their problem solving. For instance, surgeon Atul Gawande recently wrote about his own transformative experience visiting primary care headache clinics and learning from their unique approach to diagnosing and treating patients.

Research by one of us (Kathleen) has demonstrated how individuals with experiences in different work domains, called having “intrapersonal functional diversity,” can improve team performance by promoting greater sharing of information among team members. This boosts performance more than simply bringing together different subject matter experts.

Building this intrapersonal diversity requires not only exposing providers to different experiences but also continually creating opportunities for them to apply what they learn so that they develop a habit of viewing challenging decisions through multiple lenses. For example, hospitals can create simulation, reflection, and mentoring programs to encourage clinicians to review and learn from their experiences.

Transformations in the U.S. health care system, along with the complex needs of patients, demand more-effective communication and collaboration among the various members of care teams. Understanding how to leverage and coordinate different perspectives will help to cut down on miscommunications and improve patient care. Errors can be avoided — and lives saved — by reducing the common tendency to view complex clinical issues through just one lens. Using perspective-expanding approaches to care, at both the team and individual level, will go a long way toward improving patient care and health outcomes.

The Talent Pool Your Company Probably Overlooks

June 22, 2017 - 4:19pm

Robert Austin, a professor at Ivey Business School, and Gary Pisano, a professor at Harvard Business School, talk about the growing number of pioneering firms that are actively identifying and hiring more employees with autism spectrum disorder and other forms of neurodiversity. Global companies such as SAP and Hewlett Packard Enterprise are customizing their hiring and onboarding processes to enable highly-talented individuals, who might have eccentricities that keep them from passing a job interview — to succeed and deliver uncommon value. Austin and Pisano talk about the challenges, the lessons for managers and organizations, and the difference made in the lives of an underemployed population. Austin and Pisano are the co-authors of the article, “Neurodiversity as a Competitive Advantage” in the May-June 2017 issue of Harvard Business Review.

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How Cultures Across the World Approach Leadership

June 22, 2017 - 3:10pm

They vary in deference and decision making.

Looking Beyond H-1B Visas to Find Tech Talent

June 22, 2017 - 12:51pm

H-1B visa applications have declined for the first time in years, according to a recent report from U.S. Citizenship and Immigration Services. The department announced last month that it received 199,000 applications this year — 37,000 fewer than last year.

This is concerning to tech companies, many of which expected a huge increase in applications, due to the program’s uncertain future. As a result, tech hiring managers are now racing to recruit from a very small pool of domestic candidates. Many have doubled down on their recruitment efforts by increasing their spending on LinkedIn and Facebook ads or by attending local networking events to attract candidates.

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There is no doubt that these tactics will make a difference. But there is one strategy that could have an even bigger impact, one that HR pros don’t seem to be using: leveraging civic data insights to build more-targeted hiring and recruitment programs. LinkedIn may give you the ability to target individuals who are on LinkedIn, but civic labor data gives you the ability to find much larger populations of potential candidates.

Tech companies can make better use of the massive amount of information that’s put into the public domain by the U.S. government. They can then use the insights from this civic data to geotarget ads on career websites such as LinkedIn and Glassdoor, so these messages reach candidates in markets with fewer high-quality job opportunities. Companies could also use civic data to select a local trade journal to advertise in that reaches candidates in a very specific location with a very specific occupation or skill set. They just need to know where to look to find these data insights.

Exploring Civic Data Sources

Public sources that could prove useful in finding and attracting applicants include the U.S. Bureau of Labor Statistics (BLS), as well as the Economic Census and American Community Survey, which come from the U.S. Census Bureau.

The BLS provides data on the nation’s economic health. The agency is best known for sourcing and sharing data on unemployment across geographies and industries.

The U.S. Census Bureau releases an economic census every five years. The data collected in this survey includes information for all establishments, broken down by business type, ownership type, location, total revenue, annual and first-quarter payroll, and number of employees in the pay period. Other information varies from industry to industry.

The American Community Survey provides information on the country’s changing population, housing, and workforce, including income and median housing costs. This information can be used to measure geographic mobility to help recruiters map out potential sites for branch offices. As an example, if the data shows that people are moving away from a tech hub like Silicon Valley to a city like St. Louis, for example, that could signal that there are tech workers available for hire in St. Louis. This data provides recruiters early intel on which cities they should be scouting as sites for a branch office.

These sources are only three of many free open databases that can help recruiting managers glean insights on where to search for candidates by geography and industry. The information can also influence how recruiting managers better attract those candidates, for example by offering better salary and benefits packages or by opening an office in a nearby city.

Using Civic Data Insights to Gain an Edge

With the right technology to help streamline the process of sourcing, cleansing, and analyzing civic data, hiring managers can use public databases to gain an edge. Here are three strategies that can help:

Location. The chart below shows which states have a favorable location quotient for the BLS occupation category “Computers and Mathematics,” which we’ve labeled “Skilled Engineers” on our chart below. Open data on jobs shows what percentage of the workforce has a specific occupation on the local and national level. Dividing these percentages equals the location quotient. For instance, if computer programmers make up 10% of those employed locally and 2% of those employed nationally, then the location quotient is five. The higher the quotient, the more likely hiring managers are to find skilled candidates. That means the states with low location quotient could be targets for talented engineers who are looking for bigger challenges.

 

Salary. Using public databases, hiring managers can assess which states pay above or below the national average. Recruiters can then geotarget job ads to states where candidates are earning less. This can help increase the likelihood of attracting a skilled worker by offering a higher salary than the prospect could earn locally or in a nearby state. The following chart shows which states’ median salaries for computers and mathematics jobs fall below the national median.

 

Supply. The number of available candidates is key when searching for talent. The chart below shows the U.S. states and territories where employees in the computer science and math industry are paid the most. States with a high percentage of employees and low salaries could be fertile grounds for recruiting. They might hold candidates who would be willing to relocate for better opportunities.

 

All of this is only skimming the surface of how public data insights can be used to build more-targeted employee recruitment programs. The key is going to be for tech hiring managers to get the internal buy-in to invest in the tools necessary for the job.

How Analytics Has Changed in the Last 10 Years (and How It’s Stayed the Same)

June 22, 2017 - 10:00am

Photo by Ferdinand Stöhr

Ten years ago, Jeanne Harris and I published the book Competing on Analytics, and we’ve just finished updating it for publication in September. One major reason for the update is that analytical technology has changed dramatically over the last decade; the sections we wrote on those topics have become woefully out of date. So revising our book offered us a chance to take stock of 10 years of change in analytics.

Of course, not everything is different. Some technologies from a decade ago are still in broad use, and I’ll describe them here too. There has been even more stability in analytical leadership, change management, and culture, and in many cases those remain the toughest problems to address. But we’re here to talk about technology. Here’s a brief summary of what’s changed in the past decade.

The last decade, of course, was the era of big data. New data sources such as online clickstreams required a variety of new hardware offerings on premise and in the cloud, primarily involving distributed computing — spreading analytical calculations across multiple commodity servers — or specialized data appliances. Such machines often analyze data “in memory,” which can dramatically accelerate times-to-answer. Cloud-based analytics made it possible for organizations to acquire massive amounts of computing power for short periods at low cost. Even small businesses could get in on the act, and big companies began using these tools not just for big data but also for traditional small, structured data.

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Along with the hardware advances, the need to store and process big data in new ways led to a whole constellation of open source software, such as Hadoop and scripting languages. Hadoop is used to store and do basic processing on big data, and it’s typically more than an order of magnitude cheaper than a data warehouse for similar volumes of data. Today many organizations are employing Hadoop-based data lakes to store different types of data in their original formats until they need to be structured and analyzed.

Since much of big data is relatively unstructured, data scientists created ways to make it structured and ready for statistical analysis, with new (and old) scripting languages like Pig, Hive, and Python. More-specialized open source tools, such as Spark for streaming data and R for statistics, have also gained substantial popularity. The process of acquiring and using open source software is a major change in itself for established businesses.

The technologies I’ve mentioned for analytics thus far are primarily separate from other types of systems, but many organizations today want and need to integrate analytics with their production applications. They might draw from CRM systems to evaluate the lifetime value of a customer, for example, or optimize pricing based on supply chain systems about available inventory. In order to integrate with these systems, a component-based or “microservices” approach to analytical technology can be very helpful. This involves small bits of code or an API call being embedded into a system to deliver a small, contained analytical result; open source software has abetted this trend.

Related Video The Explainer: Big Data and Analytics <span>What the two terms really mean -- and how to effectively use each.</span> See More Videos > See More Videos >

This embedded approach is now used to facilitate “analytics at the edge” or “streaming analytics.” Small analytical programs running on a local microprocessor, for example, might be able to analyze data coming from drill bit sensors in an oil well drill and tell the bit whether to speed up or slow down. With internet of things data becoming popular in many industries, analyzing data near the source will become increasingly important, particularly in remote geographies where telecommunications constraints might limit centralization of data.

Another key change in the analytics technology landscape involves autonomous analytics — a form of artificial intelligence or cognitive technology. Analytics in the past were created for human decision makers, who considered the output and made the final decision. But machine learning technologies can take the next step and actually make the decision or adopt the recommended action. Most cognitive technologies are statistics-based at their core, and they can dramatically improve the productivity and effectiveness of data analysis.

Of course, as is often the case with information technology, the previous analytical technologies haven’t gone away — after all, mainframes are still humming away in many companies. Firms still use statistics packages, spreadsheets, data warehouses and marts, visual analytics, and business intelligence tools. Most large organizations are beginning to explore open source software, but they still use substantial numbers of proprietary analytics tools as well.

It’s often the case, for example, that it’s easier to acquire specialized analytics solutions — say, for anti-money laundering analysis in a bank — than to build your own with open source. In data storage there are similar open/proprietary combinations. Structured data in rows and columns requiring security and access controls can remain in data warehouses, while unstructured/prestructured data resides in a data lake. Of course, the open source software is free, but the people who can work with open source tools may be more expensive than those who are capable with proprietary technologies.

The change in analytics technologies has been rapid and broad. There’s no doubt that the current array of analytical technologies is more powerful and less expensive than the previous generation. It enables companies to store and analyze both far more data and many different types of it. Analyses and recommendations come much faster, approaching real time in many cases. In short, all analytical boats have risen.

However, these new tools are also more complex and in many cases require higher levels of expertise to work with. As analytics has grown in importance over the last decade, the commitments that organizations must make to excel with it have also grown. Because so many companies have realized that analytics are critical to their business success, new technologies haven’t necessarily made it easier to become — and remain — an analytical competitor. Using state-of-the-art analytical technologies is a prerequisite for success, but their widespread availability puts an increasing premium on nontechnical factors like analytical leadership, culture, and strategy.

Use Stories from Customers to Highlight Your Company’s Purpose

June 22, 2017 - 9:30am

Leaders commonly try to influence their company culture with a lofty statement of purpose. But despite the time and money an organization pours into crafting its own special statement, the result is often vague and generic — it sounds like every other well-meaning company’s purpose statement.

One simple way around this is to highlight specific stories that illustrate the values leaders want to emphasize. Stories are free, always available, and are such a core part of our human DNA that they automatically make us feel good. Especially when they’re true. And best of all, when a company brings true stories to light, the culture becomes one of paying attention. Leaders and managers learn to keep their eyes and ears on what’s most important — the real experiences of real people.

Sweetgreen is a healthy grab-and-go food chain that always seeks to “add a sweet touch,” as the company describes it. Not only does it want to serve customers delicious food with stylish sustainability baked into every bite, but it also wants to make its mark as a fine-tuned instrument of tightly aligned, mission-driven business. It uses stories to show what adding a sweet touch really looks like in practice.

One such story is of a loyal customer, recently recovering from cancer, who visited her favorite Sweetgreen location in Washington, DC. The team member behind the register recognized her and mentioned that he hadn’t seen her in a while. He told her she looked great, remembered her favorite salad order, and gave it to her on the house. The woman was so moved by this kindness — especially, one can imagine, coming from such a vulnerable place — that she wrote Sweetgreen a letter telling them how much this personalized attention meant to her. This story made the rounds through the Sweetgreen community, strengthening the company’s core values and empowering team members to live them.

As Sweetgreen cofounder Nate Ru told me, “Stories are the way humans exchange concepts and ideas. We want to create intimacy as we scale, and stories are the key, [so] we empower everyone to collect, on a day-to-day and weekly basis, stories of people living core values.”

Lyft is the San Francisco–based ride-sharing company increasingly known as the friendlier version of Uber. By encouraging passengers to sit in the front seat and engage in conversation, Lyft emphasizes human connections. Its mission is “to reconnect people through transportation and bring communities together.” It also seeks to spread its values through storytelling.

During an all-hands meeting of 500 Lyft employees, a woman stood on a stage and told the story of the Lyft driver who not only drove her daughter to safety from a violent roommate situation but actually helped her pack and unpack her belongings into a hotel room. A picture of the driver’s smiling face appeared on the screen behind her as the choked-up mother recounted the impact this man’s kindness had on her and her family.

According to Ron Storn, VP of People, one of the company’s most important values is “uplift others.” This story highlights more than the driver’s determination to do just that — by sharing the story publicly, every single one of Lyft’s employees gets uplifted as well.

When JetBlue was founded, in 1999, its mission was “Bring humanity back to air travel,” which has since been shortened to “Inspire humanity.” It doesn’t get loftier than that! And its values are safety, caring, fun, integrity, and passion, in that order. It also uses storytelling to spread these values among 20,000 crew members.

At JetBlue University, the training site for new and returning JetBlue employees in Orlando, Florida, orientation is upbeat, emotional, and often story-driven. From their auditorium seats, 170 crew members watch a video of one of their own, a man from an airport operations crew, tell the story of his ill granddaughter and how his crewmates chipped in to help pay for her medical care. It’s not uncommon for this video to move the audience to tears.

JetBlue keeps the storytelling going after orientation, with its company-sponsored homepage showcasing a constant news feed of shout-outs, its Blue Hero program, which highlights crew members who go above and beyond, and daily notes from the Head of People often sharing an inspiring story or two that have crossed his desk. These stories fly, no pun intended, throughout the organization.

Stories make us all pay closer attention to what matters. Start paying attention to the stories unfolding in your organization, and figure out how to help the best ones spread. Because people have a lot to say, and if we’re smart, we’ll start listening.

The CEO of Children’s National Health System on Leadership, Innovation, and Delivering Specialized Care

June 22, 2017 - 9:00am

Dr. Kurt Newman became a pediatric surgeon because he was attracted to the innovative culture and the extraordinary variety of problems doctors encounter at children’s hospitals, as well as the dramatic recoveries children can make. He went on to become the president and CEO of Children’s National Health System in Washington, DC and recently published a memoir, Healing Children: A Surgeon’s Stories from the Frontiers of Pediatric Medicine. I spoke to him about the advantages and challenges of specialized children’s hospitals. What follows is an edited version of our conversation. 

HBR: Patient outcomes for children are better at specialized pediatric hospitals. Why is that?

Newman: Pediatric medicine attracts people who are passionate about making a difference early in children’s lives. The payback is so meaningful that it draws people who are creative and innovative and thinking differently. They’re willing to take the risks of going into a field where maybe the pay isn’t as high, or it’s more difficult, or it’s more emotional, because of that risk-reward ratio.

We recently published a study, based on a huge data set of Medicare information, that found that younger doctors tend to have better outcomes than older doctors. One of the researchers’ theories about why is that younger doctors see more patients and so are familiar with more conditions. You’ve talked about something similar happening at children’s hospitals.

There is more and more evidence that for particularly complex diagnoses or situations, doctors who have more experience with those conditions have better outcomes. At children’s hospitals the routine scenarios are seen frequently, but so are the outliers. Often with children it’s not just one diagnosis or one organ — there are multiple services or specialists involved. And you need to have them all there together to consult with one another. The really complex patients require a team, not just the physician and the physician specialists, but also the nurses, the social workers, the child life specialists. You’re not just thinking about the actual medical issue at hand; you’re thinking about the development of that child more holistically. I think that is best done in the children’s hospital scenario.

Also, among children’s hospitals there’s a lot of sharing of best practices, of great ideas. Obviously, there’s a little bit of competition — everybody’s trying to be the best — but there’s more solidarity and collaboration than you might think. We all come together and share our safety numbers. You can see who had the best results and adopt their practices. We have a shared sense of purpose.

How can the health care system adapt to bring that kind of specialized experience to more families?

My concern is that I don’t think children’s health is a national priority right now. When I hear and listen carefully to the debates on Capitol Hill and other places, children are not as much a part of the conversation as they should be. I worry about the resources that are being provided going forward, whether it’s the coverage on Medicaid, or investments in the National Institutes of Health, or educating enough pediatricians and pediatric specialists. I think it ought to be a national priority, and we ought to look at it comprehensively. We do that with the elderly and Medicare, but we don’t have that same type of approach around children.

There’s also a different cost question — medical costs to treat childhood conditions can sound absolutely enormous, but you can actually save money over the long run if treatment solves a problem that would have caused chronic health issues later in life.

There’s a lot of evidence that supports early intervention and avoiding long-term costs. A compelling example is behavioral and mental health. One-fifth of kids will develop some type of mental health or behavioral health issue during their lifetime or during their childhood years. And the research shows that the earlier that you make a diagnosis or identify the problem, the better the treatment results are, and people can avoid a lot of the complications and heartache of those problems.

So I think there’s a strong case to be made for pediatric care as we debate health care legislation and reforms. There’s a lot of talk about cutbacks on Medicaid, for example. Over half the recipients of Medicaid are children. I would say we probably need to put more money into that instead of cutting it back, because there is the value of identification, prevention, and early intervention to avoid some of the big adult diseases and costs of those diseases, whether it’s diabetes or obesity or hypertension. There may be interventions that we can do early on to not only improve lives but save lots of money.

Can telemedicine expand the reach of existing children’s hospitals?

I think that having access to specialists through telemedicine approaches is a tremendous advance. I’ve seen great promise in some pilot studies with mental health where psychiatric and psychology resources that may not be available in a primary care setting can be accessed in real time through a teleconsultation approach. We need to move beyond pilots, though, to really being able to take advantage of the technology, and there are a lot of regulatory and bureaucratic hurdles that make that hard.

In children’s hospitals there is often a team with different specialties working together, but when there isn’t someone whose job it is to organize everybody, it falls to the parents to do a lot of the coordination. I know Atul Gawande has talked about having primary care physicians act as a sort of project manager in adult medicine. Have you tried anything innovative to solve that problem?

I can’t say that I have any magic bullet, and I think there are probably a lot of ways to try to solve the scenario that you describe. Soon after I’d been named CEO, I had the painful realization that we were having lots and lots of issues coordinating different services for families of children with autism. A lot of things we were doing were triggering their behaviors, because we didn’t quite understand what their needs were or what their families’ needs were. It created really uncomfortable, unpleasant situations, and what could be outpatient care often became inpatient care. I stole an idea from the adult world: the idea of nurse navigators for women with breast cancer, which has been replicated in other cancer situations. I created a role for a nurse navigator: Her goal was to be the “quarterback” and to work with the family and all the different specialists and help navigate this complex system. Now, when a kid comes in for a procedure or a visit, the team will have been educated about autism. The providers and front-office staff know what’s comforting to this particular child, making the experience calm, as opposed to a blood draw where you’re calling security to try to hold down a child.

Hospitals run by doctors perform 25% higher on quality scores than hospitals run by professional managers. How has your experience as a surgeon affected your decision making as a CEO?

When the opportunity came up to become CEO at the hospital where I was, the case that I made was that if we took care of the patients and families well, if the business was serving the patients and families and the doctors and the nurses, the finances would follow. The finances of a children’s hospital are not easy. In our case, 55% of our kids are on Medicaid, and the challenges of kids and the expenses of taking care of kids are really high. I didn’t necessarily have evidence, but I had a gut feeling that if we were great at taking care of the kids, then we would find a way to make the finances work. Being a physician CEO is more than just a symbol. It affects the hospital’s culture and core values. You begin attracting people who share those values and a drive to improve quality and outcomes and safety. All of those have a financial plus side to them, but more importantly, the top doctors and researchers are attracted to that kind of atmosphere.

What did you have to learn when you became CEO?

I had to solve for a deficiency, a lack of experience, with hospital finance. I knew I had to get a top chief financial officer. I had to listen to them, and I had to concede. I had to have enough intuition about operations to ask the right questions, and I had to be able to spot and recruit and retain top talent. I think that’s what a CEO should do — set a vision for greatness.

What was the biggest challenge in creating a more innovative culture at the hospital?

For me, it was to pace myself. I couldn’t do it all at once. It’s not that I didn’t want to have a culture of innovation and creativity and have the frontline come forward with ideas about how we could improve things, but I had to be judicious and thoughtful about how quickly we could incorporate things, how deep the resources were to accomplish all the things that we wanted to do. I think the hardest thing is balancing innovation and creativity against quality and safety and outcomes. That’s how we keep the sacred trust we need, because we’re taking care of kids.

Understanding Your Legal Options If You’ve Been Sexually Harassed

June 22, 2017 - 8:05am

Sexual harassment scandals at companies such as Uber and Fox News have been a reminder not only that sexual harassment is still a regrettably routine feature of working life but also that even some of the most powerful perpetrators can, eventually, be held accountable.

Despite over four decades of legal sanctions and workplace training, harassing conduct remains persistent and pervasive. We have written elsewhere about how the law and workplace need to change to better address the problem. Our focus here is on what women, who make up 90% of harassment targets, can do when they confront it personally and what strategies are most likely to be effective.

The most critical questions for employees who have been harassed at work are, first, what response do they want? And second, what are they prepared to risk to get it?

For most women, the answers are likely to turn on the seriousness of the harassment and the costs of complaining. Is the conduct ongoing, a threat to personal safety or well-being, or likely to have major job or career consequences? How easy would it be to avoid the harassment? For example, in a recent lawsuit against UC Berkeley School of Law, the dean’s assistant complained that he had repeatedly hugged and kissed her. The conduct occurred almost daily, and the assistant had no way to remove herself from the situation without quitting. Some of the allegations against Roger Ailes involved women who were not under his ongoing supervision but who wanted jobs that he could deny them if they didn’t submit to his sexual demands. As he allegedly told one, “You know if you want to play with the big boys, you have to lay with the big boys.” These women paid a significant career price for refusing, but at least they had the opportunity to avoid the harassment by staying in their current positions. By contrast, the dean’s assistant had little choice but to complain if she wanted to hold on to her position but stop the harassment.

Another key consideration for women deciding how to respond to harassment is how much legal or professional leverage they have. This depends on both whether they are likely to prevail in a lawsuit and whether their public disclosures can cause significant reputational damage.

To evaluate their legal claims, women need to understand certain basic facts about the law governing sexual harassment. The United States Supreme Court has held that Title VII of the Civil Rights Act of 1964, which bans employment discrimination on the basis of sex (as well as race, color, ethnicity, national origin, and religion), includes a ban on sexual harassment and provides that employers can be held liable for unlawful harassment in certain circumstances. Most state laws extend similar protections. Two Supreme Court cases from 1998, Faragher v. Boca Raton and Burlington Industries, Inc. v. Ellerth, established a framework for accountability based on the nature of the harassment and the position of the harasser. Employers are strictly liable for harassment by a supervisor that results in a tangible employment action. An example would be a manager who fires a subordinate for refusing to sleep with him. For harassment that does not result in such a tangible action, employers can avoid liability by establishing an affirmative defense. In effect, they must show that they took reasonable measures to prevent and correct harassment and that the victim failed to take advantage of opportunities to avoid harm. In theory, the burden is on the employer to show why liability is not appropriate, rather than the converse. In practice, however, courts have time and again granted employers the benefit of the affirmative defense without ever inquiring whether the measures they took to prevent or respond to harassment were effective. The law too often gives employers a safe harbor.

Women who are considering making a formal complaint should be realistic about the financial, psychological, and reputational cost of pursuing it. Defendants typically have deeper pockets than victims, and the price of hiring a lawyer is often prohibitive. To be sure, attorneys specializing in harassment cases are often willing to work on a contingent fee, which means that their compensation comes only if they win a judgment for the complainant. But unless damages and the likelihood of recovery are substantial, few lawyers will want to take the case. Employment discrimination cases have the lowest win rate for plaintiffs of any civil cause of action. And in sexual harassment cases it is the complainant as much as the harasser who is on trial. Consider the experience of Gretchen Carlson, the first woman to go public with a claim against Roger Ailes. The public relations department of Fox initially sought to shoot the messenger. It portrayed Carlson as a disgruntled employee with an ax to grind, released affectionate emails from Carlson to Ailes, and recruited other women at Fox News to come to his defense.

While this may sound daunting, there are steps targets of harassment can take to anticipate and mitigate these kinds of challenges.

First, employees who experience harassment should make a record. They should keep copies of incriminating emails and voicemails, and they should document their own efforts to stop the abuse. If their organization has confidential reporting channels, they should use them and, if they fear retaliation, consider the possibility of making an anonymous complaint and collecting any evidence of retaliation. They should also tell trusted friends and family members about any harassing or retaliatory conduct so those individuals could serve as witnesses in a subsequent investigation or legal proceeding.

Even if the employee is convinced reporting the incident will do nothing, she should still report it. Courts typically ask whether the victim filed an internal complaint, and if not, why not. If she waited to complain, they ask why and for how long, and are unwilling to accept the most obvious and compelling reasons. A delay of even a few days can be deemed “unreasonable,” and fears of retaliation are frequently dismissed as too vague and “generalized” to justify the failure to complain. Courts also often require specific evidence of retaliation; a generalized fear of retaliation is not enough for victims to get a jury to agree with their claims. Fears of retaliation are typically well-founded: Employees who file complaints of discrimination experience retaliation at rates as high as 50%–60%. Targets of harassment can bolster their claims by documenting specific instances of retaliatory behavior. For example, in February 2017 Susan Fowler posted a blog detailing her unsuccessful efforts to halt harassment at Uber. After repeatedly complaining about another instance of discrimination, she was threatened with termination if she filed another report. Eventually Fowler quit, but her blog recounting the experience went viral, and Uber CEO Travis Kalanick launched an “urgent investigation” into her allegations. The company subsequently fired over 20 employees. (Kalanick recently stepped down as CEO, in part because of the company’s culture and his influence on it.)

This example underscores the value of going public with or without the threat of litigation. Negative publicity can sometimes be more effective in pressuring companies to take harassment seriously than reliance on formal complaint channels.

Finally, as the Uber and Fox News cases both suggest, women can work collectively to pressure employers. What enabled Carlson to prevail was the steady trickle of other victims ready to tell their stories; Fowler likewise discovered other women at Uber who had been harassed. Safety in numbers is often what empowers women to come forward. And numbers are often what forces employers to settle and take preventive action, as is clear from the ouster of Ailes (and more recently, Bill O’Reilly), and Uber employees.

After decades of research, we know quite a bit about how victims respond to harassment and why the law has so often failed to provide appropriate remedies. They wait to see whether the behavior will stop on its own, or they keep silent because they fear that reporting will be futile or that the harasser will retaliate. Rather than filing internal or external complaints, harassment targets tend to resort to informal and nonconfrontational remedies. They vent, cope, laugh it off, treat it as some kind of less threatening misunderstanding, or simply try to get on with their jobs (and lives). They may blame themselves, pretend it is not happening, or fall into self-destructive behaviors like eating disorders or drinking problems. Many women choose costly consequences — such as quitting their jobs — to avoid dealing with harassment directly, or have high levels of absenteeism that lead to termination or other adverse results.

We hope that offering concrete strategies will help more women fight back. Documenting harassment and retaliation, working collectively with other women, and publicizing abuse can all be effective. Reforms in workplace practices are also necessary. All organizations have a responsibility to provide not just formal policies but also effective complaint channels, protections against retaliation, and efforts to monitor their progress in preventing and remedying harassment. Studies show that women respond more assertively to misconduct when employers take proactive efforts to deter harassment and protect complainants.

Those who care about equal employment opportunity can also support organizations that are working for reforms in laws governing sexual harassment and representing women who cannot afford legal assistance. And those who suffer abuse can tell their stories, through both traditional and social media. The ouster of Roger Ailes and Bill O’Reilly, and the shake-up at Uber, make clear that women’s voices can matter. But the fact that achieving those results took a quarter century of complaints at Fox and the unrelenting glare of public scrutiny at Uber reminds us how much progress remains to be made.

The Amazon–Whole Foods Deal Means Every Other Retailer’s Three-Year Plan Is Obsolete

June 21, 2017 - 12:12pm

When Amazon announced last week that it will acquire Whole Foods Market, a grocery chain with over 450 retail stores and deep industry talent, for $13.7 billion, Amazon’s stock price rose 2.4% on the news, increasing its market capitalization by $11 billion. At the same time, the price of SuperValu plummeted 14.4%, Kroger dropped 9.2%, and Sprouts fell 6.3%. You could almost hear the three-year plans of every grocer, and nearly every other traditional retailer, grinding through the shredding machines.

Nobody in the industry should be surprised that the future of retailing is moving toward a fusion of digital and physical experiences. However, Amazon’s announcement makes the nature and speed of that movement far more challenging. Too many traditional retailers have built their plans on three questionable premises: (1) They can add digital capabilities faster than Amazon can add stores; (2) Amazon’s competitive space (e-commerce) is still constrained to only around 8% of U.S. retail sales, or $391 billion of $4.9 trillion per year; and (3) store-based retailers could profitably transition to a digital world by growing e-commerce sales cautiously enough to avoid diluting earnings and cannibalizing higher-margin store sales, while retreating to the most profitable stores and product categories that would be hardest for Amazon to attack. Until last week, food was considered such a safe haven.

Now it’s clear that Amazon aims to sell customers everything, and therefore no retail spaces are safe. If Amazon can acquire its way into groceries, what will prevent it from entering department stores — as Alibaba has done in China — or furniture and appliance stores, electronics stores, or even drug stores? Moreover, if Amazon decides to use groceries to increase the frequency of customer deliveries, imagine the range of products it could quickly and profitably pile onto home delivery vehicles (or perhaps even provide for customer pickup). From today onward, the only viable retail strategy is to try to advance and merge digital and physical capabilities faster and better than Amazon does. That means retailers must learn to compete head-on with Amazon in two fundamental capabilities: agile innovation and expense management.

Amazon’s greatest competitive advantage is not its e-commerce network; it is its innovation engine. To understand this strength, take a look at the sample of innovations in the table below. The successes are impressive even before 2007, when Amazon was smaller than Bed Bath & Beyond, JC Penney, or SuperValu are today. Back in 2005, Amazon Prime was conceived, developed, and launched in about two months. Note also the innovation efforts that Amazon has abandoned (highlighted in red in the chart below and making up about 25% of this sample). Many retailers would consider these failures, but most of them contributed valuable learning toward eventual hits. For example, Amazon abandoned Auctions and zShops, yet both laid the groundwork for the enormous success of Amazon Marketplace.

 

To compete with Amazon’s relentless flow of innovations, traditional retailers have no choice but to relearn how to innovate like the successful startups they once were. This innovation in innovation requires moving from predictive plans (based on increasingly unpredictable market conditions) to adaptive, agile innovation teams. Agile innovation teams are small. Amazon CEO Jeff Bezos famously believes that if you can’t feed the team with two pizzas, it is too large. They’re also multidisciplinary (with all the digital and physical skills to complete the task), self-governing, and geared for rapid pivots rather than predictable straightaways. These teams value creative working environments more than hierarchical bureaucracies, working prototypes over excessive documentation, customer collaboration over fixed specifications, and responding to change over adherence to plans.

Yet many traditional retailers still lack the digital expertise and the right focus to make their teams succeed. Three out of four consumers say that they want more technology in stores and are more likely to visit stores that use technology effectively. But one major cross-industry study found that 70% of consumers feel that companies are getting the digital experience wrong. Indeed, many retailers are guilty of offering splashy virtual reality rooms, digital displays, and voice commands that consumers say don’t work as expected, are not convenient, are hard to use, and are confusing. While executives aim to give consumers an increased sense of control and appeal to the most digitally savvy, consumers say they want technology that simply saves them time, increases convenience, and gets faster results.

A few smaller retailers, including Warby Parker and Rebecca Minkoff, are frequently cited for getting the digital-physical fusion right. Now some major players are investing to raise their game. Walmart, for example, is making digitally focused acquisitions such as Jet.com (with its Smart Cart algorithms), Bonobos, and Moosejaw to acquire technology, talent, and customers. It is developing next-gen stores, installing pickup towers and an automated online grocery pickup facility, rolling out Walmart Pay and Scan & Go technologies to avoid checkout lines, touting free two-day shipping for online orders, and even testing associate deliveries of those orders. Most important, it is changing the culture, increasing the pace of innovation, obsessing over customer experience, and improving results.

But there are two major challenges for traditional retailers hoping to accelerate their innovation engines: First, it’s expensive; second, many retailers have delayed innovation funding for so long that the “strategic debt” seems overwhelming.

To give you a sense of the expense required, Amazon spends over $16 billion (11.8% of sales) on “technology and content.” This is not all innovation R&D or IT, but it’s mostly that. Meanwhile, Gartner reports that retail and wholesale companies spend about 1.5% of sales on IT. (Most of my retail clients seem to fall into the 2%–3% range.) Research and advisory firm IHL Group recently asked top retail CIOs how much their IT budgets are currently increasing and how much they should increase to compete against Amazon. The answer: Budgets are growing by 4.7% but would need to increase 87% to 237% to start closing the gap.

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How will retailers find this kind of money? By reallocating spending away from people and activities that matter more to managers than to customers. An effective approach applies the same kinds of agile innovation teams that develop new products to the improvement of processes and business models. Retailers love to say that “retail is detail,” but perfecting increasingly irrelevant business models is wasting money that is desperately needed to fund innovative growth. Substantial amounts of money often lie fallow in the debilitating layers of approval required for innovations or other urgent decisions, in the artificial accuracy of trying to make perfect predictions, and in manual processes that could be done better, faster, and cheaper with machine learning.

Last week the retail world learned the limitations of predictive planning compared with adaptive innovation in an increasingly unpredictable market. This week retailers will need to rapidly and radically adapt their lists of strategic initiatives, the prioritization and sequencing of those initiatives, as well as the speed and funding of their execution. We’ll know traditional retailers are getting it right when announcements of breakthrough innovations start driving their stock prices up, finally raising doubts about Amazon’s ability to respond.

Uber Can’t Be Fixed — It’s Time for Regulators to Shut It Down

June 21, 2017 - 11:40am

From many passengers’ perspective, Uber is a godsend — lower fares than taxis, clean vehicles, courteous drivers, easy electronic payments. Yet the company’s mounting scandals reveal something seriously amiss, culminating in last week’s stern report from former U.S. Attorney General Eric Holder.

Some people attribute the company’s missteps to the personal failings of founder-CEO Travis Kalanick. These have certainly contributed to the company’s problems, and his resignation is probably appropriate. Kalanick and other top executives signal by example what is and is not acceptable behavior, and they are clearly responsible for the company’s ethically and legally questionable decisions and practices.

But I suggest that the problem at Uber goes beyond a culture created by toxic leadership. The company’s cultural dysfunction, it seems to me, stems from the very nature of the company’s competitive advantage: Uber’s business model is predicated on lawbreaking. And having grown through intentional illegality, Uber can’t easily pivot toward following the rules.

Uber’s Fundamental Illegality

Uber brought some important improvements to the taxi business, which are at this point well known. But by the company’s launch, in 2010, most urban taxi fleets used modern dispatch with GPS, plus custom hardware and software. In those respects, Uber was much like what incumbents had and where they were headed.

Nor was Uber alone in realizing that expensive taxi medallions were unnecessary for prebooked trips — a tactic already used by other entrepreneurs in many cities. Uber was wise to use smartphone apps (not telephone calls) to let passengers request vehicles, and it found major cost savings in equipping drivers with standard phones (not specialized hardware). But others did this, too. Ultimately, most of Uber’s technical advances were ideas that competitors would have devised in short order.

Uber’s biggest advantage over incumbents was in using ordinary vehicles with no special licensing or other formalities. With regular noncommercial cars, Uber and its drivers avoided commercial insurance, commercial registration, commercial plates, special driver’s licenses, background checks, rigorous commercial vehicle inspections, and countless other expenses. With these savings, Uber seized a huge cost advantage over taxis and traditional car services. Uber’s lower costs brought lower prices to consumers, with resulting popularity and growth. But this use of noncommercial cars was unlawful from the start. In most jurisdictions, longstanding rules required all the protections described above, and no exception allowed what Uber envisioned. (To be fair, Uber didn’t start it — Lyft did. More on that later on.)

What’s more, Uber’s most distinctive capabilities focused on defending its illegality. Uber built up staff, procedures, and software systems whose purpose was to enable and mobilize passengers and drivers to lobby regulators and legislators — creating political disaster for anyone who questioned Uber’s approach. The company’s phalanx of attorneys brought arguments perfected from prior disputes, whereas each jurisdiction approached Uber independently and from a blank slate, usually with a modest litigation team. Uber publicists presented the company as the epitome of innovation, styling critics as incumbent puppets stuck in the past.

Through these tactics, Uber muddied the waters. Despite flouting straightforward, widely applicable law in most jurisdictions, Uber usually managed to slow or stop enforcement, in due course changing the law to allow its approach. As the company’s vision became the new normal, it was easy to forget that the strategy was, at the outset, plainly illegal.

Rotten to the Core

Uber faced an important challenge in implementing this strategy: It isn’t easy to get people to commit crimes. Indeed, employees at every turn faced personal and professional risks in defying the law; two European executives were indicted and arrested for operating without required permits. But Uber succeeded in making lawbreaking normal and routine by celebrating its subversion of the laws relating to taxi services. Look at the company’s stated values — “super-pumped,” “always be hustlin’,” and “bold.” Respect for the law barely merits a footnote.

Uber’s lawyers were complicit in building a culture of illegality. At normal companies, managers look to their attorneys to advise them on how to keep their business within the law. Not at Uber, whose legal team, led by Chief Legal Officer Salle Yoo, formerly its general counsel, approved its Greyball software (which concealed the company’s practices from government investigators) and even reportedly participated in the hiring of a private investigator to interview friends and colleagues of litigation adversaries.

Having built a corporate culture that celebrates breaking the law, it is surely no accident that Uber then faced scandal after scandal. How is an Uber manager to know which laws should be followed and which ignored?

A Race to the Bottom

The 16th-century financier Sir Thomas Gresham famously observed that bad money drives out good. The same, I’d suggest, is true about illegal business models. If we allow an illegal business model to flourish in one sector, soon businesses in that sector and others will see that the shrewd strategy is to ignore the law, seek forgiveness rather than permission, and hope for the best.

It was Lyft that first invited drivers to provide transportation through their personal vehicles. Indeed, Uber initially provided service only through licensed black cars properly permitted for that purpose. But as Lyft began offering cheaper service with regular cars, Uber had to respond. In a remarkable April 2013 posting, Kalanick all but admitted that casual drivers were unlawful, calling Lyft’s approach “quite aggressive” and “nonlicensed.” (After I first flagged his posting, in 2015, Uber removed the document from its site. But Archive.org kept a copy. I also preserved a screenshot of the first screen of the document, a PDF of the full document, and a print-friendly PDF of the full document.) And in oral remarks at the Fortune Brainstorm Tech conference in June 2013, Kalanick said every Lyft trip with a casual driver was “a criminal misdemeanor,” citing the lack of commercial licenses and commercial insurance.

Given Kalanick’s statements, you might imagine that Uber would have filed a lawsuit or regulatory complaint, seeking to stop unfair competition from a firm whose advantage came from breaking the law. Instead, Uber adopted and extended Lyft’s approach. Others learned and followed: Knowing that Uber would use unlicensed vehicles, competitors did so too, lest they be left behind. In normalizing violations, therefore, Uber has shifted the entire urban transport business and set an example for other sectors.

Fixing the Problem

It’s certainly true that, in many cases, companies that have developed a dysfunctional management culture have changed by bringing in new leaders. One might think, for example, of the bribery scandals at Siemens, where by all indications new leaders restored the company to genuine innovation and competition on the merits.

But because Uber’s problem is rooted in its business model, changing the leadership will not fix it. Unless the model itself is targeted and punished, law breaking will continue. The best way to do this is to punish Uber (and others using similar methods) for transgressions committed, strictly enforcing prevailing laws, and doing so with little forgiveness. Since its founding, Uber has offered literally billions of rides in thousands of jurisdictions, and fines and penalties could easily reach hundreds of dollars for each of these rides.

In most jurisdictions, the statute of limitations has not run out, so nothing prevents bringing claims on those prior violations. As a result, the company’s total exposure far exceeds its cash on hand and even its book value. If a few cities pursued these claims with moderate success, the resulting judgments could bankrupt Uber and show a generation of entrepreneurs that their innovations must follow the law.

Uber fans might argue that shutting down the company would be throwing the baby out with the bathwater — with passengers and drivers losing out alongside Uber’s shareholders. But there’s strong evidence to the contrary.

Take the case of Napster. Napster was highly innovative, bringing every song to a listener’s fingertips, eliminating stock-outs and trips to a physical record store. Yet Napster’s overall approach was grounded in illegality, and the company’s valuable innovations couldn’t undo the fundamental intellectual property theft. Under pressure from artists and recording companies, Napster was eventually forced to close.

But Napster’s demise did not doom musicians and listeners to return to life before its existence. Instead, we got iTunes, Pandora, and Spotify — businesses that retained what was great and lawful about Napster while operating within the confines of copyright law.

Like Napster, Uber gets credit for seeing fundamental inefficiencies that could be improved through smart deployment of modern IT. But that is not enough. Participation in the global community requires respect for and compliance with the law. It is tempting to discard those requirements when a company brings radically improved services, as many feel Uber did. But in declining to enforce clear-cut rules like commercial vehicle licensing, we reward lawbreaking and all its unsavory consequences. Uber’s well-publicized shortcomings show all too clearly why we ought not do so.

The 4 Types of Innovation and the Problems They Solve

June 21, 2017 - 11:00am

One of the best innovation stories I’ve ever heard came to me from a senior executive at a leading tech firm. Apparently, his company had won a million-dollar contract to design a sensor that could detect pollutants at very small concentrations underwater. It was an unusually complex problem, so the firm set up a team of crack microchip designers, and they started putting their heads together.

About 45 minutes into their first working session, the marine biologist assigned to their team walked in with a bag of clams and set them on the table. Seeing the confused looks of the chip designers, he explained that clams can detect pollutants at just a few parts per million, and when that happens, they open their shells.

As it turned out, they didn’t really need a fancy chip to detect pollutants — just a simple one that could alert the system to clams opening their shells. “They saved $999,000 and ate the clams for dinner,” the executive told me.

That, in essence, is the value of open innovation. When you have a really tough problem, it often helps to expand skill domains beyond specialists in a single field. Many believe it is just these kinds of unlikely combinations that are key to coming up with breakthroughs. In fact, a study analyzing 17.9 million scientific papers found that the most highly cited work tended to be mostly rooted within a traditional field, with just a smidgen of insight taken from some unconventional place.

But what if the task had been simply to make a chip that was 30% more efficient? In that case, a marine biologist dropping clams on the table would have been nothing more than a distraction. Or, what if the company needed to identify a new business model? Or what if — as is the case today — current chip technology is nearing its theoretical limits, and a completely new architecture needs to be dreamed up?

In researching my book, Mapping Innovation, I found that every innovation strategy fails eventually, because innovation is, at its core, about solving problems — and there are as many ways to innovate as there are types of problems to solve. There is no one “true” path to innovation.

Yet all too often, organizations act as if there is. They lock themselves into one type of strategy and say, “This is how we innovate.” It works for a while, but eventually it catches up with them. They find themselves locked into a set of solutions that don’t fit the problems they need to solve. Essentially, they become square-peg companies in a round-hole world and lose relevance.

We need to start treating innovation like other business disciplines — as a set of tools that are designed to accomplish specific objectives. Just as we wouldn’t rely on a single marketing tactic or a single source of financing for the entire life of an organization, we need to build up a portfolio of innovation strategies designed for specific tasks.

It was with this in mind that I created the Innovation Matrix to help leaders identify the right type of strategy to solve a problem, by asking two questions: How well can we define the problem? and How well can we define the skill domain(s) needed to solve it?

 

Sustaining innovation. Most innovation happens here, because most of the time we are seeking to get better at what we’re already doing. We want to improve existing capabilities in existing markets, and we have a pretty clear idea of what problems need to be solved and what skill domains are required to solve them.

For these types of problems, conventional strategies like strategic roadmapping, traditional R&D labs, and using acquisitions to bring new resources and skill sets into the organization are usually effective. Design thinking methods, such as those championed by David Kelley, founder of the design firm IDEO and Stanford’s d.school, can also be enormously helpful if both the problem and the skills needed to solve it are well understood.

Breakthrough innovation. Sometimes, as was the case with the example of detecting pollutants underwater, we run into a well-defined problem that’s just devilishly hard to solve. In cases like these, we need to explore unconventional skill domains, such as adding a marine biologist to a team of chip designers. Open innovation strategies can be highly effective in this regard, because they help to expose the problem to diverse skill domains.

As Thomas Kuhn explained in the The Structure of Scientific Revolutions, we advance in specific fields by creating paradigms, which sometimes can make it very difficult to solve a problem within the domain in which it arose — but the problem may be resolved fairly easily within the paradigm of an adjacent domain.

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Disruptive innovation. When HBS professor Clayton Christensen introduced the concept of disruptive innovation in his book The Innovator’s Dilemma, it was a revelation. In his study of why good firms fail, he found that what is normally considered best practice — listening to customers, investing in continuous improvement, and focusing on the bottom line — can be lethal in some situations.

In a nutshell, what he discovered is that when the basis of competition changes, because of technological shifts or other changes in the marketplace, companies can find themselves getting better and better at things people want less and less. When that happens, innovating your products won’t help — you have to innovate your business model.

More recently, Steve Blank has developed lean startup methods and Alex Osterwalder has created tools like the business model canvas and value proposition canvas. These are all essential assets for anyone who finds themselves in the situation Christensen described, and they are proving to be effective in a wide variety of contexts.

Basic research. Pathbreaking innovations never arrive fully formed. They always begin with the discovery of some new phenomenon. No one could guess how Einstein’s discoveries would shape the world, or that Alan Turing’s universal computer would someday become a real thing. As Neil deGrasse Tyson said when asked about the impact of a major discovery, “I don’t know, but we’ll probably tax it.” To his point, Einstein’s discoveries now play essential roles in technologies ranging from nuclear energy to computer technologies and GPS satellites.

Some large enterprises, like IBM and Procter & Gamble, have the resources to invest in labs to pursue basic research. Others, like Experian’s DataLabs, encourage researchers and engineers to go to conferences and hold internal seminars on what they learn. Google invites about 30 top researchers to spend a sabbatical year at the company and funds 250 academic projects annually.

Yet one of the best-kept secrets is how even small and medium-size enterprises can access world-class research. The federal government funds a variety of programs, such as the Hollings Manufacturing Extension Partnership, a series of manufacturing hubs to help develop advanced technologies, and Argonne Design Works. Local universities, which have a wealth of scientific talent, can also be a valuable resource.

Taking steps to participate in these types of programs can help small business compete in competitive markets. For example, Mike Wixom of Navitas, a four-year-old battery company that joined the Joint Center for Energy Storage Research (JCESR) as an affiliate, told me, “As a small company, we’re fighting for our survival on a daily basis. Becoming a JCESR affiliate gives us an early peek at technology, and you get to give feedback about what kinds manufacturing issues are likely to come up with any particular chemistry.”

So, clearly, being able to reach out to scientists on the cutting edge can help a business plan for the future, just as the other approaches, such as design thinking, open innovation, business model innovation, and others, can help propel a business forward if applied in the right context. But no one solution fits all problems.

If your innovation strategy is struggling or failing, consider whether it’s because you’ve locked yourself into a single approach. There are always new problems to solve; learn to apply the solution that best fits your current problem.

A New Approach to Safely Sharing Cancer Patients’ Data

June 21, 2017 - 10:00am

It is well understood that achieving the full potential of precision medicine for all cancer patients depends on the sharing of patients’ genomic and molecular data and clinical information. To this end, several efforts — including the Genomic Data Commons, ORIEN, and CancerLinQ — have been established to facilitate data sharing among clinicians and researchers and to create an open environment in which data sharing is more commonplace. Despite these improvements, patients’ health data is trapped in silos spread across a fragmented cancer ecosystem, which remains one of the most significant obstacles to advancing precision medicine. We believe the solution to this obstacle is to bring trusted third-party research and support organizations together in a coordinated effort to directly engage cancer patients in data sharing.

Precision medicine innovations are driven by complex analysis of massive data sets, with researchers querying data derived from thousands of patients for each cancer type. For all but the most prevalent of cancers, no single cancer center or institution has enough data for researchers to gain insight into the genetic mutations and molecular abnormalities that ignite the development of cancer and fuel its progression. These learnings, in turn, help drug developers understand how to develop new targeted treatments and help doctors define optimal treatment pathways for current and future patients.

Insight Center

While much discourse about the opportunities and pitfalls of widespread data sharing exists within the medical research community, most patients haven’t thought much about it. They expect, understandably so, that doctors and researchers put patient data to good use; for these patients, the fact that access to patient data remains a roadblock to precision treatments and cures is disheartening and disappointing. Those who do understand the value of their data and are willing to share it are often unsure where to begin. To accelerate advances in precision medicine, it is essential to educate patients not only in the importance of their data but also in how to access it and where and with whom to share it.

The Kraft HBS Precision Medicine Accelerator, which we cochair, set out to systematically solve this problem. Given that other data-sharing efforts have been met with varying degrees of success, we knew that a novel approach was required to truly make progress. We decided to create a direct-to-patient initiative using Collective Impact, a framework for tackling social issues first articulated, in 2011, by John Kania and Mark Kramer. Collective Impact is premised on the belief that progress in tackling complex, systematic issues can only be achieved when multiple organizations (companies, governments, NGOs, nonprofits, and so on) work toward a shared goal.

To our knowledge, this is the first time the Collective Impact approach has been used to address bottlenecks slowing the advancement of precision medicine. Based on the promising early results, we believe opportunities exist to apply the framework to other vexing problems slowing the advancement of precision medicine, including the design of clinical trials and data analytics. In the hope that others can learn from our efforts, let us explain how the Accelerator has applied the approach.

The Accelerator, acting as the backbone organization and under the leadership of an experienced senior consumer marketer, began this effort by bringing together five not-for-profit organizations: the LUNGevity Foundation, the Metastatic Breast Cancer Alliance, the Multiple Myeloma Research Foundation, the Pancreatic Cancer Action Network, and the Prostate Cancer Foundation. All are widely recognized for their efforts to expand the use of precision medicine and are, we believe, optimal organizations to educate patients in their role in advancing precision medicine. This view is supported by recently published research showing that engaging with a trusted third-party organization has helped patients better understand the value of their data and how to share it.

Convening these organizations that had always acted in isolation and never had worked together was no small feat. Marketing executives from each organization committed to weekly calls and monthly face-to-face meetings that were led by the Accelerator. For some, that meant flying across the country several times. During these calls and meetings, the executives agreed to adopt a common agenda and share patient engagement data and key suggestions for improvement.

As the initiative got under way, everyone quickly realized the value of a patient engagement scorecard and agreed to track 13 metrics across the five organizations. For example, we measured the number of active patient or caregiver email addresses in each organization’s database. While some organizations had more addresses than others, all had lower number of addresses than expected. The organizations are committed to working to improve this, and each has shared the new metrics with its board of directors.

We also quickly recognized the need to improve our competency in direct-to-patient communication. To this end, we set forth and executed a plan to adopt best practices from leading direct-to-consumer companies in the areas of customer acquisition and retention. Speakers from these companies and digital media firms presented at the monthly meetings to inspire the five not-for-profits to adopt new approaches for reaching patients throughout their cancer journey.

To determine whether the patient journey is similar enough across cancers that a cross-cancer marketing campaign could be successful, we pooled resources to conduct market research to learn more about patient needs, an exercise none of the organizations could afford to do on its own. Initial results show that the journey is similar enough, suggesting opportunities for joint patient-awareness campaigns.

Though still in the early stages of implementation, we have seen that establishing a shared culture and shared goals has led to joint action. We believe that implementing the direct-to-patient initiative using the Collective Impact approach will improve the organizations’ ability to boost patient engagement and increase their willingness to share data, ensuring that all patients benefit from the promise of precision medicine innovations.

What Does an Aspiring Founder Need to Know?

June 21, 2017 - 9:30am
Juan Díaz-faes for HBR

Alice, an outstanding 24-year-old engineer working for a top technology company, wants to launch her own startup within the next five years, but she doesn’t yet have a venture concept. What knowledge and skills does Alice need to lead a technology venture? And what’s the best way to acquire that know-how? Should Alice go to graduate school, or keep learning on the job?

We recently posed these questions to Harvard Business School alumni founders while designing a new two-year joint degree program that confers both a master of science from Harvard’s Paulson School of Engineering and Applied Sciences and an MBA from HBS. What we wanted to hear from current leaders of technology ventures was: What does someone who aspires to your role need to know?

We got input from 141 HBS alumni founders, most of whom lead venture capital–backed technology startups. Respondents’ median years of full-time work experience and founder experience were 17 and 7, respectively. Forty-nine percent of respondents had STEM undergraduate degrees.

The survey results show that no single management skill stands out above the rest. Respondents indicated that founders need to be management jacks-of-all-trades, so to speak. For eight out of 10 skill areas that we listed, at least 65% of respondents said that an aspiring founder should give high or very high priority to acquiring skills in that domain. As one respondent said, “Every one of these skills is important. The question is: For which skills will the CEO build deep personal expertise, and which will they outsource to other founding team members?”

 

Could these findings be skewed by the fact that we surveyed MBA alumni? With that in mind, we posed the same questions to 20 non-MBA founders of technology startups. The second sample’s small size meant that comparisons were suggestive rather than statistically significant, but the survey responses of non-MBA founders were quite similar to those of MBA alumni founders. The non-MBA founders shared the view that it is very important for future leaders of technology ventures to build a wide range of management skills.

In the survey, we asked respondents to explain their assessments and whether we’d failed to list any important abilities. Several themes emerged.

Skill requirements depend on the stage of the startup. Respondents emphasized that the skills required by a founder change as their venture matures. The skills most frequently mentioned as crucial during early stages include product design and development, pitching, and assembling a founding team. In later-stage ventures, important skills include recruiting specialist employees, communicating vision to new employees, and managing company culture.

Cofounders are crucial. Respondents rated assembling a founding team as the highest-priority skill for a future technology venture leader. One commented, “No 24-year-old engineer can acquire all of these skills in five years. So, the crucial skill is learning how to form a founding team that can cover the gaps. A founder must be able to assess their own strengths and weaknesses and know how to recruit and motivate complementary founding team members.” Another added, “If you don’t get decisions about potential cofounders right — for example, if your cofounder is not fully committed — it will likely kill your company.”

Founders must prioritize and be able to take feedback. Respondents cited the need for founders of technology startups to have other leadership skills, in particular: (1) openness to receiving feedback without being defensive; and (2) the ability to prioritize, including knowing what to delegate and what to do yourself. With respect to prioritization, one respondent noted, “Too many startup CEOs are easily distracted, especially technically adept founders who can see the next cool thing.”

Customer discovery and user-centered product design skills are paramount. Many respondents stressed that, during a startup’s early stages, its founders must gain a deep understanding of customer needs, and then must build on that understanding through rapid iteration and testing to prove product-market fit. As one respondent said, “Nothing else matters if you are building a product that no one wants.” Highlighting the importance of customer discovery research and lean experimentation, another noted, “Tech founders, sure that they already know what to build, are too often dismissive when told they should talk to customers.”

Always be closing? Respondents viewed selling as a crucial skill for founders, and noted that this encompassed more than just product sales. One said, “Having studied engineering in college, selling was the number one skill set that I was missing when I launched a company. As a founder, you are always selling: first to yourself and maybe a significant other, and then to potential cofounders, employees, customers, strategic partners, and investors.” Another added, “I was surprised how critical it is for a startup CEO to be great storyteller. Being able to craft and communicate a compelling story about why you are doing what you’re doing can inspire others to join you and fund you.”

Negotiations are never-ending. Respondents pointed out that negotiating was missing from the list of skills we asked about. One commented, “As with selling, a founder is constantly negotiating. Selecting the right partners and then structuring win-win deals with them is a vital skill — one that our aspiring founder didn’t learn in college engineering courses.”

Finance is less important. Finance received the second lowest priority score of the 10 skills areas. As one respondent explained, “It’s easy to figure out unit economics, or you can hire someone to do it.” However, a few respondents made a strong case for learning about finance. One said, “Most technical founders don’t have a clue about how venture finance works, and as a result they can get screwed by VCs.” Another added, “Entrepreneurs need to know that fundraising can be brutally difficult — that deals can fall apart after months of conversations. Likewise, they need to understand tradeoffs with raising funds at a high valuation.”

An entrepreneurial mindset is essential, if hard to define. Commenting on what was missing from our survey, many respondents said that aspiring founders need an entrepreneurial mindset. Persistence and grit were frequently cited as prerequisites for success, as was scrappiness, which one respondent described as “doing the impossible with little in the way of resources.” Another mentioned “flexibility, accountability, and a drive to get things done” as essential attributes. A respondent added, “This is all theory until you do it. But it’s key to gain the confidence that you can do it. That can come from case studies, meeting role models, learning-by-doing on course projects, and seeing peers take the plunge.”

What about graduate school? Having explored respondents’ views about what future leaders of technology ventures need to know, we then asked them whether an outstanding 24-year-old engineer and aspiring founder like Alice should acquire that know-how by enrolling in graduate school or through further on-the-job training. Forty-four percent of our MBA respondents said they were likely or very likely to recommend a traditional two-year MBA program. Fifty-eight percent were likely or very likely to recommend a two-year MS/MBA program that blends engineering, design, and management training and entails some additional coursework, as compared with a traditional MBA. Finally, 34% were likely or very likely to advise a young engineer to pursue further on-the-job training.

One thing we hoped to learn from this exercise was just how long a program aimed at future technology venture founders should be. Our initial hypothesis was that aspiring founders, impatient to launch their ventures, might wish to complete graduate school as quickly as possible. Instead, we came away convinced that founders need a wide breadth of management and leadership skills to succeed in their ventures. Whether they choose to learn those skills in the classroom or on the job, successful founders need broad mastery of management skills. Extreme aptitude in one area alone, like engineering, will not suffice.

What Should U.S. Companies Do If Congress Ever Passes a Tax Holiday?

June 21, 2017 - 9:00am

The Trump administration’s proposed tax reform plan to spur economic growth would lower the corporate tax rate from 35% to 15% and offer U.S. companies a one-time “tax holiday” rate of as low as 10% to bring home their stockpile of cash earned overseas. Given that the offshore stash is believed to total more than $2 trillion, advocates for a tax holiday claim that this influx will encourage companies to invest in their businesses, thereby creating millions of new jobs. Skeptics expect companies to use much of the cash to repurchase their shares, just as they did in response to the tax holiday that George W. Bush administration’s provided, in 2004. Politicians across the political spectrum, corporate executives, and media commentators blame share buybacks for job losses, stagnant wages, and underinvestment in businesses.

So what should companies do with repatriated overseas cash if the tax holiday comes to pass? They should follow a golden rule: Buy back shares only when they are meaningfully undervalued and no better opportunities to invest in the business exist. If the shares turn out to be undervalued and the buyback is truly the best possible investment, shareholders who retain their shares gain at the expense of shareholders who sell their shares to the company. Continuing shareholders, however, are not the only winners. Customers, employees, and suppliers with long-term relationships with the company benefit as well.

But a word of caution is in order. CEOs and their boards almost always believe their company’s shares are undervalued, and rarely have a full understanding of the performance expectations the company must meet to justify its stock price. History is littered with companies that repurchased shares they believed to be undervalued, only to see business prospects deteriorate and the stock price plummet. To minimize this risk, companies should compare their expectations against the market’s. More specifically, they should compare the forecasts of sales growth rates, operating profit margins, and investment requirements in their cash flow valuation model with the levels needed to justify the current stock price. If the market’s expectations are more bullish than management’s, it’s a clear signal to reject the buyback.

Given that the golden rule of share buybacks is straightforward, why are buybacks so controversial? It’s because many, if not most, public companies fail to adhere to the rule. Some companies buy back shares to boost earnings per share (EPS) by shrinking the number of outstanding shares. The perceived pressure from the investment community, combined with executive compensation that’s tied to earnings growth, fuels the obsession with near-term EPS. Executives also hope that buybacks will lift the share price, thereby boosting the value of their restricted stock and stock options.

However, shareholders who sell gain at the expense of continuing shareholders when an increase in short-term EPS, rather than long-term value, governs the board’s decision to buy back shares. Furthermore, savvy investors are not easily lulled into believing that a buyback program is a credible signal that a company’s stock is undervalued. They conduct their own analysis of price versus value to decide whether to sell or hold on to their shares. Astute investors have their own golden rule: Sell overvalued shares to the company, and retain shares if the stock is undervalued.

If a company lacks investment opportunities that create value and its shares are undervalued, are share buybacks or dividends the best way to return cash to shareholders? Why would shareholders ever prefer a dividend when other shareholders are willing to sell their shares to the company at bargain prices? As Warren Buffett advises: “Indeed, disciplined repurchases are the surest way to use funds intelligently: It’s hard to go wrong when you’re buying dollar bills for 80¢ or less.” If, on the other hand, shareholders believe the stock is overvalued, they would be wise to question whether they should continue to own it.

There is a win for everyone. When companies and investors each follow their golden rule for buybacks, they benefit along with customers, employees, suppliers, and the broader economy. In the end, the proposed tax reform’s success in fueling economic growth depends on sound resource allocation decisions by both companies and investors.

Handle Your Stress Better by Knowing What Causes It

June 21, 2017 - 8:05am

No matter how brave, hardworking, and intelligent you may be, there comes a time when stress becomes overwhelming and you get triggered. Triggers are those things that cause you to have a knee-jerk reaction that may or may not be the best response to a given situation.

When you are triggered, the emotional part of your brain takes over. You are flooded with adrenaline and cortisol, the same neurotransmitters and hormones that have evolutionarily protected us from threats like bear attacks (freeze, fight, or flight). Your logical brain temporarily shuts down, and you lose the ability to solve problems, make decisions, and think rationally.

When this happens, you have been emotionally hijacked, and it is difficult to see things as they really are. You go into protection mode, and until the perceived threat or trigger has dissipated, you will remain there. Over time these reactions can lead to acute anxiety, depression, irritability, fatigue, and other health problems from heart disease to lowered immune response.

You and Your Team Series Resilience

Work-related stress has gotten a lot of attention lately. Recent studies estimate that in the United States alone it is costing the economy over $300 billion a year. And given the fact that workplace stress is blamed for 120,000 deaths per year, how we deal with it can literally be a matter of life and death ­— and a huge determining factor in our health, happiness, and productivity.

Stress is ubiquitous and inevitable, but we all react to difficult circumstances differently. How we manage stressful situations plays a huge role in determining how resilient we are. To better manage stress, start by asking how you respond when you are under pressure:

  • How does stress affect you physically (e.g., tightness in your chest, sweating, knots in your stomach, headaches, etc.)?
  • How does stress affect you psychologically or emotionally (e.g., feeling out of control)?
  • How do you destress (e.g., laughing, meditating, practicing yoga, reading, etc.)?

Identifying your triggers is a key component in improving your emotional intelligence and resilience. Emotional intelligence is the ability to understand your mood and emotions, to be aware of the moods and emotions of others and to use this awareness to guide your behavior. Emotional intelligence determines how you interact with others, maintain relationships, stay motivated, make decisions, manage your emotions, influence others, and much more. The stronger your emotions, the more likely they are to dictate your behavior.

As the mother of a special needs child with severe behavioral and emotional challenges, I get triggered regularly, and I have had to learn how to proactively manage my stress response. This starts with being aware of my emotions.

If you pay attention to the times when you experience stress, overwhelming emotions, and frustration, you’ll begin to notice a pattern; there is usually someone or something or that triggers a stress response.

For example, take your typical workday, which is probably filled with meetings, deadlines, and other stressors. Imagine that a colleague embarrasses you in front of your manager and peers, sharing that you missed an important deadline. Your shoulders get tense, your palms get sweaty, and your stomach tightens. You have just been triggered, in this case by a feeling of embarrassment. If you’re not careful, you can unknowingly think and behave in ways that impact your relationships and other experiences throughout the rest of the day.

Some common sources of stress we are all familiar with include:

  • work
  • children
  • finances
  • relationships
  • illness
  • overcommitting
  • loneliness
  • family dynamics
  • lack of work-life balance
  • uncertainty

The good news is, once you are aware of your triggers, you can manage how you choose to react to them. The following questions are helpful in identifying your triggers:

  • It makes me angry when ___.
  • I become overwhelmed when ___.
  • I feel offended when ___.
  • I think it’s rude to ___.
  • At work I wish people would ___.
  • It makes me crazy when ___.
  • I get irritated when I come to work and ___.

In social psychology, fundamental attribution error refers to our tendency to judge others by their behavior and assign it to their character, but to judge ourselves based on our intent. Essentially, we make assumptions about people’s motives and blame them for their actions. When they exhibit a behavior we don’t like, we label it as a character flaw. What we don’t realize is that in making these judgments about others, we increase our own levels of stress.

So, the next time someone says or does something that activates your stress triggers, practice acknowledging and understanding your emotions. Assume positive intent and look for the most hopeful interpretation of their behavior. Think about that example of a colleague pointing out that you missed a deadline. What if you interpreted the situation a bit differently? What if you assume that they were asked to give a status update and had no intention of embarrassing you? Yes, they could have approached it differently, but we’re all human, and we all make mistakes.

When you focus your intentions on the most positive interpretation of a person or situation, you begin to see things differently. Not only does it reduce your stress levels but you will also be surprised at how much more optimistic you feel. You will be on your way to being happier, more productive, and more resilient.

To put this practice into action, start by identifying one situation that is challenging your emotional intelligence, and then ask yourself:

  • How is it impacting me physically, emotionally, and psychologically?
  • What triggers these feelings and emotions?
  • What action can I take to manage the situation and my emotional response more effectively?

Resilience is a set of skills that can be practiced and honed. While there is no shortage of stress in our lives, proactively managing your triggers will put you back in control. You will find that you are triggered less often and your responses are more manageable. By practicing these skills, you will not only reduce your levels of stress but also build emotional intelligence, grit, and resilience.

Changing Company Culture Requires a Movement, Not a Mandate

June 20, 2017 - 12:00pm

Culture is like the wind. It is invisible, yet its effect can be seen and felt. When it is blowing in your direction, it makes for smooth sailing. When it is blowing against you, everything is more difficult.

For organizations seeking to become more adaptive and innovative, culture change is often the most challenging part of the transformation. Innovation demands new behaviors from leaders and employees that are often antithetical to corporate cultures, which are historically focused on operational excellence and efficiency.

But culture change can’t be achieved through top-down mandate. It lives in the collective hearts and habits of people and their shared perception of “how things are done around here.” Someone with authority can demand compliance, but they can’t dictate optimism, trust, conviction, or creativity.

At IDEO, we believe that the most significant change often comes through social movements, and that despite the differences between private enterprises and society, leaders can learn from how these initiators engage and mobilize the masses to institutionalize new societal norms.

Dr. Reddy’s: A Movement-Minded Case Study

One leader who understands this well is G.V. Prasad, CEO of Dr. Reddy’s, a 33-year-old global pharmaceutical company headquartered in India that produces affordable generic medication. With the company’s more than seven distinct business units operating in 27 countries and more than 20,000 employees, decision making had grown more convoluted and branches of the organization had become misaligned. Over the years, Dr. Reddy’s had built in lots of procedures, and for many good reasons. But those procedures had also slowed the company down.

Prasad sought to evolve Dr. Reddy’s culture to be nimble, innovative, and patient-centered. He knew it required a journey to align and galvanize all employees. His leadership team began with a search for purpose. Over the course of several months, the Dr. Reddy’s team worked with IDEO to learn about the needs of everyone, from shop floor workers to scientists, external partners, and investors. Together they defined and distilled the purpose of the company, paring it down to four simple words that center on the patient: “Good health can’t wait.”

But instead of plastering this new slogan on motivational posters and repeating it in all-hands meetings, the leadership team began by quietly using it to start guiding their own decisions. The goal was to demonstrate this idea in action, not talk about it. Projects were selected across channels to highlight agility, innovation, and customer centricity. Product packaging was redesigned to be more user-friendly and increase adherence. The role of sales representatives in Russia was recast to act as knowledge hubs for physicians, since better physicians lead to healthier patients. A comprehensive internal data platform was developed to help Dr. Reddy’s employees be proactive with their customer requests and solve any problems in an agile way.

At this point it was time to more broadly share the stated purpose — first internally with all employees, and then externally with the world. At the internal launch event, Dr. Reddy’s employees learned about their purpose and were invited to be part of realizing it. Everyone was asked to make a personal promise about how they, in their current role, would contribute to “good health can’t wait.” The following day Dr. Reddy’s unveiled a new brand identity and website that publicly stated its purpose. Soon after, the company established two new “innovation studios” in Hyderabad and Mumbai to offer additional structural support to creativity within the company.

Prasad saw a change in the company culture right away:

After we introduced the idea of “good health can’t wait,” one of the scientists told me he developed a product in 15 days and broke every rule there was in the company. He was proudly stating that! Normally, just getting the raw materials would take him months, not to mention the rest of the process for making the medication. But he was acting on that urgency. And now he’s taking this lesson of being lean and applying it to all our procedures.

What Does a Movement Look Like?

To draw parallels between the journey of Dr. Reddy’s and a movement, we need to better understand movements.

We often think of movements as starting with a call to action. But movement research suggests that they actually start with emotion — a diffuse dissatisfaction with the status quo and a broad sense that the current institutions and power structures of the society will not address the problem. This brewing discontent turns into a movement when a voice arises that provides a positive vision and a path forward that’s within the power of the crowd.

What’s more, social movements typically start small. They begin with a group of passionate enthusiasts who deliver a few modest wins. While these wins are small, they’re powerful in demonstrating efficacy to nonparticipants, and they help the movement gain steam. The movement really gathers force and scale once this group successfully co-opts existing networks and influencers. Eventually, in successful movements, leaders leverage their momentum and influence to institutionalize the change in the formal power structures and rules of society.

Practices for Leading a Cultural Movement

Leaders should not be too quick or simplistic in their translation of social movement dynamics into change management plans. That said, leaders can learn a lot from the practices of skillful movement makers.

Frame the issue. Successful leaders of movements are often masters of framing situations in terms that stir emotion and incite action. Framing can also apply social pressure to conform. For example, “Secondhand smoking kills. So shame on you for smoking around others.”

In terms of organizational culture change, simply explaining the need for change won’t cut it. Creating a sense of urgency is helpful, but can be short-lived. To harness people’s full, lasting commitment, they must feel a deep desire, and even responsibility, to change. A leader can do this by framing change within the organization’s purpose — the “why we exist” question. A good organizational purpose calls for the pursuit of greatness in service of others. It asks employees to be driven by more than personal gain. It gives meaning to work, conjures individual emotion, and incites collective action. Prasad framed Dr. Reddy’s transformation as the pursuit of “good health can’t wait.”

Demonstrate quick wins. Movement makers are very good at recognizing the power of celebrating small wins. Research has shown that demonstrating efficacy is one way that movements bring in people who are sympathetic but not yet mobilized to join.

When it comes to organizational culture change, leaders too often fall into the trap of declaring the culture shifts they hope to see. Instead, they need to spotlight examples of actions they hope to see more of within the culture. Sometimes, these examples already exist within the culture, but at a limited scale. Other times, they need to be created. When Prasad and his leadership team launched projects across key divisions, those projects served to demonstrate the efficacy of a nimble, innovative, and customer-centered way of working and of how pursuit of purpose could deliver outcomes the business cared about. Once these projects were far enough along, the Dr. Reddy’s leadership used them to help communicate their purpose and culture change ambitions.

Harness networks. Effective movement makers are extremely good at building coalitions, bridging disparate groups to form a larger and more diverse network that shares a common purpose. And effective movement makers know how to activate existing networks for their purposes. This was the case with the leaders of the 1960s civil rights movement, who recruited members through the strong community ties formed in churches. But recruiting new members to a cause is not the only way that movement makers leverage social networks. They also use social networks to spread ideas and broadcast their wins.

Leadership at Dr. Reddy’s did not hide in a back room and come up with their purpose. Over the course of several months, people from across the organization were engaged in the process. The approach was built on the belief that people are more apt to support what they have a stake in creating. And during the organization-wide launch event, Prasad invited all employees to make the purpose their own by defining how they personally would help deliver “good health can’t wait.”

Create safe havens. Movement makers are experts at creating or identifying spaces within which movement members can craft strategy and discuss tactics. Such spaces have included beauty shops in the Southern U.S. during the civil rights movement, Quaker work camps in the 1960s and 1970s, the Seneca Women’s Encampment of the 1980s and early 1990s. These are spaces where the rules of engagement and behaviors of activists are different from those of the dominant culture. They’re microcosms of what the movement hopes will become the future.

The dominant culture and structure of today’s organizations are perfectly designed to produce their current behaviors and outcomes, regardless of whether those outcomes are the ones you want. If your hope is for individuals to act differently, it helps to change their surrounding conditions to be more supportive of the new behaviors, particularly when they are antithetical to the dominant culture. Outposts and labs are often built as new environments that serve as a microcosm for change. Dr. Reddy’s established two innovation labs to explore the future of medicine and create a space where it’s easier for people to embrace new beliefs and perform new behaviors.

Embrace symbols. Movement makers are experts at constructing and deploying symbols and costumes that simultaneously create a feeling of solidarity and demarcate who they are and what they stand for to the outside world. Symbols and costumes of solidarity help define the boundary between “us” and “them” for movements. These symbols can be as simple as a T-shirt, bumper sticker, or button supporting a general cause, or as elaborate as the giant puppets we often see used in protest events.

Dr. Reddy’s linked its change in culture and purpose with a new corporate brand identity. Internally and externally, the act reinforced a message of unity and commitment. The entire company stands together in pursuit of this purpose.

The Challenge to Leadership

Unlike a movement maker, an enterprise leader is often in a position of authority. They can mandate changes to the organization — and at times they should. However, when it comes to culture change, they should do so sparingly. It’s easy to overuse one’s authority in the hopes of accelerating transformation.

It’s also easy for an enterprise leader to shy away from organizational friction. Harmony is generally a preferred state, after all. And the success of an organizational transition is often judged by its seamlessness.

In a movements-based approach to change, a moderate amount of friction is positive. A complete absence of friction probably means that little is actually changing. Look for the places where the movement faces resistance and experiences friction. They often indicate where the dominant organizational design and culture may need to evolve.

And remember that culture change only happens when people take action. So start there. While articulating a mission and changing company structures are important, it’s often a more successful approach to tackle those sorts of issues after you’ve been able to show people the change you want to see.

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