David and Goliath

Photo by Alaskan Dude

I love the story of David and Goliath since I was a little kid. You must admit, it is the basic story of the underdog. Lately, as I was reading other interpretations of it, I understood how loaded with ideas and morals this story is. Then, Last week I read this fascinating article by one of my favorite writers, Malcolm Gladwell, called: “How David Beats Goliath“. And took another spin on the ideas I have already been exploring. In it, Gladwell makes two very interesting points. This is the first one:

When underdogs choose not to play by Goliath’s rules, they win. David can beat Goliath by substituting effort for ability—and substituting effort for ability turns out to be a winning formula for underdogs in all walks of life.

There are so many implications for this idea and many of them are mentioned in the article itself and I don’t want to ruin the read for you. One thing that I thought about immediately is companies’ strategy and some of things I learned and wrote about in the last few weeks.

From all the cases I have been reading lately in my strategy class, one thing is clear. In order to win against the big ones, you cannot try to be like them. You got to be different. You got to create a comparative advantage and then exploit it. Dell, Southwest, SAS, Airborne. All examples of companies who went against the big guys and won. Not because they tried to be better than the big guys. But because they were different. They came up with something new.

This is what I wrote just a few weeks ago:

But this also creates temptations. To imitate and not innovate. To be like somebody else, because it is safe. Because it is easy. This is a temptation we should be careful off.  Do you want to out-Apple Apple? Is that possible? Companies tried to out-Southwest Southwest and failed.

The same logic goes the other way. If you are the big guy, watching the little guy get bigger, your reaction should not be imitating him. You are a big guy. Little guy’s strategies will not work for you. When Dell started with the direct selling model, HP, Compaq and IBM tried it as well and failed. Their structure was not suitable for direct marketing.

The second point is about real time. To fully understand it, you should really read the article, but here is the gist of it. When talking about the Federal Reserve setting interests, one of the interviewees in the article says:

The world runs in real time, but government runs in batch. Every few months, it adjusts. Its mission is to keep the temperature comfortable in the economy, and, if you were to do things the government’s way in your house, then every few months you’d turn the heater either on or off, overheating or under heating your house.

Two thoughts on this point:

The first is a something I have been lately thinking about a lot. It is one of the most prominent things every manager should do. Investigate the information he already has. There is an abundance of information in every organization just lying there because people gather it anyway. You can make a lot out of it.

The second thought is about the challenges facing governments in the future. I think three concepts are important here: real time, transparency and aggregation of information. Governmental bodies which will be able to harness the power of real time and aggregation while keeping and improving transparency will be the most successful bodies for our society.

Elad

Why you should go and observe someone else’s work?

Photo by Timothy Valentine

Last week in our strategy class we were talking about competitive advantages. We learned about the two main ways you can create competitive advantage – cost advantage and differentiation. Then, as an answer to a student’s question (I don’t remember what it was exactly) the professor said something like this: if you are looking for how to create cost advantages – you need to look for answers in the operations class. If you want to create differentiation advantage – you need to look for answers is the marketing class.

I can’t say I agree.

I think one of the major problems companies are facing today is to create ways disengage from this kind of thinking. To create synergies between operations and marketing. And finance, accounting and HR for that matter. The thought that the advantage of the company, whatever that is, lies in one aspect or one discipline of the business is counterproductive and for me, counterintuitive. With everything we know about the importance of diversity in the creation of innovation, about the effects of social capital derived from interaction between different parts of the business, even thinking about competitive advantage as being the responsibility of one part of the business is dangerous.

I am sure our professor acknowledges that as well. All the examples of successful companies we keep seeing are examples of companies which succeeded to do both cost and differentiation advantages. Doing both requires coordination.

More than that. In the operations class we learn about things like TQM and Six-Sigma. These are concepts that not only reduce cost, but also increase quality and can create differentiation. Marketing decisions can have cost implications. The fact the Apple chooses (or choose) to create the I-pod with a very limited user interface (which I find terrible) is a marketing decision. But I am sure it has operations and cost implications. Design of the product can be a competitive advantage – who does it? Marketing or operations.

In the words of Guy Kawasaki:

The separation of engineering and marketing is artificial. It presumes that engineers build feature-laden crap that no one cares about but engineers. Maybe mediocre engineers do this. Great engineers create with a customer in mind. Fantastic engineers create with themselves in mind as the customer. Every Nokia engineer should give their prototypes to their mothers, fathers, and kids. That would fix everything. The user interface of almost every phone is unintelligible. Anyone could have done an iPhone—it’s not like Apple has a monopoly on design.

I understand the need to simplify concepts for MBAs. But the fact that we study each and every one of the courses separately is enough to create silos of thinking instead of integrative thinking. I think all disciplines, and especially strategy, should embrace an integrative look.

No matter where you work and what is your pre-defined role in your company, you should try to schedule an hour, a day, a week – with another department – to understand their work, their needs and their problems. What you will learn will be invaluable to your work.

Elad

The Continuum

I was watching Nancy Etcoff talk on TED about happiness. The subject is, for obvious reasons, of interest to me, and I found it quite entreating. But one part of the talk really spiked my interest.

During the 7^th minute of the talk, Etcoff talks about the fact that contrary to common belief, happiness and unhappiness are not on the endpoints of a single continuum. They are not on the same scale. Happiness is not simply absence of misery. There are actually two different continuums for each of these categories. Or as Etcoff says it, as you get less miserable you don’t become happy, you become less miserable.

This is a simple yet very powerful idea. But then I said to myself, haven’t I heard this idea before? Off course I have.

According to the Two-factor theory (also known as Herzberg’s motivation-hygiene theory) job satisfaction and job dissatisfaction act independently of each other. Two Factor Theory states that there are certain factors in the workplace that cause job satisfaction (Motivators, e.g. challenging work, recognition, responsibility which give positive satisfaction, arising from intrinsic conditions of the job itself, such as recognition, achievement, or personal growth), while a separate set of factors cause dissatisfaction (Hygiene factors,e.g. status, job security, salary and fringe benefits, which do not give positive satisfaction, although dissatisfaction results from their absence. These are extrinsic to the work itself, and include aspects such as company policies, supervisory practices, or wages/salary).

In the book “First, Break all the rules“, Marcus Buckingham and Curt Coffman explain what Gallup found about costumer’s satisfaction and dissatisfaction. You guessed it. They are different. Granted, here they are not on a different continuum, but according to the book, costumers have two expectations that determine their level of dissatisfaction: accuracy and availability, and two different expectations that determine their satisfaction: partnership and advice.

The implications of each if these separately are profound in each field by itself. But put together, they produce something even bigger. Our tendency to think about phenomena as a continuum. This tendency might actually be wrong. And I ask you – what other tendencies do we have that our wrong? How many mistakes we do every day, because of our underlining assumptions? When is the last time that you conducted an exercise with the sole purpose of challenging your assumptions?  It is a difficult exercise, but it is worth it.

Elad

What can mangers learn from the Milgram Experiment?

Photo by Festeban

The Milgram Experiment was a series of social psychology experiments conducted by Yale University psychologist Stanley Milgram, which measured the willingness of study participants to obey an authority figure who instructed them to perform acts that conflicted with their personal conscience (in this case, giving a lethal electric shock to another person).In layman terms, Milgram showed in his experiment people’s tendency to conform to an authority figure.

This experiment was mentioned in our Marketing class a week ago as a reminder of the power we, as managers, will have over people, meaning, especially consumers. If people will generally do what over you tell them and will easily believe whatever you tell them, that means you have a power and responsibility.

I especially enjoyed the discussion in class because just a few days before that I watched a Law & Order: SVU episode that dealt with the same experiment, featuring Robin Williams. In it, Williams plays a man who lost his wife because he listened quietly to his doctor even though he knew the doctor was wrong. This drives him mad and he starts calling people claiming to be Detective Milgram and convincing them to do terrible things. He starts a movement calling people to: “Stop being sheep”. This video is the end of this great episode:

Both of these mentions of the Milgram Experiment got me to think on the implications of that experiment to people in managerial positions. The fact that we have the power of authority is a given. The fact that this power comes with responsibility is also a given. But most of the time managers don’t use this power to bring people to perform acts that conflict with their personal conscience. They just use that power to ignore people. And by that, they lose some much.

Most people will conform to authority. As managers we should discourage that. We should recognize does who challenge our authority in a constructive ways. We should encourage institutionalized devil advocacy. The responsibility lies with us as managers.

And off course, the coin has two sides. As employees, how do we treat our managers? Are we behaving like sheep? Do we stand up for what we believe in?

I will finish with a quote by Hugh Macleod from Gapinvoid, that is not directly linked to this subject, but which I find invigorating to think about from time to time.

The price of being a sheep is boredom. The price of being a wolf is loneliness. Choose one or the other with great care.

So, what is your personal takeaway from the Milgram Experiment?

Elad

The preference of recognition

I guess it is true. Even a guy with the best work in the world (and the guy in the video is probably not so fat from that) wants to be recognized. Everybody wants to hear those simple words: “you did a great job”.

I have always believed in recognizing excellence. I think part of the failure of many of our systems, business, education (and even personal relationships) are due to the fact that we don’t take the time to recognize excellence (and even to recognize that someone is keeping the required standard). We put too much emphasis on those who are doing bad.  

A few weeks ago I read a ChangeThis manifesto called: “The Recognition Microscope – Fuel for Human Acceleration” by Adrian Gostick & Chester Elton. Here is a quick excerpt:

From country to country, employee engagement scores in a massive global study were as much as two or three times higher when a manager offered frequent, specific and timely recognition—numbers that the researchers at Towers Perrin, a leading global human capital consulting firm who conducted this latest research for us, called not only statistically significant, but impressive in size and impact.

“Thank you,” obviously is a universal concept that has an underlying definition—meaning “Do that specific behavior again.”

One point that is very important and at least in the manifesto, I am not sure the writers touch it enough. The customization of recognition. It is not only important to recognize, it is important to find the right recognition for each person. This is not easy. And don’t make the mistake that your employees want the same kind of recognition you do. They don’t. One guy likes to be mentioned in front of the entire department. The other guy would find that embracing. Maybe, he just wants a personal thank you note.

So, how do you recognize your employees? Do you do it according to each employee preference?

Elad

What are your expectations?

Photo by Roland

Today, as part of our marketing class, we had a guest lecture by Allan Watkinson from Gallup Consulting. Watkinson gave us a lecture about employee and customer engagement and Gallup’s Human-Sigma concept. I must admit it was a fascinating lecture that dealt with many of the things I write a lot about here in my blog.

Watkinson covered a few subjects that I will probably write about in following posts, but I think one of the issues that stood out for me was the subject of expectations. One of the things Gallup consultants encounter constantly is employees, even employees in high positions like executives, who are not sure what is expected of them. One of the main questions used to assess managers in the Gallup model is whether their employees know what is expected of them.

Now the notion by itself is not new for me, and I read about its importance as a question to predict managers’ effectiveness in “First, break all the rules“, but I think the importance of this concept can’t be stressed enough. More than that, this concept is not only important for managers. I actually encountered it in almost every professional and personal engagement I ever took part off.

Think about it. In teaching or presenting, setting expectations is one of the most important things. It is the first leg of “Tell them what you are going to tell them. Tell them. Tell them what you told them”. In coaching, setting expectations is the first step to create a viable relationship between coacher and coachee. I have heard about so many personal relationships that have failed or suffered because the couple did not communicate their expectations (including some of your truly). In the last few months, I have experienced first handed the importance of setting expectations in a team setting. And above all, as I write in my e-book, I believe that as an employee you should be active and set your expectations from the role to your manager.

So, if setting expectations is so important and crucial to success in so many parts of life, why most people don’t do it? Why do so many managers, couples, teachers and more are failing to set expectations correctly?

I don’t have an answer for that. I do know that you can easily differentiate yourself, not matter what it is that you do, by setting expectations.

So, when is the last time you set the expectations up front?

Elad

Contradictions

Photo by Sebi

This post will be different than usual. I don’t really have a point. Just a philosophical question. In the last few weeks in my MBA I have felt like I am under constant attack of mixed messages.

One of the main things you learn in the MBA is that no company is invincible. So many companies have failed because they were reluctant to understand that their current advantage is what might bring them down. They relied too much on the past and did not consider the possibility, that the future will be quite different. And our professors keep ramming this idea into us.  ”Past profitability is a poor indicator of future profitability” says our Strategy course slides.

But at the same time, one thing you keep learning and studying is how to try to forecast: future sales, future demands, and future trends. Half of our assignments deal with some kind of forecast of the future. The same strategy class talked about the fact the historically, some industries were less profitable than others.

Two thoughts on this:

In his novel “1984″, George Orwell’s descries the notion of Doublethink: the act of simultaneously accepting as correct two mutually contradictory beliefs. This is I have been feeling lately. They say that the ability to Doublethink is a trait of great people. I am trying to be great.

Maybe the answer lies in the middle. Understanding that both the past and the future are not reliable. The past is something we should study carefully. But we should not trust it blindly. The future is something we should try to forecast. But we should accept that we can’t.

Elad

How are you listening to your clients?

 

Photo byAgentAkit

The reading material for our Marketing Class this week included an article titled: “The customer doesn’t know best; you do“. As this is something I mentioned in my blog a number of times before, I must admit I was intrigued. And I wasn’t a disappointed.

The first point of the article deals mainly with customers’ perception around prices:

Customers always want lower prices, but marketers should rarely listen. And our tough times don’t warrant exceptions

The writer, Anne-Marie Fink, gives a number of examples where price reductions caused a decline in sales due to branding issues. The interesting examples are those in which surveys said that customers will be willing to pay a certain amount for a product but actually paid a lot more in the stores. This did not come as a total surprise to me. Surveys are problematic. But more than that, asking people to give an estimation of value is problematic. A survey takes a certain point in time and asks the surveyed to appreciate how much he will be willing to pay in the unknown future.  As Dan Gilbert points out in his fascinating TED talk, human beings are really bad at doing this, because value is situation dependent. Perception of value of a certain product changes according the circumstances – mode, what other products I am buying at that moment, was is my total sum of expenditure and more. These things are more important than what a person says he will do in some anonymous survey.

Another great example in the article relates to another point I discussed here: competitive advantage. Fink describes fast food restaurants’ attempts to introduce health food into their menus because this is what customer said they wanted. Almost all of these attempts (usually adding some kind of veggie burgers or grilled products) failed even though in the surveys customers explicitly said they would like to see healthier menus. Why?  Because you don’t go to a fast food restaurant to eat a healthy meal.  These chains lost sight of what their competitive advantage was. Off what they were offering and insisted on listening to the customer instead on focusing on themselves and their advantages.

All of this does not mean the surveys are useless or that we should ignore what customers are saying. I think it is more important to understand how we are listening to our customers and what kind of questions we are asking. In the case of consumer behaviour and price sensitiveness, the best prediction is probably the wallet and we should listen to it very carefully and adapt our “market research” to it.

So, how are you listening to your clients?

Elad

Competitive Advantage

Last week I attended a Strategy class. In one of the slides on his presentation our professor wrote the following definition for “Competitive Advantage”:

The ability to create more economic value than competitors

   * There must be something different about a firm’s offering vis-à-vis competitors’ offering

   * If all firms’ strategies were the same, no firm would have a competitive advantage

   * Competitive advantage is the result of doing something different and/or better than competitors

Two things jump out to me in the definition:

1. I don’t see Competitive Advantage as the ability to create more economic value than competitors. I think competitive advantage is how we create value differently than competitors. There is a big difference. Our competitors don’t have to be our enemies and it does not have to be a race. We can both be different.
2. Coming from a strategy professor I am not surprised to find such an emphasis on the importance of strategy, but I don’t think that: “If all firms’ strategies were the same, no firm would have a competitive advantage”. There is the little issue of implementation. And similar firms, with similar mission, vision and goals, handle implementation differently.

Same same but different. One of the readings on that same course (“The fundamental dimensions of strategy” by Frederic Frery) included this statement:

“Because the value of any strategic concept resides in its ability to create competitive advantage, the concept becomes irrelevant as soon as it is extensively adopted. In a hypercompetitive context, the better a strategic idea, the shorter its life”

We live in a society of imitators and imitation. From popular culture to workplace behaviour to academia to business.  And in some ways, that is not a bad thing. When a company comes up with a new idea, it is quickly copied, sometimes in better ways. The bar is constantly rising. What was new last week is the excepted average next week. This creates challenges. How to create innovation and differentiation that will last? Or on the other side how to let advantages go, because we live in the age of temporary advantages.

But this also creates temptations. To imitate and not innovate. To be like somebody elase, because it is safe. Because it is easy. This is a temptation we should be careful off.  Do you want to out-Apple Apple? Is that possible? Companies tried to out-Southwest Southwest and failed.

And what it true in strategic business life is even more accurate in your personal and professional life. As Peter Bregman accurately articulates:

 Trying to distinguish ourselves by being the same as others, only better, is hard to do and even harder to sustain. There are too many smart, hard working people out there all trying to excel by being the best at what everyone else is doing. It’s simply easier to be unique

What is going on with your Competitive Advantage?

Elad

Did anybody notice?

Photo by Fanny.b

Last week I attended a lecture (actually more like a Q&A session) with Naomi Simson, CEO of the fast growing online gifting retailer RedBallon. This event was organized by the AGSM MBA ICE (Innovation, commercialisation, entrepreneurship) Club and after briefly describing the story of creating RedBallon, Simson answered many questions of the eager MBAs. One of the questions posed touched the subject of employee engagement. Here is the main part of Simson’s answer:

To create an atmosphere where employees feel engaged, every manager should make sure that every day each employee will give a positive answer to these three questions:

1. Do I know what am I here to do?
2. Did anybody notice when I did it?
3. Did I go home feeling like a winner?

My eyes literally lit up when I heard this answer. This is a simple answer that is so profound, that I think it actually covers most of the important concepts of employee engagement. And mind you, this is a subject managers struggle with every day. Still, instead of talking about the entire answer, I want to concentrate only on part two: “Did anybody notice when I did it?” – I think this is the part most managers forget.

When I was training commanders in the Israeli Air Force one of the classes dealt with how to deliver punishments and give prizes. The basic concept that was taught was as follows: you punish every time somebody deviates from the norm negatively and give a prize once in a while for a positive deviation from the norm.

I disliked this class. I think it misses the most important point. You should recognize people for keeping the norm. This happens all the time. Managers concentrate on trying to “help” the struggling workers. Those who under perform. They think to themselves, hey – that guy who is doing OK doesn’t need me, he is doing OK. So they ignore him and work with the struggling guy. How does that make that make the “OK guy” feel? What is the message that this kind of behaviour sends to him? How does this affect his perception?

What is the problem with this scenario? Not only is the “OK guy” not being recognized, he is also doing OK. OK is not enough. A manager’s job is to make him excel. Average, is not enough. Helping employees excel starts by noticing and letting our employees know that we noticed. This is the basic elements of employee engagement and employee recognition.

So, when did you last made your employees aware that you noticed what they did?

Elad