No explanation, just gut

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This is the second post in a series of post I am writing after reading Blink: The Power of Thinking Without Thinking by Malcolm Gladwell (see the first post here).

As someone who is going to graduate with an MBA from a business school in a few months I respect the power on analysis. I respect the use of data and the importance of facts and figures. I have deep appreciation for forecasting models and analysis models and to rational, structured approach to decision-making and strategy. In God we trust, for everything else we need data.

At the same time, if there is one thing that I learned over the last year and half is that the although modern technology allows us to be exposed to so much data and even sometime turns it into information for us it does not guarantee that data and information will be transmitted into knowledge or even will allow us to make better decisions. Sometimes, we have to trust of judgment and gut feeling. Cause sometimes, the best decisions, those which represented a big risk but were also a big opportunity, cannot be explained rationally with analysis and data.

Gladwell writes in Blink:

When we ask people to explain their thinking – particularly thinking that comes from the unconscious – we need to be careful in how we interpret their answers…when it comes to romance, of course, we understand that. We know we cannot rationally describe the person we will fall in love with: that’s why we go on dates – to test our theories about who attracts us. There are times when we demand an explanation when an explanation really isn’t possible.

And Roger Martin writes a post on HBR.org called Management by Imagination:

We need to get away from all those old sayings about measurement and management, and in that spirit I’d like to propose a new wisdom: “If you can’t imagine it, you will never create it.” The future is about imagination, not measurement. To imagine a future, one has to look beyond the measurable variables, beyond what can be proven with past data. While Motorola was projecting future sales volumes of “feature phones,” Mike Lazaridis, founder of Research in Motion, was imagining what executive life would be like if you could receive your emails on a handheld device. How compelling would an ordinary phone be if you could have a BlackBerry attached to your belt? He couldn’t “prove” that this would be a good idea. There was no data on the demand patterns for smartphones, because smartphones existed only in his imagination. But a mere 11 years after the launch of the product of his imagination, RIM leads Motorola by an ever-accelerating margin in sales, market share and profitability.

And this is what I wrote a few months back:

It seems to me that success, in art, science or business, comes from integrating intuition and analysis. That is one of the reasons diverse teams have trouble working in the short-term (they speak different languages – one of intuition while the other analysis) but in the long-term, they tend to outperform homogeneous teams (which do not take the full picture).

Thus, if we are unable to use both (and most people will struggle doing it consistently) we need to complete our own biased point of view, with the opposite point of view. Or just remind ourselves to re-check the other point of view every once in a while.

Reading Blink in many ways just made me realize that it is not only that intuition is important; it is many times much more powerful than the other methods. The problem, obviously, is that we don’t know when that is. It is easier for us to think that rational thinking is always superior. That more information, more facts, more analysis, more questions will lead to better results. Blink, and many other examples, reminds us, that this is not true. And that is a lesson that we need to teach that rational part of our brain again and again.

Maybe trust is not only for God.

Elad

What can we learn from eggs about teamwork, creativity and more importantly, rules

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I could not believe it. A prestigious program in the city that is the financial capital of the world. A class in the respected MBA program at NYU Stern. About 40 students, working in teams of five or six people, huddling over… an egg!

The objective? Build a device using an assortment of objects that will keep the egg from breaking when it falls from the ceiling. Besides the objects there were only a few rules to the competition. A time constraint. The criteria by which the device is going to be measured (does it work? Is it creative? Is it beautiful?). And that’s about it. The results? Five totally different designs that worked in totally different ways.

The idea behind this exercise was to learn about teams and teamwork. I was assigned as an observer of one of the teams and noticed subtle issues of communications, roles and how ideas are developed. Yet, with all the issues relating to teams in the exercise, I feel the real lesson I learned is totally different. It is about rules.

I believe in the concept of outcome management. Not telling people how to do things and instead telling them what the desired outcome is and allowing them to find their own way to reach it. A manger, instead of trying to dictate to people how to do things and creating lists of rules, should concentrate instead on other, more important activities. Concentrating on the purpose, the process, taking hurdles out-of-the-way and on people’s need for autonomy and mastery seems to me as a better choice. Surrounding employees with rules is not a recipe for phenomenal results.

When I think about the “eggs class” this is exactly the lesson that comes out of it. Our professor could have come to class, with a recipe, a cookbook or a script of how to create the device, and we would still see the teams struggling and notice different ways in which they worked together to follow the rules in order to create the device. But instead, she came only with a limited number of rules pertaining to the process, not to the content. And what was the result? Five different device, each ingenious in its own way, that a single person could not have thought about. Granted, some of the devices were better, some were worse, but I am confident that if you take the best part of each device, you could create a super device.

We think we know what the best way to do things is. However, we are never smarter than a group of people. We might know the best way for us, but we can never know what the best way for others is. We can help, we can suggest, but ultimately, it’s about giving them the freedom to find their own ways.

What is the equivalent of this idea in your organization? Do you have rules about content or rules about process?

Elad

BTW, if you are interested to see some of the pictures from the event, here you go.

On ignoring best practices

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Jeffrey Pfeffer has a very interesting article in Newsweek about layoffs and how they are much less effective than people think they are. One of the closing paragraphs caught my eyes:

Despite all the research suggesting downsizing hurts companies, managers everywhere continue to do it. That raises an obvious question: why? Part of the answer lies in the immense pressure corporate leaders feel—from the media, from analysts, from peers—to follow the crowd no matter what. When SAS Institute, the $2 billion software company, considered going public about a decade ago, its potential underwriter told the company to do things that would make it look more like other software companies: pay sales people on commission, offer stock options, and cut back on the lavish benefits that landed SAS at No. 1 on Fortune’s annual Best Places to Work list. (SAS stayed private.) It’s an example of how managerial behavior can be contagious, spreading like the flu across companies. One study of downsizing over a 15-year period found a strong “adoption effect”—companies copied the behavior of other firms to which they had social ties.

That reminded me of a post I wrote about how when we did a case about SAS in our organizational behavior MBA class at AGSM. I was surprised that all three teams in my class suggested to change to a commission based sale force. This is part of what I wrote back then:

This is the reason I was truly surprised to discover that all 3 teams recommended changing the pay system for the sales representatives and adding a commission based system. My simple question is WHY? It seems to work. More important than that, this is what makes SAS unique. You know how I feel about the importance of being remarkable.

You can argue about the question whether the commissions approach is the right approach generally (or maybe argue about using a joint approach), but it seems to work for SAS. So why change it?

You might say that people think that if they are motivated by money than other people are the same. But we know they are not. People are different.

I am not sure how, but this point connected with a point I was reading in a post on the Harvard Business Review blog today, by Dan Pallotta, titled – Real Leaders Don’t Do Focus Groups:

Apple is famous for not engaging in the focus-grouping that defines most business product and marketing strategy. Which is partly why Apples products and advertising are so insanely great. They have the courage of their own convictions, instead of the opinions of everyone else’s whims. On the subject, Steve Jobs loves to quote Henry Ford who once said that if he had asked people what they wanted they would have said “a faster horse.”

And this in turn reminded me of a number of things I wrote about, especially, this post:

If you look at some of the best successes in the last few years, they come from companies that looked at the market and did not ask themselves – how do we compare? How can we do what are competitors are doing, just differently or better?

It came from companies that reinvented the game. That left the confines of the industry and created new industries where they excel. Itunes; Google; Twitter; Iphone; are just some of the examples that spring to my mind.

What are the best practices you should be ignoring but instead are trying to imitate?

Elad

Should managers Push or Pull

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A discussion in class yesterday prompted me to think about the subject of Push vs. Pull management. What does that mean? Ask yourself – when do you actively engage with your employees and when do you wait for them to come to you?

My guess is that for most managers, the instinct of when to push and when to pull is out of tune.

They tend to push criticism (not feedback), rules and answers.

They tend to pull feedback (that is, they give feedback only when asked to), recognition (yearly performance reviews, anyone?) and taking hurdles out of employees’ way (that is, wait until the employee comes to them with a problem).

One example. Do you have an open door policy or do you practice MBWA (management by walking around).

Another my favorite examples, resisting the temptation to give answers and to tell people what to do. Seth Godin wrote a few days ago:

People are just begging to be told what to do. There are a lot of reasons for this, but I think the biggest one is: “If you tell me what to do, the responsibility for the outcome is yours, not mine. I’m safe.”

When asked, resist.

Instead of pulling people to ask you what they should do, resist the temptation to give answers and push back with some questions. Susan Docherty, who leads the United States sales, service and marketing team at General Motors, said, in an interview on the New York Times:

It’s one thing to say that you’re inclusive, but it’s a whole other thing to be inclusive. And when people come into my office, they feel welcome. My door is open. They can bring ideas. They begin to understand that, as a leader, I want to be collaborative. I don’t have all the answers or all the best ideas, nor do I want to.

You don’t have all the answer either. So, why not start asking great questions instead?

The ability to pull and push in the right times is critical. When do you push and when do you pull?

Elad

Small decisions, fake sun-glasses and celebrating contradictions

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I have always been fascinated with small decisions and how one such decision can lead to a spiral that ends in enormous unwanted results in the future. Last semester, while still down at AGSM MBA, I took a business ethics class and noticed that in a lot of the cases we talked about, the current ethical dilemma was rooted in a small and sometimes insignificant decision in the past.

Then I read this post describing a very intriguing experiment:

…[The] psychologists Francesca Gino, Michael Norton and Dan Ariely asked two groups of young women to wear sunglasses taken from a box labeled either “authentic” or “counterfeit.” (In truth, all the eyewear was authentic, donated by a brand-name designer interested in curtailing counterfeiting.) Then the researchers put the participants in situations in which it was both easy and tempting to cheat. In one situation, which was ostensibly part of a product evaluation, the women wore the shades while answering a set of very simple math problems — under heavy time pressure. Afterward, given ample time to check their work, they reported how many problems they were able to answer correctly. They had been told they’d be paid for each answer they reported getting right, thus creating an incentive to inflate their scores. Unbeknown to the participants, the researchers knew each person’s actual score. Math performance was the same for the two groups — but whereas 30 percent of those in the “authentic” condition inflated their scores, a whopping 71 percent of the counterfeit-wearing participants did so. Why did this happen? As Gino puts it, “When one feels like a fake, he or she is likely to behave like a fake.” It was notable that the participants were oblivious to this and other similar effects the researchers discovered: the psychological costs of cheap knockoffs are hidden. The study is currently in press at the journal Psychological Science.

And that got me thinking. Here is the comment I made on that post:

It [the research described above] actually explains the downwards trends in ethics over time and the fact that a small unethical decisions might lead to a major issues in the long run. It also reminds of the broken windows theory. As soon as we are already faced with something broken, it is easier for us to act “broken” ourselves. The importance of small choices is so significant it is almost too hard to understand it.

As always I try to translate such thoughts to the world of management and to the way managers connect with their employees. I think there are a number of implications:

1. There is no such thing as a small decision. Our every act matters. And in the things that are important, like praise and recognition and helping people excel, we are tested every day. We don’t know what deciding not to engage in such activities today means for the future.

2.While thinking about the possible outcomes of the every possible decision is impossible and paralyzing, it is important to realize that the biggest issues started small. If you decide to go down a certain path, you create momentum which is hard to recognize and hard to stop. Dr. Philip G. Zimbardo says in interview for the book Reality Check: The Irreverent Guide to Outsmarting, Outmanaging, and Outmarketing Your Competition by Guy Kawasaki (You don’t have to read the whole book but read this chapter and page 365):

Good people don’t rush in to do evil where angels fear to tread; instead they start by straying only a small way away from their moral center and each successive step down is hardly different, barely noticeable, until it is too late and their behavior is shocking and may even be awesome or awful.

3. Finally, I write here in this blog that managers should stop with trying to create rules. I believe in employee autonomy and in practical wisdom. At the same time, I wrote this in my e-book:

I believe in doing things right because they are right. In obeying the rules because they are rules. I believe that there are certain things that are just not done. We have so many rules around us. Some are better, some are worse. But the sad thing is, that we are used to breaking them every day. Just think about jaywalking or avoiding certain tax payments or taking something from your office when you are not supposed to. I believe rules are there for a reason and we should follow them because they are there. Because it is right. If the rules are wrong, it is all right to try to change them. In fact, we must try and change wrong rules. But there is a legitimate way to do that. And as long as they are valid rules, we should obey them.

This might seem contradictory. It might be. I have also grown and changed in the year and a half that passed since I wrote those words. At the same time part of my philosophy is that we should celebrate contradictions – F. Scott Fitzgerald famously said that “the true test of a first-rate mind is the ability to hold two contradictory ideas at the same time”.

Elad

Connections, piracy, change and business models

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It is funny how sometimes ideas comes from different directions and connect in ways you could not have guessed they will before.

A few months ago I went to have dinner with two colleagues of mine from my AGSM MBA class. We had a wonderful dinner and an even better intellectual discussion. I don’t really remember how we got to the subject but I mentioned Larry Lessig’s talk on TED about User Generated Content (how the law is choking creativity) where he claims that our society is turning kids into criminal by illegalizing activities that are natural to them.

A few days ago I gave a session to a number of people from our Public Speaking & Debating Club about modern techniques in presentation delivery. One of the examples I used to illustrate my point and stimulate the discussion was the same lecture by Lessig from TED which brought the ideas back to my mind.

This morning, as I was going over my Google Reader reading list, I came by Seth Godin’s post titled: “Teaching the market a lesson“. Here is a small sample:

Some book publishers don’t like the Kindle. Either they’re afraid of it or they’ve crunched the numbers and they don’t like what they see. (Some days, 95% of the top selling Kindle titles are free… demonstrating that digital goods with zero marginal cost and plentiful substitutes tend to move to zero in price).

Worried about the medium, they hold back, delay or even refuse to support it.

A few minutes after that, I got an e-mail from my dear friends Ajaya, one of my colleagues from the dinner a few months ago. This is what he wrote in the e-mail:

Remember talking about illegal downloads and what the fact that almost all kids break the law means to society. Finally, it seems the music industry is figuring it out.

And the email had a link to an article from The Economist titled: “How to sink pirates“. The article describes how the music industry is finally starting to relinquish its fight against piracy, starting to use a model of streaming music, gaining money from advertisements. And it ends with this conclusion:

All of this offers a lesson for other types of media, such as films and video games. Piracy thrives because it satisfies an unmet demand. The best way to discourage it is to offer a diverse range of attractive, legal alternatives. The music industry has taken a decade to work this out, but it has now done so. Other industries should benefit from its experience—and follow its example.

Suddenly, it dawned on me. The points just seemed to connect. These lessons keep repeating themselves:

  1. The world is changing. You can jump on the boat. But you cannot stop it. The past will always try to stop the future. Be it the music industry, the book publishing industry or shop owners in 19th century France. They will fail. The answer to change is change and not more of the same.
  2. Peter Drucker wrote that you can never know how a product that was created in one field could be used in another field. Products and technologies will continue to move across industries destroying business models. The answer will not be found in barricading industries and business models, but in inventing new business models.
  3. “Free” is changing the world in more ways than we can imagine.
  4. Law, legal proceedings and fear can only take you so far. Options, Transparency and self fulfillment will win eventually. It might take time, but it will happen.

You think that the smart people running some of these industries would have learned these lessons by now.

Elad

Managing meetings

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I have been thinking about writing this post for a long time now, ever since I read this post by Karlyn Morissette a few weeks ago. One thing I hoped to learn more about in my MBA is about how to run meetings. As it is something I have been struggling for a long time now and even once tried to help somebody prepare a lecture about.

These are five of my top ideas (rules?) for running effective meetings.:

1. Everybody must come prepared. And when I say prepared I mean totally and utterly prepared. When you get to the meeting you already: read everything; made the preparations; calculated the numbers; came up with your own ideas. I spent so many meetings where people come unprepared and as a consequence half of the meeting is spent on just understanding the issue or on doing things that should have been done earlier without wasting everybody’s time. Too many people believe that they perform the best under pressure and rationalize their way into procrastination. This trend extends itself into the meetings and people say to themselves – “hey, I learn the subject while the meeting takes place”. I even got constructive feedback about the fact that I turn up to meetings too prepared. My main challenge with this rule is that it is hard to enforce and hard to create an atmosphere where preparation is the norm and not the exception.

2. Have an agenda. I think this is where Karlyn’s post makes the point better than I can:

How many meetings do you attend actually have an agenda? Better yet, a stated purpose? I learned this technique from a lady much smarter than I, Dr. Pamela Skyrme.  Pamela is a brilliant organizational coach.  She also happens to be the Director of Professional Development in my office at Dartmouth, where I’ve had the privilege of being coached by her for the last several months.  The tactic goes like this: At the beginning of each meeting make sure the group as a whole knows what they are seeking to accomplish in that meeting (if you don’t have something you’re seeking to accomplish, then you probably shouldn’t be meeting in the first place). At the end of the meeting, assess whether or not you accomplished your initial stated goals. Do this consistently and it will keep people on track and focused, since there will be some level of accountability (however minor) for not accomplishing a stated goal.

The only thing I would add is that if possible send the agenda before the meeting. The main issue I find challenging here is what happens if the group does not agree on the agenda. You can spend more time discussing the agenda then the issue.

3. Everybody speaks. If someone is at the meeting and does not talk then it is a waste of his time to have him there. Everybody has an opinion and every opinion matters. Don’t let the meeting become a shouting contest where the one who has the loudest voice or the most confidence win. There is an added bonus to this. The more people are a part of the process, the more inclined they will be to follow the decision of the group. Any challenges with this one?

4. Respect people’s time. People have short attention span. They also have busy schedule. It is important not only to start and finish a meeting on time but also to be aware of the limitations of people. If need be, take a break. If it you realize it will have to go over time, stop, acknowledge the fact out loud and discuss how you are going to approach the fact that the meeting is going to go over time and allow people to make the needed arrangements.

5. Have a clear, actionable summary. Whatever happens, you need to spend the last few minutes of the meeting assessing the conclusions, decisions and action items that are the result of the meeting. If somebody is responsible for an action item, have him write it down (it has a psychological effect). In any case, have somebody send the details to all of the relevant parties and ask them to acknowledge it was received.

Any other ideas (rules)? Any important lessons from past meetings? Thoughts about the ideas (rules) I offered? About the challenges associated with them? Waiting to hear your thoughts…

Elad

Obliquity and management

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As part of a “Business Ethics” course I am taking at my AGSM MBA I came across this fascinating article by John Kay titled:  “The role of business in society”. It deals with the long lasting debate surrounding the role of business – to make profits or to be a good corporate citizen. It is an interesting look at the debate and I think it makes some valid points, even though I think in its essence it does not contribute something very new to the discussion. However, one concept in the article made me reach a revelation, the principle of obliquity:

I call this paradox the principle of obliquity. It says that some objectives are best pursued indirectly… We are all familiar with one application of the principle of obliquity. While Americans, characteristically, talk of the pursuit of happiness, happiness is rarely best achieved when it is pursued. Research in social psychology confirms our intuition and experience. Happy people are not, in the main, those who selfishly promote their own interests: in fact happy people are most often characterized by a kind of uncalculating and outgoing generosity

In a later article, titled: “The oblique approach”, Kay writes the following things:

With maturity – personal or corporate – comes the principle of obliquity. Goals are often best achieved indirectly. Many people have noted the paradox that the most profitable companies are not necessarily the most profit oriented

It is so inspiring to read something that actually makes you feel: “wow”. And that is the way I felt when I was reading about this concept. So many times during my life I was told that the first thing we should do is concentrate on the goals and try to align ourselves with them. Why, I taught it myself a number of times. And it is true. And useful. And effective.

But not always. Because sometimes the best way to reach a goal is to reach it indirectly. We all know that sometime we are so obsessed with something that we hurt our chances of actually gaining it. When we let go, it somehow comes naturally. And I know it sounds very Hollywood-Movie like. But it actually happens.  

Think about it. When do you learn the most? When you are sitting in class actually trying to learn or when you are doing something and the learning comes as a side effect? Most people say that the most they learned it from the indirect learning – from other people, from doing, from watching – and not in formal courses. Or from failing. Could you imagine that? Those of us who learned how to drive know that the best teacher of driving is the road. Once you start driving, it actually teaches you about how to drive.

And this concept is so true in so many business settings. And it explains why many of the conventional wisdoms are just wrong! Would the manager help his flowers more by solving their problems or by letting them reach the answers by themselves? If you want to improve the performance of your team do you focus your managerial attention on your strongest people or on your weakest people? The answer to both of these questions is the indirect answer. Don’t give answers and the strongest people. or just think about Judo Strategy, and its claim that sometimes we don’t need to attack by pushing, but by pulling. Or by substituting effort for ability.

I am not saying that the answer to each and every problem is the indirect approach. But when we realize that the direct approach is not working, why not try to attack the challenges we face indirectly. It could be a powerful tool. After all, as Abraham Maslow said: “When your only tool is a hammer every problem looks like a nail“.

Elad

Re-thinking tradeoffs

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During the last few weeks, as part of our AGSM MBA integrative experience, we participated in a simulation with a software called Markstrat. The simulation allowed us to run companies in teams as part of a competitive environment, making decisions about operations, marketing, strategy and more. In the end of the two weeks experience we each had to write a short essay about what we learned from the experience. Here is a short part of what I handed in:

As future managers we should be aware of that and think carefully about the implications each decision has on our cognitive resources. Attention and time are the scarcest resources a manager can allocate, even more than money. Thus, they should be considered in a decision like any other scarce resource.

This relates to an idea I have been writing and thinking about a lot lately. Tradeoffs. I think as human beings we have the immediate tendency to want everything. To try and be everything. To try and be the best at everything. Maybe instead we should focus our attention on being the best at something. Just one thing that will make us stand out. Not because being good at everything is bad. It is because it is so hard to achieve all at once. Because success is so many times the result of tradeoffs. Of actively deciding not to be good at something, because we put all our resources on something else.

Maybe, in our multi-tasking world, we need to re-learn what our forefathers, the hunters, knew how to do so good – focus on one thing. Become your prey. Follow it enough and you will understand it, start to think like it and finally hunt it.

I was reminded of this concept yesterday while I was reading Seth Godin’s post: “Spare no expense!“. Godin, makes the same point about tradeoffs in a different setting. The resources companies put into making one customer happy. A short excerpt:

The reason we get trapped by (c) is that, “I’m doing the best I can” is always much easier than, “we need to be disciplined and help more people, even if that means that some special cases will fall through the cracks. The internet makes this even more difficult because people who fall through the cracks are able to amplify their complaints ever louder.

The way around it, I think, is to set expectations early and often. If you’re going to give me your phone number, you better answer it. If you’re going to offer a warranty, you better honor it. If you position yourself as a company with real people eager to make every single person happy–you better deliver.

No matter what, you should decide. In advance. How much do you want to spend on ad hoc emergencies, how much do you want to reserve on design and helping the masses improve their experience?

The hard part is making the decision and sticking to it. We see many companies saying things like – “we put our people first” – but when it comes to making the actual choice, the actual tradeoffs, they don’t. It is not only about not fulfilling your promises; it is about not making the right tradeoffs even though you decided to make them.

So, what are your actively chosen tradeoffs? And what do you to keep them?

Elad

Getting down from the ladder

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Our integrative experience in the AGSM MBA this week included a big chapter on adaptive leadership. One of the concepts that were mentioned time and time again was that of rank. How we perceive our and other people’s rank and what effect it has on our assumptions and behaviours.

One sentence that one of our facilitators mentioned (he actually quoted someone else, whose name I don’t remember) struck me as especially interesting. He was talking about rank in organizations and about people “going up the ladder”, being promoted. Then he said:

“When we go up the ladder, we look down and see a lot of shiny happy faces. When they look up, they see…”

Well, he did not finish, so I don’t feel I need to. But that reminded me of the “Toxic Tandem“. People in positions of power tend to be oblivious to the needs and actions of the people who have less power than them. Or in other words, as we described it in class: “managers are usually blind to their rank”. As a manager, it is easy to forget that you are up there on the ladder. That means that the focus of all eyes is on you. And it also means that you are in a different position than everybody else is. Which means it is harder for you to understand them.

Too many managers get to a management position and continue to do what they always did. Their work. Which is good, but not great. The problem is that now their work is being a manager. And that is a totally different job. A job you cannot do without leaving your desk. With out being active about it. without a little, MBWA.

So, the fact that you went up the ladder does not mean you have to stay there all the time. From time to time, you can climb down from the ladder and let the people see your happy shiny face, instead of your…

Elad