When Leaders Are Hired for Talent but Fired for Not Fitting In 029-08

Over and over again, organizations are unable to appoint the right leaders. According to academic estimates, the baseline for effective corporate leadership is merely 30%, while in politics, approval ratings oscillate between 25% and 40%. In America, 75% of employees report that their direct line manager is the worst part of their job, and 65% would happily take a pay cut if they could replace their boss with someone better. A recent McKinsey report suggests that fewer than 30% of organizations are able to find the right C-suite leaders, and that newly appointed executives take too long to adapt.

Although there are many reasons for this bleak state of affairs – including over-reliance on intuition at the expense of scientifically valid selection tools – a common problem is organizations’ inability to predict whether leaders will fit in with their culture. Even when organizations are good at assessing leaders’ talents (e.g., their skills, expertise, and generic leadership capabilities), they forget that an essential element of effective leadership is the congruence between leaders’ values and those of the organization, including the leaders’ team. As a result, too many leaders are (correctly) hired on talent but subsequently fired due to poor culture fit.

In our view, there are three critical errors organizations must fix in order to upgrade their selection efforts, namely:

Decode leaders’ motives and values: While expertise and experience are central to leaders’ potential, they are insufficient to predict leadership performance. In fact, even generic personality characteristics, such as integrity, people skills, curiosity, and self-awareness will fail to predict a leader’s fit to the role or organization. A proper understanding of fit must take into account the leader’s motives and values, also known as the “inside” of personality. Motives and values operate as an inner compass, dictating what the leader will like and reward, the type of culture and climate they will strive to create in their teams, and the activities they will see as meaningful and fulfilling.

For example, leaders who value tradition will have a strong sense of what is right and wrong, will prefer hierarchical organizations, and will have little tolerance of disruption and innovation – put them in a creative environment and they will struggle. On the other hand, leaders who value affiliation will have a strong desire to get along with others, will focus on building and maintaining strong interpersonal relations, and on working collaboratively. This means they will not be engaged if their role is too isolated and the company culture is overly individualistic. Finally, altruistic leaders will strive to improve other people’s lives and drive progress in the world, so they will suffer if their organizations are purely driven by profits and disinterested in having a positive social impact.

Understand their own organizational culture: Knowing a leader’s motives and values is pointless unless organizations are also able to decode their own culture. Sadly, most organizations underestimate the importance of accurately profiling their culture so they end up relying on intuitive and unrealistic ideas that say more about what they would like to be than what they actually are. This is why a large number of companies today describe themselves as “entrepreneurial,” “innovative,” “results-oriented,” or “diverse,” even when their own employees perceive a very different type of culture. Well-designed climate surveys, which crowdsource people’s views and experiences of the organizational culture, are a much better indicator of a company’s true values than the aspirational competencies curated by senior executives.

Be realistic about the new leader’s ability to actually change the culture: Although senior leaders are the main shapers of organizational culture, it is hard for newly appointed leaders to reshape the existing culture. That is not to say that organizations should give up and only hire leaders who are a good fit. In fact, moderate misfits who are charismatic and visionary are a company’s best bet for driving top-down change – but the process will be slow and tedious, and these leaders will need to have a great deal of support in order to persist and prevail. The odds of success will be slim, and some leaders may be so disruptive in their intentions that they may harm morale and productivity, or end up disrupting themselves. As Sartre noted, “only the guy who isn’t rowing has time to rock the boat.”

Of course, some leaders manage to perform well in virtually any context. They are able to flex or span between a range of competing competencies, which makes them more adaptive and versatile, as Rob Kaiser’s compelling research shows – but they are an exception rather than the norm. In contrast, for most people, leadership potential will be somewhat context-dependent, so there is no guarantee that a person will lead effectively just because they have been effective in a previous role or organization. Past performance is a good predictor of future performance only when the context remains the same. When it doesn’t, the focus should be on potential and the future rather than performance and the past.

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Motivating People Starts with Having the Right Attitude 05-31

Most leaders know what strong motivation looks like. When I ask leadership development clients to describe the type of motivation they’d like to see in their teams, they mention qualities such as persistence, being a self-starter, having a sense of accountability for and commitment to achieving results, and being willing to go the extra mile on projects or to help other team members. But many leaders have little idea of how to boost or sustain that level of motivation.

Many leaders don’t understand that they are an integral part of the motivational ecosystem in their companies. The motivational qualities listed above appear most frequently when employees feel valued, trusted, challenged, and supported in their work — all things that leaders can influence. For better or worse, leaders’ attitudes and behaviors have a huge effect on employees’ drive and capacity to perform.

One problem that gets in the way is a mechanistic, instrumental view of the human beings who sit at our companies’ desks. Seeing compensation as the primary or only tool we can use to motivate high performance is like trying to build a house with only a hammer. What gets lost is that incentives, regardless of which ones are applied, filter through employees’ brains along with every other aspect of the employment experience. How employees experience work from day to day has a bigger influence on their motivation than their compensation and benefits package.

Another barrier to a leader’s capacity to motivate is the widespread, mistaken belief that motivation is an inherent property of the employee — “they either have it or they don’t.”  In fact, motivation is a dynamic process, not a stable employee characteristic. When we judge an employee to be irredeemably unmotivated, we give up on trying to motivate them. A vicious cycle ensues, in which our attitude and behaviors elicit exactly those behaviors we expect from an unmotivated employee, which in turn reinforces and justifies our verdict and approach. Everybody loses: The organization is deprived of the employee’s full contribution, the leader acts unskillfully, and the employee grows increasingly disengaged.
Managers generally start out with the best of intentions. After all, whenever we hire someone new, we expect that they will be motivated. Later, if performance or engagement lags, we experience frustration at the “unmotivated, entitled” employee. It often goes something like this: “As a leader, I started out caring very much about the emotional needs of staff. Unfortunately, all this brought about was overentitlement and making it OK to use your feelings to waste time and create a negative environment. I have evolved to care less about feelings and more about getting the work done, period. As long as my expectations are clear, people get paid, and they have a safe environment, there is no room for the rest of it in the workplace.” I found this comment on a leadership article posted on the HBR Facebook page, but it could have come from the mouths of the countless leaders I’ve met during my career. Even if a leader feels perfectly justified in taking this approach, giving the impression that employees’ subjective experience of work doesn’t matter will only serve to dampen employee motivation.
It is entirely possible for leaders to learn to motivate even those employees they’ve given up on. As an example, I recently coached a leader who’s responsible for a global organization’s operations in an Eastern European country. A man in his fifties with a military background, he complained of being saddled with an underperforming team member he couldn’t fire: “He’s basically useless. All I can do is contain him so he doesn’t screw anything up — and lean on my capable people to get our work done.” The leader gave the employee routine, low-value work to do, didn’t share important information with him, didn’t bother to meet with him, and never sought his input or contribution to important projects. “Why bother with him? I can’t change him, and I don’t have time to waste on someone who’s unmotivated,” he insisted at first. Through coaching, the leader came to appreciate that these choices, which he initially saw as rational responses to a motivational deficiency in the employee, actually worsened the problem. He realized that seeing his employee as useless was only one of many possible perspectives he could take — and that it limited his leadership effectiveness. After shifting his approach from containment to facilitation, he saw substantial gains in the employee’s outward motivation and performance, to the point where the employee became a valuable member of the team.
To make the shift that boosted his employee’s motivation, this leader had to be fearless in examining his own thinking and patterns of behavior. He recognized and admitted that he didn’t see his employee as a whole human being, but rather as an object and a problem. He had to develop curiosity about what the situation was like from the employee’s point of view. He had to experience that valuing his employee’s perspective opened up avenues for motivation. As he started talking more with his employee, giving him challenging work, seeking his input, and including him in important projects, the employee responded with increased enthusiasm and commitment. “I can’t believe what a difference it makes,” he told me after a few sessions.

I believe that most interpersonal problems that arise in the world, whether in relationships, companies, or nations, come down to the fundamental difficulty humans have in seeing things from others’ perspectives. When we make assumptions about what employees believe and value, interpreting their behaviors according to our assumptions, we reduce their humanity and their complexity. The very phrase “human resources” frames employees as material to be deployed for organizational objectives.

While the essential nature of employment contracts involves trading labor for remuneration, if we fail to see and appreciate our employees as whole people, efforts to motivate them will meet with limited success. Instead of thinking about how we can control our employees, let’s focus on how we can motivate them. A good place to start is by reflecting on the best boss you’ve ever had. How did this boss make you feel? What did this boss do to earn your admiration? Try to harvest some of that boss’s motivational strategies and make them your own.

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The Best Companies Don’t Have More Stars — They Cluster Them Together 02-11

 Forming clusters  

Adding constellations to the clusters

Image credit : Shyam's Imagination Library

Shyam's take on this subject..............

I would like add that, along with the clustering activity according to the task requirement, there should also be de-clustering of the people once a task is completed, or even during the progress of the task at different stages. For example, initiation requires different level of expertise, once the processes and supply chains are in flow, you can manage with a little lesser level of talent to keep the flow seamless. Here you can de-cluster the team and re-cluster it as per the need. This will not only the optimize the utilization of talent, it will also optimize the costs, without hurting the output.

I feel that the de-clustering and re-clustering of team is as important or even more than the clustering activity.

I would even recommend formation of smaller function specific constellations within a cluster.

Customer Loyalty Is Overrated 01-10

Marketers spend a lot of time—and money—trying to delight consumers with ever-fresher, ever-more-appealing products. But their customers, it turns out, make most purchase decisions almost automatically. They look for what’s familiar and easy to buy. This package explores that idea and the science behind it, offers a counterpoint, and includes conversations with the cochairman of the LEGO Brand Group and the chairman of Intuit. 

Late in the spring of 2016 Facebook’s category-leading photo-sharing application, Instagram, abandoned its original icon, a retro camera familiar to the app’s 400- million-plus users, and replaced it with a flat modernist design that, as the head of design explained, “suggests a camera.” At a time when Instagram was under a growing threat from its rival Snapchat, he offered this rationale for the switch: The icon “was beginning to feel…not reflective of the community, and we thought we could make it better.”

The assessment of AdWeek, the marketing industry bible, was clear from its headline: “Instagram’s New Logo Is a Travesty. Can We Change it Back? Please?” In GQ’s article “Logo Change No One Wanted Just Came to Instagram,” the magazine’s panel of designers called the new icon “honestly horrible,” “so ugly,” and “trash,” and summarized the change thus: “Instagram spent YEARS building up visual brand equity with its existing logo, training users where to tap, and now instead of iterating on that, it’s flushing it all down the toilet for the homescreen equivalent of a Starburst.”

It’s too soon to tell whether the design change will actually have commercial consequences for Instagram, but this is not the first time a company has experienced such a reaction to a rebranding or a relaunch. PepsiCo’s introduction of its aspartame-free Diet Pepsi was—like the infamous New Coke debacle—a botched attempt at reinvention that resulted in serious revenue losses and had to be reversed. The interesting question, therefore, is: Why do well-performing companies routinely succumb to the lure of radical rebranding? One could understand the temptation to adopt such a strategy in the face of disaster, but Instagram, PepsiCo, and Coke were hardly staring into the abyss. (It’s worth noting that Snapchat, whose market share among young users is now particularly strong, has assiduously stuck to its familiar ghost icon. Full disclosure: A.G. Lafley serves on the board of Snap Inc.)

The answer, we believe, is rooted in some serious misperceptions about the nature of competitive advantage. Much new thinking in strategy argues that the fast pace of change in modern business (perhaps nowhere more obvious than in the app world) means no competitive advantage is sustainable, so companies must continually update their business models, strategies, and communications to respond in real time to the explosion of choice that ever more sophisticated consumers now face. To keep your customers—and to attract new ones—you need to remain relevant and superior. Hence Instagram was doing exactly what it was supposed to do: changing proactively

.
That’s an edgy thought, to be sure; but a lot of evidence contradicts it. Consider Southwest Airlines, Vanguard, and IKEA, all featured in Michael Porter’s classic 1996 HBR article “What Is Strategy?” as exemplars of long-lived competitive advantage. A full two decades later those companies are still at the top of their respective industries, pursuing largely unchanged strategies and branding. And although Google, Facebook, or Amazon might stumble and be crushed by some upstart, the competitive positions of those giants hardly look fleeting. Closer to home (one author of this article is part of the P&G family), it would strike the Tide or Head & Shoulders brand managers of the past 50 years as rather odd to hear that their half-century advantages have not been or are not sustainable. (No doubt the Unilever managers of long-standing consumer favorites such as Dove soap and Hellmann’s mayonnaise would feel the same.)


In this article we draw on modern behavioral research to offer a theory about what makes competitive advantage last. It explains both missteps like Instagram’s and success stories like Tide’s. We argue that performance is sustained not by offering customers the perfect choice but by offering them the easy one. So even if a value proposition is what first attracted them, it is not necessarily what keeps them coming.


In this alternative worldview, holding on to customers is not a matter of continually adapting to changing needs in order to remain the rational or emotional best fit. It’s about helping customers avoid having to make yet another choice. To do that, you have to create what we call cumulative advantage.


Let’s begin by exploring what our brains actually do when we shop.

Creatures of Habit

The conventional wisdom about competitive advantage is that successful companies pick a position, target a set of consumers, and configure activities to serve them better. The goal is to make customers repeat their purchases by matching the value proposition to their needs. By fending off competitors through ever-evolving uniqueness and personalization, the company can achieve sustainable competitive advantage


An assumption implicit in that definition is that consumers are making deliberate, perhaps even rational, decisions. Their reasons for buying products and services may be emotional, but they always result from somewhat conscious logic. Therefore a good strategy figures out and responds to that logic.


But the idea that purchase decisions arise from conscious choice flies in the face of much research in behavioral psychology. The brain, it turns out, is not so much an analytical machine as a gap-filling machine: It takes noisy, incomplete information from the world and quickly fills in the missing pieces on the basis of past experience. Intuition—thoughts, opinions, and preferences that come to mind quickly and without reflection but are strong enough to act on—is the product of this process. It’s not just what gets filled in that determines our intuitive judgments, however. They are heavily influenced by the speed and ease of the filling-in process itself, a phenomenon psychologists call processing fluency. When we describe making a decision because it “just feels right,” the processing leading to the decision has been fluent.

Processing fluency is itself the product of repeated experience, and it increases relentlessly with the number of times we have the experience. Prior exposure to an object improves the ability to perceive and identify that object. As an object is presented repeatedly, the neurons that code features not essential for recognizing the object dampen their responses, and the neural network becomes more selective and efficient at object identification. In other words, repeated stimuli have lower perceptual-identification thresholds, require less attention to be noticed, and are faster and more accurately named or read. What’s more, consumers tend to prefer them to new stimuli.


In short, research into the workings of the human brain suggests that the mind loves automaticity more than just about anything else—certainly more than engaging in conscious consideration. Given a choice, it would like to do the same things over and over again. If the mind develops a view over time that Tide gets clothes cleaner, and Tide is available and accessible on the store shelf or the web page, the easy, familiar thing to do is to buy Tide yet another time.


A driving reason to choose the leading product in the market, therefore, is simply that it is the easiest thing to do: In whatever distribution channel you shop, it will be the most prominent offering. In the supermarket, the mass merchandiser, or the drugstore, it will dominate the shelf. In addition, you have probably bought it before from that very shelf. Doing so again is the easiest possible action you can take. Not only that, but every time you buy another unit of the brand in question, you make it easier to do—for which the mind applauds you.

Each time you choose a product, it gains advantage over those you didn’t choose.

Meanwhile, it becomes ever so slightly harder to buy the products you didn’t choose, and that gap widens with every purchase—as long, of course, as the chosen product consistently fulfills your expectations. This logic holds as much in the new economy as in the old. If you make Facebook your home page, every aspect of that page will be totally familiar to you, and the impact will be as powerful as facing a wall of Tide in a store—or more so.


Buying the biggest, easiest brand creates a cycle in which share leadership is continually increased over time. Each time you select and use a given product or service, its advantage over the products or services you didn’t choose cumulates.


The growth of cumulative advantage—absent changes that force conscious reappraisal—is nearly inexorable. Thirty years ago Tide enjoyed a small lead of 33% to 28% over Unilever’s Surf in the lucrative U.S. laundry detergent market. Consumers at the time slowly but surely formed habits that put Tide further ahead of Surf. Every year, the habit differential increased and the share gap widened. In 2008 Unilever exited the business and sold its brands to what was then a private-label detergent manufacturer. Now Tide enjoys a greater than 40% market share, making it the runaway leader in the U.S. detergent market. Its largest branded competitor has a share of less than 10%. (For a discussion of why small brands even survive in this environment, see the sidebar “The Perverse Upside of Customer Disloyalty.”)

A Complement to Choice

We don’t claim that consumer choice is never conscious, or that the quality of a value proposition is irrelevant. To the contrary: People must have a reason to buy a product in the first place. And sometimes a new technology or a new regulation enables a company to radically lower a product’s price or to offer new features or a wholly new solution to a customer need in a way that demands consumers’ consideration.


Robust where-to-play and how-to-win choices, therefore, are still essential to strategy. Without a value proposition superior to those of other companies that are attempting to appeal to the same customers, a company has nothing to build on.


But if it is to extend that initial competitive advantage, the company must invest in turning its proposition into a habit rather than a choice. Hence we can formally define cumulative advantage as the layer that a company builds on its initial competitive advantage by making its product or service an ever more instinctively comfortable choice for the customer.


Companies that don’t build cumulative advantage are likely to be overtaken by competitors that succeed in doing so. A good example is Myspace, whose failure is often cited as proof that competitive advantage is inherently unsustainable. Our interpretation is somewhat different.
Launched in August 2003, Myspace became America’s number one social networking site within two years and in 2006 overtook Google to become the most visited site of any kind in the United States. Nevertheless, a mere two years later it was outstripped by Facebook, which demolished it competitively—to the extent that Myspace was sold in 2011 for $35 million, a fraction of the $580 million that News Corp had paid for it in 2005.


Why did Myspace fail? Our answer is that it didn’t even try to achieve cumulative advantage. To begin with, it allowed users to create web pages that expressed their own personal style, so individual pages looked very different to visitors. It also placed advertising in jarring ways—and included ads for indecent services, which riled regulators. When News Corp bought Myspace, it ramped up ad density, further cluttering the site. To entice more users, Myspace rolled out what Bloomberg Businessweek referred to as “a dizzying number of features: communication tools such as instant messaging, a classifieds program, a video player, a music player, a virtual karaoke machine, a self-serve advertising platform, profile-editing tools, security systems, privacy filters, Myspace book lists, and on and on.” So instead of making its site an ever more comfortable and instinctive choice, Myspace kept its users off balance, wondering (if not subconsciously worrying) what was coming next.


Compare that with Facebook. From day one, Facebook has been building cumulative advantage. Initially it had some attractive features that Myspace lacked, making it a good value proposition, but more important to its success has been the consistency of its look and feel. Users conform to its rigid standards, and Facebook conforms to nothing or no one else. When it made its now-famous extension from desktop to mobile, the company ensured that users’ mobile experience was highly consistent with their desktop experience.


To be sure, Facebook has from time to time introduced design changes in order to better leverage its functionality, and it has endured severe criticism in consequence. But in the main, new service introductions don’t jeopardize comfort and familiarity, and the company has often made the changes optional in their initial stages. Even its name conjures up a familiar artifact, the college facebook, whereas Myspace gives the user no familiar reference at all.


Bottom line: By building on familiarity, Facebook has used cumulative advantage to become the most addictive social networking site in the world. That makes its subsidiary Instagram’s decision to change its icon all the more baffling.

The Cumulative Advantage Imperatives

Myspace and Facebook nicely illustrate the twin realities that sustainable advantage is both possible and not assured. How, then, might the next Myspace enhance and extend its competitive edge by building a protective layer of cumulative advantage? Here are four basic rules to follow:

1. Become popular early.

This idea is far from new—it is implicit in many of the best and earliest works on strategy, and we can see it in the thinking of Bruce Henderson, the founder of Boston Consulting Group. Henderson’s particular focus was on the beneficial impact of cumulative output on costs—the now-famous experience curve, which suggests that as a company’s experience in making something increases, its cost management becomes more efficient. He argued that companies should price aggressively early on—“ahead of the experience curve,” in his parlance—and thus win sufficient market share to give the company lower costs, higher relative share, and higher profitability. The implication was clear: Early share advantage matters—a lot.


Marketers have long understood the importance of winning early. Launched specifically to serve the fast-growing automatic washing machine market, Tide is one of P&G’s most revered, successful, and profitable brands. When it was introduced, in 1946, it immediately had the heaviest advertising weight in the category. P&G also made sure that no washing machine was sold in America without a free box of Tide to get consumers’ habits started. Tide quickly won the early popularity contest and has never looked back.

BlackBerry may be the best example of a conscious design for addiction.

Free new-product samples to gain trial have always been a popular tactic with marketers. Aggressive pricing, the tactic favored by Henderson, is similarly popular. Samsung has emerged as the market share leader in the smartphone industry worldwide by providing very affordable Android-based phones that carriers can offer free with service contracts. For internet businesses, free is the core tactic for establishing habits. Virtually all the large-scale internet success stories—eBay, Google, Twitter, Instagram, Uber, Airbnb—make their services free so that users will grow and deepen their habits; then providers or advertisers will be willing to pay for access to them.

2. Design for habit.

As we’ve seen, the best outcome is when choosing your offering becomes an automatic consumer response. So design for that—don’t leave the outcome entirely to chance. We’ve seen how Facebook profits from its attention to consistent, habit-forming design, which has made use of its platform go beyond what we think of as habit: Checking for updates has become a real compulsion for a billion people. Of course Facebook benefits from increasingly huge network effects. But the real advantage is that to switch from Facebook also entails breaking a powerful addiction.


The smartphone pioneer BlackBerry is perhaps the best example of a company that consciously designed for addiction. Its founder, Mike Lazaridis, explicitly created the device to make the cycle of feeling a buzz in the holster, slipping out the BlackBerry, checking the message, and thumbing a response on the miniature keyboard as addictive as possible. He succeeded: The device earned the nickname CrackBerry. The habit was so strong that even after BlackBerry had been brought down by the move to app-based and touch-screen smartphones, a core group of BlackBerry customers—who had staunchly refused to adapt—successfully implored the company’s management to bring back a BlackBerry that resembled their previous-generation devices. It was given the comforting name Classic.


As Art Markman, a psychologist at the University of Texas, has pointed out to us, certain rules should be respected in designing for habit. To begin with, you must keep consistent those elements of the product design that can be seen from a distance so that buyers can find your product quickly. Distinctive colors and shapes like Tide’s bright orange and the Doritos logo accomplish this. 


And you should find ways to make products fit in people’s environments to encourage use. When P&G introduced Febreze, consumers liked the way it worked but did not use it often. Part of the problem, it turned out, was that the container was shaped like a glass-cleaner bottle, signaling that it should be kept under the sink. The bottle was ultimately redesigned to be kept on a counter or in a more visible cabinet, and use after purchase increased.


Unfortunately, the design changes that companies make all too often end up disrupting habits rather than strengthening them. Look for changes that will reinforce habits and encourage repurchase. The Amazon Dash Button provides an excellent example: By creating a simple way for people to reorder products they use often, Amazon helps them develop habits and locks them into a particular distribution channel.

3. Innovate inside the brand.

As we’ve already noted, companies engage in initiatives to “relaunch,” “repackage,” or “replatform” at some peril: Such efforts can require customers to break their habits. Of course companies have to keep their products up-to-date, but changes in technology or other features should ideally be introduced in a manner that allows the new version of a product or service to retain the cumulative advantage of the old.


Even the most successful builders of cumulative advantage sometimes forget this rule. P&G, for example, which has increased Tide’s cumulative advantage over 70 years through huge changes, has had to learn some painful lessons along the way. Arguably the first great detergent innovation after Tide’s launch was the development of liquid detergents. P&G’s first response was to launch a new brand, called Era, in 1975. With no cumulative advantage behind it, Era failed to become a major brand despite consumers’ increasing substitution of liquid for powdered detergent.


Recognizing that as the number one brand in the category, Tide had a strong connection with consumers and a powerful cumulative advantage, P&G decided to launch Liquid Tide in 1984, in familiar packaging and with consistent branding. It went on to become the dominant liquid detergent despite its late entry. After that experience, P&G was careful to ensure that further innovations were consistent with the Tide brand. When its scientists figured out how to incorporate bleach into detergent, the product was called Tide Plus Bleach. The breakthrough cold-cleaning technology appeared in Tide Coldwater, and the revolutionary three-in-one pod form was launched as Tide Pods.


The branding could not have been simpler or clearer: This is your beloved Tide, with bleach added, for cold water, in pod form. These comfort- and familiarity-laden innovations reinforced rather than diminished the brand’s cumulative advantage. The new products all preserved the look of Tide’s traditional packaging—the brilliant orange and the bull’s-eye logo. The few times in Tide history when that look was altered—such as with blue packaging for the Tide Coldwater launch—the effect on consumers was significantly negative, and the change was quickly reversed.


Of course, sometimes change is absolutely necessary to maintain relevance and advantage. In such situations smart companies succeed by helping customers transition from the old habit to the new one. Netflix began as a service that delivered DVDs to customers by mail. It would be out of business today if it had attempted to maximize continuity by refusing to change. Instead, it has successfully transformed itself into a video streaming service.


Although the new Netflix markets a completely different platform for digital entertainment, involving a new set of activities, Netflix found ways to help its customers by accentuating what did not have to change. It has the same look and feel and is still a subscription service that gives people access to the latest entertainment without leaving their homes. Thus its customers can deal with the necessary aspects of change while maintaining as much of the habit as possible. For customers, “improved” is much more comfortable and less scary than “new,” however awesome “new” sounds to brand managers and advertising agencies.

4. Keep communication simple.

One of the fathers of behavioral science, Daniel Kahneman, characterized subconscious, habit-driven decision making as “thinking fast” and conscious decision making as “thinking slow.” Marketers and advertisers often seem to live in thinking-slow mode. They are rewarded with industry kudos for the cleverness with which they weave together and highlight the multiple benefits of a new product or service. True, ads that are clever and memorable sometimes move customers to change their habits. The slow-thinking conscious mind, if it decides to pay attention, may well say, “Wow, that is impressive. I can’t wait!”


But if viewers aren’t paying attention (as in the vast majority of cases), an artful communication may backfire. Consider the ad that came out a couple of years ago for the Samsung Galaxy S5. It began by showing successive vignettes of generic-looking smartphones failing to (a) demonstrate water resistance; (b) protect against a young child’s accidentally sending an embarrassing message; and (c) enable an easy change of battery. It then triumphantly pointed out that the Samsung S5, which looked pretty much like the three previous phones, overcame all these flaws. Conscious, slow-thinking viewers, if they watched the whole ad, may have been persuaded that the S5 was different from and superior to other phones.


But an arguably greater likelihood was that fast-thinking viewers would subconsciously associate the S5 with the three shortcomings. When making a purchase decision, they might be swayed by a subconscious plea: “Don’t buy the one with the water-resistance, rogue-message, and battery-change problems.” In fact, the ad might even induce them to buy a competitor’s product—such as the iPhone 7—whose message about water resistance is simpler to take in.


Remember: The mind is lazy. It doesn’t want to ramp up attention to absorb a message with a high level of complexity. Simply showing the water resistance of the Samsung S5—or better yet, showing a customer buying an S5 and being told by the sales rep that it was fully water-resistant—would have been much more powerful. The latter would tell fast thinkers what you wanted them to do: go to a store and buy the Samsung S5. Of course, neither of those ads would be likely to win any awards from marketers focused on the cleverness of advertising copy.

CONCLUSION

The death of sustainable competitive advantage has been greatly exaggerated. Competitive advantage is as sustainable as it has always been. What is different today is that in a world of infinite communication and innovation, many strategists seem convinced that sustainability can be delivered only by constantly making a company’s value proposition the conscious consumer’s rational or emotional first choice. They have forgotten, or they never understood, the dominance of the subconscious mind in decision making. For fast thinkers, products and services that are easy to access and that reinforce comfortable buying habits will over time trump innovative but unfamiliar alternatives that may be harder to find and require forming new habits.


So beware of falling into the trap of constantly updating your value proposition and branding. And any company, whether it is a large established player, a niche player, or a new entrant, can sustain the initial advantage provided by a superior value proposition by understanding and following the four rules of cumulative advantage.


Reproduced From Harvard Business Reveiw

Why Are Immigrants More Entrepreneurial? 11-02

Image credit : Shyam's Imagination Library

What do Arianna Huffington (Huffington Post), Dietrich Mateschitz (Red Bull), Elon Musk (Tesla, SpaceX), and Sergey Brin (Google) have in common? Apart from their success as entrepreneurs, they all share one distinct characteristic: extensive cross-cultural experience. Huffington grew up in Athens and studied in London before starting her career as a politician and media entrepreneur. Mateschitz spent considerable time overseas as a marketing salesman prior to founding Red Bull. Musk migrated from South Africa to the U.S. as young adult. Brin left the Soviet Union with his family after facing growing anti-Semitism and moved to the U.S., where he later cofounded Google.

Their stories are prominent examples of a widespread pattern. In the U.S., immigrants are almost twice as likely to become entrepreneurs as native-born U.S. citizens. Immigrants represent 27.5% of the countries’ entrepreneurs but only around 13% of the population. Similarly, about one-fourth of all technology and engineering companies started in the U.S. between 2006 and 2012 had at least one immigrant cofounder. And this pattern extends beyond the U.S. — data from the 2012 Global Entrepreneurship Monitor showed that the vast majority of the 69 countries surveyed reported higher entrepreneurial activity among immigrants than among natives, especially in growth-oriented ventures.

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Research has suggested that selection and discrimination effects may be driving this phenomenon. It appears plausible that entrepreneurial individuals are more likely to migrate and that immigration policies in many countries favor highly motivated and capable individuals. Additionally, discrimination against immigrants in labor markets may exert pressure on them to seek self-employment.

In a recent study, we investigated a different explanation: Cross-cultural experiences may increase individuals’ capabilities to identify promising business ideas. By living in different cultures, they encounter new products, services, customer preferences, and communication strategies, and this exposure may allow the transfer of knowledge about customer problems or solutions from one country to another. By applying this kind of arbitrage, a temporary or permanent migrant can decide to replicate a profitable product or business model available in one country but not in another. Successful companies such as Starbucks (inspired by coffeehouses in Italy) and the German online retailer Zalando (inspired by Zappos) exemplify the potential of this strategy.

Cross-cultural experiences may also stimulate creativity. Interacting with two or more cultural contexts can help immigrants combine diverse ideas, solutions, and customer problems in order to create something entirely new. This principle is illustrated by the origin story of Red Bull. When Dietrich Mateschitz traveled to Thailand in the 1980s, he observed the popularity of a cheap energizing drink called Krating Daeng among truck drivers and construction workers. Finding that it helped ease his jet lag, he decided to license the product and sell it in Austria under the name Red Bull Energy Drink. Rather than simply importing the product, Mateschitz realized the opportunity to combine the newly obtained knowledge about a product (a drink popular among truck drivers) and the knowledge about his home market (conservative beverages market, growing clubbing scene) into an entirely new business idea. By adapting size, taste, and brand, he created the first energy drink for the alternative clubbing scene — something previously unseen in the Thai and Austrian markets.

We conducted two experiments to find evidence that these effects can make immigrants more entrepreneurial. First, we analyzed the effects of short-term cross-cultural experiences in a longitudinal field experiment. We tested the entrepreneurial capabilities (i.e., the ability to identify profitable business opportunities) of 128 students before and after a semester of living and studying abroad by asking them to come up with business ideas in the context of media and food retailing. We did the same for a control group of 115 students that continued their studies at their home university.

The business opportunities they came up with were rated by four venture capitalists and industry experts blind to the source. Results showed a clear pattern (see Figure 1): The group that gained cross-cultural experience received significantly higher VC and expert ratings (+17%) on their business ideas after their semester abroad, while the ratings of the control group’s business ideas actually declined slightly (-3%) at the end of the semester.

We also conducted a laboratory experiment in which we tested these same effects with a sample that had long-term cross-cultural experiences — 96 migrant entrepreneurs in Austria. We randomly assigned them to two groups. Applying a technique called priming, we asked the experimental group to recall particular experiences while living abroad, thereby activating the memories and associations connected to their cross-cultural experience. The control group was asked to recall neutral experiences that were not related to cross-cultural memories. Both groups were invited to come up with business ideas that were then rated by experts. The business ideas of the group with activated cross-cultural experience were rated significantly higher (27%) by experts than the ideas of the control group.

In order to better understand this phenomenon, we interviewed all 96 participants after the experiment, asking them to describe how they generated ideas. These interviews were coded independently by two raters. Results showed that many participants had indeed applied knowledge arbitrage (e.g., “Innovative shop concepts such as [name of Asian supermarket chain] are missing in Vienna”) and creative recombination (e.g., “In France, I have seen supermarkets that were so big that all employees were wearing rollerblades….In my concept I also tried to use space as design concept to impress”) to identify profitable business opportunities.

The finding that cross-cultural experiences increase opportunity recognition capabilities has clear implications for businesses, entrepreneurs, and policy makers. It highlights the value of cross-cultural work experience or a migration experience for entrepreneurs and entrepreneurial companies. Entrepreneurs and managers can actively seek to build such experiences by living abroad and systematically comparing what they observe in other markets. In multinational businesses, human resource management tools such as expatriate assignments or international job rotations can help build opportunity recognition skills. To make these tools even more effective, managers can complement them with entrepreneurship training prior to an international assignment. Furthermore, priming instruments like the ones in our experiments could be used while living abroad and afterward to spur business ideation.

For companies, ignoring the positive effect of cross-cultural experience on opportunity recognition may be harmful. If expatriates with good ideas receive no chance to exploit them within a company, they might choose to do so outside of it. Previous research has identified that many expatriates choose to leave their organizations soon after finishing an overseas assignment, when they suffer from a lack of promotion opportunities, career counseling, and status. Our results suggest that some of them might do this in order to exploit opportunities to become entrepreneurs.

Implications of our research also extend to the field of immigration policy. The United Nations estimates that there are over 240 million temporary and permanent migrants and refugees worldwide. Our results help explain the above-average entrepreneurial activity of this group and highlight the positive effects that immigration can have on an economy. We show that migration does not need to be a zero-sum game or a “war for talent,” with migrating entrepreneurs increasing entrepreneurial activity in one country at the expense of another. Instead, migration can help nurture entrepreneurial abilities by fostering the learning and application of cross-cultural knowledge that helps someone identify profitable opportunities.

Since immigration is increasingly seen by some people as a threat, the insight that more immigration may result in an overall gain in entrepreneurial activity may be a useful reminder of the opportunities associated with migration. It suggests that public money may be better spent on building incubators for migrant entrepreneurs than on building border walls. 

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How to Beat Procrastination 08-24

Procrastination comes in many disguises. We might resolve to tackle a task, but find endless reasons to defer it. We might prioritize things we can readily tick off our to-do list—answering emails, say—while leaving the big, complex stuff untouched for another day. We can look and feel busy, while artfully avoiding the tasks that really matter. And when we look at those rolling, long-untouched items at the bottom of our to-do list, we can’t help but feel a little disappointed in ourselves.

The problem is our brains are programmed to procrastinate. In general, we all tend to struggle with tasks that promise future upside in return for efforts we take now. That’s because it’s easier for our brains to process concrete rather than abstract things, and the immediate hassle is very tangible compared with those unknowable, uncertain future benefits. So the short-term effort easily dominates the long-term upside in our minds—an example of something that behavioral scientists call present bias.

How can you become less myopic about your elusive tasks? It’s all about rebalancing the cost-benefit analysis: make the benefits of action feel bigger, and the costs of action feel smaller. The reward for doing a pestering task needs to feel larger than the immediate pain of tackling it.

To make the benefits of action feel bigger and more real:

Visualize how great it will be to get it done. Researchers have discovered that people are more likely to save for their future retirement if they’re shown digitally aged photographs of themselves. Why? Because it makes their future self feel more real—making the future benefits of saving also feel more weighty. When we apply a lo-fi version of this technique to any task we’ve been avoiding, by taking a moment to paint ourselves a vivid mental picture of the benefits of getting it done, it can sometimes be just enough to get us unstuck. So if there’s a call you’re avoiding or an email you’re putting off, give your brain a helping hand by imagining the virtuous sense of satisfaction you’ll have once it’s done—and perhaps also the look of relief on someone’s face as they get from you what they needed.

Pre-commit, publicly. Telling people that we’re going to get something done can powerfully amplify the appeal of actually taking action, because our brain’s reward system is so highly responsive to our social standing. Research has found that it matters greatly to us whether we’re respected by others—even by strangers. Most of us don’t want to look foolish or lazy to other people. So by daring to say “I’ll send you the report by the end of the day” we add social benefits to following through on our promise—which can be just enough to nudge us to bite the bullet.

Confront the downside of inaction. Research has found that we’re strangely averse to properly evaluating the status quo. While we might weigh the pros and cons of doing something new, we far less often consider the pros and cons of not doing that thing. Known as omission bias, this often leads us to ignore some obvious benefits of getting stuff done. Suppose you’re repeatedly putting off the preparation you need to do for an upcoming meeting. You’re tempted by more exciting tasks, so you tell yourself you can do it tomorrow (or the day after). But force yourself to think about the downside of putting it off, and you realize that tomorrow will be too late to get hold of the input you really need from colleagues. If you get moving now, you have half a chance of reaching them in time—so finally, your gears creak into action.

To make the costs of action feel smaller:

Identify the first step. Sometimes we’re just daunted by the task we’re avoiding. We might have “learn French” on our to-do list, but who can slot that into the average afternoon? The trick here is to break down big, amorphous tasks into baby steps that don’t feel as effortful. Even better: identify the very smallest first step, something that’s so easy that even your present-biased brain can see that the benefits outweigh the costs of effort. So instead of “learn French” you might decide to “email Nicole to ask advice on learning French.” Achieve that small goal, and you’ll feel more motivated to take the next small step than if you’d continued to beat yourself up about your lack of language skills.

Tie the first step to a treat. We can make the cost of effort feel even smaller if we link that small step to something we’re actually looking forward to doing. In other words, tie the task that we’re avoiding to something that we’re not avoiding. For example, you might allow yourself to read lowbrow magazines or books when you’re at the gym, because the guilty pleasure helps dilute your brain’s perception of the short-term “cost” of exercising. Likewise, you might muster the self-discipline to complete a slippery task if you promise yourself you’ll do it in a nice café with a favorite drink in hand.

Remove the hidden blockage. Sometimes we find ourselves returning to a task repeatedly, still unwilling to take the first step. We hear a little voice in our head saying, “Yeah, good idea, but . . . no.” At this point, we need to ask that voice some questions, to figure out what’s really making it unappealing to take action. This doesn’t necessarily require psychotherapy. Patiently ask yourself a few “why” questions—“why does it feel tough to do this?” and “why’s that?”—and the blockage can surface quite quickly. Often, the issue is that a perfectly noble competing commitment is undermining your motivation. For example, suppose you were finding it hard to stick to an early morning goal-setting routine. A few “whys” might highlight that the challenge stems from your equally strong desire to eat breakfast with your family. Once you’ve made that conflict more explicit, it’s far more likely you’ll find a way to overcome it—perhaps by setting your daily goals the night before, or on your commute into work.

So the next time you find yourself mystified by your inability to get important tasks done, be kind to yourself. Recognize that your brain needs help if it’s going to be less short-sighted. Try taking at least one step to make the benefits of action loom larger, and one to make the costs of action feel smaller. Your languishing to-do list will thank you. 

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How to Create an Exponential Mindset 08-24

How to Create an Exponential Mindset.

A three dimensional image depicting exponential thinking.  Image credit : Shyam's  Imagination Library

 

Digital business models are a bit of a misnomer. It’s not digital technology that defines them; it’s their ability to create exponential value. The music and video industries, for example, weren’t redefined by converting analog to digital formats. Just ask Sony about Minidisc players and Netflix about their DVD business.

To create exponential value, it’s imperative to first create an exponential mindset. The incremental mindset focuses on making something better, while the exponential mindset is makes something different. Incremental is satisfied with 10%. Exponential is out for 10X.

In the last century, industrial business models were defined by their use of machines to create increasing returns to scale. Digital business models use network effects to create what Ray Kurzweil describes as accelerating returns to scale. The key difference is that industrial models are linear while digital models are exponential, as shown in the chart below.

While others have written about how to design exponential strategies and organizations, I want to focus here on how to create an exponential mindset. My work with clients suggests that the incremental mindset is more deeply embedded than we might think. Unless you are conscious and diligent, you can end up with a strategy that looks digital (i.e. uses digital technology) but doesn’t actually operate digitally (i.e. achieves accelerating returns).

The role of incremental and exponential mindsets vary in each phase of the business journey: launch, grow, and expand.

Launch: Vision and Uncertainty

In the launch phase of a business, the team needs to develop and refine the business model. The Lean Startup approach of test, iterate, and pivot is the right thing to do. But you also need the right way to think. Are you thinking about your business incrementally or exponentially?

The incremental mindset draws a straight line from the present to the future. A “good” incremental business plan enables you to see exactly how you will get from here to there. But exponential models are not straight. They are like a bend in the road that prevents you from seeing around the corner, except in this case the curve goes up.

Without an exponential mindset, Google would never have created such an ambitious vision as “organizing the world’s information,” Facebook would never have set out to “make the world more open and connected,” and Airbnb to “create a world where all 7 Billion people can Belong Anywhere.” Similarly, a group of innovative organizations in the public sector are out to solve global social issues by achieving “transformative scale.”

In Maine they have an expression that “You can’t get there from here.” In the launch phase, you need to realize that an exponential strategy has inherent uncertainty. You can’t know what things will look like on the other side of the curve. You can’t draw a straight line from where you are to where you are going. There’s no step-by-step plan. The exponential mindset helps you become comfortable with uncertainty and more ambitious with your vision.

Take a look at the chart above. In the first part of the build phase, you don’t see a lot of change. It’s not until the second part when the line starts to bend. It’s simply the nature of exponential change. Things happen very slowly before they happen very quickly. If this was the only world we knew, it wouldn’t be a problem. But we were raised with an incremental mindset. So we can’t help but compare the exponential path to the incremental path. And this creates a problem.

We are accustomed to measuring progress linearly and incrementally. If 30% of the time has gone by, we assume that we should be 30% of the way there. That’s how things work in the physical world when we are traveling to a destination. But exponential models don’t work that way.
What happens is that businesses run into something I call the “expectation gap,” where the exponential strategy is at greatest risk from the incremental mindset. It’s where many companies abandon the exponential model for the incremental.

I see this consistently on a micro scale in my own work. My workshops are designed with an exponential mindset to generate new ways of thinking about marketing, culture and strategy. Somewhere around a third of the way into a workshop, the leader invariably says something like “so when are we going to get something done?” The reason is that they are still operating with an incremental mindset. A third of the time has passed, but it seems like they are only 10% of the way to our destination. In fact, most of the progress happens once the curve starts to bend. Invariably by the end of the day the same people are remarking that they can’t believe how much we got done in such a short period of time.

In your exponential journey, pay attention to when people get the most impatient for results. It’s the point in the chart where there is the largest gap between incremental and exponential paths. This expectation gap is a risk to the business strategy because the impatience can be used by opponents or skeptics to convince stakeholders to jump from the exponential to the incremental. You will have the immediate relief of having “line of sight” once again and see steady progress. But you will also have given up the possibility of accelerating returns and the opportunity to keep up with customers and competitors. The exponential mindset helps you have the courage to persevere and the patience to see it through.

Grow: Agility and Control

In the third phase, you have managed the uncertainty of the early days, the impatience of the middle phase, and now you are firmly “in the curve.” Growth is happening faster than you can handle. At this point, the incremental mindset is to try to rein things in and get things under control. But that would be a mistake. To sustain the accelerating returns, you need to shift your mindset about how to mobilize and manage resources.

The incremental mindset assumes that it takes more inputs to produce more outputs. So as growth starts to accelerate, teams start to look for more resources in proportion to the growth. But the addition of too many people or too many resources can “flood the engine” of growth. You need an exponential mindset to figure out how 1X additional input can create 10X additional output.
You also need to apply an exponential mindset to how you manage the resources you have. The incremental mindset about management is like creating a line of dominos. Everything needs to be highly coordinated with active oversight to make progress one step at a time. The exponential mindset is like this demonstration with ping pong balls in which things happen in parallel with a focus on the interactions among participants.

As I’ve written about separately, there is a way to let go without losing control. In the exponential mindset, managers replace control of people with control of principles. The use of doctrine to guide decision-making generates alignment, consistency and empowerment. But most leaders are accustomed to making decisions rather than empowering decisions. The anxiety from a loss of control can easily push companies off the exponential path back onto the incremental path. The exponential mindset helps to grow output faster than input, and empower teams to achieve both alignment and autonomy.

To summarize, digital business models require a shift from incremental to exponential. At the start, it takes vision and a leap of faith to commit to the unknown. In the early days, it takes courage and patience to build the foundation for growth even when results aren’t yet apparent. When growth kicks in, agility comes from empowering others and letting go without losing control. In all of the stages, the challenge is to “unlearn” familiar ways of thinking and embrace the unfamiliar. But with a shift from the incremental to exponential mindset comes the opportunity for real innovation. 


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How an Ecosystem Mindset Can Help People and Organizations Succeed 05-14

How an Ecosystem Mindset Can Help People and Organizations Succeed

Greg Gopman has had an interesting two and a half years. In December 2013 he was an up-and-coming young San Francisco entrepreneur and CEO of an incubator, when he posted an offhand comment on Facebook about homelessness in his city. In part, he wrote:

In other cosmopolitan cities, the lower part of society keep to themselves. They sell small trinkets, beg coyly, stay quiet, and generally stay out of your way. They realize it’s a privilege to be in the civilized part of town and view themselves as guests. And that’s okay.

Gopman’s post quickly went viral, was blogged about endlessly at media sites such as Gawker’s now-defunct Valleywag, and he became a poster child for everything wrong with the tech industry in the Bay Area. Overnight, his career came to a complete standstill.

But what Gopman did next was the interesting part: he threw himself at the task of actually trying to fix the homeless problem in San Francisco with the typical zeal of a startup entrepreneur.

Gopman’s journey is a great illustration of how to adopt what I call an ecosystem mindset: an understanding that the keys to new value and growth likely do not reside within one’s current boundaries but beyond them, and that success involves forging new connections to solve problems and create new value as a team. It’s a mindset that very few big companies and individuals have, but need.

Gopman’s first step was to conceive and create a product to solve the problem, a set of “I love SF” wristbands. The idea was that homeless people could sell them and help support themselves. Nobody called him for a resupply.

Next, he spent months researching current approaches, going out and talking to local organizations working with the homeless. His idea was to host a Town Hall to End Homelessness, bringing to bear his own expertise in organizing hackathons.

At the end of the event, Gopman met a man who had recently been made homeless after a stroke left him unable to work. The two started meeting regularly and trading notes, the man telling Gopman about what homeless camps actually needed. Gopman went to visit homeless encampments with his new colleague, and even spent a night sleeping in one.

The two launched a small business based on mutual observations of what people in these camps spend their time doing. The business fared much better than the wristband idea, but they eventually shut it down.

Finally, Gopman began hosting meetings for a group of activists, civic workers, and homeless people. They devised a plan for homeless encampments that would operate more like cooperatives, and would include case managers, vocational schools, showers, wifi, a dining hall, and wellness programming while operating at a profit. They named it A Better San Francisco.

While the internet continually paints Gopman as yet another shallow Silicon Valley tech bro looking to salvage his reputation, I believe Gopman’s story perfectly embodies the journey away from a closed Organism Mindset toward a more open Ecosystem Mindset.

The journey is one that everyone, individuals and organizations alike, can benefit from: start from a self-centric position, and meet, talk, and fail your way outwards. Along the way, partner with others, try small tests, and learn.

So how do you undertake this journey — either as an individual or as an organization? Let’s look at GE as an example.

Build new connections. Nobody can truly understand the ecosystem they operate in without getting out and wading in it. Take Beth Comstock, Vice Chair at GE. Comstock now oversees GE Ventures, so it is her job to grow GE’s ecosystem and to make money doing it, but long before she took on that role, she was always meeting people, traveling from city to city, and hosting events. She knows that getting out and building new connections is the way to build value for her company.

Establish channels between possible partners. These channels do not need to be — should not be — business deals per se. They should be created with the intent to understand how collaboration can happen. GE and GE Ventures, for example, actively seek and develop channels rather than simply looking for budding new companies to invest in. They’ve established Open Office Hours with senior-level experts at partner offices in Redwood City, panel discussions at like-minded accelerators in Boston, and similar initiatives in hotspots of new value creation around the country.

Partner with others. GE and their Ventures arm are also constantly on the lookout for new partners. The organization currently counts 61 startups in their portfolio in fields as diverse as energy, healthcare and manufacturing. They partner as well with mature organizations, such as Santa Clara University’s Miller Center for Social Entrepreneurship, to find and accelerate new solutions and add value through training and mentoring.

Of course, sometimes these partnerships end badly, as with the much-celebrated partnership between GE and Quirky, a New York manufacturing startup. Last year, Quirky declared bankruptcy last year and GE claimed that Quirky hurt its reputation with customers. Occasional outcomes like these are table stakes in the game though, and should not deter one from pushing forward with new partnerships across the ecosystem — and GE Ventures has pushed on accordingly.

Foster sustained action. GE invests time, money, and resources to create sustained, active relationships with accelerator programs in an array of fields and locations, from Energy Excelerator in Honolulu to Robotics Hub in Pittsburgh. The result for GE and its partners is an ongoing, complex exchange of ideas, value, and initiatives, which often dovetail with each other since everyone involved sustain contact and pass information back and forth. The result, for each player in the ecosystem, is certainly no worse than if they were pursuing their goals on their own, and potentially much greater because of their interconnection.

As Greg Gopman’s story shows, you don’t need to have a separate venture arm like GE with a huge budget to make this all work. It’s really just about applying the principles of the Ecosystem Mindset with whatever means you have: reach out, set up channels, partner, bring people from different parts of the ecosystem together for your cause, and go forward. If you do this, you’ll find that your solutions will take on new life. They’ll be more complex, more distributed across the ecosystem, more resilient, and more suited to survival in the modern world of increasing complexity and change.

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How Leaderless Groups End Up with Leaders 02-24

How Leaderless Groups End Up with Leaders

We’ve always known that communication is an important leadership skill. But most leadership research and advice is centered on what leaders say and how they say it, not on the underlying neural processes that govern communication between people.

A new finding in brain science reveals a curious dynamic — a neural synchronization — during communication between leaders and followers: the brain activity of leaders and followers is more highly synchronized than the brain activity between followers and followers.

In their experiment, Jing Jiang of the Max Planck Institute and her colleagues asked 11 groups of three people to conduct a leaderless discussion while their brain activity was monitored and the conversations were recorded. They were given the following topic for discussion: “An airplane crash-landed on a deserted island. Only six persons survived: a pregnant woman, an inventor, a doctor, an astronaut, an ecologist, and a vagrant. Whom do you think should be given the only one-person hot-air balloon to leave the island?” Each group was given five minutes to think about the problem alone, and then five minutes to discuss it. After the discussion, one person had to be chosen as the leader to represent the group and report the findings.

In addition, independent judges observed the group discussions and were asked to choose a leader using their own criteria. They also rated the quality of communication skills of people using the following seven criteria: group coordination, active participation, new perspectives, input quality, logic and analytic ability, verbal communication, and nonverbal communication.

Brain synchrony was determined for each two-person interaction within the three-person groups. Every time one person addressed another, this synchrony was determined by a measure called “coherence,” which indicates how often the frequency and scale of brain waves of both people are in sync.

The findings in the study were remarkable: Most (nine out of 11) of the external judges chose the same group leaders that the participants themselves chose. Something about these leaders clearly stood out.

When a leader and a follower were talking to each other, the degree of coherence, or neural synchrony, between the two was much greater than when followers were talking to each other within the groups. But then the question was, in the leader-follower pairs, who initiated the synchrony? Whose brain does the synchronizing with the other?

A statistical test called a Granger Causality Analysis (GCA) can be used to determine this. GCA indicated that both leaders and followers initiated the synchrony, but another statistical test, a two sample t-test, found that leader-initiated communication induced greater coherence and synchrony than did follower-initiated communication. Also, the degree of synchrony was associated with the quality of communication skills mentioned above.

The researchers found that one could predict leaders after 23 seconds by looking at the synchrony data alone, because leaders induced much greater coherence. So just by looking at the degree of synchrony induced when someone spoke, one could tell who was a leader.

Clearly, neither the leader nor the followers were aware of this neural synchronization, since it’s all happening on a biological level. The brain region in which the synchrony was detected was the junction between the left temporal (side and bottom) and parietal (side and top) lobes (the left TPJ). The synchronization occurred during verbal communication, but not during nonverbal

communication or periods of silence. The results are important because they help us reflect on how communication influences who is a leader, how leaders emerge during the communication process, and what factors cause them to be leaders. There are four important implications:

It’s not how much you communicate. It’s how well you communicate. How often leaders spoke did not matter. Even when they spoke less often, it was the degree of brain synchronization and the quality of their communication, measured by the seven aspects mentioned above, that mattered. The greater the quality, the greater the coherence and synchrony with followers. High-quality communications may increase synchrony with followers.

It’s your verbal skills, not your nonverbal skills, that matter when making decisions. In general, nonverbal communication can reveal a lot, but in this experiment it did not affect whether leaders were chosen. Their verbal communication skills were that mattered.

When leaders initiate conversations, they should seek to synchronize with followers or have followers synchronize with them. Being aware of the brain synchronization phenomenon helps leaders better understand the biological basis of good communication. This implies that it is important for leaders to start conversations with a view to developing synchrony with followers. Finding common ground and a means for connection is important and can result in a higher level of coherence during communication between leaders and followers.

In decision making, your synchrony, not your authority, is what matters. Try to predict how others will respond to you by putting yourself in their shoes; this is especially important when managing another person’s emotions. It’s a skill that can be developed. Leaders would benefit from setting time aside to anticipate how their decisions will impact others, and then adjusting those choices if necessary.

We also know that social synchrony is disturbed when people are threatened; the brain’s “alarm,” the amygdala, registers the threat. In organizations, this fact implies that for leaders to be perceived as leaders, they need to be in touch with their followers emotionally, understand their points of view, and address threats that disrupt cooperation.

The brain region that synchronized in the Jiang study is also known for having a significant role in sharing emotional states and in reading the mental states of others, which are important for maintaining group cohesion and cooperation. When the brain is cooperative, it is usually activated by shared social emotions. If leaders want to truly influence their followers, they’ll remember this — and speak accordingly.

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