HBS Cases: Women MBAs at Harvard Business School 09-20

September 20, 2013, 12:29 am

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HBS Cases: Women MBAs at Harvard Business School

Professor Boris Groysberg discusses his new case, "Women MBAs at Harvard Business School: 1962-2012," which delves into the experiences of the School's alumnae over the past 50 years.

In 1962, the Harvard Business School faculty voted for women to be directly admitted to the two-year MBA Program for the first time. In September 1963, eight female students enrolled in the Class of 1965, alongside 676 men. The School has come a long way toward gender equity since then, with women making up 40 percent of the Class of 2014. But a new case study shows that there's still a ways to go.

“WE WANT THEM TO GRAPPLE WITH WHAT IT TAKES TO BUILD AN ORGANIZATION, TO LEVERAGE DIVERSITY AND CREATE AN INCLUSIVE CULTURE.” —BORIS GROYSBERG

Titled "Women MBAs at Harvard Business School: 1962-2012," the case delves into the experiences of alumnae and alumni over the past 50 years, both inside and outside the classroom, as Dean Nitin Nohria considers what HBS might be like 10 years from now, when his young daughters are grown.

"It looks back and asks whether we have been successful," says Boris Groysberg, the Richard B. Chapman Professor of Business Administration at HBS, who cowrote the case with HBS Global Research Group associate director Kerry Herman and research associate Annelena Lobb. "It also lets us look into the future and ask, how can we create a more inclusive culture? And how should HBS change over the next 10 years in order to accelerate the advancement of women leaders who make a difference in the world?"

On March 8, in observance of International Women's Day, faculty members will teach the case to all first-year MBA students at HBS (Nohria will introduce it to second-year students), in conjunction with a multimedia video case comprising oral histories of HBS alumnae and female professors. Second-year students and some Executive Education participants will have the option of discussing the case that day, too. In April, the case will be taught to 700 alumnae and alumni at the W50 Summit, the centerpiece of the 50^th anniversary celebration.

EVENTS

Women's 50th

This article is part of a continuing series on faculty research and teaching commemorating the 50th anniversary of the first women to enter Harvard Business School's two-year MBA program.

"We want them to grapple with what it takes to build an organization, to leverage diversity and create an inclusive culture," Groysberg says. While "Women MBAs at Harvard Business School" commemorates the 50th anniversary of women in the full two-year MBA Program, the authors made sure that it was more candid than congratulatory. "The Dean made it clear early on that what really happened here is what should be in the case, because one way to make the future of this institution better is to talk honestly about our past. So there are good stories, and there are stories that the School probably isn't very proud of. But it's all part of our history, and hopefully our future is going to be better than our past."

"YOU'RE A SHINING LIGHT"

The authors conducted some 60 interviews for the case, and indeed the anecdotes in the case run the gamut from inspiring to unsettling. One of the seven women in the Class of 1967 recalls a supportive group of male classmates, one of whom told her, "You're a shining light, and we want you to know how much we appreciate you." But another woman in the same class recalls male classmates repeatedly asking her, "Tell me why you're here at HBS taking a place away from a man."

HBS professors' attitudes toward women were a mixed bag, too. As early as the 1940s and into the 1960s, several HBS faculty members would cross the Charles River to teach business administration courses to students at Radcliffe College, indicating a personal commitment to educating women well before they were officially admitted into the full two-year MBA Program. In 1965, the School hired an administrative assistant to the Dean, whose main responsibility was to recruit women and make sure they received moral support during their time at HBS. Many professors joined the charge, actively encouraging women to apply to HBS.

But others were uncomfortable with women in the classroom. A 1971 alumna remembers several professors who never called on a woman in class "unless it was a discussion of a woman's product." A Class of 1973 alumna recalls professors "who, in the middle of a class, would look at the women and the African Americans and say, 'Is this too difficult for you?'"

By 1985 women made up 25 percent of the graduating MBA class and Professor Regina Herzlinger (DBA 1971) was becoming the first female faculty member to receive an endowed chair at HBS. Still, anecdotes reveal an ongoing "obliviousness" on the part of the administration. A 1982 alumna says, "We still had urinals in the women's restrooms almost 20 years after women had been admitted. So it was pretty clear that Harvard hadn't quite embraced women at that time."

The 1990s proved frustrating for those working toward gender equality at HBS. In 1995, women made up only 28 percent of the MBA class—the lowest percentage since the mid-1980s. That said, the School was making strides in research on gender issues. Myra M. Hart (MBA '81, DBA '95) joined the faculty in 1995, for example, and initiated an executive program for women, which was based on her doctoral research on the career choices of female HBS grads.

“WE STILL HAD URINALS IN THE WOMEN’S RESTROOMS ALMOST 20 YEARS AFTER WOMEN HAD BEEN ADMITTED.” —MBA CLASS OF 1982 ALUMNA

By the middle of the next decade, 38 percent of entering students in the MBA Program were women. Many of the alumna reported having felt more comfortable at HBS—encouraged to speak up in class, for example—than in previous decades.

Kathleen L. McGinn, the Cahners-Rabb Professor of Business Administration, established a set of field studies in which female second-years researched the reasons behind differing academic performances between male and female students. Robin J. Ely, the Diane Doerge Wilson Professor of Business Administration and, since 2010, Senior Associate Dean for the School's Culture and Community Initiative, organized a research team to look into the factors that made female students and faculty thrive. By 2012, men and women were performing equally in terms of grades, and they generally reported equal levels of student satisfaction.

Recent alumnae, however, note a dearth of female protagonists in the cases discussed in class. ("I think I remember two," said a 2011 alumna.) Even now, only about 8 percent of HBS cases focus on a woman protagonist. "I think we can certainly do better," Groysberg says. "The argument in the 1970s was that we just didn't have enough examples of female protagonists in business. I don't think that's a valid argument in 2013."

Descriptions of life after HBS in the case reveal a stubborn consistency from 1962 to 2012: the fact that women seem to bear the brunt of the work/family trade-off decisions. And classroom discussions indicate that students just assume that's the way it goes. In the case, Nohria recalls his experience teaching the first-year required leadership course: "When there were women protagonists in a case, people had questions about how they managed work-family balance. Men had families, too, but we didn't seem to ask those questions about men."

AN EMOTIONAL EXPERIENCE

Discussing the case in his office recently, surrounded by precarious stacks of documents, Groysberg looks a little weary. "For me this has been a very emotional experience, this case," he says. "There were maybe 100 hours of interviews. We interviewed in teams, and many times we'd walk out together just speechless after hearing these stories. Sometimes I'd get home and not fall asleep until three or four o'clock in the morning, just thinking about it and unwinding."

But he's hopeful and excited about the School's role in the future of women in business. "I really think we are at an inflection point in 2013," he says. "At an individual level, at an organizational level, and even at a governmental level, more women and men are tired of gender inequality. It's our opportunity to make something of that—or it's our opportunity to miss."

In addition to teaching students about building an inclusive organization, the case will give faculty an opportunity to collect—and maybe employ—students' ideas about how to make HBS a more inclusive place.

"I'm anticipating a co-creation of knowledge and a co-creation of ideas," Groysberg says. "Our students have aspirations for the School, and so do our alumni. There's a reason they picked HBS over other schools. It's going to be a learning experience for us as much as it is a learning experience for the students in the classroom."

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How India's Parliamentary Elections work 09-20

September 20, 2013, 3:07 am

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How Russel Redenbaugh Defeated his Disabilities 09-20

September 20, 2013, 6:43 am

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How Russel Redenbaugh Defeated his Disabilities

by Rich Karlgaard

Russell Redenbaugh chose to live an extraordinary life

They’re called boomerang kids—young adults who can’t survive outside the nest and who return to Mommy’s basement. In 1962 in Salt Lake City, a teenager named Russell Redenbaugh was preparing for his boomerang role. He was just drifting. After high school he thought he might get a job in the family’s small candy factory.

How Russel Redenbaugh Defeated his Disabilities

His only passion was model rockets. But in May 1962, one blew up in his face. Redenbaugh almost bled to death and was immediately blinded in one eye. He lost part of a thumb and half his fingers. Months later he lost sight in the other eye.

Then something changed. When the last surgery failed to save his eye, “that very day—in that hospital bed—I made some declarations,” says Redenbaugh. “I declared that I would not be dependent, that I would not be poor, that I would not live at home, that I would live in the sighted world, doing sighted things.”

I got to know Redenbaugh about 10 years ago. He, his wife, Natalia, and their guide dog were regular attendees at George Gilder’s Telecosm conference. I knew Redenbaugh was an investor of some kind. I was astonished when Steve Forbes said Redenbaugh was also a champion jujitsu athlete. I assumed he’d won against other disabled athletes. A proud man of military bearing, he seemed the sort who didn’t like to talk about his disability.

This April at a TED conference in Bend, Oregon, Redenbaugh gave an 18-minute talk about his life. I watched, dumbstruck by its power (Google ‘Redenbaugh TED’). So I called him to get the rest of the story. It turns out he never liked to talk about his disability because he doesn’t think of himself as disabled, but “post-traumatic gifted”.

Redenbaugh graduated from the University of Utah, first in his class. He applied to the business schools at Harvard and Stanford—and was turned down. “Both said, ‘No one who is blind could manage a programme as difficult as ours,’” Redenbaugh says. “I don’t know how they knew, because they had never admitted anyone who was blind.” He flew to Philadelphia to make a personal appeal to the admissions dean at the Wharton School. He got in—and graduated fifth in his class.

Job offers were slow. He got only one—from a tiny money management firm in Philadelphia, Cooke & Bieler. That was in 1969. By the late 1980s Redenbaugh sold his partnership and was rich. “I sold because I couldn’t convince my partners that the fall of the Berlin Wall was a good thing and that the 1990s would be great for stocks.” Some see better than others.

Senator Bob Dole appointed Redenbaugh to the US Commission on Civil Rights, which for Redenbaugh was—and I apologise—an eye-opener. He concluded that the commission’s goal was to expand the list of victims, not solve problems. 

What was next? “I wanted to do something at which I could win.” For years Redenbaugh had a personal trainer, who also taught jujitsu. Eventually Redenbaugh’s curiosity got the better of him. 

“It’s like judo but rougher. You start standing up, as in judo, but the first point is to take your opponent to the mat; then the fight continues, often on the mat. I discovered that being blind was not the big problem, as long as I didn’t let go of my opponent.” Redenbaugh pauses. “The big problem was not being able to make grips. In jujitsu you fight with your hands, arms, legs and feet. You fight for joint locks and choke holds.”

In 2003, Redenbaugh went to Brazil for the International Competition for Master Seniors. He won gold. Let me be clear: He won gold in open competition. All of his opponents were sighted. None was missing a thumb and half their fingers. “Many people thought that was an accident or a fluke, or just luck.” So he returned in 2004 and 2005. “And I got two more gold medals.”

Your move, boomerangers. 

Now view the video of his TED talk

Thanks Forbes India Magazine  & TED

How To Boost Your Company's Value: Mind the Intangible Assets 09-20

September 20, 2013, 7:39 am

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How To Boost Your Company's Value: Mind the Intangible Assets 

BY CURTIS KROEKER

You may not be able to touch them, but things like patents, processes, and a good reputation just might boost your business's price tag


Mention business “assets,” and most people think of actual physical items, such as equipment and real estate-;things that are tangible. But intangible assets--such as copyrights, trademarks, a brand, a solid reputation--play an important role in the valuation and sale of businesses.

In fact, all nearly all businesses, even those that exist solely in cyberspace, possess intangible assets. And if you’re selling your company, it’s critical to leverage such assets to both increase your own value and make your company more attractive to buyers.

Assigning value to intangible assets is also challenging. There are several different methods for estimating the worth of intangibles. With so much on the line, most sellers will be well-served to consult a business broker or professional appraiser rather than trying to value intangible assets on their own. However, there are several things you can do to highlight and improve the value of your company’s intangible assets as you prepare to sell your business.

Identify Your Intangible Assets. In the months leading up to a sale, sellers typically conduct an inventory of equipment, real estate, and other physical assets. But savvy sellers also include intangible assets in their pre-sale inventories. This list can be extensive. In addition to intellectual property, it’s important to consider the value of contracts, agreements, partnerships, customer relationships, Internet domains, brand recognition, and more. Essentially, any non-material asset that contributes to your company’s success has the potential to boost its value.

Document Such Assets’ Impact For business buyers, the value of an asset is limited to its ability to generate bottom line outcomes. This is especially true when it comes to intangible assets, since many intangibles don’t have value beyond the context of the business itself.

By documenting the impact of intangible assets, you can demonstrate their worth to prospective buyers. For example, loyalty metrics illustrate the value of customer relationships. Sales tied to proprietary processes show the dollar value of specific pieces of intellectual property.

Standardize Systems and Processes Intangible assets tend to be unique business elements and can intimidate buyers who are unsure whether or not they will be able to leverage them to achieve similar results. So as much as possible, try to standardize and document the use of intangible assets, highlighting how they are integrated into processes that rely on key employees, tangible assets, and other resources that will exist after you have exited the business.

Develop Your Intangibles Depending on the timing of your sale, it may be possible to create new intangible assets as well as increase the value of intangible assets that already exist. You can also make intangible assets more tangible. For example, if you have a proprietary process that differentiates your business from the competition, it may be beneficial to secure a patent for it before you list your business in the business-for-sale marketplace. Poof: something intangible becomes tangible.

Of course, some intangible assets are more valuable than others to prospective buyers. To avoid investing time and resources in intangibles that may contribute little to business value and sale price, consult a business broker early in the process.

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Business and Human Rights event with BSR and Yahoo 09-20

September 20, 2013, 8:16 am

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Twitter roundup: Business and Human Rights event

A summary of our Business and Human Rights event with BSR and Yahoo in New York City this week, including articles, photos and tweets

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Marc Gunther, editor-at-large for Guardian Sustainable Business, left, moderates a business and human rights panel including BSR adviser Christine Bader, Citi's Shawn Miller and Yahoo's Sonja Gittens-Ottley Photographer: Courtney Katz/BSR

Business impacts on human rights span an almost inconceivably wide range that varies from industry to industry and company to company. There's child labor, forced labor, housing, living wages, community relocation, gender equality, health and safety, water, internet freedom vs privacy and much, much more.

All of these issues carry emotional weight - and plenty of reputational and other risks for businesses - but also, arguably, more than their share of complications and gray areas.

Can human-rights-aware company accomplish more by staying in a country where human rights aren't well protected or to leave? Is it more important for a corporation to follow local laws or international standards when they conflict? How much of the burden for protecting human rights falls on businesses' shoulders, as opposed to governments'?

Executives and thought leaders discussed these tricky questions and more - sharing challenges, experiences and best practices - in a New York City event hosted by the Guardian, BSR and Yahoo on Tuesday.

Discover more in the articles and tweets below:

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CEO survey is gloomy reading for the corporate sustainability movement 09-20

September 20, 2013, 8:29 am

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CEO survey is gloomy reading for the corporate sustainability movement

The world's largest CEO sustainability study shows most companies are not integrating social, environmental and governance issues into their core strategies

World's largest CEO sustainability study makes bleak reading with evidence that business transformation has ground to a halt. Photograph: Piyal Adhikary/EPA

The results of the world's largest CEO sustainability study   make bleak reading with strong evidence that the journey towards business transformation has ground to a halt.

The survey, released to coincide with the United Nations Global Compact (UNGC) leaders summit in New York, shows that despite the recognition the world is in grave danger, business leaders do not believe the conditions are in place for them to meet the challenge.

CEOs admit they are still struggling to make the business case for long-term investments, while key influencers such as consumers, governments and investors are failing to provide the incentives. For example, just one third of those running public companies believe their share price currently includes value directly attributable to sustainability initiatives and performance.

Lack of progress on challenges

The study, of more than 1,000 top executives from 27 industries across 103 countries, comes hard on the heels of depressing results from two other recent surveys, one from the UNGC and the other from the global NGO CDP, which also provide concrete evidence of the lack of corporate progress.

What is perhaps most worrying about the study is that it shows the majority of the world's most powerful corporate leaders feel powerless to respond to the multiple challenges of climate change, resource scarcity, poverty and environmental degradation.

They clearly recognise the enormity of the risks with only a third believing the global economy is on track to meet the demands of a growing population within planetary boundaries. Two-thirds also recognise business is not doing enough to meet these challenges.

But the optimism shown when the last survey was carried out three years ago in the business sector's ability to lead from the front has collapsed like a soufflé taken out of the oven too early.

"Pilot paralysis"

As the study concludes: "CEOs see business caught in a cycle of "pilot paralysis"— individual, small-scale projects, programmes and business units with an incremental impact on sustainability metrics — and while they see a role for business in promoting sustainable development, their responsibilities to the more traditional fundamentals of business success, and to the expectations of markets and stakeholders, are preventing greater scale, speed and impact."

In fact, only 45% of CEOs believe that sustainability will be "very important" to the future success of their business, compared with 54% in the last survey carried out in 2010.

"This drop is striking in the context of intensifying global challenges," says the report. "A decline in the perceived importance of sustainability among global business leaders is not encouraging for those working to align business with sustainable development."

Barriers to change

The reason for the drop is because short-term pressures caused by the economic downturn mean sustainability is being put on the back burner to await another day. Growth and employment were the most important issues identified by CEOs, while issues more closely tied to social and environmental development, such as climate change, poverty, water and health, slipped down the agenda.

Perhaps the most shocking statistic is that CEOs are finding it progressively harder to justify the business case for sustainability. In fact, this was identified by the respondents as the fastest-rising barrier to change. In 2007, just 18% said they were unable to trace a link between sustainability and business value. In 2010, this rose to 30%, and this year it has gone up again to 37%.

Could this have something to do with the fact that discussions with CEOs showed that many business leaders starting to act on sustainability still do not have a clue what the term actually represents, confusing it with philanthropy and charity?

The report says: "The more adept companies become at measuring and tracking their own sustainability performance, the more their frustration grows at an apparent inability to tie performance improvements and industry leadership to the fundamentals of business value beyond incremental gains."

Peter Lacy, managing director at Accenture's strategy and sustainability in Asia Pacific, who led the report, sums up the quandary CEOs are in: "Sustainability has become firmly established on the leadership agenda of almost every leading business," he says.

"But there is also reason for caution. Our interviews this year suggest that business may collectively have reached a plateau in the advancement of sustainability. Without radical, structural change to markets and systems, CEOs believe, business may be unable to lead the way toward the peak of a sustainable economy."

A place for policy

The report clearly shows that for CEOs to act decisively, they believe they need government at global, national and local levels to step in and force the pace of change.

The study shows that 85% of CEOs demand clearer policy and market signals to support green growth while only a slightly smaller percentage emphasise the need for governments to set a policy framework for economic development within the boundaries of environmental and resource constraints.

Business is known for its general dislike of tougher regulations, but the frustration of CEOs is evident from the fact that more than half are clear in their call for "hard" measures of intervention, including regulation and standards; 43% call for governments to adjust subsidies and incentives; and 31% seek intervention through taxation.

It's interesting to note their frustration with the lack of progress of voluntary approaches, which are supported by a mere fifth of respondents. Only 15% see "trading schemes and markets" as an effective policy tool, the lowest of any option presented.

CEOs feel unsupported

It is also painfully obvious from the survey results that CEOs feel unsupported by other main sections of society. While nearly two-thirds of CEOs believe consumers are their most important stakeholder when it comes to having an impact on a company's approach to sustainability, they say they get no credit for embedding it into their company practices.

Perhaps more worrying is the continuing lack of interest from investors, which restricts the appetite of CEOs to break from the crowd and take risks. Just 12% of respondents regard investor pressure as among their chief motivators on sustainability, the same figure as 2010, and less than a quarter see investors as an important stakeholder.

These deeply worrying figures are made only slightly less depressing by the 69% who expect investor interest to be an increasingly important factor in building sustainability issues into core business. Given this feeling of powerlessness, it is not surprising that the desire of CEOs to build cross-sector collaboration to drive change continues to grow in popularity. While only 15% of CEOs rank NGOs as among their most important stakeholders, more than three-quarters believe partnerships and collaboration across sectors will be instrumental in the way that their company delivers positive social and environmental outcomes over the next five years.

As the notion of convergence takes hold, CEOs are beginning to see a transition toward long-term partnerships; not single-issue, arm's length co-operation, but genuine collaboration as issues and interests coincide.

Disconnect between challenges and action

Like many survey results, there are a number of contradictions in the responses of CEOs. One of the most striking is the disconnect between CEOs' perceptions of the lack of global progress and their high opinion of their own individual efforts and achievements. More than three-quarters are satisfied with the speed and effectiveness of execution of their own company's sustainability strategy, and nearly two-thirds believe that they are doing enough to address sustainability challenges.

The report concludes: "CEOs clearly recognise the scale of the global challenge — but may not yet see the urgency or the incentive for their own businesses to do more and to have a greater impact. This disconnect suggests that a gap persists between the approach to sustainability of the majority of companies globally — an approach centred on philanthropy, compliance, mitigation and the license to operate — and the approach being adopted by leading companies, focused on innovation, growth and new sources of value."

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Credits

This content is brought to you by Guardian Sustainable Business in association with the UN Global Compact. Paid for by the UN Global Compact. All editorial controlled and overseen by the Guardian.

The Business of Human Well being: What Does It Mean To Be A Volunteer? 09-21

September 20, 2013, 7:25 pm

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The Business of Human Well being: What Does It Mean To Be A Volunteer?

DNA OF SUCCESS   

In November last year, nearly 200 entrepreneurs and intrapreneurs aspiring to scale up their business and personal capabilities came together to attend a very special business leadership program called INSIGHT: The DNA of Success. Designed by Sadhguru and facilitated by Dr. Ram Charan, globally renowned CEO Coach, the panel comprised some of the most successful names from the Indian business sphere, including KV Kamath and GM Rao.

The second edition of the program will be underway during 23-26 November 2013 at Isha Yoga Center. Leading up to this exciting event, we have been bringing you a video series called “The Business of Wellbeing”. As part of the panel discussions at INSIGHT 2012, Sadhguru was interviewed by Inderjit Gupta, former Editor of Forbes India magazine. In this video, Sadhguru talks about what it means to be a volunteer.

Inderjit Gupta, former Editor of Forbes India:

Truly, I’ve been amazed by the experience (of INSIGHT). I mean the whole attention to detail, the sheer planning that seems to have gone in. It’s truly extraordinary, the fact that this program is being run and managed by a team of volunteers, young volunteers, who seem to have done a extraordinary job of creating a very, very unique experience. Sadhguru, I was hoping you could help us understand what it takes to run a volunteer program of this kind. What does it take to infuse passion and purpose in these young volunteers?

Sadhguru:

Essentially, volunteering means to become willing, or in other words to become an absolute yes to life. Most human beings are “yes” if it’s convenient, “no” when it’s not convenient; “yes” if it’s yielding something, “no” if it’s not yielding something for them. A volunteer means there’s only one thing that he’s dropped, which is a very significant thing, he’s just dropped this one calculation, “What can I get?” If a human being drops this one calculation, “What can I get out of this?”… if he drops that, suddenly he becomes a phenomenon. This is something that I am constantly demonstrating to people, what our volunteers can do.

This is a small program for us. If you see our major events… for example,Mahashivaratri is approaching – over one million people will be there, through the night, from evening six to morning six. Or if you look atProject GreenHands or the Rural Rejuvenation programs… or just about anything that’s been done here.

Or, for example, the Dhyanalinga dome. The dome is made in such a way, there is no cement, there is no steel, there’s no concrete. This is a simple technology: all the bricks are trying to fall down at the same time, so they cannot. It’s like everybody is trying to get out of the door and they cannot – unless one person has the courtesy to move back. Then they will go. But the bricks don’t have courtesy. So, they all keep on trying to come down and they cannot come down. So for this to happen, it took 1.8 lakh bricks to build that. These 180,000 bricks – every one of them was measured to the millimeter by the volunteers. If somebody is a little lax, somebody puts a brick which is two millimeters less than what it should be, the whole thing may collapse. So I sat down and I spoke to them, “See, this is what it means. This is what I’m placing in your hands. You never handled a brick in your life, but you have got to measure like this.” And men, women, children sat down, day and night and they measured, and they measured, and they measured… and they laid these bricks. I’m giving you just one example. Any number of things like this have been done.

What is it that fires them? There is something beyond passion, there is something beyond motivation, there is something beyond profit, which is very significant for a human being, which generally most human beings never explore. Their whole life remains within certain expectations of profit, some passion towards it, some intensity. But volunteers live an intense life…

This is the greatest blessing: that you constantly live among people who are intense, focused and willing to give themselves to what needs to happen. This the greatest pleasure a man can have. This is the greatest fortune a man can have. And fortunately, we have it.

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As drug firms squirm under glare, authorities look abroad for cure 09-22

September 21, 2013, 8:00 pm

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As drug firms squirm under glare, authorities look abroad for cure

DCGI, health ministry initiate dialogues with foreign regulators, try to understand 

Even as the domestic pharmaceutical industry feels the heat of global scrutiny, the Drugs Controller General of India (DCGI) and the health & family welfare ministry have initiated proactive dialogue with international regulators.

While DCGI G N Singh is on a tour to Brussels, along with a team of health ministry officials and drug inspectors, starting Sunday, senior ministry officials have gone to St Petersburg for discussions with the Russian regulatory agency.

“India is a developing country and we are evolving each day. The global standards are also changing and getting stricter with increasing generic penetration and competition. Since our companies are major players in the sector, they are under stringent scrutiny,” Singh told Business Standard, confirming he was going to the European Union (EU) to meet regulatory agencies there and understand their requirement of manufacturing best practices.

Dialogues might also be pursued with the US Food and Drugs Administration (FDA), which recently issued several enforcements on major Indian drug makers like Ranbaxy, Wockhardt and RPG Lifesciences, besides Strides Arcolab’s injectible manufacturing arm Agila Specialities.

The regulator, along with the health ministry, is evaluating the issues highlighted by the US FDA and might invite officials from the agency to visit India and have detailed discussions on their requirements on good manufacturing practices and review implementations and processes here, according to an official.

A source said the European regulator had also pointed out some lapses in the Indian manufacturing systems, though no major domestic firm, except Wockhardt, had faced serious enforcement actions from the EU in recent times.

The latest intervention by the government and DCGI comes in the wake of an increasing number of Indian companies attracting import alerts, warning letters and recalls from the international markets — mainly the US, the world’s largest drug market that accounts for around 30 per cent of the Indian pharmaceutical industry’s revenues. For major drug makers like Ranbaxy, the country contributes around 40 per cent of their total revenues.

While the US FDA recently imposed an import alert on Ranbaxy’s manufacturing facility in Mohali (Punjab), barring supply of medicines from this unit to the US, Wockhardt’s Waluj facility faced a similar import alert earlier this year. The Wockhardt facility is under import alert from the UK drug regulator, too, which has barred supply to the all EU nations. Two other important facilities of Ranbaxy — at Paonta Sahib and Dewas — have been under import alert since 2008.

Other companies like Agila Specialties have received warning letters.

The Indian regulator, however, feels there is “nothing seriously wrong” with Indian standards or medicines manufactured here. Instead, it is a matter of “services”, which is a routine thing and can be corrected if it does not meet requirements, says DCGI Singh. The government and the regulator, therefore, are hopeful that dialogue among regulatory agencies would help understand each other’s requirements and mitigate the problem.

The Indian pharmaceutical industry, pegged at Rs 74,000 crore, is one of the major generic drug suppliers to the world. Others include the US, Israel and South Africa. In 2012-13, the US remained a top destination for India’s pharma exports, accounting for $3.7 billion, compared with $3.2 billion the previous year. The UK was the second with $511 million worth of exports, against $491 million a year earlier.

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India demands changes in WTO trade facilitation agreement 09-22

September 21, 2013, 8:26 pm

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India demands changes in WTO trade facilitation agreement 

But industry prefers present form as it will reduce its cost burden

Even as the government is collating inputs from industry to chalk out its negotiating strategy in a trade ministers’ meet during December 3-6 in Bali, Indonesia, it has demanded some immediate changes to the Trade Facilitation Agreement (TFA) being discussed at the World Trade Organization (WTO).

India has clearly stated that it will not agree to TFA’s conclusion without the changes it suggested. The commerce and industry ministry has the authority to negotiate on behalf of the country. The ministry wants to make it compulsory for customs authorities globally to allow exporters to take back portions of the rejected consignments at the borders before nullifying the entire shipment, officials in the commerce department told Business Standard.

“The draft trade facilitation proposal has substantial cost implications for developing countries. Countries will have to amend their laws. Apart from cost implications, the onerous compliance implications are also a matter of concern,” said a senior commerce department official on condition of anonymity.

However, Indian industry is strongly batting for the deal to go through in its present form for it will reduce industry’s cost burden. A comprehensive deal on trade facilitation will reduce transaction costs by 10 per cent in advanced economies and by 13-15.5 per cent in developing countries, says a study by Organisation for Economic Co-operation and Development (OECD).

The TFA, which aims to reduce bureaucracy at borders, has the potential to provide a $1-trillion boost to global economy, according to WTO chief Roberto Azevêdo who wants work on the deal to speed up before trade ministers from all 159 member countries meet in Bali.  India has also proposed that the customs procedures be made transparent and non-discriminatory to avoid any non-tariff barriers and encourage greater flow of goods from one country to another.

“The benefits of a trade facilitation agreement will accrue largely to the developed countries and those developing countries which are strong manufacturer-exporters. Such an agreement based on the current proposals would aggravate the adverse balance of trade of many developing countries,” the official, who is involved in the talks, said.

In FY13, India witnessed an unprecedented level of trade deficit at $191 billion with exports falling by 1.76 per cent to $300.60 billion, while imports stood at $491.6 billion.

The official added that if TFA is accepted in the present form, the “burden of policy change required to implement the deal will lie only on developing countries”. The main objective of the deal is to reduce bottlenecks of shipments at borders by smoothening customs procedures through customs streamlining, easing transaction costs and red tape at international borders.

According to a recent World Bank study, most of the gains in trade facilitation will come from improving infrastructure such as ports and roads, which calls for a considerable amount of expenditure and investment.

Developing countries such as India, China, the Philippines and Brazil have also urged agreement on food security along with the TFA as a successful outcome of the Bali meet. TFA is only a minor component of the entire global trade deal, which started in Doha in 2001. However, a major consensus on this is expected to pep up the deadlocked talks for a global trade deal as countries are increasingly diverting their attention to regional trading arrangements.

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Three years gone, but Games still not over for organisers 09-22

September 21, 2013, 8:41 pm

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Three years gone, but Games still not over for organisers

OC continues to keep office & pay Rs 30 lakh as rent

Seated comfortably in a big room overlooking the Lutyens Delhi skyline, Delhi Commonwealth Games (CWG) CEO Jarnail Singh is only occasionally disturbed by visitors. There aren’t many: The odd former employee enquiring about his dues, routine administrative work, or (rarely) a knock on the door from a CBI inspector looking for a file.

Singh’s room has shrunk since the 2010 heyday. The office that once occupied a whole sprawling building with multiple floors on Central Delhi’s Jaisingh Road is now reduced to just one. The other floors now house some home ministry departments, including the National Investigation Agency that recently moved here.

It’s been three years since the Delhi edition of the Games ended and the next is to begin in Glasgow from July next year. But the Indian Games organising committee (OC) hasn’t yet been wound up. What still keep the committee busy are a series of cases involving disputes with vendors over payment issues. The staff has been trimmed to 40 but the office doesn’t come cheap. The OC is fighting cases amounting to Rs 400 crore in arbitration alone. And till those are settled, the OC will continue to pay the New Delhi Municipal Corporation Rs 30 lakh as rent every month — from what is left of the government’s initial budget allocation to OC for conducting the Games.

After charges of alleged corruption in various deals involving suppliers surfaced, the government asked OC to stop after paying 40 per cent of their dues (around Rs 250 crore). Citing the terms of their contracts, some of these international contractors approached the Supreme Court, petitioning for release of the remaining amount. The Supreme Court ordered them to go for arbitration with the OC which is being conducted by three retired SC judges.

Most of these disputes relate to the companies that got the contract for Games overlays (temporary facilities at various venues provided during operational phase of the Games). The overlays include provision for tents, portable toilets, civil construction, security fences, display LED boards, etc.

CBI has already filed FIRs in cases involving these firms. OC has argued that some of these deals were overvalued, so payments won’t be made till the arbitration dispute is resolved. The companies involved include Switzerland’s Nussli, Delhi-based Pico Deepali Overlays and ESAJV D Art Indo Consortium.

OC’s staff might have been cut and responsibilities reduced. But the rent for the shrunken office remains Rs 30 lakh a month.

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Case Study: The Costs and Benefits of a Strong Culture11-05

November 4, 2013, 6:52 pm

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Case Study: The Costs and Benefits of a Strong Culture

by David A. Garvin 

“How long is this list of escapees?” Kumar Chandra asked as he pointed at the slide on the screen. He was the head of operations at Parivar, a midsize Chennai-based IT services company.

Everyone in the room chuckled, except for Indira Pandit, vice president of HR. Nearly 100 employees had given notice in recent weeks.

“We’re losing them faster than your people can bring them in,” she said, turning to Vikram Srinivasan, the head of recruiting. “Our turnover rate is up to 35%.”

(Editor’s Note: This fictionalized case study will appear in a forthcoming issue of Harvard Business Review, along with commentary from experts and readers. If you’d like your comment to be considered for publication, please be sure to include your full name, company or university affiliation, and e-mail address.)

Vikram shook his head. “This isn’t our problem. It’s the Indian labor market. And it may not even be a bad thing. Some studies show that the more frequently employees move around within an industry, the more innovative it becomes.”

Indira gave him a skeptical look.

“This is to be expected, Indira, especially now that we’re rising above the second tier,” he argued.

This time only Kumar laughed, and Indira knew why. Sure, Parivar was growing — in revenue, profitability, and reputation — but it was still much smaller than companies like Infosys, HCL, and other leading global providers of low- to midrange business-process outsourcing services. In the past decade, Parivar’s charismatic CEO Sudhir Gupta had saved the organization from bankruptcy and made it an industry success story — but it was hardly in the first tier.

“I need to present these numbers to Sudhir at the end of the week, and I can’t do that without a theory on what’s happening and a solution to propose. That’s why I called this meeting,” said Indira.

“What about the ‘People Support’ idea that came up in the Future Vision exercise?” Vikram asked. Parivar had just finished its annual innovation process. Employees from all over the company — particularly new and young ones — were encouraged to join senior leaders in brainstorming and design sessions focused on how the firm could reach its goals for the year. This event, a hallmark of Parivar’s inclusive culture, was meant to foster collaboration and an entrepreneurial spirit.

 One proposal that had garnered attention was the creation of a new function whose sole purpose would be to support Parivar’s employees by hearing their grievances and figuring out solutions.

“I, for one, love the ‘People Support’ idea,” Vikram added. “It emphasizes Sudhir’s philosophy of genuine caring for our people.”

“It sounds genuinely expensive to me,” said Kumar. Indira loved his pragmatism.

“Cost aside, I’m not sure that’s the direction we want to take.” She pointed at the screen. “These people have told us that Sudhir’s ‘love culture’ — our attentiveness to both personal and professional matters —  isn’t so alluring anymore. They don’t necessarily want to feel like part of a family at work.”

“Come on,” Vikram said. “That’s our biggest selling point. Recruits love that they won’t be just a cog in the machine, that our company and its managers — Sudhir included — will listen to them. That everyone at Parivar matters.”

“That expectation may attract them, but it’s not keeping them here, especially when competitors offer a 30% pay raise,” Indira countered. “It’s what we’re hearing in the exit interviews.”

Vikram was clearly not convinced: “We need to go bigger. We should put our money where our mouth is with the People Support function, show that we’re 100% committed to our culture of inclusion. That’s the best way to reverse the trend.”

Big Brotherly Love

Amal, an associate in his twenties, had clearly prepared for his exit interview with Indira. He was checking off items on a handwritten list.

“Everyone says I’ll hate it at Wipro, that it’s too rigid there. But it’s Wipro! How can I refuse?”

“Yes, I’ve heard they have the same high expectations we do, but it’s more process-driven, far less personal. Here you get more attention from the top.”

Amal smirked. “Yes, if you’re one of Sudhir’s clan.”

“What do you mean?” Indira asked.

“Don’t get me wrong. Parivar promised access to senior executives, and I got it. But Sudhir doesn’t swing by the office, put his legs up, and chat with just anyone. There’s an ‘in’ crowd. Only his favorites get that family-like attention. I guess it’s understandable — one man can only do so much. But if I’m not seeing him or other top people, I’m just stuck at a company that wants to be overinvolved in my life.”

“This People Support idea, for instance,” he said, pointing to the last item on his list. He seemed to be on a roll, so Indira just listened. “I heard about it from my friend who was in that Future Vision group. You have to admit it feels a bit like Big Brother. A whole group of managers dedicated to walking around and asking about our problems? We don’t need more people to talk to. We need more money.” He sat back in his chair, satisfied.

“Thank you for being so candid,” Indira said. “This really is helpful, and we wish you the best of luck.”

A few minutes later, Amal’s manager poked his head into Indira’s office. “Did you get an earful?” he asked.

“I sure did,” Indira said, gesturing for him to come in. “I think he’ll be happy at Wipro — it seems more his speed.”

“You should know that Amal is an outlier. Most people on my team are not like him. They love our company culture.”

Thinking about her long list of “escapees,” Indira wondered whether that was really true.

A New Best Practice?

Sudhir’s office, where he regularly held big meetings, was crowded with inviting, comfortable couches. Indira scanned the room as people settled in. It was a typical gathering: most of Parivar’s senior leaders, including Vikram and Kumar, and a handful of younger employees.

“I’ve asked Nisha to tell us more about the People Support idea,” Sudhir announced. “It’s the brainchild of her Future Vision team. Ready, Nisha?”

Nisha, who looked to be fresh out of business school, began her slide presentation, describing how the new function would work. She included a scenario: An employee is worried about his future with the company because he has been given a time-consuming project that will involve working late, compromising his ability to look after a sick mother in the evening. Aware of the People Support function, he seeks out one of its designated “listeners,” as they would be called, and explains his dilemma. The listener helps him negotiate an arrangement with his boss that allows him not to stay late every night. In Nisha’s last slide, all the characters — the employee, the boss, the listener, and the sick mother — are smiling.

Everyone in the audience clapped, and Sudhir congratulated Nisha.  “This is what I love about coming to work every day: Fresh ideas from smart, young people.”

Not surprisingly, Kumar was the first with questions: How much would the function cost? How would it scale up as the company grew? Who would manage it? Nisha attempted to provide answers, but Sudhir interrupted before she got very far. “We must still work some things out, of course, and those all are legitimate concerns. But I think this would be money well spent.”

Kumar wasn’t satisfied. “OK, so we won’t discuss specifics today, but what about our broader plans for growth? Will all this family stuff be appropriate outside India, when we expand to the UK and the U.S.?”

“That’s also an important issue to explore. But people everywhere want their company to care about them and their lives,” Sudhir said, indicating with a glance at Kumar that the interrogation should cease. “Indira, do you have any questions? This obviously falls into your arena.”

Indira shared Kumar’s concerns and more. But she wanted to ask something new. “Nisha, thank you for this thoughtful presentation. I was wondering if you’ve considered how the listeners will be evaluated. How will we know if they’re performing well?”

“Retention numbers,” Nisha said. “The lower our turnover rate, the better the listeners are doing.”

Indira contemplated the complexity of evaluating anyone on the basis of turnover, given the volatility in the labor market. She felt queasy thinking about it and dreaded delivering the most recent attrition numbers to Sudhir.

Vikram piped up to ask whether any other companies in India or elsewhere had tried a similar program or if Parivar would lead the way.

“As far as we know — and Nisha has researched it — no other company has done this before. Sure, HCL has its employee-first culture, but this is about truly understanding and meeting our people’s needs. Nisha and I were talking earlier about how someday this might become a best practice for all of India, perhaps beyond.”

Later, as everyone was filing out, Sudhir pulled Indira aside. “Thank you for going easy on Nisha. We want to encourage young people like her to put forward bold ideas. But of course I want your honest opinion. We’re meeting on Friday, yes? You had something for me?”

Honest Skepticism

Indira took the elevator to the fourth floor. She hoped her colleague and business school friend, Amrita, would be in her office.

“Thank God you’re not busy,” she joked, finding Amrita with her head down at her desk. The two women were always busy, but they had an open-door policy for each other.

Indira explained about the meeting in Sudhir’s office, the People Support function, the exit interview with Amal, and the horrible turnover numbers.

“So I’m skeptical of this People Support idea because I’m not sure we can really nurture Sudhir’s love culture across an organization that’s growing so fast. It’s one thing as a philosophy of how he interacts with people, but building processes and formal management structures around it is a whole different story.”

“That’s a tough message to deliver to someone who has turned the company around, tripled revenue, and quintupled profits with that culture at the center,” Amrita acknowledged. “I’m sure he thinks this is solving the problem of his limited capacity.”

“But can you formalize a culture as distinctive as ours into processes and roles?” Indira wondered honestly. “Will this People Support function even work? And if it does, won’t it alienate more employees like Amal? What if it worsens our turnover problem instead of fixing it? If we want to expand to Europe and the U.S., don’t we need to be less like a cult?”

Amrita laughed. “You know what Sudhir likes to say: ‘Cult is part of culture.’ But it’s not your style to just say what he wants to hear, Indira. If you think People Support is a bad idea, tell him. He’ll take your advice seriously.”

Indira knew she had more power than most HR heads. Sudhir wanted to run a humane company, and that meant giving her a say on big issues.

“I plan to be honest with him,” Indira replied. “But another thing Sudhir always says is, ‘Don’t come to me with a problem; come with a solution.’ If Vikram and Nisha are right, People Support could be just the edge we need against the likes of Wipro and Infosys, a way to retain our people and win new recruits. What if this helps us break into the top tier?”

“Do you really think it will, Indira?”

“I’m not sure, and I don’t have any better ideas right now.”

Question: Should Indira endorse the new People Support function?

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Who Has 1 Billion Users And Is About To Overtake Facebook? 11-05

November 4, 2013, 7:00 pm

≫ Next: Nice or Tough: Which Approach Engages Employees Most? 11-06

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Who Has 1 Billion Users And Is About To Overtake Facebook?

It’s not Twitter, Google+ or LinkedIn. It’s a company that most people in the West don’t know. That, however, is set to change, with the explosive growth of China’s Tencent and its mobile messaging app WeChat...

Last week, Facebook, the current king of social networks, admitted that it’s losing teen users, and that the overall growth in its monthly active users has slowed to 18% year-on-year. This isn’t helped by the fact that it and other Western social networks are banned in China. By contrast, Tencent recently announced that WeChat’s users have almost tripled from the 85 million of the year before.

Source: WorldOfCEOs, JPMorgan, Credit Suisse, Bloomberg & company announcements

And Tencent’s reach – unlike local Twitter-equivalent Sina Weibo and Facebook-equivalent RenRen – is not just restricted to China. WeChat was rebranded from the more Chinese-sounding Weixin to appeal to an international audience, and it’s now virally coming across here. In just four months between May and September 2013, its overseas users have doubled from 50m to 100m.

So, in an increasingly crowded mobile messaging, what is Tencent and WeChat doing right?

First, it has managed to differentiate its product with some killer features that keep users coming back for more. On the messaging side, users can “hold-to-talk” and send free walkie-talkie style messages that bypass the need for voicemail. Yet what keeps its network growing are fun discovery features that can connect users locally and across continents.

WeChat has neatly fused together the open approach of social networks such as Twitter, where anyone can follow anybody, and more closed networks such as Facebook, which rely on mutual friend connections. It’s growing virally through social connection and not just social media.

For instance, the ability to identify “People Nearby” can make the daily commute or a night out with friends much more interesting. Here is a quick summary of my results when looking for other WeChat users in London...

Alternatively, you can “shake” your smartphone, and be connected with other users anywhere in the world who are shaking their phones at the same moment.

In growing its international user base, Tencent has brought on board brand ambassadors, such NBA star LeBron James, soccer star Lionel Messi and Bollywood actors Varun Dhawan and Parineeti Chopra, who users can follow and interact with.

Massive Value Creation

Shaking and tapping on smartphones are not just gimmicks: floated on the Hong Kong stock-exchange in 2004 (the same year as Google), Tencent has far outstripped Google in the rate of appreciation of its share price, up 104 times on it IPO price compared to Google’s 8.5 times price appreciation.

With a $101bn US market cap (still some way off Google’s $343bn valuation), Tencent joins Yahoo!, eBay and Amazon among the world’s most valuable internet companies.

From Copycat To WeChat

Like many of China’s tech companies, Tencent’s roots lie in the “copycat innovation” and localization of what was happening in Silicon Valley. The company was founded in 1998 by Shenzhen University computer sciences graduate Huateng “Pony” Ma, and five classmates. Its first product, OICQ or Open ICQ, was a Chinese copy of the popular ICQ desktop instant messenger that had been acquired by AOL in the same year. When AOL filed a lawsuit in March 2000 for violation of its intellectual property, Tencent eventually lost the battle and changed the name of the product from OICQ to QQ, as it is still known today.

With an increase in user numbers but unable to cash in on its huge user base, Pony and his co-founders nearly had to sell the company. A big early success was in attracting venture capital – in 2000, Pacific Century CyberWorks and IDG invested $4 million for a 40% stake, proving to be the kick-start that Tencent needed.

A big part of the success of WeChat has been down to the fact that, when other companies continued to develop for the desktop, founderPony Ma made a big bet on mobile. A CEO known for his understanding of and investment in long-term growth, a few years ago Pony made the smart move to shift more than half of its 20,000 employees to focus on mobile. Although Tencent’s mobile business has not been the source of its revenue (70% of its revenue is from user payments and the rest from commerce), Tencent expects that eventually “the real value is the connection of the phone with business offline.”

Pony is currently ranked third in Hurun Rich List and fifth in Forbes Chinese Rich List. Reflecting on the “copycat years”, he attributed his early success to a combination of copying and luck:

“When we were a small company, we needed to stand on the shoulders of giants to grow up.” Paraphrasing a quote attributed to Isaac Newton, he added, “If I have seen further it is by standing on the shoulders of giants.”

Pony is known to pay attention to details that most big companies ignore, drawing comparisons with the late Steve Jobs. Indeed, even Jobs owned up to a degree of copycat innovation in launching new products – when he unveiled the iBooks app at the launch of the iPad in 2010, he acknowledged that it bore similarities to Amazon’s Kindle: “Amazon’s done a great job of pioneering this functionality with the Kindle. We’re going to stand on their shoulders and go a little further.”

However, Pony didn’t want to stop with copying, adding:

But copying others can't make you great. So the key is how to localize a great idea and create domestic innovation.”

A company veteran added: “it was entrepreneurship, concentration and passion that helped Pony succeed.”

WeGlobal?

Despite WeChat’s frightening domestic and overseas exponential growth rate, it doesn’t have it all its own way in the global market. Martin Lau, President of Tencent, acknowledges that the US remains something of a sticking point, commenting at a conference at Stanford University last month, “US is a very tough market. You have your free SMS which takes away the cost appeal of microchat. You have [Apple’s] iMessage… We will try to find ways to provide differentiated services.”

WeChat is also up against WhatsApp, a hypergrowth American startup that also almost doubled its monthly active users to 350m from 200m in April. Other competitors, such as Viber and Japan’s Line exist, but tellingly, they won’t reveal their monthly user figures.

So there’s an interesting global battleground setting up: both between Facebook, Tencent and WhatsApp in global social media and messaging, and Amazon, eBay and Alibaba in global e-commerce. LinkedIn is currently the leading professional social network and doesn't have a recognised global direct competitor: it will be interesting to see if one emerges from China or elsewhere.

I’m confident that Tencent will overtake Facebook, although partly because China’s population is bigger and partly because it has an unfair advantage over Western competitors blocked out of the Chinese market. This needs to change.

My overall prediction for the next few years is that Tencent will build a significant global business of great value: with products and brands we’ll increasingly come to know, interact with – and maybe even love.

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Nice or Tough: Which Approach Engages Employees Most? 11-06

November 6, 2013, 6:12 am

≫ Next: Wharton Professor Eric Bradlow unveils a new metric for marketers to determine customer lifetime value. 11-06

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Nice or Tough: Which Approach Engages Employees Most?

by Jack Zenger and Joseph Folkman

It’s probably no news to most people who work that poor leaders produce disgruntled, unengaged employees. Our research also shows convincingly that great leaders do the opposite — that is, that they produce highly committed, engaged, and productive employees.

And the difference is cavernous — in a study of 160,576 employees working for 30,661 leaders at hundreds of companies around the world, we found average commitment scores in the bottom quarter for those unfortunate enough to work for the worst leaders (those leaders who had been rated in the bottom 10th percentile by their bosses, colleagues, and direct reports on 360 assessments of their leadership abilities). By contrast, average commitment scores for those fortunate enough to work for the best leaders (those rated in the 90th percentile) soared to the top 20th percentile. More simply put, the people working for the really bad leaders were more unhappy than three quarters of the group; the ones working for the really excellent leaders were more committed than eight out of ten of their counterparts.

What exactly fosters this engagement? During our time in the training and development industry we’ve observed two common — and very different — approaches. On the one hand are leaders we call “drivers”; on the other, those we call “enhancers.”

Drivers are very good at establishing high standards of excellence, getting people to stretch for goals that go beyond what they originally thought possible, keeping people focused on the highest priority goals and objectives, doing everything possible to achieve those goals, and continually improving.

Enhancers, by contrast, are very good at staying in touch with the issues and concerns of others, acting as role models, giving honest feedback in a helpful way, developing people, and maintaining trust.

Which approach works best? When we asked people in an informal survey which was most likely to increase engagement, the vast majority opted for the enhancer approach. In fact, most leaders we’ve coached have told us that they believe the way to increase employee commitment was to be the “nice guy or gal.”

But the numbers tell a more complicated story. In our survey, we asked the employees not only about their level of engagement but also explicitly, on a scale of one to five, to what degree they felt their leaders fit our profiles for enhances and drivers. We judged those leaders “effective” as enhancers or drivers who scored in the 75th percentile (that is, higher than three out of four of their peers) on those questions.

Putting the two sets of data together, what we found was this: Only 8.9% of employees working for leaders they judged effective at driving but not at enhancing also rated themselves in the 10% in terms of engagement. That wasn’t very surprising to many people who assume that most employees don’t respond well to pushy or demanding leaders. But those working for those they judged as effective enhancers were even less engaged (well, slightly less). Only 6.7% of those scored in the top 10% in their levels of engagement.

  

Essentially, our analysis suggests, that neither approach is sufficient in itself. Rather, both are needed to make real headway in increasing employee engagement. In fact, fully 68% of the employees working for leaders they rated as both effective enhancers and drivers scored in the top 10% on overall satisfaction and engagement with the organization.

Clearly, we were asking the wrong question, when we set out to determine which approach was best. Leaders need to think in terms of “and” not “or.” Leaders with highly engaged employees know how to demand a great deal from employees, but are also seen as considerate, trusting, collaborative, and great developers of people.

In our view, the lesson then is that those of you who consider yourself to be drivers should not be afraid to be the “nice guy.” And all of you aspiring nice guys should not view that as incompatable with setting demanding goals. The two approaches are like the oars of a boat. Both need to be used with equal force to maximize the engagement of direct reports.

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Wharton Professor Eric Bradlow unveils a new metric for marketers to determine customer lifetime value. 11-06

November 6, 2013, 6:24 am

≫ Next: Three Wrongs Make a Right 11-06

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SIX STEPS TO A CLUMPIER CONSUMER

Wharton Professor Eric Bradlow unveils a new metric for marketers to determine customer lifetime value.

Professor Eric Bradlow, W’88, HOM’00, shares an epiphany from his latest marketing analytics research: how one data point could help marketers better identify their customers with the most promising customer lifetime value (CLV).

It’s called “clumpiness”—a measurement of how binge-y a shopper is. Clumpy shoppers—those that shop in spurts comparable to the behavior of binge drinkers and binge sleepers—are more valuable in the long run than nonclumpy shoppers, according to data collected by Bradlow, who serves as Wharton’s K.P. Chao Professor, vice dean and director of Wharton Doctoral Programs, and co-director of the Wharton Customer Analytics Initiative.

Your options are to watch the full webinar to gain a greater understanding of clumpiness, or read our six takeaways, presented below.

Better yet, you could do both—read this blog and watch the full webinar.

1. Does clumpiness apply to business-to-business customers? “I have no empirical proof,” Bradlow told his remote webinar audience. “I am willing to bet a lot of money that clumpy B2B is worth more in the future,” he said, adding that if any B2B marketers would like to share their data sets, he would be happy to test his hypothesis on them.

2. Bradlow will offer links to the two research papers that explain his new finding, as well as an Excel spreadsheet to demonstrate how to measure the clumpiness of your customers, on his Wharton homepage  .

3. Digital consumers seem to behave more clumpily. In his analysis, 40 to 50 percent of Hulu, YouTube, Amazon and eBay customers are clumpy. Shoppers of traditional products—like toilet paper, for instance—tend not to be clumpy.

Prof. Eric Bradlow

4. There are two types of clumpy—visit clumpiness and purchase clumpiness. Shoppers who are visit clumpy are not necessarily purchase clumpy and are thus not necessarily more valuable. Purchase- clumpy shoppers tend to have that long-term value.

5. Female shoppers, younger shoppers under 30, loyalty program members and customers with wish lists tend to be clumpier.

6. The traditional framework of CLV and customer segmentation is RFM: recency, frequency and monetary value. This framework is lacking without a fourth attribute: C for clumpiness.

For others—and those Wharton community members who want as much of Bradlow as they can get—please watch the video below of Bradlow’s Wharton Lifelong Learning master class on “mining for gold in marketing.”

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Three Wrongs Make a Right 11-06

November 6, 2013, 6:34 am

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Three Wrongs Make a Right

By Ryan Sauers | 

Today I was eating at a restaurant with my family and it was one we had never tried before. As it turns out, it will be the basis of this week’s blog post. The server does not come to our table for 10 minutes after we were seated. Wrong #1. So, I had to go ask someone who our server was and then he magically appeared. We told him we were ready with our drink and food order if that made it easier for him. (Yes, we were hungry.) Oh yeah, and before I forget, this restaurant has one of those Coke machines that can make tons of variety flavors of drinks. So, we order a few like Cherry Coke Zero and then a couple of iced teas (yes Kelly Mallozzi, and John Foley) sweet tea. OK, back to the story...

So, the server disappears for quite a while and finally comes back and has the drink order entirely wrong. Wrong #2. He went back to fix this once we told him. Third, the manager comes out to ask if we ordered only two food orders (there were four of us there today) instead of four food orders. We said no and she apologized and said the server put in all the food wrong as well. Wrong #3.

The server never told us it was his first day or we might have been more understanding. This was just a lack of good communications on his part. However, the manager did everything right. She rushed to get all the drinks fixed, took care of our table herself, offered us a free appetizer, and then explained all the options with each meal (which we did not get the first time). You see, she took a situation that was quickly getting bad and fixed it. So my experience was not great today, but it would not stop me from going back. Why? She cared and communicated she was sorry and explained the truth as to what was going on.

She was honest, did not make excuses and simply took care of the problem. Is this not something we can all learn from and apply to our business? There are times when it might be appropriate to explain “why” something went wrong to a customer. However, in many cases the best policy is to say we have “dropped the ball” on this and we will do whatever it takes to make the situation right. This is what the manager did for my family at lunch. Little does she know I am blogging about this on an international blog. 

Customers do not like mistakes. However, my most loyal customers were earned based on how I make bad situations “right” for them. Once a customer knows you will go the extra mile and do what is right, you have reached an entirely new level in your relationship. You make them feel important and they know that you will stand behind a problem. Thus, you create more than a loyal customer...you make a raving fan.

So, as the title states...sometimes three wrongs can make a right!

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Control Is for Beginners 11-06

November 6, 2013, 6:49 am

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Control Is for Beginners

by Deborah Mills-Scofield 

My daughter’s voice teacher   recently told another student to stop practicing.  ”What?!” I almost yelled.  ”What happened to the theory of 10,000 hours of practice for mastery?”  But she explained that, at times, over-practicing can stifle music, just like over-training can stifle athletes and over-engineering can create products too complex to use.  There is a time to stop rehearsing, stop waiting for perfection, stop waiting for control and just go for it.

We need to balance grabbing opportunities as they present themselves — even if we’re not ready and have to ramp up as best and as fast we can — and practicing a lot so that when the opportunity appears, we’re prepared.   At Bell Labs, we were all about practicing; we called it experimenting.  We experimented, learned, applied, and iterated until it was flawless; AT&T wouldn’t release anything into the market until it was absolutely perfect.  When I was designing the system for which I received a patent, I wanted to get prototypes in front of potential customers for feedback before we got too far down the road. How naïve of me! Of course we couldn’t show customers something that wasn’t perfect — it would affect their expectations and maybe (horreur!) negatively impact the brand.  Needless to say, by the time the system was perfect enough to get into the market, we had lost most of our competitive advantage.

In its quest for perfection, for example, AT&T acquiesced creating and leading the cellular industry.  Even though Bell Labs invented cellular telephone technology in 1946  , received the patents for it, and piloted mobile telephone service from the 1940’s through 1980’s, AT&T didn’t offer it on a broad commercial basis because, among other things, it didn’t meet the same “perfect” quality standards as wired telephone service. In 1994, AT&T bought McCaw Cellular  , getting back into the cellular telephone industry, 50 years after having created the technology. As my daughter says, “Sometimes, perfection is the enemy of accomplishment.”

So how do you get it right? That depends on what you mean by “right.”  Maybe we can learn from musicians who practice spontaneity: jazz musicians.  My daughter’s voice teacher, Kim Nazarian, has taught me a lot. One of the founders of the Grammy-winning jazz vocal group The New York Voices  , Kim     teaches her students to be in the flow, the conversation of the music.  Yes, she sometimes practices not practicing, but that doesn’t mean she isn’t a gifted and successful jazz singer. This isn’t a paradox — if you know what you’re doing and you’re competent, spontaneity becomes its own skill.

Another musician I’ve learned from is Carl Størmer  , founder of Jazzcode  .  Carl   was a fellow-storyteller   at this year’s BIF-9   conference. As he shows us by jamming with two people he’d never practiced with before, sometimes you just need to let go.  A Jazz musician needs to stop controlling and start trusting his band members’ competency and artistry.  This trust, the willingness to let go and allow for space, lets band members take risk (that’s what a jazz solo is!) and try something new and different — while being supported by their band-mates. Without that support, you get a chaos of sound. With too much control, you don’t get jazz. Carl’s wife, Ane, sums up this attitude with her own adage: “Control is for beginners.”

When we don’t give our people the space to take calculated risks, learn, apply, and iterate, we are really risking our future.  While there is a risk to improvising and spontaneity, control brings its own insidious dangers. In our push for perfection, we over-engineer. We add so many bells and whistles that it takes a Ph.D. to use the product. Just because we can doesn’t mean we should.  Just because we can practice to perfection doesn’t mean that’s best.

Spontaneity and relinquishing control provide enormous advantages, even if it takes a certain kind of non-practice to feel comfortable with it.  Jazz musicians know that.  Innovators should learn that as well… because sometimes, control really is for beginners.

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How Caregiving Can Change Your Personality 11-07

November 6, 2013, 6:44 pm

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How Caregiving Can Change Your Personality

Being a long-term family caregiver is bound to make an impact on the kind of person you are.

Some readers worry that their personality changes are negative. Yes, that can happen. There's a sneaky side of caregiver burnout. Stress, exhaustion and responsibility can take its toll.

Yet, many of the changes to a caregiver's personality will be positive and hopefully become lifelong attributes.

Below, I've given just a glimpse of changes different personality types may go through during long-term family caregiving. Much depends, of course, on personal insight, general openness to change, feelings for the person you are caring for and your own physical and mental health.

In the end, whether the changes that remain with you are positive or negative may rest with how you view life in general.

Take charge personality

For people who instinctively want to take charge of every situation, caregiving can either turn them into frustrated tyrants, or mellow their personalities to a state where the best aspects remain, but what may be an overly-aggressive approach to life can be smoothed out.

It's easy to step into the "do as I say" role with ailing parents.

After all, you know that driving is not an option for your elder. You know what medications need to be taken and that a schedule needs to be followed. You know what the weather outside is doing, therefore you know the type of clothing they should wear.

To handle these (and hundreds of other issues while caring for your parents) and not slip into an overtly "parental" mode yourself can be difficult for anyone. However, for this super-efficient personality, the challenge can be nearly overwhelming.

It's helpful to remember that there's likely no greater route to depleting the self-esteem of an ailing elder than to have their children boss them around. Therefore, it can be beneficial to consciously repeat the mantra that your parents are still your parents and they deserve to be treated as such.

Even the strongest take charge personalities can mellow somewhat, if they remember that empathy and dignity are more important than efficiency.

Kindness sometimes means not gloating over being "right." Showing respect is more important than trying to force elders to understand that which no longer makes sense to them.

It will be a challenge, but there are few rewards greater than taking time to respect the importance of the legacy of this person's life, and keeping this history in mind during the long, exhausting duties of caregiving. Doing so may eventually take the edges off of your strong personality, leaving you smart and efficient, but making you a better mate, a better friend, a better employee.

Disorganized personality

If you have a laid back, easy going personality and find yourself rather lax about organization, caregiving will likely force you to tweak your natural tendencies.

Learning the basics of at least minimal organization will help you locate a Power of Attorney (POA) for your elder quickly when needed or make certain that your parent's bills get paid on time.

It's best to start folders and keep records early in your caregiving journey, because you may find yourself mired in Medicare statements and other medical issues, as well as having to make financial decisions. To do this, you need some kind of organization and to adopt some key caregiver time management skills, even if it's a system that only you understand. 

Don't worry. A bit more organization won't upend your appealing laid back personality. This need for some organization will likely make your whole life run a little smoother because it will become ingrained within you and remain, even after caregiving is over.

You will still remain you.

Timid personality

Someone who is by nature quite timid may have to learn to be more assertive with ailing parents.

Telling your parent that it's time to use the bathroom or time for medicine, especially if the parent is responding negatively, can be tough for a person with a timid personality. A more timid spouse caring for his or her mate with the more dominant personality in the pairing can also find subtly taking over the dominant role quite difficult.

Knowing that your parent or spouse needs a certain routine in order to get well, or at least endure minimal pain, may allow this type of personality to grow stronger. Knowing that loved ones depend on you to be their advocate in the outside world will give you additional motivation and courage.

You'll need to learn to cope with medical people, social workers and others whom you may never have confronted in your pre-caregiving life.

Have faith. You are up to the task. Your reticent personality that allows others lots of room to be themselves will remain, but through caregiving, you will be a stronger, more assertive version of yourself.

Did my decades of caring for multiple elders change me?

Indeed it did. There are many rewards of family caregiving. I believe the experience strengthened me and made me more assertive and organized in the advocate role. It enhanced my natural empathy toward the problems others face. It made me realize just how difficult life can be, even for the smartest, most talented person who may develop dementia or other illnesses. It helped me understand that one has to go the distance, but knowing when to ask for help can be part of that process.

While some of the depth I've hopefully gained over time could be chalked up to general maturity, I do believe that my years of care giving have enhanced my perspective on life in general.

For that opportunity, I remain grateful.

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Why You Should Fill Your Company With 'Athletes' 11-07

November 7, 2013, 5:19 am

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 Why You Should Fill Your Company With 'Athletes'

At our company, we work to fill our roster with “athletes.” I don’t mean this necessarily in the physical sense, although it turns out that quite a few of our members are literal athletes – we have a national-class triathlete, I have a personal interest in competitive and recreational bodybuilding, and there are multiple marathoners, bikers, soccer, and basketball players, CrossFit enthusiasts, etc. on staff. 

We also have a company wide interest in health and fitness, which we call “Fishbowl FIT.” But when I advise people to seek and hire athletes, what I am really referring to is the athlete traits (akin to leadership traits) that make any individual an exceptional hire.

The traits of athletes we desire are as follows:

Why Wrestlers Make the Best Employees

1. They have the drive to practice a task rigorously, relentlessly, and even in the midst of failure until they succeed. Athletes are tenacious—they seldom or never give up. They also have a strong work ethic and the ability to respect and deal with the inevitable issues of temporary pain (along with the intuition to know when the cause of the pain is an issue too serious to safely ignore.)

2. Athletes achieve their goals. If one avenue is blocked, they find another path to success. If their physical strength has given out, they learn to work smarter, not harder. As they learn to become more effective they become more efficient.

3. Athletes develop new skills. Even though an athlete is highly specialized at certain skills, such as speed, blocking, or hand-eye coordination, they are also good at adapting to scenarios that call for cross-functional skills.

4. Athletes are exceptional entrepreneurs.As you consider new hires, you will likely discover that business athletes are often former (or current) entrepreneurs. Whereas people from large corporate environments may tend to be specialized in their skills and single-minded in their objectives, a business athlete is equipped to see the bigger vision of all that goes into making a company thrive. They can think strategically and are tuned in to the “big picture” and the long-term goals. They also know how to put the strategy into action.

5. Athletes strive for balance. Too much junk food and too little sleep will not contribute to a healthy company or a winning performance. Their bodies must be strong and in good condition, so athletes understand that they can’t cheat the system for long and expect positive results. A true business athlete will respect the laws of balance in energy, health, sleep, and nutrition (as well as the business corollaries) that will allow them to succeed and to do so not only in the present but for the long term as well.

6. Athletes work well with partners and in teams. Athletes know how to leverage the unique and complementary strengths of each member of their team. They know that cutting down a teammate or disrespecting a partner will only contribute to an organization’s demise. In fact, an athlete will typically put the needs of the team or a partner on equal par or even ahead of their own needs. How do you find and hire these athletes? Consider the questions you ask in interviews about outside projects, other interests, community service, the ability to focus on pet tasks, and the concepts of teamwork. And, as always, be keen to the ways you can recognize and hire for propensity instead of for current demonstrable traits. Many of my own strongest players have never previously excelled at a physical sport. They never knew they were athletes. That’s an important aspect of hiring athletes: The world’s best athletes are not necessarily discovered; they are trained.

How are you finding, fostering, and training the champion athletes on your own business team?  Everyone deserves the opportunity to discover the “athlete” within themselves.

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Can You Reverse Heart Disease? 11-08

November 7, 2013, 6:20 pm

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Can You Reverse Heart Disease?

What may be possible if you have coronary artery disease.

Imagine that you’ve just left your cardiologist’s office. He’s told you that you have to make some changes. Your blood pressure is way over the limit at 170 over 100 and your LDL cholesterol (that’s the “bad” kind) is hovering right around 200. He conducted an exercise cardiac stress test, putting you on the treadmill and increasing the speed and elevation periodically while monitoring your heart -- and he didn’t like the results.

The diagnosis: coronary artery disease (CAD).

Besides surgery or medication, is there anything you can do to modify the course of CAD? The answer to that is, clearly, yes -- as long as your doctor is on board. Making some simple but significant changes in what you eat, how often you exercise, how much you weigh, and how you manage stress can help to put the brakes on heart disease.

But can you actually reverse heart disease, not just slow it down? The answer to that question is much more controversial. Here are two expert's views.

Yes, You Can!

Dean Ornish, MD, founder and president of the Preventive Medicine Research Institute and clinical professor of medicine at the University of California, San Francisco, says that you absolutely can reverse at least some of the damage of even severe heart disease. Indeed, one of his six best-selling books is titledDr. Dean Ornish's Program for Reversing Heart Disease.

In his 2007 book The Spectrum, Ornish describes patients waiting to undergo a heart transplant -- those with the worst possible damage -- who enrolled in his program while on the transplant list. Some of them, he says, improved so much that they no longer needed a transplant.

“Our studies show that, with significant lifestyle changes, blood flow to the heart and its ability to pump normally improve in less than a month, and the frequency of chest pains fell by 90% in that time,” Ornish says. “Within a year on our program, even severely blocked arteries in the heart became less blocked, and there was even more reversal after five years. That’s compared with the natural history in other patients in our study, in which the heart just got worse and worse.”

Those lifestyle measures include exercise -- Ornish calls for people to walk at least half an hour a day, or an hour three times a week. Your cupboards, refrigerator, and dinner table will also need a total transformation if you expect to have a chance of actually reversing heart disease, not just preventing it or stopping its progression.

“Just making moderate changes in your diet may be enough to prevent heart disease, but it won’t be enough to reverse it,” Ornish says.

Ornish's plan categorizes foods from 1-5, ranging from most to least healthful. To actually reverse heart disease, you have to stay in Category 1.

In essence, that means becoming a vegetarian, filling your plate with fruits and vegetables, whole grains, legumes, soy products, nonfat dairy, and egg whites, and keeping away from fats, refined sugar, and carbohydrates. “You want to eat foods in their natural form as much as possible," Ornish says.

Ornish’s program also calls for regular yoga, meditation, and stress reduction.

If you have serious heart disease and are extremely motivated, you may be able to make such major changes, but they are difficult to sustain, says Lori Mosca, MD, MPH, PhD, professor of medicine and director of preventive cardiology at Columbia University Medical Center and the author of Heart to Heart: a Personal Plan for Creating a Heart Healthy Family.

“You have to live a very strict lifestyle, way beyond even the normal heart-healthy life,” she says. “And even then, I wouldn’t say you can ‘reverse’ heart disease, because that implies you had something and now you don’t. With very strict changes you can regress heart lesions, but they shrink -- they don’t go away. You can’t cure heart disease, but you can slow its progression.”

Mosca instead emphasizes slowing heart disease, and preventing it in the first place, through lifelong efforts to eat heart healthy, get regular physical activity, avoid smoking, and maintain a healthy weight.

On the diet side, that means embracing variety. “I don’t think that dietary approaches that are highly restrictive are sustainable,” she says. To keep heart disease in check, she advises:

Embrace the USDA’s new “MyPlate” program (similar to a visual she’s had on her Web site for years), in which half your plate is loaded with fruits and vegetables, and the other half is evenly divided between lean proteins and high-quality carbs such as brown rice.

• Limit the saturated fat in your diet to less than 7% of calories.
• Choose heart-healthy sources of fat, such as salmon and other fish rich in omega-3 fatty acids, nuts, and olives.

Ornish agrees that for most people who are just looking to either prevent heart disease or slow it down, going entirely “Category 1” isn’t needed. “If you need to reverse a life-threatening illness, you’re well advised to live as much as you can on the healthiest end of the spectrum,” he says. “But if you’re just trying to stay healthy, it’s unsustainable to say, ‘Never eat certain foods.’ It’s much more sustainable to just move in a healthier direction.”

And if you slip up and eat something that’s really not heart-healthy (a bacon cheeseburger, say, or a gooey doughnut) -- don’t beat yourself up. “If you indulge one day, then eat healthy the next. If you don’t exercise one day, do more the next,” says Ornish. “Guilt, shame, and anger are toxic to the heart, so forgive yourself and move on.”

Once you start making those changes, you might find that the rewards spur you to make more.

“We found that the more people changed their diet and lifestyle, the more they felt better, no matter how old or sick they felt,” Ornish says. “The better you feel, the more you want to keep doing it. The myth is that a pill is easy and diet and lifestyle changes are hard, but the data show that less than half the people prescribed Lipitor still take it after a year. Taking a pill to prevent something bad happening is fear-based, and it can be boring. But making healthy changes to your life makes you feel good, so you’re not just living longer, but better.”

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Mastering the building blocks of strategy 11-08

November 8, 2013, 5:32 am

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Mastering the building blocks of strategy

Increase your likelihood of developing effective strategies through an approach that’s thorough, action-oriented, and comfortable with debate and ambiguity.

byChris Bradley, Angus Dawson, and Antoine Montard
Left unchecked, market forces continually conspire to deplete profits. Powerful business strategies can counteract those tendencies, but good strategy is difficult to formulate. Indeed, the latest McKinsey research (see “The strategic yardstick you can’t afford to ignore.”) finds that a very small number of companies create most economic profit.² The research also shows that a significant number of good companies outperform even in so-called bad industries, where the average economic profit is less than the market average.How do they do it? In other words, where do powerful strategies come from? Sometimes it’s luck, or good timing, or a stroke of inspiration. In our experience, it’s also possible to load the dice in favor of developing good strategies by focusing on the core building blocks that often get overlooked. One is the need to gain agreement—before creating strategy—on the essential decisions and the criteria for making them. Another is to ensure that the company is prepared and willing to act on a strategy once it is adopted. Too much of what passes for strategy development, we find, consists of hurried efforts that skip one or more of the essentials. The resulting strategies are often flawed from the start.It’s also easy, though, to go too far in the other direction and make the creation of strategy a rigid, box-checking exercise. Appealing as a formula-driven approach might be, it ignores the truth that strategy creation is a journey—and an inherently messy one at that. Proprietary insights are hard to come by. Shaping keen insights into good strategies requires deep interpersonal engagement and debate from senior executives, as well as the ability to deal with ambiguity in charged and often stressful circumstances. When would-be strategists overlook these dynamics, they cover the essentials in name only. Consequently, they miss opportunities and threats, or create great paper strategies that remain unfinished in practice.In this article, we’ll outline a middle path—an end-to-end way of thinking that views the creation of strategy as a journey, not a project. This method, developed through our work with some 900 global companies over the past five years, can help senior executives approach strategy in a rigorous and complete way. We’ll also describe some principles that strategists should keep in mind as they use the method to ensure that their strategic-planning processes embody the spirit of debate and engagement, which, in turn, yields inspiration. By better understanding both the method and how to get the most out of it, companies can boost the odds that the strategies they create will beat the market.
Do justice to strategy’s building blocksMost companies we’re familiar with demonstrate a variety of good habits when they create strategies, and they get many things right. But what they miss can be critical. Consider these examples:a technology company that prided itself on analytical rigor but never accurately diagnosed how difficult it would be for a targeted customer group to provide reasonable returns a beer company that rightly focused on industry structure in its core business but made a losing bet on a related business—wine—after failing to forecast declining returns stemming from structural shifts there a telecommunications company’s strategy team, which recognized the importance of involving senior managers but ended up alienating them by holding a series of time-consuming workshops that focused on alignment around strategic choices, though the full set of choices hadn’t yet been identified.These problems don’t have to happen. We find that companies do better when they ground all their strategy-development efforts and processes in an understanding of the building blocks of strategy. These straightforward modes of activity (exhibit) track the progression of a strategy from its roots as an idea through its emergence as an operational reality.
ExhibitThe building blocks of strategy help companies make strategic choices and carry them through to operational reality.

One central building block is deep insight into the starting position of the company: where and why it creates—or destroys—value (diagnose). Executives also need a point of view on how the future may unfold (forecast). By combining insights into a company’s starting position with a perspective on the future, the company can develop and explore alternative ways to win (search) and ultimately decide which alternative to pursue (choose). With the strategy selected, the company needs to create an action plan and reallocate resources to deliver it (commit).

These five core building blocks are book-ended by two others. One is an initial block (frame) to ensure that the team properly identifies and agrees to both the questions asked and the decisions made as the strategy is developed. The final block (evolve) is dedicated to the constant monitoring and refreshing of the strategy as conditions change and new information becomes available.

To some extent, the building blocks simply represent a thorough list of activities that all good strategists perform. And while all are important and should be included in the creation of strategy, slavishly following this or any other framework won’t bring success. Depending on the situation, some blocks will be more critical than others and therefore require more attention (see sidebar, “Re-create, recommit, and refresh”).

Re-create, recommit, and refresh

For a number of years, we, our colleagues, and many others who are engaged in the practice of strategy have been pointing out how ill-suited traditional strategic-planning processes are to the dynamism and pace of 21st-century business life. Less clear is what should happen to many organizations’ well-oiled approaches. Shut them down? Morph them into budgeting and operational-planning processes? Use them to synthesize the valuable insights emerging from more frequent strategic dialogues involving larger numbers of executives?

The building blocks of strategy shed fresh light on what strategic planning should and shouldn’t try to do. For starters, we’d emphasize that periodically—perhaps as often as every three to five years, if new competitors arrive or markets unexpectedly shift—companies must re-create their strategies. This cannot be accomplished through typical planning processes, as it requires broader skills, wider engagement, and more flexibility to make big strategic choices than they allow. So forget about strategic planning when you need to revamp your strategy; instead, take a more immersive strategy-development approach using all of the seven building blocks described in this article.

At the other end of the spectrum is what we would describe as the need to recommit organizations to established strategies. Traditional strategic planning is tailor-made for this purpose, and thinking about the task in these terms helps elevate it above the glorified budgeting exercise into which some processes lapse. Two of the building blocks we have described in this article—commit and evolve—are useful reminders of what any such strategic- planning process should accomplish: the constant monitoring of strategy, the reallocation of resources, the alignment of management on strategic priorities, and the creation of targets, budgets, and operational plans.

Between these two extremes lies the strategic refresh, which is particularly relevant for organizations where a lot of valuable, ongoing strategy dialogue takes place among members of the top team. Such engagement can highlight nagging issues that might one day necessitate a strategic redo but certainly merit attention now. For example, if signs suggesting that one or more key assumptions have become less valid emerge from strategic dialogues at the business-unit level, it might be time to update the company’s perspective on long-term trends. This exercise could be elevated in importance by making it a core theme of the upcoming strategic-planning process. In such situations, it’s a good idea to check all seven building blocks quickly, with an emphasis on understanding the strategic implications of underlying changes. If they are big enough, that could be a red flag signaling the need to re-create the strategy and thus to elevate the discussion beyond strategic-planning parameters.

That’s why taking some time to frame issues at the outset is so important. When strategists do so, they are better able to identify the real choices and constraints facing their organizations and to see which building blocks are likely to matter most given the situation at hand. Unfortunately, many executives feel that taking the time to frame strategy choices thoughtfully and to decide where to focus strategy-development efforts is a luxury they don’t have.

We’ve seen evidence of this pressure firsthand and in the responses to an executive survey we’ve been conducting as part of an ongoing research project. Fully two-thirds of the 200 executives we’ve surveyed so far report that they feel rushed to provide outputs in their strategic-planning processes. This pressure is understandable in today’s always-on, fast-changing environment, but it can be hazardous to a company’s strategic health. That’s especially true in the all-too-common situations when it’s not immediately obvious what factors will determine the success or failure of a change to strategy.

A financial-services institution in the Asia–Pacific region, for example, was investigating a growth opportunity involving the creation of an online business. Changing the company’s focus in this way would be a big undertaking, but the upside potential was large. Moreover, the members of the strategy team could already see that demonstrating the channel’s significant potential to the top team would be straightforward. Before doing that, however, they stepped back to spend some time thinking through the idea’s broader strategic context—framing, in other words.

When they did, they saw a serious risk of cannibalization for one of the company’s existing businesses. The new venture would also require substantial funding over the next three to five years before it contributed financially. This had important implications, and the team’s members needed to convince themselves that the risk was worth taking. Moreover, if the company made the move, would it stick with the effort when the time came to provide funding for people and technology?

Instead of steaming ahead with analytical work to prove the potential, the team recognized that it would be critical to invest a disproportionate amount of time and effort to the commit building block. The strategy team did this, in part, by developing a powerful multimedia concept prototype to capture the imaginations of the top team and the executives representing key support functions. The team’s focus on gaining commitment was prescient; the prototype and the communication around it helped convince the leaders that the concept was so compelling for consumers that if the company didn’t cannibalize its existing business, a competitor would probably come up with the idea. The effort also helped motivate the leaders of the finance and IT functions to support the new offer. The company launched it in record time, to promising early results in both customer acquisition and levels of customer engagement.

In retrospect, the team credits the conversations and debates held during this framing period as necessary to identify and resolve the potential stumbling blocks related to the organization’s strategic direction. Although messy at times, this activity helped build an organizational commitment to the strategy and its importance to the company.

Myth-bust your story

A focus on strategic building blocks also can help companies develop penetrating insights. While “insight” conjures up visions of research, data crunching, and “aha” moments, real strategic insight also rests on a seemingly mundane and easy-to-overlook factor: a thorough understanding of how and why a company, its competitors, and others in the industry value chain make money. Absent dumb luck, a strategy that doesn’t tap directly into such an understanding will underperform.

The difficulty, as professor Phil Rosenzweig of the International Institute for Management Development has explained so well,³ is that a company’s performance—good or bad—creates strong impressions that powerfully shape the way people perceive strategies, leaders, cultures, and organizational effectiveness. A commodity company, for instance, might falsely attribute its strong performance to the efficiency of its operations. Yet despite its efficiency, the economics of those operations could be swamped by market-structure changes that have significant pricing implications or by unexpectedly volatile demand.

One way senior executives can address the challenge, we find, is explicitly questioning received corporate wisdom—much as the popular US television show MythBusters does when it takes apparent axioms, urban legends, and popular assumptions and (in entertaining fashion) tries to prove or disprove them. In the creation of strategy, this approach means dispassionately identifying the elements that contribute to performance, while discounting any factor contaminated by perceptions of the company’s supposed greatness. It also requires a curiosity that’s woefully lacking in some strategic-planning processes. Nearly eight in ten executives we surveyed, for example, say that the processes of their companies are more geared to confirming existing hypotheses than to testing new ones.

To see how these dynamics play out in practice, consider the experience of a global retailer that was revisiting its strategy after the previous one had delivered five years of strong earnings. The positive results, most in the company believed, reflected good execution and the success of a recent initiative to refresh the store format. Still, the leader of the business felt there could be more to the story and worried that continuing along the same path might not produce the same results in the future. To determine what was actually driving performance, the leader met with the company’s strategy team, as well as other executives.

This was time well spent. The resulting discussions sparked important insights—revealing, for example, that while overall performance was good, there were problems under the surface. On the positive side, the company was steadily improving its margins and winning customers from a higher-cost competitor. Nonetheless, the solid network growth at the top-line level appeared to be masking a worrisome decline in the productivity of older stores. The big drag on performance, the team discovered, was the loss of mainstream customers to a cheaper competitor, which careful analysis showed to have an unassailable advantage on cost. Increasing promotional activity had so far seemed to stem the march of this aggressive rival, but the retailer was running out of steam and hitting practical limits. Significant changes would be necessary.

Let them grapple

This realization was the product of more than just number crunching. The thoughtful argument and debate surrounding the analysis from day one played a vital part in generating the insights. In our experience, many companies forget this truth when they create strategy. Instead, they put too much emphasis on preparing documents and completing analyses and not enough on stimulating the productive debates that lead to better decisions.

Getting executives to grapple with the issues can be a messy process, and the debates may be quite personal. After all, formulating good strategies typically involves revisiting fundamental and deeply held beliefs about a company’s past and future, and people tend not to shift their views without a fight.⁴ But without the necessary fights, and without the use of carefully designed decision-making techniques, companies may end up with rubber-stamped strategies whose flaws are exposed during implementation—or afterward, by competitors.

When companies find ways to get executives grappling—throughout the strategy-development process—with the choices that matter, they make better, less biased decisions. They also improve the likelihood that the relevant stakeholders will be on board when the time comes to make and act on choices.⁵

To exemplify our point, let’s look again at the retailer’s strategy team as it engaged with the company’s broader leadership group to share its observations. Most strategy teams interact with decision makers by presenting management with a summary report and recommendations. But this team understood that senior managers needed time to debate the issues themselves and reach their own conclusions—and that such collective discussions would improve the resulting strategy.

Because the senior managers had a very hands-on attitude, the strategy team designed a series of weekly meetings called think tanks to let them work through a profit-deconstruction exercise illuminating the company’s past. In each session, the analysis was tabled after a certain point, and the management team’s members took turns drawing out conclusions or identifying further questions that needed answering. The strategy team was prohibited from bringing any conclusions of the analysis to these meetings, much to its discomfort. This ensured that company leaders were invested in the decision-making process and could challenge the strategy team with new ideas.

Through a series of small-group meetings, the leadership team (with analytical help from the strategy team) debated the reasons for the company’s past success and how to continue it. By unpacking these complex dynamics together, the leadership team arrived at an accurate, sharp diagnosis: the company needed to restore mainstream shoppers’ trust in its prices. The result was a simple, focused strategy for delivering “value” products and reinforcing that market position with customers. Furthermore, because the management team was deeply involved in the diagnosis, its members had a strong incentive to drive implementation.

Don’t leave the strategy unfinished

In conversations with senior executives, we occasionally hear some version of this saying: “I’d rather have a good strategy and great execution than vice versa.” We believe that this attitude reflects confusion about what great strategy is. Such a strategy creates a path for action and is inherently incomplete without it. Yet many companies fail to get the conditions for successful implementation right, and fully two-thirds of the executives in our survey admit that their companies struggle with the issue.

It’s a crucial struggle. No strategy, however brilliant, can be implemented successfully unless the people who have the most important jobs know what they need to do differently, understand how and why they should do it, and have the necessary resources. An added challenge, of course, is that strategic choices often involve big changes over long, three- to five-year time frames.

Finishing a strategy, therefore, requires creating tangible, proximate goals that connect to the longer-term strategy. It’s easy to create a high-level list of next steps and things to do differently on Monday morning. It’s much harder to roll back the future and connect it to the present so that people understand what they need to do differently and actually do it.

When companies fail to set proximate goals, the results can be disappointing. An Asian telecommunications company, for example, had landed on an intriguing and counterintuitive strategy involving two big shifts: it wanted to move its target customer base from big business to the midmarket and to standardize its products rather than provide customized service to large clients. Making the changes work, however, would require salespeople to start saying no to new business from large and complex clients so that the company could redirect its efforts to midmarket customers. The short-term pain (lower revenues and higher costs) would ultimately lead the company to a market-beating position.

The management team understood and encouraged the shift and was ready to act. But the strategy team did not do enough to prepare the organization for the moves, instead spending its time on detailed initiative-planning exercises. Absent any effort to translate the company’s strategic desires into proximate goals for its employees, those employees balked at the changes.

Sales managers, for example, not only viewed saying no to larger customers as a short-term loss for the business but also were simply not as excited about pursuing midmarket customers with simpler needs. They understood the strategy intellectually and believed the analysis, but their skills, incentives, and ways of working and even thinking had not changed. Without such changes, they couldn’t connect the necessary steps to a longer-term goal and naturally reverted to their old ways, creating a backlash that inevitably undermined the strategy. Only afterward did the team recognize the kinds of activities that might have helped—for example, changing the salespeople’s goals, resetting the overall budget to acknowledge the transition from one customer segment to another, and using the reallocated funding to generate a new product-development road map.

Creating strategy in today’s environment of complexity, ever-changing priorities, and conflicting agendas is a daunting task. Yet when senior executives invest the time and effort to develop a more thorough, thoughtful approach to strategy, they not only increase the odds of building a winning business but also often enjoy a positive spin-off: the gifts of simplicity and focus, as well as the conviction to get things done.

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