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How quickly should a new CEO shift corporate resources? 11-08

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How quickly should a new CEO shift corporate resources?

Moving early to reconfigure the business portfolio and top-management team improves corporate performance and the odds for a lengthy tenure.

byStephen Hall and Conor KehoeNew CEOs face a critical strategic choice. Should they settle into the job, spend a year or more getting to know their businesses, and then start shifting the portfolio? Or is it better to act quickly and boldly early on to divert resources from mature activities to a new generation of corporate opportunities?
We observe CEOs following both approaches, but one appears to deliver superior results: between 1990 and 2010, chief executives who reallocated corporate resources early in their tenures generated materially stronger returns for shareholders than those who waited. In the process, these active CEOs also seem to have prolonged their own time at the top. What’s more, a similar decisiveness in changing the composition of the top team also brought disproportionate longer-term rewards.
In our database of more than 1,500 multibusiness public companies in the United States, we identified a subset that reported changing their CEOs. We then divided the 365 “new” CEOs in our database into two roughly equal groups: those who were slow to reallocate capital across the business portfolio during their first three years and those who were fast to reallocate it.1 When we correlated these results with a CEO’s individual tenure, we discovered that just over one-third of the relatively inactive CEOs had moved on by year six, but only a quarter of the fast leaders had.
The best results were achieved by CEOs who moved swiftly early on and then throttled back the rate of resource-allocation change to allow the market to understand and value their early actions. By contrast, late starters—those who were slow to reallocate capital during the first three years of their mandate but then picked up the pace of change—did not find themselves as well rewarded by the market. Exhibit 1 compares the total returns generated by companies with “fast–slow” versus “slow–fast” CEOs.

Exhibit 1

CEOs who initiated resource reallocations early in their tenures—but slowed down the pace later—generated superior returns.


As we have argued in our companion article focused on the downturn, (see “Never let a good crisis go to waste”), the key to allocating resources actively lies not just in acquisitions and disposals but also in the undoubtedly more difficult challenge of taking capital away from mature, often well-performing businesses and reinvesting it in faster-growing alternatives. Fast CEOs are much more inclined to do so than their slow counterparts are (Exhibit 2). Interestingly, CEOs recruited from outside a company appear to find it easier to undertake such nurturing and pruning of existing portfolio businesses than do those appointed from the inside.2 Internal candidates, notwithstanding their more intimate knowledge of the company, may be more reluctant than outsiders to prune businesses overseen by their former peers. New inside CEOs, moreover, may have a bias in favor of the existing portfolio. After all, it is always hard to be objective about children you yourself have raised.

Exhibit 2

The difference between fast and slow CEOs appears to be most pronounced with respect to nurturing and pruning.


The value to CEOs of making swift and meaningful changes in the allocation of resources applies not only to capital but also to top talent. Our data show that CEOs who add or subtract members of their executive committees within the first year of their tenure are likely to survive longer and to achieve higher total returns to shareholders (TRS) in their first three years as chief executive. Our analysis shows that the greatest impact comes from moving swiftly to change the top team rather than from the actual number of changes. If CEOs combine this decisive approach to top talent with a rapidly implemented capital-reallocation strategy, the results are even more dramatically positive (Exhibit 3).

Exhibit 3

CEOs who were quick to make top-management changes and reallocated more in their first three years in office generated superior returns.

CEOs, it appears, should consciously exploit the “honeymoon” period during the early part of their tenure to make the difficult decisions about capital and people. Markets are sluggish to recognize the rewards of reallocation—they usually mark down the shares at first. It takes approximately one to two years for the cumulative TRS effect to turn positive. But the message of our research is that over time, markets will be less forgiving toward CEOs who adopt a prolonged “steady as she goes” policy, as it produces lower long-term TRS.
Our research also suggests some additional rules of the road for new CEOs and members of their senior teams:
  • Explain the reallocation strategy clearly. Investors may react badly to any plan that hits near-term earnings, but they will be more understanding if they know what’s happening, the reasons behind it, and the projected time frame for the results. As far as possible, nurture long-term investors—and do not pander to “short-termists.”
  • Be bold. Don’t worry about reallocating too much. We imagined we would find some companies that had reallocated so much that TRS declined as a result. No such example existed in our database covering US multibusiness companies over 20 years. Managers seem strongly biased to do much less than is needed to optimize TRS.
  • Own’ the careers of senior corporate talent. CEOs must ensure that they are free to deploy good people to manage new or expanded activities across the corporate portfolio. The ability to exert a strong influence over the career moves of a company’s top 100 to 300 executives is vital for successful corporate reallocators.
  • Enlist board support. The most effective board directors, according to a recent McKinsey survey,3 focus on overseeing the execution of strategy (making sure that people, processes, and resources are in place to carry it out) and on holding management accountable. CEOs should use their boards to reinforce and oversee the changes required to increase the pace and scale of resource reallocation by engaging board members to become challenging but supportive “coaches.”


ISRO chief takes Mars mission replica to Tirupati, rationalists fume 11-09

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ISRO chief takes Mars mission replica to Tirupati, rationalists fume

Shyam's view,


Constitution allows everyone the right to practice one's religion with freedom. As a citizen of India, Shri. Radhakrishna enjoys this privilege.
Similarly the same constitution allows Mr. Narendra Nayak the freedom to be rationalist and propagate his views.
When such an important event takes place people seek divine blessings in their own way depending on their religion and faith. Constitutionally they are not wrong so long as they do it on their won will, and don't force others to do it.
Whether Shri,. Radhakrishna has violated any ISRO secrecy clause or not is for the Government and the ISRO to decide.
No one else including Mr. Narendra Nayak has a right to pass a judgement on this issue.
This is not to take away even one bit from the extraordinary work these rationalist are doing in educating the people against the the fake sanyasis and sadhus exploiting in the name of religion.
I duly acknowledge the great work being done by Shri Narendra Nayak and his team. My reply shouldn't be construed as a support for religious fanatics.
This is just one of case where I do not support these people.
Best of luck to you Shri. Narendra.
But kindly do not impede any one fundamental right to practice one religion.

Shyam

Mangalore: The Federation of Rationalist Associations has strongly criticised ISRO Chairman Dr K Radhakrishnan for offering special prayers and performing pooja with the replica of Mars Orbiter Mission at the Lord Venkateshwara temple in Tirupati, a day before the successful launch of the spacecraft from Sriharikota. 

In a statement the federation president and noted rationalist Narendra Nayak said, "We strongly condemn the attitude of the Chairman of ISRO K Radhaksrishnan who has insulted the Constitution of India by placing the replica of the satellite meant for the Mars mission at the feet of a deity at Tirupati. 


He is unfit to occupy the position of the head of the space mission and should be immediately sacked.

" He has also stated that the act was against India's secular Constitution. "He has perhaps forgotten that ours is secular republic and that worship of a deity belonging to one particular religion particularly in matters of state is negating this very basic tenet of our Constitution. He has also forgotten Article 51AH which states that it is the duty of every citizen to develop scientific temper and the spirit of enquiry and humanism. I don't know which principle of science is applicable to the act of placing a replica of the satellite at the feet of a statue at a temple. Again, if we quote his own words - We have to understand a lot from the solar system etc. If this is the case we have to also go a long way to understand how a person like him in a responsible position in a government organisation is foolish enough to believe that prayers to particular god can ensure the proper launch of a satellite! I don't know who is responsible for the failures in such a scenario! We demand that he be immediately sacked for having done this affront to the Constitution of country. If he were to go a temple for his personal work we would have no reason to object at all. But, carrying his personal superstition into matters of the state is a crime against our Constitution."

 ISRO chief Radhakrishnan seeks divine blessings for Mars mission Radhaksrishnan and his wife had visited the famous Venkateshwara Temple on Monday. He had placed the replica of the Mars Mission before the god. After the special pooja Radhakrishnan had said that they did not want to leave anything to chance. India's journey to Mars begun with the successful launch of the Mars Orbiter Mission on Tuesday afternoon. Indian Space Research Organisation (ISRO) joined an elite club of just four agencies in the world which dared to travel to Mars. The Rs 450 crore Mars Orbiter Mission was successfully launched from Dr Satish Dhawan Space Centre (SDSC) in Sriharikota, a small coastal village in Andhra Pradesh on Tuesday at 2:38 pm.

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Building Wharton's Brand in India 11-09

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Building Wharton's Brand in India

Building Wharton’s brand and global business pipeline were dual goals of Executive Education’s recent visit to Mumbai and New Delhi.

Editor’s note: Wharton Executive Education is increasing its connections to alumni and to the international business community by traveling to key global cities. Below are highlights of recent visits to Mumbai and New Delhi, India, the first country outside the U.S. where Wharton launched an open-enrollment program.

The timing was ideal—coming on the two-year anniversary of Wharton’s first open-enrollment program launched outside the United States in India. To date, about 300 business leaders throughout India have participated in Wharton’s Accelerated Development Program (ADP).

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It’s not surprising that India is a strategic destination for Wharton. As an emerging economy and a booming market for entrepreneurs, the country is experiencing significant growth. Acquisitions are common. Managers face the challenge of merging cultures while producing products very quickly, and many of them are assuming new roles with higher levels of responsibility. In India and in China, another growth area for Wharton programs, the economies are in high gear. Not surprisingly, their need for leadership and management development is much higher than in the West, where the pace of growth has slowed.  
Wharton’s ADP in India has attracted a much more senior group than the School anticipated, and the evaluations have been stellar—among the highest in Executive Education’s overall portfolio. The exposure in India’s business press as well as the buzz from these executives in our program has been phenomenal, and Wharton is looking to replicate India’s success in other regions.
A major highlight of the trip was exploring how Wharton could link up with the top 10 industry associations and the top multinationals for partnerships or management and Executive Education programming.
Wharton Executive Education also attended a reception of the Wharton Club of Africa, where Wharton alums from Africa and India gathered to explore how investors and business leaders in India could connect and do business in Africa.
The opportunity for Wharton to use programs like the ADP and custom programs on the ground in India is enhancing the brand of the school, allowing us to showcase Wharton’s two most important differentiators:
• Our size. Wharton works with more than 10,000 business executives each year, giving faculty a strong handle on the challenges companies face around the world, both in the developing world and in mature markets. 
• Our methodology. Faculty members take much more of a mixed-methodology approach that includes cases, action learning, global immersion trips and facilitated discussions. As a result, Wharton tends to be much more interactive and tailored to the needs of working business leaders, who can engage in real-world problems right now by leveraging Wharton’s social classroom experience.


Don’t Inflict Help, Provide It 11-11

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Don’t Inflict Help, Provide It

A colleague of mine on the leadership coaching staff at Stanford had a student who was wrestling with an important personal issue. I knew a dean who was well-positioned to be of assistance, and I offered to put her in touch with my colleague. I emailed the two of them and felt good that I’d been able to help.
Shortly afterward, though, my colleague called me, and I was stunned to realize that she was upset and angry with me for intervening. While I had thought that she had accepted my initial offer, she had actually said she’d think about it and would let me know if and when she wanted me to take action. She felt that by taking the initiative without her assent I had interfered with the work she’d been doing with the student and, far from helping, had potentially made the situation worse.
When I tweeted   about it, Torbjörn Gyllebring responded  , “I usually refer to [that] as ‘inflicting help,’” —  a perfect way of describing what I’d inadvertently done to my colleague.
What are the various ways we can, with the best of intentions, inflict help?
The Right Help at the Wrong Time. This is what I provided to my colleague. The dean I knew was in a position to support my colleague and her student, but providing help before it had been asked for created confusion and frustration and was ultimately counterproductive. For help to truly be helpful, the recipients must be ready for it — and as helpers we need to assess that readiness accurately. It’s easy to misread potential openness for an actual invitation.
The Right Help, But Too Much Of It. Alternatively, we can offer help and it’s received with gratitude. But we may not know when to stop. The desire to help takes over, and we pass the point of diminishing returns and keep right on going. I’ve often made this mistake when providing coaching clients with readings intended to supplement our work together. My enthusiasm can lead me to send someone far more material than they have time to absorb, and they feel overwhelmed. 
I’ve learned that I help not only by providing access to material, but also by limiting that access and by gauging each client’s individual capacity. As helpers we need to be keenly attuned to recipients’ ability to make effective use of our help and to stop helping when it’s no longer helpful.
The Wrong Help. Someone wants our help, and we’re able to offer it at the right time. But as the situation evolves it becomes clear that what we’re offering isn’t actually what’s needed. This was the mistake I made with several teams of MBA students that I supervised in the first few years of my work at Stanford.
 I thought they needed help with tactical execution, but what they lacked was strategic guidance; to use Peter Drucker’s distinction, I was offering management when they neededleadership. Thankfully, in my second year I got some candid feedback that allowed me to change my approach. As helpers we may think we know what’s needed, but even—and perhaps especially—when we’re viewed as experts we need to access our ignorance and be open to the possibility that we may be wrong.
What motivates all this unhelpful help? Why do we step in when it’s not necessarily helpful? Two factors not only explain this dilemma but also suggest potential solutions.
The Relationship, and Our Role In It. First, in many cases the motive to inflict help is a function of the relationship, or, more precisely, our interpretation of our role in that relationship. If there’s a difference in status within the relationship, such as between a manager and a subordinate, in the senior role we may feel that our primary function is to offer help. But when we find ourselves repeatedly inflicting help, we need to step back and question how we’re interpreting our role in that relationship.
Perhaps we’re fulfilling the role in an outdated way that no longer reflects the state of the relationship or the capabilities of the other party. Perhaps we’re applying a set of archetypes to the relationship — such as expert/novice or guide/follower — that no longer fit (or never did.) While the desire to be of service is laudable, we need to check our assumptions about how and when we can best be of service in this particular role.
Emotion Regulation. Second, it’s essential to understand and regulate the emotions that underlie our helping impulse. Logical analysis can influence our behavior, but our actions inevitably have an emotional dimension, although at times these feelings may lie just beyond our conscious awareness. Comprehending the emotions that motivate our desire to help can allow us to (1) sense when they’re causing us to inflict help, (2) arrest our habitual helping responses, and (3) create opportunities to make different choices.
We’re driven to diminish our negative emotions and enhance our positive emotions, and helping relationships can trigger powerful feelings on both sides. When we feel the need to help we perceive a problem that we want to alleviate, and its persistence can trigger discomfort, anxiety, anger, and fear. The task here is to gain a greater sense of comfort with our discomfort, to simply notice these feelings and sit with them without being compelled to take action in order to soothe ourselves.
On the other side of the emotional spectrum, when we feel the need to help we perceive an opportunity to distinguish ourselves while being of service, and this can trigger excitement, enthusiasm, and even joy. The task here is to calm ourselves in the face of these stimulating emotions, to simply notice these feelings and, again, sit with them without being compelled to take action to maintain this pleasurable state.
As leaders, as colleagues, as friends, and as family members, we’re asked to help in almost every sphere of life. Those who feel, as I do, a powerful desire to be of service, may have chosen a profession that presents us with the opportunity to fulfill this drive on a daily basis. But being mindful of the difference between providing help and inflicting it is what allows us to truly make a difference.

The Real Cost of Bribery 11-10

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The Real Cost of Bribery


George Serafeim finds that the biggest problem with corporate bribery isn't its effect on a firm's reputation or the regulatory headaches it causes. Rather, bribery's most significant impact is its negative effect on employee morale.
In the age of globalization, it's easy to see how giving into bribery might be competitively advantageous. In fact, research    by Harvard Business School's Paul M. Healy   and George Serafeim   found that firms that launch anticorruption efforts grow their businesses more slowly than firms that don't, especially in regions where bribery is the expected norm.
“IF YOU THINK OF THE COST [OF BRIBERY] AS JUST FINES AND REGULATORY ACTIONS, YOU’RE MISSING A BIG PIECE OF THE PUZZLE.”
"We have a pretty good understanding of the benefits of bribery—facilitating entry into a market, for starters," says Serafeim, an assistant professor in the Accounting and Management unit. "But we still have a much more limited understanding about the costs of bribery."
That's why Serafeim recently set out to analyze the negative effects of bribery on corporate performance. The results of his study, detailed in the paper Firm Competitiveness and Detection of Bribery, surprised him. As it turns out, the biggest problem with corporate corruption isn't its effect on a firm's reputation or the regulatory headaches it causes. Rather, bribery's most significant impact is its negative effect on employee morale.

INITIATION, DETECTION, AND RESPONSE

Serafeim aimed to find out how bribery affected a firm's operations across four dimensions of competitiveness: its external business relations, its interaction with regulators, its public reputation, and the morale of its employees. (Each of these factors has proven to be crucial to a firm's standing in the competitive landscape.)
He hypothesized that the extent of the damage to a firm would depend on three factors: who initiated the under-the-table payment, how it was detected, and the way the firm responded to the bribe after it was uncovered.
Employee morale drops when a company bribes its way to success.To test the hypothesis, Serafeim evaluated data from the forensic services practice of PricewaterhouseCoopers, which provides global consulting services to companies dealing with potential legal issues. The firm annually surveys thousands of its clients about their respective issues. Serafeim focused on survey answers from 2009 through 2011, during which some 10 percent of respondents (about 500 respondents) anonymously reported that their firm had experienced a bribery incident. Many of the survey takers who had dealt with corruption worked for firms based in countries infamous for rampant bribery, including Russia, Ukraine, and South Africa. But there were also on-the-take reports from firms based in Australia, the United Kingdom, and the United States, where bribery is less common but still existent.
"Bribery is a global phenomenon, and people engage in this type of behavior all over the world," Serafeim says. "There are different magnitudes and different extents of bribery, but everywhere in the world you can find it. The idea that bribery doesn't exist in the developed world is a myth."
The survey included both hypothetical and reactive questions, asking respondents how they believed the detection of bribery would affect the firm and—in cases where it had actually happened—how bribery really did affect the firm.

SPECULATION VERSUS REALITY

It turned out that speculation did not match the reality. Respondents guessed that their firm's reputation would be most negatively affected by bribery, followed in speculated impact by business relations, employee morale, and relations with regulators. But respondents who had actually dealt with the problem reported that employee morale was by far more significantly affected by bribery than any other factor.
That's important because studies have shown that employee morale is directly related to a firm's performance, including stock market returns. For instance, the consultancy Sirota recently surveyed   13.6 million employees in 840 companies about workplace morale. High-morale companies (those at which more than 75 percent of the workforce reported "overall satisfaction with their company") had significantly stronger year-over-year stock performance than companies with lower morale reports. These high-morale companies averaged a 15.1 percent improvement in their stock price from 2011 to 2012, compared with a 4.1 percent year-over-year improvement among the lower-morale companies.
Serafeim's findings also indicate that bribery could hurt a firm even if no one outside the organization ever found out about it.
People know each other and talk within an organization, Serafeim observes. "Information is hard to contain within a group of people, even if it's never officially reported," he says. "The lesson for managers is that bribery is more costly than you might think. If you think of the cost as just fines and regulatory actions, you're missing a big piece of the puzzle."
As Serafeim had hypothesized, the extent of bribery's impact on all four competitiveness factors depended on who committed the bribe, who discovered the bribe, and what the firm did in response.
On average, cases in which a senior executive committed the bribe had 64.9 percent more significant impact than those in which the briber was lower down on the corporate totem pole, according to the survey results. "Senior management is the ambassador of what the firm stands for—the culture of the firm and what people are incentivized to be doing," Serafeim says. "As a result, it sends a strong message about what the organization stands for."
That said, he notes that respondents reported at least a moderate negative effect even in cases where the bribery wasn't committed by an employee.
"The idea that whatever happens outside an organization is not going to impact the organization—it's actually not true," Serafeim says. "If your customers or suppliers are engaging in this type of behavior, it has an impact on the organization."
With regard to how bribes were discovered, Serafeim found that bribery cases detected by a firm's internal control systems (including tip-offs and whistle-blowers) had a far less negative impact than those detected by outside regulators.
"This sends a strong message that firms that invest in control systems are going to realize benefits," Serafeim says. "You're not just incurring costs by investing in these systems. There are benefits. Besides protecting reputation and morale, it also means that the firm is able to contain and control actions that its business allies or employees take."
And punishing the offending party proved to be good for business. "Dismissal of an employee that initiated bribery or cease of business relations with an outside party that initiated bribery is significantly associated with a lower likelihood of significant impact on a firm's reputation," Serafeim reports in his paper.
One thing that didn't seem to matter: the size of the bribe. Thirty-five percent of the bribes reported in the survey fell under $100,000, and they had just as much of an effect on competitiveness factors as the 16 percent involving amounts more than $500,000. "Size does not matter when it comes to bribery," Serafeim says. "Small or big bribing is bad business in the long term."

They Loved Your G.P.A. Then They Saw Your Tweets. 11-12

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They Loved Your G.P.A. Then They Saw Your Tweets.



still talking about the high school senior who attended a campus information session last year for prospective students. Throughout the presentation, she apparently posted disparaging comments on Twitter about her fellow attendees, repeatedly using a common expletive.Perhaps she hadn’t realized that colleges keep track of their social media mentions.

“It was incredibly unusual and foolish of her to do that,” Scott A. Meiklejohn, Bowdoin’s dean of admissions   and financial aid, told me last week. The college ultimately denied the student admission, he said, because her academic record wasn’t competitive. But had her credentials been better, those indiscreet posts could have scuttled her chances.
“We would have wondered about the judgment of someone who spends their time on their mobile phone and makes such awful remarks,” Mr. Meiklejohn said.
As certain high school seniors work meticulously this month to finish their early applications to colleges, some may not realize that comments they casually make online could negatively affect their prospects. In fact, new research from Kaplan Test Prep  , the service owned by the Washington Post Company, suggests that online scrutiny of college hopefuls is growing.
Of 381 college admissions officers who answered a Kaplan telephone questionnaire this year, 31 percent said they had visited an applicant’s Facebook or other personal social media page to learn more about them — a five-percentage-point increase from last year. More crucially for those trying to get into college, 30 percent of the admissions officers said they had discovered information online that had negatively affected an applicant’s prospects.
“Students’ social media and digital footprint can sometimes play a role in the admissions process,” says Christine Brown, the executive director of K-12 and college prep programs at Kaplan Test Prep. “It’s something that is becoming more ubiquitous and less looked down upon.”
In the business realm, employers now vet the online reputations of job candidates as a matter of course. Given the impulsiveness of typical teenagers, however — not to mention the already fraught nature of college acceptances and rejections — the idea that admissions officers would covertly nose around the social media posts of prospective students seems more chilling.
There is some reason for concern. Ms. Brown says that most colleges don’t have formal policies about admissions officers supplementing students’ files with their own online research. If colleges find seemingly troubling material online, they may not necessarily notify the applicants involved.
“To me, it’s a huge problem,” said Bradley S. Shear, a lawyer specializing in social media   law. For one thing, Mr. Shear told me, colleges might erroneously identify the account of a person with the same name as a prospective student — or even mistake an impostor’s account — as belonging to the applicant, potentially leading to unfair treatment. “Often,” he added, “false and misleading content online is taken as fact.”
These kinds of concerns prompted me last week to email 20 colleges and universities — small and large, private and public, East Coast and West Coast — to ask about their practices. Then I called admissions officials at 10 schools who agreed to interviews.
Each official told me that it was not routine practice at his or her institution for admissions officers to use Google searches on applicants or to peruse their social media posts. Most said their school received so many applications to review — with essays, recommendations and, often, supplemental portfolios — that staff members wouldn’t be able to do extra research online. A few also felt that online investigations might lead to unfair or inconsistent treatment.
“As students’ use of social media is growing, there’s a whole variety of ways that college admissions officers can use it,” Beth A. Wiser, the director of admissions   at the University of Vermont, told me. “We have chosen to not use it as part of the process in making admissions decisions.”
Other admissions officials said they did not formally prohibit the practice. In fact, they said, admissions officers did look at online material about applicants on an ad hoc basis. Sometimes prospective students themselves ask an admissions office to look at blogs or videos they have posted; on other occasions, an admissions official might look up an obscure award or event mentioned by an applicant, for purposes of elucidation.
“Last year, we watched some animation videos and we followed media stories about an applicant who was involved in a political cause,” says Will Hummel, an admissions officer at Pomona College in Claremont  , Calif. But those were rare instances, he says, and the supplemental material didn’t significantly affect the students’ admissions prospects.
Admissions officials also said they had occasionally rejected applicants, or revoked their acceptances, because of online materials. Often, these officials said, a college may learn about a potential problem from an outside source, such as a high school counselor or a graduate, prompting it to look into the matter.
Last year, an undergraduate at Pitzer College in Claremont, Calif., who had befriended a prospective student on Facebook, notified the admissions office because he noticed that the applicant had posted offensive comments about one of his high school teachers.
“We thought, this is not the kind of person we want in our community,” Angel B. Perez, Pitzer’s dean of admission   and financial aid, told me. With about 4,200 applications annually for a first-year class of 250 students, the school can afford to be selective. “We didn’t admit the student,” Mr. Perez said.
But colleges vary in their transparency. While Pitzer doesn’t contact students if their social media activities precluded admission to the school, Colgate University does notify students if they are eliminated from the applicant pool for any reason other than being uncompetitive candidates.
“We should be transparent with applicants,” says Gary L. Ross, Colgate’s dean of admission. He once called a student, to whom Colgate had already offered acceptance, to check whether an alcohol-related incident that was reported online was indeed true. (It was, and Colgate rescinded the offer of admission.)
“We will always ask if there is something we didn’t understand,” Mr. Ross said.
In an effort to help high school students avoid self-sabotage online, guidance counselors are tutoring them in scrubbing their digital identities. At Brookline High School   in Massachusetts, juniors are taught to delete alcohol-related posts or photographs and to create socially acceptable email addresses. One junior’s original email address was “bleedingjesus,” said Lenny Libenzon, the school’s guidance department chairman. That changed.
“They imagine admissions officers are old professors,” he said. “But we tell them a lot of admissions officers are very young and technology-savvy.”
Likewise, high school students seem to be growing more shrewd, changing their searchable names on Facebook or untagging themselves in pictures to obscure their digital footprints during the college admission process.
“We know that some students maintain two Facebook accounts,” saysWes K. Waggoner, the dean of undergraduate admission   at Southern Methodist University in Dallas.
For their part, high school seniors say that sanitizing social media accounts doesn’t seem qualitatively different than the efforts they already make to present the most appealing versions of themselves to colleges. While Megan Heck, 17, a senior at East Lansing High School   in Michigan, told me that she was not amending any of her posts as she applied early to colleges this month, many of her peers around the country were.
“If you’ve got stuff online you don’t want colleges to see,” Ms. Heck said, “deleting it is kind of like joining two more clubs senior year to list on your application to try to make you seem more like the person they want at their schools.”

Pune student's Doodle 4 Google winning entry on Google India homepage 11-14

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Children's Day: 


Pune student's Doodle 4 Google winning entry on Google India homepage

New Delhi: The Children's Day doodle on the Google India home page has been designed by a class 10 student from Pune. The doodle titled "Sky's the limit for Indian women" has been designed by Gayatri Ketharaman for the fifth edition of Doodle 4 Google competition with the theme celebrating Indian women.
"Each letter of the doodle depicts the trait of Indian women. She is graceful and elegant, adept at balancing work and home. She is a go-getter and also personifies motherhood," says Gayatri Ketharaman, a student of Bishop's co-education school in Pune.

ALSO SEE 2012: Doodle 4 Google winner on Google India home page

The winner was selected from among 12 finalists chosen from different parts of the country by the national jury comprising actress Kirron Kher and political cartoonist Ajit Ninan. Along with the national winner, three students grouped into different categories were also awarded.
The doodle has been designed by Gayatri Ketharaman for the 5th edition of Doodle 4 Google competition.
Children\'s Day: Pune student\'s Doodle 4 Google winning entry on Google India homepage
Madhuram Vatsal from Lucknow won the prize in Class one to three category, while Binita Biswajeeta from Odisha with her doodle 'Women are future, empower them better' won in Class four to six category, and Akash Shetty from Bangalore with doodle titled 'Indian women leading our country' won in the Class seven to ten category.
This year the competition received 1.5 lakh entries in the contest held across 100 cities and 1,500 schools.
in 2012, the Doodle4Google winner was Arun Kumar Yadav, a class 9 Kendriya Vidyalaya student from Chandigarh. The 2012 Doodle 4 Google winning entry that featured on the Google India homepage on November 14 last year was titled 'India - A Prism of Multiplicity'.
Google4Doodle is an annual competition in which Google invites students from classes 1 to 10 to share their creativity by doodling on the Google logo. Google 4 Doodle 2013 is the fifth year of the competition in India.

Facebook Says Its New Data Center Will Run Entirely on Wind 11-15

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Facebook Says Its New Data Center Will Run Entirely on Wind

  • BY KLINT FINLEY

An artist’s rendering of Facebook Iowa data center, due to open in 2014. Image: Facebook
Facebook passed another milestone in the green data center arms race today with the announcement that its Altoona, Iowa data center will be 100 percent powered by wind power when it goes online in 2015.
This will Facebook’s second data center — after its Lulea, Sweden location — to run on all renewable power.
The electricity for the new data center will come from a nearby wind project in Wellsburg, Iowa, according to a blog post from Facebook  . Both the wind project, which will be owned and operated by MidAmerican Energy, and the data center are currently under construction.
Green data centers have come a long way since environmental advocacy organization Greenpeace began railing against Facebook in 2010. Following criticism of their energy use patterns, companies like Facebook and Apple vowed to clean-up their acts. Since then, Greenpeace has upgraded its ratings of Apple‘s environmental practices andpraised Facebook’s energy use transparency.
But that’s not to say that these data centers are actually environmentally friendly as of yet. Reaching 100 percent renewable energy is tough to pull off. Apple claims that its data centers are powered by 100 percent renewable sources, but it’s using renewable energy credits to “offset” its use of coal and nuclear power. Google is working with regulators to find ways to buy more clean energy directly. Facebook has settled on a goal of powering its data centers on 25 percent renewable energy by 2015. eBay and Microsoft, meanwhile, have unveiled plans to use natural gas-based fuel cells to power new data centers. Natural gas burns far cleaner than coal, but still emits some carbon.
But one of the biggest impacts of these sorts of projects is a boost in overall availability of renewable energy, says Greenpeace IT analyst Gary Cook. “When Facebook said back in spring that they were going to Iowa, the utility company in Iowa, MidAmerican Energy, announced that they were shelving plans to build a new nuclear facility and then filed plans to build a wind plant instead,” Cook told us earlier this week. “If you look at the regulatory filing, this was because they have new customers, namely Facebook, that want more renewable energy.”
That fact is not lost no Facebook. “When we settled on Altoona as the location for our fourth data center, one of the deciding factors was the opportunity to help develop a new wind project in the state,” the Facebook blog says.
“The project will add up to 138 MW of new renewable wind capacity to the grid in Iowa – more than what our data center is likely to require for the foreseeable future.”


Jai Hanuman 11-15

Mobilizing your C-suite for big-data analytics 11-16

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Mobilizing your C-suite for big-data analytics


Leadership-capacity constraints are undermining many companies’ efforts. New management structures, roles, and divisions of labor can all be part of the solution.

Over the past 30 years, most companies have added new C-level roles in response to changing business environments. The chief financial officer (CFO) role, which didn’t exist at a majority of companies in the mid-1980s, rose to prominence as pressures for value management and more transparent investor relations gained traction.1 Adding a chief marketing officer (CMO) became crucial as new channels and media raised the complexity of brand building and customer engagement. Chief strategy officers (CSOs) joined top teams to help companies address increasingly complex and fast-changing global markets.

Today, the power of data and analytics is profoundly altering the business landscape, and once again companies may need more top-management muscle. Capturing data-related opportunities to improve revenues, boost productivity, and, sometimes, create entirely new businesses puts new demands on companies—requiring not only new talent and investments in information infrastructure but also significant changes in mind-sets and frontline training.2 It’s becoming apparent that without extra executive horsepower, stoking the momentum of data analytics will be difficult for many organizations.

Because the new horizons available to companies typically span a wide range of functions, including marketing, risk, and operations, the C-suite can evolve in a variety of ways. In some cases, the solution will be to enhance the mandate of the chief information, marketing, strategy, or risk officer. Other companies may need new roles, such as a chief data officer, chief technical officer, or chief analytics officer, to head up centers of analytics excellence. This article seeks to clarify the most important tasks for executives playing those roles and then sets out some critical questions whose answers will inform any reconfiguration of the C-suite. Daunting as it may seem to rethink top-management roles and responsibilities, failing to do so, given the cross-cutting nature of many data-related opportunities, could well mean jeopardizing top- or bottom-line growth and opening the door to new competitors.

Six top-team tasks behind data analytics

Crafting and implementing a big-data and advanced-analytics strategy demands much more than serving up data to an external provider to mine for hidden trends. Rather, it’s about effecting widespread change in the way a company does its day-to-day business. The often-transformative nature of that change places serious demands on the top team. There’s no substitute for experienced hands who can apply institutional knowledge, navigate organizational hazards, make tough trade-offs, provide authority when decision rights conflict, and signal that the leadership is committed to a new analytics culture. In our experience, the concerted action that’s required falls into six categories. Leaders should take full measure of them before assigning responsibilities or creating roles.

Establishing new mind-sets

Senior teams embarking on this journey need both to acquire a knowledge of data analytics so they can understand what’s rapidly becoming feasible and to embrace the idea that data should be core to their business. Only when that top-level perspective is in place can durable behavioral changes radiate through the organization. An important question to ask at the outset is “Where could data analytics deliver quantum leaps in performance?” This exercise should take place within each significant business unit and functional organization and be led by a senior executive with the influence and authority to inspire action.

Leaders at one large transportation company asked its chief strategy officer to take charge of data analytics. To stretch the thinking and boost the knowledge of top managers, the CSO arranged visits to big data-savvy companies. Then he asked each business unit to build data-analytics priorities into its strategic plan for the coming year. That process created a high-profile milestone related to setting real business goals and captured the attention of the business units’ executives. Before long, they were openly sharing and exploring ideas and probing for new analytics opportunities—all of which helped energize their organizations.

Defining a data-analytics strategy

Like any new business opportunity, data analytics will underdeliver on its potential without a clear strategy and well-articulated initiatives and benchmarks for success. Many companies falter in this area, either because no one on the top team is explicitly charged with drafting a plan or because there isn’t enough discussion or time devoted to getting alignment on priorities. 

At one telecommunications company, the CEO was keen to move ahead with data analytics, particularly to improve insights into customer retention and pricing. Although the company moved with alacrity to hire a senior analytics leader, the effort stalled just as quickly. To be sure, the analytics team did its part, diving into modeling and analysis. However, business-unit colleagues were slow to train their midlevel managers in how to use the new models: they didn’t see the potential, which, frankly, wasn’t part of “their” strategic priorities.

As we have argued previously,3 capturing the potential of data analytics requires a clear plan that establishes priorities and well-defined pathways to business results, much as the familiar strategic-planning process does. Developing that plan requires leadership. At a North American consumer company, the CEO asked the head of online and digital operations, an executive with deep data knowledge, to create the company’s plan. The CEO further insisted that it be created in partnership with a business-unit leader who was not familiar with big data. 

This partnership—combining a data and analytics expert and an experienced frontline change operator— ensured that the analytics goals outlined in the plan were focused on actual, high-impact business decisions. Moreover, after these executives shared their progress with top-team counterparts, their collaborative model became a blueprint for the planning efforts of other business units.

Determining what to build, purchase, borrow, or rent

Another cluster of decisions that call for the authority and experience of a senior leader involves the assembly of data and the construction of advanced-analytics models and tools designed to improve performance. The resource demands often are considerable. With multitudes of external vendors now able to provide core data, models, and tools, top-management experience is needed to work through “build versus buy” trade-offs. 

Do strategic imperatives and expected performance improvements justify the in-house development and ownership of fully customized intellectual property in analytics? Or is reaching scale quickly so important that the experience and talent of vendors should be brought to bear? 

The creation of powerful data assets also can require the participation of senior leadership. Locking in access to valuable external data, for instance, may depend on forging high-level partnerships with customers, suppliers, or other players along the value chain.

The radically diverging paths different retailers have chosen underscore the range of options leaders must weigh. Several retailers and analytics firms have established long-term contracts covering a broad sweep of analytics needs. Other large players, both brick-and-mortar and online, have invested in deep internal data and analytics expertise. Each of these choices reflects a dynamic set of strategic, financial, and organizational requirements that shouldn’t be left to middle management.

Securing analytics expertise

Under almost any strategic scenario, organizations will need more analytics experts who can thrive amid rapid change. The data-analytics game today is played on an open and (frequently) cloud-based infrastructure that makes it possible to combine new external and internal data readily and in user-friendly fashion. The new environment also requires management skills to engage growing numbers of deep statistical experts who create the predictive or optimization models that will underwrite growth.

The hunt for such talent is taking place in what has become the world’s hottest market for advanced skills. Retaining these valued employees and then getting them to connect with business leaders to make a real difference is a true top-management task—one that often demands creative solutions. 

The leader of a big-data campaign at a major consumer company, for instance, decided to invest in an analytics unit distant from company headquarters. This other locale had abundant talent and a cultural environment preferred by data scientists and engineers. The leader then closed the loop, ensuring that each unit of the analytics team had a direct connection to a business-unit team at the company.Mobilizing resources

Companies often are surprised by the arduous management effort involved in mobilizing human and capital resources across many functions and businesses to create new decision-support tools and help frontline managers exploit advanced analytics models. An empowered senior player is vital to breaking down the institutional barriers that frequently hamper efforts to supercharge decisions through data analytics. 

Success requires getting a diverse group of managers to coalesce around change—encouraging alignment across a wide phalanx of IT, business-lines, analytics, and training experts. The possibility of failure is high when companies don’t commit leadership.

Take the example of a second transportation company, where middle managers across product areas were tasked with identifying data-analytics opportunities and then pushing them forward. The analytics managers were routinely frustrated when data teams failed to deliver data on schedule or in usable formats. When it came time to embed the resulting analytics into customized tools, managers faced additional frustrations as urgent requests worked their way through routine budgeting and planning processes. 

The company gave the task of stepping up the pace of its analytics agenda to a top marketing and sales executive, who assembled cross-functional teams including database managers, analysts, and software programmers. The teams rotated across analytics opportunities, steering them from launch to implementation in six- to eight-week bursts. Through this rapid mobilization, the company checked off several analytics priorities only months after the marketing leader took charge.

Building frontline capabilities

The sophisticated analytics solutions that statisticians and scientists devise must be embedded in frontline tools so simple and engaging that managers and frontline employees will be eager to use them daily. The scale and scope of this adoption effort—which must also involve formal training, on-the-job coaching, and metrics that clearly define progress—shouldn’t be downplayed. In our experience, many companies spend 90 percent of their investment on building models and only 10 percent on frontline usage, when, in fact, closer to half of the analytics investment should go to the front lines.

Here, again, we have seen plenty of cases where no one on the top team assumed responsibility for sustained ground-level change. Lacking senior accountability and engagement, one financial-services company weathered several waves of analytics investment and interest only to have efforts fizzle when training and adoption fell short. Dismayed, business-unit leaders then took charge, investing in ongoing training sessions for managers and end users, pushing for the constant refinement of analytics tools, and tracking tool usage with new metrics. Over time, thanks to the consistent application of analytics, the transformation effort gained the hoped-for momentum.

Putting leadership capacity where it’s needed

As companies size up these challenges, most will concede that they need to add executive capacity. But that leaves unanswered important decisions about where, exactly, new roles will be located and how new lines of authority will be drawn. As we’ll outline below, our experience shows that companies can make a strong case for leading their data-analytics strategies and talent centrally or even for establishing a formal data-analytics center of excellence. 

However, frontline activities (mobilizing resources, building capabilities) will need to take place at the business-unit or functional level, for two reasons. First, the priorities for using data analytics to increase revenues and productivity will differ by business. Second, and just as important, companies best catalyze frontline change when they connect it with core operations and management priorities and reinforce it with clear metrics and targets.

Beyond this bias for pushing frontline mobilization responsibility to business units, there is no single prescription for where and how a company should add leadership capacity. Given the relative immaturity of data-analytics applications, that shouldn’t be surprising. Yet as leaders review their options, they needn’t fly blind. Pushing for answers to three key questions, in our experience, brings strategic clarity to the needed organizational changes:

Will a central customer or operational database be used across business units?

Is there a compelling need to build substantial analytics resources internally to retain talent and build proprietary assets and advantages?

Within each business unit, can the current functional executives handle the change-management challenge or should the company dedicate new executive capacity specifically for the data-analytics change effort?

We’ll illustrate the importance of these issues through examples of companies that have addressed them in different ways.

When central data assets are key

At many consumer-services businesses, exploiting analytics involves combining transaction data across a number of businesses or channels. That approach allows these companies to shape insights such as how consumers engage with Web sites or decide between shopping online or in stores. These companies often have (or are building) new central data warehouses or data environments, as well as related data-management capabilities. In addition, they often are working through new rules of the road on issues such as how they can access data while protecting consumer privacy or ensure that key customers aren’t hassled by unnecessary contacts.

In such cases, an enhanced role for the CIO—spearheading the development of the data-analytics strategy and talent building—is a popular path. Operationally, the CIO takes charge of efforts to develop the data and analytics infrastructure while letting the business units mobilize change aimed at exploiting it.

At one multibusiness consumer-services company, for instance, the board and senior-leadership team recognized that a significant step-up in performance could be achieved if it fully exploited analytics opportunities across business lines by harnessing its multichannel databases. Recognizing the overarching role that the central databases play in the company’s agenda, the leadership designated the chief information officer to direct the effort and to define the data and analytics strategy.

The leaders realized that each business unit, by necessity, would have its own targeted analytic priorities, such as strengthening promotional offers or optimizing inventory levels. Moreover, a different group of managers would be applying the insights across business units. The leadership concluded that under these circumstances, managing analysis and frontline training from the center would be a mistake and decided instead that the CIO should partner with business-unit leaders, sharing with them a tiered set of responsibilities.

At present, the CIO is immersed in two key projects. The first is creating a new infrastructure that unites the company’s multichannel transaction data with external social-media and competitive information and delivers the result to business units through an intuitive interface.

 The second involves building up analytics expertise that can be assigned to different business units but managed centrally, at least for the next couple of years as the effort gains critical mass. The analytics team is led by a deeply experienced executive who reports to the CIO and provides a crucial injection of top-management capacity. In parallel, business-unit leaders are hammering out analytics priorities and building the skills of frontline managers who will use new models to, for example, redirect spending across media channels.

When substantial internal analytics expertise is core to performance

We are also seeing a second approach, which shares some of the centralized aspects we touched on above but specifically involves companies that decide to build rather than outsource a critical body of advanced analytics expertise. That decision often leads organizations to locate the expertise centrally, where it serves as a common platform for creating value across business units.

At one consumer-facing company, analytics expertise and leadership were concentrated in the finance and risk-management team, which historically had accounted for significant data-related value creation. When the company began pursuing a more aggressive analytics strategy, the CFO took responsibility for several tasks, including defining the basic strategy, overseeing make-versus-buy decisions for the core risk-management analytics tools, mobilizing resources within the function’s analytics team, and building expertise.

However, having made these primary decisions about analytics, the CEO and CFO soon realized that significant complementary efforts were needed to secure better data for the analytics team and to reinforce change efforts and revamp several processes across the business units. To lead these initiatives, they established a new position—chief data officer—within the CFO’s organization. 

This CDO proactively manages information, working with business managers to identify both internal and external data they may not even realize exists. Delivered ready for analysis, the data can be applied rapidly to needed tasks by modeling experts and, just as important, continually refreshed for new experiments and broader application. 

Many companies may find they need this type of leadership to support business leaders as they identify sources of data-driven advantages, work through analytics priorities, and try to accelerate frontline adoption.

When managing scale and complexity within business units is paramount

Whether elements of the effort are managed centrally or not, much of the data-analytics heavy lifting will fall on business or functional leaders within individual business units. A core question at the business-unit level is whether to add a new role or ask a key functional leader (such as the CMO or the head of operations) to add new responsibilities to what in all likelihood is already a pretty full plate.

When the senior leaders of a large financial-services company took a wide-ranging look at its strategy, they decided that one business unit could gain a significant competitive edge if it doubled down on data analytics. To push the strategy ahead decisively, the company recruited a chief analytics officer, who reports to the business-line president and oversees a new center of excellence drawing on internal consultants, analytics modelers, and software programmers.

This approach, which represents a significant organizational change, is accelerating the business unit’s data-transformation effort. As a top-team member, the CAO can drive a broad range of decisions, from setting analytics strategy to defining the responsibilities of frontline managers. Since the center of excellence spans multiple disciplines, the CAO can mobilize analytics and software-programming resources swiftly, which has sped up the creation of frontline tools. 

Meantime, operating from within the business unit has given him a deeper understanding of what makes it tick—its priorities, patterns of working, and ongoing challenges. This has paid off in sharper decisions about which tools to develop and a keener sense of the skills that training programs need to foster. The fact that the business unit’s leaders are engaged with the CAO on a day-to-day basis helps keep them focused on their analytics and adoption agendas.

Building on this success, the company has recently taken the further step of adding another new role, a chief data officer, who reports to the CIO but works daily with the chief analytics officer to help knit together data and new analytics tools and to speed frontline change.

For companies pursuing the potential of data analytics, a decision about leadership capacity looms—regardless of where in the end they decide to place it. For some, such as the consumer-facing companies described earlier, current top-team members will be asked to step up and assume broader leadership responsibilities, often with additional support from new, senior lieutenants. 

For others, such as the financial-services company we explored, establishing one or more new senior posts to drive the analytics agenda will be the best solution.

At all companies, top teams, and probably board members as well, need a better understanding of the scale of what’s needed to ensure data-analytics success. Then they must notch these responsibilities against their existing management capacity in a way that’s sensitive to the organization’s core sources of value and that meshes with existing structures. None of this is easy, but it’s the only serious way to pursue data analytics as a new frontier for growth.

About the authors

Brad Brown is a director in McKinsey’s New York office, David Court is a director in the Dallas office, and Paul Willmott is a director in the London office.
The authors would like to acknowledge the contributions of Matthew Ariker, Amit Garg, Joshua Goff, Lori Sherer, and Isaac Townsend to the development of this article.


Lata Mangeshkar amidst controversy for recommending sister Usha’s name for Padma awards! 11-18

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Lata Mangeshkar amidst controversy for recommending sister Usha’s name for Padma awards!


Lata Mangeshkar amidst controversy for recommending sister Usha’s name for Padma awards!
 

A RTI application to the Home Ministry that was made public has got Bollywood’s legendary singer in a tight spot

Lata Mangeshkar is stuck in the eye of a controversy. The veteran singer apparently recommended names of singer Suresh Wadkar, social worker Rajmal Parakh and her own sibling Usha Mangeshkar for the Padma awards.
According to the singer she wasn’t wrong in recommending these names; she also confirmed that every year the award committee sends her a letter asking for recommendations. She also confirmed having suggested several people for this award earlier. Clarifying her stand on her sister, Mangeshkar feels that her younger sister has been in the industry for over five decades and sung several melodic songs in various languages that have become popular. As for Suresh Wadkar Latafeels that he has been around for almost 40 years and has dedicated his life for music by starting music academies in India as well as abroad. The singer was obviously miffed with being dragged into this controversy and has vowed to never ever to suggest any names for the awards.
The singer took to Twitter immediately after this episode to clear her stand, “Namaskar. Kalnewspapers aur tv pe maine news dekhi jisme padma puraskaar ke liye maine meri behen usha aur suresh wadkar ji ke naam ki sifaarish ki. Lekin har saal mujhe ye puraskaar ki jo samitee hai unka letter aata hai aur usme likha hota hai ki aap jo naam uchit samajhti hai’n unke naam aur bio data wo mujhse mangwaate hain. Maine aaj tak kai logo’n ke naam bheje hain. Aur mujhe lagta hai ki usha jaisi kalakar jo film industry me 50 se bhi adhik varsho’n se gaa rahi hai aur assamese gujraathi ,hindi, marathi rajasthani in sab bhashao’n me uske gaane bohot popular hai. Isi tarha suresh wadkar ji jinhone kai bhashao’n me gaaya hai, pichle 40 saalon se wo gaa rahe hai. Sangeet vidyalaya bhi wo chalate hai jinki shaakhaayein na sirf mumbai balki america u,a.e me bhi hai. To aise sarwagun sampanna kalakaro’n ke naamo’n ka sujhao agar maine diya to isme kya galat hai. Mujhe padma-puraskaar samiti ka letter aata hai isliye main sujhao deti hu. Par aainda se main unhe koi sujhao nahi dungi.
Interestingly, Mangeshkar isn’t the only one to have recommended, there are politicians and other musicians who have submitted names of family and friends for the awards. Classical singer Pandit Jasraj, Sarod player Ustad Amjad Ali Khan a recipient of Padma Vibhushan made submitted six names that include his sons Amaan and Ayaan and also Jaya Prada’s name was suggested by Samajvadi Party leader Amar Singh.
And even if Usha Mangeshkar’s name hasn’t made it to the nominations list, one cannot help but wonder the lobbying that takes place for an honour like the Padma awards that also has monetary benefits for its winners. 

Does High School Determine the Rest of Your Life?

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Does High School Determine the Rest of Your Life?

A new study shows that the popular kids in high school wind up making more money. Then again, a lot of people still hate them

“When you get to be our age, you all of a sudden realize that you are being ruled by people you went to high school with,” noted the late novelist Kurt Vonnegut. “You all of a sudden catch on that life is nothing but high school.”
I thought of Vonnegut’s observation after I read a new study   released by the National Bureau of Economic Research titled simply “Popularity.” Individuals’ social status in high school has a “sizable effect” on their earnings as adults, reported lead author Gabriella Conti of the University of Chicago  : “We estimate that moving from the 20th to 80th percentile of the high-school popularity distribution yields a 10% wage premium nearly 40 years later.”
Conti’s study is part of a wave of research looking at how our social experiences in school connect to our lives after graduation. “We’ve all wondered at times if high school determines who we become as adults, and now we have the empirical data to test that notion,” says Pamela Herd, an associate professor of public affairs and sociology at the University of Wisconsin  -Madison.
Herd is a co-director of the Wisconsin Longitudinal Study, one of the largest and longest-running investigations   of how lives unfold in high school and beyond. The study, funded by the National Institute on Aging, has followed more than 10,000 members of Wisconsin’s 1957 graduating class for over 50 years, beginning when they were seniors and continuing throughout the decades as they established careers, raised families and began their lives as retirees and grandparents.
The Wisconsin program is the granddaddy of a generation of studies that are just now coming to fruition. They’re being joined by a slew of shorter-term studies conducted by psychologists, sociologists, economists and epidemiologists, researchers from varied fields who have all taken an interest in the high school years. “Social scientists are realizing that many of our adult outcomes can be traced back at least in part to our experiences in high school,” says Robert Crosnoe, a sociologist at the University of Texas at Austin and the author of Fitting In, Standing Out, a 2011 book   that draws on his seven-year study of the adolescent social scene.
It’s not just the turbulent life stage of adolescence that has consequences for our later lives, Crosnoe stresses, but also the interactions of this developmental transition with the structures and hierarchies of high school. The institution has its origins in the secondary schools   of the early 19th century, but it was only in the past 50 years or so — when high schools swelled as the children of the baby boom entered adolescence and youth culture took center stage — that our popular notion of high school took shape. Namely: high school as a formative life experience, as social as it is academic, in which students encounter a jostling bazaar of potential identities — from jock to prep to geek — and choose (or are assigned) one that will stay with them for years to come.
And yes, there’s some truth to the yearbook predictions, social scientists find. Broadly speaking, the brainy grinds and the glad-handing class officers achieve success as adults. The jocks are fitter and in better health. The outcasts and dropouts are more likely to be depressed and unemployed. The kids who drank and smoked pot under the bleachers are mostly still drinking and doping, sometimes to excess.
But it may be time for a re-evaluation of many of our notions about what matters in high school, say researchers who study adolescence and its aftermath, including popularity and friendship, intelligence and hard work. For example, “popularity is not all it’s cracked up to be,” says Kathleen Boykin McElhaney, a psychologist at the University of Virginia. Her study   of 164 adolescents, published in the journal Child Development in 2008, found that teenagers who don’t belong to their schools’ “in” groups can still function well socially if they find a comfortable niche among their classmates. As long as they feel happy with themselves and their friends, it doesn’t matter how popular they are. “Our work shows that popularity isn’t all that important,” says McElhaney. “The key is finding a group of people with whom you can feel at ease being yourself.”
Indeed, recent research suggests that popularity isn’t entirely positive. Belonging to the cool crowd is associated with higher rates of drinking, drug use, sexual activity and minor delinquency during adolescence. And the connection between social status and risky behavior may be a lasting one: a 2008 study   co-authored by Marlene J. Sandstrom, a professor of psychology at Williams College, reported that popularity in high school was associated with higher rates of substance abuse and sexual promiscuity in the three years after graduation.
What’s more, popular kids may not even be well liked. Researchers distinguish   between two types of popularity: perceived popularity, or how socially prominent individuals are, and sociometric popularity, or how well liked they are. Membership in the two groups often doesn’t overlap. Sociometrically popular teens have a wide group of friends and are described by classmates as trustworthy and kind; perceived-popular students are admired and envied by their peers but are also regarded as arrogant and stuck-up. And no wonder: many studies have linked perceived popularity to high levels of what researchers call relational aggression: spreading gossip, engaging in taunting and bullying and practicing exclusion and the silent treatment in order to maintain one’s social position.
If the populars don’t have a lock on friendship, neither do the brains have an exclusive claim on post–high school success. In a recent study  , Stephen D.H. Hsu and James Schombert, physics professors at the University of Oregon, analyzed undergraduates’ high school test scores and college grades. “Low SAT scores do not preclude high performance in most majors,” they reported. High-achieving students often succeed because of their dogged effort, they pointed out, rather than innate brilliance. “Our results suggest that almost any student admitted to university can achieve academic success, if they work hard enough,” the authors concluded.
Another study  , by economists Jeffrey S. Zax and Daniel I. Rees of the University of Colorado, examined the connection between individuals’ IQ and academic performance, measured in the last year of high school, and how much money they were making in their mid-30s and early 50s. Using data from the Wisconsin Longitudinal Study, they concluded that “previous analyses have overstated the role of intelligence in economic success.” Hard work and the development of capacities like conscientiousness and cooperation also matter for success, not to mention personal satisfaction and fulfillment. Coveted as they are in high school, brains and popularity get you only so far in the real world.
For some unhappy teens, life is bad in high school and threatens to stay that way if they don’t get help. For these students — the ones with drug and alcohol problems, the ones who are bullied and harassed, the ones who drop out of school altogether — intervention by adults is more important than ever, says Crosnoe. “Education is critical to making our way in today’s society, especially today’s economy, and kids who miss out on the full academic and social experience of high school will feel the effects of that lack reverberate through their lives for many years to come.”
For the rest of us, high school is one important experience among many — a lasting influence, but one that is hardly determinative. In the study by Zax and Rees, the authors ended on an unexpected note. “The most striking result,” they said, was how little they were able to make predictions about people’s adult lives on the basis of characteristics measured in adolescence. At least 75% of the variation seen among people in middle age couldn’t be foretold from what they were like in high school — meaning, they wrote, that “there is plenty of opportunity for individuals to rise above or fall below the level to which their endowments and environment might direct them.” So maybe life is more than just high school, after all.

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The Start-up Turning Point: When You Need to Ask for Help 11-19

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The Start-up Turning Point: When You Need to Ask for Help

It was another hair-pulling day on the startup front lines. Scott Rousseau had spent $700 to exhibit his gourmet sea salt at a retail trade show, but the place was a ghost town. "Nine hours a day for three days in a row, and it was a dead loss," recalls Rousseau, owner of Woburn, Mass.-based Beyond the Shaker  .
Worth his salt: Scott Rousseau of Beyond the Shaker.
Worth his salt: Scott Rousseau of Beyond the Shaker.
Photo © Kristin Teig
Rousseau and the exhibitor in the next booth, a woman with a jewelry line, had plenty of time to get to know each other. A month later she reached out to him with an idea: She suggested that Rousseau take part in the wholesale New England Made trade show, despite its expensive price tag. Rousseau risked $2,000 on the tip, purchasing a booth at the 2012 show. The move paid off: He closed deals with 15 stores and two distributors. One of the distributors had her own trade show, which in turn led to 10 more accounts--a breakthrough event critical to Beyond the Shaker's growth, as it moved the company's focus to the wholesale arena.
There's an irony at the root of entrepreneurship. You start a business to be self-sufficient and self-directed, but you can't achieve that without other folks lending a hand along the way. Particularly in a venture's early days, you are hardly a rugged individualist--more like a humble supplicant, reaching out for a sale, a distributor or an investment wherever you can. Contrary to the myth that entrepreneurs are one-person shows, there are hordes of people and events along the way that make small businesses possible. Knowing the scenarios that can help push a startup from treading water to liftoff--those crucial turning points--is essential for any entrepreneur.
The catalysts for such events come in many forms. It may be the introduction of key investors, manufacturers or clients; luck or serendipity can be factors as well. But the vast majority come from changes in attitude and tough personal choices.

It Can't Hurt to Ask

Opportunities for turning points don't fall from the sky. Change comes from relationships--connecting with others in a way that allows your idea, enthusiasm or opportunity to strike a chord. The critical lever is candor: treading that fine line between projecting credibility and being unashamed about your basic needs. "Being an entrepreneur and being shy don't go together," says Jay Miletsky, founder of New York-based MyPod Studios, part of the $7 million Sequel Media Group. "You can't be bashful in making a request."
Miletsky wasn't, getting his original investment of $400,000 from his girlfriend's boss and an acquaintance in his family network. He launched his site in 2010 as a platform for businesses to share videos with clients outside of YouTube. But the sales cycle was too long for corporate clients, and his initial investor was calling twice a day for progress reports. After three "very miserable" months, he turned to a not-so-near acquaintance: his mother's friend's daughter's husband.
The two weren't particularly friendly, but necessity is the mother of geniality. "I knew he was in this industry," Miletsky recalls. "I asked him, ‘Can we grab lunch?' I told him, ‘I know you know a lot about this industry, and I'd like some advice.' Everyone likes to feel they can give advice."
Turned out the man had funds, a small incubator for new online ad businesses and the contacts needed to shift MyPod Studios to a consumer, ad-supported video site. Without him, Miletsky says, "we would have been hard-pressed to afford being able to make the switch."

One Big Buyer

For consumer products, finding an influential buyer is a time-tested route to success. It often happens when someone at a large retail operation opens doors to shelf space, influencing others. For Ginny Simon, a former nutritionist in Miami who started ginnybakes  , a line of organic, gluten-free bake mixes and cookies, that key force was Eddie Niemes, manager of a Fresh Market grocery. Niemes tasted the product, liked it and sent it to company headquarters in Greensboro, N.C., where it got the thumbs-up for distribution among all 120-plus Fresh Market stores.
Ginny Simon of ginnybakes found a recipe for success.
Ginny Simon of ginnybakes found a recipe for success.
Photo © Joe Sands
"If it wasn't for Eddie, I don't think there would be a ginnybakes," Simon says. "He gave me my first break." Simon, who launched her venture in 2010 for $25,000, has ridden that break far. Not long after Fresh Market accepted her products, she got into Whole Foods Markets in the Southeast, and later into 70 Publix stores. Ginnybakes expects to see sales of $3 million to $5 million next year. Simon's husband, Steve, has quit 26 years of lawyering to help manage the company.
"The local Whole Foods and Publix buyers believed in me and my product and that the local community would want it," Simon says. "And we had the right product at the right time. I would say it's karma. We were at the head of the trend to gluten-free."

Mentorship with Meaning

While Simon's turning point happened quickly, for Richelieu Dennis of Amityville, N.Y.-based Sundial Brands  , it took 20 years and a bit of expert guidance.
Dennis and childhood friend Nyema Tubman, exiled from their native Liberia by civil war, sold shea-butter soaps, crafted from a recipe by Dennis' grandmother, on the streets of Harlem in the 1980s and '90s. They then graduated to flea markets, festivals and county fairs. "There were so many no's, so many artificial barriers," Dennis says of breaking through to a larger market. "The ability to forget is a prerequisite for an entrepreneur."
Sundial Brands
Photo courtesy of Sundial Brands
Store buyers pigeonholed his hair and skincare products as ethnic items that should be sold at bargain-basement prices. But Dennis saw Sundial as a premium brand with appeal to all. For 20 years the company's long-term solvency was uncertain, but the partners persevered until they met Macy's buyer Debbie Murtha at a diversity fair. She gave them a primer on branding and pricing, leading to an order from Macy's in 2008.
The right mentor made a difference for Sundial. "She gave us access to high-level retailers and the opportunity to be successful. It was truly, incredibly validating after so many years," Dennis says.
The Macy's cachet led to an even bigger buy from Target, where Sundial launched its SheaMoisture brand in 2010. Before the Macy's order, Sundial had 20 employees; today the company has 100.

Seeing With Fresh Eyes

Even experienced entrepreneurs don't have all the answers, so an unbiased outside opinion can offer clarity. At Redbubble, a website where independent artists sell wall art, T-shirts and other products, company identity was a sticking point. Board members had initially positioned Redbubble as a market for high-end art. But after the Melbourne, Australia-based company invested $150,000 in an outside review with focus groups, they learned that consumers were more interested in unique items selling for less than $60.
"We ended up riding a wave we didn't know existed: people against mass products," co-founder Martin Hosking says. The company rebranded after the study, resulting in 100 percent sales growth annually for the last four years. Redbubble now has annual sales of $25 million.
New perspectives also helped Adam Miller, CEO of Cornerstone OnDemand, a company that sells cloud-based talent management and human resources software. A trip around the world when he was 25 taught Miller that he didn't have all the answers, and that he needed to watch his step: A slip on an icy Himalayan ridge almost cost him his life before a Sherpa guide caught him.
Miller, who started Cornerstone out of his New York apartment in 1999, brought in a consultant in 2005 to help with another slippery slope. His sales team didn't seem to know how to solution-sell and weren't using case studies of early clients effectively. Additionally, the company name, CyberU, "didn't give prospects the feeling the company was viable," Miller notes. His goal was an IPO, but Cornerstone "was nowhere on track to be a public company," he says.
Miller decided to "fire" himself, take some time away and come back with fresh eyes. "It's remarkable what you can see when you do that," he says. "I saw all the things that were wrong with the business."
After attending a sales seminar by Steve Martin, a business consultant and author, Miller asked if they could meet. Martin told Miller to act as if the firm had only 12 months to live; in other words, to rethink everything. Miller wound up changing the company name, repositioning and reinventing the sales operations. After the makeover, Cornerstone went on to raise its first venture capital round and in 2011 had a successful public offering. Today its products are used in 190 countries.
Was it a stroke of genius or luck? "Luck is part of it sometimes," Miller admits, "but fortune favors the prepared."

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VISION AND MISSION SHOULD DRIVE STRATEGY 11-20

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VISION AND MISSION SHOULD DRIVE STRATEGY


The chart below demonstrates the approach for developing a successful marketing strategy. The graphic suggests that a vision and mission should drive the price, place product and promotion marketing components and that once these 4 Ps are identified a strategy can be developed.


It is interesting to ask which of the 4 P’s is most important.  To determine value of each of the four Ps requires a vision and mission statement that clearly defines the nature of a business, the market segment to be served and an idea of what success looks like.


  


For my classes at the University of Houston’s Bauer College of Business I have used the example of an individual with a pressure washer and limited funds wishing to enter into the maintenance business and grow to be a major player in home and commercial maintenance.


This individual might create a vision statement that as follows:  1) To make available quality exterior maintenance service to home and business clients throughout the state of Texas, and 2) Create value and make a difference.


The mission statement might be as follows: 1) Using internal cash flows to develop an organization that provides exceptional quality service at reasonable rates, 2) Create a network of technology and industrial partners to provide innovative and effective solutions for exterior building maintenance, 3) Develop an organization that is highly effective, lean and fast moving and 4) Maximize financial returns.


This vision and mission statement would help determine how the components of marketing would fit together to develop a marketing strategy. Since we know that it is to be a self-financed operation and that the only service now available is pressure washing, identifying the market that can be served now is important. The potential customers are those that need pressure washing but can’t afford or don’t want the services of well-established exterior maintenance companies.


After some consideration a strategy statement might be developed. In this case the marketing strategy statement might be: To market convenient, low price pressure washing service to individual home and small business owners while adding services and markets as cash flow allows.


In this case product does not define what the business vision is for the long term. Here the Ps requiring attention will be promotion to efficiently let potential customers know of the service available. The place P will also be important in that the service should be offered only in areas that can be served with existing personnel and equipment.


It is with the vision and mission driven strategy that the Planning, Organizing, Directing and Controlling components of management can be employed. At this point strategy directs the development of the tactics that are in alignment with the vision and mission.


Planning would start with available resources and describe the process to grow from a single pressure washer driven organization to a statewide organization providing services to a large base of customers. The plan would describe the growth rate based on reasonable customer base growth and new services to be offered. The planning would consider the type of work force to deliver the service (brokered, through other providers, independent contractors, employees and so on).


The plan would describe the internal cash flows and the amount of cash to be used to maintain and grow the business. It would also describe approaches to increase cash flows, incur debt or invite equity partners into the business.


The plan would also describe the whether the types of equipment needed, when it would be needed and if it should be leased or purchased. Finally, the planning process would indentify the methods by which the company would be managed from sales approaches to accounting procedures from quality control to credit management and job logistics.


After the plan is developed and compared with the vision, mission and strategy the business can set the organizational structure, understand how to direct activities and create reports that allow management to gauge how closely actual results measure against planned goals.


This is a simple example but shows the importance of understanding what an organization wishes to do (vision/mission and strategy) before developing tactics.


I recently visited with a young entrepreneur who had a small business that was seasonal. This entrepreneur also had a pretty clear idea of what he would like his business to grow to over time.


Faced with the need to fill in the off-season business cycles he thought he would provide other types of seasonal businesses. While it was a reasonable approach the seasonal business would not move his company toward the ultimate goal he had set for the business.  I advised that using an approach of filling available work time with work that didn’t support the long-term goals of the business could change the focus and perhaps prevent the attainment of the long-term goal.


Young entrepreneurs aren’t the only people facing this dilemma. Seasoned CEOs find themselves faced with challenges and responding to market changes and competitors in ways that are not in keeping with the organizations mission and vision. These CEOs are usually driven by short-term profit requirements and analyst’s expectations.


It can be difficult to always go back to check to see if the latest tactics being implemented to address a business challenge support the firm’s mission and vision. It is more difficult to require that mid-level managers spread across many operating units only implement tactical solutions that are in keeping with the firm’s overall mission and vision driven strategy.


By not insuring implemented tactics are in alignment with a mission and vision driven strategy is the surest way for an organization to find itself in an unintended business, producing value for unintended markets. This can spell financial ruin in the worst case and in the best of cases it will require a change in the mission and vision statement and direction of the business.




Atrial Fibrillation (AFib) Myths and Facts 11-20

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Atrial Fibrillation (AFib) Myths and Facts

By Michele Chan Santos 






Atrial fibrillation, also known as AFib, happens when your normal heart beat or rhythm is changed and may not be able to pump enough blood. About 1% of Americans have AFib.










Millions of people with long-lasting AFib live quite well, said Gordon F. Tomaselli, MD, director of the Division of Cardiology at Johns Hopkins University School of Medicine and a past president of the American Heart Association. "It's very possible to live a normal life for many years."

If you or someone you know has been diagnosed with AFib, it’s important to separate the myths from the facts. Here’s what you need to know:

Myth: People with atrial fibrillation shouldn't drive.

Fact:  "This is not true," Tomaselli says. "It really depends on your symptoms. If you have dizziness, lightheadedness, and are passing out, then clearly you shouldn't drive until your symptoms are cared for." Once your condition is under control through medication or other treatments, it's OK to drive, he says.

Myth: People with atrial fibrillation shouldn't have sex.

Fact: "That's false," says Dr. Richard Wu, MD, a professor of internal medicine at the University of Texas Southwestern Medical Center. "There is no medical reason for them not to. Simply having AFib does not mean having to give up intimacy."

Myth: You can get AFib from drinking coffee.

Fact:  There's no link between drinking coffee in moderation and AFib, Wu says. "Actually, it's the opposite. A moderate amount of caffeine gives you a lower risk."

Myth: Eating ice cream or drinking something cold always leads to AFib.

Fact: Some people’s heart rhythms do change after having cold drinks or eating ice cream, Wu says. This is because your food pipe, or esophagus, which can be sensitive to cold, runs right behind the top part of your heart, which is where the heartbeat gets changed in AFib, Tomaselli says. Because the esophagus and the heart are close together, you might have an irregular heartbeat.

This doesn’t mean you can’t eat your favorite ice cream again. Many people with AFib aren’t affected this way, and even in many who are, it won’t be a trigger every time, Tomaselli says. 

Myth: Only older people develop atrial fibrillation.

Fact: "It can occur in anyone at any age," Tomaselli says. "But it is more likely the older we get." Wu says that many with AFib are diagnosed between the ages of 50 and 65.

Myth: You would know if you had atrial fibrillation.

Fact: About 15% of AFib patients have no symptoms before diagnosis, according to Wu: "A patient might come in for a routine physical and their doctor notices there is an irregularity." Other patients might not realize they have AFib, but "they know something is not quite right," Tomaselli says. "For example, if their tolerance for exercise has changed." If something feels off, see your doctor.


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KIPP’s Michael Feinberg on Closing the Worldwide Education Gap 11-20

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KIPP’s Michael Feinberg on Closing the Worldwide Education Gap 

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The Knowledge is Power Program (KIPP), the intensive public school program, was launched in 1994 by teachers Michael Feinberg and Dave Levin. The organization predominantly serves low-income American students from African-American and Latino families. These are the children who often fall through the cracks of America’s education system, but KIPP focuses on ensuring these students go to college, graduate from college and move on to rewarding careers.
KIPP is working to close the achievement gap between rich and poor students and its success rate has been notable: Over the course of 20 years, it has grown into a network of 141 American public schools filled with 50,000 students. The KIPP education model — with rigorous hours and demanding academics — is now being replicated in schools around the world.
Knowledge@Wharton sat down with co-founder Feinberg to understand how KIPP began, how it developed and grew, and how it continues to inspire educators and students on a global scale. Feinberg also describes how the founder of retailer Gap helped KIPP expand across the U.S., and outlines the challenges KIPP continues to face as it expands.
An edited transcript of the conversation appears below.
Knowledge@Wharton: Mike, thank you for joining us. Before you started KIPP, you taught fifth grade as part of the Teach for America program. Could you tell me the story of your first teaching experience and how that led to the creation of KIPP?
Feinberg: I taught fifth grade for two years before starting the Knowledge Is Power Program with my partner, Dave Levin. We were both 1992 Teach for America members placed in Houston. I was a fifth grade bilingual teacher…. There was a huge shortage of teachers at the time. Dave was in another part of town teaching upper elementary [students]. Like all first year teachers, we were horrible. In fact, I think we were probably the worst of the horrible teachers.
We latched onto the master teachers and learned how to teach. You learn how to teach through apprenticeships. At the end of our first year, we thought we were doing a pretty good job with our kids. They loved learning. They became excited about school and wanted to go to college and have a career. We very naively thought we had succeeded in our work. In the kindergarten to grade 12 assembly line, we gave our kids a great fifth grade year. Then they went off to “bigger and better” in middle school. And that naïve bubble burst around the second week into our second year of teaching when we watched our former kids start to fail. They were skipping school and joining gangs and doing drugs. It was alarming.
At first it was easy to blame the other schools and teachers. But one night in late 1993 we had this epiphany that all that finger pointing was adding to the problem, not contributing to the solution. So we looked in the mirror and we pointed the finger at ourselves. We stayed up all night pouring our feelings of failure and frustration onto the computer, and by about five in the morning we had the Knowledge Is Power Program (KIPP) written up.
The premise of KIPP back then, 20 years ago, as it is today, is very simple: There are no shortcuts. If we’re going to try to provide children with all the academic, intellectual and character skills they need to do well throughout their lives, then we need to quit looking for the “magic bullet”. We have to roll up our sleeves and get to it.
So we started the Knowledge is Power Program thinking we were going to motivate kids to go to school from 7:30 a.m. to 5:00 p.m., four hours on Saturdays, half the summer [and complete] two hours of homework a night. We quickly realized one year wasn’t enough. That’s when we turned KIPP into a school, and now it’s become a network of schools.
Knowledge@Wharton: What were some of the biggest challenges that you faced when you were creating KIPP, and how did you overcome them?
Feinberg: The biggest challenge in the early years remains the biggest challenge today. On any given day, in any given hour, in any given classroom, teaching and learning is extremely difficult. Everyone thinks that they know how to do it well, especially with lots of experience under their belt. But being in front of a group of children and imparting knowledge from your brain and heart into the brain and heart of a five-, 10- or 15-year-old is an extremely difficult art and science. To do it at a high level is the most difficult part.
The other difficult part is simply getting people to believe in your idea. It’s difficult to convince people about a new program … that will help under-served children succeed in school and life at the highest levels of society.
We’ve come a long way since the early 1990s and more people believe today than they did 20 years ago. But collectively, society doesn’t yet believe that the achievement gap is something that we can overcome. That’s what we are trying to demonstrate and prove every single day.
“One night in late 1993 we had this epiphany that all that finger pointing was adding to the problem, not contributing to the solution. So we looked in the mirror and we pointed the finger at ourselves.”
Knowledge@Wharton: Let’s go back to talking about the basic structure of the program: The no-shortcuts approach. Is this something that evolved over time? And how has the basic structure of the KIPP education model evolved over the past 20 years?
Feinberg: The basic structure is still in place. I think the most innovative part about KIPP over the years is that we don’t try to be innovative. We just focus on great teaching.
Any school in the world that is doing a great job, I’d argue, has two basic ingredients: great teaching and more of it. It’s that simple. But that is easy to say and hard to do.
Ultimately, we focus on a basic structure of longer school days, weeks and years; great teaching and learning; and having a culture of high expectations, quality inputs and quality outputs. It’s about getting our kids to go to and through college and have the freedom to do in this world what they want to do. We’re focused on executing on those things day in and day out.
Also, one of our most central core beliefs is that promises to children are sacred. We promise parents and kids that if they choose to come to our KIPP public schools, we will do whatever it takes to help them get to and through college. That’s a bold promise, and we’re on the hook. We are accountable to make sure that child’s future is secure. That’s what gets us out of bed in the morning, and that’s what motivates us to do right by the kids and parents in our communities.
Knowledge@Wharton: Do the kids and parents also make a similar promise? Do you try to select the most highly motivated kids and parents?
Feinberg: We don’t select our kids and parents. They select us. It’s a public, open-enrollment school, which means anyone can come. If enrollment outpaces classroom space, we use a lottery system for admission. The only kids who don’t have to be in a lottery are the younger brothers and sisters of current students. But we do not do any kind of selection. We are just a public school of choice.
Knowledge@Wharton: You have about 50,000 students right now across the 141 schools that are part of your network. How many students apply to become part of KIPP?
 How many are you able to admit?
Feinberg: It varies from region to region. In Houston, we now have 22 schools and 11,000 kids. Last year, we had nearly 10,000 kids apply to KIPP, but we only had room for 2,000. So we had a very difficult lottery. We are trying to grow as fast as we can to accommodate as many people as we can, but we are growing as slow as we must to maintain quality.
Knowledge@Wharton: That’s a great approach: balancing growth and not compromising on quality. I’m glad you’re straddling that.
Feinberg: There are people that are amazed about our growth and how big we’ve become. We are proud of having this high performing network of 141 schools and 50,000 kids. But remember, we are about to celebrate our 20th anniversary in 2014 and there was no growth for the first six years. When we started growing, we grew through a terrific school leadership training program, which was supported by Don and Doris Fisher, who founded [retail stores] Gap and Old Navy. Now we are growing by 15 to 20 schools a year. But this did not happen overnight.
Knowledge@Wharton: You mentioned that there was not much growth in the first six years, and then KIPP got a jumpstart. Was this from your partnership with the Fishers? How did this come about?
Feinberg: Yes. The KIPP program started as a school in Houston and a school in New York City. Dave Levin started the KIPP academy in the Bronx. I stayed in Houston and started the KIPP academy there. Both of us focused on fifth grade. We grew it one year at a time. We kept our heads down and focused on our kids and delivering on our sacred promise. By 1999 our two schools became full-sized fifth grade to eighth grade charter schools. They were some of the highest performing schools in their respective communities.
Then 60 Minutes did a piece on our kids and that opened up the floodgates. We had people calling us, saying, “We saw that program on TV. Can we order 15 KIPPs for next year?”
We started thinking about how to leverage the success of these tiny schools for the greater good. We started asking people how to scale the ideas and the success. We were fortunate enough to build a relationship with Don and Doris Fisher, who were very passionate about educational reform in the United States. It was a terrific match and we created a new, non-profit foundation called the KIPP Foundation in April 2000. The goal was to find amazing teachers and train them for a year in this fellowship program — the Fisher Fellowship — to get their business and leadership skills to compliment their terrific instructional skills. From there, we helped them open and operate new KIPP schools. That’s how we’ve been growing for the past 13 years.
“Being in front of a group of children and imparting knowledge from your brain and heart into the brain and heart of a five-, 10- or 15-year-old is an extremely difficult art and science. To do it at a high level is the most difficult part.”
Knowledge@Wharton: You’ve mentioned the importance of passionate teachers. What do you think makes a great teacher, and how do you identify the teachers who are the best fit for KIPP?
Feinberg: I think there are four things that make a teacher a great teacher. First and foremost, the teacher must have a lot of knowledge and passion about [his or her] subject matter. They can bring in a wealth of outside resources into the classroom to make the learning come alive.
Second, teachers must know how to take all that knowledge and passion from their brain and heart and transfer it into the brain and heart of their students. For most of us, that’s a skill that must be acquired over several years.
Third, teachers must have a “Do whatever it takes” attitude.
Lastly, these teachers have to buy into the core beliefs and values of their schools. It’s possible to be a terrific teacher, but still not fit with the rest of the faculty. We need people who are going to be good teammates, not just in their classrooms but in the teachers’ lounges as well.
Knowledge@Wharton: So you partnered with the Fishers to create the KIPP Foundation. You took KIPP national. What challenges did you face in scaling things? How did you overcome them? What lessons did you learn?
Feinberg: For us, if great teaching leads to a great school, the critical path is a great school leader — the principal. The principal, or the school leader, is going to be the one who’s going to recruit the great teachers, develop the great teachers, retain the great teachers and motivate the great teachers. For us, the most challenging part has been recruiting those amazing leaders. In the last 13 years we’ve had more than 5,000 people apply for the Fisher Fellowship. We’ve given out about 190 fellowships, but 30 people didn’t make it through the fellowship program. There’s not a quota, that’s simply how many people we’ve been able to successfully find to do this work.
Thankfully, now it’s getting relatively easier as we’ve created this large footprint of schools. More and more of our Fisher Fellows are our teachers who are developing further leadership qualities. But ultimately, finding these school leaders and keeping them is the biggest challenge.
Knowledge@Wharton: People in other countries are trying to replicate your success, but they’ve had some difficulties. They’ve found that although they may have a great program, when the students go back to their social and family environments, sometimes this undoes some of their great work. How have you faced this challenge?
Feinberg: We form great relationships with all of our families as part of our work. We’ve partnered with our families. There are some examples where the parents can feel threatened by their child learning more about the world than they have. But that, I would say, is more the exception than the rule. For the most part, families are hungry for their children to learn and live the American dream.
Now that we’re doing international work and helping educators start these KIPP-inspired schools in India, South Africa, Israel, Chile and Mexico, I realize that the American dream is really a global dream. It’s hard to find parents who don’t want their children to have a better life than them. Parents know that education is the ticket for their kids to have a better life.
Knowledge@Wharton: I’m fascinated by your overseas expansion. Can you tell me a little bit more about the challenges involved with this?
Feinberg: Sure. For years we had international educators knock on our door and ask for help. That traffic has increased in the last four or five years. For a few years when they first came to us, they would say, “Can you come to our country?” Our answer was always, “Sorry, we still have a lot of work to do here.” But I told them, “We can help you through our leadership training. If you have someone in your country who has got the skills and passion, and there are resources to get them to the United States, have them come over here and train with us through a Fisher Fellowship. They can steal all our great ideas.” We don’t believe in intellectual property. We give it away. Then they can go back to their country and start a great school. It won’t be a KIPP school, but it will be a KIPP-inspired school. They will be part of our network and we can all learn and grow together. We didn’t market this idea. We just put the bait in the water.
Israel was the first country to take me up on this offer. Then came the Indians. Then the Mexicans. Then the South Africans.
We’ve spun off a new non-profit called the One World Network of Schools because there’s such a growing line at the door. So now, when people knock on KIPP’s door, we refer them to One World. The One World Network of Schools helps with the training, support and founding of these new schools.
Meanwhile, when people first knock on our door they think they want to replicate KIPP. But what they really want to replicate is the KIPP School Leadership Program. My Indian friends don’t talk about starting dozens or hundreds of schools. They need thousands. There’s a bit of a scale issue in India. And we don’t have enough seats to train everyone in the United States. So ultimately, we have to replicate the KIPP School Leadership Program in these other countries so there are places for teachers to get trained to start these transformative new schools. That’s how you can scale this.
“When people first knock on our door they think they want to replicate KIPP. But what they really want to replicate is the KIPP School Leadership Program.”
Knowledge@Wharton: How do you measure KIPP’s success?
Feinberg: Ultimately, we have to ask ourselves: Did we deliver on our sacred promises to our children? Did they get through college and now have the freedom to succeed in life? We start tracking kids from eighth grade and I can tell you that 100% of my kids will go to college from my class of 2013. But if I look at my eighth graders from a bunch of years ago, roughly 85% to 90% went to college. So far, depending on the region, 45% to 48% have graduated from college.
We think about these numbers in two ways: On the one hand, we celebrate this because this is five or six times better than the national average, where just 8% of low-income kids graduate from college. Also, 31% of all adults in the United States have a college degree, and we’re a lot higher than that, so we celebrate that, too. But compared to 82% of top-quartile income kids who graduate from college, we’re still well below that number. So we still have an achievement gap and we want to close that gap.
Knowledge@Wharton: What are the main obstacles to closing that achievement gap? How are you tackling them?
Feinberg: Firstly, it’s just continued rigor in pre-kindergarten through 12th grade. It’s about getting the kids set up for academic success. Those numbers I gave you were all for kids who started KIPP in fifth grade. We’ve since started primary schools, so by 2018 we should see the benefits of starting kids in KIPP at an even younger age.
Secondly, there are financial issues, both direct and indirect. On the direct side, the cost of higher education is going through the roof. It’s difficult to afford.
Knowledge@Wharton: How do you deal with that?
Feinberg: We help our kids apply for scholarships and maximize financial aid as much as possible.
There’s also an indirect challenge with the family, because sometimes parents push their kids to stop school and come back home to take an $8-an-hour job to help the family pay rent. Alternatively, sometimes students take on full-time work — 40 hours a week in a mall — to make tuition payments, and that means 40 hours a week that they’re not studying in the library. Then their grades suffer and their financial aid packages close down and it’s a vicious circle. That’s the financial challenge.
There is also horrible college counseling in this country. Sometimes kids who should be staying close to home go far away, and kids who should go to a small school go to a big school. Or sometimes they choose a school where it’s difficult to finish the program. That’s a problem.
There is also all the challenges of being a first generation, low-income kid. You can’t call home for the right kind of advice. And you need those non-academic skills too: You need grit, self control and optimism. No one is born with those things, you develop them over time.
Those are the things we have to work on, both on the kindergarten to grade 12 side, and on the higher education side….
Knowledge@Wharton: When it comes to funding college education, does your curriculum emphasize things like financial literacy, entrepreneurship and leadership?
Feinberg: Absolutely. Our KIPP college team starts in middle school, teaching kids about what it’s going to take to be prepared for college and life. Leadership, personal finance and entrepreneurship are all part of that.
It’s about academics, but also character. There’s a lot beyond traditional subjects that we need to give to our kids to set them up for success.
Knowledge@Wharton: Where would you like KIPP to be on its 25th birthday?
Feinberg: By our 25th anniversary, I would love to say that we are truly closing the achievement gap. I would love to inspire other schools to improve and see our 8,000-kid wait-list in Houston shrink because the other schools have gotten better, so kids and parents stop wanting to come just to KIPP. That’s what I’m hoping for.
Knowledge@Wharton: Anything we can do to help you get there?
Feinberg: … Universities should be partners with the K-12 schools and give feedback about where knowledge gaps exist. We want to find out where our kids aren’t doing well to help them succeed.
Lastly, it’s about great teaching and having a terrific faculty that keeps developing teaching skills.

American Express CEO Kenneth Chenault: Valuing EQ over IQ 11-20

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American Express CEO Kenneth Chenault: Valuing EQ over IQ

When Kenneth Chenault first came to American Express more than 30 years ago as a young executive just off a two-and-a-half year consulting stint at Bain & Company, he looked around and saw an opportunity in the corporation’s struggling merchandising group. The person overseeing that group and the rest of Travel Related Services at the time was Louis V. Gerstner, Jr., who later went on to become CEO of RJR Nabisco and then IBM.

Gerstner advised Chenault against getting involved with the offshoot business selling jewelry, stereo equipment and other odds and ends by direct mail to American Express customers. In fact, said Gerstner, he was ready to shut the whole enterprise down.

“‘Do not take this job,’ Lou told me over and over,” Chenault, now the chairman and CEO of American Express, said during a recent Wharton Leadership Lecture. ”But I said, ‘Lou, I want to take on a challenge.’ I never shied away from taking a risk, and I felt this was the way I should go.”

“My view is often to take on the assignments that no one else wants, particularly early on in a career.” –Kenneth Chenault

As Chenault started work, he looked around for what he called “the best and the brightest” available to him at American Express. He realized that because the division was a neglected part of the corporation, he would get experience in all aspects of that business, “something they would never have let some 33-year-old just out of the consulting business do otherwise. My view is often to take on the assignments that no one else wants, particularly early on in a career. Everyone wants to be in the glamorous part of a business. I wanted to learn.”

In the two years that Chenault ran merchant services, it went from an albatross to a profit center, its revenues more than tripling from $150 million to $500 million. Gerstner finally insisted Chenault join the credit card side of the corporation, and a leadership star was born. “Leadership takes many forms, but one thing that is most important is to realize that change is inevitable, especially in the age we live in now, and that you always have to be adaptable to change,” noted Chenault.

He emphasized that American Express itself was hardly a glamorous company when it started in 1850. It was the original company Henry Wells, William G. Fargo and John Butterfield founded to move freight. “Moving freight [was] not a business with a lot of glamour,” he said. “But they instituted core values that we still hold 163 years later in our day-to-day operations — integrity and customer commitment…. It is pretty extraordinary that a freight company founded in 1850 established a brand that remains relevant in 2013 in the digital age.”

Chenault took over as CEO in 2001 after a series of jobs that he held for 20 years at the company. It was unusual for an African American to reach the top of an American corporation, but Chenault has never felt his race either qualified him for a position or prevented him from getting it. He said he just had confidence in himself as a leader and went about his work methodically, never back-biting and always seeking advice even from executives who might have been competitors.

“I really did not focus on becoming a CEO until around 10 years before it happened, but I worked with people who could be viewed as competition and worked well with them,” he stated. ”I had straightforward conversations with them and said, ‘Let us focus on what is best for the company.’ I thought by doing that, everything would work out for the best.” When he became CEO, the top 10 executives in the 70,000-employee company all stayed on although over time, some left for other positions.

Identifying Good Leaders

Chenault described his leadership style as both simple and complex. The simple part, he said, is that he feels he has kept his integrity, that he has never tried to fool anyone and that he has been consistent in his goals: to serve that traditional triumvirate of customers, employees and shareholders.

He is constantly looking for good leaders in his company. He does not evaluate whether someone is a leader until he sees who that person’s followers are. “Who is listening to them? How many people respect him?” said Chenault, referring to the questions he asks of young leaders in particular. Mostly, he added, that is demonstrated when someone is both decisive and compassionate.

Chenault oversaw a restructuring of American Express’s business in 1995 as vice chairman. When it became clear he would have to eliminate nearly 16,000 jobs, he said decided to tell people up to 18 months before their actual departure date so that they would have time to adjust to the layoffs. 

“You do what you can to be compassionate, even when the news is bad,” Chenault said, which leads to another of his leadership principles — that the leader himself has to be a team player. ”The point is not to just be a nice person, but be effective, too. Sometimes being a team player is using what I call constructive confrontation. Be courteous, but push forward on what needs to be done.”

Although Chenault said he does not devalue intellect — after all, he went to Bowdoin College, one of the nation’s best liberal arts schools, and Harvard Law School — what he values more than IQ is EQ — Executional Quotient. ”A good leader wants to get it done,” he said. “EQ is the most important thing — to have the focus to get whatever the job at hand is completed.”

He believes leadership can, indeed, be taught, and while American Express does not have formal leadership training, Chenault hopes to teach by his own example. For instance, he likes to not only get consultations from his higher executives, but values feedback from every part of the company.

 “I reach down to all levels. Any employee who sends me a question, I respond. It may not be 100 lines, but something, and if people know you can be approached, they will come to you. That creates a positive attitude about the company.” Several times a year, he will go to different parts of the country and world and hold brown bag lunches with about 25 employees, none of them senior executives. “The physical presence of a leader is important. It shows the organization, no matter how large, cares about its [employees].

“I ask them only one thing, that when they leave the meeting, tell 20 people about it,” he said. ”I don’t care if they say, ‘Ken is a jerk,’ because at least it brings a connection. It is impossible to maintain a relationship with 70,000 people, but I don’t believe in the imperial CEO. The best organizations create thousands of leaders.”

Two Role Models

Chenault admires a number of leaders, but pointed to two favorites: Nelson Mandela and Warren Buffett.

The most important thing he has learned from Mandela is that even when you are in a crisis, you have to think about the future. “Here was someone in prison who came out a stronger person,” noted Chenault. “It was not just about survival. He thought about the vision of what he wanted the country to become. It is hard to see anyone in modern history who came out from prison” such a hero.

“Sometimes being a team player is using what I call constructive confrontation.” –Kenneth Chenault

He said he doesn’t admire Buffett just because he owns 14% of American Express through Berkshire Hathaway. 

“He is someone who has an intellectual curiosity and is also incredibly genuine as a person,” said Chenault. ”He admits that he loves business, but he also engages with people. He can walk down the street in Omaha or New York and will talk to people, tell a joke, sign a dollar bill for them. He has humanity and a steel trap mind. He has a nice swift way to say, ‘No’ — not in a harsh way, but [in a way that] does not waste people’s time.”

Chenault’s favorite quote about leadership is one he attributes to Napoleon: “The role of a leader is to define reality and give hope.” It is really difficult, he said, to find out the facts of a situation and to understand the ultimate implications. “You have to be open and honest to find reality, to get the right answers to your questions. But then you have to tell the people you lead what the reasons are to be hopeful, to tell them why you should inspire them.

“This is all easy in good times, but it is a deal-breaker during challenging times, and that is when you find out who the leader is,” he noted. ”The reputations of individual leaders are truly made or lost in times of crisis. You must gain loyalty by being decisive and compassionate. Otherwise, your reputation will vanish.”


Every Leader Needs a Challenger in Chief 11-20

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Every Leader Needs a Challenger in Chief

We are drawn to those who echo what it is we already believe. We get a dopamine rush when we are presented with confirming data   similar to what we get when we eat chocolate or fall in love. On Facebook we defriend those with different political views to our own  . On Twitter we follow people just like us.
Yet a vast body of research now points to the import of contemplating diverse, dissenting views. Not just in terms of making us more rounded individuals but in terms of making us smarter decision-makers.
Dissent, it turns out, has a significant value.
When group members are actively encouraged to openly express divergent opinions they not only share more information, they consider it more systematically and in a more balanced and less biased way. When people engage with those with different opinions and views from their own they become much more capable of properly interrogating critical assumptions and identifying creative alternatives. 
Studies comparing the problem-solving abilities of groups in which dissenting views are voiced with groups in which they are not find that dissent tends to be a better precondition   for reaching the right solution than consensus.
Yet how many leaders actively seek out and encourage views alien and at odds to their own?
All too few.
President Lyndon Johnson notoriously discouraged dissent, with many historians now believing that this played a significant role   in the decision to escalate U.S. military operations in Vietnam.
 Excessive group-think is now recognized to have underpinned   President Kennedy’s disastrous authorization of a CIA-backed landing at Cuba’s Bay of Pigs. Former employees of the now defunct Lehman Brothers have talked about how voicing dissent there was considered a career-breaker  
Yale economics professor Robert Shiller explained   that when it came to warning about the bubbles he believed were developing in the stock and housing markets just before the financial crisis he did so only “quietly” because: “Deviating too far from consensus leaves one feeling potentially ostracized from the group with the risk that one may be terminated.”
Is this the feeling the “clubby” environment in your boardroom is inadvertently engendering?
 Or are you actively signaling that you want to hear views different and diverse and in opposition to your own? We need to have the confidence to allow our own ideas and positions to be challenged.
Eric Schmidt, the Executive Chairman of Google, has talked about how he actively seeks out   in meetings people with a dissenting opinion. Abraham Lincoln’s renowned “team of rivals  ” was comprised of people whose intellect he respected and were confident enough to take issue with him when they disagreed with his point of view. 
Stuart Roden, Co Fund Manager of Lansdowne Partners’ flagship fund, one of the world’s largest hedge funds, tells me he sees one of his primary roles as being the person who challenges his staff to consider how they could be wrong, and then assess how this might impact on their decision-making.
Who in your organization serves as your Challenger in Chief? 
Interrogating the choices you are considering making? Making you consider the uncontemplated, the unimaginable and that which contradicts or refutes your position?
And also challenging you?
For we are not the robotic emotionless decision-makers of economics text books, bound to make the rationally best choices. Instead we’re prone to a whole host of thinking errors and traps.
Did you know that when we’re given information that is better than we expected — i.e. that our chance of being targeted for burglary is actually only 10% when we thought it was 20% — we revise our beliefs accordingly. 
Whereas if it’s worse — i.e. if we’re told that rather than having a 10% chance of developing cancer, we actually have a 30% chance — we tend to ignore this new information  ?
Are you aware of the extent to which our emotions or moods can skew our choices? 
You may already know that stress leads to excessive tunnel vision, but did you know that studies of both judges and doctors reveal that when stressed they typically revert   to their unconscious racial stereotyping biases? 
Or that if we go 24 hours without sleep or spend a week sleeping only four or five hours a night, our thinking is as compromised as if we were drunk  
Whilst studies in which people are presented with financial choices reveal that people make worse decisions when their blood sugar has dipped, but also when they’re feeling hot under the collar. Male students presented with a financial decision after having been shown either a “neutral” image such as a rock or a “hot” image of a lingerie clad Victoria’s Secret model, made significantly poorer choices after having looked at the “hot” image  .
And how about our propensity to become overly attached to the past?
You remember how huge Nokia was. From the 1990s onwards, Nokia dominated the mobile phone industry. At its peak the company had a market value of $303 billion and by 2007 around four in 10 handsets bought worldwide were made by Nokia.
But when Apple introduced its game changing iPhone in 2007, Nokia was caught sleeping on the job. Despite having themselves developed an iPhone-style device — complete with a colour touchscreen, maps, online shopping, the lot — some seven years earlier. They never released the product. Instead they decided better to stick with what they knew worked — good, solid, reliable mobile phones.
 As a former employee working in the development team at the time said of that decision  , “Management did the usual. They killed it!” When the iPhone was introduced, Nokia engineers sneered at the Apple devices’ inability   to pass their “drop test” in which a phone was dropped onto concrete from a five-foot height.
Nokia management believed that their successful past would continue to provide a reliable guide to the future, but as we now know it didn’t. In the six years since the iPhone was introduced Nokia lost about 90% of its market value. And when Microsoft bought Nokia’s phone business this month, the fire sale price it paid for it, only half what Google paid for Motorola last year, firmly reflected just how far it had fallen.
Your Challenger in Chief needs to be alerting you to such thinking errors and foibles. And you need to be listening to him or her.

A Smarter Way to Reduce Customer Defections 11-20

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A Smarter Way to Reduce Customer Defections

Companies can't afford to lose hard-won customers, but in truth some are more important to keep than others. Recent research by Sunil Gupta and Aurélie Lemmens explains how to find them.

 
Companies spend significant sums to acquire customers. Once hooked, marketers protect those investments by attempting to keep patrons happy, engaged, and most of all, loyal.
Reducing customer attrition, or "churn" in marketing parlance, often involves offering incentives such as discounts to individuals identified as likely to defect. The tricky part comes in figuring out exactly who should be targeted.
“YOU HAVE TO LOOK AT THE NET PROFITABILITY OF THE RETENTION CAMPAIGN”
Sunil Gupta, the Edward W. Carter Professor of Business Administration at Harvard Business School, argues that companies often fail to take into account the complete value of the customers they are trying to retain.
"What's missing from traditional methods is that they focus only on a customer's likelihood to churn, but not on the overall profitability of that customer," says Gupta, who cowrote the working paper Managing Churn to Maximize Profits with Aurélie Lemmens, an associate professor at the Tilburg School of Economics and Management.
They propose a new method to target customers that potentially boosts a company's profits in a big way—by more than 100 percent on average when compared to standard retention targeting efforts.

THE FIRST CUT

Customer attrition is a widespread problem that affects firms in a variety of industries. For example, US credit card providers often deal with annual churn rates of about 20 percent, and mobile phone carriers in Europe battle 20 to 38 percent churn, according to the paper.
Marketers must be more precise in identifying customers about to defect.Lost customers lead to untapped dollars. A McKinsey report estimated that reducing churn could increase earnings of a typical US wireless carrier by as much as 9.9 percent. It's no surprise then that executives in both the United States and Europe say customer retention is their highest marketing priority—and they've been given bigger budgets to fight the battle.
But as Gupta points out, identifying potential defectors to target is not as easy as it sounds. For years, companies have used churn management strategies that generally follow two steps: ranking customers based on the estimated likelihood that they will flee and then offering incentives to a core group of customers at the top of the churn ranking.
Gupta says these traditional methods are flawed. The two steps are not set up to maximize bottom-line profit of the retention campaign because they ignore a simple but important fact: Not all customers are equally important to the firm.
"You have to look at the net profitability of the retention campaign," Gupta says. "If I offer an incentive to customers most likely to churn, they may not leave the company, but will it be profitable for me? The traditional method is focused on reducing churn, but we contend the goal should be maximizing profits, rather than only reducing churn. People have been trying to refine and improve the method for the last 10 to 15 years, but many are missing the bigger picture."
To gain maximum profit from retaining customers, companies should consider not only the churn probability of customers, but also how much they spend, the likelihood that they will respond to a retention offer, and the cost of the offer itself.
Gupta's predictive model takes all these factors into account and also determines the optimal number of customers to target, rather than targeting an arbitrary number. Devising this number means finding just the right balance in the inevitable compromise the firm has to make between increasing the target size to reduce the potential loss of money from defection and reducing the target size to trim the cost of the incentives themselves. After all, while companies don't want to lose customers, targeting too many of them could become too expensive to be worthwhile.
“ACQUIRING A CUSTOMER IS FAR MORE COSTLY THAN KEEPING A CUSTOMER”
It makes sense to target higher-value customers who are most likely to defect and who are also most likely to respond to an incentive offer.
The model also takes into account customers' likelihood to respond to incentives. If a high-value churner is not likely to respond to a promotion, there's no need to send that person the promotion, Gupta reasons. "Sometimes the cost is low, like in the case of email. But sometimes it's substantial, where companies are sending high-gloss brochures."

BOTTOM LINE

The new method certainly isn't perfect; Gupta says he actually saw more prediction errors in terms of which customers will churn. However, the new method leads to better predictions where it matters most for a company's profit by allowing companies to target their most valuable customers while factoring in the cost of the incentives.
"Even if we are a little wrong in predicting the likelihood of customers] to churn in some cases, it's OK. Our goal should not be to minimize the accuracy of churn prediction, regardless of who the customer is. Our goal should be to minimize the error in profitability of who we target," Gupta says. "Even if I'm worse in my churn prediction, I will still be better off."
During their research, Gupta and Lemmens applied this method of more precise customer targeting to a major US wireless carrier—a company not identified in the study. They found that the approach led to, on average, a 115 percent improvement in profit compared to traditional targeting methods. These extra profits came with no additional implementation costs for companies.
"All we did was use the same incentive you would otherwise use," Gupta says. "There was no change in anything except who you target, so there was no additional cost."
Gupta and Lemmens also used projections to show that Verizon Wireless, the largest wireless provider in the United States with 111.3 million subscribers, could see a profit increase of at least $28 million from a single retention campaign if it applied their approach.
Gupta says the method could be applied in nonprofit areas to predict, for example, patient compliance to a medical treatment. In fact, this gain-and-loss-based method should help just about any organization looking to retain customers with discount offers.
"I think anywhere where churn is a big deal and companies are spending resources to reduce churn, this will be useful," Gupta says. "The larger the customer base, the more beneficial this model will be to the company. From my view, acquiring a customer is far more costly than keeping a customer. So any company that wants to retain its customers should find some value in this."

5 Steps to Take Your Product From Concept to Reality 11-20

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5 Steps to Take Your Product From Concept to Reality

5 Steps to Take Your Product From Concept to Reality
Image Credit: Manifesto
Jules Pieri started The Grommet  , a product-launch platform, after realizing that contemporary entrepreneurs have ready access to manufacturing technology such as 3-D printing but no easy way to get their products into consumers' hands.
Since 2008 The Grommet has brought 1,500 companies and 6,000 products to market through its online store, which produces video reviews and social media campaigns that emphasize the people behind the products. Says Pieri: "Our first cut isn't: Will this product sell well? It's: Do people want to know this story?"
Pieri, who serves as CEO, walked us through the steps for taking a product from concept to reality.
I have an idea for a product. Now what?
Make sure there's a large market opportunity. I see a lot of mompreneurs, for instance, who are solving a very narrow problem that their child will have for only six months. Don't overlisten to your own needs. Do Google searches and see how many people are searching to solve the same problem. Check reviews on Amazon to see whether there are existing products.
What's the best way to prototype?
Start with the elementary toolkit of foam board, cardboard. You can also do 3-D printed prototypes. We had a pitch session at Fenway Park where an 8-year-old came with a 3-D printed prototype. You can rent those machines for $15 an hour now, so they're not inaccessible. If you're starting to get the kind of response you'd hoped for, you might need a visual presentation, too. I love when someone reaches out to a designer or engineer to help move to the next level. Or you can join a hacker lab to try out ideas.
At what point should inventors consider crowdfunding? 
They should get a rough prototype together first. One insider tip: Make sure you get at least 20 percent of the campaign pre-funded before it goes live; 81 percent of campaigns that have a head start are successful. Crowdfunded campaigns also are a good way to get some market intelligence. If you can get a product funded, that's a good validator. The main drawback is that campaigners can be unprepared for success--you have to quickly figure out how to deliver everything you promised.
How do you decide whether to produce in-house or outsource?
There are online inventor communities that are useful for those kinds of questions, but you can also find someone with a product in the same vein--not a competitor, but someone who uses the same kinds of processes. Sometimes people don't feel confident just picking up the phone, but anyone who has cracked this really loves talking about it. It's a real triumph to crack supply chains. When it comes time to price, make sure you create a margin structure that later allows for retail partners. Generally you want the manufacturing cost to be one-fifth of the retail price.
What are some common rookie mistakes?
You'd be surprised by how many people have a wonderful product and get a big order from someone like us, and we get an e-mail saying, "I'll be back in two weeks." They're not taking their own business seriously, and that's the kiss of death. It seems so basic, so obvious to not do that, but we see it often. The way you can get things produced today, you don't necessarily need to have the business skills to complement that, so people aren't always prepared.

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