9 Habits That Lead to Terrible Decisions

Several years ago we came up with a great idea for a new leadership-development offering we thought would be valuable to everyone. We had research demonstrating that when people embarked on a self-development program, their success increased dramatically when they received follow-up encouragement.  We developed a software application to offer that sort of encouragement. People could enter their development goals, and the software would send them reminders every week or month asking how they were doing, to motivate them to keep on going. We invested a lot of time and money in this product.

But it turned out that people did not like receiving the e-mails and found them more annoying than motivating. Some of our users came up with a name for this type of software. They called it “nagware.” Needless to say, this product never reached the potential we had envisioned.  Thinking about the decisions we had made to create this disappointing result led us to ask the question, “What causes well-meaning people to make poor decisions?”

Some possibilities came immediately to mind – people make poor decisions when under severe time pressure or when they don’t have access to all the important information (unless they’re are explaining the decision to their boss, and then it is often someone else’s fault).

But we wanted a more objective answer. In an effort to understand the root cause of poor decision making, we looked at 360-feedback data from more than 50,000 leaders and compared the behavior of those who were perceived to be making poor decisions with that of the people perceived to be making very good decisions. We did a factor analysis of the behaviors that made the most statistical difference between the best and worst decision makers. Nine factors emerged as the most common paths to poor decision making. Here they are in order from most to least significant.

  1. Laziness. This showed up as a failure to check facts, to take the initiative, to confirm assumptions, or to gather additional input. Basically, such people were perceived to be sloppy in their work and unwilling to put themselves out. They relied on past experience and expected results simply to be an extrapolation of the past.
  2. Not anticipating unexpected events. It is discouraging to consistently consider the possibility of negative events in our lives, and so most people assume the worst will not happen. Unfortunately, bad things happen fairly often. People die, get divorced, and have accidents. Markets crash, house prices go down, and friends are unreliable. There is excellent research demonstrating that if people just take the time to consider what might go wrong, they are actually very good at anticipating problems. But many people just get so excited about a decision they are making that they never take the time to do that simple due-diligence.
  3. Indecisiveness. At the other end of the scale, when faced with a complex decision that will be based on constantly changing data, it’s easy to continue to study the data, ask for one more report, or perform yet one more analysis before a decision gets made. When the reports and the analysis take much longer than expected, poor decision makers delay, and the opportunity is missed. It takes courage to look at the data, consider the consequences responsibly, and then move forward. Oftentimes indecision is worse than making the wrong decision. Those most paralyzed by fear are the ones who believe that one mistake will ruin their careers and so avoid any risk at all.
  4. Remaining locked in the past. Some people make poor decisions because they’re using the same old data or processes they always have. Such people get used to approaches that worked in the past and tend not to look for approaches that will work better. Better the devil they know. But, too often, when a decision is destined to go wrong, it’s because the old process is based on assumptions that are no longer true. Poor decision makers fail to keep those base assumptions in mind when applying the tried and true.
  5. Having no strategic alignment. Bad decisions sometimes stem from a failure to connect the problem to the overall strategy. In the absence of a clear strategy that provides context, many solutions appear to make sense. When tightly linked to a clear strategy, the better solutions quickly begin to rise to the top.
  6. Over-dependence. Some decisions are never made because one person is waiting for another, who in turn is waiting for someone else’s decision or input. Effective decision makers find a way to act independently when necessary.
  7. Isolation. Some of those leaders are waiting for input because they’ve not taken steps to get it in a timely manner or have not established the relationships that would enable them to draw on other people’s expertise when they need to. All our research (and many others’) on effective decision making recognizes that involving others with the relevant knowledge, experience, and expertise improves the quality of the decision. This is not news. So the question is why. Sometimes people lack the necessary networking skills to access the right information. Other times, we’ve found, people do not involve others because they want the credit for a decision. Unfortunately they get to take the blame for the bad decisions, as well.
  8. Lack of technical depth. Organizations today are very complex, and even the best leaders do not have enough technical depth to fully understand multifaceted issues. But when decision makers rely on others’ knowledge and expertise without any perspective of their own, they have a difficult time integrating that information to make effective decisions. And when they lack even basic knowledge and expertise, they have no way to tell if a decision is brilliant or terrible. We continue to find that the best executives have deep expertise. And when they still don’t have the technical depth to understand the implications of the decisions they face, they make it their business to find the talent they need to help them.
  9. Failure to communicate the what, where, when, and how associated with their decisions. Some good decisions become bad decisions because people don’t understand – or even know about — them. Communicating a decision, its rational and implications, is critical to the successful implementation of a decision.

Waiting too long for others’ input. Failing to get the right input at the right time. Failing to understand that input through insufficient skills. Failing to understand when something that worked in the past will not work now. Failing to know when to make a decision without all the right information and when to wait for more advice. It’s no wonder good people make bad decisions. The path to good decision making is narrow, and it’s far from straight. But keeping in mind the pitfalls can make any leader a more effective decision maker.


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The Right Way to Present Your Business Case

You’ve already put a great deal of work into preparing a solid business case for your project or idea. But when it comes to the critical presentation phase, how do you earn the support of decision makers in the room? How do you present your case so that it’s clear and straightforward while also persuasive?

What the Experts Say
Without a winning delivery, even the best-laid business plans are at a disadvantage. “The idea may be great, but if it’s not communicated well, it won’t get any traction,” says Nancy Duarte, the author of the HBR Guide to Persuasive Presentations and CEO of Duarte, Inc., a company specializing in presentations and corporate messaging workshops. A memorable presentation transforms “numbers on a page” into something more tangible, says Raymond Sheen, author of the HBR Guide to Building Your Business Case. “It becomes a business opportunity that we’re grasping, a problem we’re resolving, a step forward for the company.” Here’s how to create a persuasive pitch.

Craft an emotional story
You may be tempted to stick to facts and figures to do the persuading for you, but great presenters know that the best way to hook an audience is through a story. This ‘story’ can be as simple as outlining the need, impact, and solution; the key is to present what’s at stake through a clear arc. But the more you can inject an emotional appeal or human connection into your narrative, the stronger and more memorable your case will be. That could mean illustrating the effects of a proposed customer management system with testimonials from actual customers, or describing how the data-sharing project you want to expand helped keep employees connected during a major outage. “With a business case, odds are that you’re trying to insert change,” says Duarte. “The first reaction to that change is typically fear,” and the only real way to get your audience to overcome their reluctance is to “appeal to the heart and not the mind.”

Lead with the need
In order to grab the attention of your audience from the outset, immediately identify the business need you are trying to address. Begin by asking yourself, “What is the message that I’m trying to get across?” says Sheen. Is there a market opportunity the company is overlooking? Does the firm need a new IT system? Clearly articulate this need as soon as you begin, because no matter how well researched or innovative your solution, you won’t get support if the need isn’t apparent or convincing. “Make sure you also show how that the need aligns with corporate goals and strategies,” Sheen says. “Just because you see an opportunity doesn’t mean that the business will want to pursue it.”

Address your audience’s concerns
Addressing the individuals concerns of stakeholders in the room will go a long way toward winning you allies. “If the finance person frets about keeping expenses under control, discuss expense numbers,” says Sheen. “If you have someone who is interested in growth in Asia, show how your project helps the company grow in the region.” Research past presentations and the outcomes to make sure you have your bases covered. If there are “issues that other projects have had, you should have an answer for those,” says Sheen. You might also consider giving decision makers a preview of your presentation ahead of time, and asking for their input. You can then salt their recommendations into your presentation, which will increase their investment in your success. “When you let people feel like they co-created your content, then they’ll not only support you but then they’ll feel empowered as ambassadors,” says Duarte. “They’ll feel like they’re representing their own idea.”

Find the right medium for your message
Well-presented data can do wonders for persuading an audience. But overwhelming slides with needless detail or trotting out tired visuals will also quickly lose you favor. Think carefully about the message you want to convey. Does a bar graph, table, or pie chart more effectively present your position? Are you able to circulate documents ahead of time, which might affect the data you want to emphasize in the actual presentation? Or will a unique, more entertaining route be more persuasive? “You have to know the best medium for the information,” says Duarte.

Don’t forget to connect
But above all, make sure you avoid “relying so much on your slides that you forget to make that human connection,” says Duarte. It might also be worthwhile to use colorful metaphors, videos, or other multimedia to make your point stand out. But sometimes simpler can be better, says Duarte. One of her clients convinced his CEO to fund a multimillion project by relying on basic graphics he drew on a whiteboard. The real power of his presentation, she says, was in the strength of his narrative.

Have an elevator pitch ready
No matter how much time you’re allotted to present, you won’t know until you walk into the room whether you’ll actually have 5 minutes — or 50. It’s critical to have a short elevator pitch ready in the event your time is short. “Know which one or two slides you’re going to pull out, the ones that can tell the story,” says Sheen. By the same token, you may be asked to do a deeper dive into one facet of your case in the middle of the presentation. That’s when having some appendix slides can be helpful, so that you can expand on certain elements of your case. You don’t need to have every data point memorized, Sheen says, but if someone asks, ‘What happens if we expand into Eastern Europe?’ you need to know what the general effect might be. It’s critical to “plan for short,” says Sheen, “and be prepared to go long.”

Principles to Remember

Do:

• Tell a story — it will make your case more persuasive and memorable
• Spell out the business need — it gives the audience a reason to listen
• Have both a short and long version ready — you never know how much time you will have

Don’t:

• Overlook stakeholders’ pet concerns — address them directly to win allies in the room
• Overwhelm your audience with needless detail
• Read directly from your slides — no one wants to attend a boring read-along

Case study #1: Build buy-in ahead of time
Erik Mason, the marketing communications manager for an aesthetic skin laser company in the Northeast, felt the firm needed a new image. “Other companies with slicker marketing were gaining market share even though they had inferior technology,” Mason says.

Mason decided to pitch a total rebranding — a new logo, new tagline, and new copy and photography for ads and communications — to the new executive team brought in to prep the company for an IPO. The price tag? An 8-fold increase in the marketing budget. “Marketing was a bit of a nebulous concept for the executive team,” he says. “They knew they needed to do it,” but they weren’t sure why or what tangible effect a new marketing strategy might have.

To build support for his case, Mason approached executive team members individually to ask them what they thought competitors were doing right, and how that compared with their own company’s strategy. Those conversations “gave me a roadmap of sorts for how I needed to present the recommendations to them,” Mason says, “so it felt tailored to them based on their input.”

He crafted the presentation as a story of each of the company’s primary competitors, showcasing their branding and visuals side-by-side with their marketing spending and earnings. That analysis not only showed those with the most compelling brands and integrated marketing support had impressive revenues, but also the most positive performances on Wall Street, a helpful fact given the company’s IPO aspirations. “The cases showed how a marketing investment pays ahead, especially when it comes to shareholder value,” says Mason, now the head of his own marketing firm.

Not long after, the executive team approved a full funding of Mason’s initiative. And in short order, the company achieved consistent double-digit sales growth — and a successful IPO.

Case study #2: Impress with unique visuals
When the 2008 financial crisis necessitated painful cuts at a Silicon Valley insurance company, chief information officer Jag Randhawa knew he needed a creative solution to boost morale and keep employees engaged. He decided to try to launch a bottom-up innovation program, which would allow IT employees to submit ideas to improve customer service, business processes, and products. But first, he needed the approval of management.

Randhawa didn’t yet have data to illustrate how the program might work, only anecdotal evidence from companies in other industries. He knew that if he wanted to persuade management, he would have to make an emotional appeal.

When it came time to present, Randhawa began by asking his audience to do a selective attention exercise, also known as the “invisible gorilla” exercise. The task involves watching a video and counting how many basketball passes are made between players wearing white jerseys. Most viewers are so focused on counting the passes that they completely overlook the man dressed as a gorilla who walks through the frame. Randhawa’s audience was no different.

Not only did the video lighten the mood, “it was also very relevant to my core message,” says Randhawa. “It demonstrated the need to have extra sets of eyes on a problem and the importance of diverse perspectives that employees can offer.” As the management team asked questions about how the program might work, it was clear that Randhawa’s hook had worked. There was already a “clear sense of collective ownership,” he says. In the end, he received an overwhelming “yes” to implement the program.

For more on how to build a business case from scratch, see the HBR Guide to Building a Business Case Ebook + Tools.


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Make Your Marketing Content Useful

Marketing messages are for consumption, just like products. Your audience will value your brand and engage with it if you create content that’s more meaningful than all the listicles and other hackneyed advice out there — content that’s worthy of publication in its own right. That’s not to say you should recycle your white papers and expect people to ferret out what’s useful. Good content meets audiences where they are, and it’s tailored to them.

John Battelle alluded to all this in his 2009 prediction that agencies would become publishers, and vice versa, and I just knew he was right. So I began writing books and digital content to help my firm’s target audience address a pressing need — creating and delivering effective business presentations. That decision transformed my company. Until that point, we had done no formal marketing. In the few years since, we have experimented with almost every possible publishing channel.

One of the first things I learned is that readers don’t like it when you try to sell them something. If the content itself isn’t useful, people won’t consume it and your pitch will be lost on them anyway. You can sell more overtly through other avenues, but trust that your readers are smart enough to associate the value of your message with your brand. They’ll know where to look when they need the goods or services you provide.

For example, take Red Bull, the energy drink maker. Though it uses traditional marketing tactics, such as sponsorships and commercials, it also produces The Red Bulletin, a monthly magazine (print and digital) that delivers stories about sports, adventure, music, and other topics its target audience cares about. Whether or not you purchase Red Bull energy drinks, you can connect with the brand and lifestyle.

Offering content like this for free doesn’t mean taking a loss. My firm initially released my book Resonate as a multi-touch digital offering on iTunes for $17.99. When we changed the price to free, people downloaded more books in the first week than we sold the entire previous year. Because it got a lot of traffic, the book was promoted on the iBooks homepage, which exposed it to an even broader audience. And our business saw a huge bump in inbound project queries, which trumped the revenue we would have received from book sales.

Distributing through channels with analytics is key, though. In the traditional publishing model, the publisher and reseller retain the names of your readers, but when you are the publisher of your message, you get “paid” in loyalty and data — lots of data. Use marketing software to make sense of all that information and to look for patterns in who is consuming your content, which pieces people spend the most time reading, and so on. If the content is compelling enough, readers will willingly give their e-mail addresses to get it. That’s more valuable than cash, because unlike a transaction, ongoing communication creates and strengthens connection.

The more shareable the media, the better. If you create a great slide, for instance, people will pass it around and reuse it. It’s a self-contained, easy-to-copy bit of insight. One of our publishing experiments was to release a full-color, full-length book for free in PowerPoint. The book, Slidedocs, established guidelines for using presentation software as a publishing tool, and the numbers showed that the market was hungry for that information. To date, it has yielded 145,288 views on SlideShare, 100,000 views on our website, and 21,420 e-mail addresses. We offered a piece of useful content, and we were rewarded with an outstanding new community of fans, followers, and friends.

A good book seems to sell itself. Ideally, marketing content should function the same way. Your material will be read — and spread — if it’s useful to others. So find out what your target customers are craving, and feed it to them.


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Competing for Talent in Every Geography

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In the late 1990s, Steven Hankin of McKinsey provoked a lot of discussion when he coined the phrase “the war for talent.” As the phrase became more popular (and was elaborated in a book), others used it to warn corporations of impending talent shortfalls, advocating that it be considered a strategic business challenge that required attention at the highest levels. With the dot-com burst, the recession, and other upheavals, the imperative took a backseat, but the challenge still remains.

The original thesis of the war for talent was predicated on significant demographic shifts, like aging populations in the West. While still relevant, those shifts are now just part of the equation. Consider several new realities:

  • Many countries insist that foreign companies benefit the local community. Jobs have become a currency, and economic policymakers use them as a part of the bargain for entry.
  • Many foreign companies that had an edge a couple of decades ago now face competition for local talent from newly prestigious home-grown companies that are able to tune their talent strategies to that particular context.
  • It is increasingly difficult to send expats to some of the newer frontiers of growth. Talent is needed in Angola, Mozambique, Mongolia, Vietnam — places where the infrastructure is different from what an expat would experience in London, Paris, Singapore, or Sydney.
  • Skill levels vary widely. Multinationals accustomed to attracting talent trained in the West now have to recruit locally where education levels can sometimes be inconsistent.

GE is one of many corporations now confronting these challenges. Operating in more than 170 countries, in multiple businesses that range from financial services to jet engines, and with more than 60% of our workforce based outside the United States, we must compete in every geography and get it right. Clearly, a multimodal talent strategy is required.

In the United States, and in West European markets, the challenges center around talent replenishment and knowledge transfer to assure that productivity remains high even as the Baby Boomer population starts to retire. We have a number of initiatives to address these challenges, including apprenticeships, partnerships to promote academic achievement and to assist public school students pursue advanced degrees, and programs to hire and train veterans of the armed forces and help recent graduates build critical leadership skills.

In Africa, where talent potential is great but education and skill levels vary and are still developing, we are starting to work with local universities and technical institutions to co-create a curriculum that will strengthen skills, particularly in technical disciplines. Further, we have appointed an advisory council consisting of eminent professors and practitioners from the continent who can help identify mutual needs and ensure long-term talent development.

In other countries where an advanced talent pool is more established, notably China and India, competition is intense. Here, training and continuing education are critical differentiators in terms of hiring and engaging employees. Our leadership-development centers in Shanghai and Bengaluru (or Bangalore) are therefore very important for us to show our commitment to our talent.

In addition to a differentiated talent strategy based on geographical needs, we are also fine-tuning our talent agenda based on other shifts. A few years ago, we invited a group of early career high-performers to advise the company on how best to factor their specific needs into GE leadership processes. One thing that stood out in their report was the question of retention. We have all heard the hypothesis that members of the Millennial generation have a greater tendency to move from company to company in the first few years after they step into the corporate world. The Global New Directions team, as it was called, advised: “Don’t try to retain us; instead inspire us to stay.” That idea prompted our businesses to connect more openly with our purpose, and the deeply embedded sense of mission that our employees share. The newer generation wants to know the “onlyness” — what is it that only your company can do to benefit the world and how that aspiration can inspire them to take up the cause.

The challenge is far from over, and we need to keep fine-tuning our approach at both global and local levels. Nevertheless, a strong workforce-planning focus that helps to size demand in different geographies and is coupled with an appropriate level of investment in learning and development are key to address this business challenge. Our leaders take this seriously. It is integral to long-term differentiation.


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How to Help an Underperformer

As a manager, you can’t accept underperformance. It’s frustrating, time-consuming, and it can demoralize the other people on your team. But what do you do about an employee who isn’t performing up to snuff? How do you help turn around the problematic behavior? And how long do you let it go on before you cut your losses?

What the Experts Say
Your company may have a prescribed way of handling an underperformer, but most of those recommended processes aren’t that useful, says Jean-François Manzoni, a professor of management at INSEAD and coauthor of The Set-Up-to-Fail Syndrome: How Good Managers Cause Great People to Fail. “When you talk to senior executives, they’ll usually acknowledge that those don’t work,” he says. So chances are, it’s up to you as the manager to figure out what to do. “When people encounter an issue with underperformance, they really are on their own,” says Joseph Weintraub, a professor of management and organizational behavior at Babson College and coauthor of the book, The Coaching Manager: Developing Top Talent in Business. Here’s how to stage a productive intervention.

Don’t ignore the problem
Too often these issues go unaddressed.  “Most performance problems aren’t dealt with directly,” says Weintraub. “More often, instead of taking action, the manager will transfer the person somewhere else or let him stay put without doing anything.” This is the wrong approach. Never allow underperformance to fester on your team. It’s rare that these situations resolve themselves. It’ll just get worse. You’ll become more and more irritated and that’s going to show and make the person uncomfortable,” says Manzoni. If you have an issue, take steps toward solving it as soon as possible.

Consider what’s causing the problem
Is the person a poor fit for the job? Does she lack the necessary skills? Or is she just misunderstanding expectations? There is very often a mismatch between what managers and employees think is important when it comes to performance, Weintraub explains. It’s critical to consider the role you might be playing in the problem. “You may have contributed to the negative situation,” says Manzoni. “After all, it’s rare that it’s all the subordinate’s fault just as it’s rare that it’s all the boss’s.” Don’t focus exclusively on what the underperformer needs to do to remedy the situation — think about what changes you can make as well.

Ask others what you might be missing
Before you act, make sure to look at the problem objectively. You might talk to the person’s previous boss or someone who’s worked with him, or conduct a 360 review. When approaching other people, though, do it carefully and confidentially. Manzoni suggests you might say something like: “I’m worried that my frustration may be clouding my judgment. All I can see are the mistakes he’s making. I want to make an honest effort to see what I’m missing.” Look for evidence that might prove your assumptions wrong.

Talk to the underperformer
Once you’ve checked in with others, talk to the employee directly. Explain exactly what you’re observing, how the team’s work is affected, and make clear that you want to help. Manzoni suggests the conversation go something like this: “I’m seeing issues with your performance. I believe that you can do better and I know that I may be contributing to the problem. So how do we get out of this? How do we improve?” It’s important to engage the person in brainstorming solutions. “Ask them to come up with ideas,” says Weintraub. Don’t expect an immediate response though. The person may need time to digest your feedback and come back later with some proposals.

Confirm whether the person is coachable
You can’t coach someone who doesn’t agree that they need help. In the initial conversation — and throughout the intervention — it’s critical that the employee acknowledge the problem. “If someone says, ‘I am who I am’ or implies that they’re not going to change, then you’ve got to make a decision whether you can live with the issue and at what cost,” says Weintraub. On the other hand, if you see a willingness to change and a genuine interest in improving, chances are you can work together to turn things around.

Make a plan
Create a concrete plan for what both you and the employee are going to do differently, agreeing on measurable actions so you can mark progress. You should also ask what resources the employee needs to accomplish those goals. You don’t want her to make promises she can’t meet. Then, give her time. “Everyone needs time to change and maybe learn or acquire new skills,” says Weintraub.

Regularly monitor their progress
It may seem obvious, but unfortunately, many managers fail to follow up. Ask the person to check in with you regularly, or set up a time and date in the future to check progress. It may be helpful to ask the employee if he has someone that he’d like you to enlist in the effort. Weintraub suggests you ask: “Is there anyone you trust who can provide me with feedback about how well you’re doing in making these changes?” Doing this sends a positive message: “It says I want this to work and I want you to feel comfortable; I’m not going to sneak around your back.”

Respect confidentiality
Along the way, it’s important to keep what’s happening confidential — while also letting others know you’re working on the underperformance problem. Manzoni admits that this is a tricky line to tow. Don’t discuss the specific details with others, he says. But you might tell them something like: “Bill and I are working together on his output and lately we’ve had good discussions. I need your help in being as positive and supportive as you can.”

If there isn’t improvement, take action
If things don’t get better, change the tenor of the discussion. “At some point you leave coaching and get into the consequences speech. You might say, ‘Let me be very clear that this is the third time this has happened and since your behavior hasn’t changed, I need to explain the consequences,’” says Weintraub. Disciplinary actions, particularly letting someone go, shouldn’t be taken lightly. “When you fire somebody, it not only affects that person, but also you, the firm, and everybody around you,” says Manzoni.

While it may be painful to fire someone, it may be the best option for your team. “It’s disheartening if you see the person next to you not performing,” says Weintraub. Manzoni elaborates: “The person you’re asking to leave is only one of the stakeholders. The people left behind are the more important ones . . . When people feel the process is fair, they’re willing to accept a negative outcome.”

Praise and reward positive change
Of course if the person makes positive changes, say so. Make clear that you’re noticing the developments and reward him accordingly. “At some point, if the non-performer has improved, be sure to take them off the death spiral. You want a team that can make mistakes and learn from them,” says Weintraub.

Principles to Remember

Do:

  • Take action as soon as possible­ — the sooner you intervene the better
  • Consider how you might be contributing to the performance issues
  • Make a concrete, measurable plan for improvement

Don’t:

  • Forget to follow up — monitor their progress regularly
  • Waste your time trying to coach someone who is unwilling to admit that there’s an issue
  • Talk about specific performance issues with others on the team

Case study#1: Be ready to invest time
Allie Rogovin managed a five-person team at Teach for America when she brought in Max* as a recruiting coordinator. The job had two main responsibilities: completing administrative duties that supported the recruiting team and managing special projects. Allie recognized that the administrative component wasn’t that exciting. “So I let him know that the better and faster he completed these tasks, the more time he’d have for the fun projects,” she says. But before long, Max was struggling with the core part of his role. “I realized a couple months into the job he wasn’t getting his administrative duties done in time,” she says.

Allie started by giving Max an action plan template. She asked him to take 20 minutes at the end of each day to enter and prioritize all of his tasks . She then reviewed his list every evening and gave him input on how he might shuffle his priorities for the next day. They also started meeting three times a week instead of just once a week.

“He was a very valuable team member and I knew he could do a good job. That made me want to invest time in working with him,” she says. She continued meeting with Max regularly and reviewing his priorities for three months. “I didn’t think it was going to be that long but I wanted to see that he was building new habits,” says Allie. Max still occasionally missed deadlines but he was showing definite signs of improvement. “We tweaked the plan along the way and he eventually got into the swing of things,” she says.

“I frankly wouldn’t have done it if I didn’t see huge potential in him,” says Allie.

Case study #2: Make clear what needs to change
Bill Wright*, a business developer at a residential building company, hired a new project manager last summer. We’ll call him Jack. Right from the start, Bill saw performance issues. One of Jack’s primary responsibilities was to develop small projects. That meant defining the scope of the project, talking with homeowners, negotiating with subcontractors, and coordinating with design professionals. “He was taking too long to get things done. What should’ve taken days, was taking three to four weeks,” Bill says. This was problematic for many reasons: “I was supposed to be billing his time to the client but I couldn’t bill for the amount of time he was putting in. Plus I had disgruntled homeowners who were wondering why things were taking so long.”

Bill met with Jack weekly to review the current workload, prioritize tasks, and resolve any issues. “I wanted to help him move things forward but eventually I got so frustrated that I started to take projects over,” Bill says. At Jack’s 90-day review, Bill had a frank conversation with his employee about the consequences of not being able to turn around his performance. “When I asked what he needed, Jack said that he wanted more than an hour of my time each week to get more input on his work. I said I was happy to do that and asked him to go ahead and schedule a regular meeting time,” Bill says. But Jack never followed up or put any additional time on Bill’s calendar.

“It was very clear that it wasn’t working out. There were never signs of any progress.” That’s when Bill sat Jack down and made it clear that his job was on the line. Again, there was no change in behavior, so several weeks later, he let Jack go. “I look back on it and realize I made a bad hire. I recently hired his replacement and it’s like night and day. He already gets the job.”

*Not their real names


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For Breakthrough Innovation, Focus on Possibility, Not Profitability

More than 15 years after its founding, Google remains a company that inspires profound admiration — and at times, a bit of confusion.

The company is currently investing in self-driving cars, a futuristic idea that some people believe will never be achieved. It’s also rolling out Google Glass, a wearable computing device that’s inspired skepticism and some mockery.

The derision is misplaced. As someone who’s been involved in marketing breakthrough innovations, I’m convinced Google’s approach is the right one. Google is focused on possibility rather than profitability — a mindset that’s necessary to create innovations that transform categories. Many breakthrough innovations I’ve led have suffered when I’ve let the profitability mindset creep in. Google should be admired for first setting out to answer the question: “Is this possible?”

Successful innovations programs create a balance between the probable/profitable short-term programs and the possibility programs that challenge the status quo. Unfortunately, most companies are organized and focused on the probable/profitable short term, and therefore miss the potential of breakthrough innovation that comes from being focused on the possible.  This is frequently how well-established category leaders miss opportunities that transform their categories.

Programs that transform take patience. Speed to market, probability of quick return, and profitability mindset have to take a backseat to truly delivering a product that delights the consumer in every aspect. My perspective on this comes from my own experience.

At Keurig, the pod-based coffee company where I worked as president for six years, sales grew at a 61% compound annual rate, propelling Keurig Green Mountain from $500 million to $4.5 billion in net sales from 2008-2013.  Keurig machines sit on the counter in more than 18 million households. Most people think that Keurig just recently appeared.  But in fact, Keurig was founded more than 15 years ago.  The first machines were sold in 2000.

Today, The brewers cost $100 or $150, still a significant premium to the standard drip coffee maker. But what many people forget is that in its early years, Keurig brewers cost $900 apiece. Early K-cups were made by hand. Keurig opted to  start out in the office coffee market, not the consumer market. That made the $900 price point competitive and acceptable. The whole approach to the office became a way to commercialize the design quicker and to gain consumer experience as the company drove the brewer down the cost curve. The wider diversity of coffee drinkers in an office (vs. a single consumer household) planted the seeds of the importance of having an eco-system of brands beyond our own. This led to the variety and partnering strategy that has been at the core of Keurig’s success. Today, Starbucks, Dunkin Donuts, Folgers, Caribou, Peets, and Snapple, to name just a few, participate as partners in the system.  It’s the only brand of single serve that offers a wide variety of brands of coffee and roasts, along with other beverages.

If the company’s founders and early leaders had focused on profitability instead of possibility, I’m not sure the system would have been as successful. And they certainly wouldn’t have invited the competition to share in the system to maximize the variety. Variety accelerated the growth.  It was the vision of transforming the way consumers make coffee that took them on the decade long journey to success, growth and profitability.

Possibility sharply focuses the scope of the breakthrough innovation. If the only question is “Is it possible to make it?”, then that question defines who you bring onto the team both from a capability standpoint (can this person help us figure it out?) and from a character standpoint. (Specifically: Does this person bring an optimistic or pessimistic perspective?) People who make great leaders of breakthrough innovation programs always ask the “What if” question. It frees you to look for talent and resources beyond your company — who are the partners who will share your vision, who bring incremental talent and cross-category perspectives to make this work?

One of the key ingredients to the possibility mindset is the addition of truly understanding what the consumer wants.  The question isn’t just “Is it possible to make it?” but “Is it possible to make exactly what your specific target consumer wants?” In contrast, the profitability mindset shuts down ideas and shortcuts the process. It stifles creativity and likely limits the team to only those ideas, capabilities, business models, and resources already inside the company.

Once the original ‘is it possible’ question has been solved for, the trick is to apply the same optimistic, focused thinking to the commercialization process. Now that we know it is possible to make, is it possible to make smaller, faster, better, and more cost effectively?

The opportunity is to create a win-win:  Create something that is right for the consumer and by doing this, transform a category and create a long term sustainable growth opportunity for the company.

Google is looking at “possiblity’ with Glass and self-driving cars. Both may seem like strange or silly innovations today, but over time they could turn into true breakthroughs and gain wide acceptance.

When Innovation Is Strategy
An HBR Insight Center


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How to Succeed in Business by Bundling – and Unbundling

Much of the business story of the digital age so far has been about taking products and institutions apart — unbundling them. Music CDs were unbundled into MP3s that were sold (and illicitly downloaded) individually. Newspapers have been unbundled by blogs and classified ad sites. Now, digital-education upstarts are trying to unbundle the university.

What’s becoming clear as time passes, though, is that this is not a one-way process. Yes, digital technology enables a lot of unbundling. But new bundles keep appearing.

Why is this? Well, maybe because there are “only two ways to make money in business: One is to bundle; the other is unbundle.” It’s a line that venture capitalist and Internet pioneer Marc Andreessen has trotted out a few times lately, attributing it to his former colleague Jim Barksdale. Along with being funny, this saying seemed like it might express some deep truths about where the business world is headed. So I got Andreessen and Barksdale on the phone to talk about it.

Andreessen and Barksdale started working together almost 20 years ago at Netscape Communications. Andreessen was the co-founder, fresh out of the University of Illinois, where he and some fellow students had built the very first web browser, Mosaic. Barksdale was the veteran of IBM, FedEx and AT&T Wireless (he mostly worked at it when it was called McCaw Cellular) who was brought on a few months after Netscape’s founding to provide adult supervision as its CEO. What follows are edited excerpts from our conversation, starting with Barksdale’s account of where the bundling aphorism came from:

Barksdale:  It actually was a quote at the end of a very long road show when we were taking Netscape public, a trip through Europe that ended in London. It was our last show and we were in a big hurry to get the plane. We were at the Savoy Hotel, and the ballroom was full of all these British investment bankers, and we give our normal pitch. Peter Currie, our CFO, and I were doing it, and I said, “All right, one last question.” And this fellow, he says something about, “How do you know that Microsoft isn’t just going to bundle a browser into their product?”

I said, really just to end the conversation, “Gentlemen, there’s only two ways I know of to make money: bundling and unbundling.” And said, “We’ve got an airplane to catch.” And we left, and Peter Currie, walking out the door, said, “Those people are looking at you, Barksdale, like you’re crazy. What did you just say?” And I said, “Well, best I can tell, most people spend half their time adding and other people spend half their time subtracting, so that’s what works out.”

Andreessen:  It also demonstrates a huge advantage to having to leave for a plane.

Barksdale:  That’s right. It had the added advantage of being true, as a friend of mine once said.

I had worked for several businesses during my career by that time that had become conglomerates, some fairly large, and then had divested themselves of various businesses. I’m on the board of Time Warner, we have just parsed off our third major part — our original company, Time Inc., which is the publishing arm of Time Warner. We [already had] divested ourselves of Time Warner Cable as well as AOL. So, it’s not uncommon to add a bunch of companies together, much less software products, and then divest yourself of them as the shareholders think they have more value standing alone than standing together. You do it to get your stock price up.

HBR: Bundling and unbundling have been around probably as long as businesses have been around, but especially at the level of how you present a product to the consumer, whether you’re getting a whole bunch of things like you do with cable TV, or whether you’re buying a song at a time, it just seems like the digital changes we’ve been going through over the past 20 years have really made this a key strategic decision for a lot of companies, right?

Barksdale:  It’s easier to do in the digital age. It’s easier to bundle and unbundle digital products than it was previously hard products.

Music was one of the things where there was this very clear set of bundles in which the products were sold. It was incredibly profitable for the big music companies and for a lot of the artists. And that got completely pulled apart. But now, we’re getting new sorts of bundling in there, right?

Barksdale: Like with Pandora?

HBR: Yeah.

Andreessen: I think a lot of it is based on the underlying technology change. The way I think about it is — at least in the world that I work in, sort of tech and Internet media — bundles emerge as a consequence of the current technology. And so the newspaper bundle, the idea of this slug of news and sports scores and classifieds and stock quotes that arrives once a day was a consequence of the printing plant. Of the metro area printing plant, of the distribution network for newspapers using trucks and newsstands and newspaper vending machines and the famous newspaper delivery boy. That newspaper bundle was based on the distribution technology of a time and place.

When the distribution technology changed with the internet, there was going to be the great unwind, and then the great rebundle, in the form of Google and Facebook and Twitter and all these new bundles. I think music is a great example of that. It made sense in the LP and CD era to put eight or 10 or 12 or 15 songs on a disc and press the disc and ship it out and have it sit in storage until somebody came along and bought it.

But, when you have the ability online to download or stream individual tracks, then all of a sudden that bundle just doesn’t make sense. So it collapsed apart into individual MP3s. And I think now it makes sense that it’s kind of re-bundling into streaming services like Pandora and Spotify.

HBR: A lot of the early rhetoric around the Internet was all about unbundling. You know, we’re going to free all these things from these evil big corporations and the consumers will be completely in control. And I mean, there are elements that are true, but it’s clear that people at some level need bundles.

Barksdale:  I think we use the term “disintermediate” a lot more than we do “unbundle from these terrible corporations.” I don’t remember ever giving that speech.

HBR: Bundling is often portrayed as being somehow customer unfriendly. And I think the current bundle that probably gets the most flak is the cable bundle.

Barksdale:  Well, being in the cable content business and network business, I would say that it’s probably the number one debate these days, not only within the cable companies, but it’s also within the FCC and the other people who look at it and customers and consumers. It has more to do with the total price of the bundle versus the value of the bundle.

Bundles of any time start coming together — like Marc says, I think now because it’s technologically so much easier to do — until they either tip over from their own weight or the consumer says, “I would rather have piece parts than the bundle.”

If you remember the big hue and cry in the ‘90s was, “I have to buy the whole CD to get one track, that’s not fair.” And so, once Napster came out with its track-by-track download system, you had this big wave of people that went to it because it seemed so easy and attractive. The fact that it was free and illegal didn’t seem to bother them too much.

Andreessen:  Well, the irony of that was — I think we can talk about this now because enough time has passed where it won’t make people mad — it turns out in retrospect there’s a fair amount of evidence that CDs in the ‘90s had become an oligopoly cartel. There were, I believe, several price-fixing scandals and cases that have come out of that. And so, ironically, the bundlers of that era were operating probably illegally, in the way that they were forcing the bundle and then price-fixing the bundle. So one of the reasons why people didn’t have as big a moral issue on the unbundling and the piracy that resulted is I think people felt from a moral standpoint like there was sin on both sides.

Barksdale: I do think music is a great example of what you’re trying to discuss today, Justin, and that is, music was a bundled business. Although see, I’m older than Marc, I remember when it was totally unbundled and we’d buy 45s.

We’d buy 45s, they only had one song on the front and one on the back, and the one on the back — the B side — was always a terrible song. But you had to buy both sides. And then, they came out with the LPs and new stereo systems and they put them back together and bundled them, and that led to CDs being bundled as the offshoot of the LP record.

Andreessen:  The other thing I’d say is I think the bundling or unbundling of the product actually directly affects the bundling or unbundling of the business. So one of the other things you see happening in music now is actually the music industry getting reconfigured and being split out. There are now companies that are entirely online record labels that have started from scratch. Or there are companies that are entirely focused on merchandise sales. There are companies entirely focused on touring. And the old record labels that are still bundled businesses corresponding to a bundled product offering are struggling to adapt to this new world with lots of new competitors that are effectively unbundled.

HBR: Right. Or yeah, they’re unbundled or they have new sorts of bundles that fit better with the new technology, like the Spotifys and Pandoras and Rhapsodys and all of them.

Barksdale:  The same thing’s happened to the cable industry with these “over the top” systems. They don’t spend a lot of time trying to bundle a lot of things, they just bring a whole single play, like House of Cards or Alpha House or whatever that was. Those are single-shot, unbundled offerings that seem to do well and compete with the bundled cable companies. So much so that now the cable companies are worried about this over-the-top method that goes directly through the Internet and doesn’t have to carry the overhead burden of bundling everything.

Andreessen:  From the incumbent standpoint it all looks very unfair. But from the consumer standpoint it looks like new options and new alternatives.

HBR: Clay Christensen has described this progression in technology from the integrated product to the modular. Jim, in your years in the computer industry you lived that transition from selling these big things at IBM to being part of this totally modularized PC industry. I mean, that sounds sort of like unbundling, but we keep getting new bundles nonetheless, right?

Barksdale:  Of course, you always are bundling and unbundling. You can’t stand still.

Andreessen:  One of the patterns I think that you see is that the insurgents often end up reforming themselves into a version of the company they took down. And so, famously, Sun Microsystems took down DEC by unbundling a lot of what it did when it was a huge company. And then Sun sort of reformed itself into what you might call a new DEC — a vertically integrated company which then got taken apart to some extent by Linux and Intel servers.

Oracle is an example. Larry [Ellison] has spoken openly about his attempt to basically recreate IBM by adding applications and services and hardware to what had been an infrastructure software business. And so, ironically, even the people who take down an incumbent through unbundling then come back and try to do the rebundle.

Barksdale:  Well, because it’s an effective growth strategy. Once you try to grow the business, it’s an easier out to stay focused on your core and then add things to it. And you become a big bundle again.

Andreessen: Which then creates a new vulnerability that you didn’t have when you were the insurgent.

HBR: Both of you have done a lot of investing over the years. Marc, you’re one of the founders of the venture capital firm Andreessen Horowitz, and Jim, you’re involved in a lot of philanthropic activities, but you’re still doing investing, too, right?

Barksdale:  Oh yeah, I’ve invested a lot and had a venture firm in the early 2000s, so I’m still active. I’m not nearly as active as Marc is though.

HBR: So, in making investment decisions, is this bundling or unbundling theme something that comes up a lot, that you talk with companies about?

Barksdale:  Well, most companies when they’re building strategies don’t ever use the term bundling. They just think of adding strategic advantages to their products. If they can add it to their core, they add it, and try to be as efficient as they can be, because there are efficiencies in bundling.

And there are synergies related to bundling. You don’t have to redo a lot of the core services when you put products together. But, I doubt most strategies were ever built using the term, “Let’s bundle.” Or, “Let’s unbundle.” That’s not a strategic term, really, it’s just an observation I made.

Andreessen:  I would say we probably think about the unbundling part a lot more often than we think about the bundling part, because we tend to invest in the new companies, right, the startups.

The way we think about it is sort of what I said before about music and newspapers, applied to many other industries. Often, a key characteristic of large incumbents in any industry is, they have a bundle  that is accumulated over time, for the reasons that Jim described — reasons that made total sense at the time. And then what we look for is for something to have changed in the underlying technology. The arrival of the Internet was a big one. The arrival of mobile distribution. The arrival of social networks. The arrival of Bitcoin is a current example.

So, we look for something to change in the underlying technology, and then basically say, “Well, you know, gee, if you were to sit down today with a clean sheet of paper, and you knew that the technology was changing, then what would be the proper form of the product, if you were starting from scratch?”

That’s the question that’s always the hardest for an incumbent to ask, because that’s the classic innovators dilemma. And that’s the question that’s the easiest for the startup to ask, because the startup literally is somebody sitting down with a clean sheet of paper. All they have is the ability to think from first principles, think from scratch.

I would say we look actively for the pattern of large incumbent, established industry, bundled product or service offering, coupled with underlying technology change, coupled with idea for unbundled product that the customer might prefer, and then of course coupled with an entrepreneur who can actually build a business around that. I think that’s a fairly common pattern.

You can kind of think about the evolution of the internet industry this way, right? Once upon a time, there was AOL, which bundled everything from dialup to all the information services that you use, all in one thing. And then Yahoo came along and unbundled all the content from the access. And then one of the features of Yahoo was search, Google came along and unbundled search. One of the things you could do on Google was search for people; Facebook gave people a much better way to search for other people.

You can view the technology industry as this sort of family tree of sort of progressive unbundling. A lot of this traces all the way back to IBM. But even the giants of the last 10 or 20 years are in the process of getting unbundled. Microsoft has been significantly unbundled themselves in the last 10 years. Android has unbundled a significant part of what Apple’s done. And so, the process keeps playing out.

Barksdale:  Having worked for IBM in the early days, we couldn’t conceive that a customer would want a bunch of different products sitting around on people’s desks. We thought they wanted these humongous things and one central computer room that everybody would just love to share.

Coming soon: Another excerpt from the interview, in which Andreessen and Barksdale discuss some of Barksdale’s other notable sayings.


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