Donald N. Thompson: An interview by Bob Morris

Don Thompson is an economist and professor of marketing at the Schulich School of Business at York University in Toronto. He has taught at Harvard Business School and the London School of Economics. He is author of nine books, including The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art, which details his explorations in trying to understand the high end of the contemporary art market. Shark has been published in thirteen languages. His most recent book, Oracles: How Prediction Markets Turn Employees into Visionaries, was published by Harvard Business Review Press (June, 2012).

Here is an excerpt from my interview of him. To read the complete interview, please click here.

*     *      *

Morris: Before discussing Oracles a few general questions. First, who has had the greatest influence on your personal growth? How so?

Thompson: A dozen brilliant people I encountered in grad school (at Berkeley) and later, in universities, businesses and government. From each I learned new things, but more important, new ways of looking at problems, and how to think outside the box.

Morris: To what extent has your formal education been invaluable to what you have accomplished in life thus far?

Thompson: My formal education included an MBA, which got me interested in problem solving, and a PhD, which furthered that interest but is also provided an essential entry point to an academic career. So the formal education part has been invaluable for my career path.

Morris: What do you know now about the business world that you wish you knew when you when to work full-time for the first time?

Thompson: The importance of the soft skills involved in communication, motivation and managing.

Morris: Of all the films that you have seen, which – in your opinion – best dramatizes important business principles?

Thompson: Citizen Kane. The explanation is in the eyes and mind of the viewer.

Morris: From which non-business book have you learned the most valuable lessons about business?

Thompson: I’ll suggest two: Michael Mauboussin’s More Than You Know: Finding Financial Wisdom in Unconventional Places (Columbia Business School Press 2008), and Cass Sunstein’s Going to Extremes: How Like Minds Unite and Divide (Oxford University Press, 2008). The Mauboussin book is about business, but more centrally, about making rational decisions. The Sunstein book is about how wrongheadedness gets worse when people get together in groups. Both are brilliant thinkers, I recommend anything with those names attached.

Morris: Here are several of my favorite quotations to which I ask you to respond. First, from Lao-Tzu’s Tao Te Ching:

“Learn from the people
Plan with the people
Begin with what they have
Build on what they know.”

Thompson: Right. None of us is as smart as all of us (which is also a Japanese proverb).

Morris: Next, from Voltaire: “Cherish those who seek the truth but beware of those who find it.”

Thompson: The prediction market equivalent is probably, “If you really are afraid of the answer, don’t ask the question.”

Morris:  And then, from Oscar Wilde: “Be yourself. Everyone else is taken.”

Thompson:  It never occurred to me that there was another option. Probably too late now.

Morris:Finally, from Peter Drucker: “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.”

Thompson: That is a great quote. I once was presented with its equivalent, by a Columbia marketing professor named Al Oxenfeldt, with whom I had co-authored a couple of articles and was proposing a new topic, which I had collected a lot of data on. Al said, “If something is not worth doing, it is not worth doing well.” Quite right.

Morris:In Tom Davenport’s latest book, Judgment Calls, he and co-author Brooke Manville offer “an antidote for the Great Man theory of decision making and organizational performance”: organizational judgment. That is, “the collective capacity to make good calls and wise moves when the need for them exceeds the scope of any single leader’s direct control.” What do you think?

Thompson: That is exactly the philosophy of Jim Lavoie and Joe Marino, co-CEOs of my favorite prediction-market company, Rite-Solutions – which is the subject of the first chapter of Oracles.

*     *     *

To read the complete interview, please click here.

Don cordially invites you to check out the resources at these websites:

Don’s faculty page, please click here

Amazon’s Oracles page, please click here.

Amazon’s The $12 Million Stuffed Shark page, please click here.

Why Transparency is the New Leadership Imperative

Here is an excerpt from an article written by Dorie Clark for the Harvard Business Review blog. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.

*     *     *
 
What kind of leaders do we need today?

Steve Jobs — mysterious, charismatic, intriguing — is often cited as one of the recent greats, and there are clearly benefits to his style. A recent study showed that leaders like him — those perceived as having an almost magical aura — are seen as visionary, with employees and customers clamoring to touch the hem of their garments. But that kind of leadership also has its limitations.

Succession is made harder by a towering and mysterious personality (good luck, Tim Cook). And, even more importantly, there’s no formula for becoming charismatic. You could try to model others — emulating Jobs’ cool reserve, exacting standards, and mercurial temper, for instance. But the nuances are subtle; you’re just as likely to come off as aloof or entitled, rather than intriguing. The harder, but more rewarding, path as a leader is to make yourself known — to your employees, your customers, and the public. Here are three reasons the new leadership imperative is all about transparency.

To know you is to love you. Well, love might be strong. But you want your employees to at least like you and understand where you’re coming from — because, as copious research has shown, money isn’t a good motivational tool. Rather, what will make them go above and beyond is their relationship and loyalty to you — and you’ll never get that if you don’t let them know you as a person. (Customers, being human, also like to form relationships with real people, not just faceless organizations.) Lunch meetings and feedback sessions are a great place to start, and if you’re managing across continents or your workforce is simply too large, don’t underestimate the power of video. Your personality and enthusiasm can come through just as clearly on YouTube. (A great example is this 2009 video featuring Best Buy Chief Marketing Officer Barry Judge, in which he explains his philosophy of marketing and how the company should interact with customers.)

*     *     *

To read the complete article, please click here.

Dorie Clark is a strategy consultant who has worked with clients including Google, Yale University, and the National Park Service. She is the author of the forthcoming Reinventing You: Define Your Brand, Imagine Your Future (Harvard Business Review Press 2013). You can follow her on Twitter at @dorieclark.

Help Wanted – Humans Need Not Apply

News item:
Best Buy is in a lot of trouble

News item:
The robot population is growing…fast.

—————

Put this in the “what have you read recently that makes you stop and think?” category.

Yesterday, I read the article by Farhad Manjoo, Making Best Buy Better:  The electronics chain’s only hope is to stock fewer products and sell them a whole lot better.  Here’s a key excerpt:

Best Buy is in a lot of trouble. Once the undisputed leader in technology retail—it vanquished Circuit City, CompUSA, and every mom-and-pop electronics store in the country—the company is now being killed by Amazon online and Apple offline. In March, Best Buy reported a $1.7 billion quarterly loss and announced that it would close 50 stores.  

And, don’t forget:

Amazon recently bought Kiva Systems,a company that makes robots that bring items to warehouse workers for packing, instead of the workers having to run all over the warehouse finding the items. That’s fine for now, but it’s pretty obvious that before too long, the robotic systems will become sophisticated enough that you won’t need the workers at all (or at least you’ll only need a few of them).

That paragraph comes from an article linked to on Andrew Sullivan’s blog: Our Robot Future.  I have posted before about the rise of automation (in fact, quite a few times), asking “Where will the jobs be?’” This latest news does not bring me any comfort.  Here is the key excerpt from Rise of the Machines by Paul Waldman, linked to by Sullivan:

We’re all still going to have to find ways to get people to pay us for doing stuff. Otherwise we won’t have the money to purchase the fruits of all those robots’ labors.

…the problem won’t be that the robots will kill us, but that the rise of robots will disintegrate our society, none of us will be able to make a living, and we’ll kill each other. On the other hand, wouldn’t it be nice if a robot cleaned your toilet for you?

Don’t think human looking robots.  Think software, automation…  Now, I don’t know about you, but my life is increasingly filled with such robots of one kind or another replacing work that used to be done by humans.  Just this week, I ordered multiple items from two sources. Amazon and Drugstore.com.  I talked to no one.  I clicked my mouse, and two days later the products arrived at my front door.  Oh, some humans were involved in the transactions.  A driver delivered the boxes.  Someone supposedly fetched the items from the giant fulfillment center shelves.  But I did not go into a store and interact with any humans; software facilitated the orders.

The issue is not “will there be more robots replacing more human jobs?”.  There will be.  A lot more!  (Read the Waldman article.  Or, just google it.  And the Google automated software will fetch you a mountain of articles describing our automated future).

The question is (and the chorus asking this question is growing), “Where will the jobs be?”  Oh, there will be industries adding jobs all along.  But will there be enough new jobs, in enough new industries, to provide work for all the unemployed former Best Buy, Circuit City, Amazon.com, workers?

Anyway, that is some of what I read this week.

How to make the most of uncertainty

 

Here is an excerpt from another “classic” article featured online by The McKinsey Quarterly, published by McKinsey & Company, and written by Hugh Courtney. To read the complete article, check out the abundance of other free resources, obtain information about the firm, and sign up for email alerts, please click here.

*     *     *

In extremely uncertain environments, shaping strategies may deliver higher returns, with lower risk, than they do in less uncertain times.

Shape or adapt? For years, executives have regarded the question as perhaps their most fundamental strategic choice. Is it better for a company’s competitive position to try to influence, or even determine, the outcome of crucial and currently uncertain elements of an industry’s structure and conduct? Or is the wiser course to scope out defensible positions within an industry’s existing structure and then to move with speed and agility to recognize and capture new opportunities when the market changes?

As globalization, digitization, and unfettered capital markets raise levels of uncertainty and rewrite definitions of opportunities and risks, this basic strategic choice has morphed into a more complex and high-stakes dilemma. The right strategic bets can return far higher payoffs, far more quickly; the wrong ones carry a much higher risk of systemic failure. Betting big today may fundamentally reshape a market on a global scale to the advantage of a company or quickly produce losses that can throw it into bankruptcy. A company may avoid foolhardy mistakes by waiting for uncertainty to diminish, or it may squander the chance to lay claim to first-mover advantages.

The truth is that no dominant solution exists. You might argue that any good strategy should attempt to shape and adapt by specifying actions designed to increase the probability of some outcomes while simultaneously preparing for others. That approach may work in some cases. Yet the actions a company must take to shape the market are often inconsistent with those needed to adapt. Consider Qualcomm. For the past few years, it has been trying to move the wireless-telephone industry toward its CDMA (Code Division Multiple Access) technology. CDMA, a technical standard that determines how information travels and communicates through a wireless network, is competing with other technologies to become the industry standard for next-generation mobile phones.

Qualcomm realizes that if it wants to shape the industry, it must build a coalition of supporters around the CDMA technology. This approach involves cutting deals with wireless companies to get them on board and convincing consumers that CDMA is superior. To win the standards battle, Qualcomm must be totally committed to the cause or at least look as though it were. If the company tried to hedge its bets by producing chips for a competing technology as well—something an adapter might do—it would undoubtedly undermine its shaping efforts. How could Qualcomm convince its potential partners that CDMA was superior if it simultaneously invested in competing standards?

As the story of Qualcomm illustrates, under uncertainty, shaping actions are often at odds with adapting ones. Shape or adapt is therefore a real choice for most companies most of the time. But how, amid rising uncertainty and ever-greater risks, can a company nail down the right strategic choice?

The different shapes of shapers and adapters

An essential starting point is understanding your alternatives. Shaping and adapting strategies may take many different forms. Shapers generally attempt to get ahead of uncertainty by driving industry change their way. Some, like Qualcomm, aim to increase the probability that a preferred technology or business process will become an industry standard. Others grapple with uncertainty by introducing fundamental product, service, or business-system innovations intended to redefine the basis of competition in an industry: think of the low-price, point-to-point air travel model of Southwest Airlines, Dell Computer’s direct-sales approach, or Netscape Communications’ breakthrough Internet browser, Navigator.

Other shapers try to restructure unstable industry environments by making bold mergers and acquisitions, as BP did in the oil industry, or by breaking up integrated companies, as AT&T did in 1996 by spinning off its equipment provider, Lucent Technologies. Other companies, such as McDonald’s in the 1990s, shape nascent markets by replicating business systems in new geographies. Still others focus on shaping the conduct of competitors; in the 1970s, for example, DuPont built its capacity in the titanium dioxide industry ahead of market demand, thus influencing its competitors’ expansion plans.

Adapters, by contrast, take the existing and future industry structure and conduct as given. When a market is stable, adapters try to define defensible positions within the industry’s existing structure. When high uncertainty prevails, they attempt to win through speed and agility in recognizing and capturing new opportunities as the market changes. They might quickly follow a potential shaper’s lead, as Compaq Computer did when it bet on Microsoft and Intel with early alliances in the 1980s. Other adapters hedge against future market uncertainty when they can identify a limited, discrete set of paths the market may follow. In the late 1980s, for example, software companies could hedge against uncertainty about which PC operating system would emerge as the industry standard by developing products for each of the contenders, notably DOS, Macintosh, Windows, Unix, and OS/2.

Still other adapters build their strategies around constant experimentation in products, services, and business systems. In the credit card industry, Capital One Financial conducted 27,000 tests of products, prices, features, packages, marketing channels, credit policies, account-management approaches, customer service methods, and collection and retention procedures in 1998. [Note: Capital One Financial Corporation, The Innovation Imperative, 1998 annual report, p. 4.] Finally, some adapters manage uncertainty by building flexible organizations designed to respond to changing market needs. Many professional-services firms, for example, focus on recruiting and developing people with general-management skills that will be valuable to clients regardless of how the market evolves.

With such a broad range of approaches, no wonder business strategists can’t agree on a dominant answer to the shape-or-adapt problem. In fact, even individual companies may not consistently choose one alternative across all issues, business lines, and times. Nor do the data support a one-size-fits-all answer. McKinsey research suggests that 86 percent of the biggest business winners from 1985 to 1995 followed predominantly market-shaping strategies. [Note: This research analyzed the 50 "stars" with the greatest sales, profit, and market capitalization growth during the sample period. The stars included not only some computer and retail giants (such as Best Buy, Microsoft, Oracle, Sun Microsystems, The Home Depot, and Wal-Mart) but also lesser-known industrial companies (M. S. Carriers), business-services firms (Omnicon), health care companies (Biomet), and financial-services firms (Advanta).] Yet the research clearly shows that adapters too can win big.

*     *     *

To read the complete article, please click here.

Hugh Courtney is an associate principal in McKinsey’s Washington, DC, office. This article is adapted from his book, 20/20 Foresight: Crafting Strategy in an Uncertain World, Boston: Harvard Business School Press, 2001.

 

 

David A. Aaker: An interview by Bob Morris

David A. Aaker

In his own words:

“My passion is understanding brands and helping firms build brands and brand portfolios. My first brand book, Managing Brand Equity defined brand equity and set forth its value to a firm and its customers. The second, Building Strong Brands, described the “brand identity” model that many firms use to manage their brands and also introduced the Brand Equity Ten measurement structure. The third, Brand Leadership extended the brand identity model and adding material on brand building programs. The fourth, Brand Portfolio Strategy, introduces models and concepts that allow a firm to sort out the complexities of brand portfolios and the priorities and relationships that define them. The fifth, Spanning Silos presents research showing the problems that product and country silos organizations pose to those who would build brands and create effective marketing and what some firms have done to create cooperation and communication to break down the silo barriers.

“My latest book, not counting my autobiography, is Brand Relevance: Making Competitors Irrelevant that shows success in dynamic markets involves creating offerings so innovative that they create new categories or subcategories making competitors irrelevant.

“I am a part of Prophet, a global brand and marketing consulting company that is on the forefront of branding issues, professor emeritus of the Haas School at UC Berkeley, and an advisor to Denstu. I live in Orinda, California near my three daughters and seven grandchildren and try to do a lot of biking and just enough golfing.”  My biography “From Fargo to the World of Brands,” elaborates.

Morris: Before discussing Brand Relevance, a few general questions. At one time, marketing was defined as a process by which to create or increase demand. To what extent is that still true?

Aaker: It is still true and good message for those that think that marketing is selling and that brands are logos.  Marketing over the last few decades has struggled with some success to be perceived as strategic and to have a place at the executive table.

Morris: Obviously, “going to market” has certainly become much more complicated in recent years. Of all the changes that have occurred, which do you consider to be the most significant? Why?

Aaker: One is the importance of brand equity and the brand portfolio as a foundation for business strategy and strategic options.  Another is the proliferation of media including social media that has made brand building more complex and introduced new ways of relating to customers.

Morris: Which business thinker has had the greatest influence on your own thoughts about marketing? How so?

Aaker: In one of my blog postings on davidaaker.com I note the three books that influenced me the most.  The one at the top was Peter Drucker’s Managing for Results–among other things he talks about critical result areas and categorizing businesses as tomorrow breadwinners, today’s breadwinners, among several other categories.  Drucker was the most influential business management writer in the last century to me.  The other authors were Ted Leavitt [The Marketing Imagination] and Alfred Sloan [My Years with General Motors].

Morris: In your opinion, which company has sustained the most effective marketing initiatives, year-after-year, and how do you explain its success?

Aaker: Apple has created a new subcategory at least five times in the last decade.  The reason is Steve Jobs, who, in my mind, is the top CEO of our time.

Morris: Years ago during dinner in San Francisco, I asked a venture capitalist how he decided which funding proposals to focus on among the hundreds that arrived on his desk each month. “I always ask three questions: Who are you? What do you do? And then the ‘killer question,’ Why should I care?”

David, my own opinion is that these are questions that all marketers must ask and then answer, especially the third one. What do you think?

Aaker: I like to pose the following two questions to employees of a firm.  What does the brand stand for?  Do you care?  If the answer is not positive to both questions, brand building will be difficult.  With respect to customers I would want to know if they know anything about the brand, why they would buy it if purchasing something in a particular category, and if they would recommend it.

Morris: When and why did you found your firm, Prophet? Also, please explain its name.

Aaker: Prophet was formed in 1990 by two Haas graduates.  I and Michael Dunn, its CEO, joined in 1999 when it had 18 employees and local clients.  It now has nearly 200 employees and offices around the world.

Morris: To what extent (if any) has its mission changed since then?

Aaker: It has expanded from a base in brand and brand portfolio strategy to now include innovation, design, analytics, and social media strategies.

Morris: What do you know now about business that you wish you knew then?

Aaker: Michael and a terrific team run Prophet, I am the guru in the corner.  But in watching their progress, I am struck by how many dimensions have to be right, offering development, offering delivery, staff hiring, staff evaluation and motivation, staff retention, culture, finance, accounting, country specific issues and more.

Morris: I was astonished, frankly, to learn that Coca-Cola had 22.5 million visitors on Facebook last month in contrast with only 270,000 to its website…more than 80 times as much traffic. How do you explain this?

Aaker: I think it is a choice that most companies need to make, based on what they are attempting to accomplish. Coke drives people to its Facebook page because so many are on Facebook.  But many other brands like Pampers, General Mills, or Harley have the website as the centerpiece.

Morris: In your opinion, what will be the single greatest business opportunity within (let’s say) the next 3-5 years. Please explain.

Aaker: To create offerings so innovative that they create new categories or subcategories.  The future of winners will be about innovation and growth.  Innovation is not easy.  It is not just brainstorming. It is creating the right organizational culture, processes, and people.

*     *     *

To read the complete interview, please click here.

David Aaker cordially invites you to check out the resources at these websites:

http://www.davidaaker.com

http://www.prophet.com/about/leadership/aaker

http://www2.haas.berkeley.edu/faculty/aaker_david.aspx

 

Brand Relevance: A book review by Bob Morris

Brand Relevance: Making Competitors Irrelevant
David A. Aaker
Jossey-Bass/John Wiley & Sons (2011)

If your “brand” isn’t relevant, neither are you or your company

Those who have read any of David Aaker’s previous books already know that he presents information, insights, and counsel that are anchored in specific real-world circumstances within a broad and deep frame-of-reference. Brand Relevance is no exception. On the contrary, I think it is his most important, his most valuable book thus far. In Reality Check, Guy Kawasaki shares everything he has learned thus far about how to (and how not to) “outsmart, outmanage, and outmarket your competition.” In his latest book, Aaker shares everything he has learned thus far about how to (and how not to) “drive change through innovations that will create new categories and subcategories – making competitors less relevant –[so that] other firms can recognize the emergence of these new categories and subcategories and adapt to them.”

As he explains, the way for a firm to get on top of its strategies in a time of change is to achieve these four strategic objectives: (1) Complete and then follow a process by which to create new categories and subcategories that make competitors irrelevant; (2) Apply the brand relevance concept to the given circumstances and leverage its power as a way to drive and understand dynamic markets; (3) understand how and why brand relevance can be diminished or lost as well as how and why to avoid or replenish that loss; and (4), understand and develop or strengthen the characteristics it must have “to support substantial or transformational innovation that will lead to new categories or subcategories.”

Aaker identifies with meticulous care the “what” of these and other strategic objectives, then devoting the bulk of his attention to explaining how to achieve them. To support his results-driven approach, he makes brilliant use of 25 mini-case studies of a remarkably diverse range of companies that include IKEA, Best Buy, Whole Foods Market, Zappos, Zipcar, Apple, Segway’s Human Transporter, Salesforce.com, and Walmart. As these and other exemplars have clearly demonstrated, companies are most relevant when their clients depend on them to help them be most relevant to their own clients. Here in a single source is about all the information, insights, and counsel any C-level executives need to ensure that their companies gain and then sustain brand preference and thereby make their competitors irrelevant.

Wikibrands: A book review by Bob Morris

Wikibrands: Reinventing Your Company in a Custiner-Driven Marketplace
Sean Moffitt and Mike Dover
McGraw-Hill (2011)

How the new levers of brand development achieve customer participation

What is the meaning of the noun wikibrand(s)? According to Sean Moffitt and Mike Dover, it refers to a “progressive set of organizations, products, services, ideas, and causes that tap the powers of customer participation, social influence, and collaboration to drive the business value.” They go on to suggest, “Derived from the Hawaiian word wiki, traditionally meaning `quick’ but more currently meaning `tribal knowledge’ and `a collaborative website,’ and the Middle English word torch, whose current business meaning is `a distinctive name identifying a product or a manufacturer.’”

My take is that the most powerful brands, wikibrands, are those that create multi-dimensional participation and multi-sensory experience in co-creation with an organization’s most loyal and most engaged customers. “In a connected world and cluttered marketplace,” Moffitt and Dover note, “brands are tapping into the instinctual human need for genuine participation, peer-to-peer dialogue, and shared media to survive and thrive.” They explain how to “get true brand engagement, customer experience, and social collaboration into the very nucleus of an organization and not leaving them hanging out on the periphery.” They make it crystal clear that this is not a marketing opportunity; rather, this is a business opportunity. “It’s a big, cultural driving force…a pragmatic road map for winning in the current marketplace.”

As I worked my way through the lively and eloquent narrative, these are among the portions that attracted my attention in Chapters 3-8.

• “The Seven Divides: Compelling Reasons to Change” (Pages 21, 23, 25-30)

• “Top Factors in the Changing Importance of Social Media, Word of Mouth, and Community Building (Figure 2.1, Page 22)

• “Eight Customer Experience Norms” (Table 2.2, Page 24)

• “The Six Benefits of Wikibrands” (Pages 50-62)

• “Seven Key Language Principles” (Pages 107-112)

• “Community Participation Motivations” (Table 8.1, Page 132)

• “Six Classes of Influencer” (Pages 136-138)

Note: An influencer is someone who has significant influence on the values, opinions, preferences, and consumer behavior of others.

It is important to keep in mind that the information, insights, observations, caveats, and recommendations provided by Moffitt and Dover were revealed during wide and deep research and are anchored in real-world situations, many of which involve global “wikibranders” such as Accenture, Best Buy, Cisco, Disney, FedEx, Hewlett-Packard, IBM, Nokia, and Procter & Gamble.

That said, I presume to suggest that the core principles as well as the most effective strategies, and tactics of wikibranding can also be of substantial value to much smaller companies such as family-owned retail franchises. Those who doubt that are urged to check out “Eleven Ways to Develop a Wikibrand” (Pages 278-286) and “Fifty-Question Assessment: Readiness for Brand Community” (Pages 286-2388) in which Sean Moffitt and Nike Dover provide material that, all by itself, is worth far more than the cost of several copies of this book. Is it that valuable? Read it and judge for yourself.

How Companies Win: A book review by Bob Morris

How Companies Win: Profiting from the Demand-Driven Business Models No Matter What Business You’re In
Rick Kash and David Calhoun
Harper Business (2010)

In today’s global business world, companies “win” if everyone associated with them throughout their value chain also “win.” The title of this review refers to a question that Rick Kash and David Calhoun ask their reader: “Do you have a proprietary understanding of unsatisfied demand in your marketplace?” Those who gain that understanding have a significant, perhaps decisive competitive advantage. They will thrive but only to the extent that they can sustain that advantage. I agree with Kash and Calhoun that there are valuable lessons to be learned from the exemplar companies they discuss such as Allstate, Anheuser-Busch, Apple, Ball Park Franks, Best Buy, Hershey’s, and Hewlett-Packard, to name but seven and listed in alpha order.

For example, Kash and Calhoun assert that what the leaders at Hershey’s learned is what leaders in any other company must also learn, whatever the size and nature of their company may be:

• Know who your customers are (e.g. their demographics and motivations)
• Why they buy (i.e. their demand by profit pool and the need states they experience)
• What they buy (i.e. a detailed understanding of the brands, packs, tastes, and textures most customers prefer)
• Where and how they buy (i.e. shopper missions and channel preferences)
• When customers consume (i.e. the key usage occasions and locations)

Credit Kash and Calhoun with providing a cohesive, comprehensive, and cost-effective game plan and operations manual to design, introduce, implement, and then strengthen an appropriate demand chain; that is, “a collaborative network composed of manufacturer, retailers, and media companies [or their equivalent entities] that enable each participant to better understand – and more completely and precisely fulfill – customer demand.”

Col. Bernard Banks on “How Companies Can Develop Critical Thinkers and Creative Leaders”

Col. Bernard Banks

Here is an excerpt from an article written by Col. Bernard Banks for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

*     *     *

This post is part of an HBR Spotlight examining leadership lessons from the military.

Today’s leaders are continually cajoled to act as “outside-the-box” thinkers. Such pronouncements give the impression the only sound solutions are ones never previously conceived. However, what industry and the military really strive to produce are leaders possessing strong critical and creative thinking skills. Both implicitly eschew the notion that a box even exists. What can industry learn from the military about how to advance the development of such leaders? One tangible example is how to construct and execute experiential training while continuing to meet the needs of customers and stakeholders.

Today’s organizations operate in what the U.S. Army War College defines as a VUCA environment. Volatility, uncertainty, complexity, and ambiguity are constant realities in the 21st century. The military seeks to prepare for the challenges it will inevitably face by crafting realistic training scenarios and routinely integrating such activities into its ongoing operations. The goal is not to teach them what to think, but to enhance their ability to think critically and creatively about the myriad of contingencies posed by a fluid environment — in essence to teach them how to think.

In industry, 90% of time is typically devoted to executing business actions, and less than 10% is allocated for increasing organizational and individual capabilities through training. The military, on the other hand, spends as much time training as it does executing — even in the midst of high stress/high risk operations. A unit in Afghanistan or Iraq will not suspend its experiential training program while involved in combat operations, because its ability to cogently and creatively address future challenges is enhanced by an enduring commitment to improving people’s competence and adaptability through experiential exercises, as well as actual experiences. But the real lesson for industry leaders is not simply that training is important. What’s really valuable is how the military crafts its training opportunities.

The Army defines leadership as both accomplishing the mission and improving the organization. Permanently improving the organization requires the development of its human capital. The military believes you substantively improve people by improving their ability to adroitly address challenges in their environment. Therefore, we do not seek to confine people’s thinking by restricting the solutions available to them, unless the proposed action violates any of these criteria: is it immoral, unsafe, unethical, or illegal?

In order to have people wrestle with what it takes to conceive of action plans where the aforementioned criteria constitute their only boundaries, the military structures its experiential training activities with wide parameters. Events are constructed to reflect ambiguity in the operating environment (while also targeting specific organization needs). Leaders are responsible for setting the conditions in every training event and resourcing them appropriately, as well as for reminding participants throughout the exercises that there are a myriad of potentially elegant solutions to each ill-defined challenge.

Two other things are important to take away from the military practice of engaging in routine experiential training. First, feedback is crucial. The military practice of conducting intermediate and final after-action reviews (AARs) — in which all participants examine the planning, preparation, execution, and follow-up of any significant organizational initiative — fosters a learning culture. Second, coaching is required to translate feedback into behavioral changes. Research has demonstrated that feedback without coaching rarely results in behavioral changes. So, all leaders must develop their capacity to coach others. Reflection and dialog lie at the heart of development. Experiential training creates the impetus for both to occur.

If you wait for the right time to train it’ll rarely occur. Today is the opportunity to prepare for tomorrow, regardless of how much else is going on.

*     *     *

Bernard (Bernie) Banks is a faculty member in the Department of Behavioral Sciences & Leadership at West Point and a Colonel in the United States Army. He has presented on the topic of leadership at the University of Pennsylvania’s Wharton School of Business, Duke University’s Fuqua School of Business, and Harvard’s Kennedy School of Government, and consulted or provided training to companies including GE, IBM, Citigroup, Best Buy, and Procter & Gamble. He is a graduate of West Point and holds graduate degrees from Harvard, Northwestern, Columbia, and the U.S. Army War College.

Empowered: A book review by Bob Morris

Empowered: Unleash Your Employees, Energize Your Customers, and Transform Your Business
Josh Bernoff and Ted Schadler
Harvard Business Press (2010)

Many years ago, Southwest Airlines’ then chairman and CEO, Herb Kelleher, explained his company’s competitive advantage: “Our people. We take really good care of them, they take really good care of our customers, and then our customers take really good care of our shareholders.” I recalled those comments as I began to read this book in which Josh Bernoff and Ted Schadler explain how to create what Ben McConnell and Jackie Huba characterize as “customer evangelists” by first creating “highly empowered and resourceful operatives: HEROes for short.”

To a much greater extent than at any prior time that I can recall, customers today are self-directed, and, yes, self-empowered. They have instant access to more and better sources of information about just anything they may be thinking about purchasing. Moreover, they have more and better choices re when, where, and how to make a purchase. It is imperative, therefore, that everyone who interacts with a customer be empowered (i.e. have the authority) to make whatever decision and/or take whatever action may be necessary to solve a customer’s problem or in some other way provide whatever assistance a customer may need.

Bernoff and Schadler make brilliant use of various reader-friendly devices, such as Tables, Figures, mini-case studies, and bullet point checklists. For example, Table 1-1 (on Page 13) illustrates how “the forces in the groundswell power shift apply in the marketplace and the workplace in terms of (a) groundswell technology trends (e.g. smart mobile devices), how customers are empowered by it (e.g. get information about products and share it regardless of location), how to serve customers with it (e.g. create mobile applications to provide information to customers), and how workers benefit from it (e.g. collaborate with colleagues and partners from any location). Mini-case studies include those of Best Buy (Pages 7-11), Black & Decker (21-23), Thomson Reuters (31-34), Ford (46-50), Intuit (63-68), Zappos (68-71), the NFL Philadelphia Eagles (85-88), NHL (105-107), Sunbelt Rentals (141-142), and IBM Blue (166-169).

Most of the material in this book consists of information, insights, and advice that, Bernoff and Schadler fervently hope, will help business leaders to empower employees, to develop and then support HERoes. In most of the organizations with which I have been associated, however, senior-level executives tend not to see themselves as “employees”; moreover, they are reluctant to empower those whom they do view as employees. (I wish I had a dollar for every time I heard one of the C-Suiters refer to non-executives as “them.”) Of course, as they clearly indicate in their book, Bernoff and Schadler fully understand how difficult it will be for many of their readers to become change agents in a company “at the start of the journey toward empowering [its] HERoes.”

What to do? Here is what they suggest: “First, spend some time learning how mobile, video, cloud, and social technologies work…Second, don’t just identify customer problems, imagine solutions…Third, reach out to people who can help…Fourth, build a plan [such as the Effort-Value Evaluation in Chapter 2]…If your project affects customers or employees, you’ll generally need some management approval – but you’ll have to balance the need to get approvals higher up in the organization with the ability to get started.”