Most Valuable Business Insights: 16-20

After having read and reviewed so many business books, I now share brief comments about what I consider to be the 25 most valuable business insights and the books in which they are either introduced or (one man’s opinion) best explained. Here are 16-20.

16. PERFORMANCE MEASUREMENT: First, determine which tasks are most important. Then, make performance expectations crystal clear to each of those whose performance will be measured.  Next, co-determine with them what the metrics for measurement will be. Third and finally, review measurement data after 45-60 days and revise (if necessary) (a) performance expectations and/or (b) the criteria by which performance is measured.

Best Sources:

Transforming Performance Measurement
Dean Spitzer

Analytics at Work
Thomas H. Davenport, Jeanne G. Harris, and Robert Morison

17. PERSUASION: This is the art and science of convincing another person or persons to agree with what they are asked to think, believe, or do. The basic requirements include eloquence, conviction, logic, and clarity as well as sufficient information to justify the given proposition or action. The most persuasive people respond effectively to a question that may only be implicit: “What’s in it for me?” One of the most effective persuasion strategies is to appeal to enlightened self-interest.

Best Sources:

Influence: The Psychology of Persuasion
Robert B. Cialdini

Crucial Conversations: Tools for Talking When Stakes Are High
Kerry Patterson, Joseph Grenny, Ron McMillan, Al Switzler

18. POWER: This is probably one of the most difficult terms to define because it has both positive and negative connotations and can be experienced in so many different dimensions (i.e. mental, physical, emotional, and spiritual). As Thoreau, Ghandi, and then Martin Luther King, Jr. suggest, non-violent resistance can have great power; we also know what other forms of power can do in response to that resistance.

Best Sources:

Power: Why Some People Have It and Others Don’t
Jeffrey Pfeffer

The Elements of Power: Lessons on Leadership and Influence
Terry R. Bacon

19. PRODUCTIVITY: Get the most and best results from the least consumption resources (e.g. time, energy, materials). It is imperative to know what those desired results are, first. Otherwise, Peter Drucker’s observation applies: “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.” Experts recommend that, in meetings and conversations, focus on discussion of what must be done, not on what to discuss.

Best Sources:

Mastering the Rockefeller Habits: What You Must Do to Increase the Value of Your Growing Firm
Verne Harnish

Now…Build a Great Business! 7 Ways to Maximize Your Profits in Any Market
Mark Thompson and Brian Tracy

20. SELLING usually requires these components: a seller, a buyer, and a product and/or service of some kind. The term is also used with regard to convincing people (getting their “buy-in”) such as during change initiatives or during a negotiation (“I’ll buy that”).  Whatever the situation, the challenge to anyone selling is to possess the right information (i.e. accurate, sufficient, relevant, and verifiable) and present it effectively (i.e. convincingly).

Best Sources:

SPIN Selling
Neil Rackham’s

Selling to the C-Suite: What Every Executive Wants You to Know About Successfully Selling to the Top
Nicholas-A.C.-Read and Stephen J. Bistritz

You know you are competing on analytics when….

Thomas H. Davenport

In an article that appeared in Harvard Business Review (January 2006), Thomas H. Davenport explains how to become an analytics competitor: champion analytics from the top, create a single analytics initiative, focus on your analytics efforts, establish an analytics culture, hire the right people, and use the right technology (ies). He later co-authored Competing on Analytics: The New Science of Winning with Jeanne G. Harris, published by Harvard Business School Press (2007).

To read my interview of Davenport, please click here.

Note: He is now in the process of completing a second interview.

To determine whether or not your organization is an analytics competitor, here is a checklist he provides in his HBR article:

1. You apply sophisticated information systems and rigorous analysis not only to your core capabilities but also to a range of functions as varied as marketing and human resources.

2. Your senior executive team not only recognizes the importance of analytics capabilities but also makes their development and maintenance a primary focus.

3. You treat fact-based decision making not only as a best practice but also as part of the culture that’s constantly emphasized and communicated by senior executives.

4. You hire not only people with analytical skills but a lot of people with the very best analytical skills – and consider them and value them as a key to your organization’s success.

5. You not only employ analytics in almost every function and department but also consider it so strategically important that you manage it at the enterprise level.

6. You not only are expert at number crunching but also invent proprietary metrics for use in key business processes.

7. You not only use copious data and in-house analysis but also share them with customers and suppliers.

8. You not only avidly consume data but also seize every opportunity to generate information, creating a “test and learn” culture based on what numerous small experiments reveal.

9. You not only have committed to competing on analytics but also have been building, strengthening your capabilities for several years.

10. You not only emphasize the importance of analytics internally but also make quantitative capabilities part of your company’s “story,” to be shared in the annual report and in discussion with financial analysts, customers, and the business media.

Book Review: Competing on Analytics

Competing on Analytics: The New Science of Winning
Thomas H. Davenport and Jeanne G. Harris
Harvard Business School Press (2007)

In this volume, Thomas Davenport and Jeanne Harris explain how to become an analytical competitor: “an organization that uses analytics extensively and systematically to outthink and outexecute the competition” through support of a strategic, distinctive capability (e.g. Netflix and Wal-Mart), taking an enterprise-level approach to and management of analytics (e.g. Harrah’s Entertainment and RBC Financial Group), sustaining a commitment to analytics by senior management (e.g. Jeff Bezos, founder and CEO of Amazon, and Rich Fairbank, founder and CEO of Capital One), and having large-scale ambition (i.e. the aforementioned companies as well as others “bet their future success on analytics-based strategies”), with senior executive commitment “perhaps the most important because it can make the others possible.” Davenport and Harris classify companies within five stages of analytical competition:

Stage 1: Analytically impaired (“flying blind”)

Stage 2: Localized analytics (isolated, fragmented, disconnected, inconsistent, etc.)

Stage 3: Analytical aspirations (sees need, begins to explore options)

Stage 4: Analytical companies (enterprise-wide perspective, eager to innovate and differentiate)

Stage 5: Analytical competitors (analytics are the primary driver of performance and value)

Obviously, the challenge is to become a Stage 5 organization but an even greater challenge is to remain one. According to Davenport and Harris, companies that successfully compete on analytics have analytical capabilities that are difficult to duplicate, unique, adaptable to many situations, better than the competition, and renewable. By design and when utilized, those capabilities must also be able to accommodate all manner of changes within the given competitive marketplace. In some circumstances, in heavily regulated industries or when the analytics support an obsolete business model (e.g. large U.S. airlines such as American and United), analytics are not enough. Still another challenge is to identify those internal applications of business analytics that are clearly strategic and involve competitive advantage.

Interview: Thomas H. Davenport

Thomas H. Davenport

Thomas H. Davenport holds the President’s Chair in Information Technology and Management at Babson College and is responsible for the overall management of the Institute for Process Management. He and Larry Prusak also manage the Working Knowledge program. His published works include Process Innovation, Thinking for a Living, Working Knowledge and What’s the Big Idea? with Prusak, The Attention Economy co-authored with John Beck, most recently Competing on Analytics co-authored with Jeanne G. Harris.

Note: This interview was conducted in 2007. Davenport is now in the process of completing another interview.

Morris: In your various books and articles, you offer excellent advice as to how to manage knowledge. Let’s begin with a more basic challenge, one which Carla O’Dell and Jackson Grayson examine in If Only We Knew What We Know: First determining what your information needs are and then what necessary knowledge already exists within an organization. Your views on that?

Davenport: I certainly agree that it’s better to start with the knowledge your organization possesses already. It’s somewhat surprising that relatively few organizations have done either of the two steps above. They don’t examine their strategies and decide what information and knowledge are critical to achieving them, and they don’t have a good inventory of what they know already. Those two steps in that order would be a great boon for knowledge management.

Morris: In What’s the Big Idea? you and Larry Prusak explain how ideas are linked to business success, who introduces ideas to organizations and how they do that, why “content counts,” where the best management ideas come from, how ideas interact with markets, where to find ideas most appropriate to a given organization and then how to sell them, and why idea-based leadership is essential to any organization’s success. These are admirable objectives. Why do so few organizations achieve them?

Davenport: People get very excited about business ideas, but they don’t manage them to fruition very well. There are a variety of problems in this regard. Most companies take on too many ideas at once. They don’t have any sort of process for monitoring how the idea is being implemented within the organization. GE is the primary exception. Under Jack Welch they developed a management system for making new business ideas a reality, and they were very disciplined about which ones they took on. Then there aren’t usually enough idea practitioners around to make it all work.

Morris: Also in What’s the Big Idea?, you and Prusak assert that “Idea-Friendly Culture” which (a) has open dialogue between and among all levels, (b) supports “boundarylessness” to maximize individual and collective intellect from both within and outside the organization, and finally, (c) encourages trust and responsibility which will “allow people to learn effectively from each other and provide motivation for putting ideas to work.” That said, what role could and should senior management have to expedite and support such initiatives?

Davenport: They control the organization’s resources, and each idea that an organization adopts consumes resources. So it’s very important that they decide which ideas enter the portfolio that the organization will try to implement. They’re really setting the idea strategy—“what ideas are we going to pursue?” They also have to put pressure on the organization to make things happen. At GE, Welch would call business unit managers who would be moving a little slowly on an idea, and say, “Why aren’t you doing more with digitization? This is really critical to our success and your long-term future here.” That’s obviously very powerful.

Morris: As you indicate in Thinking for a Living, what do you consider to be the appropriate relationship between knowledge workers and various technologies provided to them?

Davenport: In most cases thus far, knowledge workers have been the victim of the technologies. A lot of tools have been thrown at knowledge workers, and nobody’s given them much help in thinking about how it fits their jobs and their objectives. Now we all have a lot of technologies—laptops, desktops, PDAs, cell phones, pagers, etc.—but they don’t integrate very well, and everything is very fragmented. The result is that only a small percentage (less than 1% in my informal surveys) of knowledge workers feel that they are very good at managing their personal information and knowledge environments.

Morris: In the same book, you suggest that individual knowledge work improvement initiatives have two attributes. With regard to the first, why should they be focused on improving the performance of knowledge workers as individuals, not as members of a larger group

Davenport: I did some work with the Software Engineering Institute at Carnegie-Mellon. I realized that they had figured out something important. If you want to improve how an organization gets better at software development, you need to address the problem on multiple levels: the company, the team, and the individual. I think the same thing applies to knowledge worker productivity and effectiveness. We really haven’t done enough at any of these levels for knowledge work.

Morris: Why should individually oriented initiatives be directed at improving some skill or capability, rather than instituting a new process?

Davenport: I really believe in both. Again, we should be working on multiple levels. Of course, you can’t do that for every job. You have to pick one or a few knowledge work roles that are very critical to your organization’s success, and focus on those.

Morris: In Chapter 7 of Thinking for a Living, you pose a very important question: “What’s more important to improving knowledge worker performance: technological networks or human networks?” For those who have not as yet read your brilliant book, what is the gist of your response to that question?

Davenport: Well, I try to go with the data, and when we asked high-performing knowledge workers how they get the information they need to do their jobs, they generally said they got more useful information from their human networks than from technological ones. Consider the implications of that.

Of course, you don’t really have to choose—you can try to improve both types of networks. The problem is that most organizations spend a lot more time and money on the technological networks, and ignore the human ones altogether. Knowledge workers are well aware of that neglect…and resent it.

Morris: In your opinion, what are some of the most common misconceptions about the practices of high performance knowledge workers and how they get their work done?

Davenport: I guess the biggest misconception is that you can’t do anything with knowledge workers, as I suggested above. Organizations just leave them alone. I think it’s possible to impose a bit more structure on knowledge work and measure and improve it in almost every case. Of course, you can go too far, and alienate these unique and very valuable workers.

Morris: Before concluding this interview, please tell us about your next book, Strategic Management in the Innovation Economy, which you co-authored with Marius Leibold and Sven Voelpel.

Davenport: That book is really a textbook about how to pursue multiple forms of innovation in the contemporary world. I don’t generally do textbooks, but Marius and Sven did most of the work. Right now I am most excited about my next book, which is about how companies compete on their analytical capabilities. It should be out in early 2007. I’m not a terribly quantitative person myself, but I see the world moving in that direction. I wrote an article on this topic entitled “Competing on Analytics” in the January (2006) issue of Harvard Business Review, and it’s gotten a more positive reaction than just about anything else I’ve written. So I’m excited about it.