New products and services are created to enable people to do tasks better than they previously could or do things they couldn't before. But innovations also carry risks. Just how risky an innovation turns out to be depends in great measure on the choices people make in using it. Attempts to gauge the riskiness of an innovation must take into account the limitations of the models--formal and informal--on which people base their decisions about how to use the innovation, warns Robert C. Merton, MIT professor and Nobel laureate in economics. Some models turn out to be fundamentally flawed and should be jettisoned, he argues, while others are merely incomplete and can be improved upon. Some models require sophisticated users to produce good results; others are suitable only to certain applications. And even when people employ appropriate models to make choices about how to use an innovation--striking the right balance between risk and performance--experience shows that it is almost impossible to predict how their changed behavior will influence the riskiness of other choices and behaviors they make, often in apparently unrelated domains. It's the old story of unintended consequences. The more complex the system an innovation enters, the more likely and severe its unintended consequences will be. Indeed, many of the risks associated with an innovation stem not from the innovation itself but from the infrastructure into which it is introduced. In the end, any innovation involves a leap into the unknowable. If we are to make progress, however, that's a fact we need to accept and to manage.
From Apple to Merck to Wikipedia, more and more organizations are turning to crowds for help in solving their most vexing innovation and research questions, but managers remain understandably cautious. It seems risky and even unnatural to push problems out to vast groups of strangers distributed around the world, particularly for companies built on a history of internal innovation. How can intellectual property be protected? How can a crowdsourced solution be integrated into corporate operations? What about the costs? These concerns are all reasonable, the authors write, but excluding crowdsourcing from the corporate innovation tool kit means losing an opportunity. After a decade of study, they have identified when crowds tend to outperform internal organizations (or not). They outline four ways to tap into crowd-powered problem solving--contests, collaborative communities, complementors, and labor markets--and offer a system for picking the best one in a given situation. Contests, for example, are suited to highly challenging technical, analytical, and scientific problems; design problems; and creative or aesthetic projects. They are akin to running a series of independent experiments that generate multiple solutions--and if those solutions cluster at some extreme, a company can gain insight into where a problem's "technical frontier" lies. (Internal R&D may generate far less information.)
Traditionally, companies have managed their constituencies with specific processes: marketing to customers, procuring from vendors, developing HR policies for employees, and so on. The problem is, such processes focus on repeatability and compliance, so they can lead to stagnation. Inviting your constituencies to collectively help you solve problems and exploit opportunities--"co-creation"--is a better approach. It allows you to continually tap the skills and insights of huge numbers of stakeholders and develop new ways to produce value for all. The idea is to provide stakeholders with platforms (physical and digital forums) on which they can interact, get them to start exploring new experiences and connections, and let the system grow organically. A co-creation initiative by a unit of Becton, Dickinson and Company demonstrates how this works. A global leader in syringes, BD set out to deepen its ties with hospital customers and help them reduce the incidence of infections from unsafe injection and syringe disposal practices. The effort began with a cross-functional internal team, brought in the hospital procurement and supply managers BD had relationships with, and then reached out to hospitals' infection-prevention and occupational health leaders. Eventually product designers, nurses, sustainability staffers, and even hospital CFOs were using the platform, contributing data that generated new best practices and reduced infections.
In 2009, TED, an organizer of highly respected conferences on "ideas worth spreading," threw its doors open, allowing anyone, anywhere, to manage and stage local, independent events under its banner. In the next few years, an army of volunteers produced some 5,000 such TEDx events in more than 130 countries. The brand extension and new content TED gained through these gatherings would have cost millions to produce by traditional means. But they came with a risk: TED no longer completely controlled its brand, and an extended community of people who didn't work for TED were now capable of damaging it. And when TEDx licensees began putting dubious pseudoscientific presentations on their programs, that risk became a real threat. The blogosphere trashed TED for producing dumb content and questioned its overall credibility. In this article, Nilofer Merchant describes the uproar and the lessons it offers: (1) that "open" does not mean "easy" or "free" and (2) that you need to get the crowd working with you, not against you. TED did that, turning things around by adopting three practices: "listening loudly," realigning the community through shared purpose, and being strategic about the parts of the business it opened to the crowd and the parts it kept under tight control.
At 43, Sheryl Sandberg can look back on an already illustrious career that began with her graduation summa cum laude from Harvard and moved through the World Bank, Harvard Business School, McKinsey, the U.S. Treasury Department, and Google before landing her at Facebook, where she manages the social media giant's complex business operations. Nevertheless, she has faced her own internal barriers to success, which is part of the reason for her parallel career as an outspoken advocate for women aspiring to leadership positions. In this interview with HBR's editor in chief, Sandberg talks about her new book, "Lean In: Women, Work, and the Will to Lead"; how and why women hold themselves back; understanding gender differences and celebrating them; the "likability" gap, and much more.
Employees make decisions every day about whether to contribute to others--and their willingness to help is crucial to group and organizational effectiveness. But in a competitive, often zero-sum, world of work, generosity can be a dangerous path. How can leaders foster it without cutting into productivity, undermining fairness, and allowing employees to become doormats? The key, explains Wharton's Adam Grant, is to help givers reach a more nuanced understanding of what generosity is and is not. They'll be better positioned for sustainable giving when they can distinguish generosity from three attributes that often travel with it: timidity, availability, and empathy. Givers can overcome timidity, Grant says, by learning to act as agents--using "relational accounts" to advocate for others while negotiating for themselves. They can set boundaries on when, how, and whom to help. And they can strive to be perspective takers, not just empathizers, gathering knowledge about others that can lead to more-productive allocations of time that will benefit the organization as a whole.
In the wake of the corporate missteps of recent years, we've heard plenty about how boards of directors should act as more responsible stewards. But one voice has been notably missing from the chorus of advice--the voice of the CEO. The authors, who include the founder of the Yale Chief Executive Leadership Institute, have tapped their networks to ask dozens of well-regarded chief executives: What keeps boards from being as effective as they could be? Are they really the cartooned millstone around the CEO's neck, or do they help shape the enterprise in positive ways? What can they do to become a greater strategic asset? The answers--surprisingly candid and highly revelatory--can be distilled into five prescriptions. Boards should be careful not to rein in boldness too tightly. They should do their homework on the company and the industry at large. They should recognize that character and credentials, not celebrity, are what's needed for a high-functioning board. Directors should also overcome any conflict aversion and bring energetic, constructive debate to the boardroom--contrary to conventional wisdom, CEOs don't want rubber-stamp approval of their plans. And they should work to make the inherently fraught succession process less awkward, taking care not to overlook talent in the internal pipeline. As the debates over governance continue, those seeking to improve board performance should listen to every informed perspective, including the constituency that knows boards and their failings best.
Much of the strategy and management advice that business leaders turn to is unreliable or impractical, say the authors, because those who would guide us underestimate the power of chance. Raynor and Ahmed undertook a statistical study of 25,000 companies--those that had traded on U.S. stock exchanges at any time from 1966 to 2010. They measured performance according to return on assets--a metric, they reasoned, that reliably reflects managerial efforts rather than simply changes in expectations, which are the primary driver of shareholder returns. Out of that 25,000 they identified 344 companies they deem exceptional: 174 Miracle Workers, whose ROA fell in the top 10% of all companies studied, and 170 Long Runners, whose ROA fell in the top 20% to 40%. For purposes of comparison, they also identified companies that were Average Joes. After repeatedly trying and failing to isolate measurable behaviors that were consistently relevant to success, the authors shifted their emphasis away from what these companies did to hypotheses about how they thought. They realized that the choices these companies had made were consistent with three seemingly elementary rules: (1) Better before cheaper--in other words, compete on differentiators other than price. (2) Revenue before cost--that is, prioritize increasing revenue over reducing costs. (3) There are no other rules--so change anything you must to follow Rules 1 and 2.
Why doesn't a woman who continues to have unwanted pregnancies avail herself of the free contraception at a nearby clinic? What keeps people from using free chlorine tablets to purify their drinking water? Behavioral economics has shown us that we don't always act in our own best interests. This is as true of health decisions as it is of economic ones. An array of biases, limits on cognition, and motivations leads people all over the world to make suboptimal health choices. The good news is that human nature can also be a source of solutions. Through her studies in Zambia exploring the reasons for unwanted pregnancies and the incentives that would motivate hairdressers to sell condoms to their clients, the author has found that designing effective health programs requires more than providing accessible, affordable care; it requires understanding what makes both end users and providers tick. By understanding the cognitive processes underlying our choices and applying the tools of behavioral economics--such as commitment devices, material incentives, defaults, and tools that tap our desire to help others--it's possible to design simple, inexpensive programs that encourage good health decisions and long-term behavior change.
Almost every organization has people it can't do without--specialists with "deep smarts," who are the go-to experts on critical issues. But because their knowledge is experienced-based, it's often instinctive and unarticulated, and never gets passed on. Capturing it is a challenge for both the organization and for colleagues who wish to become in-house authorities themselves. This article offers a methodical system for acquiring deep smarts from an expert. It involves observing that person extensively to understand what makes him successful, practicing the behaviors he exhibits on your own, partnering with him to solve problems, and ultimately taking responsibility for some of his tasks. Describing the experiences of one executive as she takes this journey with a mentor, the authors show how you too can gain the wisdom that will make you indispensable to your firm.
Riding the popularity of a great first product is easy; finding the next one is hard. Written by Elie Ofek and Jill Avery, this fictional HBR Case Study features expert commentary by Gauri Nanda and Ravi Sawhney.
Philippe Starck has designed thousands of products, interiors, and buildings for clients ranging from Microsoft to Baccarat. Here, he reveals the secrets of his productivity: being a control freak, traveling light, and hiring by intuition.
Riding the popularity of a great first product is easy; finding the next one is hard. Written by Elie Ofek and Jill Avery, this fictional HBR Case Study features expert commentary by Gauri Nanda and Ravi Sawhney.
Riding the popularity of a great first product is easy; finding the next one is hard. Written by Elie Ofek and Jill Avery, this fictional HBR Case Study features expert commentary by Gauri Nanda and Ravi Sawhney.
This is an MIT Sloan Management Review article. The number of companies that outsource critical business processes to outside suppliers has been growing significantly worldwide. In 2012, companies outsourced some $309 billion of services - activities including finance and accounting, human resource management, procurement and legal services - and the overall volume has been growing at a rate of around 25% annually. Although many organizations initiated business process outsourcing (BPO) as part of an effort to reduce costs or acquire new skills, it has since evolved into much more. In relationships companies classify as high-performing, service providers deliver substantial long-term improvements to the client's operating efficiency and strategic performance. These types of innovations require companies and service providers to work together. BPO providers do not need incentives to improve their own revenue or margins, but they do need them to focus on the client's performance. While partners may incentivize innovation by using mechanisms such as productivity targets, allocating innovation days and agreeing to gain share on innovation projects, innovation won't happen unless clients and providers implement a more comprehensive process that combines acculturation across different organizations, an engaging method for generating ideas, adequate funding and a system for managing change. Perhaps the most significant factor in BPO innovation, however, is whether the right people are in place to drive the dynamic innovation process. An effective leadership pair - one person from the client organization and another person from the provider organization - goes a long way toward invigorating the innovation process. In high-performing BPO relationships, the leaders are experienced and capable, with high levels of credibility, clout and power within their own organizations.
This is an MIT Sloan Management Review article. A company's digital business model describes how the enterprise interacts digitally with its customers to generate value. The authors argue that it's time for companies to create a great digital business model before their customers leave them behind. A great digital business model will often challenge the status quo in the company: It can cause an organization to change how work gets done, who does the work and where it invests to best serve customers online. A digital business model often cannibalizes or changes the company's physical channels. And that is true whether the company is a born-on-the-Web company like Amazon, a large oil company or a local business just starting to focus on the best way to connect with customers online. The authors have created a framework to help enterprises compete digitally with three capabilities: their content, customer experience and platform. They illustrate the framework with case studies of top performers like Amazon, Apple, LexisNexis and USAA and results from an effective practices survey. They also include a self-assessment tool to help with next steps.
Professional boxing was once a mainstream sport, whose stars were widely known to the general public. Major fights were broadcast on network television. By the 2000s, the landscape had changed dramatically. Boxing had become a niche sport in the United States, few boxers were known beyond the hard-core fan base, top fights were only available on premium cable or pay-per-view (PPV), and other combat sports were on the rise. This case describes the world of professional boxing, including the roles of fighters, managers, promoters, and television. It focuses on a decision facing HBO, one of the important economic drivers of the sport. In September 2012, Julio Cesar Chavez Jr. lost a title fight to Sergio Martinez despite a thrilling final round. The fight was seen on HBO PPV. Most observers thought that a rematch would be held, and that it would attract a substantial PPV audience. However, Martinez planned a fight in his native Argentina prior to a potential rematch. Chavez would likely also have an interim fight. HBO considered the possibility of having the interim Chavez match on their cable channel rather than on PPV. This would make the fight available to more viewers, hopefully increasing the audience for the PPV rematch with Martinez, and would guarantee Chavez a sizable payment from television rights. However, if the fight were on PPV, Chavez would have the opportunity to earn more money based on PPV sales (and also take the risk of a lower payday if PPV sales did not meet expectations). If HBO believes that it is in the long term interest of the sport, the fighters, and HBO to have the fight on cable rather than PPV, how can they convince Chavez's promoter, and how can they help the promoter convince Chavez to accept a lower potential payday in exchange for an increased audience and the opportunity to build PPV sales for the planned rematch with Martinez?