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This is an MIT Sloan Management Review article. Many project managers and their executive sponsors are surprised when projects go off track: "Why didn't we see that coming?"Even projects that employ sophisticated techniques for risk management have surprising derailments. However, risk management can only manage known risks, and "unknown unknowns"(often called "unk-unks") are lurking in every project. The authors argue, however, that many unk-unks aren't really unk-unks at all. Rather, they are things no one has bothered to find out. Indeed, the authors point out, there are two kinds of unknowns: unknown unknowns (things we don't know we don't know) and known unknowns (things we know we don't know). Every project has some of both. The techniques of conventional risk management apply only to the known unknowns. However, some unk-unks can be converted into known unknowns through a process of directed recognition. The article provides an overview of the targets, methods and tools of directed recognition -the where, why and how. First, the authors introduce six project domains in and around a project where uncertainty resides (and where recognition should occur). Second, they describe the characteristics that increase uncertainty in projects and explain why they make unk-unks more likely. Finally, they present a set of techniques for converting knowable unk-unks into known unknowns. Although unk-unks are by definition things managers don't realize they are missing, it's possible, the authors say, to look at a project and its context and realize that unk-unks are likely to exist -and why.

business value from analytics is not data management or complex modeling skills. Instead, the number one barrier mentioned by survey respondents involved translating analytics into business actions -in other words, making business decisions based on the results, not producing the results themselves. With more access to useful data, companies are increasingly using sophisticated analytical methods. That, the authors argue, means there's often a gap between an organization's capacity to produce analytical results and its ability to apply them effectively to business issues. Much can be done to make analytics more consumable for managers. At the individual level, data analysts can learn more about the business; in fact, about a third (34%) of the survey respondents reported that their organizations train analytics professionals to understand business issues. Organizations can also systemically improve infrastructure and processes; improved data quality, for example,can make it easier to turn data into competitive advantage. Managers can also take steps to become savvier at understanding analytical results. In fact, managers and executives are working to become more knowledgeable about data and analytics: Many of the survey respondents reported that their organizations develop analytical skills through on-the-job (58%) or formal (23%) training. Almost half the respondents (49%) reported that their organizations train managers to make better use of analytics. Beyond training, other known steps include: identifying trustworthy analytics professionals within the organization, requiring straightforward explanations and asking detailed questions. However, the authors'research indicates that, despite their efforts, managers continue to find it difficult to keep pace with their organization's analysts for two reasons: burgeoning analytics sophistication and competing demands for managerial attention.

This is an MIT Sloan Management Review article. In the 2014 Sustainability Report, new research by MIT Sloan Management Review, The Boston Consulting Group and the UN Global Compact, shows that a growing number of companies are turning to collaborations -with suppliers, NGOs, industry alliances, governments, even competitors -to become more sustainable. Our research found that as sustainability issues become increasingly complex, global in nature and pivotal to success, companies are realizing that they can't make the necessary impact acting alone.. Authors: MIT Sloan Management Review, The Boston Consulting Group and the United Nations Global Compact.

Mindful of his company's long history of sensitivity to the environmental or health effects of the chemicals in its products, the author decided to risk losing sales by reformulating Saran Wrap. SC Johnson had acquired it from Dow in 1998, and the product's superior microwavability and impenetrable barrier to odor made it the market leader for decades. Polyvinylidene chloride (PVDC) was responsible for both those unique differentiators. When the U.S. Food and Drug Administration, environmental groups, and consumers began to express concern over the use of polyvinyl chloride (PVC), the difference between PVC and PVDC got lost in the discussion. Nevertheless, the company was concerned as well, because it used PVCs in some of its external packaging. It launched a process called Greenlist to help it reevaluate their inclusion. Since then Greenlist has been rigorously updated to sort ingredients according to category and rank them for impact on human and environmental health. The company has removed potentially hazardous products many times--and taken whatever hit accompanied each instance. It could have simply eliminated PVCs from the product packaging and left Saran Wrap as it was. Instead it pledged to stop selling wraps that contained chlorine of any kind, including PVDCs, by 2004. A dedicated research, development, and engineering team was assigned to try to re-create Saran Wrap without PVDCs within a year. But preserving its unique characteristics proved impossible, and this once iconic product became an also-ran.

Like many other companies, Deloitte realized that its system for evaluating the work of employees--and then training them, promoting them, and paying them accordingly--was increasingly out of step with its objectives. It searched for something nimbler, real-time, and more individualized--something squarely focused on fueling performance in the future rather than assessing it in the past. The new system will have no cascading objectives, no once-a-year reviews, and no 360-degree-feedback tools. Its hallmarks are speed, agility, one-size-fits-one, and constant learning, all underpinned by a new way of collecting reliable performance data. To arrive at this design, Deloitte drew on three pieces of evidence: a simple counting of hours, a review of research in the science of ratings, and a carefully controlled study of its own organization. It discovered that the organization was spending close to 2 million hours a year on performance management, and that "idiosyncratic rater effects" led to ratings that revealed more about team leaders than about the people they were rating. From an empirical study of its own high-performing teams, the company learned that three items correlated best with high performance for a team: "My coworkers are committed to doing quality work," "The mission of our company inspires me," and "I have the chance to use my strengths every day." Of these, the third was the most powerful across the organization. With all this evidence in hand, the company set about designing a radical new performance management system, which the authors describe in this article.

Much of what we believe about the best ways to compensate and motivate the sales force is based on theory and lab experiments. But in the past decade, researchers have been moving out of the lab and into the field, analyzing companies' sales and pay data, and conducting experiments involving actual salespeople. The findings from this new wave of research support some current compensation practices but call others into question. For example, studies clearly show that caps on commissions hurt sales. If managers must retain a cap, they should set it as high as possible to avoid reducing reps' incentives. Although overly complicated compensation systems have their downsides, research has found that a system needs to include enough elements (such as quarterly performance and overachievement bonuses) to keep high performers, low performers, and average performers engaged throughout the year. Managers should be careful in setting and adjusting quotas. For instance, studies show that ratcheting (raising a salesperson's annual quota if he or she exceeded it the previous year) dampens motivation. The research also suggests that it's important to pay attention to the timing of bonuses: A reward given at the end of a period is more motivating than one given at the beginning.

U.S. businesses spend $800 billion annually on sales force compensation and another $15 billion on sales training. Yet the backward-looking metrics they rely on (such as revenue generated) to gauge the impact of this spending provide limited insight into how a salesperson will do going forward and what types of training and incentives will be most effective. As a result, many companies misallocate sales force investments. The authors worked with data from a Fortune 500 B2B software, hardware, and services firm to develop a method for measuring reps' future profitability. The metric, salesperson future value (SFV), is the net present value of future cash flows from a salesperson's existing and prospective customers minus the costs of developing, motivating, and retaining the rep. The SFV analysis revealed that the firm had been overvaluing poor performers and undervaluing stars. Using the SFV calculations and data on each rep's prior training and incentives, the authors segmented reps according to whether they were motivated more by training or by various incentives. The firm then increased training for some reps and increased incentives for others, thus achieving an 8% increase in SFV across the sales force. The firm also increased its investments in high-SFV reps and reduced investments in low-SFV reps--a reallocation of resources that increased the firm's revenue by 4%.

When Mark Roberge joined HubSpot as its fourth employee, he had no sales experience but still was charged with building the sales team. His background proved to be an advantage, however: With his engineering training, Roberge brought an analytic rigor to the task. And he quickly realized that the sales compensation plan could motivate salespeople not only to sell more but also to behave in ways that advanced the start-up's evolving strategy. Each time the firm entered a new stage of growth, Roberge revised the comp plan to support its changing priorities: (1) Customer acquisition. Early on, HubSpot needed to bring in lots of customers and see how well its offer was working. So it rewarded salespeople for customers who stayed at least four months, and soon grew to 1,000 customers. (2) Customer success and retention. In the second phase, HubSpot focused on ensuring that its product fit the market. Realizing that many customers were jumping ship because they'd been given the wrong expectations, Roberge began tying commission rates to the rate of customer retention. (3) Sustainable growth. After it fixed retention, HubSpot saw that its service worked best for customers who made a commitment to it. So the firm's third plan rewarded salespeople for customers who signed up for a full year at a time. The continual adaptation paid off: In seven years HubSpot hit $100 million in sales.

For more than three decades, Andris Zoltners, now an emeritus professor at Northwestern, has been studying the best ways to organize and pay salespeople. The pioneer of sales analytics, he is the founder of one of the world's largest sales consulting firms and the author of six books on sales management. In this interview, he shares some of his insights with HBR. Companies make several common mistakes with sales compensation, Zoltners notes: over- or underincentivizing key products, setting quotas too high or too low, and underpaying top performers or overpaying people with good territories. Companies often get the proportion of incentive pay wrong, too, because they fail to account for "free sales"--residual sales they get nearly automatically. They may think they're paying 60% in salary and 40% in commissions, but if their salespeople have a lot of free sales, commissions could be closer to 15%. Overly complicated plans are also a problem. Some plans have different payments for dozens of objectives. That's too much; salespeople can focus on only four or five goals at most. Yet a bigger issue may be an overreliance on compensation in the first place, Zoltners suggests. There are other drivers of sales success--the people you hire, their managers, the design of territories. And while analytics are a useful tool, culture may prove to be an even better one.

According to the Family Business Institute, only 30% of family businesses last into the second generation, 12% remain viable into the third, and 3% operate into the fourth generation or beyond. Those that do continue often see their value decline significantly as a result of mismanaged succession. The authors, all associates of the global executive search firm Egon Zehnder, partnered with Family Business Network International to analyze 50 leading family firms. Through interviews with both family and nonfamily executives, they discovered that the most successful of these companies do four things well: (1) They establish good governance practices that separate the family and the business and ensure oversight from a professional board. (2) They are careful not to lose what makes them special--a quality the authors call "family gravity." (3) They assess future leaders on alignment with company values as well as on competencies. (4) They follow a disciplined selection process when considering candidates for the top post, and take care to provide meaningful support during the integration process.

The ubiquity of internet access has caused a sharp rise in the number of businesses offering platforms that connect users for communication or commerce. Entrepreneurs are particularly drawn to these platforms because they create significant value and have modest operating costs, and network effects protect their position once established--users rarely leave a vibrant platform. But these businesses also raise significant start-up challenges. Every platform starts out empty. Platforms need to immediately attract not only many users but multiple types of users. For example, it's not enough that many customers want to book taxis by smartphone. Drivers must also be willing to accept smartphone bookings. Harvard Business School professor Ben Edelman has been studying the dynamics of platform businesses and the strategies for launching them for 10 years. In this article he draws on research on dozens of platform sites and products to offer a framework for building a successful platform business. It involves asking five basic questions: (1) Can I attract a large group of users at once? (2) Can I offer stand-alone value to users? (3) How can I build credibility with customers? (4) How should I charge users? (5) Should my platform be compatible with legacy systems?

The authors have conducted a two-year study of how new CEOs in large organizations gain access to seasoned counsel and feedback. Although these leaders have usually experienced mentoring earlier in their careers, arrival at the top suddenly narrows the available and appropriate options. To keep raising their game--and having their thinking usefully challenged--CEOs need wise mentoring. They're finding it, the authors learned, by turning to high-profile veteran leaders from outside their companies. But these arrangements have some tricky aspects: Special considerations must go into matching mentor and mentee, structuring their sessions to deliver the intended benefits, and prioritizing the process so that it isn't crowded out by other demands. Total confidentiality is an absolute necessity--as are regular meetings--and storytelling is the mode of knowledge sharing both parties usually prefer. "Most interesting to us," the authors write, "was the psychological boost that mentors' war stories seemed to give new CEOs."

In this edited interview with HBR senior editor Alison Beard, the chess player and Soviet exile discusses strategy, power, and the importance of playing your own game.

This case traces the economic history of modern Germany, from its beginnings in the 19th century to its strong performance during the financial crisis and its emergence as a de facto economic and political leader of Europe.

The principals at Domeyard, a start-up high frequency trading (HFT) hedge fund based in Cambridge, faced a myriad of important decisions: which markets to trade on, how to raise capital, and from whom to raise capital. Many of these decisions were standard for start-ups, but some were unique to hedge funds-among them choosing the right fund structure, as well as how to raise capital for the management company versus raising capital to invest. Given the recent backlash against HFT, the question of whether they should delay any launch also loomed large.

We're never surprised to hear about unethical executives whose lapses eventually ruin their careers and companies. But is the opposite true? Do highly principled leaders and their organizations perform especially well? The answer is yes, according to new research by the leadership consultancy KRW International. CEOs whose employees gave them high marks on four key traits--integrity, responsibility, forgiveness, and compassion--had an average return on assets that was nearly five times as much as what CEOs with low character ratings had. This article describes the research findings and offers recommendations for how leaders can increase their self-awareness and overcome character deficits--for the benefit of their careers, their employees, and, it's now clear, their companies, too. This reprint contains three additional Idea Watch articles. "How Consumers Understand (and Misunderstand) Pricing Cues" describes research into how retailers unwittingly send misleading signals about whether they are high- or low-priced--something they need to understand and manage in order to compete. "Connected Cities Are Economically Healthy Cities" discusses a study showing a correlation between an area's average number of LinkedIn connections per user and its job growth. "Hello? Anyone in HQ Listening?" visually depicts several specific factors responsible for dissatisfaction and high turnover among Asian executives of Western multinationals, suggesting that parent companies needn't take a fatalistic view of this pervasive problem after all.

When you do good, you treat yourself with a cookie, new research shows.

An elaborate engraving by the Swiss artist Jost Amman in 1585 depicts scenes from the mercantile economy in Northern Europe, revealing the variety of forces that can bring success or failure to a business.

The Off Grid Electric case focuses on the creation, growth, and financing of the company from 2011 through the middle of 2014. The three cofounders saw an opportunity to provide solar electricity to much of Africa through their solar-as-a-service solution, which they launched in Tanzania in 2012. The Off Grid Electric business model was very capital intensive, and the new venture had several risks from the perspective of investors: market, business model, human resources, technology, and exit. As such, CEO Xavier Helgesen needed to think strategically about how-and when-to raise money in order to grow the business. In addition, the executive team needed to be in agreement on the company's growth plan. Should Off Grid Electric focus on rapid growth? Should they emphasize generating cash? What would these choices imply for Off Grid Electric's financing needs? At the end of the case, Helgesen receives two term sheets for a potential Series D financing. One is from Zouk Capital, a financial investor, and another is from Solar City, a strategic investor who had previously invested in Off Grid Electric. Students are asked to evaluate the term sheets from Helgesen's perspective, as well as to analyze an investment in Off Grid Electric from the perspective of an investor.

Launched in 2005, Aava natural mineral water is one of the key brands in the natural mineral water market in India. It had sales of over INR 15 crore (150 million) in 2012 and it is the second largest brand and a volume leader in the natural mineral water category. The case discusses the dilemma faced by its Managing Director and his team in light of the emerging competition. The company needs to take important decisions related to customer segment selection, product mix and introduction of new product offerings.