Harvard Business Review hi-lights 10 years 2004 2013 Harvard Business Review December 2013

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Harvard Business Review hi-lights 10 years 2004 – 2013

Harvard Business Review December 2013

This issue represents a landmark for me in as far as it is my 100th issue to comment on over 10 consecutive years. This issue has a focus on leadership. One key aspect it proposes is staying focused and cultivating awareness of what truly matters. One interesting article talks about Inequality in America and how democracy suffers when big money has too strong influence on politics. Please find a few notes below.

The Hidden Benefits of Keeping Teams Intact by Robert Huckman and Bradley Staats. Most managers underestimate the power of familiarity among team members to drive performance.

How Diversity Can Drive Innovation by Sylvia Hewlett, Melinda Marshall and Laura Sherbin. Diversity unlocks innovation and drives market growth which should intensify efforts to ensure that executive ranks both embody and embrace the power of differences. There are two kinds of diversity; inherent and acquired. Inherent diversity involves traits you are born with such as gender, ethnicity, and sexual orientation. Acquired diversity involves traits you gain from experience. Without diversity women are 20 % less likely than straight white men to win endorsement for their ideas; people of colour 24 % less likely. This costs their companies crucial market opportunities, because inherently diverse contributors understand the unmet needs in unleveraged markets. When at least one member of a team has traits in common with the end user, the entire team understands that user. Leaders who give diverse voices equal airtime are nearly twice as likely as others to unleash value-driving insights and employees in a ‘speak-up’ culture are 3.5 times as likely to contribute their full innovative potential.

Unwinding Inequality by Angus Deaton. When successful people –businessmen, lawyers, traders, doctors – use their success to change the rules in their favour, by lobbying or funding politicians, that success is no longer something to be celebrated. When they push for what they see as important without perceiving that others have different priorities – the rich have little need of public health care or public education, for example – they undermine the provision of public goods on which the rest of us depend. Justice Louis Brandes once said: “We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”

The Focused Leader by Daniel; Goleman. Every leader needs to cultivate a triad of awareness – and inward focus, a focus on others, and an outward focus. Focusing inward and focusing on others helps leaders cultivate emotional intelligence. Focusing outward can improve their ability to devise strategy, innovate, and manage organizations. To be authentic is to be the same person to others as you are to yourself – the opposite of pretentious. A child’s level of self-control is a more powerful predictor of financial success than IQ, social class, or family circumstances. The word attention comes from the Latin word attendere, meaning ‘to reach toward.’ Executives who can focus on others are easy to recognize. They are the ones who find common ground, whose opinions carry the most weight, and with whom other people want to work. They emerge as natural leaders regardless of organizational or social rank. There are three kinds of empathy; cognitive empathy – the ability to understand another person’s perspective; emotional empathy – the ability to feel what someone else feels; empathetic concern – the ability to sense what another person needs from you. Talking about positive goals and dreams activates brain centres that open you up to new possibilities. The more distracted we are, the less we can cultivate the subtler forms of empathy and compassion. Attention to social context helps us behave in ways that put others at ease. A good leader knows who the influencers of opinion in the organization are and enlist them. Focused leaders can command the full range of their own attention: They can control their impulses, they are aware of how others see them, they understand what others need from them, they can weed out distractions and also allow their minds to roam widely, free of preconceptions. Too much information can create a poverty of attention.

Analytics 3.0 by Thomas Davenport. Google, Amazon, and others have prospered not by giving customers information but by giving them shortcuts to decisions and actions.

How Google Sold Its Engineers on Management by David Garvin. Seldom did employees accept top-down directives without question. There is a tight connection between managers’ quality and workers’ happiness. Employees with high scoring bosses consistently reported greater satisfaction in multiple areas, including innovation, work-life balance, and career development. There is a lot of possible career development besides traditional promotion.

Data’s Credibility Problem – management – not technology – is the solution. Thomas Redman. The solution to data problems is better communication between the creators of data and the data users; a focus on looking forward; and above all, a shift in responsibility for data quality away from IT folks, who don’t own the business process that create the data and into the hands of managers, who are highly invested in getting the data right.

You May Not Need big Data After All by Jeanne Ross, Cynthia Beath and Anne Quaadgras. Most companies don’t see return on their analytics investment. The answer is to have good people use good data to make good decisions. Much of the hype around big data focuses on getting more information and more people to analyse it. But the opportunity presented by the information economy is best tapped by getting all people to use data more effectively.

When Marketing Is Strategy by Niraj Dawar. You must shift your strategy downstream, from products to customers. Redefining customers purchasing criteria is one of the most powerful ways companies can wrest market leadership from competitors. High failure rates for new products suggest that companies are continuing to invest heavily in product innovation but are unable to move customers’ purchase criteria.

Why Conglomerates Thrive by J. Ramachandran, K Manikanandan and Anirvan Pant. In emerging markets business groups continue to thrive. In a sense, the business group liberates strategy from structure. Too often the need to pass up opportunities in order to satisfy shareholders’ expectations has inhibited growth.

How Emerging Giants Can Take on the World by John Jullens. Great Wall began in 1984 as a vehicle repair collective and grew by focusing on the manufacture of pick-up trucks and SUVs for the Chinese market. Its approach has been “Be stronger and then be bigger.”

Be Seen as a Leader by Adam Galinski and Gavin Kilduff. Anyone can achieve higher status on a team, both at the outset and over time, by temporarily shifting his or her mind-set before the first meeting.

Notes by frank@olsson.co.nz 24 Nov 2013

Harvard Business Review November 2013

The theme for this issue is 'How to Make Smarter Decisions.' I was again impressed with the quality of the articles. Ideas in this issue include gender advice for women to speak up, ask for that job, say why you qualify for it, and always put up your hand to be counted. Business leaders can’t afford to be bystanders – they need to also address social issues and commit to principled leadership. Don’t just please the finance markets but pursue your unique way of value creation. Search for new people and ideas – they don’t need to be the smartest but they need to be different, to represent diversity. The GFC seems to be over with the system surviving more or less intact. This may seem to be good thing but we may also have more learning experiences around the corner. Banks generally need to reduce leverage by increasing equity. Please find below a few notes from the November issue.

How To Move Beyond Gender Bias – Three remedies of gender bias – educate workers about bias, create safe settings in which women can learn, and helping women focus more on purpose and less on how they are perceived. Ketina Chikwanda, senior engineer of WorleyParsons says: Women should realize that we don't need approval or permission from our colleagues. We need to brand ourselves as individuals and stand by our brand. We should work hard but see opportunities instead of what stands in the way. Speak up, ask for that job, say why you qualify for it, and always put up your hand to be counted. Rather than dwelling on biases we should use our knowledge to counter them.

Wearables in the Workplace - about wearable technologies that capture performance data. It is quite clear that in practice companies will use such devices to judge, rank, and punish employees. Treating people in this way is likely to backfire as creative energies are diverted away from improving working processes and toward gaming the system. Further reliance on automation is likely to weaken social bonds and diminish the pleasure of performing a good job for its own sake, thus reducing intrinsic and social motivation. / Adam Wood, research scientist /

Make the most of Polarizing Brands by Xueming Luo, Michael Wiles and Sascha Raithel. Learn to assess and exploit brand dispersion rather than relying on averages (understand brand lovers and haters). Managers need to dig deep to understand the full range of attitudes towards their products. Fuelled by social media, pockets of haters can quickly develop and spread, even for brands that once enjoyed uniform appeal.

The Incredibly Shrinking Information Sector by Hank Robinson. US job shrinkages in the Information sector in the first decade of the new millennium: Editors, ad sales agents, prepress technicians, reporters and correspondents shrank about 25 %. Media outlets are using fewer people to generate more content. Customer service representatives employment is down by 30 %. Equipment installers and line installers fell by 39 %. Creatives on the rise – actors, entertainers, animators and writers - is showing a small gain. Programmers, computer engineers and systems analysts reduced by 19 %. This adds up to about one million less jobs in ten years in the US.

The Reinvention Imperative by Miles D White. Pressure from Wall Street to deliver the next quarter is a given, Your job as a business leader is to counter it with a point of view on where the industry is headed in the next five to ten years. If your strategy strikes outsiders as unexpected, that's fine. They don't know your business as well as you do. Successes and failures come and go – it is courage that counts.

The Brain and Soul Capitalism by Nancy Koehn. Most leaders accept social and civic responsibilities as indispensable to doing good business; their enterprises won't survive if those responsibilities are ignored. A company's most important assets – mission, reputation and people - are not on the balance sheet. If your sole goal is to maximise profit, you are on a collision course with time. Business leaders cannot be bystanders. To address social issues, business must experiment and innovate. In the next decade we will see a decline of companies that cannot summon moral courage demanded by principled leadership. Unilever's goal is to “stay close to society to guarantee our future.”

Rakuten's CEO on Humanizing E-Commerce by Hiroshi Mikitani, founder and CEO. Human beings need communication and connection. So instead of emphasizing efficiency and convenience Rakuten tries to create a personalized, bazaar-like shopping experience. The curators running our shops will become like friends to you and will give you personal recommendations. Good prices, efficiency, speed, accuracy – those things are important and we provide them. But if we can also provide communication and interaction and a story behind the products, it becomes a win-win relationship.

Strategy: The Uniqueness Challenge by Todd Zenger. CEOs need to decide whether to maintain the course they have set or the one demanded by the market. In deciding they often end up asking themselves, is my task simply to please the market, or is it to be creative and clairvoyant, envisioning and executing a path to value creation that investors cannot see? (It is important to conform and fit in, but even more important is to gradually transform and lift the game; you need to succeed on both these score and move from one to the other – my advice to students who are about to transfer to working life)

Deciding How to Decide by Dan Lovallo and Carmina Clarke. In highly complex, uncertain contexts, traditional decision support tools such as discounted cash flow analysis are worse than useless. Nonetheless, executives use them all the time. Three key factors for choosing the right approach are: how well do you understand the variables that will determine success, how well can you predict the range of possible outcomes and how centralised is the relevant information. It is easy to fall prey to our biases and focus on a limited set of self-serving analogies that support our preconceived notions. Make it a habit at your company to consciously decide how and when you are going to make any decision.

You Can't Be a Wimp Interview of Ram Charan by Melinda Merino. Good CEOs know it takes more than analytics, taking in a lot of information from many sources and then crystallize a point of view. You need three keys to making better decisions: Perceptual Acuity – searching the external environment for anomalies and opportunities; cutting through complexity to identify a handful of variables; and imagining how to combine these variable to create options for action; Quality Judgement – build trustworthy, diverse social networks in and outside the company and factor in their biases; move from big picture down to concrete specifics; think through the second and third order consequences; and focus on the decisions you must make and decide who should make the others; Credibility- If you don't have it your decisions will never be accepted; listening to diverse and contradictory views, building support among board, employees and others; and having the courage to make the best decision even if it is unpopular. The most common reason for failure is putting the wrong person in the job and then not dealing with the miss-match. One CEO of a large Indian company has been bringing a lot of younger people into senior jobs because of their digital experience. It's been hard for him to bypass some long-serving executives, but he had the spine to make those decisions.

Beyond the Echo Chamber by Alex Pentland. Social explorers spend enormous amount of time searching for new people and ideas – but not necessarily the best people or ideas. Instead they seek to form connections with many different kinds of people and to gain exposure to a broad variety of thinking. The best researchers engaged in preparatory exploration – they proactively developed relationships and connections with other experts and later tapped into them for help with completing critical tasks. (if you first build friendships – help will be given willingly - but if your call is impersonal and only to extract value from me I may be less enthusiastic, my comment). The social networks of the star performers were more diverse than the networks of the middling performers. The best decisions rarely come from deep pondering in isolation. They happen when people learn from and draw on the experience of others with diverse and independent minds.

What We've Learned from the Financial Crisis by Justin Fox. Seven years after the crash of 1929, John Maynard Keynes published the most influential work to come out of the era of turmoil – The General Theory of Employment, Interest and Money – yet for at least another decade was it unclear how influential that book would be. After the crash of 2008 three shifts of thinking stand out. (1) Macroeconomists are realizing that it was a mistake to pay so little attention to finance. (2) Financial economists are beginning to wrestle with some of the broader consequences of what they've learned over the years of market miss-behaviour. (3) Economists' extremely influential grip on a key component of the economic world, the corporation, may be loosening. Countries that intentionally ran big fiscal deficits, such as the United States and China, weathered the storm better than those who chose austerity, as the UK and The Netherlands, or had it forced upon them. There is clear consensus that fiscal stimulus had a positive effect. The question is when to switch from crisis fighting to sound money and fiscal restraint – and it is remarkable how crude the answers are. Only by grossly oversimplifying reality have economists been able to come up with theories that have some predictive power.

All the research tells us is that financial markets are prone to instability. This instability is inherent in assessing an uncertain future, and it isn't necessarily a bad thing in itself. But when paired with lots of debt, it can lead to grave economic pain. If financial institutions funded themselves with more equity and less debt, instead of the 30-1 debt to equity ratio that prevailed on Wall Street before the crisis and still does at some European banks, they would be less sensitive to declines in asset values. For a variety of reasons bank executives don't like to issue stock tending to prefer to reduce debt. To make banks safer without a credit crunch, regulators need to force them to sell more shares. (or retain more earnings)

A few scholars have been looking into whether there's a point at which the financial sector is simply too big and too rich – when it stops fuelling economic growth and starts weighing on it.

The banks and investment banks that got into the most trouble in 2008 were generally those with the most shareholder friendly executive pay and governance. As equity account only for a tiny part of many financial institutions balance sheets, shareholders had far less at stake than creditors did. They were less owners than thrill seekers along for the ride – sharing in the upside but only on the hook for a small portion if it failed. Shareholders often hold shares in hundreds or even thousands of corporations; they can sell at a moment’s notice; they aren't responsible for the debts and messes a failed corporation leave behind. Yet, successful corporations thrive on loyalty, commitment, and goals that extend beyond enriching shareholders.

The financial system has survived more or less intact. That seems like a good thing; but it may also mean we'll be having more learning experiences soon.

Dismantling the Sales Machine by Brent Adamson, Matthew Dixon, and Nicholas Toman. Selling today requires flexibility, judgement, and a focus on results – not process. The new environment favours creative and adaptable sellers who challenge customers with disruptive insights into their business – and offer unexpected solutions. An organizational emphasis on the judgement of individual reps rather than their compliance with protocols and a managerial focus, on providing guidance and support rather than inspection and direction. Transforming a sales organization along those two dimensions is crucial for giving the reps the latitude they need to win in the new environment. Managers serve as coaches rather than enforcers; the work force self-manages to a large extent and the group is judged on long term outcomes rather than short term compliance with protocols. There should be a strong emphasis on innovation and a sense of business ownership by sales people. Good sales managers are experts at maximizing network performance in their teams.

“Wanted: critical thinkers looking for an opportunity to exercise judgement and assume responsibility for business growth.” Autonomy and the opportunity to generate value for customers are important. Hire the best employees, create an empowering environment, provide the necessary tools and guidance and get out of the way.

I try to Spark New Ideas with Christine Lagarde. What does it take to be a good leader? First you have to believe in what you are doing – to feel comfortable with the institution and its strategy. Next you have to give it your all, engaging completely in the mission you've set for yourself. And finally, you have to care about your staff – making sure you hear them and understand their take on the issues, making sure that everyone feels part of the team and is drawing satisfaction from their work. Is there a difference between masculine and feminine leadership? Studies show that certain characteristics are predominant in female leaders, like the ability to listen, to desire a form of consensus and an attention to risk, which is why women are good leaders in times of crisis. Competitiveness is delivered either through price or quality. Never give up on education and the development of the sciences, because that's where a lot of productivity and competitiveness come from. Capitalism tends to move from crisis to crisis. The same goes for governments. Short mandate periods is a big problem.

Delivering World Class Health Care Affordably by Vijay Govindarajan and Ravi Ramamurti. Treatment in Indian hospitals cost about 5 % of similar treatments in USA. Even when correcting for pay differences the cost in India is about 1/6 of the cost in the US. To cut costs, US hospitals often eliminate low-skill staff jobs, which forces doctors to spend more on routine tasks – resulting in the wrong kind of task shifting. Part of Indian cost cutting is to prolong the working life of expensive equipment through careful maintenance and repair. Senior managers often share small offices, freeing space for mission critical areas such as operating theatres. Indian fixed price model discourages doctors from ordering unnecessary procedures, while protocols ensure that essential procedures aren't skipped. The US health system could operate very differently if it were exposed to the kind of low cost innovation that drives the best Indian hospitals.

Experience Agility by Susan David and Christina Congleton. How effective leaders manage their negative thoughts and feelings. Emotional agility can help people alleviate stress, reduce errors, become more innovative, and improve job performance. Leaders who become increasingly adept to show and manage emotions are the ones most likely to thrive.

Notes by frank@olsson.co.nz 1 Nov 2013

Harvard Business Review October 2013

The theme of this issue is how to engineer breakthrough ideas but as usual there are many articles dealing with other issues as well. I liked the article which emphasized the need for line managers to run their own HR. And the line ‘Don’t Spin a Better Story, Be a Better Company’ resonates with me and my interaction with the finance industry. Please find below a few notes from the issue.

People who have strong informal networks, not necessarily connections to corporate hierarchy, are more successful at implementing change.

HR for Neophytes / A person who is new to a subject, skill, or belief/ by Peter Capelli. When line managers are responsible for recruiting, performance management and retention, companies are 29% more successful at those tasks. Getting the best performance out of people often depends on putting them in the right job, with the right boss.

More than 60% of all hires in large US firms are now filled by outside candidates compared to 10% a generation ago. This is partly owing to a cultural shift from lifelong employment to a more mobile work force, but it also results from poor hiring decisions, lack of employee development, and the myth of the ‘A’ player. There are three ways to meet talent needs. You can buy talent by hiring from the outside. You can build it by developing existing employees. Or you can borrow it, by engaging contractors or temporary workers.

Research showed that it took three years for the outside hires to perform as well as internal hires – but it took seven years for the pay of the internal hires to catch up with that of the outsiders. The article recommends outsourcing of the hiring function.

The skills in greatest demand - technical, sales and executive skills - can be learned on the job. Work based learning is best done in stretch assignments, and it is best managed by direct supervisors, who have the keenest sense of when an employee is ready for a new task and have ready access to project work. If your employees want classroom training, provide reimbursement programs – the most underused development resource in business. Employers who offer tuition reimbursement attract better applicants and have lower turnover than other firms.

The single best way to retain valued employees is to give them better opportunities than they could find elsewhere.

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