Sunday, December 30, 2018

Want Success? Invite Failure

Across from the Black Bull Inn, just off the Canterbury Road in Folkestone England, I used to get Maryland fried chicken from a Chinese take-out at a post office run by an Indian family. The chicken was notable mostly for the battered, deep fried bananas that were thrown in – looking like giant fried worms when first bitten by the uninitiated. The chicken was passable – mediocre by my taste but then I eat a lot of fried chicken. If that family is still running the post office, then their chicken is probably still being served to this day. After all, the chicken was not so bad that they would fail outright, and in any case they could survive as a post office or by selling Chinese food; yet neither did they delight their customers. Like so many businesses, they survived somewhere in the middle.

Many firms survive being mediocre. No wonder there are so many management theories about excellence. Think of all the guru books that feature “excellence” in their titles. We want high performance, yet so many organizations give us mediocrity.

Why?

The problem is simple: We don’t get excellence because we don’t invite failure.

Let me explain.

If we seek out and eliminate failing projects, then we are left with only the clearly successful ones. And if we are then left with nothing, we have learned the valuable lesson that it is time to change direction. The more stringent our definition of success, the more failures we eliminate – and the better are those few projects that survive.

Thriving markets sometimes kill off failures for us. Highly competitive markets have high failure rates and therefore stronger survivors. It is no accident that Silicon Valley has good software companies; look at the high failure rates there! Back to fried chicken, you’ll find some amazing choices in Atlanta (and Seoul). A mediocre fried chicken shack in Georgia has the life expectancy of a balloon in the pokeweed. Thriving markets kill mediocrity.

Some companies harness the power of the market. They design stand-alone, specialized products and services, and so their failures are evident. For instance, consider the evolution of the file server - computers specialized to move data. When they came along in the early 1990s, some of the first innovators in this space were worried about competing with big, general-purpose computer servers made back then by Sun, DEC, IBM, and the like. In fact, some specialized file servers failed in that competition, and the companies that made them, like Auspex, are gone. This is the great strength of specializing: Specialists know when they are not competitive

On the upside, the successful specialist is clearly best-of-breed. In the case of file servers, we saw this result for firms like NetApp and EMC. By making specialized file servers, these companies could easily judge where they did and did not have product-market fit. They then easily out-competed the general-purpose servers of the big players. Those big servers had their place, of course, at the heart of large distributed-computing systems and later as the backbones of the internet. But when it came simply to moving data, the big servers were outcompeted by the specialized servers.

Unfortunately, wrong-headed business strategy can prevent the market from eliminating mediocrity. This happens when leaders try to improve a product by adding more features. Think late-night advertisements for gadgets: “wait, and there is more!” sings the announcer, as the contraption is revealed to have yet another benefit. We end up with an “integrated” product that provides many different benefits to many different customers. Such products allow the losing parts of the overall product to stay alive when they should be allowed to fail. Integrated products allow features to subsidize each other. You are hoping that somehow the full set of integrated features will make up for the lack of individually-excellent features. Hermes’ cartoon of the one-man-band comes to mind. Amazing in some ways, the one-man-band never really caught on. One prefers a full band of individually best-of-breed performers. Best of breed beats integrated.

So what about cherry picking from the world of innovators, and building a “suite” of best-of-breed features? This road to the integrated product is traveled by big firms acquiring up-and-coming specialists that have survived the market test. This strategy can work – as long as the business acquires best-of-breed products, and as long as the value of these products is improved by being in the big firm. We’ve seen this outcome at big technology firms like Cisco, Microsoft, Google, and Facebook. These companies acquire rising stars in the technology world, and then point to their growing portfolio as evidence that they are innovative. (Somebody was innovative, and their reward was to be acquired by somebody who then claims to be innovative.) Integrated products built this way can be effective, if you are well-funded and can spot the best-of-breed early on.

A cautionary note: You may think you and your firm can make an integrated product with many features, and all of them can be best-of-breed. You may hope for that outcome, but here’s your problem: The way you get best-of-breed is by discovering product-market fit, and such discovery requires a market test. But the market test is prevented when there are too many benefits to your product. You'll end up mediocre, because you failed to invite failure.


For some of the research behind these ideas, take a look at my book on the "Red Queen".

Friday, November 30, 2018

National Culture: Constraint or Catalyst?

When you speak in public in different countries, you soon learn of a trick used by translators the world over. At the humorous parts of your talk, the translator will say: "The professor is telling a joke. He is still telling the joke. He is still telling the joke. Now the joke is done!" at which point, on cue, everyone laughs hysterically. The problem is not that a joke cannot be translated; it is that humor is often culture specific, and so even a well-translated joke is likely to cause more confusion than enjoyment. Better to just play along with the professor and keep things comfortable.

The translator trick illustrates the power of culture. We'd like to share subtleties of language, but the lens of culture changes meanings, preventing our message from getting through. To see culture's lens in action, look at this picture of some fish:


Using this picture in a series of experiments, social psychologist Michael Morris and his colleagues have found some interesting patterns. When asked about this picture, American subjects typically see the standout fish as a "leader." By contrast, Chinese subjects typically refer to the standout fish as an "outcast." Why? Well, American culture is more individualistic, while Chinese culture is more collectivistic. These cultural differences shape the lenses through which subjects see this picture, and so give very different meanings to the same image.

You're thinking "Barnett is telling me what every college sophomore knows: different cultures are different." Well, yes, that is part of the story. Cultures do differ and those differences matter. But those who stop at this (obvious) fact miss the true power of culture. They see cultural differences as an unchangeable given as in "when in Rome, do as the Romans do." The Internet tells me that this proverbial saying dates back to various saints. Be that as it may, it is a view that treats culture as an unchangeable constraint.

But culture is not unchangeable. In fact, a quick glance at the data shows just the opposite: The cultures of the world are changing dramatically. Take a look at this cultural map showing World Values Survey data from 1981-2015, illustrating shifts on both the "traditional vs. secular/rational" dimension and the "survival vs. self-expression" dimension.



Two facts are worth noting in this map. First, cultures are changing dramatically over time. Second, and most importantly, cultures are not just moving in one direction: there is no simple "convergence" going on. Rather, cultural changes are moving back and forth, often cross-cutting one another.

These cross-cutting changes reflect the struggle that is cultural change: The woman starting her own firm in the Middle East; the bureaucrat resisting pressures for corruption in Africa; the gay couple starting a family in the US. Cultural changes are occurring all around us.

With this in mind, how you look at culture matters a lot. Do you think of culture as a constraint? If so, then when in Rome you do as the Romans do - but that leaves the world unchanged. Instead, do you think of culture as emerging from our own attempts to change the world? In that case, national culture is a catalyst, turning the world in directions that our parents could not have imagined.


An interesting body of work on national culture is by Professor Michael Morris.

Wednesday, October 31, 2018

The Secret

When you don’t know how to do something, you suspect that those who do know how share a special secret. If someone would just whisper to you the special secret, then you could do it too: whistle a tune, or maybe ride a bike. Of course, there is no special secret – no single piece of information that makes all the difference. Instead, you learn most interesting things by doing. You engage the challenge in your own way, fail a lot, and possibly make it work for you. You learn.

The philosopher Alfred North Whitehead long ago made the point that valuable learning comes not from being told a fact. Recited facts are “inert” ideas disconnected from the fullness of our understanding. Valuable learning, says Whitehead, means discovering “living” knowledge: ideas “utilised, tested, or thrown into fresh combinations.” Yet we persist in believing the myth of the special secret.

I run into the myth of the special secret often because I am a teacher and parent. Children and executives often come to me in their search for one or another special secret, wanting to skip a rope, design a product, write an essay, throw a ball, run a company, or what have you. I remember when my son Willie wanted to be able to ride a bike. I removed his “training wheels” and there he was standing out in the street, superhero flames on his helmet, two-wheeled bike in hand, waiting for me to tell him the special secret that all bike riders know.

About now, what if we dropped a business school professor into this situation? What would he say? “Willie should not be doing this. Bike riding is not his ‘core competence.’ Willie should outsource bike riding to Bobby down the road, for whom bike-riding is a core competence. They can form a partnership.”

Fortunately for Willie, his patient mother stepped in. Every day for a week she ran next to him up and down the street, catching him as he fell, so he could learn. The process of discovering living knowledge is not easy, but it pays off. Now Willie knows how to ride. And he knows the secret: that there is no secret.

The same problem comes up in business all the time. How often have you been in a meeting when someone at the table proclaims “That is not our core competence!” All go quiet, the core competence trump card having been played. We are taught that companies should only do what they already know how to do.

So where do organizational capabilities come from?

Wrong answer: Organizational capabilities come from researching “best business practice.” I often have executives come to Stanford thinking they will write down inert ideas told to them by professors. There can be some value in this exercise, but frankly you could parrot inert ideas more efficiently using information technology. Besides, everybody else can easily find out these inert ideas too. A list of best practices will not make you a great company, any more than finding a recipe will make you a great cook.

Right answer: Design your organization so that it develops new capabilities. We know that some companies learn much better than others. Make it your job, as a leader, to help your organization be better at learning. Structure your organization so that your people must engage with important, unsolved problems. Establish routines that allow for failure and reward those who try to discover – regardless of the ultimate outcome. Build a culture that values discovering over knowing, becoming over being. Lead by design, and don’t forget the secret: There is no secret.


For more on the “process philosophy” of Alfred North Whitehead, read his essay Aims of Education. 

Sunday, September 30, 2018

Oblivious Leadership

The old priest prepared his sermon all week for family mass. He would target the children, draw out of them some gems and that way make his point to the adults. The message would be thankfulness, since Christmas was approaching and the Advent gospel was on appreciating God’s gifts.

Sunday. The sermon started as planned: Up came the children, sitting around the old priest in the timeless pose of prophet and disciples. The priest was direct, “What are you thankful for?”

Without hesitation, a blonde boy in the back of the group shot up a hand. The priest encouraged: “Yes, young man; what are you thankful for?”

“Life!” came the reply.

The old priest’s delight could hardly be contained, as he looked up and proclaimed to the adults, “People, did you hear that!? The boy is thankful for life!”

Seeing the misunderstanding, the boy piped up “Life is a game!” for he had been given the board game “Life” as a gift, and for that he was thankful.

The face of the old priest transformed into shock. He beseeched: “No, child, life is NOT a game!”

The perplexed child could not decode the sudden turn in the priest. Dismayed, he responded matter-of-factly, “Life is a game.”  

Tell-tale gasps and barely-suppressed laughs from the congregation spoke not of humor but of surprise, yet to the old priest the tittering sounds told a cynical story. He scanned the adults, now doubly shocked by their complicity in the child’s warped view. Down went all heads, striking a praying pose, but the shaking shoulders suggested otherwise.

Derailed, the sermon meandered through the priest’s messages on thankfulness, gratefully without any more audience participation. Calm returned. All sat in silence, sharing the quiet shame of having played a part in the derailment – made worse by the fact that only the old priest himself was oblivious.

Lest I be throwing the first stone, I admit that the story of the old priest is my story too, and yours. All of us suffer at times from not understanding the other’s understanding. Research shows that humans have a lot of trouble bridging this gap in understanding: We naturally tend to assume that others see what we see the way we see it. So if you think that this is not a problem for you, your self-assurance, itself, is a symptom of the problem.

The problem of understanding the other’s understanding is even worse for leaders. Our life experiences shape our points of view. For most leaders, their life experiences are very different from those they lead. So it is that leaders and followers rarely see things from the same vantage point. Yet leaders are expected to persuade their followers – despite the fact that they do not understand their followers' understanding.

No wonder that a vast industry tries to help leaders communicate. These efforts have mixed results, since communication failures often are just a symptom of the deeper understanding problem. It won’t help if I improve my communication techniques, but remain clueless about how my followers see things. This fact explains many a notorious gaff: The politician who knows not the price of bread; the executive flying a private jet to ask for government support; the CEO’s video explanation of layoffs, filmed in his paneled office. Such miscues result from not understanding the other's understanding.

So what should you do to bridge the understanding gap? Step one is to get beyond the suggestion to "be empathetic" that one often reads about. Remember, the problem is that you don't have a clue. You cannot empathize with someone whose life is a complete mystery to you. Some say you can bridge the gap by "walking around" at work - except that everybody knows you're the boss.

If you are serious about bridging the understanding gap, you could take a page from the tradition of academic ethnographers: Put yourself (literally) in the other’s shoes. What is it really like to be them? Try actually working in your organization – obey their rules, try to get along with others who don't know you're a boss, and work within the guidelines and systems that you have set for your people. This approach will not be easy, but you may end up coming to the most important understanding: that life is not a game.


Many academic literatures address this issue in different ways. One of my favorite approaches is the work of Professor Thomas Gilovich. Examples of using ethnography in the workplace can be found in the work of Professor John Van Maanen

Friday, August 31, 2018

Why You Don't Understand "Disruption"

Going to the upcoming "Disrupt" conference? The Broadway of innovation theater will be in full feather, as self-proclaimed "disruptors" gather to reach consensus about what are the non-consensus ideas out there. 

Big wigs having a conference on disruption is like the Czar creating a bureau on revolutionary thinking. Really want to see disruption? Don't go to a conference. Go to where people are breaking the rules.

If you just smiled, then you are probably from a small startup (or wish you were), and you know that disruptions come from startups who break the rules of the game.

For example, consider this idea from a small team of rule breakers: Provide a way to instantly share digital photographs with others anywhere on earth - but only with those who you want to see the photo.

You are thinking Instagram, the tiny company acquired in 2012 by Facebook for $1 billion.

Wrong.

I'm describing a project launched in 1996 - that's right, 1996 - by a group at Kodak's Brazil headquarters in Sao Paulo. (Yes, Kodak - everybody's favorite example of a company that failed by being too slow to innovate.) Kodak's country head for Brazil, Jarbas Mendes, and his team were trying to find innovative ways to help customers share their digital photographs. The team understood that the internet - brand new at the time - could enable such sharing. So they designed a system where one could upload photographs to a server in the cloud (though nobody yet used the term "cloud"), and send a code to another person who could then view the photographs. "The technological possibility of having an online way to view pictures was the idea. There was a lot of work by the team on this approach to sharing." recalls Joao Ciaco, who was in a marketing role on the team at the time.

What we now call Instagram was invented by Kodak in 1996 - 16 years before Instagram would be acquired for a billion.

How can this be? After all, we often hear that big, established firms are slow to innovate, and so they get disrupted by new technologies. As the story goes, success at a well-honed strategy leaves companies blind to the value of new technologies until it is too late. If this is how you understand disruption, you believe in the slow-incumbent myth.

It turns out, Kodak is not a strange exception. Often big, established firms do a great job of rapidly adopting new technologies. With success, leaders are often more willing to innovate – even when such innovations are out-of-step with their traditional organizations. And therein lies the problem: “success bias”. We misread our success at one game, and so readily launch into another – whether our organization is suited for that business or not.

Looking again at Kodak, it was the first mover in digital cameras, and it held an early lead in that market. Kodak even made the digital cameras sold by other firms trying to be in that market. The problem was not Kodak’s ability to innovate. At work was the poor fit of its organization to the logic of the digital business. If anything, Kodak was too willing to innovate given its organization.

Same with the minicomputer firms like DEC. They are often criticized for resisting a disruption. We know that the personal computer cut the legs off of the market for minicomputers (powerful mid-range computers and servers) starting in the 1980s. At that time, the cutting edge of the computer industry – the real “hackers” – were the minicomputer manufacturers like Data General and DEC that flourished from the 1960s through the 1980s. They were scrappy, imaginative rebels compared to the monoliths of the mainframe computer business. The secret to their success was imaginative design, since they relied on the architecture of the entire system for performance. And, as Tracy Kidder romanticized in his book Soul of a New Machine, they were passionate about getting products out into the market. That book documented the tale of the cult-like Data General, and its creation of the Eclipse MV/8000 minicomputer that launched in 1980.

Technology writers, decades later, would describe these innovative firms as unable to change.  The slow-incumbent myth: These successful, established firms did not see the microcomputer coming, since they were wed to the technologies and designs of the old market that they knew well.

Not true.

The real story is that the most successful minicomputer companies made the transition to the personal computer very quickly – but once there they were ill-suited organizationally. Success bias was at work yet again. For instance, Data General released its first microcomputer in 1981 – the same year as IBM. And DEC – another legendary champion of the minicomputer era – entered with the “Rainbow” in 1982. These fast-moving firms had no problem innovating. They could and did. Their problem was that everything else about their organizations was well tuned to their traditional market. They innovated in the PC market very quickly, and then they failed there at a very high rate.

We want to believe in the slow-incumbent myth, so we dismiss the early moves by incumbents as half-hearted. But look again at the evidence. Successful incumbents are often very innovative – too innovative for their own good. What is going on in these cases is success bias. When business leaders win, they infer from victory an exaggerated sense of their own ability to win.  So they are overly eager to enter into new competitions – even ones where they are not well suited to play. Their very success in the earlier business is evidence that they are well-honed to an earlier strategy - yet it is that earlier success that makes them especially willing to move into the new competition.

The lesson for leaders? Disruption is not just about technology changing; it is about changing the logic of a business. Success with a new technology requires organizing for a new logic, and organizing in new ways requires that you forget the successes of your past.


The theory behind success bias among managers is in this paper by Jerker Denrell, and evidence linking success bias with failure is in my paper with Elizabeth Pontikes.

Tuesday, July 31, 2018

How to Recognize an Authentic Entrepreneur

I still remember when Steve Jobs was featured in business school case studies as an example of bad leadership style. At the time, Apple was a less-than-successful computer company, and Steve – ever the loner - had moved on to create another less-than-successful one (Next). When things go poorly for a nonconformist, how easy it is to call them the fool. But on those rare occasions when the loner gets it right, he does so in a big way. As Andy Rachleff likes to say, nothing pays off so well as a nonconsensus strategy that wins.

But where do we find these nonconsensus entrepreneurs? Many people come to the Silicon Valley in search of them. But here’s the problem: The way to conform in the Silicon Valley is to act like an entrepreneur. Often I have been told by spectacularly intelligent Stanford students, sheepishly, that they have accepted a well-paying job at a big established company. That such great news is delivered with embarrassment says something about the culture of the Silicon Valley: The way to conform is by acting the entrepreneur. So here is the rub. In places where entrepreneurship is all the rage, you can’t tell the authentic entrepreneurs from the posers.

So to find a nonconsensus entrepreneur, we should look to places, markets, and times where entrepreneurship is unpopular. Naturally that brings to mind Tokyo. Your company’s status matters a lot in most countries, but this is especially so in Japan. So it was shocking when the “Purinto Kurabu” – Print Club in English – appeared all over Tokyo back in the 1990s.

Japanese teens lined up for blocks to get into one of these booths for a picture with their friends, which would then come out on a sticker. Ultimately, this little device proliferated worldwide, and made a lot of money along the way. But unlike most Japanese innovations, it did not come from a big established firm. Instead, it came from a start-up company, “Atlus,” formed when Naoya Harano struck out on his own. His little company was creating some of the earliest fantasy-based video games, such as “Megami Tensei” (“Transformation of the Goddess” in English) - and had a cult following in Japan. But these games did not pay the bills. Harano, desperate and intelligent (a great combination), made money any way he could – distributing billiard tables to gaming rooms, setting up karaoke machines in empty container vehicles around Tokyo, and the like. The consummate loner, Harano would likely have stayed off our radar screen, except that one day his unpredictable behavior led to a fantastically successful product. In fact, the idea for the product itself came from a female secretary at his small company. At one of the huge, established Japanese conglomerates, a new idea from a low-status female worker would have no chance. But in the hands of a nonconsensus entrepreneur, the idea saw the light of day.

More generally, it turns out that at times or in places where entrepreneurship is least likely, those few entrepreneurs who do appear may win big. So to find the nonconsensus entrepreneurs, look to where entrepreneurship is least likely. Examples abound once you look for them. In the UAE, you might be surprised to see twofour54, an entrepreneurial media hub in Abu Dhabi run by Ms. Noura Al Kaabi. Coming out of Peru, you’ll see Kola Real, formed during a coup d’état in 1988 – not exactly an ideal environment for business incubation. Or, in Kamchatka, you’ll see ecotourism ventures by Wild Salmon River Expeditions – initiated by an alliance between a former American military officer and his Russian associates. Name your own unusual circumstance. Where entrepreneurship is least expected, only the authentic entrepreneurs show up.


For academic research on this idea, check out my paper with Professor Elizabeth Pontikes on the nonconsensus entrepreneur.

Saturday, June 30, 2018

When the Means Become the Ends

The Linda Vista central office still had a Western Electric person. I was working the frame, which meant I worked for "the phone company" and had to ask the Western person should I need a volt meter. He brought me the meter and stood by while I tested the circuit. It was dead; too dead. There is always a slight bit of a background reading even on a line with no signal. Zero movement meant the volt meter was broken.

So I asked, "Is this meter working?"

"No" came his matter-of-fact reply.

"Why didn't you send it to be repaired," I asked.

"Because then we would not have a volt meter." Apparently, the rules required that we always have a volt meter. And the rules - the means by which we try to accomplish our ends - had become the ends.

OK, that was a while ago. Since then, many things have changed. We broke up the phone company and renamed Western Electric. I got fired. The iron curtain fell. We deregulated the telephone industry. My beard went grey. We invented smart phones. Yes, a lot has changed. But one thing remains the same: People allow the means to become the ends.

The iconic study of such "goal displacement" was by the political sociologist Robert Michels, whose 1911 book Political Parties documented the German Social Democratic Party's use of non-democratic means to pursue democratic ends. From this example he coined the term "iron law of oligarchy."

A century later goal displacement is still going strong. You see it every day all around you: I know an enterprise software company that developed a product a customer really wanted, but refused to sell it because it had not gone through the right approval procedure. In another case, one company's "key performance indicators" encouraged employees to push a service that harmed the company's performance. In such cases, the means have become the ends.

There is a simple solution to the problem, albeit one that is hard to put into practice: Make sure everyone knows the real "ends". That's why you have strategy; so people will know why they are working to begin with. If you're at a university, make sure the housing policies get you the right students - not the students who fit the housing policies. If you're a software company, make sure your development procedures create the best products - not just the products that conform to policy. If you're in accounting, make sure your procedures encourage employees to work toward your company's real goals.

And when you see the means displacing the ends, fix the problem. If the means have become the ends, what does that say about your leadership?


Robert Michels' book is still worth reading.

Friday, June 15, 2018

How to Create Self-Silenced Fools

Do you try hard to look like the smartest person in the room? Do you fantasize of that moment when you fire off the perfect “gotcha” remark, disarming the speaker and coming off as really smart? Nods around the room; a raised eyebrow; a sideways glance. “Who is that guy?”  

If this describes you, you're not alone; we all want to be seen as smart.

But if zinger questioning describes life in your organization, you have a leadership problem.

To see why, first note that there are two kinds of questions, those meant to show off and those meant to learn. Questioning to show off involves hurling zingers at one another, as each of us acts out what we already know. Questioning to learn requires that we admit our ignorance, and often involves asking basic questions – the ones that appear almost too basic. Such questions do not make the questioner appear smart, but they help us all to learn.

In organizations where questions are meant to show off, it is not safe to ask questions in order to learn. After all, by trying to learn, you reveal your lack of knowledge and admit to not being the smartest person in the room. As the zingers fly, who would risk raising a hand to admit ignorance? Instead we clam up and pretend. Like the illiterate who fakes it undetected through school, we expend more effort trying to conceal our ignorance than we do trying to learn. We become a self-silenced fool.

I have seen this problem in many companies, but I have seen it at universities too. I recall presenting a research paper here at Stanford at an interdisciplinary seminar – a context where many attendees don’t know each other. Back in the corner a hand went up, an old guy with a pretty simple question. Several more times over the hour he again asked basic questions, but in doing so he was helping everyone understand my research. He was questioning to learn, not to show off. After his fourth question, I said, “Sir, may I ask, who are you?” He replied, “Ken Arrow.” As people around room craned their necks to get a look at the Nobel Laureate, I continued to answer his questions. After the seminar, a junior professor introduced himself and noted that he had thought of one of Professor Arrow's questions. I said "Why did you not ask it?" He replied, “It seemed so basic, almost silly.” Worried about revealing ignorance, this smart young scholar remained silent.

The young professor is not alone; we all want to look smart. Often we claim to know how smart other people are based on their comments or questions in group settings. I have lectured for decades, and I can tell you that appearing smart and being smart are two different things. Some people are very clever at the well-timed zinger, while they remain silent when a basic question should be asked. Others, thankfully, are willing to ask the basic question – much to the relief of everybody else in the room who was too afraid to ask it.

We would all be a lot smarter if we followed these two rules:

Rule 1: Admit ignorance.

Too often, you’ll hear sayings (often attributed to Lincoln or Twain) that draw on the Biblical verse Proverbs (17:28), “Even a fool, if he keeps silent, is considered wise; if he closes his lips, intelligent.”  Normally, people use this quote to keep others silent. But if you read on, it turns out that the meaning of this verse is just the opposite: Proverbs (18:1) explains, “The fool takes no delight in understanding.” Not only does the fool stay silent, but he prefers to do so even though his silence keeps him ignorant. By looking the fool and speaking our question, we gain in knowledge precisely because we reveal our ignorance.

Rule 2: Permit ignorance.

As a leader, have you made it safe for your people to reveal ignorance? Ignorance is taboo when you treat “zingers” as evidence of intelligence. Ignorance is taboo when promotions and rewards go to those who are good at self-presentation – the “smartest person in the room.” Instead, you should create an environment where it is safe to admit ignorance. Perhaps you have not even thought about this distinction. But if your organization is filled with self-silenced fools, what does this say about your leadership?


The classic study of self-presentation is by Erving Goffman.

Tuesday, May 15, 2018

The Escalation of Bias

“I don’t care who does the electing, so long as I get to do the nominating.” This gem often is attributed to Boss Tweed, the notorious American political manipulator. In any competition, the surest way to win is to narrow down the list of those in the running. If you are the only viable candidate, you’re in. Competitions often are unfair, but restricting who can race to the top is especially important because it escalates bias to the highest levels.


The escalation of bias goes on every day the world over. What you may not realize is that it happens especially when people think they are being fair. Let me explain.

Slogans like “We are an equal opportunity employer” are seen in many companies, especially in the United States. Although such slogans are not always lived up to, in many places things have improved compared to the past. Although racism, sexism, and other forms of discrimination endure, in many industries we are seeing efforts to hire more fairly. But what about promotion?

The executive suite remains difficult to penetrate for women and minorities in the US, despite the greater fairness in hiring at lower levels. In what feels like a “bait and switch,” we hire for diversity, only to stay with the same old bias when it comes to promotion. This no doubt feels pretty unfair to those who might have merited a promotion, but were passed over because of a superficial characteristic like race or sex. Yet the hidden effect is on the privileged, who then enjoy the escalation of bias.


To see why, consider what happens to someone in the traditionally favored group – white men in the case of the US. For them, hiring equally and then promoting unequally escalates bias. After all, when it comes to choosing the next boss, blessed are those who are surrounded by "unpromotables." If race and sex matter for promotion, then the sure bet is to be the only white man in the running. So it is that hiring policies meant to improve fairness, ironically, may be triggering the escalation of bias.

The escalation of bias operates in many walks of life: The law firm that hires for diversity, but then promotes to partner those who get on with the old boys. The technology firm that boasts of a sex-blind and color-blind hiring process, run by a traditional-looking C-suite and board. We even see it in global competitions among companies. Firms are often allowed to enter another country to compete, only to find out once there that they have restricted access to government permits and the like.

In each of these situations, you get in through a fair process - but you move up through a biased one. When we trigger the escalation of bias, the privileged dominate the race to the top.


Evidence of this kind of effect triggered by hiring temporary workers is reported in my paper with Anne Miner.

Monday, April 30, 2018

Persistence Enables Innovation

Changes keep coming. Yesterday’s new thing is likely to be eclipsed by another new thing tomorrow. Many companies try to catch these waves, but only a few last. What separates the innovators from those who flame out?

Some say it comes down to being able to "pivot" into new areas fast. But in fact, the opposite is true; it comes down to persistence.

Here is the problem. You can redesign your company to become something completely different overnight, but companies that pivot overnight lack depth. After all, how deep is your ability in an area that you just discovered yesterday? You may be able to offer a product, but you’ll lose the first time you run up against a firm that has a deep background of knowledge. And to have depth of knowledge, you need to maintain a consistent focus over time.

For example, a few years ago the data storage company NetApp was approached by the Swiss stock exchange for technology to deal with connecting networks in a novel way to improve data availability and disaster recovery. NetApp’s head of Europe back then was Andreas Koenig, a scrappy “can-do” executive with a good understanding of NetApp’s technologies. Koenig knew that NetApp had been doing research for some time on continuous data availability and disaster recovery for networks spanning different locations. So he went back to corporate R&D to find a solution for this customer. There he found “Metrocluster,” a project that had been researched extensively and then shelved by the company’s corporate engineering group. Koenig resurrected the project, to the surprise of some insiders. But the product was a hit in Europe and quickly became an important part of NetApp’s product offering.

Note the key fact in this story: NetApp engineers had been working persistently on the problem for some time – even before it was clear that there was product demand. So when the market took off for this product, NetApp was able to respond well; they had deep knowledge in this area. A number of companies claim to have this kind of product, but how well-developed is their technology? The firm that persists builds its capabilities, and will win against the Johnny-come-lately.

The key to successful innovation is persistence. Keeping your focus over time builds deep knowledge. In a world of fads and fashions, have the courage to stake out a domain where you are the expert. You won’t be all things to all people, but when you do compete, you’ll win.


Systematic evidence of this idea is in my paper with Elizabeth Pontikes.

Sunday, April 15, 2018

Wrong-headed Leadership

The idea is common sense. Giraffes repeatedly stretch out their necks to get at leaves, and so over generations this action has made their necks very long. So reasoned Jean-Baptiste Lamarck in 1801, offering an early (though now discredited) version of evolutionary theory featuring heritable traits acquired by use. Over the centuries, the idea seems to keep reappearing, perhaps because we wish adaptation were so controllable. Notoriously, Joseph Stalin favored the idea as being consistent with revolutionary thinking - and profoundly harmed Soviet-era scientific progress by enforcing his belief. Wrong-headed leadership can do a lot of damage.

I see wrong-headed leadership in business all the time. Like Stalin, business leaders routinely believe that ideas are true because they want the ideas to be true. For instance: "Our organization can be both extremely efficient and extremely innovative at the same time." We know from research that this claim typically is not true; there is a trade-off between the high-variance behaviors that spawn innovation and the low-variance behaviors that make for efficiency. Yet the idea keeps reappearing, perhaps because we wish adaptation were so controllable. And so for decades management gurus have claimed to have discovered the way to make this wishful thinking true.

And when it comes to knowing the truth, our emotions seem to make things worse. Often teachers appeal to their students by being funny, or exciting, or nice, or passionate. At least since Aristotle we've known that emotional persuasion often trumps logic. After I teach a class, students tell me they "enjoyed" their experience. Hmm. Did they learn? If enjoyment is the point, perhaps class should feature a real comedian.

Same goes for the other Aristotelian appeal - credibility. Often successful business leaders become lecturers at business schools. Listen to them describe why they think something is true, and you will often hear "In my class, I teach...". Because they teach it, it must be true?

Of course, our belief in the truth of an idea should depend on whether the idea is supported by research. Such an appeal to logic lacks the emotion of pathos or the bluster of ethos, but it helps us to avoid wrong-headed thinking. Next time you accept an idea as true, ask yourself why. Wishful thinking? Good feeling? Bluster? You may be headed toward your own episode of wrong-headed leadership.

Brad Jackson has written an interesting book on this issue.

Saturday, March 31, 2018

Corruption's Mark

The fix was in. As the horses entered the turn, a large wall made them briefly invisible to the stands. Moments later the horses came back into sight - with the long-shot now in the lead. A collective moan. Angry shouting. Torn tickets flying, the cynical crowd realizing that it had been the "mark" - the victim of a con.

Of course, horse racing is notoriously corrupt - hence the crowd's immediate, cynical reaction to the fix. But corruption abounds in the world today, and affects our well being more deeply than you might realize.

You are probably thinking of corruption's direct consequences: The better horse loses; the lesser firm gets the deal; the meritorious job candidate is passed over. Such injustice often leaves the mark helpless. They played by the rules, but someone else was playing a different game - one where a corrupt payoff trumps merit. And so everyone loses: fans, shareholders, and consumers alike. Only the thief prospers in such a system.

Yet corruption has an even more insidious effect: collective nihilism. I first saw this effect in my old step-grandfather when I was but a boy. I was telling grandpa about the coming world series matchup. Grandpa waggled the cigar in his mouth, took it out, and said "the whole thing's fixed." I replied, "What do you mean, 'fixed'?" A deep, cigar laugh, and then "Well, they pay everybody off to make sure it goes the way they want. Then they collect their bets. They think we're stupid."

So went my first exposure to nihilism, the view that our institutions are so hollow as to render all action pointless. I said nothing; I knew better. Taking after my own father, I have always believed in the possibility of effective action, and to this day I resist the cynical urge to see everything as one big "fix."

But for many, widespread corruption has sown the seeds of nihilistic cynicism, distorting their perceptions. I recall a conversation in Moscow with a frustrated entrepreneur that illustrates the problem. As we shared a drink, he pointed to a passing luxury car and reflected, "When you see a nice car blow by, you know that guy stole from someone." How odd, I thought. Of course thieves are everywhere, but the shining Teslas in Palo Alto look to me like the fruit of hard work and innovation. Yet he sees corruption, and so throws up his hands as if to say "all is pointless."

Effective leadership roots out corruption, not just to do "what's right", but to create institutions that reward meaningful action. If we fail this leadership challenge, we fail the innovators of the future.


A sample of the research in this area is by Marcolo Veracierto.

Wednesday, February 28, 2018

The Authenticity Advantage

I recall sitting in the Café Mediterranean in Berkeley, struggling to make sense of Das Kapital. The upstairs seating area was good for such study, and for the occasional erudite discussion. A quirky intellectual commented on my choice of reading, and the conversation was easy. He was interesting – a physician who had majored in philosophy. I did not know that was possible; pre-meds stay focused on grades, and you don’t do that writing essays on epistemology. And then he muffed, mispronouncing Wittgenstein. Why do you major in philosophy, if not to learn how to pronounce Wittgenstein? Clearly he was not a philosophy major. Probably he was not a doctor. Maybe he was not even a guy. The conversation was over; he was a poser.

Posers work hard to conform, because they know that people are well-tuned to detect fakes. Think Frank Abagnale, the notorious serial impostor who successfully carried on in a number of false careers - including as an airline pilot, lawyer, and doctor. Criminal though he was, we are in awe of Abagnale in no small part because most of us suffer from the opposite problem: impostor syndrome. Psychologists note that many people have trouble fully embracing their own accomplishments. So the posers of the world, repulsive though they are, have to be admired for their ability to embrace playing a part in the play of life.

Growing up in San Diego, you knew the tourists because they were too perfect: Heishi beads, surfboard wax, hair just so. We locals spent a lot of time on the beach, but had not thought enough about the outfit. In my case: cutoffs that I actually cut off, no board, bad hair. Idiosyncrasy implies authenticity, since posers pay so much attention to form.

In competition, posing can be effective. We concentrate on how we dress when we apply for a job, because we’re posing and want to be seen as an appropriate choice. Those who compete in mating contests work hard at how they present themselves on Facebook. (Does he really prefer romantic comedies?) Of course companies do this too – and sometimes to great effect. You may remember when you found out that Sam Adams beer was not even brewed by the company that posed as its “brewer,” or when you realized that Häagen-Dazs ice cream was not from Europe. But it must be admitted that these brands, posers though they may be, fool enough people to be strong competitors.

The downside of posing is that most anybody can do it. In 2004 eBay declared it would dominate China, and entered by acquiring the then-leading Chinese firm EachNet. By 2008 they had failed utterly – overtaken by authentic rival TaoBao.  What happened? eBay “became Chinese” overnight through an acquisition, while TaoBao built something idiosyncratic from the ground up. I was developing case studies in China back then, and recall that there was nothing distinctive about eBay’s China operation. In fact, it was run out of Seoul! The problem with posing is that you may end up competing with the real thing.

Those who stick to their authentic identity are difficult to imitate. If you go into any part of NetApp, a leading data storage company with operations worldwide, you will see the same organizational culture in action anywhere on earth: little regard for formal titles, open exchange of information, a shared sense of concern for the customer, and respect for well-intended action. These norms are widespread at NetApp because the company hires and promotes with that culture in mind – a habit formed by its founders in its early days, and reinforced to this day by its CEO George Kurian and his leadership team. (Check out Tom Mendoza’s talks on this subject.) Of course, that means the company’s growth needed to be mostly organic, rather than by acquisition. Such growth can be painful at times, and certainly slower than the sudden growth that comes with acquisition. But most of us would prefer to grow steadily than to acquire and then fail.

Authentic companies fail too, of course. A firm’s idiosyncratic approach to doing business may be dead wrong, in which case they will fail. But to paraphrase Jeff Miller, they may be wrong, but at least they are not confused. So a difficult choice needs to be made if you are growing a business. Do you conform to the established recipes you see around you, or do you build on what makes your company authentic? Posing is likely to be less risky – at least until you encounter the real thing.


For the research on authenticity and competition is the book by Hannan, Pólos, and Carroll.

Wednesday, January 31, 2018

What Makes You Unique?

I recall a few years ago one of the kids came home from elementary school with a paper "award" that looked like this:

That afternoon, the school playground was littered with these things. Apparently the school had copied hundreds of the identical awards. Just fill in your child's name, and you have mass customization.

I got to thinking about the problem of uniqueness yesterday. I had breakfast at Baji's, but forgot my earbuds. So I was forced to listen to the guru bellowing wisdom at the next table, mansplaining to his "client" how to succeed as an entrepreneur: "...you need to have barriers to entry...bla bla bla...all about execution...bla bla bla...focus on your capabilities...bla bla bla...just like at Google...bla bla bla..."

Putting aside the superficial content, the most remarkable thing about the "conversation" is that I never once heard the entrepreneur speak. Not one single word - from when I ordered coffee to when I paid the check. So the guru thinks that his wisdom is right, regardless of what business he is talking about. Just follow his recipe, and success is yours - no matter who you are, what you do, what you're good at, or what challenges you face.

But we know from research (and experience) that there are many roads to success, each unique in some way. Research identifies this as the problem of "competitive heterogeneity," where companies differ in unique ways that lead to very different outcomes. In practice, if you listen (really listen) to people at work, you may come to see possibilities for success that apply to them because of their unique circumstances, their unique abilities, and their unique shortcomings. Of course, this means actions that might help one company to succeed may well fail for another. A sobering fact if you're a guru peddling a recipe.

Caution: Don't now conclude that generalizations cannot be true or useful. Research has taught us many useful generalizations about business success. For instance, we know that delegation and empowerment increases employee involvement and creativity. But like all generalizations, putting such an idea into practice brings in many other variables that can change what happens. Delegation that works for a creative video game studio in Chicago may not work well in a Mexican brewery or in a German automobile factory. In short, whether a generalization holds true in practice depends on the unique circumstances of the company in question.

Knowing generalizations about business is not enough. To succeed, you must also know when to apply your general knowledge in the right, specific circumstances. Know what makes your company unique. Only then can you begin to find your own, unique, path to success.


The problem of "competitive heterogeneity" is the subject of considerable research, including my book on The Red Queen.

Monday, January 15, 2018

Think You're Well Connected? Stop Fooling Yourself

You read a lot. You’re informed daily through Twitter, various blogs, and a few subscriptions. Your network is very large, and is made up of people who also have large networks. With technology at your fingertips, you are extremely well informed.

You’re fooling yourself.

Humans want to know what others think, and we’re especially persuaded when information is verified by different sources. The problem is that our “different” sources often tap the same information. You hear something from a Twitter feed that you like, that is confirmed on a blog, that is confirmed yet again by a video of a Ted talk. But what if each of these got their information from the same source? You are all recycling one single datum! It is bad to be poorly informed, but it is much worse to be poorly informed and not realize it.

For example:

“As CEO, I make sure I am in the thick of it. I stay right in the middle of things: product development, engineering, marketing, sales – they all keep me in the know.” So said the CEO of a software startup where I was conducting interviews. I met with him four times over four months, as he shaped the strategy of his budding company. He was surprised when they failed. All his information sources agreed that his strategy would win.

But let’s take a closer look. I asked everyone in his company to tell me whom they turned to for work-related advice and information. Using the matrix of these information flows among everyone in the firm, I mapped the company’s information network here - where the squares are people and the lines are their communications:


As you can see, this company's communication network is dense and saturated, with plenty of paths for information to get around. But that is precisely the problem. Throw one single datum into this company and it rapidly cycles throughout the whole system over and over and over. The central people in the middle – including the CEO – are no better informed than anybody else in this network; they just think they are. But they are simply hearing the same information as it gets recycled over and over apparently from different sources. No wonder they convinced themselves that their strategy made sense. They got the illusion of a second opinion without ever really getting a second opinion.

The solution?

Gather information from those who do not communicate with one another. In fact, you want to gather information from entire networks that do not communicate with one another. Truly rich and diverse information comes only when you hear, separately and independently, from “worlds” that do not overlap: From different parts of the earth, different economic sectors, different social demographics, different religions, languages, ideologies and cultures.

But gathering such varied data is difficult, and it is getting more difficult because of the IT revolution. Twitter will suggest that you listen to people who listen to each other. Amazon will suggest that you read something very much like what you just read. Even your search engine will try to make sure that you get results that are similar to the ones you clicked on last time. If you go with the flow, you’ll end up hearing the same narrow view recycled repeatedly – yet you’ll think you did your due diligence.

Don’t fool yourself.


One of the best academic approaches to information networks is by Duncan Watts.