Off the Cuff by Ja Ballarta

FOREWORD Back in 2012, First Pacific Leadership Academy saw the need to empower further the Top Management of the different companies under the MVP Group through an avenue that will encourage them to look into the different facets of their lives as Leaders. This thrust, supported by Chairman MVP, gave rise to Off The Cuff. What started as the Academyâ&#x20AC;&#x2122;s modest contribution to the growth of our Leaders has, in itself, given birth to a timely and meaningful e-magazine that contains articles published by international magazines, painstakingly selected by FPLA. Through Off The Cuff, the Leaders of the MVP Group are provided the means to align themselves with the movers of diverse industries all over the world. This Off The Cuff Special Edition (2017) is a compilation of the most excellent articles that were previously sent to you by the Academy. May these articles continue to give credence to the kind of Leaders that we are, within and beyond the companies that we lead.

Roy Agustin K. Evalle

General Manager and Executive Director

EDITORIAL BOARD Roy Agustin K. Evalle Niño Enrico C. Cabredo Katherine D. Biason John Zerbon P. Ong

CREATIVES

Jerone Atria A. Ballarta

C O N T R I B U T O R S

Niño Enrico C. Cabredo

INNOVATION

The world, indeed, has changed, for what was once before ideas with intertwined perplexities and and were most feared by many is now ironically being embraced, celebrated and championed. Man has come a long way to progress its kind and its ways, inaugurated with a step on the moon and followed by what we may call: A Series of UnFortunate Events. Some struggle to be even better than the good, to conquer what is yet to be known, and to some, to fathom what is not yet what is. But to whatever extent there might be, there is no way but forward, the only question by whom and when..

Katherine D. Biason

HUMAN RESOURCES

The heart of an organization falls into the Human Resources. And this heart, along with the rest of the units that make up an organization, when provided with ample opportunities to further themselves that they are able to further the needs of an organization. Off the Cuff creates an avenue to empower HR executives of the Group and opens them to the best practices and learnings from HR professionals and Executives all over the world.

Jerone Atria A. Ballarta

CREATIVITY

The student does not only learn from the words of his teacher alone but more so on how these were spoken. I firmly believe that learning largely depends on the creativity of its delivery. Whether it’s learning given more meaning by your teacher’s diction and phrasing or through the layout of words and spacing of your favorite mag, learning must be revealed in its most appropriate manner to achieve its intended effect. Through this collection of articles may you enjoy learning better than before with its new layout-design which remained faithful to their excellent sources.

INSIDE C O Z ’ C U LT U R E E AT S S T R AT E G Y F O R B R E A K FA S T

Worst CEO Screw-Ups of 2016 19 The by Jeff Kauflin

Along with the power and glory of being a CEO comes the risk that you’ll screw up and face public shame.

34 On Resilience: How One Somali Refugee

Is Paying Homage To Her Home Country And Building A Food Empire by Ally Boggard and Allie Hoffman Hawa Hassan is the creator and ShEO of Basbaas Sauce, which is a line of condiments inspired by her home country, Somalia.

26 If Humble people Make the Best Leaders, Why do we fall for Charismatic Narcissists? by Margarita Mayo The research is clear: when we choose humble, unassuming people as our leaders, the world around us becomes a better place.

IT’S ALL ABOUT US..

50 Conquering Digital Distraction

by Larry Rosen & Alexandra Samuel Digital overload may be the defining problem of today’s workplace. All day and night, on desktops, laptops, tablets, and smartphones, we’re bombarded with so many messages and alerts that even when we want to focus, it’s nearly impossible

55 The Innovative power of Criticism by Roberto Verganti In a world full of ideas, judgement, not ideation, is the key to breakthroughs

LIVING THE EXPERIENCE..

88 How Netflix reinvented HR by Patty McCord Sheryl Sandberg has called it one of the most important documents ever to come out of Silicon Valley. It’s been viewed more than 5 million times on the web.

102 Workplace

2025: Five Forces, Six New Roles and a Challenge to HR by John Boudreau In September 2013, top HR leaders undertook a voluntary and collective effort to envision the HR profession in 2025.

128 President

Oprah?

by Austin Carri Starbucks’s Howard Schultz, Disney’s Bob Iger, and other biz leaders may be mulling 2020 presidential runs. Experts weigh in on why that matters.

How Senior Executives Stay Passionate About Their Work

When we talk about “learning to love your job” or “managing yourself,” it’s often in the context of junior or midlevel roles. But these things don’t

stop mattering for senior executives. What aspects of their jobs are most important to them? What do they find rewarding? How do they sustain their

passion for the work they do — without burning out? Over the past few years, I’ve had in-depth, one-onone conversations with

hundreds of top business leaders, and questions like these frequently come up. I’ve identified several common themes in our talks, which I’ll share here. 5

IMPACT ON SOCIETY. As I was doing research and analysis for my recent book, I found that one of the best ways organizations can create a sense of purpose for their employees is to help connect their day-to-day work with the impact it has in their community and globally. People at the top also need to see the larger difference they’re making, and in some ways, because of their vantage point, that’s easier for them than it is for folks closer to the ground. Senior executives are closely involved in crafting the “story” of the organization — the message that goes out to the world — and they spend a good portion of their time outside the company, talking with stakeholders and observing the organization’s impact firsthand. When I spoke with John Hass, the CEO of Rosetta Stone, about what his company does, his focus wasn’t just on learning languages. It was much broader than that. Hass talked about understanding culture, resolving conflict, improving literacy rates, and empowering people to confidently communicate with others around the world. He has the perspective to see Rosetta Stone’s reach in these areas because he travels the world meeting customers and spending time with educational institutions and the students and teachers in them. Hass says: “It’s amazing to watch kids beaming with confidence and achieving success in the classroom, or seeing someone who is trying to assimilate into a new country or understand a new culture, to be able to bridge that gap. It’s these things that we do for our learners that make me proud of my company and the work we do.”

CONNECTION VERSUS CONSTANT AVAILABILITY. Senior executives

struggle with burnout just like everyone else, and technology has made this issue more prevalent than ever. Although they recognize how important it is to always be connected to what’s going on inside and outside the organization, connectivity

doesn’t imply constant availability. Leaders like Ellyn Shook, the chief leadership and human resources officer at Accenture, actually carry around “dumb phones,” which don’t have any apps and can’t send or receive email. These phones are the corporate equivalent of the “Batphone” (from the 1960s Batman television show) — only a few people have the number, and it’s used only in extreme circumstances. This allows executives to calmly disconnect while knowing that if an emergency arises, they will be made aware of it.

THE IMPORTANCE OF PERIPHERAL VISION. When we’re ridiculously

busy, it’s easy to focus only on what’s ahead of us, a bit like a horse with blinders. But senior executives who prosper say it’s critical to have excellent “peripheral vision” so they can pick up on things that fall beyond their expected line of sight. This makes their jobs more exciting and engaging and enhances their performance — all of which reinforces their love for the work they do. Jim Fowler and Jeff Smith talked about peripheral vision in relation to the chief information officer role (Fowler is currently CIO at General Electric, and Smith was formerly CIO at IBM). Both said that while information technology remains a priority for them, they’ve also learned to pay attention to geopolitical issues, global economics, changing workforce demographics, and talent practices. By doing so, they can more readily adapt not just to technology trends but also to organizational and societal trends. They’re much less likely to get blindsided by the changes around them.

LEADERSHIP AS SERVICE.

Executives ranging from David Fairhurst, the chief people officer at McDonald’s, to Jeff Wong, the chief innovation officer at EY, describe their roles as positions of service, not power. This is about believing

that your job as a leader is to help employees do their best work. When analyzing 252 global organizations for my book, I found that this “coach and mentor” mentality is one of the things employees want the most — but it’s also something senior managers struggle with, because it runs counter to the traditional commandand-control management style that got many of them where they are today. Those who clear that obstacle realize that a key part of their jobs as leaders is transferring their knowledge and skills to others. And once they carve out the time for it, they find it immensely gratifying. Fairhurst does this by imposing a lot of structure on his regular team meetings: The agendas are agreed on in advance, and he often requires one-page summaries for items to be discussed. He says: “The greater efficiency this creates means that I’m able to make the time for less formal, one on one sessions with members of the team, where I can get a better understanding of their career needs and ambitions, share with them some of the insights and experience I have gained over the years, and offer them coaching and guidance on how to further develop their skills and capabilities. These one-on-one sessions are some of the most enjoyable and rewarding parts of my job.” Wong looks at this sort of support as paying it forward. “I’ve been the beneficiary of a lot of great leaders’ taking a personal interest in my professional development,” he says. “They cared about how I was developing and growing in my career but also as a manager, leader, and communicator.” He tries to invest in his employees the same way, and that’s where he finds the greatest meaning in his own work: “While achieving goals and milestones is certainly an important part of any career, my personal satisfaction and measurement of ‘accomplishment’ comes from helping others achieve their full potential.”

HOW TO BECOME A MORE WELLROUNDED LEADER BY TONY SCHWARTZ

or years, when I spoke with CEOs or senior leaders, it was because they were interested in how my consulting firm could help their employees become more engaged, or innovative, or sustainably high-performing. During the past year – and especially the past six months – I’ve been hearing a different and much more personal initial question: “Can you help me better manage my own life?”

- Ambivalence about how to best attract, manage, and retain Millennials, who now represent the largest generation in the workforce, expect more flexibility in the way they work, and prefer to work for employers with a mission that goes beyond maximizing profit.

Consider the challenges that modern corporate leaders — and especially CEOs — now face, in addition to running their companies every day:

How can leaders balance these complex and often competing demands? The core challenge for modern leaders, I believe, is to become more wholly human – to actively develop a wider range of capabilities and to more deeply understand themselves.

- A high likelihood that the company they run has a business model that is being seriously disrupted, most often as a result of technology.

Consider the following qualities:

- A far more vocal and influential group of stakeholders, including employees, customers, and the public at large, all emboldened by their access to social media and by the speed at which their opinions can go viral.

- A highly volatile political climate that has prompted fear and uncertainty both inside and outside companies.

Self-control Boldness Focus on results Pragmatism

Tenacity Honesty Confidence Decisiveness

Is there any doubt these are desirable strengths for any leader? Most of us think in binary terms. What’s good is absolutely good, and the alternative is bad. Given a choice between an employee with the profile on the left, and the one on the right, it’s a no-brainer, isn’t it?

STRENGTH

Self-control Tenacity Boldness Honesty Focus on results Confidence Pragmatism Decisiveness

NEGATIVE OPPOSITE Impulsivity Laziness Hesitancy Deceitfulness Aimlessness Insecurity Impracticality Wishy-washiness

Common as it is to see the world through an either-or lens, it’s more limiting than we recognize. And relying on one set of relatively fixed strengths turns out to be insufficient to manage the complex environment leaders must now navigate. Here’s what happens, for example, when we overuse or rely too exclusively on the strengths on the left.

STRENGTH

Self-control Tenacity Courage Honesty Focus on results Confidence Pragmatism decisiveness

STRENGTH OVERUSED

Rigidity Ruthlessness Recklessness Cruelty Narrowness Arrogance Unimaginativeness Dogmatism

Think for a moment about one of your own strengths – a quality that has served you well at work and has been admired by others. Now try to recall a situation in which you have overused or over-relied on this quality. Are there occasions when your strength became a liability, causing more harm than good and even leading to the opposite of what you intended? We most often overuse our strengths under stress. When we’re not getting what we want, our instinct is to double-down on whatever has worked best in the past. It’s the same sort of impulse that prompts an addict to increase the dose when the drug of choice no longer produces the same high it originally did.

I recognize this inclination in myself. When I think of qualities that have served me well at work, drive and perseverance are high up on my list. But during the past year, as we introduced a new business model, I felt compelled to push harder and exercise more control than I had in the past. It was a rocky road. At times, I know my colleagues felt intimidated and discounted, rather than inspired and empowered. Simply noticing this inclination has reminded me of the choices I can make every day at work. But that’s not enough. It is also important to build complementary strengths or “positive opposites.” Consider the qualities in the right-hand column below:

STRENGTH

Self-control Tenacity Discernment Honesty Focus on results Confidence Pragmatism Decisiveness

POSITIVE OPPOSITE Spontaneity Patience Acceptance Compassion Reflectiveness Humility Imaginativeness Open-mindedness

In Good to Great, Jim Collins wrote that the best leaders were characterized by a blend of “humility and fierce resolve.” In my experience, it’s rare to find leaders who equally value the qualities on both the left and the right. Our tendency is to favor one, rather than recognizing the ways that each can serve as a balancing function for the other. A leader who values directness is more likely to give feedback that others can hear and apply if she balances her honesty with care and compassion. The opposite is also true. A compassionate leader who avoids difficult conversations for fear of hurting people ends up impeding their growth. The first step is simply deepening self-awareness. We can’t change what we don’t notice. What are your signal strengths? What does it look like when you overuse them? What potentially balancing qualities have you undervalued? The goal is not to find a perfect balance, but to build a complementary set of strengths, so that we can move gracefully along a spectrum of leadership qualities. Embracing our own complexity makes us more wholly human and gives us additional resources to manage ourselves and others in an increasingly complex world.

How to Build a Culture of Originality

If there’s one place on earth where originality goes to die, I’d managed to find it. I was charged with unleashing innovation and change in the ultimate bastion of bureaucracy. It was a place where people accepted defaults without question, followed rules without explanation, and clung to traditions and technologies long after they’d become obsolete: the U.S. Navy. But in a matter of months, the navy was exploding with originality—and not because of anything I’d done. It launched a major innovation task force and helped to form a Department of Defense outpost in Silicon Valley to get up to speed on cutting-edge technology. Surprisingly, these changes didn’t come from the top of the navy’s command-and-control structure. They were initiated at the bottom, by a group of junior officers in their twenties and thirties.

When I started digging for more details, multiple insiders pointed to a young aviator named Ben Kohlmann. Officers called him a troublemaker, rabble-rouser, disrupter, heretic, and radical. And in direct violation of the military ethos, these were terms of endearment. Kohlmann lit the match by creating the navy’s first rapid-innovation cell—a network of original thinkers who would collaborate to question long-held assumptions and generate new ideas. To start assembling the group, he searched for black sheep: people with a history of nonconformity. One recruit had been fired from a nuclear submarine for disobeying a commander’s order. Another had flat-out refused to go to basic training. Others had yelled at senior flag officers and flouted chains of command by writing public blog posts to express their iconoclastic views. “They were lone wolves,” Kohlmann says. “Most of them had a track record of insubordination.” Kohlmann realized, however, that to fuel and sustain innovation throughout the navy, he needed more than a few lone wolves. So while working as an instructor and director of flight operations, he set about building a culture of nonconformity. He talked to senior leaders about expanding his network and got their buy-in. He recruited sailors who had never shown a desire to challenge the status quo and exposed them to new ways of thinking. They visited centers of innovation excellence outside the military, from Google to the Rocky Mountain Institute. They devoured a monthly syllabus of readings on innovation and debated ideas during regular happy hours and robust online discussions. Soon they pioneered the use of 3-D printers on ships and a robotic fish for stealth underwater missions—and other rapid-innovation cells began springing up around the military. “Culture is king,” Kohlmann says. “When people discovered their voice, they became unstoppable.” Empowering the rank and file to innovate is where most leaders fall short. Instead, they try to recruit brash entrepreneurial types to bring fresh ideas and energy into their organizations—and then leave it at that. It’s a wrongheaded approach, because it assumes that the best innovators are rare creatures with special gifts. Research shows that entrepreneurs who succeed over the long haul are actually more risk-averse than their peers. The hotshots burn bright for a while but tend to fizzle out. So relying on a few exceptional folks who fit a romanticized creative profile is a short-term move that

underestimates everyone else. Most people are in fact quite capable of novel thinking and problem solving, if only their organizations would stop pounding them into conformity. When everyone thinks in similar ways and sticks to dominant norms, businesses are doomed to stagnate. To fight that inertia and drive innovation and change effectively, leaders need sustained original thinking in their organizations. They get it by building a culture of nonconformity, as Kohlmann did in the navy. I’ve been studying this for the better part of a decade, and it turns out to be less difficult than I expected. For starters, leaders must give employees opportunities and incentives to generate—and keep generating—new ideas, so that people across functions and roles get better at pushing past the obvious. However, it’s also critical to have the right people vetting those ideas. That part of the process should be much less democratic and more meritocratic, because some votes are simply more meaningful than others. And finally, to continue generating and selecting smart ideas over time, organizations need to strike a balance between cultural cohesion and creative dissent.

Letting a Thousand Flowers Bloom People often believe that to do better work, they should do fewer things. Yet the evidence flies in the face of that assumption: Being prolific actually increases originality, because sheer volume improves your chances of finding novel solutions. In recent experiments by Northwestern University psychologists Brian Lucas and Loran Nordgren, the initial ideas people generated were the most conventional. Once they had thought of those, they were free to start dreaming up more-unusual possibilities. Their first 20 ideas were significantly less original than their next 15. Across fields, volume begets quality. This is true for all kinds of creators and thinkers—from composers and painters to scientists and inventors. Even the most eminent innovators do their most original work when they’re also cranking out scores of less brilliant ideas. Consider Thomas Edison. In a five-year period, he came up with the lightbulb, the phonograph, and the carbon transmitter used in telephones— while also filing more than 100 patents for inventions that didn’t catch the world on fire, including a talking doll that ended up scaring children (and adults). 11

Of course, in organizations, the challenge lies in knowing when you’ve drummed up enough possibilities. How many ideas should you generate before deciding which ones to pursue? When I pose this question to executives, most say you’re really humming with around 20 ideas. But that answer is off the mark by an order of magnitude. There’s evidence that quality often doesn’t max out until more than 200 ideas are on the table. Stanford professor Robert Sutton notes that the Pixar movie Cars was chosen from about 500 pitches, and at Skyline, the toy design studio that generates ideas for Fisher-Price and Mattel, employees submitted 4,000 new toy concepts in one year. That set was winnowed down to 230 to be drawn or prototyped, and just 12 were finally developed. The more darts you throw, the better your odds of hitting a bull’s-eye. Though it makes perfect sense, many managers fail to embrace this principle, fearing that time spent conjuring lots of ideas will prevent employees from being focused and efficient. The good news is that there are ways to help employees generate quantity and variety without sacrificing day-to-day productivity or causing burnout.

Think like the enemy. Research suggests that organizations often get stuck in a rut because they’re playing defense, trying to stave off the competition. To encourage people to think differently and generate more ideas, put them on offense. That’s what Lisa Bodell of futurethink did when Merck CEO Ken Frazier hired her to help shake up the status quo. Bodell divided Merck’s executives into groups and asked them to come up with ways to put the company out of business. Instead of being cautious and sticking close to established competencies, the executives started considering bold new directions in strategy and product development that competitors could conceivably take. Energy in the room soared as they explored the possibilities. The offensive mindset, Carnegie Mellon professor Anita Woolley observes, focuses attention on “pursuing opportunities… whereas defenders are more focused on maintaining their market share.” That mental shift allowed the Merck executives to imagine competitive threats that didn’t yet exist. The result was a fresh set of opportunities for innovation. 12

Solicit ideas from individuals, not groups. According to decades of research, you get more and better ideas if people are working alone in separate rooms than if they’re brainstorming in a group. When people generate ideas together, many of the best ones never get shared. Some members dominate the conversation, others hold back to avoid looking foolish, and the whole group tends to conform to the majority’s taste. Evidence shows that these problems can be managed through “brainwriting.” All that’s required is asking individuals to think up ideas on their own before the group evaluates them, to get all the possibilities on the table. For instance, at the eyewear retailer Warby Parker, named the world’s most innovative company by Fast Company in 2015, employees spend a few minutes a week writing down innovation ideas for colleagues to read and comment on. The company also maintains a Google doc where employees can submit requests for new technology to be built, which yields about 400 new ideas in a typical quarter. One major innovation was a revamped retail point of sale, which grew out of an app that allowed

customers to bookmark their favorite frames in the store and receive an e-mail about them later. Since employees often withhold their most unusual suggestions in group settings, another strategy for seeking ideas is to schedule rapid one-on-one idea meetings. When Anita Krohn Traaseth became managing director of Hewlett-Packard Norway, she launched a “speed-date the boss” initiative. She invited every employee to meet with her for five minutes and answer these questions: Who are you and what do you do at HP? Where do you think we should change, and what should we keep focusing on? And what do you want to contribute beyond fulfilling your job responsibilities? She made it clear that she expected people to bring big ideas, and they didn’t want to waste their five minutes with a senior leader—it was their chance to show that they could innovate. More than 170 speed dates later, so many good ideas had been generated that other HP leaders implemented the process in Austria and Switzerland.

Bring back the suggestion box. It’s a practice that dates back to the early 1700s, when a Japanese shogun put a box at the entrance to his castle. He rewarded good ideas—but punished criticisms with decapitation. Today suggestion boxes are often ridiculed. “I smell a creative idea being formed somewhere in the building,” the boss thinks in one Dilbert cartoon. “I must find it and crush it.” He sets up a suggestion box, and Dilbert is intrigued until a colleague warns him: “It’s a trap!!” But the evidence points to a different conclusion: Suggestion boxes can be quite useful, precisely because they provide a large number of ideas. In one study, psychologist Michael Frese and his colleagues visited a Dutch steel company (now part of Tata Steel) that had been using a suggestion program for 70 years. The company had 11,000 employees and collected between 7,000 and 12,000 suggestions a year. A typical employee would make six or seven suggestions annually and see three or four adopted. One prolific innovator submitted 75 ideas and had 30 adopted. In many

companies, those ideas would have been missed altogether. For the Dutch steelmaker, however, the suggestion box regularly led to improvements— saving more than $750,000 in one year alone. The major benefit of suggestion boxes is that they multiply and diversify the ideas on the horizon, opening up new avenues for innovation. The biggest hurdle is that they create a larger haystack of ideas, making it more difficult to find the needle. You need a system for culling contributions—and rewarding and pursuing the best ones—so that people don’t feel their suggestions are falling on deaf ears.

Developing a Nose for Good Ideas Generating lots of alternatives is important, but so is listening to the right opinions and solutions. How can leaders avoid pursuing bad ideas and rejecting good ones? Lean on proven evaluators. Although many leaders use a democratic process to select ideas, not every vote is equally valuable. Bowing to the majority’s will is not the best policy; a select minority might have a better sense of which ideas

have the greatest potential. To figure out whose votes should be amplified, pay attention to employees’ track records in evaluation. At the hedge fund Bridgewater, employees’ opinions are weighted by a believability score, which reflects the quality of their past decisions in that domain. In the U.S. intelligence community, analysts demonstrate their credibility by forecasting major political and economic events. In studies by psychologist Philip Tetlock, forecasters are rated on accuracy (did they make the right bets?) and calibration (did they get the probabilities right?). Once the best of these prognosticators are identified, their judgments can be given greater influence than those of their peers. So, in a company, who’s likely to have the strongest track record? Not managers—it’s too easy for them to stick to existing prototypes. And not the innovators themselves. Intoxicated by their own “eureka” moments, they tend to be overconfident about their odds of success. They may try to compensate for that by researching customer preferences, but they’ll still be susceptible

to confirmation bias (looking for information that supports their view and rejecting the rest). Even creative geniuses have trouble predicting with any accuracy when they’ve come up with a winner. Research suggests that fellow innovators are the best evaluators of original ideas. They’re impartial, because they’re not judging their own ideas, and they’re more willing than managers to give radical possibilities a chance. For example, Stanford professor Justin Berg found that circus performers who evaluated videos of their peers’ new acts were about twice as accurate as managers in predicting popularity with audiences.

Make it a contest. Idea competitions can help leaders separate the wheat from the chaff, whether they’re sifting through suggestion-box entries or hosting a live innovation event. At Dow Chemical, for example, employees participate in an annual innovation tournament focused on reducing waste and saving energy. The tournament calls for ideas that require an initial investment of no more than $200,000, and those costs must be recoverable within a year. Peers review 13

the submissions, with monetary rewards going to the winners. Innovation researchers Christian Terwiesch and Karl Ulrich report that over more than a decade, the resulting 575 projects have produced an average return of 204% and saved the company $110 million a year. When an innovation tournament is well designed, you get a large pool of initial ideas, but they’re clustered around key themes instead of spanning a range of topics. People spend a lot of time preparing their entries, which can boost quality, but the work happens in a discrete window of time, so the contest is not a recurring distraction. Thorough evaluation helps to filter out the bad ideas. The feedback process typically involves having a group of subject matter experts and fellow innovators review the submissions, rate their novelty and usefulness, and provide suggestions for improvement. With the right judges in place, an innovation contest not only leverages the wisdom of the crowd but also makes the crowd wiser. Contributors and evaluators get to learn from other people’s successes and failures. Over time, the culture can evolve into one where employees feel confident in their ability to contribute ideas—and develop better taste about what constitutes quality. Because successful innovators earn recognition and rewards, everyone has an incentive to participate. 14

So start by calling for ideas to solve a problem or seize an opportunity, and then introduce a rigorous process for assessment and feedback. The most promising submissions will make it to the next round, and the eventual winners should get the staff and resources necessary to implement their ideas.

Cultivating Both Cohesion and Dissent Building a culture of nonconformity begins with learning how to generate and vet ideas, but it doesn’t end there. To maintain originality over time, leaders need to keep fighting the pressures against it. We used to blame conformity on strong cultures, believing they were so cultish and chummy that members couldn’t consider diverse views and make wise decisions. But that’s not true. Studies of decision making in top management teams show that cohesive groups aren’t more likely than others to seek consensus, dismiss divergent opinions, and fall victim to groupthink. In fact, members of strong cultures often make better decisions, because they communicate well with one another and are secure enough in their roles to feel comfortable challenging one another. Here’s the evidence on how successful hightech founders in Silicon Valley built their start-

ups: They hired primarily for commitment to the mission, looking for people who would help carry out their vision and live by their values. Founders who looked mainly for technical skill or star potential didn’t fare nearly as well. In mature industries, too, research shows that when companies place a strong emphasis on culture, their performance remains more stable. Yet there’s a dark side to strong, cohesive cultures: They can become homogeneous if left unchecked. As leaders continue to attract, select, and retain similar people, they sacrifice diversity in thoughts and values. Employees face intense pressure to fit in or get out. This sameness can be advantageous in predictable environments, but it’s a problem in volatile industries and dynamic markets. In those settings, strong cultures can be too insular to respond appropriately to shifting conditions. Leaders have a hard time recognizing the need for change, considering different views, and learning and adapting. Consider BlackBerry: After disrupting the smartphone market, senior leaders clung to the belief that users were primarily interested in efficient, secure e-mail. They dismissed the iPhone as a music player and a consumer toy, hired likeminded insiders who had engineering backgrounds but lacked marketing expertise, and ultimately failed to create a highquality web browser and

an app-friendly operating system. The result? A major downsizing, a billiondollar write-off, and a colossal collapse of market share. So to balance out a strong culture, you also need a steady supply of critical opinions. Even when they’re wrong, they’re useful—they disrupt kneejerk consensus, stimulate original thought, and help organizations find novel solutions to problems. In the navy’s rapid-innovation cell, the norm is “loyal opposition,” says Joshua Marcuse, one of Ben Kohlmann’s collaborators in the Pentagon. “Agitating against the status quo is how we contribute to the mission.” In short, make dissent one of your organization’s core values. Create an environment where people can openly share critical opinions and are respected for doing so. In the early days of Apple, employees were passionately committed to making the Mac a userfriendly household product. But each year, the Mac team also gave an award to somebody who had challenged Steve Jobs. Every one of those award winners was promoted. Cohesion and dissent sound contradictory, but a combination of the two is what brings novel ideas to the table—and keeps a strong culture from becoming a cult. Here are some ways to hold these principles in productive tension:

Prioritize organizational values. Give people a framework for choosing between conflicting opinions and allowing the best ideas to win out. When companies fail to prioritize values, performance suffers. My colleague Andrew Carton led a study showing that across hospitals, heart attack readmission rates were lower and returns on assets were higher when leaders articulated a compelling vision—but only if they spelled out no more than four organizational values. The more values they emphasized beyond that, the greater the odds that people interpreted them differently or didn’t focus on the same ones. Values need to be rank-ordered so that when employees face choices between competing courses of action, they know what comes first. At the software company Salesforce.com, trust is explicitly defined as the number one value, above growth and innovation. That communicates a clear message to employees: When working on new software, never compromise data privacy. At the online shoe and clothing retailer Zappos.com, CEO Tony Hsieh prioritizes employee happiness over customer happiness. The airline WestJet identifies safety as its most important value. And at GiveForward, a company that helps people raise money for causes, compassion tops the list. Although media coverage is critical to the company’s success, cofounder Ethan Austin notes, “We will not push a story in the media unless we are certain that the customer whose story we are sharing will benefit more than we do.” Once you’ve prioritized the values, keep scrutinizing them. Encourage new hires to challenge “the company way” when they disagree with it. They’re the ones with the freshest perspective; they haven’t yet gone native. If they familiarize themselves with the culture before speaking up, they’ll have already started marching to the same drummer. At Bridgewater, when new employees are trained, they’re asked about the company’s principles: Do you disagree?

Solicit problems, not just solutions. When working with executives, organizational psychologist David Hofmann likes to ask them to fill in the blanks in this sentence: “Don’t bring me ____; bring me ____.” Without fail, they shout out, “Don’t bring me problems; bring me solutions!” Although leaders love it when employees come up with solutions, there’s an unintended consequence: Inquiry gets dampened. If you’re always expected to have an answer ready, you’ll arrive at meetings with your diagnosis complete, missing out on the chance to learn from a range of perspectives. This may be especially common in the United States: In a recent study comparing American and German decision groups, the Germans made twice as many statements about problems and 30% fewer statements about solutions. “Americans are driven to find solutions quickly,” the researchers observe, “often without a complete and thorough analysis of the problem.” When individual members of a group have different information, as is usually the case in organizations, it’s smarter to get all the problems out there before pursuing solutions. At the digital music company Spotify, instead

of working on projects, people organize around long-term business problems. “If they were easy to solve,” chief technology officer Oskar Stål notes, “we would have solved them already. When we create a new team, people typically stay together on a business problem for at least a year. If it becomes successful, the team and mission will exist for a long time.” Angie’s List cofounder Angie Hicks holds weekly office hours to hear concerns from employees. And when Anita Krohn Traaseth became the CEO of the Norwegian government’s innovation efforts, she again used “speed dates” to give employees a voice. To make sure she had full visibility into problems, she asked people to name their three biggest bottlenecks and what they would like to safeguard or change. Only after gathering problems across a tour of 14 offices did she begin implementing solutions.

Don’t appoint devil’s advocates—go find them. Research by UC Berkeley psychologist Charlan Nemeth shows that assigning someone to play devil’s advocate doesn’t overcome confirmation bias. Though people may pay lip service to considering the counterargument, they’ll stick to their own views in the end. To make a difference, the devil’s advocate has to actually hold a dissenting view, not just voice it for argument’s sake, and the group has to believe that the dissent is authentic. Under those circumstances, groups look at more information against the majority view than for it, and they’re less confident in their original preferences. It’s rare that role-played disagreement is forcefully argued or taken seriously; actual disagreement is what stimulates thought. Groups with authentic dissenters generate more—and better— solutions to problems. Abraham Lincoln famously asked his political rivals to join his cabinet, knowing 16

they would genuinely hold contrarian views. At a recent Berkshire Hathaway annual meeting, Warren Buffett invited a trader who was shorting the stock to share his criticisms. Of course, this strategy works only if the dissenter’s input is clearly valued and respected. Model receptivity to critical feedback. Many managers end up promoting conformity because their egos are fragile. Research reveals that insecurity prevents managers from seeking ideas and leads them to respond defensively to suggestions. Employees quickly pick up on this and withhold ideas to avoid trouble. One way to overcome this barrier is to encourage people to challenge you out in the open. Years ago at the software company Index Group, CEO Tom Gerrity gathered his full staff of about 100 people and had a consultant give him negative feedback in front of everyone. When employees saw their CEO listen to critical opinions, they were less worried about speaking up. And managers became more receptive to tough comments themselves. You can also get people to challenge you by broadcasting your weaknesses. “When you’re the leader, it is really hard to get good and honest feedback, no matter how many times you ask for it,” Facebook COO Sheryl Sandberg says. “One trick I’ve discovered is that I try to speak really openly about the things I’m bad at, because that gives people permission to agree with me, which is a lot easier than pointing it out in the first place.” For example, Sandberg tells her

colleagues that she has a habit of talking too much in meetings. “If I never mentioned it, would anyone walk up to me and say, ‘Hey, Sheryl, I think you talked too much today’? I doubt it.” For a culture of originality to flourish, employees must feel free to contribute their wildest ideas. But they are often afraid to speak up, even if they’ve never seen anything bad happen to those who do. To fight that fear in the navy, Ben Kohlmann rejected the military’s traditional emphasis on hierarchy. Everyone communicated on a firstname basis, ignoring rank. “If you have an idea, pitch it to the crowd and run with it,” he told members of his rapid-innovation cell. And he introduced them to people who had successfully championed creativity and change in the navy, to show them it was possible. Other ways to nip fear in the bud include applauding employees for speaking up, even when their suggestions don’t get adopted, and sharing your own harebrained ideas. Without some degree of tolerance in the organization for bad ideas, conformity will begin to rear its ugly head. Ultimately, listening to a wider range of insights than you normally hear is the key to promoting great original thinking.

If at first you don’t succeed, you’ll know you’re aiming high enough.

Three Millennial Myth Busters That Will Make You Rethink Your HR Strategy By Steve Price

or years now, much has been written about how different millennials are from older generations. I have read many articles suggesting the importance for companies to adjust their practices and policies to meet this younger generation’s unique workplace values and perspectives. Given the emphasis on this topic, Dell set out to better understand the different generational perspectives across our team members. We polled more than 16,000 in the past year (half of whom were millennials – born in 1980 or later) on a variety of topics, including new hire onboarding experiences and opinions on compensation, career development and work-setting preferences. Our research findings were eye-opening. We found

that unlike many common assertions of late, millennials are very similar to Generation X (1965 to 1979) and Baby Boomers (1946 to 1964) when it comes to career expectations and the values with which they most identify in the workplace.

Three Millennial Myths To Bust Generational differences aside, there are many myths out there today that simply don’t match-up with Dell’s research results. Here are three common millennial myths to bust on your way to a smarter HR strategy that will help you attract and retain the best young talent:

To be clear, our research also exposed unique perspectives to millennials. For instance, millennials place business travel and relocation higher on their career goals than older generations. Furthermore, from a regional perspective, this gap grows even wider with millennials in Asia and Latin America expressing significantly higher interest in business travel than older generations in North America and Europe.

Myth No. 1: Millennials Like To Job Hop

On the contrary, Dell’s research shows that millennials predict they’ll work for five companies over their entire careers (versus six for Generation X and Baby Boomers alike). Millennials also predict that they’ll work at Dell for 10 years on average, and 75% say they would stay at Dell even if they were offered a comparable position elsewhere, which is consistent with Generation X and four points higher than Baby Boomers (71%).

Myth No. 2: Millennials Place A Higher Value On Work-Life Balance Than Other Generations

Our research shows that all generational groups rank work-life balance as a top criterion in making career decisions. When looking at job characteristics, all three generations ranked flexible work arrangements and challenging work/variety of assignments to be among their top three most valued job attributes.

Myth No. 3: Millennials Expect To Be Promoted Quickly

Our research paints a more patient perspective, with millennials predicting 3.5 years to promotion, on average.

THE GENERATIONAL GAP THAT ISNâ&#x20AC;&#x2122;T According to our research, flexible work arrangements, flexible schedules, health insurance and paid time off were consistently rated as the most valued benefits across all three generations. The only stand-out result was that Baby Boomers valued life and disability insurance more in comparison to the younger generations. In addition, all three generations were in agreement that competitive base salaries were most preferred, followed by performance bonuses, longterm incentives and overtime compensation. When we looked at training and professional development, again all three generations placed

technical training, leadership skills, project management and strategic thinking as their top four choices. The only training area that was viewed significantly differently from generation to generation was oral communication and presentations skills, which millennials ranked fifth out of 10, Generation X ranked eighth and Baby Boomers ranked at the bottom of their list. That said, when our survey turned to the methods of training, the generational blocks were all back in full alignment â&#x20AC;&#x201C; preferring instructor-led classroom-based training and on-the-job training next over self-learning web-based training.

USE RESEARCH AND DATA TO SET YOUR HR STRATEGY ACROSS ALL GENERATIONS A few years ago The Atlantic published an article that declared, “We can all agree that millennials are the worst.” While it was a light-hearted piece comparing yet two more publications writing about millennials – its assertion that this group is “the worst” is unfair. Can companies really know how best to approach this group, if they don’t understand their values? Our research suggested that there are more similarities than differences across generations. It’s important not to confuse the differences between the generations as evidence of generational gaps. In many cases – for instance, a millennial’s higher interest in presentation skills as a development area – is more a reflection of their career stage than a trait of their generational mindset.

As a large company with tens of thousands of employees and operations in more than 180 countries, we face an unprecedented challenge today as we contend with multiple generations in our workforce. Because of this, we take a more holistic approach at Dell that spans all of the generations and is then enhanced with targeted programs for different groups within the company, including programs aimed at helping those who are early in their careers. We believe that what motivates the human spirit transcends generations and we believe that our commitment to our culture code is valued by all of our team members. I recommend a similar approach for any business, large or small – take the time to objectively know the unique perspectives across all of the generations in your organization. The learnings from your research should help you develop a successful HR strategy and journey for all employees to deliver stronger business results, as well as to keep your team members more happily engaged and productive.

KEEPING UP WITH THE MILLENNIALS

UP OR OUT

Millennials have a reputation for wanting to rise quickly through the ranks—and looking for other opportunities when they don’t. The next cohort, Gen Z, may be more patient.

The now-largest generation is redefining the requirements for happiness on the job

AS THE OWNER OF A SHIPPING company in Puyallup, Washington, Pavel Vosk didn’t realize how little he understood his demographic until he had to hire them. Some of the applicants his age—he started the company when he was 20—who sought administrative and driver positions arrived with an unappealing vibe. “Their attitude was one of boredom, arrogance, that they were above the job,” says Vosk. He learned to respond by focusing on something Millennials value: teamwork. To prod those who often showed up late and didn’t respect authority, Vosk explained that their tardiness genuinely inconvenienced the rest of the team. “I’d ask how they’d feel if the shoe were on the other foot and kept emphasizing how their actions hurt not me but their co-workers,” he says. His strategy clicked. “As soon as they realized how their individual work mattered to the team’s success, they thrived.” Certainly, not all Millennials adhere to these traits, and this generation continues to evolve even as Gen Z comes into the picture. Vosk, now 27, sold his company in 2015 and today works as a management consultant, specializing in employee engagement with a focus on—no surprise—Millennials. —COELI CARR HOW TO RELATE TO MILLENNIALS

First, listen. Millennials want to provide input and be heard, a tall order when the boss may be decades older with micromanagement tendencies. “Companies that want to retain their best Millennial talent need to ensure they’re not alienating them,” says Bob Kulhan, founder and CEO of the consultancy Business Improv, whose roster of clients—including Google, American Express, and Hilton Worldwide—are seeking to address Millennial-centric issues.The core of Kulhan’s methodology, described in

TWO KINDS

Getting to “Yes And”:The Art of Business Improv, is losing the put-down response “Yes, but,” which, he says, denies, negates, and restricts the offerings of younger workers who thrive on collaboration. “It’s a sure way to undermine morale and motivation,” says Kulhan. In contrast, if you say “Yes, and,” you signal an openness to sharing information and moving towarda jointly created solution.

DELIVER WHAT YOU PROMISE

The seeds of is communication can be sowed even before a Millennial comes on board. “A

Early Millennials (born between 1980 and 1987) are collaborative and optimistic. Recessionist Millennials (1987 to 1995) are realistic, financially savvy, and ultra connected, according to BridgeWorks.

promise made by an employer during the interview sets up expectations,” says Bill Pelster, managing partner of Bersin by Deloitte,the Oakland, California– based research arm of Deloitte Consulting. Pelster cites an incident at a Silicon Valley firm involving a new Millennial hire who was told, in passing, that she could take a specific software course within three months. When her manager suddenly canceled that class, she told her family she would quit. After a rethink, she calmly spoke to her manager, who, it turns out, had no idea how much

Early Millennials AUTONOMY Choosing the hours I work • Having input about my work • Owning my own company.

the opportunity meant to her. “A more mature strategy would have been for her to confirm the company’s commitment on the spot, but Millennials aren’t fans of long,drawn-out communication,” says Pelster. Because of Millennials’ preference for working in anabbreviated world with direct verbal and written exchanges, he says, older managers should push for these employees’ greater participation in faceto-face meetings and longer conversations—where context and visual cues can foster better communication.

Recessionist Millennials FINANCIAL STABILITY Spending freely without hesitation • Making enough money to pay off debts• Saving and investing. SOURCE: 2017 BRIDGEWORKS 3G REPORT

THE NEXT WAVE IS ALREADY HERE

---WHO ARE THEY? Suffused with praise from their Boomer parents, many Millennials got used to having their voices heard early on. And there are a lot of voices: 80 million of them. Inclusiveness is a must, served up in a collaborative setting. “Their rallying cry is ‘a win for one is a win for the team,’ which explains all those open-floor plans,” says David Stillman, a consultant and co-author of The M-Factor: How the Millennial Generation Is Rocking the Workplace. Their expectations to get promoted quickly have made them difficult to retain, says Stillman: “Employers typically crossed their fingers that these new hires were merely going through a phase and that they’d come around.” That didn’t quite happen. If you can’t accommodate their sometimes contradictory demands, they have a habit of leaving. ---THE GEN Z OR YOUNG MILLENNIAL FACTOR The cadre following the Millennials, Gen Z, born between 1995 and 2012, and the youngest Millennials, now 22, share some traits. Gen-Zers are also eager for authenticity. But they prefer cubicles, says Stillman, because their Gen X parents emphasized hard work and individual effort. Raised in tougher economic times, they possess a win-or-lose survival mentality. They are clever at streamlining and simplifying procedures, and often have entrepreneurial side gigs. That’s energy you can harness. ---STAY CURRENT Stillman says many owners assume their Millennial leaders will figure it all out, ignoring the fact that the best strategy is training them to recognize Gen Z traits and understand those workers’ motivations. The job interview is a chance to attract both these cohorts by meeting applicants’ values and being completely candid. Amy Thayer, research director at Achieve, a marketing agency in Indianapolis, cites a company that overhauled its philanthropy to allow employees to select charities . That’s just one way Millennials and Gen-Zers can feel they have made a difference.

GET REAL OR THEY’LL GET LOST

The best way to address generational issues is to show there aren’t any. “A short, inexpensive and energetically edited video, posted on the company’s website and various social media, can zero in on the culture, dress code, layout—cubicles or open space—and personnel associated with the new position,” says Skylar Werde, a consultant and trainer at BridgeWorks, a consultancy in Wayzata, Minnesota, whose focus is resolving generational friction in the workplace. HR can’t always convey in words how Millennial-friendly a business is, he says, which is why many of BridgeWorks’ clients have used informal, inviting videos to capture the workplace essence. “Millennials who like what they see in the visual preview—sometimes no longer than a minute— and can also picture themselves there are every company’s dream candidates,” he says.

BECOMING LESS IMPATIENT According to the Deloitte Millennial Survey, the number of Millennials seeking new employment within two years is decreasing. Over the past year, Millennials have become a little more loyal.

Millennials who expect to leave within two years:

44%

38%

Millennials who expect to stay beyond five years:

27%

31%

ETIQUETTE SHIFT Percentage of each generation who think it is appropriate to text and surf the net during work hours:

BOOMERS GENX

14%

MILLENNIALS GENZ

12%

18%

WHY BUSINESS LEADERS NEED TO READ MORE SCIENCE FICTION by Eliot Peper 22

At the end of the 19th century, New York City stank. One hundred fifty thousand horses ferried people and goods through the streets of Manhattan, producing 45,000 tons â&#x20AC;&#x201D; tons! â&#x20AC;&#x201D; of manure a month. It piled up on streets and in vacant lots, and in 1898 urban planners convened from around the world to brainstorm solutions to the impending crisis. They failed to come up with any, unable to imagine horseless transportation.

Fourteen years later, cars outnumbered horses in New York, and visions of manure dystopia were forgotten. If 19th-century urban planners had had access to big data, machine learning techniques, and modern management theory, these tools would not have helped them. They simply would have confirmed their existing concerns. Extrapolating from past trends is useful but limiting in a world of accelerating technological change.

illustration of how, just as the internet didn’t stop at revolutionizing the computer industry, the impacts of advances in synthetic biology won’t be limited to biotech.

Science fiction can help. Maybe you associate it with spaceships and aliens, but science fiction offers more than escapism. By presenting plausible alternative realities, science fiction stories empower us to confront not just what we think but also how we think and why we think it. They reveal how fragile the status quo is, and how malleable the future can be. Daniel Suarez’s novel Change Agent describes a near future in which synthetic biology has reshaped every industry. Singapore has overtaken Silicon Valley as the world’s innovation hub after FDA regulation prompts a brain drain from California. Characters chow down on lab-grown meat and ride in autonomous vehicles manufactured from chitinous materials, while CRISPR-enhanced babies are the new hot-button social issue. It’s an

https://goldenlib.ru/uploads/01_Neuromancer.png

Infomocracy, by governance researcher Malka Older, explores how software could change our public institutions through the social and technical engineering of elections. As the barrier dissolves between political and commercial power structures, the book raises questions about large multinationals whose budgets are bigger than small countries’ and CEOs who have

growing roles as statespeople. Rising sea levels flood Manhattan in Kim Stanley Robinson’s New York 2140, prompting hedge fund managers and real estate investors to create a new intertidal market index. As climate change accelerates and the world economy becomes ever more concentrated in megacities, rethinking infrastructure becomes an ever more urgent priority. Alexander Weinstein’s Children of the New World weaves together a series of mind-bending vignettes into a compelling vision of how social media could change our lives. My own near future thriller, Cumulus, explores surveillance, inequality, and winnertake-all internet economics. The protagonists wrestle with the impacts of tech consolidation, data breaches, and the theory and practice of corporate social responsibility. William Gibson famously coined the term “cyberspace” in his 1984 masterpiece Neuromancer. Neal Stephenson’s The Diamond Age inspired Jeff Bezos to create the Kindle; Sergey Brin mines Stephenson’s even more famous Snow Crash for insights into virtual reality. And even though the Star Trek communicator spurred the invention of the cell phone, I’m not arguing that CEOs should read science fiction to actually find out what happens next. Because although we tend to assume that science fiction is about

the future, it’s actually about the present. George Orwell’s 1984, which recently shot to the top of the best-seller lists, was really about 1948, the year Orwell finished writing it. The fact that so many readers feel that it’s actually about 2017 is a testament to Orwell’s insights into human nature and the always-evolving relationship between technology, power, and society.

Science fiction isn’t useful because it’s predictive. It’s useful because it reframes our perspective on the world. Like international travel or meditation, it creates space for us to question our assumptions. Assumptions locked top 19th-century minds into believing that cities were doomed to drown in horse manure. Assumptions toppled Kodak despite the fact that its engineers built the first digital camera in 1975. Assumptions are a luxury true leaders can’t afford. But assumptions are notoriously hard to beat back, and for a very good reason: They’re useful. They provide us with cognitive shortcuts for making sense of the world. They make us more efficient and productive. The problem is that they fail to update when that world changes, and they stand in our way when we could change the world. That’s why science fiction is invaluable to the ambitious, and why companies like Google, Microsoft, and Apple have brought in science fiction writers as consultants. Exploring fictional futures frees our thinking from false constraints. It challenges us to wonder whether we’re even asking the right questions. It forces us to recognize that sometimes imagination is more important than analysis. So consider leaving the latest white papers, industry rundowns, and management hot takes at the office. For your summer reading, pick up a paperback in the Sci-Fi section. http://mymodernmet.com/wp/wp-content/uploads/2017/02/last-day-fairy-tales-national-building-museum-1.jpg

MEET THE MODERN LEARNER:

DIGITAL STRATEGIES TO ENGAGE MILLENNIALS

howcased at Learning Technologies 2017, our keynote seminar ‘Meet the Modern Learner’ was a standout success. We share our insights about the increasingly digital learning environment to help you get in synch with today’s modern learner. Watch the presentation here and read more below.

THE DIGITAL WORKPLACE

With the digital revolution empowering people to take learning into their own hands, today’s trainers are under pressure to modernise their strategies or risk becoming ineffective, out-oftouch, and even obsolete.

Today’s modern workforce is filled with tech-savvy learners who expect accessible, interactive learning experiences anytime, anywhere. Millennials (people born 1980-1995) are the largest generation in history and will make up a staggering 50% of the workforce by 2020! As such, it’s imperative that your learning appeals to the millennial market. As first generation ‘digital natives,’ millennials will expect interactive digital learning. To adapt to the modern learner and meet their rising expectations, managers are forced to rethink how they approach learning in order to retain, engage, and nurture their talent. They must simplify the employee experience to encourage learning anywhere and on any device, adapt content to create personalised learning experiences, and encourage them to engage with their training in new and creative ways.

WHAT YOU CAN DO:

STAY CONNECTED

With digital apps and social networks such as LinkedIn and Twitter becoming increasingly integrated into the modern workplace, itâ&#x20AC;&#x2122;s essential you deliver a similar interactivity in your learning. By taking your content online youâ&#x20AC;&#x2122;re bringing the world of learning into this digital sphere, making it immediately relevant and engaging for your learner. Using a cloud-based platform like PageTiger also allows the learner to access content on-the-go from any device, making the whole learning experience effortless and giving employees control over when and how they access content. See our interactive company magazine for inspiration!

BE MODULAR

Millennials are characterised by their short attention span and need for immediate gratification. Taking a modular learning approach is the perfect way to meet this requirement, as it allows content to be consumed in bite-sized pieces, keeping the learning experience fresh and engaging. This interactive learning module presents the information in an interesting, easily digestible format, and even awards the learner a certificate upon completion! Click here to see the example.

PROVIDE FEEDBACK OPPORTUNITIES Millennials are typically far more feedback-driven than previous generations, so be sure to integrate plenty of opportunities for review into your content. Including quizzes, polls and surveys is a surefire way to keep your colleagues interested and engaged. See our online training brochure to see this in action!

KEEP IT PERSONAL

Businesses should customise content so itâ&#x20AC;&#x2122;s more compelling for your learner. Rather than taking a one-size-fits-all approach, ensure that colleagues receive the information and resources that are relevant and useful for them. Offering elements such as recommended reading, videos and additional learning opportunities, is a great starting point.

SANTANDER’S HR DIRECTOR:

HOW HR CAN ENSURE THEIR WORKFORCE REFLECTS THEIR COMMUNITIES

By Jake Matthews

workforce that reflects the community it serves will always benefit the bottom line. However, with unconscious bias still clouding the hiring processes and diversity targets, for some, reachable only in the next few years, HR needs to work on improving this.

Enter Vicky Wallis, HR Director at Santander UK; she told us the “many” steps HR can take to ensure that the workforce reflects the communities they serve. “Companies should recruit at both a national and local level to source talent from all parts of the country and offer training and

development programmes for employees of all ages throughout the UK,” she said. “Understanding that a ‘one size fits all’ approach no longer works for recruitment is also an important consideration. Recruitment professionals should take a holistic approach to assessing candidates and be sure to understand the context of applications before making final decisions. “Well-rounded assessment techniques, including interviews, can shed more light on someone’s potential than standardised tests or base qualifications. Offering a variety of ways to start or restart

a career is important in ensuring that as wide a population as possible view working for your company as realistic, though still challenging and ambitious.” But how can HR offer paths into work for candidates who followed ‘less travelled’ routes? Wallis tells how: “Schemes such as internships, work placements, traineeships and apprenticeships can help companies find candidates from less traditional routes. While many successful employees are sourced from universities and other more conventional

paths such as recruitment consultancies, offering entry into a company at all levels can ensure you have a good variety of staff from diverse backgrounds. “These recruitment paths then need to be reinforced with structured development and internal mobility within the company to set the candidates on course for success, and provide them with all the support they need. The opportunity to teach someone from the ground up can build loyalty and help employees learn business- and industryspecific skills.”

Why Chief Human Resources Officers Make Great CEOs

or decades the corporate HR department was seen as a back-office function, a cost center focused on mundane administrative tasks such as managing compensation and benefits plans. But over the past 15 years Ellie Filler has noticed a dramatic change. Filler, a senior client partner in the Swiss office of the executive recruiting firm Korn Ferry, specializes in placing chief human resources officers (CHROs) with global companies. For years many of the HR chiefs she recruited reported to the COO or the CFO and complained that they lacked real influence in the C-suite. Today, she says, they often report directly to the CEO, serve as the CEO’s key adviser, and make frequent presentations to the board. And when companies search for new CHROs, many now focus on higherlevel leadership abilities and strategy implementation skills. “This role is gaining importance like never before,” Filler says. “It’s moved away from a support or administrative function to become much more of a game changer and the person who enables the business strategy.” To investigate the CHRO role within the C-suite, Filler worked with Dave Ulrich, a University of Michigan professor and a leading consultant on organization and talent issues. In looking at several sets of data, they found surprising evidence of the increasing responsibility and potential of CHROs.

First, in order to understand the importance of the CHRO relative to other C-suite positions, including CEO, COO, CFO, CMO, and CIO, Filler and Ulrich looked at salaries. To identify the best performers, they found the top decile of earners in each role. Then they averaged the annual base compensation of each group. No surprise: CEOs and COOs are the highest-paid executives. But CHROs are next, with an average base pay of $574,000—33% more than CMOs, the lowest earners on the list. “Great CHROs are very highly paid because they’re very hard to find,” Ulrich says. The researchers also studied proprietary assessments administered by Korn Ferry to C-suite candidates over more than a decade. They examined scores on 14 aspects of leadership, grouped into three categories: leadership style, or how executives behave and want to be perceived in group settings; thinking style, or how they approach situations in private; and emotional competency, or how they deal with such things as ambiguity, pressure, and risk taking. The researchers then assessed the prevalence of these traits among the different types of executives and compared the results. Their conclusion: Except for the COO (whose role and responsibilities often overlap with the CEO’s), the executive whose traits were most similar to those of the CEO was the CHRO. “This finding is very counterintuitive— nobody would have predicted it,” Ulrich says.

The discovery led Filler and Ulrich to a provocative prescription: More companies should consider CHROs when looking to fill the CEO position. In the modern economy, they say, attracting the right talent, creating the right organizational structure, and building the right culture are essential for driving strategy—and experience as a CHRO makes a leader more likely to succeed at those tasks. The advice comes with some caveats. First, Filler and Ulrich studied only the best performers, so they’re pointing to a small subset of CHROs as having corner-office potential. They don’t see a path to the top job among people who have spent their careers in HR; instead, they are touting the prospects of executives who have had broad managerial experience (and P&L responsibility) that includes a developmental stint running the HR department. They emphasize that any CHRO who aspires to become a CEO must demonstrate capabilities in a host of skills required of top leaders. “The challenge for CHROs is to…acquire sufficient technical and financial skills, in early education and in career steps along the way, if succession to CEO is a desired outcome,” they write in a white paper about their research. Indeed, some companies, including Zurich Insurance, Nestlé, Philip Morris, and Deutsche Bank, do put high-potential executives through a developmental rotation in a high-level HR job. (For one view on facilitating such developmental opportunities, see “It’s Time to Split HR,” by Ram Charan, HBR, July–August 2014.) Filler and Ulrich highlight two examples of prominent CEOs who had developmental stints in HR earlier in their careers. Mary Barra, the CEO of General Motors, served as the carmaker’s vice president of HR for 18 months, and Anne Mulcahy, Xerox’s CEO from 2001 to 2009, ran that company’s HR operations for several years in the early 1990s. It’s no coincidence that both are women: According to the researchers’ data, 42% of high-performing CHROs are female— more than double the share in the CMO position, the next highest (16%).

One implication: If more companies envisioned CHROs as potential CEOs, the number of female CEOs could dramatically increase. In their white paper Ulrich and Filler also report on what CEOs and CHROs have to say about the changing nature of the top HR role. Several CEOs see the CHRO as C-suite consigliere. “It is almost impossible to achieve sustainable success without an outstanding CHRO,” says Thomas Ebeling, the CEO of the German media company ProSiebenSat.1 Media AG and a former CEO of Novartis. “[The CHRO] should be a key sparring partner for a CEO on topics like talent development, team composition, [and] managing culture.” Peter Goerke, the London-based group director for HR at Prudential, agrees with Filler and Ulrich that although deep skills in marketing or finance might once have given CEO aspirants a significant competitive advantage, today a broader set of people-focused skills can be more useful. “Succession to a CEO role requires a balance of technical and people skills,” he says. “For all C-suite roles, and often at least one level down, there has been a gradual shift in requirements toward business acumen and ‘softer’ leadership skills. Technical skills are merely a starting point.” In spite of the historic bias against the CHRO function, the rising status of HR leaders is not entirely surprising. Over the past 20 years Jim Collins and other management theorists have focused on talent strategy as the prime determinant of corporate success—an idea Collins popularized in phrases such as “Get the right people on the bus” and “First who, then what.” In her work recruiting CHROs, Filler has seen a growing recognition that those aphorisms hold true. “If you don’t have the right people in the right places—the right talent strategy, the right team dynamics, the right culture—and if you don’t proactively manage how an organization works from a culture and a people perspective, you’re on a serious path to disaster,” she says. Conversely, a top-notch CHRO can help a company plot a more successful future.

“It’s Still Relatively Rare, But It Shouldn’t Be” Bernard Fontana has served as CEO of the Swiss cement company Holcim since 2012—and earlier in his career he spent three years as the chief human resources officer at ArcelorMittal, a 320,000-employee global mining and steelmaking company. He spoke with HBR about why a stint as CHRO is great preparation for becoming CEO. Edited excerpts follow. Did you always aspire to work in HR? No. But when I was 30 I was working for a French company, and I traveled to Hong Kong with the CEO. During the trip he talked about how at one point in his career, he’d been asked to be the head of HR. “It’s not something to do all your life, but one day if you have this opportunity, I’d advise you to take it,” he said. “You’ll learn a lot, and it will be useful if you become a CEO.” He was right. 31

Why was serving as CHRO an important experience? Leadership is about transforming an institution, and if you want to have a sustainable transformation, you need to develop leaders who will continue the journey after you. HR is an essential part of that kind of generative leadership. My predecessor as CEO had been here for 10 years, and the board was looking for an outsider with this characteristic—the ability to develop people and generate new leaders. As more companies do mergers or reorganizations, are HR skills a bigger part of a CEO’s skill set? Yes. Those transformations are times of opportunity for a company, but they’re also times of uncertainty for employees. That’s something you need to acknowledge and turn into a strength. With HR experience, you’re more aware of certain situations. You pay attention to the way you say things. During those times questions of company identity, values, and behavior matter a lot. Do you put many of your up-andcoming stars into HR roles? In HR you need a mix of experts who will spend their careers there and people who will go there for a short time for development and then return to running businesses. I do put executives into those jobs, but those development roles are the minority in any HR department. Should more boards consider hiring CHROs as CEOs? Yes. It’s still relatively rare, but it shouldn’t be. The ultimate responsibility of CEOs is to make sure that what they initiate will continue and that they develop the men and women who will carry on the work. So for me, it’s very logical to have former CHROs as CEOs, because they have experience developing people. 32

Mapping Leadership Styles The researchers analyzed 360-degree assessments of thousands of leaders in six C-suite functions—CEO, CFO, COO, CIO, CHRO, and CMO—in which each executive was ranked on 14 aspects of leadership on a scale from one to seven. The surprising result: The traits of CHROs matched up closely with those of CEOs.

Leadership encompasses many levels, facets and angles. It can only grow in marrying what you have experienced, what you know and will share... 33

Bright, Shiny Objects and the Future of HR by John Boudreau and Steven Rice

Many of us have had the experience of listening to a talk and suddenly making a connection between the speaker’s big idea and a challenge we face at work. To listen to David Rock, of the NeuroLeadership Institute, for example, is to have one’s eyes opened to recent neuroscience research. One discovery Rock shares is that when people realize they are being compared with others, a “threat response” in their brains sends cortisol levels skyrocketing and makes it hard for them to take in other information. If you oversee your company’s annual performance review process and it centers on the delivery of a single number derived from a stackranking exercise, this insight could be a lightbulb going on. Or maybe you’re listening to Rob Cross, of the University of Virginia, revealing that your company runs according to a hidden structure that looks nothing like its official org chart. Informal networks matter much more than hierarchies. Whatever the source, you find yourself doing what so many HR leaders have done before. You grab that bright, shiny object and take it home, in the form of pages of excitedly scrawled notes

and an intense resolve to get your team working on it. Is this a bad thing? We’re inclined to say that the opposite reaction—sitting with arms crossed, impervious to any provocative ideas—would be far worse. But such enthusiasm does present challenges. Applying any big new idea will change how some aspect of HR is managed, and that aspect is connected to all the others in a larger system. In this article we will describe how Juniper Networks, a Silicon Valley–based innovator of high-performance networking technology, tackles those challenges. Over the past six years the company’s HR team has adopted an approach whereby it can tap into the latest research and thinking and apply it in unexpected contexts. It’s a loose, four-part process, which we’ll outline below. But first we want to share a valuable lesson we’ve learned about cultivating such constant evolution and innovation. Before Juniper could figure out which solutions were right—much less how to apply them—it had to adopt a certain mindset.

Fall in Love with the Problem, Not the Solution As leaders, we have ready access to potentially powerful, game-changing ideas. It’s easy—and tempting—to chase after a new practice, a new expert, or new research that seems to provide some relief or a solution to a problem. What’s harder, but far more valuable, is to fall in love with the problem. Then you aren’t quite so eager to embrace the first possible solution and move on. You spend some time letting the challenge soak in, studying it from various angles, and understanding it more deeply. Rather than hastening to narrow the scope of your decision and the options under consideration, you remain receptive to additional, possibly better ones. For example, Juniper’s David Rock moment didn’t end with a workshop or a separate initiative. Brain science fueled the company’s understanding of an important problem—one tied to values and talent. In 2009 Juniper’s top managers had called for a renewed focus on values and culture as a differentiator. They sought advice from Ann Rhoades, who had done much work along these lines at Southwest Airlines and then at JetBlue. (She later wrote about her work with Juniper in Built on Values: Creating an Enviable Culture That Outperforms the Competition.) One outgrowth of that effort was a program of “trio tours”—a total of 75 sessions with three senior executives at various company locations to connect with local talent in thoughtful discussions of Juniper’s culture. During one session in Bangalore, a young engineer decided to speak his mind. The topic he put on the table was the company’s use of forced performance rankings. He felt that it was demoralizing and effectively pitted colleagues against one another in a zero-sum game. How did that jibe with Juniper’s espoused values of authenticity and trust? How did it support a culture of innovation? Unquestionably, his bluntness was challenging. But he raised

HR needed to figure out how its initiatives and activities could yield a talent pool that was better prepared and empowered to innovate.

a problem worth digging into: How should a company do performance management if it really believes in its talent and wants to raise everyone’s game? And why would a company that seeks to differentiate itself through talent use the same performance evaluation tool everyone else does? This was the problem Juniper was considering when neuroscience started to edge its way into the business world. Rock’s research clarified why forced rankings were undermining the desired culture of trust, collaboration, and risk taking. It provided another angle for exploring the complexities of culture, values, and talent systems. In 2011 Juniper became one of the first global companies to abolish forced rankings. Rather than spreading people across a bell curve, it now seeks simply to have what it calls Best Talent. It has replaced annual reviews with frequent “conversation days” for the purpose of discussing areas for improvement, goals, and career aspirations. Today more than 97% of its employees are considered Best Talent, and Juniper’s talent management efforts focus on putting the right capabilities in the right places to achieve its business goals. The Bangalore engineer was absolutely right, but his insight required more than a rush to a solution. The problem had to be viewed differently. Juniper’s leaders avoid knee-jerk reactions and instead hold out for bigger ideas and underlying principles. They home in on what’s pivotal—where change will have the greatest impact. They hired Chris Ernst, David Gonzalez, and Courtney Harrison, of the Center for Creative Leadership, and built an HR team committed to radically rethinking HR. The team’s members collectively immerse themselves in challenges—even those that don’t appear to be HR problems or that seem too big to solve. Falling in love with the problem rather than the solution makes it possible to avoid shiny-object syndrome, unconnected programs, and random HR innovation. Within that overall mindset, we believe, the right approach consists of a four-part process.

Get the Big Picture How do HR leaders decide which few, pivotal solutions to adopt and then successfully integrate them into the organization? First, they need a reliable way to discern the big picture—the conditions and business imperatives that create the context for their choices.

Six years ago that big picture was coming into focus at

Juniper after something of an identity crisis. As a start-up, the company had revolutionized the computer network industry with the M40 router, which played an essential role in scaling the internet to where it is today. Juniper grew rapidly, expanded its offerings, and was flush with success. Even so, it struggled with being “stuck in the middle”— tiny in comparison with its closest competitor, but bigger and more diversified than the single-solution niche players. It couldn’t compete with a rival that was able to throw 10 times as much money, time, and personnel at any problem. And unlike the smaller companies, Juniper had already banked on offering end-to-end solutions. To reinvent its business strategy and grow, it would have to innovate. So HR needed to figure out how its initiatives and activities could yield a talent pool that was better prepared and empowered to do so. That meant innovation within the function as well. A great example is the initiative Juniper undertook a few years later to refresh its understanding of the big picture. It sounded like madness to some at the time, but the HR team resolved to have one-on-one conversations with every senior leader of the company (a total of 150 executives), including the chairman, and with 100 other managers around the world. The conversations would include questions such as What are the key external environmental challenges currently facing Juniper? How are they affecting you and your team specifically? What excites you most about Juniper’s business strategy and its execution? What concerns you most? Of course, the risk was that HR would hear about a lot of people issues for which it had no ready solutions. Uncomfortable truths did surface. Juniper had too many silos and too many priorities. It was top-heavy and conflict avoidant. It made the work overly complex where it should have been operating more interdependently to provide solutions for customers.

That initiative paid off in ways that go well beyond leadership development and performance management. The findings inspired Juniper to rip out business units, break down P&Ls, and integrate in ways it had never done before. Now it has the simplest operating model in its history. Across the company, six people can get together and make any decision. Product lines have been streamlined too. Previously, for instance, numerous resources were tied to multiple routers, switches, and security products. Now a common resource strategy spans the product road map, saving the company millions of dollars and untold headaches.

Spot the Valuable Insight Deep understanding of the business allows HR leaders to pursue the second part of the process: Seek out—and take in—the latest and greatest management ideas and connect them to what is pivotal in the organization. Tying together values, performance assessment, and neuroscience is one example in Juniper’s experience. Another is improving customer service by analyzing an organizational network—and this effort put HR directly into the operations of the business. A series of communication problems with a key customer had resulted in missteps and quality concerns. The obvious, traditional solution might have been to focus on the salespeople who met the customer. Instead the HR team reflected on an intriguing line of research: the idea that organizations are networks, not just hierarchies and business units. That exposed the problem as a lack of sufficient collaboration across units and functions. It wouldn’t be effective to encourage everyone in the organization to be slightly more collaborative; collaboration had to be seriously enhanced in the few

spots where it would make a crucial difference. Rob Cross was recruited to conduct an organizational network analysis. He and the HR team began by looking for employees who were involved in any way with the customer account. They spoke with a few dozen key people and identified 344 such employees. “Impossible,” said the EVP sponsoring the project. “There cannot be 344 people working on a single account.” So the team did a formal network analysis, after which it told the executive he was partly right: The account didn’t have 344 people working on it—it had 920. In other words, almost 10% of Juniper’s employees had some involvement in getting the job done well for that big customer. It’s no wonder that lines were getting crossed. The network analysis brought hard (albeit uncomfortable) evidence to support an observation often made by Juniper’s founder, Pradeep Sindhu: “Silos rob networks of their inherent value.” Since then Juniper has learned to think about natural organizational networks as crucial components of how it works. But it’s what the company does with a network analysis that makes a difference. Later, for example, with a different account team, it went beyond simply describing the informal network to learning how to optimize it. HR served as an embedded adviser to the account team, conducting weekly sessions to systematically apply the network analysis findings and concepts in team planning, development, and information sharing. The team began to operate across the internal network, bringing in expertise faster, clarifying decision rights, and eliminating power or information bottlenecks. The account relationship went from being closely held by a few to involving open communication among functions and levels in both organizations. The customer is now Juniper’s largest 37

in the Europe, Middle East, and Africa region, delivering 135% of expected revenue in 2014 and with stellar customer service results. This sounds like a story in which a new idea was spotted and introduced to an organization. Its more subtle lesson is that although a new concept may be broadly useful, it will get the most traction if you think beyond its obvious appeal. Understand the research. Look at the evidence. Then dig more. You’ll better see how to translate the idea to your context.

APPLY WITH CARE Next comes sensitively integrating the insight with other initiatives already under way. Most important here is that major HR innovations must be purpose built. Juniper has explicitly moved away from a “best practice” approach. Instead it strips a promising practice down to its kernel of insight and then expands that insight into work experiences that are right for the company’s unique climate, brand, and business objectives. This allows and requires the application to have impact in connection with other components, leading to a greater payoff. Prototyping the application of an idea in some fertile area of the organization is a valuable way of working out the necessary synergies. It also offers proof of concept through experience. You can’t just tell people about a great idea and expect them to pick it up and run with it; they need to see and experience its value. HR plays a big part in creating such experiences. One example of how Juniper put its own stamp on a research idea lies in the area of boundary-spanning leadership. Rooted in research from the Center for Creative Leadership, the concept of boundary spanning—which reframes common barriers (horizontal, vertical, stakeholder, demographic, geographic) as places for opportunity and innovation—was introduced at Juniper by Chris Ernst. However, the ability to lead and collaborate across boundaries doesn’t come naturally in today’s siloed and internally competitive organizations. To more deeply explore the implications of boundary spanning, Juniper decided to bring together 85 people from engineering, sales, and operations who had differing roles, levels, locations, and backgrounds. The focal point for the gathering was a Juniper Innovation Challenge: The participants would spend three days collaborating

in San Francisco with the explicit goal of hatching new product ideas. But the company had another agenda, which it made no attempt to hide: These people would be immersed in an experience that might reveal how boundary-spanning leadership connects to the problem Juniper loves most—the need for breakthrough innovation. That purpose-built network and energizing experience changed the thinking of a small crosssection of Juniper employees about their ability to innovate. Out of it came a product that was prototyped within six months and is today being tested in production environments in more than half a dozen large companies. Of course not every HR initiative or project will lead to a clear and tangible business win and a proof-of-concept experience. But that Innovation Challenge showed how valuable it is to put early applications of a new idea in service to already recognized priorities and try them out on a manageable scale that will generate learning quickly. Ultimately, the broader dissemination of any concept will call for integration. The amalgam of ideas to which you commit must have integrity as a system, with no elements working at cross-purposes and everything guided by the same sensibility and vision. If the ideas you’ve introduced are well integrated, you’ll know— because they will begin to connect and amplify one another in unforeseen ways. When Rami Rahim was named CEO, late in 2014, he set the expectation in his first 30 days that the Juniper Way (the company’s values and related behaviors) would return to the front seat. The concepts of informal networks and boundary spanning had already taken hold, so rather than relaunching the Juniper Way top-down, the company turned to a subset of “connectors”— informal influencers—who’d been discovered through organizational network analysis. Rahim asked them to work together to redefine the values in simple language and in terms of observable behaviors and then develop that understanding across the company. HR’s collection of applied ideas revealed itself in that moment as a well-integrated system.

AIM FOR BUSINESS IMPACT The similarity of HR metrics between organizations with very different strategies is amazing— especially when you consider how powerfully the choice of what to measure can drive behaviors. In our view, if you intentionally rethink your HR function, you will also them

need to rethink how you measure progress and impact. In all its measurement efforts, HR must ensure that it keeps people’s focus on what is most pivotal for the business. Assessing pivotal impact is a critical step toward further progress. Measurement becomes a forward-looking learning and improvement process rather than a backward-looking declaration of triumph or failure. Metrics and signals along the way tell you what’s working and what isn’t, where to recalibrate or ask more questions. You need the mindset— and the stomach—for experimentation, revision, and occasional missteps. If your new initiatives are well applied, they may suggest and enable important new metrics. For example, after Juniper’s network and boundaryspanning efforts had identified the nearly 5% of employees who operate as connectors, the company had the basis for an important new metric: Those people are flagged on the dashboard, so any attrition in the group will spark an investigation of the cause. Understanding progress may also mean looking at available data through a different lens. Pay attention to business measures such as time-to-revenue of new products, cycle times, product introductions, and quality metrics. Factor them into your talent processes, compensation systems, or learning objectives—and interpret

through your big themes or pivot points. At Juniper, the level of participation in the 401(k) plan can be seen as a proxy for how people feel about the company—an indicator of culture and values. For HR, the fact that 87% of employees now participate in the plan— one of the highest participation rates among high-tech companies—is a signal that people are committed to future growth and believe that they and their colleagues can make it happen. The precise ROI of an important new idea in HR is impossible to measure. That doesn’t mean that HR can’t make its case, or that you can’t observe

the idea’s impact. You can map the logical connections between an effective HR initiative and desired business outcomes. Focus on what can be measured along that path, and extrapolate where you can’t measure precisely. That’s exactly what every other management discipline does. Juniper has undergone significant changes and challenges—including three CEOs in three years. In 2014 it sent out an employee survey designed around three key questions: Do you know our strategy? Do you understand your role in executing that strategy? Do you feel

inspired and accountable to help the company achieve it? None of those questions got even 50% affirmative responses, so the company created a road show for executives to share the granular details of its strategy with teams around the world. Then the connectors were empowered to engage their peers in small-group strategy conversations across the company. Four months after the initial survey, the results of a second survey put all three indicators above 80%.

Different by Design Developing a reputation as an innovative HR organization requires walking a fine line. You are not an R&D facility or a university; you do not employ a large cadre of social science researchers and data scientists. Your ideas for innovation will often arise from popular talks and articles. Embrace too many of those, however, or apply them too superficially, and you’ll develop a reputation for fad surfing. Dig beneath the surface to the fundamental scientific research and insights, and you can set the stage for true impact. Failing to innovate is not an option, so it’s important to have a specific approach for responsibly bringing new ideas to the organization. Juniper’s method—getting the big picture, seizing on insights, applying them wisely, and ensuring their impact— may be useful to you. It has enabled this company to move from one-off programs and unconnected experiments to a system that is always evolving in exciting and consistently business-aligned ways. There’s nothing wrong with being attracted to the bright, shiny objects of a thriving thought leadership industry. They offer new solutions and, at the least, inspire you to revisit your assumptions. The key is to maintain your long-term love affair with the problems you need to solve and the business you are here to serve. You’ll know you’ve struck the right balance when your HR programs start to look less and less like your competitors’ and contribute more and more to your competitive distinction—when every year makes you more different by design. citation

How Netflix Reinvented HR by Patty McCord

Sheryl Sandberg has called it one of the most important documents ever to come out of Silicon Valley. It’s been viewed more than 5 million times on the web. But when Reed Hastings and I (along with some colleagues) wrote a PowerPoint deck explaining how we shaped the culture and motivated performance at Netflix, where Hastings is CEO and I was chief talent officer from 1998 to 2012, we had no idea it would go viral. We realized that some of the talent management ideas we’d pioneered, such as the concept that workers should be allowed to take whatever vacation time they feel is appropriate, had been seen as a little crazy (at least until other companies started adopting them). But we were surprised that an unadorned set of 127 slides—no music, no animation—would become so influential. 40

The first took place in late 2001. Netflix had been growing quickly: We’d reached about 120 employees and had been planning an IPO. But after the dot-com bubble burst and the 9/11 attacks occurred, things changed. It became clear that we needed to put the IPO on hold and lay off a third of our employees. It was brutal. Then, a bit unexpectedly, DVD players became the hot gift that Christmas. By early 2002 our DVD-by-mail subscription business was growing like crazy. Suddenly we had far more work to do, with 30% fewer employees. One day I was talking with one of our best engineers, an employee I’ll call John. Before the layoffs, he’d managed three engineers, but now he was a one-man department working very long hours. I told John I hoped to hire some help for him soon. His response surprised me. “There’s no rush—I’m happier now,” he said. It turned out that the engineers we’d laid off weren’t spectacular—they were merely adequate. John realized that he’d spent too much time riding herd on them and fixing their mistakes. “I’ve learned that I’d rather work by myself than with subpar performers,” he said. His words echo in my mind whenever I describe the most basic element of Netflix’s talent philosophy: The best thing you can do for employees—a perk better than foosball or free sushi—is hire only “A” players to work alongside them. Excellent colleagues trump everything else. The second conversation took place in 2002, a few months after our IPO. Laura, our bookkeeper, was bright, hardworking, and creative. She’d been very important to our early growth, having devised a system for accurately tracking movie rentals so that we could pay the correct royalties. But now, as a public company, we needed CPAs and other fully credentialed, deeply experienced accounting professionals—and Laura had only an associate’s degree from a community college. Despite her work ethic, her track record, and the fact that we all really liked her, her skills were no longer adequate. Some of us talked about jury-rigging a new role for her, but we decided that wouldn’t be right.

People find the Netflix approach to talent and culture compelling for a few reasons. The most obvious one is that Netflix has been really successful: During 2013 alone its stock more than tripled, it won three Emmy awards, and its U.S. subscriber base grew to nearly 29 million. All that aside, the approach is compelling because it derives from common sense. In this article I’ll go beyond the bullet points to describe five ideas that have defined the way Netflix attracts, retains, and manages talent. But first I’ll share two conversations I had with early employees, both of which helped shape our overall philosophy.

So I sat down with Laura and explained the situation— and said that in light of her spectacular service, we would give her a spectacular severance package. I’d braced myself for tears or histrionics, but Laura reacted well: She was sad to be leaving but recognized that the generous severance would let her regroup, retrain, and find a new career path. This incident helped us create the other vital element of our talent management philosophy: If we wanted only “A” players on our team, we had to be willing to let go of people whose skills no longer fit, no matter how valuable their contributions had once been. Out of fairness to such people—and, frankly, to help us overcome our discomfort with discharging them—we learned to offer rich severance packages. With these two overarching principles in mind, we shaped our approach to talent using the five tenets below. 41

Hire, Reward, and Tolerate Only Fully Formed Adults Over the years we learned that if we asked people to rely on logic and common sense instead of on formal policies, most of the time we would get better results, and at lower cost. If you’re careful to hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace, 97% of your employees will do the right thing. Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause. Instead, we tried really hard to not hire those people, and we let them go if it turned out we’d made a hiring mistake.

bosses would allow tons of time off while others would be stingy. In general, I worried more about fairness than consistency, because the reality is that in any organization, the highest-performing and most valuable employees get more leeway. We also departed from a formal travel and expense policy and decided to simply require adultlike behavior there, too. The company’s expense policy is five words long: “Act in Netflix’s best interests.” In talking that through with employees, we said we expected them to spend company money frugally, as if it were their own. Eliminating a formal policy and forgoing expense account police shifted responsibility to frontline managers, where it belongs. It also reduced costs: Many large companies still use travel agents (and pay their fees) to book trips, as a way to enforce travel policies. They could save money by letting employees book their own trips online. Like most Netflix managers, I had to have conversations periodically with employees who ate at lavish restaurants (meals that would have been fine for sales or recruiting, but not for eating alone or with a Netflix colleague). We kept an eye on our IT guys, who were prone to buying a lot of gadgets. But overall we found that expense accounts are another area where if you create a clear expectation of responsible behavior, most employees will comply.

The company’s expense policy is five words long: “Act in Netflix’s best interests.”

Adultlike behavior means talking openly about issues with your boss, your colleagues, and your subordinates. It means recognizing that even in companies with reams of HR policies, those policies are frequently skirted as managers and their reports work out what makes sense on a case-by-case basis. Let me offer two examples.

When Netflix launched, we had a standard paid-timeoff policy: People got 10 vacation days, 10 holidays, and a few sick days. We used an honor system— employees kept track of the days they took off and let their managers know when they’d be out. After we went public, our auditors freaked. They said SarbanesOxley mandated that we account for time off. We considered instituting a formal tracking system. But then Reed asked, “Are companies required to give time off? If not, can’t we just handle it informally and skip the accounting rigmarole?” I did some research and found that, indeed, no California law governed vacation time. So instead of shifting to a formal system, we went in the opposite direction: Salaried employees were told to take whatever time they felt was appropriate. Bosses and employees were asked to work it out with one another. (Hourly workers in call centers and warehouses were given a more structured policy.) We did provide some guidance. If you worked in accounting or finance, you shouldn’t plan to be out during the beginning or the end of a quarter, because those were busy times. If you wanted 30 days off in a row, you needed to meet with HR. Senior leaders were urged to take vacations and to let people know about them—they were role models for the policy. (Most were happy to comply.) Some people worried about whether the system would be inconsistent—whether some 42

Tell the Truth About Performance Many years ago we eliminated formal reviews. We had held them for a while but came to realize they didn’t make sense—they were too ritualistic and too infrequent. So we asked managers and employees to have conversations about performance as an organic part of their work. In many functions—sales, engineering, product development—it’s fairly obvious how well people are doing. (As companies develop better analytics to measure performance, this becomes even truer.) Building a bureaucracy and elaborate rituals around measuring performance usually doesn’t improve it. Traditional corporate performance reviews are driven largely by fear of litigation. The theory is that if you want to get rid of someone, you need a paper trail documenting a history of poor achievement. At many companies, low performers are placed on “Performance Improvement Plans.” I detest PIPs. I think they’re fundamentally dishonest: They never accomplish what their name implies. One Netflix manager requested a PIP for a quality assurance engineer named Maria, who had been hired

to help develop our streaming service. The technology was new, and it was evolving very quickly. Maria’s job was to find bugs. She was fast, intuitive, and hardworking. But in time we figured out how to automate the QA tests. Maria didn’t like automation and wasn’t particularly good at it. Her new boss (brought in to create a world-class automation tools team) told me he wanted to start a PIP with her. More I replied, “Why bother? We know how this will play out. You’ll write up objectives and deliverables for her to achieve, which she can’t, because she lacks the skills. Every Wednesday you’ll take time away from your real work to discuss (and document) her shortcomings. You won’t sleep on Tuesday nights, because you’ll know it will be an awful meeting, and the same will be true for her. After a few weeks there will be tears. This will go on for three months. The entire team will know. And at the end you’ll fire her. None of this will make any sense to her, because for five years she’s been consistently rewarded for being great at her job—a job that basically doesn’t exist anymore. Tell me again how Netflix benefits? “Instead, let’s just tell the truth: Technology has changed, the company has changed, and Maria’s skills no longer apply. This won’t be a surprise to her: She’s been in the trenches, watching the work around her shift. Give her a great severance package—which, when she signs the documents, will dramatically reduce (if not eliminate) the chance of a lawsuit.” In my experience, people can handle anything as long as they’re told the truth—and this proved to be the case with Maria. When we stopped doing formal performance reviews, we instituted informal 360-degree reviews. We kept them fairly simple: People were asked to identify things that colleagues should stop, start, or continue. In the beginning we used an anonymous software system, but over time we shifted to signed feedback, and many teams held their

360s face-to-face. HR people can’t believe that a company the size of Netflix doesn’t hold annual reviews. “Are you making this up just to upset us?” they ask. I’m not. If you talk simply and honestly about performance on a regular basis, you can get good results—probably better ones than a company that grades everyone on a five-point scale.

Managers Own the Job of Creating Great Teams Discussing the military’s performance during the Iraq War, Donald Rumsfeld, the former defense secretary, once famously said, “You go to war with the army you have, not the army you might want or wish to have at a later time.” When I talk to managers about creating great teams, I tell them to approach the process in exactly the opposite way. In my consulting work, I ask managers to imagine a documentary about what their team is accomplishing six months from now. What specific results do they see? How is the work different from what the team is doing today? Next I ask them to think about the skills needed to make the images in the movie become reality. Nowhere in the early stages of the process do I advise them to think about the team they actually have. Only after they’ve done the work of envisioning the ideal outcome and the skill set necessary to achieve it should they analyze how well their existing team matches what they need. If you’re in a fast-changing business environment, you’re probably looking at a lot of mismatches. In that case, you need to have honest conversations about letting some team members find a place where their skills are a better fit. You also need to recruit people with the right skills. We faced the latter challenge at Netflix in a fairly dramatic way as we

began to shift from DVDs by mail to a streaming service. We had to store massive volumes of files in the cloud and figure out how huge numbers of people could reliably access them. (By some estimates, up to a third of peak residential internet traffic in the U.S. comes from customers streaming Netflix movies.) So we needed to find people deeply experienced with cloud services who worked for companies that operate on a giant scale—companies like Amazon, eBay, Google, and Facebook, which aren’t the easiest places to hire someone away from. Our compensation philosophy helped a lot. Most of its principles stem from ideals described earlier: Be honest, and treat people like adults. For instance, during my tenure Netflix didn’t pay performance bonuses, because we believed that they’re unnecessary if you hire the right people. If your employees are fully formed adults who put the company first, an annual bonus won’t make them work harder or smarter. We also believed in market-based pay and would tell employees that it was smart to interview with competitors when they had the chance, in order to get a good sense of the market rate for their talent. Many HR people dislike it when employees talk to recruiters, but I always told employees to take the call, ask how much, and send me the number—it’s valuable information. In addition, we used equity compensation much differently from the way most companies do. Instead of larding stock options on top of a competitive salary, we let employees choose how much (if any) of their compensation would be in the form of equity. If employees wanted stock options, we reduced their salaries accordingly. We believed that they were sophisticated enough to understand the trade-offs, judge their personal tolerance for risk, and decide what was best for them and their families. We distributed options every month, at a slight discount from the market price. We 43

had no vesting period—the options could be cashed in immediately. Most tech companies have a four-year vesting schedule and try to use options as “golden handcuffs” to aid retention, but we never thought that made sense. If you see a better opportunity elsewhere, you should be allowed to take what you’ve earned and leave. If you no longer want to work with us, we don’t want to hold you hostage. We continually told managers that building a great team was their most important task. We didn’t measure them on whether they were excellent coaches or mentors or got their paperwork done on time. Great teams accomplish great work, and recruiting the right team was the top priority.

Leaders Own the Job of Creating the Company Culture After I left Netflix and began consulting, I visited a hot start-up in San Francisco. It had 60 employees in an open loft-style office with a foosball table, two pool tables, and a kitchen, where a chef cooked lunch for the entire staff. As the CEO showed me around, he talked about creating a fun atmosphere. At one point I asked him what the most important value for his company was. He replied, “Efficiency.” “OK,” I said. “Imagine that I work here, and it’s 2:58 PM. I’m playing an intense game of pool, and I’m winning. I estimate that I can finish the game in five minutes. We have a meeting at 3:00. Should I stay and win the game or cut it short for the meeting?” “You should finish the game,” he insisted. I wasn’t surprised; like many tech start-ups, this was a casual place, where employees wore hoodies and brought pets to work, and that kind of casualness often extends to punctuality. “Wait a second,” I said. “You told me that efficiency is your most important cultural value. It’s not efficient to delay a meeting and keep coworkers waiting because of a pool game. Isn’t there a mismatch between the values you’re talking up and the behaviors you’re modeling and encouraging?” When I advise leaders about molding a corporate culture, I tend to see three issues that need attention. This type of mismatch is one. It’s a particular problem at startups, where there’s a premium on casualness that can run counter to the high-performance ethos leaders want to create. I often sit in on company meetings to get a sense of how people operate. I frequently see CEOs who are clearly winging it. They lack a real agenda. They’re working from slides that were obviously put together an hour before or were recycled from the previous round of VC meetings. Workers notice these things, and if they see a leader who’s not fully prepared and who relies on charm, IQ, and improvisation, it affects how they perform, 44

too. It’s a waste of time to articulate ideas about values and culture if you don’t model and reward behavior that aligns with those goals. The second issue has to do with making sure employees understand the levers that drive the business. I recently visited a Texas start-up whose employees were mostly engineers in their twenties. “I bet half the people in this room have never read a P&L,” I said to the CFO. He replied, “It’s true—they’re not financially savvy or business savvy, and our biggest challenge is teaching them how the business works.” Even if you’ve hired people who want to perform well, you need to clearly communicate how the company makes money and what behaviors will drive its success. At Netflix, for instance, employees used to focus too heavily on subscriber growth, without much awareness that our expenses often ran ahead of it: We were spending huge amounts buying DVDs, setting up distribution centers, and ordering original programming, all before we’d collected a cent from our new subscribers. Our employees needed to learn that even though revenue was growing, managing expenses really mattered. The third issue is something I call the split personality start-up. At tech companies this usually manifests itself as a schism between the engineers and the sales team, but it can take other forms. At Netflix, for instance, I sometimes had to remind people that there were big differences between the salaried professional staff at headquarters and the hourly workers in the call centers. At one point our finance team wanted to shift the whole company to direct-deposit paychecks, and I had to point out that some of our hourly workers didn’t have bank accounts. That’s a small example, but it speaks to a larger point: As leaders build a company culture, they need to be aware of subcultures that might require different management.

Good Talent Managers Think Like Business people and Innovators First, and Like HR People Last Throughout most of my career I’ve belonged to professional associations of human resources executives. Although I like the people in these groups personally, I often find myself disagreeing with them. Too many devote time to morale improvement initiatives. At some places entire teams focus on getting their firm onto lists of “Best Places to Work” (which, when you dig into the methodologies, are really based just on perks and benefits). At a recent conference I met someone from a company that had appointed a “chief happiness officer”—a concept that makes me slightly sick. During 30 years in business I’ve never seen an HR initiative that improved morale. HR departments might throw parties and hand out T-shirts, but if the stock price is falling or the company’s products aren’t perceived as successful, the people at those parties will quietly complain—and they’ll use the T-shirts to wash their cars. Instead of cheerleading, people in my profession should think of themselves as businesspeople. What’s good for the company? How do we communicate that to employees? How can we help every worker understand what we mean by high performance? Here’s a simple test: If your company has a performance bonus plan, go up to a random employee and ask, “Do you know specifically what you should be doing right now to increase your bonus?” If he or she can’t answer, the HR team isn’t making things as clear as they need to be. At Netflix I worked with colleagues who were changing the way people consume filmed entertainment, which is an incredibly innovative pursuit— yet when I started there, the expectation was that I would default to mimicking other companies’ best practices (many of them antiquated), which is how almost everyone seems to approach HR. I rejected those McCord, Patty (January-February 2014 Issue). How constraints. There’s no reason the HR team can’t be innovative too. Netflix Reinvented HR, Harvard Business Review 45

HOW AN ACCOUNTING FIRM CONVINCED ITS EMPLOYEES THEY COULD CHANGE THE WORLD

t’s a fabled story about a janitor’s exchange with President Kennedy during the early days of NASA: “What do you do?” the president supposedly asked the man with a broom during a visit to Cape Canaveral. “Well, Mr. President, I’m helping to put a man on the moon.” This meeting may not have actually taken place. But there’s

a good reason it’s one of the most commonly-repeated management anecdotes: it illustrates the idea that a workforce motivated by a strong sense of higher purpose is essential to engagement. A survey by Calling Brands found that working for an organization with a clearly defined purpose is second only to pay and benefits in importance for employees,

and ranks ahead of promotion opportunities, job responsibilities, and work culture. Twothirds said a higher purpose would motivate them to go the extra mile in their jobs. A similar study by Net Impact showed that almost half of today’s workforce would take a 15% pay cut to work for an organization with an inspiring purpose. Convinced that today’s workforce wants more than

what they can see in their paychecks, our firm recently launched an initiative aimed at inspiring our already highmorale workforce reach new levels of engagement by reframing and elevating the meaning and purpose of their work. The results have exceeded our expectations. Our partners and employees have flooded us with stories, our morale scores have soared,

and turnover has plummeted. Perhaps coincidentally, the firm also enjoyed one of its best financial years in recent memory— ranking as the fastest growing of the Big Four public accounting firms.

HOW WE DID IT

First, our firm needed to articulate our higher purpose. Extensive research, including hundreds of interviews, resulted in a new purpose statement: Inspire Confidence. Empower Change. But we knew we needed to do more than simply announce our purpose and expect it to take hold. We needed employees to experience it for themselves. The video highlighted dramatic, largely forgotten stories about KPMG’s role in historic events: how we managed the LendLease Act to help defeat Nazi Germany; resolved conflicting financial claims to lay the groundwork for the release of the U.S. hostages in Iran in 1981; and certified the election of Nelson Mandela in South Africa in 1994.

We created vivid posters like “We Champion Democracy” that celebrated the difference our people make on behalf of clients, communities, and society, and displayed them prominently in our offices. We reframed their roles, encouraging them to see themselves not simply as professionals executing audits, for example, but as members of a profession that helps millions of American families make better informed decisions about investing their life savings. Most importantly, we recognized that just telling people from the top down about their higher purpose would not succeed. We encouraged everyone—from our interns to our Chairman—to share their own stories about how their work is making a difference. To help, we developed an application that

enabled our people to create and share digital posters modeled after the corporate posters that we created. Calling it the 10,000 Stories Challenge, we asked our 27,000 partners and employees in June to develop posters, as individuals or teams. We offered an incentive of two extra paid days off at the end of the year if we met the 10,000 stories goal by Thanksgiving. Instead, we surpassed the goal before the Fourth of July. Soon, it became clear that the incentive wasn’t the primary motivator — we received thousands more stories even after we announced the extra days off were assured. In a startling display of our people’s pent up appetite to express the meaning of their work, by Thanksgiving we had received 42,000 stories.

RESULTS On our annual partner survey, 90% reported that the higher purpose initiatives increased people’s pride in KPMG. Scores on our employee engagement survey rose to record levels as well. Less than six months into our Purpose initiative 85% of employees agreed that KPMG is a great place to work, up slightly from 82% a year earlier; after a year scores on this same

question rose to 89%. Additionally, 60% said our purpose initiative strengthened their pride in KPMG and our work. This improvement in morale also resulted in KPMG surging 17 spots on FORTUNE magazine’s annual 100 Best Companies to Work For list, making us the number one-ranked Big Four firm for the first time in our history.

In that same survey, 76% of our employees said their “job had special meaning (and was not just a job),” six points higher than the average of our Big Four counterparts and a four-point jump year over year. Some of our most interesting findings came from comparing survey scores of employees who said their managers

discuss higher purpose with the scores of employees whose leaders don’t. While correlational and not necessarily causative, we found a strong association between leaders who talk about the positive societal impact of their teams’ work and a variety of positive human resources and business indicators.

As the chart above shows, among employees who told us their leaders discuss higher purpose, 94% said KPMG is a great place to work, and 94% said they are proud to work for KPMG. But among those whose leaders don’t discuss purpose, the corresponding results dropped to 66% and 68%. This group also reported they are three times more likely to think about looking for another job than those whose leaders do talk about purpose. Not surprisingly, year-to-date actual turnover of these two groups is dramatically different, 9.1% vs 5.6% respectively. What’s more, employees whose leaders communicated about purpose were far more motivated to strive for continuous improvement and high performance than colleagues whose leaders failed to discuss this

important topic. These big differences show up across generations of employees, regardless of whether someone is a Millennial or Baby Boomer. Moreover, relative to their representation in our workforce, older employees (those over 40) had proportionately somewhat higher participation in our 10,000 Stories Challenge than younger employees— suggesting that with all we hear about the difference in career attitudes among Millennials, Gen Xers and Baby Boomers, and the desire to recognize and express the higher purpose in one’s work, seems to cut across generational boundaries.

THE CHALLENGE

While our higher purpose initiatives have succeeded beyond our most optimistic expectations, they have not been free of challenges, missteps and unanticipated issues. Below are some key stumbling blocks and how we addressed them.

OVERCOMING AN ACADEMIC FOCUS.

At the start of our efforts we probably spent more time than necessary focused on the academic, philosophical, and theoretical elements of higher purpose. Perhaps because of our profession’s natural predilection for relying on clearly documented rules and definitions, we spent months considering the distinctions between purpose, vision, mission, ethos, and culture. And while this probably served a constructive function for the core project team, it seemed to either bore or confuse the very leaders, partners and employees we were attempting to engage. We soon realized that our objective was not to edify people on the structure and objectives of national anthems; rather, it was to fill them with the pride, optimism and commitment that results from hearing the national anthem. From that point on, we eschewed the didactic and focused on creating an emotional connection with our people by showing them, and having them show us, why their work mattered.

BREAKING THROUGH THE MESSAGE CLUTTER.

Like many large organizations, KPMG is challenged with information and message overload. So we were determined to make our purpose messaging both noticeable and memorable, engaging a third-party creative and communications agency. While we were ultimately successful, it was a heavy lift to convince our senior leadership team—which has always been skeptical of the return on investment of external advertising—to invest in a sevenfigure communications campaign.

OVERCOMING RISK AVERSION AND HYPER-CONSERVATISM.

By training, policy and, some would say, temperament, a significant portion of our partners and employees tend to be cautious, precise and circumspect in their language and judgments. Sweeping statements that lack adequate proof points or qualifying explanations are almost reflexively met with professional skepticism. In this context, dramatic headlines like “We Shape History” or “We Champion Democracy,” at first made some of our leaders uncomfortable. Fortunately, these concerns dissipated in the early stages of the initiative once they saw how positively our people responded to the powerful media we created and how enthusiastically they participated in creating their own dramatic declarations of purpose.

EXACERBATING MORALE PROBLEMS IN CERTAIN GROUPS.

We noted earlier that employees whose leaders spoke about higher purpose were more engaged, motivated, and committed than those with leaders who failed to do so. Moreover, the employees with purpose-driven leaders showed improvement in their engagement levels in the year after we began our firm-wide purpose initiatives. By contrast, employees whose leaders did not talk about purpose actually saw a significant (6-11 percentage point) downturn in key engagement indicators. At first, this finding seemed counterintuitive (i.e., even if this group is not as engaged as their counterparts, shouldn’t the firm-wide messaging have at minimum improved their levels of engagement?) But upon more thought, we believe the downturn in morale may have resulted from the increased cynicism engendered by the perception of leadership hypocrisy (in other words, “Leadership tells me we are purpose-driven, but my boss never says a word about it.”).

WHAT’S NEXT The fact that some of our leaders aren’t yet talking about higher purpose represents a huge opportunity to increase engagement levels even further. We’re now incorporating purpose storytelling training into our leadership development programs and helping participants develop compelling narratives and move past any reluctance to self-disclose. In other words, we’re helping them to speak to people’s hearts as well as their minds. One graduate of this training brought 1,500 interns to their feet after she spoke to their hearts about her own higher purpose. She concluded by recounting the parable of three bricklayers who were rebuilding a church after it had been damaged by fire. The construction architect observed the three workers on a scaffold, and asked “What are you doing?” to which the first bricklayer replied, “I’m laying bricks.” The second responded, “I’m repairing a wall.” But the third replied, “I’m building a cathedral to The Almighty.” “So, “ our partner asked the crowd, “Do you want to be bricklayers or cathedral builders?” After her presentation, a crowd of enthusiastic interns surrounded her and more than a hundred emails followed, all with the same clarion message: “I want to be a cathedral builder.” We’ve learned many lessons in the course of our Higher Purpose initiative, but none greater than recognizing the extent of the workforce’s pent-up appetite to build cathedrals—or fight terrorism, or protect life savings, or champion democracy—rather than simply lay bricks. Ultimately, unleashing the untapped power of people inspired by a sense of purpose has not only heightened employee engagement, satisfaction and loyalty, but driven our employees to strive for peak performance as well.

Dubai: Erecting Modern Landmarks

Leading Digital Transformation Is Like Urban Planning by Paul Beswick

ost companies want their businesses to keep pace with digital startups, but end up bogged down by the need to fix the daily challenges that their decades-old IT systems create. How do you redesign and rebuild major infrastructure while keeping the day-to-day work going? This kind of challenge is often referred to as “repairing the airplane while you’re flying it.” But a more instructive analogy might be the redesign of a major city’s infrastructure. Specifically, there are three urban planning strategies, commonly followed by major metropolises, that leaders can use for inspiration in the race to keep up with digital competition. They include building glistening landmarks that anchor their digital strategy (as Dubai has done), removing roadblocks and bottlenecks to improve their underlying speed and agility (Boston), or changing course altogether to construct an entirely new city (Shanghai).

Targeted investments in striking new sights, like Dubai’s Emirates Office Tower or London’s giant Ferris wheel, serve as useful starting points for broader revitalization plans. The Emirates Office Tower was one of the first skyscrapers that marked Dubai’s transition to being a modern focal point for the United Arab Emirates. Today Dubai also boasts the world’s tallest building, artificial islands, the first hotel with a rain forest, and the largest indoor theme park on earth. In the same way, investments in landmark digital projects that significantly enhance customer experience can help launch wider digital transformations. By developing visible, high-impact apps or improving data analytic capabilities separately from core IT systems, companies can roll out new offerings where they will most strongly change perception and put pressure on digital rivals — even if their back-end systems still need years to catch up. A pragmatic, output-focused approach can provide a catalyst to the back-end reinvention that needs to follow, and kickstart a company’s digital transformation by making the benefits real and impossible to miss. For example, by designing a new cloudbased customer service platform, within nine months a power company could go head-to-head with an internet service provider that had started to sell electricity alongside Wi-Fi services and cheaply financed cars. Now the utility will be able to provide not just power but also phone, internet, smart meter, smart home, and security services. To customers, the company feels as nimble and innovative as its digital competition, even though its back-end systems remain problematic.

Boston: Removing Roadblocks At the other end of the spectrum, companies can first focus on removing the structural hurdles that prevent them from moving with speed and agility over the long run. Boston, with its Big Dig project, for example, invested heavily in creating room for more vehicles and future growth by tearing down an aging elevated highway and replacing it with a tunnel highway network to circumvent the maze of congested roads in its downtown area. Even with the project’s delays and costs, city planners confronted the fact that the old infrastructure just wouldn’t fit the area’s transportation demands. Companies can help themselves become more agile and remove their own bottlenecks by taking a similar approach. For example, retailers will struggle to put the right products on their shelves until they have accurate

data about the dimensions of the packaging itself. Companies with sales forces that collect important customer data inconsistently in notes fields, because their data collection systems haven’t been kept up to date, will wrestle with problems downstream because workarounds must be developed to compensate for the poor quality of the initial input data. The business case for these improvements is often hard to make because the benefit in speed and agility is indirect. It requires an extraordinary level of vision to see how a very different company will emerge at the end of the process and to persevere — as, I’m sure, the architects of Boston’s Big Dig can testify.

Shanghai: Starting from Scratch

Finally, like Shanghai, companies can break away from their past and build a new city entirely. When Shanghai decided to invest in what it hoped would be a world-class financial hub, it built an entirely new part of the city on relatively undeveloped land across the river from Shanghai’s historic downtown, rather than attempting to retrofit its traditional center of commerce. Today Shanghai’s Pudong district is home to the Shanghai Stock Exchange and to what is generally recognized as Shanghai’s modern skyline. Companies ranging from telecom to financial services are adopting

a similar strategy by rebuilding core IT functions from scratch in the cloud. Instead of spending years gradually migrating decades-old IT systems, companies are investing in state-of-theart cloud-native systems that typically only take 18 months to create and cost about 20% as much to operate, on average. Since cloud-based systems are modular and scalable, they are fundamentally easier to manage. Companies can more easily introduce greater redundancy and improve microservices — a critical capability when your aim is to keep up with a constantly evolving

competitive landscape. By following this tactic, managers also avoid the operational risks involved with cutting across old systems into new ones. Instead, like digital natives, incumbents can build state-of-the-art systems and either meld them with their older systems at a later date or just leave them alone, like the historic Bund in Shanghai. Keeping up with digital upstarts that are rewriting the rules of industries, from retail to banking to energy, is one of the biggest management challenges for major corporations today. One reason managers continue to struggle with

this conundrum is that they usually attempt to attack their core systems on multiple fronts all at once. Instead, they should chart a course to improve their digital capabilities by learning from major cities, which have confronted challenges on an even larger scale. Digital transformation is almost always difficult and expensive, but learning to think like a city planner can help.

THERE’S NO SUCH THING AS BIG DATA IN HR

ig data” has become such a ubiquitous phrase that every function of business now feels compelled to outline how they are going to use it to improve their operations. That’s also true for Human Resources (HR) departments, which is where most of a company’s money is spent, and where

— we’d like to believe — the real value lies. One of the reasons for the special attention being given to big data in HR is that the department is always under pressure to be more analytic — which is justified to some extent. Some wishful thinkers believe that the application of big data techniques will somehow rid HR of the

some of the attributes they don’t like about it, such as the perception that they’re focusing on “soft” issues and not detailing the return on HR-related investments. As with most of “the next big thing” stories in business, big data is really important in some areas, and not so important in others. As a literal definition, HR does

not actually have big data, or more precisely, almost never does. Most companies have thousands of employees, not millions, and the observations on those employees are still for the most part annual. In a company of this size, there is almost no reason for HR to use the special software and tools associated with big data.

For most companies, the challenge in HR is simply to use data at all — the reason being that the data associated with different tasks, such as hiring and performance management, often reside in different databases. Unless we can get the data in those two databases to

be compatible, there is no way to ask even the most basic questions, such as which applicant attributes predict who will be a good performer. In short, most companies — and that includes a lot of big ones — don’t need fancy data scientists. They need database managers to clean up the data. And they need simple

software — sometimes even Excel spreadsheets can do the analyses that most HR departments need. Another major difference in HR analytics is that the questions that really matter have been under investigation longer than most other business topics. What determines a good

hire, for example, has been studied in almost the same way since WWI. So the idea of bringing in exploratory techniques like machine learning to analyze HR data in an attempt to come up with some big insight we didn’t already know is pretty close to zero.

Consider Google’s very prominent efforts over the years to analyze their people data with initiatives such as Project Oxygen, a multi-year research project that was designed to try to figure out what makes a good manager — a much more substantial effort than most any other company could pull off. Most of the conclusions from that very intensive exercise were ones that research discovered decades ago and which could have been found in textbooks. That doesn’t mean it’s not a worthwhile exercise to test how those standard assumptions of management play out in our own organizations, but expecting to find big and new insights is simply a bad bet.

The very nature of HR data imposes some unique limitations on analyses. Companies operating in the European Union, for example, know that employee data cannot be moved legally and easily across other national borders. Multinational companies can’t legally examine employee data across countries at the same time. In the U.S., analyses on employee data that could reveal the possibility of adverse impact on protected groups — e.g., our female employees in this unit are paid less than the males — triggers the need for legal and then management responses that wouldn’t happen in other parts of the business. HR has to be careful not to turn their data over to other departments that don’t understand these limitations.

So, what should HR be doing with data, after we clean up our datasets? Anytime we analyze data, it helps to start with the basics.

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First, just look at the big picture — graphs plotting outcomes across the organization and then over time: Where has turnover spiked, and when did it happen? Are there places where there are consistent employee complaints?

Second, look at more of this data, more often. For example, the move to pulse surveys (short, very quick, sometimes daily surveys) of employees that replace the annual and ponderous morale surveys are a good idea. Smart companies like IBM compile data that the employees themselves generate on company-sponsored social media, for example, to monitor morale and identify workplace concerns.

Finally, HR should be analyzing relationships among the data. Start by asking how your hiring criteria relates to actual performance. This is important not just because hiring is arguably the most important task an organization does (partly because it happens so often), but also because we are required to use criteria in hiring that do not have adverse impacts on protected groups. At the end of the day, everything starts with the quality of the data: If we don’t think our performance appraisal scores are good measures of actual performance, for example, then no analyses that try to predict who will be a good employee will be worth doing.

To Find A Cure For Blindness, These Scientists Are Mimicking Fish Eyes By Sean Captian

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Retinas, the image sensors of the eye, don’t heal after damage from an injury or a genetic disease— at least not in mammals like humans. But the retinas in some fish do regenerate. Today, researchers at the University of Washington in Seattle reported that they have hacked the cells of a mouse retina to act like those of a fish—not only growing new neurons, but also wiring those neurons up to other neurons that send signals to the brain.

This is a major step, though far from the last, toward restoring sight in people who have lost it due to retina damage from genetic diseases like retinitis pigmentosa, age-related diseases like macular degeneration, or side effects of diseases like diabetes. Retina damage isn’t the biggest causes of blindness. That would be cataracts, which affect the eye’s lens. But cataracts are curable with routine surgery. Retina damage is incurable.

Muller glia cells regenerating into neurons appear yellow in this image of a mouse retina.

That is, unless you’re a fish. The eyes of the zebrafish, in particular, have an uncanny knack for regenerating, and now scientists know how that process happens: A type of cell called Müller glia, which provides support services to the neurons, can also transform itself to stand in for a neuron that’s been lost. Humans and other mammals also have Müller glia, but the part of their DNA that would reprogram them to become neurons is locked away.

Instead of trying to engineer a new drug that might unlock that DNA, the UW researchers pored through catalogs of existing drugs that might do the trick. They found one called Trichostatin-A (TSA), a hormonal treatment for breast cancer, that also happens to open up the regeneration DNA sequence. In an injured retina, these Müller glia cells treated with TSA transformed into two types of neurons, bipolar and amacrine cells, that are part of the retina’s internal wiring.

But the UW researchers haven’t yet produced the most important neurons: the photoreceptors that actually convert light into a signal for the brain. Other researchers have generated new photoreceptors from types of cells other than Müller glia, but they haven’t wired up to other neurons. The UW researchers expect their method could someday make not only photoreceptors, but ones that connect to the brain. That will be a bright day, indeed.

Uber Needs to Recreate its Company Culture. Here’s What You Can Learn From Its Mistakes. By Nina Zipkin

During a Tuesday meeting to discuss an overhaul of Uber’s company culture, former board member David Bonderman proved exactly why the conversations needed to happen in the first place. At the start of the all-hands meeting, Arianna Huffington, who was the first woman to join the company’s board last year, announced the addition of Nestlé executive Wan Ling Martello to the board, increasing the representation of women on the board from 14 to 25 percent.

“There’s a lot of data that shows when there’s one woman on the board, it’s much more likely that there will be a second woman on the board,” Huffington noted.

bears repeating, was convened to talk about recommendations to change Uber’s culture after allegations of systemic discrimination and sexual harassment.

That’s when Bonderman interrupted.

Bonderman, the 74-year-old founding partner of investment firm TPG Capital, apologized for the “disrespectful” comment via an internal memo to Uber employees and issued this statement about his departure:

“Actually what it shows is it’s much likely to be more talking.” In the recording obtained by Yahoo Finance, you can hear Huffington respond at first with awkward laughter. And then her reply: “Oh. Come on, David. Don’t worry, David will have a lot more talking to do as well.” That is not to be the case, as Bonderman resigned shortly after the meeting, which, it

“I do not want my comments to create distraction as Uber works to build a culture of which we can be proud. I need to hold myself to the same standards that we’re asking Uber to adopt. Therefore, I have decided to resign from Uber’s board of directors, effective tomorrow morning.” 57

Earlier on Tuesday, CEO Travis Kalanick also announced that he would be taking a leave of absence in order to, as he shared in an email to the company, “take some time off of the day-today to grieve my mother, whom I buried on Friday, to reflect, to work on myself, and to focus on

building out a world-class leadership team. The ultimate responsibility, for where we’ve gotten and how we’ve gotten here rests on my shoulders,” Kalanick wrote. “There is of course much to be proud of but there is much to improve. For Uber 2.0 to succeed there is nothing more

SO WHAT EXACTLY IS UBER 2.0 GOING TO LOOK LIKE? Over the past few months, former attorney general Eric Holder and Tammy Albarrán, partners at law firm Covington & Burling, were tasked with investigating the allegations made by former engineer Susan Fowler and others.

The recommendations include: • Providing more support for the human resources department and establishing clear protocols to track complaints. • Mandatory training for senior executives, HR staffers, managers and people in the position to interview prospective employees, particularly around the topics of promoting inclusion and combatting unconscious bias. • In terms of recruiting and developing talent, implementing a blind resume review, and increased transparency when it comes to performance reviews and promotions. • The prohibition of romantic or intimate relationships between supervisor/subordinates and the consumption of alcohol during work hours, at after work events and at companysponsored events. • An update of discrimination and harassment policies including instituting a zerotolerance policy for violators of those rules -- no matter what position they hold in the company -- and explicit protection against harassment from not only other employees, but third-parties the company deals with such as clients to vendors.

A lot of these seem quite standard. But when you look at former engineer Susan Fowler’s blog post and Kalanick’s 2013 Miami letter side by side, the necessity for Holder and Albarrán to explicitly state things such as the importance of “de-emphasizing alcohol as a component of work events,” or that policies should be applied consistently across the company with no special treatment afforded to any one employee is pretty glaring. One passage in particular about Uber’s 14 cultural values speaks volumes about where Uber ran aground. Holder and Albarrán recommended that the company communicate with its employees to reassess and develop a core list of values that are accessible and easy to understand. “Eliminate those values which have been identified as redundant or as having been used to justify poor behavior, including Let Builders Build, Always Be Hustlin’, Meritocracy

important than dedicating my time to building out the leadership team. But if we are going to work on Uber 2.0, I also need to work on Travis 2.0 to become the leader that this company needs and that you deserve.”

They interviewed more than 200 Uber employees and provided a set of recommendations pertaining to how the company should address discrimination, harassment and retaliation and how it could “ensure that its commitment to a diverse and inclusive workplace was reflected not only in the company’s policies but made real in the experiences of each of Uber’s employees.” and Toe-Stepping, and Principled Confrontation; and encourage senior leaders to exhibit the values on a daily basis and to model a more collaborative and inclusive Uber culture,” the recommendation reads. “Leaders who embody these values should be part of the process of redefining Uber’s values and should be role models for other leaders within the company.” Uber has long had a reputation for aggressive tactics in its dealings with regulators and competitors. It was seen, for better or worse, as one of the key drivers of its rapid growth. But clearly, as Uber’s experience shows us, growth and success are not one in the same. In an interview with Vanity Fair in 2014, Kara Swisher asked Kalanick about the nature of the interactions with the leaders of the cities (some of whom he described as “really awesome, but most are uninspired”) his business was disrupting.

“If you don’t agree with the core principles, which are the premise of that compromise, then you have to have what I call principled confrontation. And so that is the thing that we do that I think can rub some people the wrong way.” If you’re beginning with the premise that compromise doesn’t work for you, and every interaction is a war of attrition, you can let people build all they want, but what exactly are you working toward? If you’re always hustlin’ -though if they do keep that one, I would urge them to restore the “g” to its rightful place -- you don’t stop to think about where the pitfalls may be or whether you might be in the wrong. Uber’s experience shows us that is kind of approach is a recipe for collapsing under the weight of your own hubris. In Uber’s San Francisco headquarters, up until this week, the office’s main conference room was called aptly, the War Room. Bloomberg

reported that along with the multitude of changes recommended by Covington & Burling, the room is now going to be called the Peace Room. It’s a bit on nose, but you can appreciate the thought, as long as it’s not just lip service. Uber’s culture is not going to change overnight, but now the company

seems to have the selfawareness and tools in place to build an environment where values aren’t used, as per Holder and Albarrán’s description, to “justify poor behavior.” So what can we learn from Uber’s newfound emphasis on internal, rather than external growth?

Company culture isn’t about perks or empty aphorisms that look good on a T-shirt. Simply, people want to be heard, they want their work to be valued and they want to be treated with respect. When you build your company culture, start there.

You Can’t Delegate Talent Management to the HR Department by Ron Ashkenas

Successfully identifying, developing, and retaining leadership talent is critical for any organization’s longterm success. That’s why many of them, particularly the largest ones, rely on full-time “talent management” professionals, who work in coordination with other parts of HR. These talent management people create processes for assessing leadership capabilities and set the strategy for upgrading leadership talent over time. GE’s talent management people, for example, play a critical role, at both the corporate and business-unit level, in filling key positions, insuring smooth successions, driving companywide review processes, and building tools that managers can use to direct their own careers. On paper, this approach makes perfect sense. Having great talent is a strategic imperative, so giving the job to a centralized team of “experts” should ensure that it’s done right.

A centralized function also enables a comprehensive and objective view of the company’s talent landscape (overcoming the problem of silos hiding talent), and makes it easier to implement solutions, such as leadership training, that cut across the organization and can be delivered cost-effectively. Unfortunately, the investment in centralized talent management over the past decade has had mixed results. According to a 2013 CEB study, “only one in four HR organizations have

effectively integrated their talent management practices…with the company’s strategic objectives.” Similarly, a 2012 EY survey of almost 600 global business executives found that talent management functions often measure the easy things (such as employee retention) while overlooking other factors that are important for organizational success (such as whether the right people, with the right skills, are in the right jobs). https://media.licdn.com/mpr/mpr/AAEAAQAAAAAAAAwaAAAAJGIxNzk3ZWFiLTk3OTMtNDg0ZC04MGE5LTE4Y2I5OTBiYTA3Nw.png

From my experience working with dozens of organizations on aspects of talent management, there are at least two reasons for these mixed results. The first is that the advent of talent management as a stand-alone specialty has led to overly complicated talent processes that are difficult to understand, at best, and confusing to managers, at worst. Anytime a function becomes a “profession,” with an association, conferences, certification, and the like, it starts formalizing its own language, which only insiders really understand. Just last year, for example, the Association for Talent Development, a professional society for talent development people, published a research study that proposed 15 core functions for talent development and 24 secondary functions that might be important for some organizations. Even if talent management professionals themselves could remember and implement all of these functions, it’s almost certain that managers would find them more confusing than useful. The second problem is that the rise of a central function makes it too easy for managers to forgo their personal accountability for acquiring and developing the right talent for their business. In all too many companies, how managers handle talent has no impact on their personal rating or compensation. All they need to do is fill out review forms, go to meetings, and assume that HR will make sure that the people issues are addressed. And then, if things don’t work out, they blame HR — despite the fact that they’re in a much better position to assess and develop their own people.

Countering these tendencies is not easy, but doing so can make a huge difference in organizational performance. A good example is Cognizant, a leading provider of information technology, consulting, and business process outsourcing services. Headquartered in New Jersey, Cognizant is consistently listed among the most-admired and fastest-growing companies in the world, having doubled its operating income in the past five years, while adding over 100,000 employees. To sustain this trajectory, and manage a company with now close to a quarter of a million associates, CEO Francisco D’Souza has made building a high performing leadership pipeline a critical element

of every leader’s job. Because he wants Cognizant’s leaders to grow faster than the business, he holds monthly meetings with his top two executives and the Chief People Officer to review progress on executive talent and the overall leadership pipeline. They also regularly assess whether talent development is aligned with the company’s strategic goals. They review new senior leaders who have been added, executive moves between business areas, who’s being developed for leadership positions, where gaps in leadership remain, and what’s being done to fill them. Carol Cohen, who heads their Executive Talent and Global Leadership Development function,

leads these meetings and guides the dialogue on strategic people decisions, investments, and organizational insights – but the decisions are owned by the CEO and his team. Cognizant also drives accountability for talent throughout the management ranks, since the executive team cannot be the only ones focused on this issue. To do it, the company created a simple one-page talent review document that managers use to review potential leaders annually. The document asks, for example, how the manager’s direct reports stack up against Cognizant’s defined leadership capabilities and what future roles are possible for each

direct report, based on their career interests, mobility, and strengths. This provides an easy, enterprise-wide talent snapshot that leaders can use throughout the year to plan targeted development and career moves. Cognizant’s managers can’t pass off their responsibility for managing talent to HR — they are expected to own it. Of course, not every company can replicate what Cognizant has done. The basic principles, however, can be applied just about anywhere: Identify how talent management will help to drive the business, make sure managers understand the connection between business success and talent development, and hold managers accountable for making it happen.

WORKPLACE

2025: Five Forces, Six New Roles and a Challenge to HR by John Boudreau

In September 2013, top HR leaders undertook a voluntary and collective effort to envision the HR profession in 2025. They conducted interviews, focus groups, reviews of published findings and drew upon their significant personal experience through CHREATE (The global Consortium to Reimagine HR, Employment Alternatives, Talent, and the Enterprise). Their findings included five forces shaping the future of work and organizations, and six necessary roles. They envisioned a step-change in organization challenges, responses and workplace capabilities. These changes will affect organizations differently, but the CHROs, as well as the CEOs and Board members they interviewed, believed they are relevant to virtually every organization. Should they be guiding your own strategies, organizational initiatives, capability development and HR functional design?

FIVE FORCES SHAPING THE FUTURE EXPONENTIAL TECHNOLOGY CHANGE. This includes technological breakthroughs that produce exponentially accelerated disruptions in markets and business. They include rapid adoption of robots, autonomous vehicles, commoditized sensors, and artificial intelligence, enabling global collaboration and re-thinking work and global commerce. To respond, organizations will engage flexible, distributed and transient workforces that adapt to rapid cycles of business reinvention. They will become more accurate in choosing big long-term bets and more flexible when predictions are uncertain. Workers will need to successfully engage with automation, and be prepared for more constant job loss and rapid skills obsolescence. SOCIAL & ORGANIZATIONAL RECONFIGURATION. This force will include increased democratization of work, shifting organizational forms from the hierarchy in favor of more power-balanced organizations and communities, with less employment-based

and more project-based relationships. Talent will engage with organizations increasingly based on aligned purpose, not simply economic exchange. The organizational responses will include networks replacing hierarchies, and social and external collaborations as vital elements of product and service development. Business practices and culture will reflect shared purpose and mission and horizontal and shared leadership. Talent sourcing and engagement processes will use diverse work arrangements including part-time, full-time, free agents, outsourcing, talent exchanges with partner organizations, and engagement based increasingly on a purposedriven mission. A TRULY CONNECTED WORLD. Inexpensive mobile devices, personal interfaces, virtual collaboration and new media will enable global and real-time communications that accelerate ideation and product development. Market strategies will use rapid prototyping with intensive user feedback. Organizations and their operations will be globally transparent, with extremely short product development and release cycles, immediate feedback and relationships based on trust. Work will be sourced from anywhere at any time, by workers organized in the cloud, and networks of free agents. Work will be engineered through newly defined talent management systems that support a distributed and global workforce, high-trust cultures and purpose-built networks, empowered with big data.

ALL-INCLUSIVE GLOBAL TALENT MARKET. Work will be seamlessly distributed around the globe with 24/7 operations enabled by new corporate and social policies. Extreme longevity will allow mature talent to stay in workforce longer. Female and non-white ethnicities will become talent majorities. Organizations increasingly segment work into projects, tasks and micro-tasks directed to the best talent within and outside the organization through diverse work relationships. Leadership and engagement will evolve to address highly varied and differentiated cultural preferences in policies, practices, work designs, pay and benefits. Purpose-driven organizations will excel in attracting, engaging and motivating workers from many sources. HUMAN AND MACHINE COLLABORATION. Analytics, algorithms, big data and automation will accelerate and enhance productivity and decision making, and automate and abolish tasks previously performed by humans. This will frequently disrupt product, service and labor markets, with greater volatility in unemployment and reemployment. Organizations will migrate tasks from people to machines and/or robots, mastering big data. They will augment their capabilities beyond regular full-time employment by creating and maintaining external partnerships that manage workforce transitions without hurting their reputation as a fair and attractive place to work. This will require exceptionally strong social and community relationships and ethics.

SIX NEW WORKPLACE LEADERSHIP ROLES: The CHREATE teams envisioned that these changes will require organizational capabilities embodied in new roles like those described below. These roles may be embedded in an HR profession of the future, but they reflect a profession with boundaries that extend well beyond traditional HR: The Organizational Engineer is an expert in facilitating virtual teams, developing leadership wherever it exists, and talent transitions. She is an expert at talent and task optimization. She is the knowledge resource on principles such as agility, networks, power and trust. The Virtual Culture Architect is a culture expert, advocate and brand builder. He connects current and potential workersâ&#x20AC;&#x2122; purpose to the organizationâ&#x20AC;&#x2122;s mission and goals. He is adept at principles of values, norms, and beliefs, articulated virtually and personally. The Global Talent Scout, Convener, and Coach masters new talent platforms and optimizes the relationships between workers, work and the organization, using whatever platform is best (e.g., free agent, contractor, regular employee, etc.). She is a talent contract manager, talent platform manager, and career/life coach. The Data, Talent & Technology Integrator is an expert at finding meaning in big data and algorithms, and how to design work that optimally combines technology, automation and humans. The Social Policy & Community Activist creates optimal synergy between goals that include economic returns, social purpose, ethics, sustainability, and worker well-being. She influences beyond the organization, shaping policies, regulations and laws that support the new world of work, through community engagement. Should your organization be building these capabilities? Will they reside in your future HR function, your leadership, or your line managers? Will your pipeline for this talent include professionals in procurement, marketing, finance, operations, business development and external relations, as well as from traditional HR academies and functions? Are you ready for this future? 65

10 Workplace Trends Youâ&#x20AC;&#x2122;ll See In 2017

by Dan Schawbel

Every year I give my top 10 workplace trend predictions for the upcoming year. You can read my predictions from 2013, 2014, 2015 and 2016 if you missed them. These trends are based on hundreds of conversations with human resource executives and workers, a series of national and global online surveys and secondary research from more than 160 different primary and secondary research sources, including think tanks, consulting companies, non-profits, the government and trade associations. Between 2016 and 2017, the job market will continue to improve causing both job seekers and employees to have more leverage, which will cause salaries to increase and employers to invest more job advertising, staffing firms and employee benefits. Depending on who becomes the next president of the United States, hiring may freeze, slow or continue its current trajectory. The demand for a more flexible work environment will continue and you will see an emergence of HR practitioners with new skills, including people analytics, Internet marketing, branding and knowledge on new technologies like virtual reality and wearables. The major economic and business themes over the past year have been focused on the war for talent, creating an employment experience for job seekers and candidates, overtime and compensation, the end of the annual performance review, the continued skills and leadership gap, the rise of Generation Z and the shift to the on-demand workforce. These trends have all impacted how companies recruit, retain, train and structure their workforce for the future. 66

Companies focus on improving their candidate and employee experiences. Companies

have always created marketing experiences for customers, and prospects, in order to delight them, increase loyalty and grow their revenues. Next year, you will see the walls come down between your HR, marketing and customer service departments in order to develop experiences for both candidates and employees. A recent study found that nearly 60% of job seekers have had a poor candidate experience and 72% of them have shared their experience on an online employer review site such as Glassdoor.com. When employers don’t notify candidates of their application status, they are discouraged from ever applying for another job at that company again, which limits their future talent pool. Furthermore, a bad candidate experience can turn away customers who may be your candidates, thus resulting in a loss of potential revenue. Virgin, for instance, created a new candidate experience for the thousands of people they are unable to hire out of the 150,000 applications they receive annually, and have created a new seven million dollar revenue stream by creating a better experience for them. Aside from candidates, employee retention and engagement have become some of HR’s top issues as top talent has numerous employment options and productivity is key to growth. In another study, it was discovered that 83% of HR said that “employee experience” is either important or very important to their organizations success, and in order to enhance the experience, they are investing more in training (56%), improving their work space (51%) and giving more rewards (47%). IBM has used people analytics to predict retention risk for employees in key job roles, and notifies managers so they can prevent them from quitting, which has saved the company over $130 million dollars.

The blended workforce is on the rise.

In the past five years, the gig economy has become a major trend impacting the global workforce, and has created a new kind of diversity, with full-time permanent employees working side-by-side with freelancers. A study exploring the gig economy found that 93% of companies already identify the blended workforce as they’re seeing freelance workers teaming up with employees to work on projects together. In addition, the top reason why outperforming employers are benefiting from the blended workforce is “more flexible teaming”. At the SHRM 2016 Annual Conference in Washington DC, Henry Jackson, the President of SHRM, noted that the “rise of freelance workers” was one of the top five biggest employment trends. Multiple studies from Intuit to The Freelancer’s Union predict that at least 40% of the workforce will be freelancers in the next few years. As more companies hire ondemand to solve key problems and cut costs by removing healthcare coverage, and other employee benefits, more freelancers and full-time workers will need to work together. With many freelancers working at remote offices, the ability to manage without borders is going to become a critical skills globally.

Annual performance reviews evolve into more continuous reviews.

One of the biggest discussions in HR circles is performance reviews, how to transform them and implement something new that serves both managers and employees. Professionals today desire instant feedback, a behavior they’ve adopted from the instant gratification they receive on social networks like Twitter and Facebook. Younger generations are especially impatient and are unwilling to wait a whole year to learn about their strengths and areas of improvement. A whole one-forth of employees feel that annual performance reviews don’t help improve their performance. The annual performance review is coming to an end on a global scale as generation Zs and millennials

are currently receiving feedback either daily (19%), weekly (24%) or regularly (23%). In the United States, 28% of gen Z and 17% of millennials receive feedback regularly. Two of the largest companies in the world, including GE and Adobe, have already abolished their annual review process in exchange for regularly feedback. Adobe, the first major company to step away from annual performance reviews, created a “Check-In” system, where expectations are set annually but feedback is given regularly, resulting in a 2% decrease in voluntary attrition. GE followed suit by created “Touchpoints,” where there is a daily development focusing on results and changing business demands, which has resulting in a five times increase in productivity in the past year.

Millennials meet Generation Z in the workplace.

2016 marks the first year that gen Z is in the workplace, while a third of millennials are in management roles, some of whom have direct reports. 2017 will mark the first full year that gen Z will be settled into the workplace, with a new outlook on business, new demands and widening the technology gap even more between younger and older workers. A new study found that 78% of gen Zs and millennials said that their expectations of their current workplace have been met, and their education actually did prepare them for the working world. A different study found that 36% of millennials have a manager title or above yet the Harvard Business Review found that only 7% of companies have accelerated leadership programs to nurture them. Just like with all generations studied, millennials negatively stereotype gen Zs as being lazy, which will cause some friction. Both generations will continue to put pressures on companies to transform the office, reward employees, embrace flexibility, and align the companies interests with a cause.

Augmented and virtual reality revolutionize recruiting and training.

While there has been a lot of hype around new forms of reality in 2016, companies are going to take it a lot more serious in 2017 as new equipment, programs and use cases surface. Virtual reality hardware revenue is set to reach over eight billion in the next two years and the amount of money invested will be over four hundred million with 25 million users by that time. In addition, with Facebook’s acquisition of Oculus, Apple’s patent on a 3D display system and the current success of Pokémon GO’s augmented reality app, there is no doubt that 2017 will be a massive year for these technologies. We’ve found that one-fourth of gen Z and millennials want their companies to incorporate virtual reality into the workplace and I predict that this will increase next year as more adopt VR consumer technology. The technology that employees are experiencing outside of work will naturally influence them to desire the same tech at the office. Virtual and augmented reality can help close the experience gap for job seekers and allow employee training to be more engaging, less expensive and free of distractions. For instance, The British Army is already using VR in their recruitment process, General Mills has a virtual reality tour of their offices and GE implements VR at career fairs where students wear headsets to explore their oiland-gas recovery machines.

The war for talent heats up as the employer and employee contract continues to evolve.

The average tenure for employees, regardless of age is a mere 4.6 years in the United States and based on numerous studies we’ve conducted, millennials leave after two years. Employers have recognized that there is no lifetime employment contract and some companies have incorporate strategies from the book “The Alliance” as they implement “tours of duty” to appease employees. Through hardware, including smartphones and wearables, and social networking sites, talent is more freely available and talent has more opportunities to choose from. Seventy-six percent of full-time workers are either actively looking for a job or open to new opportunities and 48% of employers are unable to fill their job vacancies because of the skills gap and high attrition rates. With all of this competition for talent, an entire 90% of employers anticipate more competition for talent, especially in emerging markets such as India, North America and Asia. This is why you will see an even greater emphasis on the employee experience in 2017 because companies are being forced to focus more on corporate culture and values than pay in order to retain employees.

Organizations restructure to focus on team over individual performance.

One of the most fascinating trends, despite the rise of the gig economy, is the emphasis of teamwork regardless of employment situation, industry or politics in a company. While individuals have their own career agenda, companies are now structured with teams because high performing teams will enable them to compete for the future. Organizations are restructuring for several reasons, including the rise of millennial and gen Z workers who grew up playing team sports and have the same expectations at the office and the fact that organizations are trying to better align to customers so they must be agile due to market volatility. Nearly all (92%) of companies rate “organizational design” as their top priority and three-fourths of gen Z’s and millennials said they are well prepared to work effectively in a team. Cisco was one of the first companies to embrace this trend, creating “Team Space,” a platform that delivers intelligence on how teams can work best to win together.

Workplace wellness, and well-being, become critical employee benefits for attracting top talent.

Companies are using wellness programs to lower absenteeism, attract talent, and save on healthcare costs, while employees have become more health conscious in the past several years. Fewer than half of American workers say that their company supports employee well-being and helps them maintain a healthy lifestyle. Compared to last year, health-related employee benefits have increased by 58% and wellness by 45%, which will continue into 2017. Companies realize that workplace stress is the biggest health issue that employees face so they invest in creating a more relaxing and healthier environment for them.

The blended workforce is on the rise.

Companies get creative with their employee benefit packages and perks. Fair compensation is most important to all age groups, genders and ethnicities almost unanimously around the world based on several studies that I’ve conducted over the years. Once you get past pay, then the two most important employee benefits are healthcare coverage and work flexibility, a benefit that wasn’t mainstream a decade ago but is today because of the sheer demands of work and our “always on”society. In a recent study, we found that compared to two years ago, work flexibility is the top employee benefit (over healthcare in 2014) globally yet only a third of companies offer it. Even the companies that offer at least some degree of work flex aren’t actively promoting those programs to employees or job seekers, who are spending more time researching companies before applying for jobs. Aside from these two major employee benefits, new ones are surfacing focusing around education and student loans, which is relevant due to the $1.3 trillion student loan crisis. One company that is on the forefront of this trend is Fidelity, with their “Step Ahead Student Loan Assistance” program, which helps employees payback loans up to $10,000. Other companies have tackled employee benefits differently, such as Maia Josebachvili of Greenhouse, who is transparent with their benefit package costs and surveys her employees to find out how to best allocate their benefit investments. Other examples include Zeeto, that provides employees a thirty dollar Seamless credit for food, Starbucks with their “College Achievement Plan” and Twitter that offers just about every type of exercise class on campus.

Office attire and workplace culture becomes more casual.

Several years ago, Virgin Founder Richard Branson was on the cover of Forbes Magazine with a scissors cutting off his tie, calling for the end of business formal attire. With the rise of younger generations, and more employees working remote, there’s no doubt that the workplace is increasingly casual. In 2017, you will see a continuation of this trend, with more employees demanding to drop their suits and ties in exchange for jeans and shirts. The Bureau of Labor Statistics shows that about onethirdof American employees do some or all of their work from home, and as someone who has worked from home for years, I can tell you that I’m not wearing a suit here! Today, 50% of managers say that employees wear less formal clothing than they did five years ago and nearly one-third would prefer to be at a company with a business casual dress code.

HR Dilemma: Will the traditional office become extinct? By Rianna Fulham

With the increase in demand for flexible working and with technological advances enabling roles to be remote, realistically, everyone that works in an office environment could work from home. “We’re currently on the brink of the cloudbased fourth industrial revolution that looks set to shake things up to an extent we’ve never seen before,” according to Brett Riley, Global Business Development Director at Nexus PSL. “Already, businesses across the globe are taking advantage of these new capabilities that allow them to employ the best person for the job, regardless of location, personality or even language. This kind of approach has worked well so far for smaller companies that can adapt quickly to change, while larger businesses bound by their own red tape are struggling to catch up.” Amanda Powell Smith, CEO at Forster Communications, agrees that the workplace is hanging, and it’s a positive, 70

as it encourages employers to keep up with employee demands - especially regarding an ageing workforce. A report by the Resolution foundation think-tank found that by 2040, nearly one in seven Britons will be over 75. The report also found that almost a third of people born today can expect to live to 100. “The traditional office is and should be in a constant state of revolution to keep up with technology and enable all employees to find and keep fulfilling work,” she says. “Flexible working needs to be recognised as a massive opportunity for both employer and employee. The real challenge is not people spending too much time out of the office, it’s that increasingly they will spend more years of their lives in it. The workplace of the future will be far more diverse in terms of age, with workers who stay into their 60s and 70s as the norm, challenging current preconceptions and forcing new ways of working.” Philip Price, Chief Executive of workplace review business WorkAdvisor, however, thinks that the traditional office environment will remain the norm for the majority of workers for many years to come. “According to government figures, over four million people, or around 14% of the workforce, now work from home, a rise of around 800,000 in a decade,” says Price. “It’s never been easier to work from home with modern communications, so that trend is sure to continue. “But for many reasons, the vast majority still work in an office with traditional nine-

to-five working hours. Many workers want to come together and share the same collective experiences - after all, we are social animals. “People who work in teams need to be clear on their business and personal objectives, but it’s tough to have absolute clarity when you don’t see and interact with your manager or co-workers. Workers need to express themselves and check things out, often physically with their colleagues. For managers, much of their time is, or should be, taken up with coaching, interacting with the team and delivering quality feedback. Be honest, has this ever really worked over skype or by an email?” Price adds that human interaction is vital to keep people motivated at work. Powell Smith agrees that communication is fundamental to keep a workforce engaged, but productivity is more important than presence:

“Communications is critical at all levels of the company, from senior teams through line managers to job starters, with recognition for skills and results rather than hours at the desk or years in the role. Only by creating and respecting tailored rather than generic job specs will we be able to maximise the potential of each individual and keep up with the rapid changes taking place.”

The Future of Work

Today’s global economy evolves at breakneck speed, with technology, consumer trends and generational shifts constantly reshaping the business landscape. The labor force is changing, too, and has now reached a tipping point in terms of what employees expect from work, according to HR experts Jeanne C. Meister, founding partner of the consulting firm Future Workplace LLC in New York City, and Kevin L. Mulcahy, a business professor at Babson College in Babson Park, Mass.

Their new book, The Future Workplace Experience: 10 Rules for Mastering Disruption in Recruiting and Engaging Employees (McGraw Hill Professional, 2016), examines research compiled from 2,100 HR leaders and managers suggesting that the conventional wisdom about work and the role of HR departments is obsolete. They were recently interviewed by HR Magazine about their findings.

You state that future work will be more personalized. What does that mean? Meister: The personalized experience takes into account each person’s career goals, physical workspace, and learning and development needs. That’s a big shift from the old HR model of standardization to make processes more efficient. It’s about understanding the expectations of workers and designing their experience around those needs.

What—or who—is driving the changing work environment? Is it generational? Meister: The desire for change is not just coming from the Millennials, although they are the ones giving voice to it. As employees, we all want the same experience at work that we enjoy in our personal lives. That’s a crossgenerational expectation. Take connectivity, for example. A recent research study of job seekers showed that a majority identified the connectivity of a workplace as a part of their criteria for accepting a job, and the sample spanned ages 22 to 57. That’s why forward-thinking companies are putting the consumer lens on work to create a better personal experience.

Why has it taken this long to gain momentum? Mulcahy: Simply because more-established employees never paused to ask for or demand better because they are more accepting of the way things are now. Younger workers see the same disruptions at work that older generations see, such as trade expansion, the digital revolution, wild economic swings—and the uncertainty is real. But they are asking employers “Why?” They want a quality work experience. And companies are responding. Graduates who exit college in the next three years will enjoy a completely different career experience than any generation before.

Creating the environment you describe seems to go beyond the normal reach of HR. Where should HR leaders start? Meister: By accepting that this is not an initiative done in a silo. Done right, it’s a partnership between HR, marketing, IT, communications and beyond. Ask marketing to use tools such as sentiment analysis and hackathons to help uncover unmet employee needs. Talk to IT about improving technology. Learn how to communicate better using tips and tricks from your editorial or communications teams. Tap the building services group about how best to use space. HR leaders are accustomed to carving out initiatives and running with them. Instead, they need to build a cross-organizational alliance and create a shared vision.

Will HR departments change to incorporate some of those marketing, IT and other skills inhouse? How do you create that environment, particularly at a business with a large labor force? Meister: You can start by recognizing the unique needs people have for their workspace. We’ve seen the benefits of open spaces. Go a step further, though, and recognize the value in the power of choice—in other words, allowing employees to decide where they want to work in the office each day, be it a collaborative space or a focused, quiet place to complete an assignment. Research shows that choice positively correlates with engagement.

In much the same way, learning is moving away from a one-size-fits-all curriculum to more of an Apple Store layout where workers can access what they want in the format they want.

The future workplace is also open to more career mobility within an organization—allowing people to work on company projects not associated with their daily roles or beyond their job descriptions. Perhaps they even spend a set number of hours each week in another department to develop and hone new skills.

Mulcahy: Absolutely. With each job opening in HR, leaders will need to consider whether the next person in that role should have years of HR experience or a background in another function that brings value, like marketing or data analysis or IT. HR needs to become much more multifunctional and, by extension, a visible agent for change. Bring in employees with different skill sets. Try new processes and kill off unpopular practices. Engage people in prototyping what the new HR should be. Let them experiment and see what works. The days of HR developing policies and telling the labor force “You’ll see it when we put it out” are

An exhibitor demonstrates one of 3Doodler’s 3D printing pens at the 2014 Consumer Electronics Show. (Photo by Patrick T. Fallon/Bloomberg)

Last spring, we named WobbleWorks one of the 10 most successful companies built on Kickstarter. At the time, it had raised $3.9 million on the crowdfunding platform in two campaigns for the 3Doodler, a 3D printing pen that had launched there in 2013. Turns out that was just the beginning for WobbleWorks, which had sales last year around $20 million from three different lines of pens and recently signed licensing deals with the Cartoon Network and CBS for kits featuring, respectively, the Powerpuff Girls and Star Trek.

to easily create threedimensional objects. Users simply draw what they want, generally with plastic rather than ink.

Like 3D printers, 3D printing pens allow users

As the technology for 3D printers has advanced,

“Within a couple of months, we’ll be at our millionth pen, which for threeand-a-half years is an awesome achievement,” says Daniel Cowen, 35, a former lawyer who is one of the company’s three cofounders. Perhaps more awesome, the fast-growing company, which has 34 employees and offices in New York and Hong Kong, is cash-flow positive, and has avoided taking on either investors or debt.

numerous companies have sprung up to take advantage of it. For 3Doodler’s inventors, Max Bogue and Peter Dilworth, the idea of having a 3D printing pen was a simpler, more intuitive idea. As toy inventors, they conceived of the idea as something fun, but it is also beginning to have more serious applications. The home 3D printing market is expected to reach $2.35 billion by 2022, according to estimates by research firm Research and Markets, and today 3D pens, sold by the likes of Kuman, Mynt3d and 7Tech, as well as 3Doodler, are a booming business. “You can use the 3Doodler to create what’s in your imagination pretty

quickly and by hand,” Bogue says. Bogue, 35, and Dilworth, 51, had previously worked in research and development for WowWee, a robotics toy company based in Hong Kong, and Dilworth had also worked as a researcher at MIT. In 2010, they teamed up to create WobbleWorks, their own toy-invention company that initially licensed concepts to large toy companies. “We were doing that successfully when we came up with the 3Doodler,” Bogue says. As with so many inventions, a random accident sparked the idea for the 3Doodler. Dilworth

WobbleWorks cofounders Max Bogue (left) and Peter Dilworth came up with the idea for the 3Doodler 3D printing pen when their 3D printer glitched making a dinosaur leg. (Photo by Craig Barritt/Getty Images for AOL Inc.)

had invented Troody, a walking biped dinosaur, and he and Bogue were working on a new version of it. One day, they were printing a dinosaur leg for Troody on a 3D printer, and the printer made a mistake. “Peter nudged me and said, ‘I wish you could just take the nozzle off the printer and use that.’ Then we slapped our heads and said, ‘Why doesn’t that exist?’” Bogue recalls. They searched to

see if anyone had created something like it and couldn’t find anything. So they printed some parts from the 3D printer to create a 3D printing pen and wrote 3Doodler on the side of it. “It worked horribly,” Bogue says, “but we said, ‘That’s cool.’ Then we went to see if any of those toy companies we worked with in the past were interested, and they were like, ‘Eh, no.’”

Undeterred, Bogue and Dilworth turned to Kickstarter, enlisting Cowen to help and ultimately bringing him on as the third cofounder. The 2013 campaign for what it dubbed “The World’s First 3D Printing Pen” raised $2.3 million from more than 26,000 backers, far surpassing its original $30,000 goal. “It was obviously a very big turning point when we went from two people doing a couple hundred thousand a year to a company that did $2 million on the Internet,” Bogue recalls. A second Kickstarter campaign, for the reinvented 3Doodler 2.0, in 2015, raised nearly $1.6 million from more than 10,000 backers. By going direct to consumer, 3Doodlers’ inventors were able to prove there was demand for the concept rather than begging retailers for an audience. Today, WobbleWorks makes three different 3Doodler product lines. Its flagship pen is the 3Doodler Create, priced at $99. A year ago, it introduced a 3Doodler pen 75

On Resilience: How One Somali Refugee Is Paying Homage To Her Home Country - And Building A Food Empire by Ally Boggard and Allie Hoffman Hawa Hassan is the creator and ShEO of Basbaas Sauce, which is a line of condiments inspired by her home country, Somalia. Born in Mogadishu, her family was forced to flee when civil war broke out. They lived in a UN Refugee Camp for a year; when Hawa was 7, her mother seized an opportunity to send her to Seattle to live with a family friend. It would be 15 years before they’d see each other again. From Kenya, her mother was able to migrate to Norway, where she opened a Somali goods store. Hawa, alone in Seattle, built a career as a model before moving to NYC and starting Basbaas Sauce. Today, it retails at some of the finest grocers in the country like Dean & Deluca national and select Whole Foods.

Photo by Emily Winiker and edited by Kendrick Daye

Allie Hoffman and Ally Bogard: What have you triumphed over? Hawa Hassan: I know it’s been quite a life already—I spent a year in refugee camp in Kenya, then moved to Seattle at a very young age and grew up without my family. It was a new world and new 76

In this interview, she describes the process of separation, assimilation, and becoming an entrepreneur. We hope she inspires you, as she did us. culture. My mom and my siblings were supposed to join us in Seattle shortly after my arrival. Around 5th grade, when they didn’t come, I aligned myself more with new friends in my new community. I got more open to new things—foods, rituals like church with random

families on Sundays, playing basketball, wearing pants—all things I had never done before. One moment I vividly remember was when I stopped wearing my hijab and started wearing pants instead of skirts all the time, just so I could play basketball.

I already felt very different because I didn’t speak English very well and I wasn’t living in a very traditional home—I was living with a group of refugee men who had come over with us from Kenya. But if I triumphed over all that, it’s because I had very special people around me. I’ve been very fortunate in that respect, and I still am.

Hoffman and Bogard: What do you hope people really understand about the Somali people and refugees? Hassan: I hope that everybody can put themselves in the shoes of refugees everywhere, No one wants to leave home—we only do it because we have to. I hope more people can understand the personal context behind these global trends. No one’s coming here just to take money or live off of this society. They will contribute greatly, just like all of their predecessors.

Hoffman and Bogard: What’s the largest professional failure you’ve experienced so far? Hassan: We all make mistakes, but we get better by learning from them. For example, I didn’t negotiate contracts well early on. I had no formal business training, and at times I gave away a little too much in order to be associated with a larger company or a larger retailer. Now, I trust my instincts better and have more faith in my brand and my existing network. I ask more questions, and I’m comfortable saying, “No.”

Hoffman and Bogard: If you could go back to an earlier version of yourself when you’re just starting out, what advice would you want to give the earlier version of yourself? Hassan: I would tell myself, “stick to the formulas, stick to the price points, stick to the projections.” Sure, flexibility is vital, but compromising on everything just because a retailer is interested is also a big mistake.

COCONUT CILANTRO CHUTNEY This vibrant, multilayered sauce balances heat with just the right amount of sweet. Elements of cilantro and coconut keep this sauce light and versatile. Commonly used daily as a flavor enhancer to everyday dishes. This sauce is vegan, gluten free, non-gmo, organic ingredients when possible, no added sugar. sugar.

TAMARIND DATE SAUCE Sweet heat, with unexpected fruit undertones. It’s a go-to addition to spice up most meals in Somalia. Spread it on toast in the morning, use it as a finishing sauce on chicken, or use it as a base for salad dressing. This sauce is vegan, gluten free, non-gmo, organic ingredients when possible, no added sugar.

Hoffman and Bogard: What is your big audacious goal? Hassan: Professionally and personally, I would love to be able to find Somali food in every grocery store across the country. It’s really important for me to have a conversation about my origins and my ethnicity. Like every immigrant, I love America and feel gratitude for all the opportunities I have. I also love my place of birth and I want very much to see it reflected in this great nation. It’s my way of paying homage, but it’s also more than that.

Hoffman and Bogard: If you were to give one piece of advice to someone you mentor, what would it be? Hassan: You’re never too small. That you and your dream are more than enough. If you stay the course, things will come to pass. Look at me, I’m just one little person. And here I am.

I think Somali food right now is where Indian food was 20 years ago. My big dream is that a Somali meal can be eaten once a week by a Wisconsin family that six years ago knew nothing more about Somalia than famine and pirates.

Roger Ailes (Fox News) The phrase “screw-up” doesn’t do justice to Ailes’ despicable alleged actions, but we thought the list would be incomplete without him. The scandal started on July 6 when, two weeks after leaving Fox News, former anchor Gretchen Carlson filed a lawsuit against the CEO, saying he sabotaged her career after she declined his sexual advances. Journalist Gabriel Sherman soon spoke with six additional womten who said they had been harassed by Ailes. Two of them went on the record. Ailes denies Carlson’s accusations, but in September, Fox News settled the lawsuit and paid Gretchen Carlson a reported $20 million. Months later, Megyn Kelly would publish a memoir in which she says Ailes sexually harassed her, a claim he also denies. On July 21 Rupert Murdoch, co-chairman of 21st Century Fox, announced that Ailes was out and took over as chairman and acting CEO of Fox News. 78

Heather Bresch (Mylan) Mylan drew the wrath of the country in 2016. The pharmaceutical company’s EpiPen product, an injected medicine for people with life-threatening allergies, was priced at $124 in 2009. By May 2016 EpiPen cost nearly $609, leaving parents who needed it for their children in a tight financial spot. In a Congressional hearing focused on the price hikes, Mylan CEO Heather Bresch said EpiPen was priced fairly and blamed increased costs on highdeductible health plans. House Representatives weren’t convinced. “I am sickened by what I’ve heard,” said Representative John Duncan (R., Tenn.). During the hearing, Bresch also falsely stated that Mylan made only $100 in profit on each EpiPen two-pack sold. Days later, Mylan said the correct number was much higher at $166. The company had sold about four million two-packs over the past year. In October Mylan agreed to pay a fine of $465 million to settle accusations that it overcharged the government for EpiPen products. The settlement didn’t include an admission of wrongdoing. Bresch remains CEO and earned nearly $19 million in total compensation in 2015. Now several U.S. states are suing Mylan and other generic drug makers for allegedly colluding to fix prices for two common generic medications, a charge Mylan denies.

Matt Harrigan (PacketSled) Parker Conrad (Zenefits) Zenefits is a Silicon Valley startup that moved fast, pursued growth at all costs and then crashed. This past February, a BuzzFeed article reported that Zenefits was employing insurance salespeople who didn’t have legitimate state licenses. A few days later, Zenefits COO David Sacks sent an internal email that read, “the fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Parker has resigned.” Other media reports accused CEO Parker Conrad of building a software tool that let insurance salespeople cheat on an online training course that’s required to receive state certification, and of presiding over a corporate culture characterized by drinking and sex in office stairwells. Zenefits didn’t comment publicly on these allegations, but a spokesman for the company said, “As Zenefits’ new CEO has made clear, it is time to turn the page at Zenefits and embrace a new set of corporate values and culture.”

We don’t often hear about CEOs threatening to kill a future president, but that’s exactly what happened at PacketSled, a San Diego-based, 25-person cybersecurity startup. After the election, an intoxicated Matt Harrigan said on Facebook that he was going to kill Donald Trump. Then he added, “Getting a sniper rifle and perching myself where it counts. Find a bedroom in the White House that suits you…. I’ll find you.” He apologized profusely afterward. “What I said was incredibly dumb, perhaps the dumbest thing I have ever said. I really only have myself to blame for this.” Harrigan resigned on November 16. 79

Elizabeth Holmes (Theranos) Elizabeth Holmes’ biggest screwups came before 2016, when Theranos didn’t disclose (paywall) that it was processing many blood tests with other companies’ more traditional machines instead of its own technology. Holmes made the list again this year because of the way she has managed the crisis. She promised to release data on the effectiveness of Theranos’ tests. In April she was scheduled to speak at a medical conference that led many physician-attendees to believe she’d be revealing data on the original technology. Instead, she focused on its newer product, miniLab, a microwave-sized device designed to analyze small samples of blood. Conference-goers called it a bait and switch. More recently, Theranos fired 43% of its staff and exited the lab business to focus on miniLab. But the lawsuits keep pouring in. Several investors have filed suit—one of which is seeking class-action status—along with Walgreens, which claims Theranos repeatedly misled the retail pharmacy chain. Walgreens says it initially found out that Theranos had voided 31,000 blood tests given to Walgreens customers through media reports, not directly from Theranos. In a press release Theranos said, “We will respond vigorously to Walgreens’ unfounded allegations, and will seek to hold Walgreens responsible for the damage it has caused to Theranos and its investors.” This year FORBES revised its estimate of Holmes’ net worth to $0. 80

Renaud Laplanche (Lending Club)

Darren Huston (Priceline) A tip from a whistleblower led Priceline’s board to open up an investigation into CEO Darren Huston. It accused Huston of having an extramarital affair with a female Priceline staffer. Huston had led Priceline’s stock to rise 30% (paywall) since he became CEO in 2013, but when the board verified the affair allegations, it fired Huston, saying he had acted “contrary to the company’s code of conduct and had engaged in activities inconsistent with the board’s expectations for executive conduct, which Mr. Huston acknowledged and for which he expressed regret.” Huston declined to comment publicly on the matter. He had to give up stock grants worth about $13 million.

Online lending platform Lending Club was once a bright spot in the fintech industry. But its CEO’s problems cast a shadow on the company this year. In the spring Lending Club’s board discovered that Laplanche had a personal investment in Cirrix Capital, but he failed to disclose it before he urged Lending Club to invest $10 million in the company. An investigation also revealed that a Lending Club engineer had falsified information to make some loans look like they had met a loan buyer’s requirements when, in fact, they hadn’t. After Laplanche discussed this incident with the board, it determined the CEO hadn’t disclosed everything he knew. The board reportedly (paywall) told Laplanche he could step down within 24 hours, or he would be fired. The company announced his resignation on May 9. In a statement to the Wall Street Journal, Laplanche said, “I recognize that events occurred on my watch where we failed to meet our high standards. While there are disagreements as to the characterization of facts, I accept that the Board acted in good faith and did what it believed was right for the Company.” On the day Laplanche resigned, Lending Club’s stock dropped 35%, from $7.10 to $4.62. Now trading slightly above $5, it has yet to recover.

Mike Pearson (Valeant) Mike Pearson went from a billionaire and Wall Street darling to a disgraced chief executive. The trouble began in August 2015, when Senator Bernie Sanders and Congressman Elijah Cummings questioned why Valeant had steeply raised the prices of heart drugs. More controversy ensued when Valeant disclosed an unusually cozy relationship with Philidor, the mail-order pharmacy that bought many Valeant products. Valeant’s share price continued to tumble and tanked again this March, on the day that Pearson came back from his three-month medical leave. The CEO had cut Valeant’s 2016 forecast and said the firm might default on its debt. Less than a week later, the board fired Pearson. Now Pearson is reportedly the subject of a criminal probe by U.S. prosecutors, who allege accounting fraud related to Valeant’s ties to Philidor. Valeant said it’s cooperating with authorities but declined to comment on the matter, as did Pearson’s lawyer. This year Valeant’s stock has dropped 86% to about $14.

John Stumpf (Wells Fargo) Wells Fargo’s big woes this year were based on events occurring prior to 2016, but CEO Stumpf’s heads-down approach to managing the crisis appeared to make matters worse. The scandal arose in September, when Wells Fargo announced it would pay $185 million to regulators because its employees had been opening new accounts for customers without their knowledge to meet quotas. At a federal hearing, Senator Elizabeth Warren lit into Stumpf, who took responsibility but also seemed to place much blame on the 5,300 low-level employees who had already been fired. Warren accused him of “gutless leadership.” At a second hearing, Stumpf took “full responsibility” for the illicit activity, but refused to say it was a consequence of management’s failings or the bank’s corporate culture. The House lawmakers scoffed. If the bank fired 5,300 employees for these offenses, it seems hard to believe that management was blame-free and there wasn’t a problem with the corporate culture. The pressure kept mounting until Stumpf stepped down in October.

How Our Company Learned to Make Better Predictions About Everything by Danny Hernandez

n Silicon Valley, everyone makes bets. Founders bet years of their lives on finding product market fit, investors bet billions on the future value of ambitious startups, and executives bet that their strategies will increase a company’s prospects. Here, predicting the future is not a theoretical superpower, it’s part of the job. But our approach to prediction seems stuck in the past. Most business forecasts fail to include measurable outcomes and are not recorded, so it is hard to know if we are even getting better at them. Research from organizational psychologist 82

Philip Tetlock, the coauthor of Superforecasting, suggests an alternative. Studying forecasting tournaments where anonymous experts predicted future events, Tetlock found that some forecasters could consistently predict better than others. Rather than possessing some innate talent, socalled “superforecasters” demonstrate what Tetlock describes as a “growth mindset,” or a willingness to learn from past mistakes and continually update their theoretical priors. Our ability to predict, like any other skill, can improve with practice.

At Twitch, a subsidiary of Amazon, we saw the promise in this research. If an individual can gain a predictive edge, so can a company. We created a program that teaches all our employees to become better forecasters regardless of their quantitative background, organizational role, or area of expertise. Taking a cue from machine learning, Twitch employees train their forecasting powers against real world historical data. Our staff are encouraged to predict quickly and are given immediate feedback so that their forecasts become more accurate. Our goal is

to leverage forecasting in order to make the “highquality, high-velocity” decisions Jeff Bezos calls for in his 2017 letter to shareholders. Through forecasting, we are better equipped to serve the millions of gamers that use our platform every day, while staying ahead of the competition. We’ve learned a lot from our experiences at Twitch, and discovered some best practices for how organizations may implement their own forecasting training programs, create a culture of forecasting, and better anticipate the future.

THE ARC OF FORECASTING AT TWITCH Numerical predictions offer a range of benefits for large, innovation organizations like Twitch. They are both precise and concise, and easy to communicate across work teams. Making predictions in terms of mathematical probabilities forces employees to quantify their own uncertainties about future events. Multiple predictions for the same event can be aggregated and averaged, and therefore help managers understand what entire teams or divisions are thinking. These numerical predictions

clarify decisions, motivate employees, and help teams communicate concerns. My belief in forecasting was cemented when I saw its power in a project I ran. Twitch is a platform for broadcasting video games. We have a product called host mode, which gives a broadcaster the ability to host another channelâ&#x20AC;&#x2122;s live broadcast on his or her own channel page. I wanted us to improve host mode, by making it easy for streamers to build and manage a list of channels to automatically host whenever youâ&#x20AC;&#x2122;re offline. So like basically everyone, I had an idea for a feature

that I was convinced was extremely important but that I lacked the direct authority to prioritize. Most people never get the buy-in they need at this point. So I decided to make a prediction:

If we build auto host Iâ&#x20AC;&#x2122;m 70% confident that, within 8 weeks, 15% of our partners (our largest influencers) will be autohosting. 83

Then I gathered supporting evidence to make the prediction convincing. We ran an auto-host study and the result was overwhelmingly positive. Almost half of participants saw 10% increases in their viewership. And what we need to build was extremely simple and cheap. Our lead engineer Jixuan Wang made his own prediction: he was 70% confident he could build the feature in eight engineering weeks. These two predictions about both the value and the cost of the feature helped me convince the stakeholders we needed. A team was allocated to work on auto host, and I solicited predictions from everyone to verify we had buy-in. Our engineer was at 75% confidence we’d hit our goal, and our lead from partnerships was at 70%. My executive mentor was a little more cautious, at 50%, but for the most part we all believed, and we knew we all believed. And when big decisions came up, we used our existing predictions as a starting point for those conversations. For instance, we asked: Should we make the push to launch for TwitchCon? It’s seemed like the perfect place for partners to make cross promotional agreements, but a 84

lot of other things were launching there and we risked getting lost in the noise. Our partnerships lead, Steve Lin, was confident that launching at TwitchCon would increase our chance of hitting our goal by 10%. Based on that prediction, our entire team agreed that launching at TwitchCon would substantially increase our chance of success. Because of our predictions, our team was completely aligned. Today, the feature is a success. Over half of our partners are auto-hosting, and channels that get 10 of their peers to auto-host them grow 10% on average. At the same time, I was helping other leaders make forecasts. But the growth of forecasting at Twitch had generally been limited by my efforts to facilitate, teach, and evangelize. Today, the training we’ve developed is allowing us to surpass that limitation and scale up forecasting throughout the company. We extend the training to product managers, engineers, executives, researchers, designers, business development — basically anyone who wants to influence the Twitch product.

TwitchCon 2015 Photo from http://imgur.com/gallery/tOtM3

Though not everyone is accustomed to numerical forecasting, the training we offer makes it easy for anyone to get comfortable. We first train employees not by predicting future, but by estimating past Twitch metrics. Understanding these numbers is not only essential for understanding Twitch’s business, but also helps employees become accustomed to estimating. For instance:

How many concurrent viewers did Twitch average last year? How much did viewership grow year-overyear in 2016? What percent of our viewership comes from mobile? Rather than provide a single number for these questions, we ask our staff to give us their 80% confidence interval, meaning a high and low estimate that they believe contains the correct answer 80% of the time. In other words, if I ask you for your 80% confidence interval in five different questions, the right answer will be within your range four out of five times. If the right answer is within your range fewer than four times, you’re overconfident. If it’s within your range all five times, you’re being too conservative and making your intervals too wide. Here’s how Tetlock himself described these “confidence quizzes” in a Harvard Business Review article last year:

“Participants are asked for range estimates about general-interest questions (such as “How old was Martin Luther King Jr. when he died?”) or companyspecific ones (such as “How mTuch federal tax did our firm pay in the past year?”). The predictors’ task is to give their best guess in the form of a range and assign

a degree of confidence to it; for example, one might guess with 90% confidence that Dr. King was between 40 and 55 when he was assassinated (he was 39). The aim is to measure not participants’ domainspecific knowledge, but, rather, how well they know what they don’t know. As Will Rogers wryly noted: “It is not what we don’t know that gets us into trouble; it is what we know that ain’t so.” Participants commonly discover that half or more of their 90% confidence ranges don’t contain the true answer.” Here’s another example you can try: What’s your 80% confidence interval for how much Amazon Web Services revenue grew in 2016? For the answer and more examples, you can view a publicly available training that I put together as an overview of Silicon Valley. Over multiple rounds of questions, individual confidence intervals adjust to match their personal level of uncertainty. Risk management expert Douglas Hubbard — a pioneer in decision science — has shown that it takes seventy questions to calibrate probability assessment such that estimates participants believe are 90% likely to occur actually occur 90% of the time. As we ask employees to make these assessments, we immediately provide the correct answers, so the Immediate feedback can help employees calibrate their assessments. Our staff quickly learns if their estimates are either over- or underconfident. Better calibration means that employee estimates are more grounded in reality and leads to lower resistance to probabilistic 85

thinking and forecasting in general. Of the employees who have participated in this training, 96% of participants say they would recommend it to a colleague. The training program has been so successful, we believe, because a better grasp of these fundamental numbers is useful when evaluating ideas, navigating resource contention, and setting expectations. Once Twitch staff have calibrated their predictions by practicing with some metrics, we ask them to make predictions that should impact their work. An easy place to start is asking them to predict how much a new project will cost to complete, in terms of either time or money. In the Standish Group’s 2016 Chaos report, they found only 16% of software projects were completed to the original specifications on time and on budget. Improving employees’ ability to estimate project completion dates and the resources required to achieve these goals helps our company stay on track. Here is a real conversation between a Twitch manager and an employee that incorporates our use of forecasting:

Employee: I’ll get Project X done this quarter. Manager: How surprised would you be if it wasn’t done by the end of the quarter? Employee: Actually not that surprised. Project Y is my top priority and projects like X have taken a full month in the past. Manager: So it’s unlikely to be done this quarter. When are you 80% sure it’ll be done by? Employee: I feel 80% confident I can deliver it by the end of June. Manager: That sounds right. Let me know if that changes. This sort of approach changes how you think about your work. Whenever I tell anyone I’ll do anything, I ask myself: am I least 80% sure I’ll actually do that? If the answer is yes, great. But if it’s no, I immediately reset expectations and say something like: “I’m sorry but realistically I’m going to need three weeks to get that to you, rather than one.” FORECASTING CHALLENGES Incorporating flash forecasting at Twitch is an iterative and improving process. Despite the promise of prediction and enthusiastic responses from our employees, we encountered three major problems while implementing forecasting training:

After successfully providing forecasting training to over 200 of our staff, we have developed several best practices to ensure the smoother roll out of future installments of the program. Whenever I talk about predictions I ask: “Do you agree it’d be really valuable if we were 20-30% better at predicting how impactful your work would be and how long it’d take?” No one has ever disagreed. I follow that question with the evidence such improvements are possible. Philip Tetlock found in a randomized controlled experiment that participants’ forecasting abilities could improve over 14% in under an hour by reading his instructions. That’s typically enough to get people excited to do the hour of calibration training I’ve prepared, and the training does the rest. Hubbard has given this training to over 1,000 people at a variety of companies and industries and this is what he’s observed:

Calibration seems to eliminate many objections to probabilistic analysis in decision making. Prior to calibration training, people might feel any subjective estimate was useless. They might believe that the only way to know a [confidence interval] is to do the math they vaguely remember

from first-semester statistics. They may distrust probabilistic analysis in general because all probabilities seem arbitrary to them. But after they’ve been calibrated, I have almost never heard them offer such a challenge. Some Twitch employees were concerned that forecasting training could reveal to their colleagues their lack of foresight. Others thought that their predictions could be misused by management. We make it explicit that predictions are a tool to make good decisions and have more impact. Being right is not the core metric for any team here. Our calibration training is anonymous, because we don’t want people to be embarrassed by the predictions they make before they are calibrated. But we can’t rely on anonymity for the actual projects we’re pursuing, because the most

important predictions are from the people closest to the project since they have the best information.

We are actively trying to build a culture that promotes “psychological safety,” defined as “a sense of confidence that the team will not reject or punish someone for speaking up.” Google found safety was the most important predictor of successful teams, and Harvard Business School professor Amy Edmondson has found it’s essential for team learning. We teach leaders to make the first forecast, explain their reasoning, and solicit forecasts from their team. The hope is that the value of the information that comes out of those conversations makes it clear that speaking up is everyone’s job. The final objection I’ve heard is that there isn’t enough evidence to make a good forecast. But at Twitch

we believe that if there is enough evidence to consider moving forward with a plan, there should be enough evidence to predict its success. Of course, not all predictions need to be rigorous and formal. We encourage employees to review the evidence they do have and make the best forecasts possible, combining both data and intuition. Being able to lean heavily on intuition is key for making quick decisions, and quantifying that intuition in the form of prediction helps us stay accountable. Remember: we all make bets about the future, whether we call them that or not. We select a career based on perceptions about its prospects; we take on projects based on what we think we can accomplish; we hire employees based on how we predict they will perform. We don’t have an option not to make predictions in our work lives, but we do have an option to try and make better ones. Individuals can get better at forecasting, and so can entire organizations. 87

INNOV 88

A TION But to whatever extent there might be, there is no way but forward, the only question by whom and when..

Ciscoâ&#x20AC;&#x2122;s CEO on Staying Ahead of Technology Shifts by John Chambers 90

ur success at Cisco has been defined by how we anticipate, capture, and lead through market transitions. Over the years, I’ve watched iconic companies disappear—Compaq, Sun Microsystems, Wang, Digital Equipment—as they failed to anticipate where the market was heading. Today we’re navigating several fundamental technology transitions, including cloud computing, mobility, and the internet of everything. These transitions force us and our customers to think about data, security, and business models differently. That means making tough decisions and immersing ourselves in a process of disrupting the market and at times ourselves. When you’re a large company with significant market share, it’s tempting to view market disruptions as a threat, but we view them as an opportunity. When a market isn’t in transition, gaining market share is hard—you’re fighting to take one or two points of share from competitors. That’s why we’re transforming our entire business, expanding to capture growth, and thinking very differently about the future of information technology. Missing Important Changes I wasn’t always interested in technology. I had been a student for a long time—I’d earned a bachelor’s degree, a law degree, and an MBA—and decided that I wanted to work in a large corporation focusing on finance and law, in either New York or Chicago. But a friend of mine was at IBM, and part of his performance review was based on how successful he was at helping to recruit. He started talking to me about a job, but I told him I wasn’t interested. I thought to myself, I didn’t go to college for nearly 10 years to be a sales rep! Then he offered tickets to a basketball game, and because I’m a huge sports fan, I accepted. After the game my friend’s manager also talked to me about working at IBM. I told him I wasn’t interested—I actually considered the field kind of geeky. He said that was the wrong way to think about it— instead I should look at the job as helping customers transform their business. Technology just happened to be the tool used in that transformation. The way he described it appealed to me. Eventually I

joined IBM as a sales rep and ended up spending six years there. From IBM, I went to Wang, where I had the chance to work with An Wang, the company’s founder and the most brilliant man I’ve ever met. He invented key parts of the computer industry and built a large, very successful company. The most important thing I learned during my time at IBM and Wang is that even great companies are imperiled if they miss a market transition—and I saw both of them miss important ones. IBM was slow to identify and adapt to the shift from mainframe computers to minicomputers. When it tried to build a minicomputer, it wound up with one that worked like a mainframe—it was so complex that it lacked the advantages of a minicomputer. That happened because IBM managers had quit listening to their customers. The same was true at Wang, which missed the shift from minicomputers to PCs. Wang actually built a PC a few years before IBM did, but built it like a minicomputer. It didn’t focus on software or applications. At IBM, I watched friends get laid off. At Wang, where I was a manager, I oversaw five rounds of layoffs during a period of 18 months. It was a painful time, but I learned what happens when companies lack the courage to disrupt themselves. After I left Wang, I got in touch with friends and people in my network, and four months later I was talking about opportunities at 22 companies. One of them was Cisco. I was told it needed someone who understood how to scale the enterprise and identify market transitions. I knew there was a great future in networking equipment, because the internet seemed ready to take off. I joined in 1991 as the senior vice president of worldwide operations, and in 1995 I became the CEO. When to Make the Leap In the 20 years since then, a whole series of shifts have occurred in the kinds of technology companies rely on and in how they consume solutions from Cisco and other suppliers. Anticipating those transitions and getting ahead of them has driven our evolution from routers and switches to mobile and video technology to application-centric infrastructure and cloud

John Chambers is the CEO of Cisco. He was number three in HBR’s 2014 list of the world’s best-performing CEOs. 91

computing. Back in the 1990s internet traffic was routed through fiber-optic cable. Within a few years the industry had shifted to switching technology, which allowed more data to travel through the same cable. In telephony the market shifted from analog to voice over internet protocol (VoIP), which allowed companies to send phone calls on the same network they used for computer data. Lucent, Nortel, Alcatel, and other companies missed that shift and were left behind. Think about how the internet has expanded from a medium for e-mail to one for web pages and then streaming video—and how users have shifted from desktop computers to smartphones and tablets for accessing all that information. Now think about the shift from owning server farms to outsourcing to the cloud. More recently, the internet of everything, which is the explosion of connections across people, 92

processes, data, and objects, has put demands on business to create new communication channels for new kinds of devices. Some of these changes required consumers to buy new devices. All of them required companies to make big investments in technology. Those that didn’t were, once again, left behind. For Cisco, each transition required a decision about when to jump from selling a profitable product to a new technology—often one that would cannibalize our existing product line. These jumps were critical, though, if we wanted to stay ahead of the curve. The best indication of when to make the jump frequently comes from our customers. That’s been true in nearly every market transition. Many years ago, before the market moved from routing to switching, I visited Ford Motor Company, a key customer. Executives there told me they were exploring a new networking

technology called Fast Ethernet. I’d never heard of it before. A week later I called on some Boeing managers, and I asked them abouTt Fast Ethernet. “Yeah, we think that might be the way to go,” they said. They told me about a company called Crescendo Communications that was making advances in that area. We ended up buying Crescendo to help us make this transition. Similarly, as the market moved toward wireless, customers told us to buy Meraki, a maker of Wi-Fi networking gear, which we did. In many other instances customers helped us spot a market shift and pointed us toward a new technology that would be useful in making the leap. That’s one reason I spend so much time listening to CIOs, CTOs, and CEOs during sales calls. A Start-Up Mentality When we’re confident that a market is going to shift, we have three ways to adapt. If we see the shift

early enough, we can develop the new technology ourselves in our traditional R&D process. We spend close to 15% of our revenue on R&D. Additionally, we have our Entrepreneurs in Residence program, which provides financial support, mentoring, and collaboration opportunities to early-stage entrepreneurs working in areas where we see huge potential, such as big data analytics, cloud computing, and enterprise security—all with the hope of bringing some of their ideas to reality and implementing them in our business. Alternatively,

hit objectives. That helps them develop a real start-up mentality and gives them a unique ability to recruit new talent. We measure their progress closely; this group is off to a great start. When the project is complete, we’ll move its members back into the main company. These engineers and developers help us bring innovative products to market quickly, but differently from our peers. Geography can play a part in spotting market shifts as well. One reason Wang and Digital Equipment failed is that they were in the Boston area, where most of the minicomputer companies were located. When I worked there, I thought every major computer company in the world was located along Route 128—and that view is part of what led the industry to miss the market shift to PCs. It has happened to other companies, too. Bill Gates has said publicly that part of the reason Microsoft was slow to adapt to the internet was that its headquarters are in Seattle rather than Silicon Valley. Being two states to the north made all the difference in not spotting that market shift. You need a certain kind of culture to adapt quickly to market changes. Sometimes it requires the courage to change your leadership team. When I became CEO, I had 11 people on my team; I knew that within a few years only one or two of them would still be at Cisco— and that’s what happened. We’ve had seven heads of sales during my time here. We’ve had six CFOs and six heads of engineering. Adapting to new markets means constantly bringing in new expertise and sustaining a resilient culture with an appetite for change. You Have to Be Bold We don’t always spot market transitions correctly. Sometimes we’re too early. For instance, we began working on the internet of everything more than seven years ago. The market wasn’t ready for it. In that instance we had the courage to keep going without overinvesting to the point where we were betting the company on it. And sure enough, eventually the market came around.

we may make an acquisition. We do that often. In fact, we’ve done 174 acquisitions. Back in the 1990s the conventional wisdom was that acquisitions in the tech industry generally fail. But we’ve been successful with most of ours. The third way we adapt is by using what we call a “spinin”: We assemble a group of engineers and developers to work on a specific project and move them out of the company, as if they were at a start-up. We have a project like that going on now. It involves 280 employees, and they’re building a multibillion-dollar business for our future. We incentivize them with financial rewards if they

In the fall of 2013 we held a conference at which everyone suddenly wanted to talk about connecting new kinds of devices and appliances to the internet and collecting new kinds of data. By the time the 2014 Consumer Electronics Show rolled around, the internet of everything was the topic, and Cisco stole the show. Now we’re spending a lot of time talking to cities and countries about how they can use internet data collection to function more efficiently and be better places to work and live. We’re already seeing results in cities such as Chicago, Barcelona, Nice, and Hamburg. Each city has unique needs, so the solutions we implement vary; but generally speaking, using data from connected devices and implementing technology such as smart parking and smart street lighting are helping to cut costs and improve the quality of life in those cities. And that’s just the beginning. Countries are also taking advantage of digitization and the internet of everything to create jobs 93

and new opportunities for innovation, as well as to improve GDP, with France, Germany, and the UK leading. At other times we have the right idea but we make a mistake in execution. The example I’m criticized for most often is Flip, the mini-video camera. We acquired the company that made it in 2009, as part of our move into consumer products. Shortly afterward Steve Jobs held up the Flip at one of his product unveilings and announced that the iPhone would shoot high-definition video. It wasn’t just adding video capability to the iPhone that disrupted the Flip—it was also the iPhone’s ability to easily upload the video into the cloud. I believe that if we’d introduced that share capability for all smartphones before Apple did, the Flip acquisition would have been successful. But we didn’t move quickly enough, and the damage was done. To our credit, we had the courage to shut the Flip down. Disrupting yourself can be really difficult. For instance, in 2014 we announced plans to realign 6,500 people, driven by our need to focus on growth areas such as cloud computing in order to adapt to what we saw as the next big transition in the market. After watching the head count at Wang go from 32,000 to zero, I’d hoped never to do another layoff. Nothing can prepare you for the pain suffered by families, customers, and shareholders. But in this case we had to move so quickly that attrition wouldn’t have gotten us where we needed to go. We finished 2014 with about the same number of employees we started with, and we’re stronger than ever. As I mentioned before, I’m a huge sports fan, and I 94

think our approach to reaching the goal of becoming the number one IT company is similar to football in many ways. It’s all about finding the hole in the line. Right now some companies have left it open because they’ve gotten comfortable with their traditional business models and are afraid to change. At Cisco we’re thinking about IT in a different way, by putting customer outcomes at the center of everything we do.

By the time it’s obvious you need to change, it’s usually too late. Very often you have to be willing to make a big move even before most of your advisers are on board. You have to be bold. And you need a culture that lets you figure out how to win even without a blueprint. That’s how we’ve always done things at Cisco. A version of this article appeared in the May 2015 issue (pp.35–38) of Harvard Business Review.

Conquering Digital Distraction Larry Rosen & Alexandra Samuel 96

Digital overload may be the defining problem of today’s workplace. All day and night, on desktops, laptops, tablets, and smartphones, we’re bombarded with so many messages and alerts that even when we want to focus, it’s nearly impossible. And when we’re tempted to procrastinate, diversions are only a click away.

This culture of constant connection takes a toll both professionally and personally. We waste time, attention, and energy on relatively unimportant information and interactions, staying busy but producing little of value. As the late Clifford Nass and his colleagues at Stanford University have shown, people who regularly juggle several streams of content do not pay attention, memorize, or manage their tasks as well as those who focus on one thing at a time. The result is reduced productivity and engagement, both in the office and at home. The Information Overload Research Group, a nonprofit consortium of business professionals, researchers, and consultants, reports that knowledge workers in the United States waste 25% of their time dealing with their huge and growing data streams, costing the economy $997 billion annually. Most people agree on the solution: Control the digital overload rather than letting it control you. But how, exactly, does one do that? We asked two experts: Larry Rosen, a psychologist, and Alexandra Samuel, a technologist. We suspected that their disparate backgrounds would lead them to offer dramatically different advice, and we were right. Rosen believes that we should systematically turn away from the information stream and focus on more energy-enhancing activities. Samuel argues that the best way to fight digital distraction is with the strategic use of digital tools. Taken together, their solutions offer a useful primer on how we can begin to tackle this huge and growing challenge.

distracted by incoming e-mails and texts that he had trouble completing important tasks, and colleagues grumbled about his failure to engage in meetings. Evenings at home were spent on his phone or laptop instead of interacting with his wife and kids. Marco confessed all this to me after I spoke at his children’s school, and then he asked if I could help him change his habits. I assured him that I could, and that he wasn’t alone.

Use behavioral principles to wean yourself from your digital devices. For the past few years, psychologists have been examining the recent dramatic changes in humans’ relationship to technology. Consider a study that colleagues and I conducted in 2008 and replicated last year. We gave people in three age groups—Baby Boomers, Generation X, and the Net Generation (born in the 1980s)—a list of 66 pairs of activities to find out which ones they typically did in tandem. Questions included, for example, “Do you go

online and text simultaneously?” and “Do you e-mail and eat at the same time?” In 2008, Baby Boomers responded yes for 59% of the pairs, on average; the numbers were 67% for Gen Xers and 75% for the Net Gen. In 2014 the percentages were higher—67% for Baby Boomers, 70% for Gen X, and 81% for the Net Gen. Meanwhile, members of the iGeneration (born in the 1990s), whom we added to the second study, were engaging in an astonishing 87% of the paired activities, even when they found one in the pair difficult all by itself. Unfortunately, the evidence shows that multitasking isn’t always successful: Doing two things well at the same time is possible only when at least one task is automatic. So, yes, you can walk and chew gum simultaneously. But check e-mail while participating in a conference call? Look at your Facebook feed and still do meaningful work? Researchers have demonstrated that the mere presence of a phone makes people less productive and less trusting, and that students who are interrupted while studying take longer to learn the material and feel more stressed. Gloria Mark, of the University of California, Irvine, has

Take a Break by Larry Rosen

Marco, a 38-year-old manager at an educational app company, used to start every day with his smartphone, checking it and replying to messages before getting out of bed. Over breakfast he read news on his CNN app, and even when driving to work, he couldn’t resist looking at his phone. At the office he was so 97

shown that workers typically attend to a task for about three minutes before switching to something else (usually an electronic communication) and that it takes about 20 minutes to return to the previous task.

diagnosis of the problem. In my lab we’ve found that many people, regardless of age, check their smartphones every 15 minutes or less and become anxious if they aren’t allowed to do so. My colleague Nancy Cheever brought 163

then shut everything down and silence your phone. Set an alarm for 15 minutes, and when it rings give yourself one minute for a tech checkin. Repeat this process until you are comfortable increasing your off-grid time to an hour or several hours. A second strategy is inspired by the research of Nathaniel Kleitman, who established that our brains work in 90-minute rest-activity cycles not only when we sleep but also when we’re awake. So you should take a recharging break every hour and a half, especially if you’re multitasking with technology, which makes the brain overly active. Even a 10-minute walk in nature is enough to have a calming effect. You might also listen to music, look at art, exercise, or meditate.

Why are we allowing ourselves to be so debilitated by technological distractions? Some people refer to the overuse of digital devices as an addiction. But since most of us don’t appear to gain much pleasure from the behavior—a defining feature of addiction—I wouldn’t classify it as such. More accurate are terms such as FOMO (fear of missing out), FOBO (fear of being offline), and nomophobia (fear of being out of mobile phone contact)—all forms of anxiety that border on obsession or compulsion. People are constantly checking their laptops, tablets, and phones because they worry about receiving new information after everyone else, responding too slowly to a text or an e-mail, or being late to comment on or like a social media post. Numerous studies support this 98

students into a lecture hall, asked them to sit without talking, doing work, or using their phones, and then assessed their anxiety over the next hour. Although light smartphone users showed no change, moderate users experienced initial alarm that leveled off, and those accustomed to checking their phones all day long felt their anxiety spike immediately and continue to increase. How do we calm the anxiety and thereby avoid the distraction? When I speak to students, parents, teachers, and business leaders, I recommend three strategies—all of which involve turning away from technology at times to regain focus. First, use behavioral principles to wean yourself from your digital devices. Allow yourself to check all modes of e-communication, but

Finally, keep technology out of your bedroom. The National Sleep Foundation (NSF) and Mayo Clinic have noted that the use of blue-lightemitting LED devices is detrimental to your sleep—a critical period that cements what you learned during the day, while removing useless information and the toxic byproducts of daily neuronal activities. NSF recommends that you abstain from viewing digital material for one hour before bedtime, while Mayo Clinic suggests dimming screens used at night, keeping them 14 inches from your face, and removing them from the room when you’re ready to sleep. The aim is to block the release of neurotransmitters that energize your brain and instead promote the production of melatonin, which allows you to rest. I persuaded Marco to periodically disconnect and, when using technology, take recharging breaks. He started going for short walks outside his office and putting his phone in a kitchen drawer at night. Within a month he was able to ignore his devices for half-hour intervals, and he felt happier and more energetic, as well as more attentive and productive.

Although we turn to technology to soothe our anxieties, overdosing on it just exacerbates them. To break the cycle, we must limit the use of our devices. Only then can we regain our ability to focus.

A CEO Who Happens to Be Female HBR: Some female CEOs are happy to talk about gender issues, some not. Do you view yourself as a “female CEO” or simply a CEO? And are there gender issues in a position like yours? Whitman: I’m a CEO who happens to be female. Sometimes gender can influence how you lead, but not always. We’re all products of our upbringing and our experiences. I’m focused on the fact that I have to deliver results and I have to be authentic, and some elements of my personality—strengths and weaknesses—shine through in my leadership. Many years ago I gave up thinking about being a female in the workplace because I wasn’t going to change that. God gave me the wisdom to know what I can change and what I can’t, and I can change how to approach financials or how to communicate. HBR: Is the bar higher for women at the top? Whitman: You have to be very good at what you do, male or female, and maybe in the early days women had to be a little bit better. In 1979, for example, there were just four women in my entering class at Procter & Gamble. But I never felt hugely disadvantaged. I just had to deliver results, be fun to work with, be easy to work with and enthusiastic. I had played a lot of sports as a girl, so I knew how to be part of a team. HBR: A lot of leaders, men and women, cite their experience playing team sports as an important asset. Can you talk more about that? Whitman: The great thing about team sports is that you don’t win unless everyone plays her position. 100

Have you ever watched a bunch of five-year-olds play soccer? They all go with the ball, and it’s not very effective. The ability to play defense and offense, to know your position, to know what you’re accountable for—all of that is learned by doing. That doesn’t mean there aren’t plenty of successful businesspeople who never played team sports, but for me, that “all for one, one for all” approach, led by a coach, was part of how I learned to lead. HBR: You’ve had a successful career. You’ve made money. What keeps you going? Whitman: I took the job because I think companies like HP are the essence of what makes this country great and have had a very positive impact on the world. I thought it mattered what happened to the company. I also like a challenge, and this is a challenge. It has been great fun. There are days I want to tear my hair out, but there’s a real role for the company to play in the industry, and I think we’ve redefined that role.

Managing Multiparty Innovation by Nathan Furr, Kate O’Keefe and Jeffrey H. Dryer

n an October morning in 2015, inside an aging beer factory in the Tempelhof neighborhood of Berlin, a group of people assembled amid idle machinery in the hope of transforming their respective industries with a novel approach to innovation. Standing shoulder to shoulder around oil barrels converted into temporary tables were innovation mavericks and senior executives at large established companies—Airbus, DHL, Caterpillar, and Cisco. The gathering, hosted by Cisco, the California-based networking and technology company, was a crucial point in a process carefully designed to tackle the most pressing challenges at the intersection of supply chain and digitization. The goal: launch partnerships for groundbreaking solutions to shared problems within the next six months. In an increasingly digital and connected environment, leaders of established companies frequently find themselves facing opportunities that they—or even their industries—cannot seize alone. The Berlin “Living Lab” (the name Cisco gives to such events) was a unique model for addressing such opportunities. Instead of relying on start-ups to create innovations and then buying in to them, organizations taking part in this new process, which we call ecosystem innovation, collaborate to develop and then commercialize new concepts.

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Cisco Hyperinnovation Living Labs (CHILL) differs from seemingly similar approaches, such as R&D alliances, because it focuses on the fast and agile commercialization of ideas without a complicated intellectual property agreement. It also differs from traditional partnership efforts, because it brings multiple partners together at a very early stage all at once. “We believe that no one company can deliver the full breadth of technology solutions that customers need at the pace the market requires,” says Chuck Robbins, Cisco’s CEO. “This process brings our teams together with partners, customers, and other companies working to find new business opportunities. Through intense analysis and collaboration, these lab sessions result in breakthrough ideas that can be implemented or invested in by those that participate, including Cisco.” At the Living Lab in Berlin, one team addressed the data-sharing problems that were created by multiple proprietary platforms; along with four universities, it is in the process of creating a crossindustry open-data platform to encourage application development by other start-ups. Another team sought to update the “pen and paper” tools used by most warehouse workers: Its solution was to replace them with augmented-reality wearables—and to design a pilot that launched in a Houston warehouse 60 days later. Cisco has applied this ecosystem innovation process to challenges in supply chain, retail (convening Nike, Costco, Visa, and Lowe’s), and health care (convening the University of California, San Francisco; Community Health Network, Walgreens, and Vocera), and will soon host a lab in finance. Early results are impressive. For example, Cisco estimates that the Airbus-DHLCaterpillar lab produced internal projects, spinouts, and joint ventures to digitize supply chains, factories, and warehouses that will generate $6 billion in new revenue and save $3.4 billion in costs over the next 10 years. Not all projects survive to fruition, but something much more important is happening: Participants are developing new innovation capabilities at the ecosystem level. Markus Durstewitz, the head of corporate innovation at Airbus, told us, “We are convinced that these big changes can only be managed and put into place by the right partners. The ecosystem innovation process was a big opportunity to show us a new way to collaborate.” In this article we discuss how large companies can develop their own ecosystem innovation capabilities, using Cisco’s process as a model. We combined insights from Kate O’Keeffe, a coauthor and the chief architect of CHILL, with those 102

gained from dozens of interviews with participants and senior executives from the organizations involved, and interpreted those insights through the lens of our research on innovation methods, R&D alliances, and learning networks. We will describe the basic principles and the process, identify the most common traps, and explain how leaders can capture valuable opportunities— the ecosystem innovations at the core of a digital age.

How to Lead Ecosystem Innovation If you think collaborating effectively with one partner is a challenge, imagine doing it with four at once—each one an enormous organization with its own distinct culture and objectives. Overcoming these challenges requires leadership, and for ecosystem innovation involving Cisco, the CHILL team leads and facilitates the entire process. It coordinates the ecosystem and the application of tools and methods drawn from design thinking, lean start-up, and business model innovation methodologies. The process has four phases, which run over several months.

1. Identify the “focus zones” and innovation partners. First the host company identifies the arenas of opportunity, or focus zones, that are important to its own strategy. Cisco recently identified health care—in particular, the digital transformation of health care—as a major growth area. However, the company’s leaders realized that to capture the most valuable opportunities, they would need to draw on partners’ capabilities to create ecosystemlevel solutions. So the CHILL team evaluated the best way to apply its methodology to the digital health care ecosystem. Specific problems to be addressed in the focus zone emerged later, in consultation with ecosystem participants. The CHILL team uses a scorecard to assess potential partners along three dimensions: maturity in innovation capability; a well-developed internal innovation process; and experience partnering with other companies, working with start-ups, or investing in start-ups. It selects partners on the basis of alignment of goals, market power, and resources. Participants needn’t be in the same industry (in fact, more radical and diverse ideas come when they’re not), but they should all have a connection to the host, or to one another, that is relevant to the ecosystem innovation effort. For example, the Berlin lab explored a subject that would benefit every

participant: how to create an adaptive supply chain—one that responds nimbly to sudden changes—through digitized systems and tools. Although the companies had not worked together in the past, they were eager to gain new knowledge and bring their respective insights and resources to bear on the challenge. The CHILL team also looks for partners that are willing to send senior executives, receive feedback from end users, and commit resources. Those executives should have top-level knowledge about organizational goals and industry challenges, experience with the innovation process or a formal innovation role at the company, and decisionmaking authority and resources to allocate to new projects. This is important because large organizations can be agonizingly bureaucratic, destroying the momentum of innovation, whereas CHILL’s startup–like speed requires individual participants with passion and clout. At the end of the Berlin lab, John Kern, the SVP of supply chain operations at Cisco, and Scott Allison, the global sector head for technology at DHL, turned to each other after presenting their team’s work (which also involved executives from Caterpillar and Airbus) and essentially said, “Let’s do this”—an on-the-spot commitment that put the funding in place and led to the launch of the open-data platform project just a few months later. Cisco’s senior corporate counsel, Jonathan Elstein, put together a simple

two-page agreement to ensure that all participants can benefit from their work without a lot of legal wrangling. “Basically, no one has claims over prior IP, and there is free use of what is created in the session,” Elstein says. “If we get involved early— talking to the other lawyers, describing the process— we can usually get over the hurdles.” Participants understand that should they decide to launch an idea, ownership will be in proportion to the human capital, IP, and financial investments that each made.

2. Find and define the problem. A successful ecosystem innovation effort includes a robust problem discovery and definition phase. CHILL team members spend three months preparing. They talk to dozens of ecosystem cohort executives, along with experts, customers, and end users, to understand the real problems customers face and identify those that offer the biggest opportunities for the participating companies. After multiple rounds of conversations, the team eventually zeroes in on a single problem to be attacked. The final challenge statement (or “ambition,” as CHILL calls it) connects Cisco’s strategy with those of its partners in the ecosystem. Once the root causes of the problem are thoroughly understood, the CHILL team defines a series of opportunity areas: specific, narrow challenges—based on real issues facing participants and customers—to be addressed during phase 3. For example, one opportunity area for the supply chain lab in Berlin was labeled “adaptive delivery” and tasked participants with creating “a revolutionary adaptive delivery tool that empowers sellers to forecast an order and reroute finished products on the basis of immediate customer needs.”

3. Convene the participants to prototype solutions. The most visible part of CHILL’s ecosystem innovation process is the Living Lab, a two-day event that embraces a design thinking and lean 103

start-up approach. At the core of that approach are rapid cycles wherein teams build a simple prototype, use it to test their “leap of faith” assumptions with customers, and then apply the learning from that test to restart the build-test-learn loop. At a CHILL lab, executives from each of the organizations are grouped into teams of four or five. The teams repeatedly cycle through hypothesis development, prototyping, and testing with customers. Each team conducts five cycles over the two days. In each cycle a team typically spends 30 minutes outlining solution ideas and hypotheses, 30 minutes developing and building a solution prototype, and 30 minutes showing the prototype to end users and getting feedback. When CEOs and end users talk directly about a solution, the impact is tremendous. David Ward, Cisco’s CTO of engineering and chief architect, calls this approach “speed innovating” and says, “This is the polar opposite of R&D. It’s built around what people don’t know, rather than the common factors we do know.” Early prototypes are simple drawings, storyboards, cardboard cutouts, or other rough representations. Later prototypes are physical mockups or digital interfaces, created with the assistance of an experienced prototype team composed of engineers, hackers, and coders. At the end of a Living Lab, teams demonstrate their prototypes in a final pitch to determine whether to continue beyond the lab. In Berlin, teams demonstrated mockedup factory processes and crude 104

working wearables. CHILL strives to create an environment and a tone that will elicit creativity and cooperation. When participants first walked into the beer factory in Berlin, for example, they saw a brightly lit stage with monitors and artwork

customer interface, unearthing the key pieces of information that customers would need in order to make a purchase decision, such as price, available space, location, and user reviews. Participants saw that they could use prototypes to move at a faster pace than they had ever thought possible. They

Lab participants can benefit from their work without a lot of legal wrangling. all around. Designers from Territory, a London design studio, were on hand to display the motion graphics they’d created for the movie The Martian—a demonstration meant to inspire the participants. Morning sessions begin with mindfulness exercises to focus participants’ attention, followed by talks with successful innovators such as Tom Chi, one of the creators of Google Glass. Chi took the stage in Berlin, declared that anything could be prototyped in seconds, and dared the participants to throw out a challenge. One suggested an “Airbnb for warehouses”—a service offering temporary storage for businesses with extra inventory. Chi proceeded to role-play how the service might function, working through the process of dropping off merchandise at a hired warehouse space and uncovering such unexpected challenges as how to handle goods that were damaged en route. He used a marker and paper to mock up the online

also saw that even the roughest prototype can be an extremely valuable tool for uncovering and testing key assumptions. The CHILL team brings along a guide, a designer, a historian, a builder, and a hacker for each team of participants. The guide acts as a coach, answering initial questions about the process and helping the team stay focused on hypothesis generation and prototyping. The designer helps capture the conversation visually. The historian documents key hypotheses and insights generated from customer testing. The builder and the hacker listen to the team’s solutions as they evolve; then, after dinner, they stay up all night working with the designer to assemble solution prototypes. When participants return in the morning and find the backbone of a physical or a software prototype, it both creates positive momentum that powers the second day and provides the raw material for a pitch that afternoon.

4. Achieve commitment and follow-up. As the second day of a Living Lab reaches its midpoint, the teams start to prepare their presentations for experts and investors—a panel composed of senior Cisco executives and executives from the participating organizations. The CHILL team also brings in business analysts to help the teams think through the business model and the “value at stake,” a metric Cisco defines as value that could be created (new revenue) or costs that could be saved by the innovation. For example, when the teams at the retail Living Lab mentioned above (Nike, Costco, Visa, and Lowe’s), held in San Francisco, designed a personalized experience in the form of a locker that was stocked with potential purchases and recommendations (and unlocked by an app), the value at stake was estimated at $432 million a year in additional revenue—an 8% increase. This metric roughly describes the potential of a project in a language that the rest of an organization can understand. After the teams present their innovations, executives who want to invest in one, including the panel “judging” the event, must commit on the spot. The goal is to get an instant decision and “timebox” the innovation cycle, which otherwise might run on and on. This also creates excitement that is vital to the future success of the

project.

Ecosystem Innovation Results It might be tempting to measure the results of ecosystem innovation in dollars alone, but these are early days, and many projects have not yet been commercialized. According to participants, however, the value of the process goes far beyond additional revenue. Every experiment produces three types of value: launch, strategic, and exit. Launch value is the profit, revenue, or enhanced reputation from commercializing an innovation. So far, about 75% of CHILL innovations have been funded and are advancing to commercialization as internal projects, joint ventures, or spun-out start-ups. Cisco estimates that the retail lab projects will reap $4.5 billion in additional revenue if they are commercialized and that the five ideas developed in the supply chain lab will generate $6 billion in additional revenue. Even if these innovations realize only

In the final stages of the process, the CHILL team spends two weeks assembling a “build archetype,” which includes (1) all the content, customer feedback, and insights generated during the session; (2) the physical architecture or code developed in making the prototype; (3) a business model; and (4) a plan of action for the next six months, agreed to by participants who committed during the wrap-up. Executives must commit on the spot, creating excitement that is vital to success. CHILL meets with all the attendees immediately after a lab, but it is up to them to take the next step. That might involve all the members of a Living Lab group, a subset of the group, or a separate start-up overseen by the member companies. Usually only two or three companies commit to moving a project to the next stage. Although CHILL does try to ensure that the group convenes its initial meetings and creates a plan to move forward, the participating executives are ultimately responsible for crafting a development agreement—usually a surprisingly straightforward step. “The parties already have experience working together during the Living Lab,” says Elstein. “They have forged a relationship and know they can create value together.”

half their potential, the value will be substantial. Strategic value is derived from the connections participants make with one another and from future collaborations. Participants repeatedly told us about seeing new opportunities to work with partners they would not previously have considered. In fact, the CHILL team estimates that for every partnership formed during the Living Lab in Berlin, three more were generated afterward as a direct result of the relationships created during the process. Exit value is knowledge, components, or solutions that are not commercialized immediately but can be tapped by participants in the future. Almost every participant we interviewed spoke effusively about customer knowledge, problem definition, process insights, or other benefits they derived. Kern notes that Cisco used the Berlin experience to create a network of innovation catalysts inside its own supply chain organization. Many others told us

that their participation helped make their large organizations more agile and ready to embrace greater risk, because the process decreased the costs of doing so.

CONCLUSION Ecosystem innovation is not a panacea, but it is one answer to the challenge of finding new ways to grow profits. Not every project developed this way succeeds: Some of them are too ambitious, some aren’t ambitious enough, some run up against cultural blocks, and some simply fail. But the process allows companies to bring extremely diverse ideas, skills, and resources together to solve ecosystem-level problems at astonishing speed. It also helps them build the innovation capabilities needed for a digital age and the collaboration skills to capture the valuable opportunities that sit at the intersection of products, companies, and industries. 105

Why Innovators Should Study the Rise and Fall of the Venetian Empire by Piero Formica

ost organizations would be happy to last for centuries, as the Venetian Republic did. From 697 to 1797 AD, Venice’s technological acumen, geographic position, and unconventionality were interlocking advantages that allowed the Most Serene Republic to flourish. But when change comes suddenly, it can turn strengths into weaknesses and sweep away even thousand-year success stories.

Venice’s military technology and the city’s pivotal location on the main trade routes of the time gave Venice several strong, mutually reinforcing advantages. The Arsenal, an advanced naval munitions factory that anticipated by several centuries the production-line method of manufacture, was the beating heart of the Venetian naval industry. From the thirteenth century on, the Arsenal nurtured creativity and spurred innovation and entrepreneurship in the construction of its galleys. The city’s geographic location helped it to defend itself from both land- and sea-based invaders. This location, consisting of a series of islands in a marshy lagoon, also pushed it to develop a (then unusual) trading and moneylending economy, since there was little land to support agriculture. And its position at the top of the Adriatic Sea allowed it to become a vital trading hub, connecting the East with the West via the Mediterranean. If, as Michael Porter wrote, competitive advantage stems from how “activities fit and reinforce one another….creating a chain that is as strong as its strongest link,” then strategic fit is something that the Venetian Republic had in spades. But, like a lot of successful entities, Venice reached a point where it focused more on exploitation than exploration: Venetian traders followed existing paths to success. Entrepreneurs chose not to move away from traditional pathways. Established practices and preferences became more popular than exploration and speculation. Merchants and traders played the game of incremental innovation by focusing on efficiency and optimization. Determined to grow their own fortunes rapidly, they pressed their feet to the accelerator rather than charting new courses.

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But toward the end of the 16th century the world was changing in ways that would make Venice less relevant. The Arsenal’s focus on galley ships made sense when the Mediterranean was the most important trading waterway. Alessandro Barbero, professor of medieval history at the University of Eastern Piedmont, in Italy, notes that the galley remained for a long time the favorite vessel of Venetian navigators. But the invention of seafaring galleons allowed countries bordering the Atlantic to set up new trade routes that did not flow through the Adriatic. This age of exploration triggered the beginning of Venice’s decline. One huge advance in technology — ships that could survive at sea for months, even years — weakened Venice’s competitive advantage and the strategic fit of its competencies.

The rise of the seafaring galleon meant Venice was suddenly disadvantaged by its location at the northern extremity of the Adriatic Sea. Moreover, its Arsenal was no longer at the cutting edge of naval technology. Venice’s economic importance had sharply contracted by the time Napoleon invaded, bringing the Venetian Empire to an official end. What’s the lesson for entrepreneurs and innovators today? The stronger the assumption that the future will function as today does, the greater the gravitational force of the status quo. Organizations set in their ways slow down and never strive for new horizons. They are doomed to wither. If you don’t want to be caught by surprise, you have to recognize that the future will be different from the past. The future is unfathomable, ambiguous, and open to every

option. One major move by a competitor, or one new technology, is sometimes all it takes to end an empire. If your current business is like a carefully tended garden, with neat beds and high walls, that’s not enough. The next opportunity (or threat) may lie outside those walls, at the messy intersection of sectors and markets. Entrepreneurs and innovators resist “success as usual” syndrome, exploring emerging technologies and new business models. They try to keep the big picture in mind and are wary of being too efficient and too optimized. This perspective helps them promote unconventional ways of thinking, solving problems, and challenging the status quo. They know the goal is not to chase a fixed horizon but to understand when and how the horizon moves as they approach it.

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UNITED STATES OF INNOVATION 2017

hange doesn’t have to happen from the top down. Even as shifts in Washington, D.C., fuel uncertainty, people in communities across the country are taking it upon themselves to chip away at the challenges in front of them, coming up with innovative solutions that can have nationwide significance. Here, we highlight some of the most promising projects, initiatives, and companies that are springing up in every state of the union. Together, they present a portrait of the country today—its concerns and responses, and its enduring capacity for progress.

SOUTH ALABAMA

An entrepreneurial food hall Downtown Birmingham’s new Pizitz Food Hall is helping to ensure the area’s urban revitalization by supporting the next generation of restaurateurs. Along with spaces for established eateries, it includes an area where a rotating group of up-andcomers can test their concepts with the public for four to six months, rent-free.

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ARKANSAS

DELAWARE

FLORIDA

The state’s effort to bring high-speed internet to all K–12 schools will be complete by summer. For Arkansas’s 600,000 students, that means additional devices in the classrooms and a more STEM-focused curriculum. The state is now exploring putting Wi-Fi on school buses to allow students to complete homework on the road.

With last year’s Delaware Blockchain Initiative, the state became the first to adopt distributed-ledger technology, to underpin its public archives. Now it’s working to allow corporations to use blockchain for financial filings; Delaware hopes to soon use it to issue shares, making trades instantaneous.

The Brightline, the country’s first privately funded passenger-railway service in 100 years, begins rolling from West Palm Beach to Miami this summer, and will eventually extend north to Orlando. New transportation hubs along the route are expected to add more than $6 billion to Florida’s economy and reinvigorate the state’s urban centers.

A push for faster classrooms

A statewide embrace of blockchain

A private take on public transit

GEORGIA

A living lab for the highway of the future Highways have always had one job: get drivers from point A to point B. But soon, “we won’t regard the singlefunction road as a good investment,” says Allie Kelly, executive director of the Ray, an 18-mile stretch of I-85 an hour outside Atlanta that serves as a testing ground for new technologies. “We’re going to want a road that can multitask,” she says, by generating energy and communicating with drivers and even the cars themselves. That’s what Kelly is developing at the Ray. Since 2015, the roadway has debuted a rollover tire-monitoring system that texts drivers their tire pressure and tread depth, plantfilled ditches that clean runoff water from the road, and pavement with built-in solar technology, turning highways into sources of renewable energy. It’s all being done in partnership with the Georgia and U.S. departments of transportation. “What we are learning here is applicable to any highway in the world,” Kelly says.

KENTUCKY

A green scheme in coal country This month, the Mountain Association for Community Economic Development will begin hiring displaced coal workers as paid interns. They will be taught to use existing skills (many are already trained electricians) to become energy-efficiency auditors and energy contractors for the state, providing a boost to Kentucky’s post-coal economy.

LOUISIANA

A multitasking coastal barrier Louisiana has turned to unconventional methods to restore and protect its eroding coast. The Living Shoreline Demonstration Project has been planting concrete and metal structures offshore that are designed to combat erosion and stimulate oyster-bed growth. Over time, the efforts will mold a more natural shoreline.

MISSISSIPPI

A resurgent manufacturing zone Joe Max Higgins Jr., CEO of the Columbusbased regional economic development organization GTR LINK, has helped generate more than 6,000 jobs in one of America’s poorest regions by persuading companies, including a helicopter maker and a steel mill, to set up plants in Mississippi’s Golden Triangle.

MARYLAND

A fresh take on urban blight Like many Rust Belt cities, Baltimore has struggled with housing vacancy. Instead of simply junking the city’s 17,000 empty buildings, a pair of social enterprises are creating job opportunities by working together to dismantle the structures mindfully. Details Deconstruction hires people facing barriers to employment—incarceration, a history of addiction, or lack of education—and puts them to work taking apart houses and preserving materials. Brick + Board transforms the salvaged hardware and reclaimed wood and brick into covetable products to sell to designers, architects, and homeowners. Their goods can be found trimming Exelon’s $160 million headquarters in downtown Baltimore and in the city’s new Open Works makerspace. “Our philosophy is that any solution to these vacancy issues has to begin with a job,” says Brick + Board director Max Pollock.

NORTH CAROLINA

OKLAHOMA

SOUTH CAROLINA

Durham’s restaurant scene is exploding—as are its landfills. Don’t Waste Durham recently debuted GreenToGo, a reusable and returnable takeout-container program that, for as low as $25 annually, allows diners to pick up boxes at participating restaurants (more than 40, and growing) and drop them off throughout the city.

Oklahoma City recently unveiled a $777 million public-works initiative called MAPS 3 that is entirely funded by a one-cent sales tax. The project includes multiple senior health centers, new convention facilities, fairground improvements, trails, a modern streetcar system, and a 70-acre park that will begin opening next year.

When states need money for public welfare programs, some turn to taxpayers. But South Carolina took the creative step of using social impact bonds in an effort to help its disproportionate number of young, lowincome mothers. The funds bolster the Nurse-Family Partnership, which provides nurses to educate and support first-time moms.

A guilt-free to-go container

A park paid for with pennies

A bond for babies

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MAINE

A pipeline for local food To bolster regional growers, Portland entrepreneur David Stone launched Forager, a platform that digitizes interactions between farmers and retailers. The approximately 100 producers who have signed up can use Forager to connect with sellers, list their inventory, and fast-track payments. Stone is planning a national expansion.

TENNESSEE

A new industry for tobacco farmers

MASSACHUSETTS

There’s a dirty secret behind denim: the toxic, resource-intensive process that creates the synthetic indigo color used by most manufacturers. Sarah Bellos’s quest to overhaul this part of denim manufacturing with her five-year-old natural-dye processor, Stony Creek Colors, led her to Robertson County, a former tobacco-farming stronghold in Tennessee. With tobacco in retreat, Bellos offers farmers an alternative: Grow the indigo plants that Stony Creek Colors uses to produce its blue dye. “We bring high-value crops to farmers,” she says, “while changing their practices to be more sustainable.” Her indigo is used in high-end jeans from brands such as J.Crew and Nudie. After opening a new plant (in a former tobacco processor), Bellos is scaling production and signing more farmers and clothing brands. But indigo is just the first step. Stony Creek is creating an entire palette of colors, all made in Tennessee and Kentucky, from either high-yield crops that Bellos breeds or agricultural waste from industries such as sawmills. “We’re applying the principles of plant breeding and chemical engineering to replace the insane use of textile dyes across the industry,” Bellos says.

New Politics founder and AmeriCorps veteran Emily Cherniack wants to reinvigorate the political system by helping civic-minded national service alumni and military veterans seek office. Her nonpartisan, four-year-old organization has nurtured 23 rising politicians, helping them hire and build teams, develop strategy, and fundraise.

A leg up for aspiring politicians

TEXAS

VIRGINIA

WEST VIRGINIA

After announcing plans in 2015 to move to 100% renewables, the 60,000-person city of Georgetown is on track to achieve its goal. Next year, its municipality-owned utilities will become one of the largest to supply customers exclusively with solar and wind power. And fixed-rate contracts mean that what’s great for the environment is also smart business.

Richmond’s Maxx Potential is a five-year-old tech company whose workers are paid (starting at $12 an hour) to learn on the job. With little technical experience, they work alongside moreseasoned colleagues to build websites and apps for Fortune 500 companies and local nonprofits alike. Some stay for years, developing nuanced skills and training newcomers.

The Veterans and Warriors to Agriculture Program helps vets, who account for an estimated 9% of West Virginia’s population, transition into civilian life and contribute to the state’s growing farming economy. With new funding from the statehouse, the program plans to offer veterans training, employment, and even help securing land.

A green city in a red state

A technology employer for all

A grassroots cure for PTSD

NEW HAMPSHIRE

A bridge with a mind of its own Portsmouth’s Memorial Bridge can now let state officials know when it needs maintenance. Engineers at the University of New Hampshire have installed sensors along the span that gather data on everything from structural soundness and traffic patterns to the effect of the bridge on the marine life below.

THE NORTHEAST CONNECTICUT

A help desk for citizens

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New Haven resident Ben Berkowitz created the SeeClickFix app to allow locals to quickly

report nonemergency issues (broken meters and streetlights, potholes, and even

excessive noise from ice-cream trucks). Officials can track, manage, and reply

within the app. It has since expanded to some 300 municipalities across the country.

NEW YORK

A big-city tech-talent pipeline

The murals of Asbury Park A mural painted on the Carousel House in Asbury Park, Oct. 7 2016, a mecca for murals and street art. (Bobby Olivier | NJ Advance Media for NJ.com)

NEW JERSEY

A rising food revolution Inside a converted steel warehouse in Newark, thousands of trays stacked 36 feet high house seeds that will soon become baby arugula, kale, and bok choy—all without the help of sunlight, soil, or even a whole lot of water. The nearly 70,000-square-foot site, among the world’s most productive vertical farms, is the new headquarters of AeroFarms and a demonstration of what cofounder David Rosenberg thinks could be the solution to food shortages. The Newark space, which will ultimately farm up to 2 million pounds of sustainable produce per year via a high-tech aeroponic growing system, has been transformative for Newark. The company’s greens are sold in area grocery stores, and AeroFarms hires local talent to run its facilities, a practice Rosenberg plans to continue as he expands. His goal is to continue opening farms around the country, and eventually the world. “We want to feed mass populations,” he says.

This fall, the first batch of graduate students will take up residence at the Cornell Tech campus on New York City’s Roosevelt Island. The campus, which will open in stages until it covers 12 acres and accommodates about 2,500 people, is the city’s bid to create a vital magnet for tech talent. The school’s curriculum, which has been developed for the past few years at Cornell Tech’s temporary residence in Manhattan, steeps students in digital product development and entrepreneurial thinking while giving them an appreciation for the real-world needs of society. “Given the pace of innovation today, [schools] need to have closer ties to government and private industries,” says founding dean Daniel Huttenlocher. The campus reflects this ethos: In addition to student housing and classrooms, it’s also home to the Bridge, a 230,000-foot mixed-use building that includes classrooms, as well as an R&D outpost of the Two Sigma investment firm, a coworking space, and offices for both Cornell Tech and outside companies. Though the project, to be completed in 2043, has been dubbed “Silicon Island” by some, Huttenlocher has a distinctly local vision. “We don’t want to lose [New York’s] diversity of people and ideas,” he says. “One of the things we [emphasize] is building things that matter. And that’s something New York is great at.”

PENNSYLVANIA

RHODE ISLAND

VERMONT

INDIANA

Pittsburgh’s Craft Business Accelerator helps both traditional artisans (glassblowers, woodworkers) and modern makers with advanced manufacturing know-how grow into smallbusiness owners by facilitating interactions with real estate developers, interior designers, architects, and restaurateurs who might buy their products.

The Rhode Island School of Design is piloting an executive education program called Design for Manufacturing Innovation to help working professionals transform and accelerate their industry. Classes include seminars on design thinking, workshops on 3-D printing and prototyping, and courses on how to assess and work with new materials.

Beginning this year, Vermont is phasing out the traditional “fee for service” system of health care with a “pay for performance” model that aims to reduce unnecessary tests and expenses by reimbursing medical practitioners based on their overall care of a patient. Vermont hopes to transition the entire state to the plan by 2022.

Founded by a husband-andwife team of Purdue University professors (and funded in part by USAID), JUA Technologies has developed an affordable machine that harnesses the sun to create high-yield dehydrated crops—and give farmers a steady source of electricity. It’s being tested on organic farms in Indiana, as well as in Kenya and Senegal.

A matchmaker for craftsmen

A fresh look at old industry

A healthier health care model

A solar spark for farmers

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ILLINOIS

A more deliberative courtroom Judges hearing bond cases have to make rapid-fire, highly consequential decisions all day long. To help them focus, the CannonDesign team in Chicago devised a new courtroom, opening later this year, that improves acoustics, minimizes distraction, and displays signage that better explains the process to defendants.

MICHIGAN

An illuminating plan in Detroit Just a few years ago, nearly half of Detroit’s 88,000 streetlights were out of commission. But after a three-year, $185 million effort that concluded this past December, the city’s Public Lighting Authority replaced old fixtures with 65,000 LED streetlights, making Detroit the largest U.S. city to have entirely energy-efficient streetlighting.

IOWA

A school for next-gen entrepreneurs Rather than enrolling students in the usual science, English, and math courses, administrators at Iowa Big, a five-yearold public high school housed in a Cedar Rapids coworking space, ask them to pick a project from a pool of ideas and bring it to life. There are no grades or classes at this initiative-based school, where students typically stay for about two years while also taking courses at their traditional high school; instead, teachers weave academics into the projects, which include everything from constructing a sustainable aquaponics farm and modeling ideas for new recreation spaces to creating an inclusive fashion line. Iowa Big, which is funded in part by a local media company and the school district to foster regional innovation, emphasizes community involvement by pairing students with a businessperson who acts as a mentor. Cofounder Shawn Cornally says the school has hundreds of students on a waiting list. It is planning a second campus, thanks to a recent $1 million grant. “[Many] public schools are trying to teach kids what they need to know and get them out,” says Cornally. “We’re interested in joy and efficacy, and in students who think of themselves as entrepreneurs.”

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NEBRASKA

A digital connection for seniors and their families

KANSAS

A lifeline for rural hospitals Internist and pediatrician Elisha Yaghmai cofounded Wichita-based Vigilias, a tech platform that connects remote clinics with primary and specialty care from bigger facilities, eliminating the need for long drives or costly transfers. The startup serves 28 Kansas hospitals and is expanding into Nebraska and New Mexico.

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When a relative is in a nursing home, health updates are often delivered to the family only after a visit to the doctor. But that doesn’t tell the complete story: If a resident stops attending bingo night or meeting friends for a daily walk, it could be a sign that she needs a higher level of care. After experiencing a gap in communication with staff caring for her own relatives, Amy Johnson cofounded LifeLoop, a web-based platform that connects employees at senior-care facilities directly with residents’ families. The LifeLoop site offers relatives real-time updates on their loved ones’ daily activities, along with the ability to send messages to staff. And by digitizing the onerous task of charting patients’ actions on paper, the platform gives staff more time to focus on the residents themselves. “We’ve eliminated an hour of work per day for [facilities’] lifestyle directors,” says Johnson, “and told a story about [the patient’s] pattern of behavior.” The service, which Johnson developed at an Omaha-based incubator, launched in the Midwest in 2015 and has spread to nine states. Johnson says the senior-care industry has become increasingly open to such innovation: “We’re on the cusp of some great advances.”

MINNESOTA

A high-speed hookup for rural residents

NORTH DAKOTA An open sky just for drones

More of Minnesota will soon have access to what’s become a necessity: reliable, affordable high-speed internet. In January, the state announced its latest Border-toBorder Broadband Development Grant to expand service to some 16,000 households and 2,000 businesses in underserved areas. A database for smart cities With free public Wi-Fi, smart traffic signals, and 125 interactive information kiosks, Kansas City is one of the country’s smartest cities. Even more intelligent: It has opened its data to residents so that they can access traffic patterns and find available parking spots. It’s also sharing its information with other cities to help them develop best practices.

North Dakota is home to the country’s first space strictly for flying drones: the Grand Sky park, a 217-acre expanse in rural Grand Forks County. There, companies (along with the military) can test and research unmanned aircraft in rugged conditions and away from commercial airspace before releasing products on the market and into the wild.

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OHIO

A holistic approach to opioid abuse prevention The Inject Hope Regional Collaborative brings together community leaders across public health, education, family services, drug prevention, and rehab sectors to address the region’s growing opiate epidemic. It launched an ad campaign last year to humanize and raise awareness of the issue.

SOUTH DAKOTA

A platform to break addiction Sioux Falls’s Face It Together is battling drug and alcohol abuse with a portfolio of data-driven tech products that enable heath care providers to offer more holistic, longterm solutions and help communities better focus their public-health resources. The organization’s technology, piloted in South Dakota, is now being used in four states.

WISCONSIN

A water sensor that can see underground Hiring experts to regularly measure the health of a well is expensive but important: Millions of Americans depend on well water. Wellntel, founded in Milwaukee, makes a series of solarpowered sensors that turns any well into a smart one, allowing owners to check on current levels and recovery time (how long it takes a well to refill after pumping) via an app. It also aggregates long-term data on a well’s water levels and can compare its performance to neighboring wells—information that’s especially useful for people in drought-weary states who can’t rely on rainwater. Cofounder Nicholas Hayes says the tracker and datasharing system compiles more groundwater information than government agencies do. After taking orders from customers in 26 states, he’s planning an international expansion. “We developed a system that puts the information in the hands of the people who use it,” he says.

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HAWAII

A sustainable tech fund The Honolulu-based Energy Excelerator is securing the islands’ finite natural resources by investing in more than 50 energy, agriculture, and mobility startups that champion sustainable, clean-tech solutions. The nonprofit program provides up to $1 million per company and helps them deploy with partners both in Hawaii and worldwide.

IDAHO

A new lens for nature lovers Boise’s Travis Leslie and Prince McClinton turned their popular Art of Visuals Instagram account, full of Idaho nature photography, into an online platform that provides emerging shutterbugs with a million-person community and tools to perfect and sell their work, including online photo tutorials and preset Lightroomediting filters.

MONTANA

A canine conservation team

ALASKA

A national brand built on local values Last fall, a pair of snacks began appearing in Whole Foods and other stores throughout the Pacific Northwest and West Coast: sleek packages of wild Alaskan salmon jerky and jars of smoked sockeye, under the label Dear North. The comestibles company is a subsidiary of the Huna Totem Corporation, which benefits its Alaska Native shareholders and the southeastern Alaskan community of Hoonah (population: 750). For years, Huna Totem has run a thriving cruise-ship port that celebrates the area’s Tlingit heritage. In an effort to create year-round revenue and jobs for locals, it launched Dear North, designed to export Alaskan products— and Hoonah’s values—to the rest of the country. “We wanted to share a piece of Alaska,” says CEO Russell Dick, “but also who we are and how we connect to the land.” The company is already planning to expand into other foods.

ARIZONA

A boost for veteran founders Former U.S. Air Force officer Phillip Potter is behind the year-old Armory, a Phoenix-

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based incubator offering mentorship and resources to veteran-led startups, which Potter says benefit from their founders’ backgrounds. A half-dozen city leaders throughout the country have already asked him to open outposts in their areas.

CALIFORNIA

A college degree for free In the fall, San Francisco will become the first city to offer tuition-free community college to residents. It’s an idea other cities have toyed with—and former President Barack Obama supported—but San Francisco is the only one that has committed to absorbing all expenses, regardless of income.

COLORADO

A marketplace for adventure Denver-based Utivity applies the peer-topeer model to skills instruction by inviting ski coaches, yoga experts, musicians, and more to list their services on its app and find eager clients. The app, which has developed a robust community with more than 1,000 experiences in the Denver area, is setting its sights on nationwide expansion.

Working Dogs for Conservation employs dogs’ impeccable sense of smell to protect the environment. Initially, a handful of dogs tracked threatened wildlife, such as grizzly bears; today, 30 dogs monitor aquatic contaminants, detect invasive species (such as zebra mussels), and sniff out diseases affecting livestock.

NEVADA

A drone-based cure for drought A partnership between Las Vegas’s Desert Research Institute, manufacturer Drone America, and aerial-services provider Avisight recently launched a fleet of drones for cloud seeding (a process that releases silver iodide to generate rain from clouds). The group plans to deploy in other regions early next year.

NEW MEXICO

A new perspective on the world Founded by researchers from the Los Alamos National Laboratory, Descartes Labs uses AI to analyze satellite imagery for industries, academia, the government— and, now, everyone. The lab’s new online GeoVisual Search tool uses geospatial analysis to let people look for objects (runways, wind turbines, orchards, etc.) across the globe.

OREGON

A housing service that doesn’t discriminate Tyrone Poole became homeless after he injured his leg in an accident. He qualified for government assistance but struggled to find a building in Portland that would approve him. Landlords had unique requirements for prospective tenants, and finding out what they were meant paying a nonrefundable fee—money Poole didn’t have. To simplify the process, he started NoAppFee.com, a platform that runs a background check on applicants and returns a list of buildings guaranteed to approve them. Currently available in Portland and Atlanta, the site charges users a one-time $35 fee, which is knocked off the first month’s rent or moving expenses. Cities around the country are now contacting Poole about building custom versions of the platform for their own low-income housing inventory. “I want to make access to housing instantaneous,” says Poole.

UTAH

An entrepreneurial dorm Last August, the Lassonde Entrepreneur Institute at the University of Utah, Salt Lake City, unveiled a 400-person dorm that functions like an incubator. Open to students of any major, the building is housing meets work space: It supports aspiring entrepreneurs with workshops, lectures, networking events, and business-plan competitions.

WASHINGTON

A second chance for food waste A Redmond-based biotech startup is giving leftover food back to the earth. WISErg installs its Harvester machines outside grocery stores and restaurants to collect and preserve food scraps until they can be transported to a nearby WISErg facility. There, they are processed into an organic, nutrient-dense liquid fertilizer and shipped to farms.

WYOMING

A map of the natural world

The Art of Visuals Instagram account, run by a team in Idaho, helps aspiring photographers start businesses.

Founded by twins Brandon and Brian Reavis, the Cody-based Natural Atlas is an interactive mapping system that encourages outdoor enthusiasts to contribute on-the-ground info and photos of the state’s trails. The founders are expanding the platform to trails nationwide and are looking for users to add their perspectives. A version of this article appeared in the May 2017 issue of Fast Company magazine.

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City University of London professor Paolo Aversa and his colleagues documented every innovation on more than 300 Formula 1 race cars over 30 years and then cross-referenced that data with information on F1 race results. They discovered that in certain situations, more innovation led to poorer performance. Their conclusion:

Sometimes, Less Innovation Is Better by Scott Berinato

Professor Aversa, defend your research. AVERSA: It started with the observation that in some races, no-frills cars, meaning those that didn’t innovate beyond F1’s minimum requirements, were doing well. My research partners—Alessandro Marino of LUISS University, Luiz Mesquita of Arizona State, and Jaideep Anand of Ohio State—and I then took it to a higher level and ran statistical models on 30 years’ worth of races. And it was clear that innovation didn’t always lead to better results. When we mapped the relationship between the two, we got an inverted U, showing that increases in innovation initially helped performance but after a point began to hurt it. But the real breakthrough was seeing that in certain circumstances, less innovative cars performed better. And average drivers were winning with average cars. 116

HBR: Why would less innovative cars perform better? We think it has to do with the environment around the innovation. If you have a complex product, like an F1 car, and are in a turbulent market, your instinct might be to innovate—to invest in getting ahead of all the change. But your chances of failing with an innovation in a dynamic, uncertain environment are very high. Often, it seems, it’s better to wait until things are more stable and let others who are busy innovating during times of turmoil fail. That’s what happens in F1? Yes. Here’s an example. In 2009, F1 announced that teams could compete using hybrid technology. This was exciting but generated great uncertainty. No one had raced

a hybrid at the F1 level before. But most teams dove into reengineering their cars to take advantage of hybrid technology. There was deep investment in innovation. One team didn’t innovate—one owned by Ross Brawn, a legend in the business. Before he’d purchased the team, it had been failing, so it was short on cash. Instead of investing in the new technology, Brawn’s team just built a really solid, basic race car. With Jenson Button, a driver who had finished 18th the year before, it blew away everyone racing the superinnovative hybrid cars and won the championship. Maybe it was luck—or a good year for the driver? The math we ran afterward suggests it wasn’t. Also, once the hybrid technology started to stabilize—once it wasn’t so uncertain—Brawn invested in it, and guess what? His team, rebranded as Mercedes, won again. He waited until the technology was better understood. The team that didn’t invest in radically new technology won the championship. But how do you know you’re in a turbulent environment? A time of turbulence is mainly defined by three factors. One: the magnitude of change. How much is the industry changing compared with other times? Two: the frequency of change. How often are changes coming at you? And three:

predictability. Can you see changes coming? The most important of these is predictability. You can absorb almost any change you can see coming. But if predictability is low, and either frequency is high or magnitude is large, you should scale back innovation until things get more stable. Certainly if all three are working against you, you should innovate less. F1 seems so specialized. Does this really apply to other businesses? We already use this framework in other fields. Think of any complex product: a cell phone, a drug. We’ve seen that anytime exogenous forces or shocks to the system happen in their markets—for instance, a new set of regulations or a major political shift—innovators tend to lose. Sudden changes create instability that seem to beg for innovation, but it’s probably better to sit tight and focus on execution and efficiency. We can apply these three factors to lots of industries. In fashion, magnitude is generally moderate— styles, materials, and so forth keep coming back in cycles. Frequency is steady, seasonal. But predictability— knowing what the next big thing will be—is wildly low. Think about music formats: The frequency of change is increasing, but it’s still

not that often—vinyl was around for decades, CDs were around for years. But magnitude is massive when changes take you from something like a CD to a streaming service. And predictability is really low now. We’ve applied these principles to everything from beer to finance and, of course, F1 racing. Are executives surprised to hear you say, “Maybe you shouldn’t be innovating so much”? We wouldn’t put it that way. F1 teams really have one product, the race car, but most companies have a portfolio of products. So we look at their different markets and think about where they should be scaling back innovation because of uncertainty. I would never say stop innovating altogether. I would say maybe push the envelope in this stable market but scale back and focus on efficiency in that market. Why did you study F1? I’m the son of an engineer. I’ve always loved Formula 1. I’ve driven race cars myself and helped design a car and build a team. Since I was a kid, I’ve watched the races with my father. It’s this amazing sport where it always seemed like the most cutting-edge cars would win. But I noticed that sometimes the lackluster cars with mediocre drivers

and low budgets won. And we’d argue about why that was. My father thought it was luck, but I thought it was something else. I said to him, “Someday I’ll prove you wrong.” So basically you’re settling a bet with your dad. It wasn’t easy, either. We had to amass blueprints to document data on six elements of the cars subject to innovation, like chassis, tires, and aerodynamics. We also had to find out if cars were updated each season. Then we graded each element’s innovativeness on a scale of 0 to 3, where 3 was radical innovation and 0 was little to none. And we vetted that with engineers. You were really committed to proving your dad wrong. I showed him the paper. He liked it. He gave me credit for winning that argument. It only took me 20 years. Where else do you want to take this research? We’re looking at other effects of turbulence. Specifically, we want to understand how it affects the likelihood that managers will create partnerships and alliances. There are lots of ways to look at what happens in times of instability. The chase goes on.

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“The heart of an organization falls into the Human Resources. And along with the rest of the units that make up an organization...”

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Of the teams we work with, about half are relatively balanced, and the rest are dominated by one or two styles. We’ve also found that top leaders are most likely to be Pioneers, and then Drivers. In many cases, the majority of executive team members share the leader’s style, which can make the team particularly susceptible to cascades. Pioneers tend to be spontaneous and outgoing. They think quickly and speak energetically, sometimes before thinking much at all. Similarly, Drivers like to take charge in group settings, and with their competitive and direct style, they’re inclined to jump right in and state their point of view rather than hang back to hear what others have to say. Especially if they’re in the majority or supported by a leader with a similar style, there’s a strong chance that Pioneers or Drivers will set the direction of a cascade with early comments. We were asked by one leader to help uncover why her team, though highly productive, was repeatedly criticized by internal stakeholders for its lack of diplomacy. We analyzed the team’s composition and saw that it was dominated by assertive and outspoken Drivers. When we asked whether this style might be ruffling feathers, those individuals pushed back, saying that they knew what needed to get done and didn’t have time to worry about people’s feelings. The team also had a small group of Integrators—the style that typically shows the most relationshipbuilding prowess. But those folks were marginalized, rarely spoke, and told us that they felt shut out and devalued. Although they were eager to share their thoughts and ideas with us in private, they were unwilling to stand up to the Drivers dominating the team. As a result, the group seemed to be losing out on the strengths of those who were best equipped to help them improve their relationships with stakeholders. How can you elevate minority perspectives on your team to avoid cascading and marginalization—without turning others off? Here are some tactics that may help.

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If you’re trying to get Guardians to share their perspective, give them the time and the details they need to prepare for a discussion or a decision. Then allow them to contribute in ways that are comfortable for them (for instance, in writing) and that don’t require them to fight for the floor—because chances are, they won’t. Making advance reading and preparation an option rather than a requirement will lessen the burden for those uninterested in spending time this way, such as Pioneers. To elicit Pioneers’ ideas, allow room for discussions to get expansive. Provide white boards and encourage people to get up and grab the marker. Determining in advance how long you’ll allow such discussions to go on will help those who prefer more structure—particularly Guardians—to relax into the free-flowing exercise. As for Integrators, dedicate some energy toward forming real relationships with them—and then ask for their thoughts. Also seek, and empower them to seek, the perspectives of other team members and stakeholders. Explore with them how the discussion or decision affects the greater good. Doing some of this work offline may prevent Drivers from getting antsy with what they may see as timeconsuming niceties. For Drivers, keep the pace of conversations brisk, and show clear connections between the discussion or decision at hand and progress toward the overall goal. Consider introducing an element of experimentation or competition—say, gamifying a training program—to keep them interested and engaged. Some styles, such as Integrators, may be less motivated by competition, so also look for ways to build or strengthen relationships—for instance, by providing opportunities

for competing teams to socialize together. Beyond these type-specific tactics, there are more-general ways to elevate minority perspectives on your team: Encourage anyone in the minority to speak up early to give them a chance to influence the direction of the conversation before a cascade sets the course. Polish psychologist Solomon Asch’s classic experiments on conformity demonstrated that when even one person goes against the majority, the likelihood that others will offer divergent perspectives increases greatly. Take advantage of this phenomenon to promote healthy dissent. Also ask people to brainstorm on their own ahead of time and then share their ideas in roundrobin fashion when the group convenes. Studies have shown that this approach is more effective than group brainstorming. Like giving minority styles the floor first,

individual brainstorming can get more diverse ideas into the mix before a particular direction gains momentum. It also gives greater voice to those who prefer to process and generate ideas in a quiet atmosphere or at a more deliberate pace. If a team is light on a particular style, try asking others to “think like” that style. Do this early in the conversation, before the majority viewpoint takes hold. Many of us are accustomed to saying, “Just playing devil’s advocate”; in this case, one might say, “Just playing Guardian here…” or “If I were to view this issue through the lens of a Driver….” We’ve found that teams that have learned about the four styles are quite adept at putting themselves in the shoes of others when asked, and that doing so can enrich and round out a discussion that otherwise might be one-dimensional.

Pay close attention to your sensitive introverts. Although a cascading team may lose out on contributions from any style that’s in the minority, members who are highly introverted or sensitive are at greatest risk of being drowned out. We see the most evidence of introversion and sensitivity among Guardians but also find these traits in a subset of Integrators we’ll call Quiet Integrators. As with people who don’t share their team’s dominating style, sensitive introverts are rarely heard unless leaders deliberately reach out to them. A Pioneer or Driver cascade can feel like Niagara Falls to Guardians, who tend to be reserved, to consider decisions carefully, and to avoid confrontation. Particularly if they’re in the minority, they may not speak up when others are clamoring to say their piece. Similarly, Quiet Integrators tend to be particularly nonconfrontational and focused on consensus—so if the team appears to be leaning in a certain direction, they’re unlikely to offer a divergent perspective. And because neither 121

effectively under stress. These findings fit right in with author Susan Cain’s work on introverts and psychologist Elaine Aron’s work on highly sensitive people. Both suggest that today’s breakneck, open-space, highly collaborative work environment is particularly challenging for these groups. Now consider all this in light of the fact that top leaders tend to be Pioneers or Drivers. People who are most introverted, most stressed, and least adaptable are often being led by those who are most extroverted, least stressed, and most adaptable. You can probably see how this could pose difficulties for everyone.

Guardians nor Quiet Integrators are inclined to embrace risk, they will probably see little reason to stick their necks out to challenge the prevailing wisdom. Add to that the ways in which Guardians and Integrators are affected by stress. In a study of more than 20,000 professionals from inside and outside Deloitte, those styles were more likely than Pioneers and Drivers to report feeling stressed.(see the exhibit &#8220;Stressed-Out&#8221;) And their stress levels were higher in response to every kind of situation we asked about—face-to-face interactions, conflicts, a sense of urgency, heavy workloads, and errors. In a second sample, this time of more than 17,000 professionals, Guardians and Integrators were also less likely to report that they work 122

levels manageable. This may involve identifying ways to slow the pace, reduce information overload, provide quieter or more private work environments, or run interference for them so that they can focus without a lot of distraction. Next, to borrow a suggestion from Susan Cain’s popular TED Talk about the power of introverts: “Stop the madness for group work! Just stop it!” Engage Guardians and Quiet Integrators by giving them some alone time for more-reflective tasks. Instead of defaulting to teamwork, ask whether some tasks are actually better done in solitude.

Sensitive introverts may not take charge, or compete, or even talk much at all, but don’t mistake this for lack of interest. They’re almost certainly observing and processing. You might ask, Why bother If you want their perspective, ask catering to sensitive introverts? them directly, but use a light touch— Shouldn’t people be able to adapt and manage their stress? cold-calling Guardians and Quiet Integrators can backfire if they To speak up even when it’s haven’t had a chance to reflect first. difficult? Maybe you simply If you do give them an opportunity don’t want those who can’t. to prepare and then make space for them to speak in a meeting, they’ll We think you do. Cain’s probably be happy to offer their and Aron’s research shows thoughts. One leader we worked with that people who are more was particularly skilled at this. Before introverted or sensitive meetings that included introverted have particular strengths that can team members, she would tell them benefit teams and organizations. what the discussion would focus on, For example, they tend to be often making specific requests to conscientious and thorough—good facilitate their involvement: “Will at spotting errors and potential risks. you say something about They can focus intensely X topic or comment on for long periods of time. section Y when we get They’re good listeners and Encourage to it in the meeting?” more likely to highlight anyone in the others’ great ideas than minority to speak up Guardians and Quiet to seek the spotlight for before a “cascade” Integrators spend a themselves. They often starts. lot of time and energy tackle and excel at the reviewing their own detail-oriented work that mistakes, so it’s important others can’t or simply don’t to create an environment where want to do. So while reaching out good faith efforts are celebrated even to sensitive introverts may be laborwhen they fail. Since teams that intensive, the effort should pay off. feel psychologically safe have been shown to outperform those that do To get the most out of your not, this can benefit team members Guardians and your Quiet of all styles. Integrators, consider asking how you can help them keep their stress

Practicing What We Preach We’ve seen the power of this approach in working with executives and teams, and we’ve also experienced it personally, in our own opposingstyles partnership. One of us, Kim, is a Pioneer with a good bit of Driver mixed in. She values expansive thinking and rapid advancement, and she leads a large team dominated by other extroverted, free-wheeling Pioneers. Suzanne is a Guardian and a Quiet Integrator—a double dose of introverted sensitivity—making her a bit different from many of her teammates. She processes things deeply, insists on rigor, and can’t be rushed. Working with Kim and the broader team sometimes feels to Suzanne like trying to thread a needle in the midst of a hurricane. To Kim, working with Suzanne sometimes feels like running in deep water. Early on, things didn’t always go smoothly for us, but with time we’ve realized how much stronger we are working together. Suzanne knows that Kim’s always got the big picture in mind, and Kim trusts that Suzanne has considered every detail. And as the team’s leader, Kim has created a protective enclave that allows Suzanne to take cover and do what she does best. Our partnership is better for it, and so is our team.

HOW WORK STYLES INFORM LEADERSHIP STRATEGY

Adam Malamut Chief Customer Experience Officer, Marriott Two years ago, when I was chief talent officer for Marriott, I was tasked with streamlining and modernizing our learning and development capabilities. I’d assembled a new team and wanted to make sure we understood one another, our roles and responsibilities, and our strategic objectives before embarking on this journey. We used the personality style framework not only to understand our own strengths and weaknesses and how to work more effectively together but also to identify where we needed to augment the team and what we could realistically accomplish in our first year, and then our second. As one of the initial steps in the strategic planning process, everyone considered their own profiles and those of their respective teams and started to staff them more

appropriately. For example, the groups working on the design and development of our learning content and delivery approaches had a strong Guardian and Driver orientation; they needed to be pushed from a creative standpoint, so we added a Pioneer to lead an arm of that team. And when I staffed the group charged with the detail-oriented and collaborative process of organizing and integrating our learning and delivery offerings, I made sure to include Guardians and Integrators. As a Pioneer and Driver, I need those types around me personally, too. Now I’m in a new role—chief customer experience officer—and getting ready to launch a series of change initiatives following our merger with Starwood. My peers and I—a group of seven senior leaders—plan to use this approach to improve collaboration as we develop and execute on our strategic plans.

MANAGING UP AND DOWN

Elizabeth Bryant Vice President, Southwest Airlines University When I took the personality style test six months ago—along with about 50 other senior Southwest executives—I had a real “aha” moment. The surprise wasn’t my own results: I’m strong on both the Pioneer and Integrator scales—a strategist and a communicator. It was that I hadn’t been thinking carefully enough about how to temper those tendencies for people with different styles. For example, my boss—who leads corporate services—is more of a Driver, so I can’t just talk through the vision of a particular initiative with him. I need to make it very clear that we’re hitting our milestones: “Here’s what we’ve accomplished, and here’s where we’re going.” We’re both paying more attention to the mix of styles on our leadership team, too. It’s the two of us plus three Integrators, so we all need to put our Guardian hats on once in a while to make sure that we’re gathering the data, protecting our history and culture, and moving at the right pace.

I’ve also had my direct reports take the assessment, and I’ve learned that they’re mostly Integrators. That’s great, but I’m conscious that we need some Driver behavior as well: A goal is just a goal until you make it happen. My husband reminded me of this the other day. We’d been house hunting, and I’d found the perfect place for us to buy, so I felt my work was done. But then he said, “You know, Elizabeth, it’s great that you have this vision and go after it, but then everyone around you has to get to work. I’m the one who has to deal with the realtor, the lawyer, the inspector.” I shared this story with my team and asked that they tell me when an idea I suggest sounds challenging—or even impossible. And I’m now more conscientious when thinking out loud. Something I ask about offhandedly could, for an Integrator, Driver, or Guardian, be understood as an important to-do item.

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HIRING AND JOB CRAFTING Greg Keeley Executive Vice President, American Express

I took the assessment as part of an executive evaluation, and I expected my results to show that I’m 100% Driver, because that was my role at American Express. But I was strongest on the Pioneer scale. This showed me that although I was doing what the firm needed me to do, many of the behaviors I’d adopted didn’t reflect who I really am. I shared the findings with my boss and my team and asked my direct reports to take the test. I was pleasantly surprised by the diversity in our group and soon realized that I could dial down the Driver aspects of my job. Of course, we still had product, process, and revenue goals to hit, but I could use a scorecard to track those, delegate some duties, and spend more time on new-product development and strategy. When I did, my job satisfaction shot way up. I’m in the same role, with the same boss and team, but I have so much more passion and energy than I did before. I’ve even changed the way I introduce myself to new colleagues or vendors. Before a meeting starts, I take a few minutes to say, “Here’s how I tend to think and act…” and I ask them to do the same for me. It’s a shortcut to better communication and engagement. And personality now informs how I think about assignments, promotions, and hiring. When I was recently trying to fill a role, I met with a strong candidate who took the assessment and came up as a Driver/Guardian. But the job required vision and coordination with other groups. What I needed was a Pioneer/Integrator. I modified the job description and finally found the right person. The Driver/Guardian took a position in the company more suited to his personality. I’d love to see middle managers adopt this sort of thinking—they oversee an estimated 80% of the workforce—because it’s fundamental leadership training. You need to know who you are before you know what you can become.

TEAMWORK Charles Derosa U.S. Treasurer, National Grid

I’ve now led three teams at National Grid, ranging from about 25 people to about 200. I always talk to my staff about personality styles, because I believe it helps people work together more effectively. I’m a Driver, one of those personalities that can push people hard. I like facts and figures, and goals and objectives. My natural instinct is to skip small talk. One of my bosses is a Pioneer; he enjoys brainstorming. One of my direct reports is an Integrator, who wants to make sure every view is expressed. Other people on my team are Guardians. They’re very reliable but not always flexible, and they often play devil’s advocate. To function effectively, we need to recognize and appreciate everyone’s style and to have open discussions about our differences: What does each of us like? And what really bugs us? This enables us to be more thoughtful in our interactions. Since we started having these conversations, the people on my team have adapted their styles a bit: The Guardians recognize that their behavior can seem defensive, and they try to avoid ruffling feathers while still conveying important messages. The Drivers now show more patience. When dealing with me, everyone prepares more thoroughly and tries to get to the point more quickly. I have adapted as well; in the past I’d get frustrated, but now I realize how important each style is in reaching the best decision. And when the group has personality conflicts, I do my best to facilitate progress. In the end, we’re all better able to work together toward our goals and those of the department. It’s human nature to gravitate toward people with work styles similar to our own. But there will always be (and we benefit from) personality diversity in the workplace. I believe in providing the right opportunity to all types.

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DECISION MAKING Gary Pilnick Vice Chairman, Corporate Development and Chief Legal Officer, Kellogg

Executives need to be thinking in all four quadrants of personality when they’re making big decisions. For example, I’m a Pioneer/Integrator, which means I need to flex to Driver and Guardian mindsets sometimes. Otherwise all I’m doing is dreaming and talking to people. When I’m working with a fellow Pioneer/ Integrator, I need to ask, “Where’s your data?” and set firm deadlines. With a Driver, I’ll say, “OK, we’ve clarified objectives and the schedule. What experts should you consult with now? Who needs to be informed?” With a Guardian, it’s about focusing on results: “Are we pushing hard enough?” Because my team has been through the assessment process, we can all talk this way now. In a recent meeting with one of my leaders, we started by “pioneering” together, then I was reminded “OK, it’s time to ‘drive’ and make a decision.” And we did it with smiles on our faces. Of course, it’s nice to lean into your dominant style, and most of us do when we’re under stress. But we all are able to shift mindsets, or think like the others, when we’re reminded to. It’s not like trying to write with the wrong hand. It’s more like going a little faster or slower than normal on the highway, or taking a new route to work. It feels different and maybe a little uncomfortable, but it’s not awkward. I’ve worked for several Pioneer/Drivers over the years, and I wouldn’t have survived without the ability to get things done. I have a strong Pioneer in a key compliance role, but I wouldn’t want anyone else because she can flex into Guardian when necessary. And I have a Driver on my team who now recognizes that he can deliver faster results with morelasting outcomes by slowing down and getting colleagues to collaborate. I see this framework as one way to move all our departments toward a more agile culture that values quick yet informed decisions. It’s a blueprint for touching all the bases.

CREATIVITY

“The student does not only learn from the words of his teacher alone but more in how these were spoken..”

SPECIAL FEATURES

“The process of mental liberation to such inhibition comes similarly that innovative solutions to our day-to-day problems often come from disciplines not too close from our own..” 125

HOW DID LIFE BEGIN? DIVIDING DROPLETS COULD HOLD THE ANSWER by Natalie Wolchover

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A COLLABORATION OF physicists and biologists in Germany has found a simple mechanism that might have enabled liquid droplets to evolve into living cells in early Earth’s primordial soup. Origin-of-life researchers have praised the minimalism of the idea. Ramin Golestanian, a professor of theoretical physics at the University of Oxford who was not involved in the research, called it a big achievement that suggests that “the general phenomenology of life formation is a lot easier than one might think.”

The central question about the origin of life has been how the first cells arose from primitive precursors. What were those precursors, dubbed “protocells,” and how did they come alive? Proponents of the “membranefirst” hypothesis have argued that a fatty-acid membrane was needed to corral the chemicals of life and incubate biological complexity. But how could something as complex as a membrane start to self-replicate and proliferate, allowing evolution to act on it? In 1924, Alexander Oparin, the Russian biochemist who first envisioned a hot, briny primordial soup as the source of life’s humble beginnings, proposed that the mystery protocells might have been liquid droplets—naturally forming, membrane-free containers that concentrate chemicals and thereby foster reactions. In recent years, droplets have been found to perform a range of essential functions inside modern cells, reviving Oparin’s longforgotten speculation about their role in evolutionary history. But neither he nor anyone else could explain how droplets might have proliferated, growing and dividing and, in the process, evolving into the first cells. Now, the new work by David Zwicker and collaborators at the Max Planck Institute for the Physics of Complex Systems and the Max Planck Institute of Molecular Cell Biology and Genetics, both in Dresden, suggests an answer. The scientists studied the physics of “chemically active” droplets, which cycle chemicals in and out of the surrounding fluid, and

discovered that these droplets tend to grow to cell size and divide, just like cells. This “active droplet” behavior differs from the passive and more familiar tendencies of oil droplets in water, which glom together into bigger and bigger droplets without ever dividing. If chemically active droplets can grow to a set size and divide of their own accord, then “it makes it more plausible that there could have been spontaneous emergence of life from nonliving soup,” said Frank Jülicher, a biophysicist in Dresden and a coauthor of the new paper. The findings, reported in Nature Physics last month, paint a possible picture of life’s start by explaining “how cells made daughters,” said Zwicker, who is now a postdoctoral researcher at Harvard University. “This is, of course, key if you want to think about evolution.” Luca Giomi, a theoretical biophysicist at Leiden University in the Netherlands who studies the possible physical mechanisms behind the origin of life, said the new proposal is significantly simpler than other mechanisms of protocell division that have been considered, calling it “a very promising direction.” However, David Deamer, a biochemist at the University of California, Santa Cruz, and a longtime champion of the membranefirst hypothesis, argues that while the newfound mechanism of droplet division is interesting, its relevance to the origin of life remains to be seen. The mechanism is a far cry, he noted,

from the complicated, multistep process by which modern cells divide. Could simple dividing droplets have evolved into the teeming menagerie of modern life, from amoebas to zebras? Physicists and biologists familiar with the new work say it’s plausible. As a next step, experiments are under way in Dresden to try to observe the growth and division of active droplets made of synthetic polymers that are modeled after the droplets found in living cells. After that, the scientists hope to observe biological droplets dividing in the same way. Clifford Brangwynne, a biophysicist at Princeton University who was part of the Dresden-based team that identified the first subcellular droplets eight years ago—tiny liquid aggregates of protein and RNA in cells of the worm C. elegans— explained that it would not be surprising if these were vestiges of evolutionary history. Just as mitochondria, organelles that have their own DNA, came from ancient bacteria that infected cells and developed a symbiotic relationship with them, “the condensed liquid phases that we see in living cells might reflect, in a similar sense, a sort of fossil record of the physicochemical driving forces that helped set up cells in the first place,” he said. “This Nature Physics paper takes that to the next level,” by revealing the features that droplets would have needed “to play a role as protocells,” Brangwynne added.

DROPLETS IN DRESDEN The Dresden droplet discoveries began in 2009, when Brangwynne and collaborators demystified the nature of little dots known as “P granules” in C. elegans germline cells, which undergo division into sperm and egg cells. During this division process, the researchers observed that P granules grow, shrink and move across the cells via diffusion. The discovery that they are liquid droplets, reported in Science, prompted a wave of activity as other subcellular structures were also identified as droplets. It didn’t take long for Brangwynne and Tony Hyman, head of the Dresden biology lab where the initial experiments took place, to make the connection to Oparin’s 1924 protocell theory. In a 2012 essay about Oparin’s life and seminal book, The Origin of Life, Brangwynne and Hyman wrote that the droplets he theorized about “may still be alive and well, safe within our cells, like flies in life’s evolving amber.”

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Oparin most famously hypothesized that lightning strikes or geothermal activity on early Earth could have triggered the synthesis of organic macromolecules necessary for life—a conjecture later made independently by the British scientist John Haldane and triumphantly confirmed by the Miller-Urey experiment in the 1950s. Another of Oparin’s ideas, that liquid aggregates of these macromolecules might have served as protocells, was less celebrated, in part because he had no clue as to how the droplets might have reproduced, thereby enabling evolution. The Dresden group studying P granules didn’t know either. In the wake of their discovery, Jülicher assigned his new student, Zwicker, the task of unraveling the physics of centrosomes, organelles involved in animal cell division that also seemed to behave like droplets. Zwicker modeled the centrosomes as “outof-equilibrium” systems that are chemically active, continuously cycling constituent proteins into and out of the surrounding liquid cytoplasm. In his model, these proteins have two chemical states. Proteins in state A dissolve in the surrounding liquid, while those in state B are insoluble, aggregating inside a droplet. Sometimes, proteins in state B spontaneously switch to state A and flow out of the droplet. An energy source can trigger the reverse reaction, causing a protein in state A to overcome a chemical barrier and transform into state B; when this insoluble protein bumps into a droplet, it slinks easily inside, like a raindrop in a puddle. Thus, as long as there’s an energy source, molecules flow in and out of an active droplet. “In the context of early Earth, sunlight would be the driving force,” Jülicher said.

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Zwicker discovered that this chemical influx and efflux will exactly counterbalance each other when an active droplet reaches a certain volume, causing the droplet to stop growing. Typical droplets in Zwicker’s simulations grew to tens or hundreds of microns across depending on their properties—the scale of cells. The next discovery was even more unexpected. Although active droplets have a stable size, Zwicker found that they are unstable with respect to shape: When a surplus of B molecules enters a droplet on one part of its surface, causing it to bulge slightly in that direction, the extra surface area from the bulging further accelerates the droplet’s growth as more molecules can diffuse inside. The droplet elongates further and pinches in at the middle, which has low surface area. Eventually, it splits into a pair of droplets, which then grow to the characteristic size. When Jülicher saw simulations of Zwicker’s equations, “he immediately jumped on it and said, ‘That looks very much like division,’” Zwicker said. “And then this whole protocell idea emerged quickly.” Zwicker, Jülicher and their collaborators, Rabea Seyboldt, Christoph Weber and Tony Hyman, developed their theory over the next three years, extending Oparin’s vision. “If you just think about droplets like Oparin did, then it’s not clear how evolution could act on these droplets,” Zwicker said. “For evolution, you have to make copies of yourself with slight modifications, and then natural selection decides how things get more complex.”

GLOBULE ANCESTOR Last spring, Jülicher began meeting with Dora Tang, head of a biology lab at the Max Planck Institute of Molecular Cell Biology and Genetics, to discuss plans to try to observe activedroplet division in action. Tang’s lab synthesizes artificial cells made of polymers, lipids and proteins that resemble biochemical molecules. Over the next few months, she and her team will look for division of liquid droplets made of polymers that are physically similar to the proteins in P granules and centrosomes. The next step, which will be made in collaboration with Hyman’s lab, is to try to observe centrosomes or other biological droplets dividing, and to determine if they utilize the mechanism identified in the paper by Zwicker and colleagues. “That would be a big deal,” said Giomi, the Leiden biophysicist. When Deamer, the membrane-first proponent, read the new paper, he recalled having once observed something like the predicted behavior

in hydrocarbon droplets he had extracted from a meteorite. When he illuminated the droplets in near-ultraviolet light, they began moving and dividing. (He sent footage of the phenomenon to Jülicher.) Nonetheless, Deamer isn’t convinced of the effect’s significance. “There is no obvious way for the mechanism of division they reported to evolve into the complex process by which living cells actually divide,” he said. Other researchers disagree, including Tang. She says that once droplets started to divide, they could easily have gained the ability to transfer genetic information, essentially divvying up a batch of protein-coding RNA or DNA into equal parcels for their daughter cells. If this genetic material coded for useful proteins that increased the rate of droplet division, natural selection would favor the behavior. Protocells, fueled by sunlight and the law of increasing entropy, would

gradually have grown more complex. Jülicher and colleagues argue that somewhere along the way, protocell droplets could have acquired membranes. Droplets naturally collect crusts of lipids that prefer to lie at the interface between the droplets and the surrounding liquid. Somehow, genes might have started coding for these membranes as a kind of protection. When this idea was put to Deamer, he said, “I can go along with that,” noting that he would define protocells as the first droplets that had membranes. The primordial plotline hinges, of course, on the outcome of future experiments, which will determine how robust and relevant the predicted droplet division mechanism really is. Can chemicals be found with the right two states, A and B, to bear out the theory? If so, then a viable path from nonlife to life starts to come into focus.

The luckiest part of the whole process, in Jülicher’s opinion, was not that droplets turned into cells, but that the first droplet—our globule ancestor—formed to begin with. Droplets require a lot of chemical material to spontaneously arise or “nucleate,” and it’s unclear how so many of the right complex macromolecules could have accumulated in the primordial soup to make it happen. But then again, Jülicher said, there was a lot of soup, and it was stewing for eons. “It’s a very rare event. You have to wait a long time for it to happen,” he said. “And once it happens, then the next things happen more easily, and more systematically.” Original story reprinted with permission from Quanta Magazine, an editorially independent publication of the Simons Foundation whose mission is to enhance public understanding of science by covering research developments and trends in mathematics and the physical and life sciences. 129

Illustrations: Ery Burns; Source Photo: Vera Anderson/WireImage/Getty Images

PRESIDENT OPRAH? Starbucks’s Howard Schultz, Disney’s Bob Iger, and other biz leaders may be mulling 2020 presidential runs. Experts weigh in on why that matters.

On a recent afternoon in Washington, D.C., at a Starbucks just a few blocks from the White House, a pair of baristas are explaining why their boss Howard Schultz should run for president. Schultz, the executive chairman of the world’s largest coffeeshop chain, had reportedly considered bids for the Oval Office in previous elections, but since he announced in December that he would be stepping down as CEO, speculation has built about his plans for 2020. Employees at this particular store seem eager for “Howard,” as they call him, to get in the race. “He’s a great guy and a great CEO,” says one of the workers, pointing to Starbucks’s unusually generous benefits and Schultz’s progressive activism on a 130

range of current issues, which include advocating for LGBTQ rights and providing job opportunities to both military veterans and refugees. “I would consider voting for him.” For many Washington pundits and insiders, the idea of a Schultz candidacy is hard to resist. The billionaire Brooklyn native seems to have the means, the private-sector bona fides, the platform and reach, and the strong personal brand to potentially mount a serious challenge to President Trump. But Schultz is hardly the only executive who is generating excitement in the political world. Ever since Trump’s November victory—which was significantly aided by his image as a businessman—election watchers are looking toward a range of corporate luminaries as potential presidential candidates. Disney CEO Bob Iger is reportedly thinking about a run, as is Dallas Mavericks owner (and Shark Tank realityTV star) Mark Cuban. Facebook CEO Mark Zuckerberg is a rumored potential contender (although he has denied it, as has COO Sheryl Sandberg). Even Oprah Winfrey hinted that she might be interested. “After Trump’s success, it’s no surprise that nonpoliticians from the worlds of business and entertainment are asking themselves, Why not me?” says Brian Fallon, who served as the press secretary for Hillary Clinton’s most recent presidential campaign. “Today, businesspeople are seen almost automatically as effective messengers on the economy, as job creators. That gives them an inherent advantage.”

with their easily criticized voting records—are associated with Washington gridlock and entrenched bureaucracy, business success is synonymous with a certain kind of savvy and smarts. “We’re in an era when CEOs are the leaders of America,” Brinkley says. “More people are going to be interested in the story of Bill Gates or Steve Jobs than some senator.” Trump convinced voters that an outsider from the corporate world would be well-suited to take on big government, but certainly his enormous brand recognition and television celebrity also contributed greatly to his appeal as a candidate. Did people vote for him because he was actually a successful CEO, or because he played one on TV? “There’s no question that Trump entered this race with a great advantage for having done The Apprentice,” says Stuart Stevens, who ran Romney’s 2012 campaign. “The idea that you have to have held elected office before to run for president is now clearly false.”

Grande aspirations: Starbucks executive chairman Howard Schultz would be a different kind of outsider candidate.

[Photo: João Canziani]

Things were very different when Henry Ford ran for a Senate seat in Michigan a century ago. With his industry-building experience and virtually unlimited finances, the automobile magnate was initially thought to be a shoo-in for the seat. He ended up losing, however, in “a defeat that sent shivers through other businesspeople thinking of running for office themselves,” according to presidential historian Douglas Brinkley. “Generations of the richest people learned there’s a populist rebellion that occurs when voters feel there’s someone rich buying [an election].” Since then, America’s perception of wealth, and of CEOs, has changed significantly, easing the way for business-world aspirants such as EDS founder Ross Perot, onetime Godfather’s Pizza leader Herman Cain, and former HP CEO Carly Fiorina, most of whom never got much traction with their presidential efforts. (Mitt Romney, who won the Republican nomination in 2012, emphasized his tenure as governor of Massachusetts more than his experience as cofounder of Bain Capital.) While career politicians—

“Democrats are looking at their senators and governors and saying, ‘Yikes, they don’t have the right stuff. But what about one of these CEOs or celebrities?’ ”

If Trump benefited so greatly from his hit reality-TV show, just think about the boost Oprah would likely get given her decades of ratings success with The Oprah Winfrey Show and her extraordinarily passionate fan base. Or imagine the halo effect Schultz and Iger might enjoy with their leadership being so closely tied to such beloved brands as Starbucks and Disney. “Most people don’t experience a Trump hotel, while people all over the country experience Starbucks every day,” says Democratic strategist Joe Trippi, who oversaw Howard Dean’s unsuccessful presidential campaign back in 2004. Business leaders can also tap into certain advantages that just aren’t available to most traditional politicians. “They have the resources to run,” says Trippi, “unlike the Bernie Sanderses of the world, who can only get the resources by attracting a big following.” Mark Cuban is a highly engaged social media star with more than 6.5 million Twitter followers. Oprah publishes her own magazine and has countless famous (and wealthy) friends and admirers. And if even a fraction of Starbucks’s 170,000 U.S. employees get excited about the idea of a Schultz campaign, that would start him off with a groundswell of campaign volunteers. But simply having a megaphone isn’t going to be enough. “Regardless of whether you own a platform like, say, a chain of retail locations or a social media network, you need that fluency 131

in identifying and reaching the audience you’re seeking,” says Fallon. “The type of innovation happening in marketing in C-suites is probably what needs to be imported to political communication.” With no obvious front-runner for the 2020 Democratic ticket, it seems quite likely that other unexpected candidates, each with their own unique brand and platform, will be floated for office in the years ahead. While reporting this story, I heard various politicos suggest possibilities ranging from billionaire hedge-fund manager turned environmental activist Tom Steyer to the actor George Clooney. “There’s a talent hunt on right now to fill the void,” says Brinkley. “Democrats are looking at their senators and governors and saying, ‘Yikes, they don’t have the right stuff. But what about one of these CEOs or celebrities?’ ” But is any of this really a good idea? Do the skills required to run large companies actually

It’s hard to picture polished corporate pros like Schultz and Iger at televised debates trading verbal punches.

Mark of interest?: If he runs, Mark Cuban will have reality-TV renown and a strong voice on Twitter.

[Illustration: Ery Burns; Source Photo: Frazer Harrison/Getty Images for LIFEWTR

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translate to government? Former President Barack Obama has said that he thinks business acumen is more helpful for building campaigns than for occupying the White House. And there’s no reason to think that traditional topdown, corporate-hierarchy thinking is particularly useful in an environment where large-scale change requires consensus-building and legislative knowhow (just look at Trump’s early stumbles). When I ask Mark Cuban about this issue, he responds that exceptional business leaders know how to learn quickly and can adjust to whatever challenges are in front of them, whether in a public or private capacity. “Romney had no problem adapting to being governor,” he says. “Nor should any strong candidate have a problem adapting to the job of POTUS. Historically, a preponderance of candidates have been attorneys. I’ll take businesspeople any day.” Voters are currently witnessing the disruptive impact of having an outsider CEO in the Oval Office, and it’s possible that their appetite for future corporate politicians will depend on what happens over the next few years. “For 2020, business leaders have to start thinking about how they’d run if Trump has so polluted the water for a no-government-experience candidate,” says Trippi. “If that’s no longer in vogue, how are you going to deal with that? Because you can’t just say, ‘He was a businessman who screwed up governing, but I won’t.’ ”

It’s also worth noting that these titans of industry wouldn’t initially be running against President Trump, but rather against one another. It’s hard to picture polished corporate pros like Schultz and Iger onstage at a series of televised primary-season debates trading verbal punches. Plus, in order to mount serious presidential campaigns, they would have to be willing to endure some enormous downsides, such as the viciousness of today’s political environment and the often-brutal media coverage. “There’s one amount of scrutiny you’re subjected to when you’re accountable to a board, shareholders, and the business press,” says Fallon. “It’s a whole other thing to subject yourself to the political press corps day in and day out—to have what you’re wearing [be judged], have to be ‘on’ every day, striking the exact right tone and appearance. It’s a different set of demands, and it takes a toll.” There is also the real risk of doing damage to their reputations should they suffer an embarrassing public defeat, like Henry Ford once did. “If you’re going to run for president, you have to have such an unbelievable hunger for the job,” Brinkley says. “If you’re the head of Starbucks now, do you want to become this beat-up, battered political figure?” That’s why it’s quite possible that none of these rumored candidates will actually decide to run when the time comes. If any of them are seriously thinking about it, they almost certainly wouldn’t say so this early in the process, but so far, they’ve generally been

evasive—as have most traditional politicians whose names are in the mix for 2020.

EXECUTIVE BRANCH A look at some of the business leaders who could be considering a 2020 White House run

Iger recently said that Disney is his full-time job, and that “I don’t think the notion of running for president is something anyone considers either on a part-time basis or in a frivolous way.” (He has reportedly informed friends that he’s toying with the idea.) Cuban tells me that he is not planning to get into the race “as of now.” And when I asked Schultz about his presidential aspirations back in 2015, he responded pretty decisively: “I have no desire to be in an elected position in government. I really do believe that I can do much more as a private citizen to effect change than if I was in Washington.” Of course, that was before the extremely unlikely rise of a celebrity real estate personality, before Hillary Clinton’s stunning electoral loss, and before voters made clear just how hungry they are for genuine, serious change. “If more people realize the stakes, and that causes people [like Schultz] to rethink the idea that they can make more of a difference outside Washington, then that’s a good thing,” says Fallon. “If Trump’s presidency might have one silver lining, it’s that, yes, politics matters. Public service is extremely relevant, and you don’t need to be a career politician to succeed at it.” A version of this article appeared in the May 2017 issue of Fast Company magazine.

MARK CUBAN

WHY IT MIGHT MAKE SENSE: The Dallas Mavericks owner and Shark Tank star has developed a reputation for blunt political commentary (he recently critiqued Trump’s management skills) and customer-first leadership. Cuban has been offering thoughts on serious subjects such as health care and infrastructure spending on his personal blog.

WHY IT MIGHT NOT: Cuban has said he’s “not the ceremonial type”—a problem given that the gig involves so much patience with pomp. He might also have trouble convincing the Democratic party’s more-liberal voters: At various points during the last election, he was outspokenly in favor of both Donald Trump and Hillary Clinton.

OPRAH WINFREY

WHY IT MIGHT MAKE SENSE: Everybody loves Oprah! The liberalleaning former talk-show host has very strong favorability numbers, according to (nonpolitical) research. Her experience turning around her OWN network—which initially struggled when she launched it—suggests that she can lead when things get tough.

WHY IT MIGHT NOT: Winfrey knows better than just about anyone how to go about building a strong personal brand, but her broad appeal is largely based on her positive, inspirational message. How will people react if she decides to run and is forced into months of hardball political combat over controversial issues?

BOB IGER

HOWARD SCHULTZ

WHY IT MIGHT MAKE SENSE: As the CEO of Disney (which also owns ABC and ESPN), Iger knows what it’s like to be at the helm of a sprawling, closely watched enterprise with global influence. He is also an expert strategist who can take credit for Disney’s acquisitions of Pixar, Marvel, and Lucasfilm.

WHY IT MIGHT NOT: Last year, Democratic candidate Bernie Sanders criticized Disney for sending work overseas and underpaying theme-park employees— while Iger’s salary neared $45 million. If he runs as a Democrat and Sanders voters aren’t excited, it could be a tough climb to the nomination.

WHY IT MIGHT MAKE SENSE: The executive chairman and former longtime CEO of Starbucks is reportedly mulling a move from lattes to legislation. Having grown Starbucks into an industry giant, worked to address various social issues, and championed worker rights, the coffee executive could have broad appeal to Democratic voters.

WHY IT MIGHT NOT: Schultz’s progressive values have occasionally resulted in tone-deaf moments, such as the wellintended but badly executed (and widely mocked) “Race Together” initiative, which pushed baristas to have awkward conversations with customers. And will voters see his fast-food skills as transferable to the White House?

Illustrations: Ery Burns

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Global survey finds PHL millennials among most bullish

AMID political noise and uncertainties at home, Filipino millennials or “Phillennials” remain among the most optimistic in the world, according to findings of Deloitte’s 2017 millennial survey released yesterday by Deloitte Southeast Asia member firm Navarro Amper & Co. (NA&Co.) NA&Co.’s statement summarizing survey results showed 89% of “Phillennials” polled expect the overall economic situation in the Philippines to improve in the next 12 months, “significantly higher” than the global average of 45% and 134

Southeast Asia’s 53%. The survey was conducted among nearly 8,000 millennials from 30 countries. Participants were born after 1982, have a college or university degree and are employed full-time predominantly in large private-sector organizations. In the Philippines, 300 millennials -- with equal gender representation -- were interviewed. Legwork for the survey was done in 2016’s fourth quarter. The poll found 84% of Filipino respondents had a rosy outlook for

the country’s social and political situation, compared to 36% globally that shared such sentiment regarding the counterpart situations in respective countries. Deloitte noted that optimism among emerging market millennials is on an upswing, in contrast to the slump seen among their developed market peers. “Notably, lack of optimism regarding ‘social progress’ is most evident in Belgium, France, Germany and the United Kingdom -- nations that are

now dealing with the reality of Brexit and the rise of far-right populism,” Deloitte said in its statement on survey results. “Meanwhile, greater optimism is seen in the Philippines, Brazil, India, Indonesia and Turkey,” it added. “On a more personal level, most ‘Phillennials’ also expect to be financially better off (84%) and happier (76%) than their parents,” Deloitte noted. “Globally, those figures stand at just

26% and 23%, respectively,” while averages for Southeast Asia stood at 44% and 38%. For “Phillennials,” terrorism emerged as the top concern, with 40% of respondents admitting it worries them, while 35% cited “crime/personal safety” as a “great concern,” Deloitte reported. Rounding up Filipino respondents’ top five concerns were health care/ disease prevention (29%), climate change/protecting the environment/ natural disasters (27%) as well as unemployment (24%).

More than nine out of 10 “Phillennials” feel that not only does the government have the ability to solve issues that worry them, “it has already made a positive impact in addressing these problems.” Moreover, about 69% of “Phillennials” feel it is acceptable for political leaders to give “opinions with passion” and 55% said it is all right for them “to take controversial or divisive positions.”

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