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HBR Sept-October 2017: Leading transformation

Harvard Business Review
September – October 2017 issue
Annotated table of contents

1. Adi Ignatius, The great transformer

Adi Ignatius, the editor in chief of Harvard Business Review, introduces the spotlight section in this issue, anchored by Jeff Immelt’s account of the transformation he led at GE.

Idea watch

2. HBR Team, When hiring execs, context matters most

Most leadership roles require handling at least seven contextual challenges well, including growing the business through innovation, market share, cost competitiveness, or geographical expansion, managing a broad portfolio of products and services or transforming a high conflict culture. This article summarises research by CEB which shows that hiring decisions which take account of the match between a candidate’s strengths (and weaknesses) and the contextual requirements of the role have a greater chance to lead to successful results. In terms of talent development, rather than preparing managers for a large variety of challenges, as well-rounded ‘athletes’, this research suggests that specialisation in just several might help leaders achieve greater productivity and effectiveness in their areas of expertise.

3. Scott Berinato, We look like our names

Scott Berinato interviews Anne-Laure Sellier about her research with colleagues which shows that human respondents and machines tend to pick the correct first names of people in photographs at rates of 25 – 40 per cent, higher than the mere chance of 20-25 percent (when they are given 5 names to choose from). Sellier argues that this effect might be due to shared, largely unconscious stereotypes surrounding the links between looks, appearance and names at any given time. Such guesses turn out to be correct because people tend to mimic the behaviour of those around them as a way to signal their tribe quickly. In a commercial setting this research is relevant for understanding whether we choose brands that match existing characteristics or we develop behaviours and characteristics post-hoc, to become more like those usually associated with a particular brand.

4. Ronaldo Mouchawar, CEO of Souq.com on building an e-commerce powerhouse in the Middle East

Established in 2006, Souq.com now serves 135 million people in seven countries in the Middle East, a region where online commerce represents only 2 per cent of the total. Set-up as an auction site, Souq.com switched to a business to customer model in 2010 and has been recently acquired by Amazon. Its development has depended on devising ingenious solutions to payment and delivery challenges, via the PayFort and Q Express systems. PayFort can handle payment via credit cards and bank checking accounts; with the aid of apps and ranking systems for reliability Souq.com also offers cash payment on delivery. Q Express tackles the lack of post-codes and addresses in the region with the help of mobile phone tracking and enables drivers to volunteer for available jobs. Funded initially through venture capital from the US, Souq.com is increasingly contributing to the emergence of an ecosystem for tech start-ups in the region.

Spotlight: Leading transformation

5. Jeffrey R. Immelt, How I remade GE

During his long tenure as CEO of GE, between September 2001 and August 2017, Jeff Immelt oversaw the transformation of the company from a classic conglomerate to a digital company, aiming to define the future of the industrial internet things. This has entailed five inter-related transformations: divestment of non-industrial and slow-growth industrial businesses; a shift to tech-driven growth; globalisation of focus, with non-US revenues and workforce now in majority; a change in strategy from industrial to digital industrial; and the development of a lean approach to organisation, to replace the old top-down model. In this riveting article Immelt distils seven lessons – be disciplined, soak, make it existential, be all in, be resilient, be willing to pivot, and embrace new kinds of talent – and illustrates them with examples from GE’s transformation and his working practices and experience.

6. Ranjay Gulati, GE’s global growth experiment

Gulati explains in some detail the dynamic interactions between the GE’s Global Growth Organization, set-up in January 2011 and GE’s global businesses, which were used to treating country organizations as mere sales forces. The GGO was charged with developing the GE’s presence across the world by taking into account local concerns. Country organizations were given P&L responsibility to emphasize their importance and accountability and GGO has had access to personnel and funds for its own projects. The initiative had high level support from the CEO, Jeff Immelt, and allowed GE to expand in high growth economies. Revenues generated outside the US now represent 59% of the total and 72% of backlog orders.

7. Steven Prokesch, Reinventing talent management

Around half of the GE workforce of 300,000 has been with the company for less than five years. To accelerate and support the integration of new comers who may be different in terms of technical skills, age and values, GE is developing a number of software applications. They cover areas such as career and succession planning, training and development, networking, talent retention and cultural change. At different stages of testing, development and adoption, these applications may represent a new frontier in deploying people analytics for the digital age.

Features

8. Mark Mortensen, Heidi K. Gardner, The overcommitted organization

Assigning employees to work on several teams and projects at the same time has become common in companies, due to increased complexity of tasks, pressure on costs and dispersed organizational forms. As well as promising to address these pressures, multi-teaming also creates challenges for team managers and for the organization as a whole. Drawing on long term qualitative research and surveys, Mortensen and Gardner diagnose the problems and offer solutions. For team leaders, they emphasize the importance of several actions: launch the team face-to-face to create trust and familiarity; map existing skills and expertise to update everyone’s perceptions of colleagues and potential contributions; mark the passing of time in tandem with the accomplishment of objectives to sustain momentum; encourage learning and transfer of knowledge between projects as an organizational norm; boost motivation by being publicly appreciative of all contributions and by fostering a sense of fairness. At the level of the organization, actively managing multi-teaming entails mapping and analysing the risks created by interdependence, as developments in one project can have implications for others, actively promoting knowledge flows so that all corners of the organization benefit from the most advanced knowledge and experience, and planning for shocks by creating appropriate buffers.

9. Annie McKee, Happiness traps

Unhappiness at work is, unfortunately, all too common. Often, it is due not to external constraints and impositions but outdated beliefs about what matters to us and the best ways to achieve it. McKee argues that there are three common traps that prevent us from enjoying our working lives: ambition, conformity and overwork. Drawing on recent research on emotional intelligence she suggests developing and deploying three competencies – emotional awareness, emotional self-control and organizational self-awareness – to diagnose the particular trap that affects us and to devise remedies. She proposes an encompassing definition of happiness, which includes meaningful work, hope and friendships in the workplace.

10. Ron Kohavi, Stefan Thomke, The surprising power of online experiments

Drawing on long industry and academic experience, Kohavi and Thomke offer a guide to designing and understanding online experiments. Any company with several thousand daily active users on its website could fruitfully use online experiments to enable better decisions in terms of presentation and marketing. Third party applications for running experiments are available, but for larger companies it makes sense to build a large-scale capability, which can be run in a centralised, decentralised or centre of excellence manner. Effective online experiments depend on clarity about the definition of success, good quality data and careful inferences about causality. All of these points are illustrated with rich examples from the experience of Microsoft and other large companies.

11. Marco Iansiti, Karim R. Lakhani, Managing our hub economy

Iansiti and Lakhani provide an analysis of the emerging hub economy in which a handful of companies, such as Google/Alphabet, Microsoft, Facebook, Apple, Alibaba and a few others, have already staked dominant positions, skewing competition and threatening to dominate the global economy as a whole. The dynamics of the hub economy are partly determined by three conditions: increasing computing processing power, connectivity, and positive feedback loops leading to network effects. Since for digital companies returns do not diminish with scale, as they add more customers, but rather increase as a result of network effects, there is no natural limit to their expansion. Thus, to preserve a degree of competition in the economy will require deliberate, concerted action from other firms, communities of interest, the public at large and governments. Iansiti and Lakhani also suggest that leaders of technology companies accept their ethical responsibilities and devise mechanisms for sharing value and sustaining the broader eco-systems around them.

12. Omar Rodriquez Vilá, Sundar Bharadwaj, Competing on social purpose

Having a social purpose does not guarantee business success while it may open up new areas of risk and controversy, through politicisation or perceived inconsistency. In this article, Vilá and Bharadwaj propose a framework for generating potential social purposes, selecting between them and ensuring that the brand delivers genuine benefits for the chosen cause. A prospective social purpose can be derived from brand heritage, opportunities to solve tensions for customers and product externalities. But to ensure appropriate fit and business results and to diminish risks, the choice of a social purpose should be guided by sets of questions around four criteria: enhancement and development of brand attributes; the creation of business adjacencies; recognised and positive consumer associations; and the likelihood of stakeholder acceptance. This framework has been derived from study of dozens of brands and their social purposes and it is illustrated here with numerous examples, including Dove, Nike, Brita, Green Works and Vaseline.

13. Radhakrishnan Gopalan, John Horn, and Todd Milbourn, Comp targets that work

Linking pay to performance could be an important tool for boards to incentivise executives effectively, and to align activities with the desired strategic objectives of the enterprise. Having studied the relationships between compensation packages and performance for the 1,000 largest US companies by market capitalisation over 15 years, Gopalan, Horn and Milbourn have distilled four principles to guide decisions on compensation packages for executives. First, adopt between three and five, unrelated targets to make it harder for executives to actively massage the numbers to achieve them. Second, set steady, incremental steps for pay-outs, rather than just minimum and maximum thresholds, to encourage continuous improvements. Third, benchmark against appropriate competitors to create relative targets for better measurement of real value created. Finally, include non-financial, qualitative targets such as customer satisfaction, employee engagement, 360 degree evaluations or environmental, social and governance metrics.

14. Susan Wolf Ditkoff, Abe Grindle, Audacious philanthropy

Seemingly intractable social problems – such as high mortality rate among Bangladeshi children, due to diarrhea, smoking, discrimination of LBGT people, blindness due to cataract disease in Tamil Nadu, India, or polio disease world-wide – have nonetheless been significantly improved due to long-term, large-scale efforts involving collaboration between government, NGOs as well as philanthropic donors. By studying in depth 15 such large scale efforts, Wolf Ditkoff and Grindle were able to identify five crucial attributes of successful interventions: a precise definition of the problem shared by all the actors involved; focus on ‘winnable goals’, stepping stones towards achieving the broader objectives, articulated in an emotionally compelling message; a powerful scaling strategy involving radical innovations, massive distribution channels, or breakthrough business models; concerted efforts to drive demand for change through marketing and sales activities; and an orientation towards continuous improvement and learning from experience. Private donors have often been instrumental in these areas in the past and could potentially increase their impact by using these insights to direct their funds to current causes.

15. Raffaella Sadun, Nicholas Bloom, and John Van Reenen, Why do we undervalue competent management?

A wide-scale research project on management practices at 12,000 firms in 34 countries shows great, enduring variability of management quality between and within countries, across 18 practices in four areas: operations management, performance monitoring, target setting and talent management. These differences are clearly reflected in business outcomes, with the best managed firms reporting higher profits, growth, number of patents, R&D spending and productivity. A number of factors account for this variability, including overly optimistic assessments by managers of how well their companies are run, governance structures, where family-owned firms are least likely to be well-run, skill deficits, especially in developing countries, and organizational politics and culture. As a result, the authors suggest that much greater investment is necessary to improve management processes; while in principle such processes are well-known, they are not easy to embed into organizations. Achieving operational excellence, crucial to the delivery of strategy, should not be taken for granted.

16. Roger L. Martin, Tony Golsby-Smith, Management is much more than a science

When should the scientific method be used? And what other intellectual tools do we have for situations where science cannot help? Martin and Golsby-Smith offer here compelling answers to these questions by drawing on the Aristotelian distinction between circumstances and relationships that cannot change – the realm of science – and circumstances and relationships that could potentially change for the better (even though we may not yet have evidence of improvement). Situations may fall into one or another of these categories at different times and the article offers a methodology for questioning and breaking the existing framing and for proposing alternative narratives. These entail imagining different futures and creating new metaphors, by mobilising ethos (the will and character to change a situation), logos (a compelling rationale to do so) and pathos (emotional resonance). In this case too success depends on a type of rigour based on evaluating the match between the proposed new solution and the conditions necessary for it to work and on prototyping to create new data.

Experience

17. Tomas Chamorro-Premuzic, Could your personality derail your career?

Chamorro-Premuzic introduces new evidence in support of the Hogan Development Survey (HDS) instrument for psychological assessment. Created by psychologists Robert and Joyce Hogan two decades ago, HDS is based on the observation that psychological traits and associated behaviours can have both upsides and downsides (or dark sides as they are characterised here) as well as degrees of intensity in their manifestation, from clinical to benign, across three clusters: distancing, seductive and ingratiating. Traits in these clusters vary in their impact on behaviour at work, distancing traits have consistently negative consequences, for instance, but results from millions of HDS tests show that 40% of those tested have one or two traits that could seriously derail their career. The article offers practical advice on how to become aware of these disruptive characteristics and suggests practical ways to curb their negative impact.

18. Marco Bertini, Nader Tavassoli, Case study: When you have to choose between core and new customers

An extreme-race company considers its relationship with core customers and the practicalities of offering them a good experience. Should they pay more for more streamlined access? Would the monetary exchange detract from the emotional commitment to the brand?

19. Alison Beard, Game changing inventions

Beard reviews four books on innovations that have shaped industries and societies and distils common themes, ranging from proper definitions of (desirable) impacts to the relative role of solitary genius and collaboration.

20. Alison Beard, Life’s work interview with Michael Strahan

Strahan, a former star defensive end for the New York Giants and NFL super bowl winner, talks about his football career and his second act as a broadcaster and owner of SMAC, a talent management and production company. Empowering people, being true to your passion, hard work and team spirit are just a few of his guiding principles.

Table of Contents

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