Behavior Economics teams up with Big Data nudging Obama’s Re-election

Text message from Barack Obama campaign announ...
Text message from Barack Obama campaign announcing that Joe Biden would be Barack Obama’s choice for VP. (Photo credit: Wikipedia)

No surprise that this past election, campaigns took advantage of big data AND they also took advantage of the growing awareness of persuasion techniques and incentives that fall under the umbrella of Behavioral Economics…both topics we discussed in the past few months.

English: Nate Silver in Washington, D.C.
English: Nate Silver in Washington, D.C. (Photo credit: Wikipedia)

Nate Silver, and his 538 blog seems to have become an even greater rock star recently.  By applying his deeper understanding of probability and statistics , he successfully predicted the election outcome well in advance of poll openings.

Today’s New York Times carried an interesting story about the unofficial influence of Academics with expertise on Influence.  I urge you to read the behind the scenes story  Academic dream Team that Helped Obama’s effort.

Not to be undone, TIME magazine got to the real team working inside the Obama campaign to get the details.  After the election they were free to publish the following story:

Inside the world of the DataCrunchers who helped Obama win Re-election

If business needs further evidence that real time analysis of integrated data delivers value, the lessons learned during the election offers some great insights. The precedents set by  this new database and the quants analyzing it, suggests additional opportunities to make change that goes down more smoothly, like Mary Poppins advised using her spoonful of sugar.  Good or bad, the reality is that big data made a big difference in this election and on the persuasive front appears to have been effective in delivering the most relevant messages to individuals.  Hard to believe that general broad-based appeals such as bill boards and television advertisements will continue to call for  high level resource investments. Then again, that’s another story I’m sure.

I haven’t seen all the articles out there but more are bound to follow.  We will do our best to revisit these topics again  in 2013.

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Isn’t Business just another game we play?

In July, the strategy discussion explored what appears to be a growing trend, gamification. In fact, by the time I managed to write up the observations from the discussion there were a host of new articles and research posted. So whether you did or didn’t attend the discussion, I hope you will find the following reflections and questions valuable and I encourage you to share your thoughts, reactions favorable or otherwise.

If you have not yet encountered this new word, let me assure you, the word may be new but the concept is as old as Adam and Eve.
Wikipedia defines Gamification as:

“the use of game design techniques[1], game thinking and game mechanics to enhance non-game contexts.”

Overall,  play is big business and the small game companies,by Gamespot’s estimate represent a small but significant fraction of the industry.   Erik Sinclair’s comparison sized the diverse software and entertainment giants (e.g. Sony and Microsoft) ,at least $220 billion in revenue, against the small upstart, dedicated gaming companies (e.g.Zynga, Take2) less than $8billion all in.  The sabre rattling threat these small companies pose in part comes from the changing nature of the US market.

Take the mobile market, Smart phones and Tablets are fast growing with higher penetration rates  among households with higher than average disposable incomes. Online and mobile games revenue estimates for 2012  total $2billion, with 10% annual growth expected.

Add in the realization of changes in the average computer and video game player’s profile and you quickly begin to recognize a different business environment that the small gaming companies are tapping.  A 2011 Entertainment Software Association study reports 72% of US households play games, with the average age of gamers being 37. “Additionally, more than half of gamers play on their phones and other handheld game devices, and women now represent 42% of the gamer population.”

Social games continuing to grow and develop in depth and richness, eventually being able to appeal more to core gamers. Growth rates in this segment expected to exceed 10% annually.

LEGO Serious Play session
LEGO Serious Play session (Photo credit: Wikipedia)

Is play merely a tactic?

When do we play or more realistically, are we ever not playing? The expressions for serious work often use the same metaphors associated with play.  In a difficult negotiation, the party with their game face on seems more serious, or more determined to win.  The contradictions, cross signals and mixed metaphors are everywhere.

When there’s little time to spare, or the manager feels “under the gun,” the race on, play is shoved aside.  Generally we perceive play as diversionary though in reality the energy, cooperation and inherent competition of play builds relationships and focuses attention on less obvious , but critical elements.

Success at work, requires some degree of impromptu problem solving, or creativity, and often on demand.  Faced with obstacles, challenges or problems, people frequently assume a more serious disposition and cut off creative responses of humor, doodling and imaging. When looking for answers, we try to think or work harder. The added time pressures and stress tend to produce more predictable, less inspiring and less lasting results.  In this context, the move to gamification represents a positive shift and opens the door to greater opportunities, made possible through  tinkering, playful recombination of ideas and averted concentration.

Traditionally, marketers used gaming techniques to engage customers and promote product sales. The relationship between understanding the psychology motivating peoples attitudes while playing games connect quite naturally to motivating people to like or use your product or service.  On face value, the merit of games differentiates them from real life.  Their self-contained outcomes  make them fun, less serious, relevant or central to the driving demands of business leadership and management needs.  Or so we thought.

Play, Great Leadership and Skill Practice

Talking through the articles collectively we realized these distinctions were fuzzy and perhaps false. Games often have consequences for losers.  Severe consequences result from not playing along at work or in school; as is the flip side magnifying the flow of rewards  to those who play well.  The value of a poker face, for example  extends beyond bluffing in a poker game.  Likewise the valuable experiences women gained in team competition with the passage of Title9  has been well documented. Direct data and studies on the impact of gaming on business run the gamut.  Surveys by M2 Research and reports by Gartner on the use of gaming in companies show games help achieve a higher degree of employee engagement and  boost overall  performance anywhere  from 10% to 80%.

In spite of these numbers, attitudes and perceptions around play as diversions, rather than serious experiences, are slow to change, though researchers like Jane McGonigal continue to trumpet the benefits. (FYI,  learn more about the brain science behind gaming in her recent book Reality is Broken is a good read, as are her TED talks.)

The Role of Metaphors

Similarity in metaphors intentionally blur the distinction and may be part of the problem. When describing work activities, frequently we include a discussion of roles and rules which are similarly found in descriptions of play. Ever encounter your boss and their gameface and perceive anything other than their motive to win?  Tadhg Kelly, a game developer, researcher writing for TechCunch describes gaming motives this way.

“Players play to achieve, to do, to build, to create, to explore, to destroy and to win. They need the game to provide them with a fascinating system which enables them to do all of those things, and usually for the game to also provide an absorbing fiction.”

This mirrors the language and findings of Theresa Amabile, from Harvard

“Our research discovered that fostering progress in meaningful work is the most important way to keep people highly engaged at work — even if that progress is a “small win.” “

Doesn’t it sound like the way companies behave? Isn’t there a difference between personal value gained from achievement and the collective value, or returns play generates for the enterprise?

 Setting and Environment

Educators have borrowed from games to make learning fun for a long time and in the wake of legislators seeking to make education matter, many software vendors and game efforts got relegated to closets as they weren’t serious enough.  The findings of brain researchers are now confirming what many have suspected all along.  Games are effective tools that  help, rather than hinder, learning as they encourage people to experiment and discover behavior conducive to a wider set of problems. Making training fun can also prove effective; but it can also prove motivating to learn.  For example, Adobe engages in a great deal of game research to understand how to help users of their software more of its functionality.  The business service arm, LEGO Serious Play, generates significant revenue and trains people to use Lego to develop leadership  skills.   These examples blur the distinction between fostering play for advancing personal knowledge, skills or abilities and accumulating reward.  Simultaneously, these activities breach the physical boundary separating work and play and results further blur our expectations,  attitudes and perceptions  of work.

Zappos may be the extreme case of work as fun, but bringing more play into work align with higher employee engagement and higher performing organizations.

Kelly however notices danger in this trend, and the quick replication of the simple game model in a variety of settings. ” There comes a point in all genres where linear improvement and broadening subject matter becomes obvious to the audience. Their play brains start to realise that they are seeing the same frames again and again, with the same actions and the same constraints.”  This familiarity translates quickly into lost attention, all the positive attributes of engagement fall off and boredom surfaces.

There’s great subtlety in this observation.  Take Tic Tac toe for example, the rules are familiar and yet something keeps many of us playing it over and over. Are the lines between boredom and continuing engagement too fine to draw?

Strategic Opportunities Play Makes Possible

If military strategy is about troop movements for advantage, and business strategy focuses on gaining advantage, specifically competitive advantage, then games offer the perfect parallel frame.  TicTacToe once you’ve played becomes more a contest in strategy and yes, game theory.

Business strategy and game theory have a long shared history, so for many, it isn’t that hard a stretch to recognize the value of using games in business.

David Levine, UCLA Dept of Economics likens economic game theory with psychologists  theory of social situations. He goes on to explain that game theory applies to parlor games such as poker or bridge, but the research focuses on the two main branches that describe how groups of people interact: cooperative and noncooperative.  “Noncooperative game theory deals largely with how intelligent individuals interact with one another in an effort to achieve their own goals.” This is the more classic extension into business, scenario planning complete with estimation of risk are often included in budget exercises as well as more elaborate evaluations of mergers or entry into new markets.

What’s new is the strategic use of social games, which I presume, fall in Levine’s former category of cooperative game play.  Social play is complex and the more independent work becomes from physical settings, the greater our independence of action, freedom from traditional forms of managerial oversight.  Social norms are less binding and on the flip side the value of social games cooperation prove apt replacements if they can lead toward mutual advancement.  The challenge becomes obligated employees to buy in to the social game, or the social network.

Humans naturally are social, its part of our DNA and survival instincts, play extends that instinct.

The strategic value of rewards or loyalty schemes are everywhere. A significant number of applications are designed to promote customer engagement and interaction.  Who doesn’t value their loyalty points or reward cards that a variety of businesses extend to customers to grow revenue and increase the demand for their brand?  These too fall easily on the cooperative side of game theory with their strategic advantages and risks limited by the size of the rewards and the rules made clear on all sides.

Like life, not all play operates in transparent settings. The complexity of a game often increases with greater ambiguity in both the rules and conditions of  imperfect information. In a prisoners dilemma scenario, the rules for winning are clear but the isolation of players raises the stakes. The multi-player social games require cooperation but is entirely voluntary. Customers choose, but what about employees?  Distributed global workforces, such as IBM  rely on cooperation and the participation is contractual in nature.

Organizations such as BESTBUY also leveraged the coincidence of their techsupport teams love of  play in multi-person games and their discovery of its contribution to creating a more cohesive, collaborative and effective team.  In addition, the employees trust their instincts, grew their confidence and proved to be more effective and efficient  solving problems for customers.  Playing does not have the same connotation as practicing, but in many ways it’s more powerful.

Take Aways

Daniel Pink’s book Drive reminded leaders to consider the difference between  intrinsic vs. extrinsic motivation’s relationship to employee performance and engagement. The growing gamification trend demonstrates the evolution of new tactics to educate, train and engage employees.  In the process as the lines between play and work blur,  games and their application inside the enterprise extends to every major discipline and includes a dose of strategic decision making. Don’t underestimate the power of  play to alter and adapt behavior especially the comfort level that comes from knowing what’s possible, probable and what’s not.

If you have any other examples or strategic use of play that you’d like to share, or have some added feedback from the discussion that I missed or just want to tell us what you think, please do.  All comments and questions are welcome!

Recommended  Articles and links to review in advance:

1. The Importance of Play to Innovation

http://www.business-strategy-innovation.com/2009/07/importance-of-play-to-innovation.html

(we also encourage you to listen to the TED presentation featuring Dr. Stuart Brown who says there’s more fun in using humor, games and fanciful play. )

 2. Work and Play: The Gamification of Hiring

The Economist

http://www.economist.com/node/21555952

 

3. The Serious Business of Play.

MIT Sloan Management Review,  2005 47(1), 19-20.

Heracleous, L., & Jacobs, C. (2005).

http://sloanreview.mit.edu/the-magazine/2004-fall/46113/sparking-strategic-imagination/

4. How three companies innovate

NYTimes 3/17/2012

http://www.nytimes.com/2012/03/18/business/how-three-companies-innovate.html

OPTIONAL for those who wish to be serious about the topic consider

Innovation’s Holy Grail, C.K. Prahalad and R.A. Mashelkar

HBR July 2010

http://hbr.org/2010/07/innovations-holy-grail/ar/2

BIG DATA: Big Deal or Just Big Business?

Technology evolves and for those of us who spend their lives adapting and endeavoring to keep up with the advancements it’s hard  not to notice a curious underlying dynamic.   Data and our ability to calculate or manipulate it for greater meaning is a little like resolving the chicken and egg paradox.  More of one begs more of the other, and yet we continue to ask which came first as if that question were important.  For many of us, our interest in  closing the uncertainty gap wishes for more data. We expect it will  help minimize the error or noise because the present picture of relationships remains a little too ambiguous. The constraint in this case is often our own experience and knowledge.

Professionally,  my own work warns against this unconscious bias.  I simply ask people to imagine three dots and ask that they line them up.  I then remind them that all three dots are coincident data points in time, and ask whether this new piece of information has changed their vision of the dots?  I then ask them to place the dots on an axis of time, and tell them that the dots now represent demand, growth or performance like ROI.  Does the way you’ve visualized the dots changed again?  I explain that the context I’ve added snapped into their own experience to create an image that creates a new puzzle as what they see fights with their expectation and they need more data to explain it.

The Economist in revisiting the Growth Matrix in 2009, put it another way. Bruce Henderson, credited with originating this framework reportedly believed  “while most people understand first-order effects, few deal well with second-and third-order effects. Unfortunately, virtually everything interesting in business lies in fourth-order effects and beyond”.

Big Data and the volume variety and velocity of its availability now has several partners,  real time processing power and plummeting data storage costs and lest we forget, simple access and manipulation tools  placing the data in an ever increasing number of users’ hands.  It is the number of people who now want to use the power of analytics that lends Big Data its influence, or at least that’s what several Chicago Booth alums who shared their thoughts last week recognized.

On May 18, 2012 Chicago was busy preparing for the arrival of NATO delegates and support.  The result was many businesses strongly encouraged their employees to work from home, leaving the monthly strategy discussion homeless.  We took advantage of the opportunity to launch our first virtual discussion combining a real-time interaction platform  (Group Systems Thinktank) and conference call (freeconferencecall.com).  Interest in the topic proved overwhelming prompting us to open up a second lunch interaction following  our usual early morning time.  The comments that follow represent a condensed version of the conversation.  Note, links to the discussion prep video and articles we encouraged participants to review in advance can be found at the bottom of this post. Also, a full transcripts are available to those who interested in seeing the automated output from ThinkTank, just drop me a note.

What’s the deal

Its a toss up whether mobility or big data has captured the imagination of business media more. The duel isn’t the point. Other driving forces and a growing need for critical thinking skills that were already in short supply.  Data reduction may be an emerging competency.  As the earlier references to Henderson point out, the questions you are trying to answer don’t get any easier just because you suddenly have access to more data. What to do with this new wealth of rich information are the bigger questions and challenges not merely for business but for consumers as well.

In the process of  generating the following list of examples, the interaction on Thinktank let participants also provide some links, raise new questions and add additional comments.

Twitter ,Telephone call records, Smart Grid, Real time Electricity meter  data , Nike + ,Scanner data,  Comments from Call Centers,  Providers’ case and disease management notes, EMR records, Geospatial (GoogleEarth, Navistar, etc), Mobile and GPS,  Gov’t DBs (big-data in an unstructured/non-uniform sense) , The quantified self, Output or processed Data from SAS, Salesforce.com, other enterprise databases, Loyalty program, Amazon purchase history, Mint.com, Moneyball (Big data in baseball), the new NSA data warehouse in Utah, QR, The internet of things, Data.gov, The London Datastore, created by the Greater London Authority (GLA–Chicago has similar initiative) offers citizens open access , Netflix movie recommendations, SAP’s HANA usage (profiled in the report on their Sapphire Conference )

Twitter for example has evolved in ways that surprised their founders and also launched a number of new businesses with very unusual purposes. As one article pointed out routing the data can be equally important as tallying it, as illustrated by Procter and Gamble’s practice of funneling social media conversation/data to the appropriate person’s screen for monitoring and response.  In other words to be meaningful, sometimes just knowing something happened is enough, it doesn’t necessarily have to be mathematically manipulated to derive value.

Persistent challenges remain in dealing with the enormous variety of formats in which data are presented — some  sources are difficult to analyze — their pages long data dictionaries  often include details about its collection.Add to that the realization that Data is not just numbers anymore. The automatic semantic annotation required to make sense of this has also entered a new era.

Facebook, LinkedIn, Google+, Pinterest and similar social media sites would fit in here, as well.  All offer a richness of information, much of it real-time, that can be monitored, mined and used to drive decisions and actions. The customer center conversations , or customer audio recordings , transcribed to text, and then subjected to text analytics is helping improve performance management practice, allows for campaign conversion performance tracking etc

The impact or convergence of the evolving technologies with all of this new data, is as overwhelming as the scanner data that was available and stored historically but few had resource capability or interest in mining it. That era has passed and with it, new questions and promises arise.https://i1.wp.com/www.connectedaction.net/wp-content/uploads/2012/04/20120421-NodeXL-Twitter-Global-Warming-Labeled-Groups-Network.png

Can we better understand and use consumers sentiment as in  do retail customers use more electricity/phone service/etc in a method that correlates to changes in the economy? weather? Or SAPs HANA data, now makes cancer DNA genome type analysis possible in minutes.

FB and Twitter,  may be drawing more attention, but those who  bring together the different streams  and mining more deeply old sources such as scanner data  are also causing quite a stir. Target found out that teenage girl was pregnant before her dad did using methods such as these.

Add the RFID  and imagine the benefit to stores knowing the quantity of each SKU that they currently have?  Can they coordinate sharing of product between their brick-and-mortar stores?

Perhaps the focus on twitter, etc., rather than scanner data comes from hoping that trending sentiment will precede and can be used to predict purchase, rather than log it as with scanner data. At cars.com, a participant shared  that vehicle search data on our website is predictive of sales.

It looks like QR codes might achieve the same benefits of RFID as smart phones are becoming ubiquitous.

The Geo-spatial data, according to McKinsey’s recent report on Big Data as the next big innovation, quantified billions in time savings from just helping consumers avert traffic.

Several other behavioral nudging based on real time feedback is now possible. Nike is exploring and furthering this automatic feedback. Check this article for more brands using the quantified self, and more information

TOOLS

SAP’s HANA, Google’s BigQuery , Splunk, Hadoop and NoSQL databases , Tableau, Tibco Spotfire, Omniture ,Pentaho (open source BI), Amazon’s Web Service suite (more of a platform), Cloud computing platforms, Data visualization, most business users, make the data preparation easier and allows them to focus more on analysis and develop insights in combination with Machine learning tools (neural networks, support vector machines, natural language processing, etc.)

Decision making , can and does BIG data make more accuracy possible?

It offers higher granularity — like Target’s ability to create coupon books customized to individual households, Or integrate GPS level stuff — e.g. texting coupons to customers right while they’re standing next to a certain store.  Or 2nd/3rd order analysis – correlating Target’s sales with weather data; creating ‘real-time’ personalized coupons; identifying ‘trend-setters’ among the customer base to influence ‘trend-followers’ coupons

The downside? Detecting or separating out spammers from these data sets or paid to  express a certain sentiment. Totally! Like those girls paid to say great things about clothes on Facebook — not maybe necessarily analyzing big data, but using the platform.

Greater real-time evidence  can reduce risk and  insure assumptions in product/service development and marketing are on or off target.

Hard to appreciate the analytic without the qualitative context or understanding;  but maybe some strange new ideas can come out of the data, like the “diapers next to beer” epiphany. Data needs some drivers to make it meaningful, as in cause and effect. In part because qualitative data is harder to analyze.

Is quant vs. qual or the social science methods to data collection really that different from the scientific data analysis approach?  Both approaches seek to explain cause and effect, or the relationship between a stimulus to produce a predicted response. The problem is  too many people will extend a model beyond it’s capacity. Claiming “the data said so”  lets people off the hook and avoids responsibility for  decision-making.

Suggested tips include  avoid extending a model beyond its capacity, or  understand and differentiate descriptive and predictive Stats. Likewise, be wary of  finding trends that don’t exist (e.g. “data mining” or “straws that look like needles”) and confusing correlation with causality.

Perhaps cross-validation from trained analysts can help avoid  these . Danger of expecting tools to automatically extract value from large datasets.  Need to ensure good analysis, disciplined hypothesis generation, etc.

The data, even when analyzed, does not represent the decision.  This is true with small and big data.

FINAL TAKEAWAYS

 

  • Big data is here to stay – need to figure out how to use it effectively.
  • I liked the point that lots of data is around and that people just don’t know what to do with it.  The best BIG DATA process or engine in the world still won’t create the insights that are needed.
  • Corporate culture is a huge factor–the problem is not availability of data, but commitment and focus of corporate leaders to shape a culture that moves the organization in that direction.
  • Big data is here. It’s a tool and like any other, it’s the latest and greatest on the block, with a bit too much hype. But it has a definite value in providing and stronger qualitative base to identifying trends and activities.
  • My realization  is that, once again, the technology is interesting, but it is the corporate culture and will that will matter. The culture and vision lead; the strategy and models follow.
  • sharing the questions with a wider audience confirms concerns and clearly lots of assumptions that need to be played out. There is a large dark side that we still don’t understand; but the positives and opportunities for real time decision.
  • Big Data! The piles get higher and  higher and wider and wider…to what purpose? That implies the need to “mine” the data, reduce it and subject it to analysis before it can be made useful.
  • Big data will revolutionize business but it is not strategy, potential for a lot of false positives .
  • The wise use of big data offers a huge opportunity for developing differentiating strategies and for finding new product/service needs.
  • “Big data” is the current term for things that have existed for a long time.  All types and sizes of organizations can benefit from big data if they recognize the importance of the human component (not just the data and software) and have specific objectives in mind before starting.
  • Much of the expertise about analytics developed over many decades still applies, and there are new dimensions to integrate and understand because of the availability of the technologies and data.
  • Everyone on the line has experience with Big data, so I don’t think it’s so scary.  Most people have business perspectives, wanting to teach the Analysts that their conclusions need to be driven by business needs.   My comment is that as leaders, and those trained with some behavioral awareness through business school, it is _OUR_ responsibility to try and massage the analysts towards an enthusiasm for our world view…;-)
  • The human side of utilizing the technology and expertise is just as challenging as ever. (Cognitive biases, communication skills, influencing skills) Garbage in – garbage out is a big risk without proper attention and skill in applying the technology and in communicating.  The data, even when analyzed, does not represent the decision.  This is true with small and big data.

In closing, let me return to my observations about the limitations of developing strategy rooted in an expectations of the experience curve relationship.  The frame with which you approach the problem often has far more bearing than the data, your analysis or the tools.  Or at least, in June we  plan to look at some of the assumptions around growth as the ultimate strategy.

Please throw your responses, or continue to post links for others as Big Data continues to be quite newsworthy as its impact and influence continues to unfold.

Articles and links:

We suggest an  Optional  short 5 min. video tutorial , EMC produced to understand what Big Data IS?    http://youtu.be/eEpxN0htRK
The following are required advance reading.

1. IBM’s Institute for Business Value, in collaboration with MIT Sloan Management Review  2010 research findings
Analytics: The new path to value: How the smartest organizations are embedding analytics to transform insights into action

  http://public.dhe.ibm.com/common/ssi/ecm/en/gbe03371usen/GBE03371USEN.PDF

2. Strata keynote  short 7 min. video by Google’s Digital Marketing Evangelist Avinash Kaushik- a bit irreverent and a little over the top – a bit irreverent, bordering on over the top – but not boring  effort to help us understand the problems and the approach undertaken by Google.

Big Data Imperative 
March 2012
http://www.youtube.com/watch?v=CrSX97elHDA

3. Tom Davenport’s Culture of Analytics

April 5, 2011
http://smartdatacollective.com/clifffigallo/34719/tom-davenport-s-culture-analytics 

4. Inside P&G’s digital revolution
McKinsey Quarterly November 2011
http://www.mckinseyquarterly.com/Retail_Consumer_Goods/Strategy_Analysis/Inside_PGs_digital_revolution_2893
overseeing the large-scale application of digital technology and advanced analytics across every aspect of P&G’s operations and activities—from the way the consumer goods giant creates molecules in its R&D labs to how it maintains relationships with retailers, manufactures products, builds brands, and interacts with customers. The prize: better innovation, higher productivity, lower costs, and the promise of faster growth…

One more optional overview

The age of big data
NYTimes, Feb 2, 2012
http://www.nytimes.com/2012/02/12/sunday-review/big-datas-impact-in-the-world.html

 

Management 2.0–can you shift? Top 50 Overall Rank Company Innovation

In 2011, among 673 companies from 32 countries, Apple topped the list as most admired and respected by both industry peers and overall.  CNN’s Money magazine  survey used several criteria to compute an overall ranking and then shared on a single criterion those companies who made the top ten spots.  A composite summary appears below.  Surprisingly, no company ranked consistently across all criteria –not even Apple who ranked #1 only on innovation.

Top 50 Overall Rank Company Innovation Global Competi-tiveness People management Mangement Quality Long Term Invest-ment Quality of Products/Services Financial Soundness Social Res-ponsibility

25

Goldman Sachs Group

1

1

Apple

2

7

10

4

2

14

Walt Disney

6

3

3

7

10

3

2

Google

9

2

4

1

2

1

24

Nike

2

4

5

9

9

6

31

Nestle

3

3

7

8

9

7

8

7

Amazon. com

4

8

6

4

1

3

10

McDonald’s

1

1

2

12

IBM

8

49

Accenture

9

9

9

5

Procter & Gamble

9

15

3M

6

3

Berkshire Hathaway

4

Southwest Airlines

6

Coca-Cola

8

FedEx

9

Microsoft
N.A. Royal Dutch Shell

6

Nike, Google,Walt Disney and Amazon have similar rock star status.  But the failure of many of  the remaining companies to even make the top ten on other categories, or the inconsistency of the company rankings  is a bit confusing.

If analysts and directors evaluate companies using different criteria , which criteria should management prioritize?

The best case for management 2.0.

Imperfect an instrument as surveys of  directors, industry peers and analyst rankings of companies may be, the disconnects between perception and management is unsettling.

Perhaps, the problem is complexity itself. Siloed, hierarchical , central, command-control decision-making  styled organizations struggle to keep up.  As the world moves faster, successful business outcomes require simultaneous attention to multiple interdependent factors. Consistency in your approach across your markets may prove disastrous.

In compiling the chart above, I initially focused on three indicators:  people management aka Talent; overall management quality; and innovation.  The diversity of companies across these criteria rankings lend credence to the rallying cry to change existing talent and management approaches.  Traditional, internal organizational frameworks or operating design warrant alignment on more than these three factors.   Gary Hamel, long down this path, wrote The Future of management in 2007; and often describes traditional management practices as obsolete, calling for revolution within the ranks. More pertinent, values alignment do not seem to be a priority.  After all why would any organization undergo a major cultural transformation for the sake of upping this score?

Remember Total Quality Management, or the movement to adopt Six sigma cultures?   Though well-intentioned, both turned out to be somewhat of a passing fad, the impetus for effective and efficient operations did  lower bottom line costs, but the residual streamline approach undercut the very capability for resilience necessary to succeed in the current global, rapidly competitive environment.

More contemporary buzzwords rippling through the management literature continuously call for new adjustments, and a shift in style to accompany if not better accommodate technology changes. Simplifying access and transmission of multiple media, aka  web2.0. may indeed require a different management approach.  What  exactly are we describing?  Apart from branding , a series of  common threads unite the work of three thought leaders.

Ron Heifetz describes The Practice of Adaptive Leadership (2009), its associated risks, and why our attachment to authoritative leadership needs rebooting. Gary Hamel’s book, Leading the Revolution (2002) explored ways to reinvent business models in light of the dot-com technology bubble; his more recent title is The Future of Management (2007).  The monthly strategy discussion readings (links at the bottom of this post) also included the insights of Bob Thomas, author of Crucibles of Leadership (2008), from  Accenture’s Institute of High Performing Leadership.

All of these thought leaders describe  embracing unconventional thinking, full transparency, initiative, experimentation, learning from experience or basically creating adaptive cultures. Sounds a little like innovation doesn’t it?

What about the social media factor?

Coincident on the day the monthly strategy discussion met to review these authors theses on management,  the Chicago Booth Annual Management Conference keynote panel focused on the most visible evidence of these shifts– “The economics of Social Media.”  In 2011, it’s impossible to be in business and not be inundated with headlines about Linked In’s public offering,  Facebook’s 600 million and counting users, or Twitter’s 200 million strong.  Of course these are just a few of the applications business must evaluate, not so much to buy, but to watch, listen and learn to respond to many stakeholders associated with their enterprise.

The shift  of control over your brand and business between stakeholders and business leaders and managers is close to parity.  If web2.0, or social media is the people’s network where they can transact, share, express and discover–Business has to be present, flexible and responsive 24/7.  if you had doubts, now you know why Management 2.0 is critical to an organization’s survival.

Social media’s ubiquity challenges the most traditional organizations and their decision-making hierarchy.  Customer facing roles increase risk, especially if  individuals are scripted or their flexibility to act and access to information is  limited by the system.  The parameters around interaction, once  engineered to reduce costs and maximize returns, need adjusting and consider  indirect factors. Typically, an organization expects customer service to buffer or clean up  “messy” or “problem” concerns from the public.  The focus measure is efficiency–avg handle time and the number of calls/hour.  Management did not track the quality or effectiveness of the interaction in the unit performance report. The push for further labor savings resulted in outsourcing and offshoring these units, adoption of automated voice response systems or encouraging online users to check out the FAQ section of a website before contacting support.  Sure, customer satisfaction and customer relationship systems are  important, but the breadth of possible outbound responses remain tightly controlled.  In the same manner that marketing and PR  manage the company message and often write the release printed by limited media outlets.

Integrating Web2.0 and the interaction tracking within the operation exemplify internal innovations or managerial adaptation, right? Management learned to take advantage of technology to lower its delivery costs and use CRM systems to learn about the customer and track transaction behavior.  All signs of adaptation. But do they go far enough?

Back to the Future

Facebook launched in 2004 and quickly spread to all university campuses and entered some corporations, opening to any user in 2006 and quickly became the 7th most trafficked website.

In 2007, social media is not even mentioned in what   Businessweek described as attributes of the worlds most innovative companies:

The leaders of companies on this year’s BusinessWeek-BCG list of the World’s Most Innovative Companies recognize that developing breakthrough products, revamping operational processes, and coming up with new business models doesn’t happen overnight. Instead of relying on gimmicks or incremental line extensions, they’re working to build organizations that are capable of sustained innovation. They understand that requires taking risks and investing for the long-term. And they focus on the things that really matter, such as hiring the most talented employees and providing them with the environment they need to thrive.

…Getting people to step out of their comfort zones can do a lot to spark new ideas. But if they’re not paired with more fundamental changes, all those efforts will go nowhere. Fortunately, some companies have been waking up to that fact…. the proper care and feeding of employees in creative cultures takes much more than training. …best companies seem to be managing a balance of a few high-profile programs aimed at getting employees to think differently and more fundamental processes that make sure the work actually gets done.

Of the top 10 companies (Apple, Google, Toyota, GE, Microsoft, P&G, 3M, Walt Disney Co., IBM and Sony) 3M had dropped to 7 from 3rd in 2006, while Walt Disney had catapulted from 43 in 2006 to #8.  Surprised?

We compared these messages and found them to  echo some of the authors’ admonishment of the management 2.0 revolution.

Marching orders for Management 2.0 Advocates

Note: The original article citations are found below.

Gary  Hamel talks about inspiring and changing the environment, aggregating human capabilities toward the collective and mentions three big organizational challenges:

  1. Adaptability–how to build self-transforming organizations
  2. Innovation–mobilizing imagination
  3. Engagement–on both the emotional and intellectual so people bring all of their capabilities to their work.

Ron Heifetz talks about adaptive leadership means changing the way people do business in many places in the organization.  In other words, innovation isn’t just for marketing.  Leadership has to orchestrate the connections between the possible, or the abstract strategic imperative and the tactical or working level.  The question is not merely whether to  establish accountability; but how to  help all levels of the organization challenge and push the frontier of their current constructed environment and create room for experimentation, where people are free to make mistakes and learn.

Finally, Bob Thomas suggests that experience has to be turned into leadership capabilities and focus on the ability to learn lessons.  Provide the  imperative around durable processes in three facets of learning:

  1. Prepare — how do/could we frame the problem, understand how we learn and focus on accelerating the possibility to learn
  2. Deploy–activate our sense-making skills, emotional IQ, story telling, practice with  multiple decision-making and leadership styles to close the gap between theory and practice.  (Heifetz expresses the gap as the difference between knowing and abstraction).
  3. Renew–Points of view are teachable as well as adaptive.  Managers should build and exercise their own advice networks.

Sounds easy right? The 2007 article profiled GE, Disney, IBM and Boeing.  By 2011,  the companies rated by their industry peers and then overall only identified Google, Apple and only the Walt Disney company made the top 10 list.

Articles featured in the monthly Discussion

Ron Heifetz

1. Adaptive Leadership

 2. The Interview Adaptive Leadership

Gary Hamel

Can’t Innovate? It’s Management’s Fault (Really!)

Inventing Management 2.0

Bob Thomas

Turning Experience into Leadership