Harvard Business Review
January/February 2022
Annotated table of contents
1. Adi Ignatius, Celebrating a century of change
HBR will be 100 years old later this year. It’s a remarkable example of endurance and global success, with 350,000 subscribers and counting.
Idea watch
2. HBR Team, Finding the right CEO
New research on CEO successions at S&P 500 companies, since 2000, shows that heads of division have become almost as popular recruits for the top position as the traditional front runners, chief operating officers. For instance, in 2020, heads of division represented 36% of new CEOs compared to 38% for COOs. They were followed by CFOs at 9% and leapfrog candidates, coming from positions below the executive level, at 5%. Performance data for new CEOs shows that leapfrog candidates are most likely to be found in the top quartile, at 41%, followed by division heads, at 27% and COOs, at 25%. The research suggests that companies need to deepen the pool of candidates and increase their quality; board members would be well advised to spend more time interacting with managers further down in the organization.
3. Scott Berinato, When people listen to happy songs, the market outperforms
Berinato interviews Professor Alex Edmans, of London Business School, about his research linking the happiness of popular songs played on streaming platforms to stock market performance and mutual fund flows. Edmans and his colleagues based their conclusions on 500 billion streams of 58,000 songs on Spotify, in 40 countries, including the United States, using the scores on the positive/negative scale for emotions generated by the Echo Nest team at Spotify. When average scores of popular songs in each country were happier, the stock market would improve the next day, suggesting that investors respond to general social moods, as captured in listening behaviour, when they place their bets. These findings support the view that markets can be driven by non-economic, emotional factors, but the actual causal mechanism remains to be explained.
4. Salma Okonkwo, the founder of UBI Group, on leading a transition to renewable energy in Africa
Salma Okonkwo is a Ghanaian serial entrepreneur who has gained experience of business and support networks through education and work in her home country and the USA. Her first major company in Ghana, UBI was set up in 2006 to distribute petrol and diesel, and then liquified petroleum gas (LPG) to the North of the country. It built its own logistics infrastructure from scratch, including fuel-storage-tank farms and a fleet of trucks, as well as robust internal processes, such as accounting protocols. On 2013, Okonkwo stepped down as CEO, but remained as chair, when Puma Energy, a subsidiary of Transfigura purchased 49% of UBI. She then launched Blue Power Energy to build large solar power farms for Ghana’s Bui Power Authority; it seeks to earn a profit, while protecting the environment and local communities.
Spotlight: Adapting to digital disruption
5. Julian Birkinshaw, How incumbents survive and thrive
This research compares the list of Fortune 500 and Global 500 companies from 1995 and 2020, finding that new arrivals and the doomed, bankrupt companies, remain a minority. Present in larger numbers are companies who have increased their status or fell out of these lists but survived in a different way. These trajectories result out of a variety of types of responses to the challenge presented by new digital technologies – fighting back, doubling down, retrenching, and moving away – which are described here to enable individual companies to make their own choices, based on their specific circumstances.
6. Thomas W. Malnight and Ivy Buche, The strategic advantage of incumbency
Even in an era of rapid change, incumbency need not be associated with vulnerability. On the contrary, large existing companies can use their continued strategic advantages, for instance in their ability to harness complexity, and to use their presence in multiple markets across a variety of products to provide superior value to their customers. By maintaining a long-term focus, companies can use their resources to invest in new technologies and business models or could leverage their customer relationships to expand into adjacent markets. However, a shift from passive to active incumbency is necessary to overcome inertia.
Siren and his colleagues at Innosight present in detail the transformation of KWM Australia, a law firm with strong market leadership and public reputation that nonetheless chose to be pro-active in meeting new technological challenges. A few of its leaders identified emergent market changes, evaluated their importance, and built collective awareness within the firm about the need to respond. Within a year, a consensus emerged that the firm had to embed technology and use AI in its day-to-day operations, which led to a variety of measures: targeted behavioural interventions, support programs to incentivise the use of new tech and a comprehensive communications program. The steps followed at KWM have broader relevance for companies seeking to respond to market changes and can be used to guide transformation.
8. Alison Beard interviews Jonathan Knee, Can Big Tech be disrupted?
Despite their vast market capitalisation and near monopoly in certain areas, the Big Tech companies, including Google/Alphabet, Facebook/Meta, Amazon, Netflix, Microsoft and Apple continue to be tested by competitors and market forces. In this interview, Knee assesses their strengths and weaknesses; importantly, to survive in the long term they need to invest in their ecosystems in such a way that partners in their value chains have a vested interest in their success.
Features
9. Paul Leinwand, Mahadeva Matt Mani, and Blair Sheppard, Reinventing your leadership team
Leinwand and his fellow PwC collaborators describe what it takes to lead a company as it responds to shifting market conditions and the emergence of complex expectations about leadership style combining opposing qualities: strategy and execution, tech-savvy and humanism, high-integrity and politics, humility and heroism, globalism and localism, traditionalism and innovation. They define a four-step process which starts with the identification of the leadership roles needed for transformation. This guides the recruitment of the right people, but to ensure their effectiveness, there should be clear focus on company transformation. Finally, trust and collective, team accountability are crucial: sidestepping individual competitiveness will make the necessary pooling of resources to reach a common goal more likely.
Improving a fundamental aspect of one’s life, whether regarding education, health, or well-being, usually requires long-term, complex interventions and a degree of self-transformation. To be able to provide this kind of assistance, companies need to appreciate the need for partnership with their clients. This article illustrates how an offering of this kind can be created, starting with the client’s needs, the job to be done, their definition of success along the way, and barriers to be overcome. These insights are illustrated with a case study of TrueConnect, a financial benefit provider and other examples from education (Texas Christian University, Georgia State University), weight loss (Noom), and the transition from formal education to employment (Resolve Solutions Incorporated).
11. Sarah Federman, How companies can address their historical transgressions
Federman discusses real world legal cases in France and the United States brought against long-lived companies who were involved in atrocities in the past, such as slavery and the Holocaust. While the responsibility of present-day executives and companies for historical wrongs has often been difficult to establish in court, the increased public scrutiny and the reputational losses could be significant. Thus, enlightened self-interest would suggest that companies are better off accepting responsibility, setting up projects to investigate their own past, apologising publicly, engaging meaningfully with the survivors, and making amends.
12. Deborah Ancona and Dennis N. T. Perkins, Family ghosts in the executive suite
While there is general acceptance that individuals take their individual histories with them in everything they do, how this interaction between past and present works is not widely understood. In this article, Ancona and Perkins offer an informed and accessible introduction to these issues by showing how the family system of origin survives in our values and beliefs, preference for certain roles, and expectations regarding secrets, boundaries, triangles, and mastery. By identifying how this applies in an individual case, it is possible to set a realistic goal for change and to begin to envisage and make different choices in these areas.
13. Whitney Johnson, Manage your organization as a portfolio of learning curves
Johnson captures the organic transitions in the learning process by using the concept of the S curve of learning. As the curves and the plateaus in the letter S suggest, learning starts at a slow launch point and it is followed by faster upward progress, until the curve flattens again once mastery is achieved. Where we are on the curve impacts our productivity and motivation, an insight that can help set the right expectations and appreciate the knock-on effects on the organisation. Johnson goes on to show how this core insight can be incorporated in strategies for talent development, succession planning and team building, with examples from companies such as SAP, HBSE (Harris Blitzer Sports and Entertainment), Hint (a maker of fruit-infuser water), Google, Under Armer and Kraft Heinz among others.
14. Jonathan Ruane, Andrew McAfee, and William D. Oliver, Quantum computing for business leaders
Since proof of principle for quantum computing was established at the turn of the century, a great deal of investment by leading IT companies and venture capitalists has intensified the race for the next breakthrough, expected within a decade or two. Arguably, once this occurs it will be necessary to replace the current digital security infrastructure as existing encryption procedures will become obsolete. Managers need to stay vigilant regarding these technological developments and envision early the implications of quantum computing for their businesses, in areas such as simulation, linear systems, optimization, unstructured search and factoring and encryption.
15. Brent Adamson, Sensemaking for sales
Adamson argues that abundant information has made decision making for B2B purchases more difficult: buyers tend to be risk averse and avoid large commitments, preferring to invest in incremental improvements. To be effective, sales reps need to become facilitators, helping buyers to make sense of the data available to them. They tend to connect customers only with relevant sources, to clarify information and to collaborate in the learning process. Even though this stance needs to be supplier-agnostic, the sales organization can benefit overall when it focuses convincingly on the strengths of their products and creates the confidence and trust to shift customers away from the status-quo and towards embracing bigger, more complex products.
16. Dorothy S. Lund and Leo E. Strine Jr, Corporate political spending is bad business
Corporate political spending in the USA has ballooned in recent years due to increasingly light regulatory oversight, raising questions about the quality and integrity of the democratic process. In this article, Lund and Strine argue that corporate political spending is ultimately self-defeating for investors, who need the whole economy to thrive. Moreover, donations and lobbying can be divisive for donor organizations internally, as they reinforce a tendency towards arbitrary behaviour among a few powerful executives, and externally, as trust in corporations is eroded when they are seen to seek, and obtain, special favours. Instead, corporations should commit not to make any political donations from their treasuries and to lobby only for causes that are consistent with their values and approved by the board.
Experience
17. Ethan Burris, How to sell your ideas up the chain of command
Most employees are uncomfortable raising issues and regularly withhold ideas out of fear of speaking up. In this article, Burris discusses skilful behaviours that could lower the risks of negative consequences when formulating and sharing new ideas and increase the chances of success. In principle, the approach to the manager needs to be as non-threatening to their sensitivities as possible, offering explicit reassurance of good intentions; it should take place in private if possible and refer explicitly to accepted company goals. Ease of implementation and support from colleagues are also important, as well as focusing on either opportunity or threat. Moreover, any pitches should be directed to the relevant decision-maker.
18. Sandeep Puri, Case study: Should you compromise your founding principles for faster growth?
This case study focuses on a company recognised for its social mission, to create employment for LGBTQ+ people. Its product, a special kind of shortbread, is increasingly gaining in popularity and market share, and sustaining this growth might require hiring people from outside the LGBTQ+ community. Would this dilute the identity of the company and ultimately undermine its integrity and success?
19. Dagny Dukach, DEI gets real
Dukach reviews four new books on inclusion, diversity, and anti-racism that share positive, even uplifting initiatives that have changed the working lives of many across the world. While much remains to be done to ensure equity for all, these books show the wealth and depth of accumulated collective experience and present effective strategies to continue this work.
20. Alison Beard, Life’s work interview with Robin Wright
After early success in dance, modelling and the movies, Wright took an extended career break to raise a family, doing one project a year at most. In 2013, she accepted the role of Claire Underwood in the Netflix series House of Cards, gradually developing her directing and entrepreneurial careers alongside acting. About leading, she says: “the most important thing is to show kindness. It creates a kind energy where anyone can say, ‘I don’t know the answer. Let’s have a discussion. You bring your ideas, I’ll bring mine, and we’ll decide what is best for the project.’”
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