Harvard Business Review

March/April 2017

Annotated table of contents

1. Adi Ignatius, The insulated leader

Adi Ignatius, editor in chief of HBR, highlights an article from the issue, on the CEO bubble, by Hal Gregersen. The isolation of the leader is a real problem, but it can be overcome by actively inviting honest feed-back and by listening.

Idea watch

2. HBR Team, Do search ads really work?

This article presents research findings about the effectiveness of search ads on the Yelp platform, testing whether previously unknown restaurants would receive more exposure were they to advertise. The results confirm that for relatively obscure brands, advertising could make a great deal of difference. For really well-known companies, the research suggests, it might be more effective to place search ads for items they are less well known for. Since their overall brand is well known, additional generic ads usually bring little value, as was found with the case of eBay.

3. Scott Berinato, Air pollution brings down the stock market

Berinato interviews Anthony Hayes, an economics professor at the University of Ottawa, who has carried out research on the effects of pollution on market trading and stock values, part of the emerging field of behavioural finance. Hayes and his colleagues found that with every standard deviation in air quality, there was a 12% reduction in the value of stocks. Having controlled for the influence of other variables, such as temperature, rain, traffic, Hayes argues that the results are robust. Moreover there is broader evidence of negative effects of pollution on productivity and performance at school, picking peaches, working in a call centre. Further research will test the impact of pollution on violent crime and patterns on decision making by immigration judges.

How I did it?

4. Frederic Cumenal, Tiffany’s CEO on creating a sustainable supply chain

Tiffany’s is the rare luxury company in the US that takes pride in designing and crafting the jewellery it sells. It has also taken greater responsibility for sustainability issues in its supply chain in the last 25 years. The company is a supporter of global initiatives such as Kimberley Process Certification Scheme which seeks to control the flow of blood diamonds. It has five diamond workshops, including in Botswana, Mauritius, Vietnam, and Cambodia, where employee benefits include work schedules that take account of local cultural expectations about family life, maternity leave, and free lunches. The market for jewellery has been sensitive to economic downturns and trade restrictions in the last few years, but Cumenal hopes that greater public awareness of the sustainability policies at Tiffany’s will become a source of competitive advantage for the long term.

Spotlight: The new science of team work

5. Suzanne M. Johnson Vickberg and Kim Christfort, Pioneers, drivers, integrators and guardians

Johnson Vickerg and Christfort report here on a personality test they built at Deloitte, drawing on the work of biological anthropologist Helen Fisher, of Rutgers University. Tested independently on three groups of 1,000 respondents, refined further by drawing on statistical models from the work of molecular biologist Lee Silver, of Princeton, the assessment has been used by more than 190,000 people and is presented here as an addition to the personality tests toolbox. Four personality styles are defined according to central values and behavioural patterns – pioneers, guardians, drivers and integrators. Pioneers are energetic, look at the big picture, value possibilities, intuition and risk-taking. Guardians are interested in stability, order and rigour, they are pragmatic and risk-adverse, and learn from experience and data. Drivers like challenge and momentum, tackle issues directly and can go for black and white attitudes, where success and winning matters most. Finally, integrators tend to bind the teams together and feel responsibility for the group; diplomatic and consensus-driven they are more inclined to see that most things are relative.

Using this test raises awareness of style differences and enables workers and their managers to understand underlying causes for typical clashes – for instance between integrators (who abhor conflict) and drivers (who like to debate), or between guardians (who proceed carefully) and pioneers (who like adventurous exploration of ideas and possibilities). Moreover, different styles also make different contributions and understanding these can help develop diversity and inclusion in any company.

6. Alison Beard, How workstyles inform leadership

Five leaders report on their experience with this test across five areas: strategy, managing up and down, hiring and job crafting, teamwork and decision-making. To take just one example, Gary Pilnick, the Vice Chairman for Corporate Development and Chief Legal Officer at Kellogg explains how ‘thinking in all four quadrants of personality’ is useful when making decisions. His team members are encouraged to experiment with different mind sets and styles, and Pilnick makes sure that people who are stronger in each of the four types are part of the decision-making process.

7. Alison Beard interviews Helen Fisher, “If you understand how the brain works, you can reach anyone”

Helen Fisher explains how she has been able to show that the presence of particular personality traits and behaviours is connected with greater activity in brain regions regulating four biological systems. Dopamine/norepinephrine is associated with curiosity, creativity, risk-taking and mental flexibility. Serotonin production tends to favour a traditional orientation and eagerness to belong. Testosterone activity is linked to decisiveness and directness as well as proficiency in rule-based systems such as math, engineering, music. Finally, estrogen/oxytocin tends to be associated with intuition, imagination, trust and long-term, contextual thinking. Rather than trying to determine just one dominant trait, Fisher aims to identify a broader personality configuration which includes strengths and weaknesses along all of these dimensions. At the same time, the presence of certain genes in some populations can lead to greater incidence of certain behaviours, such as greater social conformity in Japan and China. Her work has been used by match.com, Deloitte, and the corporate consultancy NeuroColor she set up with David Labno.

8. Eben Harrell, A brief history of personality tests

Harrell presents briefly three personality assessments that historically have had an outsize impact in this growing industry: Myers-Briggs, Five-Factor Model and StrengthsFinder. Myer-Briggs, the oldest, from 1917, was inspired by the work of Carl Jung. The most popular test personality assessment so far, taken by tens of millions of people, it has nonetheless lost some of its appeal and credibility in the last decades. The Five-Factor Model is based on five categories that have been found, statistically, to be most commonly used to describe psychological characteristics: openness to experience, conscientiousness, extroversion, agreeableness, and neuroticism. It is now considered the gold standard in the field and has spawned a number of variations. Finally StrengthsFinder is the result of research in positive psychology, resilience and flourishing for healthy minds. It has been criticised for ignoring how criticism can also be a spur for improvement.

Features

9. Michael Mankins, Karen Harris, and David Harding, Strategy in the age of superabundant capital

This team of authors from Bain and Company report on research about the declining cost of capital since the 1980s and the growth in the global balance sheets: worldwide financial assets are now nearly 10 times greater than global GDP. Mankins et al. also predict that the cost of capital will remain low in the next twenty years, due to growing financial markets in the developing countries and the expanding number of ‘peak savers’, the population of 45-59 year-olds, critical in determining the level of savings in the global economy. In this age of superabundant capital pursuing growth can generate much more value than merely increasing operating margins through higher profitability. Finding the sources of greater growth, however, would require re-orientating investment strategies, reducing hurdle rates for new investments, allowing greater tolerance for smaller but varied investments that can mature or fail fast, and finding opportunities for growth in adjacent fields. The value of human capital is ‘where the power lies’ and companies should focus their attention to maximise their truly scarce resources – time, talent and energy.

10. Hal Gregersen, Bursting the CEO bubble

Gregersen has interviewed over 200 CEOs and other senior executives about their perceptions of the dangers of isolation at the top and practices to counteract them. While the problems are widely perceived, comparatively few executives actively try to overcome them. When they do, their efforts tend to fall in one of three areas. They seek to find out where they may be proven unexpectedly wrong, to experience situations where they may be unusually uncomfortable and to remain (uncharacteristically) quiet and listen. The article shares many tips from a great variety of CEOs and executives, alongside 10 diagnostic questions for determining whether you may be trapped in a CEO bubble.

11. Timothy Butler, Hiring an entrepreneurial leader

Butler has analysed psychological-testing results of more than 4,000 successful entrepreneurs from multiple countries comparing them with results of 1,800 business leaders who describe themselves as general managers. This has allowed him to distil three traits that are truly distinctive for the entrepreneurial attitude more broadly: the ability to thrive in uncertainty (understood as openness and relative comfort with adventure, learning and opportunity and acceptance of risk), a passionate desire to author and own projects, and a unique skill at persuasion. Individuals who have this attitude may become entrepreneurs or could work effectively in larger organizations when they are in charge of developing new projects and have significant autonomy. For companies interested to identify prospective hires with these attributes, Butler provides suggestions for interview questions and prompts.

12. Adi Ignatius interviews Walmart CEO Doug McMillon, “We need people to lean into the future”

U.S.’s largest company, Walmart, is confronted with multiple challenges as its traditional sources of competitive advantage, a wide networks of stores, sophisticated customer analytics, great purchasing clout and ability to offer any product at the lowest possible prices, are eroded. To maintain its position under increased competition, the company has chosen a company lifer, Dough McMillon, to lead a series of profound transformations: technological upgrading to digitize all stores and operations, more attractive working conditions and an ambitious sustainability agenda. In this interview, McMillon defines the challenges, describes the results of changes implemented so far and points to the road ahead.

13. Martin Ihrig and Ian C. Macmillan, How to get eco-system buy-in

Ihrig and Macmillan illustrate a methodology for determining the impact of proposed innovation on all stakeholders. They observe that new ideas often fail to take root because they run against opposition from one or more participants in the ecosystem. To counter this, they suggest a six step process for anticipating and influencing responses to proposed innovations. The steps are: identify key stakeholders and their most pressing needs; outline their consumption chains, the points at which they engage with the product or the service; describe the non-negotiable features, the differentiators and dissatisfiers of existing offers to create offer profiles; identify growth opportunities based on these profiles; map stakeholder tensions, where the new ideas are assessed in view of each stakeholders interests; and finally choose the best opportunity, i.e. the one that either offers outright benefits to all stakeholders or can be adjusted to obtain buy-in from opponents.

14. Leslie K. John, Daniel Mochon, Oliver Emrich and Janet Schwartz, What’s the value of a like

The research presented here has checked systematically, using experiments and control groups, some of the cherished notions of the new digital marketing, including the assumption that social media presence leads to increased brand exposure and sales. The authors offer guidance on how such tests and experiments can be constructed and present some results of their own. They find, for instance, that likes on platforms such as Facebook do not translate in purchasies or other brand-supporting behaviours and do not carry influence in networks of friends. However, organically growing a following allows companies to identify genuine supporters who will be responsive to advertising targeted to them. These enthusiastic consumers may also volunteer endorsements that could be picked up and used by companies in their marketing.

15. Nicholas Toman, Brent Adamson, and Cristina Gomez, The new sales imperative

Common wisdom has it that customer centric approaches and responsiveness to customer needs ought to be the core, guiding principles in B2B selling. Research suggests however that customers are often confused by the wealth of information and options they come across, find it difficult to decide on a purchase and are often left with buyer’s remorse after a purchase. In these circumstances, the article suggests a four step process for a prescriptive sales strategy. First, map the sales journey drawing on information about customer processes regarding information gathering and assessment, decision making paths and procedures. Second, analyse this information to identify obstacles to purchase, from making an effective business case for change to getting buy-in from all the functions involved. Third, design prescriptions that provide answers and solutions to these difficulties and problems, taking care to formulate advice that is unbiased and credible, speeds up the purchasing process and formulates expectations about product performance that the supplier is uniquely able to meet. Finally, track progress and be clear about the level of commitment from the client at each stage of the process.

16. Stéphane J. G. Girod and Samina Karim, Restructure or reconfigure

Girod and Karim offer a guide to understanding the difference between restructuring, which affects the ‘structural archetype’ of a business and the more frequent and lighter touch reconfiguration, reaorganisation of activities, departments, divisions that does not affect the company’s ‘underlying structure’. When is then appropriate to undertake restructuring or reconfiguration? The authors suggest that the answer to this question depends on four sets of considerations. First, in fluid, dynamic business environments, frequent reconfigurations might be requisite for maintaining a competitive edge. On the other hand, major industry disruption usually requires restructuring. Second, a company should take account of its own capacity to assimilate internal change and disruption. Frequent radical changes can be too unsettling just as too little change can ultimately undermine competitiveness. Third, whether companies choose restructuring or reconfigurations, these should be designed to amplify existing strengths. Finally, to embed change, it is often necessary to consider in detail the impact on other internal systems which may also need to adjust.

17. Steven Prokesch on Bob Langer, the Edison of medicine

This is an in-depth profile of an exceptional scholar and scientist, Bob Langer, and the MIT’s Koch Institute for Integrative Cancer Research he leads. The Institute stands out for its successes in generating breakthrough ideas, materials, and methodologies which have received high scientific recognition and have led to the establishment of tens of successful companies. Langer has made the focus on high-impact problems the core criterion for choosing research questions and projects. He makes sure that ideas have a good chance of surviving the competition in the market for ideas and in the market for products and services though several practices: he focuses on ‘platform technologies’ with multiple applications, obtains broad patents, publishes in prestigious peer-reviewed journals, allows the time for new concepts to be thoroughly tested and developed in the lab, rewards the researchers, which have one-third of royalty income after expenses and fees, involves researchers in commercial development and tracks the extent to which licensees actually use the technology to make sure that it is properly brought to the market. The teams at Koch Institutes are multidisciplinary and there is high turnover with time-limited contracts allowing researchers to benefit from this supportive environment to test their ideas in a timely manner. Thus, Langer’s leadership is decisive in providing direction and supporting the values of purposeful, rigorous scientific enquiry while encouraging freedom and self-reliance in his researchers.

Experience

18. Mitchell Lee Marks, Philip Mirvis, and Ron Ashkenas, Surviving M&A

Most M&As bring about great changes that impinge on existing employees’ aspirations and plans. Here the authors advise a pro-active approach for making the most out of this uncertainty. As a first step, they recommend a personal SWOT analysis, looking at strengths, weaknesses, opportunities and threats to enable informed choice among three types of growth opportunities. One is by way of for execution, by participating in the integration team. Second, an M&A might provide an opportunity for innovation by proposing new solutions to underlying problems. Finally, by being open to working with new people and forging new alliances one might exploit new possibilities for cooperation. In sum, the post M&A situation is a fluid one that rewards assertiveness and involvement, as shown through four case studies of executives who were able craft to responses that led to hugely beneficial results.

19. Erik Roelofsen and Tao Yue, Case study: Is holacracy for us?

The CEO of a large constructions company handling around 30,000 projects globally and encompassing several hundred relatively autonomous units considers whether holacracy might be an appropriate organisational solution. Both supporters and opponents weigh in, considering industry patterns, the pressure to ensure the accountability of units following a recent scandal at one of the country units, and the need to motivate the workforce.

20. Adi Ignatius, An uneasy codependence, China and the U.S. in the 21st century

A former Beijing bureau chief for the Wall Street Journal, Adi Ignatius revisits here old ground as he reviews three books about China’s reform path in the last few decades, its relationship with the US and the lessons Western companies might learn from their Chinese competitors.

21. Alison Beard, Life’s work interview with Mike Krzyzewski

Krzyzewski has a four-decade career at the top of college baseball coaching, much of it at Duke University as well as 11 years with the US national team. Here he shares his insight about coaching at different levels of experience, with different kinds of talent, learning from his competitors and drawing on the contributions of his collaborators including his wife and daughters.